--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ________________
Commission file number 1-13647
--------------------
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 73-1356520
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5330 East 31st Street, Tulsa, Oklahoma 74135
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (918) 660-7700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
------------------- -----------------------------------------
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes X No____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: [X]
The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant as of February 28, 2001 was
$237,337,030.
The number of shares outstanding of the registrant's Common Stock as of
February 28, 2001 was 24,205,422.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on May 24, 2001 are incorporated by reference in Part
III.
================================================================================
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
FORM 10-K
CONTENTS
PART I
ITEM 1. BUSINESS.............................................. 4
ITEM 2. PROPERTIES............................................ 23
ITEM 3. LEGAL PROCEEDINGS..................................... 23
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS... 23
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS....................... 24
ITEM 6. SELECTED FINANCIAL DATA............................... 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................... 27
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK..................................... 36
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........... 37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE................ 65
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.... 65
ITEM 11. EXECUTIVE COMPENSATION................................ 65
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT................................. 65
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........ 65
2
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K........................................ 66
SIGNATURES................................................................... 74
INDEX TO EXHIBITS............................................................ 75
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
Some of the statements contained herein under "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" may constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Although Dollar Thrifty
Automotive Group, Inc. believes such forward-looking statements are based on
reasonable assumptions, such statements are not guarantees of future performance
and certain factors could cause results to differ materially from current
expectations. These factors include: price and product competition, economic and
competitive conditions in markets and countries where our customers reside and
where our companies and their franchisees operate; changes in capital
availability or cost; costs and other terms related to the acquisition and
disposition of automobiles and conducting business; and certain regulatory and
environmental matters. Should one or more of these risks or uncertainties, among
others, materialize, actual results could vary materially from those estimated,
anticipated or projected. Dollar Thrifty Automotive Group, Inc. undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results over time.
3
PART I
------
ITEM 1. BUSINESS
COMPANY OVERVIEW
Dollar Thrifty Automotive Group, Inc., a Delaware corporation (the
"Company"), owns two vehicle rental companies, Dollar Rent A Car Systems, Inc.
("Dollar"), and Thrifty Rent-A-Car System, Inc. Thrifty Rent-A-Car System, Inc.
is an indirect subsidiary of the Company as it is a wholly owned subsidiary of
Thrifty, Inc. (Thrifty, Inc., Thrifty Rent-A-Car System, Inc. and all their
respective subsidiaries are individually or collectively, as the context
requires, referred to hereafter as "Thrifty"). Dollar and Thrifty and their
respective independent franchisees operate the Dollar and Thrifty vehicle rental
systems as separate businesses. The Dollar and Thrifty brands represent a
value-priced rental vehicle generally appealing to leisure customers, including
foreign tourists, and to small businesses and independent business travelers. As
of December 31, 2000, Dollar and Thrifty had 947 locations in the United States
and Canada of which 182 were company-owned stores and 765 were locations
operated by franchisees. While Dollar and Thrifty have franchisees in countries
outside the United States and Canada, revenues from these franchisees have not
been material to results of operations of the Company and its consolidated
subsidiaries (collectively, the "Group"). For the year ended December 31, 2000,
Dollar's gross revenues comprised approximately 76% of the Group's revenues with
Thrifty contributing the remaining 24% of revenues.
The businesses of Dollar and Thrifty have separate and different
approaches to the vehicle rental market. In the United States, Dollar's main
focus is operating company-owned stores located in major airports, and it
derives substantial revenues from leisure and tour rentals. Thrifty operates
almost exclusively through franchisees serving both the airport and local
markets. Dollar derives a majority of its U.S. revenues from providing rental
vehicles and services directly to rental customers, while Thrifty derives its
revenues primarily from franchising fees and services including vehicle leasing.
Thrifty's U.S. franchisees provide vehicles and services to the rental customer.
Dollar incurs the costs of operating its company-owned stores and its revenues
are directly affected by changes in rental demand. As Thrifty operates primarily
through franchisees, it does not incur the costs of operating the franchised
locations and does not generally deal directly with rental customers. Therefore,
changes in levels of customer demand tend to affect Thrifty's results less
quickly than those of Dollar. See Note 15 of Notes to Consolidated Financial
Statements for business segment information.
The Company was incorporated on November 4, 1997. It is the successor
to Pentastar Transportation Group, Inc., which was formed in 1989 to acquire and
operate the rental car subsidiaries of Chrysler Corporation, now known as
DaimlerChrysler Corporation ("DaimlerChrysler"). Dollar was incorporated in 1965
and Thrifty was incorporated in 1950. Thrifty, Inc., which was formed in
December 1998, directly owns Thrifty Rent-A-Car System, Inc. and Thrifty Car
Sales, Inc. ("Thrifty Car Sales"), which operates a franchised retail used car
sales network.
On December 23, 1997, the Company completed its initial public offering
of Common Stock (the "Offering") after registration with the Securities and
Exchange Commission ("SEC") on Form S-1. Upon closing of the Offering,
24,123,105 shares of Common Stock were sold at an initial price of $20.50 per
share. Of the shares sold in the Offering, 20,000,000 shares were sold by
DaimlerChrysler, which prior to the Offering was the parent of the Company, and
4,123,105 shares were sold by the Company.
In connection with the Offering, the Company completed new financing
arrangements. On December 23, 1997, the Company closed a $900 million asset
backed medium term note program, together with a Revolving Credit Facility
(hereinafter defined). In addition, on March 4, 1998, the Company established a
Commercial Paper Program (hereinafter defined) backed by a Liquidity Facility
(hereinafter defined). Proceeds of the medium term notes, including issues in
1999 and 2001, a variable funding note issue in 2000, and proceeds from the
Commercial Paper Program are each used to finance vehicles used by Dollar and
Thrifty for their operations. The Revolving Credit Facility was established to
provide letters of credit for financing and operational needs and to meet the
Group's borrowing needs for its other business operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
4
INDUSTRY OVERVIEW
The U.S. daily vehicle rental industry has two principal markets: the
airport market and the local market. Vehicle rental companies that focus on the
airport market rent primarily to business and leisure travelers. Vehicle rentals
from airport locations account for the largest portion of vehicle rentals in the
United States. Companies focusing on the local market rent primarily to persons
who need a vehicle periodically for personal or business use or who require a
temporary replacement vehicle. Rental companies also sell used vehicles and
ancillary products such as refueling services and loss damage waivers.
Vehicle rental companies typically incur substantial debt to finance
the ongoing turnover of their rental fleets. They also typically acquire a
majority of their fleets under manufacturer residual value programs that
repurchase or guarantee the resale value of Program Vehicles (hereinafter
defined) at particular times in the future. This allows a rental company to
predict this important element of its cost structure. The Program Vehicles and
the related obligations of the manufacturers are used as collateral for fleet
financing.
The rental car industry has experienced significant changes in
ownership in the past several years. In the mid-1990s, most major rental car
companies were owned by domestic automobile manufacturers. Ford Motor Company
("Ford") owned both Hertz and Budget, General Motors Corporation owned National
and DaimlerChrysler owned both Dollar and Thrifty. Since that time many of these
companies have become publicly owned. ANC Rental Corporation (spun out of
AutoNation, Inc. in 2000), which owns both Alamo and National, and Budget Group,
Inc. are both publicly owned. Cendant Corporation (formerly HFS, Inc.) purchased
Avis in 1996 and subsequently sold 80% to the public in 1997. In March 2001,
Cendant re-acquired all public ownership of Avis and operates it as a
subsidiary. Ford sold a minority interest in Hertz to the public in 1997 and has
recently reached an agreement to buy back the public ownership.
The potential for a slow down in the economy also exists in 2001,
possibly reducing the overall demand for rental cars and could compress rental
rates, which could materially affect the operating results of the Company and
its franchisees.
SEASONALITY
The Company's business is subject to seasonal variations in customer
demand, with the summer vacation period representing the peak season for vehicle
rentals. This general seasonal variation in demand, along with more localized
changes in demand, caused the Group to vary its fleet size over the course of
the year. In 2000, the Group's average monthly fleet size ranged from a low of
approximately 80,000 vehicles in the first quarter to a high of approximately
118,000 vehicles in the third quarter.
DOLLAR
GENERAL
Dollar's focus is serving the airport vehicle rental market, which is
composed of business and leisure travelers. The majority of its locations are on
or near airport facilities. Dollar operates primarily through company-owned
stores in the United States, and also licenses to independent franchisees the
right to operate as a part of the Dollar system in the United States and abroad.
All of its Canadian and international operations are franchised.
5
Dollar's services and products include fleet leasing, marketing,
centralized reservations, counter automation, insurance, central billing,
supplies and training and operational support. Dollar's company-owned stores and
franchisees rent vehicles on a daily, weekend, weekly and monthly basis, at
varying rates depending on cost and other competitive factors in each location's
market. In addition to vehicle rentals, Dollar and its franchisees sell
ancillary products and rent supplemental equipment. To meet seasonal and other
demand changes, Dollar shifts vehicles among its company-owned stores and U.S.
franchisees. Revenues from Dollar's franchisees outside the United States and
Canada have not been material to its results of operations.
As of December 31, 2000, Dollar's vehicle rental system included 282
locations in the United States and Canada, consisting of 130 company-owned
stores and 152 that were operated by franchisees. Dollar's total revenue was
$824 million in 2000, of which $775 million (94%) was generated by company-owned
stores and $49 million (6%) was revenue from Dollar franchisees for vehicle
leasing fees and other service and product fees and other revenue.
Dollar operates primarily through company-owned stores, and through
franchisees in key U.S. leisure destinations and in other U.S. locations. Dollar
has company-owned stores in over 80% of the 50 largest U.S. airport markets and
franchisees in the remaining markets. When opportunities arise, Dollar may
acquire operations from franchisees and convert them to company-owned stores.
Dollar converted four franchised operations to company-owned operations in 1996,
three in 1997, two in 1998 and three in 2000. In March 2000, Dollar acquired the
franchised operations of its largest Texas licensee, which included operations
in San Antonio, Corpus Christi, Midland/Odessa, and other smaller markets. In
September 2000, Dollar also acquired the franchised operations of its Atlanta
and Memphis licensees. Dollar generally has rights of first refusal on the sale
of a franchised operation. Consistent with Dollar's strategy of operating
corporately in the top 50 airports and other key markets, company-owned stores
located in the smaller markets may be franchised in order to grow Dollar's
franchisee system.
COMPANY-OWNED STORES
Dollar believes that having company-owned stores in most of the top 50
airport markets and other key markets enhances its ability to manage its vehicle
rental system and fleet. Dollar can implement marketing and pricing strategies
to focus on leisure and business travelers, reduce costs through bulk
purchasing, apply performance benchmarks and develop and implement best practice
management techniques nationwide. Its company-owned store network also allows
Dollar to offer customers one-way rentals in certain markets.
Vehicle rentals by customers of foreign and U.S. tour operators
generated approximately 26% of Dollar's rental revenues in 2000. These rentals
are usually part of tour packages that also include air travel and hotel
accommodations. Rentals to tour customers have certain advantages. Tour
customers tend to reserve vehicles earlier than other customers, rent them for
longer periods and cancel reservations less frequently. Dollar has significant
relationships with foreign and domestic tour operators that resulted in rental
revenue of $200 million in 2000.
Dollar is the exclusive U.S. vehicle rental company for four of its
five largest tour operator accounts. Its arrangement with the other tour
operator account is non-exclusive. The agreements for these five accounts expire
from December 15, 2001 to December 31, 2009. No single tour operator account
generated in excess of 5% of the Group's 2000 revenues.
As of December 31, 2000, Dollar had vehicle rental concessions for
company-owned stores at 68 airports in the United States. Its payments for these
concessions are usually based upon a specified percentage of airport-generated
revenue, subject to a minimum annual fee, and sometimes include fixed rent for
terminal counters or other leased properties and facilities.
6
SERVICES AND PRODUCTS PROVIDED TO RENTAL CUSTOMERS
WORLDWIDE RESERVATIONS SYSTEM. Dollar has continuously staffed
reservation facilities at its headquarters in Tulsa, Oklahoma and at its
facility in Tahlequah, Oklahoma. Dollar's reservation facilities are linked to
all major airline reservation systems and through such systems to travel
agencies in the United States, Canada and abroad. Dollar's total reservations in
2000 grew by 18% with most of the growth originating from the Internet.
Reservations through Dollar's Internet web site, (dollar.com), increased 158% in
2000, representing 16% of Dollar's non-tour reservations booked for the year. An
additional 13% of Dollar's reservations were booked through other Internet
travel sites.
SUPPLEMENTAL EQUIPMENT AND OPTIONAL PRODUCTS. Dollar rents ski racks,
mobile telephones, baby seats and other supplemental equipment and, subject to
availability and applicable local law, makes available loss damage waivers and
insurance products related to the vehicle rental.
INSTANT RETURN. Dollar offers customers instant return service at
most of its U.S. airport company-owned stores. When a customer returns a vehicle
at one of these locations, a representative meets the customer and provides a
receipt from a hand-held computer terminal.
INFORMATION SYSTEMS
Dollar depends upon a number of core information systems to operate its
business, primarily its counter automation and revenue management systems. The
counter automation system in Dollar's company-owned stores facilitates the sale
of additional products and services and allows Dollar to monitor its fleet and
financial assets. Dollar introduced its rental counter automation system,
FASTLANE(R), and began installing it in 1998 in its company-owned stores. In
1998, Dollar developed a revenue management system with Talus, a leading
supplier of such systems, which is utilized in all of Dollar's company-owned
stores. The system is designed to enable Dollar to better determine rental
demand based on historical reservation patterns and adjust its rental rates
accordingly.
In 1997, Dollar entered into an agreement with The SABRE Group, Inc.
("SABRE"), a leader in electronic distribution systems for the travel industry,
to manage and monitor its data center network and its daily information
processing. All of Dollar's key systems are housed in a secure underground SABRE
facility in Oklahoma designed to withstand disasters.
CUSTOMER SERVICE AND EMPLOYEE TRAINING
Dollar has programs at its headquarters and in company-owned stores to
improve customer service. Customer First!, Dollar's quality improvement program,
involves establishing a team at each vehicle rental location that is accountable
for customer satisfaction. Dollar's customer service center measures customer
satisfaction, tracks service quality trends, responds to customer inquiries and
provides recommendations to Dollar's senior management and vehicle rental
location supervisors. Dollar conducts initial and ongoing training for
company-owned store and franchisee employees through education centers in San
Francisco, Tulsa, Newark, Denver, Los Angeles and Cleveland with additional
training centers in Honolulu and Dallas scheduled to open in 2001.
ORLANDO OPERATIONS
Central Florida, with its many tourist attractions, is the most
important leisure destination for Dollar. Dollar's company-owned store at
Orlando International Airport has a mix of tour and retail business. Dollar also
operates a facility at the Orlando Sanford International Airport, 25 miles north
of Orlando, which mainly serves charter flights by foreign tour operators.
7
FRANCHISING
UNITED STATES AND CANADA
Approximately 6% of Dollar's 2000 revenues in the United States and
Canada consisted of leasing revenue and fees from its franchisees and other
revenues. Dollar sells its U.S. franchises on an exclusive basis for specific
geographic areas. Most franchisees are located at or near airports that generate
a lower volume of vehicle rentals than the airports served by Dollar's
company-owned stores. Dollar also makes a fleet leasing program available to its
U.S. franchisees, which in 2000 accounted for approximately 3% of Dollar's total
revenue. As of December 31, 2000, Dollar had franchised operations located in 28
countries. In Canada, Dollar's master franchisee directly operates or
subfranchises 23 airport and suburban locations. See "Fleet Acquisition and
Management -- Fleet Leasing Programs."
Dollar licenses its franchisees to use Dollar's service marks in the
vehicle rental and leasing, parking and used car sales businesses. Franchisees
pay Dollar an initial franchise fee generally based on the population, number of
airline passengers, total airport vehicle rental revenues and the level of any
other vehicle rental activity in the franchised territory, as well as other
factors.
SYSTEM FEES. In addition to an initial franchise fee, in 2000 each U.S.
franchisee was generally required to pay Dollar a system fee on their rental car
revenue equal to 8% of gross rental revenue on a monthly basis for airport
operations (8% in 1999 and 7% in 1998) and 6% for suburban operations.
FRANCHISEE SERVICES AND PRODUCTS. Dollar makes insurance coverage
available to its franchisees and provides them with training and operational
assistance, site selection guidance, vehicle damage recovery and claims
management advice, sales assistance and image and standards guidance. Dollar
also provides them with fleet planning and customer satisfaction programs and
sells them certain Dollar-branded supplies. In addition, Dollar offers its
franchisees rental rate management analysis, centralized corporate account and
tour billing and travel agent commission payments. Dollar franchisees pay Dollar
a fee for each reservation made through Dollar's worldwide reservation system.
INTERNATIONAL
Master franchisees, direct franchisees and subfranchisees operate
Dollar's vehicle rental locations outside the United States. Master franchisees
are authorized to use Dollar's service marks and business methods in territories
in which they operate directly or through subfranchisees, and are responsible
for promoting the Dollar brand name and its services and products and for
developing and supporting their direct operations and subfranchisees. Dollar's
revenues from international franchise operations were less than 1% of 2000 total
revenue.
Effective February 29, 2000, Dollar terminated its reservation transfer
agreement with Europcar International, S.A., a European-based vehicle rental
company ("Europcar") and thereafter began exchanging reservations with Sixt, AG,
a major European rental car company, which operates over 1,500 rental outlets.
Through its alliance with Sixt, Dollar offers service in more than 25 countries
covering Europe, the Middle East and Africa.
The number of foreign locations or Dollar system-wide locations
disclosed in this report does not include the Sixt locations.
8
MARKETING
Dollar's marketing strategy is to position Dollar as the value-priced,
on-airport car rental company to cost conscious leisure and business travelers.
Dollar utilizes a mix of national and local advertising, promotions and
strategic marketing efforts to promote this strategy.
NATIONAL ADVERTISING, LOCAL ADVERTISING AND PROMOTION
Dollar's national advertising programs utilize a media mix of both
print and television with an emphasis on the popular leisure destinations of
Florida, California, Hawaii, Nevada and Arizona. Dollar communicates its
value-priced message to consumers via frequent advertisements in USA TODAY and
other major U.S. metropolitan newspapers. Dollar also advertises on U.S.
broadcast and cable television networks, promoting its low rates and on-airport
convenience. Dollar spends approximately 4% of its annual total U.S. system-wide
revenues on marketing, advertising, public relations and sales promotions.
Dollar encourages franchisees, as well as local management of
company-owned stores, to develop local market relationships and retail sales
initiatives that coordinate with Dollar's national advertising programs. Dollar
makes available print and broadcast advertising materials to franchisees for use
in local markets, and pays a promotional allowance for qualifying advertising
expenditures to the franchisees that participate in Dollar's fleet program.
Dollar has made filings under the intellectual property laws of
jurisdictions in which it or its franchisees operate, including the U.S. Patent
and Trademark Office, to protect the names, logos and designs identified with
Dollar. These marks are important for customer awareness and selection of Dollar
for vehicle rental.
STRATEGIC MARKETING EFFORTS
Strategic marketing partnerships and frequent flier programs have been
established with many airline partners and travel agencies. Approximately 31% of
Dollar's non-tour reservations are booked through travel agencies utilizing the
major airline global distribution systems. Major travel agency chains and
consortia operate under preferred supplier agreements with Dollar and are
supported by Dollar's sales department. Under its preferred supplier
arrangements, Dollar provides these travel agency groups additional commissions
or lower prices in return for their featuring Dollar in their advertising or
giving Dollar a priority in their reservation systems. In general, these
arrangements are not exclusive to Dollar, and many travel agency groups have
similar arrangements with other vehicle rental companies.
During 2000, Dollar received approximately 29% of its reservations
through its dollar.com web site and other Internet travel sites. Dollar
continues to invest in its dollar.com web site and plans to continually enhance
the site to best meet its customers' travel needs. Gomez Advisors, a recognized
resource in providing consumer and business-based e-commerce research tools and
analysis, rated dollar.com as the No. 1 car rental site on the Gomez Advisors
Internet Car Rentals Scorecard four consecutive times in 1999 and 2000.
Additionally, in recognition of the shift in travel distribution patterns,
Dollar has placed significant emphasis on developing relationships with Internet
travel sites. Dollar maintains preferred supplier arrangements with two of the
leading Internet travel sites, Expedia and Travelocity.
In January 2000, Dollar launched the first full-service travel web site
sponsored by a car rental company. DollarTravel.com is powered by TRIP.com,
which offers consumers online access to more than 500 airlines, 40,000 hotels
and 45 car rental companies.
9
SUMMARY OPERATING DATA OF DOLLAR
YEARS ENDED DECEMBER 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------
(in thousands)
Revenues:
U.S. Company-owned stores $ 774,530 $ 682,769 $ 605,187
U.S. and Canada franchisees 45,158 47,848 50,011
International franchisees 1,624 2,547 3,100
Other 2,542 1,847 1,824
---------- ---------- ----------
Total revenues $ 823,854 $ 735,011 $ 660,122
========== ========== ==========
AS OF DECEMBER 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------
Rental Locations:
U.S. Company-owned stores 130 116 114
U.S. and Canada franchisee locations 152 173 154
Franchisees:
U.S. and Canada 66 77 73
International 38 40 50
10
THRIFTY
GENERAL
Thrifty's focus is on franchising and franchise support services.
Thrifty operated company-owned stores in nine cities in the United States and
Canada as of December 31, 2000. Thrifty's U.S. company-owned stores and its
franchisees derive approximately 60% of their combined rental revenues from the
airport market and approximately 40% from the local market. Thrifty's approach
of serving both the airport and local markets within each territory allows many
of its franchisees and company-owned stores to have multiple locations to
improve fleet utilization and profit margins by moving vehicles among locations
to better address differences in demand between their markets. As airports have
begun to institute fees for vehicle rental companies located outside their
properties, or limited these companies' access to airport travelers, Thrifty
franchisees have been moving to in-terminal locations. During 2000, Thrifty
moved to in-terminal locations at thirteen airports including Phoenix, Fort
Lauderdale and Dallas-Fort Worth. These additions bring Thrifty's total
in-terminal locations to 87, which is over half of the airports serviced by
Thrifty in the U.S.
As of December 31, 2000, Thrifty's vehicle rental system included 665
rental locations in the United States and Canada, divided between 613 franchisee
locations and 52 company-owned stores. The Thrifty system also included 629
locations abroad, all of which were franchisee locations. Thrifty's total
corporate revenue was $259 million in 2000, of which $218 million (84%) was
revenue from franchisees in the form of fleet leasing fees, system fees and
other service and product fees and $41 million (16%) of which was generated by
company-owned stores. Revenues from Thrifty's franchisees outside the United
States and Canada have not been material to its results of operations.
FRANCHISING
UNITED STATES
Thrifty's U.S. franchisees are the core of its operations and are
essential to its long-term profitability and growth. Thrifty offers its
franchisees a full line of services and products not easily or cost-effectively
available from other sources. Thrifty actively promotes franchisee financial
stability and growth and seeks opportunities to enhance its vehicle rental
system by improving its services to franchisees, particularly its fleet leasing
programs, and by developing new franchisee revenue opportunities, such as
airport parking and truck rental. Thrifty also works closely with its U.S.
franchisees in formulating and implementing marketing and operating strategies.
Thrifty licenses its U.S. franchisees to use its service marks and
participate in its various services and systems. Franchisees pay Thrifty an
initial franchise fee based on such factors as the population, the number of
airline passengers, and total airport vehicle rental revenues and the level of
any other vehicle rental activity in the franchised territory. Franchises are
sold on an exclusive basis for a specific geographical territory, usually a city
or metropolitan area. Over the past five years, Thrifty's franchisee turnover
has averaged approximately 7% per year, with an average of 13 terminations and
21 additions (including new territories added to existing franchise agreements)
per year.
INITIAL FRANCHISE FEES, SYSTEM FEES AND ADVERTISING FEES. Thrifty's
initial franchise fees are negotiated on a case-by-case basis, and may be
structured to promote expansion of an existing franchisee's operations into a
contiguous area. In addition to the initial franchise fee, its U.S. franchisees
pay Thrifty an administrative fee, which is generally 3% of base rental revenue,
excluding ancillary products.
U.S. franchisees also pay an advertising fee ranging from 2.5% to 5% of
base rental revenue to a separate advertising fund managed jointly by
franchisees and Thrifty management. Thrifty has implemented, and may implement
in the future, special short-term reductions in system and advertising fees to
encourage growth.
11
For 2000, Thrifty's five largest U.S. franchisees generated
approximately 19% of Thrifty's total corporate revenue in the form of system,
fleet leasing, reservation and other fees.
MARKETING TO PROSPECTIVE FRANCHISEES. Thrifty has developed programs to
attract additional franchisees in the vehicle rental industry. Programs include
attracting independent vehicle rental companies with phased-in fees and
competitive fleet leasing terms, assisting individuals experienced in vehicle
rental operations to operate their own franchises through financial assistance,
start-up fleet supply and other support. Thrifty also encourages existing
franchisees to acquire and expand into neighboring territories by offering fleet
incentives, reduced administrative and advertising fees and lower initial
franchise fees for additional territories.
FLEET LEASING PROGRAM. Thrifty has a fleet leasing program for
franchisees that it believes provides them with a competitive and flexible
source of fleet vehicles. In 2000, fleet leasing accounted for approximately 67%
of Thrifty's total revenue. Thrifty's 2001 strategy is to offer attractive lease
rates that Thrifty believes will improve franchisee health and support
additional growth in the fleet leasing program. See "Fleet Acquisition and
Management -- Fleet Leasing Programs."
TRAINING AND SUPPORT. Thrifty's franchisees are required to attend
initial orientation and receive ongoing training in areas such as customer
service and hiring. In early 1997, Thrifty began implementing its "True Blue
Pride Initiative" to identify areas requiring customer service improvements and
to implement new standards to deliver faster and friendlier service. This
initiative emphasizes the role that franchisee customer service employees should
have in identifying and resolving customer complaints. New programs that have
been developed as part of the initiative include Thrifty's express rental
program, Blue Chip, which provides for preprinted rental contracts and expedited
service.
Thrifty also publishes a comprehensive operating manual for franchisees
and provides operational support in areas such as cost control, fleet planning,
revenue management and local advertising and marketing. Thrifty also assists
franchisees on real estate matters, including site selection and airport
facility issues.
WORLDWIDE RESERVATIONS CENTER AND OTHER INFORMATION SYSTEMS. Thrifty's
franchisees benefit from Thrifty's continuously staffed worldwide reservation
centers at its headquarters in Tulsa, Oklahoma and its reservation facility in
Okmulgee, Oklahoma. Thrifty's reservation facilities are linked to all of the
major airline reservation systems and through such systems to travel agencies in
the United States, Canada and abroad. Thrifty franchisee payments for
reservations made through these centers accounted for approximately 5% of
Thrifty's 2000 total revenues. Thrifty's total reservations in 2000 grew by 9%
with most of the growth originating from the Internet. Reservations through
Thrifty's Internet web site (thrifty.com) increased in 2000 by 151% representing
8% of Thrifty's reservations booked for the year. An additional 10% of Thrifty's
reservations were booked through other Internet travel sites.
U.S. franchisees receiving a certain volume of reservations are
required to use an approved automated counter system, usually leasing or
subleasing the related hardware and software from Thrifty or a third-party
leasing agent. In addition to providing an electronic data link with Thrifty's
worldwide reservation centers, the automated counter system prints rental
agreements and provides Thrifty and its franchisees with customer and vehicle
inventory information and financial and operating reports.
Thrifty supports its information systems through a combination of
internal resources and external technology providers. Thrifty has engaged SABRE
to manage and monitor its data center network and its daily information
processing. Reservation applications systems continue to be serviced by Perot
Systems Corporation under a five-year agreement through 2002. Other information
systems are supported by Thrifty employees. Thrifty's fleet and reservation
processing systems are housed in a secure underground SABRE facility in Oklahoma
designed to withstand disasters.
12
INSURANCE, SUPPLIES AND NATIONAL ACCOUNT PROGRAMS. Thrifty makes
available to its franchisees for a fee insurance for death or injury to third
parties, property damage and damage to or theft of franchisee vehicles.
Thrifty makes bulk purchases of items used by its franchisees, which it
sells to franchisees at prices that are often lower than they could obtain on
their own. Thrifty also negotiates national account programs to allow its
franchisees to take advantage of volume discounts for many materials or services
used for operations such as tires, glass replacement, long distance telephone
service and overnight mail.
PARKING SERVICES. Airport parking operations are a natural complement
to vehicle rental operations. Thrifty encourages its franchisees that have
near-airport locations to add this ancillary business. Thrifty assists its
franchisees in obtaining additional property and in planning and implementing
parking operations. Franchisees benefit since the Thrifty service marks are
already on the premises, shuttle buses are already being operated for rental
customers and parking operations increase service levels and recognition at the
airports. Franchisees with parking operations may also offer ancillary services
such as car washes and oil changes to create additional opportunities to service
the vehicle while the traveler is away. Thrifty receives a royalty fee generally
equal to 3% of the total revenue generated from these services.
SERVICES AND PRODUCTS PROVIDED TO RENTAL CUSTOMERS. Thrifty's
franchisees provide their customers with products and services substantially
similar to those provided to customers by Dollar's company-owned stores.
INTERNATIONAL (EXCEPT CANADA)
As of December 31, 2000, Thrifty master franchisees operated 629
vehicle rental locations in 57 countries and territories outside the United
States and Canada. Regions with Thrifty franchisees include Latin America,
Europe, the Middle East, Africa and the Asia-Pacific region. Thrifty seeks to
attract international franchisees by emphasizing Thrifty's uniform image, brand
marketing efforts, worldwide reservation system and consistent vehicle rental
system practices and procedures. Thrifty's corporate revenues from international
franchisees were approximately 1% of 2000 total revenues.
Thrifty grants master franchises on a countrywide basis. Each master
franchisee is permitted to use directly and subfranchise others to use Thrifty's
service marks, systems and technologies within its country or territory.
COMPANY-OWNED STORES
Thrifty typically establishes company-owned stores only upon the
financial failure of a franchisee. Thrifty uses company-owned stores to preserve
its presence in key markets. As opportunities arise, these locations are
re-franchised. During 2000, Thrifty commenced operating its South Florida
locations, which were previously operated by an independent franchisee. As of
December 31, 2000, including Tulsa, Oklahoma, Thrifty operated company-owned
stores in four cities in the United States. In February 2001, Thrifty
re-franchised the three South Florida cities; however, it intends to continue to
operate its Tulsa, Oklahoma locations. Thrifty also began operating its Oakland
and Dallas-Fort Worth locations, and believes additional franchisee financial
failures could result during 2001. The services and products Thrifty provides to
company-owned stores and those provided by company-owned stores to vehicle
rental customers are substantially similar to those provided to and by Thrifty's
U.S. franchisees.
THRIFTY CAR SALES
Thrifty Car Sales, Inc., was formed in December 1998, to franchise
retail used car dealerships under the Thrifty Car Sales brand name. Thrifty Car
Sales provides an opportunity for both independent and manufacturer franchised
dealers to enhance or expand their used car operations under a well-recognized
national brand name. In addition to the use of the brand name dealers have
access to a variety of products and services offered by Thrifty Car Sales. These
products and services include operational and marketing support, vehicle supply
services, customized retail and wholesale financing programs as well as national
accounts and supplies programs.
13
At December 31, 2000, Thrifty Car Sales had 35 franchise locations in
operation with an additional 17 that have signed dealer agreements. An
additional 21 dealers have been approved and are pending final documentation. By
the end of 2001, Thrifty expects to double the number of locations in its
Thrifty Car Sales network.
CANADIAN OPERATIONS
Thrifty operates in Canada through its wholly owned subsidiary, Thrifty
Canada, Ltd. ("TCL"). TCL operates company-owned stores in five of the eight
largest airport vehicle rental markets in Canada and encourages franchisees to
operate in the remaining markets. As of December 31, 2000, the TCL system
included 136 vehicle rental locations, of which 93 were operated by franchisees
and 43 were operated as company-owned stores.
COMPANY-OWNED STORES
TCL's company-owned store operations include five strategic airports:
Toronto, Montreal, Vancouver, Winnipeg and Calgary. These operations are
important to maintaining a national airport presence in Canada, where TCL has
significant airport concession and lease commitments. Historically, TCL's
operating results have been adversely affected by losses incurred by
company-owned stores.
FRANCHISING
TCL provides services and products to its franchisees that are
substantially similar to those Thrifty provides to its U.S. franchisees,
including fleet leasing, insurance services, advertising and marketing support
and supplies. Due to the structure of the Canadian vehicle rental market, which
has a greater proportion of vehicle rental activity from on-airport locations
than off-airport locations as compared to the United States, Thrifty has sought
to strengthen its airport presence in Canada by encouraging existing and
prospective franchisees to locate on-airport. Canadian franchisees pay TCL a
combined monthly administrative and advertising fee fixed in most cases at 8% of
rental revenues.
MARKETING
Thrifty's marketing objective is to position the Thrifty brand as an
industry leader in delivering value for vehicle rental to value-conscious
consumers. In the United States it implements this strategy primarily through
national advertising, strategic marketing partnerships and enhancing
distribution channels. In addition, marketing assistance is provided to U.S.
franchisees in local advertising, promotion and sales.
ADVERTISING, PROMOTION AND SALES
Thrifty employs national advertising on U.S. broadcast and cable
television networks and in newspapers and travel industry and airline magazines.
Thrifty also sponsors sports and other events to increase national exposure and
promote local Thrifty operations. In the United States, Thrifty's national
advertising and marketing expenses are paid out of an advertising fund managed
by a national advertising committee consisting of representatives of Thrifty
franchisees and certain members of Thrifty management. U.S. franchisees and
company-owned stores contribute 5% of their base rental revenue from airport
operations and 2.5% of their base rental revenue from local operations to the
advertising fund. Thrifty has national marketing partnerships with major U.S.
airlines frequent flier programs. Its newest partners include Delta, U.S.
Airways and Air Canada.
14
U.S. franchisees and company-owned stores are also required to spend an
additional 3% of their base rental revenue on local advertising and promotion.
Thrifty has a local sales department that assists franchisees in developing
their local markets. Thrifty also provides an allowance for qualifying local
advertising, promotion and sales expenditures to U.S. franchisees that
participate in Thrifty's fleet leasing program. In the 2000 model year,
franchisees and company-owned stores earned an aggregate allowance of
approximately $5.9 million.
Thrifty has made filings under the intellectual property laws of
jurisdictions in which it or its franchisees operate, including the U.S. Patent
and Trademark Office, to protect the names, logos and designs identified with
Thrifty. These marks are important for customer awareness and selection of
Thrifty for vehicle rental.
STRATEGIC MARKETING EFFORTS
During 2000, the volume of reservations received through its
thrifty.com web site and other Internet travel sites continued to grow rapidly.
Thrifty continues to invest in its thrifty.com web site and recently contracted
with Mapquest to provide mapping and direction services on thrifty.com.
Thrifty enjoys a strong relationship with the travel agency community,
which is highlighted by its longstanding support of ASTA (American Society of
Travel Agents) and through its preferred supplier arrangements. Under its
preferred supplier arrangements, Thrifty provides these travel agency groups
additional commissions or lower prices in return for their featuring Thrifty in
their advertising or giving Thrifty a priority in their reservation systems. In
general, these arrangements are not exclusive to Thrifty, and many travel agency
groups have similar arrangements with other vehicle rental companies.
In January 2001, Thrifty became the exclusive car rental partner in
Carlson Wagonlit's Gold Points Rewards Program, a customer loyalty program in
the U.S. and Canada with more than 6 million cardholders and partners that
include Radisson Hotels & Resorts, MCI WorldCom, Country Inns & Suites by
Carlson, T.G.I.Friday's, Carlson Wagonlit Travel (Canada), Famous Players
Theatres and nearly 150 on-line partners like the Disney Store Online,
Hallmark.com and SharperImage.com.
15
SUMMARY OPERATING DATA OF THRIFTY
YEARS ENDED DECEMBER 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------
(in thousands)
Revenues:
U.S. and Canada franchisees $ 215,340 $ 225,934 $ 200,505
U.S. and Canada company-owned stores 40,858 33,981 34,526
International franchisees 2,885 3,063 2,888
---------- ---------- ----------
Total revenues $ 259,083 $ 262,978 $ 237,919
========== ========== ==========
AS OF DECEMBER 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------
Rental Locations:
U.S. and Canada franchisee locations 613 651 609
U.S. and Canada company-owned stores 52 33 25
Franchisees:
U.S. and Canada 226 245 232
International 57 63 67
16
FLEET ACQUISITION AND MANAGEMENT
U.S. VEHICLE SUPPLY
For the 2000 model year, DaimlerChrysler vehicles represented
approximately 86% of the Group's total U.S. fleet. The Group also purchases or
leases vehicles of other automotive manufacturers, permitting it to adjust the
composition and overall cost of its fleet. The Company expects that for the 2001
model year, DaimlerChrysler vehicles will represent over 85% of the Group's U.S.
fleet.
Automotive manufacturers' residual value programs limit the Group's
residual value risk. Under these programs, the manufacturer either guarantees
the aggregate depreciated value upon resale of covered vehicles of a given model
year, as is generally the case under DaimlerChrysler's program, or agrees to
repurchase vehicles at specified prices during established repurchase periods.
In either case, the manufacturer's obligation is subject to certain conditions
relating to the vehicle's age, physical condition and mileage. Vehicles
purchased by vehicle rental companies under these programs are referred to
herein as "Program Vehicles." Vehicles for which rental companies bear residual
value risk are referred to herein as "Non-Program Vehicles." The Company
believes that a majority of vehicles owned by other U.S. vehicle rental
companies, except for Enterprise, are Program Vehicles.
The Group's primary supplier, DaimlerChrysler, sets the terms of its
residual value program before the start of each model year. The terms include
monthly depreciation rates, minimum and maximum holding periods and mileage,
model mix requirements and vehicle condition and other return requirements. The
residual value program enables the Group to limit its residual value risk with
respect to Program Vehicles because DaimlerChrysler agrees to reimburse Dollar
and Thrifty for any difference between the aggregate gross auction sale price of
the Program Vehicles for the particular model year and the vehicles' aggregate
predetermined residual value. Under the program, Dollar and Thrifty must sell
the Program Vehicles in closed auctions to DaimlerChrysler dealers. Dollar and
Thrifty are reimbursed under the program for certain transportation and
auction-related costs.
The Group also purchases Non-Program Vehicles, when required by
manufacturers in connection with the purchase of Program Vehicles, or if it
believes there is an opportunity to lower its fleet costs or to fill model and
class niches not available through residual value programs. DaimlerChrysler,
which is the main provider of Non-Program Vehicles to the Group, does not set
any terms or conditions on the resale of Non-Program Vehicles other than
required minimum holding periods. For the 2000 model year, approximately 27% of
the vehicles acquired by the Group were Non-Program Vehicles.
The Group's operating results are materially affected by the
depreciation rates and other purchase terms provided under DaimlerChrysler's
residual value program, as well as by other purchase incentives DaimlerChrysler
provides. The percentage of vehicles acquired under DaimlerChrysler's and other
manufacturers' residual value programs in the future will depend upon a number
of factors, including the availability and cost of these programs. Residual
value programs enable Dollar and Thrifty to determine their depreciation expense
on Program Vehicles in advance. Vehicle depreciation is the largest single cost
element in the Group's operations. The percentage of the Group's vehicle rental
fleets benefiting from residual value programs could decrease if the automotive
manufacturers changed the size or terms of these programs. In that event, the
Group would have increased residual value risk that could be material to its
results of operations and could adversely affect its ability to finance its
vehicles. Second, because it is difficult to predict future vehicle resale
values, the Group may not be able to manage effectively the residual value risk
on its Non-Program Vehicles. As recently as 1997, results for the Group were
adversely affected by lower than anticipated residual values. The residual value
of Non-Program Vehicles depends on such factors as the general level of pricing
in the automotive industry for both new and used vehicles. Prices for used
vehicles generally decrease if the automotive manufacturers increase the retail
sales incentives they offer on new vehicles. The Company cannot predict the
level of retail sales incentives DaimlerChrysler or the other automotive
manufacturers will offer in the future. The Group has received substantial
payments under residual value programs over the past several years. See Note 5
of Notes to Consolidated Financial Statements.
17
DaimlerChrysler has been the Group's principal supplier of vehicles. In
1996, DaimlerChrysler began operating under five-year vehicle supply
arrangements that were formalized in 1996 and 1997 in separate U.S. vehicle
supply agreements ("VSAs") with Dollar and Thrifty. DaimlerChrysler has agreed
to make specified volumes of DaimlerChrysler vehicles available to Dollar and
Thrifty through July 2001. In June 2000, the Company entered into a new VSA with
DaimlerChrysler, which will enable the Group to acquire vehicles beginning with
the 2002 model year through the 2006 model year. Dollar and Thrifty may purchase
vehicles for use by company-owned stores or for their fleet leasing programs.
Dollar and Thrifty have agreed to promote DaimlerChrysler vehicles exclusively
in their advertising and other promotional materials. DaimlerChrysler has agreed
to make various promotional payments to Dollar and Thrifty, some of which vary
based on the volume of vehicles purchased. These payments are material to the
Group's results of operations. See Note 5 of Notes to Consolidated Financial
Statements.
The VSAs provide that Dollar and Thrifty will each purchase at least
80% of their respective vehicles from DaimlerChrysler until a certain minimum
level is reached. Also, certain minimum numbers of vehicles must be Program
Vehicles. While DaimlerChrysler has the sole discretion to set the specific
terms and conditions of its residual value program for a model year, it has
agreed in the VSAs to offer programs to Dollar and Thrifty that, taken as a
whole, are competitive with a residual value program Ford or General Motors
makes generally available to domestic vehicle rental companies.
If purchases of DaimlerChrysler vehicles by Dollar or Thrifty during
any model year exceed certain targets, DaimlerChrysler will make available to
Dollar or Thrifty additional Program Vehicles up to a maximum of 15% of the
target number of DaimlerChrysler Program Vehicles.
VEHICLE DISPOSITION
Dollar and Thrifty generally hold vehicles in rental service from eight
months to 10 months. The length of service is determined by taking into account
seasonal rental demand and the average monthly mileage accumulation. Most
vehicles must be removed from service before they reach 30,000 miles to avoid
significant penalties under DaimlerChrysler's residual value program. As of
December 31, 2000, the average age of vehicles in the Group's fleet was
approximately five months. The Group's flexibility to adjust the holding period
for vehicles, particularly for Program Vehicles, enables the Group to adjust its
fleet size up or down relatively quickly in response to changing market
conditions. Dollar or Thrifty must bear the risk on the resale of Program
Vehicles that cannot be returned.
Dollar and Thrifty dispose of Non-Program Vehicles through auctions and
directly to used car dealers, wholesalers, retail and franchisees. During 2000,
Dollar and Thrifty disposed of 51% of their Non-Program Vehicles through direct
channels and 49% through auctions. Utilizing sales channels other than auctions
avoids transportation costs, interest costs and auction fees and may provide
higher net residual amounts from disposal.
MAINTENANCE
Dollar and certain Dollar and Thrifty franchisees may have automotive
maintenance centers at airports and in urban and suburban areas. Many of these
facilities are accepted by automotive manufacturers as eligible to perform and
receive reimbursement for warranty work. Collision damage and major repairs are
generally performed by independent contractors. Dollar and Thrifty franchisees
are responsible for the maintenance of their fleet vehicles.
18
FLEET LEASING PROGRAMS
Dollar and Thrifty make fleet leasing programs available to their U.S.
franchisees for each new model year. The terms of their fleet leasing programs
generally mirror the requirements of various manufacturers' residual value
programs with respect to model mix, order and delivery, vehicle maintenance and
returns, but also include Non-Program Vehicles. Dollar and Thrifty monitor the
creditworthiness and operating performance of franchisees participating in their
fleet leasing programs and periodically audit franchisees' leased fleets. Dollar
and Thrifty design their fleet leasing programs to offer their franchisees an
attractive means of obtaining fleet vehicles. For 2000, approximately 26% and
64% of the vehicles in the fleets of Dollar's and Thrifty's respective U.S.
franchisees had been provided through their fleet leasing programs. In 2000,
approximately 3% of Dollar's and 67% of Thrifty's (including Canada) total
revenue was derived from vehicle leasing programs. During 2000, a limited number
of larger franchisees acquired their vehicles directly from manufacturers.
Dollar and Thrifty each set their respective lease rates after
considering Program Vehicle depreciation rates, estimated Non-Program Vehicle
depreciation, interest costs, model mix, administrative costs and market
conditions. Average monthly lease rates vary depending on vehicle model, and the
average lease period is between eight and ten months. Although Dollar and
Thrifty lease Non-Program Vehicles as well as Program Vehicles to their
franchisees, their fleet leasing programs eliminate the residual value risk for
their franchisees. Thrifty franchisees may, however, elect to assume some
residual value risk on certain Non-Program Vehicles they lease in exchange for a
lower lease rate.
U.S. FLEET DATA
YEARS ENDED DECEMBER 31,
-------------------------------------
2000 1999 1998
---------- ---------- ----------
THRIFTY:
Average number of vehicles leased to franchisees 31,267 31,856 29,595
---------- ---------- ----------
Average number of vehicles in combined fleets of
franchisees 49,210 45,613 39,434
Average number of vehicles in combined fleets of
company-owned stores 720 483 865
---------- ---------- ----------
Total 49,930 46,096 40,299
========== ========== ==========
DOLLAR:
Average number of vehicles leased to franchisees 4,080 4,960 6,151
---------- ---------- ----------
Average number of vehicles in combined fleets of
franchisees 15,470 14,252 13,513
Average number of vehicles in combined fleets of
company-owned stores 61,858 56,065 50,673
---------- ---------- ----------
Total 77,328 70,317 64,186
========== ========== ==========
19
COMPETITION
There is intense competition in the vehicle rental industry on the
basis of price, service levels, vehicle quality, vehicle availability and
convenience and condition of rental locations. Dollar and Thrifty's principal
competitors may have larger market shares and rental volumes, greater financial
resources and more sophisticated information systems. Dollar operates mainly in
the U.S. airport market, although compared to its competitors it relies more
heavily on leisure, tour and business customers. Dollar's franchisees have a
similar customer profile. In any given location, Dollar may compete with
national, regional and local vehicle rental companies, some of which have
greater financial resources than the Group. Dollar's principal competitors for
business and leisure travelers are Alamo, Avis, Budget, Hertz, National,
Enterprise and Thrifty. Dollar competes primarily on the basis of price and
customer service.
Thrifty's U.S. franchisees generally compete for cost-conscious
consumers with Alamo, Avis, Budget, Dollar, Hertz, National and Enterprise.
Hertz, Enterprise, Avis and Alamo as well as local and regional rental companies
are major competitors in the local market. They compete on the basis of price,
location, service and well-established customer relationships. Most Thrifty
franchisees compete in the local market for retail general use business rather
than insurance replacement rentals. Thrifty's company-owned stores have a
similar customer profile.
The Canadian vehicle rental markets are also intensely competitive. The
vast majority of the Canadian market is operated either directly or through
franchisees of the major U.S. vehicle rental companies, including Budget, Avis,
Hertz and National, as well as Dollar and Thrifty.
INSURANCE
The Group is subject to third-party bodily injury liability and
property damage liability claims resulting from accidents involving their rental
customers. For 2000 and most of 1999, the majority of the Company's operations
had first dollar coverage from insurance carriers, subject to certain policy
limits, for public liability and property damage claims. Prior to this insurance
coverage, the Group retained the risk of loss in various amounts up to $2
million on a per occurrence basis. The Group maintains additional insurance at
certain amounts in excess of its respective underlying coverages.
The Group retains the risk of loss for general and garage liability
insurance coverage up to $1 million and maintains insurance at certain amounts
in excess of $1 million. They also maintain catastrophic and comprehensive
coverage for damage to vehicles owned by them up to $3 million per occurrence
with a deductible amount of $250,000. In addition, the Group carries workers'
compensation coverage with retentions up to $100,000. The Group also carries
excess liability and directors' and officers' liability insurance coverage.
Provisions for bodily injury liability and property damage liability on
self-insured claims are made by charges to expense based upon periodic
evaluations by an independent actuary of estimated ultimate liabilities on
reported and unreported claims. As of December 31, 2000, the Group's reserve for
public liability and property damage claims was approximately $35 million. The
Group's obligations to pay these losses and indemnify the insurance carriers are
collateralized by surety bonds. As of December 31, 2000, these surety bonds
totaled approximately $46.1 million.
The Group also maintains various surety bonds to secure performance
under airport concession agreements and other obligations. As of December 31,
2000, the total amount of these bonds was approximately $28.7 million.
20
REGULATION
LOSS DAMAGE WAIVERS AND SUPPLEMENTAL LIABILITY INSURANCE
Loss damage waivers relieve customers from financial responsibility for
vehicle damage. Legislation affecting the sale of loss damage waivers has been
adopted in 26 states. These laws either require disclosure to customers that
loss damage waivers may not be necessary, limit customer liability to specified
amounts, limit the ability of vehicle rental companies to offer loss damage
waivers for sale or cap the amounts that may be charged for loss damage waivers.
Adoption of national or additional state legislation affecting or limiting the
sale, or capping the rates, of loss damage waivers could result in the loss of
this revenue and additional limitations on potential customer liability could
increase costs to Dollar, Thrifty and their franchisees.
Dollar, Thrifty and other vehicle rental companies offer customers
supplemental liability insurance ("SLI") in connection with vehicle rentals. In
1997, the State of Texas determined that car rental companies cannot sell SLI
without licensing and product approval. Some other states concluded that the
selling of SLI required an insurance license while other states were unclear on
the issue. During the fourth quarter of 1999, the Financial Services Reform Bill
was passed by Congress to address this issue. The legislation created a federal
presumption for a three-year period that car rental companies are not required
to have a state insurance license to sell certain insurance products, unless
state law specifically requires such a license. In states where existing law
does not require such insurance licensing, car rental companies are working to
enact legislation which either specifically exempts them from licensing
requirements or which grants them a limited license to sell insurance products
related to car rental, such as SLI.
FRANCHISING REGULATION
As franchisors, Dollar and Thrifty are subject to federal, state and
foreign laws regulating various aspects of franchise operations and sales. These
laws impose registration and disclosure requirements on franchisors in the offer
and sale of franchises and, in certain states, also apply substantive standards
to the relationship between the franchisor and the franchisee, including those
pertaining to default, termination and nonrenewal of franchises.
OTHER MATTERS
Certain states currently make vehicle owners (including vehicle rental
companies) vicariously liable for the actions of any person lawfully driving an
owned vehicle, regardless of fault. Some of these states, primarily New York, do
not limit this liability. Vehicle rental companies are also subject to various
federal, state and local consumer protection laws and regulations including
those relating to advertising and disclosure of charges to customers.
Dollar and Thrifty are subject to federal, state and local laws and
regulations relating to taxing and licensing of vehicles, franchise sales,
franchise relationships, vehicle liability, used vehicle sales, insurance,
telecommunications, vehicle rental transactions and labor matters. The Company
believes that Dollar and Thrifty practices and procedures are in substantial
compliance with federal, state and local laws and is not aware of any material
expenditures necessary to meet legal or regulatory requirements. Nevertheless,
considering the nature and scope of Dollar's and Thrifty's businesses, it is
possible that regulatory compliance problems could be encountered in the future.
21
ENVIRONMENTAL MATTERS
The principal environmental regulatory requirements applicable to
Dollar and Thrifty operations relate to the ownership, storage or use of
petroleum products such as gasoline, diesel fuel and new and used motor oil; the
treatment or discharge of waste waters; the operation of automotive body shops;
and the generation, storage, transportation and off-site treatment or disposal
of waste materials. Dollar and Thrifty own 11 and lease 98 locations where
petroleum products are stored in underground or above-ground tanks. For owned
and leased properties, Dollar and Thrifty have programs designed to maintain
compliance with applicable technical and operational requirements, including
leak detection testing of underground storage tanks, and to provide financial
assurance for remediation of spills or releases.
The historical and current uses of the Dollar and Thrifty facilities
may have resulted in spills or releases of various hazardous materials or wastes
or petroleum products ("Hazardous Substances") that now, or in the future, could
require remediation. The Group also may be subject to requirements related to
remediation of Hazardous Substances that have been released into the environment
at properties they own or operate, or owned or operated in the past, or at
properties to which they send, or have sent, Hazardous Substances for treatment
or disposal. Such remediation requirements generally are imposed without regard
to fault, and liability for any required environmental remediation can be
substantial.
Dollar and Thrifty may be eligible for reimbursement or payment of
remediation costs associated with releases from registered underground storage
tanks in U.S. states that have established funds to assist in the payment of
such remediation costs. Subject to certain deductibles, the availability of
funds, the compliance status of the tanks and the nature of the release, these
tank funds may be available to Dollar and Thrifty for use in remediating
releases from their tank systems.
At certain facilities, Dollar and Thrifty presently are investigating
or remediating soil or groundwater contamination. Based on currently available
information, the Company does not believe that the costs associated with
environmental investigation or remediation will be material. However, additional
contamination could be identified or occur in the future.
The use of automobiles and other vehicles is subject to various
governmental requirements designed to limit environmental damage, including that
caused by emissions and noise. Generally, these requirements are met by the
manufacturer except, on occasion, equipment failure requiring repair by the
Group.
Environmental legislation and regulations and related administrative
policies have changed rapidly in recent years. There is a risk that governmental
environmental requirements, or enforcement thereof, may become more stringent in
the future and that the Group may be subject to legal proceedings brought by
government agencies or private parties with respect to environmental matters. In
addition, with respect to cleanup of contamination, additional locations at
which wastes generated by the Group may have been released or disposed, and of
which the Group is currently unaware, may in the future become the subject of
cleanup for which the Group may be liable, in whole or part. Accordingly, while
the Group believes that it is in substantial compliance with applicable
requirements of environmental laws, there can be no assurance that the Group's
future environmental liabilities will not be material to the Group's
consolidated financial position or results of operations or cash flows.
EMPLOYEES
As of December 31, 2000, the Group employed a total of approximately
6,200 full-time and part-time employees of whom approximately 4,900 were
employed by Dollar and 1,300 by Thrifty. Approximately 270 of the Group's
employees were subject to collective bargaining agreements as of December 31,
2000. The Company believes the Group's relationship with its employees is good.
22
ITEM 2. PROPERTIES
The Company owns its headquarters located at 5330 East 31st Street,
Tulsa, Oklahoma. This location is a three building office complex that houses
the headquarters and Tulsa reservation centers for Dollar and Thrifty. These
buildings and the related improvements were mortgaged in December 1997 pursuant
to a mortgage in favor of Credit Suisse First Boston ("CSFB"), as administrative
agent for a syndicate of banks. The mortgage was executed in connection with the
Revolving Credit Facility, as described in "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources".
Dollar and Thrifty each own or lease real property used for
company-owned stores and office facilities, and in some cases own real property
that is leased to franchisees or other third parties. As of December 31, 2000,
the Group's company-owned operations were carried on at 182 locations in the
U.S. and Canada, the majority of which are leased. Dollar and Thrifty each
operate company-owned stores under concession agreements with various
governmental authorities charged with the operation of airports. Concession
agreements for airport locations, which are sometimes competitively bid, are
important for securing air traveler business.
In connection with the Revolving Credit Facility, Dollar executed
mortgages in favor of CSFB encumbering its real property located in San Diego,
Tampa and Las Vegas. Thrifty also executed mortgages in favor of CSFB
encumbering its real property located in Phoenix, Ft. Lauderdale, Orlando,
Dallas, Houston, and Salt Lake City.
ITEM 3. LEGAL PROCEEDINGS
On November 2, 1994, the City of San Jose, California filed an action
in the Superior Court of California, against Chevron, Dollar and others, seeking
unspecified compensatory and punitive damages and injunctive relief. The City of
San Jose has not served process on Dollar. The suit relates to pollution at a
site currently occupied by Dollar and formerly occupied by Chevron. Dollar has
partially remediated the affected soil, but not the allegedly affected ground
water. Dollar believes that prior uses of the site resulted in any remaining
contamination at the site.
In addition to the foregoing, various legal actions, claims and
governmental inquiries and proceedings are pending or may be instituted or
asserted in the future against the Company and its subsidiaries. Litigation is
subject to many uncertainties, and the outcome of the individual litigated
matters is not predictable with assurance. It is possible that certain of the
actions, claims, inquiries or proceedings, including the one discussed above,
could be decided unfavorably to the Company or the subsidiaries involved.
Although the amount of liability with respect to these matters cannot be
ascertained, potential liability is not expected to materially affect the
consolidated financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter ended December 31, 2000.
23
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") under the trading symbol "DTG." The high and low sales prices for the
Common Stock for each quarterly period during 2000 and 1999, were as follows:
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
2000
----
High $ 23.75 $ 21.00 $ 22.81 $ 20.81
Low $ 11.38 $ 14.88 $ 18.25 $ 14.25
1999
----
High $ 17.31 $ 23.94 $ 25.44 $ 24.06
Low $ 11.31 $ 16.56 $ 18.31 $ 16.88
The 24,205,422 shares of Common Stock outstanding at February 28, 2001
were held by approximately 3,100 registered and beneficial stockholders of
record.
The Company intends to reinvest its earnings in its business and
therefore does not anticipate paying any cash dividends in the foreseeable
future. The Company has not paid cash dividends since completion of the
Offering.
Under the terms of the Revolving Credit Facility, restrictions were
imposed by the lender on the payment of cash dividends to stockholders. During
the term of such agreement, which was extended in August 2000 through August 2,
2005, dividends are permitted at the lesser of specified monetary levels or
percentages of cash flow.
24
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA OF THE GROUP
The selected consolidated statements of operations and balance sheet
data were derived from the audited consolidated financial statements of the
Group. References to system-wide vehicle rental revenue include revenue received
from the Group's company-owned stores and by franchisees from the rental of
vehicles.
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
STATEMENTS OF OPERATIONS:
(in thousands except per share amounts)
REVENUES:
Vehicle rentals $ 813,741 $ 714,407 $ 635,600 $ 620,045 $ 497,239
Vehicle leasing 198,686 218,614 202,371 164,701 149,713
Fees and services 61,166 57,046 51,770 49,143 47,597
Other 9,850 8,685 9,225 9,899 9,342
----------- ----------- ----------- ----------- -----------
Total revenues 1,083,443 998,752 898,966 843,788 703,891
----------- ----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Direct vehicle and operating 315,164 289,129 267,504 263,850 225,558
Vehicle depreciation and lease
charges, net 340,448 311,113 305,169 294,911 230,051
Selling, general and
administrative 187,711 190,994 163,256 149,697 140,089
Interest expense, net 97,703 95,114 88,726 87,852 72,868
Amortization of cost in excess
of net assets acquired 5,941 5,842 5,417 6,010 8,169
Intangible asset impairment losses - - - - 157,758
----------- ----------- ----------- ----------- -----------
Total costs and expenses 946,967 892,192 830,072 802,320 834,493
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes 136,476 106,560 68,894 41,468 (130,602)
Income tax expense 58,467 46,974 31,229 23,427 16,682
----------- ----------- ----------- ----------- -----------
Net income (loss) (a) $ 78,009 $ 59,586 $ 37,665 $ 18,041 $ (147,284)
=========== =========== =========== =========== ===========
Earnings (loss) per share (a):
Basic $ 3.23 $ 2.47 $ 1.56 $ 0.90 $ (7.36)
Diluted $ 3.18 $ 2.43 $ 1.56 $ 0.90 $ (7.36)
BALANCE SHEET DATA:
(in thousands)
Revenue-earning vehicles, net $ 1,522,388 $ 1,507,692 $ 1,342,066 $ 1,319,490 $ 1,120,346
Total assets $ 2,100,374 $ 2,171,653 $ 1,865,300 $ 1,942,210 $ 1,647,951
Total debt $ 1,424,021 $ 1,555,609 $ 1,313,799 $ 1,418,687 $ 1,241,558
Stockholders' equity $ 458,139 $ 379,127 $ 315,914 $ 268,426 $ 183,883
25
U.S. AND CANADA
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
System-wide Data:
VEHICLE RENTAL REVENUE:
(in thousands)
Company-owned stores $ 814,000 $ 714,000 $ 636,000 $ 620,000 $ 497,000
Franchisee locations 737,000 699,000 620,000 516,000 502,000
----------- ----------- ----------- ----------- -----------
Total vehicle rental revenue $ 1,551,000 $ 1,413,000 $ 1,256,000 $ 1,136,000 $ 999,000
=========== =========== =========== =========== ===========
RENTAL LOCATIONS:
Company-owned stores 182 149 139 139 156
Franchisee locations 765 824 763 752 729
----------- ----------- ----------- ----------- -----------
Total rental locations 947 973 902 891 885
=========== =========== =========== =========== ===========
Average number of vehicles operated
during the period by company-owned
stores and franchisees 134,475 123,814 111,652 103,417 94,992
Peak number of vehicles operated
during the period by company-owned
stores and franchisees 162,515 148,832 134,407 122,286 110,771
COMPANY-OWNED STORES DATA:
VEHICLE RENTAL DATA:
Average number of vehicles operated 65,702 59,218 53,983 53,719 45,037
Number of rental days 20,347,296 18,155,768 16,374,491 16,320,568 13,740,649
Average revenue per day $ 40.00 $ 39.35 $ 38.82 $ 37.98 $ 36.19
Monthly average revenue per vehicle $ 1,032 $ 1,005 $ 980 $ 959 $ 917
VEHICLE LEASING DATA:
Average number of vehicles leased 35,520 38,690 37,709 32,814 30,583
Average monthly lease revenue per unit $ 466 $ 471 $ 447 $ 420 $ 409
(a) Management believes it is important to note that net loss and loss per
share for the year ended December 31, 1996 include intangible asset
impairment losses of $157,758,000, which includes an impairment loss
related to DaimlerChrysler's decision in 1996 to dispose of Thrifty as
a non-core asset in the amount of $155,000,000 and an impairment loss
related to TCL in the amount of $2,758,000.
26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Group owns two separate vehicle rental companies, Dollar and
Thrifty. They engage in the business of renting vehicles directly to retail and
tour customers and providing vehicle leasing and other services to franchisees
that rent to customers. The majority of Dollar's revenue is derived from renting
vehicles to customers from company-owned stores, while the majority of Thrifty's
revenue is generated from leasing vehicles and providing services to
franchisees.
The Group's revenues consist of:
o Vehicle rentals -- revenue generated from renting vehicles to
customers, including all related charges, through company-owned
stores,
o Vehicle leasing -- revenue generated from leasing vehicles to
franchisees,
o Fees and services -- revenue generated from franchise fees and
providing reservations, insurance, supplies and other products and
services to franchisees, and
o Other -- revenue generated from franchise sales, parking income,
non-vehicle lease income and interest income derived from
franchisees.
The Group's expenses consist of:
o Direct vehicle and operating -- costs related to the rental of
revenue-earning vehicles to customers and to the leasing of
vehicles to franchisees, such as field personnel expenses, facility
expenses, concessions and commissions paid to airport authorities,
travel agencies and others, insurance and lease promotion expenses,
net of certain incentives received from vehicle manufacturers,
o Vehicle depreciation and lease charges, net -- depreciation expense
relating to revenue-earning vehicles, net of gains and losses on
the disposal of such vehicles, and lease charges for vehicles
leased from third parties,
o Selling, general and administrative expenses, including
headquarters personnel expenses, advertising and marketing expenses
and reservation expenses,
o Interest expense, net -- interest expense, net of interest earned
on restricted cash, cash and cash equivalents, relating primarily
to revenue-earning vehicle financing, and
o Amortization of cost in excess of net assets acquired.
The Group's profitability is primarily a function of the volume and
pricing of rental transactions, utilization of the vehicles and the number of
vehicles leased to franchisees. Significant changes in the purchase or disposal
price of vehicles or interest rates can also have a significant effect on the
Group's profitability, depending on the ability of the Group to adjust the size
of the fleet as well as pricing and lease rates for these changes. The Group's
business requires significant expenditures for vehicles and consequently,
requires substantial liquidity to finance such expenditures.
27
The following discussion and analysis provides information that
management believes to be relevant to understanding the Company's consolidated
financial condition and results of operations. This discussion should be read in
conjunction with the Group's consolidated financial statements and the related
notes thereto included in this report.
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues in the
Group's consolidated statements of income:
YEARS ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
------- ------- -------
REVENUES:
Vehicle rentals 75.1% 71.5% 70.7%
Vehicle leasing 18.3 21.9 22.5
Fees and services 5.7 5.7 5.8
Other 0.9 0.9 1.0
------- ------- -------
Total revenues 100.0 100.0 100.0
------- ------- -------
COSTS AND EXPENSES:
Direct and vehicle operating 29.1 28.9 29.8
Vehicle depreciation and lease charges, net 31.4 31.2 33.9
Selling, general and administrative 17.3 19.1 18.1
Interest expense, net 9.0 9.5 9.9
Amortization of cost in excess of net
assets acquired 0.6 0.6 0.6
------- ------- -------
Total costs and expenses 87.4 89.3 92.3
------- ------- -------
INCOME BEFORE INCOME TAXES 12.6 10.7 7.7
INCOME TAX EXPENSE 5.4 4.7 3.5
------- ------- -------
NET INCOME 7.2% 6.0% 4.2%
======= ======= =======
28
The following table sets forth a breakdown of the Group's two major sources of
revenue:
YEARS ENDED DECEMBER 31,
-----------------------------------------------
2000 1999 1998
----------- ----------- -----------
(in thousands)
VEHICLE RENTAL REVENUE:
Dollar $ 773,328 $ 681,240 $ 603,331
Thrifty 40,413 33,167 32,269
----------- ----------- -----------
Total $ 813,741 $ 714,407 $ 635,600
=========== =========== ===========
LEASING REVENUE:
Dollar $ 25,014 $ 28,762 $ 33,224
Thrifty 173,672 189,852 169,147
----------- ----------- -----------
Total $ 198,686 $ 218,614 $ 202,371
=========== =========== ===========
YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999
REVENUES
Total revenues for the year ended December 31, 2000 increased $84.7
million, or 8.5%, to $1.083 billion compared to 1999. The increase in total
revenues was due to an increase in rental revenue of 13.9% over 1999 which was
partially offset by a 9.1% decrease in leasing revenue. Fees and services
revenue increased $4.1 million due to the growth in franchisee rental revenue.
Vehicle rental revenue and vehicle leasing revenue were impacted by franchise
acquisitions at Dollar and conversions of franchisee operations to company-owned
stores at Thrifty.
The Group's vehicle rental revenue for 2000 was $813.7 million, a 13.9%
increase from 1999. This increase was due primarily to a $92.1 million increase
at Dollar and a $7.2 million increase at Thrifty. The growth in vehicle rental
revenue at Dollar was the result of an 11.5% increase in rental days combined
with a 1.8% increase in revenue per day. The rental revenue growth at Dollar
related to the acquisition of franchisees was $16.2 million, which represented
approximately 18% of Dollar's total rental revenue growth during 2000.
Vehicle leasing revenue for 2000 was $198.7 million, a $19.9 million
decrease from 1999. This decrease in vehicle leasing revenue reflects a decrease
of $16.2 million, or 8.5%, in Thrifty's leasing revenue. This decrease was due
to a decline in the average number of vehicles leased to franchisees and to
modifications of the lease program to eliminate certain incentives previously
made available to licensees with a corresponding reduction in the lease rate.
While these lease program modifications resulted in a reduction of vehicle
leasing revenue, they had no impact on operating income. In addition, Thrifty
made some vehicles available under direct financing leases (reflected as other
revenue) as opposed to operating leases. Dollar's leasing revenue declined $3.7
million, or 13%, due to a decrease in the average number of vehicles leased to
franchisees as a result of the acquisition of franchised locations during 2000
which was partially offset by an increase in lease rates.
29
EXPENSES
Total expenses increased 6.1% from $892.2 million in 1999 to $947.0
million in 2000. This increase was due primarily to a $64.8 million, or 9.9%
increase for Dollar and a $9.8 million, or 4.2% decrease at Thrifty. Total
expenses as a percentage of revenue declined to 87.4% in 2000 from 89.3% in
1999.
Direct vehicle and operating expenses for 2000 increased $26.0 million,
or 9.0%, primarily related to a 12.1% increase in the number of rental days over
1999. These expenses increased $31.7 million at Dollar and decreased $5.7
million at Thrifty. The overall increase at Dollar was due to higher airport
concession rents, personnel and other vehicle operating costs partially offset
by a $5.1 million favorable adjustment to insurance reserves recorded during
2000. This favorable adjustment was due to improved claims experience in the
settlement of existing claims as reflected in an independent actuary's reserve
estimate. The decrease at Thrifty was primarily due to the lease program
modifications discussed earlier. Direct vehicle and operating expenses were
29.1% of revenue for 2000, compared to 28.9% of revenue for 1999.
Net vehicle depreciation expense and lease charges for 2000 increased
$29.3 million, or 9.4%, due to both an increase in the average number of owned
and leased vehicles and to higher costs per vehicle compared to 1999. Lease
charges, for vehicles leased from third parties, increased $20.7 million due to
more vehicles leased during 2000. Net vehicle depreciation expense increased
$9.5 million, or 2.9%, due to a 4.7% increase in the average depreciation rate
(6.0% at Dollar and a 1.9% increase at Thrifty) partially offset by a 1.7%
decrease in depreciable fleet. The disposition of Non-Program Vehicles resulted
in a net vehicle gain of $26.1 million in 2000 and $25.2 million in 1999. Net
vehicle depreciation and lease charges increased by $30.2 million at Dollar and
decreased by $0.9 million at Thrifty.
Selling, general and administrative expenses of $187.7 million for 2000
decreased from $190.9 million in 1999, comprised primarily of a $0.2 million
decrease at Dollar and a $3.5 million decrease at Thrifty. The lower costs were
due primarily to lower personnel related costs during 2000.
Net interest expense increased $2.6 million, or 2.7% to $97.7 million.
Net interest expense decreased as a percentage of revenue from 9.5% in 1999 to
9.0% in 2000, partially due to more vehicles under operating leases in 2000. The
increase in expense for the Group was due to the effect of higher average
vehicle debt levels and vehicle interest rates partially offset by an increase
in the interest earned on invested restricted cash and other interest income.
The tax provision for 2000 was $58.5 million. The effective tax rate of
42.8% for 2000 was down from 44.1% in 1999. The decrease in the effective tax
rate was due primarily to the change in the relationship between permanent
differences and Canadian operations to income before income taxes. The effective
tax rate differs from the U.S. statutory tax rate due primarily to
non-deductible amortization of costs in excess of net assets acquired and state
and local taxes.
OPERATING RESULTS
The Group had income before income taxes of $136.5 million for 2000 as
compared to $106.6 million in 1999, a 28.1% increase. This growth was due to a
$24.0 million increase at Dollar and a $5.9 million increase at Thrifty.
30
YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998
REVENUES
Total revenues for the year ended December 31, 1999 increased $99.8
million, or 11.1%, to $998.8 million compared to 1998. The increase in total
revenues was due to an increase in rental revenue of 12.4% over 1998 and a 8.0%
growth in leasing revenue. Fees and services revenue increased $5.3 million due
to higher franchise fees and other revenue fees from franchisees. Vehicle rental
revenue and vehicle leasing revenue were impacted by franchise acquisitions at
Dollar and re-franchising of company-owned stores at Thrifty.
The Group's vehicle rental revenue for 1999 was $714.4 million, a 12.4%
increase from 1998. This increase was due primarily to a $77.9 million increase
for Dollar and a $0.9 million increase at Thrifty. The growth in vehicle rental
revenue at Dollar was the result of an increase of 11.7% in rental days combined
with a 1.1% increase in revenue per day. The rental revenue growth at Dollar
related to the acquisition of franchisees was $15 million, which represented
19.2% of Dollar's total rental revenue growth during 1999.
Vehicle leasing revenue for 1999 was $218.6 million, a $16.2 million
increase from 1998. This increase in vehicle leasing revenue reflects an
increase of $20.7 million, or 12.2%, in Thrifty's leasing revenue due to a 6.9%
increase in the average number of vehicles leased to franchisees along with a
4.9% increase in the vehicle leasing rates partially due to a change in vehicle
mix. Dollar's leasing revenue declined $4.5 million, or 13.4% due to a decrease
in the average number of vehicles leased to franchisees as a result of the
acquisition of franchised locations during 1999, partially offset by an increase
in lease rates.
EXPENSES
Total expenses increased 7.5% from $830.1 million in 1998 to $892.2
million in 1999. This increase was due primarily to a $45.9 million, or 7.5%
increase for Dollar and a $16.3 million, or 7.5% increase at Thrifty. Total
expenses as a percentage of revenue declined to 89.3% in 1999 from 92.3% in
1998.
Direct vehicle and operating expenses for 1999 increased $21.6 million,
or 8.1%, over 1998, primarily due to an increase at Dollar. The overall increase
was due to higher airport concession rents, personnel and other vehicle
operating costs partially offset by lower insurance costs. These expenses were
28.9% of revenue for 1999, compared to 29.8% of revenue for 1998.
Net vehicle depreciation expense and lease charges increased $5.9
million, or 1.9%, for 1999 as compared to 1998, consisting of a $5.6 million
increase at Dollar and a $0.3 million increase at Thrifty. Net vehicle
depreciation expense increased $14.8 million, or 5.2%, due to a 10.4% increase
in depreciable fleet (11.2% at Dollar and 9.0% at Thrifty) partially offset by a
decline of 4.8% in the average depreciation rate (4.3% decrease at Dollar and a
5.3% decrease at Thrifty). The decline in the depreciation rate includes $25.2
million net vehicle gains on the disposal of Non-Program Vehicles. In 1998, the
disposition of Non-Program Vehicles resulted in a net vehicle gain of $5.5
million. Lease charges, for vehicles leased from third parties, declined $8.9
million due to fewer vehicles leased during 1999.
Selling, general and administrative expenses of $190.9 million for 1999
increased from $163.3 million in 1998, comprised primarily of a $13.9 million
increase at Dollar and a $13.8 million increase at Thrifty. The higher costs
were due primarily to higher information technology system costs including Year
2000 remediation, costs incurred with the start-up of Thrifty Car Sales and
other personnel related costs.
31
Net interest expense increased $6.4 million, or 7.2% to $95.1 million.
Net interest expense decreased as a percentage of revenue from 9.9% in 1998 to
9.5% in 1999. The increase in expense for the Group was due to the effect of
higher average vehicle debt levels partially offset by a decrease in vehicle
interest rates.
The tax provision for 1999 was $46.9 million. The effective rate of
44.1% for 1999 was down from 45.3% in 1998. The decrease in the effective rate
was due primarily to the change in the relationship between permanent
differences and Canadian operations to income before income taxes. The effective
tax rate differs from the U.S. statutory rate due primarily to non-deductible
amortization of costs in excess of net assets acquired, state and local taxes
and losses relating to Thrifty's Canadian subsidiary for which no benefit was
recorded.
OPERATING RESULTS
The Group had income before income taxes of $106.6 million for 1999 as
compared to $68.9 million in 1998, a 54.7% increase. This growth was due to a
$29.0 million increase at Dollar and a $8.7 million increase at Thrifty.
LIQUIDITY AND CAPITAL RESOURCES
The Group's primary cash requirements are for the acquisition of
revenue-earning vehicles and to fund its U.S. and Canadian operations. During
2000, cash provided by operating activities was $386.0 million. Net income
adjusted for depreciation, net of vehicle gains, primarily generated cash
provided by operating activities.
Cash used in investing activities was $291.4 million. The principal use
of cash in investing activities was the purchase of revenue-earning vehicles,
which totaled $2.5 billion ($1.5 billion at Dollar and $1.0 billion at Thrifty)
which was partially offset by $2.2 billion ($1.3 billion at Dollar and $0.9
billion at Thrifty) in proceeds from the sale of used revenue-earning vehicles.
The Group's need for cash to finance vehicles is highly seasonal and typically
peaks in the second and third quarters of the year when fleet levels build to
meet seasonal rental demand. Fleet levels are the lowest in the fourth quarter
when rental demand is at a seasonal low. The Company expects to continue to fund
its revenue-earning vehicles with cash provided from operations and increased
secured vehicle financing. Restricted cash and investments decreased $113.9
million for the year ended December 31, 2000 due principally to acquiring
vehicles and reducing vehicle debt. Restricted cash and investments are
restricted for the acquisition of revenue-earning vehicles and other specified
uses under the asset backed notes discussed below. The Group also used cash for
non-vehicle capital expenditures of $33.7 million. These expenditures consist
primarily of airport facility improvements for the Group's rental locations and
investments in information technology equipment and systems. The Group estimates
non-vehicle capital expenditures to be approximately $40 million in 2001. In
addition, Dollar will pursue the acquisition of certain franchisee operations,
if available. Franchisee acquisitions of Dollar funded with internal cash
totaled $10.1 million in 2000. Future franchisee acquisition expenditures are
expected to be financed with cash provided from operations.
Cash used in financing activities was $133.6 million primarily due to
the maturity of $264.2 million in asset backed notes during 2000, partially
offset by a net increase in the issuance of commercial paper totaling $129.3
million.
ASSET BACKED NOTES
The asset backed note program is comprised of $1.08 billion in asset
backed notes with maturities ranging from 2001 to 2005. Borrowings under the
asset backed notes are secured by eligible vehicle collateral and bear interest
at fixed rates on $1.04 billion ranging from 5.90% to 7.10% and floating rates
on $37.4 million ranging from LIBOR plus .95% to LIBOR plus 1.25%. Proceeds from
the asset backed notes that are temporarily unutilized for financing vehicles
and certain related receivables are maintained in restricted cash and investment
accounts, which were approximately $29.5 million at December 31, 2000.
32
In December 2000, the Company established a $150 million asset backed
Variable Funding Note Purchase Facility (the "Conduit Facility") as part of the
existing asset backed note program. Proceeds are used for financing of vehicle
purchases and for periodic refinancing of asset backed notes. The Conduit
Facility generally bears interest at market-dictated commercial paper rates.
In March 2001, Rental Car Finance Corp. issued $350 million of asset
backed notes (the "2001 Series Notes") to replace existing asset backed notes
which mature over the next five years. The 2001 Series Notes are floating rate
notes that have a term of five years. In conjunction with the issuance of the
2001 Series Notes, the Company also entered into an interest rate swap agreement
to convert this floating rate debt to a fixed rate.
COMMERCIAL PAPER PROGRAM AND LIQUIDITY FACILITY
At December 31, 2000, the Company's commercial paper program (the
"Commercial Paper Program") had a maximum size of $780 million supported by a
$700 million, 364-day liquidity facility (the "Liquidity Facility"). Borrowings
under the Commercial Paper Program are secured by eligible vehicle collateral
and bear interest based on market-dictated commercial paper rates. At December
31, 2000, the Group had $209.7 million in commercial paper outstanding under the
Commercial Paper Program. The Commercial Paper Program and the Liquidity
Facility are renewable annually. The Commercial Paper Program peaked in size
during the third quarter of 2000 when it reached $501.4 million to support the
seasonal increase in vehicle fleet.
The Commercial Paper Program was renewed for another 364-day period
effective February 28, 2001, at a maximum size of $800 million, backed by a
renewal of the Liquidity Facility which increased to $715 million.
OTHER OBLIGATIONS AND VEHICLE DEBT
Thrifty has financed its Canadian vehicle fleet through a five-year
fleet securitization program which began in February 1999. Under this program,
Thrifty can obtain vehicle financing up to CND$150 million funded through a bank
commercial paper conduit. At December 31, 2000, Thrifty had approximately
CND$68.5 million funded under this program.
On October 20, 2000, a vehicle manufacturer's finance subsidiary
extended a $115 million revolving line of credit to the Group to purchase
revenue-earning vehicles. The line of credit is secured by the vehicles financed
under this facility. This credit facility expires in one year and is renewable
annually. At December 31, 2000, the Company had $82.5 million outstanding under
the line of credit.
REVOLVING CREDIT FACILITY
The Company has a $215 million senior secured, revolving credit
facility (the "Revolving Credit Facility") which is used to provide letters of
credit with a sublimit of $190 million and cash for operating activities with a
sublimit of $70 million. During 2000, the Revolving Credit Facility was extended
for a five-year term which expires August 2, 2005. The availability of funds
under the Revolving Credit Facility is subject to the Company's continued
compliance with certain covenants, including a covenant that sets the maximum
amount the Company can spend annually on the acquisition of fixed or capital
assets, and certain financial covenants including a maximum leverage ratio, a
minimum fixed charge ratio and a minimum interest expense coverage ratio. The
Group is in compliance with all covenants. At December 31, 2000, the Group had
letters of credit outstanding under the Revolving Credit Facility of
approximately $29.3 million and no working capital borrowings.
33
DAIMLERCHRYSLER CREDIT SUPPORT
DaimlerChrysler currently provides $17.1 million of credit support for
the Group's vehicle fleet financing in the form of a letter of credit facility,
related to DaimlerChrysler's sale of the Company in December 1997. The letter of
credit declines annually over five years, which began September 30, 1999, by the
greater of $5.7 million or 50% of the Group's excess cash flow, as defined. The
Company may need to replace reductions in the letter of credit with cash from
operations or with borrowings or letters of credit under the Revolving Credit
Facility. To secure reimbursement obligations under the DaimlerChrysler credit
support agreement, DaimlerChrysler has liens and security interests on certain
assets of the Group.
DEBT SERVICING REQUIREMENTS
The Group will continue to have substantial debt and debt service
requirements under its financing arrangements. As of December 31, 2000, the
Group's total consolidated debt and other obligations was approximately $1.4
billion, substantially all of which was secured debt for the purchase of
vehicles. The Group has scheduled annual principal payments of approximately
$575 million in 2001, $172 million in 2002, $273 million in 2003, $269 million
in 2004 and $137 million in 2005.
The Group intends to use cash generated from operations and from the
sale of vehicles for debt service and, subject to restrictions under its debt
instruments, to make capital investments. The Company has historically repaid
its debt and funded its capital investments (aside from growth in its rental
fleet) with cash provided from operations and from the sale of vehicles. The
Company has funded growth in its vehicle fleet by incurring additional secured
vehicle debt and cash generated from operations. The Group expects to incur
additional debt from time to time to the extent permitted under the terms of its
debt instruments.
The Group has significant requirements for bonds to support its
insurance programs and airport concession obligations. At December 31, 2000,
various insurance companies had issued approximately $74.8 million in bonds to
secure these obligations.
INTEREST RATE RISK
The Group's results of operations depend significantly on prevailing
levels of interest rates because of the large amount of debt it incurs to
purchase vehicles. In addition, the Group is exposed to increases in interest
rates because a portion of its debt bears interest at floating rates. The
Company estimates that, in 2001, approximately 33% of its average debt will bear
interest at floating rates. The amount of the Group's financing costs affects
the amount Dollar, Thrifty and their franchisees must charge their customers to
be profitable. See Note 8 of Notes to Consolidated Financial Statements.
INFLATION
The increased acquisition cost of vehicles is the primary inflationary
factor affecting the Group. Many of the Group's other operating expenses are
also expected to increase with inflation. Management does not expect that the
effect of inflation on the Group's overall operating costs will be greater for
the Group than for its competitors.
34
NEW ACCOUNTING STANDARDS
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that all
derivatives be recognized as either assets or liabilities in the statement of
financial position and be measured at fair value. At January 1, 2001, the
Company had no identified derivative instruments or hedging activities.
Accordingly, this standard had no material effect on the Company's consolidated
financial statements upon adoption. However, during March 2001, the Company has
entered into an interest rate swap agreement (the "Swap") in connection with the
issuance of $350 million of asset backed notes. Management believes it has met
the criteria for hedge accounting for the Swap.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. In June 2000,
the SEC issued SAB 101B, "Second Amendment: Revenue Recognition in Financial
Statements." SAB 101B delayed the implementation date of SAB 101 to the fourth
quarter of 2000. The Company adopted SAB 101 pursuant to SAB 101B as required in
the fourth quarter of 2000. The adoption of SAB 101 had no impact on its
consolidated results of operations and financial position.
35
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The table below provides information about the Group's market sensitive
financial instruments and constitutes a "forward-looking statement." The Group's
primary market risk exposure is changing interest rates, primarily in the United
States. The Group's policy is to manage interest rates through use of a
combination of fixed and floating rate debt. At December 31, 2000, the Group had
entered into no hedging or derivative transactions. All items described are
non-trading and are stated in U.S. Dollars. Because a portion of the Group's
debt is denominated in Canadian dollars, its carrying value is impacted by
exchange rate fluctuations.
Fair Value
Expected Maturity Dates December 31,
as of December 31, 2000 2001 2002 2003 2004 2005 Total 2000
-------------------------- --------- --------- --------- --------- --------- ---------- ------------
(in thousands)
DEBT
Vehicle obligations and other-
floating rates $ 300,750 $ 1,400 $ 22,374 $ 56 $ 11,135 $ 335,715 $ 333,833
Weighted Average interest rates 7.15% 8.20% 7.61% 8.20% 7.71%
Vehicle obligations and other-
fixed rates $ 225,819 $ 170,386 $ 251,095 $ 269,036 $ 126,079 $ 1,042,415 $ 1,036,688
Weighted Average interest rates 6.47% 6.45% 6.40% 6.22% 6.67%
Vehicle obligations and other-
Canadian dollar denominated $ 48,223 $ - $ - $ - $ - $ 48,223 $ 48,223
Weighted Average interest rates 6.11% - - - -
Fair Value
Expected Maturity Dates December 31,
as of December 31, 1999 2000 2001 2002 2003 2004 Thereafter Total 1999
-------------------------- --------- --------- --------- --------- --------- ----------- ---------- ------------
(in thousands)
DEBT
Vehicle obligations and other-
floating rates $ 162,997 $ 5,026 $ 1,343 $ 22,417 $ 108 $ 11,135 $ 203,026 $ 201,809
Weighted Average interest rates 6.86% 7.84% 8.30% 7.43% 8.30% 7.52%
Vehicle obligations and other-
fixed rates $ 264,181 $ 225,819 $ 170,386 $ 251,095 $ 269,036 $ 126,079 $ 1,306,596 $ 1,270,960
Weighted Average interest rates 6.40% 6.47% 6.45% 6.40% 6.22% 6.67%
Vehicle obligations and other-
Canadian dollar denominated $ 47,784 $ - $ - $ - $ - $ - $ 47,784 $ 47,784
Weighted Average interest rates 5.47% - - - - -
36
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Dollar Thrifty Automotive Group, Inc.:
We have audited the accompanying consolidated balance sheets of Dollar Thrifty
Automotive Group, Inc. and subsidiaries as of December 31, 2000 and 1999, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 2000. Our
audits also included the financial statement schedule listed in the Index at
Item 14. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Dollar Thrifty Automotive Group,
Inc. and subsidiaries at December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Tulsa, Oklahoma
January 31, 2001, except for
Note 17 as to which the date is
February 28, 2001
37
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(In Thousands Except Per Share Data)
------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
REVENUES:
Vehicle rentals $ 813,741 $ 714,407 $ 635,600
Vehicle leasing 198,686 218,614 202,371
Fees and services 61,166 57,046 51,770
Other 9,850 8,685 9,225
----------- ----------- -----------
Total revenues 1,083,443 998,752 898,966
----------- ----------- -----------
COSTS AND EXPENSES:
Direct vehicle and operating 315,164 289,129 267,504
Vehicle depreciation and lease charges, net 340,448 311,113 305,169
Selling, general and administrative 187,711 190,994 163,256
Interest expense, net of interest income of $9,288,
$6,071 and $6,834 97,703 95,114 88,726
Amortization of cost in excess of net assets acquired 5,941 5,842 5,417
----------- ----------- -----------
Total costs and expenses 946,967 892,192 830,072
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 136,476 106,560 68,894
INCOME TAX EXPENSE 58,467 46,974 31,229
----------- ----------- -----------
NET INCOME $ 78,009 $ 59,586 $ 37,665
=========== =========== ===========
Earnings per share:
Basic $ 3.23 $ 2.47 $ 1.56
=========== =========== ===========
Diluted $ 3.18 $ 2.43 $ 1.56
=========== =========== ===========
See notes to consolidated financial statements.
38
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(In Thousands Except Share and Per Share Data)
------------------------------------------------------------------------------------------------------------------------------------
2000 1999
ASSETS
Cash and cash equivalents $ 38,493 $ 77,500
Restricted cash and investments 30,760 144,671
Receivables, net 182,689 140,156
Prepaid expenses and other assets 54,994 43,493
Revenue-earning vehicles, net 1,522,388 1,507,692
Property and equipment, net 90,976 69,941
Income taxes receivable - 10,573
Intangible assets, net 180,074 177,627
----------- -----------
$ 2,100,374 $ 2,171,653
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 50,455 $ 57,242
Accrued liabilities 118,562 115,232
Deferred income tax liability 13,828 5,660
Public liability and property damage 35,369 58,783
Debt and other obligations 1,424,021 1,555,609
----------- -----------
Total liabilities 1,642,235 1,792,526
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value:
Authorized 10,000,000 shares; none outstanding - -
Common stock, $.01 par value:
Authorized 50,000,000 shares; issued and outstanding 24,191,893
and 24,158,429, respectively 242 242
Additional capital 710,320 709,040
Accumulated deficit (251,455) (329,464)
Foreign currency translation adjustment (968) (691)
----------- -----------
458,139 379,127
----------- -----------
$ 2,100,374 $ 2,171,653
=========== ===========
See notes to consolidated financial statements.
39
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(In Thousands Except Share and Per Share Data)
------------------------------------------------------------------------------------------------------------------------------------
Common Stock Foreign
$.01 Par Value Currency Total
---------------------- Additional Accumulated Translation Stockholders'
Shares Amount Capital Deficit Adjustment Equity
BALANCE, JANUARY 1, 1998 23,625,000 $ 236 $ 695,716 $ (426,715) $ (811) $ 268,426
Issuance of common shares in
public offering 498,105 5 9,643 - - 9,648
Issuance of common shares for
director compensation 1,950 - 40 - - 40
Performance share incentive plan - - 481 - - 481
Comprehensive income:
Net income - - - 37,665 - 37,665
Foreign currency translation - - - - (346) (346)
----------- ------ ---------- ---------- ------ ----------
Total comprehensive income - - - 37,665 (346) 37,319
----------- ------ ---------- ---------- ------ ----------
BALANCE, DECEMBER 31, 1998 24,125,055 241 705,880 (389,050) (1,157) 315,914
Issuance of common shares for
director compensation 2,798 - 52 - - 52
Stock option transactions 30,576 1 866 - - 867
Performance share incentive plan - - 2,242 - - 2,242
Comprehensive income:
Net income - - - 59,586 - 59,586
Foreign currency translation - - - - 466 466
----------- ------ ---------- ---------- ------ ----------
Total comprehensive income - - - 59,586 466 60,052
----------- ------ ---------- ---------- ------ ----------
BALANCE, DECEMBER 31, 1999 24,158,429 242 709,040 (329,464) (691) 379,127
Issuance of common shares for
director compensation 2,164 - 40 - - 40
Stock option transactions 31,300 - 582 - - 582
Performance share incentive plan - - 658 - - 658
Comprehensive income:
Net income - - - 78,009 - 78,009
Foreign currency translation - - - - (277) (277)
----------- ------ ---------- ---------- ------ ----------
Total comprehensive income - - - 78,009 (277) 77,732
----------- ------ ---------- ---------- ------ ----------
BALANCE, DECEMBER 31, 2000 24,191,893 $ 242 $ 710,320 $ (251,455) $ (968) $ 458,139
=========== ====== ========== ========== ====== ==========
See notes to consolidated financial statements.
40
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(In Thousands)
------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 78,009 $ 59,586 $ 37,665
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 349,697 338,702 303,888
Amortization 9,450 8,927 7,708
Common stock option transactions 112 323 -
Performance share incentive plan 658 2,242 481
Net gains from disposition of revenue-earning vehicles (26,084) (25,248) (5,538)
Impairment losses - - 1,305
Provision for losses on receivables 11,925 9,682 6,891
Deferred income taxes 8,168 14,214 (2,126)
Change in assets and liabilities, net of acquisitions:
Receivables (17,011) (19,045) 26,654
Prepaid expenses, intangibles and other assets (11,917) (2,304) (10,147)
Accounts payable, accrued liabilities and income taxes payable/receivable 6,427 3,748 (21,363)
Public liability and property damage (23,414) (18,836) 1,932
Other 30 548 311
----------- ----------- -----------
Net cash provided by operating activities 386,050 372,539 347,661
CASH FLOWS FROM INVESTING ACTIVITIES:
Revenue-earning vehicles:
Purchases (2,533,661) (2,410,739) (2,093,581)
Proceeds from sales 2,169,222 1,927,007 1,782,562
Restricted cash and investments, net 113,911 (82,416) 75,725
Property and equipment:
Purchases (31,015) (18,266) (15,785)
Proceeds from sales 232 1,031 691
Acquisition of businesses, net of cash acquired (10,097) - (4,617)
----------- ----------- -----------
Net cash used in investing activities (291,408) (583,383) (255,005)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt and other obligations:
Proceeds 3,288,480 3,699,487 1,603,678
Payments (3,420,307) (3,457,971) (1,708,819)
Issuance of common shares in public offering - - 9,648
Issuance of common shares 470 544 -
Financing issue costs (2,292) (3,221) (3,732)
----------- ----------- -----------
Net cash provided by (used in) financing activities (133,649) 238,839 (99,225)
----------- ----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS (39,007) 27,995 (6,569)
CASH AND CASH EQUIVALENTS:
Beginning of year 77,500 49,505 56,074
----------- ----------- -----------
End of year $ 38,493 $ 77,500 $ 49,505
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Income taxes to taxing authorities $ 39,285 $ 52,343 $ 30,112
=========== =========== ===========
Interest $ 102,027 $ 95,038 $ 92,288
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Issuance of common stock for director compensation $ 40 $ 52 $ 40
=========== =========== ===========
Direct financing and sales-type lease receivables $ 38,472 $ 14,780 $ -
=========== =========== ===========
Deferred income on sales-type lease receivables $ 409 $ - $ -
=========== =========== ===========
Notes receivable issued for franchise sales $ - $ 590 $ -
=========== =========== ===========
Acquisition of license held for operation $ 804 $ - $ -
=========== =========== ===========
See notes to consolidated financial statements.
41
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
Dollar Thrifty Automotive Group, Inc. ("Dollar Thrifty Group" or the
"Company") is the successor to Pentastar Transportation Group, Inc. Prior
to December 23, 1997, the Company was a wholly owned subsidiary of
Chrysler Corporation, now known as DaimlerChrysler Corporation
("DaimlerChrysler"). On December 23, 1997, the Company completed an
initial public offering of all its outstanding common stock owned by
DaimlerChrysler together with additional shares issued by the Company
(Note 9).
The Company's significant wholly owned subsidiaries include Dollar Rent A
Car Systems, Inc. ("Dollar"), Thrifty, Inc., Rental Car Finance Corp.
("RCFC") and Dollar Thrifty Funding Corp. ("DTFC"). Thrifty, Inc. is the
parent company to Thrifty Rent-A-Car System, Inc. which is the parent
company to Thrifty Canada Ltd. ("TCL") (individually and collectively
referred to as "Thrifty"). Dollar and Thrifty were acquired in 1990 and
1989, respectively. The acquisitions were accounted for using the purchase
method of accounting and the purchase prices were allocated to the assets
acquired and liabilities assumed based on their estimated fair values,
which are reflected in the accompanying consolidated financial statements.
RCFC and DTFC are special purpose financing entities for the Dollar
Thrifty Group, which were formed in 1995 and 1998, respectively. RCFC and
DTFC are each separate legal entities whose assets are not available to
satisfy any claims of creditors of Dollar Thrifty Group or any of its
other subsidiaries. The term the "Company" is used to refer to Dollar
Thrifty Group and subsidiaries, collectively, and to the individual
subsidiaries of Dollar Thrifty Group. Intercompany accounts and
transactions have been eliminated in consolidation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - Dollar and Thrifty are engaged in the business of the
daily rental of vehicles to business and leisure customers through
company-owned stores and in the business of leasing vehicles to their
franchisees for use in the daily vehicle rental business throughout the
United States and Canada. Dollar and Thrifty are also involved in selling
vehicle rental franchises worldwide and providing sales and marketing,
reservations, data processing systems, insurance and other services to
their franchisees. RCFC and DTFC provide financing services to Dollar and
Thrifty.
Estimates - The preparation of the Company's consolidated financial
statements in conformity with accounting principles generally accepted in
the United States of America requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
consolidated financial statements. Actual results could differ from those
estimates.
Cash and Cash Equivalents - Cash and cash equivalents include cash on hand
and on deposit, including highly liquid investments with initial
maturities of three months or less.
Restricted Cash and Investments - Restricted cash and investments are
restricted for the acquisition of vehicles and other specified uses under
the rental car asset backed note indenture and other agreements (Note 8).
These funds are primarily held in a highly rated money market fund with
investments primarily in government and corporate obligations with a
dollar-weighted average maturity not to exceed 60 days, as permitted by
the indenture. Restricted cash and investments are excluded from cash and
cash equivalents. Interest earned on restricted cash and investments was
$3,624,000, $2,379,000, and $4,706,000 for 2000, 1999 and 1998,
respectively.
42
Allowance for Doubtful Accounts - An allowance for doubtful accounts is
generally established during the period in which receivables are recorded.
The allowance is maintained at a level deemed appropriate based on loss
experience and other factors affecting collectibility.
Revenue-Earning Vehicles - Revenue-earning vehicles are stated at cost net
of related discounts and are depreciated over their estimated economic
lives, or at rates corresponding to manufacturers' guaranteed residual
values, where applicable. Depreciation rates range from approximately 1.0%
to 2.5% per month. Net gains and losses from sales of revenue-earning
vehicles are recorded as an adjustment to vehicle depreciation.
Property and Equipment - Property and equipment are recorded at cost and
are depreciated or amortized using principally the straight-line basis
over the estimated useful lives of the related assets. Estimated useful
lives range from ten to thirty years for buildings and improvements and
three to seven years for furniture and equipment. Leasehold improvements
are amortized over the shorter of ten years or the lives of the related
leases.
Intangible Assets - Intangible assets are amortized using the
straight-line basis. Cost in excess of net assets acquired is amortized
over forty and twenty-year periods. Other intangible assets are amortized
primarily over five years. The Company continually assesses the
recoverability of the cost in excess of net assets acquired based on its
estimates of the expected future cash flows of the operations to which
such amounts relate.
Long-Lived Assets - The Company reviews the value of long-lived assets and
certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable based upon estimated future cash flows.
Accounts Payable - Disbursements in excess of bank balances of $33,844,000
and $42,277,000 are included in accounts payable at December 31, 2000 and
1999, respectively.
Public Liability and Property Damage - Provisions for public liability and
property damage on self-insured claims are made by charges primarily to
direct vehicle and operating expense. Accruals for such charges are based
upon actuarially determined evaluations of estimated ultimate liabilities
on reported and unreported claims, prepared on at least an annual basis by
an independent actuary. Historical data related to the amount and timing
of payments for self-insured claims are utilized in preparing the
actuarial evaluations. The accrual for public liability and property
damage claims is discounted based upon the independently prepared,
actuarially determined estimated timing of payments to be made in the
future. Management reviews the actual timing of payments as compared with
the annual actuarial estimate of timing of payments and has determined
that there have been no material differences in the timing of payments for
each of the three years in the period ended December 31, 2000.
Foreign Currency Translation - Foreign assets and liabilities are
translated using the exchange rate in effect at the balance sheet date,
and results of operations are translated using an average rate for the
period. Translation adjustments are accumulated and reported as a
component of stockholders' equity and comprehensive income.
43
Revenue Recognition - The Company rents revenue-earning vehicles under
short-term rental contracts. Revenues are recognized as earned under the
terms of the rental contracts. The Company also leases revenue-earning
vehicles to franchisees primarily under operating leases. Revenues are
recognized as earned over the lease term.
Initial franchise fees are recognized upon substantial completion of all
material services and conditions of the franchise sale, which coincides
with the date of sale and commencement of operations by the franchisee.
Continuing franchise fees are reported as revenue as the fees are earned.
Advertising Costs - Advertising costs are primarily expensed as incurred.
The Company incurred advertising expense of $30,166,000, $34,142,000, and
$35,863,000 for 2000, 1999 and 1998, respectively.
Thrifty's primary advertising is conducted by an unconsolidated affiliated
entity, Thrifty Rent-A-Car System, Inc. National Advertising Committee
("Thrifty National Ad"). Thrifty made payments of $2,983,000, $2,865,000
and $3,073,000 in 2000, 1999 and 1998, respectively, to Thrifty National
Ad to support funding of advertising campaigns, which are included in
advertising costs. Thrifty also received reimbursement from Thrifty
National Ad for administrative services performed of $2,647,000,
$2,392,000 and $1,790,000 during 2000, 1999 and 1998, respectively, which
are recorded as offsets to selling, general and administrative expense.
Environmental Costs - The Company's operations include the storage of
gasoline in underground storage tanks at certain company-owned stores.
Liabilities incurred in connection with the remediation of accidental fuel
discharges are recorded when it is probable that obligations have been
incurred and the amounts can be reasonably estimated.
Income Taxes - U.S. operating results are included in the Company's
consolidated U.S. income tax returns. The Company has provided for income
taxes on its separate taxable income or loss and other tax attributes.
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of the Company's assets
and liabilities. A valuation allowance is recorded for deferred income tax
assets when management determines it is more likely than not that such
assets will not be realized.
Earnings Per Share - Basic earnings per share ("EPS") is computed by
dividing net income by the weighted average number of common shares
outstanding during the period. Diluted EPS is based on the combined
weighted average number of common shares and common share equivalents
outstanding which include, where appropriate, the assumed exercise of
options. In computing diluted EPS, the Company has utilized the treasury
stock method.
Stock-Based Compensation - The Company accounts for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees." Compensation cost for stock options, if any, is measured as
the excess of the quoted market price of the Company's stock at the date
of grant over the amount an employee must pay to acquire the stock.
Compensation cost for shares issued under performance share plans is
recorded based upon the current market value of the Company's stock at the
end of each period. The Company has adopted the disclosure requirements of
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation."
44
New Accounting Standard - Effective January 1, 2001, the Company adopted
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that all
derivatives be recognized as either assets or liabilities in the statement
of financial position and be measured at fair value. The Company currently
has no identified derivative instruments or hedging activities.
Accordingly, this standard had no material effect on the Company's
consolidated financial statements upon adoption.
3. ACQUISITIONS
During 2000, Dollar acquired certain assets and assumed certain
liabilities of eleven locations from three former franchisees, the largest
locations being San Antonio, Atlanta and Memphis. Total cash paid for
these three acquisitions was $10,097,000, net of cash acquired. In
addition, during 1998, Dollar acquired certain assets and assumed certain
liabilities of its former San Diego and Phoenix franchisees. Total cash
paid for these two acquisitions was $4,617,000, net of cash acquired. Each
of these transactions has been accounted for using the purchase method of
accounting and operating results of the acquirees from the dates of
acquisition, which are not material to the year of acquisition, are
included in the consolidated statements of income.
4. RECEIVABLES
Receivables consist of the following:
December 31,
-----------------------------
2000 1999
(In Thousands)
Trade accounts receivable $ 108,145 $ 85,955
Notes receivable 10,199 7,152
Financing receivables, net 27,324 14,090
Due from DaimlerChrysler 62,449 50,727
--------- ---------
208,117 157,924
Less allowance for doubtful accounts (25,428) (17,768)
--------- ---------
$ 182,689 $ 140,156
========= =========
Trade accounts and notes receivable include primarily amounts due from
franchisees and tour operators arising from billings under standard credit
terms for services provided in the normal course of business and amounts
due from the sale of revenue-earning vehicles. Notes receivable are
generally issued to certain franchisees at current market interest rates
with varying maturities and are generally guaranteed by franchisees.
Financing receivables arise from direct financing and sales-type leases of
vehicles with franchisees. These receivables principally have terms up to
one year and are collateralized by the vehicles. Direct financing and
sales-type lease receivables are presented net of unearned income of
$804,000 and $285,000 at December 31, 2000 and 1999, respectively.
Due from DaimlerChrysler is comprised primarily of amounts due under
various incentive and promotion programs.
45
5. REVENUE-EARNING VEHICLES
Revenue-earning vehicles consist of the following:
December 31,
---------------------------------
2000 1999
(In Thousands)
Revenue-earning vehicles $ 1,677,335 $ 1,659,926
Less accumulated depreciation (154,947) (152,234)
----------- -----------
$ 1,522,388 $ 1,507,692
=========== ===========
Dollar and Thrifty entered into U.S. Vehicle Supply Agreements ("VSAs")
with DaimlerChrysler, which commenced with the 1997 model year and expire
in July 2001. In June 2000, the Company entered into a new VSA with
DaimlerChrysler, which will enable the Company to acquire revenue-earning
vehicles beginning with the 2002 model year through the 2006 model year.
Under the current VSAs, DaimlerChrysler has agreed to supply certain
specified volumes of vehicles, which are comprised of approximately 80%
guaranteed depreciation program vehicles ("Program Vehicles"). Dollar and
Thrifty are required to purchase at least 80% of their vehicles from
DaimlerChrysler, up to specified volumes of which minimum amounts must be
Program Vehicles. Under the terms of the VSAs, Dollar and Thrifty have
agreed to advertise and promote DaimlerChrysler products exclusively, and
will receive promotional payments from DaimlerChrysler for each model
year. Purchases of revenue-earning vehicles from DaimlerChrysler and
DaimlerChrysler Canada Inc. ("DaimlerChrysler Canada") were
$2,290,430,000, $2,101,537,000 and $2,007,406,000 during 2000, 1999 and
1998, respectively.
Vehicle acquisition terms provide for guaranteed residual values in the
U.S. or buybacks in Canada of the majority of vehicles, under specified
conditions. Guaranteed residual and buyback payments received are included
in proceeds from sales of revenue-earning vehicles. Additionally, the
Company receives promotional payments and other incentives primarily
related to the disposal of revenue-earning vehicles, which amounts are
reflected as offsets to direct vehicle and operating expense. Promotional
payments are primarily amortized on the straight-line basis over the
respective model year to which the promotional payments relate. The
Company also receives interest reimbursement for Program Vehicles while at
auction and for certain delivery related interest costs, which amounts are
reflected in interest expense, net. Amounts recorded from DaimlerChrysler
and DaimlerChrysler Canada for guaranteed residual value program payments,
promotional payments, interest reimbursement and other incentives totaled
$395,694,000, $312,932,000 and $339,575,000 in 2000, 1999 and 1998,
respectively. Buyback payments received from DaimlerChrysler Canada were
$81,222,000, $69,545,000 and $64,413,000 in 2000, 1999 and 1998,
respectively.
The Company acquires some vehicles from other manufacturers, the majority
of which are subject to guaranteed buyback at established values by the
manufacturers. Rent expense for vehicles leased from other vehicle
manufacturers and third parties under operating leases was $28,493,000,
$7,787,000 and $16,664,000 for 2000, 1999 and 1998, respectively, and is
included in vehicle depreciation and lease charges, net. Amounts due over
the next three years for vehicles under operating leases with terms
greater than one year total $4,178,000.
46
6. PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
December 31,
---------------------------
2000 1999
(In Thousands)
Land $ 14,132 $ 14,325
Buildings and improvements 16,882 15,563
Furniture and equipment 50,865 41,556
Leasehold improvements 48,526 43,986
Construction in progress 21,588 9,006
--------- ---------
151,993 124,436
Less accumulated depreciation and amortization (61,017) (54,495)
--------- ---------
$ 90,976 $ 69,941
========= =========
7. INTANGIBLE ASSETS
Intangible assets consist of the following:
December 31,
----------------------------
2000 1999
(In Thousands)
Cost in excess of net assets acquired $ 264,102 $ 257,248
Other 21,830 24,723
--------- ---------
285,932 281,971
Less accumulated amortization (105,858) (104,344)
--------- ---------
$ 180,074 $ 177,627
========= =========
47
8. DEBT AND OTHER OBLIGATIONS
Debt and other obligations consist of the following (in thousands):
December 31,
---------------------------------
2000 1999
(In Thousands)
Vehicle Debt and Other Financing:
Asset backed notes:
1999 Series notes $ 250,000 $ 250,000
1997 Series notes 746,653 900,000
1995 Series notes 83,166 194,000
----------- -----------
1,079,819 1,344,000
Discounts on asset backed notes (450) (689)
----------- -----------
Asset backed notes, net of discount 1,079,369 1,343,311
Commercial paper, net of discount of $1,882 and $1,217 209,705 80,376
Vehicle manufacturer line of credit 82,462 67,938
Limited partner interest in limited partnership 45,688 45,361
Other vehicle debt 6,797 18,514
----------- -----------
Total vehicle debt and other financing 1,424,021 1,555,500
Other - 109
----------- -----------
Total debt and other obligations $ 1,424,021 $ 1,555,609
=========== ===========
Vehicle Debt and Other Financing
Asset Backed Notes are comprised of rental car asset backed notes issued
by RCFC in April 1999 (the "1999 Series notes"), December 1997 (the "1997
Series notes") and December 1995 (the "1995 Series notes").
The 1999 Series notes are comprised of fixed rate notes, with rates
ranging from 5.9% to 7.1%.
The 1997 Series notes are comprised of $713,249,000 and $866,596,000 of
fixed rate notes in 2000 and 1999, respectively, with rates ranging from
6.25% to 6.8% and $33,404,000 of floating rate notes with interest at
rates ranging from LIBOR plus .95% to LIBOR plus 1.05% (7.61% to 7.71% at
December 31, 2000 and 7.42% to 7.52% at December 31, 1999).
The 1995 Series notes are comprised of $79,166,000 and $190,000,000 of
6.6% fixed rate notes in 2000 and 1999, respectively, and $4,000,000 (2000
and 1999) floating rate notes, with an interest rate of LIBOR plus 1.25%
(7.91% and 7.72% at December 31, 2000 and 1999, respectively).
The assets of RCFC, including revenue-earning vehicles related to the
asset backed notes, restricted cash and investments, and certain
receivables related to revenue-earning vehicles, are available first to
satisfy the claims of its creditors. At December 31, 2000 and 1999,
letters of credit totaling $17,136,000 and $22,848,000, respectively,
issued on behalf of DaimlerChrysler, also serve as collateral for the
asset backed notes. These letters of credit will continue to decline over
the next three years. DaimlerChrysler has liens on and collateral interest
in certain assets of the Company. Dollar and Thrifty lease vehicles from
RCFC under the terms of a master lease and servicing agreement. The asset
backed note indentures also provide for additional credit enhancement
through overcollateralization of the vehicle fleet or other letters of
credit and maintenance of a liquidity reserve. RCFC is in compliance with
the terms of the indentures.
48
The asset backed notes mature from 2001 through 2005 and are generally
subject to repurchase on any payment date subject to a prepayment penalty.
In December 2000, the Company established a $150,000,000 asset backed
Variable Funding Note Purchase Facility (the "Conduit") as a part of the
existing asset backed note program. Proceeds are used for financing of
vehicle purchases and for periodic refinancing of asset backed notes. The
Conduit generally bears interest at market-dictated commercial paper
rates. At December 31, 2000, there were no borrowings outstanding under
this facility.
Commercial Paper represents borrowings under a $780,000,000 Commercial
Paper Program as a part of the existing asset backed note program.
Proceeds are used for financing of vehicle purchases and for periodic
refinancing of asset backed notes. Concurrently with the establishment of
the Commercial Paper Program, the Company also entered into a 364-day,
$700,000,000 Liquidity Facility to support the Commercial Paper Program.
The Liquidity Facility provides the Commercial Paper Program with an
alternative source of funding if the Company is unable to refinance
maturing commercial paper by issuing new commercial paper. Commercial
paper bears interest at rates ranging from 6.6% to 6.8% at December 31,
2000 and 6.1% to 6.3% at December 31, 1999 and matures within 45 days of
December 31, 2000.
Vehicle Manufacturer Line of Credit is renewable annually and permits the
Company to borrow up to $115,000,000 and $102,000,000 at December 31, 2000
and 1999, respectively, from a finance subsidiary of a vehicle
manufacturer. Borrowings of $82,462,000 and $67,938,000 at December 31,
2000 and 1999, respectively, bear interest at rates based on commercial
paper rates (8.24% and 7.23% at December 31, 2000 and 1999, respectively)
and are collateralized by the related vehicles.
Limited Partner Interest in Limited Partnership - In February 1999, TCL
entered into a partnership agreement (the "Partnership Agreement") with an
unrelated bank's conduit (the "Limited Partner"). This transaction
included the creation of a limited partnership (TCL Funding Limited
Partnership, the "Partnership"). TCL is the General Partner in the
Partnership.
The Partnership Agreement has a five-year term, subject to extension, with
the purpose to purchase, own, lease and rent vehicles throughout Canada.
The Limited Partner has committed to funding approximately CND$150,000,000
(approximately US$100,000,000 at December 31, 2000) to the Partnership
which they fund through issuance and sale of notes in the Canadian
commercial paper market.
TCL, as General Partner, is allocated the remainder of the partnership net
income after distribution of the income share of the Limited Partner,
which is based on the weighted average capital balance of the Limited
Partner multiplied by a rate, which is based on the average commercial
paper rate (6.1% and 5.4% at December 31, 2000 and 1999, respectively).
The Limited Partner's income share amounted to $3,510,000 and $1,854,000
for the years ended December 31, 2000 and 1999, respectively, which is
included in interest expense. Due to the nature of the relationship
between TCL and the Partnership, the accompanying consolidated statements
include the accounts of the Partnership.
49
Any amounts due to TCL, which are directly related to the vehicles,
including vehicle rental revenues, payments from licensees and proceeds
from vehicle disposition programs, are vested in the Partnership. Upon
disposition of vehicles, proceeds in excess of that required to fund
further vehicle purchases are distributed to the Partners in proportion to
their capital accounts.
TCL entered into a CND$15,000,000 (approximately US$10,000,000 at December
31, 2000) revolving line of credit to support its investment in the
Partnership. At December 31, 2000 and 1999, CND$3,800,000 (approximately
US$2,535,000) and CND$3,500,000 (approximately US$2,423,000),
respectively, were outstanding under this line of credit, which is
included in other vehicle debt. The weighted average interest rate on the
line was 6.2% and 6.7% at December 31, 2000 and 1999, respectively.
The Partnership Agreement requires the maintenance of certain letters of
credit and contains various restrictive covenants, including a limitation
on the percentage of vehicles which are not covered by manufacturer
repurchase programs and the maintenance by TCL of a specified minimum
tangible net worth. The line of credit agreement also requires the
maintenance of letters of credit and the maintenance of a specified
minimum tangible net worth by TCL.
Prior to February 1999, TCL financed its revenue-earning vehicles under a
Master Concurrent Lease Agreement (the "Lease Agreement") with an
unrelated auto leasing trust ("Leasing Trust"). In September 1999, the
Lease Agreement was terminated and the remaining CND$13,300,000
(approximately US$9,100,000) of financed vehicles were sold to the
Partnership at net book value.
Other Vehicle Debt at December 31, 2000 includes borrowings of $1,656,000
under a $20,000,000 revolving line of credit which bears interest at rates
based on commercial paper rates (8.24% at December 31, 2000). The line has
a one-year term and is collateralized by the vehicles financed under the
facility. Borrowings of $2,606,000 and $5,951,000 with weighted average
interest rates of 8.2% and 8.35% at December 31, 2000 and 1999,
respectively, are collateralized by shuttle buses and other financed
vehicles. At December 31, 1999, the Company had borrowings of $10,140,000
under a $12,000,000 revolving line of credit, which bore interest at rates
based on LIBOR (8.4% at December 31, 1999). This line was terminated in
2000.
Expected repayments of vehicle debt and other obligations outstanding at
December 31, 2000 are as follows:
2001 2002 2003 2004 2005
(In Thousands)
Asset backed notes $ 229,819 $ 170,386 $ 273,364 $ 269,036 $ 137,214
Commercial paper 211,587 - - - -
Vehicle manufacturer
line of credit 82,462 - - - -
Other vehicle debt 5,236 1,400 105 56 -
Limited partner
interest 45,688 - - - -
--------- --------- --------- --------- ---------
Total $ 574,792 $ 171,786 $ 273,469 $ 269,092 $ 137,214
========= ========= ========= ========= =========
50
Revolving Credit Facility
In December 1997, the Company established a five-year, $215,000,000 Senior
Secured Revolving Credit Facility (the "Revolver"). The Revolver provides
sublimits up to $190,000,000 for letters of credit and up to $70,000,000
for working capital borrowings. During 2000, the Revolver was extended for
a five-year term, which expires in August 2005. As of December 31, 2000,
the Company is required to pay a 0.25% commitment fee on the unused
available line, a 1.50% letter of credit fee on the aggregate amount of
outstanding letters of credit and a 0.125% letter of credit issuance fee.
Interest rates on loans under the Revolver are, at the option of the
Company, based on the prime, federal funds or Eurodollar rates and are
payable quarterly. The Revolver is collateralized by a first priority lien
on substantially all material non-vehicle assets of the Company. The
Revolver contains various restrictive covenants, including maintenance of
certain financial ratios consisting of minimum net worth, adjusted EBITDA,
fixed charge, leverage and interest coverage ratios and the restriction of
cash dividends. The Company had letters of credit of $29,291,000 and
$37,845,000 and no working capital borrowings outstanding under the
Revolver at December 31, 2000 and 1999, respectively.
9. STOCKHOLDERS' EQUITY
The Company conducted an initial public offering of its common stock which
closed on December 23, 1997. The Company issued and sold 4,123,105 shares
of its common stock and DaimlerChrysler sold all of the 20,000,000
outstanding shares of the Company's common stock that it owned. The common
stock was sold at an initial price of $20.50 per share. The Company
received net proceeds of $76,484,000 from the issuance of the shares. The
proceeds received by the Company from the offering were initially used to
provide collateral for financing of revenue-earning vehicles and for other
general corporate purposes.
On July 23, 1998, the Company adopted a stockholders' rights plan. The
rights were issued on August 3, 1998, to stockholders of record on that
date, and will expire on August 3, 2008, unless earlier redeemed,
exchanged or amended by the Board of Directors.
The plan provides for the issuance of one right for each outstanding share
of the Company's common stock. Upon the acquisition by a person or group
of 15% or more of the Company's outstanding common stock, the rights
generally will become exercisable and allow the stockholder, other than
the acquiring person or group, to acquire common stock at a discounted
price.
The plan also includes an exchange option after the rights become
exercisable. The Board of Directors may effect an exchange of part or all
of the rights, other than rights that have become void, for shares of the
Company's common stock for each right. The Board of Directors may redeem
all rights for $.01 per right, generally at any time prior to the rights
becoming exercisable.
The issuance of the rights had no dilutive effect on the number of common
shares outstanding and did not affect earnings per share.
51
10. EARNINGS PER SHARE
The computation of weighted average common and common equivalent shares
used in the calculation of basic and diluted EPS is shown below:
Year Ended December 31,
--------------------------------------------------
2000 1999 1998
(In Thousands, Except Share and Per Share Data)
Net Income $ 78,009 $ 59,586 $ 37,665
========== ========== ==========
Basic EPS:
Weighted average common shares 24,168,250 24,136,050 24,105,837
========== ========== ==========
Basic EPS $ 3.23 $ 2.47 $ 1.56
========== ========== ==========
Diluted EPS:
Weighted average common shares 24,168,250 24,136,050 24,105,837
Shares contingently issuable:
Stock options 184,909 205,576 43,569
Performance awards 167,593 131,467 37,350
Director compensation shares deferred 18,710 12,008 3,197
---------- ---------- ----------
Shares applicable to diluted 24,539,462 24,485,101 24,189,953
========== ========== ==========
Diluted EPS $ 3.18 $ 2.43 $ 1.56
========== ========== ==========
Options to purchase 2,223,028, 1,584,000 and 1,155,000 shares of common
stock were outstanding at December 31, 2000, 1999 and 1998, respectively,
but were not included in the computation of diluted earnings per share
because the exercise price was greater than the average market price of
the common shares.
11. EMPLOYEE BENEFIT PLANS
Employee Benefit Plans
The Company sponsors a retirement savings plan that incorporates the
salary reduction provisions of Section 401(k) of the Internal Revenue Code
and covers substantially all employees of the Company meeting specific age
and length of service requirements. For 2000, employee contributions are
matched by the Company to the extent of 50% up to 6% of the employee's
eligible compensation, subject to statutory limitations. For 1999 and
1998, the Company matched 50% up to 5% of the employee's eligible
compensation. Contributions expensed by the Company totaled $2,264,000,
$1,598,000 and $1,090,000 in 2000, 1999 and 1998, respectively.
Effective January 1, 2001, the Company's 50% match was increased to 75% up
to 6% of the employee's eligible compensation.
Included in accrued liabilities at December 31, 2000 and 1999 is
$2,776,000 and $2,301,000, respectively, for employee health claims, which
are self-insured by the Company. The accrual includes amounts for incurred
and incurred but not reported claims.
52
The Company has bonus and profit sharing plans for all employees based on
company performance. Expense related to these plans was $11,260,000,
$17,096,000 and $8,109,000 in 2000, 1999 and 1998, respectively.
Deferred Compensation and Retirement Plans
The Company has deferred compensation and retirement plans providing key
executives with the opportunity to defer compensation, including related
investment income. Under the deferred compensation plan, the Company
contributes up to 7% of participant cash compensation. Participants become
fully vested under both the deferred compensation and retirement plans
after five years of service. The total of participant deferrals in the
deferred compensation and retirement plans, which are reflected in accrued
liabilities, was $13,386,000 and $10,791,000 as of December 31, 2000 and
1999, respectively. Expense related to these plans totaled $2,140,000,
$4,525,000 and $2,086,000 in 2000, 1999 and 1998, respectively.
Long-Term Incentive Plan
The Company has a long-term incentive plan ("LTIP") for employees and
non-employee directors under which its Board of Directors, upon the
recommendation of the Human Resources and Compensation Committee, is
authorized to provide for grants in the form of nonqualified stock
options, incentive stock options, stock appreciation rights, restricted
stock, performance share awards and other stock-based incentive awards.
The exercise prices for nonqualified stock options are equal to the fair
market value of the Company's common stock at the date of grant, except
for the initial grant, which was made at the initial public offering
price. The options vest in three equal annual installments commencing on
the first anniversary of the grant date and have a term not exceeding ten
years from the date of grant. In May 2000, an additional 2,400,000 shares
were approved by the shareholders for issuance under the LTIP. At December
31, 2000, the Company's common stock outstanding authorized for issuance
under the LTIP was 4,819,189 shares, with a share addition provision that
allows for the number of shares reserved to increase by 10% of any newly
issued shares.
Performance share awards are granted to Company officers and certain key
employees. Such awards established a target number of shares that may be
earned in three equal annual installments commencing on the first
anniversary of the grant date. The number of performance shares ultimately
earned is expected to range from zero to 200% of the target award,
depending on the level of corporate performance each year against annual
profit targets and stock price appreciation targets. Any performance share
installments not earned as of a given anniversary date are forfeited.
Performance shares earned are delivered on the third anniversary of the
initial grant, provided the grantee is then employed by the Company.
Values of the performance shares earned will be recognized as compensation
expense over the period the shares are earned. At December 31, 2000,
performance shares earned in 1998, 1999 and 2000, net of forfeitures,
totaled approximately 168,000 shares. All shares earned vested on January
31, 2001. The Company recognized $658,000, $2,242,000 and $481,000 of
compensation cost in 2000, 1999 and 1998, respectively, for performance
share awards.
53
The status of the Company's stock option plan is summarized below:
Weighted
Number of Average
Shares Exercise
(In Thousands) Price
-------------- ----------
Outstanding at December 31, 1997 $ - $ -
Granted 1,677 17.60
Exercised - -
Canceled (34) 19.68
------- -------
Outstanding at December 31, 1998 1,643 17.56
Granted 505 19.07
Exercised (30) 15.04
Canceled (81) 16.31
------- -------
Outstanding at December 31, 1999 2,037 18.02
Granted 714 19.29
Exercised (31) 12.29
Canceled (45) 18.40
------- -------
Outstanding at December 31, 2000 2,675 $ 18.42
======= =======
Options exercisable at:
December 31, 2000 1,497 $ 18.63
December 31, 1999 868 $ 18.91
December 31, 1998 396 $ 20.31
Accounting for Stock-Based Compensation
As stated in Note 2, the Company has elected to follow the intrinsic value
approach prescribed in APB Opinion No. 25 in accounting for its employee
stock plans. The Company has adopted the disclosure-only provisions of
SFAS No. 123. If the Company had elected to recognize compensation cost
based on the fair value of the options granted at the grant date as
prescribed by SFAS No. 123, net income for 2000, 1999 and 1998 would have
been reduced from the amounts as reported of $78,009,000, $59,586,000 and
$37,665,000 to the pro forma amounts of $75,468,000, $57,259,000 and
$34,377,000, respectively. Diluted earnings per share as reported of
$3.18, $2.43 and $1.56 would have been reduced to the pro forma amounts of
$3.08, $2.34 and $1.42 for 2000, 1999 and 1998, respectively.
The pro forma amounts noted reflect the portion of the estimated fair
value of awards earned in 2000, 1999 and 1998 based on the vesting period
of the options.
54
The Black-Scholes option valuation model was used to estimate the fair
value of the options at the date of grant for purposes of the pro forma
amounts noted. The following assumptions were used for 2000, 1999 and
1998: weighted-average expected life of the awards of five years,
volatility factor of 37.5%, risk-free interest rate of 5.96%, 5.75% and
4.74%, respectively, and no payment of dividends. Based on this model, the
weighted-average fair value of options granted during 2000, 1999 and 1998
was $8.13, $8.03 and $7.10 per share, respectively.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions, including the
expected stock volatility. Because the Company's employee stock options
have characteristics significantly different from traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of the
employee stock options.
The following table summarizes information regarding fixed stock options
that were outstanding at December 31, 2000:
Options Outstanding Options Exercisable
---------------------------------------------------- ------------------------------
Weighted-Average Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Life Exercise Exercisable Exercise
Prices (In Thousands) (In Years) Price (In Thousands) Price
$10.50 - $19.3750 1,569 8.91 $ 16.95 412 $ 13.67
$19.6875 - $21.1875 1,106 7.04 20.51 1,085 20.51
------- ------- ------- --------- -------
$10.50 - $21.1875 2,675 8.14 $ 18.42 1,497 $ 18.63
======= ======= ======= ======= =======
Under certain circumstances, including a change of control of the Company,
the options outstanding would be exercisable immediately.
55
12. INCOME TAXES
Income tax expense consists of the following:
Year Ended December 31,
------------------------------------------
2000 1999 1998
(In Thousands)
Current:
Federal $ 40,235 $ 26,072 $ 26,658
State and local 9,580 6,208 6,347
Foreign 484 480 350
-------- -------- --------
50,299 32,760 33,355
Deferred:
Federal 6,597 11,481 (1,717)
State and local 1,571 2,733 (409)
-------- -------- --------
8,168 14,214 (2,126)
-------- -------- --------
$ 58,467 $ 46,974 $ 31,229
======== ======== ========
Foreign losses before income taxes were approximately $965,000, $549,000
and $1,727,000 in 2000, 1999 and 1998, respectively.
Deferred tax assets and liabilities consist of the following:
December 31,
--------------------------
2000 1999
(In Thousands)
Deferred tax assets:
Public liability and property damage $ 13,172 $ 22,086
Allowance for doubtful accounts and notes receivable 7,897 5,426
Other accrued liabilities 21,307 17,073
Federal and state NOL credits and carryforwards 3,665 4,059
Canadian NOL carryforwards 142 1,607
Canadian depreciation 4,291 4,365
Other Canadian temporary differences 5,522 4,018
-------- --------
55,996 58,634
Valuation allowance (9,955) (9,990)
-------- --------
Total $ 46,041 $ 48,644
======== ========
Deferred tax liabilities:
Depreciation $ 57,064 $ 53,717
Other 2,805 587
-------- --------
Total $ 59,869 $ 54,304
======== ========
56
The Company has net operating loss carryforwards available in certain
states to offset future state taxable income. At December 31, 2000, TCL
has net operating loss carryforwards of approximately $321,000 available
to offset future taxable income in Canada, which expire through 2002.
Valuation allowances have been established for the total estimated future
tax effect of the Canadian net operating losses and other deferred tax
assets, since management believes it is more likely than not that such
benefits will not be realized.
The Company's effective tax rate differs from the maximum U.S. statutory
income tax rate. The following summary reconciles taxes at the maximum
U.S. statutory rate with recorded taxes:
Year Ended December 31,
--------------------------------------------------------------------------
2000 1999 1998
-------------------- -------------------- --------------------
Amount Percent Amount Percent Amount Percent
(Amounts in Thousands)
Tax expense computed at the
maximum U.S. statutory rate $ 47,767 35.0 % $ 37,296 35.0 % $ 24,113 35.0 %
Difference resulting from:
Amortization of cost in excess
of net assets acquired 1,717 1.3 1,871 1.8 1,774 2.6
State and local taxes, net of
federal income tax benefit 7,188 5.3 5,732 5.4 3,860 5.6
Foreign losses 364 0.2 682 0.6 604 0.9
Foreign taxes 484 0.4 480 0.4 350 0.5
Other 947 0.6 913 0.9 528 0.7
-------- ------- -------- ------- -------- -------
$ 58,467 42.8 % $ 46,974 44.1 % $ 31,229 45.3 %
======== ======= ======== ======= ======== =======
13. CONCENTRATION OF CREDIT RISK AND FAIR VALUE INFORMATION
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of restricted cash and
investments and trade receivables. The Company limits its exposure on
restricted cash and investments by investing in highly rated funds.
Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers comprising the Company's
customer base, and their dispersion across different businesses and
geographic areas.
The following estimated fair values of financial instruments have been
determined by the Company using available market information and valuation
methodologies.
Cash and Cash Equivalents, Restricted Cash and Investments, Receivables,
Accounts Payable, Accrued Liabilities and Public Liability and Property
Damage - The carrying amounts of these items are a reasonable estimate of
their fair value.
Debt and Other Obligations - The fair value of floating-rate debt
approximates the carrying value as these instruments are at current market
interest rates. At December 31, 2000, the fair value of the asset backed
notes with fixed interest rates was less than the carrying value by
approximately $5,727,000.
Letter of Credit and Guaranteed Obligations - The estimated fair value of
these items was $263,000 and $196,000 at December 31, 2000 and 1999,
respectively.
57
14. COMMITMENTS AND CONTINGENCIES
Concessions and Operating Leases
The Company has certain concession agreements with airports and hotels
throughout the United States and Canada. Typically, these agreements
provide airport terminal counter or hotel space in return for a minimum
rent. In many cases, the Company's subsidiaries are also obligated to pay
insurance and maintenance costs and additional rents generally based on
revenues earned at the location. Certain of the airport locations are
operated by franchisees who are obligated to make the required rent and
concession fee payments under the terms of their franchise arrangements
with the Company's subsidiaries.
The Company's subsidiaries operate from various leased premises under
operating leases with terms up to 25 years. Some of the leases contain
renewal options.
Expenses incurred under operating leases and concessions were as follows:
Year Ended December 31,
---------------------------------------
2000 1999 1998
(In Thousands)
Rent $ 21,824 $ 20,833 $ 17,530
Concession expenses:
Minimum fees 33,824 29,627 20,832
Contingent fees 28,251 25,628 27,784
-------- -------- --------
83,899 76,088 66,146
Less sublease rental income (2,081) (2,408) (2,836)
-------- --------- --------
Total $ 81,818 $ 73,680 $ 63,310
======== ======== ========
58
Future minimum rentals and fees under noncancelable operating leases, and
the Company's obligation for minimum airport concession fees at December
31, 2000 are presented in the following table. Concession fees-franchisee
locations presented are required to be paid by franchisees under terms of
sublease agreements.
Concession Fees
---------------------------
Company-
Owned Franchisee Operating
Stores Locations Leases Total
(In Thousands)
2001 $ 32,413 $ 2,416 $ 20,718 $ 55,547
2002 29,664 1,963 17,500 49,127
2003 22,259 1,825 13,977 38,061
2004 17,806 1,827 10,409 30,042
2005 16,910 1,810 8,846 27,566
Thereafter 74,278 26,215 45,094 145,587
--------- --------- --------- ---------
193,330 36,056 116,544 345,930
Less sublease rental income - - (3,738) (3,738)
--------- --------- --------- ---------
$ 193,330 $ 36,056 $ 112,806 $ 342,192
========= ========= ========= =========
Public Liability and Property Damage
For 2000 and most of 1999, the majority of the Company's operations had
first dollar coverage from insurance carriers, subject to certain policy
limits, for public liability and property damage claims. Prior to this
insurance coverage, the Company was self-insured or had policy deductibles
up to certain limits. The accrual for public liability and property damage
includes amounts for incurred and incurred but not reported losses. Such
liabilities are necessarily based on actuarially determined estimates and
management believes that the amounts accrued are adequate. At December 31,
2000 and 1999, these amounts have been discounted at 5.2% and 6.3%,
respectively, (assumed risk free rate), based upon the actuarially
determined estimated timing of payments to be made in future years.
Discounting resulted in reducing the accrual for public liability and
property damage by $3,266,000 and $6,434,000 at December 31, 2000 and
1999, respectively. Estimated payments of public liability and property
damage as of December 31, 2000 are as follows (in thousands):
2001 $ 19,994
2002 6,242
2003 3,736
2004 2,385
2005 1,675
Thereafter 4,603
--------
Aggregate undiscounted public liability and property damage 38,635
Effect of discounting (3,266)
--------
$ 35,369
========
59
Contingencies
Various claims and legal proceedings have been asserted or instituted
against the Company, including some purporting to be class actions, and
some which demand large monetary damages or other relief which could
result in significant expenditures. Litigation is subject to many
uncertainties, and the outcome of individual matters is not predictable
with assurance. The Company is also subject to potential liability related
to environmental matters. The Company establishes reserves for litigation
and environmental matters when the loss is probable and reasonably
estimable. It is reasonably possible that the final resolution of some of
these matters may require the Company to make expenditures, in excess of
established reserves, over an extended period of time and in a range of
amounts that cannot be reasonably estimated. The term "reasonably
possible" is used herein to mean that the chance of a future transaction
or event occurring is more than remote but less than likely. Although the
final resolution of any such matters could have a material effect on the
Company's consolidated operating results for the particular reporting
period in which an adjustment of the estimated liability is recorded, the
Company believes that any resulting liability should not materially affect
its consolidated financial position.
Other
The Company is party to a data processing services agreement which
requires monthly payments totaling $4,420,000 (2001), $4,535,000 (2002),
and $564,000 (2003). Additionally, the Company has a telecommunications
contract which requires annual payments of $5,100,000 through 2004 and an
agreement to outsource services pertaining to the development and support
of a reservation system which requires annual payments of $1,400,000
through 2002.
In addition to the letters of credit described in Note 8, the Company had
letters of credit and guarantee obligations totaling $2,625,000 and
$1,964,000, at December 31, 2000 and 1999, respectively.
At December 31, 2000, the Company had outstanding vehicle purchase
commitments of approximately $1,597,871,000.
15. BUSINESS SEGMENTS
The Company has two reportable segments: Dollar and Thrifty. These
reportable segments are strategic business units that offer different
products and services. They are managed separately based on the
fundamental differences in their operations. Dollar operates company-owned
stores located at major airports and derives the majority of its revenues
by providing rental vehicles and services directly to rental customers.
Thrifty operates primarily through franchisees serving both the airport
and local markets, and it derives the majority of its revenues from
franchising fees and services including vehicle leasing.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
segment performance based on profit and loss from operations before income
taxes.
60
Included in the consolidated financial statements are the following
amounts relating to geographic locations:
Year Ended December 31,
-----------------------------------------------
2000 1999 1998
(In Thousands)
Revenues:
United States $ 1,035,472 $ 953,509 $ 857,330
Other foreign countries 47,971 45,243 41,636
----------- ----------- -----------
$ 1,083,443 $ 998,752 $ 898,966
=========== =========== ===========
Long-lived assets:
United States $ 267,489 $ 244,673 $ 243,854
Other foreign countries 3,561 2,895 1,457
----------- ----------- -----------
$ 271,050 $ 247,568 $ 245,311
=========== =========== ===========
Revenues are attributed to geographic regions based on the location of the
transaction. Long-lived assets include property and equipment and
intangible assets.
Information by industry segment is set forth below:
Year Ended
December 31, 2000 Dollar Thrifty Other Consolidated
-------------------------------------------------------------------------------------------------------------------
(In Thousands)
Revenues from external customers $ 823,854 $ 259,084 $ 505 $ 1,083,443
Interest expense, net (a) 62,116 35,585 2 97,703
Depreciation and amortization, net 223,224 109,024 815 333,063
Income before income taxes 103,024 33,452 - 136,476
Segment assets $ 1,325,775 $ 688,048 $ 86,551 $ 2,100,374
Expenditures for segment assets $ 1,589,073 $ 974,625 $ 978 $ 2,564,676
Year Ended
December 31, 1999 Dollar Thrifty Other Consolidated
-------------------------------------------------------------------------------------------------------------------
(In Thousands)
Revenues from external customers $ 735,011 $ 262,978 $ 763 $ 998,752
Interest expense, net (a) 59,166 35,325 623 95,114
Depreciation and amortization, net 206,048 114,844 1,489 322,381
Income before income taxes 79,020 27,540 - 106,560
Segment assets $ 1,270,620 $ 667,161 $ 233,872 $ 2,171,653
Expenditures for segment assets $ 1,541,803 $ 886,500 $ 702 $ 2,429,005
61
Year Ended
December 31, 1998 Dollar Thrifty Other Consolidated
-------------------------------------------------------------------------------------------------------------------
(In Thousands)
Revenues from external customers $ 660,122 $ 237,919 $ 925 $ 898,966
Interest expense, net (a) 54,767 33,195 764 88,726
Depreciation and amortization, net 193,366 111,171 1,521 306,058
Income before income taxes 50,055 18,839 - 68,894
Segment assets $ 1,137,405 $ 628,409 $ 99,486 $ 1,865,300
Expenditures for segment assets $ 1,294,845 $ 812,236 $ 2,285 $ 2,109,366
(a) Management primarily uses net interest, not the gross interest
revenue and expense amounts, in assessing segment performance.
16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of the quarterly operating results during 2000 and 1999 follows:
Income Basic Diluted
Operating Before Earnings Earnings
Revenues Income Income Taxes Net Income Per Share Per Share
----------------------------------------------------------------------------------------
(In Thousands Except Per Share Amounts)
2000
First quarter $ 234,423 $ 42,701 $ 20,636 $ 11,312 $ 0.47 $ 0.46
Second quarter 286,723 69,929 43,785 24,761 1.02 1.01
Third quarter 322,910 91,935 61,065 35,964 1.49 1.46
Fourth quarter 239,387 35,555 10,990 5,972 0.25 0.24
----------- ----------- ----------- ----------- ------ ------
Total year $ 1,083,443 $ 240,120 $ 136,476 $ 78,009 $ 3.23 $ 3.18
=========== =========== =========== =========== ====== ======
1999
First quarter $ 211,551 $ 32,000 $ 10,609 $ 5,397 $ 0.22 $ 0.22
Second quarter 259,350 56,568 30,494 16,988 0.70 0.69
Third quarter 299,356 80,967 52,036 30,210 1.25 1.23
Fourth quarter 228,495 37,981 13,421 6,991 0.29 0.28
----------- ----------- ----------- ----------- ------ ------
Total year $ 998,752 $ 207,516 $ 106,560 $ 59,586 $ 2.47 $ 2.43
=========== =========== =========== =========== ====== ======
Operating income in the table above represents pre-tax income before
interest and amortization of costs in excess of net assets acquired.
62
17. SUBSEQUENT EVENTS
The Commercial Paper Program was renewed for another 364-day period
effective February 28, 2001, at a maximum size of $800 million backed by a
renewal of the Liquidity Facility which increased to $715 million.
RCFC is in the process of finalizing a Private Placement Memorandum to
offer $350 million of asset backed notes (the "2001 Series notes") during
March 2001 to replace existing asset backed notes which mature over the
next five years.
******
63
SCHEDULE II
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 2000, 1999 AND 1998
-------------------------------------------------------------------------------------------------------------------
Balance at Additions Balance at
Beginning Charged to End of
of Year Income Deductions Year
(In Thousands)
2000
Allowance for doubtful accounts $ 17,768 $ 11,925 $ (4,265) $ 25,428
========= ========= ========= =========
Public liability and property damage $ 58,783 $ (2,770) $ (20,644) $ 35,369
========= ========= ========= =========
1999
Allowance for doubtful accounts $ 14,910 $ 9,682 $ (6,824) $ 17,768
========= ========= ========= =========
Public liability and property damage $ 77,619 $ 4,710 $ (23,546) $ 58,783
========= ========= ========= =========
1998
Allowance for doubtful accounts $ 12,745 $ 6,891 $ (4,726) $ 14,910
========= ========= ========= =========
Public liability and property damage $ 75,687 $ 44,528 $ (42,596) $ 77,619
========= ========= ========= =========
64
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements on matters
related to accounting or financial disclosure during the fiscal years ended
December 31, 2000 and 1999.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information appearing under the captions
"Biographical Information Regarding Director Nominees and Named Executive
Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's definitive Proxy Statement which will be filed pursuant to Regulation
14A promulgated by the SEC not later than 120 days after the end of the
Company's fiscal year ended December 31, 2000, and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information appearing under the captions
"Meetings, Committees and Compensation of the Board of Directors -
Compensation," "Meetings, Committees and Compensation of the Board of Directors
- Certain Understandings," and "Executive Compensation" in the Company's
definitive Proxy Statement which will be filed pursuant to Regulation 14A
promulgated by the SEC not later than 120 days after the end of the Company's
fiscal year ended December 31, 2000, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the information appearing under the caption
"Security Ownership of Certain Beneficial Owners, Director Nominees and
Executive Officers" in the Company's definitive Proxy Statement which will be
filed pursuant to Regulation 14A promulgated by the SEC not later than 120 days
after the end of the Company's fiscal year ended December 31, 2000, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information appearing under "Certain
Relationships and Related Transactions" in the Company's definitive Proxy
Statement which will be filed pursuant to Regulation 14A promulgated by the SEC
not later than 120 days after the end of the Company's fiscal year ended
December 31, 2000, and is incorporated herein by reference.
65
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS A PART OF THIS REPORT
(1) ALL FINANCIAL STATEMENTS. The response to this portion
of Item 14 is submitted as a separate section herein under
Part II, Item 8 - Financial Statements and Supplementary
Data.
(2) FINANCIAL STATEMENT SCHEDULES. Schedule II - Valuation
and Qualifying Accounts - Years Ended December 31, 2000,
1999 and 1998 is set forth under Part II - Item 8 -
Financial Statements and Supplementary Data. All other
schedules are omitted because they are not applicable or
the information is shown in the financial statements or
notes thereto.
(3) INDEX OF EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
1.1 Form of U.S. Underwriting Agreement, filed as the same
numbered exhibit with the Company's Registration Statement on
Form S-1, as amended, Registration No. 333-39661, which became
effective December 16, 1997***
1.2 Form of Subscription Agreement, filed as the same numbered
exhibit with the Company's Registration Statement on Form S-1,
as amended, Registration No. 333-39661, which became effective
December 16, 1997***
3.1 Certificate of Incorporation of the Company, filed as the same
numbered exhibit with the Company's Registration Statement on
Form S-1, as amended, Registration No. 333-39661, which became
effective December 16, 1997*
3.2 By-Laws of the Company, as amended, which became effective
July 22,1999, filed as the same numbered exhibit with the
Company's Form 10-Q for the quarterly period ended June 30,
1999, filed August 12, 1999*
4.1 Form of Certificate of Common Stock, filed as the same
numbered exhibit with the Company's Registration Statement
on Form S-1, as amended, Registration No. 333-39661, which
became effective December 16, 1997*
4.2 Base Indenture dated as of December 13, 1995 between Thrifty
Car Rental Finance Corporation and Bankers Trust Company,
filed as the same numbered exhibit with the Company's
Registration Statement on Form S-1, as amended, Registration
No. 333-39661, which became effective December 16, 1997*
4.3 Series 1995-1 Supplement to Base Indenture dated as of
December 13, 1995 between Thrifty Car Rental Finance
Corporation and Bankers Trust Company, filed as the same
numbered exhibit with the Company's Registration Statement on
Form S-1, as amended, Registration No. 333-39661, which became
effective December 16, 1997*
66
4.4 Master Motor Vehicle Lease and Servicing Agreement dated as of
December 13, 1995 between Thrifty Car Rental Finance
Corporation and Thrifty, filed as the same numbered exhibit
with the Company's Registration Statement on Form S-1, as
amended, Registration No. 333-39661, which became effective
December 16, 1997*
4.5 Master Collateral Agency Agreement dated as of December 13,
1995 between Thrifty Car Rental Finance Corporation and
Bankers Trust Company, filed as the same numbered exhibit with
the Company's Registration Statement on Form S-1, as amended,
Registration No. 333-39661, which became effective December
16, 1997*
4.6 Form of Revolving Credit Agreement among the Company, Dollar,
Thrifty and the Institutions named therein, filed as the same
numbered exhibit with the Company's Registration Statement on
Form S-1, as amended, Registration No. 333-39661, which became
effective December 16, 1997*
4.7 Form of Series 1997-1 Supplement to Base Indenture between
Rental Car Finance Corp. and Bankers Trust Company, filed as
the same numbered exhibit with the Company's Registration
Statement on Form S-1, as amended, Registration No.
333-39661, which became effective December 16, 1997*
4.8 Form of Master Motor Vehicle Lease and Servicing Agreement
among the Company, Dollar, Thrifty and Rental Car Finance
Corp., filed as the same numbered exhibit with the Company's
Registration Statement on Form S-1, as amended, Registration
No. 333-39661, which became effective December 16, 1997*
4.9 Commitment Letter dated November 19, 1997, among Credit Suisse
First Boston, The Chase Manhattan Bank, Chase Securities Inc.,
Dollar, Thrifty and the Company regarding a $230,000,000
Revolving Credit Facility and a $545,000,000 Commercial Paper
Liquidity Facility and related Term Sheet, filed as the same
numbered exhibit with the Company's Registration Statement on
Form S-1, as amended, Registration No. 333-39661, which became
effective December 16, 1997*
4.10 Amended and Restated Master Collateral Agency Agreement dated
as of December 23, 1997 among the Company, Rental Car Finance
Corp., Thrifty, Dollar and Bankers Trust Company, filed as the
same numbered exhibit with the Company's Form 8-K, filed March
16, 1998*
4.11 Chrysler Support Letter of Credit and Reimbursement Agreement
dated as of December 23, 1997 among DaimlerChrysler, Dollar,
Thrifty, the Company, TRAC Team, Inc. and DTAG Services, Inc.,
filed as the same numbered exhibit with the Company's Form
8-K, filed March 16, 1998*
4.12 Series 1998-1 Supplement to Base Indenture dated as of March
4, 1998 between Rental Car Finance Corp. and Bankers Trust
Company, filed as the same numbered exhibit with the Company's
Form 8-K, filed March 16, 1998*
67
4.13 Master Motor Vehicle Lease and Servicing Agreement dated
as of March 4, 1998 among the Company, Dollar, Thrifty and
Rental Car Finance Corp., filed as the same numbered exhibit
with the Company's Form 8-K, filed March 16, 1998*
4.14 Note Purchase Agreement dated as of March 4, 1998 among Rental
Car Finance Corp., Dollar Thrifty Funding Corp. and Credit
Suisse First Boston, filed as the same numbered exhibit with
the Company's Form 8-K, filed March 16, 1998*
4.15 Liquidity Agreement dated as of March 4, 1998 among Dollar
Thrifty Funding Corp., Certain Financial Institutions and
Credit Suisse First Boston, filed as the same numbered exhibit
with the Company's Form 8-K, filed March 16, 1998*
4.16 Depositary Agreement dated as of March 4, 1998 between Dollar
Thrifty Funding Corp. and Bankers Trust Company, filed as the
same numbered exhibit with the Company's Form 8-K, filed March
16, 1998*
4.17 Collateral Agreement dated as of March 4, 1998 among Dollar
Thrifty Funding Corp., Credit Suisse First Boston Corporation
and Bankers Trust Company, filed as the same numbered exhibit
with the Company's Form 8-K, filed March 16, 1998*
4.18 Dealer Agreement dated as of March 4, 1998 among Dollar
Thrifty Funding Corp., the Company, Credit Suisse First Boston
Corporation and Chase Securities Inc., filed as the same
numbered exhibit with the Company's Form 8-K, filed March 16,
1998*
4.19 Rights Agreement (including a Form of Certificate of
Designation of Series A Junior Participating Preferred Stock
as Exhibit A thereto, a Form of Right Certificate as Exhibit B
thereto and a Summary of Rights to Purchase Preferred Stock as
Exhibit C thereto) dated as of July 23, 1998 between the
Company and Harris Trust and Savings Bank, as Rights Agent,
filed as the same numbered exhibit with the Company's Form
8-K, filed July 24, 1998*
4.20 Supplement No. 2 to Series 1998-1 Supplement to Base
Indenture dated March 4, 1999, among Rental Car Finance Corp.,
Dollar, Thrifty, the Company, Bankers Trust Company and Credit
Suisse First Boston, filed as the same numbered exhibit with
the Company's Form 8-K, filed May 18, 1999*
4.21 Extension of Scheduled Liquidity Commitment Termination Date
dated March 4, 1999, among Dollar Thrifty Funding Corp.,
various Liquidity Lenders and Credit Suisse First Boston,
filed as the same numbered exhibit with the Company's Form
8-K, filed May 18, 1999*
4.22 Series 1999-1 Supplement to Base Indenture dated as of April
29, 1999 between Rental Car Finance Corp. and Bankers Trust
Company, filed as the same numbered exhibit with the
Company's Form 8-K, filed May 18, 1999*
68
4.23 Note Purchase Agreement dated as of April 29, 1999 among
Rental Car Finance Corp., the Company, Credit Suisse First
Boston Corporation and Chase Securities Inc., filed as the
same numbered exhibit with the Company's Form 8-K, filed May
18, 1999*
4.24 Enhancement Letter of Credit Application and Agreement dated
April 29, 1999, among Dollar, Thrifty, the Company, Rental
Car Finance Corp. and Credit Suisse First Boston, filed as
the same numbered exhibit with the Company's Form 8-K, filed
May 18, 1999*
4.25 Supplement No. 4 to Series 1998-1 Supplement dated as of
February 18, 2000, among Rental Car Finance Corp., Dollar,
Thrifty, the Company, Bankers Trust Company, Credit Suisse
First Boston and Dollar Thrifty Funding Corp., filed as the
same numbered exhibit with the Company's Form 10-Q for the
quarterly period ended March 31, 2000, filed May 10, 2000*
4.26 Extension Agreement dated as of February 18, 2000, among
Dollar Thrifty Funding Corp., certain financial institutions,
as the Liquidity Lenders, and Credit Suisse First Boston,
filed as the same numbered exhibit with the Company's Form
10-Q for the quarterly period ended March 31, 2000, filed May
10, 2000*
4.27 Amendment No. 3 to Liquidity Agreement dated as of February
18, 2000, among Dollar Thrifty Funding Corp., certain
financial institutions, as the Liquidity Lenders, and Credit
Suisse First Boston, filed as the same numbered exhibit with
the Company's Form 10-Q for the quarterly period ended March
31, 2000, filed May 10, 2000*
4.28 Supplement No. 5 to Series 1998-1 Supplement to Base Indenture
dated July 17, 2000, among Rental Car Finance Corp., Dollar,
Thrifty, the Company, Bankers Trust Company and Credit Suisse
First Boston, filed as the same numbered exhibit with the
Company's Form 10-Q for the quarterly period ended September
30, 2000, filed November 13, 2000*
4.29 Amended and Restated Credit Agreement dated as of August 3,
2000, among the Company, Dollar, Thrifty, Various Financial
Institutions named therein, Credit Suisse First Boston, The
Chase Manhattan Bank and Chase Securities Inc., filed as the
same numbered exhibit with the Company's Form 10-Q for the
quarterly period ended September 30, 2000, filed November 13,
2000*
4.30 Amendment Agreement dated as of August 3, 2000, among the
Company, Dollar, Thrifty, Various Financial Institutions
named therein, Credit Suisse First Boston, The Chase
Manhattan Bank and Chase Securities Inc., filed as the same
numbered exhibit with the Company's Form 10-Q for the
quarterly period ended September 30, 2000, filed November 13,
2000*
4.31 Supplement No. 6 to Series 1998-1 Supplement to Base Indenture
dated August 31, 2000, among Rental Car Finance Corp., Dollar,
Thrifty, the Company, Bankers Trust Company and Credit Suisse
First Boston, filed as the same numbered exhibit with the
Company's Form 10-Q for the quarterly period ended September
30, 2000, filed November 13, 2000*
4.32 Amendment No. 2 to Master Motor Vehicle Lease and Servicing
Agreement dated as of November 9, 2000 among Rental Car
Finance Corp., Dollar, Thrifty and the Company**
69
4.33 Amendment No. 3 to Master Motor Vehicle Lease and Servicing
Agreement dated as of December 14, 2000 among Rental Car
Finance Corp., Dollar, Thrifty and the Company**
4.34 Series 2000-1 Supplement to Base Indenture dated as of
December 15, 2000 between Rental Car Finance Corp. and Bankers
Trust Company**
4.35 Note Purchase Agreement dated as of December 15, 2000 among
Rental Car Finance Corp., the Company, the Conduit Purchasers
from time to time party thereto, the Committed Purchasers
from time to time party thereto, the Managing Agents from
time to time party thereto and Bank One, NA, as
Administrative Agent**
4.36 Enhancement Letter of Credit Application and Agreement dated
as of December 15, 2000 among Dollar, Thrifty, the Company,
Rental Car Finance Corp. and Credit Suisse First Boston**
5 Opinion of Debevoise & Plimpton regarding legality of the
Common Stock, filed as the same numbered exhibit with the
Company's Registration Statement on Form S-1, as amended,
Registration No. 333-39661, which became effective December
16, 1997***
5.1 Opinion of Hall, Estill, Hardwick, Gable, Golden & Nelson,
P.C. regarding the legality of the Common Stock being
registered, filed as the same numbered exhibit with the
Company's Form S-8, Registration No. 333-79603, filed May 28,
1999***
5.2 Opinion of Hall, Estill, Hardwick, Gable, Golden & Nelson,
P.C. regarding the legality of the Common Stock being
registered, filed as the same numbered exhibit with the
Company's Form S-8, Registration No. 333-50800, filed November
28, 2000***
10.1 Vehicle Supply Agreement between DaimlerChrysler and Dollar,
filed as the same numbered exhibit with the Company's
Registration Statement on Form S-1, as amended, Registration
No. 333-39661, which became effective December 16, 1997*
10.2 Amended and Restated Vehicle Supply Agreement between
DaimlerChrysler and Thrifty, filed as the same numbered
exhibit with the Company's Registration Statement on Form S-1,
as amended, Registration No. 333-39661, which became effective
December 16, 1997*
10.3 Employment Continuation Agreement between the Company and
Joseph E. Cappy dated September 29, 1998, filed as the same
numbered exhibit with the Company's Form 10-Q for the
quarterly period ended September 30, 1998, filed November 16,
1998*
10.4 Employment Continuation Plan for Key Employees of Dollar
Thrifty Automotive Group, Inc., which became effective
September 29, 1998, filed as the same numbered exhibit with
the Company's Form 10-Q for the quarterly period ended
September 30, 1998, filed November 16, 1998*
10.5 Dollar Thrifty Automotive Group, Inc. Retirement Plan, dated
as of December 5, 1998, by and among the Company, Thrifty,
Dollar and Bank of Oklahoma, N.A., filed as the same numbered
exhibit with the Company's Form 10-K for the fiscal year
ended December 31, 1998, filed March 19, 1999*
70
10.6 Dollar Thrifty Automotive Group, Inc. Retirement Savings Plan,
as adopted by the Company pursuant to the Adoption Agreement
(Exhibit 10.7), filed as the same numbered exhibit with the
Company's Form S-8, Registration No. 333-89189, filed October
15, 1999*
10.7 Adoption Agreement #005 Nonstandardized Code Section 401(k)
Profit Sharing Plan of Dollar Thrifty Automotive Group, as
amended, filed as the same numbered exhibit with the Company's
Form S-8, Registration No. 333-89189, filed October 15, 1999*
10.8 Pentastar Transportation Group, Inc. Deferred Compensation
Plan, filed as the same numbered exhibit with the Company's
Registration Statement on Form S-1, as amended, Registration
No. 333-39661, which became effective December 16, 1997*
10.9 Pentastar Transportation Group, Inc. Executive Retention Plan,
filed as the same numbered exhibit with the Company's
Registration Statement on Form S-1, as amended, Registration
No. 333-39661, which became effective December 16, 1997*
10.10 Dollar Thrifty Automotive Group, Inc. Long-Term Incentive
Plan, filed as the same numbered exhibit with the Company's
Registration Statement on Form S-1, as amended, Registration
No. 333-39661, which became effective December 16, 1997*
10.11 Tax Sharing and Disaffiliation Agreement between
DaimlerChrysler and Dollar Thrifty Automotive Group, Inc.,
filed as the same numbered exhibit with the Company's
Registration Statement on Form S-1, as amended, Registration
No. 333-39661, which became effective December 16, 1997*
10.12 Form of Indemnification Agreement between the Company and
DaimlerChrysler, filed as the same numbered exhibit with the
Company's Registration Statement on Form S-1, as amended,
Registration No. 333-39661, which became effective December
16, 1997*
10.13 Amendment to Long-Term Incentive Plan dated as of September
29, 1998, filed as the same numbered exhibit with the
Company's Form S-8, Registration No. 333-79603, filed May 28,
1999*
10.14 Amendment to Deferred Compensation Plan dated as of September
29, 1998, filed as the same numbered exhibit with the
Company's Form S-8, Registration No. 333-33144, filed March
23, 2000*
10.15 Second Amendment to Deferred Compensation Plan dated as of
September 23, 1999, filed as the same numbered exhibit with
the Company's Form S-8, Registration No. 333-33144, filed
March 23, 2000*
10.16 Third Amendment to Deferred Compensation Plan dated as of
January 14, 2000, filed as the same numbered exhibit with the
Company's Form S-8, Registration No. 333-33144, filed March
23, 2000*
10.17 First Amendment to Retirement Plan dated as of September 23,
1999, filed as the same numbered exhibit with the Company's
Form S-8, Registration No. 333-33146, filed March 23, 2000*
71
10.18 Second Amendment to Retirement Plan dated as of January 14,
2000, filed as the same numbered exhibit with the Company's
Form S-8, Registration No. 333-33146, filed March 23, 2000*
10.19 Second Amendment to Long-Term Incentive Plan dated as of May
25, 2000, filed as the same numbered exhibit with the
Company's Form 10-Q for the quarterly period ended June 30,
2000, filed August 9, 2000*
10.20 Vehicle Supply Agreement between DaimlerChrysler Motors
Corporation and Dollar Thrifty Automotive Group, Inc.
executed June 26, 2000, filed as the same numbered exhibit
with the Company's Form 10-Q for the quarterly period ended
June 30, 2000, filed August 9, 2000*
10.21 [ Reserved ]
10.22 Adoption, Consent and Third Amendment to Retirement Plan
dated as of July 1, 2000, filed as the same numbered exhibit
with the Company's Form 10-Q for the quarterly period ended
September 30, 2000, filed November 13, 2000*
15.1 Letter from Deloitte & Touche LLP regarding interim financial
information, filed as the same numbered exhibit with the
Company's Form S-8, Registration No. 333-79603, filed May 28,
1999***
15.2 Letter from Deloitte & Touche LLP regarding interim financial
information, filed as the same numbered exhibit with the
Company's Form S-8, Registration No. 333-89189, filed October
15, 1999***
15.3 Letter from Deloitte & Touche LLP regarding interim financial
information, filed as the same numbered exhibit with the
Company's Form S-8, Registration No. 333-50800, filed November
28, 2000***
21 Subsidiaries of the Company**
23.2 Consent of Debevoise & Plimpton (included in Exhibit 5), filed
as the same numbered exhibit with the Company's Registration
Statement on Form S-1, as amended, Registration No. 333-39661,
which became effective December 16, 1997*
23.3 Consent of Donovan Leisure Newton & Irvine LLP, filed as the
same numbered exhibit with the Company's Registration
Statement on Form S-1, as amended, Registration No. 333-39661,
which became effective December 16, 1997*
23.4 Consent of Deloitte & Touche LLP, filed as the same numbered
exhibit with the Company's Form S-8, Registration No.
333-79603, filed May 28, 1999*
23.5 Consent of Hall, Estill, Hardwick, Gable, Golden & Nelson,
P.C. (included in Exhibit 5.1), filed as the same numbered
exhibit with the Company's Form S-8, Registration No.
333-79603, filed May 28, 1999*
23.6 Consent of Deloitte & Touche LLP, filed as the same numbered
exhibit with the Company's Form S-8, Registration No.
333-89189, filed October 15, 1999*
72
23.7 Consent of Deloitte & Touche LLP, filed as the same numbered
exhibit with the Company's Form 10-K for the fiscal year
ended December 31, 1999, filed March 22, 2000*
23.8 Consent of Deloitte & Touche LLP, filed as the same numbered
exhibit with the Company's Form S-8, Registration No.
333-33144, filed March 23, 2000*
23.9 Consent of Deloitte & Touche LLP, filed as the same numbered
exhibit with the Company's Form S-8, Registration No.
333-33146, filed March 23, 2000*
23.10 Consent of Deloitte & Touche LLP, filed as exhibit 23.8 with
the Company's Form 11-K, filed June 28, 2000*
23.11 Consent of Deloitte & Touche LLP, filed as exhibit 23.9 with
the Company's Form 11-K/A, filed October 16, 2000*
23.12 Consent of Deloitte & Touche LLP, filed as the same numbered
exhibit with the Company's Form S-8, Registration No.
333-50800, filed November 28, 2000*
23.13 Consent of Hall, Estill, Hardwick, Gable, Golden & Nelson,
P.C. (included in Exhibit 5.2), filed as the same numbered
exhibit with the Company's Form S-8, Registration No.
333-50800, filed November 28, 2000*
23.14 Consent of Deloitte & Touche LLP regarding Forms S-8,
Registration No. 333-79603, Registration No. 333-89189,
Registration No. 333-33144, Registration No. 333-33146
and Registration No. 333-50800**
---------
* Incorporated by reference
** Filed herewith
*** Not incorporated by reference in this report
(b) No report on Form 8-K was filed by the Company during or
applicable to the quarter ended December 31, 2000.
(c) FILED EXHIBITS
--------------
The response to this item is submitted as a separate section
of this report.
73
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 13, 2001 DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
By: /s/ JOSEPH E. CAPPY
--------------------------------
Name: Joseph E. Cappy
Title: President and Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ JOSEPH E. CAPPY Chairman of the Board March 13, 2001
------------------------ Chief Executive Officer
Joseph E. Cappy President and Director
/s/ STEVEN B. HILDEBRAND Executive Vice President March 13, 2001
------------------------ Principal Financial Officer
Steven B. Hildebrand Principal Accounting Officer
/s/ MOLLY S. BOREN Director March 13, 2001
------------------------
Molly S. Boren
/s/ THOMAS P. CAPO Director March 13, 2001
------------------------
Thomas P. Capo
/s/ EDWARD J. HOGAN Director March 13, 2001
------------------------
Edward J. Hogan
/s/ MARYANN N. KELLER Director March 13, 2001
------------------------
Maryann N. Keller
/s/ EDWARD C. LUMLEY Director March 13, 2001
------------------------
Edward C. Lumley
/s/ JOHN C. POPE Director March 13, 2001
------------------------
John C. Pope
/s/ JOHN P. TIERNEY Director March 13, 2001
------------------------
John P. Tierney
/s/ EDWARD L. WAX Director March 13, 2001
------------------------
Edward L. Wax
74
INDEX TO EXHIBITS
-----------------
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
4.32 Amendment No. 2 to Master Motor Vehicle Lease and Servicing
Agreement dated as of November 9, 2000 among Rental Car Finance
Corp., Dollar, Thrifty and the Company
4.33 Amendment No. 3 to Master Motor Vehicle Lease and Servicing
Agreement dated as of December 14, 2000 among Rental Car Finance
Corp., Dollar, Thrifty and the Company
4.34 Series 2000-1 Supplement to Base Indenture dated as of December
15, 2000 between Rental Car Finance Corp. and Bankers Trust
Company
4.35 Note Purchase Agreement dated as of December 15, 2000 among
Rental Car Finance Corp., the Company, the Conduit Purchasers
from time to time party thereto, the Committed Purchasers from
time to time party thereto, the Managing Agents from time to
time party thereto and Bank One, NA, as Administrative Agent
4.36 Enhancement Letter of Credit Application and Agreement dated as
of December 15, 2000 among Dollar, Thrifty, the Company, Rental
Car Finance Corp. and Credit Suisse First Boston
21 Subsidiaries of the Company
23.14 Consent of Deloitte & Touche LLP regarding Forms S-8,
Registration No. 333-79603, Registration No. 333-89189,
Registration No. 333-33144, Registration No. 333-33146 and
Registration No. 333-50800
75