-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
RfFdk379gDN+a8+w02Xs6Dqwg5HFwIyADdoV+kPWjQUY8HaZxiT27x2UqmjrNDC/
HUnYsMcBeqfne2H2XATaDA==
<SEC-DOCUMENT>0001049108-02-000002.txt : 20020415
<SEC-HEADER>0001049108-02-000002.hdr.sgml : 20020415
ACCESSION NUMBER: 0001049108-02-000002
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020320
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: DOLLAR THRIFTY AUTOMOTIVE GROUP INC
CENTRAL INDEX KEY: 0001049108
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTO RENTAL & LEASING (NO DRIVERS) [7510]
IRS NUMBER: 731356520
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-13647
FILM NUMBER: 02580266
BUSINESS ADDRESS:
STREET 1: 5330 EAST 31ST STREET
CITY: TULSA
STATE: OK
ZIP: 74135
BUSINESS PHONE: 9186607700
MAIL ADDRESS:
STREET 1: 5330 EAST 31ST STREET
CITY: TULSA
STATE: OK
ZIP: 74135
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>form10kannualreport2001.txt
<TEXT>
- --------------------------------------------------------------------------------
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, 2001
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, 2002 was
$350,350,297.
The number of shares outstanding of the registrant's Common Stock as of
February 28, 2002 was 24,326,345.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on May 22, 2002, are incorporated by reference in Part
III.
================================================================================
1
<PAGE>
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
FORM 10-K
TABLE OF 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.........................................38
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...............39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE....................68
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........68
ITEM 11. EXECUTIVE COMPENSATION....................................68
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.....................................68
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............68
2
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.......................................69
SIGNATURES....................................................................80
INDEX TO EXHIBITS.............................................................81
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 upon
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 companies' customers
reside and where our companies and their franchisees operate; air travel
patterns; 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 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
<PAGE>
PART I
------
ITEM 1. BUSINESS
Company Overview
Dollar Thrifty Automotive Group, Inc., a Delaware corporation ("DTG"),
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 DTG as it is a wholly owned subsidiary of Thrifty, Inc.
Thrifty Car Sales, Inc., which operates a franchised retail used car sales
network, is also a wholly owned subsidiary of Thrifty, Inc. and an indirect
subsidiary of DTG (Thrifty, Inc., Thrifty Rent-A-Car System, Inc., Thrifty Car
Sales, Inc. and all their respective subsidiaries are individually or
collectively, as the context requires, referred to hereafter as "Thrifty"). DTG,
Dollar and Thrifty and each of their subsidiaries are individually or
collectively referred to herein as the "Company", as the context may require.
The Company has two additional subsidiaries, Rental Car Finance Corp. and Dollar
Thrifty Funding Corp., which are special purpose financing entities and have
been appropriately consolidated as part of the Company. 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, 2001, Dollar and Thrifty had 869 locations in the United States
and Canada of which 193 were company-owned stores and 676 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. For the year ended
December 31, 2001, Dollar's gross revenues comprised approximately 75% of the
Company's revenues with Thrifty contributing the remaining 25% 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
predominantly 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. See Note
16 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").
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 utilized 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
Company'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
<PAGE>
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 determine in
advance 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 (currently
operating under bankruptcy court protection pursuant to Chapter 11 of the U.S.
Bankruptcy Code), which owns both Alamo and National, and Budget Group, Inc. are
both publicly owned. In 2001, Cendant Corporation re-acquired all ownership of
Avis (formerly sold to the public in 1997) and operates it as a subsidiary. Ford
re-acquired all public ownership of Hertz in 2001.
Prior to 2001, the car rental industry had experienced steady growth
over the last decade driven by increased leisure and business airline passenger
traffic and additional capacity in the hotel industry. During 2001, however, the
travel industry suffered from the effects of an economic recession as well as
the terrorist attacks of September 11. In the aftermath of September 11, airline
passenger traffic dropped significantly from the prior year and car rental
companies reduced their fleet size in response to lower levels of demand. Rental
car pricing, already weak prior to September 11, further weakened during the
fourth quarter of 2001. Car rental demand and pricing are expected to improve as
the economy strengthens and the travel industry recovers in 2002; however, the
timing and strength of recovery, which could materially affect the operating
results of the Company, remains uncertain.
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 Company to vary its fleet size over the course of
the year. In 2001, the Company's average monthly fleet size ranged from a low of
approximately 73,000 vehicles in the fourth quarter to a high of approximately
120,000 vehicles in the third quarter. Due principally to effects of September
11, the fourth quarter fleet size was reduced an additional 15% below the normal
seasonal decline.
5
<PAGE>
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.
Dollar's services and products include fleet leasing, marketing,
centralized reservations, counter automation, insurance, central billing,
supplies, 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, 2001, Dollar's vehicle rental system included 269
locations in the United States and Canada, consisting of 134 company-owned
stores and 135 that were operated by franchisees. Dollar's total revenue was
$769 million in 2001, of which $733 million (95%) was generated by company-owned
stores, and $36 million (5%) 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 39 of the 50 largest U.S. airport markets and
franchisees in all but one of the remaining markets. When opportunities arise,
Dollar may acquire operations from franchisees and convert them to company-owned
stores. Dollar converted three franchised operations to company-owned operations
in 1997, two in 1998 and three in 2000. No franchised operations were converted
to company-owned operations during 2001; however, Dollar will continue to pursue
opportunities in 2002. Dollar generally has the right of first refusal on the
sale of a franchised operation. Consistent with its 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 23% of Dollar's rental revenues in 2001. 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 $171 million in 2001.
Dollar is the exclusive U.S. vehicle rental company for four of its
five largest tour operator accounts. The agreements for these five accounts
expire from December 2002 to March 2009. No single tour operator account
generated in excess of 5% of the Company's 2001 revenues.
6
<PAGE>
As of December 31, 2001, Dollar had vehicle rental concessions for
company-owned stores at 69 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.
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 Internet web site,
(dollar.com), continues to show significant growth with reservations booked
through dollar.com increasing 15% in 2001, representing 19% of Dollar's non-tour
reservations booked for the year. An additional 18% of Dollar's reservations
were booked through other Internet travel sites.
Supplemental Equipment and Optional Products. Dollar rents ski racks,
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, reservations 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. In 1998, Dollar developed a revenue
management system with Manugistics Group, Inc. (formerly 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., a
leading global information technology service company, to manage and monitor its
data center network and its daily information processing, which agreement was
later transferred to EDS Information Systems, L.L.C. ("EDS"). All of Dollar's
key systems are housed in a secure underground EDS 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 customer satisfaction training and team-based problem solving,
especially as it relates to improving customer service. 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 Tulsa, Newark, Los Angeles, Cleveland and Honolulu, with an
additional training center in Oakland scheduled to open in 2002. Training for
newly hired rental employees is performed at individual work sites using
computer based training materials.
7
<PAGE>
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 international tour operators.
Franchising
United States and Canada
Approximately 5% of Dollar's 2001 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 2001 accounted for approximately 2% of Dollar's total
revenue. In Canada, Dollar's master franchisee directly operates or
subfranchises 16 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, each U.S.
franchisee is 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 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
As of December 31, 2001, Dollar had franchised operations located in 27
countries outside the United States and Canada. 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 2001 total revenue.
Dollar exchanges reservations with Sixt, AG, a major European rental car
company. Through its alliance with Sixt, Dollar offers service in more than 42
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
<PAGE>
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.
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 has
national marketing partnerships with major U.S. airlines' frequent flier
programs.
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 most major airline partners and many travel agencies.
Approximately 25% 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 2001, Dollar received approximately 37% 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. 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, as well as having strong online market share with Orbitz and HRN.
Additionally, Dollar's innovative use of direct-connect technology with
Southwest Airlines' southwest.com web site opened up another new distribution
channel in 2001.
9
<PAGE>
Summary Operating Data of Dollar
Years Ended December 31,
-----------------------------------
2001 2000 1999
--------- --------- ---------
(in thousands)
Revenues:
U.S. Company-owned stores $ 732,597 $ 774,530 $ 682,769
U.S. and Canada franchisees 35,136 45,158 47,848
International franchisees 1,412 1,624 2,547
Other 119 2,542 1,847
--------- --------- ---------
Total revenues $ 769,264 $ 823,854 $ 735,011
========= ========= =========
As of December 31,
-----------------------------------
2001 2000 1999
--------- --------- ---------
Rental Locations:
U.S. Company-owned stores 134 130 116
U.S. and Canada franchisee locations 135 152 173
Franchisees:
U.S. and Canada 61 66 77
International 42 38 40
10
<PAGE>
Thrifty
General
Thrifty's focus is on franchising and franchise support services.
However, Thrifty has begun operating company-owned stores in key markets to
assure continued service availability to its customers. Thrifty operated
company-owned stores in ten cities in the United States and Canada as of
December 31, 2001. Thrifty's U.S. company-owned stores and its franchisees
derive approximately 65% of their combined rental revenues from the airport
market and approximately 35% 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. At December 31, 2001,
Thrifty had 84 in-terminal locations, which is over half of the airports
serviced by Thrifty in the U.S.
As of December 31, 2001, Thrifty's vehicle rental system included 600
rental locations in the United States and Canada, divided between 541 franchisee
locations and 59 company-owned stores. The Thrifty system also included 642
locations abroad, all of which were franchisee locations. Thrifty's total
corporate revenue was $251 million in 2001, of which $189 million (75%) was
revenue from franchisees in the form of fleet leasing fees, system fees and
other service and product fees and $62 million (25%) 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 car
sales, 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 8% per year, with an average of 15 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
<PAGE>
For 2001, Thrifty's five largest U. S. franchisees generated
approximately 16% 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 recruiting 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 2001, fleet leasing accounted for approximately 57%
of Thrifty's total revenue. Thrifty's 2002 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. Thrifty implemented its "True Blue Pride Initiative," which
identified areas requiring customer service improvements and established 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 2001 total revenues. Thrifty's Internet web site (thrifty.com)
continues to show significant growth with reservations booked through
thrifty.com increasing by 60% in 2001, representing 12% of Thrifty's
reservations booked for the year. An additional 19% 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 EDS 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 January 31, 2003. Other
information systems are supported by Thrifty employees. Thrifty's fleet and
reservation processing systems are housed in a secure underground EDS facility
in Oklahoma designed to withstand disasters.
12
<PAGE>
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 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, 2001, Thrifty master franchisees operated 642
vehicle rental locations in 60 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 2001 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 may be
re-franchised. During 2001, Thrifty re-franchised three South Florida cities
previously operated corporately and terminated existing franchise agreements and
re-franchised San Jose, San Antonio/Austin, El Paso and New Haven. Additionally,
during 2001, Thrifty commenced operating its Dallas-Fort Worth, San Francisco
and Oakland locations, previously operated by independent franchisees, and
expects to operate additional locations in key markets in 2002 to provide
continued service to its customers. As of December 31, 2001, Thrifty operated
company-owned stores in four cities in the United States. In March 2002, Thrifty
began operating the locations of former franchisees, including Washington, D.C.,
Baltimore and Denver. 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.
13
<PAGE>
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. At December 31, 2001, Thrifty Car Sales had 45
franchise locations in operation.
Canadian Operations
Thrifty operates in Canada through its wholly owned subsidiary, Thrifty
Canada, Ltd. ("TCL"). TCL operates company-owned stores in six of the eight
largest airport vehicle rental markets in Canada and encourages franchisees to
operate in the remaining markets. As of December 31, 2001, the TCL system
included 127 vehicle rental locations, of which 85 were operated by franchisees
and 42 were operated as company-owned stores.
Company-Owned Stores
TCL's company-owned store operations include six strategic airports:
Toronto, Montreal, Vancouver, Winnipeg, Calgary and Ottawa. 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.
14
<PAGE>
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 2001 model year,
franchisees and company-owned stores earned an aggregate allowance of
approximately $4.7 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 2001, 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 introduced a new
and easier means of booking 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, 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. In addition, during July 2001, Thrifty became the exclusive
car rental supplier in Radisson's "Look to Book" program.
15
<PAGE>
Summary Operating Data of Thrifty
Years ended December 31,
-----------------------------------
2001 2000 1999
--------- --------- ---------
(in thousands)
Revenues:
U.S. and Canada franchisees $ 185,556 $ 215,340 $ 225,934
U.S. and Canada Company-owned stores 62,230 40,858 33,981
International franchisees 2,930 2,885 3,063
--------- --------- ---------
Total revenues $ 250,716 $ 259,083 $ 262,978
========= ========= =========
As of December 31,
-----------------------------------
2001 2000 1999
--------- --------- ---------
Rental Locations:
U.S. and Canada franchisee locations 541 613 651
U.S. and Canada Company-owned stores 59 52 33
Franchisees:
U.S. and Canada 212 226 245
International 60 57 63
16
<PAGE>
Fleet Acquisition and Management
U.S. Vehicle Supply
For the 2001 model year, DaimlerChrysler vehicles represented
approximately 84% of the Company's total U.S. fleet. The Company 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
2002 model year, DaimlerChrysler vehicles will represent approximately 90% of
the Company's U.S. fleet.
Automotive manufacturers' residual value programs limit the Company'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 Company'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 Company 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 Company 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 Company, does not set
any terms or conditions on the resale of Non-Program Vehicles other than
required minimum holding periods. For the 2001 model year, approximately 23% of
the vehicles acquired by the Company were Non-Program Vehicles.
The Company'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 Company's operations. The percentage of the Company'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 Company 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 Company may not be able to manage effectively the residual
value risk on its Non-Program Vehicles. 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 Company has received substantial payments under
residual value programs over the past several years. See Note 5 of Notes to
Consolidated Financial Statements.
17
<PAGE>
DaimlerChrysler has been the Company'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 with Dollar and Thrifty, which commenced with the 1997 model
year and expired in July 2001. In June 2000, the Company entered into a new
vehicle supply agreement (the "VSA") with DaimlerChrysler, which enables the
Company to acquire vehicles beginning with the 2002 model year through the 2006
model year. Under the VSA, DaimlerChrysler has agreed to make specified volumes
of DaimlerChrysler vehicles available for use by company-owned stores or for
fleet leasing programs. Dollar and Thrifty will promote DaimlerChrysler vehicles
exclusively in their advertising and other promotional materials and
DaimlerChrysler has agreed to make various promotional payments to the Company.
These payments are material to the Company's results of operations. See Note 5
of Notes to Consolidated Financial Statements.
The VSA provides that the Company will purchase at least 80% of its
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
VSA to offer programs to the Company 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 the Company during any model
year exceed certain targets, DaimlerChrysler will make available 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 8
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, 2001, the average age of vehicles in the Company's fleet was
approximately 6 months. The Company's flexibility to adjust the holding period
for vehicles, particularly for Program Vehicles, enables it to adjust the 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, retailers and franchisees. During
2001, Dollar and Thrifty disposed of 45% of their Non-Program Vehicles through
direct channels and 55% 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
<PAGE>
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 2001, approximately 23% and
63% 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 2001,
approximately 2% of Dollar's and 57% of Thrifty's (including Canada) total
revenue was derived from vehicle leasing programs.
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.
<TABLE>
<CAPTION>
U.S. Fleet Data
Years Ended December 31,
----------------------------------
2001 2000 1999
-------- -------- --------
<S> <C> <C> <C>
Thrifty:
Average number of vehicles leased to franchisees 28,384 31,267 31,856
-------- -------- --------
Average number of vehicles in combined fleets of
franchisees 44,821 49,210 45,613
Average number of vehicles in combined fleets of
company-owned stores 2,418 720 483
-------- -------- --------
Total 47,239 49,930 46,096
======== ======== ========
Dollar:
Average number of vehicles leased to franchisees 3,028 4,080 4,960
-------- -------- --------
Average number of vehicles in combined fleets of
franchisees 13,041 15,470 14,252
Average number of vehicles in combined fleets of
company-owned stores 62,611 61,858 56,065
-------- -------- --------
Total 75,652 77,328 70,317
======== ======== ========
</TABLE>
19
<PAGE>
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 and tour 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 Company. 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 and its U.S. franchisees generally compete for cost-conscious
consumers with Alamo, Avis, Budget, Hertz, National, Dollar 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 Company is subject to third-party bodily injury liability and
property damage liability claims resulting from accidents involving their rental
vehicles. For 2001, 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 retained the risk of loss in various amounts up
to $2 million on a per occurrence basis. The Company maintains additional
insurance at certain amounts in excess of its respective underlying coverages.
During the first quarter of 2002, the Company reverted to retaining the risk of
loss in various amounts up to $1 million on a per occurrence basis.
The Company retains the risk of loss for general and garage liability
insurance coverage in various amounts up to $2 million and maintains insurance
at certain amounts in excess of $2 million. During 2001, the Company began
retaining the risk of loss for any catastrophic and comprehensive damage to its
vehicles. Previously, the Company insured this risk with a $250,000 deductible.
In addition, the Company carries workers' compensation coverage with retentions
in various amounts up to $250,000. The Company 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, 2001, the Company's reserve
for public liability and property damage claims was approximately $23 million.
The Company's obligations to pay these losses and indemnify the insurance
carriers are collateralized by surety bonds. As of December 31, 2001, these
surety bonds totaled approximately $34.5 million.
The Company also maintains various surety bonds to secure performance
under airport concession agreements and other obligations. As of December 31,
2001, the total amount of these bonds was approximately $22.7 million.
20
<PAGE>
Regulation
Loss Damage Waivers and Ancillary Insurance
Loss damage waivers relieve customers from financial responsibility for
vehicle damage. Legislation affecting the sale of loss damage waivers has been
adopted in 25 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
<PAGE>
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 12 and lease 102 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 Company 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
Company.
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 Company 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 Company may have been released or disposed, and of
which the Company is currently unaware, may in the future become the subject of
cleanup for which the Company may be liable, in whole or part. Accordingly,
while the Company believes that it is in substantial compliance with applicable
requirements of environmental laws, there can be no assurance that the Company's
future environmental liabilities will not be material to the Company's
consolidated financial position or results of operations or cash flows.
Employees
As of December 31, 2001, the Company employed a total of approximately
5,400 full-time and part-time employees of whom approximately 4,100 were
employed by Dollar and 1,300 by Thrifty. Approximately 200 of the Company's
employees were subject to collective bargaining agreements as of December 31,
2001. The Company believes its relationship with its employees is good.
22
<PAGE>
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".
In connection with the Revolving Credit Facility, Dollar also 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.
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, 2001,
the Company's company-owned operations were carried on at 193 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.
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. 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. 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, 2001.
23
<PAGE>
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 2001 and 2000, were as follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
2001
----
High $ 22.38 $ 25.46 $ 24.00 $ 15.50
Low $ 17.88 $ 19.75 $ 8.50 $ 9.35
2000
----
High $ 23.75 $ 21.00 $ 22.81 $ 20.81
Low $ 11.38 $ 14.88 $ 18.25 $ 14.25
The 24,326,345 shares of Common Stock outstanding at February 28, 2002
were held by approximately 3,300 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 lenders on the payment of cash dividends to stockholders. During
the term of such agreement, which expires August 2, 2005, dividends are
permitted at the lesser of specified monetary levels or percentages of cash
flow, except during the amendment and waiver period which extends through
January 31, 2003, in which the amendment and waiver prohibits the payment of
dividends. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources".
24
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Selected Consolidated Financial Data of the Company
The selected consolidated financial data was derived from the audited
consolidated financial statements of the Company. References to system-wide
vehicle rental revenue include revenue received from the Company's company-owned
stores and by franchisees from the rental of vehicles.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
Statements of Operations:
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues:
Vehicle rentals $ 791,699 $ 813,741 $ 714,407 $ 635,600 $ 620,045
Vehicle leasing 162,204 198,686 218,614 202,371 164,701
Fees and services 56,057 61,166 57,046 51,770 49,143
Other 10,075 9,850 8,685 9,225 9,899
----------- ----------- ----------- ----------- -----------
Total revenues 1,020,035 1,083,443 998,752 898,966 843,788
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Direct vehicle and operating 359,782 315,164 289,129 267,504 263,850
Vehicle depreciation and lease
charges, net 365,894 340,448 311,113 305,169 294,911
Selling, general and
administrative 169,599 187,711 190,994 163,256 149,697
Interest expense, net 92,365 97,703 95,114 88,726 87,852
Amortization of goodwill 6,178 5,941 5,842 5,417 6,010
----------- ----------- ----------- ----------- -----------
Total costs and expenses 993,818 946,967 892,192 830,072 802,320
----------- ----------- ----------- ----------- -----------
Income before income taxes 26,217 136,476 106,560 68,894 41,468
Income tax expense 12,380 58,467 46,974 31,229 23,427
----------- ----------- ----------- ----------- -----------
Net income $ 13,837 $ 78,009 $ 59,586 $ 37,665 $ 18,041
=========== =========== =========== =========== ===========
Earnings per share:
Basic $ 0.57 $ 3.23 $ 2.47 $ 1.56 $ 0.90
Diluted $ 0.57 $ 3.18 $ 2.43 $ 1.56 $ 0.90
Balance Sheet Data:
(in thousands)
Revenue-earning vehicles, net $ 1,524,909 $ 1,522,388 $ 1,507,692 $ 1,342,066 $ 1,319,490
Total assets $ 2,163,692 $ 2,100,374 $ 2,171,653 $ 1,865,300 $ 1,942,210
Total debt $ 1,516,733 $ 1,424,021 $ 1,555,609 $ 1,313,799 $ 1,418,687
Stockholders' equity $ 463,321 $ 458,139 $ 379,127 $ 315,914 $ 268,426
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
U. S. and Canada
Years Ended December 31,
-----------------------------------------------------------------------
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SYSTEM-WIDE DATA:
Vehicle rental revenue:
(in thousands)
Company-owned stores $ 792,000 $ 814,000 $ 714,000 $ 636,000 $ 620,000
Franchisee locations 634,000 737,000 699,000 620,000 516,000
----------- ----------- ----------- ----------- -----------
Total vehicle rental revenue $ 1,426,000 $ 1,551,000 $ 1,413,000 $ 1,256,000 $ 1,136,000
=========== =========== =========== =========== ===========
Rental locations:
Company-owned stores 193 182 149 139 139
Franchisee locations 676 765 824 763 752
----------- ----------- ----------- ----------- -----------
Total rental locations 869 947 973 902 891
=========== =========== =========== =========== ===========
Average number of vehicles operated
during the period by company-owned
stores and franchisees 130,252 134,475 123,814 111,652 103,417
Peak number of vehicles operated
during the period by company-owned
stores and franchisees 159,993 162,515 148,832 134,407 122,286
COMPANY-OWNED STORES DATA:
Vehicle rental data:
Average number of vehicles operated 68,696 65,702 59,218 53,983 53,719
Number of rental days 20,640,229 20,347,296 18,155,768 16,374,491 16,320,568
Average revenue per day $ 38.36 $ 40.00 $ 39.35 $ 38.82 $ 37.98
Monthly average revenue per vehicle $ 960 $ 1,032 $ 1,005 $ 980 $ 959
Vehicle leasing data:
Average number of vehicles leased 30,087 35,520 38,690 37,709 32,814
Average monthly lease revenue per unit $ 449 $ 466 $ 471 $ 447 $ 420
</TABLE>
26
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The Company 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 Company's revenues consist of:
o Vehicle rentals consists of revenue generated from renting vehicles
to customers, including all related charges, through company-owned
stores and is recognized as earned on a daily basis under the
related rental contracts with customers.
o Vehicle leasing consists of revenue generated from leasing vehicles
to franchisees, principally under operating leases with fixed
monthly payments and is recognized as earned over the lease terms.
o Fees and services includes revenue generated from continuing
franchise fees and providing reservations, insurance, supplies and
other products and services to franchisees and is recognized as
earned on a monthly basis.
o Other includes revenue generated from franchise sales, parking
income, non-vehicle lease income and interest income derived from
franchisees and is recognized as earned on a daily or monthly
basis, except initial franchise fees, which are recognized upon
substantial completion of all material services and conditions of
the franchise sale and which coincides with the date of sale and
commencement of operations by the franchisee.
The Company's expenses consist of:
o Direct vehicle and operating includes 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 includes 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 includes expenses including
headquarters personnel expenses, advertising and marketing expenses
and reservation expenses.
o Interest expense, net includes interest expense, net of interest
earned on restricted cash, cash and cash equivalents, relating
primarily to revenue-earning vehicle financing.
o Amortization of goodwill.
The Company'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
Company's profitability, depending on the ability of the Company to adjust
pricing and lease rates for these changes. The Company's business requires
significant expenditures for vehicles and consequently, requires substantial
liquidity to finance such expenditures.
27
<PAGE>
As with most companies, the Company must exercise judgment in estimating
certain costs included in its results of operations. The more significant items
include:
Public liability and property damage - The Company may self-insure or retain a
portion of the exposure for losses related to public liability and property
damage insurance. The Company retains the services of a third party actuary to
provide estimates of these exposures for losses; however, these estimates change
as claims are finalized and paid.
Vehicle depreciation expense - The Company generally purchases 75% to 80% of its
vehicles as Program Vehicles for which residual values are determined by
depreciation rates that are established and guaranteed by the manufacturers. The
remaining 20% to 25% of the Company's vehicles are purchased without the benefit
of a manufacturer residual value guaranty program. For these Non-Program
Vehicles, the Company must estimate what the residual values of these vehicles
will be at the expected time of disposal to determine monthly depreciation
rates. The Company continually evaluates estimated residual values. Differences
between actual residual values and those estimated by the Company result in a
gain or loss on disposal and are recorded as an adjustment to depreciation
expense. The average life of the Non-Program Vehicles is 8 to 10 months and the
Company typically has experienced gains on disposal.
Bad debt expense - The Company provides services to its franchisees, which
include vehicles provided under a fleet leasing program. The Company
historically has experienced several franchisee failures each year, particularly
during periods of economic recession or as a result of other factors impacting
the travel or rental car industries or individual franchisees. The Company must
estimate a reserve for the potential that amounts owed by its franchisees will
not be collected. This estimate includes evaluating the financial viability of
the franchisee and related collateral and may change as economic or industry
conditions change.
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 Company's consolidated financial statements and the related
notes thereto included in this report.
28
<PAGE>
Results of Operations
The following table sets forth the percentage of total revenues in the
Company's consolidated statements of income:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Vehicle rentals 77.6 % 75.1 % 71.5 %
Vehicle leasing 15.9 18.3 21.9
Fees and services 5.5 5.7 5.7
Other 1.0 0.9 0.9
----------- ----------- -----------
Total revenues 100.0 100.0 100.0
----------- ----------- -----------
Costs and expenses:
Direct vehicle and operating 35.3 29.1 28.9
Vehicle depreciation and lease charges, net 35.9 31.4 31.2
Selling, general and administrative 16.6 17.3 19.1
Interest expense, net 9.0 9.0 9.5
Amortization of goodwill 0.6 0.6 0.6
----------- ----------- -----------
Total costs and expenses 97.4 87.4 89.3
----------- ----------- -----------
Income before income taxes 2.6 12.6 10.7
Income tax expense 1.2 5.4 4.7
----------- ----------- -----------
Net income 1.4 % 7.2 % 6.0 %
=========== =========== ===========
</TABLE>
29
<PAGE>
The following table sets forth a breakdown of the Company's two major
sources of revenue:
Years Ended December 31,
---------------------------------------------
2001 2000 1999
--------- --------- ---------
(in thousands)
Vehicle rental revenue:
Dollar $ 730,304 $ 773,328 $ 681,240
Thrifty 61,395 40,413 33,167
--------- --------- ---------
Total $ 791,699 $ 813,741 $ 714,407
========= ========= =========
Leasing revenue:
Dollar $ 19,036 $ 25,014 $ 28,762
Thrifty 143,168 173,672 189,852
--------- --------- ---------
Total $ 162,204 $ 198,686 $ 218,614
========= ========= =========
Year Ended December 31, 2001 Compared with Year Ended December 31, 2000
The Company's operating results were negatively impacted in 2001 by the
slowing U.S. economy, weaker rental car pricing and the dramatic impact on
travel in the aftermath of the September 11 terrorist attacks. In addition to
the decline in revenue caused by decreased volume and pricing, the Company
experienced lower vehicle utilization, higher bad debt expenses associated with
its franchisees, and incurred other expenses associated with right-sizing its
cost structure, particularly following September 11.
Revenues
Total revenues for the year ended December 31, 2001 decreased $63.4
million, or 5.9%, to $1.020 billion compared to $1.083 billion in 2000. The
decline in total revenues was due to decreases in leasing revenue of 18.4%, fees
and services revenue of 8.4% and rental revenue of 2.7%.
The Company's vehicle rental revenue for 2001 was $791.7 million, a 2.7%
decrease from 2000. This decrease was due primarily to a $43.0 million decrease
at Dollar, partially offset by a $21.0 million increase at Thrifty. The decline
in vehicle rental revenue at Dollar was the result of a 1.5% decrease in rental
days combined with a 4.1% decrease in revenue per day. The rental revenue growth
at Thrifty was the result of a shift of several locations from franchised
operations to corporate operations.
Vehicle leasing revenue for 2001 was $162.2 million, an 18.4% decrease
from 2000. This decrease in vehicle leasing revenue reflects a decrease of $30.5
million, or 17.6%, in Thrifty's leasing revenue and a decrease of $6.0 million,
or 23.9% in Dollar's leasing revenue. This decrease was primarily due to a 15.3%
decline in the average lease fleet, due to the shift of locations from
franchised operations to corporate operations, combined with a 3.6% decline in
the average lease rate, partially due to a decline in interest rates.
Fees and services revenue decreased 8.4% to $56.1 million compared to
2000, primarily due to the shift of locations from franchised operations to
corporate operations.
30
<PAGE>
Expenses
Total expenses increased 4.9% from $947.0 million in 2000 to $993.8
million in 2001. This increase was due primarily to a $22.4 million, or 3.1%
increase for Dollar and a $24.9 million, or 11.0% increase at Thrifty. Total
expenses as a percentage of revenue rose to 97.4% in 2001 from 87.4% in 2000.
Direct vehicle and operating expenses for 2001 increased $44.6 million,
or 14.2%, comprised of a $21.4 million increase at Dollar and a $23.2 million
increase at Thrifty. The overall increase at Dollar was due to higher insurance
costs and vehicle-related expenses, including costs related to accelerated
vehicle returns in right-sizing the cost structure, and to costs associated with
operating additional corporate stores. The increase at Thrifty was primarily due
to higher costs related to the operation of additional corporate stores that
were previously operated by franchisees and to increased bad debt expenses for
franchisee receivables. Direct vehicle and operating expenses were 35.3% of
revenue for 2001, compared to 29.1% of revenue for 2000.
Net vehicle depreciation expense and lease charges for 2001 increased
$25.4 million, or 7.5%, from 2000 consisting of a $21.8 million increase at
Dollar and a $3.6 million increase at Thrifty. Net vehicle depreciation expense
increased $20.7 million, or 6.1%, due to a 7.6% increase in the average
depreciation rate at both Dollar and Thrifty, partially offset by a 1.4%
decrease in depreciable fleet. The disposition of Non-Program Vehicles resulted
in a net vehicle gain of $13.8 million in 2001 and $26.1 million in 2000. Lease
charges for vehicles leased from third parties decreased $7.6 million due to
fewer vehicles leased during 2001.
Selling, general and administrative expenses of $169.6 million for 2001
decreased from $187.7 million in 2000, comprised primarily of a $17.5 million
decrease at Dollar and a $0.1 million decrease at Thrifty. The lower costs were
due primarily to lower personnel related costs, sales and marketing costs and
other administrative costs in 2001. In 2001, the Company incurred $2.5 million
in severance costs associated with layoffs of headquarters personnel due to the
impacts of September 11.
Net interest expense decreased $5.3 million, or 5.5% to $92.4 million in
2001 primarily due to lower interest rates, partially offset by higher average
vehicle debt.
The tax provision for 2001 was $12.4 million. The effective tax rate of
47.2% for 2001 was higher than the 42.8% in 2000. The increase 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 goodwill amortization and state and local taxes.
Operating Results
The Company had income before income taxes of $26.2 million for 2001
as compared to $136.5 million in 2000. This decline was due to a $77.0 million
decrease at Dollar and a $33.3 million decrease at Thrifty.
31
<PAGE>
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 Company'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.
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
(a 6.0% increase 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.
32
<PAGE>
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 Company 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 goodwill amortization and state and local taxes.
Operating Results
The Company 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.
Liquidity and Capital Resources
The Company's primary uses of liquidity are for the purchase of vehicles
for its rental and leasing fleets, non-vehicle capital expenditures, franchisee
acquisitions and for working capital. The Company also uses letters of credit or
insurance bonds to secure certain commitments related to airport concession
agreements, insurance programs, and for other purposes.
The Company's primary sources of liquidity are cash generated from
operations, secured vehicle financing, the Revolving Credit Facility and
insurance bonds. Cash generated by operating activities is primarily the result
of net income, adjusted for depreciation, and totaled $370.3 million for 2001.
The liquidity necessary for purchasing vehicles is primarily obtained from
secured vehicle financing, most of which is asset backed notes, sales proceeds
from disposal of used vehicles and cash generated by operating activities. The
asset backed notes require varying levels of credit enhancement or
overcollateralization, which is provided by a combination of cash, vehicles and
letters of credit. These letters of credit and working capital loans are
provided under the Company's Revolving Credit Facility.
The Company believes that its cash generated from operations,
availability under its Revolving Credit Facility, insurance bonding programs and
secured vehicle financing programs are adequate to meet its liquidity
requirements for the foreseeable future. A portion of the secured vehicle
financing is supported by 364-day bank facilities, which are renewable annually.
These facilities were renewed by February 2002. A significant portion of the
secured vehicle financing consists of asset backed notes, which have varying
maturities through 2006. The Company generally issues additional notes each year
to replace maturing notes and provide for growth in its fleet. The Company
believes the asset backed note market continues to be a viable source of vehicle
financing and expects to issue approximately $350 million in additional notes
during 2002, partially to replace maturing notes of $170 million.
Cash used in investing activities was $457.1 million. The principal use
of cash in investing activities was the purchase of revenue-earning vehicles,
which totaled $2.8 billion ($1.7 billion at Dollar and $1.1 billion at Thrifty),
which was partially offset by $2.4 billion ($1.5 billion at Dollar and $0.9
billion at Thrifty) in proceeds from the sale of used revenue-earning vehicles.
The Company'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 increased $17.3
million for the year ended December 31, 2001. Restricted cash and investments
are restricted for the acquisition of revenue-earning vehicles and other
specified uses under the asset backed notes and other agreements discussed
below. The Company also used cash for non-vehicle capital expenditures of $32.9
million. These expenditures consist primarily of airport facility improvements
for the Company's rental locations and investments in information technology
equipment and systems. The Company estimates non-vehicle capital expenditures to
be approximately $15 million in 2002. In addition, the Company will pursue the
acquisition of certain franchisee operations, subject to Revolving Credit
Facility restrictions, if available. Future franchisee acquisition expenditures
are expected to be financed with cash provided from operations.
33
<PAGE>
Cash received in financing activities was $85.8 million primarily due
to the issuance of $350 million in asset backed notes in March 2001, partially
reduced by the maturity of asset backed notes totaling $230 million and a net
decrease in the issuance of commercial paper totaling approximately $81 million.
The Company has various commitments primarily related to long-term debt,
commercial paper and short-term borrowings outstanding for vehicle purchases,
airport concession fee and operating lease commitments related to airport and
other facilities, and vehicle purchases. The Company expects to fund these
commitments with cash generated from operations, sales proceeds from disposal of
used vehicles and continuation of asset backed note issuances as existing notes
mature. The following table provides details regarding the Company's contractual
cash obligations and other commercial commitments subsequent to December 31,
2001:
<TABLE>
<CAPTION>
Payments due or commitment expiration by period
-------------------------------------------------------------------------------
(In thousands)
Beyond
Total 2002 2003 2004 2005 2006 5 Years
----------- ----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Contractual cash obligations:
Long-term debt (1) $ 1,201,561 $ 171,786 $ 273,469 $ 269,092 $ 253,881 $ 233,333 $ -
Commercial paper outstanding (1) 128,502 128,502 - - - - -
Other short-term borrowings (1) 187,180 187,180 - - - - -
----------- ----------- --------- --------- --------- --------- ---------
Subtotal - Debt and other obligations 1,517,243 487,468 273,469 269,092 253,881 233,333 -
----------- ----------- --------- --------- --------- --------- ---------
Operating lease commitments 112,116 21,638 16,903 12,981 10,483 8,656 41,455
Airport concession fee commitments 205,863 37,865 29,263 23,879 20,595 16,295 77,966
Vehicle purchase commitments 852,513 852,513 - - - - -
----------- ----------- --------- --------- --------- --------- ---------
Total contractual cash obligations $ 2,687,735 $ 1,399,484 $ 319,635 $ 305,952 $ 284,959 $ 258,284 $ 119,421
=========== =========== ========= ========= ========= ========= =========
Other commercial commitments:
Letters of credit $ 74,321 $ 40,409 $ 19,037 $ 14,875 $ - $ - $ -
=========== =========== ========= ========= ========= ========= =========
</TABLE>
(1) Further discussion of long-term debt, commercial paper outstanding and
short-term borrowings is described below and in Note 8 of the Notes to
Consolidated Financial Statements. Amounts exclude related discounts,
where applicable.
Asset Backed Notes
The asset backed note program is comprised of $1.2 billion in asset
backed notes with maturities ranging from 2002 to 2006. Borrowings under the
asset backed notes are secured by eligible vehicle collateral and bear interest
at fixed rates ranging from 5.90% to 7.10% on $1.17 billion, including the 2001
Series Notes of $350 million, which are floating rate notes swapped to a fixed
rate, and floating rates on $33.4 million ranging from LIBOR plus 0.95% to LIBOR
plus 1.05%. Proceeds from the asset backed notes that are temporarily not
utilized for financing vehicles and certain related receivables are maintained
in restricted cash and investment accounts, which were approximately $42.6
million at December 31, 2001.
34
<PAGE>
In April 2001, the Company increased its financing capacity from $150
million to $200 million under its asset backed Variable Funding Note Purchase
Facility (the "Conduit Facility"). In January 2002, the Conduit Facility was
renewed and increased to $275 million. An additional bank is expected to enter
into the Conduit Facility in April 2002, increasing the facility to $325
million. Proceeds are used for financing of vehicle purchases and for periodic
refinancing of asset backed notes. The Conduit Facility generally bears interest
at market-based commercial paper rates and is renewed annually.
In March 2001, Rental Car Finance Corp. issued $350 million of asset
backed notes (the "2001 Series Notes") to replace maturing asset backed notes
and provide additional vehicle financing capacity. 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, 2001, the Company's commercial paper program (the
"Commercial Paper Program") had a maximum capacity of $800 million supported by
a $715 million, 364-day liquidity facility (the "Liquidity Facility").
Borrowings under the Commercial Paper Program are secured by eligible vehicle
collateral and bear interest at market-based commercial paper rates. At December
31, 2001, the Company had $128.3 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 2001 when it reached $649.7 million to support the
seasonal increase in vehicle fleet.
The Commercial Paper Program was renewed for a 364-day period effective
February 26, 2002, at a maximum capacity of $589 million, backed by a renewal of
the Liquidity Facility totaling $522 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, 2001, Thrifty had approximately
CND$81.9 million (US$51.4 million) funded under this program.
In September 2001, a vehicle manufacturer's finance subsidiary increased
an existing revolving line of credit to $140 million for the Company 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, 2001, the Company had $113.1 million outstanding under
the line of credit.
The Company has a $25 million vehicle line of credit that bears interest
at rates based on commercial paper rates. The line has a one-year term and is
collateralized by the vehicles financed under the facility. At December 31,
2001, the Company had $18.4 million outstanding under the line of credit.
35
<PAGE>
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 that 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 non-vehicle capital
assets, and certain financial covenants including a minimum level of adjusted
EBITDA, a maximum leverage ratio, a minimum fixed charge coverage ratio and a
minimum interest coverage ratio. Prior to December 31, 2001, the Company
received a waiver from compliance with certain of its financial covenants
through January 31, 2002. In early January 2002, the Company completed an
amendment and waiver affecting certain of its financial covenants through
January 2003, which included limiting expenditures for non-vehicle capital
assets and for franchisee acquisitions and the usage of the Revolving Credit
Facility to a maximum of $190 million during the amendment and waiver period. At
December 31, 2001, the Company had letters of credit outstanding under the
Revolving Credit Facility of approximately $60.3 million and no working capital
borrowings.
DaimlerChrysler Credit Support
DaimlerChrysler currently provides $11.4 million of credit support for
the Company'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 Company'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 Company.
Debt Servicing Requirements
The Company will continue to have substantial debt and debt service
requirements under its financing arrangements. As of December 31, 2001, the
Company's total consolidated debt and other obligations were approximately $1.5
billion, substantially all of which was secured debt for the purchase of
vehicles. The majority of the Company's vehicle debt is issued by special
purpose finance entities as described herein all of which are fully consolidated
into the Company financial statements. The Company has scheduled annual
principal payments of approximately $488 million in 2002, $273 million in 2003,
$269 million in 2004, $254 million in 2005 and $233 million in 2006.
The Company 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 Company expects to incur
additional debt from time to time to the extent permitted under the terms of its
debt instruments.
The Company has significant requirements for bonds to support its
insurance programs and airport concession obligations. At December 31, 2001,
various insurance companies had issued approximately $57.2 million in bonds to
secure these obligations.
36
<PAGE>
Interest Rate Risk
The Company'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 Company is exposed to increases in interest
rates because a portion of its debt bears interest at floating rates. The
Company estimates that, in 2002, approximately 35% of its average debt will bear
interest at floating rates. The amount of the Company'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 Company. Many of the Company's other operating expenses are
also expected to increase with inflation. Management does not expect that the
effect of inflation on the Company's overall operating costs will be greater for
the Company than for its competitors.
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. During March 2001, the Company 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 June 2001, the Financial Accounting Standards Board ("FASB") approved
the issuance of SFAS No. 141, "Business Combinations", and SFAS No. 142,
"Goodwill and Other Intangible Assets". SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. SFAS No. 141 also specifies the types of acquired intangible assets
that are required to be recognized and reported separately from goodwill and
those acquired intangible assets that are required to be included in goodwill.
Effective January 1, 2002, SFAS No. 142 requires that goodwill no longer be
amortized, but instead tested for impairment at least annually. SFAS No. 142
also requires recognized intangible assets to be amortized over their respective
estimated useful lives and reviewed for impairment. Any recognized intangible
asset determined to have an indefinite useful life will not be amortized, but
instead tested for impairment in accordance with the standard until its life is
determined to no longer be indefinite.
The Company adopted the provisions of SFAS No. 141 and SFAS No. 142 as
required on January 1, 2002, with the exception of the earlier adoption of the
requirement to use the purchase method of accounting for all business
combinations initiated after June 30, 2001. Application of the non-amortization
provisions of SFAS No. 141 and SFAS No. 142 will have a favorable impact on the
Company's net income of approximately $5.9 million for the year ending December
31, 2002. The Company is currently performing the required impairment tests of
goodwill and other intangible assets as of January 1, 2002, but has not yet
determined the effect, if any, the tests will have on its consolidated financial
position or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which is effective for fiscal
years beginning after December 15, 2001. The Company adopted the provisions of
SFAS No. 144 as required on January 1, 2002. This standard had no effect on the
Company's consolidated financial statements upon adoption.
37
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The table below provides information about the Company's market
sensitive financial instruments and constitutes a "forward-looking statement."
The Company's primary market risk exposure is changing interest rates, primarily
in the United States. The Company manages interest rates through use of a
combination of fixed and floating rate debt and an interest rate swap agreement.
All items described are non-trading and are stated in U.S. Dollars. Because a
portion of the Company's debt is denominated in Canadian dollars, its carrying
value is impacted by exchange rate fluctuations.
<TABLE>
<CAPTION>
Fair Value
Expected Maturity Dates December 31,
as of December 31, 2001 2002 2003 2004 2005 2006 Total 2001
- -------------------------- --------- --------- --------- --------- --------- ----------- -----------
(in thousands)
Debt
<S> <C> <C> <C> <C> <C> <C> <C>
Vehicle obligations and other-
floating rates $ 260,031 $ 22,269 $ - $ 11,135 $ - $ 293,435 $ 293,204
Weighted Average interest rates 3.05% 2.89% - 2.99% -
Vehicle obligations and other-
fixed rates (1) $ 171,786 $ 251,200 $ 269,092 $ 242,746 $ 233,333 $ 1,168,157 $ 1,196,178
Weighted Average interest rates 6.46% 6.40% 6.22% 6.37% 6.04%
Vehicle obligations and other-
Canadian dollar denominated $ 55,651 $ - $ - $ - $ - $ 55,651 $ 55,651
Weighted Average interest rates 2.72% - - - -
</TABLE>
(1) Fixed rate vehicle obligations and other include the $350 million Series
2001 Notes swapped from a floating interest rate to a fixed interest rate.
<TABLE>
<CAPTION>
Fair Value
Expected Maturity Dates December 31,
as of December 31, 2000 2001 2002 2003 2004 2005 Total 2000
- -------------------------- --------- --------- --------- --------- --------- ----------- -----------
(in thousands)
Debt
<S> <C> <C> <C> <C> <C> <C> <C>
Vehicle obligations and other-
floating rates $ 299,705 $ - $ 22,269 $ - $ 11,135 $ 333,109 $ 331,227
Weighted Average interest rates 7.15% - 7.61% - 7.71%
Vehicle obligations and other-
fixed rates $ 226,864 $ 171,786 $ 251,200 $ 269,092 $ 126,079 $ 1,045,021 $ 1,039,294
Weighted Average interest rates 6.48% 6.46% 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% - - - -
</TABLE>
38
<PAGE>
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, 2001 and 2000, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 2001. 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, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, 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
February 8, 2002, except for
Note 18 as to which the
date is February 26, 2002
39
<PAGE>
<TABLE>
<CAPTION>
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In Thousands Except Per Share Data)
- ---------------------------------------------------------------------------------------------------------
2001 2000 1999
<S> <C> <C> <C>
REVENUES:
Vehicle rentals $ 791,699 $ 813,741 $ 714,407
Vehicle leasing 162,204 198,686 218,614
Fees and services 56,057 61,166 57,046
Other 10,075 9,850 8,685
------------ ------------ ------------
Total revenues 1,020,035 1,083,443 998,752
------------ ------------ ------------
COSTS AND EXPENSES:
Direct vehicle and operating 359,782 315,164 289,129
Vehicle depreciation and lease charges, net 365,894 340,448 311,113
Selling, general and administrative 169,599 187,711 190,994
Interest expense, net of interest income of $6,570,
$9,288 and $6,071 92,365 97,703 95,114
Amortization of goodwill 6,178 5,941 5,842
------------ ------------ ------------
Total costs and expenses 993,818 946,967 892,192
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 26,217 136,476 106,560
INCOME TAX EXPENSE 12,380 58,467 46,974
------------ ------------ ------------
NET INCOME $ 13,837 $ 78,009 $ 59,586
============ ============ ============
Earnings per share:
Basic $ 0.57 $ 3.23 $ 2.47
============ ============ ============
Diluted $ 0.57 $ 3.18 $ 2.43
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
40
<PAGE>
<TABLE>
<CAPTION>
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
(In Thousands Except Share and Per Share Data)
- ---------------------------------------------------------------------------------------------------------
2001 2000
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 37,532 $ 38,493
Restricted cash and investments 48,090 30,760
Receivables, net 197,224 182,689
Prepaid expenses and other assets 64,946 54,994
Revenue-earning vehicles, net 1,524,909 1,522,388
Property and equipment, net 101,231 90,976
Income taxes receivable 8,149 -
Intangible assets, net 181,611 180,074
------------ ------------
$ 2,163,692 $ 2,100,374
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 25,741 $ 50,455
Accrued liabilities 112,626 118,562
Deferred income tax liability 22,132 13,828
Public liability and property damage 23,139 35,369
Debt and other obligations 1,516,733 1,424,021
------------ ------------
Total liabilities 1,700,371 1,642,235
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 24,310,816
and 24,191,893, respectively 243 242
Additional capital 708,962 710,320
Accumulated deficit (237,618) (251,455)
Accumulated other comprehensive loss (8,266) (968)
------------ ------------
Total stockholders' equity 463,321 458,139
------------ ------------
$ 2,163,692 $ 2,100,374
============ ============
</TABLE>
See notes to consolidated financial statements.
41
<PAGE>
<TABLE>
<CAPTION>
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In Thousands Except Share and Per Share Data)
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Accumulated
$.01 Par Value Other Treasury Stock Total
------------------ Additional Accumulated Comprehensive -------------- Stockholders'
Shares Amount Capital Deficit Income (Loss) Shares Amount Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999 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
Issuance of common shares for
director compensation 3,828 - 60 - - - - 60
Issuance of common shares for
401(k) company match 12,562 - 162 - - - - 162
Stock option transactions 102,074 1 2,035 - - - - 2,036
Performance share incentive plan:
Purchase of common stock for the
treasury - - - - - (167,241) (3,615) (3,615)
Issuance of common stock in
settlement of vested performance
shares:
Common stock 459 - - - - - - -
Treasury stock transferred to
deferred compensation plan - - (3,615) - - 167,241 3,615 -
Comprehensive income:
Net income - - - 13,837 - - - 13,837
Interest rate swap - - - - (6,758) - - (6,758)
Foreign currency translation - - - - (540) - - (540)
---------- ------ --------- --------- -------- ------- ------ -----------
Total comprehensive income - - - 13,837 (7,298) - - 6,539
---------- ------ --------- --------- -------- ------- ------ -----------
BALANCE, DECEMBER 31, 2001 24,310,816 $ 243 $ 708,962 $(237,618) $ (8,266) - $ - $ 463,321
========== ====== ========= ========= ======== ======= ====== ===========
</TABLE>
See notes to consolidated financial statements.
42
<PAGE>
<TABLE>
<CAPTION>
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In Thousands)
- --------------------------------------------------------------------------------------------------------------------------
2001 2000 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,837 $ 78,009 $ 59,586
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 372,322 349,697 338,702
Amortization 9,823 9,450 8,927
Common stock option transactions 40 112 323
Performance share incentive plan - 658 2,242
Net gains from disposition of revenue-earning vehicles (13,752) (26,084) (25,248)
Provision for losses on receivables 21,790 11,925 9,682
Deferred income taxes 12,810 8,168 14,214
Change in assets and liabilities, net of acquisitions:
Receivables 21,216 (17,011) (19,045)
Prepaid expenses, intangibles and other assets (1,129) (9,275) 3,906
Accounts payable, accrued liabilities and income
taxes payable/receivable (54,079) 6,427 3,748
Public liability and property damage (12,230) (23,414) (18,836)
Other (367) 30 548
---------- ---------- ----------
Net cash provided by operating activities 370,281 388,692 378,749
CASH FLOWS FROM INVESTING ACTIVITIES:
Revenue-earning vehicles:
Purchases (2,815,139) (2,533,661) (2,410,739)
Proceeds from sales 2,410,068 2,169,222 1,927,007
Net change in restricted cash and investments (17,330) 113,911 (82,416)
Property, equipment and software:
Purchases (32,900) (33,657) (24,476)
Proceeds from sales 483 232 1,031
Acquisition of businesses, net of cash acquired (2,271) (10,097) -
---------- ---------- ----------
Net cash used in investing activities (457,089) (294,050) (589,593)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt and other obligations:
Proceeds 7,667,314 3,288,480 3,699,487
Payments (7,574,773) (3,420,307) (3,457,971)
Issuance of common shares 2,218 470 544
Purchase of common stock for the treasury (3,615) - -
Financing issue costs (5,297) (2,292) (3,221)
---------- ---------- ----------
Net cash provided by (used in) financing activities 85,847 (133,649) 238,839
---------- ---------- ----------
CHANGE IN CASH AND CASH EQUIVALENTS (961) (39,007) 27,995
CASH AND CASH EQUIVALENTS:
Beginning of year 38,493 77,500 49,505
---------- ---------- ----------
End of year $ 37,532 $ 38,493 $ 77,500
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Income taxes to taxing authorities $ 7,125 $ 39,285 $ 52,343
========== ========== ==========
Interest $ 94,244 $ 102,027 $ 95,038
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Issuance of common stock for director compensation $ 60 $ 40 $ 52
========== ========== ==========
Direct financing and sales-type lease receivables $ 57,963 $ 38,472 $ 14,780
========== ========== ==========
Deferred income on sales-type lease receivables $ 401 $ 409 $ -
========== ========== ==========
Notes receivable issued for franchise sales $ - $ - $ 590
========== ========== ==========
Acquisition of franchises $ 422 $ 804 $ -
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
43
<PAGE>
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
Dollar Thrifty Automotive Group, Inc. ("DTG") is the successor to Pentastar
Transportation Group, Inc. Prior to December 23, 1997, DTG was a wholly
owned subsidiary of Chrysler Corporation, now known as DaimlerChrysler
Corporation ("DaimlerChrysler"). On December 23, 1997, DTG completed an
initial public offering of all its outstanding common stock owned by
DaimlerChrysler together with additional shares issued by DTG.
DTG'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 Car Sales and 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, which
were formed in 1995 and 1998, respectively, and are appropriately
consolidated with DTG and subsidiaries. RCFC and DTFC are each separate
legal entities whose assets are not available to satisfy any claims of
creditors of DTG or any of its other subsidiaries. The term the "Company"
is used to refer to DTG and subsidiaries, individually or collectively, as
the context may require. 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
$3,531,000, $3,624,000 and $2,379,000, for 2001, 2000 and 1999,
respectively.
44
<PAGE>
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. The Company generally purchases 75% to 80% of its
vehicles as Program Vehicles for which residual values are determined by
depreciation rates that are established and guaranteed by the
manufacturers. The remaining 20% to 25% of the Company's vehicles are
purchased without the benefit of a manufacturer residual value guaranty
program. For these Non-Program Vehicles, the Company must estimate what the
residual values of these vehicles will be at the expected time of disposal
to determine monthly depreciation rates. The Company continually evaluates
estimated residual values. Differences between actual residual values and
those estimated by the Company result in a gain or loss on disposal and are
recorded as an adjustment to depreciation expense. Depreciation rates
generally range from approximately 1.00% to 2.60% per month.
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 lives of the related leases.
Intangible Assets - Intangible assets are amortized using the straight-line
basis. Goodwill is amortized over forty and twenty-year periods. Other
intangible assets are amortized primarily over five years. The Company
assesses the recoverability of goodwill 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 $13,740,000
and $33,844,000 are included in accounts payable at December 31, 2001 and
2000, 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 is 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, 2001.
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.
45
<PAGE>
Revenue Recognition - Revenues from vehicle rentals are recognized as
earned on a daily basis under the related rental contracts with customers.
Revenues from leasing vehicles to franchisees are principally under
operating leases with fixed monthly payments and are recognized as earned
over the lease terms. Revenues from fees and services include providing
sales and marketing, reservations, information systems and other services
to franchisees. Revenues from these services are generally based on a
percentage of franchisee rental revenue and are recognized as earned on a
monthly basis. Initial franchise fees, which are recorded to other
revenues, 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.
Advertising Costs - Advertising costs are primarily expensed as incurred.
The Company incurred advertising expense of $28,781,000, $30,166,000 and
$34,142,000, for 2001, 2000 and 1999, 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 $3,447,000, $2,983,000
and $2,865,000 in 2001, 2000 and 1999, 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 $2,757,000, $2,647,000
and $2,392,000 during 2001, 2000 and 1999, 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 the grantee 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."
46
<PAGE>
New Accounting Standards - Effective January 1, 2001, the Company adopted
SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities"
and its amendments which establish 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. During March 2001, the
Company entered into an interest rate swap agreement, which qualified for
hedge accounting treatment under SFAS No. 133 (Note 9).
In June 2001, the Financial Accounting Standards Board ("FASB") approved
the issuance of SFAS No. 141, "Business Combinations", and SFAS No. 142,
"Goodwill and Other Intangible Assets". SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations
initiated after June 30, 2001. SFAS No. 141 also specifies the types of
acquired intangible assets that are required to be recognized and reported
separately from goodwill and those acquired intangible assets that are
required to be included in goodwill. Effective January 1, 2002, SFAS No.
142 requires that goodwill no longer be amortized, but instead tested for
impairment at least annually. SFAS No. 142 also requires recognized
intangible assets to be amortized over their respective estimated useful
lives and reviewed for impairment. Any recognized intangible asset
determined to have an indefinite useful life will not be amortized, but
instead tested for impairment in accordance with the standard until its
life is determined to no longer be indefinite.
The Company adopted the provisions of SFAS No. 141 and SFAS No. 142 as
required on January 1, 2002, with the exception of the earlier adoption of
the requirement to use the purchase method of accounting for all business
combinations initiated after June 30, 2001. Application of the
non-amortization provisions of SFAS No. 141 and SFAS No. 142 will have a
favorable impact on the Company's net income of approximately $5.9 million
for the year ending December 31, 2002. The Company is currently performing
the required impairment tests of goodwill and other intangible assets as of
January 1, 2002, but has not yet determined the effect, if any, the tests
will have on its consolidated financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which is effective for fiscal
years beginning after December 15, 2001. The Company adopted the provisions
of SFAS No. 144 as required on January 1, 2002. This standard had no effect
on the Company's consolidated financial statements upon adoption.
Reclassifications - Certain reclassifications have been made to the 2000
and 1999 consolidated financial statements to conform to the
classifications used in 2001.
3. ACQUISITIONS
During 2001, Thrifty acquired certain assets and assumed certain
liabilities of nineteen locations from four former franchisees, the largest
locations being Dallas and San Francisco. 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, net of cash acquired, for these acquisitions
was $2,271,000 and $10,097,000 in 2001 and 2000, respectively. 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 in 2001 or 2000, are included in the
consolidated statements of income of the Company.
47
<PAGE>
4. RECEIVABLES
Receivables consist of the following:
December 31,
-----------------------------
2001 2000
(In Thousands)
Trade accounts receivable $ 91,623 $ 108,145
Notes receivable 6,662 10,199
Financing receivables, net 44,227 27,324
Due from DaimlerChrysler 78,967 62,449
----------- -----------
221,479 208,117
Less allowance for doubtful accounts (24,255) (25,428)
----------- -----------
$ 197,224 $ 182,689
=========== ===========
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 for vehicles. 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 $628,000 and $804,000 at December 31, 2001 and 2000,
respectively.
Due from DaimlerChrysler is comprised primarily of amounts due under
various incentive and promotion programs.
5. REVENUE-EARNING VEHICLES
Revenue-earning vehicles consist of the following:
December 31,
------------------------------
2001 2000
(In Thousands)
Revenue-earning vehicles $ 1,693,461 $ 1,677,335
Less accumulated depreciation (168,552) (154,947)
----------- -----------
$ 1,524,909 $ 1,522,388
=========== ===========
Dollar and Thrifty entered into U.S. Vehicle Supply Agreements with
DaimlerChrysler, which commenced with the 1997 model year and expired in
July 2001. In June 2000, the Company entered into a new vehicle supply
agreement (the "VSA") with DaimlerChrysler, which enables the Company to
acquire revenue-earning vehicles beginning with the 2002 model year through
the 2006 model year. Under the VSA, DaimlerChrysler has agreed to supply
certain specified volumes of vehicles, which are comprised of approximately
80% guaranteed depreciation program vehicles ("Program Vehicles"). The
Company is required to purchase at least 80% of its vehicles from
DaimlerChrysler, up to specified volumes of which minimum amounts must be
Program Vehicles. Under the terms of the VSA, Dollar and Thrifty will
advertise and promote DaimlerChrysler products exclusively, and the Company
will receive promotional payments from DaimlerChrysler for each model year.
Purchases of revenue-earning vehicles from DaimlerChrysler and
DaimlerChrysler Canada Inc. ("DaimlerChrysler Canada") were $2,499,355,000,
$2,290,430,000 and $2,101,537,000 during 2001, 2000 and 1999, respectively.
48
<PAGE>
Vehicle acquisition terms provide for guaranteed residual values in the
U.S. or buybacks in Canada on 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
$474,602,000, $395,694,000 and $312,932,000 in 2001, 2000 and 1999,
respectively. Buyback payments received from DaimlerChrysler Canada were
$78,749,000, $81,222,000 and $69,545,000 in 2001, 2000 and 1999,
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 $20,905,000,
$28,493,000 and $7,787,000 for 2001, 2000 and 1999, 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 $1,151,000.
6. PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
December 31,
-----------------------------
2001 2000
(In Thousands)
Land $ 13,744 $ 14,132
Buildings and improvements 17,273 16,882
Furniture and equipment 57,412 50,865
Leasehold improvements 76,811 48,526
Construction in progress 5,974 21,588
------------ ------------
171,214 151,993
Less accumulated depreciation and amortization (69,983) (61,017)
------------ ------------
$ 101,231 $ 90,976
============ ============
49
<PAGE>
7. INTANGIBLE ASSETS
Intangible assets consist of the following:
December 31,
-----------------------------
2001 2000
(In Thousands)
Goodwill $ 268,859 $ 266,048
Software 28,880 19,884
------------ -------------
297,739 285,932
Less accumulated amortization (116,128) (105,858)
------------ -------------
$ 181,611 $ 180,074
============ =============
8. DEBT AND OTHER OBLIGATIONS
Debt and other obligations consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------------
2001 2000
(In Thousands)
<S> <C> <C>
Vehicle Debt and Other Financing:
Asset backed notes:
2001 Series notes $ 350,000 $ -
1999 Series notes 250,000 250,000
1997 Series notes 600,000 746,653
1995 Series notes - 83,166
------------- -------------
1,200,000 1,079,819
Discounts on asset backed notes (279) (450)
------------- -------------
Asset backed notes, net of discount 1,199,721 1,079,369
Commercial paper, net of discount of $231 and $1,882 128,271 209,705
Vehicle manufacturer line of credit 113,086 82,462
Limited partner interest in limited partnership 51,442 45,688
Other vehicle debt 24,213 6,797
------------- -------------
Total debt and other obligations $ 1,516,733 $ 1,424,021
============= =============
</TABLE>
Vehicle Debt and Other Financing
Asset Backed Notes are comprised of rental car asset backed notes issued by
RCFC in March 2001 (the "2001 Series notes"), April 1999 (the "1999 Series
notes"), December 1997 (the "1997 Series notes") and December 1995 (the
"1995 Series notes").
The 2001 Series notes are floating rate notes that were converted to a
fixed rate of 6.04% by entering into an interest rate swap agreement (Note
9) in conjunction with the issuance of the notes.
The 1999 Series notes are comprised of fixed rate notes, with rates ranging
from 5.9% to 7.1%.
50
<PAGE>
The 1997 Series notes are comprised of $566,596,000 and $713,249,000 of
fixed rate notes in 2001 and 2000, respectively, with rates ranging from
6.45% to 6.70% and $33,404,000 of floating rate notes with interest at
rates ranging from LIBOR plus 0.95% to LIBOR plus 1.05% (2.89% to 2.99% at
December 31, 2001 and 7.61% to 7.71% at December 31, 2000).
The 1995 Series notes were comprised of $79,166,000 of 6.6% fixed rate
notes, and $4,000,000 floating rate notes, with an interest rate of LIBOR
plus 1.25% (7.91% at December 31, 2000). The 1995 Series notes matured and
were paid off in June 2001.
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 to satisfy the claims of
its creditors. At December 31, 2001 and 2000, letters of credit totaling
$11,424,000 and $17,136,000, 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 two 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.
The asset backed notes mature from 2002 through 2006 and are generally
subject to repurchase on any payment date subject to a prepayment penalty.
Conduit Facility - In December 2000, the Company established a $150,000,000
asset backed Variable Funding Note Purchase Facility (the "Conduit") as
part of the existing asset backed note program. In April 2001, an
additional bank entered into the Conduit increasing its financing capacity
from $150,000,000 to $200,000,000. Proceeds are used for financing of
vehicle purchases and for periodic refinancing of asset backed notes. The
Conduit generally bears interest at market-based commercial paper rates and
is renewed annually. At December 31, 2001 and 2000, respectively, there
were no borrowings outstanding under this facility (Note 18).
Commercial Paper represents borrowings under a $800,000,000 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, DTFC also entered into a 364-day, $715,000,000 Liquidity
Facility to support the Commercial Paper Program. The Liquidity Facility
provides the Commercial Paper Program with an alternative source of funding
if DTFC is unable to refinance maturing commercial paper by issuing new
commercial paper. Commercial paper bears interest at rates ranging from
1.85% to 2.05% at December 31, 2001 and 6.6% to 6.8% at December 31, 2000
and matures within 45 days of December 31, 2001 (Note 18).
Vehicle Manufacturer Line of Credit is renewable annually and permits the
Company to borrow up to $140,000,000 and $115,000,000 at December 31, 2001
and 2000, respectively, from a finance subsidiary of a vehicle
manufacturer. Borrowings of $113,086,000 and $82,462,000 at December 31,
2001 and 2000, respectively, bear interest at rates based on commercial
paper rates (4.20% and 8.24% at December 31, 2001 and 2000, 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.
51
<PAGE>
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$94,230,000 at December 31, 2001) to the Partnership,
which is funded 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
(2.7% and 6.1% at December 31, 2001 and 2000, respectively). The Limited
Partner's income share amounted to $2,863,000, $3,510,000 and $1,854,000
for the years ended December 31, 2001, 2000 and 1999, respectively, which
is included in interest expense. Due to the nature of the relationship
between TCL and the Partnership, the accounts of the Partnership are
appropriately consolidated with the Company.
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. TCL was in compliance with all such covenants and
requirements at December 31, 2001.
Other Vehicle Debt at December 31, 2001 and 2000 includes borrowings of
$18,443,000 and $1,656,000, respectively, under a vehicle line of credit,
which was increased from $20,000,000 to $25,000,000 during 2001 and bears
interest at rates based on commercial paper rates (3.79% and 8.24% at
December 31, 2001 and 2000, respectively). The line has a one-year term and
is collateralized by the vehicles financed under the facility. Borrowings
of $1,561,000 and $2,606,000 with a weighted average interest rate of 8.2%
at both December 31, 2001 and 2000, respectively, are collateralized by
shuttle buses.
During 2001, TCL increased the vehicle line of credit to support its
investment in the Partnership to CND$20,000,000 (approximately
US$12,564,000 at December 31, 2001). At December 31, 2001 and 2000,
CND$6,700,000 (approximately US$4,209,000) and CND$3,800,000 (approximately
US$2,535,000), respectively, were outstanding under this line of credit.
The weighted average interest rate on the line was 2.9% and 6.2% at
December 31, 2001 and 2000, respectively. In January 2002, this line of
credit was renewed through February 2004.
In December 2001, Thrifty entered into a vehicle line of credit up to
$15,000,000 with interest rate based on LIBOR and is collateralized by the
related vehicles. The line of credit will expire in August 2002. No amounts
were outstanding under this line of credit at December 31, 2001.
52
<PAGE>
Expected repayments of vehicle debt and other obligations outstanding at
December 31, 2001 are as follows:
<TABLE>
<CAPTION>
2002 2003 2004 2005 2006
(In Thousands)
<S> <C> <C> <C> <C> <C>
Asset backed notes $ 170,386 $ 273,364 $ 269,036 $ 253,881 $ 233,333
Commercial paper 128,502 - - - -
Vehicle manufacturer
line of credit 113,086 - - - -
Limited partner
interest 51,442 - - - -
Other vehicle debt 24,052 105 56 - -
---------- ---------- ---------- ---------- ----------
Total $ 487,468 $ 273,469 $ 269,092 $ 253,881 $ 233,333
========== ========== ========== ========== ==========
</TABLE>
Revolving Credit Facility
The Company has a five-year, $215,000,000 Senior Secured Revolving Credit
Facility (the "Revolver") that expires August 2005. The Revolver provides
sublimits up to $190,000,000 for letters of credit and up to $70,000,000
for working capital borrowings. As of December 31, 2001, the Company is
required to pay a 0.30% commitment fee on the unused available line, a
1.75% 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. Prior
to December 31, 2001, the Company received a waiver from compliance with
certain of its financial covenants through January 31, 2002. In early
January 2002, the Company completed an amendment and waiver affecting
certain of its financial covenants through January 2003, which included
limiting expenditures for non-vehicle capital assets and for franchisee
acquisitions and the usage of the Revolver to a maximum of $190 million
during the amendment and waiver period. The Company had letters of credit
of $60,294,000 and $29,291,000 and no working capital borrowings
outstanding under the Revolver at December 31, 2001 and 2000, respectively
(Note 18).
9. DERIVATIVE FINANCIAL INSTRUMENTS
Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities" and its amendments,
which establish accounting and reporting standards for derivative
instruments and for hedging activities. SFAS No. 133 requires that all
derivatives be recognized as either assets or liabilities in the statement
of financial position and be measured at fair value and, if the derivative
is not designated as a hedging instrument, changes in fair value must be
recognized in earnings in the period of change. If the derivative is
designated as a hedge and to the extent such hedge is determined to be
effective, changes in fair value of the derivative are either (a) offset by
the change in fair value of the hedged asset or liability for a fair value
hedge or (b) reported as a component of other comprehensive income (loss)
in the period of change, and subsequently recognized in earnings when the
offsetting hedged transaction occurs for a cash flow hedge.
53
<PAGE>
The Company is exposed to market risks, such as changes in interest rates.
Consequently, the Company manages the financial exposure as part of its
risk management program, by striving to reduce the potentially adverse
effects that the potential volatility of the financial markets may have on
the Company's operating results. During March 2001, the Company entered
into an interest rate swap agreement (the "Swap") to adjust the variable
interest rate on $350 million of asset backed notes to a fixed interest
rate. The Swap, which terminates in April 2006, constitutes a cash flow
hedge and continues to satisfy the criteria for hedge accounting. The
Company reflects the Swap in its statement of financial position as a
liability at fair market value, which was approximately $11,264,000 at
December 31, 2001, and the Company records the related loss of $6,758,000,
which is net of income taxes, in total comprehensive income on the
statement of stockholders' equity. Deferred gains and losses are recognized
in earnings as an adjustment to interest expense over the same period in
which the related interest payments being hedged are recognized to
earnings. The Company is unable to reasonably estimate the net amount of
the existing deferred income or loss at December 31, 2001 that is expected
to be reclassified into earnings within the next twelve months.
10. STOCKHOLDERS' RIGHTS PLAN
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.
54
<PAGE>
11. 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:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
2001 2000 1999
(In Thousands, Except Share and Per Share Data)
<S> <C> <C> <C>
Net Income $ 13,837 $ 78,009 $ 59,586
========== ========== ==========
Basic EPS:
Weighted average common shares 24,103,838 24,168,250 24,136,050
========== ========== ==========
Basic EPS $ 0.57 $ 3.23 $ 2.47
========== ========== ==========
Diluted EPS:
Weighted average common shares 24,103,838 24,168,250 24,136,050
Shares contingently issuable:
Stock options 195,197 184,909 205,576
Performance awards - 167,593 131,467
Shares held for compensation plans 157,205 - -
Director compensation shares deferred 31,303 18,710 12,008
---------- ---------- ----------
Shares applicable to diluted 24,487,543 24,539,462 24,485,101
========== ========== ==========
Diluted EPS $ 0.57 $ 3.18 $ 2.43
========== ========== ==========
</TABLE>
Options to purchase 2,136,046, 2,223,028 and 1,584,000 shares of common
stock were outstanding at December 31, 2001, 2000 and 1999, 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.
12. 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 2001, employee contributions are
matched by the Company to the extent of 75% up to 6% of the employee's
eligible compensation, subject to statutory limitations. For 2000 and 1999,
the Company matched 50% up to 6% and 5%, respectively, of the employee's
eligible compensation. Contributions expensed by the Company totaled
$2,933,000, $2,264,000 and $1,598,000 in 2001, 2000 and 1999, respectively.
Effective January 1, 2002, the Company suspended matching of employee
contributions to the 401(k) plan. The company match may be reinstated for
2002 based on operating performance.
55
<PAGE>
Included in accrued liabilities at December 31, 2001 and 2000 is $2,892,000
and $2,776,000, respectively, for employee health claims, which are
self-insured by the Company. The accrual includes amounts for incurred and
incurred but not reported claims.
The Company has bonus and profit sharing plans for all employees based on
company performance. Expense related to these plans was $11,260,000 and
$17,096,000 in 2000 and 1999, respectively. No expense was recorded for
2001 relating to these plans.
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 $17,375,000 and $13,386,000 as of December 31, 2001 and
2000, respectively. Expense related to these plans totaled $735,000,
$2,140,000 and $4,525,000 in 2001, 2000 and 1999, respectively.
Long-Term Incentive Plan
The Company has a long-term incentive plan ("LTIP") for employees and
non-employee directors under which the Human Resources and Compensation
Committee of the Board of Directors of the Company 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, 2001, the
Company's common stock outstanding authorized for issuance under the LTIP
was 4,831,082 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 vest 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. 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. On January 31,
2001, performance shares earned in 1998, 1999 and 2000, net of forfeitures,
totaling approximately 168,000 shares vested and were settled through the
purchase of common stock for the treasury totaling $3,615,000. These shares
were ultimately transferred to the deferred compensation plan by the
Company for the benefit of the employees. During 2001, there were no
performance shares earned and, thus, no compensation expense recognized.
The Company recognized $658,000 and $2,242,000 of compensation cost in 2000
and 1999, respectively, for performance share awards.
56
<PAGE>
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, 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
Granted 706 12.29
Exercised (102) 17.38
Canceled (71) 18.35
---------- ----------
Outstanding at December 31, 2001 3,208 $ 17.10
========== ==========
Options exercisable at:
December 31, 2001 1,948 $ 18.21
December 31, 2000 1,497 $ 18.63
December 31, 1999 868 $ 18.91
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 2001, 2000 and 1999 would have been reduced
from the amounts as reported of $13,837,000, $78,009,000 and $59,586,000 to
the pro forma amounts of $11,551,000, $75,468,000 and $57,259,000,
respectively. Diluted earnings per share as reported of $0.57, $3.18 and
$2.43 would have been reduced to the pro forma amounts of $0.47, $3.08 and
$2.34 for 2001, 2000 and 1999, respectively.
The pro forma amounts noted reflect the portion of the estimated fair value
of awards earned in 2001, 2000 and 1999 based on the vesting period of the
options.
57
<PAGE>
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 2001:
weighted-average expected life of the awards of six years, volatility
factor of 56.43% and risk-free interest rate of 4.33%. The following
assumptions were used for 2000 and 1999: weighted-average expected life of
the awards of five years, volatility factor of 37.5% and risk-free interest
rate of 5.96% and 5.75%, respectively. There were no dividend payments made
in 2001, 2000 or 1999. Based on this model, the weighted-average fair value
of options granted during 2001, 2000 and 1999 was $6.96, $8.13 and $8.03
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, 2001:
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C>
$10.50 - $12.8750 1,028 8.73 $ 11.12 377 $ 10.56
$15.25 - $19.6875 1,099 8.34 19.22 542 19.14
$20.50 - $23.90 1,081 6.17 20.65 1,029 20.51
------- ------- -------- ------- --------
$10.50 - $23.90 3,208 7.73 $ 17.10 1,948 $ 18.21
======= ======= ======== ======= ========
</TABLE>
Under certain circumstances, including a change of control of DTG, the
options outstanding would be exercisable immediately.
58
<PAGE>
13. INCOME TAXES
Income tax expense consists of the following:
Year Ended December 31,
-----------------------------------------
2001 2000 1999
(In Thousands)
Current:
Federal $ (2,737) $ 40,235 $ 26,072
State and local 1,745 9,580 6,208
Foreign 562 484 480
----------- ----------- -----------
(430) 50,299 32,760
Deferred:
Federal 12,637 6,597 11,481
State and local 173 1,571 2,733
----------- ----------- -----------
12,810 8,168 14,214
----------- ----------- -----------
$ 12,380 $ 58,467 $ 46,974
=========== =========== ===========
Foreign losses before income taxes were approximately $2,519,000, $965,000
and $549,000 in 2001, 2000 and 1999, respectively.
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
2001 2000
(In Thousands)
<S> <C> <C>
Deferred tax assets:
Public liability and property damage $ 7,777 $ 13,172
Allowance for doubtful accounts and notes receivable 7,544 7,897
Other accrued liabilities 21,659 21,307
Federal and state NOL credits and carryforwards 2,997 3,665
Interest rate swap 4,506 -
Canadian NOL carryforwards 4,751 142
Canadian depreciation 2,618 4,291
Other Canadian temporary differences 2,658 5,522
----------- -----------
54,510 55,996
Valuation allowance (10,027) (9,955)
----------- -----------
Total $ 44,483 $ 46,041
=========== ===========
Deferred tax liabilities:
Depreciation $ 61,342 $ 57,064
Other 5,273 2,805
----------- -----------
Total $ 66,615 $ 59,869
=========== ===========
</TABLE>
59
<PAGE>
The Company has net operating loss carryforwards available in certain
states to offset future state taxable income. At December 31, 2001, TCL has
net operating loss carryforwards of approximately $11,435,000 available to
offset future taxable income in Canada, which expire through 2008.
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:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------
2001 2000 1999
-------------------------- -------------------------- --------------------------
Amount Percent Amount Percent Amount Percent
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Tax expense computed at the
maximum U.S. statutory rate $ 9,176 35.0 % $ 47,767 35.0 % $ 37,296 35.0 %
Difference resulting from:
Goodwill amortization 1,717 6.6 1,717 1.3 1,871 1.8
State and local taxes, net of
federal income tax benefit 1,247 4.8 7,188 5.3 5,732 5.4
Foreign losses 882 3.3 364 0.2 682 0.6
Foreign taxes 562 2.1 484 0.4 480 0.4
Other (1,204) (4.6) 947 0.6 913 0.9
----------- ----------- ----------- ----------- ----------- -----------
$ 12,380 47.2 % $ 58,467 42.8 % $ 46,974 44.1 %
=========== =========== =========== =========== =========== ===========
</TABLE>
14. 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 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, 2001, the fair value of the asset backed
notes with fixed interest rates, including the effect of the interest rate
swap (Note 9), was greater than the carrying value by approximately
$28,021,000.
Letters of Credit and Guaranteed Obligations - The estimated fair value of
these items was $260,000 and $263,000 at December 31, 2001 and 2000,
respectively.
60
<PAGE>
15. 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,
-----------------------------------------
2001 2000 1999
(In Thousands)
Rent $ 25,386 $ 21,824 $ 20,833
Concession expenses:
Minimum fees 37,601 33,824 29,627
Contingent fees 24,093 28,251 25,628
----------- ----------- -----------
87,080 83,899 76,088
Less sublease rental income (1,617) (2,081) (2,408)
----------- ----------- -----------
Total $ 85,463 $ 81,818 $ 73,680
=========== =========== ===========
61
<PAGE>
Future minimum rentals and fees under noncancelable operating leases and
the Company's obligations for minimum airport concession fees at December
31, 2001 are presented in the following table. Concession fees-franchisee
locations presented are required to be paid by franchisees under terms of
sublease agreements.
<TABLE>
<CAPTION>
Concession Fees
--------------------------
Company-
Owned Franchisee Operating
Stores Locations Leases Total
(In Thousands)
<S> <C> <C> <C> <C>
2002 $ 35,455 $ 2,410 $ 21,638 $ 59,503
2003 26,993 2,270 16,903 46,166
2004 21,617 2,262 12,981 36,860
2005 19,334 1,261 10,483 31,078
2006 15,097 1,198 8,656 24,951
Thereafter 69,161 8,805 41,455 119,421
----------- ----------- ----------- -----------
187,657 18,206 112,116 317,979
Less sublease rental income - - (5,582) (5,582)
----------- ----------- ----------- -----------
$ 187,657 $ 18,206 $ 106,534 $ 312,397
=========== =========== =========== ===========
</TABLE>
Public Liability and Property Damage
For 2001, 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, 2001 and 2000, these amounts have been discounted at 3.7% and
5.2%, (assumed risk free rate), respectively, 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 $1,542,000 and $3,266,000 at December 31, 2001 and 2000,
respectively. Estimated payments of public liability and property damage as
of December 31, 2001 are as follows (in thousands):
2002 $ 10,810
2003 4,673
2004 3,035
2005 2,167
2006 1,596
Thereafter 2,400
-----------
Aggregate undiscounted public liability and property damage 24,681
Effect of discounting (1,542)
-----------
$ 23,139
===========
62
<PAGE>
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
payments totaling $4,535,000 and $564,000 in 2002 and 2003, respectively.
Additionally, the Company has a telecommunications contract which requires
annual payments of $4,800,000 through February 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 $2,603,000 and
$2,625,000 at December 31, 2001 and 2000, respectively.
At December 31, 2001, the Company had outstanding vehicle purchase
commitments of approximately $852,513,000.
16. 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.
63
<PAGE>
Included in the consolidated financial statements are the following amounts
relating to geographic locations:
Year Ended December 31,
----------- ----------- -----------
2001 2000 1999
(In Thousands)
Revenues:
United States $ 971,392 $ 1,035,472 $ 953,509
Other foreign countries 48,643 47,971 45,243
----------- ----------- -----------
$ 1,020,035 $ 1,083,443 $ 998,752
=========== =========== ===========
Long-lived assets:
United States $ 278,960 $ 267,489 $ 244,673
Other foreign countries 3,882 3,561 2,895
----------- ----------- -----------
$ 282,842 $ 271,050 $ 247,568
=========== =========== ===========
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:
<TABLE>
<CAPTION>
Year Ended
December 31, 2001 Dollar Thrifty Other Consolidated
(In Thousands)
<S> <C> <C> <C> <C>
Revenues from external customers $ 769,264 $ 250,716 $ 55 $ 1,020,035
Interest expense, net (a) 58,664 33,701 - 92,365
Depreciation and amortization, net 250,070 117,205 1,118 368,393
Income before income taxes 25,995 222 - 26,217
Segment assets $ 1,294,697 $ 746,533 $ 122,462 $ 2,163,692
Expenditures for segment assets $ 1,725,867 $ 1,120,010 $ 2,162 $ 2,848,039
</TABLE>
<TABLE>
<CAPTION>
Year Ended
December 31, 2000 Dollar Thrifty Other Consolidated
(In Thousands)
<S> <C> <C> <C> <C>
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 $ 1,590,521 $ 975,819 $ 978 $ 2,567,318
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
Year Ended
December 31, 1999 Dollar Thrifty Other Consolidated
(In Thousands)
<S> <C> <C> <C> <C>
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 $ 1,544,802 $ 889,711 $ 702 $ 2,435,215
</TABLE>
(a) Management primarily uses net interest, not the gross interest revenue
and expense amounts, in assessing segment performance.
17. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of the quarterly operating results during 2001 and 2000 follows:
<TABLE>
<CAPTION>
Income Basic Diluted
Operating (Loss) Net Earnings Earnings
Income Before Income (Loss) (Loss)
Revenues (Loss) Income Taxes (Loss) Per Share Per Share
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C>
2001
First quarter $ 243,861 $ 38,185 $ 17,015 $ 9,209 $ 0.38 $ 0.38
Second quarter 280,975 46,936 21,847 12,417 0.52 0.50
Third quarter 299,572 43,123 14,656 6,038 0.25 0.25
Fourth quarter 195,627 (3,484) (27,301) (13,827) (0.57) (0.57)
----------- ----------- ----------- ----------- --------- ----------
Total year $ 1,020,035 $ 124,760 $ 26,217 $ 13,837 $ 0.57 $ 0.57
=========== =========== =========== =========== ========= ==========
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
=========== =========== =========== =========== ========= ==========
</TABLE>
Operating income in the table above represents pre-tax income before
interest and goodwill amortization.
65
<PAGE>
18. SUBSEQUENT EVENTS
On January 7, 2002, the Company entered into a second amendment and waiver
agreement to the Revolver. The principal effects of the amendment and
waiver relate to certain changes in the financial covenants among other
restrictions. The amendment and waiver period will expire on January 31,
2003.
The Commercial Paper Program was renewed for a 364-day period effective
February 26, 2002, at a maximum capacity of $589 million backed by a
renewal of the Liquidity Facility, in the amount of $522 million.
The Conduit was renewed for a 364-day period effective January 31, 2002, at
a maximum capacity of $275 million.
******
66
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
- ------------------------------------------------------------------------------------------------------------
Balance at Additions Balance at
Beginning Charged to End of
of Year Income Deductions Year
(In Thousands)
2001
<S> <C> <C> <C> <C>
Allowance for doubtful accounts $ 25,428 $ 21,790 $ (22,963) $ 24,255
=========== =========== =========== ===========
Public liability and property damage (1) $ 35,369 $ 4,868 $ (17,098) $ 23,139
=========== =========== =========== ===========
2000
Allowance for doubtful accounts $ 17,768 $ 11,925 $ (4,265) $ 25,428
=========== =========== =========== ===========
Public liability and property damage(1) $ 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(1) $ 77,619 $ 4,710 $ (23,546) $ 58,783
=========== =========== =========== ===========
</TABLE>
(1) Payments (deductions) of public liability and property damage reserves
significantly exceeded additional charges because the majority of the
Company's operations were insured with first dollar coverage from insurance
carriers, subject to certain policy limits, during this period.
67
<PAGE>
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,
2001 and 2000.
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, 2001, 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, 2001, 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, 2001, 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, 2001, and is incorporated herein by reference.
68
<PAGE>
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, 2001, 2000 and 1999
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 DTG'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 DTG'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 DTG, filed as the same numbered
exhibit with DTG's Registration Statement on Form S-1, as amended,
Registration No. 333-39661, which became effective December 16,
1997*
3.2 By-Laws of DTG, as amended, which became effective July 22, 1999,
filed as the same numbered exhibit with DTG'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 DTG'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 DTG'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 DTG's
Registration Statement on Form S-1, as amended, Registration
No. 333-39661, which became effective December 16, 1997*
69
<PAGE>
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 DTG'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 DTG'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 DTG, Dollar, Thrifty and
the Institutions named therein, filed as the same numbered exhibit
with DTG'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 DTG'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
DTG, Dollar, Thrifty and Rental Car Finance Corp., filed as the
same numbered exhibit with DTG'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 DTG 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 DTG'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 DTG, Rental Car Finance Corp., Thrifty,
Dollar and Bankers Trust Company, filed as the same numbered
exhibit with DTG'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,
DTG, TRAC Team, Inc. and DTAG Services, Inc., filed as the same
numbered exhibit with DTG'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 DTG's Form 8-K, filed March
16, 1998*
4.13 Master Motor Vehicle Lease and Servicing Agreement dated as of
March 4, 1998 among DTG, Dollar, Thrifty and Rental Car Finance
Corp., filed as the same numbered exhibit with DTG'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 DTG's Form 8-K,
filed March 16, 1998*
70
<PAGE>
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 DTG'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 DTG'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 DTG's Form
8-K, filed March 16, 1998*
4.18 Dealer Agreement dated as of March 4, 1998 among Dollar Thrifty
Funding Corp., DTG, Credit Suisse First Boston Corporation and
Chase Securities Inc., filed as the same numbered exhibit with
DTG'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 DTG and Harris Trust and Savings Bank, as
Rights Agent, filed as the same numbered exhibit with DTG'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, DTG, Bankers Trust Company and Credit Suisse First
Boston, filed as the same numbered exhibit with DTG'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 DTG'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 DTG's Form 8-K, filed May
18, 1999*
4.23 Note Purchase Agreement dated as of April 29, 1999 among Rental Car
Finance Corp., DTG, Credit Suisse First Boston Corporation and
Chase Securities Inc., filed as the same numbered exhibit with
DTG's Form 8-K, filed May 18, 1999*
4.24 Enhancement Letter of Credit Application and Agreement dated April
29, 1999 among Dollar, Thrifty, DTG, Rental Car Finance Corp. and
Credit Suisse First Boston, filed as the same numbered exhibit
with DTG'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, DTG,
Bankers Trust Company, Credit Suisse First Boston and Dollar
Thrifty Funding Corp., filed as the same numbered exhibit with
DTG's Form 10-Q for the quarterly period ended March 31, 2000,
filed May 10, 2000*
71
<PAGE>
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 DTG'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 DTG'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, DTG, Bankers Trust Company and Credit Suisse First
Boston, filed as the same numbered exhibit with DTG'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 DTG, 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 DTG'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 DTG, 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 DTG'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,
DTG, Bankers Trust Company and Credit Suisse First Boston, filed
as the same numbered exhibit with DTG'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 DTG, filed as the same numbered exhibit
with DTG's Form 10-K for the fiscal year ended December 31, 2000,
filed March 13, 2001*
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 DTG, filed as the same numbered exhibit
with DTG's Form 10-K for the fiscal year ended December 31, 2000,
filed March 13, 2001*
4.34 Series 2000-1 Supplement to Base Indenture dated as of December 15,
2000 between Rental Car Finance Corp. and Bankers Trust Company,
filed as the same numbered exhibit with DTG's Form 10-K for the
fiscal year ended December 31, 2000, filed March 13, 2001*
72
<PAGE>
4.35 Note Purchase Agreement dated as of December 15, 2000 among Rental
Car Finance Corp., DTG, 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, filed as the same numbered
exhibit with DTG's Form 10-K for the fiscal year ended December 31,
2000, filed March 13, 2001*
4.36 Enhancement Letter of Credit Application and Agreement dated as of
December 15, 2000 among Dollar, Thrifty, DTG, Rental Car Finance
Corp. and Credit Suisse First Boston, filed as the same numbered
exhibit with DTG's Form 10-K for the fiscal year ended December
31, 2000, filed March 13, 2001*
4.37 Supplement No. 7 to Series 1998-1 Supplement dated as of February
28, 2001 among Rental Car Finance Corp., Dollar, Thrifty, DTG,
Bankers Trust Company and Credit Suisse First Boston, filed
as the same numbered exhibit with DTG's Form 10-Q for the quarterly
period ended March 31, 2001, filed May 11, 2001*
4.38 Extension Agreement dated as of February 28, 2001 among Dollar
Thrifty Funding Corp., certain financial institutions, as the
Liquidity Lenders, and Credit Suisse First Boston, filed as the
same numbered exhibit with DTG's Form 10-Q for the quarterly period
ended March 31, 2001, filed May 11, 2001*
4.39 Amendment No.4 to Liquidity Agreement dated as of February 28, 2001
among Dollar Thrifty Funding Corp., certain financial institutions,
as the Liquidity Lenders, and Credit Suisse First Boston, filed
as the same numbered exhibit with DTG's Form 10-Q for the quarterly
period ended March 31, 2001, filed May 11, 2001*
4.40 Amendment No.2 to Series 1998-1 Supplement dated as of February 28,
2001 between Rental Car Finance Corp. and Bankers Trust Company,
filed as the same numbered exhibit with DTG's Form 10-Q for the
quarterly period ended March 31, 2001, filed May 11, 2001*
4.41 Series 2001-1 Supplement to Base Indenture dated as of March 6,
2001 between Rental Car Finance Corp. and Bankers Trust Company,
filed as the same numbered exhibit with DTG's Form 10-Q for the
quarterly period ended March 31, 2001, filed May 11, 2001*
4.42 Master Motor Vehicle Lease and Servicing Agreement dated as of
March 6, 2001 among DTG, Dollar, Thrifty and Rental Car Finance
Corp., filed as the same numbered exhibit with DTG's Form 10-Q for
the quarterly period ended March 31, 2001, filed May 11, 2001*
4.43 Addendum to the Amended and Restated Master Collateral Agency
Agreement dated as of March 6, 2001 among DTG, Rental Car Finance
Corp., Thrifty, Dollar and Bankers Trust Company, filed as the same
numbered exhibit with DTG's Form 10-Q for the quarterly period
ended March 31, 2001, filed May 11, 2001*
4.44 Note Purchase Agreement dated as of March 6, 2001 among Rental Car
Finance Corp., DTG, Deutsche Banc Alex. Brown, JP Morgan Chase &
Co., Salomon Smith Barney and Credit Suisse First Boston
Corporation, filed as the same numbered exhibit with DTG's Form
10-Q for the quarterly period ended March 31, 2001, filed May 11,
2001*
73
<PAGE>
4.45 Enhancement Letter of Credit Application and Agreement dated as of
March 6, 2001 among Dollar, Thrifty, DTG, Rental Car Finance Corp.
and Credit Suisse First Boston, filed as the same numbered exhibit
with DTG's Form 10-Q for the quarterly period ended March 31, 2001,
filed May 11, 2001*
4.46 Master Exchange and Trust Agreement dated as of July 23, 2001 among
Rental Car Finance Corp., Dollar, Thrifty, Chicago Deferred
Exchange Corporation, VEXCO, LLC and The Chicago Trust Company,
filed as the same numbered exhibit with DTG's Form 10-Q for the
quarterly period ended September 30, 2001, filed November 13, 2001*
4.47 Collateral Assignment of Exchange Agreement dated as of July 23,
2001 by and among Rental Car Finance Corp., Dollar, Thrifty and
Bankers Trust Company, filed as the same numbered exhibit with
DTG's Form 10-Q for the quarterly period ended September 30, 2001,
filed November 13, 2001*
4.48 First Amendment and Waiver to Amended and Restated Credit Agreement
dated as of September 30, 2001 by and among DTG, Dollar, Thrifty,
Various Financial Institutions named therein and Credit Suisse
First Boston, filed as the same numbered exhibit with DTG's Form
10-Q for the quarterly period ended September 30, 2001, filed
November 13, 2001*
4.49 Extension Agreement dated December 14, 2001 between Rental Car
Finance Corp., DTG, Falcon Asset Securitization Corporation, Bank
One, NA, Deutsche Bank, AG, New York Branch, Liberty Street Funding
Corp. and The Bank of Nova Scotia**
4.50 Amendment No. 4 to Master Motor Vehicle Lease and Servicing
Agreement dated as of December 31, 2001 among Rental Car Finance
Corp., Dollar, Thrifty, DTG, Bankers Trust Company, Bank One, NA,
The Bank of Nova Scotia, Dollar Thrifty Funding Corp. and Credit
Suisse First Boston**
5 Opinion of Debevoise & Plimpton regarding legality of the Common
Stock, filed as the same numbered exhibit with DTG'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 DTG'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 DTG'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 DTG'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 DTG's Registration Statement on Form S-1, as amended,
Registration No. 333-39661, which became effective December 16,
1997*
74
<PAGE>
10.3 Employment Continuation Agreement between DTG and Joseph E. Cappy
dated September 29, 1998, filed as the same numbered exhibit with
DTG'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 DTG'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, as adopted
by DTG effective December 5, 1998 filed as the same numbered
exhibit with DTG's Form 10-Q for the quarterly period ended June
30, 2001, filed August 13, 2001 (the instrument filed with the
10-Q replaced the instrument previously filed as the same numbered
exhibit with DTG's Form 10-K for the fiscal year ended December 31,
1998, filed March 19, 1999)*
10.6 Dollar Thrifty Automotive Group, Inc. Retirement Savings Plan, as
adopted by DTG pursuant to the Adoption Agreement (Exhibit 10.7),
filed as the same numbered exhibit with DTG'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 DTG'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 DTG'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 DTG'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 DTG'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 DTG, filed as the same numbered exhibit with DTG'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 DTG and DaimlerChrysler,
filed as the same numbered exhibit with DTG'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 DTG's Form S-8,
Registration No. 333-79603, filed May 28, 1999*
75
<PAGE>
10.14 Amendment to Deferred Compensation Plan dated as of September 29,
1998, filed as the same numbered exhibit with DTG'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 DTG'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 DTG'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 DTG's Form S-8,
Registration No. 333-33146, filed March 23, 2000*
10.18 Second Amendment to Retirement Plan dated as of January 14, 2000,
filed as the same numbered exhibit with DTG'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 DTG'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 DTG executed June 26, 2000, filed as the same numbered exhibit
with DTG's Form 10-Q for the quarterly period ended June 30, 2000,
filed August 9, 2000
10.21 First Amendment to Employment Continuation Plan for Key Employees,
which became effective January 24, 2001, filed as the same numbered
exhibit with DTG's Form 10-Q for the quarterly period ended March
31, 2001, filed May 11, 2001*
10.22 Adoption, Consent and Third Amendment to Retirement Plan dated as
of July 1, 2000, filed as the same numbered exhibit with DTG's Form
10-Q for the quarterly period ended September 30, 2000, filed
November 13, 2000*
10.23 First Amendment to Employment Continuation Agreement between DTG
and Mr. Cappy dated April 23, 2001, filed as the same numbered
exhibit with DTG's Form 10-Q for the quarterly period ended June
30, 2001, filed August 13, 2001*
10.24 Second Amendment to Employment Continuation Plan for Key Employees,
which became effective April 23, 2001, filed as the same numbered
exhibit with DTG's Form 10-Q for the quarterly period ended June
30, 2001, filed August 13, 2001*
10.25 Second Amendment to Employment Continuation Agreement between DTG
and Mr. Cappy dated May 7, 2001, filed as the same numbered exhibit
with DTG's Form 10-Q for the quarterly period ended June 30, 2001,
filed August 13, 2001*
10.26 Third Amendment to Employment Continuation Plan for Key Employees,
which became effective May 7, 2001, filed as the same numbered
exhibit with DTG's Form 10-Q for the quarterly period ended June
30, 2001, filed August 13, 2001*
76
<PAGE>
10.27 Third Amendment to Employment Continuation Agreement between DTG
and Mr. Cappy dated November 19, 2001**
10.28 Fourth Amendment to Employment Continuation Plan for Key Employees,
which became effective November 19, 2001**
15.1 Letter from Deloitte & Touche LLP regarding interim financial
information, filed as the same numbered exhibit with DTG'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 DTG'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 DTG's Form
S-8, Registration No. 333-50800, filed November 28, 2000***
15.4 Letter from Deloitte & Touche LLP regarding interim financial
information, filed as the same numbered exhibit with DTG's Form
10-Q for the quarterly period ended June 30, 2001, filed August 13,
2001***
15.5 Letter from Deloitte & Touche LLP regarding interim financial
information, filed as the same numbered exhibit with DTG's Form
10-Q for the quarterly period ended September 30, 2001, filed
November 13, 2001***
15.6 [Reserved]
15.7 [Reserved]
15.8 [Reserved]
15.9 [Reserved]
15.10 [Reserved]
15.11 [Reserved]
15.12 [Reserved]
15.13 [Reserved]
15.14 Letter from Deloitte & Touche LLP regarding interim financial
information, filed as the same numbered exhibit with DTG's Form
10-Q for the quarterly period ended March 31, 2001, filed May 11,
2001***
21 Subsidiaries of DTG**
23.2 Consent of Debevoise & Plimpton (included in Exhibit 5), filed as
the same numbered exhibit with DTG's Registration Statement on
Form S-1, as amended, Registration No. 333-39661, which became
effective December 16, 1997*
77
<PAGE>
23.3 Consent of Donovan Leisure Newton & Irvine LLP, filed as the same
numbered exhibit with DTG'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 DTG'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 DTG'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 DTG's Form S-8, Registration No. 333-89189, filed
October 15, 1999*
23.7 Consent of Deloitte & Touche LLP, filed as the same numbered
exhibit with DTG'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 DTG'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 DTG'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
DTG's Form 11-K for the fiscal year ended December 31, 1999, filed
June 28, 2000*
23.11 Consent of Deloitte & Touche LLP, filed as exhibit 23.9 with
DTG's Form 11-K/A for the fiscal year ended December 31, 1999,
filed October 16, 2000*
23.12 Consent of Deloitte & Touche LLP, filed as the same numbered
exhibit with DTG'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 DTG's Form S-8, Registration No. 333-50800, filed November 28,
2000*
23.14 Consent of Deloitte & Touche LLP regarding DTG's Forms S-8,
Registration No. 333-79603, Registration No. 333-89189,
Registration No. 333-33144, Registration No. 333-33146 and
Registration No. 333-50800, filed as the same numbered exhibit with
DTG's Form 10-K for the fiscal year ended December 31, 2000, filed
March 13, 2001*
23.15 Consent of Deloitte & Touche LLP, filed as the same numbered
exhibit with DTG's Form 11-K for the fiscal year ended December
31, 2000, filed June 28, 2001*
78
<PAGE>
23.16 Consent of Deloitte & Touche LLP regarding DTG's 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 DTG during or applicable to the
quarter ended December 31, 2001.
(c) Filed Exhibits
--------------
The response to this item is submitted as a separate section of this
report.
79
<PAGE>
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 20, 2002
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 20, 2002
------------------------ Chief Executive Officer
Joseph E. Cappy President and Director
/s/ STEVEN B. HILDEBRAND Executive Vice President March 20, 2002
------------------------ Principal Financial Officer
Steven B. Hildebrand Principal Accounting Officer
/s/ MOLLY S. BOREN Director March 20, 2002
------------------------
Molly S. Boren
/s/ THOMAS P. CAPO Director March 20, 2002
------------------------
Thomas P. Capo
/s/ EDWARD J. HOGAN Director March 20, 2002
------------------------
Edward J. Hogan
/s/ MARYANN N. KELLER Director March 20, 2002
------------------------
Maryann N. Keller
/s/ EDWARD C. LUMLEY Director March 20, 2002
------------------------
Edward C. Lumley
/s/ JOHN C. POPE Director March 20, 2002
------------------------
John C. Pope
/s/ JOHN P. TIERNEY Director March 20, 2002
------------------------
John P. Tierney
/s/ EDWARD L. WAX Director March 20, 2002
------------------------
Edward L. Wax
80
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit Number Description
- -------------- -----------
4.49 Extension Agreement dated December 14, 2001 between Rental Car
Finance Corp., DTG, Falcon Asset Securitization Corporation, Bank
One, NA, Deutsche Bank, AG, New York Branch, Liberty Street Funding
Corp. and The Bank of Nova Scotia
4.50 Amendment No. 4 to Master Motor Vehicle Lease and Servicing
Agreement dated as of December 31, 2001 among Rental Car Finance
Corp., Dollar, Thrifty, DTG, Bankers Trust Company, Bank One, NA,
The Bank of Nova Scotia, Dollar Thrifty Funding Corp. and Credit
Suisse First Boston
10.27 Third Amendment to Employment Continuation Agreement between DTG
and Mr. Cappy dated November 19, 2001
10.28 Fourth Amendment to Employment Continuation Plan for Key Employees,
which became effective November 19, 2001
21 Subsidiaries of DTG
23.16 Consent of Deloitte & Touche LLP regarding DTG's Forms S-8,
Registration No. 333-79603, Registration No. 333-89189,
Registration No. 333-33144, Registration No. 333-33146 and
Registration No. 333-50800
81
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>3
<FILENAME>exhibit449.txt
<TEXT>
EXHIBIT 4.49
------------
RENTAL CAR FINANCE CORP.
5330 East 31st Street
Tulsa, Oklahoma 74135
December 14, 2001
Each of the Conduit Purchasers,
Committed Purchasers and Managing Agents
party to the Note Purchase Agreement
c/o Bank One, NA, as Administrative Agent
1 Bank One Plaza
Suite 0079
Chicago, Illinois 60670
To Whom it May Concern:
Reference is made to (i) that certain Note Purchase Agreement, dated as of
December 15, 2000, as amended by that certain Amendment No. 1 to Note Purchase
Agreement dated as of April 20, 2001 (the "Note Purchase Agreement"), among
Rental Car Finance Corp. ("RCFC"), Dollar Thrifty Automotive Group, Inc., the
Conduit Purchasers, the Committed Purchasers and the Managing Agents party
thereto, and Bank One, NA, as Administrative Agent, and (ii) that certain Series
2000-1 Supplement, dated as of December 15, 2000, as amended by that certain
Amendment No. 1 to Series 2000-1 Supplement, dated as of April 20, 2001 (the
"Series 2000-1 Supplement"), between RCFC and Bankers Trust Company, as Trustee
(the "Trustee"), to the Base Indenture, dated as of December 13, 1995, as
amended by the Amendment to Base Indenture, dated as of December 23, 1997,
between RCFC and the Trustee. Capitalized terms utilized herein but not
otherwise defined shall have the meanings ascribed to them in the Note Purchase
Agreement and the Series 2000-1 Supplement.
The parties hereto hereby agree to extend, effective as of the current
Expiration Date and the current Series 2000-1 Termination Date, the current
Expiration Date and the current Series 2000-1 Termination Date to January 31,
2002.
Except as specifically modified above, the Note Purchase Agreement, the Series
2000-1 Supplement and the other Series Documents are and shall continue to be in
full force and effect and are hereby in all respects ratified and confirmed. The
consents contained in this agreement are limited to the specific facts and
circumstances set forth herein and shall not operate as a waiver of, or a
consent to any variation from, any other provision of the Note Purchase
Agreement, the Series 2000-1 Supplement or any of the other Series Documents.
This agreement shall be governed by, and construed in accordance with, the laws
of the State of New York.
<PAGE>
This agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement. Delivery of an executed counterpart
of a signature page to this agreement by facsimile shall be effective as
delivery of a manually executed counterpart of this agreement.
[Signature pages follow]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
RENTAL CAR FINANCE CORP., as Seller
By: _____________________________________
Pamela S. Peck
Vice President and Treasurer
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.,
as Master Servicer
By: _____________________________________
Pamela S. Peck
Treasurer
Acknowledged and consented to by:
FALCON ASSET SECURITIZATION CORPORATION, as a Conduit Purchaser
By: ____________________________________
Name:
Title:
BANK ONE, NA, as a Committed Purchaser, as the Managing Agent for the Bank One
Ownership Group, as the Administrative Agent and as a Series 2000-1 Noteholder
By: ____________________________________
Name:
Title:
DEUTSCHE BANK, AG, New York Branch, as a Committed Purchaser
By: ____________________________________
Name:
Title:
<PAGE>
LIBERTY STREET FUNDING CORP., as a Conduit Purchaser
By: ____________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA, as a Committed Purchaser, as the Managing Agent for the
BNS Ownership Group and as a Series 2000-1 Noteholder
By: ____________________________________
Name:
Title:
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>4
<FILENAME>exhibit450.txt
<TEXT>
EXHIBIT 4.50
------------
------------------------------------------------------------------------------
Amendment No. 4
to
Master Motor Vehicle Lease and Servicing Agreement
dated as of December 31, 2001
among
Rental Car Finance Corp.,
as Lessor,
Dollar Rent A Car Systems, Inc.,
as a Lessee,
Thrifty Rent-A-Car System, Inc.,
as a Lessee,
and
Dollar Thrifty Automotive Group, Inc.,
as Master Servicer and Guarantor
------------------------------------------------------------------------------
<PAGE>
Amendment No. 4
to Master Motor Vehicle Lease and Servicing Agreement
This Amendment No. 4 to Master Motor Vehicle Lease and Servicing Agreement,
dated as of December 31, 2001 ("Amendment"), among Rental Car Finance Corp., an
Oklahoma corporation, as Lessor ("Lessor"), Dollar Rent A Car Systems, Inc., an
Oklahoma corporation, as a Lessee ("Dollar"), Thrifty Rent-A-Car System, Inc.,
an Oklahoma corporation, as a Lessee ("Thrifty") (Dollar and Thrifty are
collectively referred to herein as the "Lessees"), and Dollar Thrifty Automotive
Group, Inc., a Delaware corporation, as Master Servicer and Guarantor (in such
capacity, the "Guarantor") (Lessor, Lessees and the Guarantor are collectively
referred to herein as the "Parties").
Recitals
A. Lessor, Lessees and the Guarantor entered into that certain Master
Motor Vehicle Lease and Servicing Agreement dated as of March 4, 1998, as
subsequently amended by Amendment No. 1 to Master Motor Vehicle Lease and
Servicing Agreement, dated as of November 19, 1998, Amendment No. 2 to Master
Motor Vehicle Lease and Servicing Agreement, dated as of November 9, 2000 and
Amendment No. 3 to Master Motor Vehicle Lease and Servicing Agreement, dated as
of December 14, 2000 (collectively, the "Master Lease"); and
B. The Parties wish to amend the Master Lease as provided herein.
Now therefore, the Parties hereto agree as follows:
1. Definitions. Capitalized terms used in this Amendment not herein
defined shall have the meaning contained in the Master Lease.
2. Amendments. The Master Lease is hereby amended as follows:
a. Section 24.14 of the Master Lease is hereby amended to read in its
entirety as follows:
The Guarantor will not permit (a) the Interest Coverage Ratio, as of
the last day of each Fiscal Quarter, to be less than the ratio of
4.00:1.00, or (b) the Fixed Charge Coverage Ratio, as of the last day of
each Fiscal Quarter, to be less than the ratio of 1.00:1.00.
3. Effect of Amendment. Except as expressly set forth herein, this
Amendment shall not by implication or otherwise limit, impair, constitute a
waiver of, or otherwise affect the rights and remedies of any of the Parties
hereto under the Master Lease, nor alter, modify, amend or in any way affect any
of the terms, conditions, obligations, covenants or agreements contained in the
Master Lease, all of which are hereby ratified and affirmed in all respects by
each of the Parties hereto and shall continue in full force and effect. This
Amendment shall apply and be effective only with respect to the provisions of
the Master Lease specifically referred to herein, and any references in the
Master Lease to the provisions of the Master Lease specifically referred to
herein shall be to such provisions as amended by this Amendment.
4. Applicable Provisions. Pursuant to Section 22 of the Master Lease,
the Lessor, the Lessees and the Guarantor may enter into an amendment to the
Master Lease provided that the Master Collateral Agent and the Trustee, the
Required Group II Noteholders and each Enhancement Provider with respect to each
Series of Notes included in Group II consent thereto in writing.
1
<PAGE>
5. Waiver of Notice. Each of the Parties hereto waives any prior notice
and any notice period that may be required by any other agreement or document
in connection with the execution of this Amendment.
6. Binding Effect. This Amendment shall be binding upon and inure to the
benefit of the Parties and their respective successors and assigns.
7. Governing Law. This Amendment shall be construed in accordance with
the Laws of the State of New York (without giving effect to the provisions
thereof regarding conflicts of laws), and the obligations, rights and remedies
of the parties hereto shall be determined in accordance with such laws.
8. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties herein in separate counterparts, each of
which when executed and delivered shall be deemed to be an original and all of
which taken together shall constitute but one and the same agreement.
[signatures follow]
2
<PAGE>
In witness thereof, the Parties have caused this Amendment to be duly
executed by their respective officers thereunto duty authorized, as of the date
first above written.
LESSOR:
Rental Car Finance Corp.
By: ______________________________________
Pamela S. Peck
Vice President and Treasurer
LESSEES:
Dollar Rent A Car Systems, Inc.
By: ______________________________________
Michael H. McMahon
Treasurer
Thrifty Rent-A-Car System, Inc.
By: ______________________________________
Pamela S. Peck
Treasurer
GUARANTOR:
Dollar Thrifty Automotive Group, Inc.
By: ______________________________________
Pamela S. Peck
Treasurer
S-1
<PAGE>
The following hereby consent to the foregoing Amendment as of the date
first above written.
MASTER COLLATERAL AGENT AND TRUSTEE:
Bankers Trust Company
By: ______________________________________
Name:
Title:
GROUP II NOTEHOLDERS:
Bank One, NA, in its capacity as Managing
Agent and as a Series 2000-1 Noteholder
By: ______________________________________
Name:
Title:
The Bank of Nova Scotia, in its capacity
as Managing Agent and as a Series 2000-1
Noteholder
By: ______________________________________
Name:
Title:
Dollar Thrifty Funding Corp.
By: ______________________________________
Pamela S. Peck
Vice President and Treasurer
ENHANCEMENT PROVIDER:
Credit Suisse First Boston, NEW YORK BRANCH
By: ______________________________________
Name:
Title:
By: ______________________________________
Name:
Title:
S-2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>exhibit1027.txt
<TEXT>
EXHIBIT 10.27
-------------
THIRD AMENDMENT TO
EMPLOYMENT CONTINUATION AGREEMENT
WHEREAS, on September 29, 1998, Dollar Thrifty Automotive Group, Inc. (the
"Company") and Joseph E. Cappy (the "Executive") entered into an Employment
Continuation Agreement (the "Agreement"), as amended by a First Amendment
thereto on April 23, 2001 and a Second Amendment thereto on May 7, 2001; and
WHEREAS, the Company and the Executive wish to amend the Agreement pursuant
to their reserved rights under Section 17 of the Agreement.
NOW, THEREFORE, the Agreement is amended as follows:
1. Section 1(e) of the Agreement is hereby deleted in its entirety:
2. Section 9 of the Agreement is hereby deleted in its entirety and
replaced with the following:
9. Confidentiality; Nonsolicitation. (a) During the Term, the Company
agrees that it will disclose to Executive its confidential or
proprietary information (as defined in this Section 9(a)) to the
extent necessary for Executive to carry out his obligations to the
Company. The Executive hereby covenants and agrees that he will not,
without the prior written consent of the Company, during the Term or
thereafter disclose to any person not employed by the Company, or use
in connection with engaging in competition with the Company, any
confidential or proprietary information of the Company. For purposes
of this Agreement, the term "confidential or proprietary information"
will include all information of any nature and in any form that is
owned by the Company and that is not publicly available (other than by
Executive's breach of this Section 9(a)) or generally known to persons
engaged in businesses similar or related to those of the Company.
Confidential or proprietary information will include, without
limitation, the Company's financial matters, customers, employees,
industry contracts, strategic business plans, product development (or
other proprietary product data), marketing plans, and all other
secrets and all other information of a confidential or proprietary
nature. For purposes of the preceding two sentences, the term
"Company" will also include any Subsidiary (collectively, the
"Restricted Group"). The foregoing obligations imposed by this Section
9(a) will not apply (i) during the Term, in the course of the business
of and for the benefit of the Company, (ii) if such confidential or
proprietary information will have become, through no fault of the
Executive, generally known to the public or (iii) if the Executive is
required by law to make disclosure (after giving the Company notice
and an opportunity to contest such requirement).
1
<PAGE>
(b) The Executive hereby covenants and agrees that during the Term and
during the Continuation Period, the Executive will not, without the
prior written consent of the Company, which consent shall not
unreasonably be withheld, on behalf of Executive or on behalf of any
person, firm or company, directly or indirectly, attempt to influence,
persuade or induce, or assist any other person in so persuading or
inducing, any employee of the Restricted Group to give up, or to not
commence, employment or a business relationship with the Restricted
Group.
3. Paragraph 2 of Annex A is hereby deleted in its entirety and replaced
with the following:
2. Employment Continuation Pay. A lump sum payment in an amount equal
to (a) the sum of the Executive's Base Pay and Incentive Pay,
multiplied by (b) three.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to the
Agreement to be duly executed and delivered on the 19th day of November, 2001.
_________________________________________
Joseph E. Cappy, Executive
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
By:______________________________________
Steven B. Hildebrand
Executive Vice President and Chief
Financial Officer
2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>exhibit1028.txt
<TEXT>
EXHIBIT 10.28
-------------
FOURTH AMENDMENT TO
EMPLOYMENT CONTINUATION PLAN
FOR KEY EMPLOYEES
The Employment Continuation Plan for Key Employees adopted by Dollar
Thrifty Automotive Group, Inc. on September 29, 1998 (the "Plan"), and amended
as of January 24, 2001, April 23, 2001, on May 7, 2001, and is further amended
on the 19th day of November, 2001 as follows:
1. Section 3(e) of the Plan is hereby deleted in its entirety:
2. Section 5(a)(i) of the Plan is hereby deleted in its entirety and
replaced with the following:
(i) Subject to Section 9, each Key Employee who is listed on Annex A
and who is terminated or terminates employment in accordance with
Section 4(b) shall, within five (5) business days after such
termination, receive Employment Continuation Pay from the Company in a
lump sum payment in an amount equal to (A) the sum of the Key
Employee's amount of Base Pay and Incentive Pay, multiplied by (B) two
(for those Key Employees listed on Annex A except if such Key Employee
is also listed on Annex A-1) or three (for those Key Employees listed
on Annex A-1).
3. Section 9 of the Plan is hereby deleted in its entirety and replaced
with the following:
9. Confidentiality; Nonsolicitation. (a) During the Term, the Company
has disclosed to the Key Employee its confidential or proprietary
information (as defined in this Section 9(a)) to the extent necessary
for the Key Employee to carry out his obligations to the Company. As a
condition to his participation in the Plan, each Key Employee shall
covenant and agree that he will not, without the prior written consent
of the Company, during the Term or thereafter disclose to any person
not employed by the Company, or use in connection with engaging in
competition with the Company, any confidential or proprietary
information of the Company. For purposes of this Plan, the term
"confidential or proprietary information" will include all information
of any nature and in any form that is owned by the Company and that is
not publicly available (other than by the Key Employee's breach of
this Section 9(a)) or generally known to persons engaged in businesses
similar or related to those of the Company. Confidential or
proprietary information will include, without limitation, the
Company's financial matters, customers, employees, industry contracts,
strategic business plans, product development (or other proprietary
product data), marketing plans, and all other secrets and all other
information of a confidential or proprietary nature. For purposes of
the preceding two sentences, the term "Company" will also include any
Subsidiary (collectively, the "Restricted Group"). The foregoing
obligations imposed by this Section 9(a) will not apply (i) during the
Term, in the course of the business of and for the benefit of the
Company, (ii) if such confidential or proprietary information will
have become, through no fault of the Key Employee, generally known to
the public or (iii) if the Key Employee is required by law to make
disclosure (after giving the Company notice and an opportunity to
contest such requirement).
1
<PAGE>
(b) As a condition to his participation in the Plan, each Key Employee
shall covenant and agree that during the Continuation Period the Key
Employee will not, without the prior written consent of the Company,
which consent shall not unreasonably be withheld, on behalf of the Key
Employee or on behalf of any person, firm or company, directly or
indirectly, attempt to influence, persuade or induce, or assist any
other person in so persuading or inducing, any employee of the
Restricted Group to give up, or to not commence, employment or a
business relationship with the Restricted Group.
2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>exhibit21.txt
<TEXT>
EXHIBIT 21
----------
SUBSIDIARIES OF DTG
-------------------
The following are significant subsidiaries of DTG at December 31, 2001.
Name Jurisdiction Also "doing business as"
---- ------------ ------------------------
Dollar Rent A Car Systems, Inc. Oklahoma Dollar Rent A Car
Thrifty Rent-A-Car System, Inc. Oklahoma Thrifty Car Rental
Thrifty, Inc. Oklahoma N/A
Rental Car Finance Corp. Oklahoma N/A
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>8
<FILENAME>exhibit2316.txt
<TEXT>
EXHIBIT 23.16
-------------
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We consent to the incorporation by reference in Registration Statements No.
333-79603, No. 333-89189, No. 333-33144, No. 333-33146 and No. 333-50800 of
Dollar Thrifty Automotive Group, Inc. on Forms S-8 of our report dated February
8, 2002, except for Note 18 as to which the date is February 26, 2002, appearing
in the Annual Report on Form 10-K of Dollar Thrifty Automotive Group, Inc. for
the year ended December 31, 2001.
DELOITTE & TOUCHE LLP
Tulsa, Oklahoma
March 20, 2002
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----