Alamo/National Reports Second Quarter Loss and Lowers Full Year Forecast
ANC Rental Corporation today announced a net loss for the second quarter 2001 of $23.6 million or $0.52 per share, compared to net income of $15.5 million last year. Revenue for the three-month period was $850.6 million or $58.6 million below last year.Comparative results of operations were impacted by:
| - | A significant economic downturn throughout the entire travel sector o Continued price competition in the North American airport market |
| - | Higher fleet costs, which are the results of higher acquisition and disposal costs as well as the relative mix of fleet |
| - | Higher non-vehicle interest expense, the result of the Company's post-spin capital structure. |
Commenting, Mr. Michael S. Egan, the Chairman and Chief Executive Officer noted, "In the second quarter, our business has been affected primarily by the dramatic downturn in both business and tour travel. We have been addressing these challenges aggressively, and throughout the quarter, we have made substantial efforts to re-size our fleet, as well as to control discretionary spending and significantly reduce costs throughout the entire organization. Looking ahead, we are entering our strongest quarter with two very strong brands. We believe our rental fleet is now balanced with anticipated demand, and that pricing in the domestic airport market, as compared to last year, is beginning to stabilize.
"In addition, we have been engaged in investigating, and are continuing to pursue, strategic alternatives to maximize shareholder value and strengthen ANC. We have engaged Lehman Brothers to assist us in evaluating these options, which could include, among other possibilities, a significant investment by a third party or the sale of the Company."
Revenue Results
Consolidated revenue for the quarter was $850.6 million as compared to $909.2 million last year, a decrease of 6.4%. Volume was lower by 4.1% primarily in North America with declines in commercial and tour channels. Pricing for the quarter declined 2.0% excluding the effects of foreign exchange as poor economic conditions, driving lower volumes, continue to adversely affect pricing.
Cost Results
Direct operating costs decreased $1.3 million to $354.9 million for the quarter ended June 30, 2001. Decreases in field personnel costs, the result of the Company's first quarter cost reduction program, were offset by increasing facility and rent expense due in part to the recently completed sale and leaseback transactions.
Vehicle depreciation increased $31.6 million to $271.1 million for the quarter ended June 30, 2001. Savings realized in our efforts to rationalize fleet size were more than offset by higher vehicle acquisition costs, relative mix of fleet and losses relative to disposition of fleet.
Selling, general and administrative costs decreased $21.1 million to $162.7 million for the quarter ended June 30, 2001. The decrease is the result of the Company's initiatives to lower advertising and marketing spending as well as other discretionary expenses.
Separately, the quarter's results were favorably impacted by a $1.0 million gain on interest rate hedges due to the application of new derivative accounting standards adopted in 2001. Additionally, June 30, 2000 results were negatively impacted by $8.3 million of transition costs related to the Company's 1999 restructuring plan, which did not recur in the current quarter.
The benefit for income taxes was $6.9 million for the three months ended June 30, 2001 as compared to a provision of $9.9 million for the prior year. The year to date effective rate was lowered to 33.8% reflecting the effects of the current lower earnings expectations.
Financing Transactions
During the quarter, ANC Rental Corporation closed $1.1 billion of asset-backed financings in two parts (i) $600.0 million of asset-backed medium term notes and (ii) $531.0 million of auction-rate notes. Proceeds of these offerings were used to retire maturing asset-backed medium term notes and provide for the reduction of ANC's $1.1 billion single seller commercial paper program, which is set to expire in September 2001. The Company expects to replace remaining maturing capacity with similar asset-backed financings. The Company closed additional seasonal fleet financing facilities with a total capacity of $300.0 million.
As of June 30, 2001 the Company rolled-over its $200.0 million interim financing into a six-year term loan; concurrent with the roll-over the Company became obligated to issue warrants representing up to approximately 3.7 million shares of common stock. The warrants have a term of ten years and an exercise price of $0.01 per share.
Also during the quarter, the Company completed its program of sale and leaseback transactions, generating net proceeds of $31.3 million for the quarter and $110.3 million for the year. The proceeds initially have been used for working capital purposes and then up to approximately $70.0 million is scheduled to be used in September 2001 to pay down a portion of the roll-over loan.
Earnings Outlook
With economic and industry conditions uncertain, the Company anticipates third quarter earnings to range between $0.40 to $0.60 per diluted share as compared to $1.10 per diluted share in the prior year with North American revenue per day up to 2% below last year and volumes 5% below last year. For the full year, the Company anticipates reporting a loss in the range of $1.10 to $1.45 per share compared to $0.04 loss per share in the prior year.
ANC Rental Corporation , headquartered in Fort Lauderdale, is one of the world's largest car rental companies with annual revenue of approximately $3.5 billion in 2000. ANC Rental Corporation, the parent company of Alamo and National, has more than 3,000 locations in 66 countries and employs approximately 19,000 associates worldwide.
Certain statements and information included in this press release constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. Additional discussion of factors that could cause the actual results to differ materially from management's projection, forecasts, estimates and expectations is contained in the Company's Form 10-K and other SEC filings.
ANC Rental Corporation
Consolidated Statements of Operations (Unaudited)
($ in millions except per share amounts)
Three Months As % of
Ended June 30, Total Revenue
2001 2000 2001 2000
Revenue:
Alamo $ 345.3 $ 366.9 40.6% 40.4%
National 348.3 383.3 41.0 42.2
------ ------- ------ ------
North America 693.6 750.2 81.6 82.6
Alamo Local Market 65.7 67.7 7.7 7.4
International 91.3 91.3 10.7 10.0
------ ------- ------ ------
Total Revenue 850.6 909.2 100.0 100.0
Direct operating costs 354.9 356.2 41.6 39.2
Vehicle depreciation, net 271.1 239.5 31.9 26.3
Selling, general, and
administrative 162.7 183.8 19.1 20.2
Severance/transition cost -- 8.3 -- 0.9
Amortization of
intangible assets 2.5 2.5 0.3 0.3
Interest expense,
net of income 90.4 90.9 10.7 10.0
Fair value adjustment
on interest rate hedges (1.0) -- (0.1) --
Loss on sale and
leaseback transaction 0.5 -- 0.1 --
Other (income) expense,
net -- 2.6 -- 0.3
------ ------ ------ ------
Income (loss) before
income taxes (30.5) 25.4 (3.6) 2.8
Provision (benefit)
for income taxes (6.9) 9.9 (0.8) 1.1
------ ------ ------ ------
Net income (loss) $ (23.6) $ 15.5 (2.8)% 1.7%
======== ========= ========== ========
Net income (loss)
per share:
Basic & diluted $ (0.52) $ 0.34
Shares used in
computing per share
amounts:
Basic & diluted 45.2 45.1
ANC Rental Corporation
Consolidated Statements of Operations (Unaudited)
($ in millions except per share amounts)
Six Months As % of
Ended June 30, Total Revenue
2001 2000 2001 2000
Revenue:
Alamo $ 646.3 $ 682.0 39.9% 39.7%
National 669.8 721.4 41.4 42.0
------ ------- ------ ------
North America 1,316.1 1,403.4 81.3 81.7
Alamo Local Market 129.1 137.9 8.0 8.0
International 174.4 176.7 10.7 10.3
------ ------- ------ ------
Total Revenue 1,619.6 1,718.0 100.0 100.0
Direct operating costs 691.0 701.1 42.6 40.8
Vehicle depreciation, net 512.7 469.1 31.7 27.3
Selling, general,
and administrative 320.5 366.8 19.8 21.3
Severance/transition cost 2.0 15.7 0.1 0.9
Amortization of
intangible assets 5.0 5.0 0.3 0.3
Interest expense,
net of income 178.7 172.2 11.0 10.1
Fair value adjustment
on interest rate hedges 2.3 -- 0.1 --
Loss on sale and
leaseback transaction 4.2 -- 0.3 --
Other (income) expense,
net (0.6) 2.9 -- 0.2
------ ------ ------ ------
Loss before income taxes (96.2) (14.8) (5.9) (0.9)
Provision (benefit)
for income taxes (32.5) (5.8) (2.0) (0.3)
------ ------ ------ ------
Net loss before
cumulative effect of
change in accounting
principle (63.7) (9.0) (3.9) (0.6)
Cumulative effect of
change in accounting
principle, net of tax 7.1 -- 0.4 --
------ ------ ------ ------
Net loss $ (56.6) (9.0) (3.5)% (0.6)%
======== ========= ========== ========
Net loss per share
before cumulative
effect of change in
accounting principle:
Basic & diluted $ (1.41) (0.20)
Net loss per share:
Basic & diluted $ (1.25) (0.20)
Shares used in computing
per share amounts:
Basic & diluted 45.2 45.1
ANC Rental Corporation
Key Operating Statistics (Unaudited)
($ in millions except statistical amounts)
Three months ended June 30,
Key Operating Statistics 2001 2000 Change
Revenue per day $ 35.54 $ 36.32 (2.1)%
Revenue per day, net
of foreign exchange $ 35.82 $ 36.55 (2.0)%
translation
Charge days in millions 23.6 24.6 (4.1)%
Utilization 76.87% 79.63% (276)bps
Other Data
Vehicle interest expense $ 75.7 $ 87.9 $ 12.2
Non-vehicle interest expense 16.6 3.5 (13.1)
Non-vehicle depreciation
and amortization 31.6 25.5 (6.1)
Capital expenditures 9.6 21.6 12.0
Balance Sheet Data June 2001 Dec. 2000 June 2000
Cash $ 96.6 $ 21.4 $ 10.3
Restricted cash 334.5 321.9 273.1
Vehicles, net 5,262.1 4,451.4 5,583.2
Vehicle debt 4,728.9 4,228.9 4,939.0
Other debt 289.3 276.7 332.8
Shareholders' equity 820.0 892.6 894.3