Budget Group Lowers Earnings Expectations for Q4 and 1999
23 November 1998
Budget Group Lowers Earnings Expectations for Fourth Quarter and 1999
DAYTONA BEACH, Fla., Nov. 23 -- Budget Group, Inc.
today announced that its fourth quarter earnings will fall below expected
levels and analysts' consensus estimates. The company anticipates a net loss
for the quarter prior to restructuring and one-time items to be between $32
million and $36 million, or a loss of 88 cents to 99 cents per share, based on
36.5 million basic shares outstanding. In addition, the company is taking
cost reduction actions which are expected to result in after tax restructuring
and non-recurring item charges of approximately $20 million, or approximately
55 cents per share, in the fourth quarter. For full year 1998, earnings
excluding one-time and extraordinary items are expected to be between $1.02
and $1.13 per share, based on 34.5 million diluted shares outstanding.
The company's Budget Rent a Car (BRAC) subsidiary is facing lower than
expected earnings as a result of costs associated with its continuing efforts
to improve operations, less than expected same-market transaction growth and
higher operating expenses related to the rollout of new marketing and service
initiatives. Operating margins are lower while business begins to build at
new BRAC locations and as recently acquired franchise operations are
integrated into corporate operations. Earlier this month, BRAC restructured
its field sales organization to eliminate redundancies, step up its commercial
sales effort and re-enter the tour business. In addition, BRAC is moving its
credit card processing to the company's financial services center in Orlando.
European BRAC operations have been adversely impacted by the loss of
revenues and royalty fees from BRAC's former franchisee in Germany, Sixt AG,
since BRAC ceased delivery of reservations to Sixt in October. Efforts to
rebuild the Budget system in Germany are under way, and the company
anticipates incurring start-up costs associated with opening corporate
locations in key German markets during the fourth quarter.
Earnings at Budget Car Sales have been negatively impacted by rapid store
growth. The company has slowed expansion plans for Budget Car Sales locations
to allow management to focus on improving the performance of locations that
have not been able to meet its car sales business model.
Due to delays in development of a new point-of-sale system, Ryder TRS is
incurring additional costs of approximately $5 million in the fourth quarter
to maintain its current system provided and supported by Ryder Systems, Inc.
The new system will be brought on-line during the first quarter of 1999.
Management continues to take actions to consolidate Budget One-Way Truck
operations from Dallas to Ryder TRS in Denver.
Results for the fourth quarter and full year 1998 are expected to be
announced in late February of 1999.
The company preliminarily anticipates 1999 diluted earnings per share to
be between $1.80 and $2.00. These estimates could be affected by risk factors
that have been described in the company's SEC filings, as described below, and
could be further negatively impacted depending on the outcome of the dispute
between BRAC and its terminated German licensee.
Sandy Miller, Budget Group Chairman and CEO said, "We are continuing to
progress in our efforts to improve the operations of our Budget Rent a Car
subsidiary and to consolidate functions among Budget Group companies. We
remain committed to delivering earnings growth for our shareholders and are
taking the necessary steps to improve the profitability of our operating
divisions and build on the strengths of our great Budget and Ryder brands."
Budget Group, Inc. is a global network of vehicle rental and sales
companies operating in three principal segments: Car Rental, Truck Rental and
Car Sales. In Car Rental, Budget Group, through subsidiary companies and their
franchisees, operates Budget Rent a Car Corporation, the world's third largest
car and truck rental system, and Premier Car Rental, the nation's third
largest company serving the insurance replacement market. The company also
operates Van Pool Services, the U.S. leader in commuter van pooling services,
and Budget Airport Parking, a system of airport parking units located adjacent
to Budget Rent a Car facilities in select locations. In Truck Rental, Budget
Group operates Ryder TRS, the nation's second largest consumer truck rental
company; Budget Truck Rental, the third largest consumer truck rental company;
and Cruise America, the largest recreational vehicle rental and sales company
in North America. In Car Sales, Budget Group operates Budget Car Sales, one
of the leading independent retailers of late model vehicles in the U.S. with
both new and used car dealerships.
Statements made in this press release that are not historical in nature
may include "forward-looking statements" within the meaning of the federal
securities laws. It is important to note that these statements involve a
number of risks, uncertainties and other factors that could cause Budget
Group, Inc.'s actual results to differ materially from those projected in such
forward-looking statements. Additional information concerning such matters is
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, and other documents subsequently filed by the Company with
the SEC, all of which are available from the SEC.