Budget Group Reports Second Quarter Results In Line With Expectations
21 July 1999
Budget Group Reports Second Quarter Results In Line With Expectations
Discusses Outlook for Balance of Year
DAYTONA BEACH, Fla., July 21 -- Budget Group, Inc.
released its second quarter 1999 operating results today, reporting diluted
earnings per share of $0.42 compared to $0.33 before non-recurring and
extraordinary items in second quarter 1998. Net income for the second quarter
was $16.2 million versus $10.4 million before non-recurring and extraordinary
items in the prior year. Revenue increased 29% to $791.7 million from $614.4
million in the prior year second quarter. Operating income for the quarter
was $86.2 million compared to $61.3 million in the prior year. Prior year
second quarter includes only one month of Ryder TRS.
During the second quarter, reflecting strength in the Car Rental segment,
car rental revenue increased 14% to $432.8 million compared to $379.3 million
in second quarter 1998. Car Rental operating income for the quarter was $54.7
million compared to $43.4 million in the prior year. Budget Rent a Car North
America, which represents 73% of this segment, achieved revenue growth of 9%
versus prior year second quarter. Daily dollar average (DDA) at $41.44 was up
slightly despite strong length-of-rent growth of 5%. Volume (rental days)
increased by 8% and utilization rose 390 basis points for the quarter.
Continuing trends experienced in first quarter, revenue from Budget
International increased 39% from prior year second quarter. Same market
volume growth of 34% reflected the success of marketing initiatives throughout
Europe.
"The Car Rental business remains strong, the trends are favorable and we
expect to see these trends continue for the balance of the year," stated Sandy
Miller, Budget Group Chairman and CEO.
Budget Car Sales returned to profitability in the second quarter. Revenue
from the Car Sales group reached $166.8 million in the second quarter compared
to $132.9 million in the prior year. Revenue includes proceeds from the sale
of units at retail and wholesale within the group. During the second quarter,
the Car Sales group reported operating income of $0.5 million compared to an
operating loss of $0.7 million in the prior year second quarter. This
represents a significant improvement over a first quarter 1999 operating loss
of $2.8 million and the fourth quarter 1998 operating loss, before one-time
and non-recurring charges, of $6.9 million. During the second quarter of
1999, Car Sales closed three under-performing stores, reduced staff and
relocated the Indianapolis-based car sales administrative functions to the
company's Shared Services Center in Orlando. Units sold retail increased to
7,993 compared to 6,577 units sold during the prior year second quarter.
Revenues for the Truck Rental group reached $213.7 million in the second
quarter versus $121.4 million in 1998, which included only one month of Ryder
TRS. For the quarter, the Truck Rental group had operating income of $33.6
million compared to operating income of $25.5 million in the prior year second
quarter. Volume at Ryder TRS was up slightly over prior year, and volume at
Budget Truck was up 9.8% over prior year second quarter.
Ryder TRS, which represents 66% of the Truck Rental group, experienced a
6.5% decrease in rates for the quarter. Rates for Budget Truck were flat.
Efforts to increase rates in the second quarter were not successful.
Commenting on rates within the truck rental industry, Miller noted, "We are
disappointed that previously announced rate increases did not hold. In fact,
pricing actions by competitors have driven industry rates well below 1998 rate
levels despite inflation and rising costs within the truck rental industry.
In addition, delays in production and delivery of medium-duty trucks resulted
in lower truck fleet levels for Ryder TRS (down 8.3% from prior year)."
The integration of Ryder TRS and Budget Truck is proceeding on target.
Back office functions have been consolidated, the field operations of the two
companies have been merged, and the truck management teams have been combined.
Maintenance expense reduction is on target. In addition, Ryder TRS has
launched an aggressive sales and advertising campaign. The 'Home Free with
Ryder TRS' campaign is the first consumer marketing promotion for Ryder TRS in
several years.
The issues at the Truck Rental group related to pricing and lower than
expected fleet levels will continue into the balance of the year and are
expected to adversely impact the company's earnings by $0.40 to $0.50 per
share in third quarter and $0.10 to $0.15 per share in fourth quarter. These
estimates could be affected by other risk factors that have been described in
the company's SEC filings, as described below.
Commenting on the quarter, Miller noted, "Like the first quarter, our
second quarter results are in line with our expectations. Budget Rent a Car
North America and Budget International continue to experience healthy revenue
growth. Transaction growth from strong increases in tour business coupled
with our yield management system (now operational at most airport locations)
are driving continued improvements in utilization and revenue per unit. I am
especially pleased to see the Car Sales group report operating profits for the
quarter and anticipate now showing a full year profit for the group. Our
strength in the Car Rental division in the second quarter helped offset
weaknesses we're experiencing in the Truck Rental division primarily due to
the truck rental industry's failure to raise rates. Our other subsidiaries,
VPSI and Cruise America, met our expectations and we expect these trends to
continue throughout the year."
Miller closed by saying, "Though we anticipate a shortfall in earnings
from the truck division for the remainder of the year, many of the planned
cost savings initiatives are now in place and being realized, and we continue
to make progress in our plans to integrate our Ryder TRS and Budget truck
operations. We have merged the Budget and Ryder TRS field organization and
consolidated our truck rental headquarters. We are optimistic that the
management team now in place at Budget Truck Group is on track in implementing
a solid strategic plan to increase revenue and contribute stronger earnings to
Budget Group in 2000 and beyond."
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 VPSI, 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.
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, 1998, and other documents subsequently filed by the Company with
the SEC, all of which are available from the SEC.
BUDGET GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Period Ending June 30
(in thousands)
2nd quarter Year to Date
1999 1998 1999 1998
OPERATING REVENUE:
Vehicle rental $585,623 $450,141$1,072,111 $790,096
Retail vehicle sales 174,831 140,746 342,787 238,037
Royalty fees and other 31,248 23,465 56,127 42,204
Total operating revenue 791,702 614,352 1,471,025 1,070,337
OPERATING EXPENSES:
Direct vehicle and operating 237,891 173,651 464,635 328,093
Depreciation -- vehicle 144,882 117,668 281,945 212,190
Cost of retail vehicle sales 151,703 124,578 300,627 210,333
Selling, general and
administrative 152,735 125,506 289,718 201,495
Amortization and non-vehicle
depreciation 18,278 11,624 35,260 20,740
Merger expenses -- pooling - - - 1,595
Total operating expenses 705,489 553,027 1,372,185 974,446
OPERATING INCOME 86,213 61,325 98,840 95,891
OTHER EXPENSE:
Vehicle interest, net 44,836 37,618 90,177 69,048
Other interest, net 9,894 7,018 12,643 15,855
Debt extinguishment costs - 9,454 - 9,454
Total other expense 54,730 54,090 102,820 94,357
INCOME (LOSS) BEFORE INCOME TAXES 31,483 7,235 (3,980) 1,534
Provision (benefit) for
income taxes 10,467 1,833 (6,569) (447)
Distribution on trust
preferred securities 4,804 651 9,427 651
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 16,212 4,751 (6,838) 1,330
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT
(Net of income taxes of
$26,602) - (45,296) - (45,296)
NET INCOME (LOSS) $16,212 $(40,545) $(6,838) $(43,966)
2nd quarter Year to Date
1999 1998 1999 1998
Weighted average number of
shares outstanding 35,902,000 29,499,000 35,879,000 28,134,000
Basic EPS -- Income (loss)
before extraordinary item $0.45 $0.16 $(0.19) $0.05
Basic EPS -- Extraordinary Item -- $(1.54) -- $(1.61)
Basic EPS -- Net Income (loss) $0.45 $(1.37) $(0.19) $(1.56)
Weighted average number of
shares outstanding
-- Diluted 46,818,000 30,243,000 35,879,000 28,963,000
Diluted EPS -- Income (loss)
before extraordinary item $0.42 $0.16 $(0.19) $0.05
Diluted EPS -- Extraordinary Item -- $(1.50) -- $(1.57)
Diluted EPS -- Net Income (loss)$0.42 $(1.34) $(0.19) $(1.52)
BUDGET GROUP, INC.
SEGMENT REPORTING
Period Ending June 30
(in thousands)
2nd quarter Year to Date
1999 1998 1999 1998
REVENUE:
Car Rental $432,792 $379,287 $820,351 $718,057
Truck Rental and Sales 213,703 121,389 365,187 164,598
Retail Car Sales 166,810 132,932 327,564 224,916
Eliminations (21,603) (19,256) (42,077) (37,234)
Total Revenue $791,702 $614,352 $1,471,025 $1,070,337
OPERATING INCOME (LOSS):
Car Rental $54,739 $43,416 $78,653 $79,631
Truck Rental and Sales 33,584 25,523 29,822 28,013
Retail Car Sales 475 (732) (2,355) (1,453)
Corporate Overhead (2,585) (6,882) (7,280) (10,300)
Total Operating Income $86,213 $61,325 $98,840 $95,891
BUDGET RENT A CAR CORPORATION
2nd QUARTER 1999 OPERATING STATISTICS
North America - Cars
1999 CHANGE FROM
2nd QUARTER PRIOR 2nd QUARTER
Average Fleet 100,549 3.0%
Utilization 83.5% 390bps
Rental Days 7,637,647 8.0%
Daily Dollar Average $41.44 0.9%
Rental Revenue $316,515,527 8.9%
Transactions 1,913,067 2.7%
Revenue Per Unit $1,049 5.8%
Length of Rental 3.99 5.0%