Budget Group Reports Third Quarter Earnings
20 October 1999
Budget Group Reports Third Quarter Earnings
DAYTONA BEACH, Fla., Oct. 20 -- Budget Group, Inc.
released its third quarter 1999 operating results today, reporting diluted
earnings per share of $0.86 and net income of $37.3 million. For the prior
year third quarter, the company reported diluted earnings per share of $1.38
and net income of $61.3 million. Revenue increased 5.0 percent to
$899.5 million from $856.6 million in the prior year third quarter. Operating
income for the quarter was $146.0 million compared to $157.7 million in the
prior year.
The company continued to see strong performance in the Car Rental segment
with revenue increasing 13.8 percent to $504.3 million compared to
$443.2 million in third quarter 1998. Car Rental operating income for the
quarter was $93.0 million compared to $108.0 million in the prior year. Last
year, third quarter was positively affected by favorable insurance claims
expense causing a reduction in self-insurance reserves. Budget Rent a Car
North America, which represents 71% of this segment, achieved revenue growth
of 7.0% versus prior year third quarter. The daily dollar average (DDA) was
$42.45, while length-of-rent grew 5.7% due to a strong summer tour rental
season. Volume (rental days) increased by 7.8% and utilization reached
85.6 percent for the quarter, up 370 basis points over prior year third
quarter.
Budget International continued its growth trends, with revenue increasing
29% and same-market volume growth up 57% over prior year. During the first
weeks of October, the company began operations under the Budget Rent a Car
brand at four major and eight regional airports in Germany.
Budget Group Chairman and CEO Sandy Miller noted, "I am very pleased with
the progress we are making at Budget Rent a Car. We continue to see strong
improvements in operating fundamentals."
Revenues for the Truck Rental group reached $270.1 million in the third
quarter versus $262.5 million in 1998. For the quarter, the Truck Rental
group had operating income of $54.7 million compared to operating income of
$56.9 million in the prior year third quarter. For Budget Truck Rental and
Ryder TRS, which represent 84.2% of this segment, revenue increased 3.6%,
rental days (volume) were up 4.3% and utilization was 54.0%, up 80 basis
points over prior year third quarter. Dollar average for Budget and Ryder TRS
combined was down 1.8% over prior year to $89.22.
Commenting on the Truck Rental group, Miller said, "The industry pricing
climate began to firm up in the third quarter. We will continue to revise our
operating and costs models as we seek to increase profitability in this
environment and opportunistically raise rates where demand allows."
Revenue from the Car Sales group was $151.6 million in the third quarter
compared to $172.1 million in the prior year. Revenue includes proceeds from
the sale of units at retail and wholesale within the group. The decrease in
revenue reflects the closing of eight stores through September 30. During the
third quarter, the Car Sales group reported operating income of $0.7 million
compared to an operating loss of $3.5 million in the prior year third quarter.
Units sold retail totaled 7,523 compared to 7,957 units sold during the prior
year third quarter.
"Car Sales has realized operating profits in both the second and third
quarters. During the third quarter, we closed two unprofitable stores and
furthered our franchise sales efforts as we transition car sales from an
operating company to substantially a franchising company. By doing so, we
will create a continuous stream of franchise royalty fees and limit our
exposure to the volatility of the used car market. We currently have
agreements in place for 22 franchised car sales locations. In addition, we
have signed agreements to franchise, through independent ownership and joint
venture, nine of our corporate car sales locations. By year-end, we expect to
close or franchise all locations that do not meet our corporate return
objectives. We'll integrate the remaining corporate stores into Budget
Rent a Car North America as part of its overall strategy to improve the
profitability of vehicle disposal. Starting in the first quarter 2000, we
will discontinue reporting car sales as a business segment and follow the
reporting practices of other companies within the industry."
"We continue to move forward in integrating our car and truck rental
operations and are making progress in increasing revenue and taking costs out
of the business. We are integrating Budget and Premier Car Rental in the
local market and expect to see further operating margin improvements through
the reduction of overhead costs and optimization of staff, facilities and
fleet," stated Miller.
Premier, which specializes in serving the insurance replacement market,
operates over 200 local market U.S. rental offices. This summer, the company
tested a local market operating model that enables Budget to serve retail
rental segments and move from a regional provider to a national provider of
insurance replacement rentals under the Budget brand name with a variety of
rental products and services from single points of distribution. By the end
of the fourth quarter 1999, this integrated model will be in place at 650
corporate-owned local market rental locations. The company will close its
Premier headquarters and merge Premier's support functions and fleet into
Budget's. With the integration, Budget will have a fleet of over 40,000 cars
in the local market.
Budget Group has been approached by strategic and financial buyers
expressing interest in its non-core businesses. The company is pursuing these
inquiries which could result in the sale of one or more businesses. The
company's management has engaged an advisor to assist in the evaluation and
potential sale of assets and companies.
"The changes we are making and considering will allow us to concentrate on
improving the profitability of our core car and truck rental business and move
toward our goal of operating as one company," added Miller.
Budget Group, Inc. is a global network of transportation related
businesses which includes Budget Rent a Car, the world's third largest car and
truck rental system, and Ryder TRS, the nation's second largest consumer truck
rental company. For more information, visit the company's Web site at
http://www.bgi.com .
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 September 30
(in thousands, except per share data)
3rd quarter Year to Date
1999 1998 1999 1998
OPERATING REVENUE:
Vehicle rental $708,527 $644,666 $1,780,638 $1,434,762
Retail vehicle sales 160,403 183,320 503,190 421,357
Royalty fees and other 30,582 28,583 86,709 70,787
Total operating
revenue 899,512 856,569 2,370,537 1,926,906
OPERATING EXPENSES:
Direct vehicle and
operating 277,064 245,227 741,699 573,320
Depreciation--vehicle 158,279 144,151 440,224 356,341
Cost of retail
vehicle sales 139,896 165,328 440,523 375,661
Selling, general
and administrative 160,851 127,970 450,568 329,465
Amortization and non-
vehicle depreciation 17,446 16,189 52,706 36,929
Merger expenses--pooling -- -- -- 1,595
Total operating
expenses 753,536 698,865 2,125,720 1,673,311
OPERATING INCOME 145,976 157,704 244,817 253,595
OTHER EXPENSE:
Vehicle interest, net 55,002 43,525 145,180 112,573
Other interest, net 11,164 10,554 23,807 26,409
Debt extinguishment
costs -- -- -- 9,454
Total other expense 66,166 54,079 168,987 148,436
INCOME BEFORE INCOME
TAXES 79,810 103,625 75,830 105,159
Provision for income
taxes 37,744 37,658 31,175 37,211
Distribution on trust
preferred securities 4,792 4,691 14,219 5,342
INCOME BEFORE
EXTRAORDINARY ITEM 37,274 61,276 30,436 62,606
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT
(Net of income
taxes of $26,602) -- -- -- (45,296)
NET INCOME $37,274 $61,276 $30,436 $17,310
3rd quarter Year to Date
1999 1998 1999 1998
Weighted average number
of shares outstanding
-- basic 36,768 35,942 36,179 30,765
Basic EPS -- Income before
extraordinary item $1.01 $1.70 $0.84 $2.03
Basic EPS --
Extraordinary Item -- -- -- $(1.47)
Basic EPS -- Net Income $1.01 $1.70 $0.84 $0.56
Weighted average number
of shares outstanding
-- Diluted 47,485 47,016 36,259 38,946
Diluted EPS -- Income
before extraordinary
item $0.86 $1.38 $0.84 $1.78
Diluted EPS -- Extraordinary
Item -- -- -- $(1.16)
Diluted EPS -- Net
Income $0.86 $1.38 $0.84 $0.62
BUDGET GROUP, INC.
SEGMENT REPORTING
Period Ending September 30
(in thousands)
3rd quarter Year to Date
1999 1998 1999 1998
REVENUE:
Car Rental $504,267 $443,159 $1,324,618 $1,160,761
Truck Rental and
Sales 270,089 262,464 635,276 427,062
Retail Car Sales 151,620 172,122 479,185 397,493
Eliminations (26,464) (21,176) (68,542) (58,410)
Total Revenue $899,512 $856,569 $2,370,537 $1,926,906
OPERATING INCOME (LOSS):
Car Rental $93,035 $108,011 $174,943 $187,642
Truck Rental and Sales 54,717 56,851 85,004 84,864
Retail Car Sales 691 (3,478) (1,662) (4,931)
Corporate Overhead (2,467) (3,680) (13,468) (13,980)
Total Operating
Income $145,976 $157,704 $244,817 $253,595
BUDGET GROUP, INC.
3rd QUARTER 1999 OPERATING STATISTICS
Budget Rent a Car -- North America Cars
1999 CHANGE FROM
3rd QUARTER PRIOR 3rd QUARTER
Average Fleet 107,485 3.1%
Utilization 85.6% 370 bps
Rental Days 8,467,025 7.8%
Daily Dollar Average $42.45 -0.7%
Rental Revenue $359,398,857 7.0%
Transactions 1,969,376 2.1%
Revenue Per Unit $1,115 3.8%
Length of Rental 4.30 5.7%
North America -- Trucks (Ryder & Budget)
1999 CHANGE FROM
3rd QUARTER PRIOR 3rd QUARTER
Average Fleet 49,200 2.7%
Utilization 54.0% 80 bps
Rental Days 2,445,081 4.3%
Daily Dollar Average $89.22 -1.8%
Rental Revenue $218,139,923 2.4%
Transactions 790,110 1.3%
Revenue Per Unit $1,478 -0.3%
Length of Rental 3.09 3.1%