Budget Group Announces Progress on Restructuring Efforts
4 January 2000
Budget Group Announces Progress on Restructuring Efforts; Company to Take Charge in Fourth Quarter
LISLE, Ill., Jan. 4 -- Budget Group, Inc. has
announced significant progress on a number of its recent initiatives. First,
Budget has reached an amicable resolution of its differences with Ford Motor
Company, which is the company's primary source of rental vehicles. This
resolution, the terms of which are confidential, should ensure a mutually
beneficial relationship between Ford and Budget for several years to come.
Second, Budget confirmed that to the extent there are any remaining
obligations relating to its acquisition of Ryder TRS, the company can make all
payments in cash rather than issuing shares of stock.
Budget also disclosed that, in addition to previously announced
initiatives, it will: exit the car sales business; consolidate its Ryder TRS
headquarters and field operations into its North American vehicle rental
division; and sell remaining non-core assets. These measures are part of an
effort to reduce overhead and other expenses by an estimated $100 million
annually.
As a result of these initiatives, the company will take restructuring,
one-time charges and other fourth quarter adjustments of $90-95 million
pre-tax, $60-65 million after-tax, which includes charges associated with the
elimination of approximately 1,000 non-customer service related positions.
Budget also announced that it expects its 1999 fourth quarter earnings from
continuing operations, before the pre-tax charge, to be in line with analysts'
consensus estimates.
Fourth Quarter Update:
1) Exit car sales: The company has decided to exit the car sales
business as an owner/operator and transition to a franchiser of used
car sales locations, providing back-office support and services in
exchange for franchise fees. Budget entered into a joint venture to
facilitate this transition, transferring seven locations into the
venture. Budget also sold three locations and closed one other during
the quarter. Currently, the company has 40 royalty paying franchised
car sales locations.
2) Consolidate North American vehicle rental operations: The company
closed its Premier insurance replacement division including its
Indianapolis headquarters, absorbing all functions at its Lisle,
Illinois headquarters and shared services support center in Orlando.
3) Expand European operations: Budget International re-established a
critical part of its European network, opening in 13 key airport
locations in Germany, the second largest rental car market in the
world, and establishing a head office in Frankfurt. At year end, the
company operated 118 locations (versus 30 the prior year) in France
and 55 (versus 18 the prior year) in the U.K.
4) Dispose of non-core assets: Budget has received a number of
expressions of interest from both strategic and financial buyers for
its principal non-core assets, VPSI and Cruise America. The company
has also expanded the non-core asset sale list to include certain
assets associated with its car sales business.
"Our focus is on increasing pre-tax margins and returns on capital in our
core car and truck rental operations," said Sandy Miller, Budget Group
Chairman and CEO. "By concentrating our financial and management resources we
can more readily take advantage of cost reduction and revenue improvement
opportunities in our business."
2000 Goals/Milestones:
1) Exit car sales: The company will close its car sales headquarters in
Indianapolis, and transfer five additional used car sales locations to
the joint venture by the end of the first quarter. Budget will sell
the remaining locations during the second and third quarters.
2) Consolidate North American vehicle rental operations: The company
will consolidate Ryder's Denver headquarters, field functions and
back-office staff into Budget's North American vehicle rental
operations by year-end. It will also integrate its Premier Car Rental
field operations, convert 99 locations to Budget and close
39 redundant and/or unprofitable locations in the first quarter.
3) Expand European operations: Budget International will continue the
rebuilding of its network in Germany, adding approximately 150 agency
and licensee locations by year-end.
4) Dispose of non-core assets: The company will continue the orderly
disposition of non-core assets to quickly free up capital while
maximizing value.
"The actions taken in the fourth quarter demonstrate our ability to
execute our restructuring plan," said David Siegel, Budget Group President and
Chief Operating Officer. "We intend to step up the pace of change in our core
business, while exiting remaining non-core businesses in 2000."
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.budgetgroup.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. Such forward-looking statements include, among others, those
relating to:
-- the amount and timing of restructuring, one-time charges, and other
fourth quarter adjustments to be recorded by the company and the amount
of overhead and cost savings to be realized;
-- the timing and effectiveness of the measures expected to be implemented
during 2000, including the sale of non-core businesses, the disposition
of car sales assets, the consolidation and integration of other
operations; and
-- expectations for pre-tax earnings from continuing operations in the
fourth quarter of 1999.
Forward-looking statements involve risks, uncertainties and other factors
that could cause the Company's actual future activities and results of
operations to differ materially from those suggested or described in these
statements. The expected restructuring and one-time charges and related
overhead and cost savings, the measures to be implemented during 2000, and the
expectations relating to the results of operations for the fourth quarter of
1999 and 2000 are estimates or expectations based on current assumptions which
management believes to be reasonable at this time. In addition, other risks
to our business include, among others, the following: integration of the
Premier business operations and realignment of the Ryder business operations
into Budget's North American Rental Operations; successful implementation of
our car sales exit strategies; successful disposition of non-core businesses;
seasonality; competition; our potential obligation to make a make-whole
payment; the availability and terms of financing for our business; our
dependence on a principal vehicle supplier; possible changes in manufacturers'
repurchase programs; litigation with a former franchisee; the impact of
various types of regulations; additional risks of international operations;
whether our investments and cost-cutting initiatives will be successful; and
our recent losses. These factors and conditions could be substantially
different than we currently anticipate, and the Company's business could be
affected by other factors, so that the Company's actual future activities and
results of operations may differ materially from the forward-looking
statements we have made in this press release. The Company is not undertaking
any obligation to update these forward-looking statements or risk factors,
whether as a result of new information, future events or otherwise.
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 Company or the SEC.