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Executives

Vicki Vaniman – Executive Vice President, Secretary and General Counsel

H. Clifford Buster III – Chief Financial Officer

Scott L. Thompson – President and Chief Executive Officer

Analysts

John Healy – FTN Securities

Michael Millman – Millman Research Associates

Christina Woo – Soleil Streetscape Research

Jonathan Roiter – TPG Credit

Dollar Thrifty Automotive Group Inc. (DTG) Q4 2008 Earnings Call February 18, 2009 11:00 AM ET

Operator

Welcome and thank you for joining the Dollar Thrifty Automotive Group fourth quarter and year end conference call. (Operator Instructions). I would now like to turn your conference over to Miss Vicki Vaniman, Executive Vice-President, General Counsel. Ma'am, you may begin.

Vicki Vaniman

Thank you. Good morning and welcome to the Dollar Thrifty Automotive Group, Inc. fourth quarter and full year 2008 earnings release conference call. Your hosts for today’s call are Scott Thompson, President and Chief Executive Officer and Cliff Buster, Chief Financial Officer. Some of the comments contained in this conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation and Reform Act of 1995.

Actual results may differ materially from those expressed in forward looking statements due to many factors. These factors include, among others, matters that Dollar Thrifty has noted in its latest earnings release and filings with the SEC. Dollar Thrifty Automotive Group undertakes no obligation to update or revise forward-looking statements.

Today as a company we use certain non-GAAP financial measures, all of which are reconciled with GAAP numbers, and can be found in today’s press release or posted to the company’s website under the Investor Update tab.

Listeners are advised that an audio replay of this conference call will be available at the company’s Website, www.dtag.com, for one year.

And now I would like to turn the call over to Scott.

Scott L. Thompson

Thank you, Vicki. Good morning and thank you for your time and attention this morning. The fourth quarter was a transition period for the company as the new management team, which was installed mid-quarter, began taking steps to address the challenges of our industry and our company. Our financial results for the quarter highlight the difficulty of the operating environment. Cliff and I will discuss those results in a minute.

I would first like to highlight the actions that we’ve taken. As I’m sure you remember during our previous call, we updated you on a series of steps taken to reduce costs and improve cash flow that included significant personnel reductions throughout the organization, including 40% of EVPs, 30% of officers, and 15% of corporate staff.

Additionally, we have instituted reductions in employee benefits and other discretionary expenses. All of these painful actions were necessary to better position the business. I am pleased to report we are realizing the benefits of those actions in our cost structure here in 2009.

We also took several steps in fleet management to address capacity, cost and risk. First, we have significantly reduced our year end fleet and vehicle orders to align them with the expected customer demand and provide liquidity to facilitate deleveraging. We have moved towards more risk vehicles, reducing fleet financing requirements and exposure to collection of future GDP payments.

We’ve also extended our fleet holding period to hold the units' carrying cost longer and to mitigate risk in client residuals. We also are very pleased to announce that the company recently executed a long-term secondary supply agreement with Ford Motor Company to diversify our fleet and mitigate the fire risk in a dynamic marketplace.

You should also note that we’ve closed some unperforming locations and will continue to monitor the profitability of all individual locations. I expect we will take further steps to eliminate locations in the future. Finally we’ve instituted a number of new initiatives in revenue management area to increase revenues while maintaining our value position in the marketplace.

Now turning to the fourth quarter results, as previously announced on our third quarter conference call, our expectation was that the fourth quarter of 2008 would be extremely challenging, resulting in a significant loss. The conditions we encountered during the quarter certainly met those expectations. The deteriorating economy impacted consumer demand while industry over fleeting issues put significant downward pressure on rate-per-day. The combination of these two factors resulted in a 9% decline in revenues on a year-over-year basis.

Fleet costs were equally challenging during the quarter as a lack of liquidity in the retail credit market depressed demand for used vehicles. The combination of over supply and depressed consumer demand resulted in further deterioration of residual values, pushing our fleet depreciation costs above expectation and historical levels.

On a non-GAAP basis, the loss for the quarter was $1.82 per share compared to a loss of $0.86 per share in the fourth quarter of 2007. Adjusted EBITDA during the quarter was a negative $43.4 million, resulting in a negative corporate adjusted EBITDA of $2.3 million for the year.

Although the loss for the quarter was significant, this was not unexpected in light of market conditions. Now I would like to have Cliff review the details of the quarter with you.

H. Clifford Buster III

Please turn to table one in the press release. Revenues for the fourth quarter of 2008 were $355.1 million, down 8.8% as compared to last year’s fourth quarter. Our vehicle rental revenue decreased 9.8% due primarily to a 6.8% decrease in revenue per day combined with a decrease of 3.2% in the number of rental days. Fleet utilization during the quarter was consistent with prior year at 80.3% while our average rental fleet decreased approximately 3%.

On the expense side of the income statement, direct vehicle and operating expense for DBO was $200 million, down $14.89 million or 6.9% from the same period last year. During the quarter DBO decreased primarily as a result of reduced personnel related expenses, as a result of lower transaction levels, as well as lower concession fees and vehicle damage expense incurred during the quarter.

Vehicle depreciation expense was $132.7 million, up approximately $12.6 million, or 10.5% from the 2007 fourth quarter. Our monthly average depreciation cost per car for the quarter was $406.00, an increase of 16% from the prior year. The significant increase in depreciation per vehicle resulted from the auction conditions Scott mentioned earlier. SG&A expenses represented 15.1% of revenue for the quarter, up from 12.6% in the prior year period.

I would point out that SG&A in both periods includes a number of items that affect the comparability between periods, including $1.3 million in higher severance expenses, compared to the prior year, a favorable adjustment of $2.6 million in the fourth quarter of 2007 related to reduction incentive compensation accruals and a $5.1 million decrease in benefits reported related to certain deferred compensation plans which I will talk about momentarily.

Normalizing for these various items I just discussed, SG&A in total would be down $4.5 million from the fourth quarter of prior year, reflecting the cost-cutting measures taken to date. As we’ve discussed in prior periods, the change in market value of assets in deferred compensation and retirement plan impact the SG&A line with an offset in other revenue. While there’s no resulting impact to the company’s pre-tax income, SG&A will fluctuate from period to period with changes in the value of the investment.

Changes in the market value of these investments were benefits, or decreases in SG&A, of $0.1 million and $5.2 million for the fourth quarter of 2008 and 2007, respectively. Interest expense, net, during the quarter totaled $27.5 million, up from $25.8 million for the same period last year. As of year end the weighted average interest rate for vehicle debt outstanding was 4.7% and the weighted average interest rate on our non-vehicle corporate debt was 2.5%.

We took a very hard look at assets carried on the balance sheet in the fourth quarter of 2008 and we incurred non-cash charges of $16.7 million related to the impairment of long-lived assets, including $6.1 million related to the ride up of substantially all of Canada’s fixed assets, and $10.6 million in capitalized software costs which were deemed unrealizable.

Now turning to table three of the press release, GAAP earnings per share for the fourth quarter of 2008 was a loss of $3.36 per share, compared to a loss of $1.45 per share in the same period last year. Results for the fourth quarter of 2008 were impacted by a significant decrease in the fair value of interest rate swaps, representing $0.93 per share in 2008 compared to $0.57 per share in last year’s fourth quarter.

In addition, non-cash charges related to the asset impairments previously discussed totaled $0.61 for the quarter, compared to $0.01 in the prior quarter. Excluding both of these items, non-GAAP EPS for the quarter was a loss of $1.82 per share compared to a loss of $0.86 per share in the prior year.

For the full year, our GAAP earnings per share was a loss of $15.93 per share compared to $0.05 per share in 2007. GAAP losses for 2008 included $13.02 per share related to goodwill and long-lived asset impairments, and a $1.00 per share loss related to a decline in the value of interest rate swaps. In 2007 earnings per share was negatively impacted by $0.09 and $0.97 for asset impairments and changes in interest rate swaps, respectively.

Excluding these items, non-GAAP losses were $1.91 per share in 2008 compared to net income of $1.11 per share in 2007. Corporate adjusted EBITDA for 2008 was a negative $2.3 million compared to a positive $107.5 million for the prior year.

Moving on to key balance sheet items on table two of the press release, revenue earning vehicles net of depreciation totaled $1.9 billion, approximately 30% down from the same period last year as we reduced our overall fleet size, extended fleet holding periods and operated fewer of the higher cost program vehicles. Vehicle-related debt was $2.3 billion at quarter end, down approximately $100 million from December 31, 2007. Additionally non-vehicle corporate debt declined $71 million to $178 million over the same period.

At December 31, about 60% of the total debt outstanding was at fixed rates, continuing our past practice of hedging the majority of our debt against fluctuations in short-term interest rates. During the fourth quarter of 2008 we spent approximately $5 million on non-vehicle capital investments. We significantly reduced capital spending in 2008, incurring a total of $29 million in capital expenditures for the full year.

We ended the quarter with a tangible net worth of $185 million, or approximately $8.56 per share, and a debt-to-book capitalization ratio of approximately 45%. Debt-to-book capitalization is computed excluding our secured vehicle financing.

Turning to liquidity at quarter end I’m pleased to report that we had unrestricted cash and cash equivalents of $230 million at year end, an increase of $20 million from the end of the third quarter. We received an additional dividend of $100 million from our vehicle finance subsidiary during the quarter which was facilitated by the fleet actions Scott discussed earlier.

Restricted cash investments at year end totaled $597 million. As part of our planned deleveraging of the balance sheet, we temporarily suspended the like-kind exchange election on our vehicle inventories during the fourth quarter to allow the proceeds from sales of vehicles to be used to repay debt, rather than being restricted to vehicle purchases.

In February we utilized $490 million of restricted cash to repay the conduit and liquidity vehicle financing facilities prior to their scheduled maturities in May, 2009. The company’s next scheduled debt maturity will occur in the first quarter of 2010, with $400 million of medium term notes that will begin amortizing over a six-month period.

As we reported on November 24, we amended our senior secured credit facility to extend the application of the current calculation of the leverage ratio test. Under the amended facility compliance with the leverage ratio test at any date through February 28, 2009 will be based on corporate adjusted EBITDA for the trailing four quarters ended June 30, 2008 rather than for the most recently completed trailing four quarters.

We're continuing to work with our senior secured credit facility lenders to amend this facility to address the leverage ratio test and expect based on current facts and circumstances the successfully completed amendment prior to February 28th which is the expiration date of the current amendment.

With that I will now turn the call back to Scott for his discussion of our outlook for 2009.

Scott L. Thompson

Thank you, Cliff. As we look forward in 2009 we expect conditions to remain challenging. Although we believe the recent actions taken by the organization, it's better positioned to whether the storm. Vehicle rental revenue for 2009 are estimated to be down 6% to 12%, primarily driven by lower transaction volumes offset some by firmer rate per day as the industry deals with financial pressure and becomes more tightly pleated.

In January 2009, our rental revenues were consistent with January 2008 as an increase in rate per day offset single digit declines in rental days. January exceeded our expectations and may be a sign of customers moving to a value brand during a difficult period, although it's early to make predictions.

Turning to fleet, although, we have clearly seen recent improvement in used vehicles residuals, 2008 may in fact be the low mark in the used vehicle market for this downturn. We continue to be concerned that the lack of liquidity in the credit market will continue to negatively impact the used vehicle market.

At the same time pricing on new vehicles has declined and this is a positive for future fleet costs. It is impossible at this point to accurately estimate the impact of these factors on the company. Cash flow and liquidity are our top priorities in 2009.

And we will continue to take actions to absorb both. We are pleased with the growth and the unrestricted cash during the quarter with paying off our liquidity and conduit facility in advance of its maturity, with changes in our fleet financing structure that increased the percentage of non-program vehicles, with our new long term Ford supply agreement and with the positive trends were seeing in rate per day and used vehicle residuals.

Our employees are working extremely hard and making personal sacrifices to help this company. Our suppliers continue to be good partners and our lenders have been reasonable and supportive as evidenced by four amendments we have completed in the last six months. We certainly appreciate everyone's efforts.

That concludes our prepared remarks. Operator, please open the call for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Your first question comes from John Healy – FTN Equity Capital Markets.

John Healy – FTN Securities

Question for you a little bit about the fleet, could you talk to what you ended the year at in terms of fleet and I know you gave the average number that we exited the year at and maybe how you anticipate fleet to be moving throughout 2009, kind of what your purchase plans are? How much less they are going to be in 2009 and just any color you can give us on what we should expect maybe as a peak fleet this year.

Scott L. Thompson

Okay. I am going to just kind of talk in general as Cliff kind of looks at the detail numbers. Interesting from a dollar perspective the fleet's down 30% in dollars, but only about 16% or 17% in units. That's because we're not fleeting with the expensive GDPs and we're running the fleet a little bit longer. So it would depend on whether you are looking at dollars or units, call the ending fleet down 16% at year end.

As we go forward we are keeping our flexibility during the year and in fact this time last year we had about 75,000 cars on order. As we sit here today we have 6,000 cars on order. And so, we're being very conservative from an order standpoint because of the residual foreseen in used car market. I would expect that our peak fleet will be down, call it 10% or 11% from a percentage standpoint in units. Significantly more from a dollar standpoint but that will really be dependent on what we see in demand in the market place. Does that help?

John Healy – FTN Securities

Yes, that helps I guess kind of follow up on that. Is it appropriate to think that we – is it realistic to think that we should see improved utilitization probably and at some point in 2009 even despite the lower demands which…

Scott L. Thompson

No. No. No, I think your upside is not in utilization. We already run pretty high utilitization anyway from an industry standpoint. It's in rate per day. I believe the financial pressures that the industry's under as cheap financing has gone away in the marketplace and some of the companies are under financial stress.

I think there will be more capacity taken out of the industry than the demand fall and I think the upside is in rate per day. And, in fact, we have seen and continue to see a firming rate per day going into the first quarter.

Operator

Your next question comes from Christina Woo – Soleil Securities.

Christina Woo – Soleil Streetscape Research

Hi, good morning. You mentioned in your prepared comments that you were thinking that you know with consumers being more concerned about discretionary spending there might be a shift to the value brands. I'm wondering if you're also seeing a shift from business customers and if you are doing anything marketing-wise in order to try to take share in the business segment?

Scott L. Thompson

Great question, yes, yes and yes. I don’t think there's any question that in all areas consumers are being more cautious with their dollars. And, I do think that there is quite a bit of movement both in the leisure area and particularly in the business area to the value brands.

And although our marketing expenditures in total for the year are down we've certainly beefed up the expenditures in the area of business and we are targeting that segment and we hope to have positive results to report to you in the future.

Christina Woo – Soleil Streetscape Research

Can you give us just some sense of what marketing programs you have implemented? Maybe what channels you're using, you know what – is it print, is it media, where can we go to see some of the advertising aimed at business customers?

Scott L. Thompson

It's not print but I don’t think I want to go any deeper than that because I am pretty sure my competitors are going to be listening to this call and they know we're interested in the area.

Operator

Your next question comes from Michael Millman – Millman Research Associates.

Michael Millman – Millman Research Associates

Can you talk about how you look at pricing relative to your reduced, presumably reduced cost of your fleet and also give us some ideas what you'd expect your average monthly vehicle costs or depreciation costs to be in this year?

Scott L. Thompson

Could you try your first part of your question again Michael because I am not sure I fully understand your question on pricing.

Michael Millman – Millman Research Associates

Its one thing to for example have a price of $45 a day and your car cost of $500 a month. I was wondering if you take into account that the car costs may be going down; that’s a question.

Scott L. Thompson

Okay. I got it. Yes.

Michael Millman – Millman Research Associates

And does that mean that you can actually reduce, at least the number, but look at your pricing on a ratio basis.

Scott L. Thompson

Yes, no, I understand what you're saying. The reason I didn’t understand your question is because I don’t think about the business that way. I decouple those things. I don’t think the customers particularly care what our cost structure is.

I think on the revenue side that's driven based on supply and demand in each individual airport and what some of our competitors do and we do from a fleeting standpoint. And on the revenue side as I mentioned before we are clearly seeing some firmness in rate per day and I think that's a supply demand issue in the marketplace.

On the cost side we're working very, very hard with the manufacturers on that side There's no question that on the new car buys, the new car buys are coming down and that part of the fleet cost is going to be a positive in the future.

We also are seeing some lift in the residual values the last couple of months but it's still what I would call a soft used car market. And so I don’t know what to predict in that area but I think last time we talked when we did the third quarter call we were in an environment where rate per day was falling, okay?

As everyone was over fleeted and didn’t know what to do because they couldn't get out of their cars, and we had residual values falling. As we report to you today what I can tell you from a macro standpoint, even though the economy has probably gotten worse, rate per day is firming. There’s no question about that and it’s firming in some markets that were really floppy like Las Vegas and Hawaii and residual values are firming.

So I have gotten good trends walking into 2009 on those particular two critical areas but I’m not smart enough to be able to put all that in a basket and tell you that our depreciation rates are going to be 325 a month or 375 a month, so I don’t want to go into that kind of detail. But I do have to tell you that we feel much better about what we’re seeing today than we saw last time we reported to you.

Michael Millman – Millman Research Associates

Is it meaningful what rates per day are doing in February?

Scott L. Thompson

Yes and that’s why I have that, what I consider to be a little bit unusual disclosure of a one month revenue trend because one dot does not make a trend but I thought it was important to publicly tell you about our January revenues being consistent with last year's and they were consistent because rate per day offset declines in rental [days.]

And that’s my way of evidencing the fact that it is significant and it is a different trend than we saw in the fourth quarter where you can see rate per day was down 6%-ish in the fourth quarter and a couple or almost 3% for the year. So it’s a very short trend of one month but with our advanced reservation bookings, that trend looks like it’s firming up and I expect it to be more than a one-month trend.

Michael Millman – Millman Research Associates

Well, I’m way over my one. Can you just give us what the January increase and decrease were?

Scott L. Thompson

No, I think what we said was there was a single digit decline in revenue days that was offset by RPD and I think that’s enough for now. And you’ve never actually ever stopped with just one question so I’m not surprised. So let’s let someone else get on the line. Good talking to you.

Operator

Your next question comes from Christina Woo with Soleil Securities.

Christina Woo – Soleil Streetscape Research

I tried my hardest to keep my questions at one...

Scott L. Thompson

And I appreciate that.

Christina Woo – Soleil Streetscape Research

Here’s my question. How long do you think you can hold your vehicles before the increased maintenance costs and also the hit to the residual value and it being a net negative?

Scott L. Thompson

That’s a great question. The piece on the residual is easy because there’s plenty of data out there and that can be looked at mathematically and we are accounting for the extra aging of the vehicles in our depreciation so that won’t surprise us at the end if we hold the cars longer. So we’ve got that piece of the equation pretty well tied down.

The maintenance is a little bit trickier. We’re watching it closely. Let me give you some statistics so that we’re kind of all on the same page, to make sure we understand what we’ve done today. If you look at the fourth quarter and look at the average mileage on those vehicles in the fourth quarter that we sold, the average mileage was 25,000, so it’s not that high. And the average monthly service for a vehicle we sold in the fourth quarter was 12 months. So that’s kind of the first data point.

If you look at year end and say okay, at 12/31 what’s the fleet look like? The average mile, and this is just on risk cars, some people include their GDP and they really shouldn’t but this is just risk cars. Our risk fleet in total average at year end had an average mileage of 25,700 miles, so not really that old and had a 10.3 month service life.

So that’s where we are today, which really wasn’t your question but I wanted to make sure you kind of knew where we were today. Your question was what the future and I’m not sure exactly how long we’re going to hold them. That’s going to be dependent on how good our new car buy deals that are at the OEM and the residual values in the marketplace. We might hold them to 35,000-40,000 miles but that really depends on what we see going forward but we’re keeping our flexibility open from that standpoint.

Does that help? You can have another question since you were so polite to only ask one the first time.

Christina Woo – Soleil Streetscape Research

My next question is a two-part question, so I’m warning you in advance though and it does have to do with the fleet. I know that you negotiated a purchase agreement with Ford; congratulations on that. I’m curious part A is what percentage of your fleet would you estimate to be Chrysler vehicles by year-end 2009? And then part B is while I see you’re paying down some of your vehicle debt and that’s helped with covenant compliance, how do you expect to purchase the new cars given capital constraints in the market?

Scott L. Thompson

It’s always dangerous predicting but I would expect, assuming Chrysler has a successful plan with Congress, that probably 75% of our fleet at 12/31/09 will be Chryslers and a large portion of that balance would probably be Fords.

You asked about we’ve reduced some of our excess financing capacity. No question we’ve done that but we’ve taken that into – we’ve taken our future fleet into consideration in doing that and really what we’re doing is giving back extra capacity that the company had when it was in a growth mode and extra capacity that it had when it was running a GDP fleet where those cars are, call it 25% more expensive in a risk fleet.

And so I think by probably closing a few locations, running an almost all-risk fleet versus almost all-GDP fleet, probably running the cars a little bit longer, we're very comfortable that we've got the fleet financing in place for the next year to execute our plan.

Operator

Your next question comes from Jonathan Roiter – TPG Credit.

Jonathan Roiter – TPG Credit

I'm wondering in terms of pricing how much can be attributed to just a shift in fleet mix, so in terms of what people were renting and how much was just pure pricing across the board for each of the different categories of vehicles?

Scott L. Thompson

I don't think mix was a material component. We have had some of the weaker rental car companies go out of business. That has certainly been very positive. Then at the upper end of the market some of our competitors have publicly announced some pricing increases and those pricing increases are real and they're holding and I think that's given us some pricing power that we didn't have earlier.

And I don't see those trends ending. I think it really has a lot more to do with sustainable items that are going on in the marketplace.

Jonathan Roiter – TPG Credit

But in general is your fleet mix shifting?

Scott L. Thompson

No.

Jonathan Roiter – TPG Credit

No. And do you have a break out between kind of compact, mid-size, full size?

Scott L. Thompson

I'm probably – I'm looking around the table and I don't. It hasn't changed and I don't– I can get you the numbers but there hasn't been a significant change in fleet mix.

Jonathan Roiter – TPG Credit

Okay, and then, I've gone over the limit, but just one in terms of just thinking higher level about you have depreciation which you said it's stabilized but given what's going on in the auto market, it's tough to really underwrite fully stabilized or rebounding used car market. And yet your revenue earning vehicles right now at 12/31/08 it's on book at $1.9 billion and your vehicle debt is $2.3 billion. I'm just thinking about how holding cars for longer, letting them depreciate more, where your fleet debt stays fixed, how you can claw out of that deficit?

Scott L. Thompson

Well, when you're looking at debts you're not counting the restricted cash.

Jonathan Roiter – TPG Credit

Right, but I'm just assuming there's more depreciation as well, so potentially you build some cash but depreciation could take up as well. I mean are you comfortable with that?

Scott L. Thompson

I'm not sure exactly what your question is. Could you try your question again because we're –

Jonathan Roiter – TPG Credit

Yes, I guess just thinking about being in the negative equity position potentially in terms of your revenue earning vehicles versus your vehicle debt.

Scott L. Thompson

Hold on. Let me help. Maybe this will help, remember the way we depreciate our vehicles is we take each group of vehicles and decide when we think we're going to sell them and then we go out and get the current residual and use ALG curves to estimate what that vehicle will sell for in the future and we depreciate to that point.

And so the only way that we have, what I'll call a surprise, is if for some reason we have to sell those vehicles before we expect to or the used car market deteriorates from where it is currently. And so I think we're in pretty much control of when we sell the vehicles so that doesn't seem like a huge risk and the used car market has improved the last two or three months from what was absolutely probably the worst used car market in at least my lifetime.

And so we feel pretty good that the estimates out there in the future as to what we'll be able to sell those cars for, are relatively conservative. Does that help address the question you're asking?

Operator

Your next question comes from John Healy – FTN Equity Capital Markets.

John Healy – FTN Securities

Thanks for allowing me to follow up. A bigger picture I guess on the financing environment, there's been some press releases about this bill that passed through the House, I think it was House Bill 384. I guess that's now in the Senate, but the language in there that talks about the government becoming a purchaser of securitizations for car rental companies or becoming a lender to them. I was hoping to get you guy's thoughts on maybe how that came to be, how you guys got the language in there. I mean if it was an effort on the industry, as well as kind of how you guys see the outlook for that becoming a reality.

Scott L. Thompson

That was an effort by the industry, and the industry's four largest players are working very well together on industry-wide issues. As to how we see it coming together I mean I don't know. That's really above my pay grade, when you get into Washington, D.C. stuff, but we have some lobbyists over there. The industry is working closely together on that issue, and the OEMs are supportive of that issue. I don't know what the likelihood of success is at this point.

Future financing of rental car fleets is an issue, and everybody is working diligently to find an answer for that. We're all going to have to solve that at some point in time. Luckily, we do not have any medium term notes maturing until first quarter of '10, and some of our brethren have some that I think mature first, so they'll have to figure it out first. But it's still an issue we're all working through as I think a lot of companies are working through various credit issues in the market place.

Operator

Your last question comes from Michael Millman – Millman Research Associates.

Michael Millman – Millman Research Associates

Thank you for letting me go on to double digits here, I suppose. Two questions, you talked about January revenue, Hertz put out its announcement of this increase since February, so can you talk about whether that's holding and if indeed what you see in the price volume relationship in February, and then maybe could explain how this LKE disavowal if that's the right word, created cash or cash availability?

Scott L. Thompson

Okay, great, you're trying to walk me into guidance, and I appreciate that. If February RPD is trending positive compared to February last year –

Michael Millman – Millman Research Associates

Compared with January –

Scott L. Thompson

I'm not going to get into – there's some seasonality in there and that gets kind of complicated, so I think it's better to clear February to February, but it's positive, and so –

Michael Millman – Millman Research Associates

More positive than January's?

Scott L. Thompson

It was positive in January.

Michael Millman – Millman Research Associates

But February's more?

Scott L. Thompson

Now, I'm not getting into incremental positives, but both months are positive to the prior year, which is why I thought it was worth mentioning. As I mentioned before, also our reservation book, when you look forward past February, would look like that trend would continue. As to how we monetize our NOL, I'm going to let Cliff walk you through that.

H. Clifford Buster III

Hi, Michael. On the NOL, effectively the way that works, is the vehicles that are within the securitization portfolios for tax treatment, they've been subjected to like-kind exchange. What we did in suspending that like-kind exchange treatment is effectively monetize the NOLs in our balance sheet. When there are proceeds from sales of the vehicles typically, they are restricted because of the like-kind exchange election to where they can only be used to buy more vehicles.

When we suspended the like-kind exchange treatment, effectively what we did is, we created taxable gains on the sales of those vehicles. Those proceeds then were available to be used to repay debt as opposed to being restricted solely for being used for reinvestment in vehicles.

And so the taxable gains that were generated were off et by the substantial net operating loss carry forwards that we have on our balance sheet. So there's no taxable cash taxes to the company as a result of this transaction, but it allows us to free up the cash we needed to pay down those facilities.

Michael Millman – Millman Research Associates

And does this come back and bite you somehow in the future?

Scott L. Thompson

No. That's the beauty of it, is we had an NOL carry forward, and so we just utilized NOL carry forward, and then we turned back on like-kind exchange, so that we will not be in a cash tax paying position in the future.

Michael Millman – Millman Research Associates

So you can go back to like-kind exchange?

H. Clifford Buster III

Yes.

Michael Millman – Millman Research Associates

On new cars or is it only down to the level that's still under the like-kind exchange?

H. Clifford Buster III

No, it would be on new cars, all new car purchases.

Scott L. Thompson

The trick is to get it turned off for a while, monetize NOL and then get it turned back on before you start generating cash paying taxes, and we believe we've successfully done that.

Michael Millman – Millman Research Associates

And why isn't this available to all the others in the industry?

Scott L. Thompson

I don't know their particular situation but it would be my guess is that it is available to everyone in the industry that's using like-kind exchange, but I don't know their particular tax situation.

Operator

I would now like to turn the call back to Mr. Scott Thompson. Sir?

Scott L. Thompson

Thank you. In closing I want to stress that our employees are doing a remarkable job, and I believe they're up to the current challenge. The company's board of directors and management team are confident in them, and their ability to successfully execute our plan. Thank you again for your continuing support.

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Source: Dollar Thrifty Automotive Group Inc. Q4 2008 Earnings Call Transcript
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