Dollar Thrifty Automotive Q2 2009 Earnings Call Transcript

Aug. 5.09 | About: Dollar Thrifty (DTG)

Dollar Thrifty Auto (NYSE:DTG)

Q2 2009 Earnings Call

August 5, 2009 10:00 am ET

Executives

Vicki J. Vaniman Executive Vice President, General Counsel, Secretary

Scott L. Thompson President, Chief Executive Officer, Director

H. Clifford Buster III Chief Financial Officer, Executive Vice President

Analysts

John Healy - North Coast Research

Michael Millman - Millman Research Associates

Jordan Hymowitz - Philadelphia Financial

Edward Richardson - GLG Partners

[Yuri Wertiechowski] - GLG Partners

Gentry Kline - Cedrus Capital

Matthew Berg - G Core Capital

Hans Teng - Deutsche Bank Securities

Ian Ellis - Michael Capital

Operator

Good morning ladies and gentlemen. At this time I would like to welcome everyone to the Dollar Thrifty Automotive Second Quarter Financial Results Conference Call.(Operator Instructions). I would now like to turn the call over to Miss Vicki Vaniman, General Counsel. You may begin.

Vicki Vaniman

Good morning and welcome to the Dollar Thrifty Automotive Group, Inc. Second Quarter 2009 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, the company will 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 Information tab.

Now, I would like to turn the call over to Scott.

Scott Thompson

Thank you, Vicki, and good morning to everyone. As previously stated our primary objective in 2009 is to improve our operating performance while at the same time deleveraging our balance sheet and diversifying our fleet investments. During the quarter we made progress towards this objective. Our corporate adjusted EBITDA for the second quarter was $20.9 million compared to $2.7 million in the second quarter 2008. This is particularly significant in light of a contracting economy that continues to impact our industry.

A combination of revenue enhancement initiatives, cost control efforts, and firmer used vehicle residual values resulted in improved performance year-over-year. This is s significant step forward for the Company and we believe these results demonstrate the earnings potential of our strategy. I should also mention this is the second consecutive quarter of improved year-over-year corporate adjusted EBITDA in a declining economy.

In spite of these challenges of the overall economy there were positives for the rental car industry during the quarter. The industry enjoyed a positive pricing environment as most of the industry found the right balance in terms of fleet supply towards its rental demand and demonstrated improved pricing discipline. Dollar Thrifty realized an increased rate per day both in leisure and in our business sector.

Another positive for the quarter was the automobile market which began to experience a shortage of quality used vehicles resulting in firmer residual values. Both these positive trends and rate per day environment and the firmer residual value trends have continued into the third quarter.

Turning to the quarterly results: In line with our previously announced expectations revenues for the quarter declined 10.3% driven primarily by a 20.3% decrease in rental days which was partially offset by a 12.1% increase in revenue per day. One of our goals for 2009 is to improve the quality of our revenues by concentrating on enhancing rate per day and at times sacrificing transaction days as necessary to achieve the optimal revenue mix. Our results for the quarter were consistent with this approach.

Regarding fleet, we posted a 6.9% decline in our cost per vehicle per month compared with the first quarter of 2009. We expect to continue to have good news in this area as we report during the year. Several factors have combined to improve our trend and fleet costs: market improvement and residual values; the move to a mostly risk fleet; extending holding periods; new controls over inventory ordering; improved remarketing processes; closing of certain locations that generate high mileage on our vehicle combined with mileage caps on selected vehicles, and improved diversity in fleet. We expect fleet costs to be in line with industry averages sometime in 2010 after being significantly over the industry the past couple of years.

During the quarter our combined operating expenses DVO and SG&A, which by the way include all of our corporate overhead, declined to 61% of revenue from 62.6% in the second quarter of 2008. This improvement came in spite of a decline in revenue base. Since we operate a value brand one of our top goals is to be best in class in this operating ratio.

Non-GAAP earnings for the quarter were a $0.30 profit compared to a non-GAAP loss of $0.23 per share the second quarter of 2008.

Turning to deleveraging, as we discussed last quarter we are focused on a return on assets. I just reported to you the operating side of that computation. We are also working on lowering our asset base as part of driving our yields higher. As we discussed last quarter, we are running a moderate fleet during the peak. This allows us to focus on maximizing pricing and lowering our de-fleeting risk post travel season. Since June 30, 2008 we have paid back approximately $650 million in debt, lowering our total debt by 26%. Cliff will have more on this in a minute.

Turning to suppliers, I am very pleased to report that we have executed a new Chrysler supply agreement. The terms of the agreement are more appropriate for both companies in light of the current business objectives. The number of vehicles to be purchased under this new three-year agreement is consistent with a more diversified fleet. There are no minimum percentage requirements under the contract. We expect Chrysler and Ford to continue to be major suppliers for the Company. The Company plans to purchase vehicles from its various manufacturing partners based on customer demand, competitive pricing, and availability of demand. During the second quarter the Company primarily purchased from Ford as the Chrysler factories were not fully operational and availability of supply was limited.

The last comment for the quarter that I would like to comment on is the new Chrysler. As you know, during the quarter Chrysler successfully emerged from bankruptcy. We congratulate them and are excited to have access to new products. Chrysler is and has been a good partner for the Company. Also I should inform you that we have not seen any weakness in residual values of their products and all of our obligations due from Chrysler are being satisfied in the normal course of business.

Now I would like to have Cliff review the financial details of the quarter with you.

Clifford Buster

Thank you, Scott. If you will please turn to Table 1 in the press release, total revenues for the second quarter of 2009 were $399.6 million down 10.3% as compared to last years second quarter. This decline was due primarily to a 20.3% decrease in the number of rental days partially offset by a 12.1% increase in revenue per day. Transactions declined due to overall lower consumer demand as well as the location closures that have been executed since the fourth quarter of 2008.

Location closures represented approximately 3% of our overall revenue decline. Fleet utilization for the second quarter of 2009 declined 5.1% points to 80.6%. We expected a utilization decline as we focused on maintaining pricing discipline, although the decline was greater then projected as we suspended inventory dispositions during the Chrysler bankruptcy.

Turning to expenses, direct vehicle and operating expenses, or DVO, were $191.7 million down $32.6 million or 14.5% from the same period last year. As a percentage of revenue DVO expenses declined to 48% from 50.3% in the prior year period as we continue to realize the benefits of cost reduction initiatives and ongoing aggressive expense control. The primary drivers of the decrease in DVO were reduced personnel related expenses as a result of lower transaction levels and improved efficiencies in staffing levels, as well as lower gasoline expense, vehicle damage, liability insurance, and concession fees incurred during the quarter.

Vehicle depreciation expense was $122.3 million down $24.3 million or 16.6% from the 2008 second quarter primarily driven by a decrease in the average fleet size. Additionally, the second quarter 2009 monthly average depreciation expense per vehicle of $365.00 was a decrease of 1.1% from the second quarter of 2008 and a decrease of 6.9% from the first quarter of 2009.

SG&A expenses represented 13% of revenue for the quarter, up from 12.3% in the prior year period. SG&A is impacted each quarter by changes in the value of assets associated with certain deferred compensation plans, although the impact to SG&A is directly offset by a corresponding amount in other revenue resulting in no net impact to the Company’s pre-tax income. SG&A expenses in the second quarter of 2009 were impacted by asset evaluation changes resulting in additional SG&A expense of $2 million for the quarter compared to a reduction of $700,000.00 in SG&A expense for the second quarter of 2008. Excluding the effect of the changes in the value of assets in these plans SG&A for the second quarter of 2009 would have been $50.1 million or 12.6% of revenue compared to $55.7 million or 12.5% of revenue in the second quarter of 2008.

Interest expense net during the quarter totaled $22.9 million down from $29.7 million for the same period last year. The reduction in interest expense primarily resulted from a reduction in total debt of approximately $650 million on a year-over-year basis. As of June 30 the weighted average interest rate per vehicle debt outstanding was 5% and the weighted average interest rate on our non-vehicle corporate debt was 2.8%.

Now turning to Table 3 of the press release GAAP earnings per share for the second quarter of 2009 were $0.55 per share up from $0.49 per share in the same period last year. Results for the second quarter of 2009 were impacted by an increase in the fair value of interest rate swaps representing $0.24 per share compared to an increase of $0.72 per share in last years second quarter. Excluding the increase in fair value of derivatives non-GAAP EPS for the second quarter of 2009 was income of $0.30 compared to a loss of $0.23 in the same period last year.

Moving on to key balance sheet items on Table 2 of the press release, revenue earning vehicles net of depreciation totaled $1.5 billion down approximately $1.1 billion or more than 40% from the second quarter of last year. This decrease reflects the planned reduction in our overall fleet size, the impact of extending fleet holding periods, and operating significantly fewer higher cost program vehicles. The actions we have taken in fleet were done in order to both address current demand levels as well as to address future fleet financing maturities in 2010 given the challenges in the financing markets. As of June 30, we had $545 million of restricted cash on hand available to retire fleet debt upon maturity or to purchase additional vehicles.

Vehicle related debt was $1.7 billion at quarter end, down approximately $620 million from last years second quarter as well as being down approximately the same amount from year-end 2008. Additionally, non-vehicle corporate declined $20 million from year-end 2008 to $158 million. The Company’s next scheduled debt maturity does not occur until January 2010 when $400 million of fleet financing debt begins amortizing over a six month period. We continue to watch the fleet financing market closely and although clearly improving it continues to be a challenging market.

We ended the quarter with tangible net worth of $200.8 million or $9.24 per share and no net corporate debt.

Turning to liquidity at quarter end, we had cash and cash equivalents of $263 million of which $60 million is pledged to security for the repayment of debt under our senior secured credit facilities. This compares favorably to $193 million of cash and cash equivalents at March 31 and the $230 million of cash and cash equivalents at year-end 2008. The increase in cash and cash equivalents from the first quarter reflects a dividend of excess cash enhancement from our vehicle financing entity during the quarter.

As of June 30 we were in compliance with the terms of all of our various financing facilities.

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

Scott Thompson

Thank you, Cliff. We expect the overall environment in the rental car industry to remain somewhat challenging in the second half of 2009, as economic conditions negatively impact consumer confidence and travel demand. This is consistent with our previous outlook.

We have narrowed our prior revenue guidance to reflect our first six months of operations and our current fleet plans. The Company now expects its rental revenues to decline 8% to 10% for the full year of 2009 compared to 2008. All rental days are expected to be somewhat mitigated by an increase in rate per day as the industry remains tightly fleeted in order to better balance supply with reduced demand levels.

In closing, we are pleased with the results for the second quarter and the near-term trends that we are seeing. The employees of Dollar Thrifty continue to deliver day after day and are the foundation on which this turn around is built.

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

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from John Healy from North Coast Research.

John Healy - North Coast Research

My question is not so much on the press release and the earnings call, but I would like a little bit of color about the shelf registration. I was hoping that you guys could talk about the motivation behind that, maybe how you are thinking about using that, and maybe from a timing standpoint what we should expect?

Scott Thompson

First of all I am sure you probably know that when you file something with the SEC you can’t comment on that document until the SEC clears it, so I can’t comment on the document itself, but I can certainly talk about universal shelves in general and let me do that. We did file a universal shelf, by the way and a universal shelf is a document where you can issue debt or equity at sometime in the future. It allows management to access market in a more efficient manner. I would consider it to be normal for a business to have a shelf up. Quite frankly, I was surprised when I got here and found the Company did not have a shelf registration statement up. It is kind of like having a relationship with an investment banker, or commercial banker. It is really just part of good governance and keeping your access to the market open and keeping your flexibility open and I wouldn’t read anything more into particular filings than how I just described a universal shelf.

I would also point out that when you look at details, as Cliff mentioned in his notes, we have no corporate debt nor do we expect to have any net corporate debt during the peak. I think that is something that kind of ties into your question.

Our near-term debt maturities, which we talked about in detail numerous times on numerous calls, are clearly very manageable and really we don’t feel like we have a gun to our head. We have tangible net worth and we feel like we are in a decent position.

The last point I would make as it refers to your question John, is to look at the officer group. All of the officer groups have a significant equity stake in this company. I personally have a significant number of options and I have, quite frankly, purchased a significant number of shares with my own money. As an accountant, my background is I can compute dilution which I think is probably what is underlying the question, and our interests are aligned in the future as it goes to dilution.

Lastly I guess I should tell you that the Company’s trading window will be opened in the normal course of business on August 7th and there are no real changes from our corporate trading window. So, that is kind of how I would outline our thoughts on that particular document.

John Healy - North Coast Research

Okay great, that is very helpful. Did you guys mention what the excess cash was at the vehicle funding level?

Clifford Buster

Do you mean the remaining cash that is embedded in the securitization still?

John Healy - North Coast Research

Yes.

Clifford Buster

It is $72 million.

Scott Thompson

Yes, so we did not dividend all of the excess cash up from the securitizations.

John Healy - North Coast Research

Okay, thank you guys.

Operator

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

Michael Millman - Millman Research Associates

Can you talk to us about the amount of your business that is contracted, at what prices it is contracted, what the maturity of those contracts are, to what extent you might be trying to, if you are, trying to reduce them, get rid of them, and any color regarding these particularly what do you intend to do about Sanford?

Scott Thompson

Wow! I think I wrote most of those down, I will try. If you look at our rental mix we are primarily a leisure-focused business with about 68% to 69% of our business in domestic leisure and that is not contracted business. You asked specifically about contracted business and I would characterize that as our government business, our corporate business, and our kind of touring international business. Government is about 3.2 % of our business; corporate business, give or take about 5% of our corporate business, and I should mention in the second quarter our corporate business performed very well. Revenues in our corporate business were only down 7% whereas you know our overall revenues were down 10%; we had an RPD increase in our corporate business, although not quite as robust as the 12.1% that we realized overall.

In our tour business it is about 23%. You asked kind of about the terms of those contracts. Generally they run about one year and are annual kind of contracts.

I think you asked about the pricing and I don’t know how to talk about the complex pricing of those contracts in general. I guess what I would tell you is that we are competitive in those markets, that we negotiate them each one by one. But, I will tell you we have not been afraid to let contracts run off if we didn’t believe that they were profitable, and that is probably part of our performance and rate per day standpoint, is that we continue to define success based on cash flow and not revenues.

I think you asked specifically about one airport location and I think if we are probably going to talk about one airport location we need to take that offline, as we have a lot of airports and I don’t want to get into talking about one airport on the call.

Michael Millman - Millman Research Associates

What I was aiming at is I thought that you had some tour deals that were long term and very low prices and that were holding down your average prices.

Scott Thompson

Some of the tour contracts, as I said, are a year or so. The way I look at the business is there is kind of long-term business and there is spot pricing. You are right to the extent that some of those contracts were written in previous rate environment. We don’t fully benefit from the leisure price increases until those contracts get renegotiated.

Michael Millman - Millman Research Associates

Which will be when?

Scott Thompson

It varies, I mean we have a lot of customers, but generally you are talking about in the fourth quarter.

Michael Millman - Millman Research Associates

Okay, thank you.

Operator

Your next question comes from Jordan Hymowitz from Philadelphia Financial.

Jordan Hymowitz - Philadelphia Financial

What was the dollar amount of gains in the quarter from disposition of rental cars sold?

Scott Thompson

You are consistent. In thinking about my script this morning I thought you might ask that. It was about $2 million of gains this quarter, which is good news and it makes us feel good about where our net book value is that we are having gains at auction rather than losses.

Jordan Hymowitz - Philadelphia Financial

How many cars sold?

Scott Thompson

Around 7,000, Cliff is looking up the number specifically, but I think around 7,000.

Jordan Hymowitz - Philadelphia Financial

And what is the other [inaudible] rental amortization in that line?

Scott Thompson

You are talking about the depreciation expense that is coming through before the gain loss?

Jordan Hymowitz - Philadelphia Financial

Yes.

Scott Thompson

I don’t have that number in front of me, but I can tell you it is down. So, we are getting the benefit of some depreciation reduction and some gain. I should talk about just the used car auctions in general. We are finding the closing rates at the auctions are at 58% which is a pretty good closing rate and that is as of yesterday. So, we continue to feel pretty good about the used car market.

Cliff slipped me a note and said we sold 7,700 cars during the quarter. The other thing I should point out on that topic is we did stop selling cars early in the quarter when Chrysler got in trouble and went into bankruptcy, as a strategy to kind of starve the auctions and support residual values. We held back our normal sales and I think that ended up being prudent from a residual value standpoint for the Chrysler product. It did affect us in utilization and our utilization for the quarter we a little less than we had expected because of that.

Jordan Hymowitz - Philadelphia Financial

Okay, thank you.

Operator

Your next question comes from Edward Richardson - GLG Partners.

[Yuri Wertiechowski] - GLG Partners

It is actually Yuri Wertiechowski. Can you remind us what the current net cash or net debt position is at the parent level? My second question is there has been a lot of commentary from Hertz and Avis earlier this morning in terms of how vehicle depreciation costs should continue to come down basically for the industry in the back half of the year and into 2010, so I was wondering if you could give us some updated color on that front.

Scott Thompson

On the net debt at the corporate level it is zero and it is at the peak, so I guess I think the net debt at the corporate level is zero as opposed to just being a seasonality issue. On the used cars, if you go back and look at the history the last couple of years at Dollar Thrifty, our costs per car per month have run a little bit higher than the industry and quite frankly probably quite a bit higher than the industry in the fourth quarter of last year and we have been working very hard to get them down. This represents the second quarter sequentially that we have brought down that key metric. I think what we have said is we expect that during 2010 that we would get our car costs back into the average for the industry; exactly what that number is I am not sure, but we think we can get back in line with the industry.

I wouldn’t be surprised if the industry overall that the car costs going forward don’t trend down as long as the used car market stays robust and the retail and new market is what I will call $10 to $12 million SAR, I think we will all be able to buy plenty of cars at reasonable prices and residual should be supported in the used car market going forward. So, that bodes pretty well from a trend standpoint.

[Yuri Wertiechowski] - GLG Partners

It was a great quarter.

Operator

Your next question comes from Gentry Kline of Cedrus Capital.

Gentry Kline – Cedrus Capital

Can you give us a sense as to where advance rates are or the enhancement levels are, as well as the interest rates for some of the AVS deals or what you think you will be able to get? I know you are far away from doing it, but it seems like there has been an improvement in the market. Avis came out with a deal and I believe it was a 70% advance rate. So, I just want to get your thoughts on how you see that shaping up and if you are seeing the improvements.

Scott Thompson

Yes, I mean it depends on where you start. If you go back six months I think I was probably being told that we weren’t exactly sure when that market would come back and that market probably was not open six months ago. Clearly that market is open today. Avis has done a successful transaction recently. I haven’t studied their transaction in detail and we are not active in the marketplace in that we don’t have any near-term maturities. I think the advance rate around 70% is my understanding. My expectation is that as the economy improves slightly and the credit markets improve slightly that over time pricing and maybe advanced rates will come more in line with where I think they should be. They will not go back to where they were, but I guess I think the market is getting better and will probably continue to bet better unless the economy slips into a double dip or something.

Gentry Kline - Cedrus Capital

Okay thanks a lot. It’s a great quarter.

Operator

Your next question is a follow up from John Healy from North Coast Research.

John Healy - North Coast Research

You mentioned talking about improving the return on assets in the Company in your prepared remarks. I was hoping you could give us a little bit more color regarding that strategy. I have seen some releases and some news stories that talk about you guys beginning to re-franchise some of your locations. I was hoping that you could talk about the strategy behind that and maybe what the opportunity is over the long term.

Scott Thompson

The way I see the world right now is capital is precious and I see risk premiums and debt are high. When I see those two things it tells me that return on assets is probably the right way to run the Company. I think we ran about 3.2% return on assets and just for edification the way we compute that is we just take adjusted corporate EBITDA divided by average assets. At 3.2% that would be the best quarter we’ve had in the last three years, but not the best quarter the Company’s had. On an annual basis during the good years the Company ran just under 4% on that metric.

Obviously the math is not too hard. If you can get earnings, but not have to have a very big investment or any investment then that is very positive to that equation. When I look at franchising versus owning corporate stores it makes perfect sense to me that for large, complex, airport operations, we run those the best. In fact we run them very well. But, maybe in the smaller markets, maybe an owner who is there every day, every night, the owner is kind of an entrepreneurial spirit kind of guy or girl that they can run those deals better than we can and we can receive our franchise fee. When you look through the math it looks pretty good.

We have re-franchised 11 so far this year. They are small. I mean they are not going to drive the numbers because they are small operations right now. But, I think we will continue to provide very high quality people, great opportunities to become entrepreneurs’ and run profitable markets for us. I think they will run them better than we can and I think it will be positive to our return on assets.

The limiter right now, quite frankly, is the credit markets. We need those people to be credit worthy and they have to be able to get their own financing. I think once the credit markets open we may be able to accelerate that trend. Does that help?

John Healy - North Coast Research

That is very helpful.

Operator

Your next question is a follow up from Michael Millman from Millman Research Associates.

Michael Millman - Millman Research Associates

Looking back at last year can you give us an idea of what the prices revenue per day on pure leisure did between say June 30 and Labor Day and what that looks like today looking at your revs book for Labor Day?

Scott Thompson

First of all I really don’t know how to compute pure pricing. That is a concept that we are not really familiar with because I don’t know how to adjust it for mix as far as what channel you distribute product out at. But, if you just look at pricing, what we said in the prepared remarks is that we have continued to see the cost at pricing environment that we saw in the second quarter go through into the third quarter. So, I think I would read into that that July looks pretty good and August is looking pretty good and we have good visibility on those two months, if that helps. We don’t give earnings guidance, but we have given you some revenue to work with.

The other thing I should tell you that would help you is to quantify cutting the teeth. At the end of the second quarter our fleet was down 18%. If you take that and you look at our earnings guidance for the year being down 8 to 10 you would clearly expect that during the third quarter revenues would be down more and then not down quite as much during the fourth quarter, which is consistent with what we’ve always said, that we were going to cut the peak off.

Michael Millman - Millman Research Associates

Regarding the pricing are you seeing any impact from Advantage as it is re-rolled out?

Scott Thompson

No. As you know Advantage was in the marketplace last year. I don’t know if they were the 1% to 1.5% market share player overall in the top 100 airports with probably give our take a 5% player in some leisure airports. As we said in the prepared comments, we are seeing quite a bit of discipline in general in the industry.

Michael Millman - Millman Research Associates

Just give me a definition, when you say positive pricing environment in July and August, do you mean that is sequential or year-over-year?

Scott Thompson

I mean it is year-over-year.

Michael Millman - Millman Research Associates

When you say year-over-year does that mean it’s accelerating or just positive?

Scott Thompson

It means year-over-year positive.

Michael Millman - Millman Research Associates

So if July was up $10.00 and August was up $1.00 would that fit your definition of a positive pricing environment?

Scott Thompson

Yes and at the same if August were up $100.00 it would also equal that definition.

Michael Millman - Millman Research Associates

I am trying to squeeze it out of you.

Scott Thompson

As I have told you before we are really very happy with this quarter. We are very happy with some of the underlying trends we are seeing in the industry, but we are really focused on getting this company positioned right for 2010 and working on developing a strong and competitive position in the market place as we can to take advantage of what we think will be a recovery in 2010.

Michael Millman - Millman Research Associates

Okay, thank you.

Operator

Your next question comes from Matthew Berg from G Core Capital.

Matthew Berg - G Core Capital

You guys have made some structural changes to your cost structure in terms of your vehicle purchasing agreement with Chrysler and some of the things you have done with your DVO and your SG&A. Historically you have done operating margins in the double digits. How should we think about your operating margins going forward given some of the changes you have made to your P&L?

Scott Thompson

That is a great question. The truth is I don’t know exactly where we think we’re going to land yet. I use the quote in my IR presentation that is from George Patton and it says “ the definition of success is how high you bounce after you hit bottom” and I think to a certain degree that is what we are working through. We clearly had a very tough year last year and we are working to find out what we think normalized margins are, but let me give you some color on it.

I think going forward there will be more discipline particularly in this company and in the industry on rate per day; so I think we will get some lift, kind of from a historical standpoint, in revenues. At the same time, on our fleet costs we have had a very tough road and I think we will probably get some lift from that standpoint also. But, it is going to be a smaller fleet and that is going to have an impact on covering our over head.

Like I said before, if you look at return on assets and that is really what we are looking at more than margin, we historically ran just short of 4%. I can tell you that we are working towards trying to get back to that 4% kind of return on assets.

Matthew Berg - G Core Capital

Okay and then do you think that we can achieve comparable or higher operating margins going forward?

Scott Thompson

I can tell you that we are finding opportunities to run the business with different strategies that we think long-term will be beneficial, but a lot of that is going to also depend on the competitive environment of the other three large players in the industry and what strategies they deploy going forward. If the other three large players in the industry continue to show the discipline they have shown recently then I can probably answer that question I would hope so. If they don’t and have a different strategy then it will be difficult to get back to those margins.

Matthew Berg - G Core Capital

Okay. Do you have a share repurchase agreement in place?

Scott Thompson

No we don’t.

Matthew Berg - G Core Capital

Okay great quarter you guys. Thanks.

Operator

Your next question comes from Hans Teng from Deutsche Bank Securities.

Hans Teng - Deutsche Bank Securities

I am just wondering how you plan to deal with your ABS maturities in 2010.

Scott Thompson

The first point I would make is late 2010 and we have some time. I think that we are waiting for the industry to kind of determine what the right vehicle is for financing rental fleets. We are fortunate that we have a couple of very large, sophisticated players in the industry who have some debt maturities before us and I think they are kind of setting the market and determining what structures will be used.

The way I have looked at is for us we have to get the Company to the strongest cash flow positive position we can and then see where the debt markets are at the time that we have to do transactions. We do have some maturities in early ’10, but as I think we have talked about several times is we have the cash on the balance sheet to step over our early maturities and it is really the late ’10 maturities that we believe we either have to shrink further or have to do some kind of debt transaction.

Hans Teng - Deutsche Bank Securities

Okay, thank you.

Operator

Your next question comes from Ian Ellis of Michael Capital.

Ian Ellis - Michael Capital

I wanted to ask about two things which are kind of changing for the Company and the industry. One, with regard to the Company, to what extent do you think your experience recently has been a result of business customers coming over to you versus your traditional target markets? So a kind of trade down experience.

Then the second thing is whether you sense some of the strength in pricing this summer is really associated with the change in seasonality that the industry is going to experience now; an increasing proportion of the overall fleet is at risk rather than not at risk which has been the case historically.

Scott Thompson

Those are great questions. Clearly you have been around the rental car industry a long time. I think there is some trading down going on. As I mentioned before, our business traveler, our contracted business, it is up both on a rate per day standpoint and then not down as much from a volume standpoint. So, we are winning some business clients in that segment that we might not have gotten maybe if there wasn’t a downturn.

I should point out that the business segment that we work in is not the Fortune 500; these are small entrepreneurial companies and that is really more of our sweet spot than the big companies. There is no question though that the business traveler has become very cost conscious. It has become kind of in style from a business standpoint to focus on value. We hear it from our partners in the hotels that the leisure part of the business is better than the resorts.

The other question you asked about, the current pricing environment and how it interplays with the risk GDP program mix is a good question. As you clearly know the industry has moved more towards risk vehicles. In fact we are probably 90% risk, 10% program and that is probably a pretty good mix for us. To the extent people cut the peak off during the summer you would expect to have higher rates during the summer and that may not come forward during the troughs, depending on how people manage their fleet. I don’t know yet. I think as long as we have a robust used car market underneath us that the companies will be able to manage the risk fleets well during the trough and we will continue to be able to have upward momentum in pricing. But, if at a time the used car market were to get choppy and you had a lot of risk fleets in the industry, that probably would change the historical dynamic.

Ian Ellis - Michael Capital

Okay, thanks for the color on that.

Operator

Your last question comes from Jeff Kessler from Imperial Capital.

Scott Thompson

Jeff if you have a question, why don’t you call us offline and we will take care of it later this afternoon.

We appreciate the opportunity to serve and we thank all of you for your time and attention on this earnings call. Thank you and have a good day.

Operator

Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation. (Operator Instructions)

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!