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Dollar Thrifty Automotive Group, Inc. (NYSE:DTG)

Q3 2010 Earnings Call Transcript

November 2, 2010 9:00 am ET

Executives

Vicki Vaniman – EVP, General Counsel and Secretary

Scott Thompson - President and CEO

Cliff Buster – EVP and CFO

Analysts

Chris Agnew - MKM Partners

John Healy - Northcoast Research

Steve O’Hara - Sidoti Company

Emily Shanks - Barclays Capital

Michael Millman - Millman Research Associates

Neal Portis [ph] - Goldman Sachs

Jordan Hymowitz - Philadelphia Financial

Bill Cavalla [ph] - Oscar Gruss

Sachin Shah - Capstone Global Markets

Operator

Welcome and thank you for joining the Dollar Thrifty Automotive Group third quarter financial results conference call. All participants are going to be in a listen-only mode until the question and answer session. As a reminder, this call is being recorded, if you have any objections to the recording, you may disconnect at this time. I would now like to turn the call over to your host Miss Vicki Vaniman, General Counsel. You may begin.

Vicki Vaniman

Thank you. Good morning and welcome to the Dollar Thrifty Automotive Group, Inc. third quarter 2010 earnings release conference call. Scott Thompson, President and Chief Executive Officer, and Cliff Buster, Chief Financial Officer, will be the hosts for today's call. Some of the comments contained in this conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed as 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 undertakes no obligations 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 website at dtag.com, under the Investor Info tag. As you know, our merger agreement with Hertz was terminated subsequent to the failure of the shareholders to approve that as a special meaning of the shareholders on September 30th. On October 5th Avis Budget and Dollar Thrifty announced that the companies would cooperate on efforts to obtain anti-trust clearance for Avis budget to acquire Dollar Thrifty. And that Avis Budget agreed to Dollar Thrifty’s request to defer making its exchange offer while the company’s pursue approval for our proposed acquisition. Dollar Thrifty is not a party to a merger agreement and we will not make further comments on any related matters at the time. Accordingly we will not be commenting on any of the after mentioned topics on this call and ask that you refrain from any related questions during the question and answer session of the call. And now, I would like to turn the call over to Scott to discuss our record third-quarter earnings.

Scott Thompson

Thank you Vicki and good morning everyone. I am extremely pleased to report that the company achieved its seventh consecutive quarter of year-over-year double-digit growth in corporate adjusted EBITDA. In spite of the lingering uncertainties surrounding the US economy, slower than expected growth in the travel demand and the decline in the gains on vehicles sales compared to the third quarter of 2009. I would also note that the third quarter of 2010 marks the best quarterly performance in the company’s 60 year history. Corporate adjusted EBITDA for the third quarter of 2010 totaled $81.8 million. However, the third quarter was adversely impacted by $11.9 million in merger-related expenses. Excluding the merger-related expenses, corporate adjusted EBITDA for the third quarter of 2010 would have been $93.7 million, an increase of 71% compared to the same period in 2009.

Our performance this quarter demonstrates the successful combination of our strategy. The company realized a volume increase while maintaining price discipline. This balanced approach to revenue generation which combined with cost reductions across all areas of the company. I am particularly pleased with our employees execution during this peak summer season. They focused on our customers as evidenced by improvement in all of our critical customer satisfaction scopes. They achieved record profitability and lastly, they avoided being distracted by proposed merger activity.

Now turning to potential highlights for the quarter. Rental revenue for the quarter was up 1.6% compared to the third quarter of 2009 driven primarily by 1.4% increase in transaction days which was in line with our planned fleet levels for the quarter. During the third quarter of 2010, we faced a challenging compare on RPD, as we realized a 12% increase in RPD during the third quarter of 2009. In spite of this difficult comparison, the company managed to achieve a modest improvement in RPD during the quarter by also achieving this volume targets. As a result of our fleet refreshening and diversification programs during the last several quarters, we have decreased the average age in mileage on our risk fleet to an average age of nine months and 20,000 miles, down from 12 months or 28,000 miles from the third-quarter of 2009. We are now trending towards normalized fleet cost level that will be less impacted by gains on sales in the recently completed quarters.

Fleet depreciation per unit for the third-quarter of 2010 totaled $262 per month including gains on sales of approximately $10 million. Gains in the current quarter were $6.8 million lower than the third quarter of 2009 and on sequential basis $17.6 million lower than the second quarter of 2010. I will provide fleet cost updates in the fourth quarter of 2010 later in the call. One of the keys to maximizing return on assets has been our financial focus throughout the organization on cost control and operating efficiencies. During the third quarter, we saw benefits of these efforts across the organization, as we achieved reductions in operating expenses while increasing the company's revenue base.

Excluding merger-related expenses incurred during the quarter, operating expenses which were SG&A and DVO totaled 56.7% of revenues for the third quarter of 2010 compared to 61.1% of revenues in the third quarter of 2009. Non-GAAP net income excluding merger-related expenses totaled $52.8 million for the third quarter of 2010, a 97% increase from the third quarter of 2009. Non-GAAP EPS excluding merger-related expenses totaled $1.74 per diluted share for the third quarter of 2010 compared to $1.15 per diluted share for the third quarter of 2009. Our operating performance has more than offset the delusion of our October 2009 equity offering. Now I would like to have Cliff to review the financial details in a more detailed review.

Cliff Buster

Thank you Scott. Please turn to table one in the press release. Total revenues for the third quarter of 2010 were $425.5 million, a 1.6% increase compared to the prior year period and in line with our increase in average fleet of 1.7% compared to the third quarter of 2009. Fleet utilization for the third quarter of 2010 was in line with a level of the prior year period and a level that properly balances our financial returns and customer service builds. Selling, general and administrative expenses in the third quarter of 2010 increased $4.6 million compared to the 2009 third-quarter due to $11.9 million in merger-related expenses incurred during the quarter partially offset by timing differences in certain compensation related accruals.

Direct vehicle and operating expenses in the third quarter of 2010 declined $9.2 million or 4.3% on higher revenues, compared to the third quarter of 2009 primarily as a result of reduced maintenance and personal related costs. Vehicle depreciation expense for the quarter was down 16.7% from $130 million in the third quarter of 2009 to $85.7 million in the third quarter of 2010. The decrease was driven primarily by a $53 per unit improvement in our monthly fleet cost. As Scott mentioned, gains on sales of risk vehicles are component of vehicle depreciation totaled approximately $10 million in the third quarter of 2010, down from $16.8 million in the third quarter of 2009.

Interest expense, net of interest income, totaled $22.3 million for the third quarter of 2010, down from $24.6 million for the same period last year. The reduction in interest expense was driven by a $260 million reduction in the average debt balance outstanding on a year-over-year basis offset by reduced interest income as the company deployed the excess cash balances on hand in 2009 to reduce indebtedness and to re-invest in the rental fleet. Moving on to key balance sheet items, in table two of the press release, cash and cash equivalents totaled $519 million as of September 30, 2010 an increase of $19 million from December 31, 2009. Restricted cash declined $333 million since year-end to $290 million due to a net reduction in fleet, net of $190 million combined with seasonally higher fleet levels and newer fleet inventory compared to year-end 2009.

Revenue earning vehicle, net of depreciation totaled $1.5 billion at September 30, 2010, an increase of $239 million or 19.5% from December 31, 2009 levels. The increase in the book value of the fleet resulted from a significant refreshening in the fleet in addition to normal seasonal up-fleeting. Our September 30, 2010 ending fleet was in line with the third-quarter 2009 as our seasonal de fleeting went very well this year. Fleet debt decreased $190 million from December 31, 2009 to September 30, 2010 with fleet debt now totaling $1.4 billion. The reduction in fleet debt resulted from the repayment of $400 million of medium-term notes during the first half of 2010, which were offset by borrowings under new lower cost variable funding notes.

Now turning to liquidity and capital resources. During 2010, we have successfully completed $950 million of new fleet financing facilities in the US in addition to $150 million fleet financing facility in Canada. As of September 30, our $300 million three-year variable funding note facility was completely undrawn, and in October we completed an additional $450 million, 364 days variable funding note facility which was undrawn upon issuance. These facilities combined with our significant cash position provide over $1 billion of liquidity to address future debt maturities. The interest rates on the new US facilities will be below the fixed rate of interest on the current medium-term notes that they will replace.

I would point out that the companies next scheduled fleet debt maturity is $600 million of medium-term notes that began amortizing in December of 2010. Our corporate debt totals $151 million or less than one term based on trailing-12 months corporate adjusted EBITDA of $231.7 million and we are obviously at a net cash position. As of December 31, 2008, we have reduced total debt by approximately $1 billion and moved from a corporate book [ph] to book capital of approximately 46% to approximately 22% at September 30, 2010. We are currently very comfortable at this leverage ratio. We ended the quarter with tangible net worth of $497 million which represented an increase of 35% since the beginning of the year. I will now turn the call back to Scott for discussion of our outlook for the remainder of 2010.

Scott Thompson

Thank you Cliff. Subsequent to quarter-end, the company has experienced growth in transaction days of approximately 3%, and we are pleased with our forward bookings in November and December. Based on these and other factors, we expect rental revenue growth of 2% to 4% in the fourth quarter of 2010. We expect depreciation per unit per month to be within the range of $295 to $305 per unit during the fourth quarter of 2010, as gains from vehicle dispositions will decline significantly compared to recent quarters. Lastly, we reaffirm our expectation of corporate adjusted EBITDA, excluding merger-related expenses to be within the range of $240 million to $260 million for the full year of 2010, an increase of approximately 140% to 160% over the 2009 levels.

This guidance represents an improvement in corporate adjusted EBITDA of approximately $80 million to $100 million compared to the best year in the company’s history. In conclusion, I believe Dollar Thrifty is in the best competitive position in its history. Our financial position is strong by evidence by this followed balance sheet with minimal corporate leverage and substantial tangible net worth combined with a growing liquidity in corporate adjusted EBITDA. We have a diversified rental fleet for the first time in the company's history and our workforce is truly dedicated and motivated.

Lastly, I should point out that our key customer satisfaction scores are at the highest level they have ever been. The management team is fully engaged in the operating of the business on a stand-alone basis and we are fully aligned with the interest of our shareholders. We will as we have in the past continue to focus on maximizing the value of shareholder value and consistent with our fiduciary duties be open to appropriate alternatives. That concludes our prepared remarks, operator will you please open the call up for questions.

Question-and-Answer Session

Operator

Thank you. At this time we are ready to begin the question-and-answer session. (Operator instructions). Our first question comes from Chris Agnew of MKM Partners.

Chris Agnew - MKM Partners

Thank you, good morning.

Scott Thompson

Hey Chris.

Chris Agnew - MKM Partners

First question is I want to ask about net cash position and I apologize, there are four parts to this. How much additional cash will be required for the fleet enhancement in 2011 as you roll your 2006 series debts, and are you thinking of using more letters of credit and less cash for the fleet enhancements. The cash flow in fourth quarter, should we expect normal seasonal pattern for further cash generation in 4Q and then finally, you have a $100 million of cash that is restricted with - in conjunction with your credit agreement, can you free this cash up and what is the timing and thought process there?

Cliff Buster

Okay. I think you got four questions and one there but I will address those Chris. With respect to the cash that would be needed in 2011, as we role off of the older lower enhancement rate structures into to the new structures, we are looking at an additional investment of approximately $200 million which can either be in the form of cash or letters of credit. One of the things that we certainly are looking at currently is amending our existing senior credit facility, to free up the capacity of DLC is to be able to provide DLCs as enhancement for the fleet in future periods thereby reducing our need to infuse cash into the securitization and as part of that process obviously we'll be looking to free up that $100 million of additional cash as well. That is a process that has not started yet but it is something that we will be pursuing here in the near term. With respect to Q4 cash flow, I'm not aware of anything that would make this year's Q4 seasonally different from any other prior Q4s in terms of cash generation.

Operator

Thank you. Our next question comes from John Healy of Northcoast Research.

John Healy - Northcoast Research

Hi good morning.

Scott Thompson

Hi John.

John Healy - Northcoast Research

From the sounds of things, it doesn’t seem like the employees have in your - yourself have taken your eye off the ball at all. With the leverage that we saw in the SG&A line and the operating expense line, can you may be talk to some of the internal initiatives you have put in place to drive more efficiencies there and if there is more room to run and maybe how would you think those line items trending over the next couple of quarters.

Cliff Buster

Thank you and I would agree with you. I think the employees did a very good job of staying focused when clearly there were some distractions in the marketplace. I think, one of the main things we have done is, we are aggressively benchmarking all of our operations against each other as we share best practices throughout the company. It is part of our DNA that we brought to the company. We do it without consultants, we expect our employees to come up with the cost savings, implement the cost savings, we think that way they have a tendency to stick as opposed to paying outside people to tell you how to run your business. So I mean, look we have been very satisfied, we are proud of what the people have done in that area. I don't think we are through, I think they are working on it today, they will be working on it tomorrow and I think especially if we get some lift from the revenue side, we will get some operating leverage, that way also, it will make it certainly a lot easier to manage the expenses.

Operator

Our next question comes from Steve O’Hara of Sidoti Company.

Steve O’Hara - Sidoti Company

Hi. Could you just talk about any competitive activity you are seeing in the fourth quarter or any different behavior than in the past?

Scott Thompson

Yes, I can talk about that. Every day is competitive in the marketplace. I wouldn't say there is any new competitive issues that we have really seen. It is competitive on a market-by-market basis. The only thing that might be a little bit new compared to this time last year is certainly our friends at Hertz have talked about expanding the Advantage aggressively in the market place. I can't tell you that it's been really very impactful as far as our operations. When we look that Advantage last year in 2009, Advantage was already in 54% of our markets. In 2010 they were at 62% of our markets, so we're already pretty much competing with Advantage, and before when Advantage went bankrupt in 2008, I think they had about $180 million revenue, so they were already a competitor in the marketplace.

But I would not say there is any particularly new activity as you know this is a competitive industry. Fourth quarter is seasonally a slow period for the industry, so it has a tendency to be more competitive than certainly the busy season, but overall I think we feel pretty positive and that we are seeing deployments positive as opposed to negative over the last few quarters and we are cautious but we're fairly optimistic that the travel market will be coming back, although coming back slowly but we will certainly be positive for the foreseeable future.

Operator

Our next question comes from Emily Shanks of Barclays Capital.

Emily Shanks - Barclays Capital

Good morning, I have two bags of questions. I was just curious what your target vehicle utilization rate was and then secondly when you talk about the role off of the lower enhancement rates, can you give us a sense of the magnitude that the enhancement rate is actually increasing or what the all in weighted enhancement rate is.

Cliff Buster

When you are talking about the target as utilization rate are you talking for a specific quarter or on an annual basis?

Emily Shanks - Barclays Capital

On an annual basis and then maybe if you could just give us a sense of how you would like to see sort of peak and trough inside year.

Cliff Buster

Okay. Generally what we are targeting for our full-year is going to be 81% to 82% and the way that that is going to peak and trough. As you are going to be approximately 80% in Q4 and Q1, maybe some very high 70s and then you will be more in the 84% to 85% range in Q2 and Q3 during the peak seasonal periods. And then your other question was with respect to the enhancements that are rolling off and what is going to be rolling on, is that correct?

Emily Shanks - Barclays Capital

Yes I was just curious what the all in enhancement rate was and what it is going to be.

Cliff Buster

The all in enhancement rate on the old medium-term notes was approximately 30% and the all in enhancement rates on the new facilities that we put in place the last three have been between 53% and 55%.

Emily Shanks - Barclays Capital

Okay. Okay, thank you so much.

Cliff Buster

You are welcome.

Operator

Our next question comes from Michael Millman of Millman Research Associates.

Michael Millman - Millman Research Associates

Thank you.

Scott Thompson

Hey Michael.

Michael Millman - Millman Research Associates

How are you doing?

Scott Thompson

Good, and you?

Michael Millman - Millman Research Associates

I am wonderful, thank you for asking. Can you talk about what you might be doing or able to do to reduce your third-party channels and to maybe put some quantification around on how much you can do and what that might mean to the bottom line and then just quickly what's your current ROA.

Scott Thompson

Okay, I will take some of that. First of all I think as you know we have dollar.com and thrifty.com which are our direct channels and that right now represents about 46%, 47% of our reservations come in over our own channel. And so, obviously that is one of the primary answers to the company. We also then do supplement our reservations through a variety of sources and I would not say that we are going to try to not rely on those we constantly continue to expand our sources to diversify our distribution channel but we certainly have lots of good partners in that area. It is a more expensive channel to get business but it also can be a very good channel. We got a lot of good partnerships with our airlines, the Expedias of the world and we continue to utilize those channels. On - I think for ROA, was that Michael? Oh, we probably cut you off, we are still, they are banging on a calculator right now looking at ROA.

Cliff Buster

Yes, assuming the mid-point of the 240 to 260 EBITDA range, you are looking at an ROA of 12%.

Scott Thompson

Operator, you have another question Michael?

Michael Millman - Millman Research Associates

Yes, what really I was asking is not really what the ROA is, but the target was something that every year you talked about and getting back to the first question was, where could you bring that 46% to 47% and what impact of that could have on the revenue per day or bottom line however you measure it.

Scott Thompson

I going to differ the ROA target until we give 2011 guidance. I think, I would be more comfortable after we finished our 2011 budget on that particular question. But clearly you can see that we continue to be focused on that metrics and it certainly has improved over the last couple of years. I think I would expect, I’m going to call the direct channel which is the dollar.com and thrifty.com, somewhere around 45% to 50% of our business, I think we will come through that channel. I do not see that changing a lot and as far as what we pay our third-party partners, we pay them what we consider to be a very fair commission for their services. But from a strategic standpoint, we want to grow both channels, both our direct channel and our indirect channel and I do not see us strategically trying to change the mix significantly between the two.

Michael Millman - Millman Research Associates

Okay, thank you.

Operator

Our next question comes from Neal Portis [ph] of Goldman Sachs.

Neal Portis - Goldman Sachs

Thanks. Hi, good morning.

Scott Thompson

Good morning.

Neal Portis - Goldman Sachs

On pricing and volume, is there any granularity that you could provide across your different customer groups and your leisure segments or to any extent than any corporate customers.

Cliff Buster

There is, there is some - as you know we do not do a lot of large corporate customers, we do not do the large Fortune 500 kind of companies, we do some smaller mom-and-pop businesses. Generally the pricing has been positive in that area. Our tour business pricing has been positive in that area and what I will call the retail business is been slightly negative and when you blend that altogether in the third quarter you end up with a slightly positive RPD.

Operator

Our next question comes from Jordan Hymowitz of Philadelphia Financial.

Jordan Hymowitz - Philadelphia Financial

Hi guys. Thanks for taking my question.

Scott Thompson

Good morning Jordan.

Jordan Hymowitz - Philadelphia Financial

Good morning. You said that transactions in October were up 3% if I've heard correctly. Can you say what time and mileage was?

Cliff Buster

Yes, I probably have that number somewhere. But I did not give it to you.

Jordan Hymowitz - Philadelphia Financial

Will you give it or no?

Cliff Buster

Maybe – if you look we told you what the volume was and then we told you what the expected revenues were expected to be for the fourth quarter. I think what we said was that transaction days were up 3% and we are expecting rental revenues to be up 2% to 4% in the fourth quarter and from that math, you can figure out the RPD should be up slightly or down slightly would be the expectation that would correlate to that.

Jordan Hymowitz - Philadelphia Financial

Okay and you gave guidance for next year on vehicle depreciation. Last quarter you gave some pre-tax guidance for next year, are you not affirming that or are you going to wait till next year or why just give the depreciation of the pre-tax guidance for next year.

Cliff Buster

Jordan, I think the guidance that we gave, we gave the fleet cost guidance given the volatility that we have had this year from the car gains and the fleet cost guidance was 300 to 310, with respect to any 11 guidance the only thing that should have been out there would have been in conjunction with the performance that were included in the S-4 and those are obviously going to be subject to update as we go to our 2011 budgeting process. I think that’s the numbers that you are referring to.

Scott Thompson

Yes we will be giving 2011, what I call formal guidance when we report fourth-quarter which is consistent with what we have done.

Operator

Our next question comes from Bill Cavalla of Oscar Groove [ph].

Bill Cavalla - Oscar Gruss

Hi, two questions. Can you talk a little bit about the pricing environment and could you walk us through your gain and depreciation expense which looks pretty spectacular.

Scott Thompson

I can talk a little bit more about the pricing environment and then I will let Cliff talk about vehicle gains. I think about vehicle gains and some of the granular details probably on a per car basis. Cliff is probably what you - I’ll tell what you are looking for from a pricing standpoint as I think you probably know during the summer period, the peak period and as when RPD is the highest and then in the fourth quarter is seasonally a weaker period, and I think we have had seven consecutive quarters of RPD increase that we are working on although the RPD increase this quarter I would characterize it as modest but we had a very tough comp, compared to last year, we had a significant increase in the third quarter of 2009 of 12%. So we had a pretty tough comp so I was actually very glad to see we stepped over that comp.

I will have a lot more information kind of about the pricing environment after I hear from other on their earnings conference call and maybe with their fleeting expectations are going forward, but pricing going forward is going to be based on supply and demand. I think on the demand side, I think visibility is pretty good that it is going to be low single-digit kind of increase from a demand standpoint. The part of the equation is you never know about this industry is what, how many cars are people going to put in the marketplace. From our standpoint we're going to try to stay very disciplined from our fleeting standpoint and maintain our part of market share.

Bill Cavalla - Oscar Gruss

Just a follow-up before you go to depreciation. You said that you are seeing Advantage now are growing market-by-market, are they doing this by just simply opening, increasing their presence or are they also trying to buy market share at the same time.

Scott Thompson

I think they have opened up quite a few locations. When I look at the airport market share reports which, that information is public and it is good and credible, the problem is it does not come out very timely, it is always a few months behind. I do not see any major changes in market shift between the competitors with the exception of, I guess enterprise, it certainly gathered a little bit of market share over the last five or six months. Some of the other friends been little more disciplined in fleeting and Hertz picked up a little bit of share this year which offset some share they lost last year.

But I do not see anything significant in near-term market share changes. This is not an industry where the market share moves around very quickly, to be frankly honest. From a pricing standpoint I can tell you that the Hertz people have been more disciplined in the pricing of Advantage than the previous owner had been in the pricing of Advantage. And so we certainly have been comfortable with what they have been doing in the marketplace. And Cliff, did you want to talk a little bit about fleet gains.

Cliff Buster

Yes, what specifically are your questions with respect to the fleet costs and the gains on the sales of the vehicles?

Bill Cavalla - Oscar Gruss

Probably lost him. Give me the per unit gains and one reason the gains on the sales volume.

Cliff Buster

The volumes we have had, if you look at the first three quarters of this year, the gains on the sales were $25.3 million, $27.1 million and then $10 million and those where on unit sales of approximately 14,000, 18,000, 415,400 [ph] So fourth-quarter we would anticipate that the gains would continue to come down as Scott said earlier we would expect our overall fleet costs to be in the range of $295 to $305 as we have now cycled out of lot of the older 2008, 2009 units that were depreciated during the trough of the used-car market and experienced the recovery of the used-car market.

Scott Thompson

Next question.

Operator

(Operator instructions) our next question comes from Sachin Shah of Capstone Global Markets.

Sachin Shah - Capstone Global Markets

Hi, good morning.

Scott Thompson

Good morning.

Sachin Shah - Capstone Global Markets

It seems like some of the content you have given and highlighted today in the call as well as in the press release is giving an indication that you guys are kind of gearing up to run a stand-alone entity. Can you comment on that?

Cliff Buster

Well, I mean I think. We have been a stand-alone company for 60 years. We were a stand-alone company this time last year when we received an unsolicited offer. So that unsolicited offer failed and during that period we stayed focused on operating the business I think as evidenced by the numbers that we produced and so I guess what I would tell you is we never got unfocused on being a stand-alone company. That has always been the strategy but at the same time we certainly have equity interest in the officer group and certainly we understand our fiduciary duty to the shareholders to maximize shareholder value and if we see a strategic alternative that we think is in the best interest for shareholders we certainly will entertain it and work on it diligently.

Operator

Our next question comes from John Healy, Northcoast Research.

John Healy - Northcoast Research

Hi, thanks, quick question on the travel partner relationships. Have you heard or have any commentary from some of your travel partner's regarding if there is a combination of another entity on how they would pursue to do business with a new entity or are there any out causes there. We're just wondering how that trended over the last couple of months.

Cliff Buster

I cannot tell you that I have any really information on that area that would be meaningful. We certainly got some long-term relationships, most of them are under contracts. Those contracts generally are not particularly long-term in the industry and I have not heard too much chatter or information on how they would look at things potentially if there was a combination in the industry.

John Healy - Northcoast Research

Okay, thank you.

Operator

Our next question comes from Michael Millman, Millman Research Associates.

Michael Millman - Millman Research Associates

Thank you, sort of following up on the depreciation. I guess two questions, could you give us what you see as the capital or what cap costs have been in for model year 09, 10 and 11 and also could you talk about the potential for increasing your value for used cars.

Scott Thompson

Your last question broke up Michael. What is the last part of your question?

Michael Millman - Millman Research Associates

The potential to improve your returns on used-cars by going more of auction. Okay, go retail. Thanks.

Scott Thompson

Okay, go retail. Thanks.

Cliff Buster

With - your first question Michael, with respect to the cap cost from the 09s and 10s. Those generally ran on average about $16,500, $16,600. We are looking at the 11s, we're early into our model year negotiations. We gotten a significant block of the cars negotiated with board, we're probably striking to be somewhere between $16,700 and $17,000 per car on a net cap cost.

Scott Thompson

I think that would probably compare pretty favorably with some others in the industry and that is generally because our customers do not require quite the amenity load that some other brands require, and so I think from an overall car cost, I would expect our car cost to be lower on a per car per month than some others.

Michael Millman - Millman Research Associates

And when you ask about what potential of moving basically from the wholesale channel to the retail channel in remarketing used cars and what’s that numbers are currently.

Scott Thompson

Right now we're selling wholesale. We are not selling any of our used cars retail, that is something that we will probably continue to look at but I do not think that is something we will be doing quickly. But that is something we will continue to look at. Right now we're maximizing the value from wholesale standpoint by using our own sales force here in Tulsa and using the options to flex up when we need to move more cars through that system than our current sales force can sell. And over the long term I think the company will probably explore selling some of these cars retail but I don't think that is something we will be doing in the next couple of quarters. The potential is actually very big, probably the difference between wholesale and retail in the used car market is probably over a couple of thousand dollars per unit, but that is also a complex area to jump into retail but we are studying it.

Michael Millman - Millman Research Associates

All right, thank you.

Operator

Our final question comes from Sachin Shah of Capstone Global Markets.

Sachin Shah - Capstone Global Markets

Just as a follow-up. I just wanted to find out which some of this kind of terrorist activity out there. Can you just remind us if this has any impact directly on the results for the fourth quarter or have you seen any impact on results and just can you just remind us what impact it has had in the past in relation to some of the things that are kind of going on?

Scott Thompson

I'm not sure exactly what you are asking me.

Sachin Shah - Capstone Global Markets

Have you seen any impact over the past few days with some of the news coming out as part of the packages.

Scott Thompson

No, we have not seen any slowdown in bookings in the last, call it a week nor have we seen any impact in our tour business from overseas people coming in. So I guess we did not understand your question first. We have not seen any impact from any of the events you have seen in the news.

Sachin Shah - Capstone Global Markets

Okay and traditionally if you do see an impact how long does it kind of filter through. Do you see it right away or is there a lag.

Scott Thompson

Anything that would impact the number of travel orders line on the airlines would impact our business immediately, because generally where our customers come from, but again, I have not seen any impact near-term.

Sachin Shah - Capstone Global Markets

Okay, thank you very much.

Operator

I would like to turn the call back over to you Scott.

Scott Thompson

Thank you. We appreciate the opportunity to serve and thank you for your time today. On behalf of the board of directors, I would like to thank our over 6000 employees for their many contributions to the company's success. I would also like to thank our suppliers, lenders and shareholders for their ongoing support and confidence in our strategies and ability to execute, operator that concludes our call today.

Operator

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Source: Dollar Thrifty Automotive CEO Discusses Q3 2010 Results – Earnings Call Transcript

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