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Executives

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

Scott L. Thompson - Chairman, Chief Executive Officer and President

H. Clifford Buster - Chief Financial Officer, Senior Executive Vice President and Treasurer

Analysts

Adam Jonas - Morgan Stanley, Research Division

Afua Ahwoi - Goldman Sachs Group Inc., Research Division

Michael Millman - Millman Research Associates

John M. Healy - Northcoast Research

Christopher Agnew - MKM Partners LLC, Research Division

Stephen O'Hara - Sidoti & Company, LLC

Dollar Thrifty Automotive Group (DTG) Q2 2012 Earnings Call August 1, 2012 9:00 AM ET

Operator

Welcome, and thank you for joining the Dollar Thrifty Automotive Group's Second Quarter Financial Results. [Operator Instructions] This conference is being recorded. If anyone has any objections, you may disconnect at this time.

I would now like to introduce Vicki Vaniman, Executive Vice President and General Counsel.

Vicki J. Vaniman

Thank you. Good morning, and welcome to the Dollar Thrifty Automotive Group, Inc. Second Quarter 2012 Earnings Release Conference Call. Scott Thompson, Chairman, 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 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 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 our company website, dtag.com, under the Investor Info tab.

And now, I would like to turn the call over to Scott to discuss our second quarter earnings.

Scott L. Thompson

Thank you, Vicki, and good morning, everyone. Our results today mark not only another quarter of year-over-year improvement in profitability but also a record quarter for the company. The 24% increase in earnings per share resulted in the company achieving the highest earnings per share for the second quarter of the company's history. Customer-driven growth in rental base, improved vehicle utilization, a strong used vehicle market, continued emphasis on cost controls combined with the benefits of our share repurchase program to drive our quarterly performance.

Now for some details. Net income for the quarter was $49.4 million, or $1.69 per diluted share, compared to net income of $42.5 million, or $1.36 per diluted share, in the second quarter of 2011. Corporate adjusted EBITDA increased to $88.3 million compared to $81.2 million in the second quarter of 2011. Rental revenues for the second quarter of 2012 were consistent with prior-year levels. A 4.2% increase in rental days was effectively offset by a 3.8% decrease in revenue per day.

In light of the relatively flat current economic environment, we are pleased with the continued growth in rental days, although somewhat disappointed by the pricing environment in the industry.

Dollar Thrifty continues to be focused on return on assets and is avoiding booking unprofitable transactions. Revenue per units totaled $1,077 per unit per month for the second quarter of 2012 compared to $1,080 per unit per month for the second quarter of 2011.

An increase in utilization enabled us to offset the year-over-year softening pricing environment without adding incremental fleet.

Fleet cost trends for the quarter continued to be positive with fleet cost per vehicle for the second quarter of 2012 declining to $162 per month compared to $188 per month for the second quarter of 2011.

During the second quarter of 2012, we realized gains on sales of risk vehicles of $22.5 million compared to $17.8 million in the second quarter of 2011.

Now, I'd like to touch on a couple of non-financial highlights for the second quarter. First, I'm proud to announce that in June, our Australian licensee was named 1 of only 2 rental company suppliers to the Australian Federal Government under a 3-year exclusive contract. Beginning in July, Thrifty Rental Car will supply rental cars to 112 departments and agencies of the Australian Federal Government with another 84 agencies eligible to join after the initial rollout. This is an example of our brand's improved competitiveness and recognizes the quality of our products and services. We congratulate our Australian partners on this huge win. DTG will benefit from this via franchising fees.

Turning to our customer-choice program, we continue to expand our choice services that were initially rolled out in 2009. Choice allows the customers a fast rental experience and the ability to choose any car in their reserved car class. It has been very well received by our customers. We recently converted our 31st location to choice. As of quarter end, over 50% of our total rental transactions are serviced through choice locations.

Lastly, I'm proud to announce our continued expansion of our brand representation through to both corporate store openings and new franchise locations. Our goal is to achieve a 2% revenue growth annually through new corporate store openings. Through June 30, we opened 2 new airport locations, JFK in New York and Brownsville in Texas. Also, in July, we opened 1 additional airport and 4 off-airport corporate locations.

On the franchising front, we had 18 new franchise locations opened during the quarter, including 1 in the U.S. and 17 international locations. This brings the total number of franchise openings year-to-date to 42, including 8 locations in the U.S. and 34 international locations.

Cliff will now review the additional financial highlights for the quarter.

H. Clifford Buster

Thanks, Scott. Turning to Table 1 in the press release, rental revenues for the second quarter of 2012 were $379 million compared to $378 million in the second quarter of 2011. Our vehicle utilization for the quarter increased to 80.3% from 77.4% in the comparable prior-year period.

Selling, general and administrative expenses in the second quarter of 2012 declined $1.4 million compared to the second quarter of 2011, primarily due to there being no merger-related expense incurred in the second quarter of 2012 compared to $1.1 million of merger-related expenses in the second quarter of 2011.

Direct vehicle and operating expenses in the second quarter of 2012 increased $5.5 million compared to the second quarter of 2011. The increase in DV&O was primarily attributable to higher favorability in our insurance programs in the second quarter of 2011 compared to the second quarter of 2012.

Vehicle depreciation expense for the quarter decreased 13.5% from $66.5 million in the second quarter of 2011 to $57.5 million in the second quarter of 2012. The decrease is attributable to a year-over-year increase in total vehicle gains as well as reduced based depreciation rates primarily on 2010 model year vehicles.

During the second quarter of 2012, the company sold approximately 18,700 vehicles at an average gain of $1,206 per vehicle compared to approximately 8,400 vehicles sold in the second quarter of 2011 at an average gain of $2,116 per vehicle. The decline in the gain per unit reflects our ongoing efforts to refine residual value estimates and depreciation rates to more closely align with market conditions at the time of disposition.

We expect the gain per units sold will continue to moderate in future periods based on the refinement and depreciation rates resulting in less quarterly volatility in fleet costs. I should note the decisions on the volume of dispositions will continue to materially impact individual quarterly performance.

Interest expense, net of interest income, totaled $15.3 million for the second quarter of 2012 down from $18.3 million for the same period last year. We expect to see additional interest savings on a year-over-year basis for the next 4 quarters.

Before moving on to balance sheet highlights, I would like to reiterate that consistent with our disclosure last quarter, our earnings per share for the quarter and in our guidance for 2012 reflects the company's current expectations that it will be a cash taxpayer in 2012. If tax regulations change favorably with respect to bonus depreciation methods, it could negatively impact our diluted shares outstanding and positively impact our free cash flow. I should also note that we did not factor in any future share repurchase activity in our 2012 expectations.

Now turning to Table 2 of the press release. Cash and cash equivalents totaled $285 million as of June 30, 2012 compared to $509 million as of December 31, 2011. Restricted cash totaled $199 million as of June 30, 2012, down from $353 million as of December 31, 2011. The decrease in both unrestricted and restricted cash is attributable to the seasonal investments in our rental fleet in addition to utilizing excess unrestricted cash to provide collateral enhancement under our fleet financing facilities rather than incurring additional interest expense by using letters of credit.

As noted in our press release this morning, during the quarter, we reduced letters of credit outstanding for collateral enhancement in our securitization by approximately $145 million and replaced that collateral with excess cash. This action is expected to save the company approximately $6 million annually in interest expense. Based on this reduction in the letters of credit and seasonal increase in enhancement requirements due to the increase in our fleet size, we increased our investment in our securitization trust for collateral enhancement purposes to approximately $670 million as of June 30, 2012.

Revenue-earning vehicles, net of depreciation, totaled $2.1 billion at June 30, 2012, an increase of $640 million from December 31, 2011 levels. The increase in the book value of the fleet since year-end is attributable to 2 factors: the first of which is seasonal increases in fleet levels to meet peak demand. Additionally, we have undergone significant fleet refresh during the first half of 2012, which resulted in an increase in the average depreciated cap cost per vehicle due to a significantly newer fleet compared to year-end. We continued our disciplined focus on fleet as part of our overall goal of maximizing return on assets.

The average fleet operated during the quarter increased only 40 basis points or approximately 500 units when compared to the prior-year period. And as I've previously mentioned, fleet utilization improved over 350 basis points year-over-year.

Vehicle debt increased $162 million from December 31, 2011 to June 30, 2012, with vehicle debt now totaling $1.56 billion.

Now turning to liquidity and capital resources. As I've previously mentioned, the seasonal investments in fleet were funded utilizing a combination of restricted cash, borrowings under our fleet financing facilities and unrestricted cash, including the use of unrestricted cash to meet collateral enhancement requirements totaling approximately $670 million. We retained the flexibility to replace the portion of this cash collateral enhancement by utilizing either borrowings under the revolving credit facility or the issuance of letters of credit under that facility at our discretion. As of June 30, we had approximately $385 million of available capacity under our revolving credit facility that could be utilized for this purpose.

As we noted earlier and during our first quarter call, we do expect to be a cash taxpayer in 2012, although at a level substantially below the statutory rate for federal tax purposes. We currently expect approximately 40% of our book tax provision, which includes both federal and state taxes, will be paid on a current basis in 2012.

We ended the quarter with tangible net worth of $663 million and no corporate indebtedness.

I'll now turn the call back over to Scott.

Scott L. Thompson

Thank you, Cliff, great job. I'll now touch briefly on merger noise in the marketplace. As I'm sure you will respect, due to the nature of the situation, my lawyers have limited my communications. Neither Hertz nor anyone else has made a current offer to purchase the company, yet there is a persistent stream of reports regarding commitments made to the FTC by Hertz to carve up our company in the context of hypothetical transactions. This naturally creates anxiety and uncertainty for our employees and our business partners. As such, we have communicated our concerns to senior officials at the FTC. We believe that after 3 years it is either time for a compelling offer to be made or this process to come to an end, so the company can move forward without distractions of merger noise in the background.

Our position has been clear and consistent. Absent a compelling offer that fully recognizes our fair value and appropriately shares the value creation resulting from the last major consolidation in the domestic rental car industry, we'll move forward under our stand-alone plan, focusing on maximizing long-term shareholder value.

Now, I'd like to briefly discuss share repurchases. Since February, the company has returned approximately $130 million of cash to shareholders, repurchasing approximately 1.8 million shares of its stock. As of June 30, the company has remaining authorization of approximately $270 million under board-approved share repurchase program. The share repurchase program has had to be managed around open and closed windows, which at times has impacted the program. As I stated last quarter, the company continues to evaluate all available options and methods of returning cash to shareholders while focusing on the long-term success of the company.

Turning to 2012 outlook. We're updating our revenue guidance based on the trends experienced through the first half of 2012. We expect the continued rental day growth, mitigated somewhat by compression in RPD, will result in full-year 2012 rental revenue increasing modestly compared to 2011. From a fleet cost perspective, we continue to benefit in the strength of the used vehicle market. In our prior guidance, we anticipated notable softening in the used vehicle market in the first half of 2012 as compared to the same period in 2011. Used vehicle market and our remarketing efforts for the first half of the year outperformed our expectations.

We expect, subject to normal seasonality, these trends to continue at least through the back half of the year. I do need to point out, however, that the total gains on sale of risk vehicles will decline significantly in the back half of the year as our fleet refresh cycle winds down.

Based on our remarketing activity during the first half of the year and expectations for the used vehicle market, we are improving our fleet cost outlook for full-year 2012, which now is expected to be within the range of $200 to $210 per vehicle per month.

Our expectations for 2012 is that the improvement in fleet cost, I just discussed, will be mostly offset by a change in the revenue mix between volume and price. Accordingly, we are reaffirming our prior guidance of corporate adjusted EBITDA for the full-year 2012 of $285 million to $310 million. Based on share repurchase activity, that has been completed through June 30, 2012, we're increasing our guidance for diluted earnings per share to be within the range of $5.25 to $5.70 per share for 2012.

As you are aware, we don't normally give targets for balance sheet items. However, given the complexity of our seasonal use of cash for collateral enhancement as created for investors, I would like to provide some limited information on our expectation for unrestricted cash.

We currently expect that unrestricted cash balance at September 30, would be in the neighborhood of $425 million and would further increase to $525 million as of year-end. I would point out that these estimates are before consideration of any additional share repurchases and assumes we do not reissue letters of credit for fleet financing. These numbers can be materially impacted by changes in fleet costs or working capital items.

In conclusion, profitable transaction growth, rigid cost controls, disciplined fleet management are key tenets to our operating philosophy. Our well-established value brand, low operating costs, nimble operating structure, strong balance sheet and a shareholder-focused management team are the key elements to our future success.

Thanks certainly go out to our over 5,900 employees for their efforts every day in helping the company achieve its goals. Additionally, I'd like to thank our suppliers, strategic partners, lenders and shareholders for the ongoing support.

Lastly, as we have said in the past, the board will appropriately evaluate all alternatives in seeking the best results for our investors. As we have in the past, during 2012, we continue to maintain open communication channels with all potential strategic partners.

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

Question-and-Answer Session

Operator

Our first question comes from Adam Jonas of Morgan Stanley.

Adam Jonas - Morgan Stanley, Research Division

A question first on pricing -- and Hertz's results a couple of days ago showed an impressive 1.4% increase in on-airport domestic leisure and people thought, going into this that might have been a good read for you. Are we going to read that, that we really can't look at it that way -- at the low-end, things clearly are a bit more competitive? And as a follow-on, has the growth -- pretty phenomenal growth of the advantage brand had an impact on your pricing in the market?

Scott L. Thompson

That's about 5 questions, let me see what [indiscernible]. First of all, I don't know how Hertz slices their RPD, when they sliced a Hertz classic versus Advantage and it's very difficult at times to tell what a leisure customer is and a business customer. Some of our customers are business customers but they are not under contract, so it's a little bit hard to kind of slice up the pie. I guess I'd make a couple of comments. I expect that probably, from an RPD standpoint, geographic concentrations probably have more to do with RPD differences between companies than anything. We have particular markets where RPD is up and up significantly from last year, and we have markets where RPD is down and down significantly from last year. So I think geographic concentration differentials is probably the biggest issue. You asked specifically about the Advantage brand and I can tell you from our perspective, the Advantage brand is not impactful to our pricing. We pretty well price with the Enterprise group, primarily the Enterprise brand, a little bit lesser degree to the Alamo brand and that is our primary competitor and really who we fight day to day in the marketplace. The Spartan brand, whether it be the good folks at Fox or U-Save or Advantage, all quality products but they really don't impact our day-to-day pricing decision. It's really -- we price with Enterprise.

Adam Jonas - Morgan Stanley, Research Division

Great. And can I ask 1 follow-up on the second-half implied depreciation from your guidance?

Scott L. Thompson

It's a violation of our policy, but we'll let you go. Go ahead.

Adam Jonas - Morgan Stanley, Research Division

well, you gave the full-year outlook, so maybe let's see where this goes. But if we took the $200 to $210 depreciation per unit, the fleet cost per unit at face value, that would imply over $250 -- well over $250 per unit in the second half of the year, up around 30% year-on-year. I just want to make sure that I'm looking at that like-for-like, that the $130 in change and then $160 -- slightly over $160 per unit.

Scott L. Thompson

Let me give you some comments on that, but I'm not going to do a modeling discussion on the earnings call. But we've given you obviously what the fleet cost we incurred for the first 6 months. We've given you the guidance and so. From that, I think you can probably do your modeling. I think what you have to keep in mind is that at times when we defleet and so a significant number of cars as we manage the fleet as opposed to Advantage earnings, you're going to have great volatility in fleet costs. So that's the big swing. The other big swing that you have to keep in mind is the back half, primarily the fourth quarter is probably the worst time to be selling cars, and you're going to have the lowest gain per unit historically in the industry. I think you have to keep all of those things in mind as you kind of work -- as you work through the numbers.

Adam Jonas - Morgan Stanley, Research Division

That's very clear, Scott. And just to confirm, you -- would there be any implied change in the days rate DNA in that full-year guide as well versus the first half or was it just -- or are we just to think that it's off -- the off dispositions that's been mainly moving the needle here.

Scott L. Thompson

The significant swings in fleet cost would be volume of dispositions and timing of sales within the seasonality...

Operator

Our next question is from Afua Ahwoi of Goldman Sachs.

Afua Ahwoi - Goldman Sachs Group Inc., Research Division

I actually just have a question, I wanted to ask a pricing question a little differently. I think on Hertz's call, they mentioned some competitive pressures in the devalue segments of the car rental business and obviously that's where you guys operate too. I was hoping you could elaborate a little bit on; a, what sort of competitive pressures we're seeing? Is it new entrants in the markets? Is it existing entrants being a little more aggressive? And I know you mentioned a little bit about geographic, but I was just wondering if you could see if it's new and if we can expect that to be going forward.

Scott L. Thompson

Yes, I can say that I don't know of any new entries into the marketplace that have been significant. As far as what to expect -- as I mentioned before, our primary company that we compete against is the Enterprise organization, which we have found to be very tough competition, a very good management team, high-quality company, but at the same time, rational from a pricing standpoint. At the time, you also have to think that from a Dollar Thrifty standpoint, we're really not the devalue that I think you're talking about, the way we think about the market, devalue is generally the -- what we think we call Spartan brands, high-quality companies like Advantage, Fox, U-Save and they really aren't our prime competitors.

Operator

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

Michael Millman - Millman Research Associates

And I guess more on pricing. Fleets are generally considered to be reasonably tight. Why does that not have its usual impact on pricing? And also maybe you can give us some view as to what some of your new locations owned and franchisees may mean for revenue and earnings looking forward.

Scott L. Thompson

Thank you, Michael. I think if you go back -- if you remember last year, if you're going to look at last year's earnings conference call, I think, in general, the industry said, "Look, the fleets were a little bit loose. We all kept cars because of the tsunami." And what happened, it looks like, so far in the second quarter, is that as opposed to getting rates up versus last year, what really happened is we tightened up utilization and we really managed RPU as opposed to RPD. And if you look at RPU, you can see that basically RPU was flat and that we offset the pricing decline with better utilization. I can tell you that from a Dollar Thrifty standpoint, I think what you said, Cliff, that our fleet was flat [ph] up 40 basis points or 500 cars. So from our standpoint, we did not put excess capacity into the second quarter. And I guess, I'd have -- you'd have to go check and see what other people's fleeting levels were. But look, it's gotten better from a utilization standpoint and we continue to see relatively good discipline in the industry when you consider how far our costs have come down when you look at fleet costs. I think others have pointed it out in a lot of detail and I think it is accurate that if you go back and look at changes in fleet costs, they do have a tendency to impact changes in RPD. Another way to say it is, over time, when fleet costs are coming down, the industry gives back a little bit of that savings to its customers. At the same time, if fleet costs move up, they have a tendency to go get some of that from their customers over a period of time, not perfectly, but within a few quarters.

Michael Millman - Millman Research Associates

And the other question related to some of the new locations?

Scott L. Thompson

Yes, I said in the prepared remarks that we're targeting for about a 2% revenue growth standpoint from corporate stores going forward. And from a franchise standpoint, we're looking to try to get franchise revenues up 5% to 10% annually.

Operator

Our next question is from John Healy of Northcoast Research.

John M. Healy - Northcoast Research

I wanted to ask a little bit about the used car market. There has been so much commentary regarding where the used car market has been going, with the Manheim Index kind of sliding down in the next couple of months. Can you give us a little bit more color on just your overarching view of the used car market maybe for the next 18 months or so and as well as maybe what's implied, I don't know, from a Manheim index level, if you want to talk to that, in your assumptions for the remainder of the year?

Scott L. Thompson

Sure. First of all, the Manheim Index is something that people should watch but not fall in love with. It is certainly good from a standpoint of looking at the trajectory of used car prices, but you really can't go from a Manheim 125 to 103 or something to try to make the math work and compute the EPS. It's just an indicator of direction. And within the Manheim Index, there are various cars actually going up and down in the different classes, generally based on gas prices. So [indiscernible] watch it but don't just fall in love with it. You, kind of, said the framework. When we were in 2011, the used car market was very good. It clearly had some feel that the 2011 used car market had some bubble in it. There was some panic buying related to a shortage due to [indiscernible] manufacturers and the tsunami. And our expectation '12 was that it cooled off -- and it has cooled off a little bit but not very much. I think when you get to 2012, actually the used car market is healthier than it was in '11 because what's driving the 2012 used car market is demand. It's not a supply shortage caused by tsunami, it is flat demand. And let me give you a couple of data points that I keep an eye on. I watch the public automobile retailers closely, that'd be Asbury, Group 1, AutoNation, CarMax and Lithia; all quality companies retailing a lot of used cars. And if you go look at their recorded numbers for their second quarter, you'll see their average used car rental rep -- their used car revenue is up double digits and the volume in units is up double digits, okay? It's a good new car market, but it is a good used car market. And I think as long as the U.S. economy is relatively flat and consumers are still struggling with debt and still somewhat unsure from a consumer confidence standpoint about their job, I think that makes the used car product very, very much in demand. And so, I quite frankly am a bull for the next couple of years in the used car market. If you look at our used car sales -- and Cliff, help me with the numbers. I'm going to say that we -- probably the average sale of our used car wholesale is probably around 12,000, give or take.

H. Clifford Buster

That's a little bit higher.

Scott L. Thompson

Oh, 12,000 to 13,000, call it normal gross profit, probably a couple of thousand at retail. You're talking about a price point to the customer at $15,000 for a car that has a lot of life left in it compared to a new car where the average transaction price is getting close to $31,000. So look, there's going to be some seasonal declines in demand without question. It should track down from here until probably next January. That's just normal seasonality. And then I suspect it will be a little less robust next year, but still very good.

Operator

Our next question is from Christopher Agnew of MKM Partners.

Christopher Agnew - MKM Partners LLC, Research Division

Scott, thanks. That's a helpful explanation, but just a follow-on from that. Because you mentioned normal seasonality. In the last few years have definitely been disjointed. I mean any indications, sort of, magnitude-wise, what normal seasonality is and then I have another follow-up.

Scott L. Thompson

No. I mean, I would expect the seasonality for the back half of this year to look like probably the average seasonality over the last 5 years. I mean -- so I don't expect it to be much different from a seasonality standpoint. So -- the main thing we look at, and I think you probably know, is it's really important, is the start of next year, the '13 and the selling season, because that sets the tone really for the whole used car market for the balance of the summer. We're not selling very many cars in the back half of the year as Cliff alluded to in his prepared comments. So where the seasonality is in the back half of the year is probably not that significant to us. The significant issue for us always is how the selling season starts in the first quarter. And go ahead, ask your question.

Christopher Agnew - MKM Partners LLC, Research Division

Yes. And would you be comfortable putting leverage on the balance sheet in the current economic environment? And what's sort of the right level to think about given the current market conditions. You revolving -- you mentioned the revolving credit facility, I think, is $385 million. Is that a good place to start?

Scott L. Thompson

Yes. I guess, first of all, I mean, from a historical perspective, we have always said that this company needs some corporate leverage, that running it without any corporate leverage was not the right capital structure, but the timing of when we relever the structure would depend on a lot of things. Yes, look, I think things look pretty good. I mean, the dev market is really good and we certainly continue to watch it. Certainly, Europe is a concern that we keep an eye on. But look, we don't have any corporate operations in the EU and EU business is relatively insignificant to us, so we are not -- we don't have a lot of exposure to some of that stuff. And as you can see, the company is generating a lot of free cash flow. So, yes -- so we're continuing to look at that. We have some other things we need to work through. And I think you probably -- we've mentioned on the call earlier, it makes some sense to finish whatever is going off from a strategic standpoint with other large rental car companies before we do that. But it's certainly something we're comfortable doing. It's something we said that we would certainly consider in the future.

Christopher Agnew - MKM Partners LLC, Research Division

Got you. And can I squeeze in one more?

Scott L. Thompson

Sure, everybody else does.

Christopher Agnew - MKM Partners LLC, Research Division

Can you just give us some color on the monthly pace of RPD trends through the quarter? And if possible, what you're seeing also in July?

Scott L. Thompson

Yes. The -- I don't have the detailed numbers right in front of me. Off the top of my head, I would say that June and July were disappointing and then it would appear that the rates have firmed up after July, just to comment from a general trend standpoint. But still, what I'd call slightly negative. It's kind of where we sit today.

Operator

Our next question is from Steve O'Hara of Sidoti & Company.

Stephen O'Hara - Sidoti & Company, LLC

In terms of your comments on -- regarding Hertz and the FTC, I mean, am I right to say that your frustration is more with the FTC at this point, or no?

Scott L. Thompson

I don't believe that's what I said. I mean, look, we have the utmost respect for the FTC and their mandate. We believe they've been thorough. We believe they've been professional in this multi-year process.

Stephen O'Hara - Sidoti & Company, LLC

Okay. Okay, and I guess just in terms of the buyback, I mean, it seems like you guys are going -- obviously, your cash balance is going to continue to build. Any thoughts on increasing the size of the buyback or maybe getting more aggressive with it?

Scott L. Thompson

Well, we've certainly got plenty left. We have $290 million. Cliff, you okay?

H. Clifford Buster

$270 million.

Scott L. Thompson

$270 million left in the current authorization, so we got quite a bit of room already authorized. I think the question of pace is certainly a good question and we'll report our activity at the end of every quarter. As I mentioned in my prepared remarks, maybe we didn't do as good at planning as we should have and that the strategic stuff has stretched out longer than we expected and closing or opening windows has certainly impacted our ability to be as aggressive as we might otherwise have been. But it's -- clearly, part of a go-forward plan is to return cash to our shareholders.

Operator

Our next question is from Jordan [ph] Hymowitz [ph] of Smith Financial.

Unknown Analyst

I'll ask one question just to break the trend a little bit here. The $36.8 million in gains in the first 6 months, usually between 17% and 18% of your gains in the first half of the year, is that a good run rate for this year?

Scott L. Thompson

I'm kind of looking at Cliff? I'm not sure because, look, we really -- it just depends on the ordering from the OEMs, how deliveries are coming and everything. I would guess that we probably sold quite a bit the first 6 months compared to back half of the year. We probably -- we aren't going to sell that much in the back half of the year. Our fleet is in good shape. We've done a significant refresh. And we do a basically a significant refresh every other year is kind of the way the fleet plan works out.

Unknown Analyst

So it could be even less than 20% sold in the back half of the year is what you're saying?

Scott L. Thompson

It could be.

Unknown Analyst

But it's not going to be substantially more than 20% or 30%?

Scott L. Thompson

It will not be more. If anything, it'll be less.

Unknown Analyst

Okay, that's what I was trying to get at. And are you assuming approximately the same gain per vehicle in the second half as in the first half?

Scott L. Thompson

No. As was discussed in the prepared remarks, we believe the gains per vehicle should come down as were sell -- we sold quite a few model '11s in the first half of the year and we have fewer model '11s we're selling. So no, the per gains should come down and as Cliff mentioned before, we're working to try to gear our depreciation so that the gains per vehicle come down. Obviously, we think that will be better for the street to understanding the numbers, because these big gains per vehicle really skew quarterly numbers and give some analysts a challenge in doing their estimates.

Operator

Our next question is from Adam Jonas of Morgan Stanley.

Adam Jonas - Morgan Stanley, Research Division

Your comments about the distraction of the whole process, are you able to quantify the distraction in economic terms? I'm not asking for a dollar figure here, of course. But is this just an issue of morale and tension with your counterparties and stakeholders, or would you actually say you're actually feeling a tangible impact on the business itself?

Scott L. Thompson

You are really just trying to get me in trouble with my lawyers aren't you?

Adam Jonas - Morgan Stanley, Research Division

Of course, I am.

Scott L. Thompson

Let's see, how can I quantify? I can quantify it in hair loss of the CEO and CFO for sure. But in all seriousness, look, this has gone on a long time. It is stressful on the employees. We have lost a few employees that I wish we had not lost, who we lost directly related to this situation. And that's -- and if it's even just one employee that's a tough situation, high-quality people. It has impacted us at times when we have been negotiating with strategic partners because in trying to do things that are long-term in the best interests of the company, you might guess, when you have a strategic partner on the other side, they have to ask the question of what happens if you get bought by another large rental car company. And at times, that have complicated some things we wanted to do going forward. I don't think I could put a dollar figure on it. And look, I think the workforce has done a great job. Productivity is up. The HR department has done a great job being able to hire people. But look, at some point in time, we need to move forward. And certainly, it has slowed down what we would be doing from a return cash to shareholder perspective as we patiently kind of wait through this process to determine what is in the best interest of our shareholders. So hopefully that helps.

Operator

Our next question comes from Peter Gibson [ph] of Eminence Capital.

Unknown Analyst

I want to focus first, just looking at your reduction in depreciation guidance of about $20 or $30 a month. On my numbers that works out to about to -- around $35 million versus unchanged EBITDA guidance. So you mentioned this is coming in price and volume but I look at that versus the $120 million, the $140 million EBITDA guidance you have for the back half and $35 million just seems like a big number, I was just wondering if you could give us a little more sense of what exactly is driving that and whether that's a temporary phenomenon or more of a lasting phenomenon.

H. Clifford Buster

This is Cliff, I'll attempt to address that. When we put out our initial guidance at the beginning of the year, we said that we expected revenue to be up about 3% to 5%. We said we expected most of that to come from transaction volumes, which would've implied that pricing was flat. If you've looked at our sensitivity to changes in RPD, you'll know that about $0.85 of every dollar of a change in RPD, good or bad, hits the bottom line. And so what you should infer from the -- confirming the guidance on the EBITDA is that our expectations now, compared to what they were at the beginning of the year, is that RPD will not be flat for the full year. It will actually be down. And as a result of it being down, given its flow through to the bottom line, it will offset the majority of the improvement and the depreciation rates. Is the way you should think about that.

Unknown Analyst

Okay, okay. That's helpful. And then looking at the bigger picture at the depreciation rates, the $200 to $210 a month this year, I guess that compares -- as you look over the last 5 years, you guys have averaged about $300 per month, I know some of those periods have been high, and some a lot lower but when you step back and look at a period, I guess current year -- in some ways, you're benefiting from higher depreciation in prior periods right now, when you sell the cars. If you took all that away and you looked at this on a multi-year basis, 2, 3, 4 years forward, how should we be thinking about the proper depreciation month -- depreciation cost per month?

H. Clifford Buster

We're obviously not giving guidance for 2013 yet, but what I would tell you is in that period of time, you hit it exactly on the head. You need to throw out, in particular, the 2008 year. If you look at subsequent to 2008 and look at where we were in 2010, 2011, 2012 after the market stabilized, what I think you would see is a fleet cost of about $240, a fleet cost of about $210 in guidance this year for $200 to $210. Obviously, we've benefited from the strength of the used car market. And as noted, we expect it to increase in the back half of the year. But I don't think, $300 in terms of a normalized fleet cost is anywhere on our radar screen at this point. I think that's about as far as we're going to go today. We're not going to give guidance for '13 just yet.

Scott L. Thompson

The only thing I would add to that is people get balled up a little bit in the accounting because you're right, there is some timing differences, but these cars only have an 18-month life. So I mean, if you want to adjust numbers to adjust depreciation and make sure you put the earnings back in the period where you think it was over depreciated and then maybe average the periods. You can't just take it out and assume it's not there. You've got to adjust the prior numbers too. And so, we run some pretty good numbers over the last few years.

Unknown Analyst

Okay. I think that's fair. And then guys do you mind if I squeeze in one last final one?

Scott L. Thompson

It better be short.

Unknown Analyst

When you look at the car you buy today, you're probably going to be selling in 2014, maybe even it even falls in the 2015. And I guess the depreciation rate that you're booking on that car is pretty heavily impacted by the price you assume that you can sell that car at in 2 to 3 years out. So I'm just curious, how would you describe your 2015 sale price assumptions compared to -- I guess, compared to whatever metric you'd want to compare it to, current market or long-term averages or whatever?

Scott L. Thompson

Let me give you a little bit of help with that. First of all, I think the significant question that probably we didn't get asked, but people need to think about is what's going on with your cap cost? What's going on with the cars you're buying today? Is the price going up? Because that's the first start of it. And the first thing I need to tell you is the OEMs have been very fair with Dollar Thrifty, very supportive of Dollar Thrifty being a stand-alone company. And our cap cost for this year's model, which will be -- that'd be the '13 model, I suspect our overall cap cost for all of our '13s will be either equal or less than our overall cap cost per vehicle for our '12s. So that's the first piece of information that I think you probably need as you think through in what you're trying to do. And I would call that good news from our perspective. The second thing you need to know is, we don't just set the depreciation number when the car shows up and then not worry about it until we sell the car. There's an extensive process that goes on every month where a group of people review every car in the portfolio and change the depreciation if it needs to be up or down based on what we're seeing in the marketplace and that's a process that has gone on for years. And so we're constantly adjusting depreciation up and down as we get closer to the disposition of the car, if that helps you.

Operator

This concludes the question-and-answer session. I'd like to turn it back for closing remarks.

Scott L. Thompson

Thank you. We appreciate everyone's time and interest today. Operator, that concludes our call.

Operator

This concludes today's presentation. Thank you for your participation. You may now disconnect.

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