10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______________to______________

Commission file number 1-13647

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation or organization) 73-1356520
(I.R.S. Employer
Identification No.)

5330 East 31st Street, Tulsa, Oklahoma 74135
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code:   (918) 660-7700

Indicate by check mark whether the registrant  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and  (2) has been subject to such filing requirements for the past 90 days:   Yes   X     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act:

                             Large accelerated filer  X       Accelerated filer    Non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):   Yes   No   X   

The number of shares outstanding of the registrant’s Common Stock as of April 28, 2006 was 24,643,525.

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
FORM 10-Q

CONTENTS

Page

PART I  -  FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS 3

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF

        FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18

ITEM 3.     QUANTITATIVE AND QUALITATIVE

        DISCLOSURES ABOUT MARKET RISK 24

ITEM 4.     CONTROLS AND PROCEDURES 25

PART II  -  OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS 26

ITEM 1A.   RISK FACTORS 26

ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES

        AND USE OF PROCEEDS 26

ITEM 6.     EXHIBITS 27

SIGNATURES 28

FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

Some of the statements contained herein under “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Dollar Thrifty Automotive Group, Inc. believes such forward-looking statements are based upon reasonable assumptions, such statements are not guarantees of future performance and certain factors could cause results to differ materially from current expectations. These factors include: price and product competition; access to reservation distribution channels; economic and competitive conditions in markets and countries where the companies’ customers reside and where the companies and their franchisees operate; natural hazards or catastrophes; incidents of terrorism; airline travel patterns; changes in capital availability or cost; costs and other terms related to the acquisition and disposition of automobiles; systems or communications failures; costs of conducting business and changes in structure or operations; and certain regulatory and environmental matters and litigation risks. Should one or more of these risks or uncertainties, among others, materialize, actual results could vary from those estimated, anticipated or projected. Dollar Thrifty Automotive Group, Inc. undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Dollar Thrifty Automotive Group, Inc.:

We have reviewed the accompanying condensed consolidated balance sheet of Dollar Thrifty Automotive Group, Inc. and subsidiaries (the “Company”) as of March 31, 2006, and the related condensed consolidated statements of income and cash flows for the three-month periods ended March 31, 2006 and 2005. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Dollar Thrifty Automotive Group, Inc. and subsidiaries as of December 31, 2005, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for the year then ended (not presented herein); and in our report dated March 14, 2006, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2005 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

Tulsa, Oklahoma

May 5, 2006

3

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED MARCH 31, 2006 AND 2005

(In Thousands Except Per Share Data)

			Three Months
			Ended March 31,
			(Unaudited)
			2006		2005
REVENUES:
	Vehicle rentals		$	332,724	$	312,953
	Vehicle leasing			12,457		14,526
	Fees and services			12,534		12,276
	Other			4,876		3,045
		Total revenues		362,591		342,800
COSTS AND EXPENSES:
	Direct vehicle and operating			194,712		190,677
	Vehicle depreciation and lease charges, net			58,426		53,587
	Selling, general and administrative			61,998		54,855
	Interest expense, net of interest income			16,105		19,494
		Total costs and expenses		331,241		318,613
INCOME BEFORE INCOME TAXES				31,350		24,187
INCOME TAX EXPENSE				14,424		11,212
NET INCOME				16,926		12,975
BASIC EARNINGS PER SHARE			$	0.68	$	0.52
DILUTED EARNINGS PER SHARE			$	0.65	$	0.49

See notes to condensed consolidated financial statements.

4

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 2006 AND DECEMBER 31, 2005

(In Thousands Except Share and Per Share Data)

		March 31,			December 31,
		2006			2005
		(Unaudited)
ASSETS:
Cash and cash equivalents		$	256,117		$	274,299
Restricted cash and investments			460,640			785,290
Receivables, net			188,164			223,206
Prepaid expenses and other assets			104,665			89,299
Revenue-earning vehicles, net			2,706,846			2,214,991
Property and equipment, net			106,729			108,062
Income taxes receivable			774			-
Software and other intangible assets, net			31,519			28,270
Goodwill			280,091			280,122
		$	4,135,545		$	4,003,539
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable		$	58,756		$	76,616
Accrued liabilities			162,998			166,779
Income taxes payable			-			8,207
Deferred income tax liability			257,417			241,087
Public liability and property damage			101,379			100,613
Vehicle debt and obligations			2,869,122			2,724,952
	Total liabilities		3,449,672			3,318,254
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par value: Authorized 10,000,000 shares; none outstanding			-			-
Common stock, $.01 par value: Authorized 50,000,000 shares;   27,011,425 and 26,921,843 issued, espectively, and   24,858,525 and 25,370,243 outstanding, respectively			270			269
Additional capital			778,329			774,390
Accumulated deficit			(44,878	)		(61,804	)
Accumulated other comprehensive income			21,896			17,148
Treasury stock, at cost (2,152,900 and 1,551,600 shares, respectively)			(69,744	)		(44,718	)
	Total stockholders’ equity		685,873			685,285
		$	4,135,545		$	4,003,539

See notes to condensed consolidated financial statements.

5

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2006 AND 2005

(In Thousands)

					Three Months
					Ended March 31,
					(Unaudited)
					2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income				$	16,926		$	12,975
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation:
			Vehicle depreciation			67,642			67,666
			Non-vehicle depreciation			5,182			5,034
		Net gains from disposition of revenue-earning vehicles				(10,836	)		(16,395	)
		Amortization				1,575			1,386
		Performance share incentive plan				2,291			555
		Interest income earned on restricted cash and investments				(6,263	)		-
		Net losses from sale of property and equipment				34			52
		Provision for/(recovery of) losses on receivables				(129	)		1,004
		Deferred income taxes				13,275			12,126
		Change in assets and liabilities, net of acquisitions:
			Receivables			43,986			20,135
			Prepaid expenses and other assets			(9,673	)		(9,240	)
			Accounts payable			(13,646	)		(14,095	)
			Accrued liabilities			(4,252	)		4,508
			Income taxes payable/receivable			(8,981	)		-
			Public liability and property damage			766			4,356
			Other			(62	)		(131	)
				Net cash provided by operating activities		97,835			89,936
CASH FLOWS FROM INVESTING ACTIVITIES:
	Revenue-earning vehicles:
		Purchases				(1,502,611	)		(1,351,803	)
		Proceeds from sales				953,085			986,123
	Net change in restricted cash and investments					330,913			351,778
	Property, equipment and software:
		Purchases				(10,691	)		(5,844	)
		Proceeds from sales				-			2
	Acquisition of businesses, net of cash acquired					(1,713	)		(2,800	)
				Net cash used in investing activities		(231,017	)		(22,544	)
									(Continued)

6

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2006 AND 2005

(In Thousands)

					Three Months
					Ended March 31,
					(Unaudited)
					2006			2005
CASH FLOWS FROM FINANCING ACTIVITIES:
	Vehicle debt and obligations:
		Proceeds				4,283,937			1,094,097
		Payments				(4,139,769	)		(1,177,799	)
	Issuance of common shares					1,649			8,918
	Purchase of common stock for the treasury					(25,026	)		(11,900	)
	Financing issue costs					(5,791	)		(1,616	)
				Net cash provided by (used in) financing activities		115,000			(88,300	)
CHANGE IN CASH AND CASH EQUIVALENTS						(18,182	)		(20,908	)
CASH AND CASH EQUIVALENTS:
	Beginning of period					274,299			204,453
	End of period				$	256,117		$	183,545
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
	Cash paid for/(refund of):
			Income taxes to/(from) taxing authorities		$	10,115		$	(898	)
			Interest		$	24,208		$	20,447
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
	Receivables from capital lease of vehicles to franchisees				$	865		$	1,106
	Purchases of property, equipment and software included    in accounts payable				$	973		$	-

See notes to condensed consolidated financial statements.

7

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2006 AND 2005

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements include the accounts of Dollar Thrifty Automotive Group, Inc. (“DTG”) and its subsidiaries. DTG’s significant wholly owned subsidiaries include DTG Operations, Inc., Thrifty, Inc., Dollar Rent A Car, Inc., Rental Car Finance Corp. (“RCFC”) and Dollar Thrifty Funding Corp. Thrifty, Inc. is the parent company to Thrifty Rent-A-Car System, Inc., which is the parent company to Dollar Thrifty Automotive Group Canada Inc. (“DTG Canada”). The term the “Company” is used to refer to DTG and subsidiaries, individually or collectively, as the context may require.

The accounting policies set forth in Note 2 to the consolidated financial statements contained in the Form 10-K filed with the Securities and Exchange Commission on March 14, 2006 have been followed in preparing the accompanying condensed consolidated financial statements.

The condensed consolidated financial statements and notes thereto for interim periods included hereinhave notbeen audited by an independent registered public accounting firm. The condensed consolidated financial statements and notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the Company’sopinion, all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods have been made. Results for interim periods are not necessarily indicative of results for a full year.

2. SHARE-BASED PAYMENT PLANS

Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment” (“SFAS No. 123 (R)”) using the modified prospective application transition method. SFAS No. 123(R) revises SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). The Company previously adopted the fair value based method of recording stock options consistent with SFAS No. 123 and accounted for the change in accounting principle using the prospective method in accordance with SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure”, an amendment of SFAS No. 123 (“SFAS No. 148”). Under the prospective method, the Company expensed all stock based compensation granted since January 1, 2003 over the vesting period based on the fair value at the date of grant. The fair value recognition provisions of SFAS No. 123 and SFAS No. 123(R) are materially consistent; therefore, the adoption of SFAS No. 123(R) did not have a material impact on the Company’s condensed consolidated statements of financial condition, results of operation or cash flows.

SFAS No. 123(R) requires the Company to estimate forfeitures in calculating the expense relating to share-based compensation as opposed to recognizing these forfeitures and the corresponding reduction in expense as they occur, as was allowed under SFAS No. 123.

8

Long-Term Incentive Plan

The Company has a long-term incentive plan (“LTIP”) for employees and non-employee directors under which the Human Resources and Compensation Committee of the Board of Directors of the Company (the “Committee”) is authorized to provide for grants in the form of incentive option rights, non-qualified option rights, tandem appreciation rights, free-standing appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other awards to key employees and non-employee directors that may be payable or related to common stock or factors that may influence the value of common stock. At March 31, 2006, the Company’s common stock authorized for issuance under the LTIP was 2,707,687 shares. The Company has 275,109 shares available for future LTIP awards at March 31, 2006 after reserving for the maximum potential shares that could be awarded under existing LTIP grants. The Company issues new shares to satisfy LTIP awards.

Compensation cost for performance shares and restricted stock awards is recognized based on the fair value of the awards granted at the grant-date.The Company recognized compensation costs of $2.3 million and $0.6 million during the three months ended March 31, 2006 and 2005, respectively, for such awards. The Company granted 213,508 target performance shares and 27,511 restricted stock awards during the three months ended March 31, 2006. There were no performance shares or restricted stock awards granted during the three months ended March 31, 2005.

Option Rights Plan – Under the LTIP, the Committee may grant non-qualified option rights to key employees and non-employee directors. The exercise prices for non-qualified option rights are equal to the fair market value of the Company’s common stock at the date of grant, except for the initial grant, which was made at the initial public offering price. The fair market value for each award is estimated using a Black-Scholes option valuation.The non-qualified option rights generally vest in three equal annual installments commencing on the first anniversary of the grant-date and have a term not exceeding ten years from the date of grant. The maximum number of shares for which option rights may be granted under the LTIP to any participant during any calendar year is 285,000.

As of the end of 2004, all stock option rights were fully vested. Therefore, the disclosure of the pro forma results as if the fair value-based method of SFAS No. 123 had been applied is not required for the three months ended March 31, 2005. The Company has not granted stock option rights since January 1, 2003.

The following table sets forth the non-qualified option rights activity under the LTIP for the three months ended March 31, 2006:

				Weighted-
			Weighted-	Average	Aggregate
	Number of		Average	Remaining	Intrinsic
	Shares		Exercise	Contractual	Value
	(In Thousands)		Price	Term	(In Thousands)
Outstanding at January 1, 2006	956		$            17.44
Granted	-		-
Exercised	(89	)	18.41
Forfeited	(3	)	17.19
Outstanding at March 31, 2006	864		$            17.34	4.31	$              24,245
Options exercisable at March 31, 2006	864		$            17.34	4.31	$              24,245

The total intrinsic value of options exercised during the three months ended March 31, 2006 and 2005 was $2.0 million and $7.5 million, respectively. Total cash received for non-qualified option rights exercised during the three months ended March 31, 2006 and 2005 totaled $1.6 million and $8.9 million, respectively.

9

The following table summarizes information regarding fixed non-qualified option rights that were outstanding at March 31, 2006:

	Options Outstanding						Options Exercisable
			Weighted-Average		Weighted-				Weighted-
Range of	Number		Remaining		Average		Number		Average
Exercise	Outstanding		Contractual Life		Exercise		Exercisable		Exercise
Prices	(In Thousands)		(In Years)		Price		(In Thousands)		Price
$10.50 - $17.6875		288		4.93	$	11.93		288	$	11.93
$18.375 - $19.375		410		4.12		19.29		410		19.29
$19.6875 - $23.90		166		3.69		21.89		166		21.89
$10.50 - $23.90		864		4.31	$	17.34		864	$	17.34

Performance Shares – Performance shares are granted to Company officers and certain key employees. The awards granted in 2006, 2005 and 2004 established a target number of shares that generally vest at the end of a three year requisite service period following the grant-date. The number of performance shares ultimately earned will range from zero to 200% of the target award, depending on the level of corporate performance over each of the three years, which is considered the performance period. Effective January 1, 2006, the expense related to performance shares is based on a market based condition as defined in SFAS No. 123 (R) for 50% of the target award and 50% of the target award is based on defined performance indicators. For the awards granted in 2006, the grant-date fair value for the performance indicator portion of the award was based on the closing market price of the Company’s common shares at the date of grant. The market condition based portion of the award was estimated on the date of grant using a lattice-based option valuation model and the assumptions noted in the following table:

Weighted-average expected life (in years)	3
Expected price volatility	30.50%
Risk-free interest rate	4.54%

The target awards granted in 2005 and 2004 were valued at the closing market price of the Company’s common shares at the date of grant.

10

Performance shares earned are delivered based upon vesting of the grant, provided the grantee is then employed by the Company. For instances of retirement, involuntary termination without cause, disability or death, performance share awards vest on a pro-rata basis at 100% of target, but will not be issued until the end of the performance period. Any performance share installments not earned at the end of the requisite service period are forfeited. The following table presents the status of the Company’s nonvested performance shares as of March 31, 2006 and any changes during the three months ended March 31, 2006:

		Weighted-Average
	Shares	Grant-Date
Nonvested Shares	(In Thousands)	Fair Value
Nonvested at January 1, 2006	814	$                    26.16
Granted	214	45.80
Vested	-	-
Forfeited	-	-
Nonvested at March 31, 2006	1,028	$                    30.24

At March 31, 2006, the total compensation cost related to nonvested performance share awards not yet recognized is estimated at approximately $13.0 million, depending upon the Company’s performance against targets specified in the performance share agreement. This estimated compensation cost is expected to be recognized over the weighted-average period of 2.2 years. Values of the performance shares earned will be recognized as compensation expense over the requisite service period. The maximum amount for which performance shares may be granted under the LTIP during any year to any participant is 160,000 common shares.

Restricted Stock Units – Under the LTIP, the Committee may grant restricted stock units to key employees and non-employee directors. The Committee generally grants restricted stock units to non-employee directors. These grants generally vest at the end of the fiscal year in which the grants were made. For the awards granted in 2006 and 2005, the grant-date fair value of the award was based on the closing market price of the Company’s common shares at the date of grant. The following table presents the status of the Company’s nonvested restricted stock units as of March 31, 2006 and any changes during the three months ended March 31, 2006:

		Weighted-Average
	Shares	Grant-Date
Nonvested Shares	(In Thousands)	Fair Value
Nonvested at January 1, 2006	-	$                            -
Granted	28	38.06
Vested	-	-
Forfeited	-	-
Nonvested at March 31, 2006	28	$                     38.06

At March 31, 2006, the total compensation cost related to nonvested restricted stock unit awards not yet recognized is approximately $0.8 million, which is expected to be recognized over the next nine months.

3. ACQUISITIONS

During the three months ended March 31, 2006, the Company acquired certain assets and assumed certain liabilities relating to three locations from former Dollar franchisees in Tulsa and Oklahoma City, Oklahoma, and Nashville, Tennessee. Total cash paid during the three months ended March 31, 2006, net of cash acquired for acquisitions, was $1.7 million.

11

Effective January 1, 2005, the Company adopted the provisions of Emerging Issues Task Force (“EITF”) No. 04-1, “Accounting for Preexisting Relationships between the Parties to a Business Combination” (“EITF No. 04-1”).EITF No. 04-1 affirms that a business combination between two parties that have a preexisting relationship should be accounted for as a multiple element transaction. This includes determining how the cost of the combination should be allocated after considering the assets and liabilities that existed between the parties prior to the combination.Adoption of EITF No. 04-1 impacted the way in which the Company accounts for certain business combination transactions through establishing identifiable intangibles, other than goodwill, such as reacquired franchise rights through the Company’s acquisitions of franchisee operations. The Company recognized an additional $2.1 million in unamortized intangible assets for reacquired franchise rights during the three months ended March 31, 2006 (Note 7). The Company did not recognize any goodwill related to these transactions.

Each of these transactions has been accounted for using the purchase method of accounting and operating results of the acquirees from the dates of acquisition are included in the condensed consolidated statements of income of the Company. These acquisitions are not material individually or collectively to amounts presented for the three months ended March 31, 2006.

4. VEHICLE DEPRECIATION AND LEASE CHARGES, NET

Vehicle depreciation and lease charges includes the following (in thousands):

	Three Months
	Ended March 31,
	2006			2005
Depreciation of revenue-earning vehicles	$	67,642		$	67,666
Net gains from disposal of revenue-earning vehicles		(10,836	)		(16,395	)
Rents paid for vehicles leased		1,620			2,316
	$	58,426		$	53,587

5. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is based on the combined weighted average number of common shares and dilutive potential common shares outstanding which include, where appropriate, the assumed exercise of options. In computing diluted earnings per share, the Company has utilized the treasury stock method.

12

The computation of weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per share (“EPS”) is shown below (in thousands, except share and per share data):

		Three Months
		Ended March 31,
			2006		2005
Net income			$	16,926	$	12,975
Basic EPS:
	Weighted-average common shares			25,059,661		25,050,651
Basic EPS			$	0.68	$	0.52
Diluted EPS:
	Weighted-average common shares			25,059,661		25,050,651
Shares contingently issuable:
	Stock options			316,161		439,317
	Performance awards			376,034		490,300
	Shares held for compensation plans			186,443		178,600
	Director compensation shares deferred			165,512		133,399
Shares applicable to diluted				26,103,811		26,292,267
Diluted EPS			$	0.65	$	0.49

For the three months ended March 31, 2006 and 2005, all options to purchase shares of common stock were included in the computation of diluted earnings per share because no exercise price was greater than the average market price of the common shares.

6. RECEIVABLES

Receivables consist of the following (in thousands):

	March 31,			December 31,
	2006			2005
Trade accounts receivable	$	122,470		$	130,953
Notes receivable		1,275			1,448
Financing receivables, net		1,333			898
Due from DaimlerChrysler		54,005			88,428
Fair value of interest rate swap		28,853			20,903
Other vehicle manufacturer receivables		820			1,182
		208,756			243,812
Less: Allowance for doubtful accounts		(20,592	)		(20,606	)
	$	188,164		$	223,206

Trade accounts and notes receivable include primarily amounts due from rental customers, franchisees and tour operators arising from billings under standard credit terms for services provided in the normal course of business and amounts due from the sale of revenue-earning vehicles. Notes receivable are generally issued by certain franchisees at current market interest rates with varying maturities and are generally guaranteed by franchisees.

13

Financing receivables arise from direct financing and sales-type leases of vehicles with franchisees. These receivables principally have terms up to one year and are collateralized by the vehicles.

Due from DaimlerChrysler is comprised primarily of amounts due under various guaranteed residual, buyback, incentive and promotion programs, which are paid according to contract terms and are generally received within 60 days.

Fair value of interest rate swap represents the fair market value on interest rate swap agreements (Note 10).

Other vehicle manufacturer receivables include primarily amounts due under guaranteed residual, buyback and incentive programs, which are paid according to contract terms and are generally received within 60 days.

7. SOFTWARE AND OTHER INTANGIBLE ASSETS

Software and other intangible assets consist of the following (in thousands):

	March 31,			December 31,
	2006			2005
Amortized intangible assets
Software and other intangible assets	$	58,055		$	55,305
Less accumulated amortization		(32,166	)		(30,577	)
		25,889			24,728
Unamortized intangible assets
Reacquired franchise rights		5,630			3,542
Total software and other intangible assets	$	31,519		$	28,270

As discussed in Note 3, the Company adopted the provisions of EITF No. 04-1 on January 1, 2005. In applying the provisions of EITF No. 04-1 to the acquisitions completed during the three months ended March 31, 2006, the Company established unamortized separately identifiable intangible assets, referred to as reacquired franchise rights. Intangible assets with indefinite useful lives, such as reacquired franchise rights, are not amortized, but are subject to impairment testing annually or more frequently if events and circumstances indicate there may be impairment. The Company has elected to perform the annual impairment test on the indefinite lived intangible assets during the fourth quarter of each year, unless circumstances arise that require more frequent testing. During the fourth quarter of 2005, the Company completed its annual impairment test of each reacquired franchise right and concluded no impairment was indicated. Intangible assets with finite useful lives are amortized over their respective useful lives.

8. GOODWILL

The Company has elected to perform the annual impairment test on goodwill during the second quarter of each year, unless circumstances arise that require more frequent testing. During the second quarter of 2005, the Company completed the annual impairment test of goodwill and concluded goodwill was not impaired.

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The changes in the carrying amount of goodwill for the three months ended March 31, 2006 are as follows (in thousands):

Balance as of January 1, 2006	$	280,122
Goodwill through acquisitions or purchase price adjustments during the year		-
Effect of change in rates used for foreign currency translation		(31	)
Balance as of March 31, 2006	$	280,091

9. VEHICLE DEBT AND OBLIGATIONS

Vehicle debt and obligations as of March 31, 2006 and December 31, 2005 consist of the following (in thousands):

			March 31,			December 31,
			2006			2005
Asset backed notes:
	2006 Series notes		$	600,000		$	-
	2005 Series notes			400,000			400,000
	2004 Series notes			500,000			500,000
	2003 Series notes			375,000			375,000
	2001 Series notes			58,333			233,333
				1,933,333			1,508,333
		Discounts on asset backed notes		(39	)		(41	)
		Asset backed notes, net of discount		1,933,294			1,508,292
Conduit Facility				425,000			375,000
Commercial paper, net of discount of $182 and $2,554				184,539			561,155
Other vehicle debt				211,456			166,183
Limited partner interest in limited partnership				114,833			114,322
Total vehicle debt and obligations			$	2,869,122		$	2,724,952

On March 28, 2006, the Company renewed its Variable Funding Note Purchase Facility (the “Conduit Facility”) for another 364-day period with a capacity of $425 million.

On March 28, 2006, the Company renewed its Commercial Paper Program for another 364-day period at a maximum size of $649 million backed by a renewal of the Liquidity Facility in the amount of $560 million.

On March 28, 2006, RCFC issued $600 million of asset backed notes (the “2006 Series notes”) to replace maturing asset backed notes and provide for growth in the Company’s fleet. The 2006 Series notes consist of five-year floating rate notes at LIBOR plus 0.18%. In conjunction with the issuance of the 2006 Series notes, the Company also entered into interest rate swap agreements to convert this floating rate debt to fixed rate debt at a 5.27% interest rate.

10. DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to market risks, such as changes in interest rates. Consequently, the Company manages the financial exposure as part of its risk management program, by striving to reduce the potentially adverse effects that the potential volatility of the financial markets may have on the Company’s operating results. In 2001, the Company began entering into interest rate swap agreements, in conjunction with each related new asset backed note issuance in 2001 through 2006, to convert variable interest rates on a total of $1.7 billion in asset backed notes to fixed interest rates. These swaps, which have termination dates through May 2011, constitute cash flow hedges and satisfy the criteria for hedge accounting. The Company reflects these swaps in its statement of financial position at fair market value, which were assets, included in receivables, of approximately $28.9 million and $20.9 million at March 31, 2006 and December

15

31, 2005, respectively. The Company recorded income of $4.8 million, which is net of income taxes, in total comprehensive income for the three month period ended March 31, 2006 (Note 11). Deferred gains and losses are recognized in earnings as an adjustment to interest expense over the same period in which the related interest payments being hedged are recognized in earnings. Based on projected market interest rates, the Company estimates that approximately $9.7 million of net deferred gain will be reclassified into earnings within the next twelve months.

11. COMPREHENSIVE INCOME

Comprehensive income is comprised of the following (in thousands):

	Three Months
	Ended March 31,
	2006			2005
Net Income	$	16,926		$	12,975
Interest rate swap adjustment		4,829			11,278
Foreign currency translation adjustment		(81	)		(227	)
Comprehensive income	$	21,674		$	24,026

12. INCOME TAXES

The Company has provided for income taxes in the U.S. and in Canada based on taxable income or loss and other tax attributes separately for each jurisdiction. The Company has established tax provisions separately for U.S. taxable income and Canadian losses, for which no income tax benefit was recorded. Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. A valuation allowance is recorded for deferred income tax assets when management determines it is more likely than not that such assets will not be realized.

For the three months ended March 31, 2006, the overall effective tax rate of 46.0% differed from the U.S. statutory rate due primarily to the state and local taxes and losses relating to DTG Canada for which no benefit was recorded due to full valuation allowance.

13. SHARE REPURCHASE PROGRAM

In February 2006, the Company’s Board of Directors authorized a new $300 million share repurchase program to replace the $100 million share repurchase program of which $44.7 million had been used to repurchase shares. During the three months ended March 31, 2006, the Company repurchased 601,300 shares of common stock at an average price of $41.62 per share totaling $25,026,000. Since inception of the share repurchase programs, the Company has repurchased 2,152,900 shares of common stock at an average price of $32.40 per share totaling approximately $70 million, all of which were made in open market transactions. At March 31, 2006, the $300 million share repurchase program has $275 million of remaining authorization to be completed by December 31, 2008.

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14. COMMITMENTS AND CONTINGENCIES

Guarantees

The Company may provide guarantees, including certain letters of credit or performance bonds, on behalf of franchisees to support compliance with airport concession bids. Non-performance of the obligation by the franchisee would trigger the obligation of the Company. As of March 31, 2006, there were no guarantees outstanding.

Contingencies

Various claims and legal proceedings have been asserted or instituted against the Company, including some purporting to be class actions, and some which demand large monetary damages or other relief which could result in significant expenditures. Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. The Company is also subject to potential liability related to environmental matters. The Company establishes reserves for litigation and environmental matters when the loss is probable and reasonably estimable. It is reasonably possible that the final resolution of some of these matters may require the Company to make expenditures, in excess of established reserves, over an extended period of time and in a range of amounts that cannot be reasonably estimated. The term “reasonably possible” is used herein to mean that the chance of a future transaction or event occurring is more than remote but less than likely. Although the final resolution of any such matters could have a material effect on the Company’s consolidated operating results for the particular reporting period in which an adjustment of the estimated liability is recorded, the Company believes that any resulting liability would not materially affect its consolidated financial position.

15. SUBSEQUENT EVENTS

The Company announced the acquisition of its Thrifty franchisee locations in Providence, Rhode Island, and Little Rock, Arkansas, effective April 1, 2006, and Cincinnati, Ohio, effective May 1, 2006.

On April 4, 2006, an existing bank line of credit to finance vehicles was renewed and increased from $136 million to $150 million.

*******

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

The following table sets forth the percentage of total revenues in the Company’s condensed consolidated statements of income:

			Three Months
			Ended March 31,
			2006			2005
			(Percentage of Revenue)
Revenues:
	Vehicle rentals			91.8	%		91.3	%
	Vehicle leasing			3.4			4.2
	Fees and services			3.5			3.6
	Other			1.3			0.9
		Total revenues		100.0			100.0
Costs and expenses:
	Direct vehicle and operating			53.7			55.6
	Vehicle depreciation and lease charges, net			16.1			15.6
	Selling, general and administrative			17.1			16.0
	Interest expense, net of interest income			4.5			5.7
		Total costs and expenses		91.4			92.9
Income before income taxes				8.6			7.1
Income tax expense				3.9			3.3
Net income				4.7	%		3.8	%

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The following table sets forth certain selected operating data of the Company:

		Three Months
		Ended March 31,
					Percentage
	2006		2005		Change
U.S. and Canada
Vehicle Rental Data:   (includes new stores)
Average number of vehicles operated		105,707		102,024		3.6%
Number of rental days		8,098,161		7,736,465		4.7%
Vehicle utilization		85.1%		84.3%		0.8 p.p.
Average revenue per day	$	41.09	$	40.45		1.6%
Monthly average revenue per vehicle	$	1,049	$	1,022		2.6%
Same Store Vehicle Rental Data:   (excludes new stores)
Average number of vehicles operated		103,365		102,024		1.3%
Number of rental days		7,932,011		7,736,465		2.5%
Vehicle Leasing Data:
Average number of vehicles leased		9,027		11,558		(21.9%	)
Monthly average revenue per vehicle	$	460	$	419		9.8%

Three Months Ended March 31, 2006 Compared with Three Months Ended March 31, 2005

During the first quarter of 2006, the Company achieved revenue growth from volume related to both existing corporate stores and franchise acquisitions and to higher revenue per day. The Company also achieved higher vehicle utilization rates and benefited from lower vehicle liability insurance costs, lower interest costs and cost savings initiatives. The increase in revenue along with these cost improvements offset higher vehicle depreciation costs and other cost increases, which resulted in higher profits in the first quarter of 2006 as compared to last year’s first quarter.

Operating Results

The Company had income of $31.4 million before income taxes for the first quarter of 2006, compared to $24.2 million in the first quarter of 2005.

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Revenues

	Three Months
	Ended March 31,				$ Increase/			% Increase/
	2006		2005		(decrease)			(decrease)
	(in millions)
Vehicle rentals	$	332.7	$	313.0	$	19.7			6.3%
Vehicle leasing		12.5		14.5		(2.0	)		(14.2%	)
Fees and services		12.5		12.3		0.2			2.1%
Other		4.9		3.0		1.9			60.1%
Total revenues	$	362.6	$	342.8	$	19.8			5.8%
Vehicle rental metrics:
Number of rental days		8,098,161		7,736,465		361,696			4.7%
Average revenue per day	$	41.09	$	40.45	$	0.64			1.6%
Vehicle leasing metrics:
Average number of vehicles leased		9,027		11,558		(2,531	)		(21.9%	)
Average monthly lease revenue per unit	$	460	$	419	$	41			9.8%

Vehicle rental revenue for the first quarter of 2006 increased 6.3%, due to a 4.7% increase in rental days totaling $14.6 million and a 1.6% increase in revenue per day totaling $5.1 million. Vehicle rental revenue grew 4.1% due to same store revenue growth and 2.2% due to 2005 franchisee acquisitions that had not yet annualized, 2006 franchisee acquisitions and greenfield locations.

Vehicle leasing revenue for the first quarter of 2006 decreased 14.2%, due to a 21.9% decrease in the average lease fleet totaling $3.1 million, partially offset by a 9.8% increase in the average lease rate totaling $1.1 million. The decline in volume was due to fewer vehicles leased to franchisees, which is primarily attributable to the shift of several locations from franchised operations to corporate operations.

Other revenue increased $1.9 million primarily due to an increase of $1.2 million in the market value of investments in the Company’s deferred compensation and retirement plans. The revenue is attributable to the mark to market valuation of the corresponding investments and is offset in selling, general and administrative expenses and, therefore, has no impact on net income.

Expenses

	Three Months
	Ended March 31,				$ Increase/			% Increase/
	2006		2005		(decrease)			(decrease)
	(in millions)
Direct vehicle and operating	$	194.7	$	190.7	$	4.0			2.1%
Vehicle depreciation and lease charges, net		58.4		53.6		4.8			9.0%
Selling, general and administrative		62.0		54.8		7.2			13.0%
Interest expense, net of interest income		16.1		19.5		(3.4	)		(17.4%	)
Total expenses	$	331.2	$	318.6	$	12.6			4.0%

Direct vehicle and operating expenses for the first quarter of 2006 increased $4.0 million, primarily due to higher fleet and transaction levels, partially offset by lower costs per transaction. As a percent of revenue, direct vehicle and operating expenses were 53.7% in the first quarter of 2006, compared to 55.6% in the first quarter of 2005.

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The increase in direct vehicle and operating expense in the first quarter of 2006 resulted from the following:

• Personnel related expenses increased $5.9 million. Salary expenses increased approximately $3.4 million due to higher compensation costs per employee, $1.3 million from increases in the number of employees and $0.9 million related to increased costs in group health insurance.

• Airport concession expenses increased $1.9 million, which are primarily based on a percentage of revenue generated from the airport facility.

• Vehicle related costs decreased $2.5 million. This decrease resulted primarily from a decrease in vehicle insurance expense of $4.5 million primarily related to the change in the vicarious liability law, which imposed liability on vehicle owners for acts by vehicle drivers. The federal Highway Bill was signed into law on August 10, 2005, and removed unlimited vicarious liability for vehicle rental and leasing companies, limiting the Company’s exposure to state minimum financial responsibility amounts. The decrease in vehicle insurance expense was partially offset by an increase in gasoline expense of $1.3 million.

Net vehicle depreciation and lease charges for the first quarter of 2006 increased $4.8 million. As a percent of revenue, net vehicle depreciation and lease charges were 16.1% in the first quarter of 2006 compared to 15.6% in the first quarter of 2005.

The increase in net vehicle depreciation and lease charges resulted from the following:

• Net vehicle gains on disposal of Non-Program Vehicles, which reduce vehicle depreciation and lease charges, decreased $5.6 million. This decrease resulted from a lower average gain per unit, partially offset by an increase in the number of units sold.

• Lease charges, for vehicles leased from third parties, decreased $0.7 million due to a decrease in the average number of units leased.

• Vehicle depreciation expense was unchanged for the period, resulting primarily from a 1.9% decrease in the average depreciation rate offset by a 1.9% increase in the depreciable fleet. The decrease in depreciation rate was primarily the result of a shift in the fleet to lower cost units including a higher proportion of Non-Program Vehicles, which was partially offset by an increase in depreciation rates on Program Vehicles.

Selling, general and administrative expenses for the first quarter of 2006 increased $7.2 million, resulting from a $6.0 million increase in general and administrative expenses and a $1.2 million increase in sales and marketing expense. As a percent of revenue, selling, general and administrative expenses were 17.1% of revenue in the first quarter of 2006, compared to 16.0% in the first quarter of 2005.

The increase in selling, general and administrative expenses in the first quarter of 2006 resulted from the following:

• Personnel related expenses increased $2.3 million due to a $0.6 million increase in incentive compensation expense and a $1.7 million increase in performance share expense. The increase in performance share expense was partly due to better performance relative to the metrics under the performance share plans in 2006 as compared to 2005. The remainder of the increase was due to the timing of the expense since the 2006 performance shares were granted during the first quarter of 2006, but the 2005 performance shares were granted during the second quarter of 2005.

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• The market value of investments in the Company’s deferred compensation and retirement plans increased $1.2 million, which is offset in other revenue and, therefore, did not impact net income.

• Professional fees, including accounting, legal and consulting, increased $2.2 million, primarily due to costs of $1.9 million related to a review of strategic alternatives.

• Sales and marketing expense increased $1.2 million.

Net interest expense for the first quarter of 2006 decreased $3.4 million due to higher cash balances and interest rates and to an increase in the rate received on interest reimbursements relating to vehicle programs, partially offset by higher average vehicle debt and higher interest rates. Net interest expense was 4.5% of revenue in the first quarter of 2006, compared to 5.7% in the first quarter of 2005.

The income tax provision for the first quarter of 2006 was $14.4 million. The effective income tax rate in the first quarter was 46.0% compared to 46.4% in the first quarter of 2005. The Company reports taxable income for the U.S. and Canada in separate tax jurisdictions and establishes provisions separately for each jurisdiction. On a separate, domestic basis, the U.S. effective tax rate approximates the statutory tax rate including the effect of state income taxes. However, no income tax benefit was recorded for Canadian losses in 2006 or 2005, thus, increasing the consolidated effective tax rate compared to the U.S. effective tax rate.

Interim reporting requirements for applying separate, annual effective income tax rates to U.S. and Canadian operations, combined with the seasonal impact of Canadian operations, will cause significant variations in the Company’s quarterly consolidated effective income tax rates.

Outlook

The Company expects continued growth in travel in 2006. Rental rates, which are highly competitive within the rental car industry, are increasing in 2006 and are expected to remain above 2005 levels due to efforts by the industry to increase prices to offset increased fleet costs. Although vehicle manufacturers are reducing total capacity and reducing vehicle supply to the rental car industry, the Company believes it has adequate fleet to meet its forecasted growth. Additionally, vehicle manufacturers have significantly increased industry vehicle costs by increasing Program Vehicle depreciation rates and lowering incentives for the 2006 model year. The Company is shifting to a larger proportion of Non-Program Vehicles in its fleet, which will increase its exposure to fluctuations in the used car market. With a strong economy, other costs such as interest rates may continue to rise. Both higher vehicle depreciation and interest costs will negatively impact the Company’s profits unless these increased costs can be passed on to customers through higher rental rates or the Company achieves other cost reductions.

The Company continues to benefit from the removal of unlimited vicarious liability exposure with the passage of the federal Highway Bill. Because this new law was effective in August 2005, the majority of the 2006 year over year cost savings are expected to occur in the first and second quarters. The Company has also implemented several cost savings initiatives that will reduce the Company’s operating and administrative costs in the future. The Company is continuing to pursue franchise acquisitions in 2006 and will increase its investments in improved IT systems, marketing initiatives and infrastructure to facilitate additional growth.

Seasonality

The Company’s business is subject to seasonal variations in customer demand, with the summer vacation period representing the peak season for vehicle rentals. During the peak season, the Company increases its rental fleet and workforce to accommodate increased rental activity. As a result, any occurrence that disrupts travel patterns during the summer period could have a material adverse effect on the annual performance of the Company. The first and fourth quarters for the Company’s rental operations are generally the weakest, when there is limited leisure travel and a greater potential for adverse weather conditions. Many of the operating expenses such as rent, general insurance and administrative personnel are fixed and cannot be reduced during periods of decreased rental demand.

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Liquidity and Capital Resources

The Company’s primary uses of liquidity are for the purchase of vehicles for its rental and leasing fleets, non-vehicle capital expenditures, franchisee acquisitions, share repurchases and for working capital. The Company uses both cash and letters of credit to support asset backed vehicle financing programs. The Company also uses letters of credit or insurance bonds to secure certain commitments related to airport concession agreements, insurance programs, and for other purposes.

The Company’s primary sources of liquidity are cash generated from operations, secured vehicle financing, the Revolving Credit Facility (hereinafter defined) and insurance bonds. Cash generated by operating activities of $97.8 million for the three months ended March 31, 2006 was primarily the result of net income, adjusted for depreciation and a reduction in outstanding vehicle manufacturers’ receivables, which was partially offset by other asset and liability changes. The liquidity necessary for purchasing vehicles is primarily obtained from secured vehicle financing, most of which is proceeds from sale of asset backed notes, sales proceeds from disposal of used vehicles and cash generated by operating activities. The asset backed notes require varying levels of credit enhancement or overcollateralization, which are provided by a combination of cash, vehicles and letters of credit. These letters of credit are provided under the Company’s Revolving Credit Facility.

The Company believes that its cash generated from operations, availability under its Revolving Credit Facility, insurance bonding programs and secured vehicle financing programs are adequate to meet its liquidity requirements for the foreseeable future. A significant portion of the secured vehicle financing consists of asset backed notes. The Company generally issues additional notes each year to replace maturing notes and provide for growth in its fleet. The Company believes the asset backed note market continues to be a viable source of vehicle financing.

Cash used in investing activities was $231.0 million. The principal use of cash in investing activities was the purchase of revenue-earning vehicles, which totaled $1.5 billion, partially offset by $1.0 billion in proceeds from the sale of used revenue-earning vehicles and the reduction in restricted cash and investments of $330.9 million, due to increases in the rental fleet, during the three months ended March 31, 2006. The Company’s need for cash to finance vehicles is seasonal and typically peaks in the second and third quarters of the year when fleet levels build to meet seasonal rental demand. The Company expects to continue to fund its revenue-earning vehicles with cash provided from operations and increased secured vehicle financing. Restricted cash and investments, which totaled $460.6 million at March 31, 2006, are restricted for the acquisition of revenue-earning vehicles and other specified uses as defined under the asset backed note program, the Canadian fleet securitization program and a like-kind exchange program. The Company also used cash for non-vehicle capital expenditures of $10.7 million. These expenditures consist primarily of airport facility improvements for the Company’s rental locations and investments in information technology equipment and systems. The Company also used $1.7 million of cash, net of assets acquired and liabilities assumed, for franchisee acquisitions. These expenditures were financed with cash provided from operations.

Cash provided by financing activities was $115.0 million primarily due to the issuance of $600.0 million in asset backed notes in March 2006, an increase of $50.0 million under the asset backed Variable Funding Note Purchase Facility (the “Conduit Facility"), and an increase in other existing bank lines of credit of $45.3 million, partially offset by the maturity of asset backed notes totaling $175.0 million, a $376.6 million net decrease in commercial paper and share repurchases totaling $25.0 million under the share repurchase program.

The Company has significant requirements to maintain letters of credit and surety bonds to support its insurance programs and airport concession commitments. At March 31, 2006, the Company had $70.2 million in letters of credit, including $59.6 million in letters of credit already noted under the Revolving Credit Facility (see Revolving Credit Facility), and $39.2 million in surety bonds to secure these obligations.

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Asset Backed Notes

The asset backed note program at March 31, 2006 was comprised of $1.93 billion in asset backed notes with maturities ranging from 2006 to 2011. Borrowings under the asset backed notes are secured by eligible vehicle collateral. Asset backed notes totaling $1.83 billion bear interest at fixed rates ranging from 3.64% to 6.04%, including certain floating rate notes swapped to fixed rates, and at floating rates on $100 million of LIBOR plus 0.17%. On March 28, 2006, RCFC issued an additional $600 million of five-year asset backed notes consisting of floating rate notes at LIBOR plus 0.18%. In conjunction with the asset backed notes issuance, the Company also entered into interest rate swap agreements to convert this floating rate debt to fixed rate debt at a 5.27% interest rate.

Conduit Facility

Effective March 28, 2006, the Conduit Facility was renewed for another 364-day period with a capacity of $425 million.

Commercial Paper Program and Liquidity Facility

On March 28, 2006, the Company renewed its commercial paper program (the “Commercial Paper Program”) for another 364-day period at a maximum size of $649 million backed by a renewal of the Liquidity Facility in the amount of $560 million. At March 31, 2006, the Company had $184.5 million in commercial paper outstanding under the Commercial Paper Program.

Vehicle Debt and Obligations

Vehicle manufacturer and bank lines of credit provided $311.0 million in capacity at March 31, 2006. The Company had $211.5 million in borrowings outstanding under these lines at March 31, 2006. All lines of credit are collateralized by the related vehicles.

The Company finances its Canadian vehicle fleet through a fleet securitization program. Under this program, DTG Canada can obtain vehicle financing up to CND $300 million funded through a bank commercial paper conduit which expires May 31, 2010. At March 31, 2006, DTG Canada had approximately CND $134.1 million (US $114.8 million) funded under this program.

Revolving Credit Facility

The Company has a $300 million five-year, senior secured, revolving credit facility (the "Revolving Credit Facility") that expires on April 1, 2009. The Revolving Credit Facility permits letter of credit usage up to $300 million and working capital borrowing up to $100 million. The availability of funds under the Revolving Credit Facility is subject to the Company’s compliance with certain covenants, including a covenant that sets the maximum amount the Company can spend annually on the acquisition of non-vehicle capital assets, and certain financial covenants including a maximum leverage ratio, a minimum fixed charge coverage ratio and a limitation on cash dividends and share repurchases. As of March 31, 2006, the Company is in compliance with all covenants. The Company had letters of credit outstanding under the Revolving Credit Facility of approximately $167.7 million and no working capital borrowings at March 31, 2006.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following information about the Company’s market sensitive financial instruments constitutes a “forward-looking” statement. The Company’s primary market risk exposure is changing interest rates, primarily in the United States. The Company manages interest rates through use of a combination of fixed and floating rate debt and interest rate swap agreements. All items described are non-trading and are stated in U.S. dollars. Because a portion of the Company’s debt is denominated in Canadian dollars, its carrying value is impacted by exchange rate fluctuations. However, this foreign currency risk is mitigated by the underlying collateral which is the Canadian fleet. The fair value of the interest rate swaps is calculated using projected market interest rates over the term of the related debt instruments as provided by the counter parties.

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Based on the Company’s level of floating rate debt (excluding notes with floating interest rates swapped into fixed rates) at March 31, 2006, a 50 basis point fluctuation in interest rates would have an approximate $5 million impact on the Company’s expected pretax income on an annual basis. This impact on pretax income would be reduced by earnings from cash and cash equivalents and restricted cash and investments, which are invested on a short-term basis and subject to fluctuations in interest rates. At March 31, 2006, cash and cash equivalents totaled $256.1 million and restricted cash and investments totaled $460.6 million. The Company estimates that, for 2006, approximately 40% of its average debt will bear interest at floating rates.

At March 31, 2006, there were no significant changes in the Company’s quantitative disclosures about market risk compared to December 31, 2005, which is included under Item 7A of the Company’s most recent Form 10-K, except for the addition of the derivative financial instruments noted in Note 9 to the condensed consolidated financial statements.

ITEM 4. CONTROLS AND PROCEDURES

a) Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission (“SEC”) rules and forms. The disclosure controls and procedures are also designed with the objective of ensuring such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing the disclosure controls and procedures, the Company’s management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the quarter covered by this report. Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level as of the end of the quarter covered by this report.

b) Changes in Internal Control Over Financial Reporting

There has been no change in the Company's internal control over financial reporting during the three months ended March 31, 2006 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Various legal actions, claims and governmental inquiries and proceedings are pending or may be instituted or asserted in the future against the Company and its subsidiaries. Litigation is subject to many uncertainties, and the outcome of the individual litigated matters is not predictable with assurance. It is possible that certain of the actions, claims, inquiries or proceedings could be decided unfavorably to the Company or the subsidiaries involved. Although the final resolution of any such matters could have a material effect on the Company's consolidated operating results for a particular reporting period in which an adjustment of the estimated liability is recorded, the Company believes that any resulting liability should not materially affect its consolidated financial position.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A or elsewhere in our most recent Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

a) Recent Sales of Unregistered Securities

None.

b) Use of Proceeds

None.

c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

					Total Number of		Maximum
					Shares Purchased		Dollar Value of
	Total Number		Average		as Part of Publicly		Shares that May Yet
	of Shares		Price Paid		Announced Plans		Be Purchased under
Period	Purchased		Per Share		or Programs		the Plans or Programs
January 1, 2006 - January 31, 2006		-	$	-		-	$	55,282,000
February 1, 2006 - February 28, 2006		157,600	$	39.03		157,600	$	293,849,000	(a)
March 1, 2006 - March 31, 2006		443,700	$	42.54		443,700	$	274,974,000
Total		601,300				601,300

(a) On February 9, 2006, a new $300 million share repurchase program was authorized, replacing the $100 million program. This change has been reflected in shares that may yet be purchased.

In February 2006, the Company’s Board of Directors authorized a new $300 million share repurchase program to replace the $100 million share repurchase program of which $44.7 million had been used to repurchase shares. During the three months ended March 31, 2006, the Company repurchased 601,300 shares of common stock at an average price of $41.62 per share totaling $25,026,000. Since inception of the share repurchase programs, the Company has repurchased 2,152,900 shares of common stock at an average price of $32.40 per share totaling approximately $70 million, all of which were made in open market transactions. At March 31, 2006, the $300 million share repurchase program has $275 million of remaining authorization to be completed by December 31, 2008.

26

ITEM 6. EXHIBITS

10.107	Roth 401(k) Amendment effective as of March 1, 2006 for the Dollar Thrifty Automotive Group, Inc. Retirement Savings Plan
15.20	Letter from Deloitte & Touche LLP regarding interim financial information
31.25	Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.26	Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.25	Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.26	Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

27

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.

May 5, 2006	By:	/s/ GARY L. PAXTON
		Gary L. Paxton
		President, Chief Executive Officer and Principal
		Executive Officer

May 5, 2006	By:	/s/ STEVEN B. HILDEBRAND
		Steven B. Hildebrand
		Senior Executive Vice President, Chief Financial
		Officer, Principal Financial Officer and Principal
		Accounting Officer

28

EX-10

EXHIBIT 10.107

ROTH 401(k) AMENDMENT

ARTICLE I

PREAMBLE

1.1 Adoption and effective date of amendment. This amendment of the Plan is adopted to reflect Code Section 402A, as enacted by the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"). This amendment is intended as good faith compliance with the requirements of Code Section 402A and guidance issued thereunder, and this amendment shall be interpreted in a manner consistent with such guidance. This amendment shall be effective as of the date selected below.

1.2 Supersession of inconsistent provisions. This amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this amendment.

ARTICLE II

ADOPTION AGREEMENT ELECTIONS

2.1 Effective Date. Roth Elective Deferrals are permitted under the Plan as of March 1, 2006.

2.2 Hardship Distributions. If the Plan permits hardship distributions of Elective Deferrals, may a Participant receive a hardship distribution of Roth Elective Deferrals?

a.	[   ]	N/A. The Plan does not permit hardship distributions of Elective Deferrals.
b.	[X]	No, Roth Elective Deferrals may not be withdrawn for a hardship.
c.	[   ]	Yes, Roth Elective Deferrals may be withdrawn for a hardship subject to the same conditions that apply to Pre-tax Elective Deferrals.

2.3 In-Service Distributions. If the Plan permits in-service distributions, other than hardship distributions, may a Participant receive an in-service distribution of the Participant's Roth Elective Deferral account?

a.	[   ]	N/A. The Plan does not permit in-service distributions (other than hardship distributions, if otherwise permitted).
b.	[X]	No, the Roth Elective Deferral account may not be withdrawn as part of an in-service distribution.
c.	[   ]	Yes, a Participant may receive an in-service distribution from the Roth Elective Deferral account subject to the following conditions (select only one):

1.	[   ]	The distribution must satisfy the same conditions that apply to in-service distributions from the Pre-tax Elective Deferral account.
2.	[   ]	The distribution must satisfy the same conditions that apply to in-service distributions from the Pre-tax Elective Deferral account and the distribution must be a "qualified distribution" within the meaning of Code Section 402A(d)(2).

ARTICLE III

ROTH ELECTIVE DEFERRALS

3.1 Roth Elective Deferrals are permitted. The Plan's definitions and terms shall be amended as follows to allow for Roth Elective Deferrals as of the effective date entered at 2.1. Roth Elective Deferrals shall be treated in the same manner as Elective Deferrals for all Plan purposes except as provided in Article II of this amendment. The Employer may, in operation, implement deferral election procedures provided such procedures are communicated to Participants and permit Participants to modify their elections at least once each Plan Year.

3.2 Elective Deferrals. For years beginning after 2005, the term "Elective Deferrals" includes Pre-tax Elective Deferrals and Roth Elective Deferrals.

3.3 Pre-Tax Elective Deferrals. "Pre-Tax Elective Deferrals" means a Participant's Elective Deferrals which are not includible in the Participant's gross income at the time deferred and have been irrevocably designated as Pre-Tax Elective Deferrals by the Participant in his or her deferral election. A Participant's Pre-Tax Elective Deferrals will be separately accounted for, as will gains and losses attributable to those Pre-Tax Elective Deferrals.

3.4 Roth Elective Deferrals. "Roth Elective Deferrals" means a Participant's Elective Deferrals that are includible in the Participant's gross income at the time deferred and have been irrevocably designated as Roth Elective Deferrals by the Participant in his or her deferral election. A Participant's Roth Elective Deferrals will be separately accounted for, as will gains and losses attributable to those Roth Elective Deferrals. However, forfeitures may not be allocated to such account. The Plan must also maintain a record of a Participant's investment in the contract (i.e., designated Roth contributions that have not been distributed). Roth Elective Deferrals are not considered Employee Contributions for Plan purposes.

3.5 Ordering Rules for Distributions. The Administrator operationally may implement an ordering rule procedure for withdrawals (including, but not limited to, hardship or other in-service withdrawals) from a Participant's accounts attributable to Pre-Tax Elective Deferrals or Roth Elective Deferrals. Such ordering rules may specify whether the Pre-Tax Elective Deferrals or Roth Elective Deferrals are distributed first. Furthermore, such procedure may permit the Participant to elect which type of Elective Deferrals shall be distributed first.

3.6 Corrective distributions attributable to Roth Elective Deferrals. For any Plan Year in which a Participant may make both Roth Elective Deferrals and Pre-Tax Elective Deferrals, the Administrator operationally may implement an ordering rule procedure for the distribution of Excess Deferrals (Code Section 402(g)), Excess Contributions (Code Section 401(k)), Excess Aggregate Contributions (Code Section 401(m)), and Excess Annual Additions (Code Section 415). Such ordering rules may specify whether the Pre-Tax Elective Deferrals or Roth Elective Deferrals are distributed first, to the extent such type of Elective Deferrals was made for the year. Furthermore, such procedure may permit the Participant to elect which type of Elective Deferrals shall be distributed first.

3.7 Loans. If Participant loans are permitted under the Plan, then the Administrator may modify the loan policy or program to provide limitations on the ability to borrow from, or use as security, a Participant's Roth Elective Deferral account. Similarly, the loan policy or program may be modified to provide for an ordering rule with respect to the default of a loan that is made from the Participant's Roth Elective Deferral account and other accounts under the Plan.

3.8 Operational Compliance. The Plan Administrator will administer Roth Elective Deferrals in accordance with applicable regulations or other binding authority not reflected in this amendment. Any applicable regulations or other binding authority shall supersede any contrary provisions of this amendment.

This amendment has been executed this 6^th day of April, 2006.

Name of Plan:   DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. RETIREMENT SAVINGS PLAN

Name of Employer:   DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.

By:       /s/ Richard P. Halbrook     
      EMPLOYER Date signed: 4/6/06

EX-15

EXHIBIT 15.20

May 5, 2006

Dollar Thrifty Automotive Group, Inc.

5330 East 31^st Street

Tulsa, Oklahoma

We have made a review, in accordance with the standards of the Public Company Accounting Oversight Board (United States), of the unaudited interim financial information of Dollar Thrifty Automotive Group, Inc. and subsidiaries for the periods ended March 31, 2006 and 2005, as indicated in our report dated May 5, 2006; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, is incorporated by reference in Registration Statements No. 333-79603, No. 333-89189, No. 333-33144, No. 333-33146, No. 333-50800 and No. 333-128714 on Form S-8.

We also are aware that the aforementioned report, pursuant to Rule 436 (c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/ DELOITTE & TOUCHE LLP

Tulsa, Oklahoma

EX-31

EXHIBIT 31.25

CERTIFICATION

I, Gary L. Paxton, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dollar Thrifty Automotive Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2006

/s/ Gary L. Paxton

Gary L. Paxton

Chief Executive Officer

EX-31

EXHIBIT 31.26

CERTIFICATION

I, Steven B. Hildebrand, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dollar Thrifty Automotive Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2006

/s/ Steven B. Hildebrand

Steven B. Hildebrand

Chief Financial Officer

EX-32

EXHIBIT 32.25

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Dollar Thrifty Automotive Group, Inc. (the “Company”) for the period ended March 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gary L. Paxton, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Gary L. Paxton

Gary L. Paxton

Chief Executive Officer

May 5, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Dollar Thrifty Automotive Group, Inc. and will be retained by Dollar Thrifty Automotive Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

EXHIBIT 32.26

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Dollar Thrifty Automotive Group, Inc. (the “Company”) for the period ended March 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven B. Hildebrand, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. §1350, as adopted pursuant to   § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Steven B. Hildebrand

Steven B. Hildebrand

Chief Financial Officer

May 5, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Dollar Thrifty Automotive Group, Inc. and will be retained by Dollar Thrifty Automotive Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.