-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OhAih17/81L5Q9t909pYBiL05/ZBAiKwI//Q38oTkNh65EbIDoubFcl5s6qA3gzP OObR095qetYq691Wpy6IjQ== 0000950144-97-009295.txt : 19970815 0000950144-97-009295.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950144-97-009295 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BUDGET GROUP INC CENTRAL INDEX KEY: 0000922471 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTO RENTAL & LEASING (NO DRIVERS) [7510] IRS NUMBER: 593227576 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23962 FILM NUMBER: 97664000 BUSINESS ADDRESS: STREET 1: 125 BASIN ST STE 210 CITY: DAYTONA BEACH STATE: FL ZIP: 32114 BUSINESS PHONE: 9042387035 MAIL ADDRESS: STREET 1: 125 BASIN STREET CITY: DAYTONA BEACH STATE: FL ZIP: 32114 FORMER COMPANY: FORMER CONFORMED NAME: TEAM RENTAL GROUP INC DATE OF NAME CHANGE: 19940429 10-Q 1 BUDGET GROUP, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 June 30, 1997 ------------- OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- -------- Commission File No.: 0-23962 BUDGET GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 59-3227576 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 125 Basin Street, Suite 210, Daytona Beach,FL 32114 (Address of principal executive offices) (904) 238-7035 -------------- (Registrant's telephone number, including area code) 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 and 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 [ ] 19,960,683 shares of common stock were outstanding as of August 13, 1997, comprised of 18,024,083 shares of the registrant's Class A common stock, par value $0.01, and 1,936,600 shares of the registrant's Class B common stock, par value $0.01. The Exhibit Index, filed as a part of this report, appears on page 13. - -------------------------------------------------------------------------------- 2 INDEX PART I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996 3 Consolidated Statements of Operations for the Three and Six-Month Periods Ended June 30, 1997 and 1996 (unaudited) 4 Consolidated Statement of Changes in Stockholders' Equity for the Six-Month Period Ended June 30, 1997 (unaudited) 5 Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 1997 and 1996 (unaudited) 6 Notes to Unaudited Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk 12 PART II. Other Information Item 1. Legal Proceedings 13 Item 2. Changes in Securities 13 Item 3. Default Upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 Signature Page 14
2 3 BUDGET GROUP, INC. CONSOLIDATED BALANCE SHEETS Team Operations (Dollar amounts in thousands)
June 30, December 31, ASSETS 1997 1996 (UNAUDITED) ----------- ------------ Cash and cash equivalents $ 181,338 $ 50,490 Restricted cash 153,706 66,336 Trade and vehicle receivables, net 233,782 31,302 Accounts receivable, related parties 58 58 Prepaids, inventories and deposits 81,462 13,972 Vehicle inventory 29,618 16,413 Revenue earning vehicles, net 2,340,807 319,257 Property and equipment, net 135,363 18,502 Other assets 48,398 -- Intangibles, including goodwill, net 395,443 70,893 ----------- ----------- Total assets $ 3,599,975 $ 587,223 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts payable and accrued expenses $ 463,400 $ 31,127 Capital lease obligations 496 580 Deferred income taxes 3,369 7,406 Notes payable 2,756,084 454,109 ----------- ----------- Total liabilities 3,223,349 493,222 Common stock warrant -- 2,000 STOCKHOLDERS' EQUITY Convertible preferred stock 105,750 -- Common stock 199 112 Additional paid-in-capital 265,185 89,856 Foreign currency translation adjustment (42) -- Retained earnings 5,864 2,363 Treasury stock (330) (330) ----------- ----------- Total stockholders' equity 376,626 92,001 ----------- ----------- Total liabilities and stockholders' equity $ 3,599,975 $ 587,223 =========== ===========
See accompanying notes to unaudited consolidated financial statements. 3 4 BUDGET GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Dollar amounts in thousands except per share data)
FOR THE THREE-MONTH PERIODS ENDED JUNE 30, FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ OPERATING REVENUE: Rental revenue $ 235,862 $ 59,145 $ 294,559 $ 103,842 Car sales revenue 57,841 34,589 101,592 55,686 Royalties and other revenue 12,618 -- 12,618 0 ------------ ------------ ------------ ------------ Total operating revenue 306,321 93,734 408,769 159,528 OPERATING EXPENSES: Direct vehicle and operating 29,542 6,783 38,402 12,742 Depreciation - vehicles 67,814 16,219 85,217 28,023 Depreciation - nonvehicle 4,690 674 5,361 1,210 Cost of car sales 49,493 29,455 86,068 47,295 Advertising, promotion and selling 28,527 6,009 35,050 10,609 Facilities 24,391 5,089 30,326 9,417 Personnel 56,603 13,316 71,403 24,005 General and administrative 13,732 4,865 16,707 7,135 Amortization 2,429 482 2,975 996 ------------ ------------ ------------ ------------ Total operating expenses 277,221 82,892 371,509 141,432 ------------ ------------ ------------ ------------ Operating income 29,100 10,842 37,260 18,096 ------------ ------------ ------------ ------------ Other (income) expense: Vehicle interest 21,070 6,342 27,794 11,963 Other interest, net 4,544 795 5,290 931 Interest income - restricted cash (1,089) (38) (1,812) (787) Related party interest -- -- -- 118 ------------ ------------ ------------ ------------ Total other (income) expense 24,525 7,099 31,272 12,225 INCOME BEFORE INCOME TAXES 4,575 3,743 5,988 5,871 Provision for income taxes 1,922 1,497 2,487 2,348 ------------ ------------ ------------ ------------ NET INCOME $ 2,653 $ 2,246 $ 3,501 $ 3,523 ============ ============ ============ ============ NET INCOME PER COMMON AND COMMON EQUIVALENT SHARES: PRIMARY $ 0.13 $ 0.30 $ 0.21 $ 0.48 ============ ============ ============ ============ FULLY DILUTED $ 0.13 $ 0.30 $ 0.21 $ 0.47 ============ ============ ============ ============ WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: PRIMARY 20,832,000 7,569,000 16,313,000 7,413,000 ============ ============ ============ ============ FULLY DILUTED 20,978,000 7,584,000 16,391,000 7,497,000 ============ ============ ============ ============
See accompanying notes to unaudited consolidated financial statements. 4 5 BUDGET GROUP, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 (UNAUDITED)
Foreign Convertible Additional Currency Total Preferred Common Paid-In Translation Retained Treasury Stockholders' (Dollar amounts in thousands) Stock Stock Capital Adjustment Earnings Stock Equity ----------------------------------------------------------------------------------------- Balance at December 31, 1996 $ - $112 $ 89,856 $ - $2,363 $(330) $ 92,001 Shares issued in conjunction with acquisition of Budget Rent a Car Corporation 105,750 105,750 Net proceeds from stock offering 87 175,329 175,416 Foreign currency translation (42) (42) Net Income 3,501 3,501 -------- ---- -------- ---- ------ ----- --------- Balance at June 30, 1997 $105,750 $199 $265,185 $(42) $5,864 $(330) $ 376,626 ======== ==== ======== ==== ====== ===== =========
* See accompanying notes to unaudited consolidated financial statements 5 6 BUDGET GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollar amounts in thousands) FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1997 1996 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,501 $ 3,523 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 90,538 29,233 Intangible Amortization 2,975 1,133 (Gain)/Loss on sale of vehicles and equipment (1,640) - Deferred income taxes 2,963 (268) Provision for losses on accounts receivable 716 - Changes in operating assets and liabilities net of effects from acquisitions: Accounts receivable (9,638) (3,321) Prepaids, inventories and deposits (14,420) (2,507) Vehicle inventory (1,965) (6,952) Accounts payable and accrued expenses 24,987 5,777 ---------- --------- Total adjustments 94,516 23,095 ---------- --------- Net cash provided by operating activities 98,017 26,618 CASH FLOWS FROM INVESTING ACTIVITIES: Restricted cash 84,690 64,853 Proceeds from sale of revenue earning vehicles 495,770 119,348 Purchases of revenue earning vehicles (1,000,330) (263,809) Purchase of BRACC and franchise operations, net of cash acquired (143,164) (11,496) Proceeds from the sale of property and equipment 3,274 - Purchases of property and equipment (7,016) (8,924) Investment in joint ventures and other 1,150 - ---------- --------- Net cash used in investing activities (565,626) (100.028) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving credit/notes payable to banks and other notes payable 171,209 26,074 Principal payments on revolving credit/notes payable to banks and other notes payable (173,836) (500) Proceeds from fleet lender notes 685,657 108,893 Principal payments on fleet lender notes (462,447) (50,362) Proceeds from commercial paper 2,272,676 - Principal payments on commercial paper (1,982,764) - Proceeds from inssuance of common stock 175,416 - Principal payments on capital leases (84) (82) ---------- --------- Net cash provided by financing activities 685,827 84,023 ---------- --------- Net increase in cash and cash equivalents 218,218 10,613 Cash and cash equivalents, beginning of period 116,826 357 ---------- --------- Cash and cash equivalents, end of period $ 335,044 $ 10,970 ========== =========
See accompanying notes to unaudited consolidated financial statements. 6 7 BUDGET GROUP, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Budget Group, Inc., previously named Team Rental Group, Inc. (the "Company") have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes that the accompanying consolidated financial statements contain all adjustments (consisting of normal, recurring accruals) which, in the opinion of management, are necessary to present fairly the Company's consolidated financial condition, results of operations and cash flows for the periods presented. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year ending December 31, 1997. Certain amounts in the 1996 financial statements have been reclassified to conform with the current year presentation. On April 29, 1997, pursuant to stock purchase agreements entered into on January 13, 1997 the Company completed its acquisition of Budget Rent a Car Corporation ("BRACC") in a purchase transaction and changed its name to Budget Group, Inc. After the consummation of the BRACC acquisition, BRACC and its franchisees (collectively referred to as the "Budget System") operate the third largest worldwide general use car and truck rental system, with approximately 3,200 locations and a peak fleet size during 1996 of 266,000 cars and 18,000 trucks. The Budget System includes locations in both the airport and local (downtown and suburban) markets in all major metropolitan areas in the United States, in many other small and mid-size U.S. markets and in more than 110 countries worldwide. Pro forma for the BRACC Acquisition, the Budget System included approximately 455 company-owned locations in the United States at December 31, 1996, accounting for approximately 76% of 1996 U.S. system-wide revenues. In addition, Budget franchisees operated approximately 500 royalty-paying franchise locations in the United States at December 31, 1996. Budget is one of only three vehicle rental systems that offer rental vehicles throughout the world under a single brand name, with locations in Europe, Canada, Latin America, the Middle East, Asia/Pacific and Africa. The Budget System currently maintains more local market rental locations throughout the world than most of its major competitors. The Budget System is also unique among major car rental systems in that it rents trucks in most major markets worldwide. The Budget System's consumer truck rental fleet is the fourth largest in the United States. BRACC is also one of the largest independent retailers of late model vehicles in the United States, operating 23 retail car sales facilities under the name "Budget Car Sales" with pro forma revenues of $246.9 million for 1996. The consolidated financial statements for the three and six-month periods ended June 30, 1997 give effect to the Company's acquisition of BRACC from the date of acquisition through the end of the period presented. The consolidated financial statements for the three and six-month period ended June 30, 1996 give effect to the Company's acquisition of all of the outstanding stock of the Budget franchise in Phoenix, Arizona and VPSI, Inc.("VPSI"), both of which were acquired in February 1996, from the date of acquisition through the end of the period presented. 7 8 2. 1996 ACQUISITIONS Acquisition of Van Pool Operations - In February 1996, the Company purchased for a nominal amount all of the outstanding stock of VPSI located in Detroit, Michigan. VPSI provides commuter van pooling services to business commuters in 22 states, and operated a rental fleet of approximately 3,300 vans as of the acquisition date. Acquisition of Phoenix Franchise - In February 1996, the Company purchased all of the outstanding stock of Arizona Rent-A-Car Systems, Inc., located in Phoenix, Arizona, for approximately $18 million consisting of cash of approximately $5.0 million, promissory notes of $10.0 million and 272,727 shares of Class A common stock. Acquisition of ValCar Rental Car Sales, Inc. - On August 1, 1996, the Company acquired all of the outstanding stock of ValCar Rental Car Sales, Inc. for $400,000 cash. ValCar owns and operates four retail vehicle sales facilities in Indianapolis, Indiana, and was formerly owned by a director and officer of the Company. If the acquisitions (including the acquisition of BRACC)had occurred at the beginning of the periods presented, the Company's results of operations would be as shown in the following table. These unaudited pro forma results are not necessarily indicative of the actual results of operations that would have occurred had the acquisitions actually been made at the beginning of the respective periods.
SIX-MONTH PERIOD ENDED JUNE 30, 1997 1996 ---- ---- (In thousands except per share data) Operating revenue 769,336 728,021 Income before income taxes (19,090) 12 Net income (11,072) 628 Earnings per share (.60) .03
3. OTHER EVENTS On April 17, 1997, the Company's Class A common stock began trading on the New York Stock Exchange under the ticker symbol "BD". Prior to that time, the Company's Class A Common Stock had been traded on the The Nasdaq National Market. In conjunction with and concurrent to the acquisition of BRACC on April 29, 1997, the Company sold 8,625,000 shares of Class A common stock at a price of $21.625 in a public offering raising proceeds, net of underwriting commissions, of $177.2 million. The Company also issued 4,500 shares of Series A convertible, non-voting preferred stock, each share of which is convertible into 1,000 shares of the Company's Class A common stock, to Ford Motor Company. The common shares underlying the preferred stock had a value of approximately $105.8 million for purposes of determining the purchase price (based on the three day period surrounding January 13) and $97.3 million at the time of issuance (based on the public offering price). The Company also entered into the following debt financing transactions concurrently with the acquisition of BRACC: (i) $165.0 million of guaranteed senior notes at a rate of 9.57% maturing in 2007; (ii) $45.0 million of convertible subordinated notes at a rate of 6.85%, convertible into 1,609,442 shares of Class A common stock at a conversion price of $27.96 per share and maturing in 2007; (iii) a variable-rate commercial paper vehicle financing facility in the amount of $900 million; (iv) a $500 million asset-backed note vehicle financing facility maturing in 2001 and 2002, composed of a senior note in the amount of $472.5 million bearing interest at a rate of 7.35% and a subordinated note in the amount of $27.5 million bearing interest at a rate of 7.80%; and (v) a $300 million five-year secured working capital facility bearing interest at an initial rate of 1.75% over LIBOR, guaranteed by Budget Group and secured primarily by accounts receivable, cash and unencumbered vehicles. 8 9 4. SUBSEQUENT EVENTS Acquisition of Premier Car Rental, Inc. - On July 31, 1997, the Company acquired the fleet and certain other assets and assumed certain liabilities of Premier Car Rental, Inc. ("Premier") for approximately $87.2 million. Premier owns and operates 9,000 vehicles from 101 locations in 13 major U.S. markets. Premier will operate as its own brand and continue to serve the insurance replacement market. In 1996, Premier had revenues of approximately $61 million. The Company does not expect this acquisition to have a material effect on earnings in 1997. 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company's original operation, acquired in April 1987, was the Budget franchise for the San Diego metropolitan area, exclusive of the airport location, which it acquired in 1988. The Company acquired the Albany and Rochester, New York franchises and the Richmond, Virginia franchise in 1991. Concurrent with the Company's initial public offering on August 25, 1994, the Company purchased the Budget operations in Philadelphia and Pittsburgh, Pennsylvania and Cincinnati, Ohio. In November 1994, the Company acquired the Fort Wayne, Indiana Budget franchise and opened its first retail car sales facility in San Diego, California. The Company acquired the Dayton, Ohio and Charlotte, North Carolina Budget franchises in January 1995, the Hartford, Connecticut Budget franchise in March 1995 and the Los Angeles Budget franchise in October 1995. During 1995, the Company opened four retail car sales facilities, including locations in Philadelphia, Pennsylvania; Richmond, Virginia; Charlotte, North Carolina; and a second location in San Diego, California; and acquired retail car sales facilities in Dayton, Ohio and Ontario, California. In February 1996, the Company acquired the Phoenix, Arizona Budget franchise territory and VPSI, Inc., a commuter van pooling service with operations in many regions throughout the United States. In April 1996, the Company opened two retail car sales facilities, including its first facility in Cincinnati, Ohio and its second facility in Dayton, Ohio. In August 1996, the Company acquired ValCar Rental Car Sales, Inc., the operator of four retail vehicle sales facilities in Indianapolis, Indiana. In April 1997, the Company acquired Budget Rent a Car Corporation and changed its name to Budget Group, Inc. For a further discussion of this transaction, see Note 1 to the Company's financial statements herein. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company's operations have been funded by cash provided from operating activities and by financing provided by banks, automobile manufacturers' captive finance companies and leasing companies. The Company's existing indebtedness at June 30, 1997 has interest rates ranging from 5.6% to 9.6%. The Company intends to fund its operations through asset-backed notes and revolving credit facilities with financial institutions for fleet financing and working capital, as well as through other similar facilities and through placements or offerings of additional debt and/or equity securities. At June 30, 1997, the Company had $2.430 billion borrowed under asset-backed notes, which are utilized largely to finance vehicles eligible for certain manufacturers' guaranteed repurchase programs. Proceeds from the notes that are temporarily unutilized for vehicle financing are maintained in restricted cash accounts with the trustees. The notes are collateralized by the secured vehicles and the restricted cash accounts. Rates on asset-backed notes at June 30, 1997 range from 5.6% to 7.8%. The Company's other vehicle obligations consist of outstanding lines of credit to purchase rental fleet and retail car sales inventory. Collateralized available lines of credit at June 30, 1997 consist of $13 million for rental vehicles and $26 million for retail car sales inventory with maturity dates ranging from April 1997 through May 1998. Vehicle obligations are collateralized by revenue earning vehicles financed under these credit facilities and proceeds from the sale, lease or rental of rental vehicles and retail car sales inventory. Interest payments for rental fleet facilities are due monthly at annual interest rates ranging from 6.9% to 8.5% at June 30, 1997. Management expects vehicle obligations will generally be repaid within one year from the balance sheet date with proceeds received from either the repurchase of the vehicles by the manufacturers in accordance with the terms of the manufacturers' rental fleet programs or from the sale of the vehicles. Monthly payments of interest only for retail car sales inventory obligations are required at an annual interest rate of 8.5% at June 30, 1997. Retail car sales inventory obligations are paid when the inventory 10 11 is sold but in no event later than 120 days after the date of purchase. Working Capital Facilities. At June 30, 1997, the Company had a working capital facility of $300.0 million, which requires monthly interest payments on the outstanding balance at a rate based on LIBOR plus 1.75%. This agreement expires in 2002, is secured primarily by cash, accounts receivable and unencumbered vehicles and is subject to certain covenants, the most restrictive of which requires the Company to maintain certain financial ratios and minimum tangible net worth and restricts the payment of cash dividends. At June 30, 1997, the Company had $256.1 million in letters of credit outstanding under this facility. Senior Notes Payable. At June 30, 1997, the Company had $165.0 million of outstanding senior notes payable. The notes bear interest at rate of 9.57% and mature in 2007. Convertible Subordinated Notes. At June 30, 1997, the Company had $125.0 million aggregate principal amount of Series A Convertible Notes outstanding. At a conversion price of $20.07 per share, $80.0 million of the Series A Convertible Notes are convertible into 3,986,049 shares of Class A Common Stock, bear interest at a rate of 7.0% and mature in 2007. At a conversion price of $27.96 per share, $45.0 million of the Series A Convertible Notes are convertible into 1,609,442 shares of Class A Common Stock, bear interest at a rate of 6.85% and mature in 2007. CHANGE IN FINANCIAL CONDITION Total assets increased $3.013 billion from $587.2 million at December 31, 1996 to $3.600 billion at June 30, 1997. This increase resulted primarily from increases in revenue-earning vehicles of $2.022 billion and intangibles of $324.6 million. These increases were largely a result of the acquisition of BRACC. Total liabilities increased $2.730 billion from $493.2 million at December 31, 1996 to $3.223 billion at June 30, 1997 due primarily to an additional $2.302 billion of net borrowings largely to finance the vehicles of BRACC. The increase in stockholders' equity of approximately $284.6 million was due to the common stock offering and issuance of convertible preferred stock in April 1997 in conjunction with the acquisition of BRACC. RESULTS OF OPERATIONS General Operating Results. Net income for the first six months of 1997 approximated that of the first six months of 1996 at $3.5 million. Earnings per share for the first six months of 1997 decreased to $.21 per share from $.48 per share in 1996 due to the increase in average shares outstanding as a result of the stock offerings (4.6 million shares in July 1996 and 8.6 million shares in April 1997) and convertible preferred stock issued in connection with the acquisition of BRACC (convertible into 4.5 million shares). Income before income taxes increased $.1 million for the first six months of 1997 to $6.0 million from $5.9 million for the first six months of 1996. Net income for the second quarter of 1997 increased $.4 million to $2.6 million from $2.2 million in the second quarter of 1996. Earnings per share for the second quarter of 1997 decreased to $.13 per share from $.30 per share in 1996 due to the increase in average shares outstanding as previously mentioned. Income before income taxes increased $.8 million in the second quarter of 1997 to $4.6 million from $3.8 million in the second quarter of 1996. Operating Revenues. Vehicle rental revenue increased $190.7 million in the first six months of 1997 to $294.6 million from $103.8 million in the first six months of 1996. Such revenues for the second quarter of 1997 increased $176.7 million to $235.9 million from $59.2 million in 1996. These increases were due to the acquisition of BRACC which added a significant number of locations and vehicles to the Company's operations. Revenue from the sales of vehicles increased $45.9 million in the first six months of 1997 to $101.6 million from $55.7 million in the first six months of 1996. Such revenues for the second quarter of 1997 increased $23.2 million to $57.8 million from $34.6 million in 1996. These increases were due to the addition of the car sales operations of BRACC as well as new stores opened by the Company. Royalties and other revenues totaled $12.6 million in the six month and second quarter periods in 1997 and largely represent royalty and other fees due from the Company's franchisees. Operating Expenses. Total operating expenses increased $230.1 million in the first six months of 1997 to $371.5 million from $141.4 million in the first six months of 1996. Such expenses for the second quarter 11 12 of 1997 increased $194.3 million to $277.2 million from $82.9 million in 1996. These increases were also due to the addition of BRACC's operations to the Company's operations. The cost of vehicles sold increased $38.8 million in the first six months of 1997 to $86.1 million from $47.3 million in 1996. Such expenses for the second quarter of 1997 increased $20.0 million to $49.5 million from $29.5 million in 1996. These increases are reflective of the car sales revenue growth with the addition of BRACC car sales locations and new locations opened by the Company. Amortization expense increased $2.0 million in the first six months of 1997 to $3.0 million from $1.0 million in the first six months of 1996. Such expenses for the second quarter of 1997 increased $1.9 million to $2.4 million from $.5 million in 1996. These increases were largely due to intangibles, including goodwill, related to the acquisition of BRACC. Other (Income) Expense, net. Interest expense, net of interest income, increased $19.2 million in the first six months of 1997 to $31.3 million from $12.2 million in the first six months of 1996. Such expenses for the second quarter of 1997 increased $17.4 million to $24.5 million from $7.1 million in 1996. These increases were due to the financing of fleet and other borrowings related to the acquisition of BRACC net of investment income due to the increase in cash . Provision for income taxes. The provision for income taxes increased $.1 million in the first six months of 1997 to $2.5 million from $2.4 million for the first six months of 1996. The provision for the second quarter of 1997 increased $.4 million to $1.9 million from $1.5 million in 1996. The tax provision reflects the expected full year effective rate of 42% which is higher than the statutory rate due to the effects of non-deductible intangible amortization and the impact of state and local income taxes net of the federal benefit. RECENT PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128 simplifies the standards for computing earnings per share and is effective for all financial statements issued for periods ending after December 15, 1997. Earlier application is not permitted. The adoption of SFAS 128 is not expected to materially impact the Company's earnings per share. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 12 13 PART II - OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS Not applicable. ITEM 2 CHANGES IN SECURITIES In January 1997, the Board of Directors authorized the issuance of 10,000 shares of Preferred Stock, par value $0.01 per share, designated as the "Series A Convertible Preferred Stock." In connection with the acquisition of BRACC 4,500 shares of Series A Convertible Preferrred Stock were issued to Ford. The Series A Convertible Preferred Stock ranks, with respect to dividend rights and rights on liquidation, senior to the outstanding Class A and Class B common stock (the "Common Stock"). Each share of the Series A Convertible Preferred Stock is entitled to receive dividends if, as and when declared by the Board of Directors of the Company out of funds legally available therefor. Each share of Series A Convertible Preferred Stock is also entitled to receive cumulative cash dividends in respect of each share of Series A Convertible Preferred Stock in such amount as the holder thereof would receive if such share were converted into a share of Class A Common Stock immediately prior to the record date for payment of any cash dividend on the Class A Common Stock. No dividends may be declared by the Board of Directors on the Common Stock or any other class of stock ranking junior to the Series A Convertible Preferred Stock unless full cumulative dividends have been or contemporaneously are declared and paid with respect to the Series A Convertible Preferred Stock. In the event of the dissolution, liquidation or winding up of the affairs of the Company, after satisfaction of amounts payable to creditors, holders of shares of Series A Convertible Preferred Stock are entitled to receive distributions in the same amount that such holders would receive if such shares were converted into shares of Class A Common Stock immediately prior to the dissolution, liquidation or winding up of the affairs of the Company in preference to any payment to holders of Common Stock or any other securities ranking junior to the Series A Convertible Preferred Stock. ITEM 3 DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of stockholders was held on April 22, 1997 in Daytona Beach, Florida for the purpose of (i) electing nine directors to the Board of Directors; (ii) approving certain amendments to the Company's Amended and Restated Certificate of Incorporation; (iii) approving certain amendments to the Company's 1994 Incentive Stock Option Plan; and (iv) approving certain amendments to the Company's 1994 Directors' Stock Option Plan. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management's solicitations. All of management's nominees for directors as listed in the proxy statement were elected with the following vote:
Director Nominee Votes For Votes Withheld ---------------- --------- -------------- Sanford Miler 27,526,215 100 John P. Kennedy 27,526,215 100 Jeffrey D. Congdon 27,526,215 100 Ronald D. Agronin 27,526,215 100 James F. Calvano 27,526,215 100 Martin P. Gregor 27,526,215 100 Alan D. Liker 27,526,215 100 Jeffrey R. Mirkin 27,526,215 100 Dr. Stephen L. Weber 27,526,215 100
Amendments to the Company's Amended and Restated Certificate of Incorporation (i) to increase the authorized number of shares of Class A Common Stock from 17,500,000 to 35,000,000 and (ii) to change the name of the Company to Budget Group, Inc. were approved with the following vote:
- ----------------------------------------------------------------------------------------- Votes For Votes Against Votes Withheld - ----------------------------------------------------------------------------------------- Class A Class B Class A Class B Class A Class B Common Common Common Common Common Common Stock Stock Stock Stock Stock Stock ========================================================================================= 8,142,564 19,366,000 16,863 0 888 0 - -----------------------------------------------------------------------------------------
Amendments to the Company's 1997 Incentive Stock Option Plan (i) to increase by 990,000 the number of shares of Common Stock available for grant under such plan such that the total number of shares of Common Stock available for grant under such plan is 1,750,000 and (ii) to approve certain other amendments to such plan were approved with the following vote:
Votes For Votes Against Votes Withheld - ----------------------------------------------------------------------------------------- Class A Class B Class A Class B Class A Class B Common Common Common Common Common Common Stock Stock Stock Stock Stock Stock ========================================================================================= 7,158,655 19,366,000 996,652 0 5,008 0 - -----------------------------------------------------------------------------------------
Amendments to the Company's 1994 Directors' Stock Option Plan (i) to increase by 125,000 the number of shares of Common Stock available for grant under such plan such that the total number of shares of Common Stock available for grant under such plan is 150,000 and (ii) to approve certain other amendments to such plan were approved with the following vote:
- ------------------------------------------------------------------------------- Votes For Votes Against Votes Withheld - ------------------------------------------------------------------------------- Class A Class B Class A Class B Class A Class B Common Common Common Common Common Common Stock Stock Stock Stock Stock Stock =============================================================================== 7,416,882 19,366,000 743,062 0 371 0 - -------------------------------------------------------------------------------
ITEM 5 OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. Exhibit 11 Earnings Per Share Exhibit 27 Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K In a Form 8-K dated April 29, 1997 and filed on May 14, 1997, the Company filed under Item 2 and Item 7, the information, financial statements and pro forma financial information related to the acquisition of Budget Rent a Car Corporation. 13 14 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. BUDGET GROUP, INC. ------------------ (Registrant) Dated: August 14, 1997 By: /s/ Sanford Miller ------------------ Sanford Miller Chairman of the Board and Chief Executive Officer Dated: August 14, 1997 By: /s/ Jeffrey D. Congdon ---------------------- Jeffrey D. Congdon Chief Financial Officer 14 EX-11.1 2 EARNINGS PER SHARE COMPUTATION 1 EXHIBIT 11.1 EARNINGS PER SHARE COMPUTATIONS
SIX-MONTH PERIOD ENDED June 30, June 30, 1997 1996 ------- ------- PRIMARY EARNINGS PER SHARE: (Dollar and share amounts in 000's) Net Income $ 3,501 $ 3,523 ------- ------- Shares: Weighted average common shares outstanding 14,218 7,343 Effect of shares issuable under stock option plans, stock purchase warrants and convertible securities based on the treasury stock method 2,095 70 ------- ------- Adjusted common shares and equivalents 16,313 7,413 ======= ======= Earnings per share - primary $ 0.21 $ 0.48 ======= ======= FULLY DILUTED EARNINGS PER SHARE: Net Income $ 3,501 $ 3,523 ------- ------- Shares: Weighted average common shares outstanding 14,218 7,343 Effect of shares issuable under stock option plans, stock purchase warrants and convertible securities based on the treasury stock method 2,173 154 ------- ------- Adjusted common shares and equivalents 16,391 7,497 ======= ======= Earnings per share - fully diluted $ 0.21 $ 0.47 ======= =======
2 EXHIBIT 11.1 EARNINGS PER SHARE COMPUTATIONS
THREE-MONTH PERIOD ENDED June 30, June 30, 1997 1996 ------- ------- PRIMARY EARNINGS PER SHARE: (Dollar and share amounts in 000's) Net Income $ 2,653 $ 2,246 ------- ------- Shares: Weighted average common shares outstanding 17,147 7,430 Effect of shares issuable under stock option plans, stock purchase warrants and convertible securities based on the treasury stock method 3,685 139 ======= ======= Adjusted common shares and equivalents 20,832 7,569 ======= ======= Earnings per share - primary $ 0.13 $ 0.30 ======= ======= FULLY DILUTED EARNINGS PER SHARE: Net Income $ 2,653 $ 2,246 ------- ------- Shares: Weighted average common shares outstanding 17,147 7,430 Effect of shares issuable under stock option plans, stock purchase warrants and convertible securities based on the treasury stock method 3,831 154 ------- ------- Adjusted common shares and equivalents 20,978 7,584 ======= ======= Earnings per share - fully diluted $ 0.13 $ 0.30 ======= =======
EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 335,044 0 233,840 0 2,370,425 2,939,309 135,363 0 3,599,975 467,265 2,756,084 0 105,750 199 270,677 3,599,975 408,769 408,769 86,068 285,441 0 0 31,272 5,988 2,487 3,501 0 0 0 3,501 0.21 0.21 RECEIVABLES ARE REPORTED NET OF ALLOWANCES FOR DOUBTFUL ACCOUNTS ON THE BALANCE SHEET PROPERTY, PLANT & EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION ON THE BALANCE SHEET
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