FORM 10-K

OR

Commission File Number 1-13647

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.

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 o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K:    x

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act):  Yes x No o

     The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2003, the last business day of the registrant's most recently completed second fiscal quarter, based on the closing price of the stock on the New York Stock Exchange on such date was $451,105,059.

     The number of shares outstanding of the registrant’s Common Stock as of February 27, 2004 was 25,253,410.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 21, 2004, are incorporated by reference in Parts II and III.

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DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.

FORM 10-K

TABLE OF CONTENTS

PART I
ITEM 1.				BUSINESS				4
ITEM 2.				PROPERTIES				19
ITEM 3.				LEGAL PROCEEDINGS				19
ITEM 4.				SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS				20
PART II
ITEM 5.				MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS				20
ITEM 6.				SELECTED FINANCIAL DATA				21
ITEM 7.				MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION				23
ITEM 7A.				QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK				36
ITEM 8.				FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA				37
ITEM 9.				CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE				67
ITEM 9A.				CONTROLS AND PROCEDURES				67
PART III
ITEM 10.				DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT				67
ITEM 11.				EXECUTIVE COMPENSATION				67
ITEM 12.				SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS				67
ITEM 13.				CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS				68
ITEM 14.				PRINCIPAL ACCOUNTANT FEES AND SERVICES				68

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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; economic and competitive conditions in markets and countries where our companies’ customers reside and where our companies and their franchisees operate; airline travel patterns; changes in capital availability or cost; costs and other terms related to the acquisition and disposition of automobiles; costs of conducting business and changes in structure or operations; and certain regulatory and environmental matters. 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.

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PART I

Company Overview

        General

        Dollar Thrifty Automotive Group, Inc., a Delaware corporation ("DTG"), owns DTG Operations, Inc. ("DTG Operations"), Dollar Rent A Car, Inc. and Thrifty, Inc. Thrifty, Inc. owns Thrifty Rent-A-Car System, Inc. and Thrifty Car Sales, Inc. ("Thrifty Car Sales"), which operates a franchised retail used car sales network. Thrifty Rent-A-Car System, Inc. owns Dollar Thrifty Automotive Group Canada, Inc. ("DTG Canada"). Effective January 1, 2003, DTG began operating under a new corporate structure which realigned the prior brand structure to a functional structure, combining the management of operations and administrative functions for both the Dollar and Thrifty brands. DTG Operations operates company-owned stores under the Dollar brand and the Thrifty brand, provides vehicle leasing to franchisees and operates reservation centers for both brands. Thrifty Rent-A-Car System, Inc. and Dollar Rent A Car, Inc. conduct franchising activities and sales and marketing activities for their respective brands. The Company has two additional subsidiaries, Rental Car Finance Corp. and Dollar Thrifty Funding Corp., which are special purpose financing entities and have been appropriately consolidated in the financial statements of the Company. Dollar Rent A Car, Inc., the Dollar brand and DTG Operations operating under the Dollar brand are individually and collectively referred to hereafter as "Dollar". Thrifty, Inc., Thrifty Rent-A-Car System, Inc., Thrifty Car Sales, the Thrifty brand and DTG Operations operating under the Thrifty brand are individually and collectively referred to hereafter as "Thrifty". DTG, Dollar and Thrifty and each of their subsidiaries are individually or collectively referred to herein as the "Company", as the context may require. Dollar and Thrifty and their respective independent franchisees operate the Dollar and Thrifty vehicle rental systems. The Dollar and Thrifty brands represent a value-priced rental vehicle generally appealing to leisure customers, including foreign tourists, and to small businesses and independent business travelers. As of December 31, 2003, Dollar and Thrifty had 823 locations in the United States and Canada of which 310 were company-owned stores and 513 were locations operated by franchisees. While Dollar and Thrifty have franchisees in countries outside the United States and Canada, revenues from these franchisees have not been material to results of operations of the Company.

        In the United States, Dollar’s main focus is operating company-owned stores located in major airports, and it derives substantial revenues from leisure and tour package rentals. Thrifty focuses on serving both the airport and local markets operating through a network of company-owned stores and franchisees. Dollar derives a majority of its U.S. revenues from providing rental vehicles and services directly to rental customers, while Thrifty has historically derived its revenues primarily from franchising fees and services including vehicle leasing. However, as part of a new strategy, Thrifty is now shifting to operating more company-owned stores by acquiring franchisee locations in key markets. Dollar and Thrifty incur the costs of operating company-owned stores and their revenues are directly affected by changes in rental demand and pricing.

        The Company is the successor to Pentastar Transportation Group, Inc., which was formed in 1989 to acquire and operate the rental car subsidiaries of Chrysler Corporation, now known as DaimlerChrysler Corporation (such entity and its subsidiaries and members of its affiliated group are hereinafter referred to as “DaimlerChrysler”). DTG Operations, formerly known as Dollar Rent A Car Systems, Inc., was incorporated in 1965. Thrifty Rent-A-Car System, Inc. was incorporated in 1950 and Dollar Rent A Car, Inc. was incorporated in December 2002. Thrifty, Inc. was incorporated in December 1998.

        Available Information

        The Company makes available free of charge on or through its Internet web site its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after such material has been electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). The Company’s Internet address is http://www.dtag.com. The SEC also maintains a web site that contains all of the Company’s filings at http://www.sec.gov.

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        The Company has a code of business conduct, which is available on the Company’s web site under the heading, “About DTG”. The Company’s Board of Directors has adopted a corporate governance policy and committee charters, which are updated periodically and can be found on the Company’s web site under the heading, “Corporate Governance”. A copy of the code of business conduct, the corporate governance policy and the charters are available upon request to the Company’s headquarters as listed on the front of this Form 10-K, attention “Investor Relations” department.

Industry Overview

        The U.S. daily vehicle rental industry has two principal markets: the airport market and the local market. Vehicle rental companies that focus on the airport market rent primarily to business and leisure travelers. Vehicle rentals from airport locations account for the largest portion of vehicle rentals in the United States. Companies focusing on the local market rent primarily to persons who need a vehicle periodically for personal or business use or who require a temporary replacement vehicle. Rental companies also sell used vehicles and ancillary products such as refueling services and loss damage waivers to vehicle renters.

        Vehicle rental companies typically incur substantial debt to finance their rental fleets. They also typically acquire a majority of their fleets under manufacturer residual value programs that repurchase or guarantee the resale value of Program Vehicles (hereinafter defined) at particular times in the future. This allows a rental company to determine in advance this important element of its cost structure. The Program Vehicles and the related obligations of the manufacturers are used as collateral for fleet financing.

        The rental car industry has consolidated ownership of the top eight brands which are now owned by just five companies. Enterprise is privately held, Hertz is a subsidiary of Ford, Budget and Avis are operating subsidiaries of Cendant Corporation, Dollar and Thrifty are operating subsidiaries of the Company, and Alamo and National were purchased by Vanguard Car Rental USA, Inc., an affiliate of Cerberus Capital Management, L.P., a private investment group, from ANC Rental Corporation out of bankruptcy in 2003.

        Prior to 2001, the car rental industry had experienced steady growth over the last decade driven by increased leisure and business airline passenger traffic and additional capacity in the hotel industry. During 2001, however, the travel industry suffered from the effects of an economic recession as well as the terrorist attacks of September 11. In the aftermath of September 11, airline passenger traffic dropped significantly and car rental companies reduced their fleet size in response to lower levels of demand. In 2003, airline passenger enplanements were down approximately 14% from 2000 peak levels. Car rental demand improved in the second half of 2003 as the economy picked up. Car rental pricing continued to be weak in 2003, but by the fourth quarter pricing was favorable compared to the prior year. The future growth of the car rental industry will be determined by general economic conditions and the level of leisure and business travel.

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. This general seasonal variation in demand, along with more localized changes in demand, causes the Company to vary its fleet size over the course of the year. In 2003, the Company’s average monthly fleet size ranged from a low of approximately 85,000 vehicles in the first quarter to a high of approximately 131,000 vehicles in the third quarter.

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The Company

        The Company has two value rental car brands, Dollar and Thrifty, with a strategy to operate company-owned stores in the top 75 airport markets and in key leisure destinations in the United States. In the United States, the Dollar and Thrifty brands remain separate, but operate under a single management structure and share vehicles, back-office employees and facilities, where possible. The Company also operates company-owned stores in the eight largest airports in Canada under its subsidiary, DTG Canada. In Canada, the company-owned stores are primarily co-branded.

        The Company also offers franchise opportunities in smaller markets in the United States and Canada and in all markets internationally so that franchisees can operate under the Dollar or Thrifty trademarks or a more recent opportunity to dual franchise and operate both brands in one market.

Summary Operating Data of the Company

							Years Ended December 31,
							2003				2002				2001
							(in thousands)
Revenues:
			Revenue from U.S. and Canada company-owned stores				$	1,019,476			$	901,790			$	824,962
			Revenue from U.S. and Canada franchisees					198,039				225,885				220,692
			Revenue from international franchisees					4,515				4,192				4,342
			Other revenue					5,856				1,327				174
			Total revenues				$	1,227,886			$	1,133,194			$	1,050,170
							As of December 31,
							2003				2002				2001
Rental locations:
			U.S. and Canada company- owned stores					310				224				193
			U.S. and Canada franchisee locations					513				579				676
Franchisees:
			U.S. and Canada					248				243				273
			International					99				106				102

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Dollar and Thrifty Brands

        Dollar

        Dollar’s main focus is serving the airport vehicle rental market, which is composed of business and leisure travelers. The majority of its locations are on or near airport facilities. At December 31, 2003, Dollar had 102 company-owned and franchised in-terminal locations. Dollar operates primarily through company-owned stores in the United States, and also licenses to independent franchisees which operate as a part of the Dollar brand system in the United States and abroad. Until 2003, all of its Canadian and international operations were franchised. In January 2003, Dollar re-acquired its master franchise rights in Canada and began acquiring franchisees in the eight largest airport markets of Calgary, Winnipeg, Ottawa, Toronto, Montreal, Halifax, Edmonton and Vancouver. Dollar successfully completed the acquisition of all franchisees in these top markets by January 2004, when it purchased the franchise operation in Vancouver.

        As of December 31, 2003, Dollar’s vehicle rental system included 314 locations in the United States and Canada, consisting of 169 company-owned stores and 145 franchisee locations. Dollar’s total rental revenue generated by company-owned stores was $808 million for the year ended December 31, 2003.

        Thrifty

        Thrifty’s main focus historically has been on franchising and franchise support services. As part of a new strategy, Thrifty is shifting to operating more company-owned stores by acquiring franchisee locations in key markets. In 2003, Thrifty made significant progress in acquiring franchised operations and converting them to company-owned locations. Thrifty U.S. company-owned locations increased to 87 as of December 31, 2003 from 42 at December 31, 2002. Thrifty’s U.S. company-owned stores and its franchisees derive approximately 73% of their combined rental revenues from the airport market and approximately 27% from the local market. Thrifty’s approach of serving both the airport and local markets allows many of its franchisees and company-owned stores to have multiple locations to improve fleet utilization and profit margins by moving vehicles among locations to better address demand between these markets. As airports have begun to institute fees for vehicle rental companies located outside their properties or limited these companies’ access to airport travelers, Thrifty’s company-owned stores and its franchisees have been moving to in-terminal locations. At December 31, 2003, Thrifty had 94 company-owned and franchised in-terminal locations.

        As of December 31, 2003, Thrifty’s vehicle rental system included 509 rental locations in the United States and Canada, consisting of 368 franchisee locations and 141 company-owned stores. Thrifty’s total rental revenue generated by company-owned stores was $206 million for the year ended December 31, 2003.

U.S. Corporate Operations

        In 2003, the Company implemented a new operating model for U.S. Dollar and Thrifty company-owned stores. This operating model includes maintaining separate airport counters, bussing, reservations, marketing and all other customer contact activities, while using a single management team for both brands. In addition, this operating model includes sharing vehicles, back-office employees and service facilities, where possible. The Company believes this operating model will allow it to maximize the revenue available from each brand while achieving a cost structure that approaches that of operating a single brand.

        As of December 31, 2003, the Company operates the Dollar brand in 53 and the Thrifty brand in 29 of the top 75 airport markets in the United States and operates both brands in 26 of these top 75 markets. During 2003, the Company added Thrifty in 21 and Dollar in two top 75 airport markets by acquiring franchisee locations or opening greenfield locations.

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        Franchisee Acquisition Program

        The Company is pursuing opportunities to acquire both Dollar and Thrifty franchise operations in the top 75 airport markets and other key leisure markets. Historically, Thrifty had established company-owned stores only upon the financial failure of a franchisee. Thrifty is now shifting to operating more company-owned stores by acquiring franchisee locations in key markets. In 2003, Thrifty implemented a strategy to transition from a franchise operation to a corporate operation in key U.S. markets.

        During 2003, the Company acquired the Thrifty franchise operations in 14 key U.S. markets in Hawaii, including Honolulu and Maui, Manchester, Las Vegas, Memphis, Detroit, Cleveland, Atlanta, Miami, Ft. Lauderdale, West Palm Beach, Houston, Hartford and Ontario, California. Dollar and Thrifty generally have the right of first refusal on the sale of a franchised operation.

        Tour Rentals

        Vehicle rentals by customers of foreign and U.S. tour operators generated approximately 19% of the Company’s rental revenues for the year ended December 31, 2003. These rentals are usually part of tour packages that also include air travel and hotel accommodations. Rentals to tour customers have certain advantages. Tour customers tend to reserve vehicles earlier than other customers, rent them for longer periods and cancel reservations less frequently. The Company has significant relationships with foreign and domestic tour operators that resulted in $189 million in rental revenue during the year ended December 31, 2003.

        Dollar is the exclusive U.S. vehicle rental company for all five of its largest tour operator accounts. The agreements for these five accounts expire from December 15, 2004 to April 30, 2009. No single tour operator account generated in excess of 3% of the Company’s 2003 revenues.

        Other

        Dollar and Thrifty reduce costs through bulk purchasing, apply performance benchmarks and develop and implement best practice management techniques nationwide. Its company-owned store network also allows Dollar and Thrifty to offer customers one-way rentals in most markets.

        As of December 31, 2003, the Company had vehicle rental concessions for company-owned stores at 106 airports in the United States. Its payments for these concessions are usually based upon a specified percentage of airport-generated revenue, subject to a minimum annual fee, and typically include fixed rent for terminal counters or other leased properties and facilities.

        Supplemental Equipment and Optional Products – Dollar and Thrifty rent ski racks, baby seats and other supplemental equipment and, subject to availability and applicable local law, make available loss damage waivers and insurance products related to the vehicle rental.

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Summary of U.S. Corporate Operations Data

							Years Ended December 31,
							2003				2002				2001
							(in thousands)
Rental revenues:
			Dollar				$	804,700			$	780,760			$	756,644
			Thrifty					157,006				76,884				28,884
			Total rental revenues				$	961,706			$	857,644			$	785,528
							As of December 31,
							2003				2002				2001
Rental locations:
			Dollar					142				138				134
			Thrifty					87				42				17
			Total rental locations					229				180				151

Canadian Operations

        The Company operates in Canada through DTG Canada. Thrifty has historically had a strong corporate presence in Canada, and, during 2003, Dollar acquired its master franchise rights in Canada and began re-acquiring its franchisee locations in the eight largest airport markets in Canada. The Company operates corporate stores in all eight of the largest airport markets in Canada, which includes Calgary, Winnipeg, Ottawa, Toronto, Montreal, Halifax, Edmonton and Vancouver. The majority of the markets are operated under the Company’s co-branding strategy in Canada where both the Dollar and Thrifty brands are represented at one shared location. These operations are important to maintaining a national airport presence in Canada, where DTG Canada has significant airport concessions and lease commitments.

Franchising

        Dollar – United States and Canada

        Dollar sells its U.S. franchises on an exclusive basis for specific geographic areas, generally outside the top 75 airport markets. Most franchisees are located at or near airports that generate a lower volume of vehicle rentals than the airports served by Dollar’s company-owned stores.

        In Canada, Dollar acquired the master franchise rights in 2003 and sells franchises in markets outside the top eight airport markets.

        A new opportunity has been introduced in smaller U.S. and Canadian markets. The Company is offering franchisees the opportunity to dual franchise. That is, one franchisee can operate both the Dollar and the Thrifty brand, thus, allowing them to drive more business in their market while leveraging fixed costs.

        Dollar licenses its franchisees to use the Dollar brand service marks in the vehicle rental and leasing and parking businesses. Franchisees pay Dollar an initial franchise fee generally based on the population, number of airline passengers, total airport vehicle rental revenues and the level of any other vehicle rental activity in the franchised territory, as well as other factors.

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        System Fees – In addition to an initial franchise fee, each U.S. franchisee is generally required to pay Dollar a system fee equal to 8% of airport rental revenue and 6% for suburban operations.

        Franchisee Services and Products – Dollar makes insurance coverage available to its franchisees and provides them with training and operational assistance, site selection guidance, vehicle leasing programs, vehicle damage recovery and claims management advice, sales assistance and image and standards guidance. Dollar also provides franchisees with fleet planning and customer satisfaction programs and sells them certain Dollar-branded supplies. In addition, Dollar offers its franchisees rental rate management analysis, centralized corporate account and tour billing and travel agent commission payments. Dollar franchisees pay Dollar a fee for each reservation made through Dollar’s worldwide reservation system.

        Thrifty – United States and Canada

        Thrifty sells its U.S. franchises on an exclusive basis for specific geographic areas, generally outside the top 75 U.S. airport markets. Historically, Thrifty sold franchises more broadly; however, in 2003, Thrifty implemented a strategy to operate the top 75 U.S. markets as company-owned locations. In Canada, Thrifty sells franchises in markets outside the top eight Canadian airport markets.

        A new opportunity has been introduced in smaller U.S. and Canadian markets. The Company is offering franchisees the opportunity to dual franchise, operating both the Thrifty and Dollar brand.

        Thrifty licenses its franchisees to use the Thrifty brand service marks in the vehicle rental and leasing and parking businesses. Franchisees pay Thrifty an initial franchise fee generally based on the population, number of airline passengers, total airport vehicle rental revenues and the level of any other vehicle rental activity in the franchised territory, as well as other factors. Thrifty offers its franchisees a full line of products and services not easily or cost effectively available from other sources. Thrifty works closely with its franchisees in formulating and implementing marketing and operating strategies.

        System Fees and Advertising Fees – In addition to the initial franchise fee, Thrifty’s U.S. franchisees pay Thrifty an administrative fee, which is generally 3.0% of base rental revenue, excluding ancillary products. U.S. franchisees also pay an advertising fee ranging from 2.5% to 5.0% of base rental revenue to a separate advertising fund managed jointly by franchisees and Thrifty management.

        For 2003, Thrifty’s five largest U.S. franchisees generated less than 5% of the Company’s total revenue in the form of system, fleet leasing, reservation and other fees. Over the past five years, Thrifty’s franchisee turnover has averaged approximately 12% per year, with an average of 19 terminations and 16 new sales (including new territories added to existing franchise agreements) per year.

        Franchisee Services and Products – Thrifty provides its U.S. and Canadian franchisees with a full range of products and services, including vehicle leasing, insurance programs, reservations, site selection, computer systems, marketing programs and assistance, supplies, image and standards and training.

        Canadian Franchisees – A new program has been introduced in Canada allowing Canadian franchisees the opportunity to also acquire the Dollar brand and operate locations on a co-brand basis. All Canadian franchisees whether operating a single-brand or co-brand location pay a monthly fee generally equal to 8% of rental revenue.

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Summary of U.S. and Canada Franchise Operations Data

							As of December 31,
							2003				2002				2001
Franchisee locations:
			Dollar					145				129				135
			Thrifty					368				450				541
			Total franchisee locations					513				579				676
Franchisees:
			Dollar					78				56				61
			Thrifty					170				187				212
			Total franchisees					248				243				273

        International

        Dollar and Thrifty offer master franchises outside the United States and Canada, generally on a countrywide basis. Each master franchise is permitted to operate within their franchised territory directly or through subfranchisees. At December 31, 2003, Dollar had franchised locations in 24 countries and Thrifty had franchised locations in 60 countries outside the United States and Canada. These locations are in Latin America, Europe, the Middle East, and the Asia-Pacific regions. Beginning in 2003, the Company is offering franchisees the opportunity to license the rights to operate both the Dollar and Thrifty brands in certain markets on a dual franchise or co-brand basis. Revenue generated by the Company from franchised operations outside the United States and Canada totaled $4.5 million in 2003.

Thrifty Car Sales

        In December 1998, Thrifty Car Sales was formed to operate its new franchise system, “Thrifty Car Sales,” which sells primarily late model, low mileage used vehicles. Thrifty Car Sales provides an opportunity for both independent and manufacturer franchised dealers to enhance or expand their used car operations under a well-recognized national brand name. In addition to the use of the brand name, dealers have access to a variety of products and services offered by Thrifty Car Sales. These products and services include operational and marketing support, vehicle supply services, customized retail and wholesale financing programs as well as national accounts and supplies programs. As of December 31, 2003, Thrifty Car Sales had 53 franchise locations in operation.

Reservations

        The Internet is an important source of reservations for the Company. For the year ended December 31, 2003, approximately 52% of Dollar’s total non-tour reservations and 55% of Thrifty’s total reservations came through the Internet. Dollar’s Internet web site (dollar.com) provided approximately 25% of total non-tour reservations for Dollar and Thrifty’s web site (thrifty.com) provided approximately 27% of total reservations for Thrifty. The Company has continuously staffed reservation facilities for Dollar and Thrifty at its headquarters in Tulsa, Oklahoma, and at its facility in Tahlequah, Oklahoma. Dollar and Thrifty reservation systems are linked to all major airline reservation systems and through such systems to travel agencies in the United States, Canada and abroad.

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Marketing

        Dollar

        Dollar positions itself as a premier value car rental company in the travel industry, providing on airport convenience with low rates on quality vehicles. Customers who rent from Dollar are cost conscious leisure, tour and business travelers who want to save money on car rentals without compromising fundamental car rental services. Dollar implements this strategy through national advertising, strategic marketing partnerships and enhancing distribution channels.

        Advertising and Promotion

        Dollar employs national advertising primarily in newspapers. Dollar has shifted its traditional media mix of print and network/cable television to its current emphasis on Internet advertising, where it has made significant investments. In all of its advertising, Dollar promotes dollar.com, its award winning web site, to encourage travelers to book reservations with Dollar through this low cost channel. Dollar encourages franchisees, as well as local management of company-owned stores, to develop local market relationships and retail sales initiatives that coordinate with Dollar’s national advertising programs.

        Dollar has made filings under the intellectual property laws of jurisdictions in which it or its franchisees operate, including the U.S. Patent and Trademark Office, to protect the names, logos and designs identified with Dollar. These marks are important for customer awareness and selection of Dollar for vehicle rental.

        Strategic Marketing Efforts

        During 2003, the volume of reservations Dollar received through its dollar.com web site and other Internet web sites totaled approximately 52% of its total non-tour reservations. Dollar has made significant investments in dollar.com and has plans to continually enhance the web site to best meet its customers’ needs. Additionally, Dollar’s innovative use of direct-connect technology with the Southwest Airlines site, southwest.com, opened up another new booking channel in 2001, and it has continued to grow through 2003.

        Approximately 19% of Dollar’s non-tour reservations are booked through travel agencies utilizing the major airline global distribution systems. Major travel chains and consortia operate under preferred supplier agreements with Dollar, and are supported by the Dollar sales department. Under its preferred supplier agreements, Dollar provides these travel agency accounts guaranteed commission levels and overrides/marketing funds in return for promoting Dollar and giving Dollar a priority in their reservation systems. In general, these agreements are not exclusive to Dollar, and many travel agency accounts have similar arrangements with other vehicle rental companies. Dollar also maintains strong relations with many significant overseas tour operators who specialize in inbound tour packages to the United States. Dollar has also developed strategic marketing partnerships and frequent flyer programs.

        Thrifty

        Thrifty positions itself as an industry leader in delivering value for vehicle rental to value-conscious consumers. In the United States, it implements this strategy primarily through national advertising, strategic marketing partnerships and enhancing distribution channels. In addition, marketing assistance is provided to U.S. franchisees in local advertising, promotion and sales.

        Advertising and Promotion

        Thrifty employs national advertising on U.S. broadcast and cable television networks and in newspapers and travel industry and airline magazines, as well as new media advertising via the Internet. Thrifty also sponsors sports and other events to increase national exposure and promote local Thrifty operations. In the United States, Thrifty’s national advertising and marketing expenses are paid out of an advertising fund managed by a national advertising committee consisting of representatives of Thrifty franchisees and certain members of Thrifty management. U.S. franchisees and company-owned

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stores contribute 5% of their base rental revenue from airport operations and 2.5% of their base rental revenue from local operations to the advertising fund.

        Thrifty has made filings under the intellectual property laws of jurisdictions in which it or its franchisees operate, including the U.S. Patent and Trademark Office, to protect the names, logos and designs identified with Thrifty. These marks are important for customer awareness and selection of Thrifty for vehicle rental.

        Strategic Marketing Efforts

        During 2003, the volume of reservations Thrifty received through its thrifty.com web site and other Internet travel sites totaled approximately 55% of its total reservations. Thrifty continues to invest in its thrifty.com web site and recently introduced a new and easier means of booking on thrifty.com.

        Thrifty enjoys a strong relationship with the travel agency community, which is highlighted by its longstanding support of ASTA (American Society of Travel Agents) and through its preferred supplier arrangements. Under its preferred supplier arrangements, Thrifty provides these travel agency groups additional commissions or lower prices in return for their featuring Thrifty in their advertising or giving Thrifty a priority in their reservation systems. In general, these arrangements are not exclusive to Thrifty, and many travel agency groups have similar arrangements with other vehicle rental companies. Thrifty continues to be the exclusive car rental supplier in Radisson’s “Look to Book” program. Thrifty has also developed strategic partnerships with most U.S. airlines through participation in their frequent flyer programs.

        In 2003, the Thrifty relationship with Wal-Mart Stores, Inc. (“Wal-Mart”) expanded to include a test of rental counters inside a limited number of Wal-Mart stores. Thrifty’s relationship with Wal-Mart includes an exclusive marketing and sales agreement and has resulted in Thrifty being named co-primary supplier of rental cars for Wal-Mart’s corporate travel and an exclusive marketing and sales agreement with Wal-Mart.com to provide anytime, anywhere flat rate pricing for Thrifty’s compact and intermediate size rental vehicles. Thrifty is also the only car rental company approved to accept the Wal-Mart credit card.

Customer Service

        The Company has programs at its headquarters and in company-owned stores to improve customer service. These programs involve customer satisfaction training and team-based problem solving, especially as it relates to improving customer service. The Company’s customer service centers measure customer satisfaction, track service quality trends, respond to customer inquiries and provide recommendations to senior management and vehicle rental location supervisors. The Company conducts initial and ongoing training for headquarters, company-owned store and franchisee employees, using professional trainers, performance coaches and computer-based training programs.

Information Systems and Other Services

        The Company depends upon a number of core information systems to operate its business, primarily its counter automation, reservations and revenue management systems. The counter automation system in company-owned stores processes rental transactions, facilitates the sale of additional products and services and facilitates the monitoring of its fleet and financial assets. In 1998, the Company developed a revenue management system with Manugistics Group, Inc., a leading supplier of such systems, which is utilized by all company-owned stores. The system is designed to enable the Company to better determine rental demand based on historical reservation patterns and adjust its rental rates accordingly.

        EDS Information Systems, L.L.C. (“EDS”), a leading global information technology service company, manages and monitors the Company’s data center network and its daily information processing. The Company’s counter automation, reservations, revenue management, Internet web sites and fleet processing systems are housed in a secure underground EDS facility in Oklahoma designed to withstand disasters. Other information systems are supported by Company employees.

        U.S. franchisees receiving a certain volume of reservations are required to use an approved automated counter system. In addition to providing an electronic data link with the Company's worldwide reservations centers, the automated counter

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system prints rental agreements and provides the Company and its franchisees with customer and vehicle inventory information as well as financial and operating reports.

        Insurance, Supplies and National Account Programs. The Company makes available to its franchisees, for a fee, insurance for death or injury to third parties, property damage and damage to or theft of franchisee vehicles.

        The Company makes bulk purchases of items used by its franchisees, which it sells to franchisees at prices that are often lower than they could obtain on their own. The Company also negotiates national account programs to allow its franchisees to take advantage of volume discounts for many materials or services used for operations such as tires, glass replacement, long distance telephone service and overnight mail.

        Parking Services. Airport parking operations are a natural complement to vehicle rental operations. The Company encourages its franchisees that have near-airport locations to add this ancillary business.

Fleet Acquisition and Management

        Vehicle Supply

        For the 2003 model year, DaimlerChrysler vehicles represented approximately 85% of the total U.S. fleet of DTG Operations. DTG Operations also purchases vehicles from other automotive manufacturers to adjust somewhat the overall composition and cost of the fleet. The Company expects that for the 2004 model year, DaimlerChrysler vehicles will also represent approximately 85% of the total U.S. fleet of DTG Operations.

        Automotive manufacturers’ residual value programs limit the Company’s residual value risk. Under these programs, the manufacturer either guarantees the aggregate depreciated value upon resale of covered vehicles of a given model year, as is generally the case under DaimlerChrysler’s program, or agrees to repurchase vehicles at specified prices during established repurchase periods. In either case, the manufacturer’s obligation is subject to certain conditions relating to the vehicle’s age, physical condition and mileage. Vehicles purchased by vehicle rental companies under these programs are referred to as “Program Vehicles.” Vehicles not purchased under these programs and for which rental companies therefore bear residual value risk are referred to herein as “Non-Program Vehicles.” The Company believes that a majority of vehicles owned by other U.S. vehicle rental companies, except for Enterprise, are Program Vehicles.

        DaimlerChrysler, the Company’s primary supplier, sets the terms of its residual value program before the start of each model year. The terms include monthly depreciation rates, minimum and maximum holding periods and mileages, model mix requirements, and vehicle condition and other return requirements. The residual value program enables DTG Operations to limit its residual value risk with respect to Program Vehicles because DaimlerChrysler agrees to reimburse DTG Operations for any difference between the aggregate gross auction sale price of the Program Vehicles for the particular model year and the vehicles’ aggregate predetermined residual value. Under the program, DTG Operations must sell the Program Vehicles in closed auctions to DaimlerChrysler dealers. DTG Operations is reimbursed under the program for certain transportation and auction-related costs.

        DTG Operations also purchases Non-Program Vehicles, for which it bears the full residual risk because the vehicles are not covered by any manufacturer’s residual value program. It does so when required by manufacturers in connection with the purchase of Program Vehicles or when it believes there is an opportunity to lower its fleet costs or to fill model and class niches not available through residual value programs. DaimlerChrysler, which is the main provider of Non-Program Vehicles to DTG Operations, does not set any terms or conditions on the resale of Non-Program Vehicles other than requiring minimum holding periods. For the 2003 model year, approximately 17% of the vehicles acquired by DTG Operations were Non-Program Vehicles.

        The Company’s operating results are materially affected by the depreciation rates and other purchase terms provided under DaimlerChrysler’s residual value program, as well as any other purchase or promotion incentives DaimlerChrysler provides. The percentage of vehicles acquired under DaimlerChrysler and other manufacturers’ residual value programs in the future will depend upon several factors, including the availability and cost of these programs.

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        Residual value programs enable Dollar and Thrifty to determine their depreciation expense on Program Vehicles in advance. Vehicle depreciation is the largest single cost element in the Company’s operations. The percentage of the Company’s vehicle rental fleets benefiting from residual value programs could decrease if the automotive manufacturers changed the size or terms of these programs. In that event, the Company would have increased residual value risk that could be material to its results of operations and could adversely affect its ability to finance its vehicles. Second, because it is difficult to predict future vehicle resale values, the Company may not be able to manage effectively the residual value risk on its Non-Program Vehicles. The residual value of Non-Program Vehicles depends on such factors as the general level of pricing in the automotive industry for both new and used vehicles. Prices for used vehicles generally decrease if the automotive manufacturers increase the retail sales incentives they offer on new vehicles. The Company cannot predict the level of retail sales incentives DaimlerChrysler or the other automotive manufacturers will offer in the future. The Company has received substantial payments under residual value programs over the past several years. See Note 6 of Notes to Consolidated Financial Statements.

        Dollar and Thrifty entered into U.S. vehicle supply agreements with DaimlerChrysler, which commenced with the 1997 model year and expired in July 2001. In June 2000, the Company entered into a new vehicle supply agreement with DaimlerChrysler, which enabled the Company to acquire revenue-earning vehicles beginning with the 2002 model year through the 2006 model year. In October 2002, the Company finalized a new vehicle supply agreement with DaimlerChrysler, which enables the Company to acquire vehicles through the 2007 model year. In October 2003, the Company amended its vehicle supply agreement (the “VSA”) with DaimlerChrysler. This amendment did not impact the economic terms of the agreement, but provided the Company additional flexibility in managing its vehicle purchases. Under the VSA, DaimlerChrysler has agreed to make specified volumes of DaimlerChrysler vehicles available for use by company-owned stores or for fleet leasing programs. Dollar and Thrifty will promote DaimlerChrysler vehicles exclusively in their advertising and other promotional materials and DaimlerChrysler has agreed to make various promotional payments to the Company. These payments are material to the Company’s results of operations. See Note 6 of Notes to Consolidated Financial Statements.

        The VSA provides that the Company will purchase at least 75% of its vehicles from DaimlerChrysler until a certain minimum level is reached, of which 83% will be Program Vehicles and 17% will be Non-Program Vehicles for the 2004 model year. While DaimlerChrysler has the sole discretion to set the specific terms and conditions of its residual value program for a model year, it has agreed in the VSA to offer programs to the Company that, taken as a whole, are competitive with a residual value program Ford or General Motors makes generally available to domestic vehicle rental companies.

        Vehicle Disposition

        DTG Operations generally holds vehicles in rental service from seven to nine months. The length of service is determined by taking into account seasonal rental demand and the average monthly mileage accumulation. Most vehicles must be removed from service before they reach 30,000 miles to avoid significant excess mileage penalties under DaimlerChrysler’s residual value program. DTG Operations must bear the risk on the resale of Program Vehicles that cannot be returned. DTG Operations’ efforts to expand the channels for disposition of Non-Program Vehicles have been successful. DTG Operations disposed of 57% of its Non-Program Vehicles through auctions and 43% directly to used car dealers, wholesalers and its franchisees during the year ended December 31, 2003. Utilizing sales channels other than the auctions avoids transportation costs, interest costs and other fees.

        Maintenance

        DTG Operations and certain Dollar and Thrifty franchisees may have automotive maintenance centers at airports and in urban and suburban areas. Many of these facilities are accepted by automotive manufacturers as eligible to perform and receive reimbursement for warranty repairs. Collision damage repairs are generally performed by independent contractors. Dollar’s and Thrifty’s franchisees are responsible for the maintenance of their fleet vehicles.

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        Fleet Leasing Programs

        DTG Operations makes fleet leasing programs available to Dollar and Thrifty U.S. franchisees for each new model year. The terms of its fleet leasing programs generally mirror the requirements of various manufacturers’ residual value programs with respect to model mix, order and delivery, vehicle maintenance and returns, but also include Non-Program Vehicles. Dollar and Thrifty monitor the creditworthiness and operating performance of franchisees participating in the fleet leasing programs and periodically audit franchisees’ leased fleets. For the year ended December 31, 2003, approximately 12% of the Company’s total revenue was derived from vehicle leasing programs. As the Company continues to implement its corporate strategy of acquiring franchise operations and converting them to corporate operations, leasing revenue will continue to decline.

        DTG Operations sets lease rates after considering depreciation rates for Program Vehicles, estimated Non-Program Vehicle depreciation rates, interest costs, model mix, administrative costs and market conditions. Average monthly lease rates vary depending on vehicle model, and the average lease period is between seven and nine months. Although DTG Operations leases both Non-Program Vehicles as well as Program Vehicles to Dollar and Thrifty franchisees, these fleet leasing programs eliminate the residual value risk for their franchisees. Franchisees may, however, elect to assume some residual value risk on certain Non-Program Vehicles they lease in exchange for a lower lease rate.

U.S. Fleet Data

							Years Ended December 31,
							2003				2002				2001
DTG
Average number of vehicles leased to franchisees								28,162				33,849				31,412
Average number of vehicles in combined fleets of franchisees								53,410				55,703				57,862
Average number of vehicles in combined fleets of company-owned stores								75,684				65,331				65,029
Total								129,094				121,034				122,891

Competition

        There is intense competition in the vehicle rental industry on the basis of price, service levels, vehicle quality, vehicle availability and the convenience and condition of rental locations. Dollar operates mainly in the U.S. airport market, although compared to its competitors it relies more heavily on leisure, tour and small business customers. Dollar’s franchisees have a similar customer profile. In any given location, Dollar may compete with national, regional and local vehicle rental companies, many of which have greater financial resources than the Company. Dollar’s principal competitors for business and leisure travelers are Alamo, Avis, Budget, Hertz, National, Enterprise and Thrifty. Dollar competes primarily on the basis of price and customer service.

        Thrifty’s U.S. franchisees and company-owned stores generally compete for cost-conscious consumers with Alamo, Avis, Budget, Dollar, Hertz, Enterprise and National. Enterprise, Hertz, Avis and Budget as well as local and regional rental companies are major competitors in the local market. They compete on the basis of price, location, service and well-established customer relationships. Most Thrifty franchisees compete in the local market for retail general use business rather than insurance replacement rentals.

        The Canadian vehicle rental markets are also intensely competitive. The vast majority of the Canadian market is operated either directly or through franchisees of the major U.S. vehicle rental companies, including Budget, Alamo, Avis, Hertz, Enterprise and National, as well as Dollar and Thrifty.

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Insurance

        The Company is subject to third-party bodily injury liability and property damage claims resulting from accidents involving its rental vehicles. In 2003 and 2002, the Company retained the risk of loss in various amounts up to $2 million and $1 million, respectively, on a per occurrence basis for public liability and property damage claims. The Company maintains insurance coverages at certain amounts in excess of this retained risk. In 2001, the majority of the Company’s operations had first dollar coverage from insurance carriers, subject to certain policy limits, for these claims. Prior to this insurance coverage, the Company was self-insured or had policy deductibles up to certain limits. Additionally, in 2003, the Company began retaining the risk of loss on a portion of the supplemental liability insurance (“SLI”) policies sold to vehicle rental customers.

        The Company retains the risk of loss for general and garage liability insurance coverage in various amounts up to $2 million and maintains insurance at certain amounts in excess of $2 million. The Company retains the risk of loss for any catastrophic and comprehensive damage to its vehicles. In addition, the Company carries workers’ compensation coverage with retentions in various amounts up to $250,000. The Company also carries excess liability and directors’ and officers’ liability insurance coverage.

        Provisions for bodily injury liability and property damage liability on self-insured claims are made by charges to expense based upon periodic evaluations by an independent actuary of estimated ultimate liabilities on reported and unreported claims. As of December 31, 2003, the Company’s reserve for public liability and property damage claims was approximately $56.3 million. The Company’s obligations to pay these losses and indemnify the insurance carriers are collateralized by surety bonds and letters of credit. As of December 31, 2003, these letters of credit and surety bonds totaled approximately $59.6 million and $17.9 million, respectively.

        The Company also maintains various surety bonds to secure performance under airport concession agreements and other obligations. As of December 31, 2003, the total amount of these bonds was approximately $24.4 million.

Regulation

        Loss Damage Waivers and Ancillary Insurance

        Loss damage waivers relieve customers from financial responsibility for vehicle damage. Legislation affecting the sale of loss damage waivers has been adopted in 26 states. These laws either require disclosure to customers that loss damage waivers may not be necessary, limit customer liability to specified amounts, limit the ability of vehicle rental companies to offer loss damage waivers for sale or cap the amounts that may be charged for loss damage waivers. Adoption of national or additional state legislation affecting or limiting the sale, or capping the rates, of loss damage waivers could result in the loss of this revenue and additional limitations on potential customer liability could increase costs to Dollar, Thrifty and their franchisees. Legislation was passed in New York state removing many of the limitations on the car rental industry’s ability to sell loss damage waivers in New York effective February 24, 2003.

        Dollar, Thrifty and other vehicle rental companies offer customers SLI in connection with vehicle rentals. In 1997, the State of Texas determined that car rental companies cannot sell SLI without licensing and product approval. Some other states concluded that the selling of SLI required an insurance license while other states were unclear on the issue. During the fourth quarter of 1999, the Financial Services Reform Bill was passed by Congress to address this issue. The legislation created a federal presumption for a three-year period that car rental companies are not required to have a state insurance license to sell certain insurance products, unless state law specifically requires such a license. This three-year period expired in the fall of 2002; however, most states have enacted legislation or other administrative action addressing this issue. Car rental companies continue to work for legislative or administrative action in the few remaining states that have not yet addressed this issue.

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        Franchising Regulation

        As franchisors, Dollar and Thrifty are subject to federal, state and foreign laws regulating various aspects of franchise operations and sales. These laws impose registration and disclosure requirements on franchisors in the offer and sale of franchises and, in certain states, also apply substantive standards to the relationship between the franchisor and the franchisee, including those pertaining to default, termination and nonrenewal of franchises.

        Other Matters

        Certain states currently make vehicle owners (including vehicle rental companies) vicariously liable for the actions of any person lawfully driving an owned vehicle, regardless of fault. Some of these states, primarily New York, do not limit this liability. Vehicle rental companies are also subject to various federal, state and local consumer protection laws and regulations including those relating to advertising and disclosure of charges to customers.

        Dollar and Thrifty are subject to federal, state and local laws and regulations relating to taxing and licensing of vehicles, franchise sales, franchise relationships, vehicle liability, used vehicle sales, insurance, telecommunications, vehicle rental transactions and labor matters. The Company believes that Dollar’s and Thrifty’s practices and procedures are in substantial compliance with federal, state and local laws and is not aware of any material expenditures necessary to meet legal or regulatory requirements. Nevertheless, considering the nature and scope of Dollar’s and Thrifty’s businesses, it is possible that regulatory compliance problems could be encountered in the future.

Environmental Matters

        The principal environmental regulatory requirements applicable to Dollar and Thrifty operations relate to the ownership, storage or use of petroleum products such as gasoline, diesel fuel and new and used motor oil; the treatment or discharge of waste waters; the operation of automotive body shops; and the generation, storage, transportation and off-site treatment or disposal of waste materials. Dollar and Thrifty own 12 and lease 97 locations where petroleum products are stored in underground or above-ground tanks. For owned and leased properties, Dollar and Thrifty have programs designed to maintain compliance with applicable technical and operational requirements, including leak detection testing of underground storage tanks, and to provide financial assurance for remediation of spills or releases.

        The historical and current uses of the Dollar and Thrifty facilities may have resulted in spills or releases of various hazardous materials or wastes or petroleum products (“Hazardous Substances”) that now, or in the future, could require remediation. The Company also may be subject to requirements related to remediation of Hazardous Substances that have been released into the environment at properties they own or operate, or owned or operated in the past, or at properties to which they send, or have sent, Hazardous Substances for treatment or disposal. Such remediation requirements generally are imposed without regard to fault, and liability for any required environmental remediation can be substantial.

        Dollar and Thrifty may be eligible for reimbursement or payment of remediation costs associated with releases from registered underground storage tanks in U.S. states that have established funds to assist in the payment of such remediation costs. Subject to certain deductibles, the availability of funds, the compliance status of the tanks and the nature of the release, these tank funds may be available to Dollar and Thrifty for use in remediating releases from their tank systems.

        At certain facilities, Dollar and Thrifty presently are investigating or remediating soil or groundwater contamination. Based on currently available information, the Company does not believe that the costs associated with environmental investigation or remediation will be material. However, additional contamination could be identified or occur in the future.

        The use of automobiles and other vehicles is subject to various governmental requirements designed to limit environmental damage, including that caused by emissions and noise. Generally, these requirements are met by the manufacturer except, on occasion, equipment failure requiring repair by the Company.

        Environmental legislation and regulations and related administrative policies have changed rapidly in recent years. There is a risk that governmental environmental requirements, or enforcement thereof, may become more stringent in the

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future and that the Company may be subject to legal proceedings brought by government agencies or private parties with respect to environmental matters. In addition, with respect to cleanup of contamination, additional locations at which wastes generated by the Company may have been released or disposed, and of which the Company is currently unaware, may in the future become the subject of cleanup for which the Company may be liable, in whole or part. Accordingly, while the Company believes that it is in substantial compliance with applicable requirements of environmental laws, there can be no assurance that the Company’s future environmental liabilities will not be material to the Company’s consolidated financial position or results of operations or cash flows.

Employees

        As of December 31, 2003, the Company employed a total of approximately 7,000 full-time and part-time employees. Approximately 200 of the Company’s employees were subject to collective bargaining agreements as of December 31, 2003. The Company believes its relationship with its employees is good.

        The Company owns its headquarters located at 5330 East 31st Street, Tulsa, Oklahoma. This location is a three building office complex that houses the headquarters and Tulsa reservation centers for Dollar and Thrifty. These buildings and the related improvements were mortgaged in December 1997 pursuant to a mortgage in favor of Credit Suisse First Boston (“CSFB”), as administrative agent for a syndicate of banks. The mortgage was executed in connection with the Revolving Credit Facility, as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operation - Liquidity and Capital Resources”.

        In connection with the Revolving Credit Facility, the Company also executed mortgages in favor of CSFB encumbering its real property located in San Diego, Tampa, Las Vegas, Phoenix, Ft. Lauderdale, Orlando, Dallas, Houston and Salt Lake City.

        The Company owns or leases real property used for company-owned stores and office facilities, and in some cases owns real property that is leased to franchisees or other third parties. As of December 31, 2003, the Company’s company-owned operations were carried on at 310 locations in the United States and Canada, the majority of which are leased. Dollar and Thrifty each operate company-owned stores under concession agreements with various governmental authorities charged with the operation of airports. Concession agreements for airport locations, which are sometimes competitively bid, are important for securing air traveler business.

        On November 2, 1994, the City of San Jose, California filed an action in the Superior Court of California, against Chevron, Dollar and others, seeking unspecified compensatory and punitive damages and injunctive relief. The suit relates to pollution at a site currently occupied by Dollar and formerly occupied by Chevron. Dollar has partially remediated the affected soil, but not the allegedly affected ground water. Dollar believes that prior uses of the site resulted in any remaining contamination at the site.

        In addition to the foregoing, various legal actions, claims and governmental inquiries and proceedings are pending or may be instituted or asserted in the future against the Company. 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, including the one discussed above, could be decided unfavorably to the Company. Although the amount of liability with respect to these matters cannot be ascertained, potential liability is not expected to materially affect the consolidated financial position or results of operations of the Company.

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        No matters were submitted to a vote of security holders during the fourth quarter ended December 31, 2003.

PART II

        The Company’s Common Stock is listed on the New York Stock Exchange (“NYSE”) under the trading symbol “DTG.” The high and low sales prices for the Common Stock for each quarterly period during 2003 and 2002, were as follows:

        The 25,253,410 shares of Common Stock outstanding at February 27, 2004 were held by approximately 4,000 registered and beneficial stockholders of record.

        The Company has not paid cash dividends since completion of its initial public offering in December 1997, but may consider paying cash dividends in the future.

        Under the terms of the Revolving Credit Facility, restrictions were imposed by the lenders on the payment of cash dividends and share repurchases. During the term of such agreement, which expires August 2, 2005, share repurchases and dividends are permitted at the lesser of specified monetary levels or percentages of cash flow. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Liquidity and Capital Resources”.

        Reference is made to the information appearing under the caption “Security Ownership of Certain Beneficial Owners, Directors, Director Nominees and Executive Officers – Equity Compensation Plan Information” in the Company’s definitive Proxy Statement which will be filed pursuant to Regulation 14A promulgated by the SEC not later than 120 days after the end of the Company’s fiscal year ended December 31, 2003, and is incorporated herein by reference.

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Selected Consolidated Financial Data of the Company

        The selected consolidated financial data was derived from the audited consolidated financial statements of the Company.

Note:  Certain reclassifications have been made to the prior years’ financial data to conform to the classifications used in 2003.

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U. S. and Canada

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Overview

        The Company operates two value rental car brands, Dollar and Thrifty. The majority of its customers pick up their vehicles at airport locations. Both brands are value priced and the Company therefore seeks to be the industry’s low cost provider. Leisure customers rent vehicles for longer periods than business customers, on average, providing lower transaction costs. The Company believes its vehicle utilization is consistently higher than that of its competitors.

        Both Dollar and Thrifty operate through a network of company-owned stores and franchisees. The majority of the Company’s revenue is generated from renting vehicles to customers through company-owned stores, with lesser amounts generated by fees and leasing revenue from franchisees.

        During the early part of 2003, the Company’s revenues and profits were negatively impacted by weak travel conditions leading up to, during and following the war in Iraq. During the first half of 2003, revenue per day was down about 6% from the prior year and same store rental day volume was up only slightly. During the third and fourth quarters of 2003 travel began to improve as the economy began to strengthen. Year over year pricing trends improved during the third and fourth quarters from that experienced during the first half, with revenue per day down about 2% in the third quarter and up slightly in the fourth quarter compared to 2002. Same store rental day volume was up 8% in the third quarter and up nearly 14% in the fourth quarter. Airline enplanements, an important driver for airport rental car demand, were down 2.7% in 2003 versus 2002, however enplanements were down only 1.1% in the fourth quarter.

        Prior to 2003, the Company maintained separate organizations for both the Dollar and Thrifty brands. At the beginning of the year, the Company implemented a single company structure organized around functions. The Company believes this new structure provides a more efficient operating structure and will facilitate more efficient growth. The Company is working to combine and improve information technology systems to gain efficiencies and facilitate growth. The Company also closed one of its satellite reservation centers as a result of this new structure.

        The Company is working to transition the Thrifty business model from a franchise model to a corporate operating model, similar to Dollar’s. The Company’s long term strategy is to operate both brands as corporate stores in the top 75 U.S. airport markets, the top eight Canadian airport markets and in key leisure destinations and to operate through franchisees in the smaller markets. During the year, the Company acquired franchise operations in 22 key U.S. and Canadian markets and opened six U.S. greenfield locations. During 2003, rental day volume increased by over 11% in company-owned stores as a result of franchisee acquisitions and the opening of greenfield locations. The Company expects that the majority of the franchises available for sale can be purchased over the next two years and funded with cash from operations.

        During 2003, the Company also implemented a new operating model for corporate store operations, operating both the Dollar and Thrifty brands with a single management team, sharing systems, vehicles, back-office employees and service facilities, where possible. The Company believes this is a more efficient operating model, which also facilitates the transition of the Thrifty brand from a franchise model to a corporate model, as franchise operations continue to be acquired.

        The Company’s profitability is primarily a function of the volume and pricing of rental transactions, utilization of the vehicles and the number of vehicles leased to franchisees. Significant changes in the purchase or disposal price of vehicles or interest rates can also have a significant effect on the Company’s profitability, depending on the ability of the Company to adjust pricing and lease rates for these changes. The Company’s business requires significant expenditures for vehicles and consequently, requires substantial liquidity to finance such expenditures.

        The Company expects its ongoing cash flow to exceed cash required to operate the business. Thus, in July 2003, the Company announced a $30 million share repurchase program to be completed over a two year period. During the third and fourth quarters of 2003 the Company purchased 236,000 shares for $5.8 million.

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Results of Operations

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

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Year Ended December 31, 2003 Compared with Year Ended December 31, 2002

        Operating Results

        The Company had income before income taxes of $37.2 million for 2003 as compared to $77.5 million in 2002. Income before income taxes for 2003 was reduced by $22.1 million due to the implementation of Emerging Issues Task Force No. 02-16 (“EITF 02-16”). See Note 3 of Notes to Consolidated Financial Statements for further discussion.

        Revenues