DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
FORM 10-Q

FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.FORM 10-Q

CONTENTS

FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
FORM 10-Q

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2005


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

For the transition period from______________to______________

Commission file number 1-13647

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.

(Exact name of registrant as specified in its charter)


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

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

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

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

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

The number of shares outstanding of the registrant’s Common Stock as of April 29, 2005 was 25,143,334.

Page

PART I - FINANCIAL INFORMATION

ITEM

1. FINANCIAL STATEMENTS

ITEM

2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM

3. QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

ITEM

4. CONTROLS AND PROCEDURES

PART II - OTHER INFORMATION

ITEM

1. LEGAL PROCEEDINGS

ITEM

2. UNREGISTERED SALES OF EQUITY SECURITIES

AND USE OF PROCEEDS

ITEM

6. EXHIBITS

SIGNATURES

Some of the statements contained herein under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” 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 the companies’ customers reside and where the companies and their franchisees operate; natural hazards or catastrophes; incidents of terrorism; airline travel patterns; changes in capital availability or cost; costs and other terms related to the acquisition and disposition of automobiles; systems or communications failures; costs of conducting business and changes in structure or operations; and certain regulatory and environmental matters and litigation risks. Should one or more of these risks or uncertainties, among others, materialize, actual results could vary from those estimated, anticipated or projected. Dollar Thrifty Automotive Group, Inc. undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

PART I – FINANCIAL INFORMATION

Table of Contents

ITEM 1.

FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Dollar Thrifty Automotive Group, Inc.:

We have reviewed the accompanying condensed consolidated balance sheet of Dollar Thrifty Automotive Group, Inc. and subsidiaries (the “Company”) as of March 31, 2005, and the related condensed consolidated statements of income and of cash flows for the three-month periods ended March 31, 2005 and 2004. These interim financial statements are the responsibility of the Company’s management.

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

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

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Dollar Thrifty Automotive Group, Inc. and subsidiaries as of December 31, 2004, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for the year then ended (not presented herein); and in our report dated March 14, 2005, we expressed an unqualified opinion on those consolidated financial statements, which opinion includes an explanatory paragraph regarding the Company's adoption of Financial Accounting Standards Board Interpretation No. 46(R), Consolidation of Variable Interest Entities. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2004 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

Tulsa, Oklahoma

May 6, 2005

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED MARCH 31, 2005 AND 2004

(In Thousands Except Per Share Data)


			Three Months
			Ended March 31,

			(Unaudited)
			2005		2004

REVENUES:
	Vehicle rentals		$	312,953	$	265,345
	Vehicle leasing			14,526		17,768
	Fees and services			12,276		12,134
	Other			3,045		3,461

		Total revenues		342,800		298,708


COSTS AND EXPENSES:

	Direct vehicle and operating			190,677		156,565
	Vehicle depreciation and lease charges, net			53,587		69,199
	Selling, general and administrative			54,855		47,547
	Interest expense, net of interest income			19,494		19,209

		Total costs and expenses		318,613		292,520

INCOME BEFORE INCOME TAXES				24,187		6,188

INCOME TAX EXPENSE				11,212		3,431

INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE				12,975		2,757

CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE				-		3,730

NET INCOME			$	12,975	$	6,487

BASIC EARNINGS PER SHARE:
Income before cumulative effect of a change in accounting principle			$	0.52	$	0.11
Cumulative effect of a change in accounting principle				-		0.15

Net income			$	0.52	$	0.26

DILUTED EARNINGS PER SHARE:
Income before cumulative effect of a change in accounting principle			$	0.49	$	0.11
Cumulative effect of a change in accounting principle				-		0.14

Net income			$	0.49	$	0.25

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 2005 AND DECEMBER 31, 2004

(In Thousands Except Share and Per Share Data)


		March 31,			December 31,
		2005			2004

		(Unaudited)
ASSETS:
Cash and cash equivalents		$	183,545		$	204,453
Restricted cash and investments			103,437			455,215
Receivables, net			174,519			194,552
Prepaid expenses and other assets			101,395			90,030
Revenue-earning vehicles, net			2,581,285			2,267,982
Property and equipment, net			104,880			105,335
Income taxes receivable			3,757			3,757
Software and other intangible assets, net			22,004			20,020
Goodwill			279,914			279,907

		$	3,554,736		$	3,621,251

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Accounts payable		$	49,014		$	63,109
Accrued liabilities			149,207			163,214
Deferred income tax liability			219,253			202,857
Public liability and property damage			92,532			88,176
Vehicle debt and obligations			2,416,724			2,500,426

	Total liabilities		2,926,730			3,017,782

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par value: Authorized 10,000,000 shares; none outstanding			-			-
Common stock, $.01 par value: Authorized 50,000,000 shares; 26,472,668 and 25,910,030 issued, respectively, and 25,228,268 and 25,039,730 outstanding, respectively			265			259
Additional capital			760,666			748,261
Accumulated deficit			(107,182	)		(120,157	)
Accumulated other comprehensive income (loss)			8,363			(2,688	)
Treasury stock, at cost (1,244,400 and 870,300 shares, respectively)			(34,106	)		(22,206	)

	Total stockholders’ equity		628,006			603,469

		$	3,554,736		$	3,621,251

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2005 AND 2004

(In Thousands)


					Three Months
					Ended March 31,

					(Unaudited)
					2005			2004

CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income				$	12,975		$	6,487
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation:
			Vehicle depreciation			67,666			68,746
			Non-vehicle depreciation			5,034			4,040
		Net gains from disposition of revenue-earning vehicles				(16,395	)		(2,829	)
		Amortization				1,386			1,405
		Performance share incentive plan				555			109
		Net losses from sale of property and equipment				52			-
		Provision for losses on receivables				1,004			592
		Deferred income taxes				12,126			2,543
		Change in assets and liabilities, net of acquisitions:
			Receivables			20,135			23,605
			Prepaid expenses and other assets			(9,240	)		(11,735	)
			Accounts payable and accrued liabilities			(9,587	)		(17,218	)
			Public liability and property damage			4,356			4,104
			Other			(131	)		(39	)

				Net cash provided by operating activities		89,936			79,810


CASH FLOWS FROM INVESTING ACTIVITIES:
	Revenue-earning vehicles:
		Purchases				(1,351,803	)		(1,067,153	)
		Proceeds from sales				986,123			936,026
	Net change in restricted cash and investments					351,778			181,431
	Property, equipment and software:
		Purchases				(5,844	)		(5,003	)
		Proceeds from sales				2			-
	Acquisition of businesses, net of cash acquired					(2,800	)		(3,426	)

				Net cash provided by (used in) investing activities		(22,544	)		41,875







									(Continued)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2005 AND 2004

(In Thousands)


					Three Months
					Ended March 31,

					(Unaudited)
					2005			2004

CASH FLOWS FROM FINANCING ACTIVITIES:
	Vehicle debt and obligations:
		Proceeds				1,094,097			2,295,094
		Payments				(1,177,799	)		(2,415,983	)
	Issuance of common shares					8,918			5,941
	Purchase of common stock for the treasury					(11,900	)		(3,802	)
	Financing issue costs					(1,616	)		(10	)

				Net cash used in financing activities		(88,300	)		(118,760	)

CHANGE IN CASH AND CASH EQUIVALENTS						(20,908	)		2,925

CASH AND CASH EQUIVALENTS:
	Beginning of period					204,453			192,006

	End of period				$	183,545		$	194,931

SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
	Receivables from capital lease of vehicles to franchisees				$	1,106		$	3,753

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
	Cash paid for (refund of):
			Income taxes to (from) taxing authorities		$	(898	)	$	888

			Interest		$	20,447		$	20,085

See notes to condensed consolidated financial statements.

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2005 AND 2004

(Unaudited)

1.	BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements include the accounts of Dollar Thrifty Automotive Group, Inc. (“DTG”) and its subsidiaries. DTG’s significant wholly owned subsidiaries include DTG Operations, Inc., Thrifty, Inc., Dollar Rent A Car, Inc., Rental Car Finance Corp. (“RCFC”) and Dollar Thrifty Funding Corp. Thrifty, Inc. is the parent company to Thrifty Rent-A-Car System, Inc., which is the parent company to Dollar Thrifty Automotive Group Canada Inc. (“DTG Canada”). Beginning March 31, 2004, Thrifty Rent-A-Car System, Inc. National Advertising Committee (“Thrifty National Ad”) was consolidated in the financial statements of DTG under the provisions of FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” as amended in December 2003 (“FIN 46(R)”), an interpretation of Accounting Research Bulletin No. 51 (Note 15). The term the “Company” is used to refer to DTG and subsidiaries, individually or collectively, as the context may require.

The accounting policies set forth in Note 2 to the consolidated financial statements contained in the Form 10-K filed with the Securities and Exchange Commission on March 14, 2005 have been followed in preparing the accompanying condensed consolidated financial statements.

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

2.	ACQUISITIONS

During the three months ended March 31, 2005, the Company acquired certain assets and assumed certain liabilities relating to seven locations from former Thrifty franchisees in Jacksonville, Melbourne and Cape Canaveral, Florida and San Jose, California. Total cash paid during the three months ended March 31, 2005, net of cash acquired for acquisitions, was $2.8 million.

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

Each of these transactions has been accounted for using the purchase method of accounting and operating results of the acquirees from the dates of acquisition, which are individually and collectively not material to amounts presented for the three months ended March 31, 2005, are included in the condensed consolidated statements of income of the Company.

3.	VEHICLE DEPRECIATION AND LEASE CHARGES, NET

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


	Three Months
	Ended March 31,

	2005		2004

Depreciation of revenue-earning vehicles, net	$	51,271	$	65,917
Rents paid for vehicles leased		2,316		3,282

	$	53,587	$	69,199

4.	EARNINGS PER SHARE

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

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


		Three Months
		Ended March 31,

			2005		2004

Income before cumulative effect
	of a change in accounting principle		$	12,975	$	2,757

Basic EPS:
	Weighted average common shares			25,050,651		24,953,291


Basic EPS			$	0.52	$	0.11


Diluted EPS:
	Weighted average common shares			25,050,651		24,953,291
Shares contingently issuable:
	Stock options			439,317		473,922
	Performance awards			490,300		535,670
	Shares held for compensation plans			178,600		187,470
	Director compensation shares deferred			133,399		98,348

Shares applicable to diluted				26,292,267		26,248,701

Diluted EPS			$	0.49	$	0.11

For the three months ended March 31, 2005 and 2004, all options to purchase shares of common stock were included in the computation of diluted earnings per share because no exercise price was greater than the average market price of the common shares.

5.	STOCK-BASED COMPENSATION

Beginning January 1, 2003, the Company accounted for stock-based compensation plans using the fair value-based method prescribed by Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), and elected the prospective treatment option, which requires recognition as compensation expense for all future employee awards granted, modified or settled as allowed under SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (“SFAS No. 148”), an amendment of SFAS No. 123. Compensation cost for stock options and performance share and restricted stock awards is recognized based on the fair value of the awards granted at the grant date.

The following table provides pro forma results as if the fair value-based method had been applied to all outstanding and unvested awards, including stock options, performance share and restricted stock awards, using the Black-Scholes option valuation model for the 2004 period (in thousands, except per share data):


		Three Months
		Ended March 31,
		2004

Net income, as reported		$	6,487

	Add: compensation expense related to performance shares included in reported net income, net of related tax effects		65

	Deduct: compensation expense related to stock options granted prior to January 1, 2003 and performance share and restricted stock awards determined under the fair value-based method for all awards, net of related tax effects		(136	)


Pro forma net income		$	6,416

Earnings per share:
	Basic, as reported	$	0.26

	Basic, pro forma	$	0.26

	Diluted, as reported	$	0.25

	Diluted, pro forma	$	0.24

At the end of 2004, all stock options became fully vested. Therefore, the disclosure of the pro forma results as if the fair value-based methods of SFAS No. 123 had been applied is not required for the three months ended March 31, 2005. All performance share and restricted stock awards are accounted for using the fair value-based method in accordance with SFAS No. 123 for the 2005 and 2004 periods.

No stock options were granted after January 1, 2003. The assumptions used for 2002 stock option awards were as follows: weighted-average expected life of the awards of five years, volatility factor of 54.57%, risk-free interest rate of 4.46% and no dividend payments.

The Company will adopt SFAS No. 123(R), “Share-Based Payment,” (“SFAS No. 123(R)”) as required on January 1, 2006 (Note 15).

6.	RECEIVABLES

Receivables consist of the following (in thousands):


	March 31,			December 31,
	2005			2004

Trade accounts receivable	$	110,005		$	103,269
Notes receivable		1,573			1,910
Financing receivables, net		3,202			5,035
Due from DaimlerChrysler		63,203			88,110
Fair value of interest rate swap		9,667			-
Other vehicle manufacturer receivables		3,588			12,371

		191,238			210,695
Less: Allowance for doubtful accounts		(16,719	)		(16,143	)

	$	174,519		$	194,552

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

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

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

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

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

7.	SOFTWARE AND OTHER INTANGIBLE ASSETS

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


	March 31,			December 31,
	2005			2004

Amortized intangible assets
Software and other intangible assets	$	46,128		$	44,867
Less accumulated amortization		(26,231	)		(24,847	)

		19,897			20,020
Unamortized intangible assets
Reacquired franchise rights		2,107			-

Total software and other intangible assets	$	22,004		$	20,020

As discussed in Note 2, the Company adopted the provisions of EITF 04-1 on January 1, 2005. In applying the provisions of EITF 04-1 to the acquisitions completed during the three months ended March 31, 2005, the Company established an unamortized separately identifiable intangible asset, referred to as reacquired franchise rights. Intangible assets with indefinite useful lives, such as reacquired franchise rights, are not amortized, but are subject to impairment testing annually, or more frequently if events and circumstances indicate there may be an impairment. Intangible assets with finite useful lives are amortized over their respective useful lives.

8.	GOODWILL

The Company has elected to perform the annual impairment test on goodwill during the second quarter of each year, unless circumstances arise that require more frequent testing. During the second quarter of 2004, the Company completed the annual impairment test of goodwill and concluded goodwill was not impaired.

The changes in the carrying amount of goodwill for the three months ended March 31, 2005 are as follows (in thousands):


Balance as of January 1, 2005	$	279,907
Goodwill through acquisitions or purchase price adjustments during the year		62
Effect of change in rates used for foreign currency translation		(55	)

Balance as of March 31, 2005	$	279,914

9.	VEHICLE DEBT AND OBLIGATIONS

Vehicle debt and obligations as of March 31, 2005 and December 31, 2004 consist of the following (in thousands):


			March 31,		December 31,
			2005		2004

Asset backed notes:
	2004 Series notes		$	500,000	$	500,000
	2003 Series notes			375,000		375,000
	2002 Series notes			291,666		350,000
	2001 Series notes			350,000		350,000
	1999 Series notes			-		26,667
	1997 Series notes			72,211		110,548

				1,588,877		1,712,215
		Discounts on asset backed notes		-		(1	)

		Asset backed notes, net of discount		1,588,877		1,712,214
Conduit Facility				375,000		350,000
Commercial paper, net of discount of $244 and $467				147,532		155,573
Other vehicle debt				195,595		174,594
Limited partner interest in limited partnership				109,720		108,045

Total vehicle debt and obligations			$	2,416,724	$	2,500,426

On March 30, 2005, the Company renewed its Variable Funding Note Purchase Facility (the “Conduit Facility”) for another 364-day period and increased the capacity from $350 million to $375 million.

On March 30, 2005, the Company renewed its Commercial Paper Program for another 364-day period at a maximum size of $640 million backed by a renewal of the Liquidity Facility in the amount of $560 million.

10.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to market risks, such as changes in interest rates. Consequently, the Company manages the financial exposure as part of its risk management program, by striving to reduce the potentially adverse effects that the potential volatility of the financial markets may have on the Company’s operating results. In 2001, the Company began entering into interest rate swap agreements, in conjunction with each related new asset backed note issuance in 2001 through 2004, to convert variable interest rates on a total of $1.4 billion in asset backed notes to fixed interest rates. These swaps, which have termination dates through June 2008, constitute cash flow hedges and satisfy the criteria for hedge accounting. The Company reflects these swaps in its statement of financial position at fair market value, which were assets, included in receivables, of approximately $9.7 million at March 31, 2005 and were liabilities, included in accrued liabilities, of approximately $8.8 million at December 31, 2004. The Company recorded income of $11.3 million, which is net of income taxes, in total comprehensive income for the three month period ended March 31, 2005 (Note 11). Deferred gains and losses are recognized in earnings as an adjustment to interest expense over the same period in which the related interest payments being hedged are recognized to earnings. Based on projected market interest rates, the Company estimates that approximately $1.9 million of net deferred loss will be reclassified into earnings within the next twelve months.

11.

COMPREHENSIVE INCOME

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


	Three Months
	Ended March 31,

	2005			2004

Net Income	$	12,975		$	6,487

Interest rate swap adjustment		11,278			(2,858	)
Foreign currency translation adjustment		(227	)		(170	)

Comprehensive income	$	24,026		$	3,459

12.

INCOME TAXES

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

For the three months ended March 31, 2005, the overall effective tax rate of 46.4% differed from the U.S. statutory rate due primarily to the state and local taxes, losses relating to DTG Canada for which no benefit was recorded due to full valuation allowance and, beginning April 1, 2004, the consolidation of Thrifty National Ad’s operating results into the Company’s operating results due to the adoption of FIN 46(R). Thrifty National Ad files its tax returns under the provisions applicable to a trust, thus, there is no income tax effect for its profits and losses.

13.

SHARE REPURCHASE PROGRAM

In July 2003, the Company announced that its Board of Directors had authorized spending up to $30 million to repurchase the Company’s shares of common stock over a two-year period in the open market or in privately negotiated transactions. In December 2004, the Company expanded the share repurchase program by authorizing spending up to $100 million for share repurchases through December 2006. During the three months ended March 31, 2005, the Company repurchased 374,100 shares at an average price of $31.81 per share, totaling $11.9 million. Since the stock repurchase program began in 2003, the Company has repurchased 1,244,400 shares at an average price of $27.41 per share, totaling $34.1 million, all of which were made in open market transactions.

14.

COMMITMENTS AND CONTINGENCIES

Guarantees

The Company may provide guarantees, including certain letters of credit or performance bonds, on behalf of franchisees to support compliance with airport concession bids. Non-performance of the obligation by the franchisee would trigger the obligation of the Company. As of March 31, 2005, there were no guarantees outstanding.

Contingencies

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

15.

NEW ACCOUNTING STANDARDS

Beginning January 1, 2005, the Company adopted the provisions of EITF 04-1. EITF 04-1 affirms that a business combination between two parties that have a preexisting relationship should be accounted for as a multiple element transaction. This includes determining how the cost of the combination should be allocated after considering the assets and liabilities that existed between the parties prior to the combination. Adoption of EITF 04-1 impacted and will continue to impact the way in which the Company accounts for certain business combination transactions by establishing identifiable intangibles, other than goodwill, such as reacquired franchise rights through the Company’s acquisitions of franchisee operations (Notes 2 and 7).

In December 2004, the FASB issued SFAS No. 123(R), which is a revision of SFAS No. 123. This revised statement establishes accounting standards for all transactions in which an entity exchanges its equity instruments for goods and services focusing primarily on accounting for transactions with employees and carrying forward prior guidance for share-based payments for transactions with non-employees.

SFAS No. 123(R) eliminates the intrinsic value measurement method of accounting in Accounting Principles Board Opinion 25 and generally requires measuring the cost of the employee services received in exchange for an award of equity instruments based on the fair value of the award on the date of the grant. The standard requires grant date fair value to be estimated using either an option-pricing model which is consistent with the terms of the award or a market observed price, if such a price exists. Such costs must be recognized over the period during which an employee is required to provide service in exchange for the award. The standard also requires estimating the number of instruments that will ultimately be issued, rather than accounting for forfeitures as they occur.

The effective date of SFAS No. 123(R) is the first fiscal year beginning after June 15, 2005 and the Company expects to adopt SFAS No. 123(R) effective January 1, 2006. SFAS No. 123(R) permits companies to adopt its requirements using either a “modified prospective” method, or a “modified retrospective” method. Under the “modified prospective” method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS No. 123(R) for all share-based payments granted after that date, and based on the requirements of SFAS No. 123 for all unvested awards granted prior to the effective date of SFAS No. 123(R). Under the “modified retrospective” method, the requirements are the same as under the “modified prospective” method, but also permits entities to restate financial statements of previous periods based on pro forma disclosures made in accordance with SFAS No. 123. The Company plans to adopt the “modified prospective” method under SFAS No. 123(R) as required on January 1, 2006 and does not anticipate the adoption to have a material effect on the consolidated financial statements of the Company.

The Company had previously adopted the provisions of SFAS No. 123 beginning January 1, 2003 changing from the intrinsic value-based method to the fair value-based method of accounting for stock-based compensation and electing the prospective treatment option, which will require recognition as compensation expense for all future employee awards granted, modified or settled as allowed under SFAS No. 148, an amendment of SFAS No. 123.

In January 2003, the FASB issued FIN 46(R), which requires existing unconsolidated variable interest entities (“VIE’s”) to be consolidated by their primary beneficiaries if that company is subject to a majority of the risk of loss, if any, from the VIE’s activities, or entitled to receive a majority of the entity’s residual returns, or both. The Company believes that its involvement with Thrifty National Ad qualifies Thrifty National Ad as a VIE with the Company representing the primary beneficiary. Consequently, Thrifty National Ad was consolidated in the Company’s financial statements for the quarter ended March 31, 2004. The fair value of the net assets of Thrifty National Ad of approximately $3.7 million at March 31, 2004, was recorded as a cumulative effect of a change in accounting principle in the Company’s condensed consolidated statements of income. Beginning April 1, 2004, the Company began consolidating the operating results of Thrifty National Ad with its operating results. Thrifty National Ad is established for the limited purpose of collecting and disbursing funds for advertising and promotion programs for the benefit of the Thrifty Car Rental corporate and franchisee network. Thrifty National Ad files its tax returns under the provisions applicable to a trust. Accordingly, there is no tax effect on the cumulative effect of the change in accounting principle or on subsequent profits or losses. The Company’s estimated maximum exposure to loss as a result of its continuing involvement with Thrifty National Ad is expected to be minimal as expenditures are managed by Thrifty National Ad based on receipts. The Company also evaluated its franchisee network as potential VIE’s subject to possible consolidation. The Company determined that its franchisees met the FIN 46(R) definition of a business; however, the Company did not provide more than half of each franchisees’ equity or other financial support, among other qualifying conditions. Therefore, the Company believes that its franchisees do not qualify as VIE’s under FIN 46(R) and are not required to be consolidated into the Company’s financial statements.

16.

SUBSEQUENT EVENTS

On April 5, 2005, a bank line of credit for vehicles was renewed for another year and increased from $97 million to $100 million.

On April 21, 2005, RCFC issued $400 million of five-year asset backed notes (the “2005 Series Notes”) to replace maturing asset backed notes and provide for growth in the Company’s fleet. The 2005 Series Notes consist of $110 million 4.59% fixed rate notes and $290 million floating rate notes at LIBOR plus 0.17%. In conjunction with the issuance of the 2005 Series Notes, the Company also entered into interest rate swap agreements to convert $190 million of the floating rate debt to fixed rate debt at a 4.58% interest rate.

The Company acquired the operations of the Thrifty franchisees in New Orleans, Louisiana effective April 29, 2005 and in Baton Rouge, Louisiana effective May 1, 2005.

*******

Table of Contents

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

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


			Three Months
			Ended March 31,

			2005			2004

			(Percentage of Revenue)
Revenues:
	Vehicle rentals			91.3	%		88.8	%
	Vehicle leasing			4.2			5.9
	Fees and services			3.6			4.1
	Other			0.9			1.2

		Total revenues		100.0			100.0


Costs and expenses:
	Direct vehicle and operating			55.6			52.4
	Vehicle depreciation and lease charges, net			15.6			23.2
	Selling, general and administrative			16.0			15.9
	Interest expense, net of interest income			5.7			6.4

		Total costs and expenses		92.9			97.9

Income before income taxes				7.1			2.1

Income tax expense				3.3			1.2

Income before cumulative effect of a change in accounting principle				3.8			0.9

Cumulative effect of a change in accounting principle				0.0			1.3

Net income				3.8	%		2.2	%

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


		Three Months
		Ended March 31,

					Percentage
	2005		2004		Change

U.S. and Canada

(Company-Owned Stores)
Vehicle Rental Data: (includes new stores)

Average number of vehicles operated		102,024		84,849		20.2%
Number of rental days		7,736,465		6,685,376		15.7%
Vehicle utilization		84.3%		86.6%		(2.3) p.p.
Average revenue per day	$	40.45	$	39.69		1.9%
Monthly average revenue per vehicle	$	1,022	$	1,042		(1.9%	)

Same Store Vehicle Rental Data: (excludes new stores)

Average number of vehicles operated		90,592		84,849		6.8%
Number of rental days		6,819,011		6,685,376		2.0%

Vehicle Leasing Data:

Average number of vehicles leased		11,558		15,888		(27.3%	)
Monthly average revenue per vehicle	$	419	$	373		12.3%

Three Months Ended March 31, 2005 Compared with Three Months Ended March 31, 2004

During the first quarter of 2005, business and leisure travel improved, which has resulted in an increase in rental demand. The Company achieved strong revenue growth largely from volume related to franchise acquisitions and to higher revenue per day. Revenue growth combined with lower vehicle costs resulted in higher profits in the first quarter of 2005 as compared to last year’s first quarter.

Operating Results

The Company had income of $24.2 million before income taxes for the first quarter of 2005, as compared to income before income taxes and cumulative effect of a change in accounting principle of $6.2 million in the first quarter of 2004. The cumulative effect of the change in accounting principle in the first quarter of 2004 was $3.7 million. This change in accounting principle relates to the adoption of FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” as amended in December 2003 (“FIN 46(R)”), an interpretation of Accounting Research Bulletin No. 51, by the Company effective March 31, 2004.


*Revenues*

	Three Months
	Ended March 31,				$ Increase/			% Increase/
	2005		2004		(decrease)			(decrease)

	(in millions)

Vehicle rentals	$	313.0	$	265.3	$	47.7			17.9%
Vehicle leasing		14.5		17.8		(3.3	)		(18.2%	)
Fees and services		12.3		12.1		0.2			1.2%
Other		3.0		3.5		(0.5	)		(12.0%	)

Total revenues	$	342.8	$	298.7	$	44.1			14.8%


Vehicle rental metrics:
Number of rental days		7,736,465		6,685,376		1,051,089			15.7%
Average revenue per day	$	40.45	$	39.69	$	0.76			1.9%

Vehicle leasing metrics:
Average number of vehicles leased		11,558		15,888		(4,330	)		(27.3%	)
Average monthly lease revenue per unit	$	419	$	373	$	46			12.3%

Vehicle rental revenue for the first quarter of 2005 increased 17.9%, due to a 15.7% increase in rental days totaling $41.8 million and 1.9% increase in revenue per day totaling $5.9 million. Vehicle rental revenue grew by 13.1% due to 2004 franchisee acquisitions that had not yet annualized, 2005 franchisee acquisitions and greenfield locations and by 4.8% from same store growth.

Vehicle leasing revenue for the first quarter of 2005 decreased 18.2%, due to a 27.3% decrease in the average lease fleet totaling $4.9 million, partially offset by a 12.3% increase in the average lease rate totaling $1.6 million. The decline in volume was due to fewer vehicles leased to franchisees, which is primarily attributable to the shift of several locations from franchised operations to corporate operations.

Fees and services revenue increased 1.2%, due to additional revenues associated with Thrifty Rent-A-Car System, Inc. National Advertising Committee (“Thrifty National Ad”), which were $1.6 million in the first quarter of 2005. The Company adopted FIN 46(R) as of March 31, 2004 and began consolidating the results of Thrifty National Ad for the second quarter of 2004. This increase in fees and services revenue was primarily offset by lower revenues from franchisees due to the shift of several locations from franchised operations to corporate operations.


*Expenses*

	Three Months
	Ended March 31,				$ Increase/			% Increase/
	2005		2004		(decrease)			(decrease)

	(in millions)

Direct vehicle and operating	$	190.7	$	156.6	$	34.1			21.8%
Vehicle depreciation and lease charges, net		53.6		69.2		(15.6	)		(22.6%	)
Selling, general and administrative		54.8		47.5		7.3			15.4%
Interest expense, net of interest income		19.5		19.2		0.3			1.5%

Total expenses	$	318.6	$	292.5	$	26.1			8.9%

Direct vehicle and operating expenses for the first quarter of 2005 increased $34.1 million, primarily due to higher fleet and transaction levels resulting from the operation of additional corporate stores. Personnel related expenses increased by $11.1 million, facility and airport concession expenses by $8.8 million, vehicle related costs by $8.6 million and commissions by $1.6 million. Direct vehicle and operating expenses were 55.6% of revenue for the first quarter of 2005, compared to 52.4% in the first quarter of 2004.

Net vehicle depreciation and lease charges for the first quarter of 2005 decreased $15.6 million, which includes net vehicle gains from the disposition of non-program vehicles. Net vehicle gains were $16.4 million for the first quarter of 2005 compared to $2.8 million for the first quarter of 2004, due to lower acquisition costs and to a strong used car market. Due to the favorable used car market, the Company accelerated vehicle sales to the first quarter and experienced significant improvement in gains on disposal. Lease charges, for vehicles leased from third parties, decreased $1.0 million due to a decrease in the number of vehicles leased during the first quarter of 2005 and vehicle depreciation expenses decreased $1.0 million due to a 13.7% decrease in average depreciation rate, partially offset by a 14.1% increase in depreciable fleet. Net vehicle depreciation expense and lease charges were 15.6% of revenue for the first quarter of 2005, compared to 23.2% in the first quarter of 2004.

Selling, general and administrative expenses for the first quarter of 2005 increased $7.3 million. The increase was due primarily to a $1.9 million increase in personnel related costs and a $1.6 million increase in sales and marketing costs that are primarily attributable to the increase in transaction volume and to an increase of $2.4 million in expenses related to performance based compensation plans. Additionally, costs associated with Thrifty National Ad in the first quarter of 2005 totaling $1.8 million are included in the Company’s consolidated results due to the adoption of FIN 46(R) as of March 31, 2004 and contributed to the increase. Selling, general and administrative expenses were 16.0% of revenue for the first quarter of 2005, compared to 15.9% in the first quarter of 2004.

Net interest expense for the first quarter of 2005 increased $0.3 million due to higher average vehicle debt, partially offset by a decrease in the effective interest rate. Net interest expense was 5.7% of revenue for the first quarter of 2005, compared to 6.4% in the first quarter of 2004.

The income tax provision for the first quarter of 2005 was $11.2 million. The effective income tax rate for the first quarter was 46.4% compared to 55.4% for the first quarter of 2004. This decrease in the effective tax rate was due primarily to higher U.S. pretax earnings in relationship to Canadian pretax losses. The Company reports taxable income for the U.S. and Canada in separate tax jurisdictions and establishes provisions separately for each jurisdiction. On a separate, domestic basis, the U.S. effective tax rate approximates the statutory tax rate including the effect of state income taxes. However, no income tax benefit was recorded for Canadian losses in 2004 and 2005, thus, increasing the consolidated effective tax rate compared to the U.S. effective tax rate.

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

Outlook

The Company expects continued growth in travel during 2005. Airline passenger enplanements, a key driver of vehicle rental demand, have increased from prior year levels. Industry vehicle rental pricing continues to be weak due to highly competitive conditions. The used car market is expected to remain strong throughout 2005, which will provide opportunities to lower the Company's vehicle costs in the near term. However, upon replacing the existing fleet later in 2005 with new model year vehicles, the Company expects to experience higher vehicle holding costs due to vehicle manufacturers constraining new vehicle sales to the car rental industry.

Effective May 1, 2005, the Company is no longer participating as a supplier in the preferred partner program with Expedia, Inc. ("Expedia"), a third party Internet provider from whom the Company receives reservations. However, the Company continues to participate as a supplier on the Expedia Web site. This change may result in reduced volumes from this reservation channel and overall lower revenues if the Company is unable to increase reservation volume from other channels. For the full year of 2004, Expedia-generated rentals represented approximately seven percent of the Company's total revenue and approximately 11 percent of the Company's non-tour reservations.

Seasonality

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

Liquidity and Capital Resources

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

The Company’s primary sources of liquidity are cash generated from operations, secured vehicle financing, the Revolving Credit Facility (hereinafter defined) and insurance bonds. Cash generated by operating activities of $89.9 million for the three months ended March 31, 2005 was primarily the result of net income, adjusted for depreciation and a reduction in outstanding receivables. The liquidity necessary for purchasing vehicles is primarily obtained from secured vehicle financing, most of which is asset backed notes, sales proceeds from disposal of used vehicles and cash generated by operating activities. The asset backed notes require varying levels of credit enhancement or overcollateralization, which are provided by a combination of cash, vehicles and letters of credit. These letters of credit are provided under the Company’s Revolving Credit Facility.

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

Cash used in investing activities was $22.5 million. The principal use of cash in investing activities was the purchase of revenue-earning vehicles, which totaled $1.4 billion, partially offset by $1.0 billion in proceeds from the sale of used revenue-earning vehicles and the reduction in restricted cash and investments of $0.4 billion during the three months ended March 31, 2005, due to increases in the rental fleet. The Company’s need for cash to finance vehicles is highly seasonal and typically peaks in the second and third quarters of the year when fleet levels build to meet seasonal rental demand. The Company expects to continue to fund its revenue-earning vehicles with cash provided from operations and increased secured vehicle financing. Restricted cash and investments, which totaled $103.4 million at March 31, 2005, are restricted for the acquisition of revenue-earning vehicles and other specified uses as defined under the asset backed note program, the Canadian fleet securitization program and a like-kind exchange program. The Company also used cash for non-vehicle capital expenditures of $5.8 million. These expenditures consist primarily of airport rental facility improvements and investments in information technology equipment and systems. The Company also used $2.8 million of cash, net of assets acquired and liabilities assumed, for franchisee acquisitions. These expenditures were financed with cash provided from operations.

Cash used in financing activities was $88.3 million primarily due to the maturity of asset backed notes totaling $123.3 million, an $8.0 million net decrease in commercial paper and share repurchases totaling $11.9 million under the share repurchase program, partially offset by a $25.0 million increase in the Conduit Facility, a $21.0 million increase in other vehicle debt and stock options exercises totaling $8.9 million.

The Company has significant requirements for bonds and letters of credit to support its insurance programs and airport concession commitments. At March 31, 2005, the insurance companies had issued approximately $44.7 million in bonds to secure these obligations.

Asset Backed Notes

The asset backed note program at March 31, 2005 was comprised of $1.59 billion in asset backed notes with maturities ranging from 2005 to 2008. Borrowings under the asset backed notes are secured by eligible vehicle collateral. Asset backed notes totaling $1.43 billion bear interest at fixed rates ranging from 3.64% to 6.70%, including certain floating rate notes swapped to fixed rates. Asset backed notes totaling $157.0 million bear interest at floating rates ranging from LIBOR plus 0.64% to LIBOR plus 1.05%. On April 21, 2005, RCFC issued an additional $400 million of five-year asset backed notes consisting of $110 million of 4.59% fixed rate notes and $290 million of floating rate notes at LIBOR plus 0.17%. In conjunction with the asset backed note issuance, the Company also entered into interest rate swap agreements to convert $190 million of the floating rate debt to fixed rate debt at a 4.58% interest rate.

Conduit Facility

Effective March 30, 2005, the Conduit Facility was renewed for another 364-day period and increased to $375 million from $350 million.

Commercial Paper Program and Liquidity Facility

On March 30, 2005, the Company renewed its commercial paper program (the “Commercial Paper Program”) for another 364-day period at a maximum size of $640 million backed by a renewal of the Liquidity Facility in the amount of $560 million. At March 31, 2005, the Company had $147.5 million in commercial paper outstanding under the Commercial Paper Program.

Vehicle Debt and Obligations

Vehicle manufacturer and bank lines of credit provided $407.7 million in capacity at March 31, 2005. The Company had $195.6 million in borrowings outstanding under these lines at March 31, 2005. All lines of credit are collateralized by the related vehicles.

The Company finances its Canadian vehicle fleet through a fleet securitization program. Under this program, DTG Canada can obtain vehicle financing up to CND $235 million funded through a bank commercial paper conduit which expires December 31, 2005. DTG Canada is currently in the process of extending and renewing this program. At March 31, 2005, DTG Canada had approximately CND $132.8 million (US $109.7 million) funded under this program.

Revolving Credit Facility

The Company has a $300 million five-year, senior secured, revolving credit facility (the "Revolving Credit Facility") that expires on April 1, 2009. The Revolving Credit Facility permits letter of credit usage up to $300 million and working capital borrowing up to $100 million. The availability of funds under the Revolving Credit Facility is subject to the Company’s compliance with certain covenants, including a covenant that sets the maximum amount the Company can spend annually on the acquisition of non-vehicle capital assets, and certain financial covenants including a maximum leverage ratio, a minimum fixed charge coverage ratio and a limitation on cash dividends and share repurchases. As of March 31, 2005, the Company is in compliance with all covenants. The Company had letters of credit outstanding under the Revolving Credit Facility of approximately $149.9 million and no working capital borrowings at March 31, 2005.

New Accounting Standards

Beginning January 1, 2005, the Company adopted the provisions of Emerging Issues Task Force (“EITF”) No. 04-1, “Accounting for Preexisting Relationships between the Parties to a Business Combination” (“EITF 04-1”). EITF 04-1 affirms that a business combination between two parties that have a preexisting relationship should be accounted for as a multiple element transaction. This includes determining how the cost of the combination should be allocated after considering the assets and liabilities that existed between the parties prior to the combination. Adoption of EITF 04-1 impacted and will continue to impact the way in which the Company accounts for certain business combination transactions by establishing identifiable intangibles, other than goodwill, such as reacquired franchise rights through the Company’s acquisitions of franchisee operations (Notes 2 and 7).

In December 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment” (“SFAS No. 123(R)”), which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). This revised statement establishes accounting standards for all transactions in which an entity exchanges its equity instruments for goods and services focusing primarily on accounting for transactions with employees and carrying forward prior guidance for share-based payments for transactions with non-employees.

The effective date of SFAS No. 123(R) is the first fiscal year beginning after June 15, 2005 and the Company expects to adopt SFAS No. 123(R) effective January 1, 2006. SFAS No. 123(R) permits companies to adopt its requirements using either a “modified prospective” method, or a “modified retrospective” method. Under the “modified prospective” method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS No. 123(R) for all share-based payments granted after that date, and based on the requirements of SFAS No. 123 for all unvested awards granted prior to the effective date of SFAS No. 123(R). Under the “modified retrospective” method, the requirements are the same as under the “modified prospective” method, but also permits entities to restate financial statements of previous periods based on pro forma disclosures made in accordance with SFAS No. 123. The Company plans to adopt the modified prospective method under SFAS No. 123(R) as required on January 1, 2006 and does not anticipate the adoption to have a material effect on the consolidated financial statements of the Company.

Table of Contents

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Based on the Company’s level of floating rate debt (excluding notes with floating interest rates swapped into fixed rates) at March 31, 2005, a 50 basis point fluctuation in interest rates would have an approximate $5.0 million impact on the Company’s expected pretax income on an annual basis. This impact on pretax income would be reduced by earnings from cash and cash equivalents and restricted cash and investments, which are invested on a short-term basis and subject to fluctuations in interest rates. At March 31, 2005, cash and cash equivalents totaled $183.5 million and restricted cash and investments totaled $103.4 million. The Company estimates that, for 2005, approximately 40% of its average debt will bear interest at floating rates.

At March 31, 2005, there were no significant changes in the Company’s quantitative disclosures about market risk compared to December 31, 2004, which is included under Item 7A of the Company’s most recent Form 10-K.

Table of Contents

ITEM 4.

CONTROLS AND PROCEDURES

a)	Evaluation of disclosure controls and procedures

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

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

b)	Changes in internal controls

There has been no change in the Company's internal control over financial reporting during the three months ended March 31, 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Table of Contents

ITEM 1.

LEGAL PROCEEDINGS

Various legal actions, claims and governmental inquiries and proceedings are pending or may be instituted or asserted in the future against the Company and its subsidiaries. Litigation is subject to many uncertainties, and the outcome of the individual litigated matters is not predictable with assurance. It is possible that certain of the actions, claims, inquiries or proceedings could be decided unfavorably to the Company or the subsidiaries involved. Although the 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.

Table of Contents

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

a)	Recent Sales of Unregistered Securities

None.

b)	Use of Proceeds

None.

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


					Total Number of		Maximum
					Shares Purchased		Dollar Value of
	Total Number		Average		as Part of Publicly		Shares that May Yet
	of Shares		Price Paid		Announced Plans		Be Purchased under
Period	Purchased		Per Share		or Programs		the Plans or Programs

January 1, 2005 - January 31, 2005		-	$	-		-	$	77,794,000

February 1, 2005 - February 28, 2005		99,200	$	30.35		99,200	$	74,783,000

March 1, 2005 - March 31, 2005		274,900	$	32.33		274,900	$	65,894,000

Total		374,100				374,100

Table of Contents

ITEM 6.	EXHIBITS
15.16	Letter from Deloitte & Touche LLP regarding interim financial information
31.17	Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.18	Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.17	Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.18	Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Table of Contents

SIGNATURES

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

DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.

May 6, 2005	By:	/s/ GARY L. PAXTON
		Gary L. Paxton
		President, Chief Executive Officer and Principal
		Executive Officer

May 6, 2005

/s/ STEVEN B. HILDEBRAND

Steven B. Hildebrand

Senior Executive Vice President, Chief Financial

Officer, Principal Financial Officer and Principal

Accounting Officer