Loading up on debt, Budget went on an acquisition spree, snapping up Ryder TRS, the country's second-largest truck rental firm; Premier Car Rental, which specializes in providing cars for insurance companies; and Cruise America, a major renter of recreational vehicles. At the same time, Budget ventured aggressively into Europe.
Along the way, Miller became a multimillionaire, as shares in Budget Group Inc. soared fourfold to $40 after the company went public in 1994. From his office window overlooking a marina in Daytona Beach, Miller could eye his 32-foot Luhrs sportfishing boat. The hard-working guy from upstate N.Y. made great material for a number of rags-to-riches profiles, including one in Florida Trend ["Fast Lane," October 1998].
But the fast lane can be treacherous. Budget Group misjudged the difficulty of integrating Ryder TRS into its existing truck business. The other acquisitions didn't fare any better, and the foray into Europe turned out to be a money-loser.
Caught at a stop light
Meanwhile, by early 2001 the economy was sputtering; business customers already had cut back even before the Sept. 11 terrorist attacks crippled rental car firms along with the rest of the travel industry. By the end of September, the company's net worth was a negative $130 million on total assets of $4.3 billion. At year-end, Budget's debt was trading at a deep discount to its face value; its shares closed the year at 89 cents.
Budget hasn't suffered alone. In November, Fort Lauderdale-based ANC Rental Corp., owner of the Alamo and National brands, which was already struggling before Sept. 11, sought bankruptcy court protection from creditors. "September 11th just accelerated and exacerbated an already weakening environment," says Neil Abrams, president of Abrams Consulting Group in Purchase, N.Y., which specializes in the transportation business.
By the end of the year, there was growing speculation that Budget Group, with $3.4 billion in debt, would be forced to seek bankruptcy protection or be sold. Cendant Corp., a New York-based real-estate and travel franchiser and owner of Avis, was reported to be talking with Budget about acquiring certain assets. Miller did not return phone calls from Florida Trend, but Budget spokeswoman Kimberly Mulcahy says the company doesn't comment on rumors.
The impact of Sept. 11 came when Budget Group appeared to be turning the corner. The company had made strides in integrating its truck operations, which improved profitability.
To reduce its financial risk in Europe, Budget closed some locations and franchised the rest. The company refinanced $1 billion of debt. It also had reduced its fleet of cars to better match the decline in demand. "The company had done a lot of things to prosper if the economy had turned around," says Andris Kalnins, a senior analyst at Moody's Investor Services.
Potholes ahead
Budget's prospects aren't all grim. The company may be better-positioned than other rental car companies because of its more diverse revenue mix: Only half of Budget's sales come from car rentals at airports, with local car and truck rentals making up the balance. Truck rentals could hold up as unemployed workers move from one city to another for jobs.
Immediate prospects, however, are not promising. The fourth and first quarters, historically slow, will be a test for Budget as it tries to put the brakes on the amount of cash it burns through. "It'll be a tough road," says Kalnins.