For the transition period from _____ to _____
Commission File No. 001-10308
|
|
Avis Budget Group, Inc. |
(Exact name of registrant as specified in its charter) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Delaware | | | | | | 06-0918165 |
| | |
Delaware | | 06-0918165 |
(State or other jurisdiction of incorporation or organization)
| | | | | (I.R.S. Employer Identification Number)
|
6 Sylvan Way
Parsippany, NJ 379 Interpace Parkway | | | | | |
| Parsippany, | NJ | | | | | | 07054 |
(Address of principal executive offices) | | | | | (Zip Code) |
| | | | | (973) | (973) 496-4700
| | |
| | | | (Registrant’s telephone number, including area code) | |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, Par Value $0.01 | CAR | The Nasdaq Global Select Market |
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. Yesx☒ Noo☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx☒Noo☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | |
Large Accelerated Filer | ☒ | Accelerated Filer | ☐ | Non-accelerated Filer | ☐ |
Smaller Reporting Company | ☐ | Emerging Growth Company | ☐ | | |
Large accelerated filer | x | Accelerated filer | o | Non-accelerated filer | o |
Smaller reporting company | o | Emerging growth company | o | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso☐Nox☒
The number of shares outstanding of the issuer’s common stock was 81,421,55835,647,164 shares as of October 31, 2017.April 26, 2024.
Table of Contents
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PART I | | |
Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
PART II | | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 6.5. | | |
Item 6. | | |
| | |
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q may be considered “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained herein are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by any such forward-looking statements. Forward-looking statements include information concerning our future financial performance, business strategy, projected plans and objectives. These statements may be identified by the fact that they do not relate to historical or current facts and may use words such as “believes,” “expects,” “anticipates,” “will,” “should,” “could,” “may,” “would,” “intends,” “projects,” “estimates,” “plans,” “forecasts,” “guidance,” and similar words, expressions or phrases. The following important factors and assumptions could affect our future results and could cause actual results to differ materially from those expressed in such forward-looking statements:statements. These factors include, but are not limited to:
•the high level of competition in the vehicle rentalmobility industry, including from new companies or technology, and the impact such competition may have on pricing and rental volume;
a change in travel demand, including changes in airline passenger traffic;
•a change in our fleet costs, including as a result of a change in the cost of new vehicles, resulting from inflation or otherwise, manufacturer recalls, disruption in the supply of new vehicles, including due to labor actions or otherwise, shortages in semiconductors used in new vehicle production, and/or a change in the price at which we dispose of used vehicles either in the used vehicle market or under repurchase or guaranteed depreciation programs;
•the results of operations or financial condition of the manufacturers of our cars,vehicles, which could impact their ability to perform their payment obligations under our agreements with them, including repurchase and/or guaranteed depreciation arrangements, and/or their willingness or ability to make carsvehicles available to us or the rental carmobility industry as a whole on commercially reasonable terms or at all;
any change•levels of and volatility in travel demand, including future volatility in airline passenger traffic;
•a deterioration in economic conditions, generally,resulting in a recession or otherwise, particularly during our peak season or in key market segments;
our ability to continue to achieve and maintain cost savings and successfully implement our business strategies;
our ability to obtain financing for our global operations, including the funding of our vehicle fleet through the issuance of asset-backed securities and use of the global lending markets;
•an occurrence or threat of terrorism, pandemic disease,diseases such as COVID-19, natural disasters, military conflict conflicts, including the ongoing military conflicts in the Middle East and Eastern Europe, or civil unrest in the locations in which we operate;operate, and the potential effects of sanctions on the world economy and markets and/or international trade;
•any substantial changes in the cost or supply of fuel, vehicle parts, energy, labor or other resources on which we depend to operate our business, including as a result of a global pandemic such as COVID-19, inflation, the ongoing military conflicts in the Middle East and Eastern Europe, and any embargoes on oil sales imposed on or by the Russian government;
•our ability to successfully implement or achieve our business plans and strategies, achieve and maintain cost savings and adapt our business to changes in mobility;
•political, economic or commercial instability in the countries in which we operate, and our ability to conform to multiple and conflicting laws or regulations in those countries;
•the performance of the used vehicle market from time to time, including our ability to dispose of vehicles in the used vehicle market on attractive terms;
•our dependence on third-party distribution channels, third-party suppliers of other services andand co-marketing arrangements with third parties;
•risks related to completed or future acquisitions or investments that we may pursue, including the incurrence of incremental indebtedness to help fund such transactions and our ability to promptly and
effectively integrate any acquired businesses or capitalize on joint ventures, partnerships and other investments;
•our ability to utilize derivative instruments, and the impact of derivative instruments we utilize, which can be affected by fluctuations in interest rates, gasolinefuel prices and exchange rates, changes in government regulations and other factors;
our ability to accurately estimate our future results;
any major disruptions in our communication networks or information systems;
•our exposure to uninsured or unpaid claims in excess of historical levels;levels and our ability to obtain insurance at desired levels and the cost of that insurance;
•risks associated with litigation or governmental or regulatory inquiries, or any failure or inability to comply with laws, regulations or contractual obligations or any changes in laws, regulations or contractual obligations, including with respect to personally identifiable information and taxes;consumer privacy, labor and employment, and tax;
•risks related to protecting the integrity of, and preventing unauthorized access to, our information technology systems or those of our third-party vendors, licensees, dealers, independent operators and independent contractors, and protecting the confidential information of our employees and customers against security breaches, including physical or cybersecurity breaches, attacks, or other disruptions, compliance with privacy and data protection regulation, and the effects of any potential increase in cyberattacks on the world economy and markets and/or international trade;
•any impact on us from the actions of our third-party vendors, licensees, dealers, independent operators and independent contractors;contractors and/or disputes that may arise out of our agreements with such parties;
•any substantialmajor disruptions in our communication networks or information systems;
•risks related to tax obligations and the effect of future changes in the cost or supply of fuel, vehicle parts, energy, labor or other resources on which we depend to operate our business;tax laws and accounting standards;
•risks related to our indebtedness, including our substantial outstanding debt obligations, recent and future interest rate increases, which increase our financing costs, downgrades by rating agencies and our ability to incur substantially more debt;
•our ability to obtain financing for our global operations, including the funding of our vehicle fleet through the issuance of asset-backed securities and use of the global lending markets;
•our ability to meet the financial and other covenants contained in the agreements governing our indebtedness;indebtedness, or to obtain a waiver or amendment of such covenants should we be unable to meet such covenants;
risks related to tax obligations and the effect of future•significant changes in accounting standards;
risks related to completedthe assumptions and estimates that are used in our impairment testing for goodwill or future acquisitions or investments that we may pursue, including any incurrence of incremental indebtedness to help fund such transactions and our ability to promptly and effectively integrate any acquired businesses;
risks related to protecting the integrityintangible assets, which could result in a significant impairment of our information technology systemsgoodwill or intangible assets; and the confidential information of our employees and customers against security breaches, including cyber-security breaches; and
•other business, economic, competitive, governmental, regulatory, political or technological factors affecting our operations, pricing or services, including uncertainty and instability related to the potential withdrawal of countries from the European Union.services.
We operate in a continuously changing business environment and new risk factors emerge from time to time. New risk factors, factors beyond our control, or changes in the impact of identified risk factors may cause actual results to differ materially from those set forth in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. Moreover, we do not assume responsibility for the accuracy and completeness ofif future results are materially different from those statements.forecasted or anticipated. Other factors and assumptions not identified above, including those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 2 and “Risk Factors” in Item 1A in this quarterly report and in similarly titled sections set forth in Item 7 and in Item 1A and in other portions of our 20162023 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 21, 201716, 2024 (the “2016“2023 Form 10-K”), couldmay cause actual results to differ materially from those projected in any forward-looking statements.
Although we believe that our assumptions are reasonable, any or all of our forward-looking statements may prove to be inaccurate and we can make no guarantees about our future performance. Should unknown risks or uncertainties materialize or underlying assumptions prove inaccurate, actual results could differ materially from past results and/or those anticipated, estimated or projected. Except to the extent of our obligations under the federal securities laws, weWe undertake no obligation to release any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
PART I — FINANCIAL INFORMATION
| |
Item 1. | Financial Statements |
Item 1. Financial Statements Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(In millions, except per share data)
(Unaudited)
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
Revenues | | | | | $ | 2,551 | | | $ | 2,557 | |
| | | | | | | |
Expenses | | | | | | | |
Operating | | | | | 1,344 | | | 1,307 | |
Vehicle depreciation and lease charges, net | | | | | 636 | | | 265 | |
Selling, general and administrative | | | | | 325 | | | 324 | |
Vehicle interest, net | | | | | 239 | | | 133 | |
Non-vehicle related depreciation and amortization | | | | | 61 | | | 56 | |
| | | | | | | |
Interest expense related to corporate debt, net | | | | | 83 | | | 73 | |
| | | | | | | |
Restructuring and other related charges | | | | | 3 | | | 4 | |
Transaction-related costs, net | | | | | 1 | | | — | |
Other (income) expense, net | | | | | 1 | | | (2) | |
Total expenses | | | | | 2,693 | | | 2,160 | |
| | | | | | | |
Income (loss) before income taxes | | | | | (142) | | | 397 | |
Provision for (benefit from) income taxes | | | | | (29) | | | 85 | |
Net income (loss) | | | | | (113) | | | 312 | |
Less: net income attributable to non-controlling interests | | | | | 1 | | | — | |
Net income (loss) attributable to Avis Budget Group, Inc. | | | | | $ | (114) | | | $ | 312 | |
| | | | | | | |
Comprehensive income (loss) attributable to Avis Budget Group, Inc. | | | | | $ | (158) | | | $ | 302 | |
| | | | | | | |
Earnings (loss) per share | | | | | | | |
Basic | | | | | $ | (3.21) | | | $ | 7.88 | |
Diluted | | | | | $ | (3.21) | | | $ | 7.72 | |
|
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2017 | | 2016 | | 2017 | | 2016 |
Revenues | | | | | | | |
| Vehicle rental | $ | 1,949 |
| | $ | 1,871 |
| | $ | 4,798 |
| | $ | 4,772 |
|
| Other | 803 |
| | 785 |
| | 2,031 |
| | 2,008 |
|
Net revenues | 2,752 |
| | 2,656 |
| | 6,829 |
| | 6,780 |
|
| | | | | | | | | |
Expenses | | | | | | | |
| Operating | 1,256 |
| | 1,219 |
| | 3,413 |
| | 3,381 |
|
| Vehicle depreciation and lease charges, net | 616 |
| | 576 |
| | 1,717 |
| | 1,571 |
|
| Selling, general and administrative | 320 |
| | 315 |
| | 875 |
| | 896 |
|
| Vehicle interest, net | 78 |
| | 77 |
| | 215 |
| | 215 |
|
| Non-vehicle related depreciation and amortization | 66 |
| | 63 |
| | 194 |
| | 189 |
|
| Interest expense related to corporate debt, net: | | | | |
|
| |
|
|
| Interest expense | 45 |
| | 51 |
| | 142 |
| | 157 |
|
| Early extinguishment of debt | — |
| | — |
| | 3 |
| | 10 |
|
| Restructuring and other related charges | 7 |
| | 6 |
| | 52 |
| | 26 |
|
| Transaction-related costs, net | — |
| | 4 |
| | 8 |
| | 13 |
|
Total expenses | 2,388 |
| | 2,311 |
| | 6,619 |
| | 6,458 |
|
| | | | | | | | | |
Income before income taxes | 364 |
| | 345 |
| | 210 |
| | 322 |
|
Provision for income taxes | 119 |
| | 136 |
| | 69 |
| | 128 |
|
| | | | | | | | | |
Net income | $ | 245 |
|
| $ | 209 |
| | $ | 141 |
| | $ | 194 |
|
| | | | | | | | | |
Comprehensive income | $ | 279 |
| | $ | 235 |
| | $ | 251 |
| | $ | 294 |
|
| | | | | | | | | |
Earnings per share | | | | | | | |
| Basic | $ | 2.96 |
| | $ | 2.32 |
| | $ | 1.68 |
| | $ | 2.07 |
|
| Diluted | $ | 2.91 |
| | $ | 2.28 |
| | $ | 1.65 |
| | $ | 2.05 |
|
See Notes to Consolidated Condensed Financial Statements (Unaudited).
Avis Budget Group, Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions, except par value)
(Unaudited)
| | | | September 30, 2017 | | December 31, 2016 |
| | March 31, 2024 | | | | March 31, 2024 | | December 31, 2023 |
Assets | Assets | | | |
Current assets: | Current assets: | | | |
| Cash and cash equivalents | $ | 814 |
| | $ | 490 |
|
| Receivables, net | 855 |
| | 808 |
|
| Other current assets | 750 |
| | 519 |
|
Current assets: | |
Current assets: | |
| Cash and cash equivalents | |
| Cash and cash equivalents | |
| Cash and cash equivalents | |
| Receivables, net | |
| Other current assets | |
Total current assets | Total current assets | 2,419 |
| | 1,817 |
|
| | | | |
Property and equipment, net | Property and equipment, net | 693 |
| | 685 |
|
Property and equipment, net | |
Property and equipment, net | |
Operating lease right-of-use assets | |
Deferred income taxes | Deferred income taxes | 1,566 |
| | 1,493 |
|
Goodwill | Goodwill | 1,065 |
| | 1,007 |
|
Other intangibles, net | Other intangibles, net | 863 |
| | 870 |
|
Other non-current assets | Other non-current assets | 182 |
| | 193 |
|
Total assets exclusive of assets under vehicle programs | Total assets exclusive of assets under vehicle programs | 6,788 |
| | 6,065 |
|
| | | | |
Assets under vehicle programs: | Assets under vehicle programs: | | | |
Assets under vehicle programs: | |
Assets under vehicle programs: | |
| Program cash | |
| Program cash | |
| Program cash | |
| Vehicles, net | |
| Receivables from vehicle manufacturers and other | |
| Investment in Avis Budget Rental Car Funding (AESOP) LLC—related party | |
| | 23,729 | |
Total Assets | |
| Program cash | 180 |
| | 225 |
|
| Vehicles, net | 11,801 |
| | 10,464 |
|
| Receivables from vehicle manufacturers and other | 709 |
| | 527 |
|
| Investment in Avis Budget Rental Car Funding (AESOP) LLC—related party | 395 |
| | 362 |
|
| | 13,085 |
| | 11,578 |
|
Total assets | $ | 19,873 |
| | $ | 17,643 |
|
| | | | |
Liabilities and stockholders’ equity | | | |
Liabilities and Stockholders’ Equity | |
Liabilities and Stockholders’ Equity | |
Liabilities and Stockholders’ Equity | |
Current liabilities: | Current liabilities: | | | |
| Accounts payable and other current liabilities | $ | 1,866 |
| | $ | 1,488 |
|
| Short-term debt and current portion of long-term debt | 26 |
| | 279 |
|
Current liabilities: | |
Current liabilities: | |
| Accounts payable and other current liabilities | |
| Accounts payable and other current liabilities | |
| Accounts payable and other current liabilities | |
| Short-term debt and current portion of long-term debt | |
Total current liabilities | Total current liabilities | 1,892 |
| | 1,767 |
|
| | | | |
Long-term debt | Long-term debt | 3,565 |
| | 3,244 |
|
Long-term debt | |
Long-term debt | |
Long-term operating lease liabilities | |
Other non-current liabilities | Other non-current liabilities | 760 |
| | 764 |
|
Total liabilities exclusive of liabilities under vehicle programs | Total liabilities exclusive of liabilities under vehicle programs | 6,217 |
| | 5,775 |
|
| | | | |
Liabilities under vehicle programs: | Liabilities under vehicle programs: | | | |
| Debt | 3,781 |
| | 2,183 |
|
| Debt due to Avis Budget Rental Car Funding (AESOP) LLC—related party | 6,785 |
| | 6,695 |
|
| Deferred income taxes | 2,424 |
| | 2,429 |
|
| Other | 265 |
| | 340 |
|
| | 13,255 |
| | 11,647 |
|
Commitments and contingencies (Note 11) |
| |
|
Liabilities under vehicle programs: | |
Liabilities under vehicle programs: | |
| Debt | |
| Debt | |
| Debt | |
| Debt due to Avis Budget Rental Car Funding (AESOP) LLC—related party | |
| Deferred income taxes | |
| Other | |
| | 23,187 | |
Commitments and contingencies (Note 12) | | Commitments and contingencies (Note 12) | | | |
| | | | |
Stockholders’ equity: | Stockholders’ equity: | | | |
| Preferred stock, $0.01 par value—authorized 10 shares; none issued and outstanding, at each date | — |
| | — |
|
| Common stock, $0.01 par value—authorized 250 shares; issued 137 shares, at each date | 1 |
| | 1 |
|
| Additional paid-in capital | 6,862 |
| | 6,918 |
|
| Accumulated deficit | (1,442 | ) | | (1,639 | ) |
| Accumulated other comprehensive loss | (44 | ) | | (154 | ) |
| Treasury stock, at cost—55 and 51 shares, respectively | (4,976 | ) | | (4,905 | ) |
Stockholders’ equity: | |
Stockholders’ equity: | |
| Preferred stock, $0.01 par value—authorized 10 shares; none issued and outstanding, in each period | |
| Preferred stock, $0.01 par value—authorized 10 shares; none issued and outstanding, in each period | |
| Preferred stock, $0.01 par value—authorized 10 shares; none issued and outstanding, in each period | |
| Common stock, $0.01 par value—authorized 250 shares; issued 137 shares, in each period | |
| Additional paid-in capital | |
| Retained earnings | |
| Accumulated other comprehensive loss | |
| Treasury stock, at cost—101 and 102 shares, respectively | |
Stockholders’ equity attributable to Avis Budget Group, Inc. | |
| Non-controlling interests | |
Total stockholders’ equity | Total stockholders’ equity | 401 |
| | 221 |
|
Total liabilities and stockholders’ equity | $ | 19,873 |
| | $ | 17,643 |
|
Total Liabilities and Stockholders’ Equity | |
See Notes to Consolidated Condensed Financial Statements (Unaudited).
Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2024 | | 2023 |
Operating activities | | | |
Net income (loss) | $ | (113) | | | $ | 312 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | |
| Vehicle depreciation | 562 | | | 477 | |
| Amortization of right-of-use assets | 302 | | | 251 | |
| (Gain) loss on sale of vehicles, net | 39 | | | (250) | |
| Non-vehicle related depreciation and amortization | 61 | | | 56 | |
| | | | |
| Stock-based compensation | 7 | | | 8 | |
| Amortization of debt financing fees | 12 | | | 9 | |
| | | | |
| Net change in assets and liabilities: | | | |
| | Receivables | (8) | | | 34 | |
| | Income taxes and deferred income taxes | (34) | | | 66 | |
| | Accounts payable and other current liabilities | 46 | | | 82 | |
| Operating lease liabilities | (299) | | | (250) | |
| Other, net | 14 | | | 24 | |
Net cash provided by operating activities | 589 | | | 819 | |
| | | | | |
Investing activities | | | |
Property and equipment additions | (53) | | | (44) | |
Proceeds received on asset sales | 1 | | | — | |
Net assets acquired (net of cash acquired) | (1) | | | (3) | |
| | | |
| | | |
Net cash used in investing activities exclusive of vehicle programs | (53) | | | (47) | |
| | | | | |
Vehicle programs: | | | |
| Investment in vehicles | (4,081) | | | (3,880) | |
| Proceeds received on disposition of vehicles | 2,610 | | | 2,283 | |
| Investment in debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party | (254) | | | (105) | |
| Proceeds from debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party | 260 | | | 71 | |
| | (1,465) | | | (1,631) | |
Net cash used in investing activities | (1,518) | | | (1,678) | |
|
| | | | | | | | | |
| | | Nine Months Ended September 30, |
| | | 2017 | | 2016 |
Operating activities | | | |
Net income | $ | 141 |
| | $ | 194 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Vehicle depreciation | 1,500 |
| | 1,453 |
|
| (Gain) loss on sale of vehicles, net | 53 |
| | (15 | ) |
| Non-vehicle related depreciation and amortization | 194 |
| | 189 |
|
| Stock-based compensation | 8 |
| | 21 |
|
| Amortization of debt financing fees | 25 |
| | 29 |
|
| Early extinguishment of debt costs | 3 |
| | 10 |
|
| Net change in assets and liabilities: | | | |
| | Receivables | (112 | ) | | (149 | ) |
| | Income taxes and deferred income taxes | 16 |
| | 80 |
|
| | Accounts payable and other current liabilities | 74 |
| | 43 |
|
| Other, net | 139 |
| | 256 |
|
Net cash provided by operating activities | 2,041 |
| | 2,111 |
|
| | | | | |
Investing activities | | | |
Property and equipment additions | (138 | ) | | (125 | ) |
Proceeds received on asset sales | 6 |
| | 10 |
|
Net assets acquired (net of cash acquired) | (17 | ) | | (4 | ) |
Other, net | 5 |
| | 4 |
|
Net cash used in investing activities exclusive of vehicle programs | (144 | ) | | (115 | ) |
| | | | | |
Vehicle programs: | | | |
| Decrease in program cash | 53 |
| | 138 |
|
| Investment in vehicles | (9,672 | ) | | (10,151 | ) |
| Proceeds received on disposition of vehicles | 6,872 |
| | 7,373 |
|
| Investment in debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party | (33 | ) | | — |
|
| | (2,780 | ) | | (2,640 | ) |
Net cash used in investing activities | (2,924 | ) | | (2,755 | ) |
Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(In millions)
Avis Budget Group, Inc. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued) (In millions) (Unaudited) |
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
Financing activities | | | |
Proceeds from long-term borrowings | 589 |
| | 896 |
|
Payments on long-term borrowings | (596 | ) | | (527 | ) |
Net change in short-term borrowings | (3 | ) | | 1 |
|
Repurchases of common stock | (144 | ) | | (299 | ) |
Debt financing fees | (9 | ) | | (15 | ) |
Net cash (used in) provided by financing activities exclusive of vehicle programs | (163 | ) | | 56 |
|
| | | | |
Vehicle programs: | | | |
| Proceeds from borrowings | 14,276 |
| | 11,879 |
|
| Payments on borrowings | (12,930 | ) | | (10,752 | ) |
| Debt financing fees | (8 | ) | | (20 | ) |
| | 1,338 |
| | 1,107 |
|
Net cash provided by financing activities | 1,175 |
| | 1,163 |
|
| | | | |
Effect of changes in exchange rates on cash and cash equivalents | 32 |
| | 14 |
|
| | | | |
Net increase in cash and cash equivalents | 324 |
| | 533 |
|
Cash and cash equivalents, beginning of period | 490 |
| | 452 |
|
Cash and cash equivalents, end of period | $ | 814 |
| | $ | 985 |
|
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
Financing activities | | | |
Proceeds from long-term borrowings | $ | 651 | | | $ | — | |
Payments on long-term borrowings | (10) | | | (7) | |
Net change in short-term borrowings | — | | | 2 | |
| | | |
Repurchases of common stock | (15) | | | (51) | |
Debt financing fees | (11) | | | (2) | |
| | | |
| | | |
Net cash provided by (used in) financing activities exclusive of vehicle programs | 615 | | | (58) | |
| | | | |
Vehicle programs: | | | |
| Proceeds from borrowings | 6,614 | | | 5,270 | |
| Payments on borrowings | (6,296) | | | (4,359) | |
| Debt financing fees | (36) | | | (12) | |
| | 282 | | | 899 | |
Net cash provided by financing activities | 897 | | | 841 | |
| | | | |
Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash | (13) | | | 5 | |
| | | | |
Net decrease in cash and cash equivalents, program and restricted cash | (45) | | | (13) | |
Cash and cash equivalents, program and restricted cash, beginning of period | 644 | | | 642 | |
Cash and cash equivalents, program and restricted cash, end of period | $ | 599 | | | $ | 629 | |
See Notes to Consolidated Condensed Financial Statements (Unaudited).
Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Income (Loss) | | Treasury Stock | | Stockholders’ Equity Attributable to Avis Budget Group, Inc. | | Non-controlling Interests | | Total Stockholders’ Equity |
| Shares | | Amount | | | | | Shares | | Amount | | | |
Balance at December 31, 2023 | 137.1 | | | $ | 1 | | | $ | 6,634 | | | $ | 3,854 | | | $ | (96) | | | (101.6) | | | $ | (10,742) | | | $ | (349) | | | $ | 6 | | | $ | (343) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | | |
Net income (loss) | — | | | — | | | — | | | (114) | | | — | | | — | | | — | | | (114) | | | 1 | | | (113) | |
Other comprehensive loss | — | | | — | | | — | | | — | | | (44) | | | — | | | — | | | (44) | | | — | | | (44) | |
Total comprehensive income (loss) | | | | | | | (114) | | | (44) | | | | | | | (158) | | | 1 | | | (157) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Net activity related to restricted stock units | — | | | — | | | (24) | | | (2) | | | — | | | 0.2 | | | 18 | | | (8) | | | — | | | (8) | |
| | | | | | | | | | | | | | | | | | | |
Balance at March 31, 2024 | 137.1 | | | $ | 1 | | | $ | 6,610 | | | $ | 3,738 | | | $ | (140) | | | (101.4) | | | $ | (10,724) | | | $ | (515) | | | $ | 7 | | | $ | (508) | |
| | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2022 | 137.1 | | | $ | 1 | | | $ | 6,666 | | | $ | 2,579 | | | $ | (101) | | | (97.6) | | | $ | (9,848) | | | $ | (703) | | | $ | 3 | | | $ | (700) | |
| | | | | | | | | | | | | | | | | | | |
Comprehensive income (loss): | | | | | | | | | | | | | | | | | | | |
Net income | — | | | — | | | — | | | 312 | | | — | | | — | | | — | | | 312 | | | — | | | 312 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | (10) | | | — | | | — | | | (10) | | | — | | | (10) | |
Total comprehensive income (loss) | | | | | | | 312 | | | (10) | | | | | | | 302 | | | — | | | 302 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Net activity related to restricted stock units | — | | | — | | | (46) | | | — | | | — | | | 0.3 | | | 3 | | | (43) | | | — | | | (43) | |
| | | | | | | | | | | | | | | | | | | |
Balance at March 31, 2023 | 137.1 | | | $ | 1 | | | $ | 6,620 | | | $ | 2,891 | | | $ | (111) | | | (97.3) | | | $ | (9,845) | | | $ | (444) | | | $ | 3 | | | $ | (441) | |
See Notes to Consolidated Condensed Financial Statements (Unaudited).
Avis Budget Group, Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
(Unless otherwise noted, all dollar amounts in tables are in millions, except per share amounts)
1.Basis of Presentation
Avis Budget Group, Inc. provides car and truck rentals, car sharing services and ancillary servicesmobility solutions to businesses and consumers worldwide. The accompanying unaudited Consolidated Condensed Financial Statements include the accounts and transactions of Avis Budget Group, Inc. and its subsidiaries, as well as entities in which Avis Budget Group, Inc. directly or indirectly has a controlling financial interest (collectively, “we”, “our”, “us”, or the “Company”), and have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim financial reporting.
The Company operates
We operate the following reportable business segments:
•Americas—- consisting primarily of (i) vehicle rental operations in North America, South America, Central America and the Caribbean, (ii) car sharing operations in certain of these markets, and (iii) licensees in the areas in which the Company doeswe do not operate directly.
•International— - consisting primarily of (i) vehicle rental operations in Europe, the Middle East, Africa, Asia and Australasia, (ii) car sharing operations in certain of these markets, and (iii) licensees in the areas in which the Company doeswe do not operate directly.
The operating results of acquired businesses are included in the accompanying Consolidated Condensed Financial Statements from the dates of acquisition. The fair value of the assets acquired and liabilities assumed in connection with the Company’s fourth quarter 2016 acquisition of FranceCars has not yet been finalized; however, there have been no significant changes toDifferences between the preliminary allocation of the purchase price duringand the nine months ended September 30, 2017.final allocation for our 2023 acquisitions of various licensees were not material. We consolidate joint venture activities when we have a controlling interest and record non-controlling interests within stockholders’ equity and the statement of comprehensive income equal to the percentage of ownership interest retained in such entities by the respective non-controlling party.
In presenting the Consolidated Condensed Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”), management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates. In management’s opinion, the Consolidated Condensed Financial Statements contain all adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. These financial statements should be read in conjunction with the Company’s 2016our 2023 Annual Report on Form 10-K.10-K (the “2023 Form 10-K”).
Summary of Significant Accounting Policies
The Company’sOur significant accounting policies are fully described in Note 2 “Summary– Summary of Significant Accounting Policies” in our 2023 Form 10-K.
Cash and cash equivalents, Program cash and Restricted cash. The following table provides a detail of cash and cash equivalents, program and restricted cash reported within the Consolidated Condensed Balance Sheets to the amounts shown in the Company’s Annual Report on Form 10-K for fiscal year 2016.
Reclassifications. Certain reclassifications have been made to prior years’ Consolidated Condensed Financial Statements to conform to theof Cash Flows.
| | | | | | | | | | | |
| As of March 31, |
| 2024 | | 2023 |
Cash and cash equivalents | $ | 522 | | | $ | 548 | |
Program cash | 73 | | | 80 | |
Restricted cash (a) | 4 | | | 1 | |
Total cash and cash equivalents, program and restricted cash | $ | 599 | | | $ | 629 | |
________
(a)Included within other current year presentation. These reclassifications have no impact on reported net income (see “Adoption of New Accounting Pronouncements”below).assets.
Vehicle Programs. The Company presents We present separately the financial data of itsour vehicle programs. These programs are distinct from the Company’sour other activities since the assets under vehicle programs are generally funded through the issuance of debt that is collateralized by such assets. The income generated by these assets is used, in part, to repay the principal and interest associated with the debt. Cash inflows and outflows relating to the acquisition of such assets and the principal debt repayment or financing of such assets are classified as activities of the Company’sour vehicle programs. The Company believesWe believe it is appropriate to segregate the financial data of itsour vehicle programs because, ultimately, the source of repayment of such debt is the realization of such assets.
Transaction-related costs, net. Transaction-related costs, net are classified separately in the Consolidated Condensed Statements of Comprehensive Income. These costs are comprised of expenses primarily related to acquisition-related activities such as due diligence and other advisory costs, expenses related to the integration of the acquiree’s operations with those of the Company,our operations, including the implementation of best practices and process improvements, non-cash gains and losses related to re-acquired rights, expenses related to pre-acquisition contingencies and contingent consideration related to acquisitions.
Currency Transactions. The Company recordsWe record the gain or loss on foreign-currencyforeign currency transactions on certain intercompany loans and the gain or loss on intercompany loan hedges within interest expense related to corporate debt, net. During
Variable Interest Entity (“VIE”). We review our investments to determine if they are VIEs. A VIE is an entity in which either (i) the equity investors as a group lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. Entities that are determined to be VIEs are consolidated if we are the primary beneficiary of the entity. The primary beneficiary possesses the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the right to receive benefits from the VIE that are significant to it. We will reconsider our original assessment of a VIE upon the occurrence of certain events such as contributions and redemptions, either by us, or third parties, or amendments to an entity’s governing documents. On an ongoing basis, we reconsider whether we are deemed to be a VIE’s primary beneficiary. See Note 14 – Related Party Transactions for our VIE investment in our former subsidiary.
Investments. As of March 31, 2024 and December 31, 2023, we had equity method investments with a carrying value of $95 million and $93 million, respectively, which are included in other non-current assets. Earnings from our equity method investments are included within operating expenses. For the three months ended September 30, 2017March 31, 2024 and 2016,2023 we recorded $3 million and an immaterial amount related to our equity method investments, respectively. See Note 14 – Related Party Transactions for our equity method investment in our former subsidiary.
Revenues. Revenues are recognized under “Leases (Topic 842),” with the Company recorded a $2exception of royalty fee revenue derived from our licensees and revenue related to our customer loyalty program, which were approximately $42 million gain and a $1$44 million loss, respectively and during the ninethree months ended September 30, 2017March 31, 2024 and 2016, the Company recorded a $2 million gain and a $8 million loss, respectively, on such items.2023, respectively.
Adoption of New Accounting Pronouncements
On January 1, 2017, as a result of a new accounting pronouncement, the Company adopted Accounting Standards Update (”ASU”) 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, minimum statutory withholding requirements and classification in the statement of cash flows. Accordingly, in the Company’s Consolidated Condensed Balance Sheet at January 1, 2017, deferred income tax assets, net of the valuation allowance were increasedThe following table presents our revenues disaggregated by $56 million related to previously unrecognized excess tax benefits associated with equity awards, with a corresponding decrease to accumulated deficit, using the modified retrospective method. In addition, in the Company’s Consolidated Condensed Statement of Cash Flows for the nine months ended September 30, 2016, cash taxes paid related to shares directly withheld from employees for tax purposes of $10 million were reclassified from accounts payablegeography:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
Americas | | | | | $ | 1,993 | | | $ | 2,016 | |
Europe, Middle East and Africa | | | | | 382 | | | 367 | |
Asia and Australasia | | | | | 176 | | | 174 | |
Total revenues | | | | | $ | 2,551 | | | $ | 2,557 | |
The following table presents our revenues disaggregated by brand:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
Avis | | | | | $ | 1,460 | | | $ | 1,415 | |
Budget | | | | | 921 | | | 977 | |
Other | | | | | 170 | | | 165 | |
Total revenues | | | | | $ | 2,551 | | | $ | 2,557 | |
________
Other includes Zipcar and other current liabilities within net cash provided by operating activities to repurchases of common stock within net cash provided by financing activities exclusive of vehicle programs. The Company elected to account for forfeitures on an actual basis, which did not have a material impact on its Consolidated Condensed Financial Statements.brands.
Recently Issued Accounting Pronouncements
Accounting for Hedging ActivitiesImprovements to Income Tax Disclosures
In August 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” which amends the existing guidance to allow companies to more accurately present the economic results of an entity’s risk management activities in the financial statements. ASU 2017-12 becomes effective for the Company on January 1, 2019. Early adoption is permitted. The Company is currently evaluating the effect of this accounting pronouncement on its Consolidated Financial Statements.
Scope of Modification Accounting for Share-Based Payment Awards
In May 2017,December 2023, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,2023-09, “Improvements to Income Tax Disclosures,” which provides guidance on the types of changes to the terms or conditions of a share-based payment award to whichamends Topic 740 primarily through enhanced disclosures about an entity would be required to apply modification accounting. ASU 2017-09 becomesentity’s tax risks and tax planning. The amendments are effective for the Companypublic business entities in annual periods beginning after December 15, 2024, with early adoption permitted on a prospective or retrospective basis. ASU 2023-09 will become effective for us on January 1, 2018. Early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on the Company’s Consolidated Financial Statements.
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
In March 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Costs and Net Periodic Postretirement Benefit Cost,” which requires an entity to disaggregate the components of net benefit cost recognized in the consolidated statements of operations. ASU 2017-07 becomes effective for the Company on January 1, 2018. Early adoption is permitted. The adoption of this accounting pronouncement is not expected to have a material impact on the Company’s Consolidated Financial Statements.
Accounting for Goodwill Impairment
In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which requires an entity to perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. ASU 2017-04 becomes effective for the Company on January 1, 2020. Early adoption is permitted. The adoption of this accounting pronouncement is not expected to have an impact on the Company’s Consolidated Financial Statements.
Clarifying the Definition of a Business
In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” which assists entities in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. ASU 2017-01 becomes effective for the Company on January 1, 2018. Early adoption is permitted. The adoption of this accounting pronouncement is not expected to have a material impact on the Company’s Consolidated Financial Statements.
Restricted Cash
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which clarifies guidance on the classification and presentation of restricted cash in the statement of cash flows. ASU 2016-18 becomes effective for the Company on January 1, 2018. Early adoption is permitted. The adoption of this accounting pronouncement will impact the presentation of program cash in the Company’s Consolidated Statements of Cash Flows.
Classification of Certain Cash Receipts and Cash Payments
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which clarifies guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. ASU 2016-15 becomes effective for the Company on January 1, 2018. Early adoption is permitted. The adoption of this accounting pronouncement is not expected to have a material impact on the Company’s Consolidated Financial Statements.
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which sets forth a current expected credit loss impairment model for financial assets that replaces the current incurred loss model. This model requires a financial asset (or group of financial assets), including trade receivables, measured at amortized cost to be presented at the net amount expected to be collected with an allowance for credit losses deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that2025. We are expected to occur over the remaining life of a financial asset. ASU 2016-13 becomes effective for the Company on January 1, 2020. Early adoption is permitted as of January 1, 2019. The adoption of this accounting pronouncement is not expected to have a material impact on the Company's Financial Statements.
Leases
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires a lessee to recognize all long-term leases on its balance sheet as a liability for its lease obligation, measured at the present value of lease payments not yet paid, and a corresponding asset representing its right to use the underlying asset over the lease term and expands disclosure of key information about leasing arrangements. The ASU does not significantly change a lessee’s recognition, measurement and presentation of expenses and cash flows. Additionally, ASU 2016-02 aligns key aspects of lessor accounting with the new revenue recognition guidance in ASU 2014-09, “Revenue from Contracts with Customers” (see below). ASU 2016-02 becomes effective for the Company on January 1, 2019. Early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach which includes a number of optional practical expedients that entities may elect to apply. The Company is currently evaluating and planning for the implementationimpact of this ASU, including assessing its overall impact, and expects most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption, which will materially increase total assets and total liabilities relative to such amounts prior to adoption. The Company has determined portions of its vehicle rental contracts that convey the right to control the use of identified assets are within the scope of the accounting guidance contained in ASU 2016-02. As discussed in Revenue from Contracts with Customers below, the Company’s vehicle rental revenues will be accounted for under the revenue accounting standard (“Topic 606”) effective January 1, 2018, until the adoption of this accounting pronouncement on January 1, 2019.our Consolidated Financial Statements.
Recognition and Measurement of Financial Assets and Financial LiabilitiesImprovements to Reportable Segment Disclosures
In January 2016,November 2023, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,2023-07, “Improvements to Reportable Segment Disclosures,” which makes limitedamends Topic 280 primarily through enhanced disclosures about significant segment expenses. The amendments to the classification and measurement of financial instruments. The new standard amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 becomesare effective for the Companyfiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. ASU 2023-07 became effective for us on January 1, 2018. Early adoption is permitted. The2024. We are currently evaluating the impact of the adoption of this accounting pronouncement is not expected to have a material impact on the Company’sour Consolidated Condensed Financial Statements.
Revenue from Contracts with CustomersReference Rate Reform
In May 2014,January 2021, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers2021-01, “Reference Rate Reform (Topic 606)848),” which outlines a single modelamends ASU 2020-04 and clarifies the scope and guidance of Topic 848 to allow derivatives impacted by the reference rate reform to qualify for entities to use in accountingcertain optional expedients and exceptions for revenue arising from contracts with customerscontract modifications and supersedes current revenue recognition guidance.hedge accounting. The new guidance applies to all contracts with customers except for leases, insurance contracts, financial instruments, certain nonmonetary exchangesis optional and certain guarantees. Also, additional disclosures are required about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU 2014-09 becomesis effective for a limited period of time. In December 2022, the Company on January 1, 2018 and may be adopted on either a full or modified retrospective basis. The Company is currently evaluating and planning for the implementation of thisFASB also issued ASU and has determined it will adopt the requirements2022-06, “Reference Rate Reform (Topic 848): Deferral of the new standardSunset Date of Topic 848,” to defer the sunset date of ASC 848 from December 31, 2022 to December 31, 2024. As of March 31, 2024, this guidance had no impact on our Consolidated Condensed Financial Statements, and we will continue to evaluate this guidance.
2. Leases
Lessor
The following table presents our lease revenues disaggregated by geography:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
Americas | | | | | $ | 1,974 | | | $ | 1,995 | |
Europe, Middle East and Africa | | | | | 364 | | | 349 | |
Asia and Australasia | | | | | 171 | | | 169 | |
Total lease revenues | | | | | $ | 2,509 | | | $ | 2,513 | |
The following table presents our lease revenues disaggregated by brand:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, | |
| | | | | 2024 | | 2023 | |
Avis | | | | | $ | 1,434 | | | $ | 1,388 | | |
Budget | | | | | 909 | | | 964 | | |
Other | | | | | 166 | | | 161 | | |
Total lease revenues | | | | | $ | 2,509 | | | $ | 2,513 | | |
________
Other includes Zipcar and other operating brands.
Lessee
We have operating and finance leases for rental locations, corporate offices, vehicle rental fleet and equipment. Many of our operating leases for rental locations contain concession agreements with various airport authorities that allow us to conduct our vehicle rental operations on site. In general, concession fees for airport locations are based on a modified retrospective basis usingpercentage of total commissionable revenue as defined by each airport authority, some of which are subject to minimum annual guaranteed amounts. Concession fees other than minimum annual guaranteed amounts are not included in the practical expedient notmeasurement of operating lease right of use (“ROU”) assets and operating lease liabilities, and are recorded as variable lease expense as incurred. Our operating leases for rental locations often also require us to restate contracts that begin and endpay or reimburse operating expenses.
The components of lease expense are as follows:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
Property leases (a) | | | | | | | |
Operating lease expense | | | | | $ | 229 | | | $ | 205 | |
Variable lease expense | | | | | 69 | | | 83 | |
Total property lease expense | | | | | $ | 298 | | | $ | 288 | |
________
(a) Primarily within the same prior fiscal year. The Company derives revenue primarily by providing vehicle rentals and ancillary productsoperating expenses.
Supplemental balance sheet information related to customers and has determined this ASU will affect its presentation of vehicle rentalleases is as follows:
| | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
Property leases | | | |
Operating lease ROU assets | $ | 2,750 | | $ | 2,654 |
| | | |
Short-term operating lease liabilities (a) | $ | 558 | | $ | 576 |
Long-term operating lease liabilities | 2,234 | | 2,117 |
Operating lease liabilities | $ | 2,792 | | $ | 2,693 |
| | | |
Weighted average remaining lease term | 8.0 years | | 8.1 years |
Weighted average discount rate | 4.88 | % | | 4.83 | % |
________
(a) Included in accounts payable and other revenuecurrent liabilities.
Supplemental cash flow information related to leases is as the total transaction price for each vehicle rental contract will need to be allocated among performance obligations based on standalone selling price. ASU 2014-09 defines standalone selling price as the observable price of a good or service when sold separately in similar circumstancesfollows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
Cash payments for lease liabilities within operating activities: | | | |
Property operating leases | $ | 266 | | | $ | 210 | |
Non-cash activities - increase (decrease) in ROU assets in exchange for lease liabilities: | | | |
Property operating leases | $ | 380 | | | $ | 154 | |
3. Restructuring and to similar customers. The Company has also determined this ASU will impact its accounting for its customer loyalty program and rebates. As discussed in Leases above, the Company’s vehicle rental revenues will be accounted for under Topic 606 effective January 1, 2018, until the adoption of Topic 842 on January 1, 2019.Other Related Charges
| |
2. | Restructuring and Other Related Charges |
Restructuring
During the first quarter 2017, the Companyof 2024, we initiated a strategicglobal restructuring initiativeplan to drive operational efficiency throughout the organization by reducing headcount, improving processes and consolidating functions, closing certain rental locations and decreasing thefurther right size of its fleet (the “T17”our operations (“Global Rightsizing”). During the nine months ended September 30, 2017, as part of this initiative, the Company formally communicated the termination of employment to approximately 620 employees, and as of September 30, 2017, the Company had terminated the employment of approximately 595 of these employees. The costs associated with this initiative are primarily represent severance, outplacement servicesrelated to the operational scaling of processes, locations, and other costs associated with employee terminations, the majoritylines of which have been or are expected to be settled in cash. The Company expectsbusiness. We expect further restructuring expense of approximately $4$35 million related to this initiative to be incurred in fourththis year.
During the second quarter 2017.
In conjunction with previous acquisitions, the Company identified opportunitiesof 2022, we initiated a restructuring plan to integrate and streamline itsfocus on consolidating our global operations primarily in Europe (the “Acquisition integration”). This initiative is substantially complete, and the Company does not anticipate any further restructuring expense related to this initiative.
In 2014, the Company committed to various strategic initiatives to identify best practices and drive efficiency throughout its organization, by reducing headcount, improvingdesigning new processes and consolidating functions (the “T15”implementing new systems (“Cost Optimization”). The Company does not anticipate any further restructuring expense relatedWe expect this initiative to be completed this initiative.year.
The following tables summarize the changeschange to our restructuring-related liabilities and identifyidentifies the amounts recorded within the Company’sour reporting segments for restructuring charges and corresponding payments and utilizations:
| | | | | | | | | | | | | | | | | | | | |
| | Americas | | International | | Total |
Balance as of January 1, 2024 | | $ | 2 | | | $ | 2 | | | $ | 4 | |
| | | | | | |
Restructuring expense: | | | | | | |
Global Rightsizing | | 2 | | | 1 | | | 3 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Restructuring payments and utilization: | | | | | | |
Global Rightsizing | | (2) | | | (1) | | | (3) | |
Cost Optimization | | — | | | (1) | | | (1) | |
| | | | | | |
| | | | | | |
| | | | | | |
Balance as of March 31, 2024 | | $ | 2 | | | $ | 1 | | | $ | 3 | |
|
| | | | | | | | | | | | | | | | |
| | | | Americas | | International | | Total |
Balance as of January 1, 2017 | | | $ | 1 |
| | $ | 5 |
| | $ | 6 |
|
| Restructuring expense: | | | | | | | |
| T17 | | | 24 |
| | 7 |
| | 31 |
|
| Restructuring payment/utilization: | | | | | | | |
| T17 | | | (23 | ) | | (7 | ) | | (30 | ) |
| T15 | | | (1 | ) | | (2 | ) | | (3 | ) |
| Acquisition integration | | | — |
| | (1 | ) | | (1 | ) |
Balance as of September 30, 2017 | | | $ | 1 |
| | $ | 2 |
| | $ | 3 |
|
| | | | | | | | |
| | Personnel Related | | Facility Related | | Other (a) | | Total |
Balance as of January 1, 2017 | $ | 5 |
| | $ | 1 |
| | $ | — |
| | $ | 6 |
|
| Restructuring expense: | | | | | | | |
| T17 | 17 |
| | — |
| | 14 |
| | 31 |
|
| Restructuring payment/utilization: | | | | | | | |
| T17 | (15 | ) | | (1 | ) | | (14 | ) | | (30 | ) |
| T15 | (3 | ) | | — |
| | — |
| | (3 | ) |
| Acquisition integration | (1 | ) | | — |
| | — |
| | (1 | ) |
Balance as of September 30, 2017 | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | 3 |
|
__________
| |
(a)
| Includes expenses primarily related to the disposition of vehicles. |
4. Earnings Per Share
Other Related Charges
Officer Separation Costs
On May 12, 2017, the Company announced the resignation of David B. Wyshner as the Company’s President and Chief Financial Officer. In connection with Mr. Wyshner’s departure, the Company recorded other related charges of $7 million during the nine months ended September 30, 2017, inclusive of accelerated stock-based compensation expense of $2 million.
Limited Voluntary Opportunity Plan (“LVOP”)
During second quarter 2017, the Company decided to offer a voluntary termination program to certain employees in the Americas’ field operations, shared services, and general and administrative functions for a limited time. These employees, if qualified, can elect resignation from employment in return for enhanced severance benefits to be settled in cash. During the nine months ended September 30, 2017, the Company recorded other related charges of $14 million in connection with the LVOP. Approximately 325 qualified employees elected to participate in the plan, and as of September 30, 2017, the Company had terminated the employment of approximately 255 of these participants.
The following table sets forth the computation of basic and diluted earnings (loss) per share (“EPS”) (shares in millions):
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2024 | | 2023 |
Net income (loss) attributable to Avis Budget Group, Inc. for basic and diluted EPS | | | | | $ | (114) | | | $ | 312 | |
| | | | | | | | |
Basic weighted average shares outstanding | | | | | 35.6 | | | 39.6 | |
Non-vested stock (a) | | | | | — | | | 0.8 | |
Diluted weighted average shares outstanding | | | | | 35.6 | | | 40.4 | |
| | | | | | | | |
Earnings (loss) per share: | | | | | | | |
| Basic | | | | | $ | (3.21) | | | $ | 7.88 | |
| Diluted | | | | | $ | (3.21) | | | $ | 7.72 | |
________
(a) For the three months ended March 31, 2024 and 2023, 0.3 million and 0.1 million non-vested stock awards, respectively, have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding.
5. Other Current Assets
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Net income for basic and diluted EPS | $ | 245 |
| | $ | 209 |
| | $ | 141 |
| | $ | 194 |
|
| | | | | | | | |
Basic weighted average shares outstanding | 82.6 |
| | 90.4 |
| | 84.1 |
| | 93.5 |
|
Options and non-vested stock (a) | 1.4 |
| | 1.4 |
| | 1.4 |
| | 1.3 |
|
Diluted weighted average shares outstanding | 84.0 |
| | 91.8 |
| | 85.5 |
| | 94.8 |
|
| | | | | | | | |
Earnings per share: | | | | | | | |
| Basic | $ | 2.96 |
| | $ | 2.32 |
| | $ | 1.68 |
| | $ | 2.07 |
|
| Diluted | $ | 2.91 |
| | $ | 2.28 |
| | $ | 1.65 |
| | $ | 2.05 |
|
__________
| |
(a)
| For the three months ended September 30, 2017 and 2016, 0.7 million and 0.2 million non-vested stock awards, respectively, have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding. For the nine months ended September 30, 2017 and 2016, 0.8 million and 0.2 million non-vested stock awards, respectively, have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding. |
Other current assets consisted of:
| | | | | | | | | | | |
| As of | | As of |
| March 31, | | December 31, |
| 2024 | | 2023 |
Prepaid expenses | $ | 312 | | | $ | 239 | |
Sales and use taxes | 221 | | | 192 | |
Other | 246 | | | 253 | |
Other current assets | $ | 779 | | | $ | 684 | |
6. Intangible Assets
|
| | | | | | | |
| As of September 30, 2017 | | As of December 31, 2016 |
Sales and use taxes | $ | 348 |
| | $ | 153 |
|
Prepaid expenses | 231 |
| | 212 |
|
Other | 171 |
| | 154 |
|
Other current assets | $ | 750 |
| | $ | 519 |
|
Intangible assets consisted of:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Amortized Intangible Assets | | | | | | | | | | | |
License agreements | $ | 312 | | | $ | 236 | | | $ | 76 | | | $ | 316 | | | $ | 234 | | | $ | 82 | |
Customer relationships | 250 | | | 220 | | | 30 | | | 253 | | | 221 | | | 32 | |
Other | 54 | | | 46 | | | 8 | | | 56 | | | 46 | | | 10 | |
Total | $ | 616 | | | $ | 502 | | | $ | 114 | | | $ | 625 | | | $ | 501 | | | $ | 124 | |
Unamortized Intangible Assets | | | | | | | | | | | |
Goodwill | $ | 1,088 | | | | | | | $ | 1,099 | | | | | |
Trademarks | $ | 544 | | | | | | | $ | 546 | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2017 | | As of December 31, 2016 |
| Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Amortized Intangible Assets | | | | | | | | | | | |
License agreements | $ | 279 |
| | $ | 133 |
| | $ | 146 |
| | $ | 261 |
| | $ | 109 |
| | $ | 152 |
|
Customer relationships | 240 |
| | 113 |
| | 127 |
| | 224 |
| | 90 |
| | 134 |
|
Other | 50 |
| | 15 |
| | 35 |
| | 46 |
| | 12 |
| | 34 |
|
Total | $ | 569 |
| | $ | 261 |
| | $ | 308 |
| | $ | 531 |
| | $ | 211 |
| | $ | 320 |
|
| | | | | | | | | | | |
Unamortized Intangible Assets | | | | | | | | | | | |
Goodwill (a) | $ | 1,065 |
| | | | | | $ | 1,007 |
| | | | |
Trademarks | $ | 555 |
| | | | | | $ | 550 |
| | | | |
_________
| |
(a)
| The increase in the carrying amount since December 31, 2016 primarily reflects currency translation. |
For the three months ended September 30, 2017March 31, 2024 and 2016,2023, amortization expense related to amortizable intangible assets was approximately $17 million and $15 million, respectively. For the nine months ended September 30, 2017 and 2016, amortization expense related to amortizable intangible assets was approximately $48approximately $8 million in each period.
Based on the Company’sour amortizable intangible assets at September 30, 2017, the Company expectsMarch 31, 2024, we expect amortization expense of approximately $14$21 million for the remainder of 2017, $472024, $22 million for 2018, $412025, $21 million for 2019, $402026, $16 million for 2020, $302027, $9 million for 20212028 and $24$7 million for 2022,2029, excluding effects of currency exchange rates.
| |
6. | Vehicle Rental Activities |
7. Vehicle Rental Activities
The components of vehicles, net within assets under vehicle programs wereare as follows:
| | | | | | | | | | | |
| As of | | As of |
| March 31, | | December 31, |
| 2024 | | 2023 |
Rental vehicles | $ | 24,110 | | | $ | 23,114 | |
Less: Accumulated depreciation | (2,647) | | | (2,639) | |
| 21,463 | | | 20,475 | |
Vehicles held for sale | 521 | | | 734 | |
Vehicles, net investment in lease (a) | 36 | | | 31 | |
Vehicles, net | $ | 22,020 | | | $ | 21,240 | |
|
| | | | | | | |
| As of | | As of |
| September 30, | | December 31, |
| 2017 | | 2016 |
Rental vehicles | $ | 12,993 |
| | $ | 10,937 |
|
Less: Accumulated depreciation | (1,627 | ) | | (1,454 | ) |
| 11,366 |
| | 9,483 |
|
Vehicles held for sale | 435 |
| | 981 |
|
Vehicles, net | $ | 11,801 |
| | $ | 10,464 |
|
________
(a) See Note 14 – Related Party Transactions.
The components of vehicle depreciation and lease charges, net are summarized below:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, | |
| | | | | 2024 | | 2023 | |
Depreciation expense | | | | | $ | 562 | | | $ | 477 | | |
Lease charges | | | | | 35 | | | 38 | | |
(Gain) loss on sale of vehicles, net | | | | | 39 | | | (250) | | |
Vehicle depreciation and lease charges, net | | | | | $ | 636 | | | $ | 265 | | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Depreciation expense | $ | 547 |
| | $ | 523 |
| | $ | 1,500 |
| | $ | 1,453 |
|
Lease charges | 67 |
| | 57 |
| | 164 |
| | 133 |
|
(Gain) loss on sale of vehicles, net | 2 |
| | (4 | ) | | 53 |
| | (15 | ) |
Vehicle depreciation and lease charges, net | $ | 616 |
| | $ | 576 |
| | $ | 1,717 |
| | $ | 1,571 |
|
At September 30, 2017March 31, 2024 and 2016, the Company2023, we had payables related to vehicle purchases included in liabilities under vehicle programs - other of $231$483 million and $164$314 million, respectively, and receivables related to vehicle sales included in assets under vehicle programs - receivables from vehicle manufacturers and other of $707$239 million and $586$137 million, respectively.
The Company’s 8. Income Taxes
Our effective tax rate for the ninethree months ended September 30, 2017 isMarch 31, 2024 was a provisionbenefit of 32.9%20.4%. Such rate differed from the Federal statutoryStatutory rate of 35.0%21.0% primarily due to the effect of certain tax credits, partially offset by foreign taxes as a result of the mix of the Company’s earnings between the U.S.on our International operations and foreign jurisdictions.state taxes.
The Company’sOur effective tax rate for the ninethree months ended September 30, 2016March 31, 2023 was a provision of 39.8%21.4%. Such rate differed from the Federal statutoryStatutory rate of 35.0%21.0% primarily due to foreign taxes on our International operations and state taxes, partially offset by the effect of certain tax credits and foreign income taxes.the favorable adjustments related to stock-based compensation.
| |
8. | Accounts Payable and Other Current Liabilities |
The Organisation for Economic Cooperation and Development (“OECD”) published a proposal for the establishment of a global minimum tax rate of 15% (the “Pillar Two rule”), effective for fiscal 2024. We are closely monitoring developments of the Pillar Two rule as the OECD continues to refine its technical guidance and member states implement tax laws and regulations based on Pillar Two proposals. Based on our preliminary analysis, we do not expect Pillar Two to have a material impact on our financial statements for 2024.
9. Accounts Payable and Other Current Liabilities
Accounts payable and other current liabilities consisted of:
| | | | | | | | | | | |
| As of | | As of |
| March 31, | | December 31, |
| 2024 | | 2023 |
Short-term operating lease liabilities | $ | 558 | | | $ | 576 | |
Accounts payable | 504 | | | 487 | |
Accrued advertising and marketing | 267 | | | 276 | |
Accrued sales and use taxes | 268 | | | 251 | |
Accrued payroll and related | 164 | | | 188 | |
Deferred lease revenues - current | 257 | | | 168 | |
Public liability and property damage insurance liabilities – current | 172 | | | 181 | |
Other | 479 | | | 500 | |
Accounts payable and other current liabilities | $ | 2,669 | | | $ | 2,627 | |
10.Long-term Corporate Debt and Borrowing Arrangements
|
| | | | | | | |
| As of |
| As of |
| September 30, |
| December 31, |
| 2017 |
| 2016 |
Accounts payable | $ | 426 |
| | $ | 343 |
|
Accrued sales and use taxes | 329 |
| | 206 |
|
Accrued payroll and related | 172 |
| | 173 |
|
Deferred revenue – current | 154 |
| | 114 |
|
Public liability and property damage insurance liabilities – current | 141 |
| | 141 |
|
Accrued commissions | 126 |
| | 86 |
|
Other | 518 |
| | 425 |
|
Accounts payable and other current liabilities | $ | 1,866 |
| | $ | 1,488 |
|
| |
9. | Long-term Corporate Debt and Borrowing Arrangements |
Long-term corporate debt and other borrowing arrangements consisted of:
| | | | | | | | | | | | | | | | | |
| | | As of | | As of |
| Maturity | | March 31, | | December 31, |
| Date | | 2024 | | 2023 |
4.750% euro-denominated Senior Notes (a) | January 2026 | | $ | 378 | | | $ | 386 | |
5.750% Senior Notes | July 2027 | | 736 | | | 736 | |
4.750% Senior Notes | April 2028 | | 500 | | | 500 | |
7.000% euro-denominated Senior Notes | February 2029 | | 647 | | | — | |
5.375% Senior Notes | March 2029 | | 600 | | | 600 | |
7.250% euro-denominated Senior Notes | July 2030 | | 432 | | | 441 | |
8.000% Senior Notes | February 2031 | | 497 | | | 497 | |
| | | | | |
Floating Rate Term Loan (b) | August 2027 | | 1,162 | | | 1,164 | |
Floating Rate Term Loan (c) | March 2029 | | 523 | | | 524 | |
Other (d) | | | 24 | | | 30 | |
Deferred financing fees | | | (62) | | | (55) | |
Total | | | 5,437 | | | 4,823 | |
Less: Short-term debt and current portion of long-term debt | | | 405 | | | 32 | |
Long-term debt | | | $ | 5,032 | | | $ | 4,791 | |
________
(a)In April 2024, these notes were fully redeemed. See Note 18 – Subsequent Events.
(b)The floating rate term loan is part of our senior revolving credit facility, which is secured by pledges of capital stock of certain of our subsidiaries, and liens on substantially all of our intellectual property and certain other real and personal property. As of March 31, 2024, the floating rate term loan due 2027 bears interest at one-month Secured Overnight Financing Rate (“SOFR”) plus 1.75%, for an aggregate rate of 7.19%. We have entered into a swap to hedge $750 million of interest rate exposure related to the floating rate term loan at an aggregate rate of 3.26%.
(c)The floating rate term loan is part of our senior revolving credit facility, which is secured by pledges of capital stock of certain of our subsidiaries, and liens on substantially all of our intellectual property and certain other real and personal property. As of March 31, 2024, the floating rate term loan due 2029 bears interest at one-month SOFR plus 3.00% for an aggregate rate of 8.43%.
(d)Primarily includes finance leases, which are secured by liens on the related assets.
|
| | | | | | | | | |
| | | As of | | As of |
| Maturity Dates | | September 30, | | December 31, |
| | 2017 | | 2016 |
Floating Rate Senior Notes | December 2017 | | $ | — |
| | $ | 249 |
|
Floating Rate Term Loan | March 2019 | | — |
| | 144 |
|
6% euro-denominated Senior Notes | March 2021 | | — |
| | 194 |
|
Floating Rate Term Loan (a) | March 2022 | | 1,139 |
| | 816 |
|
5⅛% Senior Notes | June 2022 | | 400 |
| | 400 |
|
5½% Senior Notes | April 2023 | | 675 |
| | 675 |
|
6⅜% Senior Notes | April 2024 | | 350 |
| | 350 |
|
4⅛% euro-denominated Senior Notes | November 2024 | | 354 |
| | 316 |
|
5¼% Senior Notes | March 2025 | | 375 |
| | 375 |
|
4½% euro-denominated Senior Notes | May 2025 | | 295 |
| | — |
|
Other (b) | | | 51 |
| | 57 |
|
Deferred financing fees | | | (48 | ) | | (53 | ) |
Total | | | 3,591 |
| | 3,523 |
|
Less: Short-term debt and current portion of long-term debt | | | 26 |
| | 279 |
|
Long-term debt | | | $ | 3,565 |
| | $ | 3,244 |
|
__________
| |
(a)
| The floating rate term loan is part of the Company’s senior credit facility, which is secured by pledges of capital stock of certain subsidiaries of the Company, and liens on substantially all of the Company’s intellectual property and certain other real and personal property. As of September 30, 2017, the floating rate term loan due 2022 bears interest at three-month LIBOR plus 200 basis points, for an aggregate rate of 3.34%. The Company has entered into a swap to hedge $700 million of its interest rate exposure related to the floating rate term loan at an aggregate rate of 3.75%.
|
| |
(b)
| Primarily includes capital leases which are secured by liens on the related assets.
|
In March 2017, the CompanyFebruary 2024, we issued €250€600 million of 4½%7.000% euro-denominated Senior Notes due 2025,February 2029, at par. In April 2017, the Company used the netpar, with interest payable semi-annually. Net proceeds from the offering will be used to redeem itsall of our outstanding €175 million principal amount of 6%4.750% euro-denominated Senior Notes due 2021 for €180 millionJanuary 2026 plus accrued interest. In June 2017, the Company used the remaining proceeds to redeem a portion of its Floating Rate Senior Notes due 2017.
In March 2017, the Company increased its Floating Rate Term Loan due 2022 to $1.1 billion and reduced the loan interest, rate to three-month LIBOR plus 2.00%. The Company used the incremental term loan proceeds to repay all of its outstanding Floating Rate Term Loan due 2019. In June 2017, the Company used the remaining proceeds to redeemwith the remainder of its outstanding Floating Rate Senior Notes due 2017.being used for general corporate purposes.
Committed Credit Facilities and Available Funding Arrangements
At September 30, 2017,As of March 31, 2024, the committed corporate credit facilities available to the Companyus and/or itsour subsidiaries were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Total Capacity | | Outstanding Borrowings | | Letters of Credit Issued | | Available Capacity |
Senior revolving credit facility maturing 2028 (a) | $ | 2,000 | | | $ | — | | | $ | 1,800 | | | $ | 200 | |
|
| | | | | | | | | | | | | | | |
| Total Capacity | | Outstanding Borrowings | | Letters of Credit Issued | | Available Capacity |
Senior revolving credit facility maturing 2021 (a) | $ | 1,800 |
| | $ | — |
| | $ | 1,058 |
| | $ | 742 |
|
Other facilities (b) | 3 |
| | 3 |
| | — |
| | — |
|
__________________
| |
(a)
| (a)The senior revolving credit facility bears interest at one-month SOFR plus 1.75% and is part of our senior revolving credit facility bears interest at one-month LIBOR plus 200 basis points and is part of the Company’s senior credit facility, which is secured by pledges of capital stock of certain subsidiaries of the Company, and liens on substantially all of the Company’s intellectual property and certain other real and personal property. |
| |
(b)
| These facilities encompass bank overdraft lines of credit, bearing interest of 3.10% to 3.18% as of September 30, 2017.
|
At September 30, 2017, the Company had various uncommitted credit facilities, available, under which it had drawn approximately $2 million,include the floating rate term loan and the senior revolving credit facility, and which bear interest at rates between 0.74%are secured by pledges of capital stock of certain of our subsidiaries, liens on substantially all of our intellectual property and 4.50%.certain other real and personal property.
Debt Covenants
The agreements governing the Company’sour indebtedness contain restrictive covenants, including restrictions on dividends paid to the Companyus by certain of itsour subsidiaries, the incurrence of additional indebtedness and/or liens by the Companyus and certain of itsour subsidiaries, acquisitions, mergers, liquidations, and sale and leaseback transactions. The Company’sOur senior credit facility also contains a maximum leverage ratio requirement. As of September 30, 2017, the Company wasMarch 31, 2024, we were in compliance with the financial covenants governing itsour indebtedness.
| |
10. | Debt Under Vehicle Programs and Borrowing Arrangements |
11. Debt Under Vehicle Programs and Borrowing Arrangements
Debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding (AESOP) LLC (“Avis Budget Rental Car Funding”), consisted of:
| | | | | | | | | | | |
| As of | | As of |
| March 31, | | December 31, |
| 2024 | | 2023 |
Americas - Debt due to Avis Budget Rental Car Funding (a) | $ | 16,030 | | | $ | 15,502 | |
Americas - Debt borrowings | 1,082 | | | 1,075 | |
International - Debt borrowings (b) | 1,973 | | | 2,203 | |
International - Finance leases | 164 | | | 172 | |
Other | 40 | | | 55 | |
Deferred financing fees (c) | (99) | | | (70) | |
Total | $ | 19,190 | | | $ | 18,937 | |
|
| | | | | | | |
| As of | | As of |
| September 30, | | December 31, |
| 2017 | | 2016 |
Americas - Debt due to Avis Budget Rental Car Funding (a) | $ | 6,816 |
| | $ | 6,733 |
|
Americas - Debt borrowings (a) | 947 |
| | 577 |
|
International - Debt borrowings (a) | 2,684 |
| | 1,449 |
|
International - Capital leases | 159 |
| | 162 |
|
Other | 1 |
| | 7 |
|
Deferred financing fees (b) | (41 | ) | | (50 | ) |
Total | $ | 10,566 |
| | $ | 8,878 |
|
__________________(a)Includes approximately $843 million and $841 million of Class R notes as of March 31, 2024 and December 31, 2023, respectively, which are held by us.
| |
(a)
| The increase reflects additional borrowings principally to fund increases in the Company’s car rental fleet.
|
| |
(b)
| (b)In February 2024, we amended our European rental fleet securitization program to increase its capacity to approximately €1.9 billion and extend the maturity of the program to September 2026. We also added £200 million to our capacity within the program. (c)Deferred financing fees related to Debt due to Avis Budget Rental Car Funding as of September 30, 2017 and December 31, 2016 were $31 million and $38 million, respectively. |
In March 2017, the Company’s Avis Budget Rental Car Funding subsidiaryas of March 31, 2024 and December 31, 2023 were $81 million and $61 million, respectively.
The following table provides a summary of debt issued approximately $600 million in asset-backed notes with an expected final payment date of September 2022. The weighted average interest rate was 3%. The Company usedby AESOP during the proceeds from these borrowings to fund the repayment of maturing vehicle-backed debt and the acquisition of rental cars in the United States.three months ended March 31, 2024:
| | | | | | | | | | | | | | | | | | | | |
Issuance Date | | Maturity Date | | Weighted Average Interest Rate | | Amount Issued |
January 2024 | | June 2029 | | 5.51 | % | | $ | 1,200 | |
February 2024 | | April 2026 | | 6.24 | % | | 53 | |
February 2024 | | October 2026 | | 6.18 | % | | 37 | |
February 2024 | | April 2028 | | 6.23 | % | | 52 | |
March 2024 | | October 2027 | | 5.26 | % | | 400 | |
March 2024 | | December 2029 | | 5.35 | % | | 700 | |
In May 2017, the Company increased its capacity under the European rental fleet securitization program by €250 million. The Company used the proceeds to finance fleet purchases for certain of the Company’s European operations.
Debt Maturities
The following table provides the contractual maturities of the Company’sour debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding, at September 30, 2017.March 31, 2024:
|
| | | |
| Debt under Vehicle Programs |
Within 1 year (a) | $ | 1,868 |
|
Between 1 and 2 years | 4,751 |
|
Between 2 and 3 years | 1,908 |
|
Between 3 and 4 years | 1,143 |
|
Between 4 and 5 years | 800 |
|
Thereafter | 137 |
|
Total | $ | 10,607 |
|
__________
| | | | | |
| Debt under Vehicle Programs (a) |
(a)Within 1 year (b)
| $ | 2,090 | |
Vehicle-backed debt maturing within one year primarily represents term asset-backed securities.Between 1 and 2 years (c)
| 3,803 | |
Between 2 and 3 years (d) | 6,780 | |
Between 3 and 4 years (e) | 2,770 | |
Between 4 and 5 years | 2,365 | |
Thereafter | 1,481 | |
Total | $ | 19,289 | |
________
(a) Vehicle-backed debt primarily represents asset-backed securities.
(b) Includes $0.2 billion of bank and bank-sponsored facilities.
(c) Includes $1.3 billion of bank and bank-sponsored facilities.
(d) Includes $3.5 billion of bank and bank-sponsored facilities.
(e) Includes $0.1 billion of bank and bank-sponsored facilities.
Committed Credit Facilities and Available Funding Arrangements
As of September 30, 2017,March 31, 2024, available funding under the Company’sour debt arrangements related to our vehicle programs, including related party debt due to Avis Budget Rental Car Funding, consisted of:
| | | | | | | | | | | | | | | | | |
| Total Capacity (a) | | Outstanding Borrowings (b) | | Available Capacity |
Americas - Debt due to Avis Budget Rental Car Funding | $ | 18,455 | | | $ | 16,030 | | | $ | 2,425 | |
Americas - Debt borrowings | 1,194 | | | 1,082 | | | 112 | |
International - Debt borrowings | 3,119 | | | 1,973 | | | 1,146 | |
International - Finance leases | 242 | | | 164 | | | 78 | |
Other | 40 | | | 40 | | | — | |
Total | $ | 23,050 | | | $ | 19,289 | | | $ | 3,761 | |
________
(a) Capacity is subject to maintaining sufficient assets to collateralize debt. The total capacity for Americas - Debt due to Avis Budget Rental Car Funding includes increases from an amendment and renewal of our asset-backed variable-funding financing facilities during March 2024.
(b)The outstanding debt is collateralized by vehicles and related assets of $18.3 billion for Americas - Debt due to Avis Budget Rental Car Funding; $1.5 billion for Americas - Debt borrowings; $2.6 billion for International - Debt borrowings; and $0.2 billion for International - Finance leases.
|
| | | | | | | | | | | |
| Total Capacity (a) | | Outstanding Borrowings | | Available Capacity |
Americas - Debt due to Avis Budget Rental Car Funding (b) | $ | 9,106 |
| | $ | 6,816 |
| | $ | 2,290 |
|
Americas - Debt borrowings (c) | 974 |
| | 947 |
| | 27 |
|
International - Debt borrowings (d) | 2,897 |
| | 2,684 |
| | 213 |
|
International - Capital leases (e) | 189 |
| | 159 |
| | 30 |
|
Other | 1 |
| | 1 |
| | — |
|
Total | $ | 13,167 |
| | $ | 10,607 |
| | $ | 2,560 |
|
__________
| |
(a)
| Capacity is subject to maintaining sufficient assets to collateralize debt. |
| |
(b)
| The outstanding debt is collateralized by approximately $8.4 billion of underlying vehicles and related assets.
|
| |
(c)
| The outstanding debt is collateralized by approximately $1.3 billion of underlying vehicles and related assets. |
| |
(d)
| The outstanding debt is collateralized by approximately $3.1 billion of underlying vehicles and related assets.
|
| |
(e)
| The outstanding debt is collateralized by approximately $0.2 billion of underlying vehicles and related assets. |
Debt Covenants
The agreements under the Company’sour vehicle-backed funding programs contain restrictive covenants, including restrictions on dividends paid to the Companyus by certain of itsour subsidiaries and restrictions on indebtedness, mergers, liens, liquidations, and sale and leaseback transactions and in some cases also require compliance with certain financial requirements. As of September 30, 2017, the Company isMarch 31, 2024, we are not aware of any instances of non-compliance with any of the financial or restrictive covenants contained in the debt agreements under itsour vehicle-backed funding programs.
| |
11. | Commitments and Contingencies |
12. Commitments and Contingencies
Contingencies
In 2006, the Companywe completed the spin-offs of itsour Realogy and Wyndham subsidiaries. The Company doessubsidiaries (now known as Anywhere Real Estate, Inc., and Wyndham Hotels and Resorts, Inc. and Travel + Leisure Co., respectively). We do not believe that the impact of any resolution of pre-existing contingent liabilities in connection with the spin-offs should result in a material liability to the Companyus in relation to itsour consolidated financial position or liquidity, as RealogyAnywhere Real Estate, Inc., Wyndham Hotels and Wyndham eachResorts, Inc. and Travel + Leisure Co. have agreed to assume responsibility for these liabilities.
In March 2023, the California Office of Tax Appeals (“OTA”) issued an opinion in a case involving notices of proposed assessment of California corporation franchise tax for tax year 1999 issued to us. The Companycase involves whether (i) the notices of proposed assessment were barred by the statute of limitations; and (ii) a transaction undertaken by us in tax year 1999 constituted a tax-free reorganization under the Internal Revenue Code (“IRC”). The OTA concluded that the notices of proposed assessment were not barred by the statute of limitations and that the 1999 transaction was not a tax-free reorganization under the IRC. Anywhere Real Estate, Inc. has assumed 62.5%, and Wyndham Hotels and Resorts, Inc. and Travel + Leisure Co. have assumed 37.5% of the potential tax liability in this matter, respectively. We filed a petition for rehearing, which was denied in April 2024, and the tax assessment is expected to become payable, even if judicial relief is sought.
We are also named in litigation that is primarily related to the businesses of itsour former subsidiaries,
including Realogy and Wyndham. The Company isWe are entitled to indemnification from such entities for any liability resulting from such litigation.
In February 2015,September 2014, Dawn Valli et al. v. Avis Budget Group Inc., et al. was filed in U.S. District Court for the French Competition Authority issuedDistrict of New Jersey. The plaintiffs seek to represent a statementpurported nationwide class of objections alleging that several car rental companies,certain renters of vehicles from our Avis and Budget subsidiaries from September 30, 2008 through the present. The plaintiffs seek damages in connection with claims relating to alleged misrepresentations and omissions concerning charging customers for traffic infractions and related administrative fees. On October 10, 2023, plaintiffs’ motion for class certification was denied as to their proposed nationwide class and granted as to a subclass, created at the Court’s discretion, of Avis Preferred and Budget Fastbreak members. We have been named as a defendant in other purported consumer class action lawsuits, including two class actions filed against us in New Jersey, one seeking damages in connection with a breach of contract claim and another related to ancillary charges at our Payless subsidiary. However, the Company and two of its European subsidiaries, engaged with (i) twelve French airports, the majority of which are controlled by public administrative bodies or the French state, and violated competition law through the distribution by airports of company-specific statistics to car rental companies operating at those airports and (ii) two other international car rental companies in a concerted practice relating to train station surcharges. In February 2017, the Company was notified that the French Competition Authority dismissed the charges and cleared the Company and its subsidiaries of any wrongdoing.
In February 2017, following a state court trial in Georgia, a jury found the Company liable for damages in a case brought by a plaintiff who was injured in a vehicle accident allegedly caused by an employee of an independent contractor of the Company who was acting outside of the scope of employment. In March 2017, the Company was also found liable for damages in a companion case arising from the same incident. The Company considers the attribution of liability to the Company, and the amount of damages awarded, to be unsupported by the facts of these cases and intends to appealvigorously defend them.
We are currently involved, and in the verdicts. The Company has recognized a liability for the expected loss related to these cases, net of recoverable insurance proceeds, of approximately $12 million.
The Company isfuture may be involved, in claims and/or legal proceedings, including class actions, and governmental inquiries related, among other things,that are incidental to itsour vehicle rental and car sharing operations, including, among others, contract and licensee disputes, competition matters, employment matters,and wage-and-hour claims, insurance and liability claims, intellectual property claims, business practice disputes and other regulatory, environmental, commercial and tax matters.
We are a defendant in a number of legal proceedings for personal injury arising from the operation of our vehicles. In June 2023, two of our subsidiaries were named as defendants in a lawsuit filed in Dallas, Texas alleging that one of our employees caused the death of an individual with one of our vehicles: Peggy Dawson Edwards, Individually and as Anticipated Representative of the Estate of Michael Edwards, Sr., et. al. v. Avis Budget Car Rental, LLC; PV Holding Corp.; and Kevin Barnes, Cause No. CC-23-03188-E, pending in County Court at Law No. 5 for Dallas County, Texas. The complaint alleges that our subsidiaries are responsible for Mr. Edwards’ death and seeks compensatory and punitive damages in an unspecified
amount exceeding $1 million. The court has set a trial date in November 2024 for this lawsuit. Given the early stages of the legal proceedings, it is not possible to predict the outcome of the claim. However, the Company intends to vigorously defend it.
Litigation is inherently unpredictable and, although the Company believeswe believe that itsour accruals are adequate and/or that it haswe have valid defenses in these matters, unfavorable resolutions could occur. The Company estimatesWe estimate that the potential exposure resulting from adverse outcomes of current legal proceedings in which it is reasonably possible that a loss may be incurred could, in the aggregate, be up to approximately $50$40 million in excess of amounts accrued as of September 30, 2017; however, the Company doesMarch 31, 2024. We do not believe that the impact should result in a material liability to the Companyus in relation to itsour consolidated financial condition or results of operations.
Commitments to Purchase Vehicles
The Company maintainsWe maintain agreements with vehicle manufacturers under which the Company haswe have agreed to purchase approximately $6.1approximately $4.1 billion of vehicles from manufacturers over the next 12 months, a $2.7 billion decrease compared to December 31, 2023, financed primarily through the issuance of vehicle-backed debt and cash received upon the disposition of vehicles. Certain of these commitments are subject to the vehicle manufacturers’manufacturers satisfying their obligations under their respective repurchase and guaranteed depreciation agreements.
Concentrations
Concentrations of credit risk at September 30, 2017as of March 31, 2024 include (i) risks related to the Company’sour repurchase and guaranteed depreciation agreements with domestic and foreign car manufacturers including Ford, General Motors and Chrysler, and primarily with respect to receivables for program cars that have been disposed but for which the Company haswe have not yet received payment from the manufacturers and (ii) risks related to Realogy and Wyndham, including receivables of $30$38 million and $19$23 million,, respectively, respectively, related to certain contingent, income tax and other corporate liabilities assumed by Realogy and Wyndham in connection with their disposition.
Stockholder Rights Plan
In January 2017, the Company’s Board of Directors authorized the adoption of a short-term stockholder rights plan, with an expiration date in January 2018. Effective May 3, 2017, the Company terminated the rights plan. Pursuant to the rights plan, the Company declared a dividend of one preferred share purchase right for each outstanding share of common stock, payable to holders of record as of the close of business on February 2, 2017. Each right, which was exercisable only in the event any person or group were to acquire a voting or economic position of 10% or more of the Company’s outstanding common stock (with certain limited exceptions), would have entitled any holder other than the person or group whose ownership position had exceeded the ownership limit to purchase common stock having a value equal to twice the $90 exercise price of the right, or, at the election of the Board of Directors, to exchange each right for one share of common stock (subject to adjustment). On May 3, 2017, the Company also entered into a new cooperation agreement with SRS Investment Management LLC and certain of its affiliates.
13. Stockholders' Equity
Share Repurchases
The Company’sOur Board of Directors has authorized the repurchase of up to $1.5to approximately $8.1 billion of itsour common stock under a plan originally approved in 2013 and subsequently expanded, most recently in 2016.February 2023 (the “Stock Repurchase Program”). During the ninethree months ended September 30, 2017, the Company repurchased approximately 4.2 millionMarch 31, 2024 and 2023, we did not repurchase any shares of common stock at a cost of approximately $127 million under the program. During the nine months ended September 30, 2016, the Company repurchased approximately 9.5 million shares of common stock at a cost of approximately $290 million under the program. As of September 30, 2017,March 31, 2024, approximately $174$802 million of authorization remainsremained available to repurchase common stock under this plan.the program.
Common stock repurchases under the Stock Repurchase Program do not include shares withheld to satisfy employees’ income tax liabilities attributable to the vesting of restricted stock unit awards.
Total Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss) and other gains and losses affecting stockholders’ equity that, under GAAP, are excluded from net income.income (loss).
The components of other comprehensive income (loss) were as follows:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2024 | | 2023 |
Net income (loss) | | | | | $ | (113) | | | $ | 312 | |
| Less: net income attributable to non-controlling interests | | | | | 1 | | | — | |
Net income (loss) attributable to Avis Budget Group, Inc. | | | | | (114) | | | 312 | |
Other comprehensive income (loss): | | | | | | | |
| Currency translation adjustments (net of tax of $(5) and $3, respectively) | | | | | (52) | | | (4) | |
| Net unrealized gain (loss) on cash flow hedges (net of tax of $(2) and $2, respectively) | | | | | 7 | | | (7) | |
| Minimum pension liability adjustment (net of tax of $0 in each period) | | | | | 1 | | | 1 | |
| | | | | | (44) | | | (10) | |
Comprehensive income (loss) attributable to Avis Budget Group, Inc. | | | | | $ | (158) | | | $ | 302 | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Net income | $ | 245 |
| | $ | 209 |
| | $ | 141 |
| | $ | 194 |
|
Other comprehensive income (loss): | | | | | | | |
| Currency translation adjustments (net of tax of $9, $3, $29 and $7, respectively) | 32 |
| | 20 |
| | 105 |
| | 100 |
|
| Net unrealized gain (loss) on available-for-sale securities (net of tax of $(1), $0, $(1), $0, respectively) | — |
| | 1 |
| | 1 |
| | 1 |
|
| Net unrealized gain (loss) on cash flow hedges (net of tax of $(1), $(3), $0 and $2, respectively) | 1 |
| | 4 |
| | — |
| | (4 | ) |
| Minimum pension liability adjustment (net of tax of $(1), $0, $(2) and $(1), respectively) | 1 |
| | 1 |
| | 4 |
| | 3 |
|
| | 34 |
| | 26 |
| | 110 |
| | 100 |
|
Comprehensive income | $ | 279 |
| | $ | 235 |
| | $ | 251 |
| | $ | 294 |
|
__________________
Currency translation adjustments exclude income taxes related to indefinite investments in foreign subsidiaries.
Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Currency Translation Adjustments | | Net Unrealized Gains (Losses) on Cash Flow Hedges(a) | | Minimum Pension Liability Adjustment(b) | | Accumulated Other Comprehensive Income (Loss) |
Balance, January 1, 2024 | $ | (3) | | | $ | 37 | | | $ | (130) | | | $ | (96) | |
| Other comprehensive income (loss) before reclassifications | (52) | | | 12 | | | — | | | (40) | |
| Amounts reclassified from accumulated other comprehensive income (loss) | — | | | (5) | | | 1 | | | (4) | |
Net current-period other comprehensive income (loss) | (52) | | | 7 | | | 1 | | | (44) | |
Balance, March 31, 2024 | $ | (55) | | | $ | 44 | | | $ | (129) | | | $ | (140) | |
| | | | | | | | |
Balance, January 1, 2023 | $ | (30) | | | $ | 45 | | | $ | (116) | | | $ | (101) | |
| Other comprehensive income (loss) before reclassifications | (4) | | | (5) | | | — | | | (9) | |
| Amounts reclassified from accumulated other comprehensive income (loss) | — | | | (2) | | | 1 | | | (1) | |
Net current-period other comprehensive income (loss) | (4) | | | (7) | | | 1 | | | (10) | |
Balance, March 31, 2023 | $ | (34) | | | $ | 38 | | | $ | (115) | | | $ | (111) | |
|
| | | | | | | | | | | | | | | | | | | | |
| | Currency Translation Adjustments | | Net Unrealized Gains (Losses) on Cash Flow Hedges(a) | | Net Unrealized Gains (Losses) on Available-for Sale Securities(b) | | Minimum Pension Liability Adjustment(c) | | Accumulated Other Comprehensive Income (Loss) |
Balance, January 1, 2017 | $ | (39 | ) | | $ | 2 |
| | $ | 1 |
| | $ | (118 | ) | | $ | (154 | ) |
| Other comprehensive income (loss) before reclassifications | 105 |
| | (2 | ) | | 1 |
| | — |
| | 104 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | — |
| | 2 |
| | — |
| | 4 |
| | 6 |
|
Net current-period other comprehensive income (loss) | 105 |
| | — |
| | 1 |
| | 4 |
| | 110 |
|
Balance, September 30, 2017 | $ | 66 |
| | $ | 2 |
| | $ | 2 |
| | $ | (114 | ) | | $ | (44 | ) |
| | | | | | | | | | |
Balance, January 1, 2016 | $ | (80 | ) | | $ | (2 | ) | | $ | — |
| | $ | (65 | ) | | $ | (147 | ) |
| Other comprehensive income (loss) before reclassifications | 100 |
| | (7 | ) | | — |
| | — |
| | 93 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | — |
| | 3 |
| | 1 |
| | 3 |
| | 7 |
|
Net current-period other comprehensive income (loss) | 100 |
| | (4 | ) | | 1 |
| | 3 |
| | 100 |
|
Balance, September 30, 2016 | $ | 20 |
| | $ | (6 | ) | | $ | 1 |
| | $ | (62 | ) | | $ | (47 | ) |
__________________
All components of accumulated other comprehensive income (loss) are net of tax, except currency translation adjustments, which exclude income taxes related to indefinite investments in foreign subsidiaries and include a $39$108 million gain, net of tax, as of September 30, 2017March 31, 2024 related to the Company’sour hedge of its netour investment in euro-denominated foreign operations (see Note 14 -16 – Financial Instruments).
| |
(a)
| For the three and nine months ended September 30, 2017, amounts reclassified from accumulated other comprehensive income (loss) into corporate interest expense were $1 million ($1 million, net of tax) and $3 million ($2 million, net of tax), respectively. For the three and nine months ended September 30, 2016, amounts reclassified from accumulated other comprehensive income (loss) into corporate interest expense were $2 million ($1 million, net of tax) and $6 million ($3 million, net of tax), respectively. |
| |
(b)
| For the three and nine months ended September 30, 2016, amounts reclassified from accumulated other comprehensive income (loss) into operating expenses were $1 million ($1 million, net of tax) in each period. |
| |
(c)
| For the three and nine months ended September 30, 2017, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses were $2 million ($1 million, net of tax) and $6 million ($4 million, net of tax), respectively. For the three and nine months ended September 30, 2016, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses were $1 million ($1 million, net of tax) and $4 million ($3 million, net of tax), respectively. |
(a)For the three months ended March 31, 2024 and 2023, the amounts reclassified from accumulated other comprehensive income (loss) into corporate interest expense were gains of $7 million ($5 million, net of tax) and gains of $3 million ($2 million, net of tax), respectively.
(b)For the three months ended March 31, 2024 and 2023, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses were losses of $1 million ($1 million, net of tax), in each period.
21
| |
13. | Stock-Based Compensation |
14. Related Party Transactions
SRS Mobility Ventures, LLC
In 2021, SRS Mobility Ventures, LLC acquired a 33 1/3% Class A Membership Interest in one of our subsidiaries at fair value of $37.5 million. SRS Mobility Ventures, LLC is an affiliate of our largest shareholder, SRS Investment Management, LLC.
On September 1, 2022, through the issuance of Class B Preferred Voting Membership Interests, SRS Mobility Ventures, LLC increased their ownership in this subsidiary to 51% at a fair value of $62 million. As a result, we deconsolidated our former subsidiary, Avis Mobility Ventures LLC (“AMV”), from our financial statements and began to report our proportional share of the former subsidiary’s income or loss within other (income) expense, net in our Consolidated Condensed Statements of Comprehensive Income as we do not have the ability to direct the significant activities of the former subsidiary and are therefore no longer primary beneficiary of the VIE. In August and October 2023, SRS made capital contributions to AMV, increasing their ownership to approximately 65%.
In accordance with ASC Topic 810-10-40, we must deconsolidate a subsidiary as of the date we cease to have a controlling interest in that subsidiary and recognize the gain or loss in net income at that time. The Companyfair value of our retained investment was determined utilizing a discounted cash flow methodology based on various assumptions, including projections of future cash flows, which include forecast of future revenue and EBITDA. Upon deconsolidation, our former subsidiary had a net asset carrying amount of $49 million resulting in a gain of $10 million.
We continue to provide vehicles, related fleet services, and certain administrative services to AMV to support their operations. For the three months ended March 31, 2024 and 2023, we recorded $2 million and $8 million of related income within other (income) expense, net, respectively. For the three months ended March 31, 2024 and 2023, we recorded losses of $3 million and $6 million within other (income) expense, net, related to our equity investment, respectively.
As of March 31, 2024 and December 31, 2023, receivables from AMV related to these services were $10 million and $2 million, respectively, and our net investment in vehicle finance lease with AMV, which is included in vehicles, net, was $36 million and $31 million, respectively. The carrying value of our equity investment in AMV as of March 31, 2024 and December 31, 2023 was approximately $21 million and $24 million, respectively, which is included in other non-current assets.
15. Stock-Based Compensation
We recorded stock-based compensation expense of $1 million and $7 million ($1 and $8 million ($5 millionand $5$6 million, net of tax) during the three months ended September 30, 2017March 31, 2024 and 2016,2023, respectively.
As part of our declaration and $6 millionpayment of a special cash dividend in December 2023, we granted additional restricted stock units (“RSUs”) to our award holders with unvested shares as a dividend equivalent, which has been deferred until, and $21 million ($4 million and $14 million, net of tax) duringwill not be paid unless, the nine months ended September 30, 2017 and 2016, respectively.
The Company uses a Monte Carlo simulation model to calculate the fair valueshares of stock unit awards containing a market condition. Forunderlying the nine months ended September 30, 2017, the Company did not issue any stock unit awards containing a market condition. For the nine months ended September 30, 2016, the Company’s weighted average assumptions for expected stock price volatility, risk-free interest rate, valuation period and dividend yield were 46%, 0.98%, 3 years, and 0.0%, respectively.award vest.
The activity related to the Company’s restricted stock units (“RSUs”)RSUs consisted of (in thousands of shares):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Number of Shares | | Weighted Average Grant Date Fair Value | | Weighted Average Remaining Contractual Term (years) | | Aggregate Intrinsic Value (in millions) |
Time-based RSUs | | | | | | | |
| Outstanding at January 1, 2024 | 290 | | | $ | 161.87 | | | | | |
| | Granted (a) | 120 | | | 113.10 | | | | | |
| | Vested (b) | (90) | | | 125.57 | | | | | |
| | Forfeited | (1) | | | 180.27 | | | | | |
| Outstanding and expected to vest at March 31, 2024 (c) | 319 | | | $ | 153.71 | | | 1.6 | | $ | 39 | |
Performance-based RSUs | | | | | | | |
| Outstanding at January 1, 2024 | 411 | | | $ | 128.77 | | | | | |
| | Granted (a) | 144 | | | 113.10 | | | | | |
| | Vested (b) | (222) | | | 68.54 | | | | | |
| | Forfeited | (1) | | | 154.07 | | | | | |
| Outstanding at March 31, 2024 | 332 | | | $ | 162.12 | | | 2.1 | | $ | 41 | |
| Outstanding and expected to vest at March 31, 2024 (c) | 199 | | | $ | 156.64 | | | 2.1 | | $ | 24 | |
________
(a)Reflects the maximum number of stock units assuming achievement of all performance- and time-vesting criteria and does not include those for non-employee directors. The weighted-average fair value of time-based RSUs and performance-based RSUs granted during the three months ended March 31, 2023 was $208.84.
(b)The total fair value of RSUs vested during the three months ended March 31, 2024 and 2023 was $27 million and $17 million, respectively.
(c)Aggregate unrecognized compensation expense related to time-based RSUs and performance-based RSUs amounted to $57 million and will be recognized over a weighted average vesting period of 1.8 years.
16. Financial Instruments
|
| | | | | | | | | | | | | | |
| | Time-Based RSUs | | Performance-Based and Market-Based RSUs |
| | Number of Shares | | Weighted Average Grant Date Fair Value | | Number of Shares | | Weighted Average Grant Date Fair Value |
Outstanding at January 1, 2017 (a) | 878 |
| | $ | 34.83 |
| | 923 |
| | $ | 34.11 |
|
| Granted | 915 |
| | 35.32 |
| | 572 |
| | 35.21 |
|
| Vested (b) | (470 | ) | | 37.11 |
| | (146 | ) | | 36.55 |
|
| Forfeited/expired | (92 | ) | | 32.53 |
| | (304 | ) | | 38.73 |
|
Outstanding at September 30, 2017 (c) | 1,231 |
| | $ | 34.50 |
| | 1,045 |
| | $ | 33.03 |
|
__________
| |
(a)
| Reflects the maximum number of stock units assuming achievement of all time-, performance- and market-vesting criteria and does not include those for non-employee directors. The weighted-average fair value of time-based RSUs, and performance-based and market-based RSUs granted during the nine months ended September 30, 2016 was $25.92 and $23.33, respectively. |
| |
(b)
| The total grant date fair value of RSUs vested during the nine months ended September 30, 2017 and 2016 was $23 million and $27 million, respectively. |
| |
(c)
| The Company assumes 0.1 million of performance-based and market-based RSUs outstanding awards will vest over time with weighted average grate date fair value of $36.64. The Company’s outstanding time-based RSUs, and performance-based and market-based RSUs expected to vest had aggregate intrinsic values of $47 million and $4 million, respectively. Aggregate unrecognized compensation expense related to time-based RSUs, and performance-based and market-based RSUs amounted to $40 million and will be recognized over a weighted average vesting period of 1.3 years. |
The stock option activity consisted of (in thousands of shares):
|
| | | | | | | | | | | | | |
| | Number of Options | | Weighted Average Exercise Price | | Aggregate Intrinsic Value (in millions) | | Weighted Average Remaining Contractual Term (years) |
Outstanding at January 1, 2017 | 810 |
| | $ | 2.91 |
| | $ | 27 |
| | 2.3 |
| Granted | — |
| | — |
| | — |
| | |
| Exercised | (14 | ) | | 0.79 |
| | — |
| | |
| Forfeited/expired | — |
| | — |
| | — |
| | |
Outstanding and exercisable at September 30, 2017 | 796 |
| | $ | 2.95 |
| | $ | 28 |
| | 1.5 |
Derivative Instruments and Hedging Activities
Currency Risk. The Company usesWe use currency exchange contracts to manage itsour exposure to changes in currency exchange rates associated with certain of itsour non-U.S.-dollar denominated receivables and forecasted royalties, forecasted earnings of non-U.S. subsidiaries and forecasted non-U.S.-dollar denominated acquisitions. The CompanyWe primarily hedgeshedge a portion of itsour current-year currency exposure to the Australian, Canadian and New Zealand dollars, the euro and the British pound sterling. The majority of forward contracts do not qualify for hedge accounting treatment. The fluctuations in the value of these forward contracts do, however, largely offset the impact of changes in the value of the underlying risk they economically hedge. Forward contracts used to hedge forecasted third-party receipts and disbursements up to 12 months are designated and do qualify as cash flow hedges. The Company hasWe have designated itsour euro-denominated notes as a hedge of itsour investment in euro-denominated foreign operations.
The estimated net amount of existing gains or losses reclassified from other comprehensive income (loss) to earnings resulting from ineffectiveness or from excluding a component of the hedges’ gain or loss from the effectiveness calculation for cash flow and net investment hedges during the three and nine months ended September 30, 2017 and 2016 was not material, nor is the amount of gains or losses the Company expectswe expect to reclassify from accumulated other comprehensive income (loss) to earnings for cash flow and net investment hedges over the next 12 months.months is not material.
Interest Rate Risk. The Company usesWe use various hedging strategies including interest rate swaps and interest rate caps to create what it deemswe deem an appropriate mix of fixed and floating rate assets and liabilities. The
Company usesWe use interest rate swaps and interest rate caps to manage the risk related to itsour floating rate corporate debt and itsour floating rate vehicle-backed debt. The Company recordsWe record the effective portion of changes in the fair value of itsour cash flow hedges to other comprehensive income (loss), net of tax, and subsequently reclassifiesreclassify these amounts into earnings in the period during which the hedged transaction affects earnings and is recognized. The Company recordspresented in the same income statement line item as the earnings effect of the hedged item. We record the gains or losses related to freestanding derivatives, which are not designated as a hedge for accounting purposes, currently in its consolidated resultsearnings and are presented in the same line of operations. The changes in fair values of hedgesthe income statement expected for the hedged item. We estimate that are determined to be ineffective are immediately reclassified from accumulated other comprehensive income (loss) into earnings. The amount of gains or losses reclassified from other comprehensive income (loss) to earnings resulting from ineffectiveness related to the Company’s cash flow hedges was not material during the three and nine months ended September 30, 2017 and 2016. The Company estimates that $2approximately $26 million of losses currentlygain currently recorded in accumulated other comprehensive income (loss) will be recognized in earnings over the next 12 months.
The Company entersCommodity Risk. We periodically enter into derivative commodity contracts to manage itsour exposure in the U.S. to changeschanges in the price of unleaded gasoline. Changesfuel. These instruments were designated as freestanding derivatives and the changes in fair value are recorded in earnings and are presented in the fair valuesame line of these derivatives are recorded within operating expenses.the income statement expected for the hedged item.
The Company We held derivative instruments with absolute notional values as follows:
|
| | | |
| As of September 30, 2017 |
Interest rate caps (a) | $ | 11,035 |
|
Interest rate swaps | 1,100 |
|
Foreign exchange contracts | 887 |
|
| |
Commodity contracts (millions of gallons of unleaded gasoline) | 4 |
|
__________
| | | | | |
| As of March 31, 2024 |
(a) Foreign exchange contracts | Represents $8.0 billion of interest$ | 2,062 | |
Interest rate caps sold, partially offset by approximately $3.0 billion of interest(a) | 15,835 | |
Interest rate caps purchased. These amounts exclude $5.0 billion of interest rate caps purchased by the Company’s Avis Budget Rental Car Funding subsidiary as it is not consolidated by the Company.swaps | 750 | |
| |
| |
________
(a)Represents $10.6 billion of interest rate caps sold, partially offset by approximately $5.3 billion of interest rate caps purchased. These amounts exclude $5.9 billion of interest rate caps purchased by our Avis Budget Rental Car Funding subsidiary as it is not consolidated by us.
Estimated fair values (Level 2) of derivative instruments wereare as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of March 31, 2024 | | As of December 31, 2023 |
| | Fair Value, Asset Derivatives | | Fair Value, Derivative Liabilities | | Fair Value, Derivative Assets | | Fair Value, Derivative Liabilities |
Derivatives designated as hedging instruments | | | | | | | |
| Interest rate swaps (a) | $ | 59 | | | $ | — | | | $ | 50 | | | $ | — | |
| | | | | | | | |
Derivatives not designated as hedging instruments | | | | | | | |
| Foreign exchange contracts (b) | 4 | | | 6 | | | 5 | | | 4 | |
| Interest rate caps (c) | 7 | | | 48 | | | 19 | | | 74 | |
| | | | | | | | |
| Total | $ | 70 | | | $ | 54 | | | $ | 74 | | | $ | 78 | |
|
| | | | | | | | | | | | | | | | |
| | As of September 30, 2017 | | As of December 31, 2016 |
| | Fair Value, Asset Derivatives | | Fair Value, Liability Derivatives | | Fair Value, Asset Derivatives | | Fair Value, Liability Derivatives |
Derivatives designated as hedging instruments | | | | | | | |
| Interest rate swaps (a) | $ | 4 |
| | $ | 2 |
| | $ | 7 |
| | $ | 4 |
|
| | | | | | | | |
Derivatives not designated as hedging instruments | | | | | | | |
| Interest rate caps (b) | — |
| | 1 |
| | 1 |
| | 7 |
|
| Foreign exchange contracts (c) | 7 |
| | 10 |
| | 7 |
| | 2 |
|
| Total | $ | 11 |
| | $ | 13 |
| | $ | 15 |
| | $ | 13 |
|
__________________
Amounts in this table exclude derivatives issued by Avis Budget Rental Car Funding;Funding, as it is not consolidated by us; however, certain amounts related to the derivativesderivatives held by Avis Budget Rental Car Funding are included within accumulated other comprehensive income (loss).
| |
(a)
| Included in other non-current assets or other non-current liabilities. |
| |
(b)
| Included in assets under vehicle programs or liabilities under vehicle programs. |
| |
(c)
| Included in other current assets or other current liabilities. |
, as discussed in Note 13 – Stockholders' Equity.
(a)Included in other non-current assets or other non-current liabilities.
(b)Included in other current assets or other current liabilities.
(c)Included in assets under vehicle programs or liabilities under vehicle programs.
The effects of derivatives recognized in the Company’sour Consolidated Condensed Financial Statements wereare as follows:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2024 | | 2023 |
Derivatives designated as hedging instruments (a) | | | | | | | |
| Interest rate swaps (b) | | | | | $ | 7 | | | $ | (7) | |
| Euro-denominated notes (c) | | | | | 15 | | | (9) | |
Derivatives not designated as hedging instruments (d) | | | | | | | |
| Foreign exchange contracts (e) | | | | | (13) | | | (7) | |
| | | | | | | | |
| | | | | | | | |
| Total | | | | | $ | 9 | | | $ | (23) | |
________
(a)Recognized, net of tax, as a component of accumulated other comprehensive income (loss) within stockholders’ equity.
(b)Classified as a net unrealized gain (loss) on cash flow hedges in accumulated other comprehensive income (loss). Refer to Note 13 – Stockholders' Equity for amounts reclassified from accumulated other comprehensive income (loss) into earnings.
(c)Classified as a net investment hedge within currency translation adjustment in accumulated other comprehensive income (loss).
(d)Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures being hedged.
(e)Included in interest expense.
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 |
| 2016 |
| 2017 |
| 2016 |
Derivatives designated as hedging instruments (a) | | | | | | | |
| Interest rate swaps | $ | 1 |
| | $ | 4 |
| | $ | — |
| | $ | (4 | ) |
| Euro-denominated notes | (13 | ) | | (3 | ) | | (44 | ) | | (11 | ) |
Derivatives not designated as hedging instruments (b) | | | | | | | |
| Interest rate caps (c) | (1 | ) | | — |
| | (1 | ) | | (1 | ) |
| Foreign exchange contracts (d) | (11 | ) | | 5 |
| | (44 | ) | | 17 |
|
| Commodity contracts (e) | 1 |
| | — |
| | (1 | ) | | — |
|
| Total | $ | (23 | ) | | $ | 6 |
| | $ | (90 | ) | | $ | 1 |
|
__________
| |
(a)
| Recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity. |
| |
(b)
| Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures being hedged. |
| |
(c)
| For the three and nine months ended September 30, 2016 and 2017, included in vehicle interest, net. |
| |
(d)
| For the three months ended September 30, 2017, included a $7 million loss in interest expense and a $4 million loss in operating expense and for the nine months ended September 30, 2017, included a $25 million loss in interest expense and a $19 million loss in operating expense. For the three months ended September 30, 2016, included a $8 million gain in interest expense and a $3 million loss in operating expense and for the nine months ended September 30, 2016, included a $43 million gain in interest expense and a $26 million loss in operating expense. |
| |
(e)
| Included in operating expense. |
Debt Instruments
The carrying amounts and estimated fair values (Level 2) of debt instruments wereare as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of March 31, 2024 | | As of December 31, 2023 |
| | Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value |
Corporate debt | | | | | | | |
| Short-term debt and current portion of long-term debt | $ | 405 | | | $ | 406 | | | $ | 32 | | | $ | 32 | |
| Long-term debt | 5,032 | | | 5,021 | | | 4,791 | | | 4,812 | |
| | | | | | | | |
Debt under vehicle programs | | | | | | | |
| Vehicle-backed debt due to Avis Budget Rental Car Funding | $ | 15,949 | | | $ | 15,817 | | | $ | 15,441 | | | $ | 15,238 | |
| Vehicle-backed debt | 3,193 | | | 3,215 | | | 3,422 | | | 3,435 | |
| Interest rate swaps and interest rate caps (a) | 48 | | | 48 | | | 74 | | | 74 | |
________
(a) Derivatives in a liability position.
17. Segment Information
|
| | | | | | | | | | | | | | | | |
| | As of September 30, 2017 | | As of December 31, 2016 |
| | Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value |
Corporate debt | | | | | | | |
| Short-term debt and current portion of long-term debt | $ | 26 |
| | $ | 26 |
| | $ | 279 |
| | $ | 280 |
|
| Long-term debt | 3,565 |
| | 3,667 |
| | 3,244 |
| | 3,265 |
|
| | | | | | | | |
Debt under vehicle programs | | | | | | | |
| Vehicle-backed debt due to Avis Budget Rental Car Funding | $ | 6,785 |
| | $ | 6,834 |
| | $ | 6,695 |
| | $ | 6,722 |
|
| Vehicle-backed debt | 3,780 |
| | 3,786 |
| | 2,176 |
| | 2,187 |
|
| Interest rate swaps and interest rate caps (a) | 1 |
| | 1 |
| | 7 |
| | 7 |
|
__________
| |
(a)
| Derivatives in a liability position. |
The Company’sOur chief operating decision-maker assesses performance and allocates resources based upon the separate financial information from each of the Company’sour operating segments. In identifying itsour reportable segments, the Company consideredwe also consider the nature of services provided by our operating segments, the geographical areas in which the segments operatedoperate and other relevant factors. The Company aggregatesWe aggregate certain of itsour operating segments into itsour reportable segments.
Management evaluates the operating results of each of itsour reportable segments based upon revenuerevenues and “Adjusted EBITDA,” which the Company defineswe define as income (loss) from continuing operations before non-vehicle related depreciation and amortization,amortization; any impairment charges,charges; restructuring and other related charges,charges; early extinguishment of debt costs,costs; non-vehicle related interest,interest; transaction-related costs, net charges for
unprecedented personal-injurynet; legal matters, which includes amounts recorded in excess of $5 million related to class action lawsuits and personal injury matters; non-operational charges related to shareholder activist activity, which includes third-party advisory, legal and other professional fees; COVID-19 charges, net; cloud computing costs; other (income) expense, net; and income taxes. Net charges for unprecedented personal-injury legal matters are recorded within operating expenses in the Company’s Consolidated Condensed Statement of Comprehensive Income. The Company has revised its definition of
We believe Adjusted EBITDA is useful as a supplemental measure in evaluating the performance of our operating businesses and in comparing our results from period to exclude costs associated with the separation of certain officers of the Company and its limited voluntary opportunity plan, which offers certain employees the limited opportunity to elect resignation from employment for enhanced severance benefits. Costs associated with the separation of certain officers and the limited voluntary opportunity plan are recorded as part of restructuring and other related charges in the Company’s Consolidated Condensed Statement of Comprehensive Income. The Company did not revise prior year’speriod. We also believe that Adjusted EBITDA amountsis useful to investors because there were no costs similar in natureit allows them to these costs. The Company’sassess our results of operations and financial condition on the same basis that management uses internally. Our presentation of Adjusted EBITDA may not be comparable to similarly-titledsimilarly titled measures used by other companies.
|
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended September 30, |
| | | | 2017 | | 2016 |
| | | | Revenues |
| Adjusted EBITDA |
| Revenues |
| Adjusted EBITDA |
Americas | $ | 1,839 |
| | $ | 303 |
| | $ | 1,821 |
| | $ | 306 |
|
International | 913 |
| | 194 |
| | 835 |
| | 179 |
|
Corporate and Other (a) | — |
| | (15 | ) | | — |
| | (16 | ) |
| Total Company | $ | 2,752 |
| | $ | 482 |
| | $ | 2,656 |
| | $ | 469 |
|
| | | | | | | | | | |
Reconciliation of Adjusted EBITDA to income before income taxes | | | | |
| | | 2017 | | | | 2016 |
Adjusted EBITDA | | | $ | 482 |
| | | | $ | 469 |
|
Less: | Non-vehicle related depreciation and amortization | | 66 |
| | | | 63 |
|
| | Interest expense related to corporate debt, net | | 45 |
| | | | 51 |
|
| | Restructuring and other related charges | | 7 |
| | | | 6 |
|
| | Transaction-related costs, net | | | — |
| | | | 4 |
|
Income before income taxes | | | $ | 364 |
| | | | $ | 345 |
|
__________
| |
(a)
| Includes unallocated corporate overhead which is not attributable to a particular segment. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | 2024 | | 2023 |
| | | | Revenues | | Adjusted EBITDA | | Revenues | | Adjusted EBITDA |
Americas | $ | 1,993 | | | $ | 44 | | | $ | 2,016 | | | $ | 516 | |
International | 558 | | | (15) | | | 541 | | | 50 | |
Corporate and Other (a) | — | | | (17) | | | — | | | (31) | |
| Total Company | $ | 2,551 | | | $ | 12 | | | $ | 2,557 | | | $ | 535 | |
| | | | | | | | | | |
Reconciliation of Adjusted EBITDA to income (loss) before income taxes: |
| | | 2024 | | | | 2023 |
Adjusted EBITDA | | | $ | 12 | | | | | $ | 535 | |
Less: | Non-vehicle related depreciation and amortization | | 61 | | | | | 56 | |
| | | | | | | | |
| | Interest expense related to corporate debt, net | | 83 | | | | | 73 | |
| | | | | | | | |
| | Restructuring and other related charges | | 3 | | | | | 4 | |
| | Transaction-related costs, net | | 1 | | | | | — | |
| | Other (income) expense, net (b) | | 1 | | | | | (2) | |
| | Reported within operating expenses: | | | | | | |
| | Cloud computing costs | | 10 | | | | | 7 | |
| | | | | | | | |
| | Legal matters, net | | (5) | | | | | — | |
| | | | | | | | | | |
| | | | | | | | | | |
Income (loss) before income taxes | | | $ | (142) | | | | | $ | 397 | |
|
| | | | | | | | | | | | | | | | | | |
| | | | Nine Months Ended September 30, |
| | | | 2017 | | 2016 |
| | | | Revenues | | Adjusted EBITDA | | Revenues | | Adjusted EBITDA |
Americas | $ | 4,718 |
| | $ | 379 |
| | $ | 4,778 |
| | $ | 532 |
|
International | 2,111 |
| | 260 |
| | 2,002 |
| | 237 |
|
Corporate and Other (a) | — |
| | (44 | ) | | — |
| | (52 | ) |
| Total Company | $ | 6,829 |
| | $ | 595 |
| | $ | 6,780 |
| | $ | 717 |
|
| | | | | | | | | | |
Reconciliation of Adjusted EBITDA to income before income taxes | | | | |
| | | 2017 | | | | 2016 |
Adjusted EBITDA | | | $ | 595 |
| | | | $ | 717 |
|
Less: | Non-vehicle related depreciation and amortization | | 194 |
| | | | 189 |
|
| | Interest expense related to corporate debt, net | | 142 |
| | | | 157 |
|
| | Early extinguishment of corporate debt | | 3 |
| | | | 10 |
|
| | Restructuring and other related charges | | 52 |
| | | | 26 |
|
| | Transaction-related costs, net | | | 8 |
| | | | 13 |
|
| | Charges for legal matter, net (b) | | | (14 | ) | | | | — |
|
Income before income taxes | | | $ | 210 |
| | | | $ | 322 |
|
(a)Includes unallocated corporate overhead which is not attributable to a particular segment.__________(b)Primarily consists of gains or losses related to our equity investment in a former subsidiary, offset by fleet related and certain administrative services provided to the same former subsidiary.
| |
(a)
| Includes unallocated corporate overhead which is not attributable to a particular segment. |
| |
(b)
| Reported within operating expenses in our Consolidated Condensed Statements of Comprehensive Income. |
Since December 31, 2016,2023, there have been no significant changes in segment assets other than the Company’s International segment assets. As of September 30, 2017 and December 31, 2016, International segment assets exclusive of assets under vehicle programs were approximately $2.6 billionprograms. As of March 31, 2024 and $2.0 billion,
respectively, and InternationalDecember 31, 2023, Americas’ segment assets under vehicle programs were approximately $3.5$20.2 billion and $2.4$19.3 billion, respectively, duerespectively. This increase in assets under vehicle programs is directly correlated to seasonality.the increase in the size and cost of our vehicle fleet.
| |
16. | Guarantor and Non-Guarantor Consolidating Condensed Financial Statements |
The following consolidating financial information presents Consolidating Condensed Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016, Consolidating Condensed Balance Sheets as of September 30, 2017 and December 31, 2016, and Consolidating Condensed Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 for: (i) 18. Subsequent Events
In April 2024, our Avis Budget Group, Inc. (the “Parent”); (ii) ABCRRental Car Funding (AESOP) LLC subsidiary amended and Avis Budget Finance, Inc. (the “Subsidiary Issuers”); (iii) the guarantor subsidiaries; (iv) the non-guarantor subsidiaries; (v) elimination entries necessaryrestated its asset-backed variable-funding financing facilities to consolidate the Parent with the Subsidiary Issuers, and the guarantor and non-guarantor subsidiaries; and (vi) the Company on a consolidated basis. The Subsidiary Issuers and the guarantor and non-guarantor subsidiaries are 100% owned by the Parent, either directly or indirectly. All guarantees are full and unconditional and joint and several. This financial information is being presented in relation to the Company’s guaranteeextend its maturity through April 2025.
In April 2024, we redeemed all of the payment of principal, premium (if any) and interest on the notes issued by the Subsidiary Issuers. See Note 9 - Long-term Debt and Borrowing Arrangements for additional description of these guaranteed notes. Theour 4.750% euro-denominated Senior Notes are guaranteed by the Parent and certain subsidiaries.due January 2026 with an aggregate outstanding balance of €350 million plus accrued interest.
Investments in subsidiaries are accounted for using the equity method of accounting for purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. For purposes of the accompanying Consolidating Condensed Statements of Comprehensive Income, certain expenses incurred by the Subsidiary Issuers are allocated to the guarantor and non-guarantor subsidiaries.
Consolidating Condensed Statements of Comprehensive Income
Three Months Ended September 30, 2017
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Parent | | Subsidiary Issuers | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Total |
Revenues | | | | | | | | | | | |
| Vehicle rental | $ | — |
| | $ | — |
| | $ | 1,228 |
| | $ | 721 |
| | $ | — |
| | $ | 1,949 |
|
| Other | — |
| | — |
| | 341 |
| | 1,073 |
| | (611 | ) | | 803 |
|
Net revenues | — |
| | — |
| | 1,569 |
| | 1,794 |
| | (611 | ) | | 2,752 |
|
| | | | | | | | | | | | | |
Expenses | | | | | | | | | | | |
| Operating | — |
| | 5 |
| | 710 |
| | 541 |
| | — |
| | 1,256 |
|
| Vehicle depreciation and lease charges, net | — |
| | — |
| | 568 |
| | 605 |
| | (557 | ) | | 616 |
|
| Selling, general and administrative | 9 |
| | 2 |
| | 174 |
| | 135 |
| | — |
| | 320 |
|
| Vehicle interest, net | — |
| | — |
| | 53 |
| | 79 |
| | (54 | ) | | 78 |
|
| Non-vehicle related depreciation and amortization | — |
| | — |
| | 41 |
| | 25 |
| | — |
| | 66 |
|
| Interest expense related to corporate debt, net: | | | | | | | | | | | |
| | Interest expense | — |
| | 38 |
| | 2 |
| | 5 |
| | — |
| | 45 |
|
| | Intercompany interest expense (income) | (3 | ) | | 25 |
| | 6 |
| | (28 | ) | | — |
| | — |
|
| Restructuring and other related charges | — |
| | 5 |
| | (2 | ) | | 4 |
| | — |
| | 7 |
|
Total expenses | 6 |
| | 75 |
| | 1,552 |
| | 1,366 |
| | (611 | ) | | 2,388 |
|
Income (loss) before income taxes and equity in earnings of subsidiaries | (6 | ) | | (75 | ) | | 17 |
| | 428 |
| | — |
| | 364 |
|
Provision for (benefit from) income taxes | (6 | ) | | (30 | ) | | 87 |
| | 68 |
| | — |
| | 119 |
|
Equity in earnings of subsidiaries | 245 |
| | 290 |
| | 360 |
| | — |
| | (895 | ) | | — |
|
Net income | $ | 245 |
| | $ | 245 |
| | $ | 290 |
| | $ | 360 |
| | $ | (895 | ) | | $ | 245 |
|
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Comprehensive income | $ | 279 |
| | $ | 278 |
| | $ | 323 |
| | $ | 392 |
| | $ | (993 | ) | | $ | 279 |
|
Nine Months Ended September 30, 2017
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Parent | | Subsidiary Issuers | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Total |
Revenues | | | | | | | | | | | |
| Vehicle rental | $ | — |
| | $ | — |
| | $ | 3,169 |
| | $ | 1,629 |
| | $ | — |
| | $ | 4,798 |
|
| Other | — |
| | — |
| | 924 |
| | 2,966 |
| | (1,859 | ) | | 2,031 |
|
Net revenues | — |
| | — |
| | 4,093 |
| | 4,595 |
| | (1,859 | ) | | 6,829 |
|
| | | | | | | | | | | | | |
Expenses | | | | | | | | | | | |
| Operating | 2 |
| | 18 |
| | 1,994 |
| | 1,399 |
| | — |
| | 3,413 |
|
| Vehicle depreciation and lease charges, net | — |
| | — |
| | 1,728 |
| | 1,690 |
| | (1,701 | ) | | 1,717 |
|
| Selling, general and administrative | 29 |
| | 6 |
| | 485 |
| | 355 |
| | — |
| | 875 |
|
| Vehicle interest, net | — |
| | — |
| | 150 |
| | 223 |
| | (158 | ) | | 215 |
|
| Non-vehicle related depreciation and amortization | — |
| | 1 |
| | 121 |
| | 72 |
| | — |
| | 194 |
|
| Interest expense related to corporate debt, net: | | | | | | | | | | | |
| | Interest expense | — |
| | 118 |
| | 3 |
| | 21 |
| | — |
| | 142 |
|
| | Intercompany interest expense (income) | (9 | ) | | 80 |
| | 17 |
| | (88 | ) | | — |
| | — |
|
| | Early extinguishment of debt | — |
| | 4 |
| | — |
| | (1 | ) | | — |
| | 3 |
|
| Restructuring and other related charges | — |
| | 7 |
| | 37 |
| | 8 |
| | — |
| | 52 |
|
| Transaction-related costs, net | — |
| | — |
| | — |
| | 8 |
| | — |
| | 8 |
|
Total expenses | 22 |
| | 234 |
| | 4,535 |
| | 3,687 |
| | (1,859 | ) | | 6,619 |
|
Income (loss) before income taxes and equity in earnings of subsidiaries | (22 | ) | | (234 | ) | | (442 | ) | | 908 |
| | — |
| | 210 |
|
Provision for (benefit from) income taxes | (10 | ) | | (92 | ) | | 59 |
| | 112 |
| | — |
| | 69 |
|
Equity in earnings of subsidiaries | 153 |
| | 295 |
| | 796 |
| | — |
| | (1,244 | ) | | — |
|
Net income | $ | 141 |
| | $ | 153 |
| | $ | 295 |
| | $ | 796 |
| | $ | (1,244 | ) | | $ | 141 |
|
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Comprehensive income | $ | 251 |
| | $ | 262 |
| | $ | 405 |
| | $ | 904 |
| | $ | (1,571 | ) | | $ | 251 |
|
Three Months Ended September 30, 2016
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Parent | | Subsidiary Issuers | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Total |
Revenues | | | | | | | | | | | |
| Vehicle rental | $ | — |
| | $ | — |
| | $ | 1,216 |
| | $ | 655 |
| | $ | — |
| | $ | 1,871 |
|
| Other | — |
| | — |
| | 344 |
| | 1,021 |
| | (580 | ) | | 785 |
|
Net revenues | — |
| | — |
| | 1,560 |
| | 1,676 |
| | (580 | ) | | 2,656 |
|
| | | | | | | | | | | | | |
Expenses | | | | | | | | | | | |
| Operating | 1 |
| | 3 |
| | 719 |
| | 496 |
| | — |
| | 1,219 |
|
| Vehicle depreciation and lease charges, net | — |
| | — |
| | 525 |
| | 575 |
| | (524 | ) | | 576 |
|
| Selling, general and administrative | 10 |
| | 4 |
| | 173 |
| | 128 |
| | — |
| | 315 |
|
| Vehicle interest, net | — |
| | — |
| | 55 |
| | 78 |
| | (56 | ) | | 77 |
|
| Non-vehicle related depreciation and amortization | — |
| | — |
| | 38 |
| | 25 |
| | — |
| | 63 |
|
| Interest expense related to corporate debt, net: | | | | | | | | | | | |
| | Interest expense | — |
| | 41 |
| | 1 |
| | 9 |
| | — |
| | 51 |
|
| | Intercompany interest expense (income) | (3 | ) | | (3 | ) | | 6 |
| | — |
| | — |
| | — |
|
| Restructuring and other related charges | — |
| | — |
| | 1 |
| | 5 |
| | — |
| | 6 |
|
| Transaction-related costs, net | — |
| | — |
| | — |
| | 4 |
| | — |
| | 4 |
|
Total expenses | 8 |
| | 45 |
| | 1,518 |
| | 1,320 |
| | (580 | ) | | 2,311 |
|
Income (loss) before income taxes and equity in earnings of subsidiaries | (8 | ) | | (45 | ) | | 42 |
| | 356 |
| | — |
| | 345 |
|
Provision for (benefit from) income taxes | (3 | ) | | (18 | ) | | 87 |
| | 70 |
| | — |
| | 136 |
|
Equity in earnings of subsidiaries | 214 |
| | 241 |
| | 286 |
| | — |
| | (741 | ) | | — |
|
Net income | $ | 209 |
| | $ | 214 |
| | $ | 241 |
| | $ | 286 |
| | $ | (741 | ) | | $ | 209 |
|
| | | | | | | | | | | | | |
Comprehensive income | $ | 235 |
| | $ | 239 |
| | $ | 262 |
| | $ | 307 |
| | $ | (808 | ) | | $ | 235 |
|
Nine Months Ended September 30, 2016
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Parent | | Subsidiary Issuers | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Total |
Revenues | | | | | | | | | | | |
| Vehicle rental | $ | — |
| | $ | — |
| | $ | 3,229 |
| | $ | 1,543 |
| | $ | — |
| | $ | 4,772 |
|
| Other | — |
| | — |
| | 931 |
| | 2,746 |
| | (1,669 | ) | | 2,008 |
|
Net revenues | — |
| | — |
| | 4,160 |
| | 4,289 |
| | (1,669 | ) | | 6,780 |
|
| | | | | | | | | | | | | |
Expenses | | | | | | | | | | | |
| Operating | 3 |
| | 14 |
| | 2,013 |
| | 1,351 |
| | — |
| | 3,381 |
|
| Vehicle depreciation and lease charges, net | — |
| | — |
| | 1,514 |
| | 1,571 |
| | (1,514 | ) | | 1,571 |
|
| Selling, general and administrative | 29 |
| | 14 |
| | 492 |
| | 361 |
| | — |
| | 896 |
|
| Vehicle interest, net | — |
| | — |
| | 149 |
| | 221 |
| | (155 | ) | | 215 |
|
| Non-vehicle related depreciation and amortization | — |
| | 1 |
| | 115 |
| | 73 |
| | — |
| | 189 |
|
| Interest expense related to corporate debt, net: | | | | | | | | | | | |
| | Interest expense | — |
| | 122 |
| | 3 |
| | 32 |
| | — |
| | 157 |
|
| | Intercompany interest expense (income) | (9 | ) | | (8 | ) | | 17 |
| | — |
| | — |
| | — |
|
| | Early extinguishment of debt | — |
| | 10 |
| | — |
| | — |
| | — |
| | 10 |
|
| Restructuring and other related charges | — |
| | — |
| | 8 |
| | 18 |
| | — |
| | 26 |
|
| Transaction-related costs, net | — |
| | 1 |
| | 1 |
| | 11 |
| | — |
| | 13 |
|
Total expenses | 23 |
| | 154 |
| | 4,312 |
| | 3,638 |
| | (1,669 | ) | | 6,458 |
|
Income (loss) before income taxes and equity in earnings of subsidiaries | (23 | ) | | (154 | ) | | (152 | ) | | 651 |
| | — |
| | 322 |
|
Provision for (benefit from) income taxes | (9 | ) | | (61 | ) | | 119 |
| | 79 |
| | — |
| | 128 |
|
Equity in earnings of subsidiaries | 208 |
| | 301 |
| | 572 |
| | — |
| | (1,081 | ) | | — |
|
Net income | $ | 194 |
| | $ | 208 |
| | $ | 301 |
| | $ | 572 |
| | $ | (1,081 | ) | | $ | 194 |
|
| | | | | | | | | | | | | |
Comprehensive income | $ | 294 |
| | $ | 307 |
| | $ | 403 |
| | $ | 672 |
| | $ | (1,382 | ) | | $ | 294 |
|
Consolidating Condensed Balance Sheets
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Parent | | Subsidiary Issuers | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Total |
Assets | | | | | | | | | | | |
Current assets: | | | | | | | | | | | |
| Cash and cash equivalents | $ | 3 |
| | $ | 17 |
| | $ | — |
| | $ | 794 |
| | $ | — |
| | $ | 814 |
|
| Receivables, net | — |
| | — |
| | 248 |
| | 607 |
| | — |
| | 855 |
|
| Other current assets | 2 |
| | 87 |
| | 116 |
| | 545 |
| | — |
| | 750 |
|
Total current assets | 5 |
| | 104 |
| | 364 |
| | 1,946 |
| | — |
| | 2,419 |
|
| | | | | | | | | | | | | |
Property and equipment, net | — |
| | 164 |
| | 321 |
| | 208 |
| | — |
| | 693 |
|
Deferred income taxes | 19 |
| | 1,248 |
| | 272 |
| | 27 |
| | — |
| | 1,566 |
|
Goodwill | — |
| | — |
| | 489 |
| | 576 |
| | — |
| | 1,065 |
|
Other intangibles, net | — |
| | 27 |
| | 486 |
| | 350 |
| | — |
| | 863 |
|
Other non-current assets | 58 |
| | 24 |
| | 18 |
| | 82 |
| | — |
| | 182 |
|
Intercompany receivables | 181 |
| | 376 |
| | 1,552 |
| | 903 |
| | (3,012 | ) | | — |
|
Investment in subsidiaries | 203 |
| | 4,126 |
| | 4,064 |
| | — |
| | (8,393 | ) | | — |
|
Total assets exclusive of assets under vehicle programs | 466 |
| | 6,069 |
| | 7,566 |
| | 4,092 |
| | (11,405 | ) | | 6,788 |
|
| | | | | | | | | | | | | |
Assets under vehicle programs: | | | | | | | | | | | |
| Program cash | — |
| | — |
| | — |
| | 180 |
| | — |
| | 180 |
|
| Vehicles, net | — |
| | 22 |
| | 64 |
| | 11,715 |
| | — |
| | 11,801 |
|
| Receivables from vehicle manufacturers and other | — |
| | 1 |
| | 1 |
| | 707 |
| | — |
| | 709 |
|
| Investment in Avis Budget Rental Car Funding (AESOP) LLC-related party | — |
| | — |
| | — |
| | 395 |
| | — |
| | 395 |
|
| | | — |
| | 23 |
| | 65 |
| | 12,997 |
| | — |
| | 13,085 |
|
Total assets | $ | 466 |
| | $ | 6,092 |
| | $ | 7,631 |
| | $ | 17,089 |
| | $ | (11,405 | ) | | $ | 19,873 |
|
| | | | | | | | | | | | | |
Liabilities and stockholders’ equity | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | |
| Accounts payable and other current liabilities | $ | 13 |
| | $ | 236 |
| | $ | 587 |
| | $ | 1,030 |
| | $ | — |
| | $ | 1,866 |
|
| Short-term debt and current portion of long-term debt | — |
| | 17 |
| | 3 |
| | 6 |
| | — |
| | 26 |
|
Total current liabilities | 13 |
| | 253 |
| | 590 |
| | 1,036 |
| | — |
| | 1,892 |
|
| | | | | | | | | | | | | |
Long-term debt | — |
| | 2,911 |
| | 4 |
| | 650 |
| | — |
| | 3,565 |
|
Other non-current liabilities | 52 |
| | 84 |
| | 227 |
| | 397 |
| | — |
| | 760 |
|
Intercompany payables | — |
| | 2,634 |
| | 376 |
| | 2 |
| | (3,012 | ) | | — |
|
Total liabilities exclusive of liabilities under vehicle programs | 65 |
| | 5,882 |
| | 1,197 |
| | 2,085 |
| | (3,012 | ) | | 6,217 |
|
| | | | | | | | | | | | | |
Liabilities under vehicle programs: | | | | | | | | | | | |
| Debt | — |
| | 7 |
| | 60 |
| | 3,714 |
| | — |
| | 3,781 |
|
| Due to Avis Budget Rental Car Funding (AESOP) LLC-related party | — |
| | — |
| | — |
| | 6,785 |
| | — |
| | 6,785 |
|
Deferred income taxes | — |
| | — |
| | 2,247 |
| | 177 |
| | — |
| | 2,424 |
|
Other | — |
| | — |
| | 1 |
| | 264 |
| | — |
| | 265 |
|
| | | — |
| | 7 |
| | 2,308 |
| | 10,940 |
| | — |
| | 13,255 |
|
Total stockholders’ equity | 401 |
| | 203 |
| | 4,126 |
| | 4,064 |
| | (8,393 | ) | | 401 |
|
Total liabilities and stockholders’ equity | $ | 466 |
| | $ | 6,092 |
| | $ | 7,631 |
| | $ | 17,089 |
| | $ | (11,405 | ) | | $ | 19,873 |
|
As of December 31, 2016
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Parent | | Subsidiary Issuers | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Total |
Assets | | | | | | | | | | | |
Current assets: | | | | | | | | | | | |
| Cash and cash equivalents | $ | 3 |
| | $ | 12 |
| | $ | — |
| | $ | 475 |
| | $ | — |
| | $ | 490 |
|
| Receivables, net | — |
| | — |
| | 231 |
| | 577 |
| | — |
| | 808 |
|
| Other current assets | 2 |
| | 101 |
| | 90 |
| | 326 |
| | — |
| | 519 |
|
Total current assets | 5 |
| | 113 |
| | 321 |
| | 1,378 |
| | — |
| | 1,817 |
|
| | | | | | | | | | | | | |
Property and equipment, net | — |
| | 148 |
| | 341 |
| | 196 |
| | — |
| | 685 |
|
Deferred income taxes | 20 |
| | 1,219 |
| | 268 |
| | — |
| | (14 | ) | | 1,493 |
|
Goodwill | — |
| | — |
| | 489 |
| | 518 |
| | — |
| | 1,007 |
|
Other intangibles, net | — |
| | 28 |
| | 502 |
| | 340 |
| | — |
| | 870 |
|
Other non-current assets | 75 |
| | 24 |
| | 16 |
| | 78 |
| | — |
| | 193 |
|
Intercompany receivables | 171 |
| | 359 |
| | 1,466 |
| | 670 |
| | (2,666 | ) | | — |
|
Investment in subsidiaries | 42 |
| | 3,717 |
| | 3,698 |
| | — |
| | (7,457 | ) | | — |
|
Total assets exclusive of assets under vehicle programs | 313 |
| | 5,608 |
| | 7,101 |
| | 3,180 |
| | (10,137 | ) | | 6,065 |
|
| | | | | | | | | | | | | |
Assets under vehicle programs: | | | | | | | | | | | |
| Program cash | — |
| | — |
| | — |
| | 225 |
| | — |
| | 225 |
|
| Vehicles, net | — |
| | 24 |
| | 70 |
| | 10,370 |
| | — |
| | 10,464 |
|
| Receivables from vehicle manufacturers and other | — |
| | 1 |
| | — |
| | 526 |
| | — |
| | 527 |
|
| Investment in Avis Budget Rental Car Funding (AESOP) LLC-related party | — |
| | — |
| | — |
| | 362 |
| | — |
| | 362 |
|
| | | — |
| | 25 |
| | 70 |
| | 11,483 |
| | — |
| | 11,578 |
|
Total assets | $ | 313 |
| | $ | 5,633 |
| | $ | 7,171 |
| | $ | 14,663 |
| | $ | (10,137 | ) | | $ | 17,643 |
|
| | | | | | | | | | | | | |
Liabilities and stockholders’ equity | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | |
| Accounts payable and other current liabilities | $ | 23 |
| | $ | 189 |
| | $ | 512 |
| | $ | 764 |
| | $ | — |
| | $ | 1,488 |
|
| Short-term debt and current portion of long-term debt | — |
| | 264 |
| | 3 |
| | 12 |
| | — |
| | 279 |
|
Total current liabilities | 23 |
| | 453 |
| | 515 |
| | 776 |
| | — |
| | 1,767 |
|
| | | | | | | | | | | | | |
Long-term debt | — |
| | 2,730 |
| | 3 |
| | 511 |
| | — |
| | 3,244 |
|
Other non-current liabilities | 69 |
| | 88 |
| | 253 |
| | 368 |
| | (14 | ) | | 764 |
|
Intercompany payables | — |
| | 2,306 |
| | 359 |
| | 1 |
| | (2,666 | ) | | — |
|
Total liabilities exclusive of liabilities under vehicle programs | 92 |
| | 5,577 |
| | 1,130 |
| | 1,656 |
| | (2,680 | ) | | 5,775 |
|
| | | | | | | | | | | | | |
Liabilities under vehicle programs: | | | | | | | | | | | |
| Debt | — |
| | 14 |
| | 66 |
| | 2,103 |
| | — |
| | 2,183 |
|
| Due to Avis Budget Rental Car Funding (AESOP) LLC-related party | — |
| | — |
| | — |
| | 6,695 |
| | — |
| | 6,695 |
|
| Deferred income taxes | — |
| | — |
| | 2,258 |
| | 171 |
| | — |
| | 2,429 |
|
| Other | — |
| | — |
| | — |
| | 340 |
| | — |
| | 340 |
|
| | | — |
| | 14 |
| | 2,324 |
| | 9,309 |
| | — |
| | 11,647 |
|
Total stockholders’ equity | 221 |
| | 42 |
| | 3,717 |
| | 3,698 |
| | (7,457 | ) | | 221 |
|
Total liabilities and stockholders’ equity | $ | 313 |
| | $ | 5,633 |
| | $ | 7,171 |
| | $ | 14,663 |
| | $ | (10,137 | ) | | $ | 17,643 |
|
Consolidating Condensed Statements of Cash Flows
Nine Months Ended September 30, 2017
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Parent | | Subsidiary Issuers | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
Net cash provided by (used in) operating activities | $ | 44 |
| | $ | (45 | ) | | $ | 70 |
| | $ | 2,007 |
| | $ | (35 | ) | | $ | 2,041 |
|
| | | | | | | | | | | |
Investing activities | | | | | | | | | | | |
Property and equipment additions | — |
| | (36 | ) | | (56 | ) | | (46 | ) | | — |
| | (138 | ) |
Proceeds received on asset sales | — |
| | 1 |
| | — |
| | 5 |
| | — |
| | 6 |
|
Net assets acquired (net of cash acquired) | — |
| | (1 | ) | | (5 | ) | | (11 | ) | | — |
| | (17 | ) |
Intercompany loan receipts (advances) | — |
| | — |
| | — |
| | (264 | ) | | 264 |
| | — |
|
Other, net | 100 |
| | — |
| | — |
| | 5 |
| | (100 | ) | | 5 |
|
Net cash provided by (used in) investing activities exclusive of vehicle programs | 100 |
| | (36 | ) | | (61 | ) | | (311 | ) | | 164 |
| | (144 | ) |
| | | | | | | | | | | |
Vehicle programs: | | | | | | | | | | | |
Decrease in program cash | — |
| | — |
| | — |
| | 53 |
| | — |
| | 53 |
|
Investment in vehicles | — |
| | — |
| | — |
| | (9,672 | ) | | — |
| | (9,672 | ) |
Proceeds received on disposition of vehicles | — |
| | 39 |
| | — |
| | 6,833 |
| | — |
| | 6,872 |
|
Investment in debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party | — |
| | — |
| | — |
| | (33 | ) | | — |
| | (33 | ) |
| — |
| | 39 |
| | — |
| | (2,819 | ) | | — |
| | (2,780 | ) |
Net cash provided by (used in) investing activities | 100 |
| | 3 |
| | (61 | ) | | (3,130 | ) | | 164 |
| | (2,924 | ) |
| | | | | | | | | | | |
Financing activities | | | | | | | | | | | |
Proceeds from long-term borrowings | — |
| | 325 |
| | — |
| | 264 |
| | — |
| | 589 |
|
Payments on long-term borrowings | — |
| | (401 | ) | | (2 | ) | | (193 | ) | | — |
| | (596 | ) |
Net change in short-term borrowings | — |
| | — |
| | — |
| | (3 | ) | | — |
| | (3 | ) |
Intercompany loan borrowings (payments) | — |
| | 264 |
| | — |
| | — |
| | (264 | ) | | — |
|
Repurchases of common stock | (144 | ) | | — |
| | — |
| | — |
| |
|
| | (144 | ) |
Debt financing fees | — |
| | (5 | ) | | — |
| | (4 | ) | | — |
| | (9 | ) |
Other, net | — |
| | (135 | ) | | — |
| | — |
| | 135 |
| | — |
|
Net cash provided by (used in) financing activities exclusive of vehicle programs | (144 | ) | | 48 |
| | (2 | ) | | 64 |
| | (129 | ) | | (163 | ) |
| | | | | | | | | | | |
Vehicle programs: | | | | | | | | | | | |
Proceeds from borrowings | — |
| | — |
| | — |
| | 14,276 |
| | — |
| | 14,276 |
|
Payments on borrowings | — |
| | (1 | ) | | (7 | ) | | (12,922 | ) | | — |
| | (12,930 | ) |
Debt financing fees | — |
| | — |
| | — |
| | (8 | ) | | — |
| | (8 | ) |
| — |
| | (1 | ) | | (7 | ) | | 1,346 |
| | — |
| | 1,338 |
|
Net cash provided by (used in) financing activities | (144 | ) | | 47 |
| | (9 | ) | | 1,410 |
| | (129 | ) | | 1,175 |
|
| | | | | | | | | | | |
Effect of changes in exchange rates on cash and cash equivalents | — |
| | — |
| | — |
| | 32 |
| | — |
| | 32 |
|
| | | | | | | | | | | |
Net increase in cash and cash equivalents | — |
| | 5 |
| | — |
| | 319 |
| | — |
| | 324 |
|
Cash and cash equivalents, beginning of period | 3 |
| | 12 |
| | — |
| | 475 |
| | — |
| | 490 |
|
Cash and cash equivalents, end of period | $ | 3 |
| | $ | 17 |
| | $ | — |
| | $ | 794 |
| | $ | — |
| | $ | 814 |
|
Nine Months Ended September 30, 2016
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Parent | | Subsidiary Issuers | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
Net cash provided by operating activities | $ | 205 |
| | $ | 372 |
| | $ | 50 |
| | $ | 1,679 |
| | $ | (195 | ) | | $ | 2,111 |
|
| | | | | | | | | | | |
Investing activities | | | | | | | | | | | |
Property and equipment additions | — |
| | (15 | ) | | (63 | ) | | (47 | ) | | — |
| | (125 | ) |
Proceeds received on asset sales | — |
| | 5 |
| | 1 |
| | 4 |
| | — |
| | 10 |
|
Net assets acquired (net of cash acquired) | — |
| | — |
| | (1 | ) | | (3 | ) | | — |
| | (4 | ) |
Intercompany loan receipts (advances) | — |
| | — |
| | 28 |
| | (337 | ) | | 309 |
| | — |
|
Other, net | 93 |
| | (1 | ) | | — |
| | 5 |
| | (93 | ) | | 4 |
|
Net cash provided by (used in) investing activities exclusive of vehicle programs | 93 |
| | (11 | ) | | (35 | ) | | (378 | ) | | 216 |
| | (115 | ) |
| | | | | | | | | | | |
Vehicle programs: | | | | | | | | | | | |
Decrease in program cash | — |
| | — |
| | — |
| | 138 |
| | — |
| | 138 |
|
Investment in vehicles | — |
| | (3 | ) | | (4 | ) | | (10,144 | ) | | — |
| | (10,151 | ) |
Proceeds received on disposition of vehicles | — |
| | 25 |
| | — |
| | 7,348 |
| | — |
| | 7,373 |
|
| — |
| | 22 |
| | (4 | ) | | (2,658 | ) | | — |
| | (2,640 | ) |
Net cash provided by (used in) investing activities | 93 |
| | 11 |
| | (39 | ) | | (3,036 | ) | | 216 |
| | (2,755 | ) |
| | | | | | | | | | | |
Financing activities | | | | | | | | | | | |
Proceeds from long-term borrowings | — |
| | 557 |
| | — |
| | 339 |
| | — |
| | 896 |
|
Payments on long-term borrowings | — |
| | (523 | ) | | (3 | ) | | (1 | ) | | — |
| | (527 | ) |
Net change in short-term borrowings | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
|
Intercompany loan borrowings (payments) | — |
| | 337 |
| | — |
| | (28 | ) | | (309 | ) | | — |
|
Repurchases of common stock | (299 | ) | | — |
| | — |
| | — |
| | — |
| | (299 | ) |
Debt financing fees | — |
| | (10 | ) | | — |
| | (5 | ) | | — |
| | (15 | ) |
Other, net | — |
| | (288 | ) | | — |
| | — |
| | 288 |
| | — |
|
Net cash provided by (used in) financing activities exclusive of vehicle programs | (299 | ) | | 73 |
| | (3 | ) | | 306 |
| | (21 | ) | | 56 |
|
| | | | | | | | | | | |
Vehicle programs: | | | | | | | | | | | |
Proceeds from borrowings | — |
| | — |
| | — |
| | 11,879 |
| | — |
| | 11,879 |
|
Payments on borrowings | — |
| | — |
| | (7 | ) | | (10,745 | ) | | — |
| | (10,752 | ) |
Debt financing fees | — |
| | — |
| | (1 | ) | | (19 | ) | |
|
| | (20 | ) |
| — |
| | — |
| | (8 | ) | | 1,115 |
| | — |
| | 1,107 |
|
Net cash provided by (used in) financing activities | (299 | ) | | 73 |
| | (11 | ) | | 1,421 |
| | (21 | ) | | 1,163 |
|
| | | | | | | | | | | |
Effect of changes in exchange rates on cash and cash equivalents | — |
| | — |
| | — |
| | 14 |
| | — |
| | 14 |
|
| | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | (1 | ) | | 456 |
| | — |
| | 78 |
| | — |
| | 533 |
|
Cash and cash equivalents, beginning of period | 4 |
| | 70 |
| | — |
| | 378 |
| | — |
| | 452 |
|
Cash and cash equivalents, end of period | $ | 3 |
| | $ | 526 |
| | $ | — |
| | $ | 456 |
| | $ | — |
| | $ | 985 |
|
* * * *
26
| |
Item 2. | Management’s Discussion and Analysis of Financial Condition andResults of Operations
|
Item 2. Management’s Discussion and Analysis of Financial Condition andResults of Operations
The following discussion should be read in conjunction with our Consolidated Condensed Financial Statements and accompanying Notes thereto included elsewhere herein,in this Quarterly Report on Form 10-Q, and with our 20162023 Form 10-K. Our actual results of operations may differ materially from those discussed in forward-looking statements as a result of various factors, including but not limited to those included elsewherediscussed in this Quarterly Report on Form 10-Q“Forward-Looking Statements”. See “Forward-Looking Statements” and those included in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and other portions of our 2016 Form 10-K.for additional information. Unless otherwise noted, all dollar amounts in tables are in millions and those relating to our results of operations are presented before taxes.millions.
Our Company
We operate three of the most globally recognized brands in the global vehicle rental and car sharing industry,mobility solutions, Avis, Budget and Zipcar, together with several other brands well recognized in their respective markets, including Payless, Maggiore in Italy, FranceCars in France and Apex in both New Zealand and Australia.markets. We are a leading vehicle rental operator in North America, Europe, Australasia and certain other regions we serve, with an average rental fleet of more than 600,000 vehicles.approximately 667,000 vehicles in first quarter 2024. We also license the use of our trademarks to licensees in the areas in which we do not operate directly. We and our licensees operate our brands in approximately 180 countries throughout the world.
Our Segments
We categorize our operations into two reportable business segments: Americas, consisting primarily of our vehicle rental operations in North America, South America, Central America and the Caribbean, and our car sharing operations in certain of these markets;markets, and licensees in certain areas in which we do not operate directly; and International, consisting primarily of our vehicle rental operations in Europe, the Middle East, Africa, Asia Australasia, and ourAustralasia, car sharing operations in certain of these markets.markets, and licensees in certain areas in which we do not operate directly.
Business and Trends
Our strategy continues to primarily focus on customer experience and costs to strengthen our Company, maximize profitability, and deliver stakeholder value. During the three months ended March 31, 2024, we generated revenues are derived principally from vehicle rentals in our Company-owned operationsof $2.6 billion, net loss of $113 million and include:Adjusted EBITDA of $12 million. These results were driven primarily by increased volume, offset by decreased revenue per day, increased fleet costs, and sustained inflationary pressures on costs.
time & mileage fees charged to our customers for vehicle rentals;
payments from our customers with respect to certain operating expenses we incur, including gasoline and vehicle licensing fees, as well as concession fees, which we pay in exchange for the right to operate at airports and other locations;
sales of loss damage waivers and insurance and rentals of navigation units and other items in conjunction with vehicle rentals; and
royalty revenue from our licensees in conjunction with their vehicle rental transactions.
Our operating results are subject to variability due to seasonality, macroeconomic conditions and other factors. Car rental volumes tend to be associated with the travel industry, particularly airline passenger volumes, or enplanements, which in turn tend to reflect general economic conditions. Our vehicle rental operations are also seasonal, with the third quarter of the year historically having been our strongest due to the increased level of leisure travel during the quarter. We have a partially variable cost structure and routinely adjust the size, and therefore the cost, of our rental fleet in response to fluctuations in demand.
To date in 2017, we have operated in an uncertain and uneven economic environment marked by heightened geopolitical risks, competitive market conditions and soft used-vehicle values in the U.S. in particular. Nonetheless, we continue to anticipate that worldwide demand for vehicle rental and car sharing services will continue to grow in the remainder of 2017, most likely against a backdrop of modest and uneven global economic growth. Our access to new fleet vehicles has been adequate to meet our needs for both replacement of existing vehicles in the normal course and for growth to meet incremental demand, and we expect that to continue to be susceptible to a number of industry-specific and global macroeconomic factors that may cause our actual results of operations to differ from our historical results of operations or current expectations. The factors and trends that we currently believe are or will be most impactful to our results of operations and financial condition include the case. We will look to pursue opportunities for pricing increasesfollowing: interest rates, inflationary impact on items such as commodity prices and wages, supply of new vehicles, used car values, and an economic downturn that may impact travel demand, all of which may be exacerbated by the ongoing military conflicts in the remaining months of 2017 in order to enhance our profitabilityMiddle East and returns on invested capital.
Our objective is to focus on strategically accelerating our growth, strengthening our global position as a leading provider of vehicle rental services, continuing to enhance our customers’ rental experience, and controlling costs and driving efficiency throughout the organization.Eastern Europe. We operate in a highly competitive industry and we expect to continue to face challenges and risks. We seek to mitigate our exposure to risks in numerous ways, including delivering upon our core strategic initiatives, continued optimization of fleet levels to match changes in demand for vehicle rentals, adjustments inmonitor the size, nature and terms of our relationships with vehicle manufacturers, appropriate investments in technology and maintenance of liquidity to fund our fleet and our operations.
During 2017:
Our revenues totaled $6.8 billion in the nine months ended September 30, 2017, increased 1% compared to the nine months ended September 30, 2016 due to higher rental volumes, offset by lower time & mileage revenue per day.
In the nine months ended September 30, 2017, our net income was $141 million, representing a $53 million year-over-year reduction in earnings, and our Adjusted EBITDA was $595 million, representing a $122 million year-over-year reduction, due to higher per-unit fleet costs in the Americas, partially offset by a $20 millionpotential favorable effect from currency exchange rate movements.
We repurchased approximately $127 million of our common stock in the nine months ended September 30, 2017 under our share repurchase program, reducing our shares outstanding by approximately 4.2 million shares, or 5%.
We issued €250 million of 4½% euro-denominated Senior Notes due 2025 and $188 million of incremental term loan borrowings, the proceeds of which were used to redeem all of our outstanding 6% euro-denominated Senior Notes due 2021 and our Floating Rate Senior Notes due 2017. As a resultunfavorable impacts of these transactions, we will have no significant corporate debt maturities until 2022.and other factors on our business, operations, financial condition, and future results of operations.
RESULTS OF OPERATIONS
We measure performance principally using the following key operating statistics:metrics: (i) rental days, which represent the total number of days (or portion thereof) a vehicle was rented, (ii) time & mileage revenue per rental day, which represents revenues divided by rental days, (iii) vehicle utilization, which represents rental days divided by available rental days, with available rental days being defined as average rental fleet times the average daily revenue we earned from rental time & mileage fees charged to our customers, bothnumber of which exclude our U.S. truck rentaldays in the period, and Zipcar car sharing operations and (iii)(iv) per-unit fleet costs, which represent vehicle depreciation, lease charges and gain or loss on vehicle sales, divided by average rental fleet and exclude our U.S. truck rental operations. We also measure our ancillary revenues (rental-transaction revenue other than time & mileage revenue), such as from the sale of collision and loss damage waivers, insurance products, fuel service options and portable GPS navigation unit rentals.fleet. Our rental days, and time & mileage revenue per rental day and vehicle rental operating statisticsutilization metrics are all calculated based on the actual rental of the vehicle during a 24-hour period. We believe that this methodology provides usmanagement with the most relevant statisticsmetrics in order to effectively manage the performance of the business. Our calculation may not be comparable to other companies’the calculation of similarly-titled statistics.similarly titled metrics by other companies. We present currency exchange rate effects to provide a method of assessing how our business performed excluding the effects of foreign currency rate fluctuations. Currency exchange rate effects are calculated by translating the current-yearcurrent period results at the prior-periodprior period average exchange rate plus any related gains and losses on currency hedges.
We assess performance and allocate resources based upon the separate financial information of our operating segments. In identifying our reportable segments, we also consider the nature of services provided by our operating segments, the geographical areas in which our segments operate and other relevant factors. Management evaluates the operating results of each of our reportable segments based upon revenuerevenues and “Adjusted EBITDA,” which we define as income (loss) from continuing operations before non-vehicle related depreciation and amortization,amortization; any impairment charges,charges; restructuring and other related charges,charges; early extinguishment of debt costs,costs; non-vehicle related interest,interest; transaction-related costs, net charges for unprecedented personal-injurynet; legal matters, which includes amounts recorded in excess of $5 million related to class action lawsuits and personal injury matters; non-operational charges related to shareholder activist activity, which includes third-party advisory, legal and other professional fees; COVID-19 charges, net; cloud computing costs; other (income) expense, net; and income taxes. Net charges for unprecedented personal-injury legal matters are recorded within operating expenses in our consolidated results of operations. We have revised our definition of Adjusted EBITDA to exclude costs associated with the separation of certain officers of the Company and our limited voluntary opportunity plan, which offers certain employees the limited opportunity to
elect resignation from employment for enhanced severance benefits. Costs associated with the separation of certain officers and the limited voluntary opportunity plan are recorded as part of restructuring and other related charges in our consolidated results of operations. We did not revise prior year’s Adjusted EBITDA amounts because there were no costs similar in nature to these costs. We believe Adjusted EBITDA is useful as a supplemental measure in evaluating the performance of our operating businesses and in comparing our results from period to period. We also believe that Adjusted EBITDA is useful to investors because it allows investorsthem to assess our results of operations and financial condition on the same basis that management uses internally. Adjusted EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for net income or other income statement data prepared in accordance with U.S. GAAP. Our presentation of Adjusted EBITDA may not be comparable to similarly-titledsimilarly titled measures used by other companies.
During the three months ended March 31, 2024:
•Our revenues totaled $2.6 billion, consistent with the similar period in 2023.
•Our net loss was $114 million, representing a decrease of $426 million year-over-year, primarily due to increased fleet costs and sustained inflationary pressures on costs.
•Our Adjusted EBITDA was $12 million, representing a decrease of $523 million year-over-year.
Three Months Ended September 30, 2017March 31, 2024 vs. Three Months Ended September 30, 2016
March 31, 2023
Our consolidated condensed results of operations comprised the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | 2024 | | 2023 | | $ Change | | % Change |
Revenues | $ | 2,551 | | | $ | 2,557 | | | $ | (6) | | | 0 | % |
| | | | | | | | | | |
Expenses | | | | | | | |
| Operating | 1,344 | | | 1,307 | | | 37 | | | 3 | % |
| Vehicle depreciation and lease charges, net | 636 | | | 265 | | | 371 | | | 140 | % |
| Selling, general and administrative | 325 | | | 324 | | | 1 | | | 0 | % |
| Vehicle interest, net | 239 | | | 133 | | | 106 | | | 80 | % |
| Non-vehicle related depreciation and amortization | 61 | | | 56 | | | 5 | | | 9 | % |
| | | | | | | | |
| Interest expense related to corporate debt, net | 83 | | | 73 | | | 10 | | | 14 | % |
| | | | | | | | |
| Restructuring and other related charges | 3 | | | 4 | | | (1) | | | (25 | %) |
| Transaction-related costs, net | 1 | | | — | | | 1 | | | n/m |
| Other (income) expense, net | 1 | | | (2) | | | 3 | | | n/m |
Total expenses | 2,693 | | | 2,160 | | | 533 | | | 25 | % |
| | | | | | | | | | |
Income (loss) before income taxes | (142) | | | 397 | | | (539) | | | (136 | %) |
Provision for (benefit from) income taxes | (29) | | | 85 | | | (114) | | | (134 | %) |
Net income (loss) | (113) | | | 312 | | | (425) | | | (136 | %) |
Less: net income attributable to non-controlling interests | 1 | | | — | | | 1 | | | n/m |
Net income (loss) attributable to Avis Budget Group, Inc. | $ | (114) | | | $ | 312 | | | $ | (426) | | | (137 | %) |
|
| | | | | | | | | | | | | | | | | |
| | | | Three Months Ended September 30, | | $ Change Favorable /(Unfavorable) | | |
| | | | 2017 | | 2016 | | | % Change |
Revenues | | | | | | | |
| Vehicle rental | $ | 1,949 |
| | $ | 1,871 |
| | $ | 78 |
| | 4 | % |
| Other | 803 |
| | 785 |
| | 18 |
| | 2 | % |
Net revenues | 2,752 |
| | 2,656 |
| | 96 |
| | 4 | % |
| | | | | | | | | | |
Expenses | | | | | | | |
| Operating | 1,256 |
| | 1,219 |
| | (37 | ) | | (3 | %) |
| Vehicle depreciation and lease charges, net | 616 |
| | 576 |
| | (40 | ) | | (7 | %) |
| Selling, general and administrative | 320 |
| | 315 |
| | (5 | ) | | (2 | %) |
| Vehicle interest, net | 78 |
| | 77 |
| | (1 | ) | | (1 | %) |
| Non-vehicle related depreciation and amortization | 66 |
| | 63 |
| | (3 | ) | | (5 | %) |
| Interest expense related to corporate debt, net | 45 |
| | 51 |
| | 6 |
| | 12 | % |
| Restructuring and other related charges | 7 |
| | 6 |
| | (1 | ) | | (17 | %) |
| Transaction-related costs, net | — |
| | 4 |
| | 4 |
| | * |
|
Total expenses | 2,388 |
| | 2,311 |
| | (77 | ) | | (3 | %) |
| | | | | | | | | | |
Income before income taxes | 364 |
| | 345 |
| | 19 |
| | 6 | % |
Provision for income taxes | 119 |
| | 136 |
| | 17 |
| | 13 | % |
| | | | | | | |
Net income | $ | 245 |
| | $ | 209 |
| | $ | 36 |
| | 17 | % |
__________________
n/m - Not Meaningful
During third quarter 2017, our revenues increased as a result of
Revenues during the three months ended March 31, 2024 were consistent with the similar period in 2023, primarily due to a 5% increase in rental volumes. Currencyvolume, offset by a 5% decrease in revenue per day, excluding exchange rate movements increased revenues by $42 million.
effects. Total expenses increased as a result of25% during the three months ended March 31, 2024, compared to the similar period in 2023, primarily due to increased rental volumes, a 3% increase in per-unit fleet costs (including a 1% negative effect from currency movements) and increased operating commissions. These increases include a $30 million negative effect from currency exchange rate movements.the impact of inflation. Our effective tax rates were a benefit of 20.4% and a provision of 33% and 39%21.4% for the three months ended September 30, 2017March 31, 2024 and 2016,2023, respectively. As a result of these items, our net income increaseddecreased by $36 million.
$426 million compared to the similar period in 2023. For the three months ended September 30, 2017, the CompanyMarch 31, 2024 and 2023, we reported earnings of $2.91(loss) per diluted share which includes after-tax restructuringof $(3.21) and other related charges$7.72, respectively.
Operating expenses increased to 52.7% of ($0.06) per share. Forrevenue during the three months ended September 30, 2016,March 31, 2024 compared to 51.1% during the Company reported earnings of $2.28similar period in 2023, primarily due to an increase in volume; a decrease in revenue per diluted share, which includes after-tax restructuringday, excluding exchange rate effects; and other related charges of ($0.05) per share and after-tax transaction-related costs of ($0.04) per share.
In the three months ended September 30, 2017:
Operating expenses were reduced to 45.7% of revenue from 45.9% in third quarter 2016.
cost inflation. Vehicle depreciation and lease charges increased to 22.4%24.9% of revenue from 21.7%during the three months ended March 31, 2024 compared to 10.3% during the similar period in third quarter 2016,2023, primarily due to higher per-unitincreased per unit fleet costs, partially offsetexcluding exchange rate effects, which was driven by improved utilization.
increased fleet levels and a decrease in the gain on sale of vehicles. Selling, general and administrative costs were reduced to 11.6%approximately 12.7% of revenue comparedduring the three months ended March 31, 2024, consistent with the similar period in 2023, primarily due to 11.9%increased marketing costs and commissions, offset by a decrease in third quarter 2016.
other selling, general and administrative costs. Vehicle interest costs were reducedincreased to 2.8%9.4% of revenue during the three months ended March 31, 2024 compared to 2.9%5.2% during the similar period in the prior-year period.2023, primarily due to rising interest rates and additional funding for vehicles.
Following is a more detailed discussion of the results of each of our reportable segments and reconciliation of net income (loss) to Adjusted EBITDA:
| | | | | | Three Months Ended March 31, | | | | | | Three Months Ended March 31, |
| | | 2017 | | 2016 | | | | | 2024 | | 2023 |
| | | Revenues | | Adjusted EBITDA | | Revenues | | Adjusted EBITDA | | | | | Revenues | | Adjusted EBITDA | | Revenues | | Adjusted EBITDA |
Americas | Americas | $ | 1,839 |
| | $ | 303 |
| | $ | 1,821 |
| | $ | 306 |
|
International | International | 913 |
| | 194 |
| | 835 |
| | 179 |
|
Corporate and Other (a) | Corporate and Other (a) | — |
| | (15 | ) | | — |
| | (16 | ) |
| Total Company | |
| Total Company | $ | 2,752 |
| | $ | 482 |
| | $ | 2,656 |
| | $ | 469 |
|
| | | | | | | | |
| | Reconciliation of Net income to Adjusted EBITDA |
| | | | | | 2017 | | 2016 |
Net income | | $ | 245 |
| | $ | 209 |
|
Provision for income taxes | | 119 |
| | 136 |
|
Income before income taxes | | 364 |
| | 345 |
|
| | | | | | | | Reconciliation to Adjusted EBITDA | |
| | | | | | | | Reconciliation to Adjusted EBITDA | |
| | | | | | | | Reconciliation to Adjusted EBITDA | |
| | | | | | | | 2024 | | | | | | | | | | 2024 | | 2023 |
Net income (loss) | |
Provision for (benefit from) income taxes | |
Income (loss) before income taxes | |
| | | | | | |
Add: | Add: | Non-vehicle related depreciation and amortization | | 66 |
| | 63 |
|
Add: | |
Add: | |
Add: | |
Add: | |
Add: | |
| | Interest expense related to corporate debt, net | | 45 |
| | 51 |
|
| | Interest expense related to corporate debt, net | |
| | Interest expense related to corporate debt, net | |
| | Interest expense related to corporate debt, net | |
| | Restructuring and other related charges | | 7 |
| | 6 |
|
| | Restructuring and other related charges | |
| | Restructuring and other related charges | |
| | Restructuring and other related charges | |
| | Transaction-related costs, net | |
| | Other (income) expense, net (b) | |
| | Reported within operating expenses: | |
| | Cloud computing costs | |
| | Cloud computing costs | |
| | Cloud computing costs | |
| | Transaction-related costs, net (b) | | — |
| | 4 |
|
| | Legal matters, net | |
| | Legal matters, net | |
| | Legal matters, net | |
Adjusted EBITDA | Adjusted EBITDA | | $ | 482 |
| | $ | 469 |
|
__________________
| |
(a)
| Includes unallocated corporate overhead which is not attributable to a particular segment. |
| |
(b)
| Primarily comprised of acquisition- and integration-related expenses. |
(a)Includes unallocated corporate overhead which is not attributable to a particular segment.
(b)Primarily consists of gains or losses related to our equity investment in a former subsidiary, offset by fleet related and certain administrative services provided to the same former subsidiary.
Americas
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 | | % Change |
Revenues | | $ | 1,993 | | | $ | 2,016 | | | (1 | %) |
Adjusted EBITDA | | 44 | | | 516 | | | (91 | %) |
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | % Change |
Revenues | | $ | 1,839 |
| | $ | 1,821 |
| | 1 | % |
Adjusted EBITDA | | 303 |
| | 306 |
| | (1 | %) |
Revenues increased 1%decreased during the three months ended March 31, 2024 compared to the similar period in the third quarter 2017 compared with third quarter 2016,2023, primarily due to a 2% increase 6% decrease in time & mileage revenue per day, (includingpartially offset by a 1% favorable effect from currency movements) and a 1% increase in rental volumes. Currency movements increased revenues by $6 million.
Adjusted EBITDA decreased 1% in third quarter 2017 compared with third quarter 2016, due to a 5% increase in per-unit fleet costs, partially offset byvolume.
Operating expenses increased revenues, cost mitigating actions and improved utilization.
Into 52.5% of revenue during the three months ended September 30, 2017:
Operating expenses were reducedMarch 31, 2024 compared to 45.6% of revenue from 46.2%50.5% during the similar period in third quarter 2016,2023, primarily due to an increase in volume, a decrease in revenue per day, and cost mitigating actions.
inflation. Vehicle depreciation and lease charges increased to 24.2%24.4% of revenue from 23.3%during the three months ended March 31, 2024 compared to 8.6% during the similar period in the prior-year period,2023, primarily due to higherincreased per-unit fleet costs, partially offsetwhich was driven by improved utilization.
increased fleet levels and a decrease in the gain on sale of vehicles. Selling, general and administrative costs increased to 10.6%10.4% of revenue from 10.4% in third quarter 2016.
Vehicle interest costs were reduced to 3.2% of revenueduring the three months ended March 31, 2024 compared to 3.4%9.8% during the similar period in in the prior-year period.
International
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | % Change |
Revenues | | $ | 913 |
| | $ | 835 |
| | 9 | % |
Adjusted EBITDA | | 194 |
| | 179 |
| | 8 | % |
Revenues increased 9% in third quarter 2017 compared to third quarter 2016, due to a 13% increase in rental volumes, including a 6% benefit from FranceCars which was acquired in December 2016, partially offset by a 1% decrease in time & mileage revenue per day (including a 4% favorable effect from currency movements). Currency movements increased revenues by $36 million.
Adjusted EBITDA increased 8% in third quarter 2017 compared to third quarter 2016,2023, primarily due to increased revenues, partially offset by inflationary cost increases and operating commissions. Currency movements increased Adjusted EBITDA by $9 million.
In the three months ended September 30, 2017:
Operating expenses increased to 45.5% of revenue from 45.1% in the prior-year period, primarily due inflationarymarketing costs and higher commissions, partially offset by increased revenues.
Vehicle depreciation and lease charges increased to 18.7% of revenue from 18.2% in the third quarter 2016, primarily due to lower time & mileage revenue per day.
Selling, general and administrative costs were reduced to 12.5% of revenue from 13.5% in the prior-year period, primarily due to increased revenues and cost mitigating actions.
commissions. Vehicle interest costs increased to 2.0%10.2% of revenue from 1.8% in third quarter 2016.
Nine Months Ended September 30, 2017 vs. Nine Months Ended September 30, 2016
Our consolidated results of operations comprisedduring the following:
|
| | | | | | | | | | | | | | | | | |
| | | | Nine Months Ended September 30, | | $ Change Favorable /(Unfavorable) | | |
| | | | 2017 | | 2016 | | | % Change |
Revenues | | | | | | | |
| Vehicle rental | $ | 4,798 |
| | $ | 4,772 |
| | $ | 26 |
| | 1 | % |
| Other | 2,031 |
| | 2,008 |
| | 23 |
| | 1 | % |
Net revenues | 6,829 |
| | 6,780 |
| | 49 |
| | 1 | % |
| | | | | | | | | | |
Expenses | | | | | | | |
| Operating | 3,413 |
| | 3,381 |
| | (32 | ) | | (1 | %) |
| Vehicle depreciation and lease charges, net | 1,717 |
| | 1,571 |
| | (146 | ) | | (9 | %) |
| Selling, general and administrative | 875 |
| | 896 |
| | 21 |
| | 2 | % |
| Vehicle interest, net | 215 |
| | 215 |
| | 0 |
| | 0 | % |
| Non-vehicle related depreciation and amortization | 194 |
| | 189 |
| | (5 | ) | | (3 | %) |
| Interest expense related to corporate debt, net: | | | | |
|
| | |
| Interest expense | 142 |
| | 157 |
| | 15 |
| | 10 | % |
| Early extinguishment of debt | 3 |
| | 10 |
| | 7 |
| | 70 | % |
| Restructuring and other related charges | 52 |
| | 26 |
| | (26 | ) | | (100 | %) |
| Transaction-related costs, net | 8 |
| | 13 |
| | 5 |
| | 38 | % |
Total expenses | 6,619 |
| | 6,458 |
| | (161 | ) | | (2 | %) |
| | | | | | | | | | |
Income before income taxes | 210 |
| | 322 |
| | (112 | ) | | (35 | %) |
Provision for income taxes | 69 |
| | 128 |
| | 59 |
| | 46 | % |
| | | | | | | |
Net income | $ | 141 |
| | $ | 194 |
| | $ | (53 | ) | | (27 | %) |
During the ninethree months ended September 30, 2017, our revenues increased as a result of a 4% increaseMarch 31, 2024 compared to 5.6% during the similar period in rental volumes, partially offset by a 3% reduction in time & mileage revenue per day. Currency movements increased revenues by $18 million year-over-year.2023, primarily due to rising interest rates and additional funding for vehicles.
Total expenses increased as a result of higher rental volumes, a 5% increase in per-unit fleet costs and increased restructuring and other related charges, partially offset by cost mitigating actions. Currency movementsAdjusted EBITDA decreased expenses by $16 million year-over-year. Our effective tax rates were a provision of 33% and 40% forduring the ninethree months ended September 30, 2017 and 2016, respectively. As a result of these items, our net income decreased by $53 million.
For the nine months ended September 30, 2017, the Company reported earnings of $1.65 per diluted share, which includes after-tax restructuring and other related charges of ($0.39) per share, after-tax transaction-related costs of ($0.07) per share, after-tax debt extinguishment costs of ($0.02) per share and after-tax reversal of charges for legal matter of $0.10 per share. For the nine months ended September 30, 2016, the Company reported earnings of $2.05 per diluted share, which includes after-tax restructuring and other related charges of ($0.20) per share, after-tax transaction-related costs of ($0.11) per share and after-tax debt extinguishment costs of ($0.07) per share.
In the nine months ended September 30, 2017:
Operating expenses were 50.0% of revenueMarch 31, 2024 compared to 49.9%the similar period in the prior-year period.
Vehicle depreciation and lease charges increased to 25.1% of revenue from 23.2% in the nine months ended September 30, 2016,2023, primarily due to higher per-unit fleet costs and lower time & mileage revenue per day.inflationary pressures.
Selling, general and administrative costs were reduced to 12.8% of revenue from 13.2% in
International
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 | | % Change |
Revenues | | $ | 558 | | | $ | 541 | | | 3 | % |
Adjusted EBITDA | | (15) | | | 50 | | | (130 | %) |
Revenues increased during the first ninethree months of 2016, primarily due to cost mitigating actions.
Vehicle interest costs were 3.1% of revenueended March 31, 2024 compared to 3.2% in the prior-year period.
Following is a more detailed discussion of the results of each of our reportable segments and reconciliation of net income to Adjusted EBITDA:
|
| | | | | | | | | | | | | | | | | | |
| | | | 2017 | | 2016 |
| | | | Revenues | | Adjusted EBITDA | | Revenues | | Adjusted EBITDA |
Americas | $ | 4,718 |
| | $ | 379 |
| | $ | 4,778 |
| | $ | 532 |
|
International | 2,111 |
| | 260 |
| | 2,002 |
| | 237 |
|
Corporate and Other (a) | — |
| | (44 | ) | | — |
| | (52 | ) |
| Total Company | $ | 6,829 |
| | $ | 595 |
| | $ | 6,780 |
| | $ | 717 |
|
| | | | | | | | | | |
| | | | Reconciliation of Net income to Adjusted EBITDA |
| | | | | | | | 2017 | | 2016 |
Net income | | $ | 141 |
| | $ | 194 |
|
Provision for income taxes | | 69 |
| | 128 |
|
Income before income taxes | | 210 |
| | 322 |
|
| | | | | | | | | | |
Add: | Non-vehicle related depreciation and amortization | | 194 |
| | 189 |
|
| | Interest expense related to corporate debt, net: | | | | |
| | Interest expense | | 142 |
| | 157 |
|
| | Early extinguishment of debt | | 3 |
| | 10 |
|
| | Restructuring and other related costs | | 52 |
| | 26 |
|
| | Transaction-related costs, net (b) | | 8 |
| | 13 |
|
| | Charges for legal matter, net (c) | | (14 | ) | | — |
|
Adjusted EBITDA | | $ | 595 |
| | $ | 717 |
|
__________
| |
(a)
| Includes unallocated corporate overhead which is not attributable to a particular segment. |
| |
(b)
| Primarily comprised of acquisition- and integration-related expenses. |
| |
(c)
| Reported within operating expenses in our consolidated results of operations. |
Americas
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | % Change |
Revenues | | $ | 4,718 |
| | $ | 4,778 |
| | (1 | %) |
Adjusted EBITDA | | 379 |
| | 532 |
| | (29 | %) |
Revenues were 1% lower during the nine months ended September 30, 2017 compared with the samesimilar period in 2016,2023, primarily due to a 2% reduction4% increase in time & mileagevolume, partially offset by a 1% decrease in revenue per day, excluding exchange rate effects.
Operating expenses decreased to 51.9% of revenue during the three months ended March 31, 2024 compared to 52.6% during the similar period in 2023, primarily due to an increase in volume, partially offset by 1% growtha decrease in rental volumes. Currency movements increased revenues by $6 million year-over-year.
Adjusted EBITDA decreased 29% in the nine months ended September 30, 2017 compared with the same period 2016, due to lower revenues and a 7% increase in per-unit fleet costs.
In the nine months ended September 30, 2017:
Operating expenses were 49.0% of revenue compared to 48.9% in the prior-year period.
per day, excluding exchange rate effects. Vehicle depreciation and lease charges increased to 27.6%26.7% of revenue from 25.1%during the three months ended March 31, 2024 compared to 16.7% during the similar period in 2023, primarily due to increased per-unit fleet costs, excluding exchange rate effects, which was driven by increased fleet levels, increased depreciation rates, and a decrease in the gain on sale of vehicles. Selling, general and administrative costs were approximately 17.7% of revenue during the ninethree months ended September 30, 2016,March 31, 2024, consistent with the similar period in 2023, primarily due to increased marketing costs and commissions, offset by a decrease in other selling, general and administrative costs. Vehicle interest costs increased to 6.5% of revenue during the three months ended March 31, 2024 compared to 3.8% during the similar period in 2023, primarily due to rising interest rates and additional funding for vehicles.
Adjusted EBITDA decreased during the three months ended March 31, 2024 compared to the similar period in 2023, primarily due to higher per-unit fleet costs and lower time & mileage revenue per day.
Selling, general and administrative costs were 11.4% of revenue compared to 11.3% in the prior period.
Vehicle interest costs, at 3.6% of revenue, remained level with the nine months ended September 30, 2016.inflationary pressures, and an approximately $3 million negative impact from currency exchange rate movements.
International
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | % Change |
Revenues | | $ | 2,111 |
| | $ | 2,002 |
| | 5 | % |
Adjusted EBITDA | | 260 |
| | 237 |
| | 10 | % |
Revenues increased 5% in the nine months ended September 30, 2017 compared with the same period in 2016, primarily due to a 11% increase in rental volumes, including a 6% benefit from FranceCars, partially offset by a 4% reduction in time & mileage revenue per day. Currency movements increased revenues by $12 million.
Adjusted EBITDA increased 10% in the nine months ended September 30, 2017 compared with the same period in 2016, due to increased revenues and cost mitigating actions. Currency movements increased Adjusted EBITDA by $20 million.
In the nine months ended September 30, 2017:
Operating expenses, at 51.7% of revenue, remained level compared to the prior-year period.
Vehicle depreciation and lease charges increased to 19.6% of revenue from 18.6% compared to the first nine months of 2016, primarily due to lower time & mileage revenue per day.
Selling, general and administrative costs were reduced to 14.3% of revenue compared to 15.7% in the prior-year period, primarily due to increased revenues and cost mitigating actions.
Vehicle interest costs were 2.1% of revenue compared to 2.2% in the nine months ended September 30, 2016.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
We present separately the financial data of our vehicle programs. These programs are distinct from our other activities as the assets under vehicle programs are generally funded through the issuance of debt that is collateralized by such assets. The income generated by these assets is used, in part, to repay the principal and interest associated with the debt. Cash inflows and outflows relating to the generation or acquisition of such assets and the principal debt repayment or financing of such assets are classified as activities of our vehicle programs. We believe it is appropriate to segregate the financial data of our vehicle programs because, ultimately, the source of repayment of such debt is the realization of such assets.
| | | | September 30, 2017 | | December 31, 2016 | | Change |
| | March 31, 2024 | | | | March 31, 2024 | | December 31, 2023 | | Change |
Total assets exclusive of assets under vehicle programs | | $ | 6,788 |
| | $ | 6,065 |
| | $ | 723 |
|
Total liabilities exclusive of liabilities under vehicle programs | | 6,217 |
| | 5,775 |
| | 442 |
|
Assets under vehicle programs | | 13,085 |
| | 11,578 |
| | 1,507 |
|
Liabilities under vehicle programs | | 13,255 |
| | 11,647 |
| | 1,608 |
|
Stockholders’ equity | | 401 |
| | 221 |
| | 180 |
|
Total stockholders’ equity | |
Total assets exclusive of assets under vehicle programs increased primarily due to a seasonalThe increase in value-added tax receivables, which are recoverable from government agencies and an increase in cash. Total liabilities exclusive of liabilities under vehicle programs increasedis primarily due to a seasonalthe increase in accounts payable.corporate indebtedness from the issuance of senior notes. See “Liquidity and Capital Resources,” and Note 10 – Long-term Corporate Debt and Borrowing Arrangements to our Consolidated Condensed Financial Statements.
The increases in assets under vehicle programs and liabilities under vehicle programs are principally relatedprimarily due to the seasonal increase in the size and cost of our vehicle rental fleet.
The increasedecrease in stockholders’ equity is primarily due to our net income and currency translation adjustments.comprehensive loss.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity are cash on hand and our ability to generate cash through operations and financing activities, as well as available funding arrangements and committed credit facilities, each of which is discussed below.
During the nine months ended September 30, 2017,In February 2024, we issued €250€600 million of 4½%7.000% euro-denominated Senior Notes due 2025February 2029, at par. Thepar, with interest payable semi-annually. In April 2024, we used net proceeds from this borrowing were usedthe offering to redeem all of our outstanding 6%4.750% euro-denominated Senior Notes due 2021 and a portion of our Floating Rate Senior Notes due 2017. We also increased our Floating Rate Term Loan borrowing by $188 million, these proceeds were used to repayJanuary 2026 plus accrued interest, with the remainder of our outstanding Floating Rate Senior Notes due 2017. In addition,being used for general corporate purposes.
During 2024, our Avis Budget Rental Car Funding (AESOP) subsidiary issued approximately $600 million in$2.4 billion of asset-backed notes with an expected final payment date of September 2022dates ranging from April 2026 to December 2029, and a weighted average interest rate of 3%5.46%. In March and April 2024, AESOP amended and restated its asset-backed variable-funding financing facilities. The proceeds from these borrowings werewill be used to fund the repayment ofrepay maturing vehicle-backed debt and the acquisition of rental cars in the United States. We also increased our capacity underIn February 2024, we amended our European rental fleet securitization program by €250to increase its capacity to approximately €1.9 billion and extend its maturity to September 2026. We also added £200 million to our capacity under the proceeds of which wereprogram. The program is used to finance fleet purchases for certain of our European operations. During
Our Board of Directors has authorized the ninerepurchase of up to approximately $8.1 billion of our common stock under a plan originally approved in 2013 and subsequently expanded, most recently in February 2023. Our stock repurchases may occur through open market purchases, privately negotiated transactions or trading plans pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements, restricted payment capacity under our debt instruments and other factors. The repurchase program may be suspended, modified or discontinued at any time without prior notice. The repurchase program has no set expiration or termination date. During the three months ended September 30, 2017, we repurchased approximately 4.2 million shares of our outstanding March 31, 2024, no common stock forrepurchases were made under the program. As of March 31, 2024, approximately $127 million.$802 million of authorization remained available to repurchase common stock under the program.
CASH FLOWS
The following table summarizes our cash flows:
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 | | Change |
Cash provided by (used in): | | | | | |
| Operating activities | $ | 589 | | | $ | 819 | | | $ | (230) | |
| Investing activities | (1,518) | | | (1,678) | | | 160 | |
| Financing activities | 897 | | | 841 | | | 56 | |
Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash | (13) | | | 5 | | | (18) | |
Net decrease in cash and cash equivalents, program and restricted cash | (45) | | | (13) | | | (32) | |
Cash and cash equivalents, program and restricted cash, beginning of period | 644 | | | 642 | | | 2 | |
Cash and cash equivalents, program and restricted cash, end of period | $ | 599 | | | $ | 629 | | | $ | (30) | |
|
| | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 | | Change |
Cash provided by (used in): | | | | | |
| Operating activities | $ | 2,041 |
| | $ | 2,111 |
| | $ | (70 | ) |
| Investing activities | (2,924 | ) | | (2,755 | ) | | (169 | ) |
| Financing activities | 1,175 |
| | 1,163 |
| | 12 |
|
Effect of exchange rate changes | 32 |
| | 14 |
| | 18 |
|
Net increase in cash and cash equivalents | 324 |
| | 533 |
| | (209 | ) |
Cash and cash equivalents, beginning of period | 490 |
| | 452 |
| | 38 |
|
Cash and cash equivalents, end of period | $ | 814 |
| | $ | 985 |
| | $ | (171 | ) |
The decrease in cash provided by operating activities during the ninethree months ended September 30, 2017March 31, 2024 compared with the samesimilar period in 20162023 is principallyprimarily due to changesthe decrease in the components of working capital.our net income.
The increasedecrease in cash used in investing activities during the ninethree months ended September 30, 2017March 31, 2024 compared with the samesimilar period in 20162023 is primarily due to a netthe increase in investmentproceeds received on disposition of vehicles.
The increase in vehicles.
Cashcash provided by financing activities during the ninethree months ended September 30, 2017 was substantially unchangedMarch 31, 2024 compared with the samesimilar period in 2016.2023 is primarily due to the increase in our net corporate borrowings, offset by the decrease in our net borrowings under vehicle programs.
DEBT AND FINANCING ARRANGEMENTS
At September 30, 2017,March 31, 2024, we had approximately $14$24.6 billion of indebtedness, including corporate indebtedness of approximately $4$5.4 billion and debt under vehicle programs of approximately $10$19.2 billion. For detailed information regarding our debt and borrowing arrangements, see Notes 91, 10 and 10 11 to our Consolidated Condensed Financial Statements.
LIQUIDITY RISK
Our primary liquidity needs include the payment of operating expenses, servicing of corporate and vehicle-related debt and procurement of rental vehicles to be used in our operations.operations, servicing of corporate and vehicle-related debt and the payment of operating expenses. The present intention of management is to reinvest the undistributed earnings of the Company’sour foreign subsidiaries indefinitely into itsour foreign operations. We do not anticipate the need to repatriate foreign earnings to the United States to service corporate debt or for other U.S. needs. Our primary sources of funding are operating revenue, cash received upon the sale of vehicles, borrowings under our vehicle-backed borrowing arrangements and our senior revolving credit facility, and other financing activities.
As discussed above, as of September 30, 2017, we have cash and cash equivalents of approximately $0.8 billion, available borrowing capacity under our committed credit facilities of approximately $0.7 billion and available capacity under our vehicle programs of approximately $2.6 billion.
Our liquidity positionhas in the past been, and could in the future be, negatively affected by any financial market disruptions or the absence of a downturn inrecovery or worsening of the U.S.United States and worldwide economies, or by continued increases in interest rates, which may result in unfavorable conditions in the vehicle rentalmobility industry, in the asset-backed financing market and in the credit markets generally. We believe these factors have in the past affected and could in the futurefurther affect the debt ratings assigned to us by credit rating agencies and the cost of our borrowings. Additionally, a worsening or prolonged downturn in the worldwide economy or a disruption in the credit markets could further impact our liquidity due to (i) decreased demand and pricing for vehicles in the used-vehicle market, (ii) increased costs associated with, and/or reduced capacity or increased collateral needs under, our financings, (iii) the adverse impact of vehicle manufacturers including Ford, General Motors and Chrysler, being unable or unwilling to honor their obligations to repurchase or guarantee the depreciation on the related program vehicles and (iv) disruption in our ability to obtain financing due to negative credit events specific to us or affecting the overall debt market.
As of March 31, 2024, we had $522 million of available cash and cash equivalents and access to available borrowings under our revolving credit facility of approximately $200 million, providing us with access to an approximate $722 million of total liquidity.
Our liquidity position could also be negatively impacted if we are unable to remain in compliance with the financialconsolidated first lien leverage ratio requirement and other covenants associated with our senior credit facilityfacilities and other borrowings, including a maximum leverage ratio.borrowings. As of September 30, 2017,March 31, 2024, we were in compliance with the financial covenants governing our indebtedness. For additional information regarding our liquidity risks, see Part I, Item 1A, “Risk Factors” of our 20162023 Form 10-K.
CONTRACTUAL OBLIGATIONS
Our future contractual obligations have not changed significantly from the amounts reported within our 20162023 Form 10-K with the exception of our commitment to purchase vehicles, which decreased by approximately $1.6$2.7 billion from December 31, 2016,2023, to approximately $6.1$4.1 billion at September 30, 2017.as of March 31, 2024 due to existing fleet levels. Changes to our obligations related to corporate indebtedness and debt under vehicle programs are presented above within the section titled “Liquidity and Capital Resources—Debt and Financing Arrangements” and also within Notes 910 and 1011 to our Consolidated Condensed Financial Statements.
CRITICAL ACCOUNTING ESTIMATES ACCOUNTING POLICIESAccounting Policies
The results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex. However, in presenting our financial statements in conformity with generally accepted accounting principles (GAAP), we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions that we are required to make pertainrelate to matters that are inherently uncertain as they relate to future events.events and/or events that are outside of our control. If there is a significant unfavorable change to current conditions, it could result in a material adverse impact to our consolidated results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. Presented within the section titled “Critical Accounting Policies”Estimates” of our 20162023 Form 10-K are the accounting
policies (related to goodwill and other indefinite-lived intangible assets, vehicles, income taxes and public liability, property damage and other insurance liabilities) that we believe require subjective and/orand complex judgments that could potentially affect2017 reported results. There have been no significant changes to those accounting policies or our assessment of which accounting policies we would consider to be critical accounting policies.
New Accounting Standards
For detailed information regarding new accounting standards and their impact on our business, see Note 1 to our Consolidated Condensed Financial Statements.
| |
Item 3. | Item 3. Quantitative and Qualitative Disclosures about Market Risk |
We are exposed to a variety of market risks, including changes in currency exchange rates, interest rates and gasolinefuel prices. We assess our market risks based on changes in interest and currency exchange rates utilizing a sensitivity analysis that measures the potential impact on earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest and foreign currency exchange rates. We used September 30, 2017March 31, 2024 market rates to perform a sensitivity analysis separately for each of these market risk exposures. We have determined, through such analyses, that the impact of a 10% change in interest or currency exchange rates on our results of operations, balance sheet and cash flows would not be material. Additionally, we have commodity price exposure related to fluctuations in the price of unleaded gasoline.fuel. We anticipate that such commodity risk will remain a market risk exposure for the foreseeable future. We determined that a 10% change in the price of unleaded gasolinefuel would not have a material impact on our earnings for the period ended September 30, 2017.March 31, 2024. For additional information regarding our long-term borrowings and financial instruments, see Notes 9, 10, 11 and 1416 to our Consolidated Condensed Financial Statements.
| |
Item 4. | Controls and Procedures |
Item 4. Controls and Procedures
| |
(a) | Disclosure Controls and Procedures. Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2017.
(a)Disclosure Controls and Procedures. Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, 2024.
(b)Changes in Internal Control Over Financial Reporting. During the first quarter of 2024, there was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
|
| |
(b) | Changes in Internal Control Over Financial Reporting. During the fiscal quarter to which this report relates, there has been no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
|
PART II – OTHER INFORMATION
Item 1.Legal Proceedings
During the quarter ended September 30, 2017, the Company had no material developments to report with respect to its legal proceedings.
For additional information regarding the Company’sour legal proceedings, see Note 11 to12 – Commitments and Contingencies to our Consolidated Condensed Financial Statements and refer to the Company’s 2016our 2023 Form 10-K and Quarterly Report on Form 10-Q10-K.
SEC regulations require us to disclose certain information about proceedings arising under federal, state or local environmental provisions if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. In accordance with these regulations, we use a threshold of $1 million for the quarter ended March 31, 2017.purposes of determining whether disclosure of any such proceedings is required pursuant to this item.
Item 1A.Risk Factors
During the quarterthree months ended September 30, 2017, the CompanyMarch 31, 2024, we had no material developments to report with respect to itsour risk factors. For additional information regarding the Company’sour risk factors, please refer to the Company’s 2016our 2023 Form 10-K.
| |
Item 2. | Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
The following is a summary of the Company’s common stock repurchases by month for the quarter ended September 30, 2017:
|
| | | | | | | | | | | | | |
| Total Number of Shares Purchased(a) | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs |
July 2017 | 326,950 |
| | $ | 30.58 |
| | 326,950 |
| | $ | 190,476,807 |
|
August 2017 | 50 |
| | 33.80 |
| | 50 |
| | 190,475,117 |
|
September 2017 | 455,763 |
| | 36.70 |
| | 455,763 |
| | 173,749,879 |
|
Total | 782,763 |
| | $ | 34.14 |
| | 782,763 |
| | $ | 173,749,879 |
|
__________
| |
(a)
| Excludes, for the three months ended September 30, 2017, 11,565 shares which were withheld by the Company to satisfy employees’ income tax liabilities attributable to the vesting of restricted stock unit awards. |
The Company’sOur Board of Directors has authorized the repurchase of up to $1.5to approximately $8.1 billionof itsour common stock under a plan originally approved in 2013 and subsequently expanded, most recently in 2016February 2023. TheUnder our stock repurchase program, the Company’s stock repurchases may occur throughrepurchase shares from time to time in open market purchasestransactions, and may also repurchase shares in accelerated share repurchases, tender offers, privately negotiated transactions or trading plansby other means. Repurchases may also be made under a plan pursuant to Rule 10b5-1 ofunder the Securities Exchange Act of 1934.1934, as amended. The timing and amount and timing of specific repurchases are subject torepurchase transactions will be determined by the Company’s management based on its evaluation of market conditions, applicablethe Company’s share price, legal requirements, restricted payment capacity under its debt instruments and other factors. The stock repurchase program may be suspended, modified or discontinued at any time without prior notice. TheDuring the first quarter of 2024, no common stock repurchases were made under the program. As of March 31, 2024, approximately $802 million of authorization remained available to repurchase program hascommon stock under this program.
Item 5. Other Information
During the three months ended March 31, 2024, no set expirationdirector or termination date.Section 16 officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits
See Exhibit Index.
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.
| | | | | | | | | | | | | | |
| | | | | |
| | | | AVIS BUDGET GROUP, INC. |
| | |
Date: | May 2, 2024 | | | /s/ Cathleen DeGenova |
| Date: | | November 7, 2017 | | | Cathleen DeGenova |
| | | | /s/ Martyn Smith |
| | | | Martyn Smith |
| | | | Interim Chief Financial Officer |
| | |
Date: | November 7, 2017 | | | |
| | | | /s/ David T. Calabria |
| | | | David T. Calabria |
| | | | Senior Vice President and |
| | | | | | Chief Accounting Officer |
Exhibit Index
| | | | | |
Exhibit No. | Description |
3.1 | |
Exhibit No. | Description |
10.13.2 | |
4.1 | Indenture, dated as of October 7, 2016,February 28, 2024, by and among Avis Budget Holdings, LLC,Finance plc, as issuer, the guarantors party thereto, U.S. Bank Trust Company, National Association, as trustee, Elavon Financial Services DAC, as registrar and transfer agent, and Elavon Financial Services DAC, UK Branch, as paying agent (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated February 29, 2024). |
10.1 | Series 2024-1 Supplement, dated as of January 12, 2024, between Avis Budget Rental Car Rental,Funding (AESOP) LLC Avis Budget Group, Inc., the subsidiary borrowers from time to time parties thereto, JPMorgan Chaseand The Bank of New York Mellon Trust Company, N.A., as administrative agent,trustee and the several lenders from time to time parties thereto (Incorporatedas Series 2024-1 Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 24, 2017)January 18, 2024). |
10.2 | Fourth Amendment to Fifth Amended and Restated Series 2010-6 Supplement, dated as of January 12, 2024, by and among Avis Budget Rental Car Rental 2018 Model Year Program Letter dated August 29, 2017 betweenFunding (AESOP) LLC, as Issuer, Avis Budget Car Rental, LLC, as Administrator, JPMorgan Chase Bank, N.A., as Administrative Agent, the Non-Conduit Purchasers, the CP Conduit Purchasers, the Committed Note Purchasers, the APA Banks and Ford Motorthe Funding Agents named therein and The Bank of New York Mellon Trust Company, (IncorporatedN.A., as trustee and as Series 2010-6 Agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated January 18, 2024). |
10.3 | Fourth Amendment to Third Amended and Restated Series 2015-3 Supplement, dated as of January 12, 2024, by and among Avis Budget Rental Car Funding (AESOP) LLC, as Issuer, Avis Budget Car Rental, LLC, as Administrator, JPMorgan Chase Bank, N.A., as Administrative Agent, the Non-Conduit Purchasers, the CP Conduit Purchasers, the Committed Note Purchasers, the APA Banks and the Funding Agents named therein and The Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2015-3 Agent (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated January 18, 2024). |
10.4 | |
10.5 | |
10.6 | |
10.7 | Sixth Amended and Restated Series 2010-6 Supplement, dated as of March 4, 2024, by and among Avis Budget Rental Car Funding (AESOP) LLC, as Issuer, Avis Budget Car Rental, LLC, as Administrator, JPMorgan Chase Bank, N.A., as Administrative Agent, the Non-Conduit Purchasers, the CP Conduit Purchasers, the Committed Note Purchasers, the APA Banks and the Funding Agents named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee and as Series 2010-6 Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 31, 2017)March 8, 2024).* |
1210.8 | Statement re: ComputationFourth Amended and Restated Series 2015-3 Supplement, dated as of RatioMarch 4, 2024, by and among Avis Budget Rental Car Funding (AESOP) LLC, as Issuer, Avis Budget Car Rental, LLC, as Administrator, JPMorgan Chase Bank, N.A., as Administrative Agent, the Non-Conduit Purchasers, the CP Conduit Purchasers, the Committed Note Purchasers, the APA Banks and the Funding Agents named therein and The Bank of EarningsNew York Mellon Trust Company, N.A., as Trustee and as Series 2015-3 Agent (incorporated by reference to Fixed Charges.Exhibit 10.2 to the Company’s Current Report on Form 8-K dated March 8, 2024). |
31.110.9 | |
10.10 | |
31.1 | |
31.2 | |
32 | |
101.INS | XBRL Instance Document.Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH | XBRL Taxonomy Extension Schema. |
| | | | | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase. |
101.DEF | XBRL Taxonomy Extension Definition Linkbase. |
101.LAB | XBRL Taxonomy Extension Label Linkbase. |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase. |
104 | Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101) |
____________________
|
| |
* | Confidential treatment has been requested for certain portions of this Exhibit pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, which portions have been omitted and filed separately with the Securities and Exchange Commission. |