Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 Form10-Q

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

For the quarterly period ended June-30-2020
June 30, 2019

OR
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____


Commission File No. 001-10308
Avis Budget Group, Inc.
(Exact name of registrant as specified in its charter) 
Delaware06-0918165
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification Number)
6 Sylvan Way
Parsippany,NJ07054
(Address of principal executive offices)(Zip Code)
(973)496-4700
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically 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).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐    No  ☒

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, Par Value $0.01CARThe NASDAQ Global Select Market

The number of shares outstanding of the issuer’s common stock was 75,981,42069,668,363 shares as of July 31, 2019.
27, 2020.


Table of Contents
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Page
PART I
Item 1.
34
45
56
78
89
Item 2.
3929
Item 3.
4841
Item 4.
4841
PART II
Item 1.
4942
Item 1A.
4942
Item 2.
4944
Item 6.
4944
5045


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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,” 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. Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, the Coronavirus (“COVID-19”) outbreak, and the continued restrictions that have been placed on travel in many countries as a result of the outbreak and the adverse impact on the global economy from the outbreak. These factors include, but are not limited to:

•the COVID-19 outbreak and resulting economic conditions, which had, and is expected to continue to have, a significant impact on our operations, including an unprecedented decline in demand, as well as its current, and uncertain future impact, including, but not limited to, its effect on the ability or desire of people to travel due to travel restrictions, and other restrictions and orders, which is expected to continue to impact our results, operations, outlooks, plans, goals, growth, cash flows, liquidity, and stock price;

•
the high level of competition in the mobility industry, including from new companies or technology, and the impact such competition may have on pricing and rental volume;

•
a change in our fleet costs as a result of a change in the cost of new vehicles, manufacturer recalls, disruption in the supply of new vehicles, 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, 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 cars available to us or the rental car industry as a whole on commercially reasonable terms or at all;

a change in our fleet costs, including as a result of a change in the cost of new vehicles, manufacturer recalls, disruption in the supply of new vehicles, 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;

•our ability to realize our estimated cost savings on a timely basis, or at all, and the amount of cash expenditures made in connection with such cost saving efforts;

•the high level of competition in the mobility industry, including from new companies or technology, and the impact such competition may have on pricing and rental volume;

•the results of operations or financial condition of the manufacturers of our 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 vehicles available to us or the mobility industry as a whole on commercially reasonable terms or at all particularly when COVID-19 related restrictions are lifted and travel demand increases;

•the significant decline in travel demand as a result of COVID-19, including changes orthe current and any future disruptions in airline passenger traffic;

•the absence of an improvement in, or further deterioration of, economic conditions, particularly during our peak season or in key market segments;

•an occurrence or threat of terrorism, the current and any future pandemic diseases, natural disasters, military conflict, civil unrest or political instability in the locations in which we operate;

•
any change in economic conditions generally, particularly during our peak season or in key market segments;

•
an occurrence or threat of terrorism, pandemic disease, natural disasters, military conflict, civil unrest or political instability in the locations in which we operate;

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;business including the current and any future impacts as a result of COVID-19;

•our ability to continue to successfully implement our business 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;

1
•our dependence on third-party distribution channels, third-party suppliers of other services and co-marketing arrangements with third parties;

•
our dependence on third-party distribution channels, third-party suppliers of other services and co-marketing arrangements with third parties;

our dependence on the performance and retention of our senior management and key employees;

•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, gasoline prices and exchange rates, changes in government regulations and other factors;

•our exposure to uninsured or unpaid claims in excess of historical levels and our ability to obtain insurance at desired levels and the cost of that insurance;

•risks associated with litigation, 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 consumer privacy, labor and employment, and tax;

•
our ability to utilize derivative instruments, and the impact of derivative instruments we utilize, which can be affected by fluctuations in interest rates, gasoline prices and exchange rates, changes in government regulations and other factors;

•
our exposure to uninsured or unpaid claims in excess of historical levels;

•
risks associated with litigation, 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 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, and protecting the confidential information of our employees and customers against security breaches, including physical or cybersecurity breaches, attacks, or other disruptions, and compliance with privacy and data protection regulation;

•any impact on us from the actions of our licensees, dealers, third-party vendors and independent operators and independent contractors and/or disputes that may arise out of our agreements with such parties;

•
any impact on us from the actions of our licensees, dealers, third-party vendors and independent contractors;

any major disruptions in our communication networks or information systems;

•risks related to tax obligations and the effect of future changes in tax laws and accounting standards;

•risks related to our indebtedness, including our substantial outstanding debt obligations, potential interest rate increases, recent and potential further downgrades by rating agencies and our ability to incur substantially more debt;

•
risks related to our indebtedness, including our substantial outstanding debt obligations, potential interest rate increases, 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, or to obtain a waiver or amendment of such covenants should we be unable to meet such covenants;

•
our ability to meet the financial and other covenants contained in the agreements governing our indebtedness;

our ability to accurately estimate our future results;

•the further deterioration in general economic conditions due to COVID-19, which could be an indicator that our goodwill or other intangible assets are impaired and could result in a future impairment charge to earnings;

•risks related to actions by activist stockholders and responses from our Board of Directors and senior management; and

•other business, economic, competitive, governmental, regulatory, political or technological factors affecting our operations, pricing or services.

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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 of those statements. Other factors and assumptions not identified above, including those discussed inherein, including but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 2 and “Risk Factors” in Item 1A and in similarly titled sections set forth in Item 7 and in Item 1A and in other portions of our 20182019 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 21, 201920, 2020 (the “2018“2019 Form 10-K”), may contain forward- looking statements and involve uncertainties that could cause actual results to differ materially from those projected in any forward-looking statements. Such statements are based upon assumptions and known risks and uncertainties.

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. We 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.


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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 
June 30,		 Six Months Ended 
June 30,		 Three Months Ended 
June 30,		Six Months Ended 
June 30,
 2019 2018 2019 2018 2020201920202019
RevenuesRevenues$2,337
 $2,328
 $4,257
 $4,296
Revenues$760  $2,337  $2,513  $4,257  
        
ExpensesExpenses       Expenses
Operating1,172
 1,175
 2,243
 2,267
Operating622  1,172  1,680  2,243  
Vehicle depreciation and lease charges, net543
 591
 1,028
 1,106
Vehicle depreciation and lease charges, net374  543  833  1,028  
Selling, general and administrative313
 321
 597
 617
Selling, general and administrative132  313  383  597  
Vehicle interest, net90
 80
 171
 152
Vehicle interest, net87  90  170  171  
Non-vehicle related depreciation and amortization66
 67
 133
 128
Non-vehicle related depreciation and amortization71  66  140  133  
Interest expense related to corporate debt, net:       Interest expense related to corporate debt, net:
Interest expense48
 49
 90
 95
Interest expense51  48  99  90  
Early extinguishment of debt—
 —
 —
 5
Early extinguishment of debt3  —  7  —  
Restructuring and other related charges23
 4
 44
 10
Restructuring and other related charges28  23  72  44  
Transaction-related costs, net1
 3
 6
 7
Transaction-related costs, net1  1  3  6  
Total expensesTotal expenses2,256
 2,290
 4,312
 4,387
Total expenses1,369  2,256  3,387  4,312  
        
Income (loss) before income taxesIncome (loss) before income taxes81
 38
 (55) (91)Income (loss) before income taxes(609) 81  (874) (55) 
Provision for (benefit from) income taxesProvision for (benefit from) income taxes19
 12
 (26) (30)Provision for (benefit from) income taxes(128) 19  (235) (26) 
        
Net income (loss)Net income (loss)$62

$26
 $(29) $(61)Net income (loss)$(481) $62  $(639) $(29) 
        
Comprehensive income (loss)Comprehensive income (loss)$60
 $(24) $(36) $(103)Comprehensive income (loss)$(448) $60  $(705) $(36) 
        
Earnings (loss) per shareEarnings (loss) per share       Earnings (loss) per share
Basic$0.81
 $0.33
 $(0.39) $(0.75)Basic$(6.91) $0.81  $(8.96) $(0.39) 
Diluted$0.81
 $0.32
 $(0.39) $(0.75)Diluted$(6.91) $0.81  $(8.96) $(0.39) 
See Notes to Consolidated Condensed Financial Statements (Unaudited).

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Avis Budget Group, Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions, except par value)
(Unaudited)
June 30, 
2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents$1,258  $686  
Receivables, net537  911  
Other current assets445  548  
Total current assets2,240  2,145  
Property and equipment, net729  792  
Operating lease right-of-use assets2,714  2,596  
Deferred income taxes1,737  1,662  
Goodwill1,077  1,101  
Other intangibles, net790  798  
Other non-current assets227  217  
Total assets exclusive of assets under vehicle programs9,514  9,311  
Assets under vehicle programs:
Program cash79  211  
Vehicles, net10,810  12,177  
Receivables from vehicle manufacturers and other562  778  
Investment in Avis Budget Rental Car Funding (AESOP) LLC—related party725  649  
12,176  13,815  
Total assets$21,690  $23,126  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other current liabilities$2,084  $2,206  
Short-term debt and current portion of long-term debt19  19  
Total current liabilities2,103  2,225  
Long-term debt3,884  3,416  
Long-term operating lease liabilities2,226  2,140  
Other non-current liabilities735  757  
Total liabilities exclusive of liabilities under vehicle programs8,948  8,538  
Liabilities under vehicle programs:
Debt2,483  3,132  
Debt due to Avis Budget Rental Car Funding (AESOP) LLC—related party8,057  7,936  
Deferred income taxes2,013  2,189  
Other342  675  
12,895  13,932  
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.01 par value—authorized 10 shares; none issued and outstanding, respectively—  —  
Common stock, $0.01 par value—authorized 250 shares; issued 137 shares, respectively1  1  
Additional paid-in capital6,670  6,741  
Accumulated deficit(1,425) (785) 
Accumulated other comprehensive loss(223) (157) 
Treasury stock, at cost—67 and 63 shares, respectively(5,176) (5,144) 
Total stockholders’ equity(153) 656  
Total liabilities and stockholders’ equity$21,690  $23,126  
  June 30, 
2019		 December 31, 2018
Assets   
Current assets:   
 Cash and cash equivalents$534
 $615
 Receivables, net920
 955
 Other current assets832
 604
Total current assets2,286
 2,174
     
Property and equipment, net749
 736
Operating lease right-of-use assets2,409
 —
Deferred income taxes1,438
 1,301
Goodwill1,107
 1,092
Other intangibles, net806
 825
Other non-current assets223
 242
Total assets exclusive of assets under vehicle programs9,018
 6,370
     
Assets under vehicle programs:   
 Program cash48
 115
 Vehicles, net14,278
 11,474
 Receivables from vehicle manufacturers and other432
 631
 Investment in Avis Budget Rental Car Funding (AESOP) LLC—related party679
 559
  15,437
 12,779
Total assets$24,455
 $19,149
     
Liabilities and stockholders’ equity   
Current liabilities:   
 Accounts payable and other current liabilities$2,249
 $1,693
 Short-term debt and current portion of long-term debt420
 23
Total current liabilities2,669
 1,716
     
Long-term debt3,115
 3,528
Long-term operating lease liabilities1,995
 —
Other non-current liabilities752
 767
Total liabilities exclusive of liabilities under vehicle programs8,531
 6,011
     
Liabilities under vehicle programs:   
 Debt3,543
 2,874
 Debt due to Avis Budget Rental Car Funding (AESOP) LLC—related party8,913
 7,358
 Deferred income taxes2,029
 1,961
 Other1,063
 531
  15,548
 12,724
Commitments and contingencies (Note 13)

 

     
Stockholders’ equity:   
 Preferred stock, $0.01 par value—authorized 10 shares; none issued and outstanding, respectively—
 —
 Common stock, $0.01 par value—authorized 250 shares; issued 137 shares, respectively1
 1
 Additional paid-in capital6,723
 6,771
 Accumulated deficit(1,116) (1,091)
 Accumulated other comprehensive loss(139) (133)
 Treasury stock, at cost—61 shares, respectively(5,093) (5,134)
Total stockholders’ equity376
 414
Total liabilities and stockholders’ equity$24,455
 $19,149

See Notes to Consolidated Condensed Financial Statements (Unaudited).

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Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited) 
 Six Months Ended 
June 30,
 20202019
Operating activities
Net loss$(639) (29) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Vehicle depreciation748  941  
Amortization of right-of-use assets424  486  
(Gain) loss on sale of vehicles, net(13) (32) 
Non-vehicle related depreciation and amortization140  133  
Stock-based compensation2  12  
Amortization of debt financing fees16  16  
Early extinguishment of debt costs7  —  
Net change in assets and liabilities:
Receivables243  (77) 
Income taxes and deferred income taxes(240) (77) 
Accounts payable and other current liabilities(98) 72  
Operating lease liabilities(422) (483) 
Other, net182  3  
Net cash provided by operating activities350  965  
Investing activities
Property and equipment additions(64) (117) 
Proceeds received on asset sales4  6  
Net assets acquired (net of cash acquired)(60) (54) 
Other, net—  81  
Net cash used in investing activities exclusive of vehicle programs(120) (84) 
Vehicle programs:
Investment in vehicles(4,196) (8,715) 
Proceeds received on disposition of vehicles4,709  5,773  
Investment in debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party(175) (167) 
Proceeds from debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party99  47  
437  (3,062) 
Net cash provided by (used in) investing activities317  (3,146) 

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   Six Months Ended 
June 30,
   2019 2018
Operating activities   
Net loss$(29) $(61)
Adjustments to reconcile net loss to net cash provided by operating activities:   
 Vehicle depreciation941
 996
 Amortization of right-of-use assets486
 —
 (Gain) loss on sale of vehicles, net(32) (10)
 Non-vehicle related depreciation and amortization133
 128
 Stock-based compensation12
 12
 Amortization of debt financing fees16
 13
 Early extinguishment of debt costs—
 5
 Net change in assets and liabilities:   
  Receivables(77) (68)
  Income taxes and deferred income taxes(77) (49)
  Accounts payable and other current liabilities72
 141
 Operating lease liabilities(483) —
 Other, net3
 14
Net cash provided by operating activities965
 1,121
      
Investing activities   
Property and equipment additions(117) (115)
Proceeds received on asset sales6
 6
Net assets acquired (net of cash acquired)(54) (28)
Other, net81
 (37)
Net cash used in investing activities exclusive of vehicle programs(84) (174)
      
Vehicle programs:   
 Investment in vehicles(8,715) (8,359)
 Proceeds received on disposition of vehicles5,773
 4,807
 Investment in debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party(167) (22)
 Proceeds from debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party47
 —
  (3,062) (3,574)
Net cash used in investing activities(3,146) (3,748)
Avis Budget Group, Inc.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)

(In millions)
(Unaudited)
Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(In millions)
(Unaudited)
 Six Months Ended 
June 30,		 Six Months Ended 
June 30,
 2019 2018 20202019
Financing activitiesFinancing activities   Financing activities
Proceeds from long-term borrowingsProceeds from long-term borrowings2
 81
Proceeds from long-term borrowings669  2  
Payments on long-term borrowingsPayments on long-term borrowings(12) (94)Payments on long-term borrowings(198) (12) 
Net change in short-term borrowings—
 (2)
Issuance of common stockIssuance of common stock15  —  
Repurchases of common stockRepurchases of common stock(4) (78)Repurchases of common stock(118) (4) 
Debt financing feesDebt financing fees—
 (9)Debt financing fees(17) —  
Other, netOther, net(17) 2
Other, net—  (17) 
Net cash used in financing activities exclusive of vehicle programs(31) (100)
Net cash provided by (used in) financing activities exclusive of vehicle programsNet cash provided by (used in) financing activities exclusive of vehicle programs351  (31) 
    
Vehicle programs:Vehicle programs:   Vehicle programs:
Proceeds from borrowings11,758
 10,145
Proceeds from borrowings9,042  11,758  
Payments on borrowings(9,688) (7,643)Payments on borrowings(9,610) (9,688) 
Debt financing fees(12) (13)Debt financing fees(7) (12) 
 2,058
 2,489
(575) 2,058  
Net cash provided by financing activities2,027
 2,389
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities(224) 2,027  
    
Effect of changes in exchange rates on cash and cash equivalents, program and restricted cashEffect of changes in exchange rates on cash and cash equivalents, program and restricted cash4
 (2)Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash(4) 4  
    
Net decrease in cash and cash equivalents, program and restricted cash(150) (240)
Net increase (decrease) in cash and cash equivalents, program and restricted cashNet increase (decrease) in cash and cash equivalents, program and restricted cash439  (150) 
Cash and cash equivalents, program and restricted cash, beginning of periodCash and cash equivalents, program and restricted cash, beginning of period735
 901
Cash and cash equivalents, program and restricted cash, beginning of period900  735  
Cash and cash equivalents, program and restricted cash, end of periodCash and cash equivalents, program and restricted cash, end of period$585
 $661
Cash and cash equivalents, program and restricted cash, end of period$1,339  $585  
See Notes to Consolidated Condensed Financial Statements (Unaudited).

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Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
(Unaudited) 
Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance at March 31, 2020137.1  $1  $6,677  $(944) $(256) (67.5) $(5,186) $292  
Comprehensive loss:
Net loss—  —  —  (481) —  —  —  
Other comprehensive income—  33  —  —  
Total comprehensive loss(448) 
Non-controlling interest—  —  (2) —  —  —  —  (2) 
Net activity related to restricted stock units—  —  (5) —  —  0.1  10  5  
Balance at June 30, 2020137.1  $1  $6,670  $(1,425) $(223) (67.4) $(5,176) $(153) 
 
Balance at March 31, 2019137.1  $1  $6,737  $(1,178) $(137) (61.1) $(5,099) $324  
Comprehensive income:
Net income—  —  —  62  —  —  —  
Other comprehensive loss—  —  —  —  (2) —  —  
Total comprehensive income60  
Net activity related to restricted stock units—  —  2  —  —  —  6  8  
Option premiums paid—  —  (16) —  —  —  —  (16) 
Balance at June 30, 2019137.1  $1  $6,723  $(1,116) $(139) (61.1) $(5,093) $376  
Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Stockholders’ Equity
Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders’ EquitySharesAmountSharesAmount
Shares Amount Shares Amount 
Balance at March 31, 2019137.1
 $1
 $6,737
 $(1,178) $(137) (61.1) $(5,099) $324
               
Comprehensive income:               
Net income—
 —
 —
 62
 —
 —
 —
  
Other comprehensive loss—
 —
 —
 —
 (2) —
 —
  
               
Total comprehensive income              60
               
Net activity related to restricted stock units—
 —
 2
 —
 —
 —
 6
 8
Option premiums paid—
 —
 (16) —
 —
 —
 —
 (16)
               
Balance at June 30, 2019137.1
 $1
 $6,723
 $(1,116) $(139) (61.1) $(5,093) $376
               
Balance at March 31, 2018137.1
 $1
 $6,780
 $(1,344) $(22) (55.9) $(4,960) $455
Balance at December 31, 2019Balance at December 31, 2019137.1  $1  $6,741  $(785) $(157) (63.2) $(5,144) $656  
               
Cumulative effect of accounting change—
 —
 —
 2
 —
 —
 —
 2
Cumulative effect of accounting change—  —  —  (1) —  —  —  (1) 
               
Comprehensive loss:               Comprehensive loss:
Net income—
 —
 —
 26
 —
 —
 —
  
Net lossNet loss—  —  —  (639) —  —  —  
Other comprehensive lossOther comprehensive loss—  —  —  —  (66) —  —  
Total comprehensive lossTotal comprehensive loss(705) 
Non-controlling interestNon-controlling interest—  —  (2) —  —  —  —  (2) 
Net activity related to restricted stock unitsNet activity related to restricted stock units—  —  (84) —  —  0.4  81  (3) 
Issuance of common stockIssuance of common stock—  —  15  —  —  0.4  —  15  
Repurchase of common stockRepurchase of common stock—  —  —  —  —  (5.0) (113) (113) 
Balance at June 30, 2020Balance at June 30, 2020137.1  $1  $6,670  $(1,425) $(223) (67.4) $(5,176) $(153) 
Balance at December 31, 2018Balance at December 31, 2018137.1  $1  $6,771  $(1,091) $(133) (61.5) $(5,134) $414  
Cumulative effect of accounting changeCumulative effect of accounting change—  —  —  4  1  —  —  5  
Comprehensive lossComprehensive loss
Net lossNet loss—  —  —  (29) —  —  —  
Other comprehensive loss—
 —
 —
 —
 (50) —
 —
  Other comprehensive loss—  —  —  —  (7) —  —  
               
Total comprehensive loss              (24)Total comprehensive loss(36) 
               
Net activity related to restricted stock units—
 —
 1
 —
 —
 —
 5
 6
Net activity related to restricted stock units—  —  (27) —  —  0.3  36  9  
Exercise of stock options—
 —
 (2) —
 —
 0.1
 2
 —
Exercise of stock options—  —  (5) —  —  0.1  5  —  
Repurchase of common stock—
 —
 —
 —
 —
 (1.6) (67) (67)
Option premiums paidOption premiums paid—  —  (16) —  —  —  —  (16) 
               
Balance at June 30, 2018137.1
 $1
 $6,779
 $(1,316) $(72) (57.4) $(5,020) $372
Balance at June 30, 2019Balance at June 30, 2019137.1  $1  $6,723  $(1,116) $(139) (61.1) $(5,093) $376  

 Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders’ Equity
 Shares Amount    Shares Amount 
Balance at December 31, 2018137.1
 $1
 $6,771
 $(1,091) $(133) (61.5) $(5,134) $414
                
Cumulative effect of accounting change—
 —
 —
 4
 1
 —
 —
 5
                
Comprehensive loss:               
Net loss—
 —
 —
 (29) —
 —
 —
  
Other comprehensive loss—
 —
 —
 —
 (7) —
 —
  
                
Total comprehensive loss              (36)
                
Net activity related to restricted stock units—
 —
 (27) —
 —
 0.3
 36
 9
Exercise of stock options—
 —
 (5) —
 —
 0.1
 5
 —
Option premiums paid—
 —
 (16) —
 —
 —
 —
 (16)
                
Balance at June 30, 2019137.1
 $1
 $6,723
 $(1,116) $(139) (61.1) $(5,093) $376
                
Balance at December 31, 2017137.1
 $1
 $6,820
 $(1,222) $(24) (56.3) $(5,002) $573
                
Cumulative effect of accounting change—
 —
 —
 (33) (6) —
 —
 (39)
                
Comprehensive loss:               
Net loss—
 —
 —
 (61) —
 —
 —
  
Other comprehensive loss—
 —
 —
 —
 (42) —
 —
  
                
Total comprehensive loss              (103)
                
Net activity related to restricted stock units—
 —
 (26) —
 —
 0.3
 32
 6
Exercise of stock options—
 —
 (15) —
 —
 0.2
 17
 2
Repurchase of common stock—
 —
 —
 —
 —
 (1.6) (67) (67)
                
Balance at June 30, 2018137.1
 $1
 $6,779
 $(1,316) $(72) (57.4) $(5,020) $372
See Notes to Consolidated Condensed Financial Statements (Unaudited).

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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

1.Basis of Presentation

Avis Budget Group, Inc. provides mobility 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, 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 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 does 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 does not operate directly.

—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 does 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 does 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 20182019 acquisitions of Turiscar Group, Morini S.p.A and various licensees in Europe and North America havehas not yet been finalized; however, there have been no significant changes to the preliminary allocation of the purchase price during the six months ended June 30, 2019.2020.

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 20182019 Form 10-K.

Liquidity and Management’s Plans

The continuing cases of COVID-19 and the developments surrounding the global pandemic are having a material negative impact on all aspects of the Company’s business. Significant events affecting travel have historically had an impact on vehicle rental volumes, with the full extent of the impact generally determined by the length of time the event influences travel decisions. The COVID-19 outbreak and resulting economic conditions have had, and the Company believes will continue to have, a significant adverse impact on its operations and vehicle rental volumes, and on its financial results and liquidity, and such negative impact may continue well beyond the containment of the outbreak.

The Company cannot assure its assumptions used to estimate its liquidity requirements will be correct because it has never previously experienced such a decrease in demand, and as a consequence, its ability to be predictive is uncertain. In addition, the duration of the global pandemic is uncertain. Therefore, the Company has taken, and plans to take further actions to manage its liquidity, including reducing capital expenditures, operating expenses and the number of vehicles in its fleet. The Company has no meaningful corporate debt maturities until 2023. The Company plans to finance the routine Asset Backed Securities (“ABS”) maturities with program cash on hand, available revolving debt capacity and fleet sales. As a result, based on current operational assumptions, the Company believes it has adequate liquidity for the balance
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of 2020 and into 2021.

In April 2020, the Company entered into an amendment (the “Amendment”) to its senior credit facilities, consisting of an approximately $1.2 billion term loan maturing in 2027 and a $1.8 billion revolving credit facility maturing in 2023, which remain in place after the Amendment. The Amendment provides for relief from the quarterly-tested leverage covenant contained in the credit agreement governing the senior credit facilities until the end of a specific relief period, including a holiday from such leverage covenant through June 30, 2021, during which time (i) certain negative covenant exceptions are not available to the Company, (ii) pricing on the senior credit facilities is increased, (iii) the Company must comply with a liquidity covenant and additional reporting requirements and (iv) the Company must meet additional conditions to borrow under the revolving credit facility.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are fully described in Note 2, “Summary of Significant Accounting Policies,” in the Company’s Annual Report on2019 Form 10-K for fiscal year 2018.10-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 Consolidated Condensed Statements of Cash Flows.
As of June 30,As of June 30,
2019 201820202019
Cash and cash equivalents$534
 $489
Cash and cash equivalents$1,258  $534  
Program cash48
 161
Program cash79  48  
Restricted cash (a)
3
 11
Restricted cash (a)
2  3  
Total cash and cash equivalents, program and restricted cash$585
 $661
Total cash and cash equivalents, program and restricted cash$1,339  $585  
________
(a)
(a)Included within other current assets.

Included within other current assets.

Vehicle Programs. The Company presents separately the financial data of its vehicle programs. These programs are distinct from the Company’s 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’s vehicle programs. The Company believes it is appropriate to segregate the financial data of its 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 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, 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 records the gain or loss on foreign-currency transactions on certain intercompany loans and the gain or loss on intercompany loan hedges within interest expense related to corporate debt, net. During the three months ended June 30, 20192020 and 2018,2019, the Company recorded an immaterial amount, in each period, and duringrelated to such items. During the six months ended June 30, 20192020 and 2018,2019, the Company recorded a loss of $6 million and a gain of $3 million and an immaterial amount, respectively,in each period, related to such items.

Divestitures. In 2018, the Company entered into a definitive stock purchase agreement to sell its 50% equity method investment in Anji Car Rental & Leasing Company Limited (“Anji”China”), located in China, to Shanghai Automotive Industry Sales Company, Ltd., a 50% owner of Anji. Upon receiving clearance from applicable regulatory authorities in China during the second quarter ofChina. In 2019, the Company completed the sale for $64 million, net of cross-border withholding taxes and recorded a $44 million gain within operating expenses. Anji’sChina’s operations arewere reported within the Company’s International segment.

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Other Investments. As of June 30, 20192020 and December 31, 2018,2019, the Company had equity method investments with a carrying value of $48$53 million in each period,and $56 million respectively, which are recorded within other non-current assets. Earnings from the Company’s equity method investments are reported within operating expenses. For the three and six months ended June 30, 2020, the Company recorded income of $1 million and for the three and six months ended June 30, 2019, the Company recorded income of $4 million related to its equity method investments, and for the three and six months ended June 30, 2018, such amounts were not material.investments.

Nonmarketable Equity Securities. As of June 30, 20192020 and December 31, 2018,2019, the Company’s carrying amount ofCompany had nonmarketable equity securities waswith a carrying value of $8 million in each period, and iswhich are recorded within other non-current assets. During the six months ended June 30, 2019 the Company realized a $12 million gain from the sale of a nonmarketable equity security which is recorded within operating expenses. No adjustments were made to the carrying amounts during the three months ended June 30, 2019 and 2018, and during the six months ended June 30, 2018.2020, and during the three months ended June 30, 2019.

Revenues. RFrom January 1, 2018 through December 31, 2018, the Company’s revenues were recognized in accordance with ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” Effective January 1, 2019, revenuesevenues are recognized under ASU 2016-02, “Leases (Topic 842),” with the exception of royalty fee revenue derived from the Company’s licensees and revenue related to the Company’s customer loyalty program, which were approximately $22 million and $33 million during the three months ended June 30, 2020 and 2019, respectively and $54 million and $63 million during the three and six months ended June 30, 2020 and 2019, respectively.

The following table presents the Company’s revenues disaggregated by geography.
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended 
June 30,		Six Months Ended 
June 30,
 2019 2018 2019 20182020201920202019
AmericasAmericas$1,627
 $1,590
 $2,954
 $2,938
Americas$565  $1,627  $1,822  $2,954  
Europe, Middle East and AfricaEurope, Middle East and Africa572
 600
 1,005
 1,047
Europe, Middle East and Africa159  572  516  1,005  
Asia and AustralasiaAsia and Australasia138
 138
 298
 311
Asia and Australasia36  138  175  298  
Total revenuesTotal revenues$2,337
 $2,328
 $4,257
 $4,296
Total revenues$760  $2,337  $2,513  $4,257  



The following table presents the Company’s revenues disaggregated by brand.
 Three Months Ended June 30, Six Months Ended June 30,Three Months Ended 
June 30,		Six Months Ended 
June 30,
 2019 2018 2019 20182020201920202019
AvisAvis$1,328
 $1,351
 $2,428
 $2,496
Avis$402  $1,328  $1,387  $2,428  
BudgetBudget816
 777
 1,467
 1,419
Budget267  816  886  1,467  
OtherOther193
 200
 362
 381
Other91  193  240  362  
Total revenuesTotal revenues$2,337
 $2,328
 $4,257
 $4,296
Total revenues$760  $2,337  $2,513  $4,257  
________
Other includes Zipcar and other operating brands.

Deferred Revenue.The following table presents changes in deferred revenue associated with the Company’s customer loyalty program.
 Six Months Ended June 30,
 2019 2018
Balance, January 1$64
 $69
Revenue deferred12
 10
Revenue recognized(10) (7)
Balance, June 30$66
 $72
_______
At June 30, 2019 and 2018, $22 million and $18 million was included in accounts payable and other current liabilities, respectively, and $44 million and $54 million, respectively, in other non-current liabilities. Non-current amounts are expected to be recognized as revenue within two to three years.

At January 1, 2018, the Company’s prepaid rentals and membership fees related to its car sharing business were $125 million. During the six months ended June 30, 2018, additional revenues of $989 million were deferred and revenues of $883 million were recognized. At June 30, 2018, the ending prepaid rentals and car sharing membership fees were $231 million, of which $229 million was included in accounts payable and other current liabilities and $2 million was included in other non-current liabilities.

Adoption of New Accounting Pronouncements

Nonemployee Share-Based Payment AccountingIntangibles—Goodwill and Other—Internal-Use Software

On January 1, 2019, as a result of a new accounting pronouncement, the Company adopted Accounting Standards Update (“ASU”) 2018-02, “Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. The adoption of this accounting pronouncement did not have an impact on the Company's Consolidated Condensed Financial Statements.
Accounting for Hedging Activities

On January 1, 2019,2020, as the result of a new accounting pronouncement, the Company adopted 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 ofan entity’s risk management activities in the financial statements. The adoption of this standard did not have a material impact on the Company’s Consolidated Condensed Financial Statements.

Leases

On January 1, 2019, as the result of a new accounting pronouncement, the Company adopted Topic 842 along with related updates, which require 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. Topic 842 does not significantly change a lessee’s

recognition, measurement and presentation of expenses. Additionally, Topic 842 aligns key aspects of lessor accounting with the revenue recognition guidance in Topic 606.

The Company elected available practical expedients for existing or expired contracts of lessees and lessors wherein the Company is not required to reassess whether such contracts contain leases, the lease classification or the initial direct costs. The Company is not utilizing the practical expedient which allows the use of hindsight by lessees and lessors in determining the lease term and in assessing impairment of its right-of-useStandard Update (“ROU”ASU”) assets. Additionally, the Company elected as accounting policies to not recognize ROU assets or lease liabilities for short-term property leases (i.e., those with a term of 12 months or less at lease commencement) and, by class of underlying asset, to combine lease and nonlease components in the contract. The Company utilized the transition method allowing entities to only apply the new lease standard in the year of adoption.

Lessor
The Company has determined that revenues derived by providing vehicle rentals and other related products and mobility services to customers are within the scope of the accounting guidance contained in Topic 842 with the exception of royalty fee revenue derived from the Company’s licensees and revenue related to the Company’s customer loyalty program. The Company’s rental related revenues have been accounted for under the revenue accounting standard Topic 606, until the adoption of Topic 842.

The Company excludes from the measurement of its lease revenues any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction and collected from a customer. As a result, lease revenues exclude such taxes collected. Fees collected from customers for which the Company is the primary obligor such as airport concessions and vehicle licensing are recorded within revenues and corresponding remittances of these fees by the Company are recorded within operating expenses.

Lessee
The Company determines if an arrangement is a lease at inception. Operating leases, other than those associated with the Company’s vehicle rental programs, are included in operating lease ROU assets, accounts payable and other current liabilities, and long-term operating lease liabilities in the Company’s Consolidated Condensed Balance Sheets. Finance leases, other than those associated with the Company’s vehicle rental programs, are included in property and equipment, net, short-term debt and current portion of long-term debt, and long-term debt in the Company’s Consolidated Condensed Balance Sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. The operating lease ROU assets are reduced by any lease incentives. The Company’s lease terms may include options to extend or terminate the lease, which are included in the calculation of ROU assets when it is reasonably certain that the Company will exercise those options. Lease expense for lease payments is usually recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, which are generally not accounted for separately. Additionally, for certain leases, the Company applies a portfolio approach to account for the operating lease ROU assets and liabilities as the leases are similar in nature and have nearly identical contract provisions.

Adoption of this standard resulted in most of the Company’s operating lease commitments being recognized as operating lease liabilities and right-of-use assets, which increased total assets and total liabilities by approximately $2,811 million related to property operating leases and $183 million related to vehicle operating leases. The Company recorded a beginning accumulated deficit adjustment of $5 million, net of tax, related to the adoption of this standard.


Recently Issued Accounting Pronouncements

Intangibles—Goodwill and Other—Internal—Use Software

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-15 “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement That Is a Service Contract,” which provides guidance for determining when the arrangement includes a software license. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal useinternal-use software (and hosting arrangements that include an internal use software license). The amendments in this updateUpdate also require the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, to present the expense in the same line in its statement of income as the fees associated with the hosting element (service) of the arrangement and classify payments for capitalized implementation costs in its statement of cash flows in the same manner as payments made for fees
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associated with the hosting element. The entity is also required to present the capitalized implementation costs in its balance sheet in the same line that a prepayment for the fees of the associated hosting arrangement would be presented. ASU 2018-15 becomes effective for the Company on January 1, 2020. Early adoption is permitted. The Company is currently evaluating the impact of adopting this accounting pronouncement on its Consolidated Condensed Financial Statements.

Compensation—Retirement Benefits—Defined Benefit Plans

In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans,” which adds, removes, and clarifies disclosure requirements related to defined benefit pension and other postretirement plans. These changes are part of the FASB’s disclosure framework project, which the Board launched in 2014 to improve the effectiveness of disclosures in notes to financial statements. ASU 2018-14 becomes effective for the Company on January 1, 2021. Early adoption is permitted. The adoption of this accounting pronouncement isdid not expected to have a material impact on the Company's Consolidated Condensed Financial Statements.

Fair Value Measurement

In August 2018,On January 1, 2020, as the FASB issuedresult of a new accounting pronouncement, the Company adopted ASU 2018-13, “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement,” which adds, removes, and modifies disclosure requirements related to fair value measurements. ASU 2018-13 becomes effective for the Company on January 1, 2020. Early adoption is permitted. The adoption of this accounting pronouncement isdid not expected to have a material impact on the Company's Consolidated Condensed Financial Statements.

Measurement of Credit Losses on Financial Instruments

In June 2016,On January 1, 2020, as the FASB issuedresult of a new accounting pronouncement, the Company adopted ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” and related updates which along with related clarifying updates, setsets 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 that are expected to occur over the remaining life of a financial asset. The adoption of this accounting pronouncement did not have a material impact on the Company's Consolidated Condensed Financial Statements.

Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities

During first quarter 2020, the Company early adopted the Securities Exchange Commission’s, “Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities” rules, which simplify the disclosure requirements related to the Company’s registered securities under Rule 3-10 of Regulation S-X. The final rule also allows for the simplified disclosure to be included within Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Recently Issued Accounting Pronouncements

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued 2019-12, “Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions and improving the application of existing guidance. ASU 2016-132019-12 becomes effective for the Company on January 1, 2020.2021. Early adoption is permitted aspermitted. The Company is currently evaluating the impact of this accounting pronouncement on its Consolidated Condensed Financial Statements.

Compensation—Retirement Benefits—Defined Benefit Plans

In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans,” which adds, removes, and clarifies disclosure requirements related to defined benefit pension and other postretirement plans. These changes are part of the FASB’s disclosure framework project, which the Board launched in 2014 to improve the effectiveness of disclosures in notes to financial statements. ASU 2018-14 becomes effective for the Company on January 1, 2019.2021. Early adoption is permitted. The adoption of this accounting pronouncement is not expected to have a material impact on the Company’sCompany's Consolidated Condensed Financial Statements.

2.Leases

Lessor2. Leases

For periods after January 1, 2019, the Company combines all lease and nonlease components
12
Table of its vehicle rental contracts for which the timing and pattern of transfer are the same and the lease component meets the classification of an operating lease, and accounts for them in accordance with Topic 842. The Company derives revenues primarily by providing vehicle rentals and other related products and mobility services toContents

commercial and leisure customers. Other related products and mobility services include sales of collision and loss damage waivers under which a customer is relieved from financial responsibility arising from vehicle damage incurred during the rental; products and services for driving convenience such as fuel service options, chauffeur drive services, roadside safety net, electronic toll collection, tablet rentals, access to satellite radio, portable navigation units and child safety seat rentals; and rentals of other supplemental items including automobile towing equipment and other moving accessories and supplies. The Company also receives payment from customers for certain operating expenses that it incurs, including airport concession fees that are paid by the Company in exchange for the right to operate at airports and other locations, as well as vehicle licensing fees. Vehicle rentals and other related products and mobility services are recognized evenly over the period of rental, which is on average four days. In addition, the Company collects membership leasing fees in connection with its car sharing business. Membership leasing fees are generally nonrefundable, are deferred and recognized ratably over the period of membership.

The following table presents the Company’s lease revenues disaggregated by geography.
 Three Months Ended June 30, 2019 Six Months Ended 
June 30, 2019
Americas$1,617
 $2,936
Europe, Middle East and Africa553
 967
Asia and Australasia134
 291
Total lease revenues$2,304
 $4,194


Three Months Ended 
June 30,		Six Months Ended 
June 30,
2020201920202019
Americas$552  $1,617  $1,796  $2,936  
Europe, Middle East and Africa151  553  493  967  
Asia and Australasia35  134  170  291  
Total lease revenues$738  $2,304  $2,459  $4,194  
The following table presents the Company’s lease revenues disaggregated by brand.
Three Months Ended 
June 30,		Six Months Ended 
June 30,
 2020201920202019
Avis$389  $1,311  $1,357  $2,394  
Budget261  804  869  1,444  
Other88  189  233  356  
Total lease revenues$738  $2,304  $2,459  $4,194  
 Three Months Ended June 30, 2019 Six Months Ended 
June 30, 2019
Avis$1,311
 $2,394
Budget804
 1,444
Other189
 356
Total lease revenues$2,304
 $4,194
_______________
Other includes Zipcar and other operating brands.

Lessee

The Company has operating and finance leases for rental locations, corporate offices, vehicle rental fleet and equipment. Many of the Company’s operating leases for rental locations contain concession agreements with various airport authorities that allow the Company to conduct its vehicle rental operations on site. In general, concession fees for airport locations are based on a percentage 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 measurement of operating lease ROU assets and operating lease liabilities, and are recorded as variable lease expense as incurred. The Company’s operating leases for rental locations often also require the Company to pay or reimburse operating expenses.

The Company leases a portion of its vehicles under operating leases, some of which extend through 2025. As of June 30, 2019, the Company has guaranteed up to $278 million of residual values for these vehicles at the end of their respective lease terms. The Company believes that, based on current market conditions, the net proceeds from the sale of these vehicles at the end of their lease terms will equal or exceed their net book values and therefore has not recorded a liability related to guaranteed residual values.


The components of lease expense are as follows:
 Three Months Ended June 30, 2019 Six Months Ended 
June 30, 2019
Property leases (a)
   
Operating lease expense$179
 $356
Variable lease expense74
 126
Sublease income(3) (4)
Total property lease expense$250
 $478
    
Vehicle leases   
Finance lease expense:   
Amortization of ROU assets (b)
$12
 $23
Interest on lease liabilities (c)
1
 2
Operating lease expense (b)
62
 119
Total vehicle lease expense$75
 $144
Three Months Ended 
June 30,		Six Months Ended 
June 30,
2020201920202019
Property leases (a)
Operating lease expense$128  $179  $313  $356  
Variable lease expense20  74  56  126  
Total property lease expense$148  $253  $369  $482  
__________
(a)
(a) Primarily included in operating expense and includes $30 million of minimum annual guaranteed rent in excess of concession fees as defined in our rental concession agreement for the three and six months ended June 30, 2020.
Primarily included in operating expense.
(b)
Included in vehicle depreciation and lease charges, net.
(c)
Included in vehicle interest, net.



Supplemental balance sheet information related to leases is as follows:
 As of June 30, 2019
Property leases 
Operating lease ROU assets$2,409
  
Short-term operating lease liabilities (a)
$433
Long-term operating lease liabilities1,995
Operating lease liabilities$2,428
  
Weighted average remaining lease term9.5 years
Weighted average discount rate4.57%
  
Vehicle leases 
Finance 
Finance lease ROU assets, gross$332
Accumulated amortization(53)
Finance lease ROU assets, net (b)
$279
  
Short-term vehicle finance lease liabilities$105
Long-term vehicle finance lease liabilities141
Vehicle finance lease liabilities (c)
$246
  
Weighted average remaining lease term1.6 years
Weighted average discount rate1.48%
  
Operating 
Vehicle operating lease ROU assets (d)
$216
  
Short-term vehicle operating lease liabilities$170
Long-term vehicle operating lease liabilities46
Vehicle operating lease liabilities (e)
$216
  
Weighted average remaining lease term2.2 years
Weighted average discount rate2.89%
As of 
June 30, 2020		As of 
December 31, 2019
Property leases
Operating lease ROU assets$2,714  $2,596  
Short-term operating lease liabilities (a)
$513  $479  
Long-term operating lease liabilities2,225  2,140  
Operating lease liabilities$2,738  $2,619  
Weighted average remaining lease term8.8 years8.9 years
Weighted average discount rate4.12 %4.31 %
_________
(a)
(a) Included in Accounts payable and other current liabilities.
Included in Accounts payable and other current liabilities.
(b)
Included in Vehicles, net within Assets under vehicle programs.
(c)
Included in Debt within Liabilities under vehicle programs.

(d)
Included in Receivables from vehicle manufacturers and other within Assets under vehicle programs.
(e)
Included in Other within Liabilities under vehicle programs.



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Supplemental cash flow information related to leases is as follows:
Six Months Ended 
June 30,
20202019
Cash payments for lease liabilities within operating activities:
Property operating leases$327  $378  
Non-cash activities - increase (decrease) in ROU assets in exchange for lease liabilities:
Property operating leases (a)
455  (17) 
_________
(a)For the six months ended June 2019, ROU assets obtained in exchange for lease liabilities from initial recognition.
 Six Months Ended 
June 30, 2019
Cash payments for lease liabilities within operating activities: 
Property operating leases$378
Vehicle operating leases105
Vehicle finance leases2
Cash payments for lease liabilities within financing activities: 
Vehicle finance leases90
Non-cash activities - increase (decrease) in ROU assets in exchange for lease liabilities: 
Property operating leases (a)
(17)
Vehicle operating leases (a)
136
Vehicle finance leases133

_________
(a)
ROU assets obtained in exchange for lease liabilities from initial recognition.

3.  Restructuring and Other Related Charges
Maturities of lease liabilities
Restructuring

During first quarter 2020, the Company initiated a global restructuring plan to reduce operating costs, such as ofheadcount and facilities, due to declining reservations and revenue resulting from the COVID-19 outbreak (“2020 Optimization Plan”). During the six months ended June 30, 2019 are2020, as follows:part of this process, the Company formally communicated the termination of employment to approximately 2,400 employees. The Company expects further restructuring expense of approximately $20 million related to this initiative to be incurred in 2020.
 Property Operating Leases Vehicle Finance Leases Vehicle Operating Leases
Within 1 year$531
 $105
 $149
Between 1 and 2 years420
 7
 56
Between 2 and 3 years360
 129
 14
Between 3 and 4 years297
 5
 3
Between 4 and 5 years229
 —
 —
Thereafter1,199
 —
 —
Total lease payments3,036
 246
 222
Less: Imputed interest(608) —
 (6)
Total$2,428
 $246
 $216


During third quarter 2019, the Company initiated a restructuring plan to exit its operations in Brazil by closing rental facilities, disposing of assets and terminating personnel (“Brazil”). During the six months ended June 30, 2020, as part of this initiative, the Company formally communicated the termination of employment to approximately 20 employees. The Company expects further restructuring expense of approximately $7 million to be incurred.
Future minimum lease payments required under noncancelable operating leases, including minimum concession fees charged by airport authorities, which in many locations are recoverable from vehicle rental customers, as of December 31, 2018, were as follows:
 Amount
2019$835
2020476
2021345
2022253
2023162
Thereafter590
 $2,661



3.Restructuring and Other Related Charges

Restructuring

During first quarter 2019, the Company initiated a restructuring plan to drive global efficiency by improving processes and consolidating functions, and to create new objectives and strategies for its U.S. truck rental operations by reducing headcount, large vehicles and rental locations (“T19”). During the six months ended June 30, 2019, as part of this process, the Company formally communicated the termination of employment to approximately 240 employees, and as of June 30, 2019, the Company had terminated approximately 225 of these employees. The Company expects further restructuring expense of approximately $25 million related to this initiative to be incurred in 2019.

During first quarter 2018, the Company initiated a strategic restructuring plan to improve processes and reduce headcount in response to its new workforce planning technology that allows more effective management of staff levels (“Workforce planning”). The costs associated with this initiative primarily represent severance, outplacement services and other costs associated with employee terminations, the majority of which have been settled in cash. This initiative is substantially complete.

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The following tables summarize the changes to our restructuring-related liabilities and identifies the amounts recorded within the Company’s reporting segments for restructuring charges and corresponding payments and utilizations:
  Americas International Total
Balance as of January 1, 2019$—
 $2
 $2
 Restructuring expense:     
 T1925
 8
 33
 Restructuring payment/utilization:     
 T19(20) (7) (27)
 Workforce planning—
 (1) (1)
Balance as of June 30, 2019$5
 $2
 $7
       
  Personnel
Related		 
Other (a)
 Total
Balance as of January 1, 2019$1
 $1
 $2
 Restructuring expense:     
 T1913
 20
 33
 Restructuring payment/utilization:     
 T19(12) (15) (27)
 Workforce planning(1) —
 (1)
Balance as of June 30, 2019$1
 $6
 $7

AmericasInternationalTotal
Balance as of January 1, 2020$2  $4  $6  
Restructuring expense:
2020 Optimization Plan24  23  47  
Brazil1  —  1  
T194  —  4  
Restructuring payment/utilization:
2020 Optimization Plan(19) (17) (36) 
Brazil(2) —  (2) 
T19(6) (3) (9) 
Balance as of June 30, 2020$4  $7  $11  
 PersonnelFacility
Related
Other (a)
Total
Balance as of January 1, 2020$3  $1  $2  $6  
Restructuring expense:
2020 Optimization Plan44  1  2  47  
Brazil1  —  —  1  
T19—  —  4  4  
Restructuring payment/utilization:
2020 Optimization Plan(35) —  (1) (36) 
Brazil(1) (1) —  (2) 
T19(4) —  (5) (9) 
Balance as of June 30, 2020$8  $1  $2  $11  
__________
(a)
(a)Includes expenses primarily related to the disposition of vehicles.

Includes expenses primarily related to the disposition of vehicles.

Other Related Charges

Limited Voluntary Opportunity Plan (“LVOP”)

During 2020, the Company offered a voluntary termination program to certain employees in field operations, shared services, and general and administrative functions for a limited time. These employees, if qualified, elected resignation from employment in return for enhanced severance benefits to be settled in cash. During the six months ended June 30, 2020, the Company recorded other related charges of approximately $18 million in connection with the LVOP. As of June 30, 2020, approximately 400 qualified employees elected to participate in the plan and the employment of all participants had been terminated.

Officer Separation Costs

In March 2020, the Company announced the departure of Michael K. Tucker as Executive Vice President, General Counsel effective March 27, 2020. In connection with Mr. Tucker’s separation, the Company recorded other related charges of approximately $2 million for the six months ended June 30, 2020.

In March 2019, the Company announced the resignation of Mark J. Servodidio as the Company’s President, International effective June 14, 2019. In connection with Mr. Servodidio’s departure, the Company recorded other related charges of approximately $3 million, inclusive of accelerated stock-based compensation expense.expense for the six months ended June 30, 2019.

In May 2019, the Company announced the resignation of Larry D. De Shon as the Company’s President and Chief Executive Officer. Mr. De Shon will continuecontinued to serve in his role until a successor has been named and will be employed by the Company through December 31, 2019. In connection with Mr. De Shon’s departure, the Company recorded other related charges of approximately $8 million, inclusive of

accelerated stock-based compensation expense and expects another $5 million to be incurred in 2019 for the remaining portionsix months ended June 30, 2019.
15
Table of accelerated stock-based compensation expense.Contents

4. Earnings Per Share
4.Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (“EPS”) (shares in millions): 
 Three Months Ended 
June 30,		Six Months Ended June 30,
 2020201920202019
Net income (loss) for basic and diluted EPS$(481) $62  $(639) $(29) 
Basic weighted average shares outstanding69.6  76.0  71.3  75.9  
Options and non-vested stock (a)
—  0.4  —  —  
Diluted weighted average shares outstanding69.6  76.4  71.3  75.9  
Earnings (Loss) per share:
Basic$(6.91) $0.81  $(8.96) $(0.39) 
Diluted$(6.91) $0.81  $(8.96) $(0.39) 
  Three Months Ended 
June 30,		 Six Months Ended June 30,
  2019 2018 2019 2018
Net income (loss) for basic and diluted EPS$62
 $26
 $(29) $(61)
         
Basic weighted average shares outstanding76.0
 80.7
 75.9
 80.8
Options and non-vested stock (a)
0.4
 0.8
 —
 —
Diluted weighted average shares outstanding76.4
 81.5
 75.9
 80.8
         
Earnings (loss) per share:       
 Basic$0.81
 $0.33
 $(0.39) $(0.75)
 Diluted$0.81
 $0.32
 $(0.39) $(0.75)
__________
(a)For the three and six months ended June 30, 2020, 1.3 million, respectively non-vested stock awards, have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding. For the three months ended June 30, 2019, 0.5 million non-vested stock awards at June 30, 2019, have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding. As the Company incurred a net loss for the six months ended June 30, 2019, 1.2 million non-vested stock awards at June 30, 2019 have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding.

__________
(a)
For the three months ended June 30, 2019 and 2018, 0.5 million and 0.2 million non-vested stock awards at June 30, 2019 and 2018, respectively, have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding. As the Company incurred a net loss for the six months ended June 30, 2019 and 2018, 0.1 million outstanding options, at June 30, 2018, and 1.2 million and 1.5 million non-vested stock awards at June 30, 2019 and 2018, respectively, have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding.

5.5.  Acquisitions


Avis and Budget Licensees

In 2019,During the six months ended June 30, 2020, the Company completed the acquisitions of various licensees primarily in North America and Europe, for approximately $32$27 million, plus $19$21 million for acquired fleet. These investments were in-line with the Company’s strategy to re-acquire licensees when advantageous to expand its footprint of Company-operated locations. The acquired fleet was financed under the Company’s existing financing arrangements. The excess of the purchase price over preliminary fair value of net assets acquired was allocated to goodwill, which was assigned to the Company’s Americas reportable segment. In connection with these acquisitions, approximately $21$27 million was recorded in goodwill, other intangibles of $7 million related to customer relationships and $4 million related to license agreements. The license agreements and customer relationships are being amortized over a weighted average useful life of approximately fourtwo years. The goodwill is expected to be deductible for tax purposes. The fair value of the assets acquired and liabilities assumed has not yet been finalized and is therefore subject to change.

6.Other Current Assets
6. Other Current Assets

Other current assets consisted of:
As of 
June 30, 
2020		As of December 31, 2019
Prepaid expenses$165  $234  
Sales and use taxes134  173  
Other146  141  
Other current assets$445  $548  
 As of 
June 30, 
2019		 As of December 31, 2018
Sales and use taxes$376
 $180
Prepaid expenses281
 241
Other175
 183
Other current assets$832
 $604
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7. Intangible Assets



7.Intangible Assets

Intangible assets consisted of:
 As of June 30, 2019 As of December 31, 2018
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Amortized Intangible Assets           
License agreements$308
 $183
 $125
 $305
 $168
 $137
Customer relationships258
 154
 104
 251
 141
 110
Other52
 24
 28
 52
 21
 31
Total$618
 $361
 $257
 $608
 $330
 $278
            
Unamortized Intangible Assets           
Goodwill$1,107
     $1,092
    
Trademarks$549
     $547
    


 As of June 30, 2020As of December 31, 2019
 Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount		Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount
Amortized Intangible Assets
License agreements$266  $123  $143  $241  $108  $133  
Customer relationships254  177  77  255  165  90  
Other51  28  23  50  25  25  
Total$571  $328  $243  $546  $298  $248  
Unamortized Intangible Assets
Goodwill$1,077  $1,101  
Trademarks$547  $550  
For the three months ended June 30, 20192020 and 2018,2019, amortization expense related to amortizable intangible assets was approximately $14$16 million and $19$14 million, respectively. For the six months ended June 30, 20192020 and 2018,2019, amortization expense related to amortizable intangible assets was approximately $31$29 million and $33$31 million, respectively. Based on the Company’s amortizable intangible assets at June 30, 2019,2020, the Company expects amortization expense of approximately $27$35 million for the remainder of 2019, $51 million for 2020, $38$63 million for 2021, $27$32 million for 2022, $23$24 million for 2023, and $20$21 million for 2024 and $16 million for 2025, excluding effects of currency exchange rates.

8.Vehicle Rental Activities
8. Vehicle Rental Activities

The components of vehicles, net within assets under vehicle programs were as follows: 
 As of As of
 June 30, December 31,
 2019 2018
Rental vehicles$15,466
 $12,548
Less: Accumulated depreciation(1,482) (1,670)
 13,984
 10,878
Vehicles held for sale294
 596
Vehicles, net$14,278
 $11,474


As ofAs of
June 30,December 31,
20202019
Rental vehicles$11,964  $13,461  
Less: Accumulated depreciation(1,525) (1,621) 
10,439  11,840  
Vehicles held for sale371  337  
Vehicles, net$10,810  $12,177  
The components of vehicle depreciation and lease charges, net are summarized below: 
 Three Months Ended 
June 30,		Six Months Ended 
June 30,
 2020201920202019
Depreciation expense$334  505  $748  941  
Lease charges42  62  98  119  
(Gain) loss on sale of vehicles, net(2) (24) (13) (32) 
Vehicle depreciation and lease charges, net$374  $543  $833  $1,028  
 Three Months Ended 
June 30,		 
Six Months Ended
June 30,
 2019 2018 2019 2018
Depreciation expense$505
 $536
 $941
 $996
Lease charges62
 64
 119
 120
(Gain) loss on sale of vehicles, net(24) (9) (32) (10)
Vehicle depreciation and lease charges, net$543
 $591
 $1,028
 $1,106


At June 30, 20192020 and 2018,2019, the Company had payables related to vehicle purchases included in liabilities under vehicle programs - other of $782$150 million and $856$782 million, respectively, and receivables related to vehicle sales included in assets under vehicle programs - receivables from vehicle manufacturers and other of $214$419 million and $248$214 million, respectively.

9.Income Taxes
9. Income Taxes

The Company’s effective tax rate for the six months ended June 30, 2020 was a benefit of 26.9%. Such rate differed from the Federal Statutory rate of 21.0% primarily due to foreign taxes on our International operations and state taxes.

The Company’s effective tax rate for the six months ended June 30, 2019 was a benefit of 47.3%. Such rate differed from the Federal statutory rate of 21.0% primarily due to foreign taxes on our international International
17
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operations, state taxes and a one-time net tax benefit from the sale of equity investment in AnjiChina during the

second quarter of 2019.

The Company’s effective tax rate for the six months ended June 30, 2018 was a benefit of 33.0%. Such rate differed from the Federal statutory rate of 21.0% primarily due to U.S.
10. Accounts Payable and foreign taxes on our international operations and state taxes. Tax benefits associated with stock-based compensation increased the benefit for income taxes recorded in the current period.Other Current Liabilities

10.Accounts Payable and Other Current Liabilities

Accounts payable and other current liabilities consisted of: 
As ofAs of
June 30,December 31,
20202019
Short-term operating lease liabilities$513  $479  
Accounts payable389  378  
Accrued sales and use taxes201  223  
Public liability and property damage insurance liabilities – current177  178  
Accrued advertising and marketing128  191  
Accrued payroll and related132  195  
Deferred lease revenues – current112  125  
Other432  437  
Accounts payable and other current liabilities$2,084  $2,206  
 As of
As of
 June 30,
December 31,
 2019
2018
Short-term operating lease liabilities$433
 $—
Accounts payable400
 371
Deferred lease revenues – current230
 140
Accrued sales and use taxes228
 208
Accrued payroll and related185
 200
Accrued advertising and marketing180
 192
Public liability and property damage insurance liabilities – current152
 149
Other441
 433
Accounts payable and other current liabilities$2,249
 $1,693


11. Long-term Corporate Debt and Borrowing Arrangements
11.Long-term Corporate Debt and Borrowing Arrangements

Long-term corporate debt and borrowing arrangements consisted of:
As ofAs of
Maturity
Date		June 30,December 31,
20202019
5½% Senior NotesApril 2023$100  $200  
6⅜% Senior NotesApril 2024350  350  
4⅛% euro-denominated Senior NotesNovember 2024337  336  
5¼% Senior NotesMarch 2025375  375  
4½% euro-denominated Senior NotesMay 2025281  280  
10½% Senior Secured NotesMay 2025485  —  
4¾% euro-denominated Senior NotesJanuary 2026393  393  
5¾% Senior NotesJuly 2027400  400  
Floating Rate Term Loan (a)
August 20271,204  1,112  
Other (b)
26  28  
Deferred financing fees(48) (39) 
Total3,903  3,435  
Less: Short-term debt and current portion of long-term debt19  19  
Long-term debt$3,884  $3,416  
   As of As of
 
Maturity
Dates
 June 30, December 31,
  2019 2018
5½% Senior Notes (a)
April 2023 $675
 $675
6⅜% Senior NotesApril 2024 350
 350
4⅛% euro-denominated Senior NotesNovember 2024 341
 344
Floating Rate Term Loan (b)
February 2025 1,118
 1,123
5¼% Senior NotesMarch 2025 375
 375
4½% euro-denominated Senior NotesMay 2025 284
 287
4¾% euro-denominated Senior NotesJanuary 2026 398
 401
Other (c)
  34
 41
Deferred financing fees  (40) (45)
Total  3,535
 3,551
Less: Short-term debt and current portion of long-term debt  420
 23
Long-term debt  $3,115
 $3,528
__________
(a)The floating rate term loan is part of the Company’s senior revolving 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 June 30, 2020, the floating rate term loan due 2027 bears interest at one-month LIBOR plus 225 basis points, for an aggregate rate of 2.43%. 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 3.92%.
(b)Primarily includes finance leases which are secured by liens on the related assets.

__________
(a)
A portion of these notes have been called for redemption.
(b)
The floating rate term loan is part of the Company’s senior revolving 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 June 30, 2019, the floating rate term loan due 2025 bears interest at one-month LIBOR plus 200 basis points, for an aggregate rate of 4.41%. 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 3.67%.
(c)
Primarily includes finance leases which are secured by liens on the related assets.

In June 2019,February 2020, the Company called $400amended its Floating Rate Term Loan due 2025 to extend its maturity term to 2027 and reduce its interest to one-month LIBOR plus 1.75%. The Company increased the outstanding borrowing principal amount of the Floating Rate Term Loan to $1.2 billion and on April 1, 2020 used the additional loan amount to redeem $100 million of its outstanding 5½% Senior Notes due April 2023 to be redeemed upon2023.

In May 2020, the issuanceCompany issued $500 million of its 5¾10½% Senior Secured Notes in July 2019 (see Note 19due May 2025, at 97% of face value. The notes are guaranteed on a senior unsecured basis by the Company and on a senior secured basis by certain of the Company’s subsidiaries. The Company used the proceeds from this offering for general corporate purposes.
–Subsequent Events.)

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Committed Credit Facilities and Available Funding Arrangements

At June 30, 2019,2020, the committed corporate credit facilities available to the Company and/or its subsidiaries were as follows: 
 
Total
Capacity
 
Outstanding
Borrowings
 Letters of Credit Issued 
Available
Capacity
Senior revolving credit facility maturing 2023 (a) 
$1,800
 $—
 $1,225
 $575
Total
Capacity		Outstanding
Borrowings		Letters of Credit IssuedAvailable
Capacity
Senior revolving credit facility maturing 2023 (a)
$1,800  $—  $1,581  $219  
__________
(a)
The senior revolving credit facility bears interest at one-month LIBOR plus 200
(a)The senior revolving credit facility bears interest at one-month LIBOR plus 250 basis points and is part of the Company’s senior credit facility, which is part of the Company’s senior credit facilities, which include the floating rate term loan and the senior revolving credit facility, and which are 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.

At June 30, 2019, the Company, had various uncommitted credit facilities available, under which it had drawn approximately $1 million, which bear interest at rates between 0.79%liens on substantially all of the Company’s intellectual property and 1.53%.certain other real and personal property.

Debt Covenants

The agreements governing the Company’s indebtedness contain restrictive covenants, including restrictions on dividends paid to the Company by certain of its subsidiaries, the incurrence of additional indebtedness by the Company and certain of its subsidiaries, acquisitions, mergers, liquidations, and sale and leaseback transactions. The Company’s senior credit facilityfacilities also containscontain a consolidated first lien leverage ratio requirement.requirement which has been amended to provide a holiday from such leverage covenant through June 30, 2021 (See Note 1 – Basis of Presentation). As of June 30, 2019,2020, the Company was in compliance with the financial covenants governing its indebtedness.

12.Debt Under Vehicle Programs and Borrowing Arrangements
12. 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
 June 30, December 31,
 2019 2018
Americas - Debt due to Avis Budget Rental Car Funding (a)
$8,951
 $7,393
Americas - Debt borrowings (a)
986
 635
International - Debt borrowings (a)
2,342
 2,060
International - Finance leases (a)
226
 191
Other1
 2
Deferred financing fees (b)
(50) (49)
Total$12,456
 $10,232
As ofAs of
June 30,December 31,
20202019
Americas - Debt due to Avis Budget Rental Car Funding$8,095  $7,975  
Americas - Debt borrowings765  827  
International - Debt borrowings1,576  2,100  
International - Finance leases148  215  
Other1  —  
Deferred financing fees (a)
(45) (49) 
Total$10,540  $11,068  
__________
(a)
(a)Deferred financing fees related to Debt due to Avis Budget Rental Car Funding as of June 30, 2020 and December 31, 2019 was $38 million and $40 million, respectively

The increase reflects additional borrowings principally to fund increases in the Company’s car rental fleet.
(b)
Deferred financing fees related to Debt due to Avis Budget Rental Car Funding as of June 30, 2019 and December 31, 2018 was $38 million and $35 million, respectively.

In February 2019,January 2020, the Company’s Avis Budget Rental Car Funding subsidiary issued approximately $600$700 million in asset-backed notes with an expected final payment date of March 2022August 2025 incurring interest at a weighted average rate of 3.56%2.42%.

In April 2019, the Company’s Avis Budget Rental Car Funding subsidiary issued approximately $650 million in asset-backed notes with an expected final payment date
19
Table of September 2024 incurring interest at a weighted average rate of 3.44%.Contents



Debt Maturities

The following table provides the contractual maturities of the Company’s debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding, at June 30, 2019.2020.
 
Debt under Vehicle Programs (a)
Within 1 year$1,636
Between 1 and 2 years (b)
4,747
Between 2 and 3 years (c)
3,102
Between 3 and 4 years1,207
Between 4 and 5 years1,275
Thereafter539
Total$12,506

__________
Debt under Vehicle Programs (a)
Vehicle-backed debt primarily represents asset-backed securities.
Within 1 year (b)
Includes $3.5 billion of bank and bank-sponsored facilities.
$2,602 
Between 1 and 2 years (c)
Includes $1.7 billion of bank3,907 
Between 2 and bank-sponsored facilities.3 years1,243 
Between 3 and 4 years1,279 
Between 4 and 5 years1,538 
Thereafter16 
Total$10,585 
__________
(a) Vehicle-backed debt primarily represents asset-backed securities.
(b) Includes $1.3 billion of bank and bank-sponsored facilities.
(c) Includes $2.5 billion of bank and bank-sponsored facilities.

Committed Credit Facilities and Available Funding Arrangements

As of June 30, 2019,2020, available funding under the Company’s 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$9,526
 $8,951
 $575
Americas - Debt borrowings1,008
 986
 22
International - Debt borrowings3,017
 2,342
 675
International - Finance leases248
 226
 22
Other1
 1
 —
Total$13,800
 $12,506
 $1,294

Total
Capacity (a)
Outstanding
Borrowings (b)
Available
Capacity
Americas - Debt due to Avis Budget Rental Car Funding$9,394  $8,095  $1,299  
Americas - Debt borrowings882  765  117  
International - Debt borrowings2,947  1,576  1,371  
International - Finance leases205  148  57  
Other1  1  —  
Total$13,429  $10,585  $2,844  
__________
(a)
(a) Capacity is subject to maintaining sufficient assets to collateralize debt.
(b) The outstanding debt is collateralized by vehicles and related assets of $8.8 billion for Americas - Debt due to Avis Budget Rental Car Funding; $1.0 billion for Americas - Debt borrowings; $1.9 billion for International - Debt borrowings; and $0.2 billion for International - Finance leases.

Capacity is subject to maintaining sufficient assets to collateralize debt.
(b)
The outstanding debt is collateralized by vehicles and related assets of $10.4 billion for Americas - Debt due to Avis Budget Rental Car Funding; $1.1 billion for Americas - Debt borrowings; $2.7 billion for International - Debt borrowings; and $0.2 billion for International - Finance leases.

Debt Covenants

The agreements under the Company’s vehicle-backed funding programs contain restrictive covenants, including restrictions on dividends paid to the Company by certain of its 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 June 30, 2019,2020, the Company is not aware of any instances of non-compliance with any of the financial covenants contained in the debt agreements under its vehicle-backed funding programs.

13.Commitments and Contingencies
13. Commitments and Contingencies

Contingencies

In 2006, the Company completed the spin-offs of its Realogy and Wyndham subsidiaries. The Company does 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 Company in relation to its consolidated financial position or liquidity, as Realogy and Wyndham each have agreed to assume responsibility for these liabilities. The Company is also named in litigation that is primarily related to the businesses of its former subsidiaries, including Realogy and Wyndham. The Company is entitled to indemnification from such entities for any liability resulting from such litigation.

20
Table of Contents

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,fourth quarter 2019, the Company was also found liable for damagesappealed both verdicts resulting in a companion case arising fromreversal of the same incident.opinions rendered. The Company is appealing both verdicts and considersplaintiffs filed a petition to have the attributionGeorgia Supreme Court review the state appellate court’s reversal of liability to the Company, and the amount of damages awarded, to be unsupported by the facts of these cases.opinion. 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 is currently involved, and in the future may be involved, in claims, legal proceedings and governmental inquiries that are incidental to its vehicle rental and car sharing operations, including, among others, contract and licensee disputes, competition matters, employment and wage-and-hour claims, insurance and liability claims, intellectual property claims, business practice disputes and other regulatory, environmental, commercial and tax matters. Litigation is inherently unpredictable and, although the Company believes that its accruals are adequate and/or that it has valid defenses in these matters, unfavorable resolutions could occur. The Company estimates 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 $45$35 million in excess of amounts accrued as of June 30, 2019.2020. The Company does not believe that the impact should result in a material liability to the Company in relation to its consolidated financial condition or results of operations.

Commitments to Purchase Vehicles

The Company maintains agreements with vehicle manufacturers under which the Company has agreed to purchase approximately $3.1$1.4 billion of vehicles from manufacturers over the next 12 months, a $6.4 billion decrease compared to December 31, 2019, 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 satisfying their obligations under their respective repurchase and guaranteed depreciation agreements.

Concentrations

Concentrations of credit risk at June 30, 20192020 include (i) risks related to the Company’s repurchase and guaranteed depreciation agreements with domestic and foreign car manufacturers, primarily with respect to receivables for program cars that have been disposed but for which the Company has not yet received payment from the manufacturers and (ii) risks related to Realogy and Wyndham, including receivables of $25$24 million and $15$15 million,, respectively, related to certain contingent, income tax and other corporate liabilities assumed by Realogy and Wyndham in connection with their disposition.


14. Stockholders’ Equity
14.Stockholders’ Equity

Share Repurchases

The Company’s Board of Directors has authorized the repurchase of up to $1.7$1.8 billion of its common stock under a plan originally approved in 2013 and subsequently expanded, most recently in August 2018.2019. During the six months ended June 30, 2019, the Company did not repurchase any sharesfirst quarter of common stock under the program. During the six months ended June 30, 2018,2020, the Company repurchased approximately 1.65.0 million shares of common stock at a cost of approximately $67$113 million at an average price of $22.49 under the program. As of June 30, 2019,2020, approximately $150$76 million of authorization remains available to repurchase common stock under this plan. In August 2019, the Company’s Board of Directors increased the Company’s share repurchase program authorization by $100 million.

In June 2019 as part of its share repurchase program, the Company entered into a structured repurchase agreement involving the use of capped call options for the purchase of the Company’s common stock. The Company paid a fixed sum upon the execution of the agreement in exchange for the right to receive either a pre-determined amount of cash or stock. Upon the expiration dates set forth in the agreement, if the closing market price of our common stock is above the pre-determined price, the Company’s initial investment will be returned with a premium. If the closing market price of our common stock is at or below the pre-

determined price, the Company will receive the number of shares specified in the agreement. The Company paid net premiums of $16 million to enter into this agreement, which is recorded as a reduction of additional paid in capital. As of June 30, 2019, the Company had outstanding options for the purchase of 0.6 million shares that will settle duringsettled in September 2019.

21
Table of Contents
Share Issuances

On February 10, 2020, the Company announced it had appointed a new Chairman of the Board of Directors and in connection with this appointment, the new Chairman purchased an aggregate $15 million of unregistered shares of the Company’s common stock at a price per share equal to the closing price of the Company’s common stock on February 7, 2020.

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 (loss).

The components of other comprehensive income (loss) were as follows: 
 Three Months Ended 
June 30,		 Six Months Ended 
June 30,		 Three Months Ended 
June 30,		Six Months Ended 
June 30,
 2019 2018 2019 2018 2020201920202019
Net income (loss)Net income (loss)$62
 $26
 $(29) $(61)Net income (loss)$(481) $62  $(639) $(29) 
Other comprehensive income (loss):Other comprehensive income (loss):       Other comprehensive income (loss):
Currency translation adjustments (net of tax of $4, $(10), $(2), and $(5) respectively)9
 (54) 10
 (53)Currency translation adjustments (net of tax of $4, $4, $0, and $(2) respectively)39  9  (44) 10  
Net unrealized gain (loss) on cash flow hedges (net of tax of $4, $(1), and $7, and $(3) respectively)(13) 2
 (21) 8
Net unrealized gain (loss) on cash flow hedges (net of tax of $3, $4, $9, and $7 respectively)(8) (13) (26) (21) 
Minimum pension liability adjustment (net of tax of $0, $0, $0, and $(1), respectively)2
 2
 4
 3
Minimum pension liability adjustment (net of tax of $0, $0, $0, and $0, respectively)2  2  4  4  
 (2) (50) (7) (42)33  (2) (66) (7) 
Comprehensive income (loss)Comprehensive income (loss)$60
 $(24) $(36) $(103)Comprehensive income (loss)$(448) $60  $(705) $(36) 
__________
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, 2020$9  $(20) $(146) $(157) 
Other comprehensive income (loss) before reclassifications(44) (28) 1  (71) 
Amounts reclassified from accumulated other comprehensive income (loss)—  2  3  5  
Net current-period other comprehensive income (loss)(44) (26) 4  (66) 
Balance, June 30, 2020$(35) $(46) $(142) $(223) 
Balance, December 31, 2018$(3) $2  $(132) $(133) 
Cumulative effect of accounting change—  1  —  1  
Balance, January 1, 2019$(3) $3  $(132) $(132) 
Other comprehensive income (loss) before reclassifications10  (19) 1  (8) 
Amounts reclassified from accumulated other comprehensive income (loss)—  (2) 3  1  
Net current-period other comprehensive income (loss)10  (21) 4  (7) 
Balance, June 30, 2019$7  $(18) $(128) $(139) 
22
  
Currency
Translation
Adjustments
 
Net Unrealized
Gains (Losses)
on Cash Flow
Hedges(a)
 Net Unrealized Gains (Losses) on Available-for-Sale Securities 
Minimum
Pension
Liability
Adjustment(b)
 
Accumulated
Other
Comprehensive
Income (Loss)
Balance, December 31, 2018$(3) $2
 $—
 $(132) $(133)
 
Cumulative effect of accounting change (c)
—
 1
 —
 —
 1
Balance, January 1, 2019$(3) $3
 $—
 $(132) $(132)
 Other comprehensive income (loss) before reclassifications10
 (19) —
 1
 (8)
 Amounts reclassified from accumulated other comprehensive income (loss)—
 (2) —
 3
 1
Net current-period other comprehensive income (loss)10
 (21) —
 4
 (7)
Balance, June 30, 2019$7
 $(18) $—
 $(128) $(139)
           
Balance, December 31, 2017$71
 $5
 $2
 $(102) $(24)
 Cumulative effect of accounting change7
 1
 (2) (12) (6)
Balance, January 1, 2018$78
 $6
 $—
 $(114) $(30)
 Other comprehensive income (loss) before reclassifications(53) 8
 —
 1
 (44)
 Amounts reclassified from accumulated other comprehensive income (loss)—
 —
 —
 2
 2
Net current-period other comprehensive income (loss)(53) 8
 —
 3
 (42)
Balance, June 30, 2018$25
 $14
 $—
 $(111) $(72)
Table of Contents

__________
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 $69$79 million gain, net of tax, as of June 30, 20192020 related to the Company’s hedge of its net investment in euro-denominated foreign operations (see Note 16–Financial Instruments).
(a)
(a)For the three and six months ended June 30, 2020, the amount reclassified from accumulated other comprehensive income (loss) into corporate interest expense and vehicle interest expense was $2 million ($1 million, net of tax) and $1 million ($1 million, net of tax), respectively, in each period. For the three and six months ended June 30, 2019, the amount reclassified from accumulated other comprehensive income (loss) in corporate interest expense was $1 million ($1 million, net of tax) and $3 million ($2 million, net of tax), respectively.
For the three and six months ended June 30, 2019, the amount reclassified from accumulated other comprehensive income (loss) into corporate interest expense was $1 million ($1 million, net of tax) and $3 million ($2 million, net of tax), respectively.
(b)
For the three and six months ended June 30, 2019, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses were $2 million ($2 million, net of tax) and $4 million ($3 million, net of tax), respectively. For the three and six months ended June 30, 2018, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses were $2 million ($1 million, net of tax) and $4 million ($2 million, net of tax), respectively.
(c)
See Note 1–Basis of Presentation for the impact of adoption of ASU 2017-12.

(b)For the three and six months ended June 30, 2020, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses were $2 million ($2 million, net of tax) and $4 million ($3 million, net of tax), respectively. For the three and six months ended June 30, 2019, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses were $2 million ($2 million, net of tax) and $4 million ($3 million, net of tax), respectively.
15.Stock-Based Compensation

15. Stock-Based Compensation

The Company recorded stock-based compensation expense of $4 million and $7 million ($52 million and $5 million, net of tax) during the three months ended June 30, 2020 and 2019, respectively, and 2018, in each period,$2 million and $12 million ($1 million and ($9$9 million, net of tax) during the six months ended June 30, 2020 and 2019, and 2018,respectively.

In June 2020, the Company granted market-based RSUs that vest based on absolute stock price attainment. The grant date fair value of this award is estimated using a Monte Carlo simulation model. The weighted average assumptions used in each period.the model are as follows:
Six Months Ended 
June 30, 2020
Expected volatility of stock price91%
Risk-free interest rate0.18%
Valuation period3 years
Dividend yield—%

The activity related to restricted stock units (“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)Number of SharesWeighted
Average
Grant Date
Fair Value		Weighted Average Remaining Contractual Term (years)Aggregate Intrinsic Value (in millions)
Time-based RSUsTime-based RSUs     Time-based RSUs
Outstanding at January 1, 2019838
 $38.67
  Outstanding at January 1, 2020847  $36.99  
 
Granted (a)
485
 34.90
  
Granted (a)
705  21.67  
 
Vested (b)
(361) 35.80
  
Vested (b)
(397) 38.14  
 Forfeited(55) 38.73
  Forfeited(69) 33.51  
Outstanding and expected to vest at June 30, 2019 (c)
907
 $37.79
 1.3 $32
Outstanding and expected to vest at June 30, 2020 (c)
1,086  $26.85  1.4$25  
Performance-based and market-based RSUsPerformance-based and market-based RSUs     Performance-based and market-based RSUs
Outstanding at January 1, 20191,169
 $35.14
  Outstanding at January 1, 20201,061  $38.89  
 
Granted (a)
522
 34.87
  
Granted (a)
552  21.06  
 Vested—
 —
  
Vested (b)
(73) 36.64  
 Forfeited(430) 24.85
  Forfeited(414) 35.16  
Outstanding at June 30, 20191,261
 $38.54
 1.8 $44
Outstanding at June 30, 20201,126  $31.67  2.0$26  
Outstanding and expected to vest at June 30, 2019 (c)
518
 $39.96
 2.1 $18
Outstanding and expected to vest at June 30, 2020 (c)
38  $20.70  3.0$1  
__________
(a)
(a)Reflects the maximum number of stock units assuming achievement of all performance-, market- 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 and market-based RSUs granted during the six months ended June 30, 2019 was $34.90 and $34.87, respectively.
Reflects the maximum number of stock units assuming achievement of all performance-, market- 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 six months ended June 30, 2018 was $48.66 and $48.72, respectively.
(b)
The total fair value of RSUs vested during June 30, 2019 and 2018 was $13 million, in each period.
(c)
Aggregate unrecognized compensation expense related to time-based RSUs and performance-based RSUs amounted to $40 million and will be recognized over a weighted average vesting period of 1.6 years.

(b)The stock option activity consistedtotal fair value of (in thousandsRSUs vested during June 30, 2020 and 2019 was $18 million and $13 million, respectively.
(c)Aggregate unrecognized compensation expense related to time-based RSUs and performance-based and market-based RSUs amounted to $25 million and will be recognized over a weighted average vesting period of shares):1.5 years.
  Number of Options Weighted
Average
Exercise
Price		 Weighted
Average
Remaining Contractual Term (years)		 Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 201957
 $0.79
 0.1
 $1
 Granted—
 —
   —
 
Exercised (a)
(57) 0.79
   1
 Forfeited/expired—
 —
   —
Outstanding and exercisable at June 30, 2019—
 $—
 —
 $—

__________
23
(a)
Stock options exercised during the six months ended June 30, 2018 had an intrinsic value of $7 million and the cash received was $2 million.


16.Financial Instruments
Table of Contents
16. Financial Instruments

Derivative Instruments and Hedging Activities
Currency Risk. The Company uses currency exchange contracts to manage its exposure to changes in currency exchange rates associated with certain of its 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 Company primarily hedges a portion of its 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 has designated its euro-denominated notes as a hedge of its investment in euro-denominated foreign operations.
The estimated net amount of existing gains or losses the Company expects to reclassify from accumulated other comprehensive income (loss) to earnings for cash flow and net investment hedges over the next 12 months is not material.

Interest Rate Risk. The Company uses various hedging strategies including interest rate swaps and interest rate caps to create what it deems an appropriate mix of fixed and floating rate assets and liabilities. The Company uses interest rate swaps and interest rate caps to manage the risk related to its floating rate corporate debt and its floating rate vehicle-backed debt. The Company records the changes in the fair value of its cash flow hedges to other comprehensive income (loss), net of tax, and subsequently reclassifies these amounts into earnings in the period during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item. The Company records the gains or losses related to freestanding derivatives, which are not designated as a hedge for accounting purposes, currently in earnings and are presented in the same line of the income statement expected for the hedged item. The Company estimates that an immaterial amountapproximately $17 million of gainslosses currently recorded in accumulated other comprehensive income (loss) will be recognized in earnings over the next 12 months.

Commodity Risk. The Company periodically enters into derivative commodity contracts to manage its exposure to changes in the price of gasoline. These instruments were designated as freestanding derivatives and the changes in fair value are recorded in earnings and are presented in the same line of the income statement expected for the hedged item.

The Company held derivative instruments with absolute notional values as follows:
 As of June 30, 2019
Foreign exchange contracts$1,393
Interest rate caps (a)
8,398
Interest rate swaps1,500
  
Commodity contracts (millions of gallons of unleaded gasoline)9
__________
As of June 30, 2020
Foreign exchange contracts$1,563 
Interest rate caps (a)
8,345 
Interest rate swaps2,250 
(a)Commodity contracts (millions of gallons of unleaded gasoline)
Represents $5.7 billion of interest rate caps sold, partially offset by approximately $2.7 billion of interest rate caps purchased. These amounts exclude $3.0 billion of interest rate caps purchased by the Company’s Avis Budget Rental Car Funding subsidiary as it is not consolidated by the Company.10 


__________
(a)Represents $5.7 billion of interest rate caps sold, partially offset by approximately $2.7 billion of interest rate caps purchased. These amounts exclude $3.0 billion of interest rate caps purchased by the Company’s Avis Budget Rental Car Funding subsidiary as it is not consolidated by the Company.

Estimated fair values (Level 2) of derivative instruments were as follows: 
24
 As of June 30, 2019 As of December 31, 2018 As of June 30, 2020As of December 31, 2019
 
Fair Value,
Derivative
Assets
 
Fair Value,
Derivative
Liabilities
 Fair Value,
Derivative
Assets		 Fair Value,
Derivative
Liabilities		 Fair Value,
Derivative
Assets		Fair Value,
Derivative
Liabilities		Fair Value,
Derivative
Assets		Fair Value,
Derivative
Liabilities
Derivatives designated as hedging instrumentsDerivatives designated as hedging instruments       Derivatives designated as hedging instruments
Interest rate swaps (a)
$1
 $26
 $12
 $8
Interest rate swaps (a)
$—  $62  $—  $27  
        
Derivatives not designated as hedging instrumentsDerivatives not designated as hedging instruments       Derivatives not designated as hedging instruments
Foreign exchange contracts (b)
5
 8
 5
 11
Foreign exchange contracts (b)
4  5  5  10  
Interest rate caps (c)
—
 —
 —
 2
Interest rate caps (c)
—  1  —  1  
Commodity contracts (b)
2
 —
 —
 1
Commodity contracts (b)
—  3  —  —  
Total$8
 $34
 $17
 $22
Total$4  $71  $5  $38  
__________
Amounts in this table exclude derivatives issued by Avis Budget Rental Car Funding, as it is not consolidated by the Company; however, certain amounts related to the derivatives held by Avis Budget Rental Car Funding are included within accumulated other comprehensive income (loss), as discussed in Note 14-Stockholders’14–Stockholders’ Equity.
(a)
(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.

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’s Consolidated Condensed Financial Statements were as follows:
 Three Months Ended 
June 30,		 Six Months Ended 
June 30,		 Three Months Ended 
June 30,		Six Months Ended 
June 30,
 2019
2018 2019 2018 2020201920202019
Derivatives designated as hedging instruments (a)
Derivatives designated as hedging instruments (a)
       
Derivatives designated as hedging instruments (a)
Interest rate swaps (b)
$(13) $2
 $(21) $8
Interest rate swaps (b)
$(8) $(13) $(26) $(21) 
Euro-denominated notes (c)
(11) 26
 5
 13
Euro-denominated notes (c)
(13) (11) (2) 5  
Derivatives not designated as hedging instruments (d)
Derivatives not designated as hedging instruments (d)
       
Derivatives not designated as hedging instruments (d)
Foreign exchange contracts (e)
10
 28
 11
 19
Foreign exchange contracts (e)
(8) 10  26  11  
Interest rate caps (f)
—
 (1) —
 (1)
Interest rate caps (f)
(1) —  (1) —  
Commodity contracts (g)
1
 1
 4
 1
Commodity contracts (g)
2  1  (7) 4  
Total$(13) $56
 $(1) $40
Total$(28) $(13) $(10) $(1) 
__________
(a)
(a)Recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity.
Recognized, net of tax, as a component of 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 14–Stockholders’ Equity for amounts reclassified from accumulated other comprehensive income 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)
For the three months ended June 30, 2019, included a $15 million gain in interest expense and a $5 million loss in operating expense and for the six months ended June 30, 2019, included a $11 million gain in interest expense. For the three months ended June 30, 2018, included $20 million gain in interest expense and a $8 million gain in operating expense and for the six months ended June 30, 2018, included a $7 million gain in interest expense and a $12 million gain in operating expense.
(f)
Included primarily in vehicle interest, net.
(g)
Included in operating expense.


(b)Classified as a net unrealized gain (loss) on cash flow hedges in accumulated other comprehensive income (loss). Refer to Note 14–Stockholders’ Equity for amounts reclassified from accumulated other comprehensive income 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)For the three months ended June 30, 2020, included a $8 million loss in operating expense and for the six months ended June 30, 2020, included a $28 million gain in interest expense and $2 million loss in operating expense. For the three months ended June 30, 2019, included $15 million gain in interest expense and a $5 million loss in operating expense and for the six months ended June 30, 2019, included a $11 million gain in interest expense.
(f)Included primarily in vehicle interest, net.
(g)Included in operating expense.


Debt Instruments

The carrying amounts and estimated fair values (Level 2) of debt instruments were as follows: 
25
 As of June 30, 2019 As of December 31, 2018 As of June 30, 2020As of December 31, 2019
 
Carrying
Amount
 
Estimated
Fair
Value
 
Carrying
Amount
 
Estimated
Fair
Value
 Carrying
Amount		Estimated
Fair
Value		Carrying
Amount		Estimated
Fair
Value
Corporate debtCorporate debt       Corporate debt
Short-term debt and current portion of long-term debt$420
 $431
 $23
 $23
Short-term debt and current portion of long-term debt$19  $18  $19  $19  
Long-term debt3,115
 3,233
 3,528
 3,462
Long-term debt3,884  3,425  3,416  3,572  
        
Debt under vehicle programsDebt under vehicle programs       Debt under vehicle programs
Vehicle-backed debt due to Avis Budget Rental Car Funding$8,913
 $9,067
 $7,358
 $7,383
Vehicle-backed debt due to Avis Budget Rental Car Funding$8,057  $8,035  $7,936  $8,077  
Vehicle-backed debt3,540
 3,557
 2,871
 2,881
Vehicle-backed debt2,478  2,486  3,129  3,142  
Interest rate swaps and interest rate caps (a)
3
 3
 3
 3
Interest rate swaps and interest rate caps (a)
4  4  3  3  
__________
(a)
(a) Derivatives in a liability position.
Derivatives in a liability position.


17.Segment Information
17. Segment Information

The Company’s chief operating decision-maker assesses performance and allocates resources based upon the separate financial information from each of the Company’s operating segments. In identifying its reportable segments, the Company considered the nature of services provided, the geographical areas in which the segments operated and other relevant factors. The Company aggregates certain of its operating segments into its reportable segments.

Management evaluates the operating results of each of its reportable segments based upon revenues and “Adjusted EBITDA,” which the Company defines as income (loss) from continuing operations before non-vehicle related depreciation and amortization, any impairment charges, restructuring and other related charges, early extinguishment of debt costs, non-vehicle related interest, transaction-related costs, net charges for unprecedented personal-injury legal matters, non-operational charges related to shareholder activist activity, gain on sale of equity method investment in AnjiChina, COVID-19 charges and income taxes. Net charges for unprecedented personal-injury legal matters and gain on sale of equity method investment in AnjiChina are recorded within operating expenses in the Company’s Consolidated Condensed Statement of Comprehensive Income. Non-operational charges related to shareholder activist activity include third party advisory, legal and other professional service fees and are recorded within selling, general and administrative expenses in the Company’s Consolidated Condensed Statement of Comprehensive Income. COVID-19 charges include unusual, direct and incremental costs due to the COVID-19 global pandemic such as minimum annual guaranteed rent in excess of concession fees for the period, overflow parking for idle vehicles, incremental cleaning supplies to sanitize vehicles and facilities, and losses associated with vehicles damaged in overflow parking lots and are recorded within operating expenses in the Company’s Consolidated Condensed Statement of Comprehensive Income. The Company has revised theits definition of Adjusted EBITDA to exclude the gain on sale of equity method investment in Anji.COVID-19 charges. The Company didhas not reviserevised prior years’years' Adjusted EBITDA amounts because there were no gainsother charges similar in nature to this gain.these. The Company’s presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

26
Table of Contents
 Three Months Ended June 30, Three Months Ended June 30,
 2019 2018 20202019
 Revenues
Adjusted EBITDA
Revenues
Adjusted EBITDARevenuesAdjusted EBITDARevenuesAdjusted EBITDA
AmericasAmericas$1,627
 $152
 $1,590
 $107
Americas$565  $(233) $1,627  $152  
InternationalInternational710
 39
 738
 71
International195  (140) 710  39  
Corporate and Other (a)
Corporate and Other (a)
—
 (16) —
 (17)
Corporate and Other (a)
—  (9) —  (16) 
Total Company$2,337
 $175
 $2,328
 $161
Total Company$760  $(382) $2,337  $175  
        
Reconciliation of Adjusted EBITDA to income before income taxes    
Reconciliation of Adjusted EBITDA to income (loss) before income taxesReconciliation of Adjusted EBITDA to income (loss) before income taxes
  2019   201820202019
Adjusted EBITDAAdjusted EBITDA  $175
   $161
Adjusted EBITDA$(382) $175  
Less:Less:Non-vehicle related depreciation and amortization 66
   67
Less:
COVID-19 charges (b)
73  —  
 Interest expense related to corporate debt, net 48
   49
Non-vehicle related depreciation and amortization71  66  
 Restructuring and other related charges 23
   4
Interest expense related to corporate debt, net:
 Transaction-related costs, net  1
   3
Interest expense51  48  
 Gain on sale of equity method investment in Anji (44)   —
Early extinguishment of debt3  —  
Income before income taxes  $81
   $38
Restructuring and other related charges28  23  
Transaction-related costs, net1  1  
Gain on sale of equity method investment in China (c)
—  (44) 
Income (loss) before income taxesIncome (loss) before income taxes$(609) $81  
__________
(a)
(a)Includes unallocated corporate overhead which is not attributable to a particular segment.
Includes unallocated corporate overhead which is not attributable to a particular segment.

(b)For three months ended June 30, 2020 consists of $72 million within operating expenses and $1 million within selling, general and administrative expenses. Primarily consisting of $30 million of minimum annual guaranteed rent in excess of concession fees, $28 million of losses associated with vehicles damaged in overflow parking lots and $15 million of incremental cleaning supplies to sanitize vehicles and facilities, and overflow parking for idle vehicles.
    Six Months Ended June 30,
    2019 2018
    Revenues Adjusted EBITDA Revenues Adjusted EBITDA
Americas$2,954
 $187
 $2,938
 $122
International1,303
 18
 1,358
 74
Corporate and Other (a)
—
 (31) —
 (33)
 Total Company$4,257
 $174
 $4,296
 $163
           
Reconciliation of Adjusted EBITDA to loss before income taxes    
   2019   2018
Adjusted EBITDA  $174
   $163
Less:Non-vehicle related depreciation and amortization 133
   128
  Interest expense related to corporate debt, net:      
  Interest expense 90
   95
  Early extinguishment of debt —
   5
  Restructuring and other related charges 44
   10
  Transaction-related costs, net  6
   7
  Non-operational charges related to shareholder activist activity —
   9
  Gain on sale of equity method investment in Anji (44)   —
Loss before income taxes  $(55)   $(91)
(c) Reported within operating expenses.

Six Months Ended June 30,
20202019
RevenuesAdjusted EBITDARevenuesAdjusted EBITDA
Americas$1,822  $(263) $2,954  $187  
International691  (180) 1,303  18  
Corporate and Other (a)
—  (26) —  (31) 
Total Company$2,513  $(469) $4,257  $174  
Reconciliation of Adjusted EBITDA to loss before income taxes
20202019
Adjusted EBITDA$(469) $174  
Less:Non-vehicle related depreciation and amortization140  133  
Interest expense related to corporate debt, net:
Interest expense99  90  
Early extinguishment of debt7  —  
COVID-19 charges (b)
80  —  
Restructuring and other related charges72  44  
Non-operational charges related to shareholder
   activist activity (c)
4  —  
Transaction-related costs, net3  6  
Gain on sale of equity method investment in China (d)
—  (44) 
Loss before income taxes$(874) $(55) 

__________
(a)
(a)Includes unallocated corporate overhead which is not attributable to a particular segment.
(b)Six months ended June 30, 2020 consists of $79 million within operating expenses and $1 million within selling, general and administrative expenses. Primarily consisting of $33 million of losses associated with vehicles damaged in overflow parking lots, $30 million of minimum annual guaranteed rent in excess of concession fees and $17 million of incremental cleaning supplies to sanitize vehicles and facilities, and overflow parking for idle vehicles.
(c)Reported within selling, general and administrative expenses.
(d)Reported within operating expenses.
27
Table of Contents
Includes unallocated corporate overhead which is not attributable to a particular segment.


As of June 30, 20192020 and December 31, 2018,2019, Americas’ segment assets exclusive of assets under vehicle programs were approximately $5.9$6.7 billion and $3.8$6.2 billion, respectively, and International segment assets exclusive of assets under vehicle programs were approximately $2.8 billion and $3.0 billion, respectively.

As of June 30, 2020 and $2.5December 31, 2019, Americas’ segment assets under vehicle programs were approximately $9.9 billion and $10.5 billion, respectively, and International segment assets under vehicle programs were approximately $2.3 billion and $3.3 billion, respectively. The increaseschanges in assets exclusive of assets under vehicle programs is primarily due to the adoptionreduction of ASU 2016-02 (see Note 1–Basis of Presentation).

As of June 30, 2019 and December 31, 2018, Americas’ assets under vehicle programs were approximately $11.8 billion and $9.7 billion, respectively, and International assets under vehicle programs were approximately $3.6 billion and $3.1 billion, respectively. The increasesvehicles in assets under vehicle programs is primarily due to seasonality.


18.Guarantor and Non-Guarantor Consolidating Condensed Financial Statements

The following consolidating financial information presents Consolidating Condensed Statements of Comprehensive Income for the three and six months ended June 30, 2019 and 2018, Consolidating Condensed Balance Sheets as of June 30, 2019 and December 31, 2018, and Consolidating Condensed Statements of Cash Flows for the six months ended June 30, 2019 and 2018 for: (i) Avis Budget Group, Inc. (the “Parent”); (ii) ABCR and Avis Budget Finance, Inc. (the “Subsidiary Issuers”); (iii) the guarantor subsidiaries; (iv) the non-guarantor subsidiaries; (v) elimination entries necessary 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 relationresponse to the Company’s guarantee of the payment of principal, premium (if any) and interest on the notes issued by the Subsidiary Issuers. See Note 11–Long-term Corporate Debt and Borrowing Arrangements for additional description of these guaranteed notes. The Senior Notes are guaranteed by the Parent and certain subsidiaries.COVID-19 pandemic.

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.

The following table provides a reconciliation of the cash and cash equivalents, program and restricted cash reported within the Consolidating Condensed Balance Sheets to the amounts shown in the Consolidating Condensed Statements of Cash Flows.
 As of June 30,
 2019 2018
 Non-Guarantor Total Non-Guarantor Total
Cash and cash equivalents$520
 $534
 $475
 $489
Program cash48
 48
 161
 161
Restricted cash (a)
3
 3
 11
 11
Total cash and cash equivalents, program and restricted cash$571
 $585
 $647
 $661
_________
(a)
Included within other current assets.


Consolidating Condensed Statements of Comprehensive Income

Three Months Ended June 30, 2019
   Parent 
Subsidiary
Issuers
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations Total
Revenues$—
 $—
 $1,442
 $1,541
 $(646) $2,337
              
Expenses           
 Operating1
 —
 720
 451
 —
 1,172
 Vehicle depreciation and lease charges, net—
 —
 597
 521
 (575) 543
 Selling, general and administrative10
 6
 168
 129
 —
 313
 Vehicle interest, net—
 —
 72
 89
 (71) 90
 Non-vehicle related depreciation and amortization—
 5
 35
 26
 —
 66
 Interest expense related to corporate debt, net:           
  Interest expense—
 34
 1
 13
 —
 48
  Intercompany interest expense (income)(3) 22
 7
 (26) —
 —
 Restructuring and other related charges8
 —
 11
 4
 —
 23
 Transaction-related costs, net—
 1
 (7) 7
 —
 1
Total expenses16
 68
 1,604
 1,214
 (646) 2,256
Income (loss) before income taxes and equity in earnings of subsidiaries(16) (68) (162) 327
 —
 81
Provision for (benefit from) income taxes(6) (24) 39
 10
 —
 19
Equity in earnings of subsidiaries72
 116
 317
 —
 (505) —
Net income$62
 $72
 $116
 $317
 $(505) $62
   

 

 

 

 

 

Comprehensive income$60
 $70
 $126
 $326
 $(522) $60




Six Months Ended June 30, 2019
   Parent 
Subsidiary
Issuers
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations Total
Revenues$—
 $—
 $2,630
 $2,845
 $(1,218) $4,257
              
Expenses           
 Operating1
 —
 1,334
 908
 —
 2,243
 Vehicle depreciation and lease charges, net—
 —
 1,126
 985
 (1,083) 1,028
 Selling, general and administrative21
 8
 331
 237
 —
 597
 Vehicle interest, net—
 —
 135
 171
 (135) 171
 Non-vehicle related depreciation and amortization—
 5
 73
 55
 —
 133
 Interest expense related to corporate debt, net:           
  Interest expense—
 68
 1
 21
 —
 90
  Intercompany interest expense (income)(6) 8
 14
 (16) —
 —
 Restructuring and other related charges11
 —
 25
 8
 —
 44
 Transaction-related costs, net—
 1
 (6) 11
 —
 6
Total expenses27
 90
 3,033
 2,380
 (1,218) 4,312
Income (loss) before income taxes and equity in earnings of subsidiaries(27) (90) (403) 465
 —
 (55)
Provision for (benefit from) income taxes(10) (32) 24
 (8) —
 (26)
Equity in earnings (loss) of subsidiaries(12) 46
 473
 —
 (507) —
Net income (loss)$(29) $(12) $46
 $473
 $(507) $(29)
              
Comprehensive income (loss)$(36) $(19) $58
 $484
 $(523) $(36)



























Three Months Ended June 30, 2018
   Parent 
Subsidiary
Issuers
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations Total
Revenues$—
 $—
 $1,395
 $1,590
 $(657) $2,328
              
Expenses           
 Operating1
 (3) 677
 500
 —
 1,175
 Vehicle depreciation and lease charges, net—
 —
 605
 582
 (596) 591
 Selling, general and administrative10
 3
 176
 132
 —
 321
 Vehicle interest, net—
 —
 61
 80
 (61) 80
 Non-vehicle related depreciation and amortization—
 1
 36
 30
 —
 67
 Interest expense related to corporate debt, net:           
  Interest expense—
 39
 1
 9
 —
 49
  Intercompany interest expense (income)(3) (31) 5
 29
 —
 —
 Restructuring and other related charges—
 —
 1
 3
 —
 4
 Transaction-related costs, net—
 1
 1
 1
 —
 3
Total expenses8
 10
 1,563
 1,366
 (657) 2,290
Income (loss) before income taxes and equity in earnings of subsidiaries(8) (10) (168) 224
 —
 38
Provision for (benefit from) income taxes(5) (3) 14
 6
 —
 12
Equity in earnings of subsidiaries29
 36
 218
 —
 (283) —
Net income$26
 $29
 $36
 $218
 $(283) $26
              
Comprehensive income (loss)$(24) $(21) $(16) $165
 $(128) $(24)



Six Months Ended June 30, 2018
   Parent 
Subsidiary
Issuers
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations Total
Revenues$—
 $—
 $2,579
 $2,949
 $(1,232) $4,296
              
Expenses           
 Operating2
 1
 1,298
 966
 —
 2,267
 Vehicle depreciation and lease charges, net—
 —
 1,141
 1,086
 (1,121) 1,106
 Selling, general and administrative28
 6
 331
 252
 —
 617
 Vehicle interest, net—
 —
 113
 150
 (111) 152
 Non-vehicle related depreciation and amortization—
 1
 72
 55
 —
 128
 Interest expense related to corporate debt, net:           
  Interest expense—
 78
 2
 15
 —
 95
  Intercompany interest expense (income)(6) (9) 11
 4
 —
 —
  Early extinguishment of debt—
 5
 —
 —
 —
 5
 Restructuring and other related charges—
 —
 4
 6
 —
 10
 Transaction-related costs, net—
 1
 1
 5
 —
 7
Total expenses24
 83
 2,973
 2,539
 (1,232) 4,387
Income (loss) before income taxes and equity in earnings of subsidiaries(24) (83) (394) 410
 —
 (91)
Provision for (benefit from) income taxes(11) (22) (5) 8
 —
 (30)
Equity in earnings (loss) of subsidiaries(48) 13
 402
 —
 (367) —
Net income (loss)$(61) $(48) $13
 $402
 $(367) $(61)
              
Comprehensive income (loss)$(103) $(90) $(37) $349
 $(222) $(103)



























Consolidating Condensed Balance Sheets

As of June 30, 2019
   Parent 
Subsidiary
Issuers
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations Total
Assets           
Current assets:           
 Cash and cash equivalents$1
 $12
 $1
 $520
 $—
 $534
 Receivables, net—
 —
 277
 643
 —
 920
 Other current assets1
 134
 131
 566
 —
 832
Total current assets2
 146
 409
 1,729
 —
 2,286
              
Property and equipment, net—
 214
 326
 209
 —
 749
Operating lease right-of-use assets—
 700
 1,138
 571
 —
 2,409
Deferred income taxes14
 1,136
 207
 81
 —
 1,438
Goodwill—
 —
 471
 636
 —
 1,107
Other intangibles, net—
 25
 471
 310
 —
 806
Other non-current assets49
 32
 15
 127
 —
 223
Intercompany receivables165
 416
 2,213
 1,372
 (4,166) —
Investment in subsidiaries203
 4,779
 3,847
 —
 (8,829) —
Total assets exclusive of assets under vehicle programs433
 7,448
 9,097
 5,035
 (12,995) 9,018
              
Assets under vehicle programs:           
 Program cash—
 —
 —
 48
 —
 48
 Vehicles, net—
 68
 52
 14,158
 —
 14,278
 Receivables from vehicle manufacturers and other—
 3
 94
 335
 —
 432
 Investment in Avis Budget Rental Car Funding (AESOP) LLC-related party—
 —
 —
 679
 —
 679
   —
 71
 146
 15,220
 —
 15,437
Total assets$433
 $7,519
 $9,243
 $20,255
 $(12,995) $24,455
              
Liabilities and stockholders’ equity           
Current liabilities:           
 Accounts payable and other current liabilities$15
 $297
 $862
 $1,075
 $—
 $2,249
 Short-term debt and current portion of long-term debt—
 415
 2
 3
 —
 420
Total current liabilities15
 712
 864
 1,078
 —
 2,669
              
Long-term debt—
 2,099
 2
 1,014
 —
 3,115
Long-term operating lease liabilities—
 622
 968
 405
 —
 1,995
Other non-current liabilities42
 102
 229
 379
 —
 752
Intercompany payables—
 3,749
 416
 1
 (4,166) —
Total liabilities exclusive of liabilities under vehicle programs57
 7,284
 2,479
 2,877
 (4,166) 8,531
              
Liabilities under vehicle programs:           
 Debt—
 32
 46
 3,465
 —
 3,543
 Due to Avis Budget Rental Car Funding (AESOP) LLC-related party—
 —
 —
 8,913
 —
 8,913
Deferred income taxes—
 —
 1,840
 189
 —
 2,029
Other—
 —
 99
 964
 —
 1,063
   —
 32
 1,985
 13,531
 —
 15,548
Total stockholders’ equity376
 203
 4,779
 3,847
 (8,829) 376
Total liabilities and stockholders’ equity$433
 $7,519
 $9,243
 $20,255
 $(12,995) $24,455


As of December 31, 2018
   Parent 
Subsidiary
Issuers
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 Eliminations Total
Assets           
Current assets:           
 Cash and cash equivalents$1
 $12
 $1
 $601
 $—
 $615
 Receivables, net—
 —
 239
 716
 —
 955
 Other current assets5
 112
 116
 371
 —
 604
Total current assets6
 124
 356
 1,688
 —
 2,174
              
Property and equipment, net—
 199
 319
 218
 —
 736
Deferred income taxes13
 1,015
 207
 66
 —
 1,301
Goodwill—
 —
 471
 621
 —
 1,092
Other intangibles, net—
 26
 475
 324
 —
 825
Other non-current assets47
 39
 16
 140
 —
 242
Intercompany receivables159
 404
 2,104
 1,262
 (3,929) —
Investment in subsidiaries246
 4,786
 3,852
 —
 (8,884) —
Total assets exclusive of assets under vehicle programs471
 6,593
 7,800
 4,319
 (12,813) 6,370
              
Assets under vehicle programs:           
 Program cash—
 —
 —
 115
 —
 115
 Vehicles, net—
 55
 54
 11,365
 —
 11,474
 Receivables from vehicle manufacturers and other—
 2
 —
 629
 —
 631
 Investment in Avis Budget Rental Car Funding (AESOP) LLC-related party—
 —
 —
 559
 —
 559
   —
 57
 54
 12,668
 —
 12,779
Total assets$471
 $6,650
 $7,854
 $16,987
 $(12,813) $19,149
              
Liabilities and stockholders’ equity           
Current liabilities:           
 Accounts payable and other current liabilities$16
 $246
 $582
 $849
 $—
 $1,693
 Short-term debt and current portion of long-term debt—
 18
 3
 2
 —
 23
Total current liabilities16
 264
 585
 851
 —
 1,716
              
Long-term debt—
 2,501
 3
 1,024
 —
 3,528
Other non-current liabilities41
 87
 257
 382
 —
 767
Intercompany payables—
 3,524
 404
 1
 (3,929) —
Total liabilities exclusive of liabilities under vehicle programs57
 6,376
 1,249
 2,258
 (3,929) 6,011
              
Liabilities under vehicle programs:           
 Debt—
 28
 49
 2,797
 —
 2,874
 Due to Avis Budget Rental Car Funding (AESOP) LLC-related party—
 —
 —
 7,358
 —
 7,358
 Deferred income taxes—
 —
 1,770
 191
 —
 1,961
 Other—
 —
 —
 531
 —
 531
   —
 28
 1,819
 10,877
 —
 12,724
Total stockholders’ equity414
 246
 4,786
 3,852
 (8,884) 414
Total liabilities and stockholders’ equity$471
 $6,650
 $7,854
 $16,987
 $(12,813) $19,149




Consolidating Condensed Statements of Cash Flows

Six Months Ended June 30, 2019
 Parent 
Subsidiary
Issuers
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations Total
Net cash provided by (used in) operating activities$20
 $43
 $50
 $868
 $(16) $965
            
Investing activities��          
Property and equipment additions—
 (35) (49) (33) —
 (117)
Proceeds received on asset sales—
 1
 —
 5
 —
 6
Net assets acquired (net of cash acquired)—
 —
 (4) (50) —
 (54)
Other, net—
 —
 12
 69
 —
 81
Net cash provided by (used in) investing activities exclusive of vehicle programs—
 (34) (41) (9) —
 (84)
            
Vehicle programs:           
Investment in vehicles—
 (5) (2) (8,708) —
 (8,715)
Proceeds received on disposition of vehicles—
 24
 —
 5,749
 —
 5,773
Investment in debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party—
 —
 —
 (167) —
 (167)
Proceeds from debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party—
 —
 —
 47
 —
 47
 —
 19
 (2) (3,079) —
 (3,062)
Net cash provided by (used in) investing activities—
 (15) (43) (3,088) —
 (3,146)
            
Financing activities           
Proceeds from long-term borrowings—
 —
 —
 2
 —
 2
Payments on long-term borrowings—
 (9) (2) (1) —
 (12)
Repurchases of common stock(4) —
 —
 —
 —
 (4)
Other, net(16) (17) —
 —
 16
 (17)
Net cash provided by (used in) financing activities exclusive of vehicle programs(20) (26) (2) 1
 16
 (31)
            
Vehicle programs:           
Proceeds from borrowings—
 —
 —
 11,758
 —
 11,758
Payments on borrowings—
 (2) (5) (9,681) —
 (9,688)
Debt financing fees—
 —
 —
 (12) —
 (12)
 —
 (2) (5) 2,065
 —
 2,058
Net cash provided by (used in) financing activities(20) (28) (7) 2,066
 16
 2,027
            
Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash—
 —
 —
 4
 —
 4
            
Net decrease in cash and cash equivalents, program and restricted cash—
 —
 —
 (150) —
 (150)
Cash and cash equivalents, program and restricted cash, beginning of period1
 12
 1
 721
 —
 735
Cash and cash equivalents, program and restricted cash, end of period$1
 $12
 $1
 $571
 $—
 $585


Six Months Ended June 30, 2018
 Parent 
Subsidiary
Issuers
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations Total
Net cash provided by (used-in) operating activities$75
 $107
 $66
 $968
 $(95) $1,121
            
Investing activities           
Property and equipment additions—
 (33) (43) (39) —
 (115)
Proceeds received on asset sales—
 2
 —
 4
 —
 6
Net assets acquired (net of cash acquired)—
 (3) (4) (21) —
 (28)
Other, net—
 —
 —
 (37) —
 (37)
Net cash provided by (used in) investing activities exclusive of vehicle programs—
 (34) (47) (93) —
 (174)
            
Vehicle programs:           
Investment in vehicles—
 (1) (1) (8,357) —
 (8,359)
Proceeds received on disposition of vehicles—
 17
 —
 4,790
 —
 4,807
Investment in debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party—
 —
 —
 (22) —
 (22)
 —
 16
 (1) (3,589) —
 (3,574)
Net cash provided by (used in) investing activities—
 (18) (48) (3,682) —
 (3,748)
            
Financing activities           
Proceeds from long-term borrowings—
 81
 —
 —
 —
 81
Payments on long-term borrowings—
 (92) (1) (1) —
 (94)
Net change in short-term borrowings—
 —
 —
 (2) —
 (2)
Repurchases of common stock(78) —
 —
 —
 —
 (78)
Debt financing fees—
 (9) —
 —
 —
 (9)
Other, net2
 (71) (12) (12) 95
 2
Net cash provided by (used in) financing activities exclusive of vehicle programs(76) (91) (13) (15) 95
 (100)
            
Vehicle programs:           
Proceeds from borrowings—
 —
 —
 10,145
 —
 10,145
Payments on borrowings—
 (1) (5) (7,637) —
 (7,643)
Debt financing fees—
 —
 —
 (13) —
 (13)
 —
 (1) (5) 2,495
 —
 2,489
Net cash provided by (used in) financing activities(76) (92) (18) 2,480
 95
 2,389
            
Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash—
 —
 —
 (2) —
 (2)
            
Net decrease in cash and cash equivalents, program and restricted cash(1) (3) —
 (236) —
 (240)
Cash and cash equivalents, program and restricted cash, beginning of period4
 14
 —
 883
 —
 901
Cash and cash equivalents, program and restricted cash, end of period$3
 $11
 $—
 $647
 $—
 $661





19.Subsequent Events

In July 2019, the Company issued $400 million of 5¾% Senior Notes due July 2027, at par. The Company used the net proceeds from the offering to redeem a portion of its 5½% Senior Notes due April 2023 for $400 million plus accrued interest.

In August 2019, the Company’s Board of Directors increased the Company’s share repurchase program authorization by $100 million.


* * * *

28
Item 2.
Item 2. Management’s Discussion and Analysis of Financial Condition andResults of Operations

Results of Operations

The following discussion should be read in conjunction with our Consolidated Condensed Financial Statements and accompanying Notes included in this Quarterly Report on Form 10-Q, and with our 20182019 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 in this Quarterly Report on Form 10-Q and those included in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and other portions of our 20182019 Form 10-K. Unless otherwise noted, all dollar amounts in tables are in millions.
OVERVIEW

Our Company

We operate three of the most globally recognized brands in mobility solutions, Avis, Budget and Zipcar, together with several other regional brands well recognized in their respective markets. We are a leading vehicle rental operator in North America, Europe, Australasia and Australasiacertain other regions we serve, with an average rental fleet during 20182019 of nearly 650,000660,000 vehicles. 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, car sharing operations in certain of these markets, and licensees in the areas in which we do not operate directly; and International, consisting primarily of our vehicle rental operations in Europe, the Middle East, Africa, Asia and Australasia, car sharing operations in certain of these markets, and licensees in the areas in which we do not operate directly.

Business and Trends

Our revenuesThe spread of the novel coronavirus (“COVID-19”) and the impact on travel demand and the global economy are derived principally fromhaving significant negative impacts on all aspects of our business.

Significant events affecting travel, have historically had an impact on vehicle rental volumes, with the full extent of the impact generally determined by the length of time the event influences travel decisions. COVID-19 and the resulting economic conditions have had, and we believe will continue to have, a significant negative impact on our operations and include:
time & mileage fees charged to our customers for vehicle rentals;
sales of loss damage waivers and insurance and other supplemental items in conjunction with vehicle rentals; and
payments from our customers with respect to certain operating expenses we incur, including gasoline, vehicle licensing fees and concession fees, which provide the right to operate at airports and other locations.
In addition, we receive revenue for royalties and associated fees from our licensees in conjunction with their vehicle rental transactions.volumes and consequently our financial results, and such negative impact may continue well beyond the containment of this outbreak. In particular:

Our operating results are subject to variability due to seasonality, macroeconomic conditions and other factors. Car rental volumes tend to be associated with•Reservation volume for the travel industry, particularly airline passenger volumes, or enplanements,remainder of 2020 is significantly behind prior year on a comparable basis as a result of the effects of COVID-19, which in turn tend to reflect general economic conditions. Our operations are also seasonal, with thecould impact our peak summer season. The third quarter of the year has historically having been our strongestmost profitable quarter, as measured by net income and Adjusted EBITDA, due to increased summer leisure travel.

•The used vehicle market was significantly disrupted in the increasedfirst half of second quarter, impacting our ability to dispose of used vehicles as a result of COVID-19. While the used car market improved significantly in the second half of the second quarter, if there are further disruptions due to COVID-19, we would likely experience a reduction in residual values for risk vehicles in our fleet which could cause us to sustain a substantial loss on the ultimate sale of such vehicles or require us to depreciate those at a more accelerated rate than we have anticipated. If our ability to sell vehicles in the used vehicle market becomes severely limited again, we may have difficulty meeting collateral requirements due under our asset-backed financing facilities.

•In April 2020, Moody’s and S&P Global (the “Rating Agencies”) downgraded our long-term corporate debt rating. If we were to experience a further downgrade, this could negatively impact our ability to respond to adverse changes in general economic, industry and competitive conditions, as well as changes in government regulation and changes to our business.

29
•As a result of decreased rental volume, we have parked our vehicles in overflow parking lots. In April 2020, we experienced a fire at an overflow parking lot near Southwest Florida International Airport. As a result, we have lost vehicles with an estimated carrying value of approximately $50 million. We estimate a loss of up to $10 million related to this incident, which will be treated as COVID-19 charges and excluded from Adjusted EBITDA. We could experience similar casualty losses in other overflow parking lots.

•We have taken cost removal and mitigation actions by eliminating all non-essential capital and operating expenditures and we are continuing to negotiate with partners and suppliers for further reductions. We have reduced or furloughed a large part of our global workforce, reduced base compensation at the level of leisure travel during such quarter. vice presidents and above, froze merit increases, eliminated our 401(k) match for highly compensated employees, and canceled all future hiring. We aggressively reduced the size of our global fleet beginning in March and ended in June with over 20% fewer units than the prior year. Our vehicle dispositions will occur through both traditional methods and by utilizing our alternative distribution strategy by selling directly to dealers and consumers. Finally, we have negotiated a significant number of new vehicle cancellations to improve utilization and shrink the fleet size.

Although our results for second quarter were significantly impacted by COVID-19, we do not believe they reflect the positive momentum we saw at the end of the quarter and look to carry throughout the remainder of 2020. Our revenues in second quarter showed sequential improvement, down approximately 80% from prior year at the start and finished down approximately 60% from prior year. Rental volumes also improved throughout the second quarter and ended down approximately 50% year-over-year. Fleet size continues to be a focal point as we align with demand while taking advantage of a strong used vehicle market. As the environment remains challenging, these trends could be hindered if a “second wave” of the virus were to impact the economy.

We have never previously experienced such a partially variable cost structuredecrease in demand, and routinely adjustas a result, our ability to be predictive regarding the size,impact of such a decrease is uncertain. In addition, the duration of the global pandemic is uncertain. As a consequence, we cannot estimate the impact on our business, financial condition or forecast financial or operational results with reasonable certainty. Our results of operations, financial condition, and thereforecash flows were impacted during the cost, of our rental fleet in response to fluctuations in demand.

Thus far in 2019, worldwide demand for mobility solutions has increased,three and used-vehicle values in the U.S. have stabilized, counterbalancedsix months ended June 30, 2020, by the incremental impactongoing COVID-19 pandemic. The trends and results for the three and six months ended June 30, 2020 may not be indicative of rising interest rates, higher salaries, wagesresults that may be expected for the future quarters due to uncertainty regarding the extent and related benefits. We expect such economic conditions to continue throughout 2019.duration of the COVID-19 pandemic.

We pursue opportunities to enhance profitability and increase return on invested capital. Our strategies are intended to support and strengthen our brands, to grow our margins and earnings over time and to achieve growth and efficiency opportunities as mobility solutions continue to evolve.


We operate in a highly competitive industry and we expect to continue to face challenges and risks in managing our business. We seek to mitigate our exposure to risks in numerous ways, including delivering upon our core strategic initiatives and through continued optimization of fleet levels to match changes in demand for vehicle rentals, maintenance of liquidity to fund our fleet investment and operations, appropriate investments in technology, and adjustments in the size and the nature and terms of our relationships with vehicle manufacturers.


RESULTS OF OPERATIONS

We measure performance principally using the following key metrics: (i) rental days, which represent the total number of days (or portion thereof) a vehicle was rented, (ii) revenue per day, which represents revenues divided by rental days, (iii) vehicle utilization, which represents rental days divided by available rental days, with available rental days is defined as average rental fleet times the number of days in the period, and (iv) per-unit fleet costs, which represent vehicle depreciation, lease charges and gain or loss on vehicle sales, divided by average rental fleet. Our rental days, revenue per day and vehicle utilization metrics are all calculated based on the actual rental of the vehicle during a 24-hour period. We believe that this methodology provides us with the most relevant metrics in order to manage the business. Our calculation may not be comparable to the calculation of 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-year results at the prior-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 revenues and “Adjusted EBITDA,” which we define as income from continuing operations before non-vehicle related depreciation and amortization, any impairment charges, restructuring and other related charges, early extinguishment of debt costs, non-vehicle related interest, transaction-related costs, net charges for unprecedented personal-injury legal matters, non-operational charges related to shareholder activist activity, gain on sale of equity method investment in AnjiChina, COVID-19 charges and income taxes. Net charges for unprecedented personal-injury legal matters and gain on sale of equity method investment in AnjiChina are recorded within operating expenses in our consolidated condensed statement of operations. Non-operational charges related to shareholder activist activity include third party advisory, legal and other professional service fees and
30
are recorded within selling, general and administrative expenses in our consolidated results of operations. COVID-19 charges include unusual, direct and incremental costs due to the COVID-19 global pandemic such as minimum annual guaranteed rent in excess of concession fees for the period, overflow parking for idle vehicles, incremental cleaning supplies to sanitize vehicles and facilities, and losses associated with vehicles damaged in overflow parking lots and are recorded within operating expenses in our consolidated condensed statement of operations. We have revised our definition of Adjusted EBITDA to exclude the gain on sale of equity method investment in Anji.COVID-19 charges. We did not revise prior years’years' Adjusted EBITDA amounts because there were no gainsother charges similar in nature to this gain.these. 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 them 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-titled measures used by other companies.

During the six months ended June 30, 2019:2020:

•Our revenues totaled $4.3 billion$2,513 million and decreased 1%41% compared to the similar period in 2018,2019, primarily due to a 2% negative impact from currency exchange rate movements.reduced rental volume due to impacts directly related to COVID-19.

•Our net loss was $29$639 million and our Adjusted EBITDA loss was $174$469 million, representing an $11a loss of $643 million year-over-year, increase, primarily due to Americas’ lower per-unit fleet costs, partially offsetimpacts directly related to COVID-19.

•We repurchased $113 million of our common stock at an average price of $22.49, reducing our shares outstanding by lower revenues, higher salaries, wagesapproximately 5.0 million shares, or 7%.

•We acquired various licensees in the United States and related benefits and higher interest rates.


Europe.

Three Months Ended June 30, 20192020 vs. Three Months Ended June 30, 20182019

Our consolidated condensed results of operations comprised the following:
 Three Months Ended 
June 30,		    Three Months Ended 
June 30,
 2019 2018 
$ Change 
 % Change20202019
$ Change
% Change
RevenuesRevenues$2,337
 $2,328
 $9
 0%Revenues$760  $2,337  $(1,577) (67 %)
        
ExpensesExpenses       Expenses
Operating1,172
 1,175
 (3) 0%Operating622  1,172  (550) (47 %)
Vehicle depreciation and lease charges, net543
 591
 (48) (8%)Vehicle depreciation and lease charges, net374  543  (169) (31 %)
Selling, general and administrative313
 321
 (8) (2%)Selling, general and administrative132  313  (181) (58 %)
Vehicle interest, net90
 80
 10
 13%Vehicle interest, net87  90  (3) (3 %)
Non-vehicle related depreciation and amortization66
 67
 (1) (1%)Non-vehicle related depreciation and amortization71  66  5  8 %
Interest expense related to corporate debt, net48
 49
 (1) (2%)Interest expense related to corporate debt, net:
Restructuring and other related charges23
 4
 19
 n/m
Interest expense51  48  3  6 %
Transaction-related costs, net1
 3
 (2) (67%)Early extinguishment of debt3  —  3  n/m
Restructuring and other related charges28  23  5  22 %
Transaction-related costs, net1  1  —  0 %
Total expensesTotal expenses2,256
 2,290
 (34) (1%)Total expenses1,369  2,256  (887) (39 %)
        
Income before income taxes81
 38
 43
 n/m
Provision for income taxes19
 12
 7
 58%
Income (loss) before income taxesIncome (loss) before income taxes(609) 81  (690) n/m
Provision for (benefit from) income taxesProvision for (benefit from) income taxes(128) 19  (147) n/m
       
Net income$62
 $26
 $36
 n/m
Net income (loss)Net income (loss)$(481) $62  $(543) n/m
__________
n/mNot meaningful.
n/m Not meaningful.

Revenues decreased during the three months ended June 30, 2019 were comparable2020 compared to the similar period in 2018,2019, primarily due to a 59% decrease in volume and a 20% decrease in revenue per day excluding exchange rate movements as a result of a 2% increase in volume, partially offset by a $46the impact of COVID-19, and an $8 million negative impact from currency exchange rate movements. Total expenses decreased during the three months ended June 30, 20192020, compared to the
31
similar period in 2018,2019, primarily due to strategic cost reduction initiatives and reduced operational activities as a $44 million gain onresult of the saleimpact of an equity method investment in Anji, Americas’ lower per-unit fleet costs and a $32 million favorable impact from currency exchange rate movements, partially offset by higher salaries, wages and related benefits and higher interest rates.COVID-19.

Operating expenses decreasedincreased to 50.2%81.9% of revenue during the three months ended June 30, 20192020 compared to 50.5%50.2% during the similar period in 2018.2019. Vehicle depreciation and lease charges decreasedincreased to 23.2%49.3% of revenue during the three months ended June 30, 20192020 compared to 25.4%23.2% during the similar period in 2018, primarily due to Americas’ lower per-unit fleet costs.2019. Selling, general and administrative costs decreasedincreased to 13.4%17.4% of revenue during the three months ended June 30, 20192020 compared to 13.8%13.4% during the similar period in 2018, primarily due to lower marketing commissions, partially offset by higher salaries, wages, and related benefits.2019. Vehicle interest costs increased to 3.9%11.4% of revenue during the three months ended June 30, 20192020 compared to 3.5%3.9% during the similar period in 2018, due2019. During the three months ended June 30, 2020, all expenses increased as a percentage of revenue as a result of the impact of COVID-19, partially offset by strategic cost reduction initiatives to higher interest rates.right size the business.

Our effective tax rates were provisionsa benefit of 23%21% and 32%a provision of 23% for the three months ended June 30, 20192020 and 2018,2019, respectively. As a result of these items, our net income increasedloss decreased by $36$543 million compared to 2018.the similar period in 2019.


For the three months ended June 30, 2020 and 2019, the Company reported a loss of $6.91 per diluted share and income of $0.81 per diluted share, respectively.

32
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 June 30,Three Months Ended June 30,
  2019 2018 20202019
  Revenues Adjusted EBITDA Revenues Adjusted EBITDA RevenuesAdjusted EBITDARevenuesAdjusted EBITDA
AmericasAmericas$1,627
 $152
 $1,590
 $107
Americas$565  $(233) $1,627  $152  
InternationalInternational710
 39
 738
 71
International195  (140) 710  39  
Corporate and Other (a)
Corporate and Other (a)
—
 (16) —
 (17)
Corporate and Other (a)
—  (9) —  (16) 
Total Company$2,337
 $175
 $2,328
 $161
Total Company$760  $(382) $2,337  $175  
        
 Reconciliation to Adjusted EBITDA Reconciliation to Adjusted EBITDA
     2019 201820202019
Net income $62
 $26
Provision for income taxes 19
 12
Income before income taxes 81
 38
Net income (loss)Net income (loss)$(481) $62  
Provision for (benefit from) income taxesProvision for (benefit from) income taxes(128) 19  
Income (loss) before income taxesIncome (loss) before income taxes(609) 81  
     
Add:Add:Non-vehicle related depreciation and amortization 66
 67
Add:
COVID-19 charges (b)
73  —  
 Interest expense related to corporate debt, net 48
 49
Non-vehicle related depreciation and amortization71  66  
 Restructuring and other related charges 23
 4
Interest expense related to corporate debt, net:
 
Transaction-related costs, net (b)
 1
 3
Interest expense51  48  
 
Gain on sale of equity method investment in Anji (c)
 (44) —
Early extinguishment of debt3  —  
Restructuring and other related charges28  23  
Transaction-related costs, net (c)
1  1  
Gain on sale of equity method investment in China (d)
—  (44) 
Adjusted EBITDAAdjusted EBITDA $175
 $161
Adjusted EBITDA$(382) $175  
__________
(a)
(a)Includes unallocated corporate overhead which is not attributable to a particular segment.
(b)For three months ended June 30, 2020 consists of $72 million within operating expenses and $1 million within selling, general and administrative expenses, net in our consolidated condensed results of operations. Primarily consisting of $30 million of minimum annual guaranteed rent in excess of concession fees, $28 million of losses associated with vehicles damaged in overflow parking lots and $15 million of incremental cleaning supplies to sanitize vehicles and facilities, and overflow parking for idle vehicles.
(c)Primarily comprised of acquisition- and integration-related expenses.
(d)Reported within operating expenses in our consolidated condensed results of operations (see Note 1 to our Consolidated Condensed Financial Statements).

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 condensed results of operations (see Note 1 to our Consolidated Condensed Financial Statements).

Americas
Three Months Ended 
June 30,
20202019% Change
Revenues$565  $1,627  (65 %)
Adjusted EBITDA(233) 152  n/m
  Three Months Ended 
June 30,		  
  2019 2018 % Change
Revenues $1,627
 $1,590
 2%
Adjusted EBITDA 152
 107
 42%
__________
n/m Not meaningful.

Revenues increased 2%decreased 65% during the three months ended June 30, 20192020 compared to the similar period in 2018,2019, primarily due to 2% increasea 59% decrease in volume and 15% lower revenue per day as a result of the impacts of COVID-19.

Operating expenses increased to 78.0% of revenue during the three months ended June 30, 2020 compared to 50.4% during the similar period in 2019. Vehicle depreciation and lease charges increased to 47.7% of revenue during the three months ended June 30, 2020 compared to 24.2% during the similar period in 2019. Selling, general and administrative costs increased to 14.2% of revenue during the three months ended June 30, 2020 compared to 11.5% during the similar period in 2019. Vehicle interest costs increased to 12.9% of revenue during the three months ended June 30, 2020 compared to 4.6% during the similar period in 2019. During the three months ended June 30, 2020, all expenses increased as a percentage of revenue as a result of the impact of COVID-19, partially offset by strategic cost reduction initiatives to right size the business.

33
Adjusted EBITDA was $385 million lower during the three months ended June 30, 2020 compared to the similar period in 2019, primarily due to lower revenues directly related to COVID-19, partially offset by a 22% decrease in per-unit fleet costs excluding exchange rate effects.

International
Three Months Ended 
June 30,
20202019% Change
Revenues$195  $710  (73 %)
Adjusted EBITDA(140) 39  n/m
Revenues decreased 73% during the three months ended June 30, 2020, compared to the similar period in 2019, primarily due to a 60% decrease in volume and a 1% increase29% decrease in revenue per day partially offset byexcluding exchange rate movements as a $3result of the impacts of COVID-19, and an $8 million negative impact from currency exchange rate movements.

Operating expenses increased to 50.4%93.5% of revenue during the three months ended June 30, 20192020 compared to 49.2%49.8% during the similar period in 2018, primarily due to higher maintenance and damage expense and increased salaries, wages, and related benefits.2019. Vehicle depreciation and lease charges decreasedincreased to 24.2%53.8% of revenue during the three months ended June 30, 20192020 compared to 27.5%21.0% during the similar period in 2018, primarily due to a 10% decrease in per-unit fleet costs and higher utilization.2019. Selling, general and administrative costs decreasedincreased to 11.5%21.5% of revenue during the three months ended June 30, 20192020 compared to 12.3%15.5% during the similar period in 2018, primarily due to lower marketing commissions, partially offset by higher salaries, wages, and related benefits.2019. Vehicle interest costs increased to 4.6%6.9% of revenue during the three months ended June 30, 20192020 compared to 4.3%2.0% during the similar period in 2018, due2019. During the three months ended June 30, 2020, all expenses increased as a percentage of revenue as a result of the impact of COVID-19, partially offset by strategic cost reduction initiatives to higher interest rates.right size the business.

Adjusted EBITDA was $45$179 million higherlower in second quarter 20192020 compared to the similar period in 2018, primarily due to higher revenues, lower per-unit fleet costs and higher utilization, partially offset by higher maintenance and damage expense, higher salaries, wages, and related benefits and higher interest rates.


International
  Three Months Ended 
June 30,		  
  2019 2018 % Change
Revenues $710
 $738
 (4%)
Adjusted EBITDA 39
 71
 (45%)

Revenues decreased 4% during the three months ended June 30, 2019, compared to the similar period in 2018, primarily due to a 1% decrease in revenue per day excluding exchange rate movements and a $43 million negative impact from currency exchange rate movements, partially offset by 3% higher rental volume.

Operating expenses decreased to 49.8% of revenue during the three months ended June 30, 2019 compared to 52.7% during the similar period in 2018, primarily due to a gain on the sale of an equity method investment in Anji, partially offset by lower revenues and higher public liability and property damage expense. Vehicle depreciation and lease charges increased to 21.0% of revenue during the three months ended June 30, 2019 compared to 20.8% during the similar period in 2018. Selling, general and administrative costs increased to 15.5% of revenue during the three months ended June 30, 2019 compared to 15.2% during the similar period in 2018. Vehicle interest costs increased to 2.0% of revenue during the three months ended June 30, 2019 compared to 1.7% during the similar period in 2018.

Adjusted EBITDA was $32 million lower in second quarter 2019 compared to the similar period in 2018, primarily due to lower revenue per day, higher public liability and property damage expense and an $11 million negative impact from currency exchange rate movements.

revenues directly related to COVID-19.


34
Six Months Ended June 30, 20192020 vs. Six Months Ended June 30, 20182019

Our consolidated results of operations comprised the following:
 Six Months Ended 
June 30,		    Six Months Ended 
June 30,
 2019 2018 
$ Change 
 % Change20202019$ Change% Change
RevenuesRevenues$4,257
 $4,296
 $(39) (1%)Revenues$2,513  $4,257  $(1,744) (41 %)
        
ExpensesExpenses       Expenses
Operating2,243
 2,267
 (24) (1%)Operating1,680  2,243  (563) (25 %)
Vehicle depreciation and lease charges, net1,028
 1,106
 (78) (7%)Vehicle depreciation and lease charges, net833  1,028  (195) (19 %)
Selling, general and administrative597
 617
 (20) (3%)Selling, general and administrative383  597  (214) (36 %)
Vehicle interest, net171
 152
 19
 13%Vehicle interest, net170  171  (1) (1 %)
Non-vehicle related depreciation and amortization133
 128
 5
 4%Non-vehicle related depreciation and amortization140  133  7  5 %
Interest expense related to corporate debt, net:    

 

Interest expense related to corporate debt, net:
Interest expense90
 95
 (5) (5%)Interest expense99  90  9  10 %
Early extinguishment of debt—
 5
 (5) n/m
Early extinguishment of debt7  —  7  n/m
Restructuring and other related charges44
 10
 34
 n/m
Restructuring and other related charges72  44  28  64 %
Transaction-related costs, net6
 7
 (1) (14%)Transaction-related costs, net3  6  (3) (50 %)
Total expensesTotal expenses4,312
 4,387
 (75) (2%)Total expenses3,387  4,312  (925) (21 %)
        
Loss before income taxesLoss before income taxes(55) (91) 36
 (40%)Loss before income taxes(874) (55) (819) n/m
Benefit from income taxesBenefit from income taxes(26) (30) 4
 (13%)Benefit from income taxes(235) (26) (209) n/m
       
Net lossNet loss$(29) $(61) $32
 (52%)Net loss$(639) $(29) $(610) n/m
__________
n/mNot meaningful.
n/m Not meaningful.

Revenues decreased during the six months ended June 30, 20192020 compared to the similar period in 2018,2019, primarily as a result of a 1%35% decrease in volume and an 8% decrease in revenue per day excluding exchange rate movements as a result of the impact of COVID-19, and a $102$28 million negative impact from currency exchange rate movements, partially offset by a 2% increase in volume.movements. Total expenses decreased during the six months ended June 30, 20192020 compared to the similar period in 2018,2019, primarily due to strategic cost reduction initiatives and reduced operational activities as a $93 million favorableresult of the impact from currency exchange rate movements, Americas’ lower per-unit fleetof COVID-19.

costs and a $44 million gain on the sale of an equity method investment in Anji, partially offset by higher restructuring and other related charges and higher interest rates.

Operating expenses decreasedincreased to 52.7%66.9% of revenue during the six months ended June 30, 20192020 compared to 52.8%52.7% during the similar period in 2018, due to a gain on the sale of an equity method investment in Anji, partially offset by higher salaries, wages, and related benefits and higher maintenance and damage expense.2019. Vehicle depreciation and lease charges decreasedincreased to 24.2%33.2% of revenue during the six months ended June 30, 20192020 compared to 25.8%24.2% during the similar period in 2018, primarily due to Americas’ lower per-unit fleet costs.2019. Selling, general and administrative costs decreasedincreased to 14.0%15.2% of revenue during the six months ended June 30, 20192020 compared to 14.4%14.0% during the similar period in 2018, primarily due to lower marketing commissions, partially offset by higher salaries, wages and related benefits.2019. Vehicle interest costs increased to 4.0%6.7% of revenue during the six months ended June 30, 20192020 compared to 3.5%4.0% during the similar period in 2018, due2019. During the six months ended June 30, 2020, all expenses increased as a percentage of revenue as a result of the impact of COVID-19, partially offset by strategic cost reduction initiatives to higher interest rates.right size the business.

Our effective tax rates were benefits of 47%27% and 33%47% for the six months ended June 30, 20192020 and 2018,2019, respectively. As a result of these items, our net loss decreasedincreased by $32 million compared to 2018.$610 million.

For the six months ended June 30, 2020 and 2019, the Company reported a loss of $8.96 and earnings of $0.39 per diluted share, respectively.


35
Following is a more detailed discussion of the results of each of our reportable segments and reconciliation of net loss to Adjusted EBITDA: 
 Six Months Ended June 30,Six Months Ended June 30,
  2019 201820202019
  Revenues Adjusted EBITDA Revenues Adjusted EBITDARevenuesAdjusted EBITDARevenuesAdjusted EBITDA
AmericasAmericas$2,954
 $187
 $2,938
 $122
Americas$1,822  $(263) $2,954  $187  
InternationalInternational1,303
 18
 1,358
 74
International691  (180) 1,303  18  
Corporate and Other (a)
Corporate and Other (a)
—
 (31) —
 (33)
Corporate and Other (a)
—  (26) —  (31) 
Total Company$4,257
 $174
 $4,296
 $163
Total Company$2,513  $(469) $4,257  $174  
        
 Reconciliation to Adjusted EBITDA Reconciliation to Adjusted EBITDA
     2019 201820202019
Net lossNet loss $(29) $(61)Net loss$(639) $(29) 
Benefit from income taxesBenefit from income taxes (26) (30)Benefit from income taxes(235) (26) 
Loss before income taxesLoss before income taxes (55) (91)Loss before income taxes(874) (55) 
     
Add:Add:Non-vehicle related depreciation and amortization 133
 128
Add:Non-vehicle related depreciation and amortization140  133  
 Interest expense related to corporate debt, net    Interest expense related to corporate debt, net:
 Interest expense 90
 95
Interest expense99  90  
 Early extinguishment of debt —
 5
Early extinguishment of debt7  —  
 Restructuring and other related charges 44
 10
COVID-19 charges (b)
80  —  
 
Transaction-related costs, net (b)
 6
 7
Restructuring and other related charges72  44  
 
Non-operational charges related to shareholder activist activity (c)
 —
 9
Non-operational charges related to shareholder activist activity (c)
4  —  
 
Gain on sale of equity method investment in Anji (d)
 (44) —
Transaction-related costs, net (d)
3  6  
Gain on sale of equity method investment in China (e)
—  (44) 
Adjusted EBITDAAdjusted EBITDA $174
 $163
Adjusted EBITDA$(469) $174  
_________
(a)
(a)Includes unallocated corporate overhead which is not attributable to a particular segment.
(b)Six months ended June 30, 2020 consists of $79 million within operating expenses and $1 million within selling, general and administrative expenses, net in our consolidated results of operations. Primarily consisting of $33 million of losses associated with vehicles damaged in overflow parking lots, $30 million of minimum annual guaranteed rent in excess of concession fees and $17 million of incremental cleaning supplies to sanitize vehicles and facilities, and overflow parking for idle vehicles.
(c)Reported within selling, general and administrative in our consolidated condensed results of operations.
(d)Primarily comprised of acquisition- and integration-related expenses.
(e)Reported within operating expenses in our consolidated condensed results of operations (see Note 1 to our Consolidated Condensed Financial Statements).

Includes unallocated corporate overhead which is not attributable to a particular segment.
(b)
Primarily comprised of acquisition- and integration-related expenses.
(c)
Reported within selling, general and administrative expenses in our consolidated condensed results of operations.
(d)
Reported within operating expenses in our Consolidated Statements of Operations (see Note 1 to our Consolidated Condensed Financial Statements).

Americas
Six Months Ended 
June 30,
20202019% Change
Revenues$1,822  $2,954  (38 %)
Adjusted EBITDA(263) 187  n/m
  Six Months Ended 
June 30,		  
  2019 2018 % Change
Revenue $2,954
 $2,938
 1%
Adjusted EBITDA 187
 122
 53%


Revenues increased 1%decreased 38% during the six months ended June 30, 20192020 compared to the similar period in 2018,2019, primarily due to an increasea 34% decrease in both rental volume and 6% decrease in revenue per day as a result of the impact of COVID-19.

Operating expenses increased to 64.7% of revenue during the six months ended June 30, 2020 compared to 51.3% during the similar period in 2019. Vehicle depreciation and lease charges increased to 33.0% of revenue during the six months ended June 30, 2020 compared to 25.3% during the similar period in 2019. Selling, general and administrative costs increased to 12.9% of revenue during the six months ended June 30, 2020 compared to 12.3% during the similar period in 2019. Vehicle interest costs increased to 7.9% of revenue during the six months ended June 30, 2020 compared to 4.8% during the similar period in 2019. During the six months ended June 30, 2020, all expenses increased as a percentage of revenue as a result of the impact of COVID-19, partially offset by strategic cost reduction initiatives to right size the business.

Adjusted EBITDA was $450 million lower during the six months ended June 30, 2020 compared to the similar period in 2019, due to lower revenues directly related to COVID-19.
36

International
Six Months Ended 
June 30,
20202019% Change
Revenues$691  $1,303  (47 %)
Adjusted EBITDA(180) 18  n/m

Revenues decreased 47% during the six months ended June 30, 2020 compared to the similar period in 2019, primarily due to a $937% decrease in volume and a 12% decrease in revenue per day excluding exchange rate movements as a result of the impact of COVID-19, and a $28 million negative impact from currency exchange rate movements.

Operating expenses increased to 51.3%72.3% of revenue during the six months ended June 30, 20192020 compared to 51.1%55.7% during the similar period in 2018.2019. Vehicle depreciation and lease charges decreasedincreased to 25.3%33.6% of revenue during the six months ended June 30, 20192020 compared to 28.0%21.6% during the similar period in 2018, primarily due to a 9% decrease in per-unit fleet costs.2019. Selling, general and administrative costs decreasedincreased to 12.3%17.5% of revenue during the six months ended June 30, 20192020 compared to 12.5%15.7% during the similar period in 2018.2019. Vehicle interest costs increased to 4.8%3.8% of revenue during the six months ended June 30, 20192020 compared to 4.2%2.2% during the similar period in 2018, due to higher interest rates.

Adjusted EBITDA increased 53% in2019. During the six months ended June 30, 2019 compared to2020, all expenses increased as a percentage of revenue as a result of the similar period in 2018, due to lower per-unit fleet costs,impact of COVID-19, partially offset by higher interest rates.strategic cost reduction initiatives to right size the business.

International
  Six Months Ended 
June 30,		  
  2019 2018 % Change
Revenue $1,303
 $1,358
 (4%)
Adjusted EBITDA 18
 74
 (76%)

Revenues decreased 4% during the six months ended June 30, 2019 compared to the similar period in 2018, primarily due to a 3% decrease in revenue per day excluding exchange rate movements and a $93 million negative effect from currency exchange rate movements, partially offset by a 6% increase in volume.

Operating expenses decreased to 55.7% of revenue during the six months ended June 30, 2019 compared to 55.8% during the similar period in 2018, primarily due to a gain on the sale of an equity method investment in Anji, partially offset by higher public liability and property damage expense and higher salaries, wages and related benefits. Vehicle depreciation and lease charges increased to 21.6% of revenue during the six months ended June 30, 2019 compared to 20.8% during the similar period in 2018, primarily due to lower revenues. Selling, general and administrative costs decreased to 15.7% of revenue during the six months ended June 30, 2019 compared to 15.9% during the similar period in 2018. Vehicle interest costs increased to 2.2% of revenue during the six months ended June 30, 2019 compared to 2.0% during the similar period in 2018.

Adjusted EBITDA was $56$198 million lower during the six months ended June 30, 2019,2020 compared to the similar period in 2018,2019, primarily due to lower revenues higher public liability and property damage expense and higher salaries, wages anddirectly related benefits and a $12 million negative effect from currency exchange rate movements.to COVID-19.


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.


FINANCIAL CONDITION
June 30, 
2020		December 31, 2019Change
Total assets exclusive of assets under vehicle programs$9,514  $9,311  $203  
Total liabilities exclusive of liabilities under vehicle programs8,948  8,538  410  
Assets under vehicle programs12,176  13,815  (1,639) 
Liabilities under vehicle programs12,895  13,932  (1,037) 
Stockholders’ equity(153) 656  (809) 
FINANCIAL CONDITION
  June 30, 
2019		 December 31, 2018 Change
Total assets exclusive of assets under vehicle programs $9,018
 $6,370
 $2,648
Total liabilities exclusive of liabilities under vehicle programs 8,531
 6,011
 2,520
Assets under vehicle programs 15,437
 12,779
 2,658
Liabilities under vehicle programs 15,548
 12,724
 2,824
Stockholders’ equity 376
 414
 (38)

Total assets exclusive of assets under vehicle programs and total liabilities exclusive of liabilities under vehicle programs increased primarily due to the adoption of ASU 2016-02 (see Note 1 to our Consolidated Condensed Financial Statements).

The increasesdecreases in assets under vehicle programs and liabilities under vehicle programs are principally related to the seasonal increase in the sizereduction of our vehicle rental fleet and operating leases recognized uponto right size our business in response to the adoption of ASU 2016-02 (see Note 1 to our Consolidated Condensed Financial Statements).COVID-19 pandemic. The decrease in stockholders’ equity is primarily due to our comprehensive loss.loss and share repurchases.

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 six months ended June 30, 2019,In January 2020, our Avis Budget Rental Car Funding subsidiary issued approximately $600 million and $650$700 million in asset-backed notes with an expected final payment date of March 2022 and September 2024,August 2025, and a weighted average interest rate of 3.56% and 3.44%, respectively. 2.42%.
37
The proceeds from these borrowings were used to fund the repayment of maturing vehicle-backed debt and the acquisition of rental cars in the United States. In June 2019,May 2020, we called $400issued $500 million of our 5½10½% Senior Secured Notes due April 2023 to be redeemed uponMay 2025, at 97% of face value. We used the issuanceproceeds from this offering for general corporate purposes. During the first quarter of 2020, we repurchased approximately 5.0 million shares of our 5¾% Senior Notes in July 2019 (see Note 19 to our Consolidated Condensed Financial Statements).outstanding common stock for approximately $113 million at an average price of $22.49. We have no meaningful corporate debt maturities until 2023.

CASH FLOWS

The following table summarizes our cash flows:
 Six Months Ended June 30,
 20202019Change
Cash provided by (used in):
Operating activities$350  $965  $(615) 
Investing activities317  (3,146) 3,463  
Financing activities(224) 2,027  (2,251) 
Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash(4) 4  (8) 
Net increase (decrease) in cash and cash equivalents, program and restricted cash439  (150) 589  
Cash and cash equivalents, program and restricted cash, beginning of period900  735  165  
Cash and cash equivalents, program and restricted cash, end of period$1,339  $585  $754  
  Six Months Ended June 30,
  2019 2018 Change
Cash provided by (used in):     

Operating activities$965
 $1,121
 $(156)

Investing activities(3,146) (3,748) 602

Financing activities2,027
 2,389
 (362)
Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash4
 (2) 6
Net decrease in cash and cash equivalents, program and restricted cash(150) (240) 90
Cash and cash equivalents, program and restricted cash, beginning of period735
 901
 (166)
Cash and cash equivalents, program and restricted cash, end of period$585
 $661
 $(76)

The decrease in cash provided by operating activities during the six months ended June 30, 20192020 compared with the same period in 20182019 is primarilyprincipally due to changesthe increase in the components of working capital.our net loss.

The decreaseincrease in cash used inprovided by investing activities during the six months ended June 30, 20192020 compared with the same period in 20182019 is primarily due to an increase in proceeds received on the disposition of vehicles, partially offset by an increase inreduced net investment in vehicles.


The decreaseincrease in cash provided byused in financing activities during the six months ended June 30, 20192020 compared with the same period in 20182019 is primarily due to a decrease in net borrowings under vehicle programs.programs offset by an increase in net corporate borrowings.

DEBT AND FINANCING ARRANGEMENTS

At June 30, 2019,2020, we had approximately $16$14.4 billion of indebtedness, including corporate indebtedness of approximately $3.5$3.9 billion and debt under vehicle programs of approximately $12.5$10.5 billion. For detailed information regarding our debt and borrowing arrangements, see Notes 1, 11 and 12 to our Consolidated Condensed Financial Statements.

Supplemental Guarantor Financial Information

The following financial information presents summarized financial information presented from the Consolidated Condensed Statements of Comprehensive Income for the six months ended June 30, 2020 and Consolidated Condensed Balance Sheets as of June 30, 2020 and December 31, 2019 for: Avis Budget Group, Inc. (the “Parent”), ABCR and Avis Budget Finance, Inc. (the “Subsidiary Issuers”) and the guarantor subsidiaries (the “Guarantor Subsidiaries”). The Subsidiary Issuers and the 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 guarantee of the payment of principal, premium (if any) and interest on the Senior Notes issued by the Subsidiary Issuers. For a description of these guaranteed notes, see Note 11 to our Consolidated Condensed Financial Statements. The Senior Notes are guaranteed by the Parent and certain subsidiaries.

The following tables present summarized financial information for the Parent, the Subsidiary Issuer and the Guarantor Subsidiaries on a combined basis after intercompany transactions have been eliminated, including adjustments to remove the receivable and payable balances, investment in, and equity in earnings from the
38
subsidiaries that do not guarantee the Senior Notes (the “Non-Guarantor Subsidiaries”).

Summarized Income Statement
Six Months Ended June 30, 2020
Revenues$1,648 
Expenses2,823 
Loss before income taxes(1,175)
Benefit from income taxes(177)
Net loss$(998)
__________
For the six months ended June 30, 2020, the above amounts include expenses of $1.1 billion associated with intercompany charges from the Non-Guarantor Subsidiaries.

Summarized Balance Sheets
June 30, 
2020		December 31, 2019
Assets
Current assets$945  $485  
Non-current assets5,226  5,067  
Assets under vehicle programs366  348  
Liabilities
Current liabilities$1,210  $1,244  
Non-current liabilities5,024  4,441  
Liabilities under vehicle programs2,133  2,311  
__________
As of June 30, 2020 and December 31, 2019, the above amounts exclude receivables of $3 million and $2 million, respectively, from the Non-Guarantor Subsidiaries. As of June 30, 2020 and December 31, 2019, the above amounts exclude payables of approximately $2.0 billion and $1.0 billion, respectively, to the Non-Guarantor Subsidiaries.

LIQUIDITY RISK

Our primary liquidity needs include the procurement of rental vehicles to be used in our 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 our foreign subsidiaries indefinitely into our foreign operations. 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 of June 30, 2019, we have cash and cash equivalents of $0.5 billion, available borrowing capacity under our committed credit facilities of $0.6 billion and available capacity under our vehicle programs of approximately $1.3 billion.

Our liquidity position has been impacted by COVID-19 as a result of significant volume declines and we expect the impact of COVID-19 on the U.S. and worldwide economies to continue to affect our volumes even after the outbreak is contained. Our liquidity could be further negatively affected by any financial market disruptions or the absence of a downturn inrecovery or worsening of the U.S. and worldwide economies, which may result in unfavorable conditions in the mobility 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 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 June 30, 2020, we had access to $1.3 billion of available cash and cash equivalents and available borrowings under our revolving credit facility of approximately $0.2 billion, providing us with access to an approximate $1.5 billion of total liquidity. See Note 1 to our Consolidated Condensed Financial Statements for detailed information on liquidity and management’s plans.

39
Our liquidity position could also be negatively impacted if we are unable to remain in compliance with the financialnew liquidity covenant, the consolidated first lien leverage ratio requirement after the end of the waiver period on June 30, 2021 and other covenants associated with our senior revolving credit facilityfacilities and other borrowings, including a maximum leverage ratio.borrowings. As of June 30, 2019,2020, 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 20182019 Form 10-K.10-K as well as “Risk Factors” section in this quarterly report.


CONTRACTUAL OBLIGATIONS

Our future contractual obligations have not changed significantly from the amounts reported within our 20182019 Form 10-K with the exception of our commitment to purchase vehicles, which decreased by approximately $5.6$6.4 billion from December 31, 2018,2019, to approximately $3.1$1.4 billion at June 30, 20192020 due to seasonality.the COVID-19 impact on our business. 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 11 and 12 to our Consolidated Condensed Financial Statements.

ACCOUNTING 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, 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 pertain to matters that are inherently uncertain as they relate to future events. Presented within the section titled “Critical Accounting Policies” of our 20182019 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/or complex judgments that could potentially affect 20192020 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.

Goodwill and Other Indefinite-lived Intangible Assets. We perform our annual goodwill and other indefinite-lived intangible assets impairment assessment in the fourth quarter of each year at the reporting unit level, or more frequently if events or circumstances indicate that the carrying amount of goodwill and other indefinite-lived intangible assets may be impaired.

Accordingly, we have reviewed the carrying value of our goodwill and other indefinite-lived intangibles assets for impairment during the quarter.

When determining fair value, we utilize various assumptions, including the fair market trading price of our common stock and management’s projections of future cash flows. A change in these underlying assumptions will cause a change in the results of the tests and, as such could cause the fair value to be less than the respective carrying amount. In such an event, we would be required to record a charge, which would impact earnings. Our goodwill and other indefinite-lived intangible assets are allocated among our reporting units.

During the six months ended June 30, 2020, there was no impairment of goodwill and other intangible assets. For our Europe, Middle East and Africa (“EMEA”) reporting unit, the percentage by which the estimated fair value exceeds the carrying value was approximately 24% and the amount of goodwill allocated to our reporting unit was $464 million.

Further deterioration in the general economic conditions in the travel industry, would result in another interim impairment test of our goodwill and indefinite-lived trademarks, which may result in an impairment charge to earnings in future quarters. We will continue to closely monitor actual results versus our expectations as well as any significant changes in events or conditions, including the impact of COVID-19 on our business and the travel industry, and the resulting impact to our assumptions about future estimated cash flows, the weighted average cost of capital and market multiples. If our expectations of the operating results, both in magnitude or timing, do not materialize, or if our weighed average cost of capital increases or if market multiples decline, we may be required to record goodwill and indefinite-lived intangible asset impairment charges, which may be material.

New Accounting Standards
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For detailed information regarding new accounting standards and their impact on our business, see Note 1 to our Consolidated Condensed Financial Statements.

Item 3.Quantitative and Qualitative Disclosures about Market Risk
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 gasoline 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 June 30, 20192020 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. 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 gasoline would not have a material impact on our earnings for the period ended June 30, 2019.2020. For additional information regarding our long-term borrowings and financial instruments, see Notes 11, 12 and 16 to our Consolidated Condensed Financial Statements.

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 June 30, 2020.

(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.
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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 June 30, 2019.

(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
Item 1.Legal Proceedings

During the quarter ended June 30, 2019,2020, the Company had no material developments to report with respect to its legal proceedings. For additional information regarding the Company’s legal proceedings, see Note 13 to our Consolidated Condensed Financial Statements and refer to the Company’s 20182019 Form 10-K.

Item 1A.Risk Factors

DuringItem 1A.Risk Factors

The following risk factors are provided to update the risk factors of the Company previously disclosed in periodic reports filed with the SEC, including its 2019 Form 10-K.

COVID-19 has disrupted, and may continue to disrupt, our business and financial performance.
The outbreak of COVID-19 in multiple countries across the globe, including North America, Europe and Asia, has adversely impacted the U.S., U.K. and global economy and demand for our business. Governmental authorities have taken and continue to take measures to address the outbreak, including restrictions on travel and other orders, including partial shelter-in-place orders. The pandemic is a highly fluid and rapidly evolving situation and we cannot anticipate with any certainty the length, scope or severity of such restrictions in each of the jurisdictions that we operate.

The full impact that COVID-19 will have on our business cannot be predicted at this time due to numerous uncertainties, including the duration and severity of the outbreak, including a “second wave” caused by additional periods of increases or spikes in the number of cases and travel restrictions, the effectiveness of actions taken to contain the disease, the length of time it takes for rental volume and pricing to return and normal economic and operating conditions to resume, and other factors. This impact could include, but is not limited to, those discussed below:

•changes in our revenues and customer demand: Our revenues and profitability have been materially impacted during the first two quarters of 2020 and in the third quarter endedof 2020 to date compared to the prior year periods, and we expect they will continue to be materially adversely affected. Although we believe that renting a vehicle will continue to be a safe, clean and attractive alternative, we cannot predict whether and when volumes will increase to historical levels and how long our revenues and customer demand will be affected by the COVID-19 pandemic. As we typically generate approximately 64% of our revenues from on-airport locations, our business is highly dependent on travel and both commercial demand and leisure demand. In addition, our truck rental business is significantly affected by the housing, light commercial and consumer sectors, all of which have been adversely impacted by the COVID-19 pandemic, and we cannot predict the pace of recovery in those sectors.

•our expenses: To date we have incurred, and expect to continue to incur, increased costs related to COVID-19, such as procurement of overflow parking for our idle vehicles and costs associated with sanitizing our vehicles and facilities. In addition, the industry may be subject to enhanced health and hygiene requirements in attempts to address future outbreaks, which may increase our costs and take a significant amount of time to implement across our global operations. These additional costs may be required by regulators or expected by consumers even after the immediate effects of COVID-19 subside.

•our workforce: The COVID-19 outbreak has also caused us to reduce and furlough employees in order to aim to right size our business for vehicle rental demand by reducing operating costs. These actions could create risks, including but not limited to, our ability to manage the size of our workforce given uncertain future demand. Further, we may incur additional costs as a result of negotiations with labor unions that represent our employees or severance payments in the event our workforce is further reduced, and we could experience labor disputes or disruptions as we continue to implement our mitigation plans.

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•our relationship with, and the financial and operational capacities of, vehicle manufacturers and other suppliers: We could face disruptions in the supply of vehicles from vehicle manufacturers, whether due to outbreaks of COVID-19 at their manufacturing facilities, measures they take in response to COVID-19 or otherwise. We may also face delays in receiving delivery of vehicles or other supplies that may make it difficult to meet consumer demand.

•the used car market: We depend on the used car market to sell vehicles and enable us to refresh our fleet. The used car market has faced and may again experience lower demand due to the slowdown in overall global economic activity due to COVID-19, unemployment rates, depressed consumer demand and related factors.

•risks associated with our indebtedness (including available borrowing capacity and ability to refinance indebtedness on favorable terms, as well as our ability to meet the quarterly-tested leverage covenant contained in the credit agreement governing our senior credit facilities at the end of the covenant relief period on June 30, 2019,2021, among other things) and the Company hadadequacy of our cash flow and earnings and other conditions which may affect our liquidity: We have taken a number of actions in anticipation of, and in response to, COVID-19 that have increased our long-term debt. As we manage through the effects of the pandemic, our level of indebtedness may further increase. A default under our senior secured credit facility would enable the lenders to terminate their commitments thereunder and could trigger a cross-default, acceleration or other consequences under our other indebtedness or financial instruments. There is no material developmentsguarantee that debt financings will be available in the future to reportfund our obligations or will be available on terms consistent with respectour expectations. 

Our business is generally subject to its risk factors. For additional information regardingand impacted by, international, national and local economic conditions and travel demands. We do not expect economic and operating conditions for our business to improve until consumers are once again willing and able to travel without restrictions. This may not occur until well after the Company’s risk factors, please referbroader global economy begins to improve. Additionally, our business is also dependent on consumer sentiment and discretionary spending patterns. To date there have been significant increases in unemployment in the United States and other regions due to the Company’s 2018 Form 10-K.adoption of social distancing and other policies to slow the spread of the virus, which are likely to continue to have a significant negative impact on consumer discretionary spending, including in the mobility industry. Even when economic and operating conditions for our business improve, we cannot predict the long-term effects of the pandemic on our business or the mobility industry as a whole. If the mobility industry is fundamentally changed by the COVID-19 outbreak in ways that are detrimental to our operating model, our business may continue to be adversely affected even as the broader global economy recovers.

We believe that business disruption relating to the COVID-19 pandemic will continue to negatively impact the global economy and may materially affect our businesses as outlined above, all of which would adversely impact our business and results of operations. To the extent that the COVID-19 outbreak continues to adversely affect our business and financial performance, including for the reasons outlined above, it may also have the effect of heightening many of the other risks identified below and in the “Risk Factors” section of our 2019 10-K, such as those relating to our substantial amount of outstanding indebtedness.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
We may not realize any or all of our estimated cost savings, which may have a negative effect on our results of operations.
We have identified several areas that present opportunities for cost savings and efficiencies to potentially improve our results of operations while our business is being impacted by the COVID-19 crisis, including initiatives related to reductions in fleet, staffing and compensation expense. The potential cost savings that have been estimated based on these opportunities are based on a number of assumptions and expectations which, if achieved, would improve our profitability and cash flows from operating activities. However, there can be no assurance that the expected results will be achieved. These and any future spend reductions, if any, may also negatively impact our other initiatives or our efforts to grow our business in a recovery, which may negatively impact our future results of operations and increase the burden on existing management, systems and resources. In addition, these cost savings may be negated or offset by unexpected or increased costs, including as a result of price declines in the used car market or the increased cost of insurance, among other things, which could impact the contribution of our fleet reduction initiatives.

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We are dependent on a functioning used vehicle market and highly exposed to residual value risk in the event that vehicle prices decline, which may both be exacerbated by COVID-19.
We dispose of a significant number of vehicles in the used car market, including at wholesale automotive auctions, through sales to vehicle dealers, and directly to consumers. The COVID-19 crisis effectively closed many of the automotive auctions and vehicle dealerships across the globe, as well as retail locations that we operate directly. While such channels have reopened, they could be caused to shut down again in the future. Additionally, unprecedented increases in unemployment rates may severely impact vehicle demand from consumers and increase the number of loan and lease defaults, leading to repossessions which are typically sold by lenders in the wholesale market. Further, car manufacturers may increase incentives to stimulate new vehicle sales, which may depress used vehicle values. In the event our revenue declines do not significantly improve, we would attempt to further reduce the size of our global vehicle fleet. In such event, our competitors may likely also be attempting to sell vehicles. This confluence of events may lead to sharp and sustained declines in vehicle residual values, which may require increased compliance payments pursuant to our ABS securitization facility. In the event of extreme declines in residual values, the sale of vehicle inventory might result in no incremental recovery of our equity capital or even the requirement to fund additional capital to dispose of vehicles, or to choose to continue to keep idle vehicle fleet until demand or market values recover, which cannot be assured. The foregoing factors could have a material adverse impact on our business, financial position and results of operations.

Earnings for future periods may be impacted by impairment charges for goodwill and intangible assets.
We carry a significant amount of goodwill and identifiable intangible assets on our consolidated balance sheets. Goodwill is the excess of purchase price over the fair value of the net assets of acquired businesses. We assess goodwill and indefinite-lived intangible assets for impairment each year, or more frequently if circumstances suggest an impairment may have occurred. We have determined in the past and may again determine in the future that a significant impairment has occurred in the value of our goodwill. Additionally, we have a significant amount of identifiable intangible assets and fixed assets that could also be subject to impairment. If we determine that a significant impairment has occurred in the value of our unamortized intangible assets or fixed assets, we could be required to write off a portion of our assets, which could adversely affect our consolidated financial condition or our reported results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company’s Board of Directors has authorized the repurchase of up to $1.7$1.8 billion of its common stock under a plan originally approved in 2013 and subsequently expanded, most recently in August 2019. In August 2019, the Company’s Board of Directors increased the Company’s share repurchase program authorization by $100 million. The Company’s stock repurchases may occur through open market purchases or trading plans pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements 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 June 30, 2019,2020, no common stock repurchases were made under the plan and 11,3019,815 shares were withheld by the Company to satisfy employees’ income tax liabilities attributable to the vesting of restricted stock unit awards.

On February 10, 2020, the Company’s new Chairman purchased an aggregate $15 million of unregistered shares of the Company’s common stock at a price per share equal to the closing price of the Company’s common stock on February 7, 2020.

Item 6.Exhibits
Item 6. Exhibits

See Exhibit Index.

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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:July 29, 2020AVIS BUDGET GROUP, INC./s/ Cathleen DeGenova
Cathleen DeGenova
Date:August 6, 2019
/s/ David T. Calabria
David T. Calabria
Senior Vice President and
Chief Accounting Officer

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Table of Contents
Exhibit Index 
Exhibit No.Description
4.13.1
Indenture3.2
4.1
4.2
4.24.3
10.1
10.2
Series 2019-2 Supplement, dated as, certain of April 23, 2019, between Avis Budget Car Rental, Car Funding (AESOP) LLCLLC’s subsidiaries, the lenders from time to time party thereto and TheJPMorgan Chase Bank, of New York Mellon Trust Company, N.A., as trustee and as Series 2019-2 Agent (Incorporatedadministrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 29, 2019)27, 2020).
10.322
31.1
31.2
32
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema.
101.CALXBRL Taxonomy Extension Calculation Linkbase.
101.DEFXBRL Taxonomy Extension Definition Linkbase.
101.LABXBRL Taxonomy Extension Label Linkbase.
101.PREXBRL Taxonomy Extension Presentation Linkbase.
104Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)

5146