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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20022003COMMISSION FILE NUMBER:Commission File Number: 1-13315
AVIS GROUP HOLDINGS, INC.
(Exact name ofName Of Registrant as specified in its charter)As Specified In Its Charter)
Delaware ( incorporation or | 11-3347585 ( Identification No.) | |
6 (Address of | 07054 (Zip Code) | |
(973) 496-3500 (Registrant's telephone number, including area code) |
(973) 496-3500(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:None
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed in 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 o No ý
Indicate by checkmark whether the Registrant is an accelerated filer of the Exchange Act (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the Registrant's common stock was 5,537 shares as of July 31, 2002.2003.
Avis Group Holdings, Inc. meets the conditions set forth in General Instructions H (1) (a) and (b) to Form 10-Q and is therefore filing this form with the reduced disclosure format.
Avis Group Holdings, Inc. and Subsidiaries
Forward-looking statements in our public filings or other public statements are subject to known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements include the information concerning our future financial performance, business strategy, projected plans and objectives. Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "project", "estimates", "plans", "may increase", "may fluctuate" and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. You should understand that 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:
Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements, and the failure of such other assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our control.
You should consider the areas of risk described above in connection with any forward-looking statements that may be
1
made by us and our businesses generally. Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless required by law. 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.
2
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholder of
Avis Group Holdings, Inc.Inc
Parsippany, New Jersey
We have reviewed the accompanying consolidated condensed balance sheet of Avis Group Holdings, Inc. and subsidiaries (successor to Avis Rent A Car System, Inc. and subsidiaries, Avis Fleet Leasing and Management Corp., and subsidiaries and Reserve Claims Management Co., collectively the "Predecessor Companies") (collectively referred to as the(the "Company") as of June 30, 2003, the related consolidated condensed statements of income for the three and six month periods ended June 30, 2003 and 2002, and the related consolidated condensed statements of operations and cash flows for the three and six month period ended June 30, 2002, the period March 1, 2001 (Date of Acquisition) to June 30, 2001,2003 and as to the Predecessor Companies for the period January 1, 2001 to February 28, 2001.2002. These financial statements are the responsibility of the Company's management.
We conducted our reviewreviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review,reviews, we are not aware of any material modifications that should be made to such consolidated condensed financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of the Company as of December 31, 2001,2002, and the related consolidated statements of operations, common stockholders'income, stockholder's equity, and cash flows for the period March 1, 2001 (Date of Acquisition) to December 31, 2001 and as to the Predecessor Companies, the consolidated related statements of operations, common stockholders' equity and cash flows for the period January 1, 2001 to February 28, 2001year then ended (not presented herein); and in our report dated January 23, 2002,29, 2003, we expressed an unqualified opinion (and included an explanatory paragraph relatingwith respect to a change inthe adoption of the non-amortization provisions for goodwill and other indefinite lived intangible assets, the accounting for derivative instruments and hedging activities)activities, as discussed in Note 1 to the consolidated financial statements) on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated condensed balance sheet as of December 31, 20012002 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ DELOITTEDeloitte & TOUCHETouche LLPAugust 12, 2002
New York, New York
August 6, 2003
13
Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONSINCOME
(In thousands)
| | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Three Months Ended June 30, 2002 | Three Months Ended June 30, 2001 | | 2003 | 2002 | 2003 | 2002 | ||||||||||||
Revenues | Revenues | $ | 650,631 | $ | 628,893 | Revenues | $ | 730,675 | $ | 650,631 | $ | 1,334,255 | $ | 1,215,234 | ||||||
Expenses | Expenses | Expenses | ||||||||||||||||||
Operating, net | 256,366 | 232,168 | Operating, net | 267,256 | 256,366 | 511,169 | 480,401 | |||||||||||||
Vehicle depreciation and lease charges, net | 161,401 | 170,982 | Vehicle depreciation and lease charges, net | 229,571 | 161,401 | 413,613 | 321,251 | |||||||||||||
Selling, general and administrative | 121,929 | 116,540 | Selling, general and administrative | 114,797 | 121,929 | 222,950 | 236,860 | |||||||||||||
Vehicle interest, net | 51,339 | 55,899 | Vehicle interest, net | 62,851 | 51,339 | 117,810 | 101,986 | |||||||||||||
Non-vehicle interest, net | 10,823 | 14,577 | Non-vehicle interest, net | 9,791 | 10,823 | 20,904 | 21,618 | |||||||||||||
Non-vehicle depreciation and amortization | 9,445 | 15,075 | Non-vehicle depreciation and amortization | 10,737 | 9,445 | 21,043 | 17,943 | |||||||||||||
Total expenses | Total expenses | 611,303 | 605,241 | Total expenses | 695,003 | 611,303 | 1,307,489 | 1,180,059 | ||||||||||||
Income before income taxes | Income before income taxes | 39,328 | 23,652 | Income before income taxes | 35,672 | 39,328 | 26,766 | 35,175 | ||||||||||||
Provision for income taxes | Provision for income taxes | 16,518 | 13,753 | Provision for income taxes | 13,164 | 16,518 | 9,878 | 14,774 | ||||||||||||
Net income | Net income | $ | 22,810 | $ | 9,899 | Net income | $ | 22,508 | $ | 22,810 | $ | 16,888 | $ | 20,401 | ||||||
See Notes to Consolidated Condensed Financial Statements.
2
Avis Group Holdings, Inc. and SubsidiariesCONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS(In thousands)
| | | Predecessor Companies | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| | March 1, 2001 (Date of Acquisition) to June 30, 2001 | |||||||||
| Six Months Ended June 30, 2002 | Two Months Ended February 28, 2001 | |||||||||
Revenues | $ | 1,215,234 | $ | 846,889 | $ | 385,821 | |||||
Expenses | |||||||||||
Operating, net | 480,401 | 310,979 | 174,087 | ||||||||
Vehicle depreciation and lease charges, net | 321,251 | 225,172 | 110,117 | ||||||||
Selling, general and administrative | 236,860 | 154,115 | 83,229 | ||||||||
Vehicle interest, net | 101,986 | 76,446 | 43,625 | ||||||||
Non-vehicle interest, net | 21,618 | 19,663 | 9,167 | ||||||||
Non-vehicle depreciation and amortization | 17,943 | 20,268 | 7,833 | ||||||||
Total expenses | 1,180,059 | 806,643 | 428,058 | ||||||||
Income (loss) before income taxes | 35,175 | 40,246 | (42,237 | ) | |||||||
Provision (benefit) for income taxes | 14,774 | 21,652 | (15,783 | ) | |||||||
Income (loss) from continuing operations | 20,401 | 18,594 | (26,454 | ) | |||||||
Income from discontinued operations, net of tax | — | — | 4,947 | ||||||||
Income (loss) before cumulative effect of accounting change | 20,401 | 18,594 | (21,507 | ) | |||||||
Cumulative effect of accounting change, net of tax | — | — | (7,612 | ) | |||||||
Net income (loss) | $ | 20,401 | $ | 18,594 | $ | (29,119 | ) | ||||
See Notes to Consolidated Condensed Financial Statements.
34
Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share data)
| | June 30, 2002 | December 31, 2001 | June 30, 2003 | December 31, 2002 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | |||||||||||||||
Cash and cash equivalents | $ | 40,669 | $ | 13,311 | |||||||||||
Receivables, net | 165,755 | 168,372 | |||||||||||||
Prepaid expenses | 40,966 | 42,543 | |||||||||||||
Deferred income taxes | 556,148 | 548,087 | |||||||||||||
Property and equipment, net | 256,217 | 245,276 | |||||||||||||
Goodwill, net | 1,254,909 | 1,271,192 | |||||||||||||
Other assets | 145,054 | 146,608 | |||||||||||||
Assets | |||||||||||||||
Cash and cash equivalents | $ | 26,512 | $ | 25,252 | |||||||||||
Restricted cash | 69,154 | 59,012 | |||||||||||||
Receivables, net | 164,866 | 158,730 | |||||||||||||
Deferred income taxes | 523,617 | 481,335 | |||||||||||||
Property and equipment, net | 283,256 | 278,830 | |||||||||||||
Goodwill | 1,255,146 | 1,254,401 | |||||||||||||
Other assets | 121,968 | 105,315 | |||||||||||||
Total assets exclusive of assets under management programs | Total assets exclusive of assets under management programs | 2,459,718 | 2,435,389 | 2,444,519 | 2,362,875 | ||||||||||
Assets under management programs: | Assets under management programs: | ||||||||||||||
Restricted cash | 9,306 | 581,187 | |||||||||||||
Vehicles, net | 4,226,575 | 3,428,893 | |||||||||||||
Due from vehicle manufacturers | 64,492 | 92,614 | |||||||||||||
Restricted cash | 93,222 | 2,462 | |||||||||||||
Vehicles, net | 6,665,835 | 4,173,847 | |||||||||||||
Due from vehicle manufacturers | 81,456 | 258,459 | |||||||||||||
4,300,373 | 4,102,694 | 6,840,513 | 4,434,768 | ||||||||||||
Total assets | Total assets | $ | 6,760,091 | $ | 6,538,083 | $ | 9,285,032 | $ | 6,797,643 | ||||||
LIABILITIES AND STOCKHOLDER'S EQUITY | |||||||||||||||
Liabilities and stockholder's equity | |||||||||||||||
Liabilities: | Liabilities: | ||||||||||||||
Accounts payable | $ | 245,132 | $ | 363,891 | |||||||||||
Accrued liabilities | 447,341 | 434,665 | |||||||||||||
Due to Cendant Corporation and affiliates, net | 514,007 | 514,433 | |||||||||||||
Non-vehicle debt | 575,856 | 588,259 | |||||||||||||
Public liability, property damage and other insurance liabilities | 215,877 | 228,503 | |||||||||||||
Accounts payable | $ | 400,489 | $ | 205,727 | |||||||||||
Accrued liabilities | 391,003 | 415,009 | |||||||||||||
Due to Cendant Corporation and affiliates, net | 750,792 | 551,809 | |||||||||||||
Non-vehicle debt | 401,580 | 534,231 | |||||||||||||
Public liability, property damage and other insurance liabilities | 222,042 | 211,786 | |||||||||||||
Total liabilities exclusive of liabilities under management programs | Total liabilities exclusive of liabilities under management programs | 1,998,213 | 2,129,751 | 2,165,906 | 1,918,562 | ||||||||||
Liabilities under management programs: | Liabilities under management programs: | ||||||||||||||
Vehicle debt | 6,434,453 | 4,245,703 | |||||||||||||
Deferred income taxes | 294,615 | 288,005 | |||||||||||||
Vehicle debt | 4,115,860 | 3,771,341 | |||||||||||||
Deferred income taxes | 307,296 | 315,905 | 6,729,068 | 4,533,708 | |||||||||||
4,423,156 | 4,087,246 | ||||||||||||||
Commitments and contingencies (Note 6) | |||||||||||||||
Commitments and contingencies (Note 7) | |||||||||||||||
Stockholder's equity: | Stockholder's equity: | ||||||||||||||
Common stock, $.01 par value—authorized 10,000 shares; issued 5,537 shares | — | — | |||||||||||||
Additional paid-in-capital | 168,832 | 168,832 | |||||||||||||
Retained earnings | 209,707 | 189,306 | |||||||||||||
Accumulated other comprehensive loss | (39,817 | ) | (37,052 | ) | |||||||||||
Common stock, $.01 par value—authorized 10,000 shares; issued 5,537 shares | — | — | |||||||||||||
Additional paid-in-capital | 168,832 | 168,832 | |||||||||||||
Retained earnings | 258,640 | 241,752 | |||||||||||||
Accumulated other comprehensive loss | (37,414 | ) | (65,211 | ) | |||||||||||
Total stockholder's equity | Total stockholder's equity | 338,722 | 321,086 | 390,058 | 345,373 | ||||||||||
Total liabilities and stockholder's equity | Total liabilities and stockholder's equity | $ | 6,760,091 | $ | 6,538,083 | $ | 9,285,032 | $ | 6,797,643 | ||||||
See Notes to Consolidated Condensed Financial Statements.
45
Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
| | | Predecessor Companies | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
| | March 1, 2001 (Date of Acquisition) to June 30, 2001 | ||||||||||
| Six Months Ended June 30, 2002 | Two Months Ended February 28, 2001 | ||||||||||
Operating Activities | ||||||||||||
Net income (loss) | $ | 20,401 | $ | 18,594 | $ | (29,119 | ) | |||||
Adjustments to arrive at income (loss) from continuing operations | — | — | 2,665 | |||||||||
Income (loss) from continuing operations | 20,401 | 18,594 | (26,454 | ) | ||||||||
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities: | ||||||||||||
Non-vehicle depreciation and amortization | 17,943 | 20,268 | 7,833 | |||||||||
Net change in operating assets and liabilities, excluding the impact of acquisitions and dispositions: | ||||||||||||
Receivables | (12,664 | ) | (12,108 | ) | 10,108 | |||||||
Accounts payable | (9,766 | ) | (12,531 | ) | (30,518 | ) | ||||||
Accrued liabilities | 848 | (3,789 | ) | 1,486 | ||||||||
Other, net | (10,935 | ) | (4,082 | ) | (30,923 | ) | ||||||
Net cash provided by (used in) operating activities exclusive of management programs | 5,827 | 6,352 | (68,468 | ) | ||||||||
Management programs: | ||||||||||||
Vehicle depreciation | 312,221 | 211,602 | 104,336 | |||||||||
Net cash provided by operating activities | 318,048 | 217,954 | 35,868 | |||||||||
Investing Activities | ||||||||||||
Property and equipment additions | (24,807 | ) | (25,658 | ) | (5,821 | ) | ||||||
Retirements of property and equipment | 778 | 8,375 | 433 | |||||||||
Payment for purchase of rental car franchise licensees | (3,087 | ) | (19,047 | ) | — | |||||||
Net cash used in investing activities exclusive of management programs | (27,116 | ) | (36,330 | ) | (5,388 | ) | ||||||
Management programs: | ||||||||||||
Decrease in restricted cash | 571,881 | 5,208 | 10,978 | |||||||||
Decrease in due from vehicle manufacturers | 29,348 | 131,813 | 16,368 | |||||||||
Investment in vehicles | (2,684,823 | ) | (1,900,052 | ) | (940,559 | ) | ||||||
Payments received on investment in vehicles | 1,472,033 | 1,412,819 | 812,647 | |||||||||
(611,561 | ) | (350,212 | ) | (100,566 | ) | |||||||
Net cash used in investing activities | (638,677 | ) | (386,542 | ) | (105,954 | ) | ||||||
5
Avis Group Holdings, Inc. and SubsidiariesCONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)(In thousands)
| Six Months Ended June 30, 2003 | Six Months Ended June 30, 2002 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Operating Activities | ||||||||||||||||||
Net income | $ | 16,888 | $ | 20,401 | ||||||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities exclusive of management programs: | ||||||||||||||||||
Non-vehicle depreciation and amortization | 21,043 | 17,943 | ||||||||||||||||
Net change in operating assets and liabilities, excluding the impact of acquisitions and dispositions: | ||||||||||||||||||
Receivables | (7,675 | ) | (12,664 | ) | ||||||||||||||
Income taxes and deferred income taxes | 5,094 | 5,087 | ||||||||||||||||
Accounts payable | (33,251 | ) | (9,766 | ) | ||||||||||||||
Accrued liabilities | (36,033 | ) | 848 | |||||||||||||||
Other, net | (7,750 | ) | (16,022 | ) | ||||||||||||||
Net cash provided by (used in) operating activities exclusive of management programs | (41,684 | ) | 5,827 | |||||||||||||||
Management programs: | ||||||||||||||||||
Vehicle depreciation | 385,318 | 312,221 | ||||||||||||||||
Net cash provided by operating activities | 343,634 | 318,048 | ||||||||||||||||
Investing Activities | ||||||||||||||||||
Property and equipment additions | (26,927 | ) | (24,807 | ) | ||||||||||||||
Proceeds from sales of property and equipment | 4,427 | 778 | ||||||||||||||||
Payment for purchase of rental car franchise licensees | (208 | ) | (3,087 | ) | ||||||||||||||
Net cash used in investing activities exclusive of management programs | (22,708 | ) | (27,116 | ) | ||||||||||||||
Management programs: | ||||||||||||||||||
Decrease (increase) in restricted cash | (90,760 | ) | 571,881 | |||||||||||||||
Decrease in due from vehicle manufacturers | 180,493 | 29,348 | ||||||||||||||||
Investment in vehicles | (5,209,445 | ) | (2,684,823 | ) | ||||||||||||||
Payments received on investment in vehicles | 2,536,891 | 1,472,033 | ||||||||||||||||
| | | | Predecessor Companies | ||||||||||||||
| | | March 1, 2001 (Date of Acquisition) to June 30, 2001 | (2,582,821 | ) | (611,561 | ) | |||||||||||
| | Six Months Ended June 30, 2002 | Two Months Ended February 28, 2001 | |||||||||||||||
Net cash used in investing activities | (2,605,529 | ) | (638,677 | ) | ||||||||||||||
Financing Activities | Financing Activities | |||||||||||||||||
Principal payments on borrowings | (124,452 | ) | (253 | ) | ||||||||||||||
Increase (decrease) in due to Cendant Corporation and affiliates, net | 205,394 | (2,667 | ) | |||||||||||||||
Net cash provided by (used in) financing activities exclusive of management programs | 80,942 | (2,920 | ) | |||||||||||||||
Management programs: | ||||||||||||||||||
Proceeds from borrowings | Proceeds from borrowings | — | 140,000 | — | 3,196,399 | 650,431 | ||||||||||||
Principal payments on borrowings | Principal payments on borrowings | (253 | ) | (457,806 | ) | (77 | ) | (1,004,437 | ) | (299,818 | ) | |||||||
Increase (decrease) in due to Cendant Corporation and affiliates, net | (2,667 | ) | 316,882 | (45,818 | ) | |||||||||||||
Payments for debt issuance costs | Payments for debt issuance costs | (131 | ) | (4,231 | ) | (12 | ) | (10,243 | ) | (131 | ) | |||||||
Issuances of common stock | — | — | 140 | |||||||||||||||
Net cash used in financing activities exclusive of management programs | (3,051 | ) | (5,155 | ) | (45,767 | ) | ||||||||||||
Management programs: | ||||||||||||||||||
Proceeds from borrowings | 650,431 | 916,633 | 132,294 | |||||||||||||||
Principal payments on borrowings | (299,818 | ) | (786,470 | ) | (31,087 | ) | ||||||||||||
350,613 | 130,163 | 101,207 | 2,181,719 | 350,482 | ||||||||||||||
Net cash provided by financing activities | Net cash provided by financing activities | 347,562 | 125,008 | 55,440 | 2,262,661 | 347,562 | ||||||||||||
Effect of changes in net assets of discontinued operations | — | — | 394 | |||||||||||||||
Effect of changes in exchange rates on cash and cash equivalents | Effect of changes in exchange rates on cash and cash equivalents | 425 | (117 | ) | (11 | ) | 494 | 425 | ||||||||||
Net increase (decrease) in cash and cash equivalents | 27,358 | (43,697 | ) | (14,263 | ) | |||||||||||||
Net increase in cash and cash equivalents | 1,260 | 27,358 | ||||||||||||||||
Cash and cash equivalents, beginning of period | Cash and cash equivalents, beginning of period | 13,311 | 66,105 | 80,368 | 25,252 | 13,311 | ||||||||||||
Cash and cash equivalents, end of period | Cash and cash equivalents, end of period | $ | 40,669 | $ | 22,408 | $ | 66,105 | $ | 26,512 | $ | 40,669 | |||||||
Supplemental disclosure of Cash Flow Information: | ||||||||||||||||||
Interest payments | $ | 130,775 | $ | 108,764 | $ | 44,315 | ||||||||||||
Income tax payments, net | $ | 485 | $ | 8,889 | $ | 1,962 |
See Notes to Consolidated Condensed Financial Statements.
6
Avis Group Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unless otherwise noted, all dollar amounts are in thousands)
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited Consolidated Condensed Financial Statements include the accounts and transactions of Avis Group Holdings, Inc. and its subsidiaries, (collectively, "the Company").
Avis Group Holdings, Inc. is a holding company that operates through a wholly-owned subsidiary,including Avis Rent A Car System, Inc., the second largest general use car rental brand in the world. On March 1, 2001, all the Company's common stock not then-owned by Cendant Corporation ("Cendant" (collectively, "the Company") was acquired by. The Company is a wholly-owned subsidiary of Cendant for approximately $994 million with the Company emerging as the surviving legal entity. Accordingly, the Consolidated Condensed Financial Statements as of and for the three and six months ended June 30, 2002, for the period March 1, 2001 (Date of Acquisition) to June 30, 2001 and as of December 31, 2001 include the financial statements of Avis Group Holdings, Inc. and its subsidiaries. The Consolidated Condensed Financial Statements for the two months ended February 28, 2001 include the financial statements of the Company and its former fleet management and fuel card businesses, which are presented as a discontinued operation (the "Predecessor Companies"Corporation ("Cendant").
In management's opinion, the Consolidated Condensed Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results. 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. In addition, management is required to make estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgmentjudgments and available information. Accordingly, actual results could differ from those estimates. The Consolidated Condensed Financial Statements should be read in conjunction with the Company's Annual Report on Form 10-K dated March 29, 2002.
Certain reclassifications have been made to prior period amounts to conform to the current period presentation.
Assets classified under management programs are generated in the Company's core business operations. The Company seeks to offset the interest rate exposures inherent in these assets by matching them with financial liabilities that have similar term and interest rate characteristics. Fees generated from these assets are used, in part, to repay the interest and principal associated with the financial liabilities. Funding for the Company's assets under management programs is also provided by asset-backed financing arrangements, which are classified as debt under management programs. Cash inflows and outflows relating to the generation and acquisition of such assets and the principal debt repayment or financing of such assets are classified as activities of the Company's management programs.
Pursuant to certain covenant requirements in an indenture under which the Company issued debt, the Company continues to operate and maintain its status as a separate public reporting entity.
Assets used by the Company to generate revenue are classified as assets under management programs. Funding for such assets is primarily provided by secured financing arrangements, which are classified as liabilities under management programs. Revenues generated from these assets are used,The Consolidated Condensed Financial Statements should be read in part, to repay the interest and principal associatedconjunction with the debt. Cash inflows and outflows relating to the generation and acquisition of assets and the principal debt repayment or financing of such assets are classified as activities of the Company's management programs.Annual Report on Form 10-K filed on March 6, 2003.
Changes in Accounting Policies
On
Stock-Based Compensation. Under Cendant's existing stock plans, Cendant common stock awards (including stock options, stock appreciation rights, restricted shares and restricted stock units) are granted to the Company's employees, including directors and officers of the Company. Prior to January 1, 2002,2003, the Company adoptedmeasured its stock-based compensation using the intrinsic value approach under Accounting Principles Board ("APB") Opinion No. 25, as permitted by Statement of Financial Accounting Standards ("SFAS") No. 142 "Goodwill123, "Accounting for Stock-Based Compensation." Accordingly, Cendant did not recognize compensation expense upon the issuance of its stock options to employees because the option terms were fixed and Other Intangible Assets" in its entirety. Priorthe exercise price equaled the market price of the underlying common stock on the date of grant. Therefore, the Company was not allocated compensation expense upon Cendant's issuance of common stock to the adoptionCompany's employees. The Company complied with the provisions of SFAS No. 142, all intangible assets were amortized on a straight-line basis over their estimated periods to be benefited. Subsequent123 by providing pro forma disclosures of net income giving consideration to the adoption, the Company did not amortize any goodwill or indefinite-lived intangible assets during 2002.
In connection with the implementationfair value method provisions of SFAS No. 142,123.
On January 1, 2003, Cendant adopted the Companyfair value method of accounting for stock-based compensation provisions of SFAS No. 123, which is considered by the Financial Accounting Standards Board ("FASB") to be the preferable accounting method for stock-based employee compensation. Cendant also adopted SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure," in its entirety on January 1, 2003. Under the fair value method of accounting provisions of SFAS No. 123, Cendant is required to assess goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. The Company reviewedexpense all employee stock options over their vesting period based upon the carryingfair value of all its goodwill and other intangible assets by comparing such amountsthe award on the date of grant. Under SFAS No. 148, which amended SFAS No. 123 to theirprovide alternative methods of transition for a voluntary change to the fair value based method of accounting provisions, Cendant elected to use the prospective transition method when adopting SFAS No. 123. Accordingly, Cendant is only required to expense employee stock options that were granted subsequent to December 31, 2002.
7
The following table illustrates the effect on net income as if the fair value based method had been applied to all employee stock awards granted by Cendant:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 | 2002 | 2003 | 2002 | |||||||||
Reported net income | $ | 22,508 | $ | 22,810 | $ | 16,888 | $ | 20,401 | |||||
Add back: Stock-based employee compensation expense | |||||||||||||
included in reported net income, net of tax(a) | 187 | — | 187 | — | |||||||||
Less: Total stock-based employee compensation expense | |||||||||||||
determined under the fair value based method for all awards, net of tax(b) | 852 | 2,332 | 1,518 | 4,641 | |||||||||
Pro forma net income | $ | 21,843 | $ | 20,478 | $ | 15,557 | $ | 15,760 | |||||
Early Extinguishment of Debt. On January 1, 2003, the Company adopted SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." Such standard requires any gain or loss on the early extinguishment of debt to be presented as a component of continuing operations (unless specific criteria are met) whereas SFAS No. 4 required that such gain or loss be classified as an extraordinary item in determining net income. Accordingly, on January 1, 2003, the Company reclassified $1.3 million of 2002 pretax gains on the early extinguishments of debt to continuing operations as a component of net non-vehicle interest ($472 thousand and $822 thousand were recorded during the third and fourth quarters of 2002, respectively).
Costs Associated with Exit or Disposal Activities. On January 1, 2003, the Company adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." Such standard requires costs associated with exit or disposal activities (including restructurings) initiated after December 31, 2002 to be recognized when the costs are incurred, rather than at the date of commitment to an exit or disposal plan. This standard nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Under SFAS No. 146, a liability related to an exit or disposal activity is not exceed their respective fair values. Accordingly,recognized until such liability has actually been incurred whereas under EITF Issue No. 94-3 a liability was recognized at the initial implementationtime of a commitment to an exit or disposal plan. The impact of adopting this standard didwas not result in a charge and, as such, did not impactmaterial to the Company's results of operations during 2002.or financial position.
7Guarantees. On January 1, 2003, the Company adopted FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," in its entirety. Such Interpretation elaborates on the disclosures to be made by a guarantor about its obligations under certain guarantees issued. It also clarifies that a guarantor is required to recognize, at the inception of any guarantee issued or modified after December 31, 2002, a liability for the fair value of the obligation undertaken in issuing the guarantee. The impact of adopting this Interpretation was not material to the Company's results of operations or financial position.
Recently Issued Accounting Pronouncements
Derivative Instruments and Hedging Activities. On April 30, 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." Such standard amends and clarifies the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The provisions of this standard are generally effective for contracts entered into or modified after June 30, 2003 and are not expected to have a material impact on the Company's consolidated financial statements.
Consolidation of Variable Interest Entities. On January 17, 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). Such Interpretation addresses the consolidation of entities that are not controllable through voting interests or in which the equity investors do not bear the residual economic risks and rewards. These entities have been commonly referred to as special purpose entities ("SPE"), although other non-SPE-type entities may be subject to the Interpretation. This Interpretation provides guidance related to identifying variable interest entities and
8
determining whether such entities should be consolidated. It also requires disclosures for both the primary beneficiary of a variable interest entity and other parties with significant variable interests in the entity. Transferors to a qualifying SPE ("QSPE") and certain other interests in QSPEs are not subject to this Interpretation.
While the Company will not be impacted by the consolidation requirements of FIN 46, it will be subject to the disclosure requirements for variable interest entities. The Company will adopt these disclosure requirements on July 1, 2003, as required.
2. Related Party TransactionsIntangible Assets
ExpensesIntangible assets consisted of:
| As of June 30, 2003 | As of December 31, 2002 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||
Amortized Intangible Assets | |||||||||||||||||||
Customer lists(a) | $ | 18,952 | $ | 2,240 | $ | 16,712 | $ | 18,952 | $ | 1,760 | $ | 17,192 | |||||||
Unamortized Intangible Assets | |||||||||||||||||||
Goodwill(b) | $ | 1,255,146 | $ | 1,254,401 | |||||||||||||||
Amortization expense relating to customer lists was approximately $240 thousand for the three months ended June 30, 2003 and 2002 each and $480 thousand for the six months ended June 30, 2003 and 2002 each. Based on its amortizable intangible assets at June 30, 2003, the Company expects related amortization expense to approximate $1 million for the entire 2003 fiscal year and for each of the succeeding five years.
3. Vehicles, Net
Vehicles, net consisted of:
| As of June 30, 2003 | As of December 31, 2002 | |||||
---|---|---|---|---|---|---|---|
Rental vehicles | $ | 7,134,288 | $ | 4,415,761 | |||
Vehicles held for sale | 3,264 | 144,283 | |||||
7,137,552 | 4,560,044 | ||||||
Less: accumulated depreciation | (471,717 | ) | (386,197 | ) | |||
$ | 6,665,835 | $ | 4,173,847 | ||||
The components of vehicle depreciation and lease charges, net are summarized below:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 | 2002 | 2003 | 2002 | |||||||||
Depreciation expense | $ | 218,942 | $ | 159,844 | $ | 385,318 | $ | 312,221 | |||||
Lease charges | 5,305 | 4,682 | 12,318 | 11,885 | |||||||||
Loss (gain) on sales of vehicles, net | 5,324 | (3,125 | ) | 15,977 | (2,855 | ) | |||||||
$ | 229,571 | $ | 161,401 | $ | 413,613 | $ | 321,251 | ||||||
Depreciation expense is net of the amortization of certain incentives and allowances from various vehicle manufacturers of approximately $50.7 million and $40.1 million for the three months ended June 30, 2003 and 2002, respectively, and $88.0 million and $64.4 million for the six months ended June 30, 2003 and 2002, respectively.
Vehicle interest expense amounts are net of interest income of $460 thousand and $865 thousand for the three months ended June 30, 2003 and 2002, respectively, and $1.7 million and $1.5 million for the six months ended June 30, 2003 and 2002, respectively.
9
The Company subleases a portion of its fleet to Budget Rent A Car System, Inc. ("Budget"), a wholly-owned subsidiary of Cendant not within the Company's ownership structure. As of June 30, 2003 and December 31, 2002, the Company had $2,291.2 million and $182.1 million, respectively, of vehicles recorded on its Consolidated Condensed Balance Sheets that were subleased to Budget. These vehicles were purchased with proceeds received from the issuance of rental car asset-backed notes under the AESOP Funding Program (see Note 6—Vehicle Debt).
The Company charges Budget a monthly fee equal to the leased vehicles' monthly depreciation, interest and administrative expenses. For vehicles subleased to Budget during the three and six months ended June 30, 2003, the Company recorded vehicle depreciation expense of $85.5 million and $119.8 million, respectively, and vehicle interest expense of $22.7 million and $33.7 million, respectively, on its Consolidated Condensed Statements of Income. For the three and six months ended June 30, 2003, the Company recorded revenue from the Budget vehicle sublease of approximately $110.2 million and $158.8 million, respectively, on its Consolidated Condensed Statements of Income, which included the vehicle depreciation and interest expense, as well as administrative fees of $2.0 million and $5.3 million, respectively.
4. Due to Cendant Corporation and Affiliates, Net
Due to (from) Cendant Corporation and affiliates, net, consisted of:
| As of June 30, 2003 | As of December 31, 2002 | |||||
---|---|---|---|---|---|---|---|
Due to Cendant-working capital and trading, net(a) | $ | 337,925 | $ | 253,032 | |||
Due from Cendant-demand-long-term(b) | (117,683 | ) | (155,246 | ) | |||
Due to Cendant-long-term(c) | 530,575 | 408,108 | |||||
Due to other Cendant affiliates, net(d) | 76,885 | 55,467 | |||||
Due from Budget(e) | (76,910 | ) | (9,552 | ) | |||
Total due to Cendant Corporation and affiliates, net | $ | 750,792 | $ | 551,809 | |||
10
Included within total expenses on the Company's Consolidated Condensed Statements of Income are the following items charged by Cendant and affiliates, which include allocations from Cendant for services provided to the Company:
| Three Months Ended June 30, 2002 | Three Months Ended June 30, 2001 | ||||
---|---|---|---|---|---|---|
Royalties | $ | 27,977 | $ | 26,610 | ||
Reservations | 16,639 | 14,031 | ||||
Data processing | 9,475 | 15,657 | ||||
Rent, corporate overhead allocations and other | 15,300 | 10,957 | ||||
Interest, net | 2,959 | 7,011 | ||||
Total | $ | 72,350 | $ | 74,266 | ||
| | | Predecessor Companies | ||||||
---|---|---|---|---|---|---|---|---|---|
| | March 1, 2001 (Date of Acquisition) to June 30, 2001 | |||||||
| Six Months Ended June 30, 2002 | Two Months Ended February 28, 2001 | |||||||
Royalties | $ | 52,253 | $ | 35,810 | $ | 16,205 | |||
Reservations | 29,321 | 19,186 | 8,496 | ||||||
Data processing | 17,740 | 20,141 | 11,395 | ||||||
Rent, corporate overhead allocations and other | 29,079 | 11,629 | 1,456 | ||||||
Interest, net | 6,358 | 7,011 | — | ||||||
Total | $ | 134,751 | $ | 93,777 | $ | 37,552 | |||
On the Consolidated Condensed Statements of Operations, the royalty and reservation charges are included
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 | 2002 | 2003 | 2002 | |||||||||
Royalties(a) | $ | 27,301 | $ | 27,977 | $ | 51,722 | $ | 52,253 | |||||
Reservations(a) | 12,172 | 16,639 | 24,253 | 29,321 | |||||||||
Data processing(b) | 9,144 | 9,475 | 16,439 | 17,740 | |||||||||
Rent, corporate overhead allocations and other(b) | 15,465 | 15,300 | 31,500 | 29,079 | |||||||||
Interest on amounts due to Cendant | |||||||||||||
Corporation and affiliates, net(c) | 3,960 | 2,959 | 7,840 | 6,358 | |||||||||
Total | $ | 68,042 | $ | 72,350 | $ | 131,754 | $ | 134,751 | |||||
These charges, including corporate overhead allocations by Cendant, are determined in accordance with various intercompany agreements, which are based upon factors such as square footage, employee salaries and computer usage time.
Additionally, Cendant charges the Company a royalty fee of 4.4% for the use of its Avis trade name. Such fee consists of a base royalty of 3.0% of the gross revenue and a supplemental royalty of 1.4% of the gross revenue payable quarterly in arrears. The supplemental royalty will increase to a maximum of 1.5% in the third quarter of 2003. The contract will continue through 2047.
3. Restricted Cash5. Non-Vehicle Debt
Restricted cash includesNon-vehicle debt consisted of:
| As of June 30, 2003 | As of December 31, 2002 | ||||
---|---|---|---|---|---|---|
11% senior subordinated notes(*) | $ | 397,736 | $ | 530,146 | ||
Other | 3,844 | 4,085 | ||||
$ | 401,580 | $ | 534,231 | |||
4. Intangible Assets
Intangible assets consisted of:
| June 30, 2002 | December 31, 2001 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | |||||||||
Amortized Intangible Assets | |||||||||||||
Customer lists | $ | 18,952 | $ | 1,280 | $ | 18,952 | $ | 800 | |||||
Unamortized Intangible Assets | |||||||||||||
Goodwill | $ | 1,254,909 | $ | 1,297,774 | $ | 26,582 | |||||||
8
Customer lists are included in other assetsnon-vehicle interest on the Company's Consolidated Condensed Balance Sheet. Amortization expense relating to customer lists duringStatement of Income.
These notes contain restrictive covenants, including restrictions on indebtedness of material subsidiaries and mergers and limitations on liens and liquidations, and also require the three and six months endedmaintenance of certain financial ratios. At June 30, 2002 was approximately $240 thousand and $480 thousand, respectively. Amortization expense relating to all intangible assets during the two months ended February 28, 2001 and the period March 1, 2001 (Date of Acquisition) to June 30, 2001, was approximately $2.1 million and $10.5 million, respectively, including the amortization of goodwill of $2.1 million and $10.2 million, respectively. The Company expects amortization expense on intangible assets for the remainder of 2002 to approximate $480 thousand and $1 million for each of the succeeding five years.
The changes in the carrying amount of goodwill for 2002 are as follows:
Balance as of January 1, 2002 | $ | 1,271,192 | ||
Goodwill acquired during 2002 | 1,836 | |||
Other | (18,119 | ) | ||
Balance as of June 30, 2002 | $ | 1,254,909 | ||
Had2003, the Company applied the non-amortization provisions of SFAS No. 142 for the three months ended June 30, 2001was in compliance with all restrictive and for the period March 1, 2001 (Date of Acquisition) to June 30, 2001 and the two months ended February 28, 2001, net income (loss) would have been as follows:financial covenants.
| | | Predecessor Companies | |||||||
---|---|---|---|---|---|---|---|---|---|---|
| | March 1, 2001 (Date of Acquisition) to June 30, 2001 | ||||||||
| Three Months Ended June 30, 2001 | Two Months Ended February 28, 2001 | ||||||||
Reported net income (loss) | $ | 9,899 | $ | 18,594 | $ | (29,119 | ) | |||
Add back: Goodwill amortization, net of tax | 3,108 | 4,708 | 1,307 | |||||||
Pro forma net income (loss) | $ | 13,007 | $ | 23,302 | $ | (27,812 | ) | |||
5.6. Vehicle Debt
Vehicle debt consisted of:
| June 30, 2002 | December 31, 2001 | ||||
---|---|---|---|---|---|---|
Commercial paper notes | $ | 299,030 | $ | 119,998 | ||
Series 2001-2 auction rate rental car asset-backed notes | 385,000 | 40,000 | ||||
Series 1997-1B 6.40% asset-backed medium-term notes | 566,667 | 850,000 | ||||
Series 1998-1 6.14% asset-backed medium-term notes | 600,000 | 600,000 | ||||
Series 2000-1 floating rate rental car asset-backed notes | 250,000 | 250,000 | ||||
Series 2000-2 floating rate rental car asset-backed notes | 300,000 | 300,000 | ||||
Series 2000-3 floating rate rental car asset-backed notes | 200,000 | 200,000 | ||||
Series 2000-4 floating rate rental car asset-backed notes | 500,000 | 500,000 | ||||
Series 2001-1 floating rate rental car asset-backed notes | 750,000 | 750,000 | ||||
Other | 265,163 | 161,343 | ||||
$ | 4,115,860 | $ | 3,771,341 | |||
| As of June 30, 2003 | As of December 31, 2002 | |||||
---|---|---|---|---|---|---|---|
AESOP Funding Program: | |||||||
Variable funding rental car asset-backed notes | $ | 668,600 | $ | 494,000 | |||
Auction rate rental car asset-backed notes | 500,000 | 185,000 | |||||
Medium term rental car asset-backed notes | 4,974,654 | 3,349,795 | |||||
Other | 291,199 | 216,908 | |||||
$ | 6,434,453 | $ | 4,245,703 | ||||
11
As of June 30, 2002,2003, the Company's asset-backed funding arrangements under the AESOP Funding programProgram provided for the issuance of up to $4.14$7.2 billion of debt. Amounts outstanding under the AESOP Funding program approximated $3.85 billion. Asdebt, of June 30, 2002, the Company had an additional $291which approximately $933 million of availability under the AESOP Funding program.was available. In addition, the Company had other outstanding vehicle debt of approximately $265 million and availability of approximately $112$203 million under other funding arrangements as of June 30, 2002.2003.
6.Debt Maturities and Covenants
The contractual final maturities of vehicle debt at June 30, 2003 are as follows:
Year | | Amount | |||
---|---|---|---|---|---|
Within 1 year | $ | 1,088,049 | |||
Between 1 and 2 years | 1,592,855 | ||||
Between 2 and 3 years | 1,842,945 | ||||
Between 3 and 4 years | 918,488 | ||||
Between 4 and 5 years | 748,871 | ||||
Thereafter | 243,245 | ||||
$ | 6,434,453 | ||||
Debt under the Company's AESOP Funding Program contains restrictive covenants, including restrictions on dividends paid to the Company by certain of its subsidiaries and indebtedness of material subsidiaries, mergers, limitations on liens, liquidations, and sale and leaseback transactions, and also requires the maintenance of certain financial ratios. At June 30, 2003, the Company was in compliance with all such restrictive and financial covenants.
7. Commitments and Contingencies
The Company is involved in pending litigation in the usual course of business. In the opinion of management, such litigation will not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.
9
7. Comprehensive Income (Loss)8. Stockholder's Equity
The components of comprehensive income (loss) are summarized as follows:
| Three Months Ended June 30, 2002 | Three Months Ended June 30, 2001 | ||||||
---|---|---|---|---|---|---|---|---|
Net income | $ | 22,810 | $ | 9,899 | ||||
Other comprehensive income (loss): | ||||||||
Currency translation adjustment | 3,660 | 2,239 | ||||||
Unrealized losses on cash flow hedges, net of tax | (17,466 | ) | (1,395 | ) | ||||
Total comprehensive income | $ | 9,004 | $ | 10,743 | ||||
| | | Predecessor Companies | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| | March 1, 2001 (Date of Acquisition) to June 30, 2001 | |||||||||
| Six Months Ended June 30, 2002 | Two Months Ended February 28, 2001 | |||||||||
Net income (loss) | $ | 20,401 | $ | 18,594 | $ | (29,119 | ) | ||||
Other comprehensive income (loss): | |||||||||||
Currency translation adjustment | 4,451 | (1,175 | ) | (1,758 | ) | ||||||
Unrealized gains (losses) on cash flow hedges, net of tax | (5,880 | ) | (2,766 | ) | 561 | ||||||
Minimum pension liability adjustment | (1,336 | ) | — | — | |||||||
Cumulative effect from change in accounting policy for derivative instruments, net of tax | — | — | 1,464 | ||||||||
Total comprehensive income (loss) | $ | 17,636 | $ | 14,653 | $ | (28,852 | ) | ||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 | 2002 | 2003 | 2002 | |||||||||
Net income | $ | 22,508 | $ | 22,810 | $ | 16,888 | $ | 20,401 | |||||
Other comprehensive income (loss): | |||||||||||||
Currency translation adjustments, net of tax | 8,684 | 3,660 | 14,197 | 4,451 | |||||||||
Unrealized gains (losses) on cash flow hedges, | |||||||||||||
net of tax | 7,398 | (17,466 | ) | 13,627 | (5,880 | ) | |||||||
Minimum pension liability adjustment, net of tax | — | — | (27 | ) | (1,336 | ) | |||||||
Total comprehensive income | $ | 38,590 | $ | 9,004 | $ | 44,685 | $ | 17,636 | |||||
The after-tax components of accumulated other comprehensive income (loss) for the six months ended June 30, 2002loss are as follows:
| Currency Translation Adjustments | Unrealized Losses on Cash Flows Hedges | Minimum Pension Liability Adjustment | Accumulated Other Comprehensive Loss | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance, January 1, 2002 | $ | (2,469 | ) | $ | (34,583 | ) | $ | — | $ | (37,052 | ) | ||
Current period change | 4,451 | (5,880 | ) | (1,336 | ) | (2,765 | ) | ||||||
Balance June 30, 2002 | $ | 1,982 | $ | (40,463 | ) | $ | (1,336 | ) | $ | (39,817 | ) | ||
| Currency Translation Adjustments | Unrealized Gains (Losses) on Cash Flows Hedges | Minimum Pension Liability Adjustment | Accumulated Other Comprehensive Income (Loss) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance, January 1, 2003 | $ | 1,537 | $ | (48,963 | ) | $ | (17,785 | ) | $ | (65,211 | ) | ||
Current period change | 14,197 | 13,627 | (27 | ) | 27,797 | ||||||||
Balance June 30, 2003 | $ | 15,734 | $ | (35,336 | ) | $ | (17,812 | ) | $ | (37,414 | ) | ||
8. Subsequent Event12
On July 25, 2002, the Company issued $750 million of rental car asset backed notes under its AESOP Funding Program. Approximately $500 million of such notes bear interest at a fixed rate of 3.85% and approximately $250 million of such notes bear interest at a floating rate of LIBOR plus 29 basis points.
9. Guarantor and Non-Guarantor Consolidating Condensed Financial Statements
The following consolidating condensed financial information presents the Consolidating Condensed Balance Sheets as of June 30, 20022003 and December 31, 2001,2002, the ConsolidatedConsolidating Condensed Statements of OperationsIncome for the three months ended June 30, 20022003 and June 30, 20012002 and the Consolidating Condensed Statements of OperationsIncome and Statements of Cash Flows for the six months ended June 30, 2003 and 2002 the period March 1, 2001 (Date of Acquisition) to June 30, 2001, and as to the Predecessor Companies for the two months ended February 28, 2001 ofof: (a) Avis Group Holdings, Inc. ("the Parent"); (b) the guarantor subsidiaries; (c) the non-guarantor subsidiaries; (d) elimination entries necessary to consolidate the Parent with the guarantor and non-guarantor subsidiaries; and (e) the Company on a consolidated basis.
Investments in subsidiaries are accounted for using the equity method for purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. Separate financial statements and other disclosures with respect to the subsidiary guarantors have not been provided as management believes the following information is sufficient.
10
Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONSINCOME
For the Three Months endedEnded June 30, 2003
| Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues | $ | — | $ | 659,393 | $ | 71,282 | $ | — | $ | 730,675 | |||||
Expenses | |||||||||||||||
Operating, net | — | 231,242 | 36,014 | — | 267,256 | ||||||||||
Vehicle depreciation and | |||||||||||||||
lease charges, net | — | 213,083 | 16,488 | — | 229,571 | ||||||||||
Selling, general and | |||||||||||||||
administrative | — | 104,662 | 10,135 | — | 114,797 | ||||||||||
Vehicle interest, net | 3,459 | 58,461 | 931 | — | 62,851 | ||||||||||
Non-vehicle interest, net | 6,334 | 3,457 | — | — | 9,791 | ||||||||||
Non-vehicle depreciation | |||||||||||||||
and amortization | 240 | 9,739 | 758 | — | 10,737 | ||||||||||
Total expenses | 10,033 | 620,644 | 64,326 | — | 695,003 | ||||||||||
Income (loss) before equity in earnings of subsidiaries | (10,033 | ) | 38,749 | 6,956 | — | 35,672 | |||||||||
Equity in earnings of subsidiaries | 27,221 | 4,390 | — | (31,611 | ) | — | |||||||||
Income before income taxes | 17,188 | 43,139 | 6,956 | (31,611 | ) | 35,672 | |||||||||
Provision (benefit) for income taxes | (5,320 | ) | 15,918 | 2,566 | — | 13,164 | |||||||||
Net income | $ | 22,508 | $ | 27,221 | $ | 4,390 | $ | (31,611 | ) | $ | 22,508 | ||||
13
Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF INCOME
For the Three Months Ended June 30, 2002
| | Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | | Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues | Revenues | $ | — | $ | 591,572 | $ | 59,059 | $ | — | $ | 650,631 | Revenues | $ | — | $ | 591,572 | $ | 59,059 | $ | — | $ | 650,631 | ||||||||||
Expenses | Expenses | Expenses | ||||||||||||||||||||||||||||||
Operating, net | — | 227,135 | 29,231 | — | 256,366 | Operating, net | — | 227,135 | 29,231 | — | 256,366 | |||||||||||||||||||||
Vehicle depreciation and lease charges, net | — | 146,991 | 14,410 | — | 161,401 | Vehicle depreciation and lease charges, net | — | 146,991 | 14,410 | — | 161,401 | |||||||||||||||||||||
Selling, general and administrative | — | 113,735 | 8,194 | — | 121,929 | Selling, general and administrative | — | 113,735 | 8,194 | — | 121,929 | |||||||||||||||||||||
Vehicle interest, net | 459 | 50,544 | 336 | — | 51,339 | Vehicle interest, net | 459 | 50,544 | 336 | — | 51,339 | |||||||||||||||||||||
Non-vehicle interest, net | 7,658 | 3,165 | — | — | 10,823 | Non-vehicle interest, net | 7,658 | 3,165 | — | — | 10,823 | |||||||||||||||||||||
Non-vehicle depreciation and amortization | 240 | 8,439 | 766 | — | 9,445 | Non-vehicle depreciation and amortization | 240 | 8,439 | 766 | — | 9,445 | |||||||||||||||||||||
Total expenses | Total expenses | 8,357 | 550,009 | 52,937 | — | 611,303 | Total expenses | 8,357 | 550,009 | 52,937 | — | 611,303 | ||||||||||||||||||||
Income (loss) before equity in earnings of subsidiaries | Income (loss) before equity in earnings of subsidiaries | (8,357 | ) | 41,563 | 6,122 | — | 39,328 | Income (loss) before equity in earnings of subsidiaries | (8,357 | ) | 41,563 | 6,122 | — | 39,328 | ||||||||||||||||||
Equity in earnings of subsidiaries | Equity in earnings of subsidiaries | 26,166 | 3,550 | — | (29,716 | ) | — | Equity in earnings of subsidiaries | 26,166 | 3,550 | — | (29,716 | ) | — | ||||||||||||||||||
Income before income taxes | Income before income taxes | 17,809 | 45,113 | 6,122 | (29,716 | ) | 39,328 | Income before income taxes | 17,809 | 45,113 | 6,122 | (29,716 | ) | 39,328 | ||||||||||||||||||
Provision (benefit) for income taxes | Provision (benefit) for income taxes | (5,001 | ) | 18,947 | 2,572 | — | 16,518 | Provision (benefit) for income taxes | (5,001 | ) | 18,947 | 2,572 | — | 16,518 | ||||||||||||||||||
Net income | Net income | $ | 22,810 | $ | 26,166 | $ | 3,550 | $ | (29,716 | ) | $ | 22,810 | Net income | $ | 22,810 | $ | 26,166 | $ | 3,550 | $ | (29,716 | ) | $ | 22,810 | ||||||||
Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONSINCOME
For the ThreeSix Months Ended June 30, 20012003
| | Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | | Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues | Revenues | $ | — | $ | 570,551 | $ | 58,342 | $ | — | $ | 628,893 | Revenues | $ | — | $ | 1,192,152 | $ | 142,103 | $ | — | $ | 1,334,255 | ||||||||||
Expenses | Expenses | Expenses | ||||||||||||||||||||||||||||||
Operating, net | — | 206,665 | 25,503 | — | 232,168 | Operating, net | — | 441,147 | 70,022 | — | 511,169 | |||||||||||||||||||||
Vehicle depreciation and lease charges, net | — | 158,512 | 12,470 | — | 170,982 | Vehicle depreciation and lease charges, net | — | 380,717 | 32,896 | — | 413,613 | |||||||||||||||||||||
Selling, general and administrative | — | 108,548 | 7,992 | — | 116,540 | Selling, general and administrative | — | 202,842 | 20,108 | — | 222,950 | |||||||||||||||||||||
Vehicle interest, net | 3,459 | 52,015 | 425 | — | 55,899 | Vehicle interest, net | 6,918 | 109,670 | 1,222 | — | 117,810 | |||||||||||||||||||||
Non-vehicle interest, net | 8,350 | 6,227 | — | — | 14,577 | Non-vehicle interest, net | 14,344 | 6,560 | — | — | 20,904 | |||||||||||||||||||||
Non-vehicle depreciation and amortization | 4,746 | 9,505 | 824 | — | 15,075 | Non-vehicle depreciation and amortization | 480 | 19,055 | 1,508 | — | 21,043 | |||||||||||||||||||||
Total expenses | Total expenses | 16,555 | 541,472 | 47,214 | — | 605,241 | Total expenses | 21,742 | 1,159,991 | 125,756 | — | 1,307,489 | ||||||||||||||||||||
Income (loss) before equity in earnings of subsidiaries | Income (loss) before equity in earnings of subsidiaries | (16,555 | ) | 29,079 | 11,128 | — | 23,652 | Income (loss) before equity in earnings of subsidiaries | (21,742 | ) | 32,161 | 16,347 | — | 26,766 | ||||||||||||||||||
Equity in earnings of subsidiaries | Equity in earnings of subsidiaries | 14,176 | 4,674 | — | (18,850 | ) | — | Equity in earnings of subsidiaries | 26,803 | 10,316 | — | (37,119 | ) | — | ||||||||||||||||||
Income (loss) before income taxes | (2,379 | ) | 33,753 | 11,128 | (18,850 | ) | 23,652 | |||||||||||||||||||||||||
Income before income taxes | Income before income taxes | 5,061 | 42,477 | 16,347 | (37,119 | ) | 26,766 | |||||||||||||||||||||||||
Provision (benefit) for income taxes | Provision (benefit) for income taxes | (12,278 | ) | 19,577 | 6,454 | — | 13,753 | Provision (benefit) for income taxes | (11,827 | ) | 15,674 | 6,031 | — | 9,878 | ||||||||||||||||||
Net income | Net income | $ | 9,899 | $ | 14,176 | $ | 4,674 | $ | (18,850 | ) | $ | 9,899 | Net income | $ | 16,888 | $ | 26,803 | $ | 10,316 | $ | (37,119 | ) | $ | 16,888 | ||||||||
1114
Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONSINCOME
For the Six Months endedEnded June 30, 2002
| | Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | | Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues | Revenues | $ | — | $ | 1,098,987 | $ | 116,247 | $ | — | $ | 1,215,234 | Revenues | $ | — | $ | 1,098,987 | $ | 116,247 | $ | — | $ | 1,215,234 | ||||||||||
Expenses | Expenses | Expenses | ||||||||||||||||||||||||||||||
Operating, net | — | 422,895 | 57,506 | — | 480,401 | Operating, net | — | 422,895 | 57,506 | — | 480,401 | |||||||||||||||||||||
Vehicle depreciation and lease charges, net | — | 289,810 | 31,441 | — | 321,251 | Vehicle depreciation and lease charges, net | — | 289,810 | 31,441 | — | 321,251 | |||||||||||||||||||||
Selling, general and administrative | — | 221,329 | 15,531 | — | 236,860 | Selling, general and administrative | — | 221,329 | 15,531 | — | 236,860 | |||||||||||||||||||||
Vehicle interest, net | 918 | 100,524 | 544 | — | 101,986 | Vehicle interest, net | 918 | 100,524 | 544 | — | 101,986 | |||||||||||||||||||||
Non-vehicle interest, net | 15,315 | 6,303 | — | — | 21,618 | Non-vehicle interest, net | 15,315 | 6,303 | — | — | 21,618 | |||||||||||||||||||||
Non-vehicle depreciation and amortization | 479 | 15,919 | 1,545 | — | 17,943 | Non-vehicle depreciation and amortization | 479 | 15,919 | 1,545 | — | 17,943 | |||||||||||||||||||||
Total expenses | Total expenses | 16,712 | 1,056,780 | 106,567 | — | 1,180,059 | Total expenses | 16,712 | 1,056,780 | 106,567 | — | 1,180,059 | ||||||||||||||||||||
Income (loss) before equity in earnings of subsidiaries | Income (loss) before equity in earnings of subsidiaries | (16,712 | ) | 42,207 | 9,680 | — | 35,175 | Income (loss) before equity in earnings of subsidiaries | (16,712 | ) | 42,207 | 9,680 | — | 35,175 | ||||||||||||||||||
Equity in earnings of subsidiaries | Equity in earnings of subsidiaries | 27,737 | 5,614 | — | (33,351 | ) | — | Equity in earnings of subsidiaries | 27,737 | 5,614 | — | (33,351 | ) | — | ||||||||||||||||||
Income before income taxes | Income before income taxes | 11,025 | 47,821 | 9,680 | (33,351 | ) | 35,175 | Income before income taxes | 11,025 | 47,821 | 9,680 | (33,351 | ) | 35,175 | ||||||||||||||||||
Provision (benefit) for income taxes | Provision (benefit) for income taxes | (9,376 | ) | 20,084 | 4,066 | — | 14,774 | Provision (benefit) for income taxes | (9,376 | ) | 20,084 | 4,066 | — | 14,774 | ||||||||||||||||||
Net income | Net income | $ | 20,401 | $ | 27,737 | $ | 5,614 | $ | (33,351 | ) | $ | 20,401 | Net income | $ | 20,401 | $ | 27,737 | $ | 5,614 | $ | (33,351 | ) | $ | 20,401 | ||||||||
Avis Group Holdings, Inc. and SubsidiariesCONSOLIDATING CONDENSED STATEMENT OF OPERATIONSFor the Period March 1, 2001 (Date of Acquisition) to June 30, 2001
| Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues | $ | — | $ | 767,986 | $ | 78,903 | $ | — | $ | 846,889 | ||||||
Expenses | ||||||||||||||||
Operating, net | — | 276,363 | 34,616 | — | 310,979 | |||||||||||
Vehicle depreciation and lease charges, net | — | 206,553 | 18,619 | — | 225,172 | |||||||||||
Selling, general and administrative | — | 143,494 | 10,621 | — | 154,115 | |||||||||||
Vehicle interest, net | 4,612 | 70,973 | 861 | — | 76,446 | |||||||||||
Non-vehicle interest, net | 11,634 | 8,029 | — | — | 19,663 | |||||||||||
Non-vehicle depreciation and amortization | 6,574 | 12,599 | 1,095 | — | 20,268 | |||||||||||
Total expenses | 22,820 | 718,011 | 65,812 | — | 806,643 | |||||||||||
Income (loss) before equity in earnings of subsidiaries | (22,820 | ) | 49,975 | 13,091 | — | 40,246 | ||||||||||
Equity in earnings of subsidiaries | 25,759 | 6,022 | — | (31,781 | ) | — | ||||||||||
Income before income taxes | 2,939 | 55,997 | 13,091 | (31,781 | ) | 40,246 | ||||||||||
Provision (benefit) for income taxes | (15,655 | ) | 30,238 | 7,069 | — | 21,652 | ||||||||||
Net income | $ | 18,594 | $ | 25,759 | $ | 6,022 | $ | (31,781 | ) | $ | 18,594 | |||||
12
Avis Group Holdings, Inc. and SubsidiariesCONSOLIDATING CONDENSED STATEMENT OF OPERATIONS(Predecessor Companies)For the Two Months Ended February 28, 2001
| Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues | $ | — | $ | 344,496 | $ | 41,325 | $ | — | $ | 385,821 | |||||||
Expenses | |||||||||||||||||
Operating, net | — | 154,747 | 19,340 | — | 174,087 | ||||||||||||
Vehicle depreciation and lease charges, net | — | 100,718 | 9,399 | — | 110,117 | ||||||||||||
Selling, general and administrative | — | 77,866 | 5,363 | — | 83,229 | ||||||||||||
Vehicle interest, net | 2,306 | 40,375 | 944 | — | 43,625 | ||||||||||||
Non-vehicle interest, net | 9,167 | — | — | — | 9,167 | ||||||||||||
Non-vehicle depreciation and amortization | — | 7,282 | 551 | — | 7,833 | ||||||||||||
Total expenses | 11,473 | 380,988 | 35,597 | — | 428,058 | ||||||||||||
Income (loss) before equity in earnings (losses) of subsidiaries | (11,473 | ) | (36,492 | ) | 5,728 | — | (42,237 | ) | |||||||||
Equity in earnings (losses) of subsidiaries | (25,645 | ) | 9,950 | — | 15,695 | — | |||||||||||
Income (loss) before income taxes | (37,118 | ) | (26,542 | ) | 5,728 | 15,695 | (42,237 | ) | |||||||||
Provision (benefit) for income taxes | (7,999 | ) | (9,926 | ) | 2,142 | — | (15,783 | ) | |||||||||
Income (loss) from continuing operations | (29,119 | ) | (16,616 | ) | 3,586 | 15,695 | (26,454 | ) | |||||||||
Income (loss) from discontinued operations, net of tax | — | (6,358 | ) | 11,305 | — | 4,947 | |||||||||||
Income (loss) before cumulative effect of accounting change | (29,119 | ) | (22,974 | ) | 14,891 | 15,695 | (21,507 | ) | |||||||||
Cumulative effect of accounting change, net of tax | — | (2,671 | ) | (4,941 | ) | — | (7,612 | ) | |||||||||
Net income (loss) | $ | (29,119 | ) | $ | (25,645 | ) | $ | 9,950 | $ | 15,695 | $ | (29,119 | ) | ||||
1315
Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED BALANCE SHEET
June 30, 20022003
| | Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | | Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 98 | $ | 7,887 | $ | 32,684 | $ | — | $ | 40,669 | ||||||||||||||||||||||
Assets | Assets | |||||||||||||||||||||||||||||||
Receivables, net | — | 135,094 | 30,661 | — | 165,755 | Cash and cash equivalents | $ | 267 | $ | 13,595 | $ | 12,650 | $ | — | $ | 26,512 | ||||||||||||||||
Prepaid expenses | — | 33,109 | 7,857 | — | 40,966 | Restricted cash | — | (193 | ) | 69,347 | — | 69,154 | ||||||||||||||||||||
Due from affiliate | (328,977 | ) | 178,602 | 150,375 | — | — | Receivables, net | — | 125,133 | 39,733 | — | 164,866 | ||||||||||||||||||||
Deferred income taxes | 218,280 | 336,241 | 1,627 | — | 556,148 | Deferred income taxes | 157,713 | 358,138 | 7,766 | — | 523,617 | |||||||||||||||||||||
Property and equipment, net | — | 241,383 | 14,834 | — | 256,217 | Property and equipment, net | — | 266,486 | 16,770 | — | 283,256 | |||||||||||||||||||||
Investment in consolidated subsidiaries | 707,986 | 644,419 | — | (1,352,405 | ) | — | Investment in consolidated subsidiaries | 798,656 | 685,747 | — | (1,484,403 | ) | — | |||||||||||||||||||
Goodwill | 806,809 | 444,667 | 3,433 | — | 1,254,909 | Goodwill | 801,243 | 449,760 | 4,143 | — | 1,255,146 | |||||||||||||||||||||
Other assets | 15,541 | 34,113 | 95,400 | — | 145,054 | Other assets | 14,580 | 69,397 | 37,991 | — | 121,968 | |||||||||||||||||||||
Total assets exclusive of assets under management programs | Total assets exclusive of assets under management programs | 1,419,737 | 2,055,515 | 336,871 | (1,352,405 | ) | 2,459,718 | Total assets exclusive of assets under management programs | 1,772,459 | 1,968,063 | 188,400 | (1,484,403 | ) | 2,444,519 | ||||||||||||||||||
Assets under management programs: | Assets under management programs: | Assets under management programs: | ||||||||||||||||||||||||||||||
Restricted cash | — | 174 | 9,132 | — | 9,306 | Restricted cash | — | 95 | 93,127 | — | 93,222 | |||||||||||||||||||||
Vehicles, net | — | (97,824 | ) | 4,324,399 | — | 4,226,575 | Vehicles, net | — | (97,638 | ) | 6,763,473 | — | 6,665,835 | |||||||||||||||||||
Due from vehicle manufacturers | — | 5,399 | 59,093 | — | 64,492 | Due from vehicle manufacturers | — | 1,126 | 80,330 | — | 81,456 | |||||||||||||||||||||
— | (92,251 | ) | 4,392,624 | — | 4,300,373 | — | (96,417 | ) | 6,936,930 | — | 6,840,513 | |||||||||||||||||||||
Total assets | Total assets | $ | 1,419,737 | $ | 1,963,264 | $ | 4,729,495 | $ | (1,352,405 | ) | $ | 6,760,091 | Total assets | $ | 1,772,459 | $ | 1,871,646 | $ | 7,125,330 | $ | (1,484,403 | ) | $ | 9,285,032 | ||||||||
LIABILITIES AND STOCKHOLDER'S EQUITY | ||||||||||||||||||||||||||||||||
Liabilities and stockholder's equity | Liabilities and stockholder's equity | |||||||||||||||||||||||||||||||
Liabilities: | Liabilities: | Liabilities: | ||||||||||||||||||||||||||||||
Accounts payable | $ | (16,459 | ) | $ | 166,744 | $ | 94,847 | $ | — | $ | 245,132 | Accounts payable | $ | (93,086 | ) | $ | 492,486 | $ | 1,089 | $ | — | $ | 400,489 | |||||||||
Accrued liabilities | 107,466 | 306,005 | 33,870 | — | 447,341 | Accrued liabilities | 6,651 | 349,483 | 34,869 | — | 391,003 | |||||||||||||||||||||
Due to Cendant Corporation and affiliates, net | 418,617 | 275,723 | (180,333 | ) | — | 514,007 | Due to (from) Cendant Corporation and affiliates, net | 1,064,412 | 13,121 | (326,741 | ) | — | 750,792 | |||||||||||||||||||
Non-vehicle debt | 571,391 | 4,465 | — | — | 575,856 | Non-vehicle debt | 397,736 | 3,844 | — | — | 401,580 | |||||||||||||||||||||
Public liability, property damage and other insurance liabilities | — | 144,141 | 71,736 | — | 215,877 | Public liability, property damage and other insurance liabilities | — | 138,779 | 83,263 | — | 222,042 | |||||||||||||||||||||
Total liabilities exclusive of liabilities under management programs | Total liabilities exclusive of liabilities under management programs | 1,081,015 | 897,078 | 20,120 | — | 1,998,213 | Total liabilities exclusive of liabilities under management programs | 1,375,713 | 997,713 | (207,520 | ) | — | 2,165,906 | |||||||||||||||||||
Liabilities under management programs: | Liabilities under management programs: | Liabilities under management programs: | ||||||||||||||||||||||||||||||
Vehicle debt | — | 80,490 | 4,035,370 | — | 4,115,860 | Vehicle debt | — | 73,858 | 6,360,595 | — | 6,434,453 | |||||||||||||||||||||
Deferred income taxes | — | 277,710 | 29,586 | — | 307,296 | Deferred income taxes | 6,688 | 1,419 | 286,508 | — | 294,615 | |||||||||||||||||||||
— | 358,200 | 4,064,956 | — | 4,423,156 | 6,688 | 75,277 | 6,647,103 | — | 6,729,068 | |||||||||||||||||||||||
Stockholder's equity | Stockholder's equity | 338,722 | 707,986 | 644,419 | (1,352,405 | ) | 338,722 | Stockholder's equity | 390,058 | 798,656 | 685,747 | (1,484,403 | ) | 390,058 | ||||||||||||||||||
Total liabilities and stockholder's equity | Total liabilities and stockholder's equity | $ | 1,419,737 | $ | 1,963,264 | $ | 4,729,495 | $ | (1,352,405 | ) | $ | 6,760,091 | Total liabilities and stockholder's equity | $ | 1,772,459 | $ | 1,871,646 | $ | 7,125,330 | $ | (1,484,403 | ) | $ | 9,285,032 | ||||||||
1416
Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED BALANCE SHEET
December 31, 20012002
| | Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | | Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||||||||||||||||||||||||
Assets | Assets | |||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 18 | $ | 5,210 | $ | 8,083 | $ | — | $ | 13,311 | Cash and cash equivalents | $ | 69 | $ | 10,886 | $ | 14,297 | $ | — | $ | 25,252 | |||||||||||
Receivables, net | — | 142,386 | 25,986 | — | 168,372 | Restricted cash | — | — | 59,012 | — | 59,012 | |||||||||||||||||||||
Prepaid expenses | — | 34,569 | 7,974 | — | 42,543 | Receivables, net | — | 122,436 | 36,294 | — | 158,730 | |||||||||||||||||||||
Deferred income tax | 221,741 | 326,332 | 14 | — | 548,087 | Deferred income taxes | 157,713 | 315,856 | 7,766 | — | 481,335 | |||||||||||||||||||||
Property and equipment, net | — | 230,429 | 14,847 | — | 245,276 | Property and equipment, net | — | 264,091 | 14,739 | — | 278,830 | |||||||||||||||||||||
Investment in consolidated subsidiaries | 677,401 | 628,280 | — | (1,305,681 | ) | — | Investment in consolidated subsidiaries | 746,729 | 664,644 | — | (1,411,373 | ) | — | |||||||||||||||||||
Goodwill | 825,234 | 443,000 | 2,958 | — | 1,271,192 | Goodwill | 801,243 | 449,760 | 3,398 | — | 1,254,401 | |||||||||||||||||||||
Other assets | 16,020 | 34,791 | 95,797 | — | 146,608 | Other assets | 15,059 | 56,016 | 34,240 | — | 105,315 | |||||||||||||||||||||
Total assets exclusive of assets under management programs | Total assets exclusive of assets under management programs | 1,740,414 | 1,844,997 | 155,659 | (1,305,681 | ) | 2,435,389 | Total assets exclusive of assets under management programs | 1,720,813 | 1,883,689 | 169,746 | (1,411,373 | ) | 2,362,875 | ||||||||||||||||||
Assets under management programs: | Assets under management programs: | Assets under management programs: | ||||||||||||||||||||||||||||||
Restricted cash | — | 9,457 | 571,730 | — | 581,187 | Restricted cash | — | 83 | 2,379 | — | 2,462 | |||||||||||||||||||||
Vehicles, net | — | (128,932 | ) | 3,557,825 | — | 3,428,893 | Vehicles, net | — | (102,326 | ) | 4,276,173 | — | 4,173,847 | |||||||||||||||||||
Due from vehicle manufacturers | — | 7,855 | 84,759 | — | 92,614 | Due from vehicle manufacturers | — | 20,758 | 237,701 | — | 258,459 | |||||||||||||||||||||
— | (111,620 | ) | 4,214,314 | — | 4,102,694 | — | (81,485 | ) | 4,516,253 | — | 4,434,768 | |||||||||||||||||||||
Total assets | Total assets | $ | 1,740,414 | $ | 1,733,377 | $ | 4,369,973 | $ | (1,305,681 | ) | $ | 6,538,083 | Total assets | $ | 1,720,813 | $ | 1,802,204 | $ | 4,685,999 | $ | (1,411,373 | ) | $ | 6,797,643 | ||||||||
LIABILITIES AND STOCKHOLDER'S EQUITY | ||||||||||||||||||||||||||||||||
Liabilities and stockholder's equity | Liabilities and stockholder's equity | |||||||||||||||||||||||||||||||
Liabilities: | Liabilities: | Liabilities: | ||||||||||||||||||||||||||||||
Accounts payable | $ | — | $ | 151,379 | $ | 212,512 | $ | — | $ | 363,891 | Accounts payable | $ | (78,584 | ) | $ | 418,917 | $ | (134,606 | ) | $ | — | $ | 205,727 | |||||||||
Accrued liabilities | 109,143 | 300,337 | 25,185 | — | 434,665 | Accrued liabilities | 8,683 | 379,090 | 27,236 | — | 415,009 | |||||||||||||||||||||
Due to Cendant Corporation and affiliates, net | 726,645 | 63,214 | (275,426 | ) | — | 514,433 | Due to (from) Cendant Corporation and affiliates, net | 908,508 | 11,997 | (368,696 | ) | — | 551,809 | |||||||||||||||||||
Non-vehicle debt | 583,540 | 4,719 | — | — | 588,259 | Non-vehicle debt | 530,146 | 4,085 | — | — | 534,231 | |||||||||||||||||||||
Public liability, property damage and other insurance liabilities | — | 166,432 | 62,071 | — | 228,503 | Public liability, property damage and other insurance liabilities | — | 142,423 | 69,363 | — | 211,786 | |||||||||||||||||||||
Total liabilities exclusive of liabilities under management programs | Total liabilities exclusive of liabilities under management programs | 1,419,328 | 686,081 | 24,342 | — | 2,129,751 | Total liabilities exclusive of liabilities under management programs | 1,368,753 | 956,512 | (406,703 | ) | — | 1,918,562 | |||||||||||||||||||
Liabilities under management programs: | Liabilities under management programs: | Liabilities under management programs: | ||||||||||||||||||||||||||||||
Vehicle debt | — | 86,004 | 3,685,337 | — | 3,771,341 | Vehicle debt | — | 97,544 | 4,148,159 | — | 4,245,703 | |||||||||||||||||||||
Deferred income taxes | — | 283,891 | 32,014 | — | 315,905 | Deferred income taxes | 6,687 | 1,419 | 279,899 | — | 288,005 | |||||||||||||||||||||
— | 369,895 | 3,717,351 | — | 4,087,246 | 6,687 | 98,963 | 4,428,058 | — | 4,533,708 | |||||||||||||||||||||||
Stockholder's equity | Stockholder's equity | 321,086 | 677,401 | 628,280 | (1,305,681 | ) | 321,086 | Stockholder's equity | 345,373 | 746,729 | 664,644 | (1,411,373 | ) | 345,373 | ||||||||||||||||||
Total liabilities and stockholder's equity | Total liabilities and stockholder's equity | $ | 1,740,414 | $ | 1,733,377 | $ | 4,369,973 | $ | (1,305,681 | ) | $ | 6,538,083 | Total liabilities and stockholder's equity | $ | 1,720,813 | $ | 1,802,204 | $ | 4,685,999 | $ | (1,411,373 | ) | $ | 6,797,643 | ||||||||
1517
Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2003
| Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Operating Activities | ||||||||||||||||
Net income | $ | 16,888 | $ | 26,803 | $ | 10,316 | $ | (37,119 | ) | $ | 16,888 | |||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities exclusive of management programs | (21,581 | ) | (36,921 | ) | (70 | ) | — | (58,572 | ) | |||||||
Net cash provided by (used in) operating activities exclusive of management programs | (4,693 | ) | (10,118 | ) | 10,246 | (37,119 | ) | (41,684 | ) | |||||||
Management programs: | ||||||||||||||||
Vehicle depreciation | — | 358,533 | 26,785 | — | 385,318 | |||||||||||
Net cash provided by (used in) operating activities | (4,693 | ) | 348,415 | 37,031 | (37,119 | ) | 343,634 | |||||||||
Investing Activities | ||||||||||||||||
Property and equipment additions | — | (25,229 | ) | (1,698 | ) | — | (26,927 | ) | ||||||||
Proceeds from sales of property and equipment | — | 3,779 | 648 | — | 4,427 | |||||||||||
Payment for purchase of rental car franchise licensees | — | — | (208 | ) | — | (208 | ) | |||||||||
Investment in subsidiaries | (26,803 | ) | (10,316 | ) | — | 37,119 | — | |||||||||
Net cash used in investing activities exclusive of management programs | (26,803 | ) | (31,766 | ) | (1,258 | ) | 37,119 | (22,708 | ) | |||||||
Management programs: | ||||||||||||||||
Increase in restricted cash | — | (12 | ) | (90,748 | ) | — | (90,760 | ) | ||||||||
Decrease in due from vehicle manufacturers | — | 19,632 | 160,861 | — | 180,493 | |||||||||||
Investment in vehicles | — | (11,971 | ) | (5,197,474 | ) | — | (5,209,445 | ) | ||||||||
Payments received on investment in vehicles | — | (345,552 | ) | 2,882,443 | — | 2,536,891 | ||||||||||
— | (337,903 | ) | (2,244,918 | ) | — | (2,582,821 | ) | |||||||||
Net cash used in investing activities | (26,803 | ) | (369,669 | ) | (2,246,176 | ) | 37,119 | (2,605,529 | ) | |||||||
Financing Activities | ||||||||||||||||
Principal payments on borrowings | (124,211 | ) | (241 | ) | — | — | (124,452 | ) | ||||||||
Increase in due to Cendant Corporation and affiliates, net | 155,905 | 34,447 | 15,042 | — | 205,394 | |||||||||||
Net cash provided by financing activities exclusive of management programs | 31,694 | 34,206 | 15,042 | — | 80,942 | |||||||||||
Management programs: | ||||||||||||||||
Net increase in borrowings | — | — | 2,191,962 | — | 2,191,962 | |||||||||||
Payments for debt issuance costs | — | (10,243 | ) | — | — | (10,243 | ) | |||||||||
— | (10,243 | ) | 2,191,962 | — | 2,181,719 | |||||||||||
Net cash provided by financing activities | 31,694 | 23,963 | 2,207,004 | — | 2,262,661 | |||||||||||
Effect of changes in exchange rates on cash and cash equivalents | — | — | 494 | — | 494 | |||||||||||
Net increase (decrease) in cash and cash equivalents | 198 | 2,709 | (1,647 | ) | — | 1,260 | ||||||||||
Cash and cash equivalents, beginning of period | 69 | 10,886 | 14,297 | — | 25,252 | |||||||||||
Cash and cash equivalents, end of period | $ | 267 | $ | 13,595 | $ | 12,650 | $ | — | $ | 26,512 | ||||||
18
Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2002
| | Parent | Guarantor | Non- Guarantor | Eliminations | Avis Group Holdings, Inc. Consolidated | Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Avis Group Holdings, Inc. Consolidated | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Operating Activities | Operating Activities | ||||||||||||||||||||||||||||||||
Net income | Net income | $ | 20,401 | $ | 27,737 | $ | 5,614 | $ | (33,351 | ) | $ | 20,401 | $ | 20,401 | $ | 27,737 | $ | 5,614 | $ | (33,351 | ) | $ | 20,401 | ||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities exclusive of management programs | Adjustments to reconcile net income to net cash provided by (used in) operating activities exclusive of management programs | (27,692 | ) | (6,266 | ) | 19,384 | — | (14,574 | ) | (27,692 | ) | (6,266 | ) | 19,384 | — | (14,574 | ) | ||||||||||||||||
Net cash provided by (used in) operating activities exclusive of management programs | Net cash provided by (used in) operating activities exclusive of management programs | (7,291 | ) | 21,471 | 24,998 | (33,351 | ) | 5,827 | (7,291 | ) | 21,471 | 24,998 | (33,351 | ) | 5,827 | ||||||||||||||||||
Management programs: | Management programs: | ||||||||||||||||||||||||||||||||
Vehicle depreciation | — | 291,352 | 20,869 | — | 312,221 | ||||||||||||||||||||||||||||
Vehicle depreciation | — | 291,352 | 20,869 | — | 312,221 | ||||||||||||||||||||||||||||
Net cash provided by (used in) operating activities | Net cash provided by (used in) operating activities | (7,291 | ) | 312,823 | 45,867 | (33,351 | ) | 318,048 | (7,291 | ) | 312,823 | 45,867 | (33,351 | ) | 318,048 | ||||||||||||||||||
Investing Activities | Investing Activities | ||||||||||||||||||||||||||||||||
Property and equipment additions | Property and equipment additions | — | (23,278 | ) | (1,529 | ) | — | (24,807 | ) | — | (23,278 | ) | (1,529 | ) | — | (24,807 | ) | ||||||||||||||||
Retirements of property and equipment | — | 89 | 689 | — | 778 | ||||||||||||||||||||||||||||
Proceeds from sales of property and equipment | — | 89 | 689 | — | 778 | ||||||||||||||||||||||||||||
Payment for purchase of rental car franchise licensees | Payment for purchase of rental car franchise licensees | — | (2,835 | ) | (252 | ) | — | (3,087 | ) | — | (2,835 | ) | (252 | ) | — | (3,087 | ) | ||||||||||||||||
Investment in subsidiaries | Investment in subsidiaries | (27,737 | ) | (5,614 | ) | — | 33,351 | — | (27,737 | ) | (5,614 | ) | — | 33,351 | — | ||||||||||||||||||
Net cash used in investing activities exclusive of management programs | Net cash used in investing activities exclusive of management programs | (27,737 | ) | (31,638 | ) | (1,092 | ) | 33,351 | (27,116 | ) | (27,737 | ) | (31,638 | ) | (1,092 | ) | 33,351 | (27,116 | ) | ||||||||||||||
Management programs: | Management programs: | ||||||||||||||||||||||||||||||||
Decrease in restricted cash | — | 9,283 | 562,598 | — | 571,881 | ||||||||||||||||||||||||||||
Decrease in due from vehicle manufacturers | — | 2,456 | 26,892 | — | 29,348 | ||||||||||||||||||||||||||||
Investment in vehicles | — | (57,042 | ) | (2,627,781 | ) | — | (2,684,823 | ) | |||||||||||||||||||||||||
Payments received on investment in vehicles | — | (248,886 | ) | 1,720,919 | — | 1,472,033 | |||||||||||||||||||||||||||
Decrease in restricted cash | — | 9,283 | 562,598 | — | 571,881 | ||||||||||||||||||||||||||||
Decrease in due from vehicle manufacturers | — | 2,456 | 26,892 | — | 29,348 | ||||||||||||||||||||||||||||
Investment in vehicles | — | (57,042 | ) | (2,627,781 | ) | — | (2,684,823 | ) | |||||||||||||||||||||||||
Payments received on investment in vehicles | — | (248,886 | ) | 1,720,919 | — | 1,472,033 | |||||||||||||||||||||||||||
— | (294,189 | ) | (317,372 | ) | — | (611,561 | ) | — | (294,189 | ) | (317,372 | ) | — | (611,561 | ) | ||||||||||||||||||
Net cash used in investing activities | Net cash used in investing activities | (27,737 | ) | (325,827 | ) | (318,464 | ) | 33,351 | (638,677 | ) | (27,737 | ) | (325,827 | ) | (318,464 | ) | 33,351 | (638,677 | ) | ||||||||||||||
Financing Activities | Financing Activities | ||||||||||||||||||||||||||||||||
Net decrease in non-vehicle debt | — | (253 | ) | — | — | (253 | ) | ||||||||||||||||||||||||||
Principal payments on borrowings | — | (253 | ) | — | — | (253 | ) | ||||||||||||||||||||||||||
Increase (decrease) in due to Cendant Corporation and affiliates, net | Increase (decrease) in due to Cendant Corporation and affiliates, net | 35,108 | 16,065 | (53,840 | ) | — | (2,667 | ) | 35,108 | 16,065 | (53,840 | ) | — | (2,667 | ) | ||||||||||||||||||
Payments for debt issuance costs | — | (131 | ) | — | — | (131 | ) | ||||||||||||||||||||||||||
Net cash provided by (used in) financing activities exclusive of management programs | Net cash provided by (used in) financing activities exclusive of management programs | 35,108 | 15,681 | (53,840 | ) | — | (3,051 | ) | 35,108 | 15,812 | (53,840 | ) | — | (2,920 | ) | ||||||||||||||||||
Management programs: | Management programs: | ||||||||||||||||||||||||||||||||
Net increase in borrowings | — | — | 350,613 | — | 350,613 | ||||||||||||||||||||||||||||
Payments for debt issuance costs | — | (131 | ) | — | — | (131 | ) | ||||||||||||||||||||||||||
Net increase in vehicle debt | — | — | 350,613 | — | 350,613 | — | (131 | ) | 350,613 | — | 350,482 | ||||||||||||||||||||||
Net cash provided by financing activities | Net cash provided by financing activities | 35,108 | 15,681 | 296,773 | — | 347,562 | 35,108 | 15,681 | 296,773 | — | 347,562 | ||||||||||||||||||||||
Effect of changes in exchange rates on cash and cash equivalents | Effect of changes in exchange rates on cash and cash equivalents | — | — | 425 | — | 425 | — | — | 425 | — | 425 | ||||||||||||||||||||||
Net increase in cash and cash equivalents | Net increase in cash and cash equivalents | 80 | 2,677 | 24,601 | — | 27,358 | 80 | 2,677 | 24,601 | — | 27,358 | ||||||||||||||||||||||
Cash and cash equivalents, beginning of period | Cash and cash equivalents, beginning of period | 18 | 5,210 | 8,083 | — | 13,311 | 18 | 5,210 | 8,083 | — | 13,311 | ||||||||||||||||||||||
Cash and cash equivalents, end of period | Cash and cash equivalents, end of period | $ | 98 | $ | 7,887 | $ | 32,684 | $ | — | $ | 40,669 | $ | 98 | $ | 7,887 | $ | 32,684 | $ | — | $ | 40,669 | ||||||||||||
1619
Avis Group Holdings, Inc. and SubsidiariesCONSOLIDATING CONDENSED STATEMENT OF CASH FLOWSFor the Period March 1, 2001 (Date of Acquisition) to June 30, 2001
| Parent | Guarantor | Non- Guarantor | Eliminations | Avis Group Holdings, Inc. Consolidated | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Operating Activities | |||||||||||||||||
Net income | $ | 18,594 | $ | 25,759 | $ | 6,022 | $ | (31,781 | ) | $ | 18,594 | ||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities exclusive of management programs | (118,194 | ) | 130,934 | (24,982 | ) | — | (12,242 | ) | |||||||||
Net cash provided by (used in) operating activities exclusive of management programs | (99,600 | ) | 156,693 | (18,960 | ) | (31,781 | ) | 6,352 | |||||||||
Management programs: | |||||||||||||||||
Vehicle depreciation | — | 195,458 | 16,144 | — | 211,602 | ||||||||||||
Net cash provided by (used in) operating activities | (99,600 | ) | 352,151 | (2,816 | ) | (31,781 | ) | 217,954 | |||||||||
Investing Activities | |||||||||||||||||
Property and equipment additions | — | (24,781 | ) | (877 | ) | — | (25,658 | ) | |||||||||
Retirements of property and equipment | — | 8,169 | 206 | — | 8,375 | ||||||||||||
Payment for purchase of rental car franchise licensees | — | (18,748 | ) | (299 | ) | — | (19,047 | ) | |||||||||
Investment in subsidiaries | (25,759 | ) | (6,022 | ) | — | 31,781 | — | ||||||||||
Net cash used in investing activities exclusive of management programs | (25,759 | ) | (41,382 | ) | (970 | ) | 31,781 | (36,330 | ) | ||||||||
Management programs: | |||||||||||||||||
Decrease in restricted cash | — | — | 5,208 | — | 5,208 | ||||||||||||
(Increase) decrease in due from vehicle manufacturers | — | (3,443 | ) | 135,256 | — | 131,813 | |||||||||||
Investment in vehicles | — | (41,397 | ) | (1,858,655 | ) | — | (1,900,052 | ) | |||||||||
Payments received on investment in vehicles | — | (182,724 | ) | 1,595,543 | — | 1,412,819 | |||||||||||
— | (227,564 | ) | (122,648 | ) | — | (350,212 | ) | ||||||||||
Net cash used in investing activities | (25,759 | ) | (268,946 | ) | (123,618 | ) | 31,781 | (386,542 | ) | ||||||||
Financing Activities | |||||||||||||||||
Net decrease in non-vehicle debt | (317,650 | ) | (156 | ) | — | — | (317,806 | ) | |||||||||
Increase (decrease) in due to Cendant Corporation and affiliates, net | 443,173 | (102,192 | ) | (24,099 | ) | — | 316,882 | ||||||||||
Payments for debt issuance costs | — | (4,231 | ) | — | — | (4,231 | ) | ||||||||||
Net cash provided by (used in) financing activities exclusive of management programs | 125,523 | (106,579 | ) | (24,099 | ) | — | (5,155 | ) | |||||||||
Management programs: | |||||||||||||||||
Net (decrease) increase in vehicle debt | — | (8,744 | ) | 138,907 | — | 130,163 | |||||||||||
Net cash provided by (used in) financing activities | 125,523 | (115,323 | ) | 114,808 | — | 125,008 | |||||||||||
Effect of changes in exchange rates on cash a cash equivalents | — | — | (117 | ) | — | (117 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 164 | (32,118 | ) | (11,743 | ) | — | (43,697 | ) | |||||||||
Cash and cash equivalents, beginning of period | 141 | 36,745 | 29,219 | — | 66,105 | ||||||||||||
Cash and cash equivalents, end of period | $ | 305 | $ | 4,627 | $ | 17,476 | $ | — | $ | 22,408 | |||||||
17
Avis Group Holdings, Inc. and SubsidiariesCONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS(Predecessor Companies)For the Two Months Ended February 28, 2001
| Parent | Guarantor | Non- Guarantor | Eliminations | Avis Group Holdings, Inc. Consolidated | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Operating Activities | |||||||||||||||||
Net income (loss) | $ | (29,119 | ) | $ | (25,645 | ) | $ | 9,950 | $ | 15,695 | $ | (29,119 | ) | ||||
Adjustments to arrive at income (loss) from continuing operations | — | 9,029 | (6,364 | ) | — | 2,665 | |||||||||||
Income (loss) from continuing operations | (29,119 | ) | (16,616 | ) | 3,586 | 15,695 | (26,454 | ) | |||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities exclusive of management programs | 425 | 77,124 | (119,563 | ) | — | (42,014 | ) | ||||||||||
Net cash provided by (used in) operating activities exclusive of management programs | (28,694 | ) | 60,508 | (115,977 | ) | 15,695 | (68,468 | ) | |||||||||
Management programs: | |||||||||||||||||
Vehicle depreciation | — | 96,394 | 7,942 | — | 104,336 | ||||||||||||
Net cash provided by (used in) operating activities | (28,694 | ) | 156,902 | (108,035 | ) | 15,695 | 35,868 | ||||||||||
Investing Activities | |||||||||||||||||
Property and equipment additions | — | (5,169 | ) | (652 | ) | — | (5,821 | ) | |||||||||
Retirements of property and equipment | — | 165 | 268 | — | 433 | ||||||||||||
Investment in subsidiaries | 25,645 | (9,950 | ) | — | (15,695 | ) | — | ||||||||||
Net cash provided by (used in) investing activities exclusive of management programs | 25,645 | (14,954 | ) | (384 | ) | (15,695 | ) | (5,388 | ) | ||||||||
Management programs: | |||||||||||||||||
Decrease in restricted cash | — | — | 10,978 | — | 10,978 | ||||||||||||
Decrease in due from vehicle manufacturers | — | — | 16,368 | — | 16,368 | ||||||||||||
Investment in vehicles | — | 378 | (940,937 | ) | — | (940,559 | ) | ||||||||||
Payments received on investment in vehicles | — | (82,703 | ) | 895,350 | — | 812,647 | |||||||||||
— | (82,325 | ) | (18,241 | ) | — | (100,566 | ) | ||||||||||
Net cash provided by (used in) investing activities | 25,645 | (97,279 | ) | (18,625 | ) | (15,695 | ) | (105,954 | ) | ||||||||
Financing Activities | |||||||||||||||||
Net decrease in non-vehicle debt | — | (77 | ) | — | — | (77 | ) | ||||||||||
Increase (decrease) in due to Cendant Corporation and affiliates, net | (89,023 | ) | 43,123 | 82 | — | (45,818 | ) | ||||||||||
Payments for debt issuance costs | — | (12 | ) | — | — | (12 | ) | ||||||||||
Issuances of common stock | 140 | — | — | — | 140 | ||||||||||||
Net cash provided by (used in) financing activities exclusive of management programs | (88,883 | ) | 43,034 | 82 | — | (45,767 | ) | ||||||||||
Management programs: | |||||||||||||||||
Net increase (decrease) in vehicle debt | 92,000 | (2 | ) | 9,209 | — | 101,207 | |||||||||||
Net cash provided by financing activities | 3,117 | 43,032 | 9,291 | — | 55,440 | ||||||||||||
Effect of changes in net assets of discontinued operations | — | (131,512 | ) | 131,906 | — | 394 | |||||||||||
Effect of changes in exchange rates on cash and cash equivalents | — | — | (11 | ) | — | (11 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 68 | (28,857 | ) | 14,526 | — | (14,263 | ) | ||||||||||
Cash and cash equivalents, beginning of period | 73 | 65,602 | 14,693 | — | 80,368 | ||||||||||||
Cash and cash equivalents, end of period | $ | 141 | $ | 36,745 | $ | 29,219 | $ | — | $ | 66,105 | |||||||
18
Item 2. Management's Narrative Analysis of the Results of Operations
The following discussion should be read in conjunction with our Consolidated Condensed Financial Statements and accompanying Notes thereto included elsewhere herein.herein and with our 2002 Annual Report on Form 10-K filed with the Commission on March 6, 2003. Unless otherwise noted, all dollar amounts are in thousands and presented before taxes (as appropriate).thousands.
We are one of the second largest general use car rental brandcompanies in the world. On March 1, 2001, all of our outstanding common stock not then-owned by Cendant Corporation ("Cendant") was acquired byworld and a wholly-owned subsidiary of PHH Corporation ("PHH")Cendant Corporation.
Our comparative results of operations for the three months ended June 30, 2003 and 2002 comprised the following:
| 2003 | 2002 | Change | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Revenues | $ | 730,675 | $ | 650,631 | $ | 80,044 | ||||
Total expenses | 695,003 | 611,303 | 83,700 | |||||||
Income before income taxes | 35,672 | 39,328 | (3,656 | ) | ||||||
Provision for income taxes | 13,164 | 16,518 | (3,354 | ) | ||||||
Net income | $ | 22,508 | $ | 22,810 | $ | (302 | ) | |||
Total revenues and expenses increased 12.3% and 13.7%, respectively, primarily due to our subleasing arrangement with Budget Rent A Car System, Inc., a wholly-owned subsidiary of Cendant not within our ownership structure. We sublease a portion of our fleet to Budget for approximately $994a monthly fee comprised of a depreciation component, interest component and administrative fee component. As a result of this relationship, we generated incremental revenues and expenses of $110.2 million and we emerged as$108.2 million (consisting of vehicle depreciation expense of $85.5 million and vehicle interest expense of $22.7 million), respectively. Excluding such amounts, domestic car rental revenues declined $41 million (7%) in second quarter 2003 compared with second quarter 2002. The net reduction in domestic car rental revenues was primarily due to a 10% quarter-over-quarter reduction in domestic car rental days, which was partially offset by a 1% increase in time and mileage revenue per domestic rental day, reflecting an increase in pricing. In addition, quarter-over-quarter expenses include favorable interest costs of $8 million on the surviving legal entity. At such time,financing of vehicles due to lower interest rates, which were offset by incremental vehicle-related net expenses and customer service costs. The increase in vehicle-related net expenses includes incremental maintenance and damage costs due to a reduction in warranty-related services provided to car manufacturers, a decline in gas reimbursements from our fleet managementcar rental customers and fuel card businesses were soldhigher vehicle license and registration costs. Despite reduced revenue domestically, revenues from our international operations increased $10 million due to PHHincreased transaction volume and therefore, are presented as a discontinued operationfavorable foreign exchange rates, principally in Australia.
Our overall effective tax rate was 36.9% and 42.0% for the accompanying Consolidated Condensed Financial Statements. Accordingly, we are now a wholly-owned subsidiarythree months ended June 30, 2003 and 2002, respectively. The effective tax rate for the second quarter of Cendant.2003 was lower primarily due to foreign and state taxes.
RESULTS OF OPERATIONS
The acquisition of us by Cendant resulted in significant changes to the valuation of certain of our assets, liabilities and stockholder's equity. The periods prior to the acquisition have been designated "Predecessor Companies" and the period subsequent to the acquisition has been designated "Successor Company". TheOur comparative results of the Predecessor Companies and the Successor Company have been combinedoperations for the six months ended June 30, 2001 since we believe that separate discussions for the two months ended February 28, 20012003 and the four months ended June 30, 2001 are not meaningful in terms of our operating results or comparisons to the prior period.
Three Months Ended June 30, 2002 vs. Three Months Ended June 30, 2001
Our comparative results of operations, excluding our former fleet management and fuel card businesses, comprised the following:
| 2002 | 2001 | Change | 2003 | 2002 | Change | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues | $ | 650,631 | $ | 628,893 | $ | 21,738 | $ | 1,334,255 | $ | 1,215,234 | $ | 119,021 | ||||||||
Expenses, excluding non-vehicle interest | 600,480 | 590,664 | 9,816 | |||||||||||||||||
Non-vehicle interest, net | 10,823 | 14,577 | (3,754 | ) | ||||||||||||||||
Total expenses | 611,303 | 605,241 | 6,062 | 1,307,489 | 1,180,059 | 127,430 | ||||||||||||||
Income before income taxes | 39,328 | 23,652 | 15,676 | 26,766 | 35,175 | (8,409 | ) | |||||||||||||
Provision for income taxes | 16,518 | 13,753 | 2,765 | 9,878 | 14,774 | (4,896 | ) | |||||||||||||
Income from continuing operations | $ | 22,810 | $ | 9,899 | $ | 12,911 | ||||||||||||||
Net income | $ | 16,888 | $ | 20,401 | $ | (3,513 | ) | |||||||||||||
Total revenuerevenues and expenses increased 3.5%9.8% and 10.8%, respectively, primarily due to our subleasing arrangement with Budget, as discussed above. As a 4.1% increaseresult of this relationship, we generated incremental revenues and expenses of $158.8 million and $153.5 million (consisting of vehicle depreciation expense of $119.8 million and vehicle interest expense of $33.7 million), respectively. Excluding such amounts, domestic car rental revenues declined $61 million (6%) in vehiclesix months 2003 compared with six months 2002. The net reduction in domestic car rental revenue per day, whichrevenues was due principally to strong pricing in our leisure business.
Total expenses increased 1.0% primarily due to higher commission-relatedan 8% period-over-period reduction in domestic car rental days, which was partially offset by a 2% increase in time and mileage revenue per domestic rental day, reflecting an increase in pricing. In addition, period-over-period expenses associated with higher revenues,includes favorable interest costs of $18 million on the launchfinancing of an advertising campaign during the second quarter of 2002vehicles due to lower interest rates, which were offset by incremental vehicle-related net expenses and severancecustomer service costs. The increase in vehicle-related net expenses includes incremental maintenance and damage costs related to the relocation of our information technology operations from Garden City, New York to Parsippany, New Jersey.
Non-vehicle interest, net decreased 25.8% primarily due to a decreasereduction in interestwarranty-related services provided to car manufacturers, a decline in gas reimbursements from our car rental customers and higher vehicle license and registration costs. Despite reduced revenue domestically, revenues from our international operations increased $22 million, due to increased transaction volume and favorable foreign exchange rates, principally in Australia, New Zealand, and the repayment of all amounts outstanding under a revolving credit facility during 2001.Canada.
Our overall effective tax rate was 42.0%36.9% and 58.1% for the three months ended June 30, 2002 and 2001, respectively. The lower tax rate for the three months ended June 30, 2002 was primarily due to the elimination of goodwill amortization expense.
As a result of the above-mentioned items, income from continuing operations increased $12.9 million, or 130%, in the second quarter 2002.
19
Six Months Ended June 30, 2002 vs. Six Months Ended June 30, 2001
Our comparative results of operations, excluding our former fleet management and fuel card businesses comprised the following:
| 2002 | 2001 | Change | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Revenues | $ | 1,215,234 | $ | 1,232,710 | $ | (17,476 | ) | |||
Expenses, excluding non-vehicle interest | 1,158,441 | 1,205,871 | (47,430 | ) | ||||||
Non-vehicle interest, net | 21,618 | 28,830 | (7,212 | ) | ||||||
Total expenses | 1,180,059 | 1,234,701 | (54,642 | ) | ||||||
Income (loss) before income taxes | 35,175 | (1,991 | ) | 37,166 | ||||||
Provision for income taxes | 14,774 | 5,869 | 8,905 | |||||||
Income (loss) from continuing operations | $ | 20,401 | $ | (7,860 | ) | $ | 28,261 | |||
Total revenue decreased 1.4% primarily due to a reduction in car rental transaction volume, which resulted primarily from the residual effect of reduced commercial air travel due to the September 11th terrorist attacks.
Total expenses decreased 4.4% primarily due to a decrease in operating expenses derived from our ability to reduce our operating expenses as a result of reduced car rental transaction volume during the first quarter of 2002. Vehicle depreciation and lease charges and vehicle interest expense also decreased due to a corresponding reduction in average fleet size and the related decrease in average vehicle debt supporting such fleet.
Non-vehicle interest, net decreased 25.0% primarily due to a decrease in interest rates and the repayment of all amounts outstanding under a revolving credit facility during 2001.
The provision for income taxes42.0% for the six months ended June 30, 2003 and 2002, reflects our overallrespectively. The effective tax rate of 42.0% for 2002. The increase in the provision was primarily due to the Company reporting pretax income in 2002 versus a pretax loss of $42.2 million for the two months ended February 28, 2001 at an effective tax rate of 37.4% offset by a pre-tax income of $40.2 million for the period March 1, 2001 (Date of Acquisition) to June 30, 2001 at an effective tax rate of 53.8% and the elimination of goodwill amortization expense.
As a result of the above-mentioned items, income from continuing operations increased $28 million for the six months ended June 30, 2002.2003 was lower primarily due to foreign and state taxes.
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Forward-Looking StatementsACCOUNTING POLICIES
Forward-lookingWe operate in an environment where we are paid a fee for a service performed. Therefore, the results 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 entitled "Critical Accounting Policies" of our public filings 2002 Annual Report on Form 10-K are the accounting policies that we believe require subjective and/or other public statements are subject to knowncomplex judgments that could potentially affect reported results (financial instruments and unknown risks, uncertaintiesgoodwill and other factorsintangible assets). There have not been any significant changes to those accounting policies nor to our assessment of which may cause our actual results, performance or achievementsaccounting policies that we would consider to be materially different from any future results, performance or achievements expressed or impliedcritical accounting policies.
On January 1, 2003, Cendant adopted the fair value method of accounting for stock-based compensation provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" and all the provisions of SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure." As a result, our financial statements beginning on January 1, 2003 reflect compensation expense for all stock-based compensation, including common stock options granted by Cendant as such forward-looking statements. These forward-looking statements were basedexpense is now allocated to us by Cendant.
Also on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements include the information concerning our future financial performance, business strategy, projected plans and objectives.
Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "project", "estimates", "plans", "may increase", "may fluctuate" and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forwardlooking in nature and not historical facts. You should understand thatJanuary 1, 2003, we adopted the following important factors and assumptions could affect our future results and could cause actual results to differ materially from those expressedstandards as a result of the issuance of new accounting pronouncements by the Financial Accounting Standards Board ("FASB") in such forward-looking statements:2002:
During 2003, the effectFASB issued the following pronouncements, which we will adopt on July 1, 2003:
For more detailed information regarding any of these pronouncements and the impact thereof on our business;
20Consolidated Condensed Financial Statements.
Other factors and assumptions not identified above were also involved in the derivation of these forward looking statements, and the failure of such other assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our control.
You should consider the areas of risk described above in connection with any forward-looking statements that may be made by us and our businesses generally. Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless required by law. 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.
21
Item 3. Quantitative And Qualitative Disclosure About Market Risks
As previously discussed in our 20012002 Annual Report on Form 10-K, we assess our market risk based on changes in interest and foreign currency exchange rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in earnings, fair values, and cash flows based on a hypothetical 10% change (increase and decrease) in interest rates.our market risk sensitive positions. We used June 30, 20022003 market rates to perform a sensitivity analysis separately for each of our market risk exposures. The estimates assume instantaneous, parallel shifts in interest rate yield curves.curves and exchange rates. We have determined, through such analyses, that the impact of a 10% change in interest and foreign currency exchange rates and prices on our earnings, fair values and cash flows would not be material.
22
Item 4. Controls and Procedures
21
Item 6. Exhibits and Reports on Form 8-K
(a)
See Exhibit Index
(b)
NoneOn April 28, 2003, we filed a current report on Form 8-K to report under Item 5 our selected first quarter 2003 financial results.
2322
Pursuant to the requirements of the Section 13 or 15(d) 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 GROUP HOLDINGS, INC. | ||||
/s/ President |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ KURT FREUDENBERG | Freudenberg Senior Vice President and Controller |
24Date: August 13, 2003
Exhibit No. | Description | |
---|---|---|
3.1 | Certificate of Incorporation of Avis Rent A Car, Inc. (Incorporated by reference to the Company's Registration Statement on Form S-1, Registration No. 333-46737, dated February 23, 1998). | |
3.2 | By-Laws of Avis Group Holdings, Inc. (Incorporated by reference to the Company's Registration Statement on Form S-1, Registration No. 333-46737, dated February 23, 1998). | |
10.1 | Series 2003-3 Supplement, dated as of May 6, 2003, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II L.L.C., as Issuer, and The Bank of New York, as Trustee and Series 2003-3 Agent. | |
10.2 | Series 2003-4 Supplement, dated as of June 19, 2003, to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AESOP Funding II L.L.C., as Issuer, and The Bank of New York, as Trustee and Series 2003-4 Agent. | |
12 | ||
31.1 | Certification of President Pursuant to Rules 13a-14(a) and 15d-14(a) Promulgated Under the Securities Exchange Act of 1934, as amended. | |
31.2 | Certification of Senior Vice President and Controller Pursuant to Rules 13a-14(a) and 15d-14(a) Promulgated Under the Securities Exchange Act of 1934, as amended. | |
32 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |