QuickLinks-- Click hereUse these links to rapidly navigate through thisreview the document
Table of Contents

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, 20022003
COMMISSION 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)

(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

IndexTable of Contents

FORWARD-LOOKING STATEMENTS

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:

•

terrorist attacks, such as the September 11, 2001 terrorist attacks on New York City and Washington, D.C., other attacks, acts of war or measures taken by governments in response thereto may negatively affect the travel industry and our financial results and could also result in a disruption in our business;



•

the effect of economic or political conditions or any outbreak or escalation of hostilities on the economy on a national, regional or international basis and the impact thereof on our business;



•

the effects of a decline in travel, due to political instability, war, pandemic illness, adverse economic conditions or otherwise, on our business;



•

the effect of changes in current interest rates on our financing costs;



•

our ability to develop and implement operational, technological and financial systems to manage growing operations and to achieve enhanced earnings or effect cost savings;



•

our ability to reduce quickly our substantial technology costs and other overhead costs in response to a reduction in revenue;



•

competition in the vehicle rental industry and the financial resources of, and products available to, competitors;



•

our ability to provide fully integrated disaster recovery technology solutions in the event of a disaster;



•

our ability to obtain financing on acceptable terms to finance our growth strategy and to operate within the limitations imposed by financing arrangements;



•

our ability to obtain external financing in the event we are unable to obtain financing from Cendant Corporation;



•

competitive and pricing pressures in the vehicle rental industry;



•

changes, if any, in vehicle manufacturer repurchase arrangements;



•

in relation to our management programs, (i) the deterioration in the performance of the underlying assets of such programs and (ii) the impairment of our ability to access our principal financing program if General Motors Corporation should not be able to honor its obligations to repurchase a substantial number of our vehicles; and



•

changes in laws and regulations or the applications thereof, including changes in accounting standards, state, international and federal tax laws, privacy policy regulations or other laws that impact our business.

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

PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements

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 LLP
August 12, 2002
New York, New York
August 6, 2003

13

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONSINCOME
(In thousands)

See Notes to Consolidated Condensed Financial Statements.

2

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands)

See Notes to Consolidated Condensed Financial Statements.

34

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share data)

See Notes to Consolidated Condensed Financial Statements.

45

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)

5

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)

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:

---

^(a)

The 2003 amounts reflect the second quarter 2003 issuance by Cendant of 465 thousand restricted stock units to certain of the Company's employees (including officers) as a form of compensation. These restricted stock units entitle the employee to receive one share of Cendant's common stock upon vesting, which occurs ratably over a four year period. Accordingly, Cendant allocated compensation expense of $300 thousand to the Company during the three and determinedsix months ended June 30, 2003, which on an after-tax basis is $187 thousand.

^(b)

Pro forma compensation expense reflected for grants awarded prior to January 1, 2003 is not indicative of future compensation expense that would be recorded by the carrying amountsCompany. Future expense will vary based upon factors such as the type of award granted by the Company and the then-current fair market value of such assets didaward.

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:

---

^(a)

Included as a component of other assets on the Company's Consolidated Condensed Balance Sheets.

^(b)

The changes in the carrying amount of goodwill reflect $587 thousand of foreign currency translation adjustments and $158 thousand of goodwill in connection with the 2003 acquisition of a foreign licensee.

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:

The components of vehicle depreciation and lease charges, net are summarized below:

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:

---

^(a)

Represents funding for the Company's working capital and trading needs, which is provided by Cendant. Such intercompany funding accrues interest at LIBOR plus 87.5 basis points for amounts borrowed up to $155.3 million and LIBOR plus 140 basis points for borrowings exceeding such amount.

^(b)

Represents borrowings by Cendant of the Company's restricted cash under management programs in return for a demand note.

^(c)

Represents (i) $380.0 million of funding the Company received from Cendant during 2001 to repay outstanding borrowings under a revolving credit facility and debt assumed by the Company in connection with the 2001 acquisition of the Company includeby Cendant and (ii) $28.1 million and $122.4 million of funding the Company received from Cendant to repay the Company's 11% Senior Subordinated Notes during 2002 and the first quarter of 2003, respectively (see Note 5—Non-Vehicle Debt). All such funding bears interest at LIBOR plus 140 basis points.

^(d)

Primarily represents amounts due to a subsidiary of Cendant for reservation charges incurred during 2002, that are partially offset by other trading and funding activities between the Company and other Cendant affiliates.

^(e)

Represents amount due from Budget for sublease of vehicles (see Note 3—Vehicles, Net) and certain other administrative expenses.

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

---

^(a)

Included within selling, general and administration expenses on the rent and other and data processing expenses are includedCompany's Consolidated Condensed Statements of Income. Royalties represent charges to the Company from Cendant for use of the Avis trade name.

^(b)

Included within operating net and interest expense is includedexpenses on the Company's Consolidated Condensed Statements of Income.

^(c)

Included within non-vehicle interest, net. net on the Company's Consolidated Condensed Statements of Income.

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:

---

^(*)

The change in the balance reflects redemptions of $110.9 million in face value of these notes (carrying value of $123.2 million) for $124.2 million in cash and investments that are not readily available for normalapproximately $9.2 million related to the amortization of a premium. In connection with such redemptions, the Company disbursements that have been set asiderecorded a loss of $1.0 million ($600 thousand after taxes) as required under the Company's debt covenants. The restricted cash balance at December 31, 2001 was held as collateral for outstanding vehicle debt that was not callable and, therefore, could not be immediately repaid. During 2002, the restricted cash was depleted through the normal purchasea component of vehicles.

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:

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:

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	)

The after-tax components of accumulated other comprehensive income (loss) for the six months ended June 30, 2002loss are as follows:

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

13

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF INCOME
For the Three Months Ended June 30, 2002

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONSINCOME
For the ThreeSix Months Ended June 30, 20012003