A C C E L E R AT E G R O W T H
G LO B A L E X PA N S I O N
C U S T O M E R F O C U S
D R I V I N G E F F I C I E N C Y
2 0 1 3 A N N U A L R E P O R T
> Strong results: building on the four pillars of our success.
Table of Contents
Letter to Shareholders
Form 10-K
Part I
Item 1. Business.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Signatures
March 28, 2014
Dear fellow shareholders:
I’m pleased to report that Avis Budget Group enjoyed another very successful year. We continued to
strengthen our world-renowned Avis and Budget vehicle rental brands. We achieved outstanding financial
results once again. We maintained our focus on cost containment and expanding efficiency initiatives
around the world. We used our capital resources in a number of strategic ways, funding organic growth
initiatives as well as acquisitions that provide us with new profitable growth opportunities, most notably
Zipcar, the world leader in car sharing. And we continued to enhance our customer experience around the
world, launching innovative technology solutions and customer-focused products that are enthusiastically
supported by our highly engaged and service-focused global workforce.
These efforts contributed to revenue of $7.9 billion, an 8% increase from 2012; Adjusted EBITDA of
$769 million, excluding certain items, down 8% but still the second-highest total in the Company’s history
(but second only because of the below-trend fleet costs in 2012 that normalized in 2013); and net income,
excluding certain items, of $256 million, or $2.20 per diluted share1. We saw top-line revenue growth in our
North America and International segments, which represent 97% of our global revenue; reduced operating
expenses as a percentage of revenue; and we enjoyed a 104% year-over-year increase in our stock price. Over
the last two years our stock price has increased 250%, making us one of the top-performing U.S. stocks over
that period. Our results over that time represent a remarkable achievement for a company that just five
years ago faced unprecedented challenges associated with the 2008-09 recession. The steps we took then,
and since, have allowed us to strengthen our operations and to implement our ongoing global strategic plan,
which has proven to be on-target in virtually every aspect. Our strategy and focus have helped make us a
strong, global company operating a compelling portfolio of brands competing in numerous segments in
today’s evolving world of travel and technology. The following are just a few highlights from the past year:
• We achieved profitable organic growth from a variety of sources, including:
O Our successful efforts to increase our realized pricing in North America;
O Continued focus on cross-border travel;
O Signing and renewing partnerships with leading travel and affinity brands;
O Capitalizing on under-served demand for premium and specialty vehicles;
O Winning and retaining new commercial accounts, with a renewed emphasis on
profitability;
O New marketing initiatives that attract new customers and help enhance loyalty among
existing customers.
• We completed targeted acquisitions and investments that helped us expand our global
presence and offer a more consistent brand experience around the world. In addition to
Zipcar, we entered the deep-value segment in North America by adding Payless Car Rental
to our portfolio. We strengthened our presence in South America’s leading economy through
a 50% investment in our Avis and Budget licensee for Brazil; and we acquired our Budget
licensee in Belgium, the Netherlands and Luxembourg. We also launched our brands in a
number of small, but growing travel destinations including Cambodia, Colombia and Laos
while expanding our Avis presence in Taiwan.
1
• We achieved significant synergies from the integration of Zipcar’s operations with our own,
while preserving the brand experience and technology capabilities that have made Zipcar so
successful. We have delivered on our promises to make more Zipcars available during peak
periods, to offer Zipcars at major U.S. airports and to expand Zipcar’s geographic footprint
into new markets.
• We enhanced the customer experience we offer around the world through improved
technology and our renewed focus on customer service excellence, resulting in our winning
customer service awards in all three of our operating regions. We strengthened our customer
interactions, both through more effective person-to-person communications and in other
ways such as simpler rental agreements available in multiple languages, enhanced websites
and new mobile applications.
• We continued to emphasize improving organizational efficiency. Our now-global Performance
Excellence initiative continues to identify new opportunities to enhance our offerings to
customers while operating at lower cost and with greater efficiency. In Europe, the
expansion of our Shared Services Center in Budapest is expected to reduce expenses while
improving our range of customer service. And our new optimization tools are helping us
manage our fleet and our pricing more effectively.
These are just a few examples. We saw improvements in almost every aspect of our operations around the
world, both those owned by the Company as well as those of our valued licensees, who have also helped
expand the Avis and Budget brands globally. I could make an argument that 2013 was the best year in our
Company’s history, but I strongly believe that our best years are ahead of us. I also believe with equal
conviction that there remains significant untapped opportunity inherent in our ongoing strategic plan that we
can realize to accelerate profitable revenue growth, expand our global presence organically and through
strategic acquisitions, and enhance our customer experience while always striving for greater efficiency.
We bring to this challenge the best employees in the world, who exemplify our global core values of
Commitment, Responsibility and Integrity through their actions every day, and I hope you join me in thanking
them for their outstanding dedication and many contributions to our Company. On behalf of the
approximately 29,000 Avis Budget Group employees around the world, thank you for your continued support
of our efforts.
Yours sincerely,
Ronald L. Nelson
Chairman and Chief Executive Officer
1 A reconciliation of Adjusted EBITDA and net income, excluding certain items, to the most comparable financial measures
calculated and presented in accordance with GAAP can be found in our earnings release issued on February 19, 2014 and
on our website at avisbudgetgroup.com.
This letter contains forward-looking statements that are subject to known and unknown risks and uncertainties that
could cause actual results to differ materially from those expressed or implied by such statements. Important
assumptions and other important factors that could cause actual results to differ materially from those in the forward-
looking statements are specified in our 2013 Annual Report on Form 10-K including under headings such as “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NO. 001-10308
AVIS BUDGET GROUP, INC.
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
DELAWARE
06-0918165
6 SYLVAN WAY
PARSIPPANY, NJ
(Address of principal executive offices)
07054
(Zip Code)
973-496-4700
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS
Common Stock, Par Value $.01
NAME OF EACH EXCHANGE
ON WHICH REGISTERED
The NASDAQ Global Select Market
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
As of June 30, 2013, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $3,061,255,984
based on the closing price of its common stock on the NASDAQ Global Select Market. All executive officers and directors of the registrant
have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant.
As of January 31, 2014, the number of shares outstanding of the registrant’s common stock was 106,942,686.
Portions of the registrant’s definitive proxy statement to be mailed to stockholders in connection with the registrant’s annual stockholders’
meeting scheduled to be held on May 23, 2014 (the “Annual Proxy Statement”) are incorporated by reference into Part III hereof.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Item
Description
Page
1
1A
1B
2
3
4
5
6
7
7A
8
9
9A
9B
10
11
12
13
14
15
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits and Financial Statement Schedules
Signatures
3
22
33
34
35
35
36
39
41
56
57
57
57
59
60
60
60
60
60
61
62
[THIS PAGE INTENTIONALLY LEFT BLANK]
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K may be considered “forward-looking
statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. The forward-looking
statements contained herein are subject to known and unknown risks, uncertainties, assumptions and other
factors that may cause our actual results, performance or achievements to be materially different from those
expressed or implied by any such forward-looking statements. Forward-looking statements include information
concerning our future financial performance, business strategy, projected plans and objectives. These statements
may be identified by the fact that they do not relate to historical or current facts and may use words such as
“believes,” “expects,” “anticipates,” “will,” “should,” “could,” “may,” “would,” “intends,” “projects,” “estimates,”
“plans,” and similar words, expressions or phrases. The following important factors and assumptions could affect
our future results and could cause actual results to differ materially from those expressed in such forward-looking
statements:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the high level of competition in the vehicle rental industry and the impact such competition may have on
pricing and rental volume;
a change in travel demand, including changes in airline passenger traffic;
a change in our fleet costs as a result of a change in the cost of new vehicles, disruption in the supply of
new vehicles, and/or a change in the price at which we dispose of used vehicles either in the used vehicle
market or under repurchase or guaranteed depreciation programs;
risks related to our March 2013 acquisition of Zipcar, Inc. (“Zipcar”), including our ability to realize the
synergies contemplated by the transaction and our ability to promptly and efficiently integrate the
business into Avis Budget Group;
the results of operations or financial condition of the manufacturers of our cars, which could impact their
ability to perform their payment obligations under our agreements with them, including repurchase and/or
guaranteed depreciation arrangements, and/or their willingness or ability to make cars available to us or
the rental car industry as a whole on commercially reasonable terms or at all;
any change in economic conditions generally, particularly during our peak season or in key market
segments;
our ability to continue to achieve and maintain cost savings and successfully implement our business
strategies;
our ability to obtain financing for our global operations, including the funding of our vehicle fleet through
the issuance of asset-backed securities and use of the global lending markets;
an occurrence or threat of terrorism, pandemic disease, natural disasters, military conflict or civil unrest in
the locations in which we operate;
our dependence on third-party distribution channels, third-party suppliers of other services and co-
marketing arrangements with third parties;
our ability to utilize derivative instruments, and the impact of derivative instruments we utilize, which can
be affected by fluctuations in interest rates, gasoline prices and exchange rates, changes in government
regulations and other factors;
our ability to accurately estimate our future results;
any major disruptions in our communication networks or information systems;
our exposure to uninsured claims in excess of historical levels;
•
•
•
•
•
•
•
•
•
•
•
our failure or inability to comply with laws, regulations or contractual obligations or any changes in laws,
regulations or contractual obligations, including with respect to personally identifiable information and
taxes;
any impact on us from the actions of our licensees, dealers and independent contractors;
any substantial changes in the cost or supply of fuel, vehicle parts, energy, labor or other resources on
which we depend to operate our business;
risks related to our indebtedness, including our substantial outstanding debt obligations and our ability to
incur substantially more debt;
our ability to meet the financial and other covenants contained in the agreements governing our
indebtedness;
the terms of agreements among us and our former real estate, hospitality and travel distribution
businesses following the separation of those businesses from us in 2006, particularly with respect to the
allocation of assets and liabilities, including contingent liabilities and guarantees, the ability of each of the
separated companies to perform its obligations, including indemnification obligations, under these
agreements, and the right of our former real estate business to control the process for resolving disputes
related to contingent liabilities and assets;
risks associated with litigation or governmental or regulatory inquiries or investigations involving our
Company;
risks related to tax obligations and the effect of future changes in accounting standards;
risks related to our October 2011 acquisition of Avis Europe plc (“Avis Europe”), including our ability to
realize the synergies contemplated by the transaction;
risks related to completed or future acquisitions or investments that we may pursue, including any
incurrence of incremental indebtedness to help fund such transactions and our ability to promptly and
effectively integrate any acquired businesses; and
other business, economic, competitive, governmental, regulatory, political or technological factors
affecting our operations, pricing or services.
We operate in a continuously changing business environment and new risk factors emerge from time to time. New
risk factors, factors beyond our control, or changes in the impact of identified risk factors may cause actual results
to differ materially from those set forth in any forward-looking statements. Accordingly, forward-looking statements
should not be relied upon as a prediction of actual results. Moreover, we do not assume responsibility for the
accuracy and completeness of those statements. Other factors and assumptions not identified above, including
those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set
forth in Item 7, in “Risk Factors” set forth in Item 1A and other portions of this Annual Report on Form 10-K may
contain forward-looking statements and involve uncertainties that could cause actual results to differ materially
from those projected in such statements. Such statements are based upon assumptions and known risks and
uncertainties.
Although we believe that our assumptions are reasonable, any or all of our forward-looking statements may prove
to be inaccurate and we can make no guarantees about our future performance. Should unknown risks or
uncertainties materialize or underlying assumptions prove inaccurate, actual results could differ materially from
past results and/or those anticipated, estimated or projected. Except to the extent of our obligations under the
federal securities laws, we undertake no obligation to release any revisions to any forward-looking statements, to
report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in
any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
ITEM 1. BUSINESS
PART I
Except as expressly indicated or unless the context otherwise requires, the “Company,” “Avis Budget,” “we,” “our”
or “us” means Avis Budget Group, Inc. and its subsidiaries. “Avis,” “Budget,” “Budget Truck,” “Zipcar,” “Payless”
and “Apex” refer to our Avis Rent A Car System, LLC, Budget Rent A Car System, Inc., Budget Truck Rental, LLC,
Zipcar, Inc., Payless Car Rental and Apex Car Rentals operations, respectively, and, unless the context otherwise
requires, do not include the operations of our licensees, as further discussed below.
OVERVIEW
We are a leading global provider of vehicle rental and car sharing services, operating three of the most
recognized brands in the industry through Avis, Budget and Zipcar. We are a leading vehicle rental operator in
North America, Europe, Australia, New Zealand and certain other regions we serve. We and our licensees operate
the Avis and Budget brands in approximately 175 countries throughout the world. We generally maintain a leading
share of airport car rental revenue in North America, Europe, Australia and New Zealand and we operate one of
the leading truck rental businesses in the United States.
Our brands are differentiated to help us meet a wide range of customer needs throughout the world. Avis is a
leading rental car supplier positioned to serve the premium commercial and leisure segments of the travel
industry, and Budget is a leading rental vehicle supplier focused primarily on more value-conscious segments of
the industry. On average, our rental fleet totaled more than 520,000 vehicles and we completed more than 30
million vehicle rental transactions worldwide in 2013. We generate approximately 71% of our vehicle rental
revenue from on-airport locations and approximately 29% of our revenue from off-airport locations. We also
license the use of the Avis and Budget trademarks to licensees in areas in which we do not operate directly. Our
brands have an extended global reach with more than 10,000 car and truck rental locations throughout the world,
including approximately 4,500 car rental locations operated by our licensees. We believe that Avis and Budget
both enjoy complementary demand patterns with mid-week commercial demand balanced by weekend leisure
demand.
Our Zipcar brand, which we acquired in 2013, is the world’s leading car sharing company, with more than 860,000
members in the United States, Canada and Europe. We also operate Budget Truck, one of the leading truck
rental businesses in the United States, with a fleet of approximately 23,000 Budget trucks that operate through a
network of approximately 1,300 dealer-operated and 350 Company-operated locations throughout the continental
United States. We also own Payless, a car rental brand that we acquired in 2013 that operates in the deep-value
segment of the industry, and Apex, which is a leading deep-value car rental brand in New Zealand and Australia.
We also have investments in certain of our Avis and Budget licensees outside of the United States, including
licensees in Brazil, India and China.
In 2013, we generated total revenues of $7,937 million. The Avis, Budget, Budget Truck and Zipcar brands
accounted for approximately 65%, 26%, 5% and 3% of our revenue, respectively, in 2013.
COMPANY HISTORY
The Company is a Delaware corporation headquartered in Parsippany, New Jersey. We operate three of the most
recognized brands in the global vehicle services industry through Avis, Budget and Zipcar, as well as Budget
Truck, one of the leading truck rental businesses in the United States, and smaller regional car rental brands. Our
predecessor company was formed in 1974, and in 1997 merged with HFS Incorporated (“HFS”), and the
combined company was subsequently renamed Cendant Corporation (“Cendant”). HFS acquired the Avis brand in
1996, and in 2001 Cendant acquired Avis’ vehicle rental operations in North America, Australia and New Zealand.
Founded in 1946, Avis is believed to be the first company to rent cars from airport locations. Avis expanded its
geographic reach throughout the United States through growth in licensed and Company-operated locations in
the 1950s and 1960s. In 1963, Avis introduced its award winning “We try harder®” advertising campaign, which is
considered to be one of the top ten advertising campaigns of the 20th century by Advertising Age magazine.
3
In 2002, Cendant acquired the Budget brand and Budget vehicle rental operations in North America, Australia and
New Zealand. Budget was founded in 1958 as a car rental company for the value-conscious vehicle rental
customer and grew its business rapidly during the 1960s, expanding its rental car offerings throughout North
America and significantly expanding its Budget truck rental business in the 1990s.
In 2006, Cendant completed the sales and spin-offs of several significant subsidiaries and changed its name to
Avis Budget Group, Inc. In 2011, we expanded our international operations with the acquisition of Avis Europe,
which was previously an independently-owned licensee operating the Avis and Budget brands in Europe, the
Middle East and Africa, and the Avis brand in Asia. Upon the completion of the acquisition of Avis Europe, the Avis
and Budget brands were globally re-united under a single company, making Avis Budget Group one of the largest
vehicle rental companies in the world.
In 2013, we acquired Zipcar, the world’s leading car sharing company, and further increased our growth potential
and our ability to better serve a greater variety of our customers’ transportation needs. In 2012 and 2013, we also
acquired our Apex and Payless brands, which allowed us to expand our presence in the deep-value segment of
the car rental industry.
We have a long history of innovation in the vehicle rental and car sharing business, including the 1973 launch of
our proprietary Wizard system, a constantly updated information-technology system that is the backbone of our
operations. In 1987, we introduced the Roving Rapid Return, powered by a handheld computer device that
allowed customers to bypass the car return counter, and in 1996, we became one of the first car rental companies
to accept online reservations. In 2000, we introduced Avis Interactive, the first Internet-based reporting system in
the car rental industry. In 2009, we launched what we believe to be the first car rental iPhone application in the
United States, and in 2012, we believe that our Avis brand became the first in the industry to offer mobile
applications to its customers on all four major mobile platforms — Android, BlackBerry, iPhone and Microsoft
Windows. Our Zipcar operations have been a constantly innovating pioneer in using advanced vehicle
technologies as the first car sharing company in the United States to develop a self-service solution to managing
the complex interactions of real-time, location-based activities inherent in a large-scale car sharing operation,
including new member application, reservations and keyless vehicle access, fleet management and member
management, and the first to allow members to reserve the specific make, model, type and color of their car by
phone, Internet or wireless mobile device.
Since becoming an independent vehicle rental services company in 2006, we have focused on strengthening our
brands, our operations, our competitiveness and our profitability. In conjunction with these efforts, we have
implemented process improvements impacting virtually all areas of the business; realized significant cost savings
through the integration of Avis Europe and Zipcar with our pre-existing operations; achieved reductions in
operating and selling, general and administrative expenses, including significant reductions in staff; assessed
location, segment and customer profitability to address less-profitable aspects of our business; implemented price
increases and changes to our sales, marketing and affinity programs to improve profitability; and sought to better
optimize our acquisition, deployment and disposition of fleet in order to lower costs and better meet customer
demand.
SEGMENT INFORMATION
We categorize our operations into three reporting segments:
• North America, provides car rentals in the United States and vehicle rentals in Canada, as well as
ancillary products and services, and operates the Company’s Zipcar car sharing business;
•
International, provides and licenses the Company’s brands to third parties for vehicle rentals and ancillary
products and services primarily in Europe, the Middle East, Africa, Asia, South America, Central America,
the Caribbean, Australia and New Zealand; and
• Truck Rental, provides truck rentals and ancillary products and services to consumers and commercial
users in the United States.
4
The following table presents key operating metrics for each of our three reporting segments:
North America (a)
International
Truck Rental
________
(a) Excluding Zipcar.
Total 2013 Rental
Days
89 million
37 million
4 million
130 million
Average 2013 Time
and Mileage (“T&M”)
Revenue per Day
$40.55
$42.48
$76.85
Average 2013 Rental
Fleet Size
342,000
145,000
25,000
512,000
The following graphs present the composition of our rental days and our average rental fleet in 2013, by segment:
Composition of
2013 Rental Days
Composition of
2013 Rental Fleet
International
28%
Truck
Rental
3%
North
America
67%
International
28%
Truck
Rental
5%
North
America
69%
Our North America segment includes the financial results of Zipcar and Payless since our acquisition of each
business in March 2013 and July 2013, respectively. Financial data for our segments and geographic areas are
reported in Note 20-Segment Information to our Consolidated Financial Statements included in Item 8 of this
Annual Report on Form 10-K.
OUR STRATEGY
Our objective is to focus on strategically accelerating our growth, strengthening our global position as a leading
provider of vehicle rental services, continuing to enhance our customers’ rental experience, and controlling costs
and driving efficiency throughout the organization. We expect to achieve our goals by focusing our efforts on the
following core strategic initiatives:
• Strategically Accelerate Growth. We have pursued and will continue to pursue numerous opportunities
intended to increase our revenues and make disproportionate contributions to our earnings. For instance:
We are focused on promoting car class upgrades, adjusting our mix of vehicles to match
customer demand, growing our rentals to small-business and international travelers, increasing
the number of rentals that customers book through our own websites, increasing the proportion of
transactions in which customers prepay us, and expanding our ancillary revenues derived from
offering additional ancillary products and services to the rental transactions of an increasing
percentage of our customers. We believe these efforts will each not only generate incremental
revenue, but also add to profitability.
We are focused on yield management and pricing optimization in an effort to increase the rental
fees we earn per rental day. We have implemented technology systems that strengthen our yield
management and that enable us to tailor our product and price offerings not only to meet our
customers’ needs, but also in response to actions taken by our competitors. We expect to
continue to adjust our pricing to bolster profitability and match changes in demand.
5
We see significant growth opportunities related to our Zipcar brand. We expect to increase our
Zipcar membership base by growing the number of businesses, government agencies and
universities that Zipcar serves within its existing markets, as well as expanding the brand into new
markets where our existing car rental presence will help enable the introduction of Zipcar’s car
sharing services. We expect that such growth will include making more Zipcars available at
airport locations, offering one-way usage of Zipcars at certain locations and cross-marketing
partnerships through our well-established corporate and affinity relationships.
We continue to focus on addressing the need of the deep-value segment of the vehicle rental
industry with Payless and Apex and look to increase our profitability in this segment as we grow
our revenues.
• Strengthening Our Global Position. While we currently operate, either directly or through licensees, in
approximately 175 countries around the world, we have strengthened and will continue to strengthen and
further expand our global footprint through organic growth and potentially through acquisitions, joint
ventures, licensing opportunities or other relationships:
In countries where we have Company-operated locations, we will continue to identify
opportunities to add new rental locations, to grant licenses to independent third parties for regions
where we do not currently operate and/or do not wish to operate directly, to strengthen the
presence of the Avis, Budget, Zipcar, Apex and Payless brands (including by multi-branding
locations), as applicable, and to re-acquire previously granted license rights in certain cases.
In countries operated by licensees, including our joint ventures in Brazil, China and India, we will
seek to ensure that our licensees are well positioned to realize the growth potential of our brands
in those countries and are aggressively growing their presence in those markets, and we expect
to consider the re-acquisition of previously granted license rights in certain cases.
Zipcar represents a substantial growth opportunity for us as we believe that there are numerous
geographic markets outside the United States, particularly in Europe and Asia, where Zipcar’s
proven car sharing model can be utilized to meet substantial, currently unmet transportation
needs.
• Enhancing Customers’ Rental Experience. We are committed to serving our customers and enhancing
their rental experience, including through our Customer Led, Service Driven™ initiative, which is aimed at
improving our customers’ rental experience with our brands, our systems and our employees. Following
an extensive review of the ways, places and occasions in which our brands, our systems and our
employees interact with existing and potential customers, we have implemented actions that we expect
will improve the service we provide at these customer “touchpoints.” For example:
Over the last two years, we have launched Avis Preferred Select & Go™, a vehicle-choice
program for customers, revised our rental agreements and receipts to improve transparency, and
significantly expanded customer-service-oriented training of our employees, achieving significant
increases in customer satisfaction.
We continue to upgrade our technology, to make the reservation, pick-up and return process
more convenient and user-friendly, with a particular emphasis on enabling and simplifying our
customers’ online interactions with us.
In 2013, we also made Avis and Budget rental agreements available in French, German,
Portuguese and Spanish, as a courtesy to our customers at participating airport locations across
North America.
We expect to continue to invest in these efforts.
• Controlling Costs and Driving Efficiency throughout the Organization. We have continued our efforts
to rigorously control costs. We continue to aggressively reduce expenses throughout our organization,
6
and we have eliminated or reduced significant costs through the integration of Avis Europe in 2012 and
2013. In addition:
We continued to develop and implement our Performance Excellence process improvement
initiative to increase efficiencies, reduce operating costs and create sustainable cost savings
using LEAN, Six Sigma and other tools. This initiative, which we have expanded to cover our
operations in Europe and Asia, has generated substantial savings since its implementation and is
expected to continue to provide incremental benefits.
We have implemented initiatives to integrate Payless and Zipcar, to realize cost efficiencies from
combined maintenance, systems, technology and administrative infrastructure, as well as fleet
utilization benefits and savings by combining our car rental and car sharing fleets at times to
reduce the number of unutilized Zipcars during the week and to better satisfy Zipcar’s unmet
weekend demand.
We have also continued to implement technology solutions, including self-service voice
reservation technology, mobile communications with customers and fleet optimization
technologies to reduce costs, and we will further continue to pursue innovative solutions to
support our strategic initiatives.
We believe such steps will continue to aid our financial performance.
In executing our strategy, we plan to continue to position our three distinct and well-recognized global brands to
focus on different segments of customer demand, complemented by our other brands in their respective regional
markets. With Avis as a premium brand preferred more by corporate and upscale leisure travelers, Budget as a
mid-tier brand preferred more by value-conscious travelers, Payless and Apex as deep-value brands and Zipcar
offering its members an economical alternative to car ownership, we believe we are able to target a broad range
of demand, particularly since the brands share the same operational and administrative infrastructure while
providing differentiated though consistently high levels of customer service.
We aim to provide products, services and pricing, to use various marketing channels and to maintain marketing
affiliations and corporate account contracts that complement each brand’s positioning. We plan to continue to
invest in our brands through a variety of efforts, including television commercials, print advertisements and on-line
and off-line marketing. We see particular growth opportunities for our Budget brand in Europe, as Budget’s share
of airport car rentals is significantly smaller in Europe than in other parts of the world, and for Zipcar
internationally, where the brand’s proven car sharing model can be expanded into numerous geographic markets.
We operate in a highly competitive industry and we expect to continue to face challenges, including uncertain
economic conditions, particularly outside of the United States. We seek to mitigate our exposure to risks in
numerous ways, including delivering upon the core strategic initiatives described above and through continued
optimization of fleet levels to match changes in demand for vehicle rentals, maintenance of liquidity to fund our
fleet and our operations, and adjustments in the size, nature and terms of our relationships with vehicle
manufacturers.
OUR BRANDS AND OPERATIONS
OUR BRANDS
Our Avis, Budget and Zipcar brands are three of the most recognized brands in our industry. We believe that we
enjoy significant benefits from operating our Avis and Budget brands to target different rental customers but share
the same maintenance facilities, fleet management systems, technology and administrative infrastructure. In
addition, we are able to recognize significant benefits and savings by combining our car rental and car sharing
maintenance activities and fleets at times to reduce the number of unutilized cars and to meet demand peaks. We
believe that Avis, Budget and Zipcar all enjoy complementary demand patterns with mid-week commercial
demand balanced by weekend leisure demand. We also operate the Apex and Payless brands, which operate in
the deep-value segment of the car rental industry and augment our Avis, Budget and Zipcar brands.
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Avis
Avis is a leading rental car supplier positioned to serve the premium commercial and leisure segments of the
travel industry. The Avis brand provides high-quality car rental services at price points generally above non-
branded and value-branded national car rental companies. We operate or license the Avis car rental system (the
“Avis System”), one of the largest car rental systems in the world, comprised of approximately 5,450 locations
worldwide, including in virtually all of the largest commercial airports and cities in the world.
We operate approximately 2,650 Avis car rental locations worldwide, in both the on-airport and off-airport, or local,
rental markets. In 2013, our Avis operations generated total revenue of approximately $5.2 billion, of which
approximately 60% (or $3.1 billion) was derived from North American operations. In addition, we license the Avis
brand to other independent commercial owners in approximately 2,800 locations throughout the world. In 2013,
approximately 72% of the Avis System total revenue was generated by our Company-operated locations and the
remainder was generated by locations operated by independent licensees, which generally pay royalty fees to us
based on a percentage of applicable revenue.
The table below presents the approximate number of locations that comprise the Avis System:
Company-operated locations
Licensee locations
Total Avis System Locations
Avis System Locations
North
America
1,400
300
1,700
International
1,250
2,500
3,750
Total
2,650
2,800
5,450
The graphs below present the approximate composition of Avis System locations and Avis System revenue in
2013:
Composition of
Avis System Locations
Composition of
Avis System Revenue
In 2013, Avis derived approximately $2.0 billion and $1.7 billion (or 53% and 47%) of its vehicle rental revenue
from commercial and leisure customers, respectively, and $2.6 billion and $1.1 billion (or 69% and 31%) of its
vehicle rental revenue from customers renting at airports and locally, respectively.
We offer Avis customers a variety of premium services, including:
• Avis Preferred, a counter bypass program available at major airport locations;
• Avis Preferred Select & Go, a service that allows customers at certain locations to select an alternate
vehicle or upgrade their vehicle choice without visiting the rental counter;
•
•
•
portable GPS navigation units for rent;
premium luxury, sport and performance vehicles available for rent;
availability of eco-friendly vehicles, including gas/electric hybrid vehicles;
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•
•
•
•
•
roadside assistance;
emailed receipts;
a 100% smoke-free car rental fleet in North America;
electronic toll collection services that let customers pay highway tolls without waiting in toll booth lines;
amenities such as Avis Access, a full range of special products and services for drivers and passengers
with disabilities;
• Avis Interactive, a proprietary management tool that allows corporate clients to easily view and analyze
their rental activity via the Internet, permitting these clients to better manage their travel budgets and
monitor employee compliance with applicable travel policies;
•
•
customer loyalty programs; and
supporting online interactions with our customers through each of the four major mobile platforms –
Android, Apple, BlackBerry and Microsoft Windows – which Avis in 2012 became the first car rental
company to offer.
In 2013, Avis was named World’s Leading Car Hire, North America’s Leading Car Hire and Europe’s Leading
Business Car Rental Company by the World Travel Awards, and received numerous other awards. Avis was also
again named the leading car rental company in customer loyalty in the Brand Keys Customer Loyalty
Engagement Index for the 14th consecutive year.
Budget
Budget is a leading rental car supplier focused primarily on more value-conscious segments of the industry. We
operate or license the Budget vehicle rental system (the “Budget System”), which is comprised of approximately
3,350 car rental locations and represents one of the largest car rental systems in the world. The Budget System
encompasses locations at most of the largest airports and cities in the world.
We operate approximately 1,650 Budget car rental locations worldwide. In 2013, our Budget car rental operations
generated total revenue of approximately $2.1 billion, of which 80% (or $1.7 billion) was derived from North
American operations. We also license the Budget System to independent business owners who operate
approximately 1,700 locations worldwide. In 2013, approximately 65% of the Budget System total revenue was
generated by our Company-operated locations with the remainder generated by locations operated by
independent licensees, which generally pay royalty fees to us based on a percentage of applicable revenue.
The table below presents the approximate number of locations that comprise the Budget System:
Company-operated locations
Licensee locations
Total Budget System Locations
Budget System Locations
North
America
1,050
400
1,450
International
600
1,300
1,900
Total
1,650
1,700
3,350
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The graphs below present the approximate composition of Budget System locations and Budget System revenue
in 2013:
Composition of
Budget System Locations
Composition of
Budget System Revenue
In 2013, Budget derived approximately $375 million and $1.1 billion (or 25% and 75%) of its vehicle rental
revenue from commercial and leisure customers, respectively, and $1.1 billion and $358 million (or 76% and 24%)
of its vehicle rental revenue from customers renting at airports and locally, respectively. Budget’s European
revenues increased $87 million (or 78%) in 2013.
Budget offers its customers several products and programs similar to Avis, such as portable GPS navigation units,
roadside assistance, electronic toll collection, emailed receipts and refueling options, as well as special rental
rates for frequent renters and Budget’s Fastbreak service, an expedited rental service for frequent travelers.
In 2013, Budget’s loyalty program, Unlimited Budget®, was selected by Travel Weekly as a 2013 Gold Magellan
Award Winner, which honors the best loyalty programs in the travel industry.
Zipcar
Founded in 2000, Zipcar operates the world’s leading membership-based car sharing network that provides
“wheels when you want them” to over 860,000 members, also known as “Zipsters,” in more than 25 major
metropolitan areas and over 300 college campuses in the United States, Canada and Europe. Zipcar provides its
members self-service vehicles in reserved parking spaces located in residential neighborhoods, business districts,
college campuses and business office complexes.
Our members may reserve vehicles by the hour or by the day at rates that include gas, insurance and other costs
associated with vehicle ownership, and they can make their reservations through Zipcar’s reservation system,
which is available by phone, Internet or wireless mobile devices. Our members generally have the flexibility to
choose the make, model, type and even the color of the Zipcar that they want depending on their specific needs
and desires for each trip and the available Zipcars in their neighborhoods. The flexibility and affordability of our
service, as well as broader consumer trends toward responsible and sustainable living, provide a significant
platform for future growth.
We acquired Zipcar in March 2013. Prior to our acquisition, Zipcar designed its operations to be scalable through
a distributed self-service fleet of vehicles. We continue to make substantial investment in refining, innovating and
improving Zipcar’s operations and fleet management systems and integrating certain elements of Zipcar’s
operations and fleet into our business. We believe that the experience that we have gained and continue to
accumulate while scaling and operating our network is a key advantage, informing our decisions regarding our
existing operations and services as well as our plans for expansion. From the date of acquisition to year-end, our
Zipcar operations generated revenue of $246 million.
Zipcar offers its members the freedom of on-demand access to a fleet of vehicles at any hour of the day or night,
in their neighborhood or in any of our Zipcar cities and locations, without the costs or hassles of vehicle
ownership. Benefits to members include:
• Cost-effective alternative to car ownership - Members pay for time they reserve the vehicle and have no
responsibility for the additional costs and hassles associated with car ownership, including parking, gas,
taxes, registration, insurance, maintenance and lease payments.
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• Convenience and accessible fleet - Zipcars are interspersed throughout local neighborhoods where they
are parked in reserved parking spaces and garages within an easy walk of where our members live and
work. Members can book a designated vehicle online, by phone or via their mobile device, unlock the
selected vehicle using a keyless entry card (called a “Zipcard”), and drive away. Because each Zipcar has
a designated parking space, members are spared the often time-consuming undertaking of finding an
available parking spot.
• Freedom and control - Unlike public transportation, which operates on fixed routes and schedules, we
provide our members with much of the freedom associated with car ownership. Like car owners, our
members can choose when and where they want to drive. They also have the added benefit of being able
to choose, based upon the readily available Zipcars in their neighborhoods, the make, model, type and
even the color of the vehicle they want to drive based on their specific needs and desires for each trip.
• Responsible and sustainable living - We are committed to providing our members with socially
responsible, sustainable alternatives that support the global environment, their communities and city
livability. Studies show that car sharing reduces the number of miles driven, the number of vehicles on the
road and carbon emissions.
• Zipcar for Universities - We provide college students, faculty, staff and local residents living in or near
rural and urban campuses with access to Zipcars. Zipcars are located on over 300 college and university
campuses. Our program for universities helps university administrators maximize the use of limited
parking space on campus and reduce campus congestion while providing an important amenity for
students, faculty, staff and local residents. In some cases, Zipcar is the only automobile transportation
available to students, since many traditional rental car services have higher age restrictions.
• Zipcar for Business and Zipcar for Government - We offer special programs to businesses, federal
agencies and local governments seeking to save money, meet environmental sustainability goals and
reduce parking requirements. We offer reduced membership fees and weekday driving rates to
employees of companies, federal agencies and local governments that sponsor the use of Zipcars. We
have also partnered with residential property managers and developers who provide their commercial and
residential tenants with access to Zipcar memberships and Zipcars.
• FastFleet - We offer a fleet management solution, known as FastFleet, to organizations that manage their
own fleets of vehicles. Through this service, we license our proprietary vehicle-on-demand technology on
a software-as-a-service basis to organizations that already manage their own fleets of vehicles. FastFleet
enables these organizations to maximize the efficiency and reduce the cost of their own fleets by
monitoring and improving per-vehicle utilization levels as well as streamlining the administrative efforts
required to manage the vehicle fleet.
In 2013, the Zipcar brand was recognized as one of “20 Brilliant Brand Logos” by Entrepreneur Magazine, and
continued to be recognized as the leading car sharing services provider in the world and for the quality of the
customer experience it offers.
Budget Truck
Our Budget Truck rental business is one of the largest local and one-way truck rental businesses in the United
States. At December 31, 2013, Budget Truck has a fleet of approximately 23,000 trucks that are rented through a
network of approximately 1,300 dealers and 350 Company-operated locations throughout the continental United
States. These dealers are independently-owned businesses that generally operate other retail service
businesses. In addition to their principal businesses, the dealers rent our light- and medium-duty trucks to
consumers and to our commercial accounts and are responsible for collecting payments on our behalf. The
dealers receive a commission on all truck and ancillary equipment rentals. The Budget Truck rental business
serves both the consumer and light commercial sectors. The consumer sector consists primarily of individuals
who rent trucks to move household goods on either a one-way or local basis. The light commercial sector consists
of a wide range of businesses that rent light- to medium-duty trucks, which we define as trucks having a gross
vehicle weight of less than 26,000 pounds, for a variety of commercial applications. In 2013, Budget Truck’s rental
business generated total revenue of approximately $373 million.
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Other Brands
Our Payless brand, which we acquired in July 2013, is a leading rental car supplier positioned to serve the deep-
value segment of the car rental industry. We operate or license the Payless brand, which is comprised of
approximately 125 vehicle rental locations worldwide, including approximately 15 Company-operated locations
and approximately 110 locations operated by licensees. All Company-operated Payless locations are in the United
States at or near major airport locations. Payless’ base T&M fees are often lower than those of larger, more
established brands, but Payless has historically achieved a greater penetration of ancillary products and services
with its customers. The Payless business model should allow the Company to extend the life cycle of a portion of
our fleet, as we intend to “cascade” certain vehicles that exceed certain Avis and Budget age or mileage
thresholds to then be used by Payless. From the date of acquisition until year-end 2013, our Payless car rental
operations generated total revenue of approximately $44 million.
Our Apex brand, which we acquired in 2012, operates primarily in the deep-value segment of the car rental
industry in New Zealand and Australia, where we have approximately 19 Apex rental locations. Apex operates its
own rental fleet, separate from Avis and Budget vehicles and generally older and less expensive than vehicles
offered by Avis, Budget and other traditional car rental companies. Apex generates substantially all of its
reservations through its proprietary websites and contact centers. The substantial majority of Apex locations are at
or near major airport locations. In 2013, our Apex car rental operations generated total revenue of approximately
$42 million.
RESERVATIONS, MARKETING AND SALES
Reservations
Our customers can make Avis, Budget, Budget Truck, Payless and Apex car rental reservations through our
brand-specific websites and through our toll-free reservation centers, by calling a specific location directly, through
brand-specific mobile applications, through online travel agencies, through travel agents or through selected
partners, including many major airlines. Travel agents can access our reservation systems through all major
global distribution systems (“GDSs”), which provide information with respect to rental locations, vehicle availability
and applicable rate structures.
Our Zipcar members may reserve cars by the hour or by the day through Zipcar’s reservation system, which is
accessible by phone, Internet or wireless mobile devices. We also provide two-way SMS texting, enabling us to
proactively reach out to members during their reservation via their mobile device to manage their reservation,
including instant reservation extension.
In 2013, we generated approximately 30% of our vehicle rental reservations through our brand-specific websites,
12% through our contact centers, 28% through GDSs, 7% through online travel agencies, 12% through direct-
connect technologies and 11% through other sources. Virtually all of our Zipcar car sharing reservations were
generated online or through our Zipcar mobile applications. We use a voice reservation system that allows
customers to conduct certain transactions such as confirmation, cancellation and modification of reservations
using self-service interactive voice response technology. In addition to our Zipcar mobile applications, we have
also developed Avis and Budget mobile applications for the Android, Apple, BlackBerry and Microsoft Windows,
allowing our customers to more easily manage their car rental reservations on their mobile devices.
Marketing and Sales
We support our Avis, Budget, Budget Truck, Zipcar and other brands through a range of marketing channels and
campaigns, including traditional media, such as television, radio and print advertising, as well as Internet and
email marketing and wireless mobile device applications. In 2012 and 2013, we developed new global brand
propositions and visual identities, including new brand logos for Avis and Budget, to evolve and refine each
brand’s differentiated market position. This evolution builds upon our brands’ heritage and service legacy while
driving global consistency across our regions. We have also implemented a customer relationship management
system that will enable us to deliver more targeted and relevant offers to customers across both online and offline
channels and will allow our customers to benefit through better and more relevant marketing, improved service
delivery and loyalty programs that reward frequent renters with free rental days and car class upgrades.
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We use social media to promote our brands and to provide our customers with the tools to interact with our
brands electronically. Avis, Budget and Zipcar maintain Facebook pages and Twitter accounts, with a total of over
300,000 Facebook fans and over 40,000 followers on Twitter. We also use digital marketing activities to drive
international reservations.
In addition to our social and digital media efforts, our Zipcar brand also focuses on localized marketing initiatives,
which entails low-cost, word-of-mouth marketing of its services and the use of marketing “street teams” that target
potential members at the local level. These efforts highlight simple messages that communicate the benefits of
“wheels when you want them.” Zipcar members also actively recruit new members as incentivized by Zipcar’s
member referral program, which awards driving credit for new member referrals.
In 2013, we retained approximately 98% of our existing commercial contracts in North America and maintained,
expanded or entered into marketing alliances with key marketing partners that include brand exposure and cross-
marketing opportunities for each of the brands involved. For example, under our multi-year agreement with the
PGA TOUR, Avis was named the “Official Rental Car Company” of the PGA TOUR and promotes its products and
services to millions of golfers and golf fans worldwide through prominent placement of the Avis logo on PGA
TOUR event scoreboards and other marketing channels.
We continue to maintain strong links to the travel industry and we expanded or entered into marketing alliances
with numerous marketing partners in 2013:
• We maintain marketing partnerships with several major airlines, including Air Canada, Air France,
American Airlines, British Airways, Frontier Airlines, Iberia, KLM, Lufthansa, SAS, Southwest Airlines,
United Airlines and Virgin America.
• We offer customers the ability to earn frequent traveler points with most major U.S. and European airlines’
frequent traveler programs, as well as those of Air Canada, Air New Zealand, Japan Airlines and Qantas,
among others.
• Our brands are affiliated with the frequency programs of major hotel companies, including Hilton Hotels
Corporation, Hyatt Corporation, Starwood Hotels and Resorts Worldwide, Inc. and Wyndham Worldwide.
These arrangements provide incentives to loyalty program participants and provide us with cooperative
marketing opportunities, including call transfer programs and online links with various partners’ websites.
•
In 2013, we signed new agreements with Norwegian Cruise Lines, Spirit Airlines, SNCF (France’s
national railway operator), Club Premier (Latin America’s first frequent flyer program), Taiwan High Speed
Rail, FlightBridge and others.
In 2013, approximately 64% of vehicle rental transactions from our Company-operated Avis locations were
generated by travelers who rented from Avis under contracts between Avis and the travelers’ employers or
through membership in an organization with which Avis has a contractual affiliation (such as AARP and Costco
Wholesale). In 2013, we entered into an exclusive multi-year agreement with AARP that allows us to promote our
Avis, Budget, Budget Truck and Payless brands to AARP’s base of more than 37 million members. In 2013, we
also entered into a new multi-year agreement with Costco Travel to provide more than 45 million Costco
Wholesale members in the United States with vehicle rentals and ancillary products from Avis and Budget. Avis
maintains marketing relationships with other organizations such as American Express, MasterCard International
and Sears, through which we are able to provide their customers with incentives to rent from Avis. Avis licensees
also generally have the option to participate in these affiliations.
Additionally, we offer “Unlimited Budget,” a loyalty incentive program for travel agents, and the Budget Small
Business Program, a program for small businesses that offers discounted rates, central billing options and rental
credits to its members. Budget has contractual arrangements with American Express, MasterCard International
and other organizations, which offer members incentives to rent from Budget.
In addition to participating in many of the marketing agreements discussed above, Budget Truck maintains certain
truck-rental-specific marketing and/or co-location relationships, including those with Simply Self Storage, Sears
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and Extra Space Storage. We also have an exclusive agreement to advertise Budget Truck rental services in the
Mover’s Guide, an official U.S. Postal Service change of address product.
Our Zipcar brand also partners with other active lifestyle brands that appeal to our Zipcar members and organize,
sponsor or participate in charitable and community events with organizations important to us and our Zipcar
members. Zipcar maintains relationships with universities to market to the “next generation consumer” that, upon
graduation, may migrate to the major metropolitan areas that we serve, continue their relationship with us and
advocate for broad sponsorship of Zipcar membership at their places of work. Through our Zipcar for Business
program, we also offer reduced membership fees and weekday driving rates to employees of companies, federal
agencies and local governments that sponsor the use of Zipcars.
LICENSING
We have licensees in more than 160 countries throughout the world. Revenue derived from our vehicle rental
licensees in 2013 totaled $136 million, with approximately $116 million in our International segment and $20
million in our North America segment. Licensed locations are independently operated by our licensees and range
from large operations at major airport locations and territories encompassing entire countries to relatively small
operations in suburban locations. Our licensees generally maintain separate independently owned and operated
fleets. Royalties generated from licensing provide us with a source of high-margin revenue because there are
relatively limited additional fixed costs associated with fees paid by licensees to us. Locations operated by
licensees represented approximately 52% of our Avis and Budget car rental locations worldwide and
approximately 30% of total revenue generated by the Avis and Budget Systems in 2013. We facilitate one-way car
rentals between Company-operated and licensed locations, which enables us to offer an integrated network of
locations to our customers.
We generally enjoy good relationships with our licensees and meet regularly with them at regional, national and
international meetings. Our relationships with our licensees are governed by license agreements that grant the
licensee the right to operate independently operated Avis, Budget or Payless car and/or truck rental businesses in
certain territories. Our license agreements generally provide our licensees with the exclusive right to operate in
their assigned territory. These agreements impose obligations on the licensee regarding its operations and most
agreements restrict the licensee’s ability to transfer its license agreement and capital stock. Licensees are
generally required to adhere to our system standards for each brand as updated and supplemented by our policy
bulletins, brand manuals and service program.
Our license agreements typically have terms ranging from five to 20 years. The car rental royalty fee payable to
us under our license agreements is generally 5% to 8% of gross rental revenue, but certain licensees, both in
North America and internationally, have license agreements with different royalty fee structures. We maintain the
right to monitor the operations of licensees and, when applicable, can declare a licensee to be in default under its
license agreement. We perform audits as part of our program to assure licensee compliance with brand quality
standards and contract provisions. Generally, we can terminate license agreements for certain defaults, including
failure to pay royalties and failure to adhere to our operational standards. Upon termination of a license
agreement, the licensee is prohibited from using our brand names and related marks in any business. In the
United States, these license relationships constitute “franchises” under most federal and state laws regulating the
offer and sale of franchises and the relationship of the parties to a franchise agreement.
OTHER REVENUE
In addition to revenue from our vehicle rentals and licensee royalties, we generate revenue from our customers
through the sale and/or rental of optional ancillary products and services. Our employees offer products to
customers that will enhance their rental experience, including collision and loss damage waivers, insurance
products such as additional/supplemental liability insurance or personal accident/effects insurance, products for
driving convenience such as portable GPS navigation units, optional roadside assistance services, fuel service
options, electronic toll collection and other ancillary products and services, such as access to satellite radio and
child safety seats. In addition, we also supplement our daily truck rental revenue by offering customers
automobile towing equipment and other moving accessories such as hand trucks, furniture pads and moving
supplies.
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In 2013, approximately 5% of our revenue was generated by the sale of collision and loss damage waivers, under
which we agree to relieve a customer from financial responsibility arising from vehicle damage incurred during the
rental period if the customer has not breached the rental agreement. In addition, we receive reimbursement from
our customers for certain operating expenses we incur, including gasoline and vehicle licensing fees, as well as
airport concession fees, that we pay in exchange for the right to operate at airports and other locations.
OUR TECHNOLOGIES
Car Rental
We use a broad range of technologies in our car rental operations, substantially all of which are linked to what we
call Wizard, our worldwide reservation, rental, data processing and information management system. The Wizard
system enables us to process millions of incoming customer inquiries each day, providing our customers with
accurate and timely information about our locations, rental rates and vehicle availability, as well as the ability to
place or modify reservations. Additionally, the Wizard system is linked to all major travel distribution networks
worldwide and provides real-time processing for travel agents, travel industry partners (such as airlines and online
travel sites), corporate travel departments and individual consumers through our websites or contact centers. The
Wizard system also provides personal profile information to our reservation and rental agents to help us better
serve our customers.
We also use data supplied from the Wizard system and airline reservation systems in certain proprietary
information management systems to maintain centralized control of major business processes such as fleet
acquisition and logistics, sales to corporate accounts and determination of rental rates. The principal components
of the systems we employ include:
• Fleet planning model. We have a comprehensive decision tool to develop fleet plans and schedules for
the acquisition and disposition of our fleet, along with fleet age, mix, mileage and cost reports based upon
these plans and schedules. This tool allows management to monitor and change fleet volume and
composition on a daily basis and to optimize our fleet plan based on estimated business levels and
available repurchase and guaranteed depreciation programs. We also use third-party software to further
optimize our fleet acquisition, rotation and disposition activities.
• Yield management. We have a yield management system which is designed to enhance profits by
providing greater control of vehicle availability and rate availability changes at our rental locations. Our
system monitors and forecasts supply and demand to support our efforts to optimize volume and rate at
each location. Integrated into this yield management system is a fleet distribution module that takes into
consideration the costs as well as the potential benefits associated with distributing vehicles to various
rental locations within a geographic area to accommodate rental demand at these locations. The fleet
distribution module makes specific recommendations for movement of vehicles between locations.
• Pricing decision support systems. Pricing in the vehicle rental industry is highly competitive and complex.
To improve our ability to respond to rental rate changes in the marketplace, we have utilized sophisticated
systems to gather and report competitive industry rental rate changes every day. Our systems, using data
from third-party reservation systems as its source of information, automatically scan rate movements and
report significant changes to our staff of pricing analysts for evaluation. These systems greatly enhance
our ability to gather and respond to rate changes in the marketplace. In 2013, we began developing an
integrated pricing and fleet optimization tool that we expect will allow us to test and implement improved
pricing and fleet deployment strategies and optimization algorithms, as well as automate the
implementation of certain price changes.
• Business mix model. We have developed a strategic planning model to evaluate discrete components of
our business relative to each other. The model considers revenue and costs to determine the potential
margin contribution of each discrete segment. The model develops business mix and fleet optimization
recommendations by using data from our financial systems, the Wizard system and the fleet and revenue
management systems along with management’s objectives and targets.
• Enterprise data warehouse. We have developed a sophisticated and comprehensive electronic data
storage and retrieval system which retains information related to various aspects of our business. This
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data warehouse allows us to take advantage of comprehensive management reports and provides easy
access to data for strategic decision making for our brands.
• Sales and marketing systems. We have developed a sophisticated system of online data tracking which
enables our sales force to analyze key account information of our corporate customers including historical
and current rental activity, revenue and booking sources, top renting locations, rate usage categories and
customer satisfaction data. We use this information, which is updated weekly and captured on a country-
by-country basis, to assess opportunities for revenue growth, profitability and improvement.
• Campaign management. We have deployed tools that enable us to recognize customer segments and
value, and to automatically present appropriate offers on our Avis and Budget websites.
•
•
Interactive adjustments. We have developed a customer data system that allows us to easily retrieve
pertinent customer information and make needed adjustments to completed rental transactions online for
superior customer service. This data system links with our other accounting systems to handle any
charge card transaction automatically.
Interactive voice response system. We have developed an automated voice response system that
enables the automated processing of customer reservation confirmations, cancellations, identification of
rental locations, extension of existing rentals and requests for copies of rental receipts over the phone
using speech recognition software.
• On Location. We introduced our “On Location®” service to certain of our corporate customers, which
enables self-service car rentals at their campus locations. This service consists of a two-way
communications device connected to the vehicle’s on-board diagnostics system. This device retrieves key
vehicle information that integrates with the Wizard system to perform a check-in and check-out of a
vehicle in a self-service mode.
Car Sharing
Our Zipcar car sharing technology was specifically designed and built for our car sharing business and has been
continually refined and upgraded to optimize the Zipcar experience for our members. Our fully-integrated platform
centralizes the management of our Zipcar reservations, member services, fleet operations and financial systems
to optimize member experience, minimize costs and leverage efficiencies. Through this platform, we:
•
process new member applications;
• manage reservations and keyless vehicle access;
• manage and monitor member interactions;
• manage billing and payment processing across multiple currencies;
• manage our car sharing fleet remotely; and
• monitor and analyze key metrics of each Zipcar such as utilization rate, mileage and maintenance
requirements.
Each interaction between members and our Zipcars is captured in our system, across all communication
channels, providing us with knowledge we use to improve our members’ experiences and better optimize our
business processes. We have built and continue to innovate our technology platform in order to support growth
and scalability.
• Reservation System Software. Our Zipcar reservation system processes membership applications and
enables existing members to reserve Zipcars online, over the phone, using mobile applications on the
iPhone or Android platforms, or through other web-enabled mobile devices. Through our reservation
system, members have around-the-clock access to the complete, real-time inventory of Zipcars and can
manage all necessary transactions online. Because all of our reservation and member services data is
fed back into our centralized database, we are able to track and analyze aggregated member usage
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data to better allocate vehicles among locations and improve availability and convenience for our
members.
• Fleet Administration System Software and Hardware. Managing a widely dispersed fleet of Zipcars
requires a comprehensive suite of tools optimized for car sharing. Each Zipcar is equipped with a
telematics control unit, including mobile data service, radio frequency identification card readers,
wireless antennae, wiring harness, vehicle interface modules and transponders for toll systems. This
hardware, together with internally developed embedded firmware and vehicle server software, allows us
to authorize secure access to our Zipcars from our data centers and provides us with a comprehensive
set of fleet management data that is stored in our centralized database.
OUR FLEET
We offer for rental a wide variety of vehicles, including luxury and specialty vehicles. Our fleet consists primarily of
vehicles from the current and immediately preceding model year. We maintain a single fleet of vehicles for Avis and
Budget in countries where we operate both brands. The substantial majority of Zipcar’s fleet is dedicated to use by
Zipcar, but we have developed processes to share vehicles between the Avis/Budget fleet and Zipcar’s fleet primarily
to help meet Zipcar’s demand peaks. We maintain a diverse car rental fleet, in which no vehicle manufacturer
represented more than 23% of our 2013 fleet purchases, and we regularly adjust our fleet levels to be consistent
with demand. We participate in a variety of vehicle purchase programs with major vehicle manufacturers. In 2013,
we purchased vehicles from Audi, BMW, Chrysler, Fiat, Ford, General Motors, Hyundai, Kia, Mazda, Mercedes,
Mitsubishi, Nissan, Peugeot, Porsche, Renault, Subaru, Toyota and Volkswagen, among others. During 2013,
approximately 23%, 19% and 12% of the cars acquired for our car rental fleet were manufactured by Ford, General
Motors and Chrysler, respectively.
Fleet costs represented approximately 23% of our aggregate expenses in 2013. Fleet costs can vary from year to
year based on the prices at which we are able to purchase and dispose of rental vehicles.
In 2013, on average, approximately 37% of our rental car fleet was comprised of vehicles subject to agreements
requiring automobile manufacturers to repurchase vehicles at a specified price during a specified time period or
guarantee our rate of depreciation on the vehicles during a specified period of time, or were vehicles subject to
operating leases. Cars subject to these agreements are sometimes referred to as “program” cars, and cars not
subject to these agreements are sometimes referred to as “risk” cars because we retain the risk associated with
such cars’ residual values at the time of their disposition. Such agreements typically require that we pay more for
program cars and maintain them in our fleet for a minimum number of months (typically four to eleven months)
and impose certain return conditions, including car condition and mileage requirements. When we return program
cars to the manufacturer, we receive the price guaranteed at the time of purchase and are thus protected from
fluctuations in the prices of previously-owned vehicles in the wholesale market. Of the approximately 520,000
vehicles we disposed of in 2013, approximately 60% were sold pursuant to repurchase or guaranteed
depreciation programs. The future percentages of program and risk cars in our fleet will depend on our seasonal
needs and the availability and attractiveness of manufacturers’ repurchase and guaranteed depreciation
programs. The Company has agreed to purchase approximately $6.4 billion of vehicles from manufacturers over
the next twelve months.
We dispose of our risk cars largely through automobile auctions, including auctions that enable dealers to
purchase vehicles online more quickly than through traditional auctions, as well as through direct-to-dealer sales.
In 2013, we also expanded the number of states that can participate in our Ultimate Test Drive retail car sales
program, which offers customers the ability to purchase Avis and Budget rental vehicles through a collaboration
with AutoNation, Inc.
For 2013, our average monthly car rental fleet size ranged from a low of approximately 418,000 vehicles in
January to a high of approximately 599,000 vehicles in July. Our average monthly car rental fleet size typically
peaks in the summer months. Average fleet utilization for 2013, which is based on the number of rental days (or
portion thereof) that vehicles are rented compared to the total amount of time that vehicles are available for rent,
ranged from 66% in January to 78% in August. Our calculation of utilization may not be comparable to other
companies’ calculation of similarly titled statistics. We are also taking actions to realize fleet utilization benefits
and savings by combining a portion of our car rental and car sharing fleets at times to reduce the number of
unutilized Zipcars during the week and to better satisfy Zipcar’s unmet weekend demand.
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We place a strong emphasis on vehicle maintenance for customer safety and customer satisfaction reasons, and
because quick and proper repairs are critical to fleet utilization. To accomplish this task we employ a fully-certified
National Institute for Automotive Service Excellence technician instructor and have developed a specialized
training program for our technicians, who operate in approximately 105 maintenance and damage repair centers
in North America. Our technician training department also prepares its own technical service bulletins that can be
retrieved electronically at our repair locations.
CUSTOMER SERVICE
We believe our commitment to delivering a consistently high level of customer service across all of our brands is a
critical element of our success and strategy. Our Customer Led, Service Driven™ program focuses on improving
the overall customer experience based on our research of customer service practices, improved customer
insights, executing our customer relationship management strategy and delivering customer-centric employee
training.
Our associates and managers at our Company-operated locations are trained and empowered to resolve most
customer issues at the location level. In addition, we have simplified our rental agreements for both the Avis and
Budget brands to make them easier for our customers to read and understand. We also continuously track
customer satisfaction levels by sending location-specific surveys to recent customers and utilize detailed reports
and tracking to assess and identify ways that we can improve our customer service delivery and the overall
customer experience. In 2013, we received over 700,000 responses to our online customer satisfaction surveys.
Our surveys ask customers to evaluate their overall satisfaction with their rental experience, among other things.
Results are analyzed in aggregate and by location to help further enhance our service levels to our customers.
EMPLOYEES
As of December 31, 2013, we employed approximately 29,000 people worldwide, of whom approximately 7,000
were employed on a part-time basis. Of our approximately 29,000 employees, approximately 20,000 were
employed in our North America and Truck Rental segments and 9,000 in our International segment.
In our North America and Truck Rental segments, the majority of our employees are at-will employees and,
therefore, not subject to any type of employment contract or agreement. Certain of our executive officers may be
employed under employment contracts that specify a term of employment and specify pay and other benefits. In
our International segment, we enter into employment contracts and agreements in those countries in which such
relationships are mandatory or customary. The provisions of these agreements correspond in each case with the
required or customary terms in the subject jurisdiction. Many of our employees are covered by a wide variety of
union contracts and governmental regulations affecting, among other things, compensation, job retention rights
and pensions.
As of December 31, 2013, approximately 35% of our employees in each of our North America, International and
Truck Rental segments were covered by collective bargaining agreements with various labor unions. We believe
our employee relations are satisfactory. We have never experienced a large-scale work stoppage.
AIRPORT CONCESSION AGREEMENTS
We generally operate our vehicle rental and car sharing services at airports under concession agreements with
airport authorities, pursuant to which we typically make airport concession payments and/or lease payments. In
general, concession fees for on-airport locations are based on a percentage of total commissionable revenue (as
defined by each airport authority), subject to minimum annual guaranteed amounts. Concessions are typically
awarded by airport authorities every three to five years based upon competitive bids. Our concession agreements
with the various airport authorities generally impose certain minimum operating requirements, provide for
relocation in the event of future construction and provide for abatement of the minimum annual guarantee in the
event of extended low passenger volume.
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OTHER BUSINESS CONSIDERATIONS
SEASONALITY
Our car rental business is subject to seasonal variations in customer demand patterns, with the spring and
summer vacation periods representing our peak seasons. Our truck rental operations also experience higher
levels of demand during the late spring and summer months when most self-moves occur, with the third quarter
typically being our busiest quarter. Generally, however, December is also a strong month for our truck rental
operations due to increased retail sales activity and package deliveries. Our Zipcar operations are also subject to
seasonality due to increased usage during the summer months and holidays. We vary our fleet size over the
course of the year to help manage any seasonal variations in demand, as well as localized changes in demand.
COMPETITION
The competitive environment for the vehicle rental industry is generally characterized by intense price and service
competition among global, local and regional competitors. Competition in our vehicle rental operations is based
primarily upon price, customer service quality, including usability of booking systems and ease of rental and
return, vehicle availability, reliability, rental locations, product innovation and national or international distribution.
In addition, competition is also influenced strongly by advertising, marketing and brand reputation.
The use of technology has increased pricing transparency among vehicle rental companies by enabling cost-
conscious customers to more easily compare on the Internet and their mobile devices the rental rates available
from various vehicle rental companies for any given rental. This transparency has further increased the
prevalence and intensity of price competition in the industry.
Our car rental and car sharing operations compete primarily with Enterprise Holdings, Inc., which operates the
Enterprise brand worldwide and the National and Alamo car rental brands in North America; Europcar Group,
which operates the Europcar, National and Alamo brands in Europe; Hertz Global Holdings, Inc., which operates
the Hertz, Dollar and Thrifty brands; and Sixt AG. We also compete with smaller regional car rental and car
sharing companies. Our truck rental operations compete primarily with U-Haul International, Inc., and Penske
Truck Leasing Corporation, as well as other smaller regional companies.
INSURANCE AND INSURANCE RELATED PRODUCTS
Our vehicle rental operations and corporate operations expose us to various types of claims for personal injury,
death and property damage related to the use of our vehicles and/or properties, as well as general employment-
related matters stemming from our operations. We generally assume the risk of liability to third parties arising from
vehicle rental services in the United States, Canada, Puerto Rico and the U.S. Virgin Islands, in accordance with
the minimum financial responsibility requirements (“MFRs”) and primacy of coverage laws of the relevant
jurisdiction. In certain cases, we assume liability above applicable MFRs, but to no more than $1 million per
occurrence, other than in cases involving a negligent act on the part of the Company, for which we purchase
insurance coverage for exposures beyond retained amounts from a combination of unaffiliated excess insurers.
With respect to our Zipcar operations, in 2013 we transitioned coverage of our fleet from unaffiliated insurers to
the Company’s insurance program.
In Europe, we insure the risk of liability to third parties arising from vehicle rental services in accordance with local
regulatory requirements through a combination of reinsurance and self-insurance, subject to certain limits,
provided by our captive insurance subsidiary, AEGIS Motor Insurance Limited, or through the use of insurance
products offered by unaffiliated insurers. Our retained liabilities in Europe are capped as AEGIS purchases
reinsurance from an unaffiliated insurer to limit its exposure. We insure the risk of liability to third parties in
Argentina, Australia and New Zealand through a combination of unaffiliated insurers and one of our affiliates.
These insurers provide insurance coverage supplemental to minimum local requirements.
We offer our U.S. customers a range of optional insurance products and coverages such as supplemental liability
insurance, personal accident insurance, personal effects protection, physical damage waivers, automobile towing
protection and cargo insurance, which create additional risk exposure for us. When a customer elects to purchase
supplemental liability insurance or other optional insurance related products, we typically retain economic
exposure to loss, since the insurance is provided by an unaffiliated insurer that is reinsuring its exposure through
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our captive insurance subsidiary, Constellation Reinsurance Co., Ltd. Additional personal accident insurance
offered to our customers in Europe is underwritten by a third-party insurer, and reinsured by our Avis Budget
Europe International Reinsurance Limited subsidiary. We also maintain excess insurance coverage through
unaffiliated carriers to help mitigate our potential exposure to large liability losses. We otherwise bear these and
other risks, except to the extent that the risks are transferred through insurance or contractual arrangements.
OUR INTELLECTUAL PROPERTY
We rely primarily on a combination of trademark, trade secret and copyright laws, as well as contractual
provisions with employees and third parties, to establish and protect our intellectual property rights. The service
marks “Avis,” “Budget,” and “Zipcar” and related marks or designs incorporating such terms and related logos and
marks such as “We try harder,” and “wheels when you want them” are material to our vehicle rental and car
sharing businesses. Our subsidiaries and licensees actively use these marks. All of the material marks used by
Avis, Budget and Zipcar are registered (or have applications pending for registration) with the United States
Patent and Trademark Office as well as in foreign jurisdictions. Our subsidiaries own the marks and other
intellectual property, including the Wizard system, used in our business. We also own trademarks and logos
related to the “Apex Car Rental” brand in Australia and New Zealand and related to the “Payless Car Rental”
brand in the United States and several other countries.
CORPORATE SOCIAL RESPONSIBILITY
The Company strives to maintain best practices in corporate social responsibility, which includes an emphasis on
the several key initiatives, including a global ethics program for all employees worldwide; data protection
guidelines aimed at protecting Company and customer data; a competitive employee benefits program;
commitments to equal employment opportunities and diversity; offering fuel-efficient rental vehicles; and a
commitment to corporate philanthropy through which we give back to the communities in which we operate.
• Ethical Standards. We seek to hold our employees to high ethical standards. We place great emphasis on
professional conduct, safety and security, information protection and integrity. Our employees are
required to follow our Code of Conduct and Business Principles. Our Code of Conduct represents the
core of our business philosophy and values and covers numerous areas, including standards of work-
related behavior; security of information, systems and other assets; conflicts of interest; securities laws;
and community service. We provide employees with training to help understand both our Code of
Conduct and how to interpret it in various situations. Failure to comply with our Code of Conduct is
grounds for disciplinary action, up to and including termination of employment.
• Data Protection. We are committed to taking appropriate measures to properly secure information,
records, systems and property. Employees are trained to take particular precautions to protect the
Company, our employees, vendors and customers, and, in many cases, themselves, from the unlawful or
inappropriate use or disclosure of that information.
• Employee Benefits Programs. Our employees are critical to our success. To ensure their well-being and
professional growth we generally offer a competitive salary plus incentive compensation potential and
comprehensive benefits. In addition, we offer health and welfare benefits that may include a range of
training, employee assistance and personal development programs to help employees and their families
prosper. Our employee benefits programs are all offered and administered in compliance with applicable
local law.
• Equal Opportunity Employment. We are committed to providing equal employment opportunity to all
applicants and employees without regard to race, color, religion, sex, sexual orientation, age, marital
status, national origin, citizenship, physical or mental disability, military veteran status, or any other
protected classification under any applicable law. In addition, the Company will reasonably accommodate
known disabilities and religious beliefs of employees and qualified applicants.
• Diversity. As a growing global organization, the Company is proud of the diversity of its workforce. We
strive to attract and retain talented and diverse people throughout our organization. We engage in several
initiatives to support diversity throughout our Company, including programs specifically designed to
develop female leaders in our organization and our commitment to assisting current and former military
20
personnel. The Company also maintains an industry-leading supplier diversity program to promote the
growth and development of suppliers who are disadvantaged, minority-owned or women-owned business
enterprises.
• Environment. The Company has taken numerous steps to minimize its environmental impact, including
contracting with licensed vendors to recycle used motor oil, oil filters, parts and brake cleaner fluids. Car
washes installed at our facilities typically recycle and reuse at least 80 percent of their wastewater. Many
of our model-year 2013 and 2014 vehicles are EPA SmartWay Certified by the United States
Environmental Protection Agency as “green” vehicles. Our rental fleet also includes gas/electric hybrid
vehicles which offer outstanding fuel efficiency and reduced emissions.
• Philanthropy. The Company is committed to supporting the communities in which it operates by working
with nonprofit organizations focused on assisting those in need. Through relationships with widely-
recognized charitable groups and outreach through the Avis Budget Group Charitable Foundation and
employee volunteer teams, the Company and its employees contribute to many worthwhile organizations
and deserving causes that help improve our communities.
REGULATION
We are subject to a wide variety of laws and regulations in the United States and internationally, including those
relating to, among others, consumer protection, insurance products and rates, franchising law, customer privacy
and data protection, competition, environmental matters, taxes, automobile-related liability, corruption, labor and
employment matters, cost and fee recovery, the protection of our trademarks and other intellectual property, and
local ownership or investment requirements. Additional information about the regulations that we are subject to
can be found in Item 1A - Risk Factors in this Annual Report.
COMPANY INFORMATION
Our principal executive office is located at 6 Sylvan Way, Parsippany, New Jersey 07054 (our telephone number
is 973-496-4700). The Company files electronically with the Securities and Exchange Commission (the “SEC”)
required reports on Form 8-K, Form 10-Q, Form 10-K and Form 11-K; proxy materials; ownership reports for
insiders as required by Section 16 of the Securities Exchange Act of 1934; registration statements and other
forms or reports as required. Certain of the Company’s officers and directors also file statements of changes in
beneficial ownership on Form 4 with the SEC. The public may read and copy any materials that the Company has
filed with the SEC at the SEC’s Public Reference Room located at 100 F Street, NE, Washington, D.C. 20549.
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 800-
SEC-0330. Such materials may also be accessed electronically on the SEC’s Internet site (sec.gov). The
Company maintains a website (avisbudgetgroup.com) and copies of our annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, Section 16 reports, proxy materials and any amendments to
these reports filed or furnished with the SEC are available free of charge in the Investor Relations section of our
website, as soon as reasonably practicable after filing with the SEC. Copies of our board committee charters,
Codes of Conduct and Ethics, Corporate Governance Guidelines and other corporate governance information are
also available on our website. If the Company should decide to amend any of its board committee charters,
Codes of Conduct and Ethics or other corporate governance documents, copies of such amendments will be
made available to the public through the Company’s website. The information contained on the Company’s
website is not included in, or incorporated by reference into, this Annual Report on Form 10-K.
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ITEM 1A. RISK FACTORS
The following is a cautionary discussion of the most significant risks, uncertainties and assumptions that we
believe are significant to our business and should be considered carefully in conjunction with all of the other
information set forth in this Annual Report on Form 10-K. In addition to the factors discussed elsewhere in this
report, the factors described in this item could, individually or in the aggregate, cause our actual results to differ
materially from those described in any forward-looking statements. Should unknown risks or uncertainties
materialize or underlying assumptions prove inaccurate, actual results could materially differ from past results
and/or those anticipated, estimated or projected. Achievement of future results is subject to risks, uncertainties
and potentially inaccurate assumptions. Past financial performance may not be a reliable indicator of future
performance and historical trends should not be used to anticipate results or trends in future periods.
RISKS RELATED TO OUR BUSINESS
We face risks related to the high level of competition in the vehicle rental industry.
The vehicle rental industry is highly competitive, with price being one of the primary competitive factors. We risk
losing rental volume to the extent that our competitors reduce their pricing and we do not match or provide
competitive pricing or if price increases we seek to implement make us less competitive. If competitive pressures
lead us to lose rental volume or match any downward pricing and we are unable to reduce our operating costs,
then our financial condition or results of operations could be materially adversely impacted.
Additionally, pricing in the industry is impacted by the size of rental fleets and the supply of vehicles available for
rent. Any significant fluctuations in the supply of rental vehicles available in the market due to an unexpected
decrease in demand, or actions taken by our competitors to increase market share by acquiring more fleet could
negatively affect our pricing, operating plans or results of operations if we are unable to adjust the size of our
rental fleet in response to fluctuations in demand.
The risk of competition on the basis of pricing in the truck rental industry can be even more intense than in the car
rental industry because it can be more difficult to reduce the size of our truck rental fleet in response to reduced
demand.
We face risks related to fleet costs.
Fleet costs typically represent our single largest expense and can vary from year to year based on the prices that
we are able to purchase and dispose of our rental vehicles. In 2013, on average approximately 37% of our 2013
rental car fleet was comprised of program cars or vehicles subject to operating leases. Such program cars enable
us to determine our depreciation expense in advance of purchase, which is a significant component of our fleet
costs. However, as discussed below, such program cars result in additional exposure to the manufacturers with
whom we have such agreements.
We source our fleet needs from a wide range of auto manufacturers. To the extent that any of these auto
manufacturers significantly curtail production or increase the cost of purchasing program cars, we may be unable
to obtain a sufficient number of vehicles to operate our business without significantly increasing our fleet costs or
reducing our volumes.
Automobile manufacturers may not continue to sell program cars to us on terms or at prices consistent with past
agreements. Our program car purchases also generally provide us with flexibility to reduce the size of our fleet
rapidly in response to seasonal demand fluctuations, economic constraints or other changes in demand. This
flexibility may be reduced in the future to the extent that we reduce the percentage of program cars in our car
rental fleet or features of the programs are altered.
Failure by a manufacturer to fulfill its obligations under any program agreement or incentive payment obligation
could leave us with a material expense if we are unable to dispose of program cars at prices estimated at the time
of purchase or with a substantial unpaid claim against the manufacturer, particularly with respect to program cars
that were either (i) resold for an amount less than the amount guaranteed under the applicable program and
therefore subject to a “true-up” payment obligation from the manufacturer; or (ii) returned to the manufacturer but
for which we were not yet paid, and therefore we could incur a substantial loss as a result of such failure to
22
perform. Any reduction in the market value of the vehicles in our fleet could effectively increase our fleet costs,
adversely impact our profitability and potentially lead to decreased capacity in our asset-backed car rental funding
facilities due to the collateral requirements for such facilities that effectively increase as market values for vehicles
decrease.
The costs of our non-program vehicles may also be adversely impacted by the relative strength of the used car
market, particularly the market for one- to two-year old used vehicles. We currently sell non-program vehicles
through auctions, third-party resellers and other channels in the used vehicle marketplace. Such channels may
not produce stable used vehicle prices. A reduction in residual values for non-program vehicles in our rental fleet
could cause us to sustain a substantial loss on the ultimate sale of such vehicles or require us to depreciate those
vehicles at a more accelerated rate while we own them.
If our ability to sell vehicles in the used vehicle marketplace were to become severely limited at a time when
required collateral levels were rising, the outstanding principal amount due under our asset-backed financing
facilities may be required to be repaid sooner than anticipated with vehicle disposition proceeds and lease
payments we make to our vehicle program subsidiaries. If that were to occur, the holders of our asset-backed
debt may have the ability to exercise their right to instruct the trustee to direct the return of program cars and/or
the sale of risk cars to generate proceeds sufficient to repay such debt.
We face risks related to safety recalls.
Our vehicles may be subject to safety recalls by their manufacturers that could have an adverse impact on our
business when we remove such recalled vehicles from our rentable fleet. The recalls may cause us to incur
incremental costs as we retrieve vehicles from customers, which may ultimately cause us to decide not to re-rent
vehicles until we can arrange for the repairs described in the recalls to be completed. If a large number of vehicles
were to be the subject of simultaneous recalls, or if needed replacement parts were not in adequate supply, we
may be unable to re-rent recalled vehicles for a significant period of time. We could also face liability claims
related to vehicles subject to a safety recall. Depending on the nature and severity of the recall, it could create
customer service problems, reduce the residual value of the vehicles involved, harm our general reputation and/or
have an adverse impact on our financial condition or results of operations.
Weakness in general economic conditions in the United States, Europe and other areas in which we
operate, weakness in travel demand and the housing market, and/or a significant increase in fuel costs
can adversely impact our business.
If economic conditions in the United States, Europe and/or worldwide were to weaken, our financial condition or
results of operations could be adversely impacted.
Any significant airline capacity reductions, airfare or related fee increases, reduced flight schedules, or any events
that disrupt or reduce business or leisure air travel such as work stoppages, military conflicts, terrorist incidents,
natural disasters, disease epidemics, or the response of governments to any such events, could have an adverse
impact on our results of operations. Likewise, any significant increases in fuel prices, a severe protracted
disruption in fuel supplies or rationing of fuel could discourage our customers from renting vehicles or reduce or
disrupt air travel, which could also adversely impact our results of operations.
Our truck rental business can be impacted by the housing market. If conditions in the housing market were to
weaken, we may see a decline in truck rental transactions, which could have an adverse impact on our business.
We face risks related to our ability to successfully implement our business strategies and preserve the
value of our brands.
Our objective is to focus on strategically accelerating growth, strengthening our global position as a leading
provider of vehicle rental services, continuing to enhance our customers’ rental experience and controlling costs
and driving efficiency throughout the organization. If we are unsuccessful in implementing our strategic initiatives,
our financial condition or results of operations could be adversely impacted.
Failure to provide a high-quality reservation and rental experience for our customers and members for any reason
could substantially harm our reputation and adversely impact our financial condition or results of operations.
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We face risks related to our Zipcar operations.
We expect that the competitive environment for our car sharing services will become more intense as additional
companies enter our existing markets or try to expand their operations. Competitors could introduce new solutions
with competitive price and convenience characteristics or undertake more aggressive marketing campaigns than
we provide. Such developments could adversely impact our business and result of operations should we be
unable to compete with such efforts.
Because Zipcar members are located primarily in cities, we compete for limited parking locations that are
convenient to our members or are available on terms that are commercially reasonable to our business. If we are
unable to obtain and maintain a sufficient number of parking locations that are convenient to our members, our
ability to attract and retain members would suffer.
We expect to achieve significant benefits from integrating certain Zipcar operations, such as vehicle maintenance
and fleet procurement and disposition, with our existing infrastructure and by sharing fleet between Zipcar and our
other brands. To realize such benefits, we must successfully combine and integrate portions of our car rental and
car sharing operations in an efficient and effective manner. If we are unable to achieve these objectives within the
anticipated time frame, or at all, the anticipated benefits and cost savings of the acquisition may not be realized
fully, or at all, or may take longer to realize than expected.
We face risks related to political, economic and commercial instability in the countries in which we
operate.
Our global operations are dependent upon products manufactured, purchased and sold in the United States and
internationally, including in countries with political and economic instability. Operating and seeking to expand
business in a number of different regions and countries exposes us to a number of risks, including:
• multiple and potentially conflicting laws, regulations and policies that are subject to change;
•
•
•
•
•
the imposition of currency restrictions, restrictions on repatriation of earnings or other restraints;
local ownership or investment requirements, as well as difficulties in obtaining financing in foreign
countries for local operations;
varying tax regimes, including consequences from changes in applicable tax laws;
national and international conflict, including terrorist acts; and
political and economic instability or civil unrest that may severely disrupt economic activity in affected
countries.
The occurrence of one or more of these events may adversely impact our financial condition or results of
operations. Our licensees’ vehicle rental operations may also be impacted by political, economic and commercial
instability, which in turn could impact the amount of royalty payments they make to us.
We face risks related to third-party distribution channels that we rely upon.
In 2013, we generated approximately 47% of our car rental reservations through third-party distribution channels,
which include:
•
•
traditional and online travel agencies, airlines and hotel companies, marketing partners such as credit
card companies and membership organizations and other entities that help us attract customers; and
global distribution systems, such as Amadeus, Galileo/Apollo, Sabre and Worldspan that connect travel
agents, travel service providers and corporations to our reservations systems.
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Changes in our pricing agreements, commission schedules or arrangements with third-party distribution channels,
the termination of any of our relationships or a reduction in the transaction volume of such channels, or a GDS’s
inability to process and communicate reservations to us could have an adverse impact on our financial condition
or results of operations, particularly if our customers are unable to access our reservation systems through
alternate channels.
We face risks related to our leases and vehicle rental concessions.
We lease or have vehicle rental concessions at locations throughout the world, including at airports both in the
United States and internationally and train stations throughout Europe where vehicle rental companies are
frequently required to bid periodically for the available locations. If we were to lose any lease or vehicle rental
concession, particularly at an airport or a train station in a major metropolitan area, there can be no assurance
that we would be able to find a suitable replacement on reasonable terms and our business could be adversely
impacted.
We face risks related to the seasonality of our business.
In our business, the third quarter of the year has historically been our strongest quarter due to the increased level
of summer leisure travel and household moving activity. We vary our fleet size over the course of the year to help
manage seasonal variations in demand, as well as localized changes in demand that we may encounter in the
various regions in which we operate. In 2013, the third quarter accounted for 30% of our total revenue for the year
and was our most profitable quarter as measured by Adjusted EBITDA. Any circumstance or occurrence that
disrupts rental activity during the third quarter could have a disproportionately adverse impact on our financial
condition or results of operations.
We face risks related to acquisitions, including the acquisition of existing licensees or investments in
other related businesses.
We may engage in strategic transactions, including the acquisition of or investment in existing licensees and/or
other related businesses. The risks involved in engaging in these strategic transactions include the possible
failure to successfully integrate the operations of acquired businesses, or to realize the expected benefits of such
transactions within the anticipated time frame, or at all, such as cost savings, synergies or sales or growth
opportunities. In addition, the integration may result in material unanticipated challenges, expenses, liabilities or
competitive responses, including:
•
•
•
•
•
•
•
inconsistencies between our standards, procedures and policies and those of the acquired business;
the increased scope and complexity of our operations could require significant attention from
management and could impose constraints on our operations or other projects;
unforeseen expenses, delays or conditions, including required regulatory or other third-party approvals or
consents;
the costs of compliance with U.S. and international laws and regulations, including the acquisition or
assumption of unexpected liabilities, litigation, penalties or other enforcement actions;
provisions in our and the acquired business’s contracts with third parties that could limit our flexibility to
take certain actions or our ability to retain customers;
higher than expected costs may arise due to unforeseen changes in tax, trade, environmental, labor,
safety, payroll or pension policies;
higher than expected investments may be required to implement necessary compliance processes and
related systems, including accounting systems and internal controls over financial reporting;
•
limitations on, or costs associated with, workforce reductions;
25
•
•
•
the Company may fail to implement its strategy for a particular acquisition, including successfully
integrating the acquired business;
the Company may fail to retain, motivate and integrate key management and other employees of the
acquired business; and
the possibility of other costs or inefficiencies associated with the integration and consolidation of
operational and administrative systems, processes and infrastructures of the combined company.
Any one of these factors could result in delays, increased costs or decreases in the amount of expected revenues
related to combining the companies and could adversely impact our financial condition or results of operations.
We face risks related to our derivative instruments.
We typically utilize derivative instruments to manage fluctuations in interest rates, gas prices and foreign
exchange rates. The derivative instruments we use to manage our risk are usually in the form of interest rate and
commodity swaps and foreign exchange forward and swap agreements. Periodically, we are required to
determine the change in fair value, called the “mark to market,” of some of these derivative instruments, which
could expose us to substantial mark-to-market losses or gains if such rates or prices fluctuate materially from the
time the derivatives were entered into. Accordingly, volatility in rates or prices may adversely impact our financial
position or results of operations and could impact the cost and effectiveness of our derivative instruments in
managing our risks.
We face risks related to fluctuations in currency exchange rates.
Our international operations generate revenue and incur operating costs in a variety of currencies. The financial
position and results of operations of many of our foreign subsidiaries are reported in the relevant local currency
and then translated to U.S. dollars at the applicable currency exchange rate for inclusion in our consolidated
financial statements. Changes in exchange rates among these currencies and the U.S. dollar will affect the
recorded levels of our assets and liabilities in our financial statements. While we take steps to manage our
currency exposure, such as currency hedging, we may not be able to effectively limit our exposure to
intermediate- or long-term movements in currency exchange rates, which could adversely impact our financial
condition or results of operations.
We face risks related to liability and insurance.
Our businesses expose us to claims for personal injury, death and property damage related to the use of our
vehicles, having our customers on our premises and for workers’ compensation claims and other employment-
related claims by our employees. We may become exposed to uninsured liability at levels in excess of our
historical levels resulting from unusually high losses or otherwise. In addition, liabilities in respect of existing or
future claims may exceed the level of our reserves and/or our insurance, which could adversely impact our
financial condition and results of operations. Furthermore, insurance with unaffiliated insurers may not continue to
be available to us on economically reasonable terms or at all. Should we experience significant liability for which
we did not plan, our results of operations and financial position could be negatively impacted.
We reinsure certain insurance exposures as well as the optional insurance coverages that we offer through
unaffiliated third-party insurers, which subjects us to regulation under various insurance statutes, including
insurance holding company statutes, of the jurisdictions in which our insurance company subsidiaries are
domiciled. Any changes in regulations that alter or impede our reinsurance obligations or subsidiary operations in
all or certain jurisdictions could adversely impact the economic benefits that we rely upon to support our
reinsurance efforts, which in turn would adversely impact our financial condition or results of operations.
Optional insurance products that we offer to renters in the United States, including, but not limited to,
supplemental liability insurance, personal accident insurance and personal effects protection, are regulated under
state laws governing such products. Our car rental operations in Europe must comply with certain European
Union regulations regarding the sale of personal accident insurance by intermediaries. In our other international
car rental operations, our offering of optional insurance coverages has not historically been regulated. Any
changes in U.S. or international laws that change our operating requirements with respect to optional insurance
26
products could increase our costs of compliance or make it uneconomical to offer such products, which would
lead to a reduction in revenue and profitability. Should more of our customers decline purchasing supplemental
liability insurance products as a result of any changes in these laws or otherwise, our financial condition or results
of operations could be adversely impacted.
We offer loss damage waivers to our customers as an option for them to reduce their financial liability that may be
incurred as a result of loss or damage to the rental vehicle. Certain states in the United States have enacted
legislation that mandates disclosure to each customer at the time of rental that damage to the rented vehicle may
be covered to some extent by the customer’s personal automobile insurance and that loss damage waivers may
not be necessary. In addition, some states have statutes that establish or cap the daily rate that can be charged
for loss damage waivers. Should new state or federal laws or regulations arise that place new limits on our ability
to offer loss damage waivers to our customers, our financial condition or results of operations could be adversely
impacted.
If the current federal law that pre-empted state laws that imputed tort liability solely based on ownership of a
vehicle involved in an accident were to change, our insurance liability exposure could materially increase.
Costs associated with lawsuits or investigations or increases in the legal reserves that we establish
based on our assessment of contingent liabilities may have an adverse effect on our results of
operations.
We are involved in various claims and lawsuits and other legal proceedings that arise in and outside of the
ordinary course of our business. From time to time, the vehicle rental industry may be reviewed or investigated by
regulators, which could lead to tax assessments, enforcement actions, fines and penalties or the assertion of
private litigation claims. It is not possible to predict with certainty the outcome of claims, investigations and
lawsuits, and we could in the future incur judgments, taxes, fines or penalties or enter into settlements of lawsuits
and claims that could have an adverse impact on our financial condition or results of operations. In addition, while
we maintain insurance coverage with respect to certain claims, we may not be able to obtain such insurance on
acceptable terms in the future, if at all, and any such insurance may not provide adequate coverage against any
such claims.
As required by U.S. generally accepted accounting principles (“GAAP”), we establish reserves based on our
assessment of contingencies, including contingencies related to legal claims asserted against us. Subsequent
developments may affect our assessment and estimates of the loss contingency recorded as a reserve and
require us to make payments in excess of our reserves, which could have an adverse effect on our financial
condition or results of operations.
We face risks related to U.S. and international laws and regulations that could impact our global
operations.
We are subject to multiple, and sometimes conflicting, U.S. and international laws and regulations related to,
among others, consumer protection, competition, customer privacy and data protection, franchising, fraud and
anti-bribery, environmental matters, taxes, automobile-related liability, labor and employment matters, currency-
exchange and other various banking and financial industry matters, health and safety, insurance rates and
products, claims management, protection of our trademarks and other intellectual property and other trade-related
laws and regulations in numerous jurisdictions. Recent years have seen a substantial increase in the global
enforcement of certain of these laws such as the U.S. Foreign Corrupt Practices Act, the UK Bribery Act and
similar foreign laws and regulations. Our continued operation and expansion outside of the United States,
including in developing countries, could increase the risk of governmental investigations and violations of such
laws. We cannot predict the nature, scope or effect of future regulatory requirements to which our global
operations may be subject or the manner in which existing or future laws may be administered or interpreted. Any
alleged or actual violations of any law or regulation, change in law or regulation or in the interpretation of existing
laws or regulations may subject us to government scrutiny, investigation and civil and criminal penalties, may limit
our ability to provide services in any of the countries in which we operate and could result in a material adverse
impact on our reputation, business, financial position or results of operations.
In the United States and certain other international locations where we have Company-operated locations, we
may recover from consumers various costs associated with the title and registration of our vehicles and certain
27
costs, including concession costs imposed by an airport authority or the owner and/or operator of the premises
from which our vehicles are rented. We may in the future be subject to potential U.S. or international laws or
regulations that could negatively impact our ability to separately state, charge and recover such costs, which
could adversely impact our financial condition or results of operations.
With respect to U.S. and international consumer privacy and data protection laws and regulations in the
jurisdictions in which we operate, we may be limited in the types of information that we may collect about
individuals with whom we deal or propose to deal, as well as how we collect, process and retain the information
that we are permitted to collect, some of which may be non-public personally identifiable information. The
centralized nature of our information systems requires the routine flow of information about customers and
potential customers across national borders, particularly in the United States and Europe. If this flow of
information were to become illegal, or subject to onerous restrictions, our ability to serve our customers could be
negatively impaired for an extended period of time. In addition, our failure to maintain the security of the data we
hold, whether as a result of our own error or the actions of others, could harm our reputation or give rise to legal
liabilities that adversely impact our financial condition or results of operations. Privacy and data protection
regulations impact the ways that we process our transaction information and increase our compliance costs. In
addition, the Payment Card Industry imposes strict customer credit card data security standards to ensure that
our customers’ credit card information is protected. Failure to meet these data security standards could result in
substantial increased fees to credit card companies, other liabilities and/or loss of the right to collect credit card
payments, which could adversely impact our financial condition or results of operations.
We face risks related to environmental laws and regulations.
We are subject to a wide variety of environmental laws and regulations in the United States and internationally in
connection with our operations, including, among other things, with respect to the ownership or use of tanks for
the storage of petroleum products, such as gasoline, diesel fuel and motor and waste oils; the treatment or
discharge of waste waters; and the generation, storage, transportation and off-site treatment or disposal of solid
or liquid wastes. We maintain liability insurance covering our storage tanks. In the United States, we have
instituted an environmental compliance program designed to ensure that these tanks are properly registered in
the jurisdiction in which they are located and are in compliance with applicable technical and operational
requirements. We are also subject to various environmental regulatory requirements in other countries in which
we operate. The tank systems located at each of our locations may not at all times remain free from undetected
leaks, and the use of these tanks may result in significant spills, which may require remediation and expose us to
material liabilities.
We may also be subject to requirements related to the remediation of substances that have been released into
the environment at properties owned or operated by us or at properties to which we send substances for
treatment or disposal. Such remediation requirements may be imposed without regard to fault and liability for
environmental remediation can be substantial. These remediation requirements and other environmental
regulations differ depending on the country where the property is located. We have made, and will continue to
make, expenditures to comply with environmental laws and regulations, including, among others, expenditures for
the remediation of contamination at our owned and leased properties, as well as contamination at other locations
at which our wastes have reportedly been identified. Our compliance with existing or future environmental laws
and regulations may, however, require material expenditures by us or otherwise have an adverse impact on our
financial condition or results of operations.
The U.S. Congress and other legislative and regulatory authorities in the United States and internationally have
considered, and will likely continue to consider, numerous measures related to climate change and greenhouse
gas emissions. Should rules establishing limitations on greenhouse gas emissions or rules imposing fees on
entities deemed to be responsible for greenhouse gas emission become effective, demand for our services could
be affected, our fleet and/or other costs could increase, and our business could be adversely impacted.
28
We face risks related to changes in healthcare laws.
In 2010, the United States enacted significant healthcare reform laws, many of which have provisions that take
effect in 2014. Due to the breadth and complexity of the legislation, uncertainty regarding the effect of these laws
on healthcare costs generally, and uncertainty regarding how large employers will respond to the new laws and
regulations, it is difficult to predict the overall impact of these laws on our business over the coming years.
Significant increases in costs due either to the new laws or general healthcare cost increases could adversely
impact our financial condition or results of operations, expose us to expanded liability, adversely impact our ability
to attract or retain employees, or require us to revise the ways in which we conduct business.
We face risks related to franchising or licensing laws and regulations.
We sometimes sell licenses to third parties to operate locations under our brands in exchange for the payment of
a royalty by the third-party licensee. Our licensing activities and sales are subject to various state and federal laws
and regulations. In particular, the U.S. Federal Trade Commission requires that we make extensive disclosure to
prospective licensees but does not require registration. A number of states require registration and/or disclosure in
connection with licensing offers and sales, as well as franchise relationship laws that could limit our ability to,
among other things, terminate license agreements or withhold consent to the renewal or transfer of these
agreements. We are also subject to certain regulations affecting our license arrangements in Europe and other
international locations. Although our licensing operations have not been materially adversely affected by such
existing regulations, such regulations could have a greater impact on us if we were to become more active in
granting or selling new licenses to third parties. Should our operations become subject to new laws or regulations
that negatively impact our ability to engage in licensing activities, our financial condition or results of operations
could be adversely impacted.
We face risks related to the actions of, or failures to act by, our licensees, dealers or independent
operators.
Our vehicle rental licensee and dealer locations are independently owned and operated. We also operate many of
our Company-owned locations through agreements with “agency operators,” which are third-party independent
contractors who receive commissions to operate such locations. Our agreements with our licensees, dealers and
agency operators (“third-party operators”) generally require that they comply with all laws and regulations
applicable to their businesses, including our internal policies and standards. Under these agreements, third-party
operators retain control over the employment and management of all personnel at their locations. Regulators,
courts or others may seek to hold us responsible for the actions of, or failures to act by third-party operators.
Although we actively monitor the operations of these third-party operators, and under certain circumstances have
the ability to terminate their agreements for failure to adhere to contracted operational standards, we are unlikely
to detect all problems. Moreover, there are occasions when the actions of third-party operators may not be clearly
distinguishable from our own. It is our policy to vigorously seek to be dismissed from any such claims involving
third-party operators and to pursue indemnity for any adverse outcomes that affect our Company. Failure of third-
party operators to comply with laws and regulations may expose us to liability, damages and negative publicity
that may adversely impact our financial condition or results of operations.
29
We face risks related to our reliance on communications networks and centralized information systems.
We rely heavily on the satisfactory performance and availability of our information systems, including our
reservation systems, websites and network infrastructure to attract and retain customers, accept reservations,
process rental and sales transactions, manage our fleet of vehicles, account for our activities and otherwise
conduct our business. We have centralized our information systems, and we rely on communications service
providers to link our systems with the business locations these systems were designed to serve. A failure or
interruption that results in the unavailability of any of our information systems, or a major disruption of
communications between a system and the locations it serves, could cause a loss of reservations, interfere with
our fleet management, slow rental and sales processes, create negative publicity that damages our reputation or
otherwise adversely impacts our ability to manage our business effectively. We may experience temporary system
interruptions for a variety of reasons, including network failures, power outages, cyber-attacks, software errors or
an overwhelming number of visitors trying to access our systems during periods of strong demand. Because we
are dependent in part on independent third parties for the implementation and maintenance of certain aspects of
our systems and because some of the causes of system interruptions may be outside of our control, we may not
be able to remedy such interruptions in a timely manner, or at all. Our systems’ business continuity plans and
insurance programs seek to mitigate such risks but they cannot fully eliminate the risk that a disruption could be
experienced in any of our information systems.
We face risks related to protecting the confidential information of our customers against security
breaches, including cyber-security breaches.
Third parties may have the technology or expertise to breach the security of our customer transaction data and
our security measures may not prevent physical security or cyber-security breaches, which could result in
substantial harm to our business, our reputation or our results of operations. We rely on encryption and/or
authentication technology licensed and, at times, administered by independent third parties to secure
transmission of confidential information, including credit card numbers. Our outsourcing agreements with these
third-party service providers generally require that they have adequate security systems in place to protect our
customer transaction data. However, advances in computer capabilities, new discoveries in the field of
cryptography or other cyber-security developments could render our security systems and technology or those
employed by our third-party service providers vulnerable to a breach. In addition, anyone who is able to
circumvent our security measures could misappropriate proprietary information or cause interruptions in our
operations. Cyber-security risks such as malicious software and attempts to gain unauthorized access to data are
rapidly evolving and could lead to disruptions in our reservation system or other data systems, unauthorized
release of confidential or otherwise protected information or corruption of data. Any successful efforts by
individuals to infiltrate, break into, disrupt, damage or otherwise steal from the Company’s, its licensees’ or its
third-party service providers’ security or information systems could damage our reputation and expose us to a risk
of loss or litigation and possible liability that could adversely impact our financial condition or results of operations.
We face risks associated with our like-kind exchange program.
We utilize a like-kind exchange program whereby we replace vehicles in a manner that allows tax gains on
vehicles sold in the United States to be deferred. The program has resulted in a material deferral of federal and
state income taxes beginning in 2004. The benefit of deferral is dependent on reinvestment of vehicle disposition
proceeds in replacement vehicles within a prescribed period of time (usually six months). An extended downsizing
of our fleet could result in reduced deferrals, utilization of tax attributes and increased payment of federal and
state income taxes that could require us to make material cash payments. Such a downsizing or reduction in
purchases would likely occur if, and to the extent, we are unable to obtain financing when our asset-backed rental
car financings mature or in connection with a significant decrease in demand for vehicle rentals. Therefore, we
cannot offer assurance that the expected tax deferral will continue or that the relevant law concerning like-kind
exchange programs will remain intact in its current form.
U.S. federal and state income tax laws, legislation or regulations governing like-kind exchange and accelerated
depreciation deductions and the administrative interpretations of those laws, legislation or regulations are subject
to amendment at any time. We cannot predict when or if any new federal or state income tax laws, legislation,
regulations or administrative interpretations will be adopted and in what manner. Any such change could eliminate
certain tax deferrals that are currently available with respect to like-kind exchange or accelerated depreciation
30
deductions, which would adversely impact our financial condition or results of operations by reducing or
eliminating deferral of federal or state income taxes allowed for our U.S. vehicle rental fleet.
We face risks related to our protection of our intellectual property.
We have registered “Avis,” “Budget,” “Zipcar” and “Payless” and various related marks or designs, such as “We
try harder,” and “wheels when you want them,” as trademarks in the United States and in certain other countries.
At times, competitors may adopt service names similar to ours, thereby impeding our ability to build brand identity
and possibly leading to market confusion. In addition, there could be potential trade name or trademark
infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of
our registered trademarks. From time to time, we have acquired or attempted to acquire Internet domain names
held by others when such names have caused consumer confusion or had the potential to cause consumer
confusion.
Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names,
copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of
resources and could adversely impact our financial condition or results of operations.
We face risks related to our reliance on former subsidiaries to fulfill their obligations under the
agreements related to their disposition.
We continue to manage the administration of certain legacy items which remain following our sales and spin-offs
of several significant subsidiaries, including the spin-offs of Realogy Corporation (“Realogy”) and Wyndham
Worldwide Corporation (“Wyndham Worldwide”). Realogy and Wyndham Worldwide have agreed to take
responsibility or indemnify us for 62.5% and 37.5%, respectively, of certain contingent and other of our corporate
liabilities including those relating to unresolved tax and legal matters as well as 100% of certain liabilities that
relate to their respective businesses (the “Assumed Obligations”), including (i) all taxes imposed on us and certain
of our subsidiaries and (ii) certain of our contingent and other corporate liabilities and/or those of our subsidiaries
to the extent incurred prior to August 23, 2006. If either Realogy or Wyndham Worldwide were to default in its
payment, when due, of any such Assumed Obligations, each non-defaulting party, including us, would be required
to pay an equal portion of the defaulted amounts, and any such default may adversely impact our financial
condition or results of operations. In conjunction with such indemnification, Realogy effectively controls the
process for resolving disputes related to many of the Assumed Obligations. Realogy, Wyndham Worldwide and/or
other separated companies are also required to indemnify us in respect of certain liabilities that relate to their
respective businesses, including certain effective guarantees that result from either us or one of our subsidiaries
remaining a named lessee on real estate leases pertaining to properties occupied by the separated companies as
well as certain litigation that pertains to the businesses of such companies in which we are also named. Any
failure by the separated companies to pay any of their assumed liabilities when due or to indemnify us when
required may adversely impact our financial condition or results of operations.
RISKS RELATED TO OUR INDEBTEDNESS
We face risks related to our current and future debt obligations.
Our ability to satisfy and manage our debt obligations depends on our ability to generate cash flow and on overall
financial market conditions. To some extent, this is subject to prevailing economic and competitive conditions and
to certain financial, business and other factors, many of which are beyond our control. Our total debt as of
December 31, 2013, was $10.7 billion, requiring us to dedicate a significant portion of our cash flows to pay
interest and principal on our debt, which reduces the funds available to us for other purposes. Our business may
not generate sufficient cash flow from operations to permit us to service our debt obligations and meet our other
cash needs, which may force us to reduce or delay capital expenditures, sell or curtail assets or operations, seek
additional capital or seek to restructure or refinance our indebtedness. If we must sell or curtail our assets or
operations, it may negatively affect our ability to generate revenue. Certain of our indebtedness contains
restrictive covenants and provisions applicable to us and our subsidiaries that limit our ability to, among other
things:
•
incur additional debt to fund working capital, capital expenditures, debt service requirements, execution of
our business strategy or acquisitions and other purposes;
31
•
•
•
•
provide guarantees in respect of obligations of other persons;
pay dividends or distributions, redeem or repurchase capital stock;
prepay, redeem or repurchase debt;
create or incur liens;
• make distributions from our subsidiaries;
•
•
•
sell assets and capital stock of our subsidiaries;
consolidate or merge with or into, or sell substantially all of our assets to, another person; and
respond to adverse changes in general economic, industry and competitive conditions, as well as
changes in government regulation and changes to our business.
Our failure to comply with the restrictive covenants contained in the agreements or instruments that govern our
debt obligations, if not waived, would cause a default under the senior credit facility and could result in a cross-
default under several of our other debt agreements including our U.S. and European asset-backed debt facilities.
If such a failure were to occur, certain provisions in our various debt agreements could require that we repay or
accelerate debt payments to the lenders or holders of our debt and there can be no assurance that we would be
able to refinance or obtain a replacement for such financing programs.
We face risks related to movements or disruptions in the credit and asset-backed securities markets.
We finance our operations through the use of asset-backed securities and other debt financing structures
available through the credit market. Our total asset-backed debt as of December 31, 2013, was approximately
$7.3 billion, with remaining available capacity of approximately $3.5 billion. We maintain asset-backed facilities in
the United States, Canada, Australia and Europe. If the asset-backed financing market were to be disrupted for
any reason, we may be unable to obtain refinancing for our operations at current levels, or at all, when our asset-
backed financings mature. Likewise, any disruption of the asset-backed financing market could also increase our
borrowing costs, as we seek to engage in new financings or refinance our existing asset-backed financings. In
addition, we could be subject to increased collateral requirements to the extent that we request any amendment
or renewal of any of our existing asset-backed financings.
We face risks related to potential increases in interest rates.
A portion of our borrowings, primarily our vehicle-backed borrowings, bears interest at variable rates that expose
us to interest rate risk. If interest rates were to increase, whether due to an increase in market interest rates or an
increase in our own cost of borrowing, our debt service obligations for our variable rate indebtedness would
increase even though the amount of borrowings remained the same, and our results of operations could be
adversely affected. As of December 31, 2013, our total outstanding debt of approximately $10.7 billion included
unhedged interest rate sensitive debt of approximately $1.9 billion. During our seasonal borrowing peak in 2013,
outstanding unhedged interest rate sensitive debt totaled approximately $4.3 billion.
Approximately $600 million of our corporate indebtedness as of December 31, 2013, and virtually all of our $7.3
billion of debt under vehicle programs, matures within the next five years. If we are unable to refinance maturing
indebtedness at interest rates that are equivalent to or lower than the interest rates on our maturing debt, our
results of operations or our financial condition may be adversely affected.
32
RISKS RELATED TO OUR COMMON STOCK
We face risks related to the market price of our common stock.
We cannot predict the prices at which our common stock will trade. The market price of our common stock
experienced substantial volatility in the past and may fluctuate widely in the future, depending upon many factors,
some of which may be beyond our control, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
our quarterly or annual earnings, or those of other companies in our industry, including our key suppliers;
financial estimates that we provide to the public, any changes in such estimates, or our failure to meet
such estimates;
actual or anticipated fluctuations in our operating results;
changes in accounting standards, policies, guidance, interpretations or principles;
announcements by us or our competitors of acquisitions, dispositions, strategies, marketing affiliations,
projections, fleet costs, pricing actions or other competitive actions;
changes in earnings estimates by securities analysts or our ability to meet those estimates;
changes in investors’ and analysts’ perceptions of our industry, business or related industries;
the operating and stock price performance of other comparable companies;
overall market fluctuations;
success or failure of competitive service offerings or technologies;
tax or regulatory developments in the United States or foreign countries;
litigation involving us; and
general economic conditions and conditions in the credit markets.
If any of the foregoing occurs, it could cause our stock price to fall and may expose us to litigation, including class
action lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.
Our shareholders’ percentage of ownership may be diluted in the future.
Our shareholders’ percentage of ownership may be diluted in the future due to equity issuances, conversion of
our convertible senior notes due 2014 or equity awards that we granted or will grant to our directors, officers and
employees. In addition, we may undertake acquisitions financed in part through public or private offerings of
securities, or other arrangements. If we issue equity securities or equity-linked securities, the issued securities
would have a dilutive effect on the interests of the holders of our common shares. Holders of our convertible
senior notes may also convert their notes into up to approximately 4 million shares of our common stock. In 2013,
we granted approximately 1.2 million restricted stock units and in January 2014, we granted approximately
580,000 restricted stock units. We also expect to grant restricted stock units, stock options and/or other types of
equity awards in the future.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
33
ITEM 2. PROPERTIES
Our principal executive offices are located at 6 Sylvan Way, Parsippany, New Jersey 07054 pursuant to a lease
agreement that expires in 2023. We own a facility in Virginia Beach, Virginia, which serves as a satellite
administrative facility for our car and truck rental operations. We also lease office space in Tulsa, Oklahoma, and
Boston, Massachusetts, pursuant to leases expiring in 2022 and 2023, respectively. These locations primarily
provide operational and administrative services or contact center operations. We also lease office space in
Bracknell, England, Budapest, Hungary and Barcelona, Spain, pursuant to leases expiring in 2022, 2018 and
2019, respectively, for corporate offices, contact center activities and other administrative functions, respectively,
in Europe. There are approximately 20 other leased office locations throughout the world used for administrative,
regional sales and operations activities.
We lease or have vehicle rental concessions for our brands at locations throughout the world. Avis operates
approximately 1,400 locations in North America and approximately 1,250 international locations. Of those
locations, approximately 280 in North America and approximately 200 outside of North America are at airports.
Budget operates at approximately 1,050 locations in North America, of which approximately 220 are at airports.
Budget also operates at approximately 600 international locations, of which approximately 150 are at airports.
Payless also operates at approximately 15 locations in North America, all of which are at or near airports. We
believe that our properties are sufficient to meet our present needs and we do not anticipate any difficulty in
securing additional space, as needed, on acceptable terms.
34
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings related to wage and hour and employee classification
claims that involve allegations that we violated the Fair Labor Standards Act and various other state labor laws by
misclassifying certain management employees as exempt from receiving overtime compensation. The relief
sought in these cases varies but most cases typically seek to recover payment for alleged unpaid overtime
compensation and attorneys’ fees and costs. These matters are at various stages in the litigation process and we
intend to vigorously defend against these suits.
In January 2013, six putative class actions were filed in the Delaware Chancery Court and two putative class
actions were filed in Massachusetts state court arising out of the acquisition of Zipcar by the Company. The
complaints all generally alleged that Zipcar’s board of directors breached its fiduciary duties of care and loyalty by
failing to take steps to maximize the value of Zipcar for its public shareholders and that the Company aided and
abetted the breaches of fiduciary duties by Zipcar’s board of directors. The parties executed a stipulation of
settlement in October 2013, which the Delaware Chancery Court reviewed and approved in February 2014, and
which resulted in this matter being fully dismissed.
Additionally, we are involved in other claims, legal proceedings and governmental inquiries related, among other
things, to our vehicle rental and car sharing operations, including, among others, business practice disputes,
contract and licensee disputes, employment and wage-and-hour claims, competition matters, insurance claims,
intellectual property claims and other regulatory, environmental, commercial and tax matters. The Company
believes that it has adequately accrued for such matters as appropriate. However, litigation is inherently
unpredictable and, although the Company believes that its accruals are adequate and/or that it has valid defenses
in these matters, unfavorable resolutions could occur, which could adversely impact the Company’s financial
position, results of operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
35
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET PRICE OF COMMON STOCK
Our common stock is currently traded on the NASDAQ Global Select Market (“NASDAQ”) under the symbol
“CAR.” The following table sets forth the quarterly high and low sales prices per share of our common stock as
reported by NASDAQ for 2013 and 2012. At January 31, 2014, the number of stockholders of record was
approximately 4,226.
2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
DIVIDEND POLICY
High
Low
$
28.47 $
34.21
33.30
40.72
20.32
25.74
26.57
27.77
High
Low
$
15.52 $
16.97
17.90
20.49
10.59
11.93
12.85
15.32
We neither declared nor paid any cash dividend on our common stock in 2013 and 2012, and we do not anticipate
paying dividends on our common stock for the foreseeable future. Our ability to pay dividends to holders of our
common stock is limited by the Company’s senior credit facility, the indentures governing our senior notes and our
vehicle financing programs, insofar as we may seek to pay dividends out of funds made available to the Company
by its subsidiaries that are governed by such senior credit facility. The declaration and payment of future dividends
to holders of our common stock will be at the discretion of our Board of Directors and will depend upon many
factors, including our financial condition, earnings, capital requirements of our businesses, covenants associated
with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors that
the Board of Directors deems relevant.
36
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides information about shares of our common stock that may be issued upon the exercise
of options and restricted stock units under all of our existing equity compensation plans as of December 31, 2013.
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved
by security holders
Total
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants, Rights
and Restricted
Stock Units (a)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(Excludes Restricted
Stock Units) ($)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in First
Column) (b)
4,734,867 $
—
4,734,867 $
2.82
—
2.82
6,023,674
—
6,023,674
__________
(a)
Includes options and other awards granted under the following plans approved by stockholders: the Amended and Restated 2007 Equity and
Incentive Plan, the 1997 Stock Incentive Plan, the 1997 Stock Option Plan and the Directors Deferred Compensation Plan. The 1997 Stock
Incentive Plan, the 1997 Stock Option Plan and the Directors Deferred Compensation Plan were each approved with respect to an initial allocation
of shares.
Represents 3,546,821 shares available for issuance under the Amended and Restated 2007 Equity and Incentive Plan and 2,476,853 shares
available for issuance pursuant to the 2009 Employee Stock Purchase Plan.
(b)
ISSUER PURCHASES OF EQUITY SECURITIES
The following is a summary of the Company’s common stock repurchases by month for the quarter ended
December 31, 2013:
Period
October 1-31, 2013
November 1-30, 2013
December 1-31, 2013
Total
Total Number
of Shares
Purchased
Average Price
Paid per Share
—
33.95
37.49
35.73
— $
359,942
361,875
721,817 $
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
— $
359,942
361,875
721,817 $
Approximate
Dollar Value of
Shares That
May Yet Be
Purchased
Under the
Plans or
Programs
175,342,769
163,122,400
149,554,997
149,554,997
In August 2013, the Company obtained Board approval to repurchase up to $200 million of its common stock. The
Company’s stock repurchases may occur through open market purchases or trading plans pursuant to Rule
10b5-1 of the Securities Exchange Act of 1934. The repurchase program may be suspended, modified or
discontinued at any time without prior notice. The repurchase program has no set expiration or termination date.
37
PERFORMANCE GRAPH
Set forth below is a line graph and table comparing the cumulative total stockholder return of our common stock
against the cumulative total returns of peer group indices, the S&P MidCap 400 Index and the Dow Jones US
Transportation Average Index for the period of five fiscal years commencing December 31, 2008 and ending
December 31, 2013. The broad equity market indices used by the Company are the S&P MidCap 400 Index,
which measures the performance of mid-sized companies, and the Dow Jones US Transportation Average Index,
which measures the performance of transportation companies. The graph and table depict the result of an
investment on December 31, 2008 of $100 in the Company’s common stock, the S&P MidCap 400 Index and the
Dow Jones US Transportation Average Index, including investment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Avis Budget Group, Inc., the S&P Midcap 400 Index,
and the Dow Jones US Transportation Average Index
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
12/08
12/09
12/10
12/11
12/12
12/13
Avis Budget Group, Inc.
S&P Midcap 400
Dow Jones US Transportation Average
2008
2009
2010
2011
2012
2013
As of December 31,
Avis Budget Group
$ 100.00 $ 1,874.29 $ 2,178.57 $ 1,531.43 $ 2,831.43 $ 5,774.29
S&P MidCap 400 Index
Dow Jones U.S. Transportation
Average Index
$ 100.00 $ 137.38 $ 173.98 $ 170.96 $ 201.53 $ 269.04
$ 100.00 $ 118.58 $ 150.29 $ 150.30 $ 161.64 $ 228.52
38
ITEM 6. SELECTED FINANCIAL DATA
2013
As of or For the Year Ended December 31,
2011
(In millions, except per share data)
2010
2012
2009
Results of Operations
Net revenues
Net income (loss)
Adjusted EBITDA (a) (b)
Earnings (loss) Per Share
Basic
Diluted
Financial Position
Total assets
Assets under vehicle programs
Corporate debt
Debt under vehicle programs (c)
Stockholders’ equity
__________
(a)
$
$
$
$
$
7,937 $
7,357 $
5,900 $
5,185 $
5,131
16 $
290 $
(29) $
54 $
(47)
708 $
802 $
605 $
398 $
205
0.15 $
0.15
2.72 $
2.42
(0.28) $
(0.28)
0.53 $
0.49
(0.46)
(0.46)
16,284 $
10,452
3,394
7,337
771
15,218 $
10,099
2,905
6,806
757
12,938 $
10,327 $
9,090
3,205
5,564
412
6,865
2,502
4,515
410
10,093
6,522
2,131
4,374
222
The following table reconciles Adjusted EBITDA to Net income (loss) within our Selected Financial Data, which we define as income
from continuing operations before non-vehicle related depreciation and amortization, any impairment charge, early extinguishment of
debt, non-vehicle related interest, transaction-related costs and income taxes. Our presentation of Adjusted EBITDA may not be
comparable to similarly-titled measures used by other companies.
Adjusted EBITDA
Less: Non-vehicle related depreciation and amortization
Interest expense related to corporate debt, net
Early extinguishment of debt
Transaction-related costs
Impairment
Income (loss) before income taxes
Provision for (benefit from) income taxes
Net income (loss)
__________
For the Year Ended December 31,
2013
2012
2011
2010
2009
$
$
708
152
228
147
51
33
97
81
16
$
$
802
125
268
75
34
—
300
10
290
$
$
$
605
95
219
—
255
—
36
65
(29) $
398
90
170
52
14
—
72
18
54
$
$
205
96
153
—
—
33
(77)
(30)
(47)
(b)
(c)
Adjusted EBITDA includes restructuring costs of $61 million, $38 million, $5 million, $11 million and $20 million for the years ended
December 31, 2013, 2012, 2011, 2010 and 2009, respectively.
Includes related-party debt due to Avis Budget Rental Car Funding (AESOP) LLC (“Avis Budget Rental Car Funding”). See Note 14 to
our Consolidated Financial Statements.
In presenting the financial data above in conformity with GAAP, we are required to make estimates and
assumptions that affect the amounts reported. See “Critical Accounting Policies” under Item 7 of this Annual
Report for a detailed discussion of the accounting policies that we believe require subjective and complex
judgments that could potentially affect reported results.
TRANSACTION RELATED-COSTS, RESTRUCTURING AND OTHER ITEMS
During 2013, 2012, 2011 and 2010, we recorded $51 million, $34 million, $255 million and $14 million,
respectively, of transaction-related costs, primarily related to our acquisition of Avis Europe and Zipcar, the
integration of acquired businesses with our operations and expenses related to our previous efforts to acquire
Dollar Thrifty Automotive Group, Inc. (“Dollar Thrifty”). In 2013, these costs were primarily related to the
acquisition of Zipcar and the integration of acquired businesses. During 2012, these costs were primarily related
to the integration of Avis Europe’s operations with the Company’s. In 2011, these costs included (i) a $117 million
39
non-cash charge related to the unfavorable license rights reacquired by the Company through the acquisition of
Avis Europe, which provided Avis Europe with royalty-free license rights within certain territories, (ii) $89 million of
expenses related to due-diligence, advisory and other costs, and (iii) $49 million for losses on foreign-currency
transactions related to the Avis Europe purchase price. In 2010, these costs related to due-diligence and other
cost for our previous efforts to acquire Dollar Thrifty. See Notes 2 and 5 to our Consolidated Financial Statements.
In 2012, we implemented a restructuring initiative related to our Truck Rental segment, and in 2011, we
implemented a restructuring initiative subsequent to the acquisition of Avis Europe. In 2010 and 2009, we
implemented cost-reduction and efficiency improvement plans to reduce costs, enhance organizational efficiency
and consolidate and rationalize existing processes and facilities. We recorded expenses related to these and
other restructuring initiatives of $61 million in 2013, $38 million in 2012, $5 million in 2011, $11 million in 2010,
and $20 million in 2009. See Note 4 to our Consolidated Financial Statements.
In 2013, 2012 and 2010, we recorded $147 million, $75 million, and $52 million, respectively, of expense related
to the early extinguishment of corporate debt.
In 2013, we recorded a charge of $33 million ($33 million, net of tax) for the impairment of our equity-method
investment in our Brazilian licensee. In 2009, we recorded a $33 million ($20 million, net of tax) non-cash charge
for the impairment of investments, to reflect the other-than-temporary decline of the investments’ fair value below
their carrying value.
40
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our Consolidated Financial Statements and
accompanying Notes thereto included elsewhere herein. Unless otherwise noted, all dollar amounts in tables are
in millions and those relating to our results of operations are presented before taxes.
OVERVIEW
OUR COMPANY
We operate three of the most recognized brands in the global vehicle rental and car sharing industry, Avis, Budget
and Zipcar. We are a leading vehicle rental operator in North America, Europe, Australia, New Zealand and
certain other regions we serve, with a fleet of more than 500,000 vehicles. We also license the use of the Avis and
Budget trademarks to licensees in the areas in which we do not operate directly. We and our licensees operate
the Avis, Budget and/or Zipcar brands in approximately 175 countries throughout the world.
OUR SEGMENTS
We categorize our operations into three reportable business segments: North America, International, and Truck
Rental, as discussed in Part I of this Form 10-K.
BUSINESS AND TRENDS
Our revenues are derived principally from car and truck rentals in our Company-owned operations and include:
•
•
•
time and mileage (“T&M”) fees charged to our customers for vehicle rentals;
payments from our customers with respect to certain operating expenses we incur, including gasoline and
vehicle licensing fees, as well as concession fees, which we pay in exchange for the right to operate at
airports and other locations;
sales of loss damage waivers and insurance and rentals of navigation units and other items in conjunction
with vehicle rentals; and
•
royalty revenue from our licensees in conjunction with their vehicle rental transactions.
Our operating results are subject to variability due to seasonality, macroeconomic conditions and other factors.
Car rental volumes tend to be associated with the travel industry, particularly airline passenger volumes, or
enplanements, which in turn tend to reflect general economic conditions. Our vehicle rental operations are also
seasonal, with the third quarter of the year historically having been our strongest due to the increased level of
leisure travel during such quarter. We have a partially variable cost structure and routinely adjust the size, and
therefore the cost, of our rental fleet in response to fluctuations in demand.
We believe that the following factors, among others, may affect and/or impact our financial condition and results of
operations:
• worldwide enplanements;
•
•
•
•
•
•
•
fleet, pricing, marketing and strategic decisions made by us and by our competitors;
changes in fleet costs and in conditions in the used vehicle marketplace;
changes in borrowing costs and in market willingness to purchase corporate and vehicle-related debt;
our acquisitions, our integration of acquired operations and our realization of synergies, particularly with
respect to Zipcar and Avis Europe;
demand for car sharing services;
changes in the price of gasoline;
changes in currency exchange rates; and
41
•
demand for truck rentals.
We continue to operate in an uncertain economic environment, which impacted our business in 2013 and will
continue to do so. Nonetheless, we anticipate that worldwide demand for vehicle rental and car sharing services
will increase in 2014, most likely against a backdrop of modest economic growth in most of the geographic
markets in which we operate directly. We also expect that our access to new fleet vehicles will be adequate to
meet our needs for both replacement of existing vehicles in the normal course and for growth to meet incremental
demand. We experienced declines in realized pricing from 2009 to 2012, and we took actions in 2013 that helped
achieve a modest increase in realized pricing. We will look to pursue opportunities for further pricing increases in
2014 in order to maintain our returns on invested capital and to enhance our profitability.
Our objective in 2014 is to focus on growing our business profitably, strengthening our position as a leading
global provider of vehicle rental services, continuing to enhance the quality of vehicle rental services that we
provide to customers, and maintaining and enhancing efficiencies achieved through process improvement and
other actions. We operate in a highly competitive industry and we expect to continue to face challenges and risks.
We seek to mitigate our exposure to risks in numerous ways, including delivering upon the core strategic
initiatives described above and through continued optimization of fleet levels to match changes in demand for
vehicle rentals, maintenance of liquidity to fund our fleet and our operations, and adjustments in the size, nature
and terms of our relationships with vehicle manufacturers.
2013 HIGHLIGHTS
In 2013, we achieved record transaction volumes and revenues and had the second-highest Adjusted EBITDA in
our history:
• Our net revenues increased 8% year-over-year to $7.9 billion in 2013, primarily due to a 3% increase in Avis
and Budget rental days, as well as the acquisitions of Zipcar and Payless Car Rental (“Payless”).
• Pricing (our average T&M revenue per rental day) increased 1% in North America, excluding Zipcar and
Payless, driven by a 3% increase in leisure pricing.
• Adjusted EBITDA totaled $708 million in 2013, which represents a 12% decline from $802 million in 2012
primarily due to higher fleet costs in North America.
• We completed the acquisition of Zipcar, the world’s leading car sharing network, in March 2013.
• We repurchased $62 million principal amount of our outstanding 3½% Convertible Senior Notes due 2014
and $50 million of our common stock, reducing our diluted shares outstanding by approximately 5.4 million
shares.
• We completed the acquisition of Payless, the sixth largest car rental company in North America, in July
2013.
• We acquired a 50% ownership stake in our Brazilian licensee for Avis and Budget in August 2013.
• Our share price increased 104% to $40.42.
RESULTS OF OPERATIONS
We measure performance using the following key operating statistics: (i) rental days, which represents the total
number of days (or portion thereof) a vehicle was rented, and (ii) T&M revenue per rental day, which represents
the average daily revenue we earned from rental and mileage fees charged to our customers. We also measure
our ancillary revenues (rental-transaction revenue other than T&M revenue), such as from the sale of collision and
loss damage waivers, insurance products, fuel service options and portable GPS navigation unit rentals. Our
vehicle rental operating statistics (rental days and T&M revenue per rental day) are all calculated based on the
actual rental of the vehicle during a 24-hour period. We believe that this methodology, while conservative,
provides our management with the most relevant statistics in order to manage the business. Our calculation may
not be comparable to other companies’ calculation of similarly-titled statistics.
We assess performance and allocate resources based upon the separate financial information of our operating
segments. In identifying our reportable segments, we also consider the nature of services provided by our
operating segments, the geographical areas in which our segments operate and other relevant factors.
Management evaluates the operating results of each of our reportable segments based upon revenue and
42
“Adjusted EBITDA”, which we define as income from continuing operations before non-vehicle related
depreciation and amortization, any impairment charge, early extinguishment of debt, non-vehicle related interest,
transaction-related costs and income taxes. Our presentation of Adjusted EBITDA may not be comparable to
similarly-titled measures used by other companies.
Year Ended December 31, 2013 vs. Year Ended December 31, 2012
Our consolidated results of operations comprised the following:
Revenues
Vehicle rental
Other
Net revenues
Expenses
Operating
Vehicle depreciation and lease charges, net
Selling, general and administrative
Vehicle interest, net
Non-vehicle related depreciation and amortization
Interest expense related to corporate debt, net:
Interest expense
Early extinguishment of debt
Restructuring expense
Transaction-related costs
Impairment
Total expenses
Income before income taxes
Provision for income taxes
Net income
__________
* Not meaningful.
Year Ended
December 31,
2012
2013
Change % Change
$
5,707 $
2,230
7,937
5,297 $
2,060
7,357
4,074
1,811
1,019
264
152
228
147
61
51
33
7,840
97
81
3,824
1,471
925
297
125
268
75
38
34
—
7,057
300
10
410
170
580
250
340
94
(33)
27
(40)
72
23
17
33
783
(203)
71
8%
8%
8%
7%
23%
10%
(11%)
22%
(15%)
96%
61%
50%
*
11%
(68%)
*
$
16 $
290 $
(274)
(94%)
During 2013, our net revenues increased principally as a result of a 3% increase in total rental days (excluding
acquisitions), $246 million of revenue from Zipcar and $44 million of revenue from Payless. Movements in
currency exchange rates had virtually no effect on revenues in 2013 compared to 2012.
Total expenses increased as a result of higher vehicle depreciation and lease charges resulting from a 2%
increase in our car rental fleet and a 17% increase in our per-unit fleet costs (excluding acquisitions); an increase
in operating expenses as a result of the acquisition of Zipcar, increased volumes and inflationary pressures on
costs; an increase in selling, general and administrative costs, driven by the acquisition of Zipcar and increased
marketing commissions; and an increase in debt extinguishment costs in connection with the retirement of a
portion of our outstanding corporate debt. Our expenses were not materially impacted by currency exchange
rates. As a result of these items, and a $71 million increase in our provision for income taxes, our net income
decreased $274 million. Our effective tax rates were a provision of 84% and 3% in 2013 and 2012, respectively,
principally due to the non-deductibility of a portion of our debt extinguishment costs and the treatment of
impairment costs in 2013 and the effective settlement of a $128 million unrecognized tax benefit in 2012.
In the year ended December 31, 2013:
• Operating expenses decreased to 51.3% of revenue from 52.0% in the prior year, driven by cost-
reduction efforts.
43
• Vehicle depreciation and lease charges increased to 22.8% of revenue from 20.0% in 2012, principally
due to higher per-unit fleet costs amid an anticipated normalization of used-car residual values.
• Selling, general and administrative costs increased to 12.8% of revenue from 12.6% in 2012.
• Vehicle interest costs declined to 3.3% of revenue compared to 4.0% in the prior year, principally due to
lower borrowing rates.
Following is a more detailed discussion of the results of each of our reportable segments:
North America
International
Truck Rental
Corporate and Other (a)
Total Company
2013
Revenues
2012
$
$
5,083 $
2,481
373
—
7,937 $
4,640
2,342
374
1
7,357
Less: Non-vehicle related depreciation and amortization
Interest expense related to corporate debt, net:
Interest expense
Early extinguishment of debt
Transaction-related costs (b)
Impairment (c)
Income before income taxes
% Change
(10%)
3%
(55%)
*
(12%)
% Change
2013
Adjusted EBITDA
2012
10% $
6%
0%
*
8%
$
500 $
240
15
(47)
708
152
228
147
51
33
97 $
556
234
33
(21)
802
125
268
75
34
—
300
__________
* Not meaningful.
(a)
(b) For 2013, primarily represents costs related to the integration of acquired businesses and our acquisition of Zipcar and,
Includes unallocated corporate overhead and the elimination of transactions between reportable segments.
for 2012, primarily represents costs related to the integration of the operations of Avis Europe.
(c) We recorded a charge of $33 million for the impairment of our equity-method investment in our Brazilian licensee.
North America
Revenue
Adjusted EBITDA
2013
2012
% Change
$
5,083 $
4,640
500
556
10%
(10%)
Revenues increased 10% in 2013 compared with 2012, primarily due to the acquisitions of Zipcar and Payless
and 3% growth in rental volumes and a 1% increase in pricing (excluding acquisitions).
Adjusted EBITDA decreased 10% in 2013 compared with 2012 due to higher fleet costs, partially offset by lower
vehicle interest expense, as our borrowing rates declined year-over-year.
Zipcar and Payless contributed $246 million and $44 million to revenues and $25 million and an insignificant
amount to Adjusted EBITDA, respectively, in 2013.
In the year ended December 31, 2013:
• Operating expenses were 49.4% of revenue, a decrease from 50.4% in the prior year, primarily due to
higher pricing and our continued cost-reduction efforts.
• Vehicle depreciation and lease charges increased to 24.8% of revenue from 20.3% in 2012, due to 25%
higher per-unit fleet costs, excluding acquisitions.
• Selling, general and administrative costs decreased to 11.8% of revenue from 12.0% in the prior year.
44
• Vehicle interest costs declined to 4.0% of revenue compared to 5.3% in the prior year, principally due to
lower borrowing rates.
International
Revenue
Adjusted EBITDA
2013
2012
$
2,481 $
240
2,342
234
% Change
6%
3%
Revenues increased 6% during 2013 compared with 2012, primarily due to a 4% increase in rental days and a
10% increase in ancillary revenues (excluding Apex Car Rentals (“Apex”)), the October 2012 acquisition of Apex,
and a $14 million increase related to currency exchange rates, partially offset by a 2% decrease in pricing
(excluding Apex).
Adjusted EBITDA increased 3% in 2013 compared with 2012. Apex contributed $42 million to revenue and $9
million to Adjusted EBITDA in 2013, compared to $8 million of revenue and $2 million of Adjusted EBITDA in
fourth quarter 2012.
In the year ended December 31, 2013:
• Operating expenses, at 52.9% of revenue, remained level compared to the prior year.
• Vehicle depreciation and lease costs decreased to 20.2% of revenue from 20.6% in the prior year,
principally due to an increase in fleet utilization.
• Selling, general and administrative costs increased to 13.9% of revenue from 13.3% in the prior-year,
primarily due to increased marketing commissions.
• Vehicle interest costs increased to 1.9% of revenue compared to 1.6% in the prior year, due to lower cash
balances in 2013.
Truck Rental
Revenue
Adjusted EBITDA
2013
2012
% Change
$
373 $
15
374
33
0%
(55%)
Revenues decreased $1 million as the effects on volume of having an 8% smaller fleet were largely offset by a
7% increase in pricing.
Adjusted EBITDA decreased principally as a result of approximately $21 million of restructuring expenses we
incurred in 2013 as we reposition this business.
Corporate and Other
Revenue
Adjusted EBITDA
__________
* Not meaningful
2013
2012
% Change
$
— $
(47)
1
(21)
*
*
Revenue and Adjusted EBITDA decreased $1 million and $26 million, respectively, in 2013 compared with 2012.
Adjusted EBITDA decreased in 2013 primarily due to greater selling, general and administrative expenses which
are not attributable to a particular segment.
45
Year Ended December 31, 2012 vs. Year Ended December 31, 2011
Our consolidated results of operations comprised the following:
Revenues
Vehicle rental
Other
Net revenues
Expenses
Operating
Vehicle depreciation and lease charges, net
Selling, general and administrative
Vehicle interest, net
Non-vehicle related depreciation and amortization
Interest expense related to corporate debt, net:
Interest expense
Early extinguishment of debt
Restructuring expense
Transaction-related costs
Total expenses
Income before income taxes
Provision for income taxes
Net income (loss)
__________
* Not meaningful.
Year Ended
December 31,
2012
2011
Change % Change
$
5,297 $
2,060
7,357
4,338 $
1,562
5,900
959
498
1,457
3,824
1,471
925
297
125
268
75
38
34
7,057
300
10
3,025
1,223
756
286
95
219
—
5
255
5,864
36
65
799
248
169
11
30
49
75
33
(221)
1,193
264
(55)
22%
32%
25%
26%
20%
22%
4%
32%
22%
*
*
(87%)
20%
*
(85%)
$
290 $
(29) $
319
*
During 2012, our net revenues increased principally due to the acquisition of Avis Europe in fourth quarter 2011
and 6% increases in total rental days and ancillary revenues (excluding Avis Europe). Movements in currency
exchange rates had virtually no effect on revenues.
Total expenses increased as a result of including the results of Avis Europe for the full year; an increase in debt
extinguishment costs in connection with the retirement of a portion of our outstanding corporate debt; and an
increase in restructuring expenses. These increases were partially offset by a decrease in transaction-related
costs, which for 2012 related primarily to the integration of the operations of Avis Europe and which for 2011
related to costs associated with the acquisition of Avis Europe and our previous efforts to acquire Dollar Thrifty.
Our expenses were not materially impacted by currency exchange rates. As a result of these items, and a $55
million decrease in our provision for income taxes, our net income increased $319 million. Our effective tax rates
were a provision of 3% and 181% for 2012 and 2011, respectively, which reflected the settlement of a $128 million
unrecognized tax benefit in 2012 and the non-deductibility of many of the transaction-related costs related to the
acquisition of Avis Europe in 2011.
In the year ended December 31, 2012:
• Operating expenses were 52.0% of revenue, versus 51.3% in the prior year, primarily due to the
acquisition of Avis Europe.
• Vehicle depreciation and lease costs declined to 20.0% of revenue in 2012, from 20.7% in 2011, primarily
due to lower per-unit fleet costs in North America amid robust used-car residual values in the first half of
the year, partially offset by the acquisition of Avis Europe.
• Selling, general and administrative costs decreased to 12.6% of revenue, versus 12.8% in 2011, as a
result of our cost-reduction initiatives.
46
• Vehicle interest costs declined to 4.0% of revenue, compared to 4.8% in the prior-year period, principally
due to lower borrowing rates.
Following is a more detailed discussion of the results of each of our reportable segments:
North America
International
Truck Rental
Corporate and Other (a)
Total Company
2012
Revenues
2011
$
$
4,640 $
2,342
374
1
7,357 $
4,495
1,028
376
1
5,900
Less: Non-vehicle related depreciation and amortization
Interest expense related to corporate debt, net:
Interest expense
Early extinguishment of debt
Transaction-related costs (b)
% Change
26%
84%
(33%)
*
33%
% Change
2012
Adjusted EBITDA
2011
3% $
128%
(1%)
*
25%
556 $
234
33
(21)
802
125
268
75
34
442
127
49
(13)
605
95
219
—
255
36
Income before income taxes
$
300 $
__________
* Not meaningful
(a)
(b) For 2012, primarily represents costs related to the integration of the operations of Avis Europe and, for 2011, primarily
Includes unallocated corporate overhead and the elimination of transactions between segments.
represents costs related to our acquisition of Avis Europe and our previous efforts to acquire Dollar Thrifty.
North America
Revenue
Adjusted EBITDA
2012
2011
% Change
$
4,640 $
4,495
556
442
3%
26%
Revenues increased 3% during 2012 compared with 2011, primarily due to a 5% increase in rental days, partially
offset by a 2% decrease in pricing.
Adjusted EBITDA increased 26% during 2012 compared with 2011, primarily due to the increase in revenue and
an 8% decline in per-unit fleet costs.
In the year ended December 31, 2012:
• Operating expenses decreased to 50.4% of revenue versus 50.6% in the prior year, highlighting our cost-
reduction efforts in an environment where our T&M revenue per day declined.
• Vehicle depreciation and lease costs declined to 20.3% of revenue in 2012 from 21.5% in the prior year,
primarily due to lower per-unit fleet costs amid strong used-car residual values during the first half of
2012.
• Selling, general and administrative costs decreased to 12.0% of revenue, compared to 12.1% of revenue
for 2011.
• Vehicle interest expense decreased to 5.3% of revenue versus 5.9% in the prior year, principally due to
lower borrowing rates.
47
International
Revenue
Adjusted EBITDA
2012
2011
$
2,342 $
234
1,028
127
% Change
128%
84%
Revenues increased in 2012 compared with 2011, primarily due to the acquisition of Avis Europe during fourth
quarter 2011 and a 7% increase in rental days (excluding Avis Europe).
Adjusted EBITDA increased 84% in 2012 compared with 2011, principally due to the acquisition of Avis Europe.
Avis Europe contributed approximately $1.6 billion to revenue and $103 million to Adjusted EBITDA during 2012,
compared with $359 million of revenue and no effect on Adjusted EBITDA in fourth quarter 2011.
In the year ended December 31, 2012:
• Operating expenses were 52.9% of revenue, an increase from 50.1% in the prior-year, primarily due to
the acquisition of Avis Europe, partially offset by an increase in ancillary revenues (excluding Avis
Europe).
• Vehicle depreciation and lease costs increased to 20.6% of revenue from 20.4% in 2012, primarily due to
the acquisition of Avis Europe.
• Selling, general and administrative costs decreased to 13.3% of revenue from 15.7% in the prior year,
primarily due to the acquisition of Avis Europe.
• Vehicle interest costs increased to 1.6% of revenue compared to 1.1% in 2012, primarily due to the
acquisition of Avis Europe.
Truck Rental
Revenue
Adjusted EBITDA
2012
2011
% Change
$
374 $
33
376
49
(1%)
(33%)
Revenues decreased 1% during 2012 compared with 2011, primarily due to a 2% decrease in rental days,
partially offset by a 1% increase in pricing.
Adjusted EBITDA decreased in 2012 compared with 2011, primarily due to decreased revenues, an $8 million
increase in vehicle maintenance costs and inflationary price increases.
Corporate and Other
Revenue
Adjusted EBITDA
__________
* Not meaningful
2012
2011
% Change
$
1 $
(21)
1
(13)
*
*
Revenue was unchanged and Adjusted EBITDA decreased $8 million in 2012 compared with 2011. Adjusted
EBITDA decreased primarily due to increases in selling, general and administrative expenses primarily related to
the significant growth and increased complexity of our business.
48
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
We present separately the financial data of our vehicle programs. These programs are distinct from our other
activities as the assets under vehicle programs are generally funded through the issuance of debt that is
collateralized by such assets. The income generated by these assets is used, in part, to repay the principal and
interest associated with the debt. Cash inflows and outflows relating to the generation or acquisition of such
assets and the principal debt repayment or financing of such assets are classified as activities of our vehicle
programs. We believe it is appropriate to segregate the financial data of our vehicle programs because, ultimately,
the source of repayment of such debt is the realization of such assets.
FINANCIAL CONDITION
Total assets exclusive of assets under vehicle programs
Total liabilities exclusive of liabilities under vehicle programs
Assets under vehicle programs
Liabilities under vehicle programs
Stockholders’ equity
As of December 31,
2012
2013
Change
$
5,832 $
5,119 $
5,720
10,452
9,793
771
5,197
10,099
9,264
757
713
523
353
529
14
Total assets exclusive of assets under vehicle programs increased primarily due to the acquisitions of Zipcar and
Payless and an increase in cash and cash equivalents (see Note 5 to our Consolidated Financial Statements and
“Liquidity and Capital Resources—Cash Flows”).
Total liabilities exclusive of liabilities under vehicle programs increased primarily due to an increase in corporate
debt to finance the acquisition of Zipcar (see “Liquidity and Capital Resources—Debt and Financing
Arrangements”).
Assets under vehicle programs increased primarily due to an increase in the size of our vehicle rental fleet to
accommodate increased rental demand, inflationary increases in the average book value of our rental cars and
the acquisitions of Zipcar and Payless.
Liabilities under vehicle programs increased principally as a result of additional borrowings to support the increase
in our vehicle rental fleet and the acquisitions of Zipcar and Payless. See “Liquidity and Capital Resources—Debt
and Financing Arrangements” for a detailed account of the change in our debt related to vehicle programs.
The increase in stockholders’ equity is primarily due to our net income for the year ended December 31, 2013.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our principal sources of liquidity are cash on hand and our ability to generate cash through operations and
financing activities, as well as available funding arrangements and committed credit facilities, each of which is
discussed below.
During 2013, we completed several corporate financing transactions, primarily to repay existing debt. In particular,
we:
•
•
•
issued $500 million of 5½% Senior Notes due 2023;
amended and borrowed an incremental $300 million under the Floating Rate Term Loan due 2019;
issued €250 million (approximately $325 million, at issuance) of 6% Euro-denominated Senior Notes due
2021;
•
issued $250 million of Floating Rate Senior Notes due 2017; and
49
•
amended our senior revolving credit facility to extend its maturity to 2018, expand its borrowing capacity
to $1.65 billion, and reduce its borrowing spread by 75 basis points;
and used proceeds from these borrowings, as well as cash generated from our operations, to:
•
•
•
•
•
•
•
•
fund our acquisitions of Zipcar and Payless;
retire the entire $450 million principal amount outstanding of our
Senior Notes due 2018;
repay the entire $250 million principal amount outstanding of our Floating Rate Senior Notes due 2014;
repurchase $62 million of our 3½% Convertible Notes due 2014;
repay all $49 million of our Floating Rate Term Loan due 2016;
repay $39 million of our 8¼% Senior Notes due 2019;
repay approximately $27 million principal amount outstanding of our 9¾% Senior Notes due 2020; and
repurchase approximately 1.6 million shares of our outstanding common stock.
During 2013, we also increased our borrowings under vehicle programs to fund the seasonal increase in our
rental fleet and completed a three-year, €500 million (approximately $687 million) European securitization
program, which matures in 2016 and will be used to finance fleet purchases for a portion of our European
operations.
Cash Flows
Year Ended December 31, 2013 vs. Year Ended December 31, 2012
The following table summarizes our cash flows:
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effects of exchange rate changes
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Year Ended December 31,
2013
2012
Change
$
$
2,253 $
(2,234)
76
(8)
87
606
693 $
1,889 $
(2,073)
250
6
72
534
606 $
364
(161)
(174)
(14)
15
72
87
The increase in cash provided by operating activities during 2013 compared to 2012 is principally due to
increased revenues and our continued cost reduction efforts.
The increase in cash used in investing activities during 2013 compared with 2012 is primarily due to the
acquisitions of Zipcar and Payless, partially offset by an increase in proceeds from the sale of vehicles and a
decrease in our investment in vehicles.
The decrease in cash provided by financing activities in 2013 compared with 2012, primarily reflects an increase
in net payments on vehicle borrowings in 2013, partially offset by an increase in net proceeds from corporate
borrowings to fund the acquisition of Zipcar.
We anticipate that our non-vehicle capital expenditures will be approximately $190 million in 2014. As of
December 31, 2013, we had approximately $150 million of authorized share repurchase capacity, and we
currently anticipate that we will utilize substantially all such capacity to repurchase common stock in 2014.
50
Year Ended December 31, 2012 vs. Year Ended December 31, 2011
The following table summarizes our cash flows:
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effects of exchange rate changes
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Year Ended December 31,
2012
2011
Change
$
1,889 $
1,578 $
(2,073)
250
6
72
534
(2,373)
424
(6)
(377)
911
$
606 $
534 $
311
300
(174)
12
449
(377)
72
During 2012, we generated more cash from operating activities compared with 2011, primarily due to improved
operating results.
The decrease in cash used in investing activities in 2012 compared with 2011 primarily reflects a decrease in
acquisitions, as Avis Europe was purchased in 2011, partially offset by an increase in net purchases of vehicles as
a result of the inclusion of Avis Europe in our results for the full year in 2012 compared with only three months in
2011.
The decrease in cash provided by financing activities in 2012 compared with 2011 principally reflects an $180
million increase in the net payments on corporate borrowings and related activity.
Debt and Financing Arrangements
At December 31, 2013, we had approximately $10.7 billion of indebtedness (including corporate indebtedness of
approximately $3.4 billion and debt under vehicle programs of approximately $7.3 billion). We use various
hedging strategies, including derivative instruments, to manage a portion of the risks associated with our floating
rate debt.
Corporate indebtedness consisted of:
Floating Rate Senior Notes
3½% Convertible Notes (a)
Floating Rate Term Loan (b)
Floating Rate Senior Notes (c)
8¼% Senior Notes
Floating Rate Term Loan (b) (d)
9¾% Senior Notes
6% Euro-denominated Senior Notes
5½% Senior Notes
Other
Total
Maturity Date
As of December 31,
2012
2013
Change
May 2014 $
— $
250 $
October 2014
May 2016
November 2017
December 2017
March 2018
January 2019
March 2019
March 2020
March 2021
April 2023
66
—
300
247
—
691
989
223
344
500
128
49
300
—
446
730
689
250
—
—
3,360
34
3,394 $
2,842
63
2,905 $
$
(250)
(62)
(49)
—
247
(446)
(39)
300
(27)
344
500
518
(29)
489
__________
(a)
The 3½% Convertible Notes due 2014 are convertible by the holders into approximately 4 million shares of our common
stock as of December 31, 2013.
51
(b)
(c)
(d)
The Floating Rate Term Loans are part of our senior credit facility, which is secured by pledges of capital stock of
certain subsidiaries of the Company, and liens on substantially all of the Company’s intellectual property and certain
other real and personal property.
As of December 31, 2013, the Floating Rate Senior Notes due 2017 bear interest at the three-month LIBOR, plus 275
basis points, for an aggregate rate of 3.00%. We have entered into a swap to hedge our interest rate exposure related
to these notes at an aggregate rate of 3.58%.
As of December 31, 2013, the Floating Rate Term Loan due 2019 bears interest at the greater of three-month LIBOR or
0.75%, plus 225 basis points, for an aggregate rate of 3.00%. We have entered into a swap to hedge $600 million of our
interest rate exposure related to the floating rate term loan at an aggregate rate of 3.96%.
The following table summarizes the components of our debt under vehicle programs, including related party debt
due to Avis Budget Rental Car Funding:
As of December 31,
2012
2013
Change
North America – Debt due to Avis Budget Rental Car Funding (a)
North America – Canadian borrowings
International – Debt borrowings
International – Capital leases
Truck Rental – Debt borrowings (b)
Other (c)
Total
$
$
5,656 $
400
731
289
226
35
7,337 $
5,203 $
353
679
315
253
3
6,806 $
453
47
52
(26)
(27)
32
531
__________
(a) The increase reflects additional borrowings principally to fund an increase in our fleet driven by increased rental volume
and the acquisitions of Zipcar and Payless.
(b) The decrease reflects reduced borrowings due to a decrease in the size of our truck fleet.
(c) The increase is principally related to Zipcar capital leases.
The following table provides the contractual maturities for our corporate debt and our debt under vehicle
programs, including related party debt due to Avis Budget Rental Car Funding, at December 31, 2013:
Due in 2014
Due in 2015
Due in 2016
Due in 2017
Due in 2018
Thereafter
Corporate
Debt
Debt Under
Vehicle
Programs
$
$
89 $
17
16
561
11
2,700
3,394 $
1,264
1,534
1,618
998
1,532
391
7,337
At December 31, 2013, we had approximately $4.6 billion of available funding under our various financing
arrangements (comprised of $1.1 billion of availability under our committed credit facilities and approximately $3.5
billion available for use in our vehicle programs). As of December 31, 2013, the committed non-vehicle-backed
credit facilities available to us and/or our subsidiaries included:
Total
Capacity
Outstanding
Borrowings
Letters of
Credit
Issued
Available
Capacity
Senior revolving credit facility maturing 2018 (a)
Other credit facilities (b)
__________
(a) The senior revolving credit facility bears interest of one-month LIBOR, plus 225 basis points. The senior revolving credit
facility is part of our senior credit facility, which is secured by pledges of capital stock of certain subsidiaries of the
Company, and liens on substantially all of our intellectual property and certain other real and personal property.
1,650 $
13
598 $
— $
—
$
1
(b) These credit facilities encompass bank overdraft lines of credit, bearing interest of 4.50% to 5.69% as of December 31,
1,052
12
2013.
52
At December 31, 2013, the Company had various other uncommitted credit facilities available, which bear interest
at rates of 0.52% to 2.50%, under which it had drawn approximately $4 million.
The following table presents available funding under our debt arrangements related to our vehicle programs,
including related party debt due to Avis Budget Rental Car Funding, at December 31, 2013:
Total
Capacity(a)
$
Outstanding
Borrowings
Available
Capacity
North America – Debt due to Avis Budget Rental Car Funding (b)
North America – Canadian borrowings (c)
International – Debt borrowings (d)
International – Capital Leases (e)
Truck Rental – Debt borrowings (f)
Other (g)
Total
$
8,031 $
753
1,408
404
233
35
10,864 $
5,656 $
400
731
289
226
35
7,337 $
2,375
353
677
115
7
—
3,527
__________
(a) Capacity is subject to maintaining sufficient assets to collateralize debt.
(b) The outstanding debt is collateralized by approximately $7.3 billion of underlying vehicles and related assets.
(c) The outstanding debt is collateralized by $549 million of underlying vehicles and related assets.
(d) The outstanding debt is collateralized by $1.3 billion of underlying vehicles and related assets.
(e) The outstanding debt is collateralized by $306 million of underlying vehicles and related assets.
(f) The outstanding debt is collateralized by $338 million of underlying vehicles and related assets.
(g) The outstanding debt is collateralized by $28 million of underlying vehicles and related assets.
The significant terms for our outstanding debt instruments, credit facilities and available funding arrangements as
of December 31, 2013, can be found in Notes 13 and 14 to our Consolidated Financial Statements.
LIQUIDITY RISK
Our primary liquidity needs include the payment of operating expenses, servicing of corporate and vehicle-related
debt and procurement of rental vehicles to be used in our operations. The present intention of management is to
reinvest the undistributed earnings of the Company’s foreign subsidiaries indefinitely into its foreign operations.
We do not anticipate the need to repatriate foreign earnings to the United States to service corporate debt or for
other U.S. needs. Our primary sources of funding are operating revenue, cash received upon the sale of vehicles,
borrowings under our vehicle-backed borrowing arrangements and our senior revolving credit facility, and other
financing activities.
As discussed above, as of December 31, 2013, we have cash and cash equivalents of $693 million, available
borrowing capacity under our committed credit facilities of $1.1 billion, and available capacity under our vehicle
programs of approximately $3.5 billion.
Our liquidity position could be negatively affected by financial market disruptions or a downturn in the U.S. and
worldwide economies, which may result in unfavorable conditions in the vehicle rental industry, in the asset-
backed financing market, and in the credit markets, generally. We believe these factors have in the past affected
and could in the future affect the debt ratings assigned to us by credit rating agencies and the cost of our
borrowings. Additionally, a downturn in the worldwide economy or a disruption in the credit markets could impact
our liquidity due to (i) decreased demand and pricing for vehicles in the used vehicle market, (ii) increased costs
associated with, and/or reduced capacity or increased collateral needs under, our financings, (iii) the adverse
impact of vehicle manufacturers, including Ford, General Motors, Chrysler, Peugeot, Volkswagen, Fiat, Mercedes,
Kia, BMW, Toyota, and Renault, being unable or unwilling to honor their obligations to repurchase or guarantee
the depreciation on the related program vehicles, (iv) disruption in our ability to obtain financing due to negative
credit events specific to us or affecting the overall debt market and (v) the effect of Realogy or Wyndham being
unable or unwilling to honor its obligations under the agreements governing their disposition (see Item 1A. Risk
Factors for further discussion).
Our liquidity position could also be negatively impacted if we are unable to remain in compliance with the financial
and other covenants associated with our senior credit facility and other borrowings including a maximum leverage
ratio. As of December 31, 2013, we were in compliance with the financial covenants in our senior credit facility.
53
CONTRACTUAL OBLIGATIONS
The following table summarizes our principal future contractual obligations as of December 31, 2013:
Corporate debt
$
89
$
17
$
16
$
561
$
11
$
2,700
$
3,394
2014
2015
2016
2017
2018
Thereafter
Total
Debt under vehicle
programs
Debt interest
Operating leases (a)
Commitments to purchase
vehicles (b)
Defined benefit pension plan
contributions (c)
Other purchase
commitments (d)
Contingent consideration (e)
Total (f)
1,264
1,534
1,618
403
561
6,420
20
90
—
347
368
—
—
30
12
288
288
—
—
18
—
998
236
215
—
—
12
—
1,532
184
162
—
—
10
—
391
196
719
—
—
—
—
7,337
1,654
2,313
6,420
20
160
12
$
8,847
$
2,308
$
2,228
$
2,022
$
1,899
$
4,006
$
21,310
__________
(a)
(b)
(c)
(d)
(e)
(f)
Operating lease obligations are presented net of sublease rentals to be received (see Note 15 to our Consolidated Financial
Statements) and include commitments to enter into operating leases.
Represents commitments to purchase vehicles, the majority of which are from Ford Motor Company, General Motors Company and
Chrysler Group LLC. These commitments are generally subject to the vehicle manufacturers satisfying their obligations under the
repurchase and guaranteed depreciation agreements. The purchase of such vehicles is generally financed through financings under
vehicle programs in addition to cash received upon the sale of vehicles, many of which were purchased under repurchase and
guaranteed depreciation programs (see Note 15 to our Consolidated Financial Statements).
Represents the expected contributions to our defined benefit pension plans in 2014. The amount of future contributions to our defined
benefit pension plans will depend on the rates of return generated from plan assets and other factors (see Note 18 to our Consolidated
Financial Statements) and are not included above.
Primarily represents commitments under service contracts for information technology and telecommunications and marketing
agreements with travel service companies.
Represents contingent consideration related to the acquisition of Apex in October 2012.
Excludes income tax uncertainties of $44 million, $15 million of which is subject to indemnification by Realogy and Wyndham. We are
unable to estimate the period in which these income tax uncertainties are expected to be settled.
For more information regarding guarantees and indemnifications, see Note 15 to our Consolidated Financial
Statements.
ACCOUNTING POLICIES
Critical Accounting Policies
In presenting our financial statements in conformity with GAAP, we are required to make estimates and
assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required
to make relate to matters that are inherently uncertain as they pertain to future events and/or events that are
outside of our control. If there is a significant unfavorable change to current conditions, it could result in a material
adverse impact to our consolidated results of operations, financial position and liquidity. We believe that the
estimates and assumptions we used when preparing our financial statements were the most appropriate at that
time. Presented below are those accounting policies that we believe require subjective and complex judgments
that could potentially affect reported results. However, our businesses operate in environments where we are paid
a fee for a service performed, and therefore the results of the majority of our recurring operations are recorded in
our financial statements using accounting policies that are not particularly subjective, nor complex.
Goodwill and Other Indefinite-lived Intangible Assets. We have reviewed the carrying value of our goodwill and
other indefinite-lived intangible assets for impairment. In performing this review, we are required to make an
assessment of fair value for our goodwill and other indefinite-lived intangible assets. When determining fair value,
we utilize various consistent assumptions, including the fair market trading price of our common stock and
management’s projections of future cash flows. A change in these underlying assumptions will cause a change in
the results of the tests and, as such, could cause the fair value to be less than the respective carrying amount. In
such event, we would then be required to record a charge, which would impact earnings. We review the carrying
54
value of goodwill and other indefinite-lived intangible assets for impairment annually, or more frequently if
circumstances indicate that an impairment may have occurred.
Our goodwill and other indefinite-lived intangible assets are allocated among our reporting units. During 2013,
2012 and 2011, there was no impairment of goodwill or other intangible assets. In the future, failure to achieve our
business plans, a significant deterioration of the macroeconomic conditions of the countries in which we operate,
or significant changes in the assumptions and estimates that are used in our impairment testing for goodwill and
indefinite-lived intangible assets (such as the discount rate) could result in significantly different estimates of fair
value that could trigger an impairment of the goodwill or intangible assets of our reporting units.
Business Combinations. The Company uses the acquisition method of accounting for business combinations,
which requires that the purchase price of acquired companies be allocated to the tangible and intangible assets
acquired and the liabilities assumed, as applicable, at their respective estimated fair values at the date of
acquisition.
Our assessment of the purchase price allocation and the related fair values requires management to make
significant estimates and assumptions with respect to intangible assets. Examples of critical valuation
assumptions used by management include projected future cash flows, the estimated weighted average cost of
capital and market royalty rates. We believe that our estimates are based on reasonable assumptions and, in part,
on historical experience and information obtained from the management of the acquired companies and are
unpredictable and inherently uncertain, and actual results could differ from those assumptions.
Vehicles. We present vehicles at cost, net of accumulated depreciation, on the Consolidated Balance Sheets. We
record the initial cost of the vehicle, net of incentives and allowances from manufactures. We acquire our rental
vehicles either through repurchase and guaranteed depreciation programs with certain automobile manufacturers
or outside of such programs. For rental vehicles purchased under such programs, we depreciate the vehicles
such that the net book value on the date of sale or return to the manufacturers is intended to equal the contractual
guaranteed residual values. For risk vehicles, acquired outside of manufacturer repurchase and guaranteed
depreciation programs, we depreciate based on the vehicles’ estimated residual market values and their expected
dates of disposition. The estimation of residual values requires the Company to make assumptions regarding the
age and mileage of the vehicle at the time of disposal, as well as expected used vehicle auction market
conditions. The Company periodically evaluates estimated residual values and adjusts depreciation rates as
appropriate. Differences between actual residual values and those estimated result in a gain or loss on disposal
and are recorded as part of vehicle depreciation and lease charges, net, at the time of sale. See Note 2 to our
Consolidated Financial Statements.
Income Taxes. We account for income taxes under the asset and liability method, which requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of events that have been reflected
in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the
differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect
for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period that includes the enactment date.
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In
making such determination, we consider all available positive and negative evidence, including scheduled
reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent results of
operations. In the event we were to determine that we would be able to realize deferred income tax assets in the
future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which
would reduce the provision for income taxes. Currently we do not record valuation allowances on the majority of
our tax loss carryforwards as there are adequate deferred tax liabilities that could be realized within the
carryforward period.
See Notes 2 and 8 to our Consolidated Financial Statements for more information regarding income taxes.
Public Liability, Property Damage and Other Insurance Liabilities. Insurance liabilities on our Consolidated
Balance Sheets include supplemental liability insurance, personal effects protection insurance, public liability,
property damage and personal accident insurance claims for which we are self-insured. We estimate the required
liability of such claims on an undiscounted basis utilizing an actuarial method that is based upon various
assumptions which include, but are not limited to, our historical loss experience and projected loss development
55
factors. The required liability is also subject to adjustment in the future based upon changes in claims experience,
including changes in the number of incidents and changes in the ultimate cost per incident.
Adoption of New Accounting Pronouncements
During 2013, we adopted the following standards as a result of the issuance of new accounting pronouncements:
• ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment”
• ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”
On January 1, 2014, we adopted the following standard as a result of the issuance of new accounting
pronouncements:
• ASU No. 2013-11, “Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss
Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”
For detailed information regarding these pronouncements and the impact thereof on our business, see Note 2 to
our Consolidated Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to a variety of market risks, including changes in currency exchange rates, interest rates and
gasoline prices. We manage our exposure to market risks through our regular operating and financing activities
and, when deemed appropriate, through the use of derivative financial instruments, particularly swap contracts,
futures and options contracts, to manage and reduce the interest rate risk related to our debt; currency forward
contracts to manage and reduce currency exchange rate risk; and derivative commodity instruments to manage
and reduce the risk of changing unleaded gasoline prices.
We are exclusively an end user of these instruments. We do not engage in trading, market-making or other
speculative activities in the derivatives markets. We manage our exposure to counterparty credit risk related to
our use of derivatives through specific minimum credit standards, diversification of counterparties, and procedures
to monitor concentrations of credit risk. Our counterparties are substantial investment and commercial banks with
significant experience providing such derivative instruments.
Our total market risk is influenced by a wide variety of factors including the volatility present within the markets
and the liquidity of the markets. There are certain limitations inherent in the sensitivity analyses discussed below.
These “shock tests” are constrained by several factors, including the necessity to conduct the analysis based on a
single point in time and the inability to include the complex market reactions that normally would arise from the
market shifts modeled. For additional information regarding our borrowings and financial instruments, see Notes
13, 14 and 19 to our Consolidated Financial Statements.
Currency Risk Management
We have currency rate exposure to exchange rate fluctuations worldwide and particularly with respect to the
Australian, Canadian and New Zealand dollars, the Euro and British pound sterling. We use currency forward
contracts and currency swap contracts to manage exchange rate risk that arises from certain intercompany
transactions and from non-functional currency denominated assets and liabilities and earnings denominated in
non-U.S. dollar currencies. Our currency forward contracts are often not designated as hedges and therefore
changes in the fair value of these derivatives are recognized in earnings as they occur. We anticipate that such
currency exchange rate risk will remain a market risk exposure for the foreseeable future.
We assess our market risk based on changes in currency exchange rates utilizing a sensitivity analysis. The
sensitivity analysis measures the potential impact on earnings, cash flows and fair values based on a hypothetical
10% appreciation or depreciation in the value of the underlying currencies being hedged, against the U.S. dollar
at December 31, 2013. With all other variables held constant, a hypothetical 10% change (increase or decrease)
in currency exchange rates would not have a material impact on our earnings at December 31, 2013. Because
unrealized gains or losses related to foreign currency forward and swap contracts are expected to be offset by
corresponding gains or losses on the underlying exposures being hedged, when combined, these foreign
currency contracts and the offsetting underlying commitments do not create a material impact on our
Consolidated Financial Statements.
56
Interest Rate Risk Management
Our primary interest rate exposure at December 31, 2013 was interest rate fluctuations in the United States,
specifically LIBOR and commercial paper interest rates due to their impact on variable rate borrowings and other
interest rate sensitive liabilities. We use interest rate swaps and caps to manage our exposure to interest rate
movements. We anticipate that LIBOR and commercial paper rates will remain a primary market risk exposure for
the foreseeable future.
We assess our market risk based on changes in interest rates utilizing a sensitivity analysis. Based on our interest
rate derivatives as of December 31, 2013, we estimate that a 10% change in interest rates would not have a
material impact on our earnings. Because gains or losses related to interest rate derivatives are expected to be
offset by corresponding gains or losses on the underlying exposures being hedged, when combined, these
interest rate contracts and the offsetting underlying commitments do not create a material impact on our
Consolidated Financial Statements.
Commodity Risk Management
We have commodity price exposure related to fluctuations in the price of gasoline. We anticipate that such
commodity risk will remain a market risk exposure for the foreseeable future. We determined that a hypothetical
10% change in the price of gasoline would not have a material impact on our earnings as of December 31, 2013.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Consolidated Financial Statements and Consolidated Financial Statement Index commencing on Page F-1
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. Under the supervision and with the participation of our Chief Executive
Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our
disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on such evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures
were effective as of the end of the period covered by this annual report.
(b) Management’s Annual Report on Internal Control Over Financial Reporting. Our management is responsible
for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15
(f) and 15d-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control
over financial reporting as of December 31, 2013. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control - Integrated Framework (1992). Based on this assessment, our management believes that, as of
December 31, 2013, our internal control over financial reporting is effective. The effectiveness of the
Company’s internal control over financial reporting as of December 31, 2013, has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm. Their attestation report is included below.
(c) Changes in Internal Control Over Financial Reporting. During the last fiscal quarter, there has been no
change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial reporting.
57
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Avis Budget Group, Inc.
Parsippany, New Jersey
We have audited the internal control over financial reporting of Avis Budget Group, Inc. and subsidiaries (the
"Company") as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework
(1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's
management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the
company's principal executive and principal financial officers, or persons performing similar functions, and
effected by the company's board of directors, management, and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
the company's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion
or improper management override of controls, material misstatements due to error or fraud may not be prevented
or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over
financial reporting to future periods are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2013, based on the criteria established in Internal Control - Integrated Framework (1992)
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements and financial statement schedule as of and for the year
ended December 31, 2013 of the Company and our report dated February 20, 2014 expressed an unqualified
opinion on those consolidated financial statements and financial statement schedule.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 20, 2014
58
ITEM 9B. OTHER INFORMATION
None.
59
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information contained in the Company’s Annual Proxy Statement under the sections titled “Corporate
Governance - Board of Directors,” “Corporate Governance - Functions and Meetings of the Board of Directors
Governance - Codes of Conduct”, “Corporate Governance - Committees of the Board of Directors”, “Executive
Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” is incorporated herein by reference in
response to this item.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the Company’s Annual Proxy Statement under the section titled “Executive
Compensation” is incorporated herein by reference in response to this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information contained in the Company’s Annual Proxy Statement under the section titled “Security Ownership
of Certain Beneficial Owners” is incorporated herein by reference in response to this item.
Information concerning our equity compensation plans is included in Part II of this report under the caption
“Securities Authorized for Issuance under Equity Compensation Plans.”
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information contained in the Company’s Annual Proxy Statement under the section titled “Corporate
Governance - Related Person Transactions” and “Corporate Governance - Functions and Meetings of the Board
of Directors - Director Independence” is incorporated herein by reference in response to this item.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information contained in the Company’s Annual Proxy Statement under the section titled “Ratification of
Appointment of Auditors” is incorporated herein by reference in response to this item.
60
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15(A)(1). FINANCIAL STATEMENTS
See Consolidated Financial Statements and Consolidated Financial Statements Index commencing on page F-1
hereof.
ITEM 15(A)(2). FINANCIAL STATEMENT SCHEDULES
See Schedule II – Valuation and Qualifying Accounts for the years ended December 31, 2013, 2012 and 2011
commencing on page G-1 hereof.
ITEM 15(A)(3). EXHIBITS
See Exhibit Index commencing on page H-1 hereof.
61
Pursuant to the requirements of 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.
SIGNATURES
AVIS BUDGET GROUP, INC.
By:
/s/ IZILDA P. MARTINS
Izilda P. Martins
Senior Vice President and Acting Chief Accounting
Officer
Date: February 20, 2014
Pursuant to the requirements 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.
Signature
Title
Date
/s/ RONALD L. NELSON
(Ronald L. Nelson)
/s/ DAVID B. WYSHNER
(David B. Wyshner)
/s/ IZILDA P. MARTINS
(Izilda P. Martins)
/s/ W. ALUN CATHCART
(W. Alun Cathcart)
/s/ MARY C. CHOKSI
(Mary C. Choksi)
/s/ LEONARD S. COLEMAN, JR.
(Leonard S. Coleman, Jr.)
/s/ JEFFREY H. FOX
(Jeffrey H. Fox)
/s/ JOHN D. HARDY, JR.
(John D. Hardy, Jr.)
/s/ LYNN KROMINGA
(Lynn Krominga)
/s/ EDUARDO G. MESTRE
(Eduardo G. Mestre)
/s/ F. ROBERT SALERNO
(F. Robert Salerno)
/s/ STENDER E. SWEENEY
(Stender E. Sweeney)
Chairman of the Board, Chief Executive
Officer and Director
February 20, 2014
Senior Executive Vice President and
Chief Financial Officer
February 20, 2014
Senior Vice President and Acting Chief
Accounting Officer
February 20, 2014
Director
February 20, 2014
Director
February 20, 2014
Director
February 20, 2014
Director
February 20, 2014
Director
February 20, 2014
Director
February 20, 2014
Director
February 20, 2014
Director
February 20, 2014
Director
February 20, 2014
62
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013,
2012 and 2011
Consolidated Balance Sheets as of December 31, 2013 and 2012
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013, 2012
and 2011
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-8
F-9
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Avis Budget Group, Inc.
Parsippany, New Jersey
We have audited the accompanying consolidated balance sheets of Avis Budget Group, Inc. and subsidiaries (the
"Company") as of December 31, 2013 and 2012, and the related consolidated statements of operations,
comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended
December 31, 2013. Our audits also included the financial statement schedule listed in the Index at Item 15.
These consolidated financial statements and financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on the consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2013, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company's internal control over financial reporting as of December 31, 2013, based on the
criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 20, 2014 expressed an unqualified
opinion on the Company's internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 20, 2014
F-2
Avis Budget Group, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
Revenues
Vehicle rental
Other
Net revenues
Expenses
Operating
Vehicle depreciation and lease charges, net
Selling, general and administrative
Vehicle interest, net
Non-vehicle related depreciation and amortization
Interest expense related to corporate debt, net:
Interest expense
Early extinguishment of debt
Restructuring expense
Transaction-related costs
Impairment
Total expenses
Income before income taxes
Provision for income taxes
Net income (loss)
Earnings (loss) per share
Basic
Diluted
Year Ended December 31,
2012
2013
2011
$
5,707 $
2,230
7,937
5,297 $
2,060
7,357
4,338
1,562
5,900
4,074
1,811
1,019
264
152
228
147
61
51
33
7,840
97
81
3,824
1,471
925
297
125
268
75
38
34
—
7,057
300
10
3,025
1,223
756
286
95
219
—
5
255
—
5,864
36
65
$
$
$
16 $
290 $
(29)
0.15 $
0.15 $
2.72 $
2.42 $
(0.28)
(0.28)
See Notes to Consolidated Financial Statements.
F-3
Avis Budget Group, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Net income (loss)
Other comprehensive income (loss), net of tax
Currency translation adjustments, net of tax of $7, $0 and $0,
respectively
Available-for-sale securities:
Net unrealized gains on available-for-sale securities, net of tax of $0,
$0 and $0, respectively
Less: realized gains on available-for-sale securities reclassified to
earnings, net of tax of $0, $1 and $0, respectively
Cash flow hedges:
Net unrealized holding losses arising during period, net of tax of $1, $1
and $2, respectively
Less: cash flow hedges reclassified to earnings, net of tax of $0, $(9)
and $(23), respectively
Minimum pension liability adjustment:
Pension and post-retirement benefits, net of tax of $(19), $1 and $19,
respectively
Less: Pension and post-retirement benefits reclassified to earnings,
net of tax of $(6), $(6) and $(3), respectively
Year Ended December 31,
2011
2012
2013
16 $
290 $
(29)
(27) $
34 $
(23)
$
$
—
—
1
—
24
9
7
2
(2)
(1)
14
(23)
8
32
2
—
(4)
37
(31)
5
(14)
(43)
Total comprehensive income (loss)
$
23 $
322 $
See Notes to Consolidated Financial Statements.
F-4
Avis Budget Group, Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
Assets
Current assets:
Cash and cash equivalents
Receivables (net of allowance for doubtful accounts of $50 and $40)
Deferred income taxes
Other current assets
Total current assets
Property and equipment, net
Deferred income taxes
Goodwill
Other intangibles, net
Other non-current assets
Total assets exclusive of assets under vehicle programs
Assets under vehicle programs:
Program cash
Vehicles, net
Receivables from vehicle manufacturers and other
Investment in Avis Budget Rental Car Funding (AESOP) LLC—related party
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other current liabilities
Short-term debt and current portion of long-term debt
Total current liabilities
Long-term debt
Other non-current liabilities
Total liabilities exclusive of liabilities under vehicle programs
Liabilities under vehicle programs:
Debt
Debt due to Avis Budget Rental Car Funding (AESOP) LLC—related party
Deferred income taxes
Other
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, $.01 par value—authorized 10 million shares; none issued and outstanding
Common stock, $.01 par value—authorized 250 million shares; issued 137,081,056 and
137,081,056 shares
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Treasury stock, at cost—30,515,721 and 30,027,146 shares
Total stockholders’ equity
Total liabilities and stockholders’ equity
See Notes to Consolidated Financial Statements.
F-5
December 31,
2013
2012
$
$
$
693
619
177
455
1,944
614
1,299
691
923
361
5,832
116
9,582
391
363
10,452
16,284
1,479
89
1,568
3,305
847
5,720
1,681
5,656
2,177
279
9,793
606
553
146
405
1,710
529
1,454
375
731
320
5,119
24
9,274
439
362
10,099
15,218
1,421
57
1,478
2,848
871
5,197
1,603
5,203
2,163
295
9,264
—
—
1
7,893
(2,360)
117
(4,880)
771
16,284
$
1
8,211
(2,376)
110
(5,189)
757
15,218
$
$
$
$
Avis Budget Group, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Year Ended December 31,
2012
2011
2013
Operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Vehicle depreciation
Gain on sale of vehicles, net
Non-vehicle related depreciation and amortization
Deferred income taxes
Amortization of debt financing fees
Impairment
Non-cash charge on unfavorable license rights reacquired with the acquisition of Avis
Europe plc
Net change in assets and liabilities, excluding the impact of acquisitions and
dispositions:
Receivables
Income taxes
Accounts payable and other current liabilities
Other, net
Net cash provided by operating activities
Investing activities
Property and equipment additions
Proceeds received on asset sales
Net assets acquired (net of cash acquired)
Other, net
Net cash used in investing activities exclusive of vehicle programs
Vehicle programs:
Increase in program cash
Investment in vehicles
Proceeds received on disposition of vehicles
Investment in debt securities of Avis Budget Rental Car Funding (AESOP)—related
party
Proceeds from debt securities of Avis Budget Rental Car Funding (AESOP)—related
party
Net cash used in investing activities
Financing activities
Proceeds from long-term borrowings
Payments on long-term borrowings
Net change in short-term borrowings
Debt financing fees
Purchases of warrants
Proceeds from sale of call options
Repurchases of common stock
Other, net
Net cash provided by (used in) financing activities exclusive of vehicle programs
$
16
$
290
$
(29)
1,678
(6)
152
37
41
33
1,438
(97)
125
128
57
—
1,395
(234)
95
32
78
—
—
—
117
(66)
(14)
(28)
410
2,253
(152)
22
(537)
2
(665)
(65)
(183)
(28)
224
1,889
(132)
21
(69)
(9)
(189)
29
(18)
20
93
1,578
(65)
14
(841)
(7)
(899)
(79)
(10,899)
9,409
(13)
(11,067)
9,196
(11)
(8,659)
7,196
—
—
(400)
—
(1,569)
(2,234)
2,972
(2,608)
(36)
(37)
(78)
104
(48)
3
272
—
(1,884)
(2,073)
1,152
(1,501)
10
(16)
(29)
43
—
1
(340)
400
(1,474)
(2,373)
682
(668)
(97)
(78)
—
—
—
1
(160)
F-6
Avis Budget Group, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In millions)
Year Ended December 31,
2012
2011
2013
Vehicle programs:
Proceeds from borrowings
Payments on borrowings
Debt financing fees
Net cash provided by financing activities
Effect of changes in exchange rates on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental disclosure
Interest payments
Income tax payments, net
12,953
(13,115)
(34)
(196)
76
12,108
(11,490)
(28)
590
250
(8)
87
606
693
457
58
$
$
$
6
72
534
606
552
65
$
$
$
$
$
$
10,534
(9,917)
(33)
584
424
(6)
(377)
911
534
465
51
See Notes to Consolidated Financial Statements.
F-7
Avis Budget Group, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Treasury Stock
Shares
Amount
Total
Stockholders’
Equity
Balance at January 1, 2011
137.0
$
1
$
8,828
$
(2,637) $
92
(33.2) $
(5,874) $
410
Comprehensive loss:
Net loss
Other comprehensive loss
Total comprehensive loss
Net activity related to restricted
stock units
Exercise of stock options
Realization of tax benefits for
stock-based awards
—
—
—
—
—
—
—
—
—
—
—
—
(111)
(215)
30
(29)
—
—
—
—
Balance at December 31, 2011
137.0
$
1
$
8,532
$
(2,666) $
Comprehensive income:
Net income
Other comprehensive income
Total comprehensive income
Net activity related to restricted
stock units
Exercise of stock options
Activity related to employee stock
purchase plan
Repurchase of warrants
Sale of call options, net of tax of
$(1)
—
—
0.1
—
—
—
—
—
—
—
—
—
—
—
—
—
(202)
(130)
(2)
(29)
42
290
—
—
—
—
—
—
—
(14)
—
—
—
78
—
32
—
—
—
—
—
—
—
0.4
1.2
—
—
—
124
217
—
(43)
13
2
30
(31.6) $
(5,533) $
412
—
—
0.8
0.8
—
—
—
—
—
212
130
2
—
—
Balance at December 31, 2012
137.1
$
1
$
8,211
$
(2,376) $
110
(30.0) $
(5,189) $
Comprehensive income:
Net income
Other comprehensive income
Total comprehensive income
Net activity related to restricted
stock units
Exercise of stock options
Realization of tax benefits for
stock-based awards
Activity related to employee stock
purchase plan
Repurchase of warrants
Sale of call options, net of tax of
$(1)
Repurchase of common stock
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(197)
(155)
3
(1)
(78)
110
—
16
—
—
—
—
—
—
—
—
—
7
—
—
—
—
—
—
—
—
—
0.4
0.9
—
—
—
(0.2)
(1.6)
—
—
207
157
—
2
—
(7)
(50)
Balance at December 31, 2013
137.1
$
1
$
7,893
$
(2,360) $
117
(30.5) $
(4,880) $
See Notes to Consolidated Financial Statements.
F-8
322
10
—
—
(29)
42
757
23
10
2
3
1
(78)
103
(50)
771
Avis Budget Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise noted, all dollar amounts are in millions, except per share amounts)
1.
Basis of Presentation
Avis Budget Group, Inc. provides car and truck rentals, car sharing services and ancillary services to
businesses and consumers worldwide. The accompanying Consolidated Financial Statements include the
accounts and transactions of Avis Budget Group, Inc. and its subsidiaries, as well as entities in which Avis
Budget Group, Inc. directly or indirectly has a controlling financial interest (collectively, the “Company”).
The Company operates the following reportable business segments:
•
•
•
North America—provides car rentals in the United States and vehicle rentals in Canada, as well
as ancillary products and services, and operates the Company’s Zipcar car sharing business.
International—provides and licenses the Company’s brands to third parties for vehicle rentals
and ancillary products and services in Europe, the Middle East, Africa, Asia, South America,
Central America, the Caribbean, Australia and New Zealand.
Truck Rental—provides truck rentals and ancillary products and services to consumers and
commercial users in the United States.
In 2013, 2012 and 2011, the Company completed the business acquisitions discussed in Note 5 to these
consolidated financial statements. The operating results of the acquired businesses are included in the
accompanying consolidated financial statements from the dates of acquisition.
The Company presents separately the financial data of its vehicle programs. These programs are distinct
from the Company’s other activities since the assets under vehicle programs are generally funded through
the issuance of debt that is collateralized by such assets. The income generated by these assets is used, in
part, to repay the principal and interest associated with the debt. Cash inflows and outflows relating to the
acquisition of such assets and the principal debt repayment or financing of such assets are classified as
activities of the Company’s vehicle programs. The Company believes it is appropriate to segregate the
financial data of its vehicle programs because, ultimately, the source of repayment of such debt is the
realization of such assets.
2.
Summary of Significant Accounting Policies
Accounting Principles
The Company’s Consolidated Financial Statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”).
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and all entities in which it has
a direct or indirect controlling financial interest and variable interest entities (“VIEs”) for which the Company
has determined it is the primary beneficiary. Intercompany transactions have been eliminated in
consolidation.
Use of Estimates and Assumptions
The use of estimates and assumptions as determined by management is required in the preparation of the
Consolidated Financial Statements in conformity with GAAP. These estimates are based on management’s
evaluation of historical trends and other information available when the Consolidated Financial Statements
are prepared and may affect the amounts reported and related disclosures. Actual results could differ from
those estimates.
F-9
Revenue Recognition
The Company derives revenue primarily through the operation and licensing of the Avis and Budget rental
systems and by providing vehicle rentals and other services to business and leisure travelers and others.
Other revenue includes sales of loss damage waivers and insurance products, fuel and fuel service
charges, rentals of GPS navigation units and other items. Revenue is recognized when persuasive
evidence of an arrangement exists, the services have been rendered to customers, the pricing is fixed or
determinable and collection is reasonably assured.
Vehicle rental and rental-related revenue is recognized over the period the vehicle is rented. Licensing
revenue principally consists of royalties paid by the Company’s licensees and is recorded within other
revenues as the licensees’ revenue is earned (over the rental period of a vehicle). The Company renews
license agreements in the normal course of business and occasionally terminates, purchases or sells
license agreements. In connection with ongoing fees that the Company receives from its licensees pursuant
to license agreements, the Company is required to provide certain services, such as training, marketing and
the operation of reservation systems. Revenue and expenses associated with gasoline, vehicle licensing
and airport concessions are recorded on a gross basis within revenue and operating expenses.
Currency Translation
Assets and liabilities of foreign operations are translated at the rate of exchange in effect on the balance
sheet date; income and expenses are translated at the prevailing monthly average rate of exchange. The
related translation adjustments are reflected in “Accumulated other comprehensive income” in the
stockholders’ equity section of the Consolidated Balance Sheets and in the Consolidated Statements of
Comprehensive Income. The accumulated currency translation adjustment as of December 31, 2013 and
2012 was $166 million and $193 million, respectively. Currency gains and losses resulting from transactions
are included in earnings.
Cash and Cash Equivalents
The Company considers highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
Property and Equipment
Property and equipment (including leasehold improvements) are stated at cost, net of accumulated
depreciation and amortization. Depreciation (non-vehicle related) is computed utilizing the straight-line
method over the estimated useful lives of the related assets. Amortization of leasehold improvements is
computed utilizing the straight-line method over the estimated benefit period of the related assets, which
may not exceed 20 years, or the lease term, if shorter. Useful lives are as follows:
Buildings
Furniture, fixtures & equipment
Capitalized software
Buses and support vehicles
30 years
3 to 10 years
3 to 7 years
4 to 15 years
The Company capitalizes the costs of software developed for internal use when the preliminary project
stage is completed and management (i) commits to funding the project and (ii) believes it is probable that
the project will be completed and the software will be used to perform the function intended. The software
developed or obtained for internal use is amortized on a straight-line basis commencing when such
software is ready for its intended use. The net carrying value of software developed or obtained for internal
use was $108 million and $71 million as of December 31, 2013 and 2012, respectively.
F-10
Goodwill and Other Intangible Assets
Goodwill represents the excess, if any, of the fair value of the consideration transferred by the acquirer and
the fair value of any non-controlling interest remaining in the acquiree, if any, over the fair values of the
identifiable net assets acquired. The Company does not amortize goodwill, but assesses it for impairment at
least annually and whenever events or changes in circumstances indicate that the carrying amount of this
asset may exceed its fair value. The Company performs its annual impairment assessment in the fourth
quarter of each year at the reporting unit level. The Company assesses goodwill for such impairment by
comparing the carrying value of each reporting unit to its fair value using the present value of expected
future cash flows. When appropriate, comparative market multiples and other factors are used to
corroborate the discounted cash flow results.
Other intangible assets, primarily trademarks, with indefinite lives are not amortized but are evaluated
annually for impairment and whenever events or changes in circumstances indicate that the carrying
amount of this asset may exceed its fair value. If the carrying value of an other intangible asset exceeds its
fair value, an impairment loss is recognized in an amount equal to that excess. Other intangible assets with
finite lives are amortized over their estimated useful lives and are evaluated each reporting period to
determine if circumstances warrant a revision to these lives.
Impairment of Long-Lived Assets
The Company is required to assess long-lived assets for impairment whenever circumstances indicate
impairment may have occurred. This analysis is performed by comparing the respective carrying values of
the assets to the undiscounted expected future cash flows to be generated from such assets. Property and
equipment is evaluated separately within each segment. If such analysis indicates that the carrying value of
these assets is not recoverable, the carrying value of such assets is reduced to fair value.
Program Cash
Program cash primarily represents amounts specifically designated to purchase assets under vehicle
programs and/or to repay the related debt.
Vehicles
Vehicles are stated at cost, net of accumulated depreciation. The initial cost of the vehicles is recorded net
of incentives and allowances from manufacturers. The Company acquires many of its rental vehicles
pursuant to repurchase and guaranteed depreciation programs established by automobile manufacturers.
Under these programs, the manufacturers agree to repurchase vehicles at a specified price and date, or
guarantee the depreciation rate for a specified period of time, subject to certain eligibility criteria (such as
car condition and mileage requirements). The Company depreciates vehicles such that the net book value
on the date of return to the manufacturers is intended to equal the contractual guaranteed residual values,
thereby minimizing any gain or loss.
Rental vehicles acquired outside of manufacturer repurchase and guaranteed depreciation programs are
depreciated based upon their estimated residual values at their expected dates of disposition, after giving
effect to anticipated conditions in the used car market, which are reviewed on a continuous basis. Any
adjustments to depreciation are made prospectively.
The estimation of residual values requires the Company to make assumptions regarding the age and
mileage of the car at the time of disposal, as well as expected used vehicle auction market conditions. The
Company periodically evaluates estimated residual values and adjusts depreciation rates as appropriate.
Differences between actual residual values and those estimated result in a gain or loss on disposal and are
recorded as part of vehicle depreciation at the time of sale. For 2013, 2012 and 2011, rental vehicles were
depreciated at rates ranging from 1% to 43% per annum. Vehicle-related interest expense amounts are net
of vehicle-related interest income of $9 million, $8 million and $8 million for 2013, 2012 and 2011,
respectively.
F-11
Advertising Expenses
Advertising costs are generally expensed in the period incurred. Advertising expenses, recorded within
selling, general and administrative expense on our Consolidated Statements of Operations, include radio,
television, travel partner rewards programs, internet advertising and other advertising and promotions and
were approximately $116 million, $127 million and $107 million in 2013, 2012 and 2011, respectively.
Taxes
The Company accounts for income taxes under the asset and liability method, which requires the
recognition of deferred tax assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial statement and tax basis of assets and liabilities
using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of
a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that
includes the enactment date.
The Company records net deferred tax assets to the extent it believes that it is more likely than not that
these assets will be realized. In making such determination, the Company considers all available positive
and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable
income, tax planning strategies and recent results of operations. In the event the Company were to
determine that it would be able to realize the deferred income tax assets in the future in excess of their net
recorded amount, the Company would adjust the valuation allowance, which would reduce the provision for
income taxes.
The Company reports revenues net of any tax assessed by a governmental authority that is both imposed
on and concurrent with a specific revenue-producing transaction between a seller and a customer.
Fair Value Measurements
The Company measures fair value of assets and liabilities and discloses the source for such fair value
measurements. Financial assets and liabilities are classified as follows: Level 1, which refers to assets and
liabilities valued using quoted prices from active markets for identical assets or liabilities; Level 2, which
refers to assets and liabilities for which significant other observable market inputs are readily available; and
Level 3, which are valued based on significant unobservable inputs.
The fair value of the Company’s financial instruments is generally determined by reference to market values
resulting from trading on a national securities exchange or in an over-the-counter market (Level 1 inputs). In
some cases where quoted market prices are not available, prices are derived by considering the yield of the
benchmark security that was issued to initially price the instruments and adjusting this rate by the credit
spread that market participants would demand for the instruments as of the measurement date (Level 2
inputs). In situations where long-term borrowings are part of a conduit facility backed by short-term floating
rate debt, the Company has determined that its carrying value approximates the fair value of this debt
(Level 2 inputs). The carrying amounts of cash and cash equivalents, available-for-sale securities, accounts
receivable, program cash and accounts payable and accrued liabilities approximate fair value due to the
short-term maturities of these assets and liabilities.
The Company’s derivative assets and liabilities consist principally of currency exchange contracts, interest
rate swaps, interest rate contracts and commodity contracts, and are carried at fair value based on
significant observable inputs (Level 2 inputs). Derivatives entered into by the Company are typically
executed over-the-counter and are valued using internal valuation techniques, as no quoted market prices
exist for such instruments. The valuation technique and inputs depend on the type of derivative and the
nature of the underlying exposure. The Company principally uses discounted cash flows to value these
instruments. These models take into account a variety of factors including, where applicable, maturity,
commodity prices, interest rate yield curves of the Company and counterparties, credit curves, counterparty
creditworthiness and currency exchange rates. These factors are applied on a consistent basis and are
based upon observable inputs where available.
F-12
Derivative Instruments
Derivative instruments are used as part of the Company’s overall strategy to manage exposure to market
risks associated with fluctuations in currency exchange rates, interest rates and gasoline costs. As a matter
of policy, derivatives are not used for trading or speculative purposes.
All derivatives are recorded at fair value either as assets or liabilities. Changes in fair value of derivatives
not designated as hedging instruments are recognized currently in earnings within the same line item as the
hedged item. The effective portion of changes in fair value of a derivative that is designated as either a cash
flow or net investment hedge, is recorded as a component of accumulated other comprehensive income.
The ineffective portion is recognized in earnings within the same line item as the hedged item, including
vehicle interest, net or interest related to corporate debt, net. Amounts included in accumulated other
comprehensive income are reclassified into earnings in the same period during which the hedged item
affects earnings. Amounts related to our derivative instruments are recognized in the Consolidated
Statements of Cash Flows consistent with the nature of the hedged item (principally operating activities).
Investments
The Company determines the appropriate classification of its investments in debt and equity securities at
the time of purchase and reevaluates such determination at each balance sheet date. Common stock
investments in affiliates over which the Company has the ability to exercise significant influence but not a
controlling interest are carried on the equity method of accounting. Available-for-sale securities are carried
at current fair value with unrealized gains or losses reported net of taxes as a separate component of
stockholders’ equity. Trading securities are recorded at fair value with realized and unrealized gains and
losses reported currently in earnings. As of December 31, 2013, the Company has investments in available-
for-sale securities with a fair value of $6 million.
Joint venture investments are typically accounted for under the equity method of accounting. Under this
method, the Company records its proportional share of the joint venture’s net income or loss within
operating expenses in the Consolidated Statements of Operations. As of December 31, 2013, the Company
had investments in several joint ventures with a carrying value of $53 million, recorded within non-current
assets on the Consolidated Balance Sheets.
Aggregate realized gains and losses on investments and dividend income are recorded within operating
expenses on the Consolidated Statements of Operations. During 2013, the amount realized from the sale of
certain equity investments was not material. During 2012 and 2011, the Company realized a gain of $2
million and $1 million, respectively, from the sale of equity investments.
Self-Insurance Reserves
The Consolidated Balance Sheets include $416 million and $407 million of liabilities associated with
retained risks of liability to third parties as of December 31, 2013 and 2012, respectively. Such liabilities
relate primarily to public liability and third-party property damage claims, as well as claims arising from the
sale of ancillary insurance products including but not limited to supplemental liability, personal effects
protection and personal accident insurance. These obligations represent an estimate for both reported
claims not yet paid and claims incurred but not yet reported. The estimated reserve requirements for such
claims are recorded on an undiscounted basis utilizing actuarial methodologies and various assumptions
which include, but are not limited to, the Company’s historical loss experience and projected loss
development factors. The required liability is also subject to adjustment in the future based upon the
changes in claims experience, including changes in the number of incidents and changes in the ultimate
cost per incident. These amounts are included within accounts payable and other current liabilities and
other non-current liabilities.
The Consolidated Balance Sheets also include liabilities of approximately $59 million and $61 million as of
December 31, 2013 and 2012, respectively, related to workers’ compensation, health and welfare and other
employee benefit programs. The liabilities represent an estimate for both reported claims not yet paid and
claims incurred but not yet reported, utilizing actuarial methodologies similar to those mentioned above.
These amounts are included within accounts payable and other current liabilities and other non-current
liabilities.
F-13
Stock-Based Compensation
Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is
recognized as expense on a straight-line basis over the vesting period. The Company’s policy is to record
compensation expense for stock options, and restricted stock units that are time- and performance-
based, for the portion of the award that is expected to vest. Compensation expense related to market-based
restricted stock units is recognized provided that the requisite service is rendered, regardless of when, if
ever, the market condition is satisfied. We estimate the fair value of restricted stock units using the market
price of the Company’s common stock on the date of grant. We estimate the fair value of stock-based and
cash unit awards containing a market condition using a Monte Carlo simulation model. Key inputs and
assumptions used in the Monte Carlo simulation model include the stock price of the award on the grant
date, the expected term, the risk-free interest rate over the expected term, the expected annual dividend
yield and the expected stock price volatility. The expected volatility is based on a combination of the
historical and implied volatility of the Company’s publicly traded, near-the-money stock options, and the
valuation period is based on the vesting period of the awards. The risk-free interest rate is derived from the
U.S. Treasury yield curve in effect at the time of grant and, since the Company does not currently pay or
plan to pay a dividend on its common stock, the expected dividend yield was zero.
Business Combinations
The Company uses the acquisition method of accounting for business combinations, which requires that the
assets acquired and liabilities assumed be recorded at their respective fair values at the date of acquisition.
Assets acquired and liabilities assumed in a business combination that arise from contingencies are
recognized if fair value can be reasonably estimated at the acquisition date. The excess, if any, of (i) the fair
value of the consideration transferred by the acquirer and the fair value of any non-controlling interest
remaining in the acquiree, over (ii) the fair values of the identifiable net assets acquired is recorded as
goodwill. Gains and losses on the re-acquisition of unfavorable license agreements are recorded in the
Consolidated Statements of Operations upon completion of the respective acquisition. Transaction-related
costs incurred to effect a business combination are expensed as incurred, except for the cost to issue debt
related to the acquisition.
Transaction-related Costs
Transaction-related costs are classified separately in the Consolidated Statements of Operations. These
costs comprise expenses related to the integration of the acquiree’s operations with those of the Company,
including duplicate headcount costs for functions or positions that are integrated, costs associated with the
implementation of incremental compliance-related programs, expenses for the implementation of best
practices and process improvements, and expenses related to acquisition-related activities such as due-
diligence and other advisory costs. Transaction-related costs in 2011 also include a non-cash charge
related to the reacquired unfavorable license rights and losses on currency transactions related to the Avis
Europe acquisition.
Currency Transactions
The Company records the net gain or loss of currency transactions on certain intercompany loans and the
unrealized gain or loss on intercompany loan hedges within interest expense related to corporate debt, net.
During the years ended December 31, 2013 and 2012, the Company recorded losses of $11 million and
$17 million, respectively, on such items. There was no such item in the year ended December 31, 2011.
Adoption of New Accounting Standards During 2013
In January 2013, as a result of the issuance of a new accounting pronouncement, the Company adopted
Accounting Standards Update (“ASU”) No. 2012-2, “Testing Indefinite-Lived Intangible Assets for
Impairment,” which provides companies the option to first assess qualitative factors to determine whether
there are events or circumstances which would lead to a determination that it is more likely than not that the
indefinite-lived intangible asset is impaired, and it did not have an impact on the Company’s financial
statements.
In January 2013, as a result of issuance of a new accounting pronouncement, the Company adopted, as
required, ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
F-14
Income,” which requires companies to disclose additional information about amounts reclassified out of
accumulated other comprehensive income by component. The adoption of this pronouncement resulted in
incremental disclosure about activity and amounts reclassified out of accumulated other comprehensive
income.
Recently Issued Accounting Pronouncements
On January 1, 2014, as a result of the issuance of a new accounting pronouncement, the Company
adopted ASU No. 2013-11, “Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net
Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” which requires tax
benefits to be presented in the financial statements as a reduction to a deferred tax asset for a net
operating loss carryforward or a tax credit carryforward. The adoption of this accounting pronouncement will
not have an impact on the Company’s financial statements.
3.
Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (“EPS”) (shares in
millions):
Net income (loss) for basic EPS
Convertible debt interest, net of tax
Net income (loss) for diluted EPS
Basic weighted average shares outstanding
Options, warrants and non-vested stock
Convertible debt
Diluted weighted average shares outstanding
Earnings (loss) per share:
Basic
Diluted
__________
(a)
Year Ended December 31,
2012
2011(a)
2013
$
$
$
$
16 $
—
16 $
290 $
4
294 $
107.6
3.8
—
111.4
106.6
2.5
12.5
121.6
(29)
—
(29)
105.2
—
—
105.2
0.15 $
0.15 $
2.72 $
2.42 $
(0.28)
(0.28)
As the Company incurred a net loss in 2011, all outstanding stock options, restricted stock units, stock warrants
and issuable shares underlying the convertible debt have an anti-dilutive effect and therefore are excluded from
the computation of diluted weighted average shares outstanding. Accordingly, basic and diluted weighted average
shares outstanding are equal for such period.
The following table summarizes the Company’s outstanding common stock equivalents that were anti-
dilutive and therefore excluded from the computation of diluted EPS (shares in millions):
As of December 31,
2012
2013
2011
—
—
4.0
0.2
7.9
—
3.4
21.2
21.2
Options (a)
Warrants (b)
Shares underlying convertible debt
__________
(a)
The weighted average exercise price for anti-dilutive options for 2012 and 2011 was $17.12 and $7.90,
respectively.
Represents all outstanding warrants for 2012 and 2011. The exercise price for the warrants was $22.50.
(b)
4.
Restructuring
During fourth quarter 2012, the Company initiated a strategic restructuring initiative to better position the
business of its Truck Rental segment, in which it closed certain rental locations and decreased the size of
the rental fleet, with the intent to increase fleet utilization and reduce costs. During the year ended
December 31, 2013, the Company recorded restructuring expense of $21 million related to this initiative and
expects no further restructuring expenses to be incurred in 2014.
F-15
In 2011, subsequent to the acquisition of Avis Europe, the Company initiated restructuring initiatives,
identifying synergies across the Company, enhancing organizational efficiencies and consolidating and
rationalizing processes. During the years ended December 31, 2013, 2012 and 2011, as part of this
process, the Company formally communicated the termination of employment to approximately 580, 550
and 50 employees, respectively. During 2013, 2012 and 2011, the Company recorded restructuring
expenses in connection with these initiatives of $40 million, $37 million and $3 million, respectively, the
majority of which have been or are expected to be settled in cash. These expenses primarily represent
costs associated with severance, outplacement services and other costs associated with employee
terminations. As of December 31, 2013, the Company has terminated approximately 440 of the employees
affected in 2013 and anticipates that it will incur an additional $20 million of restructuring expenses related
to these initiatives in 2014.
The following tables summarize the change to our restructuring-related liabilities and identify the amounts
recorded within the Company’s reporting segments for restructuring charges and corresponding payments
and utilizations:
Personnel
Related
Facility
Related
Other (a)
Total
Balance as of January 1, 2011
$
Restructuring expense
Acquired restructuring obligation
Cash payment/utilization
Balance as of December 31, 2011
Restructuring expense
Cash payment/utilization
Balance as of December 31, 2012
Restructuring expense
Cash payment/utilization
Balance as of December 31, 2013
__________
(a)
$
Includes expenses related to the disposition of vehicles.
— $
5
—
(4)
1
37
(26)
12
34
(29)
17 $
6 $
—
1
(6)
1
—
—
1
6
(2)
5 $
— $
—
—
—
—
1
(1)
—
21
(21)
— $
North
America
International
Truck Rental
Total
Balance as of January 1, 2011
$
Restructuring expense
Acquired restructuring obligation
Cash payment/utilization
Balance as of December 31, 2011
Restructuring expense
Cash payment/utilization
Balance as of December 31, 2012
Restructuring expense
Cash payment/utilization
Balance as of December 31, 2013
$
6 $
2
—
(7)
1
1
(1)
1
7
(7)
1 $
— $
3
1
(3)
1
36
(25)
12
33
(24)
21 $
— $
—
—
—
—
1
(1)
—
21
(21)
— $
6
5
1
(10)
2
38
(27)
13
61
(52)
22
6
5
1
(10)
2
38
(27)
13
61
(52)
22
5.
Acquisitions
Zipcar
In March 2013, the Company completed the acquisition of the entire issued share capital of Zipcar, a
leading car sharing company, for $473 million, net of acquired cash. The acquisition increased the
Company’s growth potential and its ability to better serve a greater variety of customer transportation
needs.
The excess of the purchase price over fair value of net assets acquired was allocated to goodwill, which
was assigned to the Company’s North America segment. The goodwill is not expected to be deductible for
tax purposes. The fair values of certain tangible assets and liabilities acquired, identifiable intangible assets,
F-16
income and non-income based taxes, and residual goodwill are not yet finalized and subject to change. In
connection with this acquisition, $188 million was recorded in identifiable intangible assets (consisting of
$112 million related to trademarks and $76 million related to customer relationships) and $269 million was
recorded in goodwill. The trademark assets are indefinite-lived and the customer relationship intangibles will
be amortized over an estimated life of 8 years.
Brazilian licensee
In August 2013, the Company acquired a 50% ownership stake in its Brazilian licensee for $53 million.
Approximately $47 million of the total consideration was paid in 2013 and the remainder is expected to be
paid by the end of first quarter 2014. The Company’s investment significantly increases its presence in the
Brazilian car rental market.
The Company’s investment in its Brazilian licensee was recorded as an equity investment within Other non-
current assets, and the Company’s share of the Brazilian licensee’s operating results is reported within
Operating expenses. In conjunction with the acquisition, the Company agreed to the payment of contingent
consideration of up to $13 million based on the Brazilian licensee’s future financial performance. The fair
value of the contingent consideration was estimated by utilizing a Monte Carlo simulation technique, based
on a range of possible future results, and no value was attributed to the contingent consideration at the
acquisition date or at December 31, 2013. The Company’s investment, which is recorded in its International
segment, totaled approximately $17 million at December 31, 2013, net of an impairment charge of $33
million ($33 million, net of tax). The impairment charge was recorded at the time of the investment based on
a combination of observable and unobservable fair value inputs (Level 3), specifically a combination of the
Income approach-discounted cash flow method and the Market approach-public company market multiple
method.
Payless Car Rental
In July 2013, the Company completed the acquisition of Payless for $46 million, net of acquired cash. The
acquisition provides the Company with a position in the deep-value segment of the car rental industry.The
excess of the purchase price over preliminary fair value of net assets acquired was allocated to goodwill,
which was assigned to the Company’s North America segment. The goodwill is not expected to be
deductible for tax purposes. The fair value of the assets acquired and liabilities assumed has not yet been
finalized and is therefore subject to change. In connection with this acquisition, $23 million was recorded in
identifiable intangible assets (consisting of $16 million related to trademarks and $7 million related to
license agreements) and $27 million was recorded in goodwill. The trademark assets are indefinite-lived
and the license agreements will be amortized over an estimated life of 15 years.
Apex Car Rentals
In October 2012, the Company completed the acquisition of the assets of Apex, a leading deep-value car
rental company in New Zealand and Australia, operating a fleet of approximately 4,000 rental vehicles. In
conjunction with the acquisition, the Company paid $63 million in cash (including the acquisition of fleet)
and agreed to the payment of contingent consideration with an estimated acquisition date fair value of $9
million. The contingent consideration consists of a maximum of $26 million in additional payments that are
contingent on the future financial performance of Apex. The fair value of the contingent consideration at the
acquisition date, and at December 31, 2013, was estimated by utilizing a Monte Carlo simulation technique,
based on a range of possible future results. Any changes in contingent consideration are recorded in
Transaction-related costs. The amount recognized for contingent consideration was $12 million at
December 31, 2013. In connection with this acquisition, $21 million was recorded in trademarks and $16
million was recorded in goodwill, which were allocated to the Company’s International segment. The
goodwill is not expected to be deductible for tax purposes.
Avis Europe
In October 2011, the Company completed the acquisition of the entire issued share capital of Avis Europe
for $976 million and subsequently repaid $649 million of assumed Avis Europe indebtedness. Avis Europe
provides vehicle rental and ancillary products and services in Europe, the Middle East, Africa and Asia. The
acquisition reunited the global operation of the Avis and Budget brands under one corporate umbrella.
F-17
The Company recorded a $117 million net, non-cash charge, within transaction-related costs, related to the
reacquired unfavorable license rights that provided Avis Europe with royalty-free license rights within certain
territories. This net charge reflects the difference, as of the acquisition date, between the fair value of the
license rights and their contractual value. The Company used a relief from royalty rate analysis to determine
the fair value. This valuation considered, but was not limited to, (i) the contracted royalty rates, (ii) the
market royalty rate and (iii) the term of the license contracts.
The excess of the purchase price over fair value of net assets acquired was allocated to goodwill, which
was assigned to the Company’s International segment. The goodwill is not expected to be deductible for tax
purposes. The fair value of the assets acquired and liabilities assumed, as set forth in the table below,
reflects various fair value estimates and analyses, including work performed by third-party valuation
specialists. The following summarizes the allocation of the purchase price of Avis Europe:
Cash
Receivables
Other current assets
Property and equipment
Deferred income taxes
Other intangibles
Other non-current assets
Vehicles
Receivables from vehicle manufacturers and other
Total identifiable assets acquired
Accounts payable and other current liabilities
Debt
Other non-current liabilities
Liabilities under vehicles program - debt
Total liabilities assumed
Net assets acquired
Goodwill
Non-cash charge related to the reacquired unfavorable license rights
Total
$
$
136
245
213
91
27
254
31
1,706
282
2,985
(552)
(763)
(322)
(779)
(2,416)
569
290
117
976
Other intangibles consisted primarily of $188 million related to license agreements and $66 million related to
customer relationships. These license agreements are amortized over a weighted-average life of
approximately 20 years. Customer relationships are amortized over a weighted-average life of
approximately 12 years.
Avis Europe contributed net revenues of $359 million and a net loss of $223 million, including $213 million
of transaction-related costs, net of tax to the Company’s results from October 2011 through
December 2011. The net loss was primarily due to a non-cash charge, recorded at the time of the
acquisition, related to the unfavorable license rights reacquired by the Company. The following unaudited
pro forma summary presents the Company’s consolidated information as if Avis Europe had been acquired
on January 1, 2011. These amounts were calculated after conversion of Avis Europe’s results into U.S.
dollars, applying adjustments to align the financial information with GAAP and the Company’s accounting
policies. In addition, adjustments were made to reflect the impact to amortization expense and related
income tax expense for fair value adjustments and revised useful lives assigned to intangible assets as if
Avis Europe had been acquired on January 1, 2011.
Net revenues
Net income
Earnings per share – Diluted
F-18
(unaudited)
Pro Forma Summary
for the Year Ended
December 31,
2011
$
7,259
22
0.17
6.
Intangible Assets
Intangible assets consisted of:
As of December 31, 2013
As of December 31, 2012
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Amortized Intangible Assets
License agreements (a) (d)
Customer relationships (b) (e)
Other (c)
$
$
272
166
2
440
$
$
52
35
1
88
$
$
220
131
1
352
$
$
Unamortized Intangible Assets
Goodwill (d) (e)
Trademarks (d) (e)
_________
(a) Primarily amortized over a period ranging from 20 to 40 years.
(b) Primarily amortized over a period ranging from 8 to 20 years.
(c) Primarily amortized over 27 years.
(d)
The increase primarily relates to the acquisition of Payless.
The increase primarily relates to the acquisition of Zipcar.
691
571
(e)
Amortization expense relating to all intangible assets was as follows:
39
19
1
59
$
$
218
67
1
286
$
$
$
$
$
$
257
86
2
345
375
445
Year Ended December 31,
2012
2011
2013
License agreements
Customer relationships
Total
$
$
12 $
15
27 $
13 $
8
21 $
4
3
7
Based on the Company’s amortizable intangible assets at December 31, 2013, the Company expects
related amortization expense of approximately $29 million for each of the five succeeding fiscal years
excluding effects of currency exchange rates.
The carrying amounts of goodwill and related changes are as follows:
North
America
International
Truck
Rental
Total
Company
2,471
Gross goodwill as of January 1, 2012
$
1,359 $
869 $
243 $
Accumulated impairment losses as of
January 1, 2012
Goodwill as of January 1, 2012
Acquisitions
Adjustments to the allocation of purchase
price
Goodwill as of December 31, 2012
Acquisitions
Foreign currency translation adjustments
Goodwill as of December 31, 2013
(1,355)
4
1
—
5 $
296
—
301 $
$
$
(535)
334
16
5
355 $
4
16
375 $
(228)
15
—
(2,118)
353
17
—
15 $
—
—
15 $
5
375
300
16
691
F-19
7.
Vehicle Rental Activities
The components of vehicles, net within assets under vehicle programs are as follows:
Rental vehicles
Less: Accumulated depreciation
Vehicles held for sale
Vehicles, net
As of December 31,
2012
2013
$
$
10,234 $
(1,411)
8,823
759
9,582 $
10,000
(1,345)
8,655
619
9,274
The components of vehicle depreciation and lease charges, net are summarized below:
Year Ended December 31,
2012
2011
2013
Depreciation expense
Lease charges
Gain on sale of vehicles, net
Vehicle depreciation and lease charges, net
$
$
1,678 $
139
(6)
1,811 $
1,438 $
130
(97)
1,471 $
1,395
62
(234)
1,223
For the years ended December 31, 2013, 2012 and 2011, the Company had purchases of vehicles included
in payables of $260 million, $284 million and $356 million, respectively, and sales of vehicles included in
receivables of $378 million, $439 million and $339 million, respectively.
8.
Income Taxes
The provision for (benefit from) income taxes consists of the following:
Year Ended December 31,
2012
2011
2013
Current
Federal
State
Foreign
Current income tax provision (benefit)
Deferred
Federal
State
Foreign
Deferred income tax provision
Provision for income taxes
$
$
(4) $
12
36
44
28
8
1
37
81 $
(109) $
(16)
7
(118)
93
20
15
128
10 $
—
(3)
36
33
36
10
(14)
32
65
Pretax income (loss) for domestic and foreign operations consists of the following:
United States (a)
Foreign (b)
Pretax income
__________
(a) For the years ended December 31, 2013 and 2012, includes debt extinguishment costs of $147 million and $75
93
97 $
300 $
233 $
4 $
67
$
$
74
(38)
36
Year Ended December 31,
2012
2011
2013
million, respectively.
(b) For the year ended December 31, 2011, includes $128 million of transaction-related costs.
F-20
Current and non-current deferred income tax assets and liabilities are comprised of the following:
Current deferred income tax assets:
Accrued liabilities and deferred revenue
Provision for doubtful accounts
Acquisition and integration-related liabilities
Convertible note hedge
Valuation allowance (a)
Current deferred income tax assets
Current deferred income tax liabilities:
Accrued liabilities and deferred revenue
Prepaid expenses
Current deferred income tax liabilities
Current deferred income tax assets, net
Non-current deferred income tax assets:
Net tax loss carryforwards
Accrued liabilities and deferred revenue
Depreciation and amortization
Tax credits
Convertible note hedge
Acquisition and integration-related liabilities
Other
Valuation allowance (a)
Non-current deferred income tax assets
Non-current deferred income tax liabilities:
Depreciation and amortization
Other
Non-current deferred income tax liabilities
Non-current deferred income tax assets, net
As of December 31,
2012
2013
$
209 $
12
10
1
(28)
204
5
22
27
177 $
1,431 $
137
15
75
—
16
46
(319)
1,401
101
1
102
1,299 $
$
$
$
179
10
8
3
(22)
178
6
26
32
146
1,454
151
54
62
2
16
36
(276)
1,499
42
3
45
1,454
__________
(a) The valuation allowance of $347 million at December 31, 2013 relates to tax loss carryforwards, foreign tax credits
and certain state deferred tax assets of $279 million, $46 million and $22 million, respectively. The valuation
allowance will be reduced when and if the Company determines it is more likely than not that the related deferred
income tax assets will be realized. The valuation allowance of $298 million at December 31, 2012 relates to tax loss
carryforwards, foreign tax credits and certain state deferred tax assets of $227 million, $53 million and $18 million,
respectively.
Deferred income tax assets and liabilities related to vehicle programs are comprised of the following:
Deferred income tax assets:
Depreciation and amortization
Deferred income tax liabilities:
Depreciation and amortization
Deferred income tax liabilities under vehicle programs, net
As of December 31,
2012
2013
$
$
51 $
51
2,228
2,228
2,177 $
49
49
2,212
2,212
2,163
At December 31, 2013, the Company had U.S. federal net operating loss carryforwards of approximately
$3.3 billion, most of which expire in 2031. Such net operating loss carryforwards are primarily related to
accelerated depreciation of the Company’s U.S. vehicles. Currently, the Company does not record valuation
allowances on the majority of its U.S. federal tax loss carryforwards as there are adequate deferred tax
liabilities that could be realized within the carryforward period. At December 31, 2013, the Company had
foreign net operating loss carryforwards of approximately $445 million with an indefinite utilization period. No
F-21
provision has been made for U.S. federal deferred income taxes on approximately $720 million of
accumulated and undistributed earnings of foreign subsidiaries at December 31, 2013, since it is the present
intention of management to reinvest the undistributed earnings indefinitely in those foreign operations. The
determination of the amount of unrecognized U.S. federal deferred income tax liability for unremitted
earnings is not practicable.
The reconciliation between the U.S. federal income tax statutory rate and the Company’s effective income
tax rate is as follows:
Year Ended December 31,
2012
2011
2013
U.S. federal statutory rate
Adjustments to reconcile to the effective rate:
State and local income taxes, net of federal tax benefits
Changes in valuation allowances (a)
Taxes on foreign operations at rates different than
statutory U.S. federal rates
Resolution of prior years’ examination issues
Non-deductible debt extinguishment costs
Non-deductible transaction-related costs
Other non-deductible expenses
Other
35.0%
35.0%
35.0%
4.1
15.5
5.9
—
18.8
3.2
2.3
(1.3)
83.5%
4.9
0.9
—
(42.5)
4.7
0.3
0.6
(0.6)
3.3%
4.2
(1.3)
(13.2)
—
—
146.5
10.1
(0.7)
180.6%
__________
(a) For the year ended December 31, 2013, includes 13.1% related to our impairment expense.
The following is a tabular reconciliation of the gross amount of unrecognized tax benefits for the year:
Balance at January 1
Additions for tax positions related to current year
Additions for tax positions for prior years
Additions associated with the acquisition of Avis Europe
Reductions for tax positions for prior years
Settlements
Statute of limitations
Balance at December 31
$
$
2013
2012
2011
54 $
4
9
—
—
—
(4)
63 $
186 $
4
5
—
(140)
(1)
—
54 $
40
—
143
34
(3)
—
(28)
186
In 2012, the Company recorded a reduction in its unrecognized tax benefits primarily due to an effective
settlement of $128 million for pre-2007 taxes. The Company does not anticipate that total unrecognized tax
benefits will change significantly in 2014.
Substantially all of the gross amount of the unrecognized tax benefits at December 31, 2013, 2012 and 2011,
if recognized, would affect the Company’s provision for, or benefit from, income taxes. As of December 31,
2013, the Company’s unrecognized tax benefits were offset by tax loss carryforwards in the amount of $18
million.
The following table presents unrecognized tax benefits:
Unrecognized tax benefit in non-current income taxes payable (a)
Accrued interest payable on potential tax liabilities (b)
As of December 31,
2012
2013
$
44 $
28
39
22
__________
(a)
Pursuant to the agreements governing the disposition of certain subsidiaries in 2006, the Company is entitled to
indemnification for certain pre-disposition tax contingencies. As of December 31, 2013, $15 million of
unrecognized tax benefits are related to tax contingencies for which the Company believes it is entitled to
indemnification.
The Company recognizes potential interest related to unrecognized tax benefits within interest expense related to
corporate debt, net on the accompanying Consolidated Statements of Operations. Penalties incurred during the
(b)
F-22
twelve months ended December 31, 2013, 2012 and 2011, were not significant and were recognized as a
component of income taxes.
9.
Other Current Assets
Other current assets consisted of:
Prepaid expenses
Sales and use taxes
Other
Other current assets
10. Property and Equipment, net
Property and equipment, net consisted of:
Land
Buildings and leasehold improvements
Capitalized software
Furniture, fixtures and equipment
Buses and support vehicles
Projects in process
Less: Accumulated depreciation and amortization
Property and equipment, net
As of December 31,
2012
2013
187 $
132
136
455 $
174
108
123
405
As of December 31,
2012
2013
56 $
549
494
374
74
64
1,611
(997)
614 $
58
521
419
319
64
37
1,418
(889)
529
$
$
$
$
Depreciation and amortization expense relating to property and equipment during 2013, 2012 and 2011 was
$124 million, $104 million and $88 million, respectively (including $36 million, $30 million and $26 million,
respectively, of amortization expense relating to capitalized software).
11. Other Non-Current Assets
Other non-current assets consisted of:
Debt financing fees
Receivables from Realogy (a)
Investments (b)
Receivables from Wyndham (a)
Other
Other non-current assets
As of December 31,
2012
2013
134 $
60
59
36
72
361 $
127
62
41
37
53
320
$
$
__________
(a)
Represents amounts due for certain contingent, tax and other corporate liabilities assumed by former
subsidiaries. These amounts are due on demand upon the Company’s settlement of the related liability. At
December 31, 2013 and 2012, there are corresponding liabilities recorded within other non-current liabilities.
Realogy has posted a letter of credit for the benefit of the Company with respect to these obligations, as more
fully described under Note 15—Commitments and Contingencies.
In 2013, amount includes the Company’s (i) 50% ownership of Anji Car Rental and Leasing Company Limited
(“Anji”), our joint venture for the Avis brand in China, and (ii) 50% ownership in its Brazilian licensee. In 2012,
amounts included (i) 50% ownership of Anji and (ii) 33% ownership of Mercury Car Rentals Limited, our joint
venture for the Avis brand in India.
(b)
F-23
12. Accounts Payable and Other Current Liabilities
Accounts payable and other current liabilities consisted of:
Accounts payable
Accrued payroll and related
Accrued sales and use taxes
Public liability and property damage insurance liabilities – current
Deferred revenue – current
Accrued commissions
Advertising and marketing
Accrued interest
Income taxes payable – current
Other
Accounts payable and other current liabilities
13. Long-term Debt and Borrowing Arrangements
Long-term debt and other borrowing arrangements consisted of:
Floating Rate Senior Notes
3½% Convertible Notes
Floating Rate Term Loan (a)
Floating Rate Senior Notes
8¼% Senior Notes
Floating Rate Term Loan (a)
9¾% Senior Notes
6% Euro-denominated Senior Notes
5½% Senior Notes
Other
Total
Less: Short-term debt and current portion of long-term debt
Long-term debt
Maturity
Date
May 2014
October 2014
May 2016
November 2017
December 2017
March 2018
January 2019
March 2019
March 2020
March 2021
April 2023
As of December 31,
2012
2013
344 $
210
193
136
87
77
75
63
13
281
1,479 $
309
198
148
132
60
67
82
66
58
301
1,421
As of December 31,
2012
2013
— $
66
—
300
247
—
691
989
223
344
500
3,360
34
3,394
89
3,305
$
250
128
49
300
—
446
730
689
250
—
—
2,842
63
2,905
57
2,848
$
$
$
$
__________
(a)
The Floating Rate Term Loans are part of the Company’s senior credit facility, which is secured by pledges of capital stock of
certain subsidiaries of the Company, and liens on substantially all of the Company’s intellectual property and certain other real
and personal property.
Convertible Notes
3½% Convertible Senior Notes. The Company’s 3½% Convertible Senior Notes due October 2014 (the
“Convertible Notes”) were issued in October 2009 at par value, for aggregate proceeds of $345 million. The
Convertible Notes are senior unsecured obligations of the Company. The Convertible Notes are not
redeemable by the Company prior to maturity; however, they are convertible by the holders at any time prior
to the second trading day before the maturity date of the Convertible Notes. The initial conversion rate for
the Convertible Notes is 61.5385 shares of common stock per $1,000 principal amount, which is equal to an
initial conversion price of approximately $16.25 per share, and which is subject to adjustment under certain
circumstances.
Concurrently with the issuance of the Convertible Notes, the Company purchased a convertible note hedge
and entered into a warrant transaction, which effectively increased the conversion price of the Convertible
F-24
Notes, from the Company’s perspective, to $22.50 per share. The convertible note hedge was intended to
reduce the net number of shares required to be issued upon conversion of the Convertible Notes.
During 2013 and 2012, the Company repurchased $62 million and $217 million, respectively, of its
Convertible Notes at a cost of $115 million and $257 million, respectively. In conjunction with the
repurchase of the Convertible Notes, the Company repurchased warrants and sold convertible note hedges
corresponding to the repurchased Convertible Notes. In December 2013, the Company unwound the
remaining outstanding convertible note hedge and warrants. See Note 16-Stockholders’ Equity for further
details.
Term Loans
Floating Rate Term Loan due 2016. In October 2012, the Company issued an incremental $30 million under
its Floating Rate Term Loan due 2016. In December 2013, the Company repaid the entire outstanding
principal amount plus any accrued and unpaid interest.
Floating Rate Term Loan due 2019. The Company issued $500 million and $200 million of Floating Rate
Term Loan in March and October 2012, respectively, under the Company’s senior credit facility. The
Company used the proceeds of the loan to repay approximately $420 million of term loan borrowings due
2014 and 2018 and $75 million of its senior notes due 2014.
During 2013, the Company amended its senior credit facility to issue, in aggregate, an additional $300
million of term loan due 2019. A portion of the proceeds was used to partially fund the acquisition of Zipcar.
The term loan has a committed aggregate principal amount of $1 billion and bears interest at the greater of
three-month LIBOR or 0.75% plus 225 basis points, for an aggregate rate of 3.00% at December 31, 2013;
however, the Company has entered into an interest rate swap to hedge $600 million of its interest rate
exposure related to the floating rate term loan at an aggregate rate of 3.96%.
Senior Notes
Floating Rate Senior Notes due 2014. In June 2013, the Company repaid $100 million of outstanding
principal, and in December 2013, the Company repaid the remaining outstanding principal of $150 million.
Senior Notes due 2017. In November 2012, the Company issued its
Senior Notes at par, for
aggregate proceeds of $300 million with interest payable semi-annually. The Company has the right to
redeem these notes in whole or in part at any time on or after May 15, 2015, at specified prices, plus any
accrued and unpaid interest through the redemption date.
Floating Rate Senior Notes due 2017. In November 2013, the Company issued its Floating Rate Senior
Notes at 98.75% of their face value for aggregate proceeds of $247 million. The interest rate on these notes
is equal to three-month LIBOR plus 275 basis points, for an aggregate rate of 3.00% at December 31, 2013;
however, the Company has entered into an interest rate swap to hedge its interest rate exposure related to
the these notes at an aggregate rate of 3.58%.
In connection with the sale of the Floating Rate Notes due December 2017, the Company entered into a
registration rights agreement, under which it has agreed to use its reasonable best efforts to file with the
Securities and Exchange Commission and cause to become effective a registration statement with respect
to a registered offer to exchange the notes for new notes, with substantially identical terms in all material
respects. In accordance with the registration rights agreement, the Company could be required to pay
additional interest of up to 0.25% per annum on the principal amount of the notes from February 18, 2015
until the exchange offer is completed, a shelf registration statement, if required, is declared effective or the
restricted notes become freely tradable under the Securities Act. The Company believes the likelihood of
occurrence of such event is remote and, as such, the Company has not recorded a related liability as of
December 31, 2013.
Senior Notes due 2018. During 2013, the Company repaid the entire outstanding $446 million
9
principal plus accrued and unpaid interest.
8¼% Senior Notes due 2019. In March 2012, the Company issued a third tranche of 8¼% Senior Notes in
the amount of $125 million at 103.5% of their face value, for aggregate proceeds of $129 million with
interest payable semi-annually. The Company has the right to redeem these notes in whole or in part at any
F-25
time on or after October 15, 2014, at specified redemption prices, plus any accrued and unpaid interest
through the redemption date. In December 2013, the Company purchased approximately $39 million of the
aggregate principal amount.
9¾% Senior Notes due 2020. In April 2013, the Company purchased approximately $27 million of the
aggregate principal amount.
6% Euro-denominated Senior Notes. In March 2013, the Company issued €250 million of 6% Euro-
denominated Senior Notes due March 2021, at par, with interest payable semi-annually. The notes are
unsecured obligations of the Company’s Avis Budget Finance plc subsidiary, are guaranteed on a senior
basis by the Company and certain of its domestic subsidiaries and rank equally with all of the Company’s
existing senior unsecured debt. The Company has the right to redeem these notes in whole or in part on or
after April 1, 2016 at specified redemption prices, plus any accrued and unpaid interest. The Company used
the proceeds from the issuance to partially fund the acquisition of Zipcar.
5½% Senior Notes due 2023. In April 2013, the Company completed an offering of $500 million of 5½%
Senior Notes due April 2023. The notes were issued at par, with interest payable semi-annually. The
Company has the right to redeem these notes in whole or in part on or after April 1, 2018 at specified
redemption prices, plus any accrued and unpaid interest.
In connection with the issuance of the 5½% Senior Notes due 2023, the Company completed a cash tender
offer pursuant to which approximately $326 million in aggregate principal amount of its
due 2018 and approximately $27 million of the aggregate principal amount of its 9¾% Senior Notes due
2020 were purchased by the Company for $398 million plus accrued interest. In June 2013, the Company
Senior Notes due 2018 for $139 million
redeemed the remaining $124 million principal amount of the
plus accrued interest.
Senior Notes
The Floating Rate Senior Notes, the
the 5½% Senior Notes, in each case as described above, are senior unsecured obligations of the
Company’s Avis Budget Car Rental, LLC (“ABCR”) subsidiary, are guaranteed by the Company and certain
of its domestic subsidiaries and rank equally in right of payment with all of the Company’s existing and
future senior unsecured indebtedness.
Senior Notes, 8¼% Senior Notes, the 9¾% Senior Notes, and
In connection with the debt amendments and repayments for the years ended December 31, 2013 and
2012, the Company recorded $147 million and $75 million in early extinguishment of debt costs,
respectively.
DEBT MATURITIES
The following table provides contractual maturities of the Company’s corporate debt at December 31, 2013:
Year
2014
2015
2016
2017
2018
Thereafter
Amount
89
17
16
561
11
2,700
3,394
$
$
F-26
COMMITTED CREDIT FACILITIES AND AVAILABLE FUNDING ARRANGEMENTS
At December 31, 2013, the committed corporate credit facilities available to the Company and/or its
subsidiaries were as follows:
Senior revolving credit facility maturing 2018 (a)
Other facilities (b)
$
1,650
13
Total
Capacity
Outstanding
Borrowings
$
Letters of
Credit Issued
598
—
— $
1
Available
Capacity
$
1,052
12
__________
(a)
The senior revolving credit facility bears interest at one-month LIBOR, plus 225 basis points. The senior revolving credit facility
is part of the Company’s senior credit facility, which is secured by pledges of capital stock of certain subsidiaries of the
Company, and liens on substantially all of the Company’s intellectual property and certain other real and personal property.
These facilities encompass bank overdraft lines of credit, bearing interest of 4.50% to 5.69% as of December 31, 2013.
(b)
During 2013, the Company extended the maturity of the senior revolving credit facility from 2016 to 2018,
expanded its borrowing capacity under the facility, and reduced its borrowing spread under the facility by 75
basis points.
At December 31, 2013, the Company had various uncommitted credit facilities available, which bear interest
at rates of 0.52% to 2.50%, under which it had drawn approximately $4 million.
DEBT COVENANTS
The agreements governing the Company’s indebtedness contain restrictive covenants, including restrictions
on dividends paid to the Company by certain of its subsidiaries, the incurrence of additional indebtedness
by the Company and certain of its subsidiaries, acquisitions, mergers, liquidations, and sale and leaseback
transactions. The Company’s senior credit facility contain financial and other covenants, including a
maximum leverage ratio. As of December 31, 2013, the Company was in compliance with the financial
covenants of its senior credit facility.
14. Debt under Vehicle Programs and Borrowing Arrangements
Debt under vehicle programs including related party debt due to Avis Budget Rental Car Funding (AESOP)
LLC (“Avis Budget Rental Car Funding”), consisted of:
As of December 31,
2012
2013
$
$
5,656 $
400
731
289
226
35
7,337 $
5,203
353
679
315
253
3
6,806
North America – Debt due to Avis Budget Rental Car Funding (a)
North America – Canadian borrowings
International – Debt borrowings
International – Capital leases
Truck Rental – Debt borrowings (b)
Other (c)
Total
__________
(a)
The increase reflects additional borrowings principally to fund an increase in the Company’s fleet driven by
increased rental volume and the acquisitions of Zipcar and Payless.
The decrease reflects reduced borrowings due to a decrease in the size of the Company’s truck fleet.
The increase is principally related to Zipcar capital leases.
(b)
(c)
North America
Debt due to Avis Budget Rental Car Funding. Avis Budget Rental Car Funding, an unconsolidated
bankruptcy remote qualifying special purpose limited liability company, issues privately placed notes to
investors as well as to banks and bank-sponsored conduit entities. Avis Budget Rental Car Funding uses the
proceeds from its note issuances to make loans to a wholly-owned subsidiary of the Company, AESOP
Leasing LP (“AESOP Leasing”), on a continuing basis. AESOP Leasing is required to use the proceeds of
such loans to acquire or finance the acquisition of vehicles used in the Company’s rental car operations. By
issuing debt through the Avis Budget Rental Car Funding program, the Company pays a lower rate of
interest than if it had issued debt directly to third parties. Avis Budget Rental Car Funding is not consolidated,
F-27
as the Company is not the “primary beneficiary” of Avis Budget Rental Car Funding. The Company
determined that it is not the primary beneficiary because the Company does not have the obligation to
absorb the potential losses or receive the benefits of Avis Budget Rental Car Funding’s activities since the
Company’s only significant source of variability in the earnings, losses or cash flows of Avis Budget Rental
Car Funding is exposure to its own creditworthiness, due to its loan from Avis Budget Rental Car Funding.
Because Avis Budget Rental Car Funding is not consolidated, AESOP Leasing’s loan obligations to Avis
Budget Rental Car Funding are reflected as related party debt on the Company’s Consolidated Balance
Sheets. The Company also has an asset within Assets under vehicle programs on its Consolidated Balance
Sheets which represents securities issued to the Company by Avis Budget Rental Car Funding. AESOP
Leasing is consolidated, as the Company is the “primary beneficiary” of AESOP Leasing; as a result, the
vehicles purchased by AESOP Leasing remain on the Company’s Consolidated Balance Sheets. The
Company determined it is the primary beneficiary of AESOP Leasing, as it has the ability to direct its
activities, an obligation to absorb a majority of its expected losses and the right to receive the benefits of
AESOP Leasing’s activities. AESOP Leasing’s vehicles and related assets, which as of December 31, 2013,
approximate $7.3 billion and many of which are subject to manufacturer repurchase and guaranteed
depreciation agreements, collateralize the debt issued by Avis Budget Rental Car Funding. The assets and
liabilities of AESOP Leasing are presented on the Company’s Consolidated Balance Sheets within Assets
under vehicle programs and Liabilities under vehicle programs, respectively. The assets of AESOP Leasing,
included within Assets under vehicle programs (excluding the Investments in Avis Budget Rental Car
Funding (AESOP) LLC—related party) are restricted. Such assets may be used only to repay the respective
AESOP Leasing liabilities, included within Liabilities under vehicle programs, and to purchase new vehicles,
although if certain collateral coverage requirements are met, AESOP Leasing may pay dividends from
excess cash. The creditors of AESOP Leasing and Avis Budget Rental Car Funding have no recourse to the
general credit of the Company. The Company periodically provides Avis Budget Rental Car Funding with
non-contractually required support, in the form of equity and loans, to serve as additional collateral for the
debt issued by Avis Budget Rental Car Funding.
The business activities of Avis Budget Rental Car Funding are limited primarily to issuing indebtedness and
using the proceeds thereof to make loans to AESOP Leasing for the purpose of acquiring or financing the
acquisition of vehicles to be leased to the Company’s rental car subsidiaries and pledging its assets to
secure the indebtedness. Because Avis Budget Rental Car Funding is not consolidated by the Company, its
results of operations and cash flows are not reflected within the Company’s financial statements. Borrowings
under the Avis Budget Rental Car Funding program primarily represent fixed rate notes and had a weighted
average interest rate of 3% as of December 31, 2013 and 2012.
Canadian borrowings. The Company finances the acquisition of vehicles used in its Canadian rental
operations through a consolidated, bankruptcy remote special-purpose entity, which issues privately placed
notes to investors and bank-sponsored conduits. The Canadian borrowings represent a mix of fixed and
floating rate debt and had a weighted average interest rate of 3% and 4% as of December 31, 2013 and
2012, respectively.
International
Debt borrowings. In March 2013, the Company entered into a three-year, €500 million (approximately $687
million) European rental fleet securitization program, which matures in 2016 and is used to finance fleet
purchases for certain of the Company’s European operations. The Company finances the acquisition of
vehicles used in its International rental car operations through this European and other consolidated,
bankruptcy remote special-purpose entities, which issue privately placed notes to banks and bank-
sponsored conduits. The International borrowings primarily represent floating rate notes and had a weighted
average interest rate of 4% as of December 31, 2013 and 2012.
Capital leases. The Company obtained a portion of its International vehicles under capital lease
arrangements for which there are corresponding assets of $306 million and $317 million, classified within
vehicles, net on the Company’s Consolidated Balance Sheets as of December 31, 2013 and 2012,
respectively. For the years ended December 31, 2013 and 2012, the interest rates on these leases ranged
from 2% to 7% and 2% to 4%, respectively. All capital leases are on a fixed repayment basis and interest
rates are fixed at the contract date.
F-28
Truck Rental
Debt borrowings. The Budget Truck funding program consists of debt facilities, including capital leases,
established by the Company to finance the acquisition of the Budget Truck Rental fleet. The borrowings
under the Budget Truck funding program are primarily fixed rate notes with a weighted average interest rate
of 3% and 4% as of December 31, 2013 and 2012, respectively.
Other
Borrowings under the Company’s other vehicle rental programs primarily represent Zipcar capital lease
arrangements for which there are corresponding assets of $28 million, classified within vehicles, net on the
Company’s Consolidated Balance Sheets as of December 31, 2013. For the year ended December 31,
2013, the interest rate on these leases ranged from 3% to 4%.
DEBT MATURITIES
The following table provides the contractual maturities of the Company’s debt under vehicle programs,
including related party debt due to Avis Budget Rental Car Funding, at December 31, 2013:
2014 (a)
2015
2016
2017
2018
Thereafter
Debt Under
Vehicle
Programs
$
$
1,264
1,534
1,618
998
1,532
391
7,337
__________
(a)
Vehicle-backed debt maturing within one year includes term asset-backed securities of approximately $674 million and bank and
bank-sponsored borrowings of $590 million.
COMMITTED CREDIT FACILITIES AND AVAILABLE FUNDING ARRANGEMENTS
The following table presents available funding under the Company’s debt arrangements related to its vehicle
programs, including related party debt due to Avis Budget Rental Car Funding, at December 31, 2013:
Total
Capacity (a)
$
$
8,031
753
1,408
404
233
35
10,864
Outstanding
Borrowings
5,656
$
400
731
289
226
35
7,337
$
$
$
Available
Capacity
2,375
353
677
115
7
—
3,527
North America – Debt due to Avis Budget Rental Car Funding (b)
North America – Canadian borrowings (c)
International – Debt borrowings (d)
International – Capital leases (e)
Truck Rental – Debt borrowings (f)
Other (g)
Total
__________
(a)
(b)
Capacity is subject to maintaining sufficient assets to collateralize debt.
The outstanding debt is collateralized by $7.3 billion of underlying vehicles and related assets.
The outstanding debt is collateralized by $549 million of underlying vehicles and related assets.
The outstanding debt is collateralized by $1.3 billion of underlying vehicles and related assets.
The outstanding debt is collateralized by $306 million of underlying vehicles and related assets.
The outstanding debt is collateralized by $338 million of underlying vehicles and related assets.
The outstanding debt is collateralized by $28 million of underlying vehicles and related assets.
(c)
(d)
(e)
(f)
(g)
DEBT COVENANTS
Debt agreements under the Company’s vehicle-backed funding programs contain restrictive covenants,
including restrictions on dividends paid to the Company by certain of its subsidiaries and restrictions on
indebtedness, mergers, liens, liquidations and sale and leaseback transactions, and in some cases also
require compliance with certain financial requirements. As of December 31, 2013, the Company is not aware
F-29
of any instances of non-compliance with any of the financial or restrictive covenants contained in the debt
agreements under its vehicle-backed funding programs.
15. Commitments and Contingencies
Lease Commitments
The Company is committed to making rental payments under noncancelable operating leases covering
various facilities and equipment. Many of the Company’s operating leases for facilities contain renewal
options. These renewal options vary, but the majority include clauses for various term lengths and prevailing
market rate rents.
Future minimum lease payments required under noncancelable operating leases, including minimum
concession fees charged by airport authorities, which in many locations are recoverable from vehicle rental
customers, as of December 31, 2013, are as follows:
2014
2015
2016
2017
2018
Thereafter
Amount
507
364
288
216
162
719
2,256
$
$
The future minimum lease payments in the above table have been reduced by minimum future sublease
rental inflows in the aggregate of $6 million for all periods shown in the table.
The Company maintains concession agreements with various airport authorities that allow the Company to
conduct its car rental operations on site. In general, concession fees for airport locations are based on a
percentage of total commissionable revenue (as defined by each airport authority), subject to minimum
annual guaranteed amounts. These concession fees, which are included in the Company’s total rent
expense, were as follows for the years ended December 31:
Rent expense (including minimum concession fees)
Contingent concession expense
Less: sublease rental income
Total
2013
2012
2011
$
$
622 $
173
795
(5)
790 $
600 $
155
755
(5)
750 $
535
104
639
(5)
634
Commitments under capital leases, other than those within the Company’s vehicle rental programs, for
which the future minimum lease payments have been reflected in Note 14—Debt Under Vehicle Programs
and Borrowing Arrangements, are not significant.
The Company leases a portion of its vehicles under operating leases, which extend through 2017. As of
December 31, 2013, the Company has guaranteed up to $82 million of residual values for these vehicles at
the end of their respective lease terms. The Company believes that, based on current market conditions,
the net proceeds from the sale of these vehicles at the end of their lease terms will equal or exceed their net
book values and therefore has not recorded a liability related to guaranteed residual values.
Contingencies
In 2006, the Company completed the spin-offs of its Realogy and Wyndham subsidiaries. In connection with
the spin-offs, Realogy assumed 62.5% and Wyndham assumed 37.5% of certain contingent and other
corporate liabilities of the Company that are not primarily related to any of the respective businesses of
Realogy, Wyndham, our former Travelport subsidiary and/or the Company’s vehicle rental operations, and
in each case incurred or allegedly incurred on or prior to each subsidiary’s disposition (“Assumed
Liabilities”). If Realogy or Wyndham were to default on its payment of costs or expenses to the Company
related to any Assumed Liabilities, the Company would be responsible for 50% of the defaulting party’s
obligation. The Company does not believe that the impact of any resolution of contingent liabilities
F-30
constituting Assumed Liabilities should result in a material liability to the Company in relation to its
consolidated financial position or liquidity, as Realogy and Wyndham each have agreed to assume
responsibility for these liabilities. In accordance with the terms of relevant documents, Realogy posted a
letter of credit in April 2007 for the benefit of the Company to cover its estimated share of the Assumed
Liabilities discussed above, subject to adjustment, although there can be no assurance that such letter of
credit will be sufficient or effective to cover Realogy’s actual obligations if and when they arise.
The Company is also named in various litigation that is primarily related to the businesses of its former
subsidiaries, including Realogy, and Wyndham and their current or former subsidiaries. The Company is
entitled to indemnification from such entities for any liability resulting from such litigation.
Additionally, the Company is also involved in claims, legal proceedings and governmental inquiries related,
among other things, to its vehicle rental operations, including, among others, contract and licensee
disputes, wage-and-hour claims, competition matters, employment matters, insurance claims, intellectual
property claims and other regulatory, environmental, commercial and tax matters. Litigation is inherently
unpredictable and, although the Company believes that its accruals are adequate and/or that it has valid
defenses in these matters, unfavorable resolutions could occur, which could materially impact the
Company’s financial position, results of operations or cash flows.
Commitments to Purchase Vehicles
The Company maintains agreements with vehicle manufacturers under which the Company has agreed to
purchase approximately $6.4 billion of vehicles from manufacturers over the next 12 months. The majority
of these commitments are subject to the vehicle manufacturers’ satisfying their obligations under their
respective repurchase and guaranteed depreciation agreements. The purchase of such vehicles is financed
primarily through the issuance of vehicle-backed debt and cash received upon the disposition of vehicles.
Other Purchase Commitments
In the normal course of business, the Company makes various commitments to purchase other goods or
services from specific suppliers, including those related to marketing, advertising and capital expenditures.
As of December 31, 2013, the Company had approximately $160 million of purchase obligations, which
extend through 2018.
Concentrations
Concentrations of credit risk at December 31, 2013, include (i) risks related to the Company’s repurchase
and guaranteed depreciation agreements with domestic and foreign car manufacturers, including Ford,
General Motors, Chrysler, Peugeot, Volkswagen, Fiat, Mercedes, Kia, Toyota, BMW, and Renault, and
primarily with respect to receivables for program cars that have been disposed but for which the Company
has not yet received payment from the manufacturers and (ii) risks related to Realogy and Wyndham,
including receivables of $62 million and $38 million, respectively, related to certain contingent, income tax
and other corporate liabilities assumed by Realogy and Wyndham in connection with their disposition.
Asset Retirement Obligations
The Company maintains a liability for asset retirement obligations. An asset retirement obligation is a legal
obligation to perform certain activities in connection with the retirement, disposal or abandonment of assets.
The Company’s asset retirement obligations, which are measured at discounted fair values, are primarily
related to the removal of underground gas storage tanks at its rental facilities. Liabilities accrued for asset
retirement obligations were $25 million and $26 million at December 31, 2013 and 2012, respectively.
F-31
Standard Guarantees/Indemnifications
In the ordinary course of business, the Company enters into numerous agreements that contain standard
guarantees and indemnities whereby the Company agrees to indemnify another party, among other things,
for performance under contracts and any breaches of representations and warranties thereunder. In
addition, many of these parties are also indemnified against any third-party claim resulting from the
transaction that is contemplated in the underlying agreement. Such guarantees or indemnifications are
granted under various agreements, including those governing (i) purchases, sales or outsourcing of assets
or businesses, (ii) leases of real estate, (iii) licensing of trademarks, (iv) access to credit facilities and use of
derivatives and (v) issuances of debt or equity securities. The guarantees or indemnifications issued are for
the benefit of the (i) buyers in sale agreements and sellers in purchase agreements, (ii) landlords in lease
contracts, (iii) licensees under licensing agreements, (iv) financial institutions in credit facility arrangements
and derivative contracts and (v) underwriters and placement agents in debt or equity security issuances.
While some of these guarantees extend only for the duration of the underlying agreement, many may
survive the expiration of the term of the agreement or extend into perpetuity (unless subject to a legal
statute of limitations). There are no specific limitations on the maximum potential amount of future payments
that the Company could be required to make under these guarantees, nor is the Company able to develop
an estimate of the maximum potential amount of future payments to be made under these guarantees as
the triggering events are not subject to predictability. With respect to certain of the aforementioned
guarantees, such as indemnifications provided to landlords against third-party claims for the use of real
estate property leased by the Company, the Company maintains insurance coverage that mitigates its
potential exposure.
Other Guarantees
The Company has provided certain guarantees to, or for the benefit of, subsidiaries of Realogy, Wyndham
and Travelport, which, as previously discussed, were sold or spun-off in 2006. These guarantees relate
primarily to various real estate operating leases. The maximum potential amount of future payments that the
Company may be required to make under the guarantees relating to these leases is estimated to be
approximately $52 million, the majority of which expire by the end of 2015. At December 31, 2013, the
liability recorded by the Company in connection with these guarantees was approximately $1 million. To the
extent that the Company would be required to perform under any of these guarantees, the Company is
entitled to indemnification by Realogy and Wyndham, as applicable. The Company monitors the credit
ratings and other relevant information for Realogy and Wyndham, in order to assess the status of the
payment/performance risk of these guarantees.
16. Stockholders’ Equity
Cash Dividend Payments
During 2013, 2012 and 2011, the Company did not declare or pay any cash dividends. The Company’s
ability to pay dividends to holders of its common stock is limited by the Company’s senior credit facility, the
indentures governing its senior notes and vehicle financing programs.
Share Repurchases
In August 2013, the Company obtained Board approval to repurchase up to $200 million of its common
stock. During 2013, the Company repurchased approximately 1,582,000 shares of common stock at a cost
of approximately $50 million under the repurchase program. The Company did not repurchase any of its
common stock during 2012 and 2011.
Convertible Note Hedge and Warrants
In 2009, the Company purchased a convertible note hedge for approximately $95 million, to potentially
reduce the net number of shares required to be issued upon conversion of the Company’s 3½% Convertible
Notes. Concurrently, the Company issued warrants for approximately $62 million to offset the cost of the
convertible note hedge.
The convertible note hedge and warrants, which were to be net-share settled, initially covered the purchase
and issuance, respectively, of approximately 21.2 million shares of common stock, subject to customary
anti-dilution provisions. The initial strike price per share of the convertible note hedge and warrants was
F-32
$16.25 and $22.50, respectively. The convertible note hedge was exercisable before expiration only to the
extent that corresponding amounts of the 3½% Convertible Notes were exercised. The convertible note
hedge and warrant transactions were accounted for as capital transactions and included as a component of
stockholders’ equity. The significant terms of the Convertible Notes can be found in Note 13—Long-term
Debt and Borrowing Arrangements.
During 2013 and 2012, respectively, concurrently with the Company’s repurchase of a portion of its 3½%
Convertible Notes, the Company repurchased warrants for the purchase of the Company’s common stock
for $37 million and $29 million and sold an equal portion of its convertible note hedge for $50 million and
$43 million, reducing the number of shares related to each of the hedge and warrant by approximately 13
million. In addition, during December 2013, the Company unwound the remaining outstanding convertible
note hedge and warrants; and repurchased warrants for the purchase of the Company’s common stock for
$41 million, and settled its convertible note hedge for proceeds of $54 million and 179,000 shares of the
Company’s common stock valued at $7 million.
Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income are as follows:
Currency
Translation
Adjustments
Net Unrealized
Gains (Losses)
on Cash Flow
Hedges
Net Unrealized
Gains on
Available-For-
Sale Securities
Minimum
Pension
Liability
Adjustment (a)
Accumulated
Other
Comprehensive
Income
Balance, January 1, 2011
$
182
$
Period change
Balance, December 31, 2011
Period change
Balance, December 31, 2012
Period change
(23)
159
34
193
(27)
Balance, December 31, 2013
$
166
$
(46) $
33
(13)
13
—
1
1
$
— $
2
2
—
2
—
2
$
(44) $
(26)
(70)
(15)
(85)
33
(52) $
92
(14)
78
32
110
7
117
__________
All components of accumulated other comprehensive income are net of tax, except currency translation adjustments, which exclude
income taxes related to indefinite investments in foreign subsidiaries and include an $11 million loss, net of tax, related to the
Company’s hedge of its net investment in Euro-denominated foreign operations (See Note 19 - Financial Instruments).
(a)
For the year ended December 31, 2013, $15 million ($9 million, net of tax) was reclassified from accumulated other
comprehensive income into selling, general and administrative expenses.
17. Stock-Based Compensation
The Company’s Amended and Restated 2007 Equity and Incentive Plan (the “2007 Plan”) provides for the
grant of options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and other stock-
or cash-based awards to employees, directors and other individuals who perform services for the Company
and its subsidiaries. The maximum number of shares reserved for grant of awards under the plan is 16
million, with approximately 3.5 million shares available as of December 31, 2013. The Company typically
settles stock-based awards with treasury shares.
With limited exception, time-based awards generally vest ratably over a three-year period following the date
of grant, and performance- or market-based awards generally vest three years following the date of grant
based on the attainment of certain performance- or market-based goals, all of which are subject to a service
condition.
Cash Unit Awards
The fair value of time-based restricted cash units is based on the Company’s stock price on the grant date.
Market-vesting restricted cash units generally vest depending on the level of relative total shareholder
return achieved by the Company during the period prior to scheduled vesting. Settlement of restricted cash
units is based on the Company’s average closing stock price over a specified number of trading days and
the value of these awards varies based on changes in the Company’s stock price.
F-33
Stock Unit Awards
Stock unit awards entitle the holder to receive shares of common stock upon vesting on a one-to-one basis.
Performance-based RSUs principally vest based upon the level of performance attained, however, upon
meeting a threshold performance level vesting can increase by up to 20% if certain relative total
shareholder return goals are achieved. Market-based RSUs generally vest based on the level of total
shareholder return or absolute stock price attainment.
The grant date fair value of the performance-based RSUs incorporates the total shareholder return metric,
which is estimated using a Monte Carlo simulation model to estimate the Company’s ranking relative to an
applicable stock index. The weighted average assumptions used in the Monte Carlo simulation model to
calculate the fair value of the Company’s stock unit awards are outlined in the table below.
Expected volatility of stock price
Risk-free interest rate
Valuation period
Dividend yield
2013
43%
0.39%
3 years
0%
2012
50%
2011
48%
0.30% - 0.42% 0.47% - 1.21%
2½ - 3 years
0%
3 - 4 years
0%
Annual activity related to stock units and cash units, consisted of (in thousands of shares):
Time-Based RSUs
Weighted
Average
Grant
Date
Fair Value
13.97
$
21.77
13.47
15.62
17.92
$
Number
of Shares
1,439
638
(678)
(91)
1,308
Performance-Based
and Market Based
RSUs
Weighted
Average
Grant
Date
Fair Value
11.30
$
20.04
9.15
12.62
13.79
$
Number
of Shares
2,058
483
(439)
(59)
2,043
Cash Unit Awards
Weighted
Average
Grant
Date
Fair Value
12.65
$
18.04
—
—
14.90
$
Number
of Units
156
111
—
—
267
Outstanding at January 1, 2013
Granted (a)
Vested (b)
Forfeited/expired
Outstanding at December 31, 2013 (c)
__________
(a)
(b)
(c)
Reflects the maximum number of stock units assuming achievement of all performance-, market- and time-vesting criteria and
does not include those for non-employee directors, which are discussed separately below. The weighted-average fair value of
time-based RSUs, performance-based and market-based RSUs, and cash units granted in 2012 was $14.39, $12.66 and
$12.65, respectively, and the weighted-average fair value of the restricted stock units and market-based restricted stock units
granted in 2011 was $14.45 and $11.67, respectively. No performance-based restricted stock units or cash units awards were
granted in 2011.
The total fair value of RSUs vested during 2013, 2012 and 2011 was $13 million, $16 million and $11 million, respectively.
The Company’s outstanding time-based RSUs, performance-based and market-based RSUs, and cash units had aggregate
intrinsic value of $53 million, $83 million and $11 million, respectively. Aggregate unrecognized compensation expense related
to time-based RSUs and performance-based and market-based RSUs amounted to $27 million and will be recognized over a
weighted average vesting period of 1.0 years. The Company assumes that substantially all outstanding awards will vest over
time.
F-34
Stock Options
The annual stock option activity consisted of (in thousands of shares):
Outstanding at January 1, 2013
Granted (a)
Exercised (b)
Forfeited/expired
Outstanding at December 31, 2013 (c)
Exercisable at December 31, 2013
Number of
Options
Weighted
Average
Exercise
Price
$
1,901
—
(919)
(3)
979
2.89
—
2.89
27.40
2.82
Aggregate
Intrinsic
Value
(in millions)
32
$
—
23
—
37
915
$
2.21
$
35
Weighted
Average
Remaining
Contractual
Term (years)
5.8
5.2
5.1
__________
(a)
(b)
(c)
No stock options were granted during 2012 or 2011.
Stock options exercised during 2012 and 2011 had intrinsic values of $11 million and $18 million, respectively, and the cash
received from the exercise of options was $3 million in 2013 and was insignificant in 2012 and 2011.
The Company assumes that substantially all outstanding stock options will vest over time.
Non-employee Directors Deferred Compensation Plan
The Company grants stock awards on a quarterly basis to non-employee directors representing 50% of a
director’s annual compensation and such awards can be deferred under the Non-employee Directors
Deferred Compensation Plan. During 2013, 2012 and 2011, the Company granted 33,000, 53,000 and
54,000 awards, respectively, to non-employee directors.
Employee Stock Purchase Plan
The Company is authorized to sell shares of its common stock to eligible employees at 95% of fair market
value. This plan has been deemed to be non-compensatory and therefore, no compensation expense has
been recognized.
Stock-Compensation Expense
During 2013, 2012 and 2011, the Company recorded stock-based compensation expense related to
employee stock awards that were granted by the Company of $24 million ($14 million, net of tax), $16
million ($10 million, net of tax) and $17 million ($11 million, net of tax), respectively. In jurisdictions with net
operating loss carryforwards, tax deductions for exercises and/or vestings of stock-based awards have
generated a $57 million tax benefit at December 31, 2013, with a corresponding increase to additional paid-
in capital. Approximately $22 million of incremental tax benefits will be recorded in additional paid-in capital
when realized in these jurisdictions.
F-35
18. Employee Benefit Plans
Defined Contribution Savings Plans
The Company sponsors several defined contribution savings plans in the United States and certain foreign
subsidiaries that provide certain eligible employees of the Company an opportunity to accumulate funds for
retirement. The Company matches portions of the contributions of participating employees on the basis
specified by the plans. The Company’s contributions to these plans were $39 million, $34 million and $15
million during 2013, 2012 and 2011, respectively.
Defined Benefit Pension Plans
The Company sponsors non-contributory defined benefit pension plans in the United States covering
certain eligible employees and sponsors contributory and non-contributory defined benefit pension plans in
certain foreign subsidiaries with some plans offering participation in the plans at the employees’ option. The
most material of the non-U.S. defined benefit pension plans is operated in the United Kingdom. Under these
plans, benefits are based on an employee’s years of credited service and a percentage of final average
compensation. However, the majority of such plans are closed to new employees and are no longer
accruing benefits. There is an unfunded defined benefit pension plan for employees in Germany, which is
closed to new employees, and a statutorily determined unfunded defined benefit termination plan for
employees in Italy.
The funded status of the defined benefit pension plans is recognized on the Consolidated Balance Sheets
and the gains or losses and prior service costs or credits that arise during the period, but are not recognized
as components of net periodic benefit cost, are recognized as a component of accumulated other
comprehensive income (loss), net of tax.
The components of net periodic benefit cost and the assumptions related to the cost consisted of the
following:
Year Ended December 31,
2012
2011
2013
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized amounts
Net periodic benefit cost
$
$
5 $
26
(28)
15
18 $
5 $
27
(25)
14
21 $
3
17
(17)
8
11
F-36
The Company uses a measurement date of December 31 for its pension plans. The funded status of the
pension plans were as follows:
Change in Benefit Obligation
Benefit obligation at end of prior year
Service cost
Interest cost
Plan amendments
Actuarial (gain) loss
Net benefits paid
Benefit obligation at end of current year
Change in Plan Assets
Fair value of assets at end of prior year
Actual return on plan assets
Employer contributions
Net benefits paid
Fair value of assets at end of current year
Total unfunded status at end of year (recognized in other non-current
liabilities in the Consolidated Balance Sheets)
As of December 31,
2012
2013
670 $
5
26
1
(11)
(21)
670 $
465 $
56
17
(21)
517 $
600
5
27
1
58
(21)
670
412
56
18
(21)
465
(153) $
(205)
$
$
$
$
$
The estimated amount that will be amortized from accumulated other comprehensive income into net
periodic benefit cost in 2014 is $3 million, which consists of $2 million for net actuarial loss and $1 million for
prior service cost.
The following assumptions were used to determine pension obligations and pension costs for the principal
plans in which the Company’s employees participated:
U.S. Pension Benefit Plans
Discount rate:
Net periodic benefit cost
Benefit obligation
Long-term rate of return on plan assets
Non-U.S. Pension Benefit Plans
Discount rate:
Net periodic benefit cost
Benefit obligation
Long-term rate of return on plan assets
For the Year Ended December 31,
2011
2012
2013
3.75%
4.75%
7.50%
4.50%
4.50%
5.25%
4.00%
4.00%
7.50%
4.75%
4.50%
5.35%
5.25%
4.00%
8.00%
5.00%
4.75%
5.25%
To select a discount rate for its defined benefit pension plans, the Company uses a modeling process that
involves matching the expected cash outflows of such plan, to a yield curve constructed from a portfolio of
AA-rated fixed-income debt instruments. The Company uses the average yield of this hypothetical portfolio
as a discount rate benchmark.
The Company’s expected rate of return on plan assets of 7.50% and 5.25% for U.S. plans and non-U.S.
plans, respectively, used to determine pension obligations and pension costs, is a long-term rate based on
historic plan asset returns in individual jurisdictions, over varying long-term periods combined with current
market conditions and broad asset mix considerations.
As of December 31, 2013, substantially all of the Company’s defined benefit pension plans had a projected
benefit obligation in excess of the fair value of plan assets. The Company expects to contribute
approximately $9 million to the U.S. plans and $11 million to the non-U.S. plans in 2014.
The Company’s defined benefit pension plans’ assets are invested primarily in mutual funds and may
change in value due to various risks, such as interest rate and credit risk and overall market volatility. Due
F-37
to the level of risk associated with investment securities, it is reasonably possible that changes in the values
of the pension plans’ investment securities will occur in the near term and that such changes would
materially affect the amounts reported in the Company’s financial statements.
The U.S. defined benefit pension plans’ investment goals and objectives are managed by the Company with
consultation from independent investment advisors. The Company seeks to produce returns on pension
plan investments, which are based on levels of liquidity and investment risk that the Company believes are
prudent and reasonable, given prevailing capital market conditions. The pension plans’ assets are managed
in the long-term interests of the participants and the beneficiaries of the plans. The Company’s overall
investment strategy has been to achieve a mix of approximately 65% of investments for long-term growth
and 35% for near-term benefit payments with a wide diversification of asset types and fund strategies. The
Company believes that diversification of the pension plans’ assets is an important investment strategy to
provide reasonable assurance that no single security or class of securities will have a disproportionate
impact on the pension plans. As such, the Company allocates assets among traditional equity, fixed income
(U.S. and non-U.S. government issued securities, corporate bonds and short-term cash investments) and
other investment strategies.
The equity component’s purpose is to provide a total return that will help preserve the purchasing power of
the assets. The pension plans hold various mutual funds that invest in equity securities and are diversified
among funds that invest in large cap, small cap, growth, value and international stocks as well as funds that
are intended to “track” an index, such as the S&P 500. The equity investments in the portfolios will
represent a greater assumption of market volatility and risk as well as provide higher anticipated total return
over the long term. The equity component is expected to approximate 45%-65% of the U.S. pension plans’
assets.
The purpose of the fixed income component is to provide a deflation hedge, to reduce the overall volatility of
the pension plans assets in relation to the liability and to produce current income. The pension plans hold
mutual funds that invest in securities issued by governments, government agencies and corporations. The
fixed income component is expected to approximate 30%-40% of the U.S. pension plans’ assets.
The management of the Company’s non-U.S. defined benefit pension plans’ investment goals and
objectives vary slightly by country, but are managed with consultation and advice from independent
investment advisors. The investment policy is set with the primary objective to provide appropriate security
for all beneficiaries; to achieve long-term growth in the assets sufficient to provide for benefits from the plan;
and to achieve an appropriate balance between risk and return with regards to the cost of the plan and the
security of the benefits. A suitable strategic asset allocation benchmark is determined for the plans to
maintain diversified portfolios, taking into account government requirements, if any, regarding unnecessary
investment risk and protection of pension plans’ assets. The defined benefit pension plans’ assets are
primarily invested in equities, bonds, absolute return funds and cash.
The Company used significant observable inputs (Level 2 inputs) to determine the fair value of the defined
benefit pension plans’ assets. See Note 2—Summary of Significant Accounting Policies for the Company’s
methodology used to measure fair value. The following table presents the defined benefit pension plans’
assets measured at fair value, as of December 31:
Asset Class
Cash equivalents
Short term investments
U.S. stock
Non-U.S. stock
Real estate investment trusts
Non-U.S. government securities
U.S. government securities
Corporate bonds
Other assets
Total assets
2013
2012
$
$
10 $
5
104
166
9
80
3
137
3
517 $
3
7
91
149
6
70
20
105
14
465
The Company estimates that future benefit payments from plan assets will be $23 million, $24 million, $25
million, $26 million, $27 million and $159 million for 2014, 2015, 2016, 2017, 2018 and 2019 to 2023,
respectively.
F-38
Multiemployer Plans
The Company contributes to a number of multiemployer plans under the terms of collective-bargaining
agreements that cover a portion of its employees. The risks of participating in these multiemployer plans are
different from single-employer plans in the following aspects: (i) assets contributed to the multiemployer
plan by one employer may be used to provide benefits to employees of other participating employers; (ii) if
a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne
by the remaining participating employers; (iii) if the Company elects to stop participating in a multiemployer
plan it may be required to contribute to such plan an amount based on the under-funded status of the plan;
and (iv) the Company has no involvement in the management of the multiemployer plans’ investments. For
the years ended December 31, 2013, 2012 and 2011, the Company contributed a total of $8 million, $9
million and $6 million, respectively, to multiemployer plans.
19. Financial Instruments
Risk Management
Currency Risk. The Company uses currency exchange contracts to manage its exposure to changes in
currency exchange rates associated with its non-U.S.-dollar denominated receivables and forecasted
royalties, forecasted earnings of non-U.S. subsidiaries and forecasted non-U.S.-dollar denominated
acquisitions. The Company primarily hedges a portion of its current-year currency exposure to the
Australian, Canadian and New Zealand dollars, the Euro and the British pound sterling. The majority of
forward contracts do not qualify for hedge accounting treatment. The fluctuations in the value of these
forward contracts do, however, largely offset the impact of changes in the value of the underlying risk they
economically hedge. Forward contracts used to hedge forecasted third-party receipts and disbursements up
to 12 months are designated and do qualify as cash flow hedges.
The Company has designated its 6% Euro-denominated Notes issued March 2013 as a hedge of its net
investment in Euro-denominated foreign operations. The Company records the effective portion of the gain
or loss on this net investment hedge, net of taxes, in accumulated other comprehensive income as part of
currency translation adjustments. For the year ended December 31, 2013, the Company has recorded an
$11 million loss, net of tax, in accumulated other comprehensive income.
The amount of gains or losses reclassified from other comprehensive income to earnings resulting from
ineffectiveness or from excluding a component of the hedges’ gain or loss from the effectiveness calculation
for cash flow and net investment hedges during 2013, 2012 and 2011 was not material, nor is the amount of
gains or losses the Company expects to reclassify from other comprehensive income to earnings over the
next 12 months.
Interest Rate Risk. The Company uses various hedging strategies including interest rate swaps and interest
rate caps to create an appropriate mix of fixed and floating rate assets and liabilities. During 2013, 2012 and
2011, the Company recorded net unrealized gains on cash flow hedges of $1 million, $13 million and $33
million, net of tax, respectively, to other comprehensive income. The after-tax amount of gains or losses
reclassified from accumulated other comprehensive income (loss) to earnings resulting from ineffectiveness
for 2013, 2012 and 2011 was not material to the Company’s results of operations.
The amount deferred in accumulated other comprehensive income that the Company expects to be
recognized in earnings in 2014 is not material.
The Company uses interest rate swaps, including freestanding derivatives and derivatives designated as
cash flow hedges, to manage the risk related to its floating rate corporate debt. In connection with such
cash flow hedges, the Company recorded net unrealized gains of $1 million, net of tax, to other
comprehensive income during each of the years 2013, 2012 and 2011.
The Company uses derivatives to manage the risk associated with its floating rate vehicle-backed debt.
These derivatives include freestanding derivatives and derivatives designated as cash flow hedges, which
have maturities ranging from August 2014 to November 2018. In connection with such cash flow hedges,
the Company did not record any net unrealized gains or losses to other comprehensive income during
2013, and during 2012 and 2011, recorded net unrealized gains of $12 million and $32 million, net of tax,
F-39
respectively. The Company recorded losses of $1 million, $3 million and $2 million related to freestanding
derivatives during 2013, 2012 and 2011, respectively.
Commodity Risk. The Company periodically enters into derivative commodity contracts to manage its
exposure to changes in the price of gasoline. These instruments were designated as freestanding
derivatives and the changes in fair value are recorded in the Company’s consolidated results of operations.
These derivatives resulted in a gain of $1 million in 2013, a gain of $3 million in 2012 and a loss of less than
$1 million in 2011.
Credit Risk and Exposure. The Company is exposed to counterparty credit risks in the event of
nonperformance by counterparties to various agreements and sales transactions. The Company manages
such risk by evaluating the financial position and creditworthiness of such counterparties and by requiring
collateral in certain instances in which financing is provided. The Company mitigates counterparty credit risk
associated with its derivative contracts by monitoring the amount for which it is at risk with each
counterparty, periodically evaluating counterparty creditworthiness and financial position, and where
possible, dispersing its risk among multiple counterparties.
There were no significant concentrations of credit risk with any individual counterparties or groups of
counterparties at December 31, 2013 or 2012, other than (i) risks related to the Company’s repurchase and
guaranteed depreciation agreements with domestic and foreign car manufacturers, including Ford, General
Motors, Chrysler, Peugeot, Volkswagen, Fiat, Mercedes, Kia, BMW, Toyota, and Renault, and primarily with
respect to receivables for program cars that were disposed but for which the Company has not yet received
payment from the manufacturers (see Note 2—Summary of Significant Accounting Policies), (ii) receivables
from Realogy and Wyndham related to certain contingent, income tax and other corporate liabilities
assumed by Realogy and Wyndham in connection with their dispostion and (iii) risks related to leases which
have been assumed by Realogy, Wyndham or Travelport but of which the Company is a guarantor.
Concentrations of credit risk associated with trade receivables are considered minimal due to the
Company’s diverse customer base. The Company does not normally require collateral or other security to
support credit sales.
Fair Value
Derivative instruments and hedging activities
As described above, derivative assets and liabilities consist principally of currency exchange contracts,
interest rate swaps, interest rate contracts and commodity contracts.
Certain of the Company’s derivative instruments contain collateral support provisions that require the
Company to post cash collateral to the extent that these derivatives are in a liability position. The aggregate
fair value of such derivatives that are in a liability position and the aggregate fair value of assets needed to
settle these derivatives as of December 31, 2013 was approximately $2 million, for which the Company has
posted cash collateral in the normal course of business.
F-40
The Company held derivative instruments with absolute notional values as follows:
Interest rate caps (a)
Interest rate swaps
Foreign exchange swaps
Foreign exchange forward contracts
As of December 31,
2012
2013
$
8,924 $
850
746
268
5,748
625
984
14
Commodity contracts (millions of gallons of unleaded gasoline)
8
—
__________
(a)
Represents $7.1 billion of interest rate caps sold, partially offset by approximately $1.8 billion of interest rate
caps purchased at December 31, 2013 and $4.1 billion of interest rate caps sold, partially offset by approximately
$1.7 billion of interest rate caps purchased at December 31, 2012. These amounts exclude $5.2 billion and $2.4
billion of interest rate caps purchased by the Company’s Avis Budget Rental Car Funding subsidiary at
December 31, 2013 and 2012, respectively.
Fair values (Level 2) of derivative instruments are as follows:
Derivatives designated as hedging instruments
Interest rate swaps (a)
$
2
$
1
$
— $
1
As of December 31, 2013
As of December 31, 2012
Fair Value,
Asset
Derivatives
Fair Value,
Liability
Derivatives
Fair Value,
Asset
Derivatives
Fair Value,
Liability
Derivatives
Derivatives not designated as hedging instruments
Interest rate caps (b)
Interest rate swaps (a)
Foreign exchange forward contracts and swaps (c)
Commodity contracts (c)
Total
$
2
—
3
—
7
$
13
—
5
—
19
$
—
—
3
—
3
$
4
12
8
—
25
__________
Amounts in this table exclude derivatives issued by Avis Budget Rental Car Funding, as it is not consolidated by the Company;
however, certain amounts related to the derivatives held by Avis Budget Rental Car Funding are included within accumulated other
comprehensive income, as discussed in Note 16—Stockholders’ Equity.
(a)
(b)
(c)
Included in other non-current assets or other non-current liabilities.
Included in assets under vehicle programs or liabilities under vehicle programs.
Included in other current assets or other current liabilities.
F-41
The effects of derivatives recognized in the Company’s Consolidated Financial Statements are as follows:
Derivatives designated as hedging instruments
Interest rate swaps (a)
Derivatives not designated as hedging instruments (b)
Foreign exchange forward contracts and swaps (c)
Interest rate caps (d)
Commodity contracts (e)
Total
__________
(a)
Year Ended December 31,
2012
2011
2013
$
$
1
$
13
$
27
4
1
33
$
(31)
(15)
3
(30) $
33
(19)
(3)
—
11
(b)
(c)
(d)
(e)
Recognized, net of tax, as a component of other comprehensive income within stockholders’ equity.
Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures
being hedged.
For the year ended December 31, 2013, included a $20 million gain included in interest expense and a $7 million gain included
in operating expenses. For the year ended December 31, 2012, included a $32 million loss in interest expense and a $1 million
gain in operating expenses. For the year ended December 31, 2011, included a $46 million loss in transaction-related costs
and a $27 million gain in operating expenses.
For the year ended December 31, 2013, $1 million of expense is included in vehicle interest, net and a $5 million gain is
included in interest expense. For the year ended December 31, 2012, amounts are included in vehicle interest, net. For the
year ended December 31, 2011, $2 million of expense is included in vehicle interest, net and $1 million of expense is included
in interest expense.
Included in operating expenses.
Debt Instruments
The carrying amounts and estimated fair values of financial instruments are as follows:
Corporate debt
Short-term debt and current portion of long-term
debt, excluding convertible debt
Long-term debt, excluding convertible debt (a)
Convertible debt (a)
Debt under vehicle programs
Vehicle-backed debt due to Avis Budget Rental Car
Funding (a)
Vehicle-backed debt (a)
Interest rate swaps and interest rate caps (b)
As of December 31, 2013
Estimated
Carrying
Fair Value
Amount
As of December 31, 2012
Estimated
Carrying
Fair Value
Amount
$
$
$
$
23
3,305
66
5,656
1,668
13
$
$
23
3,416
159
5,732
1,675
13
$
$
57
2,720
128
5,203
1,599
4
58
2,903
171
5,391
1,613
4
___________
(a)
(b)
The fair value measurements are based on significant observable inputs (Level 2).
Derivatives in liability position.
20. Segment Information
The Company’s chief operating decision maker assesses performance and allocates resources based upon
the separate financial information from the Company’s operating segments. In identifying its reportable
segments, the Company considered the nature of services provided, the geographical areas in which the
segments operated and other relevant factors. The Company aggregates two of its operating segments into
each of its North America and International reportable segments.
Management evaluates the operating results of each of its reportable segments based upon revenue and
“Adjusted EBITDA,” which the Company defines as income from continuing operations before non-vehicle
related depreciation and amortization, any impairment charge, early extinguishment of debt, non-vehicle
related interest, transaction-related costs and income taxes. The Company’s presentation of Adjusted
EBITDA may not be comparable to similarly-titled measures used by other companies.
F-42
Year Ended December 31, 2013
Net revenues
Vehicle depreciation and lease
charges, net
Vehicle interest, net
Adjusted EBITDA
Non-vehicle depreciation and
amortization
Segment assets exclusive of
assets under vehicle programs
Assets under vehicle programs
Capital expenditures (excluding
vehicles)
North
America
International
Truck
Rental
Corporate
and Other (a)
Total
$
5,083 $
2,481 $
373 $
— $
1,262
204
500
102
3,748
7,967
99
501
48
240
49
1,779
2,136
53
48
12
15
1
80
349
—
—
—
(47)
—
225
—
—
7,937
1,811
264
708
152
5,832
10,452
152
__________
(a)
Primarily represents unallocated corporate overhead, receivables from our former subsidiaries and debt
financing fees related to our corporate debt.
Year Ended December 31, 2012
Net revenues
Vehicle depreciation and lease
charges, net
Vehicle interest, net
Adjusted EBITDA
Non-vehicle depreciation and
amortization
Segment assets exclusive of
assets under vehicle programs
Assets under vehicle programs
Capital expenditures (excluding
vehicles)
North
America
International
Truck
Rental
Corporate
and Other (a)
Total
$
4,640 $
2,342 $
374 $
1 $
943
246
556
78
3,065
7,394
72
483
38
234
46
1,740
2,300
60
45
13
33
1
90
405
—
—
—
(21)
—
224
—
—
7,357
1,471
297
802
125
5,119
10,099
132
__________
(a)
Primarily represents unallocated corporate overhead, receivables from our former subsidiaries and debt
financing fees related to our corporate debt.
Year Ended December 31, 2011
Net revenues
Vehicle depreciation and lease
charges, net
Vehicle interest, net
Adjusted EBITDA
Non-vehicle depreciation and
amortization
Segment assets exclusive of
assets under vehicle programs
Assets under vehicle programs
Capital expenditures (excluding
vehicles)
North
America
International
Truck
Rental
Corporate
and Other (a)
Total
$
4,495 $
1,028 $
376 $
1 $
969
263
442
80
2,112
6,674
54
209
11
127
14
1,464
2,109
10
45
12
49
1
88
307
1
—
—
(13)
—
184
—
—
5,900
1,223
286
605
95
3,848
9,090
65
__________
(a)
Primarily represents unallocated corporate overhead, receivables from our former subsidiaries and debt
financing fees related to our corporate debt.
F-43
Provided below is a reconciliation of Adjusted EBITDA to income before income taxes.
Adjusted EBITDA (a)
Less: Non-vehicle related depreciation and amortization
Interest expense related to corporate debt, net
Early extinguishment of debt
Transaction-related costs
Impairment
Income before income taxes
For the Year Ended December 31,
2011
2012
2013
$
$
708 $
152
228
147
51
33
97 $
802 $
125
268
75
34
—
300 $
605
95
219
—
255
—
36
__________
(a)
Adjusted EBITDA includes restructuring costs of $61 million, $38 million and $5 million for the years ended
December 31, 2013, 2012 and 2011, respectively.
The geographic segment information provided below is classified based on the geographic location of the
Company’s subsidiaries.
United States
All Other
Countries
Total
2013
Net revenues
Assets exclusive of assets under vehicle programs
Assets under vehicle programs
Property and equipment, net
2012
Net revenues
Assets exclusive of assets under vehicle programs
Assets under vehicle programs
Property and equipment, net
2011
Net revenues
Assets exclusive of assets under vehicle programs
Assets under vehicle programs
Property and equipment, net
$
$
$
5,030 $
3,729
7,791
424
4,637 $
3,094
7,329
366
4,489 $
2,177
6,553
365
2,907 $
2,103
2,661
190
2,720 $
2,025
2,770
163
1,411 $
1,671
2,537
128
7,937
5,832
10,452
614
7,357
5,119
10,099
529
5,900
3,848
9,090
493
21. Guarantor and Non-Guarantor Consolidating Financial Statements
The following consolidating financial information presents Consolidating Condensed Statements of
Operations for the years ended December 31, 2013, 2012 and 2011, Consolidating Condensed Balance
Sheets as of December 31, 2013 and December 31, 2012 and Consolidating Condensed Statements of
Cash Flows for the years ended December 31, 2013, 2012 and 2011 for: (i) Avis Budget Group, Inc. (the
“Parent”); (ii) ABCR and Avis Budget Finance, Inc. (the “Subsidiary Issuers”); (iii) the guarantor subsidiaries;
(iv) the non-guarantor subsidiaries; (v) elimination entries necessary to consolidate the Parent with the
Subsidiary Issuers, the guarantor and non-guarantor subsidiaries; and (vi) the Company on a consolidated
basis. The Subsidiary Issuers and the guarantor and non-guarantor subsidiaries are 100% owned by the
Parent, either directly or indirectly. All guarantees are full and unconditional and joint and several. This
financial information is being presented in relation to the Company’s guarantee of the payment of principal,
premium (if any) and interest on the notes issued by ABCR. See Note 13—Long-term Debt and Borrowing
Arrangements for additional description of these guaranteed notes. The Senior Notes have separate
investors than the equity investors of the Company and are guaranteed by the Parent and certain
subsidiaries.
Investments in subsidiaries are accounted for using the equity method of accounting for purposes of the
consolidating presentation. The principal elimination entries relate to investments in subsidiaries and
intercompany balances and transactions. For purposes of the accompanying Consolidating Condensed
Statements of Operations, certain expenses incurred by the Subsidiary Issuers are allocated to the
F-44
guarantor and non-guarantor subsidiaries. Certain reclassifications have been made to the 2012 and 2011
consolidating condensed financial statements to correct the classification of intercompany transactions to
report them on a gross basis and to conform to the current year presentation. The reclassified amounts had
no impact on reported net income, stockholders’ equity, or the net change in cash for the periods presented
for the Parent, Subsidiary Issuer, Guarantor Subsidiaries, Non-Guarantor Subsidiaries, Eliminations or the
Company on a consolidated basis.
F-45
Consolidating Condensed Statements of Operations
For the Year Ended December 31, 2013
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
$
— $
— $
3,786
$
1,921
$
— $
Revenues
Vehicle rental
Other
Net revenues
Expenses
Operating
Vehicle depreciation and lease charges,
net
Selling, general and administrative
Vehicle interest, net
Non-vehicle related depreciation and
amortization
Interest expense related to corporate
debt, net:
Interest expense
Intercompany interest expense
(income)
Early extinguishment of debt
Restructuring expense
Transaction-related costs
Impairment
Total expenses
Income (loss) before income taxes and
equity in earnings of subsidiaries
Provision for (benefit from) income taxes
Equity in earnings of subsidiaries
Net income
Comprehensive income
$
$
5,707
2,230
7,937
4,074
1,811
1,019
264
152
228
—
147
61
51
33
7,840
97
81
—
16
23
—
—
7
—
35
—
—
3
(12)
53
—
1
—
87
(87)
(14)
89
16
23
$
$
—
—
15
—
6
—
2
196
(30)
94
—
24
33
340
(340)
(124)
305
89
96
1,098
4,884
2,425
1,776
591
182
97
—
6
—
25
3
3,086
5,007
1,627
1,806
387
265
53
29
36
—
36
23
(1,954)
(1,954)
—
(1,771)
—
(183)
—
—
—
—
—
—
—
5,105
—
4,262
—
(1,954)
(221)
156
682
305
310
$
$
$
$
745
63
—
682
657
$
$
—
—
(1,076)
(1,076) $
(1,063) $
F-46
For the Year Ended December 31, 2012
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
$
— $
— $
3,491
$
1,806
$
— $
Revenues
Vehicle rental
Other
Net revenues
Expenses
Operating
Vehicle depreciation and lease charges,
net
Selling, general and administrative
Vehicle interest, net
Non-vehicle related depreciation and
amortization
Interest expense related to corporate
debt, net:
Interest expense
Intercompany interest expense
(income)
Early extinguishment of debt
Restructuring expense
Transaction-related costs
Total expenses
Income (loss) before income taxes and
equity in earnings of subsidiaries
Provision for (benefit from) income taxes
Equity in earnings of subsidiaries
Net income
Comprehensive income
$
$
5,297
2,060
7,357
3,824
1,471
925
297
125
268
—
75
38
34
7,057
300
10
—
290
322
1
1
—
—
21
—
—
9
(18)
44
—
4
60
(59)
(8)
341
290
322
$
$
—
—
5
—
—
—
2
246
(314)
31
—
1
(29)
29
(106)
206
341
373
1,052
4,543
2,130
3,936
(1,123)
(1,123)
2,305
1,514
902
573
234
75
—
277
—
3
996
331
300
48
13
55
—
35
1
4,370
28
3,320
173
72
105
206
237
$
$
616
52
—
564
594
$
$
—
(427)
—
(237)
—
—
—
—
—
—
(664)
(459)
—
(652)
$
$
(1,111) $
(1,204) $
F-47
For the Year Ended December 31, 2011
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
$
— $
— $
3,393
$
945
$
— $
Revenues
Vehicle rental
Other
Net revenues
Expenses
Operating
Vehicle depreciation and lease charges,
net
Selling, general and administrative
Vehicle interest, net
Non-vehicle related depreciation and
amortization
Interest expense related to corporate
debt, net:
Interest expense
Intercompany interest expense
(income)
Transaction-related costs
Restructuring expense
Total expenses
Income (loss) before income taxes and
equity in earnings of subsidiaries
Provision for (benefit from) income taxes
2
2
3
—
11
—
—
10
(14)
71
—
81
(79)
(27)
Equity in earnings (loss) of subsidiaries
Net income (loss)
Comprehensive income (loss)
23
(29) $
(43) $
$
$
4,338
1,562
5,900
3,025
1,223
756
286
95
219
—
255
5
5,864
36
65
—
(29)
(43)
—
—
8
—
—
(1)
—
208
(205)
56
—
66
(66)
(22)
67
23
7
1,006
4,399
2,241
921
564
243
78
—
215
—
2
4,264
135
66
(2)
67
50
$
$
$
$
1,702
2,647
(1,148)
(1,148)
773
868
181
296
17
1
4
128
3
2,271
376
48
—
328
358
—
(566)
—
(252)
—
—
—
—
—
(818)
(330)
—
(88)
(418) $
(415) $
$
$
F-48
Consolidating Condensed Balance Sheets
As of December 31, 2013
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
Assets
Current assets:
Cash and cash equivalents
$
Receivables, net
Deferred income taxes
Other current assets
Total current assets
Property and equipment, net
Deferred income taxes
Goodwill
Other intangibles, net
Other non-current assets
Intercompany receivables
Investment in subsidiaries
Total assets exclusive of assets under
vehicle programs
Assets under vehicle programs:
Program cash
Vehicles, net
Receivables from vehicle manufacturers
and other
Investment in Avis Budget Rental Car
Funding (AESOP) LLC-related party
$
$
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other current
liabilities
Short-term debt and current portion of
long-term debt
Total current liabilities
Long-term debt
Other non-current liabilities
Intercompany payables
Total liabilities exclusive of liabilities under
vehicle programs
Liabilities under vehicle programs:
Debt
Due to Avis Budget Rental Car Funding
(AESOP) LLC-related party
Deferred income taxes
Other
Total stockholders’ equity
$
242
$
—
—
80
322
109
1,142
—
41
96
210
2,900
4,820
—
10
—
—
12
150
156
82
400
312
141
342
519
18
853
3,347
5,932
—
9
—
—
14
—
1
4
19
—
20
—
—
104
145
671
959
—
—
—
—
—
959
$
10
4,830
$
9
5,941
$
425
469
21
289
1,204
193
—
349
363
143
331
—
$
— $
—
(1)
—
(1)
—
(4)
—
—
—
(1,539)
(6,918)
693
619
177
455
1,944
614
1,299
691
923
361
—
—
2,583
(8,462)
5,832
116
9,563
391
363
10,433
$
13,016
$
—
—
—
—
116
9,582
391
363
—
(8,462) $
10,452
16,284
25
$
238
$
487
$
730
$
(1) $
1,479
65
90
—
98
—
188
—
—
—
—
—
771
14
252
2,955
96
844
4,147
11
—
—
1
12
671
3
490
6
221
340
7
737
344
436
355
—
(1)
—
(4)
(1,539)
1,057
1,872
(1,544)
—
—
1,984
—
1,984
2,900
1,670
5,656
193
278
7,797
3,347
—
—
—
—
—
(6,918)
89
1,568
3,305
847
—
5,720
1,681
5,656
2,177
279
9,793
771
Total liabilities and stockholders’ equity $
959
$
4,830
$
5,941
$
13,016
$
(8,462) $
16,284
F-49
As of December 31, 2012
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
Assets
Current assets:
Cash and cash equivalents
$
Receivables, net
Deferred income taxes
Other current assets
Total current assets
Property and equipment, net
Deferred income taxes
Goodwill
Other intangibles, net
Other non-current assets
Intercompany receivables
Investment in subsidiaries
5
—
3
5
13
—
23
—
—
109
142
723
Total assets exclusive of assets under
vehicle programs
1,010
Assets under vehicle programs:
Program cash
Vehicles, net
Receivables from vehicle manufacturers
and other
Investment in Avis Budget Rental Car
Funding (AESOP) LLC-related party
$
$
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other current
liabilities
Short-term debt and current portion of
long-term debt
Total current liabilities
Long-term debt
Other non-current liabilities
Intercompany payables
Total liabilities exclusive of liabilities under
vehicle programs
Liabilities under vehicle programs:
Debt
Due to Avis Budget Rental Car Funding
(AESOP) LLC-related party
Deferred income taxes
Other
Total stockholders’ equity
$
102
$
— $
—
1
73
176
90
1,216
—
43
80
972
2,030
4,607
—
7
—
—
156
138
81
375
276
223
74
341
14
546
3,293
5,142
—
13
—
—
499
397
4
246
1,146
163
—
301
347
117
96
—
$
— $
—
—
—
—
—
(8)
—
—
—
(1,756)
(6,046)
606
553
146
405
1,710
529
1,454
375
731
320
—
—
2,170
(7,810)
5,119
24
9,254
439
362
10,079
$
12,249
$
—
—
—
—
24
9,274
439
362
—
(7,810) $
10,099
15,218
—
—
—
—
—
1,010
$
7
4,614
$
13
5,155
22
$
250
$
490
$
659
$
— $
1,421
—
22
128
103
—
253
—
—
—
—
—
757
13
263
2,712
79
831
3,885
4
—
—
2
6
723
3
493
8
277
372
41
700
—
420
553
—
—
—
(8)
(1,756)
1,150
1,673
(1,764)
—
—
1,975
—
1,975
2,030
1,599
5,203
188
293
7,283
3,293
—
—
—
—
—
(6,046)
57
1,478
2,848
871
—
5,197
1,603
5,203
2,163
295
9,264
757
Total liabilities and stockholders’ equity $
1,010
$
4,614
$
5,155
$
12,249
$
(7,810) $
15,218
F-50
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
$
(3) $
562
$
26
$
1,736
$
(68) $
2,253
Consolidating Condensed Statements of Cash Flows
For the Year Ended December 31, 2013
Net cash provided by (used in)
operating activities
Investing activities
Property and equipment additions
Proceeds received on asset sales
Net assets acquired (net of cash acquired)
Intercompany loan receipts
Other, net
Net cash provided by (used in)
investing activities exclusive of
vehicle programs
Vehicle programs:
Decrease in program cash
Investment in vehicles
Proceeds received on disposition of
vehicles
Net cash provided by (used in)
investing activities
Financing activities
Proceeds from long-term borrowings
Payments on long-term borrowings
Net change in short term borrowings
Debt financing fees
Purchases of warrants
Proceeds from sale of call options
Repurchases of common stock
Intercompany loan payments
Other, net
Net cash provided by (used in)
financing activities exclusive of
vehicle programs
Vehicle programs:
Proceeds from borrowings
Payments on borrowings
Debt financing fees
—
—
—
—
146
146
—
—
—
—
(26)
7
(564)
233
(50)
(400)
—
(44)
40
(4)
146
(404)
—
(115)
—
—
(78)
104
(48)
—
3
(134)
—
—
—
—
2,647
(2,489)
—
(30)
—
—
—
—
(146)
(18)
—
—
—
—
(69)
4
8
60
48
51
—
(2)
—
(2)
49
—
(3)
—
—
—
—
—
(60)
—
(63)
—
—
—
—
(57)
11
19
—
4
—
—
—
(293)
(146)
(152)
22
(537)
—
2
(23)
(439)
(665)
(79)
(10,853)
9,369
(1,563)
—
—
—
—
(79)
(10,899)
9,409
(1,569)
(1,586)
(439)
(2,234)
325
(1)
(36)
(7)
—
—
—
(233)
(68)
(20)
12,953
(13,115)
(34)
(196)
—
—
—
—
—
—
—
293
214
507
—
—
—
—
2,972
(2,608)
(36)
(37)
(78)
104
(48)
—
3
272
12,953
(13,115)
(34)
(196)
76
(8)
87
606
693
Net cash provided by (used in)
financing activities
Effect of changes in exchange rates on
cash and cash equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents, beginning of
period
Cash and cash equivalents, end of
period
(134)
(18)
(63)
(216)
507
—
9
5
—
140
102
—
12
—
(8)
(74)
499
—
—
—
$
14
$
242
$
12
$
425
$
— $
F-51
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
$
(43) $
272
$
70
$
1,650
$
(60) $
1,889
For the Year Ended December 31, 2012
Net cash provided by (used in)
operating activities
Investing activities
Property and equipment additions
Proceeds received on asset sales
Net assets acquired, (net of cash acquired)
Intercompany loan receipts
Other, net
Net cash provided by (used in)
investing activities exclusive of
vehicle programs
Vehicle programs:
Increase in program cash
Investment in vehicles
Proceeds received on disposition of
vehicles
Net cash provided by (used in)
investing activities
Financing activities
Proceeds from long-term borrowings
Payments on long-term borrowings
Net change in short term borrowings
Debt financing fees
Purchases of warrants
Proceeds from sale of call options
Intercompany loan payments
Other, net
Net cash provided by (used in)
financing activities exclusive of
vehicle programs
Vehicle programs:
Proceeds from borrowings
Payments on borrowings
Debt financing fees
—
—
—
224
29
253
—
—
—
—
253
—
(222)
—
—
(29)
43
—
1
(26)
8
—
—
(4)
(22)
—
(4)
3
(1)
(23)
1,152
(1,268)
—
(16)
—
—
(224)
(25)
(43)
3
(1)
—
(1)
(42)
—
(20)
2
(18)
(60)
—
(11)
—
—
—
—
—
—
(207)
(381)
(11)
—
—
—
—
—
—
—
—
—
—
—
—
12,108
(11,490)
(28)
590
(207)
(381)
(11)
Net cash provided by (used in)
financing activities
Effect of changes in exchange rates on
cash and cash equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents, beginning of
period
Cash and cash equivalents, end of
period
$
—
3
2
5
—
(132)
234
—
(1)
1
(63)
10
(68)
—
(8)
—
—
—
(224)
(25)
(132)
21
(69)
—
(9)
(129)
(249)
(189)
—
—
—
—
(13)
(11,067)
9,196
(1,884)
(249)
(2,073)
—
—
—
—
—
—
224
85
309
—
—
—
—
309
—
—
—
1,152
(1,501)
10
(16)
(29)
43
—
1
(340)
12,108
(11,490)
(28)
590
250
6
72
534
606
(13)
(11,043)
9,191
(1,865)
(1,994)
—
—
10
—
—
—
—
(60)
(50)
540
6
202
297
$
102
$
— $
499
$
— $
F-52
For the Year Ended December 31, 2011
Net cash provided by (used in)
operating activities
Investing activities
Property and equipment additions
Proceeds received on asset sales
Net assets acquired (net of cash acquired)
Intercompany loan advances
Intercompany loan receipts
Other, net
Net cash (used in) provided by
investing activities exclusive of
vehicle programs
Vehicle programs:
Increase in program cash
Investment in vehicles
Proceeds received on disposition of
vehicles
Investment in debt securities of AESOP –
related party
Investment in debt securities of AESOP –
related party
Net cash provided by (used in)
investing activities
Financing activities
Proceeds from long-term borrowings
Payments on long-term borrowings
Net change in short-term borrowings
Debt financing fees
Intercompany loan borrowings
Intercompany loan payments
Other, net
Net cash provided by (used in)
financing activities exclusive of
vehicle programs
Vehicle programs:
Proceeds from borrowings
Payments on borrowings
Debt financing fees
Net cash provided by (used in)
financing activities
Effect of changes in exchange rates on
cash and cash equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents, beginning of
period
Cash and cash equivalents, end of
period
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
$
(32) $
(1,241) $
(236) $
2,661
$
426
$
1,578
—
—
—
(486)
242
(34)
(278)
—
—
—
(400)
400
—
(278)
—
—
—
(38)
—
—
93
55
—
—
—
—
55
—
(255)
257
(17)
10
—
—
—
(1)
(8)
—
(73)
11
—
—
(62)
(70)
682
(4)
—
(40)
486
(242)
152
1,034
—
—
(2)
(2)
—
(279)
513
(34)
2
(1)
—
—
—
(33)
—
(3)
7
—
—
4
(14)
2
(840)
—
—
(4)
(856)
(11)
(8,583)
7,178
—
—
(1,416)
—
—
—
486
(242)
32
276
—
—
—
—
—
—
(65)
14
(841)
—
—
(7)
(899)
(11)
(8,659)
7,196
(400)
400
(1,474)
(29)
(2,272)
276
(2,373)
—
(660)
(97)
—
—
—
(54)
—
—
—
—
(486)
242
(458)
682
(668)
(97)
(78)
—
—
1
(811)
(702)
(160)
—
(4)
—
—
—
—
268
264
—
—
(1)
(1)
1,032
263
(224)
(702)
10,534
(9,917)
(30)
587
—
—
—
—
—
(2)
3
1
(6)
159
138
—
—
—
$
297
$
— $
10,534
(9,917)
(33)
584
424
(6)
(377)
911
534
$
2
$
234
$
F-53
22. Selected Quarterly Financial Data—(unaudited)
Provided below are selected unaudited quarterly financial data for 2013 and 2012.
The earnings per share information is calculated independently for each quarter based on the weighted
average number of common stock and common stock equivalents outstanding, which may fluctuate, based
on quarterly income levels and market prices. Therefore, the sum of the quarters’ per share information may
not equal the annual amount presented on the Consolidated Statements of Operations.
Net revenues
Net income (loss)
Per share information:
Basic
Net income (loss)
Weighted average shares
Diluted
Net income (loss)
Weighted average shares
Net revenues
Net income (loss)
Per share information:
Basic
Net income (loss)
Weighted average shares
Diluted
Net income (loss)
Weighted average shares
First (a) (b)
Second (a) (c)
Third (d)
2013
$
1,691 $
2,002 $
2,395 $
Fourth (a) (e)
1,849
(46)
(28)
118
(28)
(0.43) $
(0.26) $
1.09 $
107.7
108.4
108.3
(0.26)
107.1
(0.43) $
107.7
(0.26) $
108.4
1.02 $
116.2
(0.26)
107.1
First (a) (f)
Second (g)
Third (h)
2012
1,623 $
(23)
1,866 $
79
Fourth (a) (i)
1,698
(46)
2,170 $
280
(0.22) $
105.9
0.74 $
2.62 $
106.7
106.8
(0.43)
106.9
(0.22) $
0.66 $
2.38 $
105.9
121.9
118.0
(0.43)
106.9
$
$
$
$
$
___________
(a)
(b)
(c)
(d)
As the Company incurred a loss from continuing operations for this period, all outstanding stock options,
restricted stock units, stock warrants and issuable shares underlying convertible notes are anti-dilutive for such
period. Accordingly, basic and diluted weighted average shares outstanding are equal for such period.
Net income (loss) for first quarter 2013 includes $40 million ($39 million, net of tax) for costs related to the early
extinguishment of corporate debt, $10 million ($7 million, net of tax) in restructuring expenses, $8 million ($6
million, net of tax) for transaction-related costs primarily related to the integration of Avis Europe and the
acquisition of Zipcar, and $4 million ($3 million, net of tax) for amortization expense related to intangible assets
recognized in the acquisitions of Avis Europe and Zipcar.
Net income (loss) for second quarter 2013 includes $91 million ($56 million, net of tax) for costs related to the
early extinguishment of corporate debt, $19 million ($16 million, net of tax) for transaction-related costs primarily
related to the integration of Avis Europe and the acquisition and integration of Zipcar, $15 million ($10 million, net
of tax) in restructuring expenses and $6 million ($4 million, net of tax) for amortization expense related to
intangible assets recognized in the acquisitions of Avis Europe and Zipcar.
Net income (loss) for third quarter 2013 includes a $10 million ($7 million, net of tax) for transaction-related costs
primarily related to the integration of Avis Europe and the acquisition of Payless, $14 million ($9 million, net of
tax) in restructuring expenses, $6 million ($4 million, net of tax) for amortization expense related to intangible
F-54
(e)
(f)
(g)
(h)
(i)
assets recognized in the acquisitions of Avis Europe and Zipcar and $33 million ($33 million, net of tax) for the
impairment of our equity-method investment in our Brazilian licensee.
Net income (loss) for fourth quarter 2013 includes $16 million ($14 million, net of tax) for the early extinguishment
of corporate debt, $22 million ($15 million, net of tax) in restructuring expenses, $14 million ($12 million, net of
tax) for transaction-related costs primarily related to the integration of Avis Europe and Zipcar and $7 million ($4
million, net of tax) for amortization expense related to intangible assets recognized in the acquisitions of Avis
Europe and Zipcar.
Net income (loss) for first quarter 2012 includes $27 million ($23 million, net of tax) for costs related to the early
extinguishment of corporate debt, $7 million ($5 million, net of tax) in restructuring expenses, $6 million ($5
million, net of tax) for transaction-related costs primarily related to the integration of the operations of Avis
Europe and $5 million ($4 million, net of tax) for amortization expense related to intangible assets recognized in
the acquisition of Avis Europe.
Net income (loss) for second quarter 2012 includes $23 million ($21 million, net of tax) for the early
extinguishment of corporate debt, $12 million ($8 million, net of tax) in restructuring expenses, $4 million ($2
million, net of tax) of transaction-related costs primarily related to the integration of the operations of Avis Europe
and $3 million ($2 million, net of tax) for amortization expense related to intangible assets recognized in the
acquisition of Avis Europe.
Net income (loss) for third quarter 2012 includes a $128 million non-cash income tax benefit for pre-2007 taxes,
$11 million ($10 million, net of tax) of transaction-related costs primarily related to the integration of the
operations of Avis Europe, $7 million ($5 million, net of tax) in restructuring expenses, $4 million ($3 million, net
of tax) for amortization expense related to intangible assets recognized in the acquisition of Avis Europe, and $2
million ($1 million, net of tax) for the early extinguishment of corporate debt.
Net income (loss) for fourth quarter 2012 includes $23 million ($16 million, net of tax) for the early extinguishment
of corporate debt, $13 million ($13 million, net of tax) of transaction-related costs primarily related to the
integration of Avis Europe, $12 million ($9 million, net of tax) in restructuring expenses and $4 million ($2 million,
net of tax) for amortization expense related to intangible assets recognized in the Avis Europe acquisition.
23. Subsequent Events
In February 2014, the Company’s Avis Budget Rental Car Funding subsidiary issued approximately $675
million in five-year asset-backed notes with a weighted average interest rate of 2.60%. The proceeds from
the borrowings will provide funds for the repayment of maturing vehicle-backed debt and the acquisition of
rental cars in the United States.
F-55
[THIS PAGE INTENTIONALLY LEFT BLANK]
Schedule II – Valuation and Qualifying Accounts
(in millions)
Description
Allowance for Doubtful Accounts:
Year Ended December 31,
2013
2012
2011
Tax Valuation Allowance:
Year Ended December 31,
2013 (a)
2012
2011 (a)
__________
(a)
Balance at
Beginning
of Period
Expensed
Adjustments Deductions
Other
Balance at
End of
Period
$
$
40 $
21
16
298 $
273
192
15 $
27
9
27 $
25
16
10 $
—
—
22 $
—
65
(15) $
(8)
(4)
— $
—
—
50
40
21
347
298
273
For 2013 and 2011, other adjustments relate to the acquisition of Zipcar and Avis Europe, respectively.
G-1
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EXHIBIT
NO.
DESCRIPTION
2.1
2.2
3.1
3.2
4.1
4.2
4.2(a)
4.2(b)
4.3
4.4
4.4(a)
4.4(b)
4.5
4.6
4.6(a)
4.7
4.8
Separation and Distribution Agreement by and among Cendant Corporation*, Realogy Corporation, Wyndham
Worldwide Corporation and Travelport Inc., dated as of July 27, 2006 (Incorporated by reference to Exhibit 2.1
to the Company’s Current Report on Form 8-K dated August 1, 2006).
Letter Agreement dated August 23, 2006 related to the Separation and Distribution Agreement by and among
Realogy Corporation, Cendant Corporation*, Wyndham Worldwide Corporation and Travelport Inc. dated as of
July 27, 2006 (Incorporated by reference to Exhibit 2.2 to the Company’s Quarterly Report on Form 10-Q for
the period ended June 30, 2007, dated August 8, 2007).
Amended and Restated Certificate of Incorporation of Avis Budget Group, Inc. (Incorporated by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K dated September 5, 2006).
Amended and Restated Bylaws of Avis Budget Group, Inc. (as of November 5, 2009) (Incorporated by
reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K dated November 5, 2009).
Indenture dated as of October 13, 2009, by and between Avis Budget Group, Inc. and The Bank of Nova Scotia
Trust Company of New York, as Trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Current
Report on Form 8-K dated October 13, 2009).
Indenture dated as of October 15, 2010 among Avis Budget Car Rental, LLC and Avis Budget Finance, Inc., as
Issuers, the Guarantors from time to time parties thereto and The Bank of Nova Scotia Trust Company of New
York as Trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated
October 18, 2010).
Supplemental Indenture, dated as of June 30, 2011, to the Indenture dated as of October 15, 2010 among Avis
Budget Car Rental, LLC and Avis Budget Finance, Inc., as Issuers, the Guarantors from time to time parties
thereto and The Bank of Nova Scotia Trust Company of New York as Trustee. (Incorporated by reference to
Exhibit 4.8(b) to Avis Budget Car Rental, LLC and Avis Budget Finance, Inc.’s Registration Statement on Form
S-4, Registration No. 333-17490, dated October 25, 2011).
Supplemental Indenture, dated as of June 21, 2013, to the Indenture, dated as of October 15, 2010, by and
among Avis Budget Car Rental, LLC and Avis Budget Finance, Inc., as Issuers, the Guarantors from time to
time parties thereto and The Bank of Nova Scotia Trust Company of New York as Trustee (Incorporated by
reference to Exhibit 4.6(c) to Avis Budget Car Rental, LLC and Avis Budget Finance, Inc.’s Registration
Statement on Form S-4, Registration No. 333-189524, dated June 21, 2013).
Form of 8.25% Senior Notes Due 2019 (Incorporated by reference to Exhibit 4.2 to the Company’s Current
Report on Form 8-K dated October 18, 2010).
Indenture dated as of October 3, 2011 between AE Escrow Corporation and The Bank of Nova Scotia Trust
Company of New York as Trustee (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on
Form 8-K dated October 14, 2011).
Supplemental Indenture dated as of October 10, 2011 among Avis Budget Car Rental, LLC, Avis Budget
Finance, Inc., Avis Budget Group, Inc., Avis Budget Holdings, LLC, and the other guarantors party thereto and
The Bank of Nova Scotia Trust Company of New York, as trustee (Incorporated by reference to Exhibit 4.1 to
the Company’s Current Report on Form 8-K dated October 14, 2011).
Supplemental Indenture, dated as of June 21, 2013, to the Indenture, dated as of October 3, 2011, by and
among Avis Budget Car Rental, LLC and Avis Budget Finance, Inc., as Issuers (successors to AE Escrow
Corporation ), the Guarantors from time to time parties thereto and The Bank of Nova Scotia Trust Company of
New York as Trustee (Incorporated by reference to Exhibit 4.7(c) to Avis Budget Car Rental, LLC and Avis
Budget Finance, Inc.’s Registration Statement on Form S-4, Registration No. 333-189524, dated June 21,
2013).
Form of 9.75% Senior Notes Due 2020 (Incorporated by reference to Exhibit 4.2 to the Company’s Current
Report on Form 8-K dated October 5, 2011).
Indenture dated as of November 8, 2012 among Avis Budget Car Rental, LLC and Avis Budget Finance, Inc.,
as Issuers, the Guarantors from time to time parties thereto and The Bank of Nova Scotia Trust Company of
New York as Trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K
dated November 13, 2012).
Supplemental Indenture, dated as of June 21, 2013, to the Indenture, dated as of November 8, 2012, by and
among Avis Budget Car Rental, LLC and Avis Budget Finance, Inc., as Issuers, the Guarantors from time to
time parties thereto and The Bank of Nova Scotia Trust Company of New York as Trustee (Incorporated by
reference to Exhibit 4.9(b) to Avis Budget Car Rental, LLC and Avis Budget Finance, Inc.’s Registration
Statement on Form S-4, Registration No. 333-189524, dated June 21, 2013).
Form of 4.875% Senior Notes Due 2017 (Incorporated by reference to Exhibit 4.2 to the Company’s Current
Report on Form 8-K dated November 13, 2012).
Indenture dated as of March 7, 2013 among Avis Budget Finance, plc, as Issuer, the Guarantors from time to time
parties thereto, Bank of Nova Scotia Trust Company of New York as Trustee and Citibank, N.A., London Branch,
as paying agent and note registrar (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on
Form 8-K dated March 11, 2013).
H-1
Supplemental Indenture, dated as of June 21, 2013, to the Indenture, dated as of March 7, 2013, by and among
Avis Budget Finance plc, as Issuer, the Guarantors from time to time parties thereto and The Bank of Nova Scotia
Trust Company of New York as Trustee (Incorporated by reference to Exhibit 4.11(b) to Avis Budget Car Rental,
LLC and Avis Budget Finance, Inc.’s Registration Statement on Form S-4, Registration No. 333-189524,dated
June 21, 2013).
Form of 6.0% Senior Notes Due 2021 (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report
on Form 8-K dated March 11, 2013).
Indenture, dated as of April 3, 2013, among Avis Budget Car Rental, LLC and Avis Budget Finance, Inc., as Issuers,
the Guarantors from time to time parties thereto and The Bank of Nova Scotia Trust Company of New York as
Trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated April 8,
2013).
Supplemental Indenture, dated as of June 21, 2013, to the Indenture, dated as of April 3, 2013, by and among
Avis Budget Finance plc, as Issuer, the Guarantors from time to time parties thereto and The Bank of Nova Scotia
Trust Company of New York as Trustee (Incorporated by reference to Exhibit 4.12(b) to Avis Budget Car Rental,
LLC and Avis Budget Finance, Inc.’s Registration Statement on Form S-4, Registration No. 333-189524, dated
June 21, 2013).
Form of 5.50% Senior Notes due 2023 (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report
on Form 8-K dated April 8, 2013).
Indenture dated as of November 25, 2013 among Avis Budget Car Rental, LLC and Avis Budget Finance, Inc., as
Issuers, the Guarantors from time to time parties thereto and Deutsche Bank Trust Company Americas as Trustee
(Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated December 2, 2013).
Form of Floating Rate Senior Notes Due 2017 (Incorporated by reference to Exhibit 4.2 to the Company’s Current
Report on Form 8-K dated December 2, 2013).
Amended and Restated Employment Agreement between Avis Budget Group, Inc. and Ronald L. Nelson
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 29,
2010).†
Amended and Restated Employment Agreement between Avis Budget Group, Inc. and David B. Wyshner
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 27,
2012).†
Agreement between Avis Budget Group, Inc. and Larry D. De Shon dated December 19, 2008 (Incorporated by
reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated December 31, 2008).†
Amendment dated January 22, 2014 to Agreement between Avis Budget Group, Inc. and Larry D. De Shon
dated December 19, 2008.†
Agreement between Avis Budget Group, Inc. and Patric T. Siniscalchi dated December 19, 2008 (Incorporated
by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended December 31,
2008, dated February 26, 2009).†
Amendment dated January 23, 2014 to Agreement between Avis Budget Group, Inc. Patric T. Siniscalchi dated
December 19, 2008.†
Agreement between Avis Budget Group, Inc. and Thomas Gartland dated April 21, 2008 (Incorporated by
reference to Exhibit 10.7(a) to the Company’s Annual Report on Form 10-K for the year ended December 31,
2009 dated February 23, 2010).†
Agreement between Avis Budget Group, Inc. and Thomas Gartland dated December 19, 2008 (Incorporated by
reference to Exhibit 10.7(b) to the Company’s Annual Report on Form 10-K for the year ended December 31,
2009, dated February 24, 2010).†
Amendment dated January 21, 2014 to Agreement between Avis Budget Group, Inc. and Thomas Gartland
dated December 19, 2008.†
Form of Avis Budget Group, Inc. Severance Agreement (Incorporated by reference to Exhibit 10.8 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2009, dated February 24, 2010).†
1997 Stock Option Plan (Incorporated by reference to Exhibit 10.23 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended April 30, 1997, dated June 16, 1997).†
Amendment to 1997 Stock Option Plan dated January 3, 2001 (Incorporated by reference to Exhibit 10.11(b) to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, dated March 29, 2001).†
Amendment to 1997 Stock Option Plan dated March 19, 2002 (Incorporated by reference to Exhibit 10.11(c) to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, dated March 5, 2003).†
Amendment to 1997 Stock Option Plan dated December 2011 (Incorporated by reference to Exhibit 10.10(d) to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, dated February 29,
2012).†
Avis Budget Group, Inc. Amended and Restated 2007 Equity and Incentive Plan (Incorporated by reference to
Annex A to the Company’s Definitive Proxy Statement on Schedule 14A, dated April 17, 2012).†
1997 Stock Incentive Plan (Incorporated by reference to Appendix E to the Joint Proxy Statement/ Prospectus
included as part of the Company’s Registration Statement on Form S-4, Registration No. 333-34517, dated
August 28, 1997).†
4.8(a)
4.9
4.10
4.10(a)
4.11
4.12
4.13
10.1
10.2
10.3
10.3(a)
10.4
10.4(a)
10.5
10.5(a)
10.5(b)
10.6
10.7
10.7(a)
10.7(b)
10.7(c)
10.8
10.9
H-2
Amendment to 1997 Stock Incentive Plan dated March 27, 2000 (Incorporated by reference to Exhibit 10.12(b)
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000 dated March 29,
2001).†
Amendment to 1997 Stock Incentive Plan dated March 28, 2000 (Incorporated by reference to Exhibit 10.12(c)
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000 dated March 29,
2001).†
Amendment to 1997 Stock Incentive Plan dated January 3, 2001 (Incorporated by reference to Exhibit 10.12(d)
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000 dated March 29,
2001).†
Amendment to Certain Stock Plans (Incorporated by reference to Exhibit 10.16(c) to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2003 dated March 5, 2003).†
Amendment to Various Equity-Based Plans (Incorporated by reference to Exhibit 10.16 to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2005 dated March 1, 2006).†
Avis Budget Group, Inc. Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K dated June 18, 2009).†
10.9(a)
10.9(b)
10.9(c)
10.10
10.11
10.12
10.12(a)
Amendment No. 1 to the Avis Budget Group, Inc. Employee Stock Purchase Plan (Incorporated by reference to
Exhibit 10.17(b) to Avis Budget Car Rental, LLC and Avis Budget Finance, Inc.’s Registration Statement on
Form S-4, Registration No. 333-17490, dated October 25, 2011).†
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
Form of Award Agreement-Restricted Stock Units (Incorporated by reference to Exhibit 10.17(a) to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2011, dated February 29, 2012).†
Form of Award Agreement-Stock Appreciation Rights (Incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K dated August 4, 2006).†
Form of Award Agreement-Stock Options (Incorporated by reference to Exhibit 10.15(c) to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2008, dated February 26, 2009).†
Form of Award Agreement-Stock Options (Incorporated by reference to Exhibit 10.15(d) to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2008, dated February 26, 2009).†
Form of Other Stock or Cash-Based Award Agreement (Incorporated by reference to Exhibit 10.4 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, dated August 6, 2009).†
Avis Budget Group, Inc. Non-Employee Directors Deferred Compensation Plan, amended and restated as of
January 1, 2013 (Incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2012 dated February 21, 2013).†
Avis Budget Group, Inc. Deferred Compensation Plan, amended and restated as of November 1, 2008
(Incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008, dated February 26, 2009).†
Avis Budget Group, Inc. Savings Restoration Plan, amended and restated as of November 1, 2008
(Incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008, dated February 26, 2009).†
Amended and Restated Equalization Benefit Plan (Incorporated by reference to Exhibit 10.59 to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2007, dated February 29, 2008).†
Avis Rent A Car System, LLC Pension Plan (Incorporated by reference to Exhibit 10.20 to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2008).†
Asset and Stock Purchase Agreement by and among Budget Group, Inc. and certain of its Subsidiaries,
Cendant Corporation* and Cherokee Acquisition Corporation dated as of August 22, 2002 (Incorporated by
reference to Exhibit 10.71 to the Company’s Annual Report on Form 10-K/A for the year ended December 31,
2001 dated November 4, 2002).
First Amendment to Asset and Stock Purchase Agreement by and among Budget Group, Inc. and certain of its
Subsidiaries, Cendant Corporation* and Cherokee Acquisition Corporation dated as of September 10, 2002
(Incorporated by reference to Exhibit 10.72 to the Company’s Annual Report on Form 10-K/A for the year ended
December 31, 2001 dated November 4, 2002).
10.23(a)
10.24
10.25
10.26
10.27
10.28
Separation Agreement, dated as of January 31, 2005, by and between Cendant Corporation* and PHH
Corporation (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated
February 4, 2005).
Tax Sharing Agreement, dated as of January 31, 2005, by and among Cendant Corporation*, PHH Corporation
and certain affiliates of PHH Corporation named therein (Incorporated by reference to Exhibit 10.4 to the
Company’s Current Report on Form 8-K dated February 4, 2005).††
Cendant Corporation* Officer Personal Financial Services Policy (Incorporated by reference to Exhibit 10.3 of
the Company’s Current Report on Form 8-K dated January 26, 2005).
Purchase Agreement, dated as of June 30, 2006, by and among the Company, Travelport Inc. and TDS
Investor LLC (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated
June 30, 2006).
Transition Services Agreement among Cendant Corporation*, Realogy Corporation, Wyndham Worldwide
Corporation and Travelport Inc., dated as of July 27, 2006 (Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K dated August 1, 2006).
H-3
10.29
10.29(a)
10.30
10.30(a)
10.31
10.32
10.33
10.34
10.35
10.35(a)
10.35(b)
10.35(c)
10.36
10.36(a)
10.36(b)
10.36(c)
10.37
10.37(a)
Tax Sharing Agreement among Cendant Corporation*, Realogy Corporation, Wyndham Worldwide Corporation
and Travelport Inc., dated as of July 28, 2006 (Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K dated August 1, 2006).
Amendment to the Tax Sharing Agreement, dated July 28, 2006, among Avis Budget Group, Inc., Realogy
Corporation, Wyndham Worldwide Corporation and Travelport Inc. (Incorporated by reference to Exhibit 10.4 to
the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008 dated August 7,
2008).
Purchase Agreement by and among Cendant Corporation*, Affinity Acquisition, Inc. and Affinity Acquisition
Holdings, Inc. dated as of July 26, 2005 (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 2005 dated November 2, 2005).
Amendment No. 1 dated as of October 17, 2005 to the Purchase Agreement dated as of July 26, 2005 by and
among Cendant Corporation*, Affinity Acquisition, Inc. (now known as Affinion Group, Inc.) and Affinity
Acquisition Holdings, Inc. (now known as Affinion Group Holdings, Inc.) (Incorporated by reference to Exhibit
10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005
dated November 2, 2005).
Agreement dated October 1, 2012 between Avis Budget Car Rental, LLC and General Motors (Incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 5, 2012).††
Agreement dated August 23, 2013 between Avis Budget Car Rental, LLC and General Motors (Incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 7, 2013).††
Avis Budget Car Rental 2013 Model Year Program Letter dated November 7, 2012 between Avis Budget Car
Rental, LLC and Ford Motor Company (Incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K dated November 13, 2012).††
Avis Budget Car Rental 2014 Model Year Program Letter dated October 26, 2013 between Avis Budget Car
Rental, LLC and Ford Motor Company (Incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K dated October 31, 2013).††
Second Amended and Restated Base Indenture, dated as of June 3, 2004, among Cendant Rental Car
Funding (AESOP) LLC***, as Issuer, and The Bank of New York, as Trustee (Incorporated by reference to
Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004,
dated August 2, 2004).
Supplemental Indenture No. 1, dated as of December 23, 2005, among Cendant Rental Car Funding (AESOP)
LLC***, as Issuer, and The Bank of New York, as Trustee, to the Second Amended and Restated Base
Indenture, dated as of June 3, 2004 (Incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K dated January 20, 2006).
Supplemental Indenture No. 2, dated as of May 9, 2007, among Avis Budget Rental Car Funding (AESOP)
LLC, as Issuer, and The Bank of New York Trust Company, N.A. (as successor in interest to The Bank of New
York), as Trustee, to the Second Amended and Restated Base Indenture, dated as of June 3, 2004
(Incorporated by reference to Exhibit 10.6 the Company Form 10-Q for the quarterly period ended June 30,
2007, dated August 8, 2007).
Supplemental Indenture No. 3, dated as of August 16, 2013, among Avis Budget Rental Car Funding (AESOP)
LLC, as Issuer, and The Bank of New York Trust Company, N.A. (as successor in interest to The Bank of New
York), as Trustee, to the Second Amended and Restated Base Indenture, dated as of June 3, 2004.
Second Amended and Restated Loan Agreement, dated as of June 3, 2004, among AESOP Leasing L.P., as
Borrower, Quartx Fleet Management, Inc., as a Permitted Nominee, PV Holding Corp., as a Permitted
Nominee, and Cendant Rental Car Funding (AESOP) LLC***, as Lender (Incorporated by reference to Exhibit
10.8 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, dated
August 2, 2004).
First Amendment, dated as of December 23, 2005, among AESOP Leasing L.P., as Borrower, Quartx Fleet
Management, Inc., as a Permitted Nominee, PV Holding Corp., as a Permitted Nominee, and Cendant Rental
Car Funding (AESOP) LLC***, as Lender, to the Second Amended and Restated Loan Agreement, dated as of
June 3, 2004 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated
January 20, 2006).
Second Amendment, dated as of May 9, 2007, among AESOP Leasing L.P., as Borrower, PV Holding Corp., as
a Permitted Nominee, Quartx Fleet Management, Inc., as a Permitted Nominee, and Avis Budget Rental Car
Funding (AESOP) LLC, as Lender, to the Second Amended and Restated Loan Agreement, dated as of June 3,
2004 (Incorporated by reference to Exhibit 10.8 the Company Form 10-Q for the quarterly period ended June
30, 2007, dated August 8, 2007).
Third Amendment, dated as of August 16, 2013, among AESOP Leasing L.P., as Borrower, PV Holding Corp.,
as a Permitted Nominee, Quartx Fleet Management, Inc., as a Permitted Nominee, and Avis Budget Rental Car
Funding (AESOP) LLC, as Lender, to the Second Amended and Restated Loan Agreement, dated as of June 3,
2004.
Amended and Restated Loan Agreement, dated as of June 3, 2004, among AESOP Leasing L.P., as Borrower,
and Cendant Rental Car Funding (AESOP) LLC***, as Lender (Incorporated by reference to Exhibit 10.29(a) to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, dated March 1, 2007).
First Amendment, dated as of December 23, 2005, among AESOP Leasing L.P., as Borrower, and Cendant
Rental Car Funding (AESOP) LLC***, as Lender, to the Amended and Restated Loan Agreement, dated as of
June 3, 2004 (Incorporated by reference to Exhibit 10.29(b) to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2006, dated March 1, 2007).
H-4
10.37(b)
10.37(c)
10.38
10.38(a)
10.38(b)
10.38(c)
10.39
10.39(a)
10.39(b)
10.39(c)
10.40
10.41
10.41(a)
10.42
10.43
10.44
10.45
Second Amendment, dated as of the May 9, 2007, among AESOP Leasing L.P., as Borrower, and Avis Budget
Rental Car Funding (AESOP) LLC, as Lender, to the Amended and Restated Loan Agreement, dated as of
June 3, 2004 (Incorporated by reference to Exhibit 10.7 the Company Form 10-Q for the quarterly period ended
June 30, 2007, dated August 8, 2007).
Third Amendment, dated as of August 16, 2013, among AESOP Leasing L.P., as Borrower, and Avis Budget
Rental Car Funding (AESOP) LLC, as Lender, to the Amended and Restated Loan Agreement, dated as of
June 3, 2004.
Second Amended and Restated Master Motor Vehicle Operating Lease Agreement, dated as of June 3, 2004,
among AESOP Leasing L.P., as Lessor, and Cendant Car Rental Group, Inc.**, as Lessee and as Administrator
(Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2004, dated August 2, 2004).
First Amendment, dated December 23, 2005, among AESOP Leasing L.P., as Lessor, and Cendant Car Rental
Group, Inc.**, as Lessee and as Administrator, to the Second Amended and Restated Master Motor Vehicle
Operating Lease Agreement, dated as of December 23, 2005 (Incorporated by reference to Exhibit 10.3 to the
Company’s Current Report on Form 8-K dated January 20, 2006).
Third Amendment, dated as of May 9, 2007, among AESOP Leasing L.P., as Lessor and Avis Budget Car
Rental, LLC, as Lessee and as the Administrator, to the Second Amended and Restated Master Motor Vehicle
Operating Lease Agreement, dated as of June 3, 2004 (Incorporated by reference to Exhibit 10.9 the Company
Form 10-Q for the quarterly period ended June 30, 2007, dated August 8, 2007).
Fourth Amendment, dated as of August 16, 2013, among AESOP Leasing L.P., as Lessor and Avis Budget Car
Rental, LLC, as Lessee and as the Administrator, to the Second Amended and Restated Master Motor Vehicle
Operating Lease Agreement, dated as of June 3, 2004.
Amended and Restated Master Motor Vehicle Finance Lease Agreement, dated as of June 3, 2004, among
AESOP Leasing L.P., as Lessor, Cendant Car Rental Group, Inc.**, as Lessee, as Administrator and as Finance
Lease Guarantor, Avis Rent A Car System, Inc.****, as Lessee, and Budget Rent A Car System, Inc., as Lessee
(Incorporated by reference to Exhibit 10.30(a) to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2006, dated March 1, 2007).
First Amendment, dated as of December 23, 2005, among AESOP Leasing L.P., as Lessor, Cendant Car Rental
Group, Inc.**, as Lessee, as Administrator and as Finance Lease Guarantor, Avis Rent A Car System, Inc.****,
as Lessee, and Budget Rent A Car System, Inc., as Lessee, to the Amended and Restated Master Motor
Vehicle Finance Lease Agreement, dated as of June 3, 2004 (Incorporated by reference to Exhibit 10.30(b) to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, dated March 1, 2007).
Third Amendment, dated as of May 9, 2007, among AESOP Leasing L.P., as Lessor, Avis Budget Car Rental,
LLC, as Lessee, as Administrator and as Finance Lease Guarantor, Avis Rent A Car System, LLC, as Lessee,
and Budget Rent A Car System, Inc., as Lessee, to the Amended and Restated Master Motor Vehicle Finance
Lease Agreement, dated as of June 3, 2004 (Incorporated by reference to Exhibit 10.11 the Company Form 10-
Q for the quarterly period ended June 30, 2007, dated August 8, 2007).
Fourth Amendment, dated as of August 16, 2013, among AESOP Leasing L.P., as Lessor, Avis Budget Car
Rental, LLC, as Lessee, as Administrator and as Finance Lease Guarantor, Avis Rent A Car System, LLC, as
Lessee, and Budget Rent A Car System, Inc., as Lessee, to the Amended and Restated Master Motor Vehicle
Finance Lease Agreement, dated as of June 3, 2004.
AESOP I Operating Sublease Agreement dated as of March 26, 2013 between Zipcar, Inc. and Avis Budget Car
Rental, LLC (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2013 dated May 8, 2013).
Second Amended and Restated Administration Agreement, dated as of June 3, 2004, among Cendant Rental
Car Funding (AESOP) LLC***, AESOP Leasing L.P., AESOP Leasing Corp. II, Avis Rent A Car System, Inc.****,
Budget Rent A Car System, Inc., Cendant Car Rental Group, Inc.** and The Bank of New York, as Trustee
(Incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2005, dated March 1, 2006).
First Amendment, dated as of August 16, 2013, among Avis Budget Rental Car Funding (AESOP) LLC, AESOP
Leasing L.P., AESOP Leasing Corp. II, Avis Rent A Car System, LLC, Budget Rent A Car System, Inc. and Avis
Budget Car Rental, LLC, as Administrator, to the Second Amended and Restated Administration Agreement
dated as of June 3, 2004.
Assignment and Assumption Agreement dated as of June 3, 2004, among Avis Rent A Car System, Inc.****,
Avis Group Holdings, Inc.***** and Cendant Car Rental Group, Inc.** (Incorporated by reference to Exhibit
10.35 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, dated March 1,
2006).
Series 2010-3 Supplement, dated as of March 23, 2010, among Avis Budget Car Rental Funding (AESOP) LLC
and The Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2010-3 Agent (Incorporated
by reference to Exhibit 10.2 to Avis Budget Group’s Current Report on Form 8-K dated March 11, 2010).
Series 2010-4 Supplement, dated as of October 28, 2010, among Avis Budget Rental Car Funding (AESOP)
LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2010-4 Agent
(Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, dated October 28,
2010).
Series 2010-5 Supplement, dated as of October 28, 2010, among Avis Budget Rental Car Funding (AESOP)
LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and Series 2010-5 Agent (Incorporated
by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, dated October 28, 2010).
H-5
Second Amended and Restated Series 2010-6 Supplement, dated as of November 5, 2013, by and among Avis
Budget Rental Car Funding (AESOP) LLC, as Issuer, Avis Budget Car Rental, LLC, as Administrator, JPMorgan
Chase Bank, N.A., as Administrative Agent, the Non-Conduit Purchasers, the CP Conduit Purchasers, the APA
Banks and the Funding Agents named therein and The Bank of New York Mellon Trust Company, N.A., as
Trustee and as Series 2010-6 Agent (Incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, dated November 7, 2013).
10.45(a)
10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
10.54
10.55
10.56
10.57
10.58
10.59
Series 2011-1 Supplement, dated as of May 3, 2011, between Avis Budget Rental Car Funding (AESOP) LLC
and The Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2011-1 Agent (Incorporated
by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated May 6, 2011).
Series 2011-2 Supplement, dated as of May 3, 2011, between Avis Budget Rental Car Funding (AESOP) LLC
and The Bank of New York Mellon Trust Company, N.A., as trustee and Series 2011-2 Agent (Incorporated by
reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated May 6, 2011).
Amended and Restated Series 2011-3 Supplement, dated as of September 9, 2013, between Avis Budget
Rental Car Funding (AESOP) LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and as
Series 2011-3 Agent (Incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form
10-Q for the period ended September 30, 2013, dated November 1, 2013).
Amended and Restated Series 2011-5 Supplement, dated as of September 9, 2013, between Avis Budget
Rental Car Funding (AESOP) LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and as
Series 2011-5 Agent (Incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form
10-Q for the period ended September 30, 2013, dated November 1, 2013).
Series 2012-1 Supplement, dated as of March 22, 2012, between Avis Budget Rental Car Funding (AESOP)
LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2012-1 Agent
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 27,
2012).
Amended and Restated Series 2012-2 Supplement, dated as of September 9, 2013, between Avis Budget Car
Funding (AESOP) LLC and The Bank of New York Mellon Trust company, N.A., as trustee and as Series
2012-2 Agent (Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for
the period ended September 30, 2013, dated November 1, 2013).
Amended and Restated Series 2012-3 Supplement, dated as of September 9, 2013, between Avis Budget
Rental Car Funding (AESOP) LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and as
Series 2012-3 Agent (Incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-
Q for the period ended September 30, 2013, dated November 1, 2013).
Amended and Restated Series 2013-1 Supplement, dated as of September 9, 2013, between Avis Budget
Rental Car Funding (AESOP) LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and as
Series 2013-1 Agent (Incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-
Q for the period ended September 30, 2013, dated November 1, 2013).
Amended and Restated Series 2013-2 Supplement, dated as of February 12, 2014, between Avis Budget Rental
Car Funding (AESOP) LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and as Series
2013-2 Agent.
Series 2014-1 Supplement, dated as of February 12, 2014, between Avis Budget Rental Car Funding (AESOP)
LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2014-1 Agent
(Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated February 18,
2014).
Second Amended and Restated Credit Agreement, dated as of August 2, 2013, among Avis Budget Holdings,
LLC, Avis Budget Car Rental, LLC, the subsidiary borrowers from time to time parties thereto, the several
lenders from time to time parties thereto, Deutsche Bank Securities Inc. as syndication agent, Citicorp USA,
Inc., Bank of America, N.A., Barclays Bank PLC and Credit Agricole Corporate and Investment Bank and The
Royal Bank of Scotland PLC, as co-documentation agents, and JPMorgan Chase Bank, N.A., as administrative
agent (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 6,
2013).
Amended and Restated Guarantee & Collateral Agreement, dated as of May 3, 2011, among made by each of
the signatories thereto in favor of JPMorgan Chase Bank, N.A., as administrative agent (Incorporated by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated May 6, 2011).
Purchase Agreement dated as of October 7, 2009, by and among Avis Budget Group, Inc. and J.P. Morgan
Securities Inc., Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays
Capital Inc. and Deutsche Bank Securities Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K dated October 13, 2009).
Purchase Agreement, dated as of October 7, 2010, by and among Avis Budget Car Rental, LLC, Avis Budget
Finance, Inc., Avis Budget Group, Inc., Avis Budget Holdings, LLC, AB Car Rental Service, Inc., ARACS LLC,
Avis Asia and Pacific, Limited, Avis Car Rental Group, LLC, Avis Caribbean, Limited, Avis Enterprises, Inc., Avis
Group Holdings, LLC, Avis International, Ltd., Avis Operations, LLC, Avis Rent A Car System, LLC, PF Claims
Management, Ltd., PR Holdco, Inc., Wizard Co., Inc., BGI Leasing, Inc., Budget Rent A Car System, Inc.,
Budget Truck Rental LLC, Runabout, LLC, Wizard Services, Inc. and Citigroup Global Markets Inc. for itself and
on behalf of the several initial purchasers (Incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K dated October 12, 2010).
H-6
Purchase Agreement, dated as of November 15, 2010, by and among Avis Budget Car Rental, LLC, Avis
Budget Finance, Inc., Avis Budget Group, Inc., Avis Budget Holdings, LLC, AB Car Rental Service, Inc., ARACS
LLC, Avis Asia and Pacific, Limited, Avis Car Rental Group, LLC, Avis Caribbean, Limited, Avis Enterprises,
Inc., Avis Group Holdings, LLC, Avis International, Ltd., Avis Operations, LLC, Avis Rent A Car System, LLC, PF
Claims Management, Ltd., PR Holdco, Inc., Wizard Co., Inc., BGI Leasing, Inc., Budget Rent A Car System,
Inc., Budget Truck Rental LLC, Runabout, LLC, Wizard Services, Inc. and Citigroup Global Markets Inc. for
itself and on behalf of the several initial purchasers (Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K dated November 18, 2010).
Purchase Agreement, by and among AE Escrow Corporation, Avis Budget Group, Inc. and Morgan Stanley &
Co. LLC for itself and on behalf of the several initial purchasers, dated September 21, 2011 (Incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 27, 2011).
Registration Rights Agreement, dated October 3, 2011, among Avis Budget Car Rental, LLC and Avis Budget
Finance, Inc., the guarantors parties thereto, Morgan Stanley & Co. LLC, and the other initial purchasers
parties thereto (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated
October 5, 2011).
Purchase Agreement, dated as of March 26, 2012, by and among Avis Budget Car Rental, LLC, Avis Budget
Finance, Inc., Avis Budget Group, Inc., Avis Budget Holdings, LLC, the subsidiary guarantors party thereto, and
Barclays Capital Inc. for itself and on behalf of the several initial purchasers (Incorporated by reference to
Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, dated
May 9, 2012).
Registration Rights Agreement, dated March 29, 2012, among Avis Budget Car Rental, LLC and Avis Budget
Finance, Inc., the guarantors parties thereto, and Barclays Capital Inc. for itself and on behalf of the several
initial purchasers (Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2012, dated May 9, 2012).
Purchase Agreement, dated as of November 5, 2012, by and among Avis Budget Car Rental, LLC, Avis Budget
Finance, Inc., Avis Budget Group, Inc., Avis Budget Holdings, LLC, AB Car Rental Service, Inc., ARACS LLC,
Avis Asia and Pacific, LLC, Avis Car Rental Group, LLC, Avis Caribbean, Limited, Avis Enterprises, Inc., Avis
Group Holdings, LLC, Avis International, Ltd., Avis Operations, LLC, Avis Rent A Car System, LLC, PF Claims
Management, Ltd., PR Holdco, Inc., Wizard Co., Inc., BGI Leasing, Inc., Budget Rent A Car System, Inc.,
Budget Rent A Car Licensor, LLC, Budget Truck Rental LLC, Runabout, LLC, Wizard Services, Inc. and Merill
Lynch, Pierce, Fenner & Smith, Incorporated for itself and on behalf of the several initial purchasers
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 6,
2012).
Registration Rights Agreement, dated November 8, 2012, among Avis Budget Car Rental, LLC and Avis Budget
Finance, Inc., the guarantors parties thereto, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and the other
initial purchasers parties thereto (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K dated November 13, 2012).
Purchase Agreement, dated as of February 28, 2013, by and among Avis Budget Finance, plc, as issuer, Avis
Budget Group, Inc. and certain of its subsidiaries as guarantors, and Citigroup Global Markets Limited, for itself
and on behalf of the several initial purchasers (Incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K dated March 5, 2013).
Purchase Agreement, dated as of March 19, 2013, by and among Avis Budget Car Rental, LLC and Avis Budget
Finance, Inc. as issuers, Avis Budget Group, Inc. and certain of its subsidiaries as guarantors, and Barclays Capital
Inc. for itself and on behalf of the several initial purchasers (Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K dated March 25, 2013).
Registration Rights Agreement, dated as of April 3, 2013, among Avis Budget Car Rental, LLC and Avis Budget
Finance, Inc., the guarantors parties thereto, Barclays Capital Inc., and the other initial purchasers parties thereto
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 8, 2013).
Purchase Agreement, dated as of November 20, 2013, by and among Avis Budget Car Rental, LLC and Avis
Budget Finance, Inc. as issuers, Avis Budget Group, Inc. and certain of its subsidiaries as guarantors, and Citigroup
Global Markets, Inc. as the initial purchaser Trustee (Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K dated November 22, 2013).
Registration Rights Agreement, dated November 25, 2013, among Avis Budget Car Rental, LLC and Avis Budget
Finance, Inc., the guarantors parties thereto and Citigroup Global Markets Inc. (Incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K dated December 2, 2013).
Agreement of Resignation, Appointment And Acceptance, dated as of September 5, 2013, by and among Avis
Budget Car Rental, LLC, Avis Budget Finance, Inc., The Bank of Nova Scotia Trust Company of New York, as the
retiring trustee, and Deutsche Bank Trust Company Americas, as the successor trustee under the indentures
described therein (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for
the period ended September 30, 2013, dated November 1, 2013).
Agreement of Resignation, Appointment And Acceptance, dated as of September 5, 2013, by and among Avis
Budget Finance, The Bank of Nova Scotia Trust Company of New York, as the retiring trustee, and Deutsche Bank
Trust Company Americas, as the successor trustee under the indenture dated as of March 7, 2013 (as amended
and supplemented) (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q
for the period ended September 30, 2013, dated November 1, 2013).
10.60
10.61
10.62
10.63
10.64
10.65
10.66
10.67
10.68
10.69
10.70
10.71
10.72
10.73
H-7
10.74
10.75
10.76
10.77
10.78
10.79
10.80
10.81
10.82
10.83
10.84
10.85
10.86
10.87
10.88
10.89
Agreement of Resignation, Appointment And Acceptance, dated as of September 5, 2013, by and among Avis
Budget Car Rental, LLC, Avis Budget Group, Inc., The Bank of Nova Scotia Trust Company of New York, as the
retiring trustee, and Deutsche Bank Trust Company Americas, as the successor trustee under the indenture dated
as of October 13, 2009 (as amended and supplemented) (Incorporated by reference to Exhibit 10.6 to the
Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2013, dated November 1, 2013).
Trust Indenture, dated as of August 26, 2010, among WTH Car Rental ULC and BNY Trust Company of
Canada, as Indenture Trustee (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K dated August 27, 2010).
Series 2011-1 Indenture Supplement, dated as of March 17, 2011, to the Trust Indenture dated as of August 26,
2010, among WTH Car Rental ULC, WTH Funding Limited Partnership, as Administrator, and BNY Trust
Company of Canada, as Indenture Trustee (Incorporated by reference to Exhibit 10.3 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2011).
Administration Agreement, dated as of August 26, 2010, among WTH Car Rental ULC, WTH Funding Limited
Partnership, as Administrator, and BNY Trust Company of Canada, as Indenture Trustee (Incorporated by
reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated August 27, 2010, dated May 6,
2011).
Master Motor Vehicle Lease Agreement, dated as of August 26, 2010, among WTH Car Rental ULC, WTH
Funding Limited Partnership, and BNY Trust Company of Canada, as Indenture Trustee (Incorporated by
reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K dated August 27, 2010).
Global Amendment dated as of February 17, 2011, to the Trust Indenture dated as of August 26, 2010 and
certain related agreements, by and among Aviscar Inc., Budgetcar Inc., 2233516 Ontario Inc., WTH Car Rental
ULC, WTH Funding Limited Partnership, BNY Trust Company Of Canada, Bay Street Funding Trust, Canadian
Master Trust, Deutsche Bank Ag, Canada Branch, Lord Securities Corporation, and Fiserv Automotive
Solutions, Inc. (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2011, dated May 6, 2011).
Second Global Amendment, dated as of August 22, 2011, among Aviscar Inc., Budgetcar Inc., WTH Funding
Limited Partnership, WTH Car Rental ULC, Montreal Trust Company Of Canada, BNY Trust Company Of
Canada, as noteholder and Indenture Trustee, and Avis Budget Car Rental, LLC (Incorporated by reference to
Exhibit 10.89 to Avis Budget Car Rental, LLC and Avis Budget Finance, Inc.’s Registration Statement on Form
S-4, Registration No. 333-17490, dated October 25, 2011).
Third Global Amendment, dated as of November 27, 2012, among Aviscar Inc., Budgetcar Inc., WTH Funding
Limited Partnership, WTH Car Rental ULC, Montreal Trust Company Of Canada, BNY Trust Company Of
Canada as noteholder and Indenture Trustee, and Avis Budget Car Rental, LLC (Incorporated by reference to
Exhibit 10.81 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, dated
February 21, 2013).
Fourth Global Amendment dated as of August 21, 2013, among Aviscar Inc., Budgetcar Inc., Zipcar Canada,
Inc., WTH Funding Limited Partnership, WTH Car Rental ULC, BNY Trust Company Of Canada as noteholder
and Indenture Trustee, Bay Street Funding Trust, Canadian Master Trust, and Avis Budget Car Rental, LLC
(Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter
year ended September 30, 2013, dated November 1, 2013).
Amended and Restated Base Indenture, dated as of March 9, 2010, between Centre Point Funding, LLC, as
Issuer, The Bank of New York Mellon Trust Company, N.A., as Trustee (Incorporated by reference to Exhibit
10.83 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, dated February
24, 2011).
Amended and Restated Administration Agreement (Group I), dated as of March 9, 2010, among Centre Point
Funding, LLC, Budget Truck Rental LLC, as Administrator, and The Bank of New York Mellon Trust Company,
N.A., as Trustee (Incorporated by reference to Exhibit 10.85 to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2010, dated February 24, 2011).
Second Amended and Restated Master Motor Vehicle Operating Lease Agreement (Group I), dated March 14,
2012, among, Centre Point Funding, LLC, as Lessor, Budget Truck Rental LLC, as Administrator and as
Lessee, and Avis Budget Car Rental, LLC, as Guarantor (Incorporated by reference to Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, dated May 9, 2012).
Administration Agreement (Group II), dated as of March 9, 2010, among Centre Point Funding, LLC, Budget
Truck Rental LLC, as Administrator, and The Bank of New York Mellon Trust Company, N.A., as Trustee
(Incorporated by reference to Exhibit 10.88 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2010, dated February 24, 2011).
Master Motor Vehicle Operating Lease Agreement (Group II), dated March 9, 2010, among, Centre Point
Funding, LLC, as Lessor, Budget Truck Rental LLC, as Administrator and as Lessee, and Avis Budget Car
Rental, LLC, as Guarantor (Incorporated by reference to Exhibit 10.87 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2010, dated February 24, 2011).
Umbrella Amending and Rescission Deed, dated September 22, 2011, among AB Funding Pty Ltd., WTH Pty
Ltd., Budget Rent A Car Australia Pty Ltd., BNY Trust (Australia) Registry Limited, as Security Trustee, Westpac
Banking Corporation, Commonwealth Bank of Australia and Bank of America, N.A. (Australia Branch)
(Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated September 27,
2011).
Issuer Note Facility Agreement dated March 5, 2013 among CarFin Finance International Limited, Credit
Agricole Corporate And Investment Bank, the Initial Senior Noteholders listed therein, Deutsche Trustee
Company Limited, Deutsche Bank AG, London Branch and Deutsche Bank Luxembourg S.A. (Incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 11, 2013).
H-8
10.90
10.91
10.92
10.93
10.94
10.95
10.96
10.97
10.98
10.99
10.100
10.101
10.102
10.103
10.104
12
21
Subordinated Loan Agreement dated March 5, 2013, among CarFin Finance International Limited, Deutsche
Bank AG, London Branch, Deutsche Trustee Company Limited, and Avis Finance Company Ltd as
Subordinated Lender (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
dated March 11, 2013).††
Framework Agreement dated March 5, 2013 among CarFin Finance International Limited, Credit Agricole
Corporate And Investment Bank, Deutsche Trustee Company Limited, Credit Agricole Corporate and
Investment Bank, Avis Budget Car Rental, LLC, Avis Finance Company Limited, Avis Budget EMEA Limited,
Deutsche Bank AG, London Branch, the Initial Senior Noteholders named therein and certain other entities
named therein (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated
March 11, 2013).††
Second Amendment Agreement, dated April 15, 2013, to the Framework Agreement, the Master Definitions
Agreement, the Issuer Note Issuance Facility Agreement, the Central Servicing Agreement, the Issuer
Subordinated Facility Agreement, and the Issuer Cash Management Agreement each dated as of March 5,
2013, between, among others, CarFin Finance International Limited, Crédit Agricole Corporate and Investment
Bank, Deutsche Trustee Company Limited, Avis Budget Car Rental, LLC, Avis Finance Company Limited, Avis
Budget EMEA Limited, Deutsche Bank AG, London Branch, and certain other entities named therein
(Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2013 dated August 7, 2013).
Master Definitions Agreement dated March 5, 2013, among CarFin Finance International Limited, Credit
Agricole Corporate And Investment Bank, Deutsche Trustee Company Limited, Credit Agricole Corporate and
Investment Bank, Avis Budget Car Rental, LLC, Avis Finance Company Limited, Avis Budget EMEA Limited,
Deutsche Bank AG, London Branch, the Initial Senior Noteholders named therein and certain other entities
named therein (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated
March 11, 2013).††
Amendment Letter, dated March 19, 2013, to the Framework Agreement dated March 5, 2013 and the Master
Definitions Agreement dated March 5, 2013 between, among others, Avis Finance Company Limited, Avis
Budget Italia S.p.A. FleetCo S.A.p.A., FinCar Fleet B.V. and Avis Budget Italia S.p.A., Avis Budget Car Rental,
LLC, Avis Budget EMEA Limited, Avis Alquile un Coche S.A., Avis Budget Autovermietung GmbH & Co. KG,
Crédit Agricole Corporate and Investment Bank the Initial Senior Noteholders named therein, and Deutsche
Trustee Company Limited (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2013 dated May 8, 2013).
Fleetco Italian Facility Agreement dated March 5, 2013, among CarFin Finance International Limited, Avis
Budget Italia S.p.A., Fleet Co. S.A.p.A., Deutsche Trustee Company Limited, Credit Agricole Corporate and
Investment Bank, Deutsche Bank AG, London Branch and Avis Finance Company Limited (Incorporated by
reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated March 11, 2013).
Fleetco Spanish Facility Agreement dated March 5, 2013, among CarFin Finance International Limited, FinCar
Fleet B.V., Sucursal en España, Deutsche Trustee Company Limited, Credit Agricole Corporate and Investment
Bank and Deutsche Bank AG, London Branch (Incorporated by reference to Exhibit 10.6 to the Company’s
Current Report on Form 8-K dated March 11, 2013).
Fleetco German Facility Agreement dated March 5, 2013, among CarFin Finance International Limited, FinCar
Fleet B.V., Deutsche Trustee Company Limited, Credit Agricole Corporate and Investment Bank and Deutsche
Bank AG, London Branch (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form
8-K dated March 11, 2013).
Master German Fleet Purchase Agreement dated March 5, 2013 among FinCar Fleet B.V., Avis Budget
Autovermietung Gmbh & Co. Kg, and Credit Agricole Corporate And Investment Bank (Incorporated by
reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K dated March 11, 2013).
Spanish Master Lease Agreement dated March 5, 2013, among FinCar Fleet B.V., Sucursal en España, Avis
Alquile un Coche, S.A. and Credit Agricole Corporate And Investment Bank (Incorporated by reference to
Exhibit 10.9 to the Company’s Current Report on Form 8-K dated March 11, 2013).
Amended and Restated Italian Master Lease Agreement dated March 5, 2013 among Avis Budget Italia S.p.A.,
Fleet Co. S.A.p.A., Avis Budget Italia S.p.A. and Credit Agricole Corporate And Investment Bank (Incorporated by
reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K dated March 11, 2013).
Spanish Servicing Agreement dated March 5, 2013 among FinCar Fleet B.V., Sucursal en España, Avis Alquile
un Coche, S.A. and Credit Agricole Corporate And Investment Bank (Incorporated by reference to Exhibit 10.11
to the Company’s Current Report on Form 8-K dated March 11, 2013).††
Amended and Restated Italian Servicing Agreement dated March 5, 2013 among Avis Budget Italia S.p.A., Fleet
Co. S.A.p.A., Avis Budget Italia S.p.A. and Credit Agricole Corporate And Investment Bank (Incorporated by
reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K dated March 11, 2013).††
Finco Payment Guarantee dated March 5, 2013, among Avis Finance Company Limited in favor of FinCar Fleet
B.V., FinCar Fleet B.V., Sucursal en España, Avis Budget Italia S.p.A. Fleet Co. S.A.p.A. and Credit Agricole
Corporate and Investment Bank (Incorporated by reference to Exhibit 10.13 to the Company’s Current Report on
Form 8-K dated March 11, 2013).
Avis Europe Payment Guarantee dated March 5, 2013, among Avis Budget EMEA Limited in favor of Deutsche
Trustee Company Limited (Incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form
8-K dated March 11, 2013).
Statement Re: Computation of Ratio of Earnings to Fixed Charges.
Subsidiaries of Registrant.
H-9
23.1
31.1
31.2
32
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
Consent of Deloitte & Touche LLP.
Certification of Chief Executive Officer pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the
Securities Exchange Act of 1934, as amended.
Certification of Chief Financial Officer pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the
Securities Exchange Act of 1934, as amended.
Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
XBRL Instance Document.
XBRL Taxonomy Extension Schema.
XBRL Taxonomy Extension Calculation Linkbase.
XBRL Taxonomy Extension Definition Linkbase.
XBRL Taxonomy Extension Label Linkbase.
XBRL Taxonomy Extension Presentation Linkbase.
____________________
*
**
***
****
*****
†
††
Cendant Corporation is now known as Avis Budget Group, Inc.
Cendant Car Rental Group, LLC (formerly known as Cendant Car Rental Group, Inc.) is now known as Avis Budget
Car Rental, LLC.
Cendant Rental Car Funding (AESOP) LLC, formerly known as AESOP Funding II L.L.C, is now known as Avis
Budget Rental Car Funding (AESOP) LLC.
Avis Rent A Car System, Inc. is now known as Avis Rent A Car System, LLC.
Avis Group Holdings, Inc. is now known as Avis Group Holdings, LLC.
Denotes management contract or compensatory plan.
Confidential treatment has been requested for certain portions of this Exhibit pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934, as amended, which portions have been omitted and filed separately with the
Securities and Exchange Commission.
H-10
SECTION 302 CERTIFICATION
I, Ronald L. Nelson, certify that:
1.
I have reviewed this annual report on Form 10-K of Avis Budget Group, Inc.;
Exhibit 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 20, 2014
/s/ Ronald L. Nelson
Chief Executive Officer
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SECTION 302 CERTIFICATION
I, David B. Wyshner, certify that:
1.
I have reviewed this annual report on Form 10-K of Avis Budget Group, Inc.;
Exhibit 31.2
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 20, 2014
/s/ David B. Wyshner
Senior Executive Vice President and
Chief Financial Officer
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International Headquarters
Avis Budget Group, Inc.
6 Sylvan Way
Parsippany, New Jersey 07054
Tel: 973.496.4700
Web: www.avisbudgetgroup.com
NASDAQ: CAR