March 26, 2019
Dear fellow shareholders,
Avis Budget Group had another successful year in 2018, reporting our ninth consecutive year of revenue growth,
generating more than 40 million transactions and a record $9.1 billion of revenue. Reported net income was $165
million and diluted earnings per share was $2.06. Adjusted EBITDA was $781 million, Adjusted Net Income increased
to $292 million and Adjusted Diluted Earnings per Share increased to $3.65. Net cash provided by operating activities
was $2.6 billion for the year and we generated $430 million of Adjusted free cash flow which was used to make a
number of strategic acquisitions, as well as repurchasing $200 million of common stock, or 7% of our outstanding
shares.
Our results were particularly strong in the Americas, with Adjusted EBITDA growing 15% and margin expanding
100 basis points. This was achieved by driving profitable revenue growth, a 7% reduction in per-unit fleet costs and
higher utilization. This growth was partially offset by our International segment where increased volume and higher
utilization was more than offset by lower revenue per day, higher maintenance and damage costs and increased
marketing expenses.
Profitable Revenue Growth
We have embarked on a journey to reinvent the rental experience we offer customers by making it more transparent,
convenient, personalized and seamless. That journey began in 2017, when we formally launched our award winning
Avis mobile app. Since then, we have surpassed two million app transactions, and the overwhelming majority
of users have told us they are very satisfied with their experience. This satisfaction is translating into substantial
improvements in our net promoter scores for app users, signaling that we are exceeding our customers’ expectations
and contributing to stronger loyalty.
We acquired Morini and Turiscar Group last year, following our acquisitions of Maggiore and its Amico Blue
commercial fleet business in 2015, FranceCars in 2016 and ACL Hire Limited in the U.K. in 2017. The addition of these
businesses has enabled us to build a substantial European light commercial footprint in a short amount of time.
We were also able to bring our premium Avis brand back to Japan in 2018 through a licensing agreement with Idex
Auto Japan while also expanding our Budget brands’ global footprint in Taiwan last year.
Digitizing our Business to Improve Margins and Enable Future New Growth
We’ve embarked on an ambitious process of digitizing our business to improve the experience we provide to our
customers, drive substantial operating efficiencies and improve the margins of our business, and open the door to new
revenue opportunities and new business models, starting with our commitment to connecting our entire global fleet
by 2020.
Having a fully connected fleet will allow us to streamline operations and reduce costs, including more sophisticated
tracking of idle vehicles and employing more dynamic fleet planning. Critical data including mileage, fuel level and
vehicle condition can also be shared real-time, resulting in a more efficient workforce, better maintained vehicles,
and an overall better customer experience. We signed new agreements with Toyota, Peugeot, and Ford in 2018 to
add additional OEM-embedded connected vehicles to our fleet, as well as with I.D. Systems for additional 75,000
in-vehicle telematics devices, and in early 2019 we expanded our agreement with Continental to boost our fleet of
connected cars in the U.S. and Europe by equipping an additional 50,000 vehicles with connected technology.
We also announced that our data analytics platform now leverages Amazon Web Service’s cloud-based connected
vehicle solution, enabling us to leverage advanced data management and scalable analytic capabilities for our
connected car platform. We have already partnered with Kansas City to provide customers easy access to parking
and traffic information through the Avis app, and we believe we are very well positioned to collaborate with other
municipalities around the globe as they move forward with their Smart City initiatives.
Innovation at Avis Budget Group
At Avis Budget Group, we envision a world where personal mobility will be completely connected, integrated and
on-demand. Our goal, therefore, is to leverage innovation and build on our position as a leading global provider
of mobility solutions for consumers, businesses and cities. That’s why we are building on our core experience, data
intelligence & technology to extend our offering and capabilities today.
We believe mobility in the long term will be offered as a service and that fleet management capabilities will become
extremely valuable for any sustainable mobility company. With a fleet of nearly 650,000 vehicles and more than 70
years of experience in managing global fleets, we are well positioned to take advantage of the development of new
mobility models as we leverage our fleet management capabilities to provide fleet management services to the public
sector, as well as other companies.
A great example of this is the agreement we signed with Waymo in mid-2017 to offer fleet support and maintenance
services for their self-driving car program in Phoenix, Arizona. This partnership also allows us to accelerate our
knowledge and hands-on experience of autonomous cars for a future when they become available in the marketplace
and is an implicit demonstration of how we can leverage our physical properties, global workforce and platforms to
drive new business models.
Another example is the multi-year deal partnership we signed with Lyft in 2018 to add thousands of vehicles to the
Lyft Express Drive program in cities across North America. Through this partnership, and a digital integration enabled
by our Next Generation platform’s APIs, Lyft drivers are able to seamlessly and quickly reserve an Avis rental vehicle
in select cities from within the Lyft app. We also partnered with ViaVan, a leading provider of new on-demand urban
van-pooling services, to provide fleet management services in the U.K as part of their global expansion. And we just
recently announced our partnership and small investment in Fetch, a promising Peer-2-Peer-technology-based truck
rental solution, enabling customers in Florida to rent Budget trucks through their platform.
We will continue to look for other innovative companies to partner with as we evolve our business to meet the
opportunities presented by a future where mobility is completely connected, integrated, on-demand, shared, and is
delivered to both consumers and businesses as a service.
Corporate Social Responsibility
Avis Budget Group takes its responsibility as a corporate citizen seriously. We are conscious of how our actions not
only benefit our customers and our employees, but the community and our environment as well. We recognize that
being a successful organization means not only evaluating where we have been but looking to the future and how our
actions today can have an impact tomorrow.
Our business and philanthropic activities support the communities where we operate and monitor, measure and
manage our environmental impact - working to reduce it where possible.
We recognize through the power of our brands and our teams, as we look at today to have better tomorrows, that we
must aim to be better, moving forward with purpose in how we support our employees, customers, business partners
and the communities in which we live and work.
Our efforts are highlighted in numerous ways. Through our Inspiring Change activities, teams engage with charitable
organizations around the world and in their communities, whether during times of natural disaster or coming together
for a common cause. We support many worthy organizations and causes on a local, national and global basis. Our
goal is to inspire change by sharing our time, talent and resources with our employees, customers and communities.
We value diversity in all aspects of our business operations, including providing our products and services to our
customers and the communities we serve.
Conclusion
Our leadership team fully recognizes that mobility services are undergoing massive shifts which provide both risks and
opportunities to our business. Our goal is to leverage technology to become the leading global provider of end-to-end
mobility for consumers, businesses and cities in a future world where personal transportation is delivered as a service.
That’s why we are reinventing rental, digitizing our business and exploring new business models, including partnering
with innovators in the broader mobility landscape. Our team is innovating and investing to expand our global total
addressable market, test and enable higher margin business models and forging new business partnerships that will
help transform Avis Budget Group into an innovative-digital organization. On behalf of our 30,000 employees around
the world, I invite you to join us on this incredible voyage.
Yours sincerely,
Larry D. De Shon
President and Chief Executive Officer
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 Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”) including
under headings such as “Forward-Looking Statements,” “Risk Factors” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” and in other filings and furnishings made by the Company with the
Securities and Exchange Commission from time to time. The Company undertakes no obligation to publicly update any
forward-looking statements or reflect subsequent events or circumstances.
This letter also includes financial measures such as Adjusted EBITDA, Adjusted free cash flow, Adjusted Net Income and
Adjusted Diluted Earnings per Share that exclude certain items that are not considered generally accepted accounting
principles (GAAP) measures as defined under SEC rules. Important information regarding such measures is contained in
“Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and
other portions of our 2018 Form 10-K and on Tables 1, 4 and 5 and Appendix I of our earnings release issued on February
20, 2019 and available on our website at avisbudgetgroup.com. The Company believes that these non-GAAP measures
are useful in measuring the comparable results of the Company period-over-period. The GAAP measures most directly
comparable to Adjusted EBITDA, Adjusted free cash flow, Adjusted Net Income and Adjusted Diluted Earnings per Share
are net income (loss), net cash provided by operating activities, net income (loss) and diluted earnings (loss) per share,
respectively.
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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, 2018
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 every Interactive Data File required to be submitted 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 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
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
As of June 30, 2018, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $2,564,141,255
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, 2019, the number of shares outstanding of the registrant’s common stock was 75,769,075.
Portions of the registrant’s definitive proxy statement to be mailed to stockholders in connection with the registrant’s 2019 annual meeting of
stockholders (the “Annual Proxy Statement”) are incorporated by reference into Part III hereof.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Item
Description
Page
PART I
1
Business
1A Risk Factors
1B Unresolved Staff Comments
2
Properties
3
4
5
6
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
7
7A Quantitative and Qualitative Disclosures about Market Risk
8
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
9
9A Controls and Procedures
9B Other Information
PART III
10 Directors, Executive Officers and Corporate Governance
11
Executive Compensation
12
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
13 Certain Relationships and Related Transactions, and Director Independence
14
Principal Accountant Fees and Services
PART IV
15
Exhibits and Financial Statement Schedules
Signatures
3
23
35
35
36
36
37
40
42
54
55
55
55
57
58
58
58
58
58
59
60
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 mobility industry, including from new companies or technology, and the
impact such competition may have on pricing and rental volume;
a change in our fleet costs as a result of a change in the cost of new vehicles, manufacturer recalls,
disruption in the supply of new vehicles, and/or a change in the price at which we dispose of used
vehicles either in the used vehicle market or under repurchase or guaranteed depreciation programs;
the results of operations or financial condition of the manufacturers of our cars, which could impact their
ability to perform their payment obligations under our agreements with them, including repurchase and/or
guaranteed depreciation arrangements, and/or their willingness or ability to make cars available to us or
the rental car industry as a whole on commercially reasonable terms or at all;
a change in travel demand, including changes or disruptions in airline passenger traffic;
any change in economic conditions generally, particularly during our peak season or in key market
segments;
an occurrence or threat of terrorism, pandemic disease, natural disasters, military conflict, civil unrest or
political instability in the locations in which we operate;
any substantial changes in the cost or supply of fuel, vehicle parts, energy, labor or other resources on
which we depend to operate our business;
our ability to continue to successfully implement our business strategies, achieve and maintain cost
savings and adapt our business to changes in mobility;
political, economic or commercial instability in the countries in which we operate, and our ability to
conform to multiple and conflicting laws or regulations in those countries;
our dependence on third-party distribution channels, third-party suppliers of other services and co-
marketing arrangements with third parties;
our dependence on the performance and retention of our senior management and key employees;
risks related to completed or future acquisitions or investments that we may pursue, including the
incurrence of incremental indebtedness to help fund such transactions and our ability to promptly and
effectively integrate any acquired businesses or capitalize on joint ventures, partnerships and other
investments;
our ability to utilize derivative instruments, and the impact of derivative instruments we utilize, which can
be affected by fluctuations in interest rates, gasoline prices and exchange rates, changes in government
regulations and other factors;
•
our exposure to uninsured or unpaid claims in excess of historical levels;
1
•
•
•
•
•
•
•
•
•
•
risks associated with litigation, governmental or regulatory inquiries, or any failure or inability to comply
with laws, regulations or contractual obligations or any changes in laws, regulations or contractual
obligations, including with respect to personally identifiable information and consumer privacy, labor and
employment, and tax;
risks related to protecting the integrity of, and preventing unauthorized access to, our information
technology systems or those of our third-party vendors, and protecting the confidential information of our
employees and customers against security breaches, including physical or cybersecurity breaches,
attacks, or other disruptions, and compliance with privacy and data protection regulation;
any impact on us from the actions of our licensees, dealers, third-party vendors and independent
contractors;
any major disruptions in our communication networks or information systems;
risks related to tax obligations and the effect of future changes in tax laws and accounting standards;
risks related to our indebtedness, including our substantial outstanding debt obligations, potential interest
rate increases, and our ability to incur substantially more debt;
our ability to obtain financing for our global operations, including the funding of our vehicle fleet through
the issuance of asset-backed securities and use of the global lending markets;
our ability to meet the financial and other covenants contained in the agreements governing our
indebtedness;
our ability to accurately estimate our future results; 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 in 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.
Although we believe that our assumptions are reasonable, any or all of our forward-looking statements may prove
to be inaccurate and we can make no guarantees about our future performance. Should unknown risks or
uncertainties materialize or underlying assumptions prove inaccurate, actual results could differ materially from
past results and/or those anticipated, estimated or projected. We undertake no obligation to release any revisions
to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any
forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-
looking statements contained in the Private Securities Litigation Reform Act of 1995.
2
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,”
“Apex,” “Maggiore,” “Morini Rent,” “Turiscar” and “FranceCars” refer to our Avis Rent A Car System, LLC, Budget
Rent A Car System, Inc., Budget Truck Rental, LLC, Zipcar, Inc., Payless Car Rental, Inc., Apex Car Rentals,
Maggiore Rent S.p.A., Morini S.p.A., Turiscar Group and AAA France Cars SAS 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 mobility solutions through our three most recognized brands, Avis, Budget and
Zipcar, together with several other brands, well recognized in their respective markets. We and our licensees
operate the Avis and Budget brands in approximately 180 countries throughout the world. We generally maintain a
leading share of airport car rental revenue in North America, Europe and Australasia, and we operate one of the
leading truck rental businesses in the United States.
Our differentiated brands help us meet a wide range of customer mobility needs throughout the world. Avis is a
leading vehicle rental brand positioned to serve the premium commercial and leisure segments of the travel
industry. Budget is a leading vehicle rental brand focused primarily on more value-conscious segments of the
industry. Our Zipcar brand is one of the world’s leading car sharing networks offering an alternative to traditional
vehicle rental and ownership.
On average, our rental fleet totaled nearly 650,000 vehicles in 2018 and we completed more than 40 million
vehicle rental transactions worldwide. We generate approximately 65% of our revenue from on-airport locations
and approximately 35% of our revenue from off-airport locations. We license the use of the Avis, Budget, Zipcar
and Payless trademarks to licensees in areas in which we do not operate directly. Our brands have an extended
global reach with more than 11,000 car and truck rental locations throughout the world, including approximately
4,600 car rental locations operated by our licensees. We believe that Avis, Budget and Zipcar enjoy
complementary demand patterns with mid-week commercial demand balanced by weekend leisure demand.
We operate Budget Truck, one of the leading truck rental businesses in the United States, through a network of
dealer-operated and Company-operated locations throughout the continental United States. We also own
Payless, a car rental brand that operates in the deep-value segment of the industry in the United States and
certain other international regions; Apex, which is a leading deep-value car rental brand in New Zealand and
Australia; Maggiore and Morini Rent, leading vehicle rental brands in Italy; Turiscar, a well-established car rental
brand in Portugal; and FranceCars, which operates one of the largest light commercial vehicle fleets in France.
We also have investments in certain of our Avis and Budget licensees outside of the United States.
We categorize our operations into two reportable business segments:
•
•
Americas, which provides and licenses the Company’s brands to third parties for vehicle rentals and
ancillary products and services in North America, South America, Central America and the Caribbean,
and operates the Company’s car sharing business in certain of these markets; and
International, which 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 and Australasia, and operates the
Company’s car sharing business in certain of these markets.
Additional discussion of our reportable segments is included in the Item 7. “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and in Note 19 to the Consolidated Financial
Statements included in this Annual Report on Form 10-K.
3
COMPANY HISTORY
Avis was founded in 1946 and is believed to be the first company to rent cars from airport locations. Since its
founding, Avis has expanded its business throughout the United States and internationally, becoming one of the
largest and most recognized car rental brands in the world. In 1996, Avis was acquired by HFS Incorporated and
in 1997 merged with our predecessor company, with the combined entity being renamed Cendant Corporation. In
2006, Cendant spun off several significant subsidiaries and changed its name to Avis Budget Group, Inc. The
Company is a Delaware corporation headquartered in Parsippany, New Jersey.
Budget was founded in 1958 to appeal to the value-conscious car rental customer. In 2002, we acquired the
Budget brand and certain Budget vehicle rental operations, including the Budget truck rental business. In 2011,
we acquired Avis Europe, an independently-owned Company licensee, to expand our international operations and
globally reunite the Avis and Budget brands. In 2012 and 2013, we acquired our Apex and Payless brands,
respectively, which allowed us to expand our presence in the deep-value segment of the car rental industry. In
2013, we acquired Zipcar, one of the world’s leading car sharing networks, to better serve a greater variety of our
customers’ mobility needs. In 2015, we acquired Maggiore, a leading provider of vehicle rental services in Italy. In
2016, we acquired FranceCars, a privately held vehicle rental company based in France, which significantly
expanded our presence in the French market. In 2018, we acquired Morini, which focuses on rentals of cars, vans
and refrigerated trucks in Northern Italy, and Turiscar, a well-established vehicle rental company in Portugal, and
also invested in our licensee in Greece. These acquisitions have allowed us to continue to expand our global
footprint of Company-operated locations and brand presence.
OUR STRATEGY
Our objective is to drive sustainable, profitable growth for our Company by delivering strategic initiatives aimed at
winning and retaining customers through differentiated brands and products, increasing our margins via revenue
growth and operational efficiency and enhancing our leadership in the evolving mobility industry.
Supporting and Strengthening Our Brands
In executing our strategy, we will continue to position our distinct and well-recognized global brands to focus on
different segments of customer demand, complemented by our other brands in their respective regional markets.
While our brands address different use-cases and target customers, we achieve efficiencies by sharing the same
operational and administrative infrastructure while providing differentiated value propositions tailored to each of
our brands.
We currently operate our brands, either directly or through independent operators and licensees around the world
and we plan to continue to strengthen and further expand our global footprint through organic growth and,
potentially, through acquisitions, joint ventures, licensing agreements 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 areas where we do not currently
operate and do not wish to operate directly, to strengthen the presence of our brands and in certain cases
to re-acquire previously granted license rights.
In countries operated by licensees or partners, we will seek to ensure that those businesses are well
positioned to realize the growth potential of our brands in those countries and are growing their presence
in those markets, and in certain cases we will continue to consider the re-acquisition of previously granted
license rights.
In countries where we have either Company-operated or licensee-operated locations, we will also
continue to identify opportunities to leverage our Zipcar brand and its car sharing model, which allows us
to fulfill the expanding urban mobility needs of customers.
Since our Avis brand represents approximately 58% of our revenue and is recognized as a global leader in
vehicle rental, we are particularly focused on maintaining and building its reputation as a reliably high-quality
service provider. Our Avis Preferred loyalty program, which offers our customers the ability to bypass the rental
4
counter and also earn reward points, coupled with our continued investment in technology, including our Avis
mobile application and websites, and our growing fleet of connected cars, are all key parts of our efforts to
enhance the Avis experience for our customers.
We aim to provide a range of vehicles, products and services at competitive prices, to leverage various marketing
channels and to maintain marketing affiliations and corporate account contracts that complement each brand’s
positioning. We also continue to invest in our brands through a variety of efforts, including both on-line and off-line
marketing. We continue to see particular growth opportunities for Budget and our other local brands in Europe, as
the share of airport car rentals for Budget is significantly smaller in Europe than in certain other parts of the world.
To further support and strengthen our brands, we are committed to serving our customers and enhancing their
rental experience through new organic offerings that optimize our brands, our systems and our employees. We
frequently solicit feedback from and survey our customers to better understand their needs and we have
implemented actions to enhance our services, including the following:
• We created our Avis mobile application to provide a higher quality end-to-end user experience, building
upon direct feedback from customers to re-design the rental experience to meet their needs. Our Avis
mobile application allows customers to reserve, update and cancel reservations, choose their car,
exchange or upgrade their vehicle, add ancillary products, extend rentals, return the vehicle with one
click, view and share current and past rental receipts to expedite expense processing, review rental
agreement details and the vehicle’s insurance card, and, in the case of connected vehicles, lock and
unlock the vehicle, confirm their fuel level at the beginning and end of their rental as well as miles driven,
using their mobile device;
• We continue to upgrade our technology and the ways it can further serve our customers, to make the
vehicle reservation, pick-up and return processes more convenient and user-friendly, with a particular
emphasis on enabling and simplifying our customers’ online transactions. We have partnered with other
technology and product companies to continuously improve the user experience through various mobile
and technology capabilities. These include working with Amazon to allow for voice-controlled access to
our services through Amazon Alexa enabled devices; and
• We piloted and subsequently launched “Curbside Delivery” services in select U.S. airport markets, in
which customers can bring their car to the Avis and Budget return lot, where an Avis or Budget employee
will drive them to their appointed terminal or gate and complete the vehicle return process transaction at
the curb.
We will continue to invest in these and other innovative efforts, with a particular emphasis on technologies,
services and products that will allow us to not only serve customers more effectively and efficiently, but offer new
brand-differentiating options.
Margins and Operational Efficiency
Our strategy is focused on identifying and implementing actions to increase our margins over the next several
years. We see significant potential in opportunities that optimize our pricing and customer mix; increase sales of
ancillary products and services through new product and service development; optimize our procurement
processes; refine the deployment and disposition of vehicles (e.g. increasing the use of non-auction channels for
selling our vehicles); drive operational efficiency in our business; and apply connected car/in-vehicle systems and
other innovative mobility technologies in our operations.
We continue to pursue opportunities intended to drive our margins and increase our revenues and profitability,
including:
• Offering our customers useful ancillary products and services, promoting car class upgrades, adjusting
our mix of vehicles to match customer demand; repositioning our sales strategy to focus on the most
profitable segments, increasing the number of rentals that customers book directly through our websites
and mobile applications and increasing the proportion of “Pay Now” transactions by which customers
prepay for rentals.
•
Investing in yield management and pricing analytics tools, such as our Revenue Management System, to
increase the profits we earn per rental day. We have implemented, and plan to continue deploying, new
technology systems that strengthen our yield management decisions and enable us to tailor our product,
5
service and price offerings to meet our customers’ needs and react quickly to shifting market conditions.
We will continue to adjust our pricing to improve profitability and manage our fleet to match changes in
demand.
• Managing and improving our fleet decisions to better optimize and drive the purchase, deployment, and
disposition of our fleet to lower costs and meet customer demand, grow our direct-to-dealer and
consumer sales performance, reduce maintenance and repair expenses, better optimize our salvage
costs, reduce the risk of damage to our vehicles, and improve fleet utilization benefits and savings by
combining our vehicle rental and car sharing fleets when appropriate which we believe will create
significant financial benefits.
• Seeking opportunities where our investments will generate strong margin returns, including expanding
rental locations, acquiring and integrating existing licensees in key markets, participating in joint ventures
and acquiring leading local brands.
•
Increasing our Zipcar membership base within its existing markets, as well as expanding the brand into
new markets.
We also continued to focus our efforts on rigorously controlling our costs, aggressively reducing expenses and
increasing efficiencies throughout our organization by:
•
Implementing process improvements throughout our business to increase efficiencies, reduce operating
costs and create sustainable cost savings.
• Achieving reductions in underlying direct operating and selling, general and administrative expenses,
including reductions in staff where and when appropriate.
• Assessing location, segment and transaction profitability to address less-profitable aspects of our
business and focus on the more-profitable accounts that will help drive increased margins.
• Deploying changes to our sales, marketing and affinity programs to improve profitability.
•
•
Integrating our acquired businesses, to realize cost efficiencies from combined maintenance, systems,
technology and administrative infrastructure.
Implementing innovative technological solutions like self-service voice reservation technology, mobile
communications with customers and fleet optimization technologies to reduce costs.
We believe such operational improvements will continue to assist and in some cases, drive our financial
performance.
Our Evolving Mobility Platform
We believe our Company is well-positioned as a global leader in the evolving mobility marketplace. Mobility is
more than providing a clean reliable car of choice for a customer to use to get from point A to point B; it also
means providing our customers the choice to rent a vehicle or share a vehicle, and to do so by the year, month,
week, day, hour or fraction of an hour. Mobility means our customers, using their smartphones or tablets, can
customize their experiences with our products, services, and employees, bypass the counter or change their
minds about the make or model of a vehicle and review their options on their mobile device right up to the
moment they exit the parking lot. Mobility also means providing customers with choices even on the shortest trips,
including how they want to be transported to or from their rental vehicles at the airport or by providing them with
real time data about the wait time for the next shuttle.
When our customers return their rental vehicles to our fleet, whether at an airport or off-airport facility or a
designated customer parking spot, our preferred customers can receive their complete charges for their
transaction including gas, ancillary products use, and any other applicable charges, via email or text, within
minutes of their proper return of the vehicle. In the future we intend to deliver more data content to our customers
in their vehicles and to their devices that will provide them with customized access to useful information they want
to know about, including eating, shopping, lodging, emergency assistance and tips on just enjoying the location
they are visiting.
With our connected cars, mobility means being able to collect data about the car that will improve customer
service and vehicle safety. It also means that we will be able to provide a new suite of services for clients who are
looking to utilize our operational experience and our technology to maintain and manage their own fleets, and
provide supply chain services with quality and precision at levels that exceed their ability to do so themselves.
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Our current and growing list of business partnerships with other mobility service providers in adjacent business
models allows us to offer more options to our business and leisure customers to satisfy a wide variety of mobility
needs.
For our shareholders, mobility means seizing opportunities that will increase our overall value through strategies
that expand the use of our technologies, fleet and employees, open new markets, increase revenue and margins
across all our brands; and maintain our strength as an innovator in the expanding mobility market.
Since 2017, we have undertaken several initiatives and entered into partnerships in support of our strategy,
including:
• Exceeding our goal of having more than 100,000 connected vehicles in our U.S. Avis fleet in 2018,
delivering both customer benefits and operational efficiencies, including entering into agreements with
Ford and Toyota to connect all their vehicles in our U.S. Avis fleet. We also expect to expand connected
vehicles in Europe during 2019, bringing us closer to our goal of having a 100% global connected fleet;
• Our launch of our first-ever Mobility Lab in the Kansas City, Missouri area, utilizing fully connected
vehicles that allows us to leverage our capabilities to deliver operational efficiencies through on-demand
inventory counts, mileage management and automated maintenance notifications that enhance and
optimize the Company’s fleet management capabilities;
• Our integration with Amazon Alexa, which allows travelers to book and manage their car rental
reservations through the voice platform on Amazon Echo;
• Our partnership with Waymo, an Alphabet Inc. company, through which we are offering fleet support and
maintenance services for their growing fleet of autonomous vehicles in Phoenix, Arizona. This provides a
unique opportunity to grow our understanding of the support and operational maintenance requirements
for self-driving vehicles at the fleet level, including staffing and facility requirements;
• Our focus on emerging technologies through our collaboration with various international and local
technology incubators;
• Our partnership with Lyft, in which we are enabling Lyft drivers across North America the ability to use
Avis vehicles on a monthly and weekly basis as an alternative to using their own personal vehicle;
• Our partnership with Brightline in Florida, the only privately owned and operated passenger rail service in
the United States, in which we offer Brightline passengers and those living or working near Brightline’s
stations convenient access to Avis and Zipcar vehicles that can be reserved via integration with the
Brightline app; and
• Our use of Amazon Web Services’ (“AWS”) Connected Vehicle Solution to build our data analytics
platform, providing highly secure and scalable cloud services and allows us to leverage AWS’ capabilities
for artificial intelligence, machine learning, and data management to develop a wide variety of innovative
connected vehicle applications and mobility services.
We are committed to finding new and innovative ways of thinking and operating, and to leverage our technology,
employees, global presence and capabilities to be leaders among the contributors that are now shaping the
evolving mobility market.
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 brands with services and products targeted to different customers
and sharing 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 increase our fleet utilization efficiency 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, augmenting our Avis, Budget and Zipcar brands. In
addition, our Maggiore and Morini brands in Italy, FranceCars brand in France and Turiscar brand in Portugal
further extend the range of vehicle use occasions we are able to serve.
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The following graphs present the approximate composition of our revenue by brand, customer and market in
2018.
* Includes Budget Truck.
** Includes Zipcar and other operating brands.
*** Includes Budget Truck and Zipcar.
Avis
The Avis brand provides high-quality vehicle rental and other mobility solutions at price points generally above
non-branded and value-branded vehicle rental companies to serve the premium commercial and leisure
segments of the travel industry. We operate or license the Avis vehicle rental system (the “Avis System”), one of
the largest global vehicle rental systems, at approximately 5,500 locations worldwide, including in virtually all of
the largest commercial airports and cities in the world.
The Avis System is comprised of an approximately equal number of company-owned and licensee vehicle rental
locations worldwide, in both the on-airport and off-airport, or local, rental markets. The table below presents the
approximate number of locations that comprise the Avis System as of December 31, 2018.
Company-operated locations
Licensee locations
Total Avis System Locations
* Certain locations support multiple brands.
Avis System Locations*
Americas
1,550
700
2,250
International
1,300
1,950
3,250
Total
2,850
2,650
5,500
In 2018, our company-operated Avis locations generated total world-wide revenue of approximately $5.3 billion, of
which approximately $2.6 billion was derived from commercial customers and approximately $3.6 billion was
derived from customers renting at airports. The following graphs present the approximate composition of our Avis
revenue by segment, customer and market in 2018.
We also license the Avis System to independent commercial owners who operate approximately half of our
locations worldwide and generally pay royalty fees to us based on a percentage of applicable revenue. In 2018,
approximately 33% of the global Avis System revenue was generated by our licensees. The graphs below present
the approximate composition of the Avis System revenue in 2018.
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We offer Avis customers a variety of premium services, including:
•
the Avis mobile application, which allows customers a new and innovative way to control many elements
of their rental experience via their mobile devices without the need to visit the rental counter. The Avis
mobile application also allows customers to track Avis shuttle buses to rental locations, find their vehicle,
and locate nearby gas stations and parking facilities;
• Avis Preferred, a frequent renter rewards program that offers counter-bypass at major airport locations
and reward points for every dollar spent on vehicle rentals and related products;
•
•
the Avis Select Series, a selection of luxury vehicles including Mercedes, Jaguars, Corvettes, and others;
availability of premium, sport and performance vehicles as well as eco-friendly vehicles, including
gasoline/electric hybrids;
•
access to portable navigation units, tablets and in-dash satellite radio service;
• Avis rental services such as roadside assistance, fuel service options, e-receipts, electronic toll collection
services that allow customers to pay highway tolls without waiting in toll booth lines, and amenities such
as Avis Access, a full range of special products and services for drivers and passengers with disabilities;
• Curbside Delivery, a service that provides customers at select airport locations in the United States with
the added convenience of being dropped off at the airport terminal in the same car that they rented;
for our corporate customers, Avis Budget Group Business Intelligence, a proprietary customer reporting
solution that provides a centralized reporting tool and customer reporting portal for all corporate clients
around the globe. This enables them to easily view and analyze their rental activity, permitting them to
better manage their travel budgets and monitor employee compliance with applicable travel policies; and
applications that serve our customers through various mobile and technology platforms, including Apple
Watch devices and voice-controlled access through Amazon Alexa enabled devices.
•
•
Budget
The Budget brand is a leading supplier of vehicle rental and other mobility solutions focused primarily on more
value-conscious customers. We operate or license the Budget vehicle rental system (the “Budget System”), which
is comprised of vehicle rental locations at most of the largest airports and cities in the world.
The table below presents the approximate number of locations that comprise the Budget System as of December
31, 2018.
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Company-operated locations
Licensee locations
Total Budget System Locations
* Certain locations support multiple brands.
Budget System Locations*
Americas
1,375
650
2,025
International
875
1,100
1,975
Total
2,250
1,750
4,000
In 2018, our company-operated Budget vehicle rental operations generated total revenue of approximately $2.7
billion, of which approximately $2.0 billion was derived from leisure customers and $2.1 billion was derived from
customers renting at airports. The following graphs present the approximate composition of our Budget revenue
by segment, customer and market in 2018.
We also license the Budget System to independent commercial owners who operate approximately half of our
locations worldwide and generally pay royalty fees to us based on a percentage of applicable revenue. In 2018,
approximately 29% of the global Budget System revenue was generated by our licensees. The graphs below
present the approximate composition of the Budget System revenue in 2018.
Budget offers its customers several products and services similar to Avis, such as refueling options, roadside
assistance, electronic toll collection, curbside dropoff and other supplemental rental products, emailed receipts
and special rental rates for frequent renters. In addition, Budget’s mobile application allows customers to reserve,
modify and cancel reservations on their mobile device, and its Fastbreak service, expedites rental service for
frequent travelers.
Budget Truck
Our Budget Truck rental business is one of the largest local and one-way truck rental businesses in the United
States. As of December 31, 2018, our Budget Truck fleet is comprised of approximately 18,000 vehicles that are
rented through a network of approximately 640 dealer-operated and 430 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 customers 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
10
pounds, for a variety of commercial applications.
Zipcar
Zipcar operates one of the world’s leading membership-based car sharing networks, which provides its members
on-demand access to vehicles in over 500 cities and towns and at more than 600 college campuses around the
world. Zipcar provides its members on-demand, self-service vehicles in reserved parking spaces located in
neighborhoods, business districts, office complexes, college campuses and airports, as an alternative to car
ownership. Members can reserve vehicles online, on a mobile device or over the phone, by the minute, hour or by
the day, at rates that include gasoline, insurance and other costs associated with vehicle ownership. In 2018, we
widened Zipcar’s product offering by launching our Zipcar Commuter product, which is now available in 11 major
markets in North America and provides unlimited, sole access to a vehicle and dedicated parking spot for Zipcar
members who commute outside of the city for work. We also began offering our Zipcar “Flex” product in London
providing for one-way rentals that are typically at a lower price than ride-hailing services.
Other Brands
Our Payless brand is a leading rental car supplier positioned to serve the deep-value segment of the vehicle
rental industry. We operate or license the Payless brand, which is comprised of approximately 280 locations
worldwide, including approximately 120 Company-operated locations and more than 160 locations operated by
licensees. Company-operated Payless locations are primarily located in North America, the majority of which are
at or near major airports. Payless’ rental 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 allows the Company to extend the life-cycle of a portion of our fleet, as we “cascade”
certain vehicles that exceed certain Avis and Budget age or mileage thresholds to be used by Payless.
Our Apex brand operates in the deep-value segment of the vehicle rental industry in New Zealand and Australia,
where we have approximately 30 rental locations. Apex operates its own rental fleet, separate from Avis and
Budget vehicles. Apex generates its reservations through its proprietary websites as well as its contact center and
online travel agencies and typically has a greater-than-average length of rental. Apex operates rental locations at,
or near, major airports and in several metropolitan cities.
Our Maggiore brand is a leading vehicle rental brand in Italy, where we operate or license approximately 140
rental locations under the Maggiore name. Our Maggiore brand has a strong domestic reputation and benefits
from a strong presence at airport, off-airport and railway locations, and benefits from the integration of our existing
operations and fleet management expertise. In addition, our recently acquired Morini brand is a leading vehicle
rental brand in Italy, which offers rental of cars, vans and refrigerated vehicles. We operate or license more than
40 rental locations under the Morini name throughout the country.
Our FranceCars brand operates one of the largest light commercial vehicle fleets in France from approximately 85
rental locations and leverages our existing operational processes and local customer base.
Our recently acquired Turiscar brand is a leading vehicle rental brand in Portugal, primarily in the corporate
market, including light commercial vehicles, from approximately 25 rental locations throughout the country.
RESERVATIONS, MARKETING AND SALES
Reservations
Our customers can make vehicle rental reservations through our brand-specific websites and toll-free reservation
centers, by calling a specific location directly, through our brand-specific mobile applications, online travel
agencies, travel agents or through selected partners, including many major airlines, associations and retailers.
Travel agents can access our reservation systems through all major global distribution systems, which provide
information with respect to rental locations, vehicle availability and applicable rate structures.
Our Zipcar members may reserve cars by the minute, hour or by the day through Zipcar’s reservation system,
which is accessible through the Zipcar website, through the Zipcar application on their smartphone or by phone.
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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.
Marketing and Sales
We support our brands through a range of marketing channels and campaigns, including traditional media, such
as television and print advertising, as well as Internet and email marketing, social media and mobile device
applications. We market through sponsorships of major sports entities such as the PGA Tour, the New York
Yankees, the Toronto Maple Leafs and Toronto FC. We also market through sponsorships of charitable
organizations such as the Make-A-Wish Foundation. We utilize a customer relationship management system that
enables us to deliver more targeted and relevant offers to customers across online and offline channels and
allows 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.
We maintain strong links to the travel industry including marketing alliances with numerous marketing partners,
such as:
• Many major airlines, including Air Canada, Air France, Air New Zealand, American Airlines, British
Airways, Frontier Airlines, Hawaiian Airlines, Iberia Airlines, Japan Airlines, JetBlue Airways, KLM,
Lufthansa, Norwegian Air, Qantas, SAS, Southwest Airlines, Virgin America and WestJet Airlines;
• Many major hotel companies, including Best Western International, Inc., Choice Hotels International,
Hyatt Corporation, MGM Resorts International, Radisson Hotels and Resorts, Universal Parks & Resorts
and Wyndham Hotels & Resorts and in 2018, we became the exclusive car rental partner of Luxury
Retreats, an Airbnb worldwide villa rental company;
• Offering customers the ability to earn frequent traveler points with many major airlines’ and hotels’
frequent traveler programs. We are the exclusive rental partner of the Aeroplan, JetBlue and Wyndham
Rewards loyalty programs; and
• Relationships with non-travel entities, such as affinity groups, membership organizations, retailers,
financial institutions and credit card companies.
In addition, we developed new relationships that provide brand exposure and access to new customers, including
a multi-year deal with Lyft to provide vehicles to the Lyft Express Drive Program in cities across North America, an
agreement with Amazon to reward customers who rent an Avis or Budget car with gift cards, and a mobility
partnership with Brightline, a privately owned passenger rail service in Florida.
Approximately 60% of vehicle rental transactions in 2018 from our Company-operated Avis locations were
generated by travelers who rented from Avis under contracts between Avis and their employers or through
membership in an organization with which Avis has a contractual affiliation (such as AARP and Costco
Wholesale). Avis also maintains marketing relationships with other organizations such as American Express,
MasterCard International and others, through which we are able to provide their customers with incentives to rent
from Avis. Generally, Avis licensees also have the option to participate in these affiliations.
Additionally, we offer “Unlimited Rewards®,” an award-winning loyalty incentive program for travel agents, and
Avis and Budget programs for small businesses that offer discounted rates, central billing options and rental
credits to members. Budget has contractual arrangements with American Express, MasterCard International and
other organizations, which offer members incentives to rent from Budget.
Our Zipcar brand also partners with other active lifestyle brands that appeal to our Zipcar members and we
organize, sponsor and participate in charitable and community events with organizations that are important to our
Zipcar members. Zipcar maintains close relationships with universities that allow us to market to the “next
generation consumer” who, upon graduation, may 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 weekday driving rates to employees of companies, federal agencies and local governments that sponsor
the use of Zipcars.
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LICENSING
We have licensees in approximately 175 countries throughout the world. Royalty fee revenue derived from our
vehicle rental licensees in 2018 totaled $135 million, with approximately $97 million in our International segment
and $38 million in our Americas 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 or rural 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 costs associated with fees paid by licensees to us. Locations operated by
licensees represented approximately 45% of our Avis and Budget vehicle rental locations worldwide and
approximately 31% of total revenue generated by the Avis and Budget Systems in 2018. We facilitate one-way
vehicle 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 vehicle rental businesses in certain territories. Our license
agreements generally provide our licensees with the exclusive right to operate under one or more of our brands in
their assigned territory. These agreements impose obligations on the licensee regarding its operations, and most
agreements restrict the licensee’s ability to sell, transfer or assign its rights granted under the license agreement
or to change the control of its ownership without our consent.
The terms of our license agreements, including duration, royalty fees and termination provisions, vary based upon
brand, territory, and original signing date. Royalty fees are generally structured to be a percentage of the
licensee’s gross rental income. 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 or 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.
We continue to optimize the Avis and Budget Systems by issuing new license agreements and periodically
acquiring licensees to grow our revenues and expand our global presence. Discussion of our recent acquisitions
is included in Note 5 to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
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. We offer products to customers that will
enhance their rental experience, including:
•
•
•
•
collision and loss damage waivers, under which we agree to relieve a customer from financial
responsibility arising from vehicle damage incurred during the rental;
additional/supplemental liability insurance or personal accident/effects insurance products which provide
customers with additional protections for personal or third-party losses incurred;
products for driving convenience such as fuel service options, chauffeur drive services, roadside
assistance services, electronic toll collection services, curbside dropoff, tablet rentals, access to satellite
radio, portable navigation units and child safety seat rentals; and
products that supplement truck rental including automobile towing equipment and other moving
accessories such as hand trucks, furniture pads and moving supplies.
13
We offer customized bundling of certain of these ancillary products and services, allowing our customers to
benefit from discounted pricing and providing customers the flexibility to add multiple products or services that
suit their needs.
We also receive payment from our customers for certain operating expenses that we incur, including vehicle
licensing fees, as well as airport concession fees that we pay in exchange for the right to operate at airports and
other locations. In addition, we collect membership fees in connection with our car sharing business.
OUR TECHNOLOGIES
Vehicle Rental
We use a broad range of technologies in our vehicle rental operations, substantially all of which are linked to what
we call our Wizard system, which is a worldwide reservation, rental, fleet control, 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
virtually 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 other third-party reservation and information management
systems to maintain centralized control of major business processes such as fleet acquisition and logistics, sales
to corporate accounts and determination of pricing. 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, allowing
management to monitor and change fleet deployment on a daily basis and to optimize our fleet plan
based on estimated business levels and available repurchase and guaranteed depreciation programs.
• Revenue management system. We have a revenue management system which is designed to enhance
profitability by providing greater control of vehicle availability, inventory movements and pricing at our
rental locations. Our system monitors and forecasts both vehicle supply and customer demand to support
our strategy to optimize volume and rate at each location. An integrated fleet distribution module takes
into consideration the costs and benefits associated with distributing vehicles to various rental locations
within a geographic area to accommodate demand, and make specific recommendations for movement of
vehicles between locations. We utilize sophisticated systems to gather and report competitive industry
rental rate changes every day using data from third-party reservation systems, which automatically scan
rate movements and report significant changes for evaluation.
• Websites and mobile applications. Our websites and mobile applications leverage our technology across
brands and provide a simpler, streamlined experience for our customers.
• Connected car services application. We have developed an enterprise-wide application that interfaces
with various telematics solutions that support our self-service and connected car strategy. This
application, among other things, enables a more accurate reading of fuel and mileage to enable a
customer to self-service check-out and check-in their vehicle.
• Campaign management. We have deployed tools that enable us to recognize customer segments and
value, and to automatically present appropriate offers on our 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.
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Car Sharing
Our Zipcar car sharing technology was specifically designed and built for our car sharing business and has been
continually refined and upgraded. Our fully-integrated platform centralizes the management of our Zipcar
reservations, member services, fleet operations and financial systems to optimize the member experience,
minimize costs and leverage efficiencies. Our platform allows for basic functions such as processing new member
applications, managing reservations and keyless vehicle access, and providing the mobile and website
applications used by our members. This platform also allows us to manage and monitor member interactions and
communications, billing and payment processing, manage our car sharing fleet, including service and cleanings,
vehicle locations and monitor and analyze key metrics of each Zipcar such as utilization rate, mileage and
maintenance requirements.
Each Zipcar is typically equipped with a combination of telematics modules, including a control unit with 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, vehicle communication protocols and datacenter 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.
Interactions between members and our Zipcars are captured in our system, across all communication channels,
providing us with knowledge we use to improve our members’ experiences and optimize our business processes.
We continue to innovate our technology platform to provide scale to support growth, drive operational efficiency
and improve the member experience.
OUR FLEET
We offer a wide variety of vehicles in our rental fleet, including luxury cars, specialty-use vehicles and light commercial
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. We maintain a diverse rental fleet, in which no vehicle manufacturer
represented more than 14% of our 2018 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. The following
presents the approximate percentage of fleet purchases by manufacturer in 2018.
* Includes all manufacturers for which fleet purchases were less than 5%.
15
Fleet costs represented approximately 25% of our aggregate expenses in 2018. 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 2018, on average, approximately 38% 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, which are subject to a fixed lease period and interest rate. We refer to cars subject to these
agreements as “program” cars and cars not subject to these agreements as “risk” cars because we retain the risk
associated with such cars’ residual values at the time of their disposition. The following graphs present the
approximate percentage of program cars in both our average rental car fleet and fleet purchases within each of
our reporting segments in the last three years.
Our agreements with automobile manufacturers typically require that we pay more for program cars and maintain
them in our fleet for a minimum number of 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 therefore protected from fluctuations in the prices of previously-owned vehicles in
the wholesale market. In 2018, approximately 54% of the vehicles we disposed of were sold pursuant to
repurchase or guaranteed depreciation programs. The future percentages of program and risk cars in our fleet will
depend on several factors, including our expectations for future used car prices, our seasonal needs and the
availability and attractiveness of manufacturers’ repurchase and guaranteed depreciation programs.
We dispose of our risk cars largely through automobile auctions and direct-to-dealer sales. In 2018, we continued
to expand the scope of our direct-to-consumer car sales program to include the sale of our risk cars directly to
consumers through our retail lots in several U.S. cities and through our Ultimate Test Drive program, which offers
customers the ability to purchase well-maintained, late-model rental vehicles from our rental car fleet. Alternative
disposition channels such as direct-to-consumer, online auctions, retail lots and direct-to-dealer sales provide the
opportunity to increase vehicle sale prices and reduce relevant fleet costs compared to selling cars at auctions.
In 2018, our average monthly vehicle rental fleet size ranged from a low of approximately 557,000 vehicles in
January to a high of approximately 746,000 vehicles in July. Our average monthly car rental fleet size typically
peaks in the summer months. Average fleet utilization for 2018, 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 65% in January to 75% in July. Our calculation of utilization may not be comparable to other
companies’ calculation of similarly titled metrics.
16
We place a strong emphasis on the quality of our 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 developed specialized training programs for our technicians. Our Maintenance and Damage Planning
Department prepares technical service bulletins that can be retrieved electronically at our repair locations. In
addition, we have implemented policies and procedures to promptly address manufacturer recalls as part of our
ongoing maintenance and repair efforts.
CUSTOMER SERVICE
Our commitment to delivering a consistently high level of customer service across all of our brands is a critical
element of our success and business strategy. Our Customer Led, Service Driven™ program focuses on
continually improving the overall customer experience based on our research of customer service practices,
improved customer insights, executing our customer relationship management strategy, delivering customer-
centric employee training and leverage our mobile applications technology and the enriched experience it
provides our customers.
The employees at our Company-operated locations are trained and empowered to resolve most customer issues
at the location level. 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. Our location-specific surveys ask customers to
evaluate their overall satisfaction with their rental experience and the likelihood that they will recommend our
brands, as well as key elements of the rental experience. Results are analyzed in aggregate and by location to
help further enhance our service levels to our customers.
We understand our customers’ time is valuable and we offer rental options that provide greater control and self-
service capabilities. While our mobile applications provide a fast customer experience, our customers know a
company representative is always available to meet their needs. Our survey platform includes specific questions
to learn more about individual preferences and find innovative ways to better serve and anticipate our customers’
needs.
EMPLOYEES
As of December 31, 2018, we employed approximately 30,000 people worldwide, of whom approximately 8,800
were employed on a part-time basis. Of our approximately 30,000 employees, approximately 18,000 were
employed in our Americas segment and 12,000 in our International segment.
In our Americas segment, 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 variety of union contracts and governmental
regulations affecting, among other things, compensation, job retention rights and pensions.
As of December 31, 2018, approximately 27% of our employees were covered by collective bargaining or similar
agreements with various labor unions. We believe our employee relations are satisfactory.
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), often subject to minimum annual guaranteed amounts. Concessions are
typically awarded by airport authorities every three to ten 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 vehicle rental business is subject to seasonal variations in customer demand patterns, with the spring and
summer vacation periods representing our peak seasons for the majority of the countries in which we operate. 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. The following chart presents our quarterly revenues for the years ended December
31, 2016, 2017 and 2018.
COMPETITION
The competitive environment for our 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, loyalty programs and brand reputation. We
believe the prominence and service reputation of our brands, extensive worldwide ownership of mobility solutions
and commitment to innovation provides us with a competitive advantage.
The use of technology has increased pricing transparency among vehicle rental companies and other mobility
solutions providers enabling cost-conscious customers to more easily compare on the Internet and their mobile
devices the rates available for the mobility solutions that fit their needs. This transparency has further increased
the prevalence and intensity of price competition in the industry.
Our vehicle rental operations compete primarily with Enterprise Holdings, Inc., which operates the Enterprise,
National and Alamo car rental brands; Hertz Global Holdings, Inc., which operates the Hertz, Dollar and Thrifty
brands; Europcar Mobility Group, which operates the Europcar, Goldcar, InterRent and Ubeeqo brands; and Sixt
AG. We also compete with smaller local and regional vehicle rental companies for vehicle rental market share,
and with ride-hailing companies largely for short length trips in urban areas. Our Zipcar brand also competes with
various local and regional mobility companies, including mobility services sponsored by several auto
manufacturers, ride-hailing and car sharing companies and other technology players in the mobility industry. Our
Budget Truck operations in the United States competes with several other local, regional and nationwide truck
rental companies including U-Haul International, Inc., Penske Truck Leasing Corporation, Ryder Systems, Inc.
and Enterprise.
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INSURANCE AND RISK MANAGEMENT
Our vehicle rental and corporate operations expose us to various types of claims for bodily 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 retain economic exposure for liability to third parties arising
from vehicle rental and car sharing 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, up to $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.
In Europe, we insure the risk of liability to third parties arising from vehicle rental and car sharing services in
accordance with local regulatory requirements primarily through insurance policies provided by unaffiliated
insurers. We may retain a portion of the insured risk of liability through local deductibles, and by reinsuring certain
risks through our captive insurance subsidiary AEGIS Motor Insurance Limited. In Australasia, motor vehicle
bodily injury insurance coverage is compulsory and provided upon vehicle registration. In addition, we provide our
customers with third-party property damage insurance through an unaffiliated third-party insurer. We retain a
share of property damage risk through local deductibles and through AEGIS Motor Insurance Limited. We insure
the risk of liability to third parties in Argentina and Brazil through unaffiliated insurers.
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, emergency sickness protection, 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 our captive insurance subsidiary, Constellation Reinsurance Co., Ltd. Additional personal
accident insurance offered to our customers in Europe and Australasia is provided 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,” “We Know The Road” and “Own The Trip, Not The Car” 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 U.S. 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 Rentals” brand in Australia and New Zealand, the “Payless Car Rental” brand in the
United States and several other countries, the “Maggiore” and “Morini” brands in Italy, the “FranceCars” brand in
France and the “Turiscar” brand in Portugal.
CORPORATE SOCIAL RESPONSIBILITY
At Avis Budget Group, we take our responsibilities as a corporate citizen seriously. We remain aware of how our
actions can benefit the community and are sensitive to the needs of the environment, our customers and our
employees. We recognize that being a successful organization means our progress is measured not only in
economic terms, but also in the many ways we impact the world around us.
We believe in being responsible global corporate citizens and strive to establish and maintain best practices in
corporate social responsibility through a focus on:
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• The Environment: As a responsible corporate citizen, we are committed to monitoring, measuring and
managing our environmental impact, and working to reduce it where practicable on an ongoing basis. The
following illustrate those commitments:
• Car Sharing: Through our Zipcar brand, operating one of the world’s leading car sharing networks,
considered to be one of the most environmentally-friendly transportation alternatives available;
• Fleet: Offering our customers a wide variety of vehicles that are environmentally friendly, including as
defined by the U.S. Environmental Protection Agency’s SmartWay Certification Program;
• Outreach: Partnering with our corporate customers to help them measure and manage the
environmental impact of Avis and Budget rental vehicles used by their employees and, where
applicable, partnering to help them achieve their sustainability goals;
• Compliance: Meeting or voluntarily exceeding the requirements of all federal, state and local health,
safety and environmental protection laws; and
• Reduction: Limiting our use of natural resources and recycling where practicable, whether water, oil,
tire rubber, paper, plastic or other materials.
• Our People and our Customers: We believe that our success has its foundation in how we treat our
employees. Avis Budget Group is committed to maintaining a professional and supportive workplace built
on trust between employees and management. In concert with our core values, we seek to foster an
environment where communication among our employees is open, honest, and respectful; performance is
recognized; growth is encouraged; and accomplishments – individual and collective – are celebrated. We
also seek to support the well-being and development of the people we employ and the communities in
which they work. The following initiatives reflect our commitment to achieving these goals:
• Employee Engagement: We periodically measure the success of our workplace initiatives in a
Company-wide employee survey. Conducted by an independent third-party to ensure impartiality and
confidentiality, the survey is part of a long tradition of listening to what employees have to say about
the Company, about the job they do, and about what they expect. The findings from each survey are
presented by managers to employees and plans to address areas for improvement are established;
• 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 benefit programs are all offered and
administered in compliance with applicable local law;
•
Live Well – Healthy Living: We maintain a comprehensive program of initiatives designed to
encourage our employees and their families to be mindful of their health and to enhance their ability
to care for themselves and manage their health care expenses;
• Equal Opportunity Employment: We are committed to providing equal employment opportunity to all
applicants and employees without regard to race, religion, color, sex, sexual orientation, gender,
gender identity, age, national origin, ancestry, citizenship, protected veteran or disability status or any
factor prohibited by law, and as such we affirm in policy and practice to support and promote the
concept of equal employee opportunity and affirmative action, in accordance with all applicable
federal, state, provincial and municipal laws. In addition, the Company will reasonably accommodate
known disabilities and religious beliefs of employees and qualified applicants; and
• Diversity and Inclusion: 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 by
engaging in several initiatives to support diversity and inclusion, including programs specifically
designed to develop female leaders and to assist current and former military personnel.
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• Our Communities: The Company is committed to supporting the communities in which it operates by
working with nonprofit organizations focused on assisting those in need such as Make-A-Wish. 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 and inspire change in our
communities.
• Our Business: We hold our employees to high ethical standards. We place great emphasis on
professional conduct, safety and security, information protection and integrity.
• Ethical Standards: Our employees are required to follow our Code of Conduct. This important
document represents the core of our business philosophy and values and covers numerous areas,
including standards of work-related behavior; safe work practices; security of information, systems
and other assets; conflicts of interest; securities laws; and community service. We provide employees
with training to help them understand both our Code of Conduct and how to interpret it in various
situations.
• Sustainable Procurement: Our Third-Party Standards of Conduct represents the Company’s
commitment to fostering sustainable relationships with our business partners, agents, consultants,
suppliers and other third parties and ensuring that they uphold ethical, social and environmental
standards.
• Supplier Diversity: 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. As a result of our commitment, we are honored to be one of America’s
Top Corporations for Women’s Business Enterprises for 17 consecutive years and a corporate
member of the Billion Dollar Roundtable.
• 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.
REGULATION
We are subject to a wide variety of laws and regulations in the countries in which we operate, including those
relating to, among others, consumer protection, insurance products and rates, franchising, customer privacy and
data protection, securities and public disclosure, competition and antitrust, environmental matters, taxes,
automobile-related liability, corruption and anti-bribery, labor and employment matters, health and safety, claims
management, automotive retail sales, currency-exchange and other various banking and financial industry
regulations, 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 of this Annual Report on Form 10-K.
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. Such materials may 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
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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. The risks described below are not an exhaustive list of
all of the risks that we face and are not listed by order of priority or materiality. In addition to the factors discussed
elsewhere in this Annual Report on Form 10-K, 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 mobility industry.
The mobility industry is highly competitive, with price being one of the primary competitive factors. To the extent
that our competitors reduce their pricing and we do not provide competitive pricing or if price increases we
implement make us less competitive, we risk losing rental volume from existing customers, as well as lessening
the chances of success for future bids for new customer accounts. 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 vehicle rental 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.
We expect that the competitive environment for our mobility services will become more intense as additional
companies, including automobile manufacturers, ride-hailing companies, car sharing companies, and other
technology players in the mobility industry enter our existing markets or try to expand their operations.
Companies offering new mobility business models, including ride-hailing or car sharing services, or autonomous
vehicles, may affect demand for rental vehicles. Some of these companies may have access to substantial
capital, innovative technologies or have the ability to launch new services at a relatively low cost. To the extent
these companies can improve transportation efficiency, alter driving patterns or attitudes toward vehicle rental,
offer more competitive prices or fleet management services, more effectively utilize mobile platforms, undertake
more aggressive marketing campaigns, price their competing services below market or otherwise disrupt the
mobility industry, we risk heightened pricing competition and/or loss of rental volume, which could adversely
impact our business and results of operations if we are unable to compete with such efforts.
The risk of competition on the basis of pricing in the truck rental industry can be even more impactful than in the
car rental industry as it can be more difficult to reduce the size of our truck rental fleet in response to significantly
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 vehicles. We purchase program cars, which are guaranteed a rate of
depreciation through agreements with auto manufacturers, and non-program, or “risk” vehicles. In 2018, on
average approximately 62% of our rental car fleet was comprised of risk vehicles.
The costs of our risk vehicles may 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 risk vehicles through various sales
channels in the used vehicle marketplace, including traditional auctions, on-line auctions, direct-to-dealer sales,
and directly to consumers through either retail lots or our Ultimate Test Drive consumer car sales program. These
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channels may not produce stable vehicle prices in the future, as the market for used vehicles is subject to
changes in demand for such vehicles, consumer interests, inventory levels, new car pricing, interest rates, fuel
costs, tariffs and general economic conditions. A reduction in residual values for risk 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 than previously anticipated while we own them.
If the market value of the vehicles in our fleet is reduced or our ability to sell vehicles in the used vehicle
marketplace were to become severely limited, we may have difficulty meeting collateral requirements due under
our asset-backed financing facilities, which could lead to decreased capacity in such facilities and effectively
increase our fleet costs or adversely impact our profitability. In addition, if we are unable to meet our collateral
requirements under such facilities, the outstanding principal amount due may be required to be repaid earlier than
anticipated. 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.
Program and leased vehicles enable us to determine our depreciation expense in advance of purchase. Our
program and leased vehicles also generally provide us with flexibility to reduce the size of our fleet rapidly. This
flexibility is affected by the percentage of program vehicles in our fleet and the features of the programs provided
by auto manufacturers. Our inability to reduce the size of our fleet in response to seasonal demand fluctuations,
economic constraints or other changes in demand could have an adverse impact on our fleet costs and results of
operations.
While we source our fleet purchases from a wide range of auto manufacturers, our program purchases expose us
to risk to the extent that any of these auto manufacturers significantly curtail production, increase the cost of
purchasing program vehicles or decline to sell program vehicles to us on terms or at prices consistent with past
agreements. Should any of these risks occur, 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.
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
perform.
We face risks related to safety recalls affecting our vehicles.
Our vehicles may be subject to safety recalls by their manufacturers that could have an adverse impact on our
business when we remove recalled vehicles from our rentable fleet. We cannot control the number of vehicles that
will be subject to manufacturer recalls in the future. Recalls often require us to retrieve vehicles from customers
and/or hold vehicles until we can arrange for the repairs described in the recalls to be completed. As such, recalls
can result in incremental costs, negatively impact our revenues and/or reduce our fleet utilization. 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 utilize 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 travel demand or general economic conditions, and/or a significant increase in fuel costs,
can adversely impact our business.
Demand for vehicle rentals can be subject to and impacted by international, national and local economic
conditions. If travel demand or 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 or weaken travel demand and tourism, such as work
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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 reduction 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 to preserve the
value of our brands.
Our strategic objectives involve winning and retaining customers through supporting and strengthening our
brands, increasing operational efficiency and margins and enhancing our position in the evolving mobility industry.
We see significant potential in the areas of optimizing our pricing, customer mix and sales of ancillary products
and services; optimizing our procurement, deployment and disposition of vehicles, including increased use of non-
auction channels for selling our risk cars; and applying connected-car/in-vehicle systems and other emerging
technologies in our operations. If we are unsuccessful in implementing our strategic initiatives, our financial
condition or results of operations could be adversely impacted.
The Company continues to further streamline its administrative and shared-services infrastructure through a
restructuring program that identifies and replicates best practices, leverages the scale and capabilities of third-
party service providers, and is designed to increase the global standardization and consolidation of non-rental-
location functions over time. We cannot be certain that such initiatives will continue to be successful. Failure to
successfully implement any of these initiatives could have an adverse impact on our financial condition or results
of operations.
Any failure to adapt to changes in the mobility industry, provide a high-quality rental experience for our customers
and members, adopt new technologies, capitalize on cost saving initiatives or meet customer needs could
substantially harm our reputation and competitiveness, and could adversely impact our financial condition or
results of operations.
We face risks related to political, economic and commercial instability or uncertainty in the countries in
which we operate.
Our global operations expose us to a number of risks, including exposure to a wide range of international, national
and local economic and political conditions and instability. For example, our operations in the United Kingdom
includes a significant amount of cross-border business that could be negatively impacted by the withdrawal of the
United Kingdom from the European Union. Uncertainty related to the proposed withdrawal of the United Kingdom
from the European Union could lead to volatility in the global financial markets, adversely affect tax, legal and
regulatory regimes, and could impact the economies of the United Kingdom and other countries in which we
operate, which could have a material adverse effect on our results in such countries. Operating our business in a
number of different regions and countries exposes us to a number of risks, including:
• multiple and potentially conflicting laws, regulations, trade policies and agreements that are subject to
change;
•
•
•
•
varying tax regimes, including consequences from changes in applicable tax laws;
the imposition of currency restrictions, restrictions on repatriation of earnings or other restraints, as well
as difficulties in obtaining financing in foreign countries for local operations;
potential changes to import-export laws, trade treaties or tariffs in the countries where we purchase
vehicles;
local ownership or investment requirements, or compliance with local laws, regulations or business
practices;
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•
•
•
uncertainty and changes to political and regulatory regimes as a result of changing social, political,
regulatory and economic environments in the United States and internationally;
national and international conflict, including terrorist acts; and
political and economic instability or civil unrest that may severely disrupt economic activity in affected
countries.
Exposure to these risks 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.
We rely upon third-party distribution channels to generate a significant portion of our car rental reservations,
including:
•
•
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 (“GDS”), such as Amadeus, Galileo/Apollo, Sabre and Worldspan, that
connect travel agents, travel service providers and corporations to our reservation systems.
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 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 third-party communications
service and system providers to provide technology services and 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 system interruptions or disruptions for a variety of reasons, including as the result
of network failures, power outages, cyber attacks, employee errors, software errors, an unusually high volume of
visitors attempting to access our systems, or localized conditions such as fire, explosions or power outages or
broader geographic events such as earthquakes, storms, floods, epidemics, strikes, acts of war, civil unrest or
terrorist acts. 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
risks as a disruption could be experienced in any of our information systems.
We face risks related to cybersecurity breaches of our systems and information technology.
Threats to network and data security are becoming increasingly diverse and sophisticated. As cybersecurity
threats become more frequent, intense and sophisticated, costs of proactive defense measures may increase.
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 cybersecurity breaches, which could result in
substantial harm to our business, our reputation or our results of operations. We rely on encryption and/or
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authentication technology licensed from and, at times, administered by independent third parties to secure
transmission of confidential information, including credit card numbers and other customer personal information.
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 cybersecurity developments could render our security
systems and information technology, or those used 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. Risks of cybersecurity incidents caused by malicious third parties using
sophisticated, targeted methods to circumvent firewalls, encryption, and other security defenses, could include
hacking, viruses, malicious software, ransomware, phishing attacks, denial of service attacks and other attempts
to capture, disrupt or 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. The techniques used by third parties change frequently and may be difficult to detect for
long periods of time. 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 increased costs, litigation or other liability that could adversely impact
our financial condition or results of operations. Failure to appropriately address these issues could also give rise
to potentially material legal risks and liabilities.
We face risks related to our property leases and vehicle rental concessions.
We lease or have vehicle rental concessions at locations throughout the world, including at most airports where
we operate, and at train stations throughout Europe, where vehicle rental companies are frequently required to
bid periodically for space at these locations. If we were to lose a property 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 location on reasonable terms which could adversely impact our business.
We face risks related to the seasonality of our business.
In our business, the third quarter of the year has historically been our most profitable quarter as measured by net
income and Adjusted EBITDA 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. Any
circumstance or occurrence that disrupts rental activity during the third quarter, especially in North America and
Europe, could have a disproportionately adverse impact on our financial condition or results of operations.
We are dependent on our senior management and other key personnel.
Our success depends on our senior management team and other key personnel, our ability to effectively recruit
and retain high quality employees, and replace those who retire or resign. The loss of services of one or more
members of our senior management team could adversely affect our business. Failure to retain and motivate our
senior management and to hire, retain and develop other important personnel could impact our management and
operations, ability to execute our strategies and adversely affect our business and operating results.
We face risks related to acquisitions, including the acquisition of existing licensees or investments in or
partnerships with other related businesses.
We may engage in strategic transactions, including the acquisition of or investment in existing licensees and/or
other related businesses, or partnerships or joint ventures with companies in related or cross-function lines of
business. 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, sales and growth opportunities. In addition, the
integration of an acquired business or oversight of a partnership or joint venture may result in material
unanticipated challenges, expenses, liabilities or competitive responses, including:
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a failure to implement our strategy for a particular strategic transaction, including successfully integrating
the acquired business into our existing infrastructure, or a failure to realize value from a strategic
partnership, joint venture or other investment;
inconsistencies between our standards, procedures and policies and those of the acquired business,
partnership and/or joint venture;
costs or inefficiencies associated with the integration of our operational and administrative systems;
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, or provisions in contracts with third parties that could limit our flexibility to take certain actions;
an inability to retain the customers, employees, suppliers and/or marketing partners of the acquired
business, partnership or joint venture or generate new customers or revenue opportunities through a
strategic partnership;
the costs of compliance with local laws and regulations and the implementation of compliance processes,
as well as the assumption of unexpected liabilities, litigation, penalties or other enforcement actions; and
higher than expected costs arising due to unforeseen changes in tax, trade, environmental, labor, safety,
payroll or pension policies.
Any one of these factors could result in delays, increased costs or decreases in the amount of expected revenues
related to combining the companies or derived from a strategic transaction and could adversely impact our
financial condition or results of operations.
We face risks related to fluctuations in currency exchange rates.
Our 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 consolidated 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 our derivative instruments.
We typically utilize derivative instruments to manage fluctuations in foreign exchange rates, interest rates and
gasoline prices. The derivative instruments we use to manage our risk are usually in the form of interest rate
swaps and caps and foreign exchange and commodity contracts. 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 liability and insurance.
Our global operations expose us to several forms of liability, including claims for bodily injury, death and property
damage related to the use of our vehicles, or for having our customers on our premises, as well as workers’
compensation 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
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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 be subject
to an adverse ruling, or experience other significant liability for which we did not plan and are unable to
adequately insure against such liability, our results of operations, financial position or cash flows could be
negatively impacted.
We reinsure certain insurance exposures as well as offer optional insurance coverages through unaffiliated third-
party insurers, which then reinsure all or a portion of their risks through our insurance company subsidiaries,
which subjects us to regulation under various insurance laws and statutes in the jurisdictions in which our
insurance company subsidiaries are domiciled. Any changes in regulations that alter or impede our reinsurance
obligations or insurance subsidiary operations 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 outside the United States must also comply with
certain local laws and regulations regarding the sale of supplemental liability and personal accident and effects
insurance by intermediaries. Any changes in law that affect our operating requirements with respect to our sale of
optional insurance 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 to
purchase optional 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 responsibility 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 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.
Additionally, current U.S. federal law pre-empts state laws that impute tort liability based solely on ownership of a
vehicle involved in an accident. If such federal law were to change, our insurance liability exposure could
materially increase.
We may be unable to collect amounts that we believe are owed to us by customers, insurers and other third
parties related to vehicle damage claims or liabilities. The inability to collect such amounts in a timely manner or to
the extent that we expect could adversely impact our financial condition or results of operations.
Costs associated with lawsuits, investigations or increases in legal reserves that we establish based on
our assessment of contingent liabilities may have an adverse effect on our results of operations.
Our global operations expose us to various claims, lawsuits and other legal proceedings that arise in and outside
of the ordinary course of our business in the countries in which we operate. We may be subject to complaints and/
or litigation involving our customers, licensees, employees, independent operators and others with whom we
conduct business, including claims for bodily injury, death and property damage related to use of our vehicles or
our locations by customers, or claims based on allegations of discrimination, misclassification as exempt
employees under the Fair Labor Standards Act, wage and hourly pay disputes, and various other claims. We
could be subject to substantial costs and/or adverse outcomes from such complaints or litigation, which could
have a material adverse effect on our financial condition, cash flows or results of operations.
We outsource some of our business functions to third parties, including operations at many of our Company-
owned locations, which are third-party independent operators who receive commissions to operate such
locations. We are involved or may become involved in legal proceedings and investigations that claim that our
third-party independent operators should instead be treated as employees. There can be no assurance that
legislative, judicial or regulatory authorities will not assert interpretations of existing laws or introduce new
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regulations that would mandate that we change the classification of these operators. In the event of such a
reclassification, we could be exposed to material liabilities and additional costs which could have an adverse
effect on our business and results of operations. These liabilities and additional costs could include exposure
under federal, state and local tax laws, workers’ compensation, unemployment benefits, labor, and employment
laws, as well as potential liability for penalties and interest.
From time to time, our Company and/or other companies in the vehicle rental industry may be reviewed or
investigated by government 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 or 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 exposure for certain types of legal
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 actual or potential loss contingencies, including contingencies related to legal claims asserted
against us. Subsequent developments may affect our assessment and estimates of such loss contingencies 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 laws and regulations that could impact our global operations.
We are subject to multiple, and sometimes conflicting, laws and regulations in the countries in which we operate
that relate to, among others, consumer protection, competition and antitrust, customer privacy and data
protection, securities and public disclosure, automotive retail sales, franchising, corruption and anti-bribery,
environmental matters, taxes, automobile-related liability, labor and employment matters, cost and fee recovery,
currency-exchange and other various banking and financial industry regulations, health and safety, insurance
rates and products, claims management, protection of our trademarks and other intellectual property and other
trade-related laws and regulations. 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 global operations and expansion 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, regulation,
trade treaties or tariffs, or changes in the interpretation of existing laws or regulations may subject us to
government scrutiny, investigation and civil and criminal penalties, 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 certain countries in which we have Company-operated locations, we may recover certain costs from
consumers, including costs associated with the title and registration of our vehicles, or 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 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.
We are subject to privacy, data protection, security transfer and other regulations, as well as private
industry standards, that could negatively impact our global operations and cause us to incur additional
incremental expense that impacts our future operating results.
Our business requires the secure processing and storage of sensitive information relating to our customers,
employees, business partners and others. Current consumer privacy and data protection laws, particularly the
European Union’s General Data Protection Regulation which became effective in 2018 (the “GDPR”), and other
regulations in the jurisdictions in which we operate limit the types of information that we may collect, process and
retain about our customers and other individuals with whom we deal or propose to deal, some of which may be
non-public personally identifiable information. The GDPR, which is wide-ranging in scope, provides EU residents
greater control over their personal data and imposes several requirements relating to the consent of the
individuals to whom the personal data relates, the information provided to the individuals, the security and
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confidentiality of the personal data, data breach notification and the use of third-party processors in connection
with the processing of personal data. It also imposes significant forfeitures and penalties for noncompliance. The
Company has adopted policies and procedures in compliance with the GDPR, however, such policies and
procedures may need to be updated as additional information concerning best practices is made available
through guidance from regulatory authorities or published enforcement decisions. Other privacy laws may be
interpreted and applied inconsistently from country to country and impose inconsistent or conflicting requirements.
Complying with varying jurisdictional privacy requirements could increase our operating costs, divert management
attention or require additional changes to our business practices. Should we be found to not be in compliance with
the GDPR or similar privacy and data protection laws, we could be subject to substantial monetary forfeitures and
other penalties that could negatively impact our operating results or harm our reputation.
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. Should this flow of
information become illegal or subject to onerous restrictions, our ability to serve our customers could be
negatively impacted 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 laws
and regulations restrict the ways that we process our transaction information and 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 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 storage tanks at our locations. In the United States, we administer 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. 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 uninsured liability
or liabilities in excess of insurance.
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.
Environmental regulatory authorities are likely to continue to pursue 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 in the countries in
which we operate, demand for our services could be affected, our fleet and/or other costs could increase, and our
business could be adversely impacted.
We face risks related to franchising or licensing laws and regulations.
We license to third parties the right to operate locations using our brands in exchange for royalty payments. Our
licensing activities are subject to various laws and regulations in the countries in which we operate. In particular,
laws in the United States require that we provide extensive disclosure to prospective licensees in connection with
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licensing offers and sales, as well as comply with 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, independent operators
or third-party vendors.
Our vehicle rental licensee and dealer locations are independently owned and operated. We also operate many of
our Company-owned locations through agreements with “independent operators,” which are third-party
independent contractors who receive commissions to operate such locations. We also enter into service contracts
with various third-party vendors that provide services for us or in support of our business. Under our agreements
with our licensees, dealers, independent operators and third-party vendors (collectively referred to as “third-party
operators”), the third-party operators retain control over the employment and management of all personnel at their
locations or in support of the services that they provide our Company. These agreements also generally require
that third-party operators comply with all laws and regulations applicable to their businesses, including relevant
internal policies and standards. Regulators, courts or others may seek to hold us responsible for the actions of, or
failures to act by, third-party operators or their employees based on theories of vicarious liability, negligence, joint
operations or joint employer liability. 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 misconduct or noncompliance by the third-party operator or its
employees. 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 claims involving third-
party operators and to pursue indemnity for any adverse outcomes that affect the Company. Failure of third-party
operators to comply with laws and regulations or our operational standards, or our inability to be dismissed from
claims against our third-party operators, may expose us to liability, damages and negative publicity that may
damage our brand and reputation and adversely affect our financial condition or results of operations.
We face risks related to our protection of our intellectual property.
We have registered certain marks and designs 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 associated with tax reform.
In 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law, which broadly reforms the U.S. corporate
income tax system. Several provisions of the Tax Act affect the Company, specifically the provision eliminating the
use of like-kind exchange for personal property and the provision allowing for full expensing of qualified property
purchases through the year 2022. Since 2004, we have utilized a like-kind exchange program whereby we
replace vehicles in a manner that allows tax gains on vehicles sold in the U.S. to be deferred, resulting in a
material deferral of U.S. federal and state income taxes. The Tax Act repealed like-kind exchange treatment for
vehicle sales as of January 1, 2018. The effect of the elimination of our like-kind exchange will be largely offset
through 2022 by the full expensing provision of certain business assets in the year placed in service, which we
believe includes our vehicles. However, an extended downsizing of our fleet would significantly decrease the
amount of tax deductions available under the full expensing provision. This would result in the utilization of tax
attributes and increased federal and state income tax liabilities 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
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obtain financing when our asset-backed rental car financings mature, or in connection with a significant decrease
in demand for vehicle rentals. In addition, the full expensing provision phases out at the end of year 2022 and we
are not certain if this provision will be extended. U.S. states continue to modify their tax statutes as a result of the
Tax Act and such state legislation could negate the full expensing benefits granted under the Tax Act or negatively
impact our tax liability in that state. Therefore, we cannot offer assurance that the benefits from the expected tax
deductions will continue.
The Tax Act also makes significant changes to the U.S. Internal Revenue Code applicable to corporations. Such
changes include a permanent reduction to the corporate income tax rate, a mandatory one-time repatriation tax
on undistributed historic earnings of foreign subsidiaries, elimination or limitation of the deductibility of certain
business expenses, and requiring the inclusion in the U.S. tax base certain earnings generated by foreign
subsidiaries, among other changes. While the Company believes it will not be materially impacted by these
changes, the ultimate impact of the Tax Act may differ from our current estimates due to changes in interpretations
of the Tax Act, legislative action, changes in accounting standards for income taxes, among other things, which
could 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 outstanding debt
obligations require 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 debt obligations contain restrictive covenants and provisions
applicable to us and our subsidiaries that limit our ability to, among other things:
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incur additional debt to fund working capital, capital expenditures, debt service requirements, execution of
our business strategy or acquisitions and other purposes;
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;
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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 our senior credit facility and could result in a cross-
default under several of our other debt obligations, including our U.S. and European asset-backed debt facilities.
If such a default 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.
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We face risks related to movements or disruptions in the credit and asset-backed securities markets.
We finance our vehicle fleet purchases and operations through the use of asset-backed securities in the United
States, Canada, Australia and Europe and other debt financing structures available through the credit markets. If
the asset-backed financing and/or credit markets were to be disrupted for any reason, we may be unable to obtain
refinancing for our operations or vehicle fleet purchases at current levels, or at all, when our respective asset-
backed financings or debt financings mature. Likewise, any disruption of the asset-backed financing or credit
markets could also increase our borrowing costs, as we seek to engage in new financings or refinance our
existing 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 or debt 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, 2018, our total outstanding debt of approximately $13.8 billion included
unhedged interest rate sensitive debt of approximately $4.1 billion. During our seasonal borrowing peak in 2018,
outstanding unhedged interest rate sensitive debt totaled approximately $5.5 billion.
Virtually all of our debt under vehicle programs and certain of our corporate indebtedness 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.
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:
• weakness in general economic conditions and credit markets;
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changes in consumers’, investors’ and analysts’ perceptions of our industry, business or related
industries;
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, management or
stockholder changes, 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;
the operating and stock price performance of other comparable companies;
overall stock market fluctuations;
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success or failure of competitive service offerings or technologies;
tax or regulatory developments in the United States and other countries in which we operate;
litigation involving us;
actions of activist stockholders and responses from our Board and senior management; and
the timing and amount of any share repurchases by us.
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 stockholders’ percentage of ownership may be diluted in the future.
Our stockholders’ percentage of ownership may be diluted in the future due to equity issuances 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. We expect to continue to grant restricted stock units, stock options and/or other
types of equity awards in the future.
Certain provisions of our certificate of incorporation and by-laws, and Delaware law could prevent or
delay a potential acquisition of control of our Company, which could decrease the trading price of our
common stock.
Our amended and restated certificate of incorporation, amended and restated by-laws and the laws in the State of
Delaware contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids
by making such practices or bids unacceptably expensive to the prospective acquirer and to encourage
prospective acquirers to negotiate with our Board of Directors rather than to attempt a hostile takeover. Delaware
law also imposes restrictions on mergers and other business combinations between us and any holder of 15% or
more of our outstanding common stock.
We believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics by
effectively requiring those who seek to obtain control of the Company to negotiate with our Board of Directors and
by providing our Board with more time to assess any acquisition of control. However, these provisions could apply
even if an acquisition of control of the Company may be considered beneficial by some stockholders and could
delay or prevent an acquisition of control that our Board of Directors determines is not in the best interests of our
Company and our stockholders.
Our business could be adversely impacted as a result of actions by activist stockholders or others.
The Company values constructive input from investors and regularly engages in dialogue with its
stockholders regarding strategy and performance. The Company’s Board of Directors and management team
are committed to acting in the best interests of all of the Company’s stockholders. There is no assurance that
the actions taken by the Board of Directors and management in seeking to maintain constructive
engagement with the Company’s stockholders will be successful, and we may be subject to formal or
informal actions or requests from stockholders or others. Responding to such actions could be costly and
time-consuming, divert attention of management and employees, and may have an adverse effect on our
business, results of operations and cash flow and the market price of our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
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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 for our Americas segment. We also
lease office space in Bracknell, England, Budapest, Hungary and Barcelona, Spain, pursuant to leases expiring in
2027, 2021 and 2019, respectively, for corporate offices, contact center activities and other administrative
functions, respectively, for our International segment. Other office locations throughout the world are leased for
administrative, regional sales and operations activities.
We lease or have vehicle rental concessions for our brands at locations throughout the world. We own
approximately 2% of the locations from which we operate and in some cases we sublease to franchisees or other
third parties. The remaining locations from which we operate our vehicle rental businesses are leased or operated
under concession agreements with governmental authorities and private entities. Those leases and concession
agreements typically require the payment of minimum rents or minimum concession fees and often also require
us to pay or reimburse operating expenses, to pay additional rent, or concession fees above guaranteed
minimums, based on a percentage of revenues or sales arising at the relevant premises, or to do both. See Note
14 to our Consolidated Financial Statements for information regarding lease commitments.
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.
ITEM 3. LEGAL PROCEEDINGS
For information regarding legal proceedings, see Note 14 to our Consolidated Financial Statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
36
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
PART II
MARKET FOR COMMON EQUITY
Our common stock is currently traded on the NASDAQ Global Select Market (“NASDAQ”) under the symbol
“CAR.” At January 31, 2019, the number of stockholders of record was 2,517.
DIVIDEND POLICY
We neither declared nor paid any cash dividend on our common stock in 2018 and 2017, and we do not currently
anticipate paying cash dividends on our common stock. However, we evaluate our dividend policy on a regular
basis and may pay dividends in the future, subject to compliance with the covenants in our senior credit facility,
the indentures governing our senior notes and our vehicle financing programs. 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 also
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.
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, 2018.
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)
2,457,610 $
—
2,457,610 $
0.79
—
0.79
5,889,509
—
5,889,509
__________
(a)
(b)
Includes options and other awards granted under the Amended and Restated Equity and Incentive Plan, which plan was
approved by stockholders.
Represents 3,469,070 shares available for issuance under the Amended and Restated Equity and Incentive Plan and
2,420,439 shares available for issuance pursuant to the 2009 Employee Stock Purchase Plan.
37
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, 2018:
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
Dollar Value of
Shares That
May Yet Be
Purchased
under the
Plans or
Programs
200,501,901
176,451,029
150,501,899
150,501,899
Total Number
of Shares
Purchased(a)
Period
October 2018
November 2018
December 2018
Total
________
(a) Excludes, for the three months ended December 31, 2018, 106 shares which were withheld by the Company to satisfy
672,141 $
804,549
989,200
2,465,890 $
672,141 $
804,549
989,200
2,465,890 $
Average Price
Paid per Share
31.83
29.89
26.23
28.95
employees’ income tax liabilities attributable to the vesting of restricted stock unit awards.
The Company’s Board of Directors has authorized the repurchase of up to approximately $1.7 billion of its
common stock under a plan originally approved in 2013 and subsequently expanded, most recently in August
2018. The Company’s stock repurchases may occur through open market purchases or trading plans pursuant to
Rule 10b5-1 of the Securities Exchange Act of 1934. The amount and timing of specific repurchases are subject
to market conditions, applicable legal requirements and other factors. The repurchase program may be
suspended, modified or discontinued at any time without prior notice. The repurchase program has no set
expiration or termination date.
38
PERFORMANCE GRAPH
Set forth below are 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, the S&P 500 Index and the
Dow Jones U.S. Transportation Average Index for the period of five fiscal years commencing December 31, 2013
and ending December 31, 2018. 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 U.S. Transportation Average
Index, which measures the performance of transportation companies. The Company has elected to begin using
the S&P Midcap 400 Index in place of the S&P 500 Index for future period comparisons because the S&P Midcap
400 Index is a more appropriate benchmark in light of the Company’s equity market capitalization. The graph and
table depict the result of an investment on December 31, 2013 of $100 in the Company’s common stock, the S&P
Midcap 400 Index, the S&P 500 Index and the Dow Jones U.S. Transportation Average Index, including
investment of dividends.
2013
2014
2015
2016
2017
2018
As of December 31,
Avis Budget Group, Inc.
S&P Midcap 400 Index
S&P 500 Index
Dow Jones U.S. Transportation
Average Index
$
$
$
$
100.00
100.00
100.00
100.00
$
$
$
$
164.10
109.77
113.69
125.07
$
$
$
$
39
89.78
107.38
115.26
104.11
$
$
$
$
90.75
129.65
129.05
127.36
$
$
$
$
108.56
150.71
157.22
151.58
$
$
$
$
55.62
134.01
150.33
132.90
ITEM 6. SELECTED FINANCIAL DATA
2018
As of or For the Year Ended December 31,
2016
(In millions, except per share data)
2017
2015
Results of Operations
Revenues
Net income
Adjusted EBITDA (a)
Earnings per share
Basic
Diluted
$
$
$
$
9,124
165
781
2.08
2.06
$
$
$
$
8,848
361
735
4.32
4.25
$
$
$
$
8,659
163
838
1.78
1.75
$
$
$
$
8,502
313
903
3.02
2.98
$
$
$
$
2014
8,485
245
876
2.32
2.22
Financial Position
Total assets
Assets under vehicle programs
Corporate debt
Debt under vehicle programs (b)
Stockholders’ equity
Ratio of debt under vehicle programs to assets
under vehicle programs
$ 19,149
12,779
3,551
10,232
414
$ 17,699
11,879
3,599
9,221
573
$ 17,643
11,578
3,523
8,878
221
$ 17,634
11,716
3,461
8,860
439
$ 16,842
11,058
3,353
8,056
665
80%
78%
77%
76%
73%
__________
(a)
The following table reconciles Net Income to Adjusted EBITDA within our Selected Financial Data, which we define as income from
continuing operations before non-vehicle related depreciation and amortization, any impairment charges, restructuring and other related
charges, early extinguishment of debt costs, non-vehicle related interest, transaction-related costs, net charges for an unprecedented
personal-injury legal matters, non-operational charges related to shareholder activist activity and income taxes. Net charges for
unprecedented personal-injury legal matters are recorded within operating expenses in our Consolidated Statements of Operations. We
have revised our definition of Adjusted EBITDA to exclude non-operational charges related to shareholder activist activity. Non-
operational charges related to shareholder activist activity include third-party advisory, legal and other professional service fees and are
recorded within selling, general and administrative expenses in our Consolidated Statements of Operations. We did not revise prior years’
Adjusted EBITDA amounts because there were no costs similar in nature to these items. Our presentation of Adjusted EBITDA may not
be comparable to similarly-titled measures used by other companies. See Management’s Discussion and Analysis of Financial Condition
and Results of Operations, Item 7, for an explanation of why we believe Adjusted EBITDA is a useful measure.
For the Year Ended December 31,
2018
2017
2016
2015
2014
Net income
$
Provision for (benefit from) income taxes
Income before income taxes
Add: Non-vehicle related depreciation and amortization
Interest expense related to corporate debt, net
Restructuring and other related charges
Transaction-related costs, net
Early extinguishment of corporate debt
Non-operational charges related to shareholder activist
activity
Impairment
$
165
102
267
256
188
22
20
19
9
—
Charges for legal matter, net
Adjusted EBITDA
—
781
$
$
$
361
(150)
211
259
188
63
23
3
—
2
(14)
735
$
$
163
116
279
253
203
29
21
27
—
—
$
313
69
382
218
194
18
68
23
—
—
26
838
$
—
903
$
245
147
392
180
209
26
13
56
—
—
—
876
(b)
Includes related-party debt due to Avis Budget Rental Car Funding (AESOP) LLC (“Avis Budget Rental Car Funding”). See Note 13 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.
40
RESTRUCTURING AND OTHER RELATED CHARGES, TRANSACTION-RELATED COSTS, AND OTHER
ITEMS
In 2018, 2017, 2016, 2015 and 2014, we recorded restructuring and other related charges of $22 million, $63
million, $29 million, $18 million, and $26 million, respectively. See Note 4 to our Consolidated Financial
Statements.
In 2018, 2017, 2016, 2015 and 2014, we recorded $20 million, $23 million, $21 million, $68 million and $13
million, respectively, of transaction-related costs, primarily related to the acquisition and integration of acquired
businesses with our operations. In 2018 and 2017, these costs primarily related to integration-related costs of
acquired businesses and acquisition-related costs of businesses pursued. In 2016, these costs primarily related to
integration-related costs of acquired businesses. In 2015, these costs were primarily related to acquisition- and
integration-related costs of acquired businesses, including $25 million of non-cash charges recognized in
connection with the acquisition of the Avis and Budget license rights for Norway, Sweden and Denmark and Avis
license rights for Poland, costs associated with the acquisition of the remaining 50% equity interest in our
Brazilian licensee, which is now a wholly-owned subsidiary, and expenses related to certain pre-acquisition
contingencies. In 2014, these costs were primarily related to acquisition- and integration-related costs of acquired
businesses, including a non-cash gain recognized in connection with the acquisition of our Budget license rights
in southern California and Las Vegas, and contingent consideration related to our Apex Car Rentals acquisition.
See Notes 2 and 5 to our Consolidated Financial Statements.
In 2018, 2017, 2016, 2015 and 2014, we recorded $19 million, $3 million, $27 million, $23 million and $56 million,
respectively, of expense related to the early extinguishment of corporate debt. See Note 12 to our Consolidated
Financial Statements.
In 2017, we recorded a $2 million impairment charge related to our Zipcar trademark.
In 2017, we recognized recoverable insurance proceeds of $27 million and a charge of $13 million related to an
adverse legal judgment against us in a personal injury case. In 2016, we recorded a charge of $26 million related
to the same legal matter. This adverse legal judgment is recorded within operating expenses in our consolidated
statement of operations.
41
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 included in this Annual Report on Form 10-K commencing on page F-1. Our actual results of
operations may differ materially from those discussed in forward-looking statements as a result of various factors,
including but not limited to those included in Item 1A, “Risk Factors” and other portions of this Annual Report on
Form 10-K. Unless otherwise noted, all dollar amounts in tables are in millions.
OVERVIEW
OUR COMPANY
We operate three of the most globally recognized brands in mobility solutions, Avis, Budget and Zipcar together
with several other brands, well recognized in their respective markets. We are a leading vehicle rental operator in
North America, Europe, Australasia and certain other regions we serve, with an average rental fleet of nearly
650,000 vehicles. We also license the use of our trademarks to licensees in the areas in which we do not operate
directly. We and our licensees operate our brands in approximately 180 countries throughout the world.
OUR SEGMENTS
We categorize our operations into two reportable business segments: Americas and International, as discussed in
Part I of this Form 10-K.
BUSINESS AND TRENDS
Our revenues are derived principally from vehicle rentals in our Company-owned operations and include:
•
•
•
time & mileage fees charged to our customers for vehicle rentals;
sales of loss damage waivers and insurance and other supplemental items in conjunction with
vehicle rentals; and
payments from our customers with respect to certain operating expenses we incur, including gasoline and
vehicle licensing fees, as well as concession fees, which we pay in exchange for the right to operate at
airports and other locations.
In addition, we receive royalty revenue and associated fees 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 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.
Throughout 2018, worldwide demand for mobility solutions increased and used-vehicle values in the United
States strengthened counterbalanced by the incremental impact of rising interest rates, higher salaries, wages
and related benefits. In 2019, we anticipate that worldwide demand for mobility solutions will increase, most likely
against a backdrop of modest and possibly uneven global economic growth.
We will aggressively pursue opportunities to enhance our profitability and return on invested capital. Our objective
is to drive sustainable profitable growth by delivering on strategic initiatives aimed at winning customers through
differentiated brands and products, increasing our margins via revenue growth and operational efficiency and
enhancing our leadership in the evolving mobility solutions industry. Our strategies are intended to support and
strengthen our brands and to grow our margins and earnings over time, and to achieve growth and efficiency
opportunities as mobility solutions continue to evolve.
We operate in a highly competitive industry and we expect to continue to face challenges and risks in managing
our business. We seek to mitigate our exposure to risks in numerous ways, including delivering upon our core
42
strategic initiatives and through continued optimization of fleet levels to match changes in demand for vehicle
rentals, maintenance of liquidity to fund our fleet investment and operations, appropriate investments in
technology and adjustments in the size and the nature and terms of our relationships with vehicle manufacturers.
During 2018:
• Our revenues totaled $9.1 billion, increasing 3% compared to 2017, due to higher rental volumes.
• Our net income was $165 million and our Adjusted EBITDA was $781 million driven by higher revenues
and Americas’ lower per-unit fleet costs.
• We repurchased $200 million of our common stock, reducing our shares outstanding by approximately
5.9 million shares, or 7%.
• We amended the terms of our Floating Rate Term Loan due 2022 and our Senior revolving credit facility
maturing 2021 and extended the maturity to 2025 and 2023, respectively.
• We issued €350 million of 4¾% euro-denominated Senior Notes due January 2026, the proceeds of
which were used to redeem all $400 million of our outstanding 5 % Senior Notes due June 2022.
• We acquired Morini S.p.A in Northern Italy, Turiscar Group in Portugal, various licensees in Europe and
North America, and a 40% ownership stake in our licensee in Greece.
RESULTS OF OPERATIONS
We measure performance principally using the following key metrics: (i) rental days, which represent the total
number of days (or portion thereof) a vehicle was rented, (ii) revenue per day, which represents revenues divided
by rental days, (iii) vehicle utilization, which represents rental days divided by available rental days, available
rental days is defined as average rental fleet times the number of days in the period, and (iv) per-unit fleet costs,
which represent vehicle depreciation, lease charges and gain or loss on vehicle sales, divided by average rental
fleet. Our rental days, revenue per day and vehicle utilization metrics are all calculated based on the actual rental
of the vehicle during a 24-hour period. We believe that this methodology provides us with the most relevant
metrics in order to manage the business. Our calculation may not be comparable to the calculation of similarly-
titled metrics by other companies. We present currency exchange rate effects to provide a method of assessing
how our business performed excluding the effects of foreign currency rate fluctuations. Currency exchange rate
effects are calculated by translating the current-year results at the prior-period average exchange rate plus any
related gains and losses on currency hedges.
We assess performance and allocate resources based upon the separate financial information of our operating
segments. In identifying our reportable segments, we also consider the nature of services provided by our
operating segments, the geographical areas in which our segments operate and other relevant factors.
Management evaluates the operating results of each of our reportable segments based upon revenue and
“Adjusted EBITDA,” which we define as income from continuing operations before non-vehicle related
depreciation and amortization, any impairment charges, restructuring and other related charges, early
extinguishment of debt costs, non-vehicle related interest, transaction-related costs, net charges for
unprecedented personal-injury legal matters, non-operational charges related to shareholder activist activity and
income taxes. Net charges for unprecedented personal-injury legal matters are recorded within operating
expenses in our consolidated results of operations. We have revised our definition of Adjusted EBITDA to exclude
non-operational charges related to shareholder activist activity. Non-operational charges related to shareholder
activist activity include third-party advisory, legal and other professional service fees and are recorded within
selling, general and administrative expenses in our consolidated results of operations. We did not revise prior
years’ Adjusted EBITDA amounts because there were no costs similar in nature to these costs. We believe
Adjusted EBITDA is useful as a supplemental measure in evaluating the performance of our operating businesses
and in comparing our results from period to period. We also believe that Adjusted EBITDA is useful to investors
because it allows them to assess our results of operations and financial condition on the same basis that
management uses internally. Adjusted EBITDA is a non-GAAP measure and should not be considered in isolation
or as a substitute for net income or other income statement data prepared in accordance with U.S. GAAP. Our
presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.
43
Year Ended December 31, 2018 vs. Year Ended December 31, 2017
Our consolidated results of operations comprised the following:
Year Ended
December 31,
2018
2017
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 and other related charges
Transaction-related costs, net
Impairment
Total expenses
Income before income taxes
Provision for (benefit from) income taxes
Net income
__________
n/m Not meaningful.
$
9,124 $
8,848 $
$ Change % Change
3%
276
4,639
2,179
1,220
314
256
188
19
22
20
—
8,857
267
102
4,472
2,221
1,120
286
259
188
3
63
23
2
8,637
211
(150)
(167)
42
(100)
(28)
3
—
(16)
41
3
2
(220)
56
(252)
(4%)
2%
(9%)
(10%)
1%
0%
n/m
65%
13%
n/m
(3%)
27%
n/m
$
165 $
361 $
(196)
(54%)
Revenues increased during 2018, compared to 2017, as a result of 4% higher rental volumes and a $41 million
benefit from currency exchange rate movements, partially offset by a 1% reduction in revenue per day excluding
exchange rate movements.
Total expenses increased as a result of additional rental volumes, higher salaries, wages and related benefits and
higher vehicle interest rates, partially offset by lower per-unit fleet costs in the Americas. These increases to
expenses include a $27 million negative effect from currency exchange rate movements.
Operating expenses increased to 50.8% of revenue during 2018 compared to 50.5% in 2017. Vehicle depreciation
and lease charges decreased to 23.9% of revenue during 2018 compared to 25.1% in 2017, primarily due to
Americas’ lower per-unit fleet costs. Selling, general and administrative costs increased to 13.4% of revenue
during 2018 compared to 12.7% in 2017, primarily due to higher salary related benefits. Vehicle interest costs
were 3.4% of revenue during 2018 compared to 3.2% in 2017.
Our effective tax rates were a provision of 38% and a benefit of 71% in 2018 and 2017, respectively, which in
2018 included additional tax expense of $30 million related to the completion of the accounting for the one-time
transition tax on the deemed repatriation of cumulative foreign subsidiary earnings initially recorded during 2017
related to the Tax Cuts and Jobs Act (the “Tax Act”) and in 2017 included a $213 million provisional income tax
benefit related to the Tax Act. This net benefit primarily consisted of a benefit of $317 million from the revaluation
of net deferred tax liabilities as a result of the corporate income tax rate reduction and a provisional expense of
$104 million for the one-time transition tax on the deemed repatriation of cumulative foreign subsidiary earnings.
For 2018, the Company reported earnings of $2.06 per diluted share, which includes a net tax provision related to
the adjustment of the one-time transition tax on the deemed repatriation of cumulative foreign subsidiary earnings
of ($0.37) per share and a benefit from the impact of our 2018 share repurchases of $0.05 per share. For 2017,
the Company reported earnings of $4.25 per diluted share, which includes a net tax benefit from the impact of the
Tax Act of $2.51 per share.
44
Following is a more detailed discussion of the results of each of our reportable segments:
Americas
International
Corporate and Other (a)
Total Company
2018
2017
Revenues
Adjusted
EBITDA
Revenues
Adjusted
EBITDA
$
$
6,186 $
2,938
—
9,124 $
558 $
287
(64)
781 $
6,100 $
2,748
—
8,848 $
486
305
(56)
735
Reconciliation of net income to Adjusted EBITDA
2017
2018
Net income
Provision for (benefit from) income taxes
Income before income taxes
Add: Non-vehicle related depreciation and amortization
Interest expense related to corporate debt, net:
Interest expense
Early extinguishment of debt
Restructuring and other related charges (b)
Transaction-related costs, net (c)
Non-operational charges related to shareholder activist activity (d)
Impairment (e)
Charges for legal matter, net (f)
$
165 $
102
267
256
361
(150)
211
259
188
19
22
20
9
—
—
781 $
188
3
63
23
—
2
(14)
735
Adjusted EBITDA
__________
(a)
(b) Other related charges include costs associated with the separation of certain officers of the Company and our limited
Includes unallocated corporate overhead which is not attributable to a particular segment.
$
voluntary opportunity plans.
(c) Primarily comprised of acquisition- and integration-related expenses.
(d) Reported within selling, general and administrative expenses in our consolidated results of operations.
(e)
(f) Reported within operating expenses in our consolidated results of operations.
Impairment charge is related to our Zipcar trademark.
Americas
Revenues
Adjusted EBITDA
2018
2017
% Change
$
6,186 $
6,100
558
486
1%
15%
Revenues increased 1% during 2018, compared to 2017, primarily due to a 1% increase in rental volumes,
partially offset by a $10 million negative effect from currency exchange rate movements.
Operating expenses increased to 49.7% of revenue during 2018 compared to 49.4% in 2017. Vehicle depreciation
and lease charges decreased to 25.4% of revenue during 2018 compared to 27.4% in 2017, primarily due to 7%
lower per-unit fleet costs. Selling, general and administrative costs increased to 11.9% of revenue during 2018
compared to 11.3% in 2017, primarily due to higher salary related benefits, partially offset by lower marketing
costs. Vehicle interest costs increased to 4.1% of revenue during 2018 compared to 3.7% in 2017, primarily due
to higher interest rates.
Adjusted EBITDA increased 15% during 2018, compared to 2017, due to higher revenues and lower per-unit fleet
costs, partially offset by higher salaries, wages and related benefits, and higher interest rates. Currency
movements increased Adjusted EBITDA by $3 million.
45
International
Revenues
Adjusted EBITDA
2018
2017
% Change
$
2,938 $
2,748
287
305
7%
(6%)
Revenues increased 7% during 2018, compared to 2017, primarily due to an 8% increase in rental volumes and a
$51 million benefit from currency exchange rate movements, partially offset by a 3% reduction in revenue per day
excluding exchange rate movements.
Operating expenses were 52.8% of revenue during 2018 compared to 52.7% in 2017. Vehicle depreciation and
lease charges increased to 20.8% of revenue during 2018 compared to 20.0% in 2017, primarily due to lower
revenue per day excluding exchange rate movements. Selling, general and administrative costs increased to
14.5% of revenue during 2018 compared to 14.1% in 2017, primarily due to higher marketing costs. Vehicle
interest costs were 2.1% of revenue during 2018 compared to 2.2% in 2017.
Adjusted EBITDA decreased 6% during 2018, compared to 2017, due to lower revenue per day excluding
exchange rate movements, increased maintenance and damage costs and increased marketing costs, partially
offset by increased rental volumes and a $15 million benefit from currency exchange rate movements.
Corporate and Other
Revenues
Adjusted EBITDA
__________
n/m Not meaningful.
2018
2017
% Change
$
— $
(64)
—
(56)
n/m
n/m
Adjusted EBITDA decreased $8 million during 2018, compared to 2017, primarily due to higher selling, general
and administrative expenses which are not attributable to a particular segment.
Year Ended December 31, 2017 vs. Year Ended December 31, 2016
For the years ended December 31, 2017 and 2016, we measured performance principally using the following key
metrics: (i) rental days, which represent the total number of days (or portion thereof) a vehicle was rented, (ii) time
& mileage revenue per rental day, which represents the average daily revenue we earned from rental time &
mileage fees charged to our customers, both of which exclude our U.S. truck rental and Zipcar car sharing
operations and (iii) per-unit fleet costs, which represent vehicle depreciation, lease charges and gain or loss on
vehicle sales, divided by average rental fleet and exclude our U.S. truck rental operations. We also measure our
ancillary revenues (rental-transaction revenue other than time & mileage revenue), such as from the sale of
collision and loss damage waivers, insurance products, fuel service options and rental of other supplemental
products. Our rental days and time & mileage revenue per rental day vehicle rental metrics are all calculated
based on the actual rental of the vehicle during a 24-hour period. We believe that this methodology provides us
with the most relevant metrics in order to manage the business. Our calculation may not be comparable to the
calculation of similarly-titled metrics by other companies. We present currency exchange rate effects to provide a
method of assessing how our business performed excluding the effects of foreign currency rate fluctuations.
Currency exchange rate effects are calculated by translating the current-year results at the prior-period average
exchange rate plus any related gains and losses on currency hedges.
46
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 and other related charges
Transaction-related costs, net
Impairment
Total expenses
Income before income taxes
Provision for (benefit from) income taxes
Net income
_________
n/m Not meaningful.
Year Ended
December 31,
2017
2016
$ Change % Change
$
6,219 $
2,629
8,848
6,081 $
2,578
8,659
4,472
2,221
1,120
286
259
188
3
63
23
2
8,637
211
(150)
4,382
2,047
1,134
284
253
203
27
29
21
—
8,380
279
116
138
51
189
(90)
(174)
14
(2)
(6)
15
24
(34)
(2)
(2)
(257)
(68)
266
2%
2%
2%
(2%)
(9%)
1%
(1%)
(2%)
7%
89%
n/m
(10%)
n/m
(3%)
(24%)
n/m
$
361 $
163 $
198
n/m
During 2017, our revenues increased as a result of a 5% increase in rental volumes, partially offset by a 1%
decrease in time & mileage revenue per day. Currency exchange rate movements increased revenues by $58
million.
Total expenses increased as a result of higher rental volumes, a 4% increase in per-unit fleet costs (including a
1% negative impact from currency exchange rate movements) and increased restructuring and other related
charges, partially offset by cost mitigating actions. Currency movements increased expenses by $25 million year-
over-year.
Operating expenses were 50.5% of revenue during 2017 compared to 50.6% in 2016. Vehicle depreciation and
lease charges increased to 25.1% of revenue during 2017 compared to 23.6% in 2016, primarily due to higher
per-unit fleet costs and lower time & mileage revenue per day, partially offset by higher utilization. Selling, general
and administrative costs decreased to 12.7% of revenue during 2017 compared to 13.1% in 2016, primarily due to
cost mitigating actions, partially offset by higher marketing commissions. Vehicle interest costs were 3.2% of
revenue during 2017 compared to 3.3% in 2016.
Our effective tax rates were a benefit of 71% and a provision of 42% in 2017 and 2016, respectively, which in
2017 included a $213 million provisional income tax benefit related to the impact of the Tax Act. This net benefit
primarily consists of a benefit of $317 million from the revaluation of net deferred tax liabilities as a result of the
corporate income tax rate reduction and a provisional expense of $104 million for the one-time transition tax on
cumulative foreign earnings. As a result of these items, our net income increased by $198 million.
For 2017, the Company reported earnings of $4.25 per diluted share, which includes after-tax restructuring and
other related charges of ($0.48) per share, after-tax transaction-related costs of ($0.23) per share, after-tax debt
extinguishment costs of ($0.02) per share, after-tax impairment charge of ($0.01) per share, after-tax reversal of
charges for legal matter of $0.10 per share and a net tax benefit from the impact of the Tax Act of $2.51 per share.
For 2016, the Company reported earnings of $1.75 per diluted share, which includes after-tax restructuring and
47
other related charges of ($0.23) per share, after-tax debt extinguishment costs of ($0.18) per share, after-tax
charges for legal matter of ($0.17) per share and after-tax transaction-related costs, net, of ($0.17) per share.
Following is a more detailed discussion of the results of each of our reportable segments:
Americas
International
Corporate and Other (a)
Total Company
2017
2016
Revenues
Adjusted
EBITDA
Revenues
Adjusted
EBITDA
$
$
6,100 $
2,748
—
8,848 $
486 $
305
(56)
735 $
6,121 $
2,538
—
8,659 $
633
273
(68)
838
Reconciliation of net income to Adjusted EBITDA
2016
2017
Net income
Provision for (benefit from) income taxes
Income before income taxes
Add: Non-vehicle related depreciation and amortization
Interest expense related to corporate debt, net:
Interest expense
Early extinguishment of debt
Restructuring and other related charges(b)
Transaction-related costs, net (c)
Impairment (d)
Charges for legal matter, net (e)
$
361 $
(150)
211
259
163
116
279
253
188
3
63
23
2
(14)
735 $
203
27
29
21
—
26
838
Adjusted EBITDA
__________
(a)
(b) Other related charges include costs associated with the separation of certain officers of the Company and our limited
Includes unallocated corporate overhead which is not attributable to a particular segment.
$
voluntary opportunity plans.
(c) Primarily comprised of acquisition- and integration-related expenses.
(d)
(e) Reported within operating expenses in our consolidated results of operations.
Impairment charge is related to our Zipcar trademark.
Americas
Revenues
Adjusted EBITDA
2017
2016
% Change
$
6,100 $
6,121
486
633
—%
(23%)
Revenues decreased in 2017 compared with 2016, primarily due to a 1% reduction in time & mileage revenue per
day, partially offset by 2% growth in rental volumes. Currency movements increased revenues by $9 million year-
over-year.
Operating expenses decreased to 49.4% of revenue during 2017 compared to 49.6% in 2016. Vehicle
depreciation and lease charges increased to 27.4% of revenue during 2017 compared to 25.5% in 2016, primarily
due to a 6% increase in per-unit fleet costs, partially offset by higher utilization. Selling, general and administrative
costs, at 11.3% of revenue during 2017, remained level compared to 2016. Vehicle interest costs, at 3.7% of
revenue during 2017, remained level compared to 2016.
Adjusted EBITDA decreased 23% in 2017 compared with 2016, due to higher per-unit fleet costs, lower revenues
and higher marketing commissions, partially offset by cost mitigating actions and higher utilization.
48
International
Revenues
Adjusted EBITDA
2017
2016
% Change
$
2,748 $
2,538
305
273
8%
12%
Revenues increased 8% during 2017 compared with 2016, primarily due to a 12% increase in rental volumes,
including a 7% benefit from FranceCars which was acquired in December 2016, partially offset by a 2% reduction
in time & mileage revenue per day (including a 1% favorable effect from currency movements). Currency
movements increased revenues by $49 million.
Operating expenses were 52.7% of revenue during 2017 compared to 52.6% in 2016. Vehicle depreciation and
lease charges increased to 20.0% of revenue during 2017 compared to 19.2% in 2016, primarily due to lower time
& mileage revenue per day. Selling, general and administrative costs were reduced to 14.1% of revenue during
2017 compared to 15.1% in 2016, primarily due to increased revenues and cost mitigating actions, partially offset
by higher marketing commissions. Vehicle interest costs were 2.2% of revenue during 2017 compared to 2.3% in
2016.
Adjusted EBITDA increased 12% in 2017 compared with 2016, due to increased revenues and cost mitigating
actions, partially offset by higher marketing commissions. Currency movements increased Adjusted EBITDA by
$24 million.
Corporate and Other
Revenues
Adjusted EBITDA
__________
n/m Not meaningful
2017
2016
% Change
$
— $
(56)
—
(68)
n/m
n/m
Adjusted EBITDA increased $12 million in 2017 compared with 2016, primarily due to lower selling, general and
administrative expenses which are not attributable to a particular segment.
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
As of December 31,
2017
2018
Change
Total assets exclusive of assets under vehicle programs
$
6,370 $
5,820 $
Total liabilities exclusive of liabilities under vehicle programs
Assets under vehicle programs
Liabilities under vehicle programs
Stockholders’ equity
6,011
12,779
12,724
414
5,935
11,879
11,191
573
550
76
900
1,533
(159)
Total assets exclusive of assets under vehicle programs increased compared to 2017 primarily due to an increase
in deferred income taxes from the Tax Act and an increase in other current assets (See Note 9 to our
49
Consolidated Financial Statements). Total liabilities exclusive of liabilities under vehicle programs was
substantially unchanged compared to 2017.
Assets and liabilities under vehicle programs increased compared to 2017 primarily due to an increase in the size
of our vehicle rental fleet. The decrease in stockholders’ equity is primarily due to our repurchases of common
stock and the adoption of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” (See Note 2 to
our Consolidated Financial Statements), partially offset by our net income.
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 2018, we amended the terms of our Floating Rate Term Loan due 2022 and our Senior revolving credit
facility maturing 2021 and extended the maturity to 2025 and 2023, respectively. In addition, our Avis Budget
Rental Car Funding subsidiary issued approximately $400 million and $550 million in asset-backed notes with an
expected final payment date of September 2023 and March 2024, respectively, and a weighted average interest
rate of 4%. The proceeds from these borrowings were used to fund the repayment of maturing vehicle-backed
debt and the acquisition of rental cars in the United States. We also increased our capacity under our European
rental fleet securitization program by €150 million (approximately $175 million), the proceeds of which were used
to finance fleet purchases for certain of our European operations, and extended its maturity to 2021. We issued
€350 million of 4¾% euro-denominated Senior Notes due January 2026 at par. The proceeds from this borrowing
were used to redeem all of our outstanding 5 % euro-denominated Senior Notes due June 2022. We
repurchased approximately 5.9 million shares of our outstanding common stock for approximately $200 million
during 2018.
Cash Flows
Year Ended December 31, 2018 vs. Year Ended December 31, 2017
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, program and restricted
cash
Cash and cash equivalents, program and restricted cash,
beginning of period
Cash and cash equivalents, program and restricted cash, end
of period
Year Ended December 31,
2018
2017
Change
$
2,609 $
2,648 $
(3,426)
(2,204)
667
(16)
(166)
901
(308)
45
181
720
(39)
(1,222)
975
(61)
(347)
181
$
735 $
901 $
(166)
Cash provided by operating activities during 2018 was substantially unchanged compared with 2017.
The increase in cash used in investing activities during 2018 compared with 2017 is primarily due to increases in
investment in vehicles and business acquisition activity.
The decrease in cash used in financing activities during 2018 compared with 2017 primarily reflects a decrease in
net payments under vehicle programs.
We anticipate that our non-vehicle property and equipment additions will be approximately $235 million in 2019.
50
Year Ended December 31, 2017 vs. Year Ended December 31, 2016
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, program and restricted
cash
Cash and cash equivalents, program and restricted cash,
beginning of period
Cash and cash equivalents, program and restricted cash, end
of period
Year Ended December 31,
2017
2016
Change
$
2,648 $
2,640 $
(2,204)
(2,182)
(308)
45
181
720
(449)
(6)
3
717
8
(22)
141
51
178
3
$
901 $
720 $
181
Cash provided by operating activities during 2017 was substantially unchanged compared with 2016.
Cash used in investing activities during 2017 was substantially unchanged compared with 2016.
The decrease in cash used in financing activities during 2017 compared with 2016 primarily reflects a decrease in
our repurchases of common stock.
Debt and Financing Arrangements
At December 31, 2018, we had approximately $13.8 billion of indebtedness (including corporate indebtedness of
approximately $3.6 billion and debt under vehicle programs of approximately $10.2 billion). For detailed
information regarding our debt and borrowing arrangements, see Notes 12 and 13 to our Consolidated Financial
Statements.
LIQUIDITY RISK
Our primary liquidity needs include the procurement of rental vehicles to be used in our operations, servicing of
corporate and vehicle-related debt and the payment of operating expenses. The present intention of management
is to reinvest the undistributed earnings of our foreign subsidiaries indefinitely into our foreign operations. Our
primary sources of funding are operating revenue, cash received upon the sale of vehicles, borrowings under our
vehicle-backed borrowing arrangements and our senior revolving credit facility, and other financing activities.
As of December 31, 2018, we have cash and cash equivalents of $0.6 billion, available borrowing capacity under
our committed credit facilities of $0.6 billion, and available capacity under our vehicle programs of approximately
$2.8 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 mobility industry, in the asset-backed
financing market and in the credit markets, generally. We believe these factors have in the past affected and could
in the 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 being unable or unwilling to honor their obligations to repurchase or guarantee the
depreciation on the related program vehicles and (iv) disruption in our ability to obtain financing due to negative
credit events specific to us or affecting the overall debt market (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 revolving credit facility and other borrowings, including a
51
maximum leverage ratio. As of December 31, 2018, we were in compliance with the financial covenants governing
our indebtedness.
CONTRACTUAL OBLIGATIONS
The following table summarizes our principal future contractual obligations as of December 31, 2018:
Corporate debt
$
23
$
17
$
16
$
16
$
690
$
2,834
$
3,596
2019
2020
2021
2022
2023
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)
Total (e)
1,502
3,810
2,486
460
835
8,664
14
76
404
476
3
—
43
287
345
1
—
38
947
255
253
—
—
21
1,086
187
162
—
—
—
450
162
590
—
—
—
10,281
1,755
2,661
8,668
14
178
$
11,574
$
4,753
$
3,173
$
1,492
$
2,125
$
4,036
$
27,153
__________
(a) Operating lease obligations are presented net of sublease rentals to be received (see Note 14 to our Consolidated Financial Statements)
and include commitments to enter into operating leases.
(b) Represents commitments to purchase vehicles, the majority of which are from Ford, Fiat Chrysler and General Motors. 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 borrowings under vehicle programs in addition to
cash received upon the sale of vehicles, some of which were purchased under repurchase and guaranteed depreciation programs (see
Note 14 to our Consolidated Financial Statements).
(c) Represents the expected contributions to our defined benefit pension plans in 2019. 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 17 to our Consolidated
Financial Statements) and are not included above.
(d) Primarily represents commitments under service contracts for information technology, telecommunications and marketing agreements
with travel service companies.
(e) Excludes income tax uncertainties of $41 million, $13 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 14 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 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 value of
52
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 2018,
2017 and 2016, there was no impairment of goodwill and no material impairment of other intangible assets, see
Note 6 to our Consolidated Financial Statements. 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 of our reporting units or intangible assets.
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 manufacturers. 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 at 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 market conditions. The
Company regularly 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. The Tax Act enacted
in the fourth quarter of 2017 included a change in the U.S. federal corporate income tax rate. For more
information regarding the accounting for the effects of the Tax Act, see Note 8 of our Consolidated Financial
Statements.
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
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 for which we are ultimately liable and changes in the cost per
incident.
Adoption of New Accounting Pronouncements
For a description of our adoption of new accounting pronouncements and the impact thereof on our business, see
Note 2 to our Consolidated Financial Statements.
53
Recently Issued Accounting Pronouncements
For a description of recently issued accounting 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 currency forward
contracts to manage and reduce currency exchange rate risk; swap contracts, futures and options contracts, to
manage and reduce the interest rate risk related to our debt; 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
12, 13 and 18 to our Consolidated Financial Statements.
Currency Risk Management
We have exposure to currency 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, 2018. 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 2018 earnings. 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.
Interest Rate Risk Management
Our primary interest rate exposure at December 31, 2018 was interest rate fluctuations in the U.S., 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 exposures and derivatives as of December 31, 2018, we estimate that a 10% change in interest rates would
not have a material impact on our 2018 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.
54
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, 2018.
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, 2018. 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 (2013). Based on this assessment, our management believes that, as
of December 31, 2018, our internal control over financial reporting was effective. The effectiveness of the
Company’s internal control over financial reporting as of December 31, 2018, 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 fiscal quarter to which this report relates,
there has been no change in the Company’s internal control over financial reporting (as such term is defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial reporting.
55
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
Avis Budget Group, Inc.
Parsippany, New Jersey
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Avis Budget Group, Inc. and subsidiaries (the "Company") as of
December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal
Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements and financial statement schedule as of and for the year ended December 31,
2018 of the Company and our report dated February 21, 2019 expressed an unqualified opinion on those consolidated
financial statements and financial statement schedule.
Basis for Opinion
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 are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 21, 2019
56
ITEM 9B. OTHER INFORMATION
None.
57
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The information contained in the Company’s Annual Proxy Statement under the sections titled “Election of
Directors - Biographical Information for Nominees,” “Election of Directors - Director Nomination Process,”
“Corporate Governance - Functions and Meetings of the Board of Directors,” “Corporate Governance - Functions
and Meetings of the Board of Directors - 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 “Proposals To Be
Voted On At Meeting-Proposal No. 2: Ratification of Appointment of Auditors” is incorporated herein by reference
in response to this item.
58
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
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, 2018, 2017 and 2016
commencing on page G-1 hereof.
ITEM 15(A)(3). EXHIBITS
See Exhibit Index commencing on page H-1 hereof.
59
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/ DAVID T. CALABRIA
David T. Calabria
Senior Vice President and Chief Accounting Officer
Date:
February 21, 2019
60
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/ LARRY D. DE SHON
(Larry D. De Shon)
/s/ MARTYN SMITH
(Martyn Smith)
/s/ DAVID T. CALABRIA
(David T. Calabria)
/s/ BRIAN CHOI
(Brian Choi)
/s/ MARY C. CHOKSI
(Mary C. Choksi)
/s/ LEONARD S. COLEMAN, JR.
(Leonard S. Coleman, Jr.)
/s/ JEFFREY H. FOX
(Jeffrey H. Fox)
/s/ LYNN KROMINGA
(Lynn Krominga)
/s/ GLENN LURIE
(Glenn Lurie)
/s/ EDUARDO G. MESTRE
(Eduardo G. Mestre)
/s/ JAGDEEP PAHWA
(Jagdeep Pahwa)
/s/ F. ROBERT SALERNO
(F. Robert Salerno)
/s/ FRANCIS J. SHAMMO
(Francis J. Shammo)
/s/ CARL SPARKS
(Carl Sparks)
/s/ SANOKE VISWANATHAN
(Sanoke Viswanathan)
President, Chief Executive Officer and
Director
February 21, 2019
Interim Chief Financial Officer
February 21, 2019
Senior Vice President and Chief
Accounting Officer
February 21, 2019
Director
February 21, 2019
Director
February 21, 2019
Chairman of the Board of Directors
February 21, 2019
Director
February 21, 2019
Director
February 21, 2019
Director
February 21, 2019
Director
February 21, 2019
Director
February 21, 2019
Director
February 21, 2019
Director
February 21, 2019
Director
Director
February 21, 2019
February 21, 2019
61
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Comprehensive Income for the years ended December 31, 2018,
2017 and 2016
Consolidated Balance Sheets as of December 31, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2018, 2017
and 2016
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 Stockholders and the Board of Directors of
Avis Budget Group, Inc.
Parsippany, New Jersey
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Avis Budget Group, Inc. and subsidiaries (the
"Company") as of December 31, 2018 and 2017, 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, 2018, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to
as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting
principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based
on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 21, 2019, expressed an unqualified
opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 21, 2019
We have served as the Company’s auditor since 1997.
F-2
Avis Budget Group, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
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 and other related charges
Transaction-related costs, net
Impairment
Total expenses
Income before income taxes
Provision for (benefit from) income taxes
Net income
Earnings per share
Basic
Diluted
Year Ended December 31,
2017
2018
2016
$
9,124 $
8,848 $
8,659
4,639
2,179
1,220
314
256
188
19
22
20
—
8,857
267
102
4,472
2,221
1,120
286
259
188
3
63
23
2
8,637
211
(150)
4,382
2,047
1,134
284
253
203
27
29
21
—
8,380
279
116
$
$
$
165 $
361 $
163
2.08 $
2.06 $
4.32 $
4.25 $
1.78
1.75
See Notes to Consolidated Financial Statements.
F-3
Avis Budget Group, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Year Ended December 31,
2016
2017
2018
165 $
361 $
163
(81) $
110 $
41
$
$
—
(2)
(2)
(23)
5
(103)
1
1
2
11
5
130
491 $
1
—
4
(57)
4
(7)
156
Net income
Other comprehensive income (loss), net of tax
Currency translation adjustments, net of tax of $(8), $33 and $(9),
respectively
Available-for-sale securities:
Net unrealized gains (losses) on available-for-sale securities, net of tax
of $0, $(1), and $(1), respectively
Cash flow hedges:
Net unrealized holding gains (losses), net of tax of $0, $0, and $(1),
respectively
Reclassification of cash flow hedges to earnings, net of tax of $1, $(2),
and $(2), respectively
Minimum pension liability adjustment:
Pension and post-retirement benefits, net of tax of $6, $(4), and $21,
respectively
Reclassification of pension and post-retirement benefits to earnings,
net of tax of $(2), $(3), and $(2), respectively
Total comprehensive income
$
62 $
See Notes to Consolidated Financial Statements.
F-4
Avis Budget Group, Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except par value)
Assets
Current assets:
Cash and cash equivalents
Receivables (net of allowance for doubtful accounts of $39 and $36, respectively)
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 14)
Stockholders’ equity:
Preferred stock, $.01 par value—authorized 10 shares; none issued and outstanding
Common stock, $.01 par value—authorized 250 shares; issued 137 shares, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Treasury stock, at cost—61 and 56 shares, respectively
Total stockholders’ equity
Total liabilities and stockholders’ equity
See Notes to Consolidated Financial Statements.
F-5
December 31,
2018
2017
$
$
$
615
955
604
2,174
736
1,301
1,092
825
242
6,370
115
11,474
631
559
12,779
19,149
1,693
23
1,716
3,528
767
6,011
2,874
7,358
1,961
531
12,724
611
922
533
2,066
704
931
1,073
850
196
5,820
283
10,626
547
423
11,879
17,699
1,619
26
1,645
3,573
717
5,935
2,741
6,480
1,594
376
11,191
—
1
6,771
(1,091)
(133)
(5,134)
414
19,149
$
—
1
6,820
(1,222)
(24)
(5,002)
573
17,699
$
$
$
$
Avis Budget Group, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Year Ended December 31,
2017
2016
2018
Operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$
165
$
361
$
163
Vehicle depreciation
(Gain) loss on sale of vehicles, net
Non-vehicle related depreciation and amortization
Deferred income taxes
Stock-based compensation
Amortization of debt financing fees
Early extinguishment of debt costs
Net change in assets and liabilities:
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:
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
Repurchases of common stock
Other, net
Net cash used in financing activities exclusive of vehicle programs
1,974
(48)
256
14
24
28
19
(44)
35
48
138
2,609
(231)
17
(91)
(44)
(349)
1,947
52
259
(192)
13
34
3
(59)
(16)
49
197
2,648
(197)
8
(21)
5
(205)
1,877
(10)
253
51
27
37
27
(65)
5
2
273
2,640
(190)
19
(55)
1
(225)
(12,589)
9,648
(11,538)
9,600
(12,461)
10,504
(188)
(61)
—
52
(3,077)
(3,426)
—
(1,999)
(2,204)
—
(1,957)
(2,182)
485
(515)
(4)
(15)
(216)
3
(262)
589
(602)
(4)
(9)
(210)
1
(235)
894
(847)
4
(20)
(398)
—
(367)
F-6
Avis Budget Group, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In millions)
Year Ended December 31,
2017
2016
2018
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, program and
restricted cash
Net (decrease) increase in cash and cash equivalents, program and restricted cash
Cash and cash equivalents, program and restricted cash, beginning of period
Cash and cash equivalents, program and restricted cash, end of period
Supplemental disclosure
Interest payments
Income tax payments, net
17,339
(16,385)
(25)
929
667
17,212
(17,269)
(16)
(73)
(308)
15,769
(15,826)
(25)
(82)
(449)
(16)
(166)
901
735
497
53
$
$
$
$
$
$
45
181
720
901
460
58
$
$
$
(6)
3
717
720
461
60
See Notes to Consolidated Financial Statements.
F-7
Avis Budget Group, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
Common Stock
Shares
137.1
Amount
1
$
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Treasury Stock
Shares
Amount
Total
Stockholders’
Equity
$
7,010
$
(1,802) $
(147)
(39.3) $
(4,623) $
439
Balance at January 1, 2016
Comprehensive income:
Net income
Other comprehensive loss
Total comprehensive income
Non-controlling interest
Net activity related to restricted stock
units
Exercise of stock options
Change in excess tax benefit on
equity awards
Activity related to employee stock
purchase plan
Repurchase of common stock
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5
(89)
(2)
(5)
(1)
—
163
—
—
—
—
—
—
—
—
(7)
—
—
—
—
—
—
—
—
—
0.5
—
—
—
—
—
—
104
2
—
2
(12.3)
(390)
Balance at December 31, 2016
137.1
$
1
$
6,918
$
(1,639) $
(154)
(51.1) $
(4,905) $
Cumulative effect of accounting
change
Comprehensive income:
Net income
Other comprehensive income
Total comprehensive income
Non-controlling interest
Net activity related to restricted stock
units
Exercise of stock options
Activity related to employee stock
purchase plan
Repurchase of common stock
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
(50)
(48)
(1)
—
56
361
—
—
—
—
—
—
—
—
130
—
—
—
—
—
—
—
—
—
0.4
0.5
—
(6.1)
—
—
—
—
54
48
1
(200)
Balance at December 31, 2017
137.1
$
1
$
6,820
$
(1,222) $
(24)
(56.3) $
(5,002) $
Cumulative effect of accounting
change
Comprehensive income:
Net income
Other comprehensive loss
Total comprehensive income
Net activity related to restricted stock
units
Exercise of stock options
Activity related to employee stock
purchase plan
Repurchase of common stock
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(31)
(17)
(1)
—
(34)
(6)
165
—
—
—
—
—
—
(103)
—
—
—
—
—
—
—
0.5
0.2
—
(5.9)
—
—
—
48
19
1
(200)
Balance at December 31, 2018
137.1
$
1
$
6,771
$
(1,091) $
(133)
(61.5) $
(5,134) $
See Notes to Consolidated Financial Statements.
F-8
156
5
15
—
(5)
1
(390)
221
56
491
1
4
—
—
(200)
573
(40)
62
17
2
—
(200)
414
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 mobility solutions 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:
•
•
Americas—consisting primarily of (i) vehicle rental operations in North America, South America,
Central America and the Caribbean, (ii) car sharing operations in certain of these markets, and
(iii) licensees in the areas in which the Company does not operate directly.
International—consisting primarily of (i) vehicle rental operations in Europe, the Middle East,
Africa, Asia and Australasia, (ii) car sharing operations in certain of these markets, and (iii)
licensees in the areas in which the Company does not operate directly.
The Company has 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 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.
Revenue Recognition
The Company derives revenues primarily by providing vehicle rentals and other related products and
mobility services to commercial and leisure customers, as well as through licensing of its rental systems.
Other related products and mobility services include sales of collision and loss damage waivers under
which a customer is relieved from financial responsibility arising from vehicle damage incurred during the
F-9
rental; products and services for driving convenience such as fuel service options, chauffeur drive services,
roadside safety net, electronic toll collection, tablet rentals, access to satellite radio, portable navigation
units and child safety seat rentals; and rentals of other supplemental items including automobile towing
equipment and other moving accessories and supplies. The Company also receives payment from
customers for certain operating expenses that it incurs, including airport concession fees that are paid by
the Company in exchange for the right to operate at airports and other locations, as well as vehicle licensing
fees. In addition, the Company collects membership fees in connection with its car sharing business.
Prior to January 1, 2018, the Company recognized revenue when persuasive evidence of an arrangement
existed, the services had been rendered to the customer, the pricing was fixed and determinable and
collection was reasonably assured. Vehicle and rental-related revenue was recognized over the period the
vehicle was rented.
For periods beginning after January 1, 2018, revenue is recognized when obligations under the terms of a
contract with the customer are satisfied; generally this occurs evenly over the contract (over time); when
control of the promised products or services is transferred to the customer. Revenue is measured as the
amount of consideration the Company expects to be entitled to receive in exchange for transferring
products or services. Certain customers may receive cash-based rebates, which are accounted for as
variable consideration. The Company estimates these rebates based on the expected amount to be
provided to customers and reduces revenue recognized. Vehicle rental and rental-related revenues are
recognized evenly over the period of rental. Licensing revenues principally consist of royalties paid by the
Company’s licensees and are recorded as the licensees’ revenues are earned (over the rental period). 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.
The Company excludes from the measurement of its transaction price any tax assessed by a governmental
authority that is both imposed on and concurrent with a specific revenue-producing transaction and
collected from a customer. As a result, revenue is recorded net of such taxes collected. Revenues and
expenses associated with gasoline, airport concessions and vehicle licensing are recorded on a gross basis
within revenues and operating expenses. Membership fees related to the Company’s car sharing business
are generally nonrefundable, are deferred and recognized ratably over the period of membership.
The following table presents the Company’s revenues disaggregated by geography.
Americas
Europe, Middle East and Africa
Asia and Australasia
Total revenues
The following table presents the Company’s revenues disaggregated by brand.
Avis
Budget
Other
Total revenues
________
Other includes Zipcar and other operating brands.
F-10
Year Ended
December 31, 2018
6,186
2,314
624
9,124
December 31, 2018
5,266
3,057
801
9,124
$
$
$
$
Contract Liabilities
The Company records deferred revenues when cash payments are received in advance of satisfying its
performance obligations, including amounts that are refundable. In addition, certain customers earn loyalty
points on rentals, for which the Company defers a portion of its rental revenues generally equivalent to the
estimated retail value of points expected to be redeemed. The Company estimates points that will never be
redeemed based upon actual redemption and expiration patterns. Currently loyalty points expire at the
earlier of 12 months of member inactivity or five years from when they were earned. Future changes to
expiration assumptions or expiration policy, or to program rules, may result in changes to deferred revenue
as well as recognized revenues from the program.
The following table presents changes in the Company’s contract liabilities during the year ended
December 31, 2018.
Balance at
January 1, 2018
Revenue
deferred
Revenue
recognized
Balance at
December 31,
2018
Prepaid rentals(a)
Other deferred revenue(b)
Total deferred revenue
$
$
101 $
93
194 $
1,764 $
218
1,982 $
1,761 $
228
1,989 $
104
83
187
________
(a) At December 31, 2018, included in accounts payable and other current liabilities.
(b) At December 31, 2018, $36 million included in accounts payable and other current liabilities and $47 million in other non-current
liabilities. Non-current amounts are expected to be recognized as revenue within two to three years.
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 (loss) 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, 2018 and
2017 was a loss of $3 million and a gain of $71 million, respectively. The Company has designated its euro-
denominated Notes as a hedge of its investment in euro-denominated foreign operations and, accordingly,
records the effective portion of gains or losses on this net investment hedge in accumulated other
comprehensive income (loss) as part of currency translation adjustments.
Cash and Cash Equivalents, Program Cash and Restricted Cash
The Company considers highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents. Program cash primarily represents amounts specifically designated to
purchase assets under vehicle programs and/or to repay the related debt, as such the Company considers
it a restricted cash equivalent. The following table provides a detail of cash and cash equivalents, program
and restricted cash reported within the Consolidated Balance Sheets to the amounts shown in the
Consolidated Statements of Cash Flows:
Cash and cash equivalents
Program cash
Restricted cash (a)
Total cash and cash equivalents, program and restricted cash
_________
(a)
Included within other current assets.
Property and Equipment
As of December 31,
2017
2018
$
$
615 $
115
5
735 $
611
283
7
901
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
F-11
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 $188 million and $196 million as of December 31, 2018 and 2017, respectively.
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 amounts of their
respective reporting units exceed their fair values. 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 at the lowest level of identifiable cash flows. 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.
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 a portion 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. Any adjustments to depreciation are made
prospectively.
F-12
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 regularly 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. Vehicle-related interest expense amounts are
net of vehicle-related interest income of $15 million, $8 million and $18 million for 2018, 2017 and 2016,
respectively.
Advertising Expenses
Advertising costs are generally expensed in the period incurred and are recorded within selling, general and
administrative expense in the Company’s Consolidated Statements of Operations. During 2018, 2017 and
2016, advertising costs were approximately $116 million, $111 million and $127 million, 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. For information regarding the accounting for the effects of the Tax Cuts and
Jobs Act (the “Tax Act”), see Note 8-Income Taxes.
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.
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 caps 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, currency
exchange rates, interest rate yield curves of the Company and counterparties, credit curves, counterparty
F-13
creditworthiness and commodity prices. These factors are applied on a consistent basis and are based
upon observable inputs where available.
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
(loss). 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 (loss) 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).
Currency Transactions
Currency gains and losses resulting from foreign currency transactions are generally included in operating
expenses within the Consolidated Statement of Operations; however, the net gain or loss of currency
transactions on intercompany loans and the unrealized gain or loss on intercompany loan hedges are
included within interest expense related to corporate debt, net. During the years ended December 31, 2018
and 2017, the Company recorded a gain of $3 million, in each period, and during the year ended
December 31, 2016, the Company recorded a loss of $6 million on such items.
Self-Insurance Reserves
The Consolidated Balance Sheets include $421 million and $422 million of liabilities associated with
retained risks of liability to third parties as of December 31, 2018 and 2017, 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 changes in
claims experience, including changes in the number of incidents for which the Company is ultimately liable
and changes in the 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 $60 million and $66 million as of
December 31, 2018 and 2017, 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 described above.
These amounts are included within accounts payable and other current liabilities and other non-current
liabilities.
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 vests. 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
F-14
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 license agreements are recorded in the Consolidated
Statements of Operations within transaction-related costs, net, upon completion of the respective
acquisition. Costs incurred to effect a business combination are expensed as incurred, except for the cost to
issue debt related to the acquisition.
The Company records contingent consideration resulting from a business combination at its fair value on
the acquisition date. The fair value of the contingent consideration is generally estimated by utilizing a
Monte Carlo simulation technique, based on a range of possible future results (Level 3). Any changes in
contingent consideration are recorded in transaction-related costs, net.
Transaction-related Costs, net
Transaction-related costs, net are classified separately in the Consolidated Statements of Operations.
These costs are comprised of expenses related to acquisition-related activities such as due-diligence and
other advisory costs, expenses related to the integration of the acquiree’s operations with those of the
Company, including the implementation of best practices and process improvements, non-cash gains and
losses related to re-acquired rights, expenses related to pre-acquisition contingencies and contingent
consideration related to acquisitions.
Investments
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. The Company assesses equity method
investments for impairment whenever events or changes in circumstances indicate that the carrying
amounts of such investments may not be recoverable. Any difference between the carrying value of the
equity method investment and its estimated fair value is recognized as an impairment charge if the loss in
value is deemed other than temporary. As of December 31, 2018 and 2017, the Company had investments
in joint ventures with a carrying value of $48 million and $32 million, respectively, recorded within other non-
current assets on the Consolidated Balance Sheets.
Aggregate realized gains and losses on equity investments and dividend income are recorded within
operating expenses on the Consolidated Statements of Operations. During 2018, the amounts realized from
the sale of equity investments and dividend income was $5 million and during 2017 and 2016, the amounts
were not material.
Divestitures
The Company classifies long-lived assets and liabilities to be disposed of as held for sale in the period in
which they are available for immediate sale in their present condition and the sale is probable and expected
to be completed within one year. The Company initially measures assets and liabilities held for sale at the
lower of their carrying value or fair value less costs to sell and assesses their fair value each reporting
period until disposed. When the divestiture represents a strategic shift that has, or will have, a major effect
on the Company’s operations and financial results, the disposal is presented as a discontinued operation.
F-15
During 2018, the Company, entered into a definitive stock purchase agreement “Purchase Agreement” to
sell the Company’s 50% equity method investment in Anji Car Rental & Leasing Company Limited (“Anji”),
located in China, to Shanghai Automotive Industry Sales Company, Ltd., a 50% owner of Anji. Anji’s
operations are reported within the Company’s International segment. The sale is expected to close in the
first half of 2019 upon receiving clearance from applicable regulatory authorities in China. As of December
31, 2018, the carrying value of the Company’s 50% equity method investment in Anji is $25 million and is
recorded as assets held for sale, which is included in other non-current assets on the Consolidated Balance
Sheets.
During 2018, as a result of the sale of a non-core business, the Company recognized a gain of $4 million
within operating expenses on the Consolidated Statement of Operations.
Nonmarketable Equity Securities
The Company classifies investments without readily determinable fair values that are not accounted for
under the equity method as nonmarketable equity securities. The accounting guidance requires
nonmarketable equity securities to be recorded at cost and adjusted to fair value at each reporting period.
The Company applies the measurement alternative, which allows these investments to be recorded at cost,
less impairment, if any, and subsequently adjust for observable price changes of identical or similar
investments of the same issuer. Any changes in value are recorded within operating expenses. As of
December 31, 2018, the Company’s carrying amount of nonmarketable equity securities is $8 million and is
recorded within other non-current assets. There were no material adjustments made to the carrying
amounts of nonmarketable equity securities during the years ended December 31, 2018 and 2017.
Adoption of New Accounting Pronouncements
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
On January 1, 2018, as a result of a new accounting pronouncement, the Company early adopted ASU
2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax
Effects from Accumulated Other Comprehensive Income,” which allows a reclassification from accumulated
other comprehensive income to retained earnings for the adjustment of deferred taxes due to the reduction
of the corporate income tax rate as a result of the Tax Act. Accordingly, the Company has reclassified $4
million of net tax benefits from accumulated other comprehensive loss to beginning accumulated deficit
related to the following (see Note 15 - Stockholders’ Equity). Prior period amounts have not been
retrospectively adjusted.
Currency Translation
Adjustments
Net Unrealized Gains
(Losses) on Cash
Flow Hedges
Net Unrealized Gains
(Losses) on Available-
for Sale Securities
Minimum Pension
Liability Adjustment
Accumulated Other
Comprehensive
Income (Loss)
$
7
$
1
$
— $
(12) $
(4)
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
On January 1, 2018, as a result of a new accounting pronouncement, the Company adopted ASU 2017-07,
“Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension
Costs and Net Periodic Postretirement Benefit Cost,” which requires an entity to disaggregate the
components of net benefit cost recognized in its consolidated statements of operations. The adoption of this
accounting pronouncement did not have a material impact on the Company’s Consolidated Financial
Statements.
Recognition and Measurement of Financial Assets and Financial Liabilities
On January 1, 2018, as a result of a new accounting pronouncement, the Company adopted ASU 2016-01,
“Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities” along with a related clarifying update, which makes limited amendments to the
classification and measurement of financial instruments. The amendments supersede the guidance to
classify equity securities with readily determinable fair values into different categories (trading or available-
for-sale) and require equity securities (including other ownership interests, such as partnerships,
unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in
F-16
the fair value recognized through net income. Accordingly, the Company has reclassified $2 million of net
unrealized gains associated with available for sale equity securities from accumulated other comprehensive
loss to beginning accumulated deficit (see Note 15 - Stockholders’ Equity). The adoption of this accounting
pronouncement did not impact the Company’s accounting for equity method investments.
Intra-Entity Transfers of Assets Other Than Inventory
On January 1, 2018, as a result of a new accounting pronouncement, the Company adopted ASU 2016-16,
“Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory,” which removes the
prohibition in Topic 740 against the immediate recognition of the current and deferred income tax effects of
intra-entity transfers of assets other than inventory. The adoption of this accounting pronouncement did not
have an impact on the Company’s Consolidated Financial Statements.
Revenue from Contracts with Customers
On January 1, 2018, as a result of a new accounting pronouncement, the Company adopted ASU 2014-09,
“Revenue from Contracts with Customers (Topic 606),” which outlines a single model for entities to use in
accounting for revenue arising from contracts with customers and supersedes current revenue recognition
guidance. The new guidance applies to all contracts with customers except for leases, insurance contracts,
financial instruments, certain nonmonetary exchanges and certain guarantees. Also, additional disclosures
are required about the nature, amount, timing and uncertainty of revenue and cash flows arising from
customer contracts, including significant judgments and changes in judgments. The Company has adopted
the requirements of the new standard on a modified retrospective basis applied to all contracts. Prior
periods have not been retrospectively adjusted. As discussed in Leases below, the Company’s rental
related revenues will be accounted for under Topic 606 until the adoption of ASU 2016-02, “Leases (Topic
842)” on January 1, 2019. Under Topic 606, each transaction that generates customer loyalty points results
in the deferral of revenue generally equivalent to the estimated retail value of points expected to be
redeemed. The associated revenue will be recognized at the time the customer redeems the loyalty points.
Previously, the Company did not defer revenue and recorded an expense associated with the incremental
cost of providing the future rental at the time when the loyalty points were earned. In the Company’s
Consolidated Balance Sheet at January 1, 2018, customer loyalty program liability increased approximately
$50 million related to the estimated retail value of customer loyalty points earned, with a corresponding
increase to accumulated deficit (approximately $40 million, net of tax) due to the cumulative impact of
adopting Topic 606. Certain customers may receive cash-based rebates, which are accounted for as
variable consideration under Topic 606. The Company estimates these rebates based on the expected
amount to be provided to customers and reduces revenue recognized.
F-17
The impact of adoption of Topic 606 on the Company’s Consolidated Statement of Comprehensive Income
for the year ended December 31, 2018 and Consolidated December 31, 2018 Balance Sheet was as
follows:
Consolidated Statement of Comprehensive Income
Revenues
Expenses
Operating
Total expenses
Income before income taxes
Provision for income taxes
Net income
Comprehensive income
Consolidated Balance Sheet
Deferred income taxes
Total assets exclusive of assets under vehicle programs
Total assets
Accounts payable and other current liabilities
Total current liabilities
Other non-current liabilities
Total liabilities exclusive of liabilities under vehicle programs
Accumulated deficit
Total stockholders’ equity
Income Taxes
Year Ended December 31, 2018
Balances
without
Adoption of
Topic 606
Effect of
Change
As Reported
$
9,124
$
9,124
$
4,639
8,857
4,642
8,860
267
102
165
62
$
$
264
101
163
60
$
$
$
$
December 31, 2018
Balances
without
Adoption of
Topic 606
Effect of
Change
As Reported
$
1,301
$
1,292
$
6,370
19,149
1,693
1,716
767
6,011
6,361
19,140
1,688
1,711
725
5,964
(1,091)
414
$
(1,053)
452
$
$
—
(3)
(3)
3
1
2
2
9
9
9
5
5
42
47
(38)
(38)
In January 2018, the FASB issued FASB Staff Question and Answer Topic 740, No. 5: Accounting for Global
Intangible Low-Taxed Income (“GILTI”), which provides guidance on accounting for the GILTI provisions of
the Tax Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible
assets of foreign corporations. The guidance allows accounting for tax on GILTI to be treated as a deferred
tax item or as a component of current period income tax expense in the year incurred, subject to an
accounting policy election. The Company has elected to account for tax on GILTI as a component of current
period income tax expense in the year incurred.
Recently Issued Accounting Pronouncements
Nonemployee Share-Based Payment Accounting
On January 1, 2019, as the result of a new accounting pronouncement, the Company adopted ASU
2018-07, “Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting,” which simplifies the accounting for share-based payments granted to nonemployees for goods
and services and aligns most of the guidance on such payments to nonemployees with the requirements for
share-based payments granted to employees. The adoption of this accounting pronouncement will not have
an impact on the Company's Consolidated Financial Statements.
F-18
Accounting for Hedging Activities
On January 1, 2019, as the result of a new accounting pronouncement, the Company adopted ASU
2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging
Activities,” which amends the existing guidance to allow companies to more accurately present the
economic results of an entity’s risk management activities in the financial statements. The adoption of this
accounting pronouncement will not have a material impact on the Company’s Consolidated Financial
Statements.
Leases
On January 1, 2019, as the result of a new accounting pronouncement, the Company adopted ASU
2016-02, “Leases (Topic 842)” along with related updates, which require a lessee to recognize all long-term
leases on its balance sheet as a liability for its lease obligation, measured at the present value of lease
payments not yet paid, and a corresponding asset representing its right to use the underlying asset over the
lease term and expands disclosure of key information about leasing arrangements. Topic 842 does not
significantly change a lessee’s recognition, measurement and presentation of expenses and cash flows.
Additionally, Topic 842 aligns key aspects of lessor accounting with the revenue recognition guidance in
Topic 606 (see Revenue from Contracts with Customers above). The Company elected available practical
expedients for existing or expired contracts of lessees and lessors wherein the Company is not required to
reassess whether such contracts contain leases, the lease classification or the initial direct costs.The
Company is not utilizing the practical expedient which allows the use of hindsight by lessees and lessors in
determining the lease term and in assessing impairment of its right of use assets. Additionally, the Company
elected as accounting policies to not recognize right of use assets or lease liabilities for short-term leases
(i.e. those with a term of 12 months or less) and, by class of underlying asset, to combine lease and non-
lease components in the contract. The Company utilized the transition method allowing entities to only
apply the new lease standard in the year of adoption.
Adoption of this standard will result in most of the Company’s operating lease commitments being
recognized as operating lease liabilities and right-of-use assets, which will increase total assets and total
liabilities by approximately $3 billion. The Company has determined portions of its vehicle rental contracts
that convey the right to control the use of identified assets are within the scope of the accounting guidance
contained in Topic 842. As discussed in Revenue from Contracts with Customers above, the Company’s
rental related revenues have been accounted for under the revenue accounting standards, until the
adoption of Topic 842 on January 1, 2019.
Intangibles—Goodwill and Other—Internal-Use Software
In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-15 “Customer’s
Accounting for Fees Paid in a Cloud Computing Arrangement That Is a Service Contract”, which provides
guidance for determining when the arrangement includes a software license. The amendments align the
requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service
contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-
use software (and hosting arrangements that include an internal use software license). The amendments in
this Update also require the entity to expense the capitalized implementation costs of a hosting
arrangement that is a service contract over the term of the hosting arrangement, to present the expense in
the same line in its statement of income as the fees associated with the hosting element (service) of the
arrangement and classify payments for capitalized implementation costs in its statement of cash flows in the
same manner as payments made for fees associated with the hosting element. The entity is also required to
present the capitalized implementation costs in its balance sheet in the same line that a prepayment for the
fees of the associated hosting arrangement would be presented. ASU 2018-15 becomes effective for the
Company on January 1, 2020. Early adoption is permitted. The Company is currently evaluating the impact
of adopting this accounting pronouncement on its Consolidated Financial Statements.
F-19
Compensation—Retirement Benefits—Defined Benefit Plans
In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework—Changes to the Disclosure
Requirements for Defined Benefit Plans,” which adds, removes, and clarifies disclosure requirements
related to defined benefit pension and other postretirement plans. These changes are part of the FASB’s
disclosure framework project, which the Board launched in 2014 to improve the effectiveness of disclosures
in notes to financial statements. ASU 2018-14 becomes effective for the Company on January 1, 2021.
Early adoption is permitted. The adoption of this accounting pronouncement is not expected to have a
material impact on the Company's Consolidated Financial Statements.
Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework—Changes to the Disclosure
Requirements for Fair Value Measurement,” which adds, removes, and modifies disclosure requirements
related to fair value measurements. ASU 2018-13 becomes effective for the Company on January 1, 2020.
Early adoption is permitted. The adoption of this accounting pronouncement is not expected to have a
material impact on the Company's Consolidated Financial Statements.
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments,” which sets forth a current expected credit loss
impairment model for financial assets that replaces the current incurred loss model. This model requires a
financial asset (or group of financial assets), including trade receivables, measured at amortized cost to be
presented at the net amount expected to be collected with an allowance for credit losses deducted from the
amortized cost basis. The allowance for credit losses should reflect management’s current estimate of
credit losses that are expected to occur over the remaining life of a financial asset. ASU 2016-13 becomes
effective for the Company on January 1, 2020. Early adoption is permitted as of January 1, 2019. The
adoption of this accounting pronouncement is not expected to have a material impact on the Company's
Consolidated Financial Statements.
3. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (“EPS”) (shares in
millions):
Year Ended December 31,
2017
2016
2018
Net income for basic and diluted EPS
$
165 $
361 $
163
Basic weighted average shares outstanding
Options and non-vested stock
Diluted weighted average shares outstanding
Earnings per share:
Basic
Diluted
79.3
0.8
80.1
83.4
1.4
84.8
$
$
2.08 $
2.06 $
4.32 $
4.25 $
92.0
1.3
93.3
1.78
1.75
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):
Non-vested stock (a)
__________
(a) The weighted average grant date fair value for anti-dilutive non-vested stock for 2018, 2017 and 2016 was $48.66,
0.2
0.5
0.2
As of December 31,
2017
2018
2016
$38.40 and $52.07, respectively.
F-20
4. Restructuring and Other Related Charges
Restructuring
During first quarter 2018, the Company initiated a strategic restructuring plan to improve processes and
reduce headcount in response to its new workforce planning technology that allows more effective
management of staff levels (“Workforce planning”). During the year ended December 31, 2018, as part of
this process, the Company formally communicated the termination of employment to approximately 190
employees, and as of December 31, 2018, the Company had terminated the employment of approximately
180 of these employees. The costs associated with this initiative primarily represent severance,
outplacement services and other costs associated with employee terminations, the majority of which have
been or are expected to be settled in cash. The Company expects no further restructuring expense related
to this initiative. This initiative is substantially complete.
During fourth quarter 2017, the Company initiated a strategic restructuring initiative to better position its
truck rental operations in the U.S., in which it closed certain rental locations and reduced the size of the
older rental fleet, with the intent to increase fleet utilization and reduce vehicle and overhead costs (“Truck
initiative”). During the year ended December 31, 2017, as part of this initiative, the Company formally
communicated the termination of employment to approximately 25 employees and as of December 31,
2018 this initiative is substantially complete.
During first quarter 2017, the Company initiated a strategic restructuring initiative to drive operational
efficiency throughout the organization by reducing headcount, improving processes and consolidating
functions, closing certain rental locations and decreasing the size of its fleet (“T17”). During the year ended
December 31, 2017, as part of this initiative, the Company formally communicated the termination of
employment to approximately 680 employees, and as of December 31, 2018, the Company had terminated
the employment of approximately 675 of these employees. The costs associated with this initiative primarily
represent severance, outplacement services and other costs associated with employee terminations, the
majority of which have been or are expected to be settled in cash. This initiative is substantially complete.
In 2014, the Company committed to various strategic initiatives to identify best practices and drive efficiency
throughout its organization, by reducing headcount, improving processes and consolidating functions
(“T15”). In first quarter 2016, the Company expanded the T15 restructuring to take advantage of additional
efficiency opportunities. The expanded T15 restructuring fits within the initiative’s focus areas to identify
best practices and drive efficiency throughout the organization, including the consolidation of rental
locations. During the year ended December 31, 2016, as part of this process, the Company formally
communicated the termination of employment to approximately 615 employees. At December 31 2018, the
Company had terminated approximately 990 employees as part of this initiative. The costs associated with
this initiative primarily represent severance, outplacement services and other costs associated with
employee terminations, the majority of which have been settled in cash. This initiative is complete.
F-21
11
21
9
(1)
(18)
(15)
(1)
6
5
35
(5)
(33)
(3)
(1)
4
13
5
2
1
(12)
(5)
(5)
(1)
2
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:
Balance as of January 1, 2016
$
10 $
1 $
— $
Personnel
Related
Facility
Related
Other (a)
Total
Restructuring expense:
T15
Acquisition integration
Avis Europe
Restructuring payment/utilization:
T15
Acquisition integration
Avis Europe
Balance as of December 31, 2016
Restructuring expense:
Truck initiative
T17
Restructuring payment/utilization:
Truck initiative
T17
T15
Acquisition integration
Balance as of December 31, 2017
Restructuring expense:
Workforce planning
Truck initiative
T17
T15
Restructuring payment/utilization:
Workforce planning
Truck initiative
T17
T15
Balance as of December 31, 2018
__________
(a)
15
9
(1)
(12)
(15)
(1)
5
1
20
(1)
(17)
(3)
(1)
4
11
1
—
1
1
—
—
(1)
—
—
1
—
—
—
(1)
—
—
—
—
—
—
—
5
—
—
(5)
—
—
—
4
15
(4)
(15)
—
—
—
2
4
2
—
(11)
(1)
(3)
(1)
1 $
—
—
—
—
— $
(1)
(4)
(2)
—
1 $
$
Includes expenses primarily related to the disposition of vehicles.
F-22
Balance as of January 1, 2016
Restructuring expense:
T15
Acquisition integration
Avis Europe
Restructuring payment/utilization:
T15
Acquisition integration
Avis Europe
Balance as of December 31, 2016
Restructuring expense:
Truck initiative
T17
Restructuring payment/utilization:
Truck initiative
T17
T15
Acquisition integration
Balance as of December 31, 2017
Restructuring expense:
Workforce planning
Truck initiative
T17
T15
Restructuring payment/utilization:
Workforce planning
Truck initiative
T17
T15
Americas
International
Total
$
1 $
10 $
11
—
—
(11)
—
—
1
5
25
(5)
(24)
(1)
—
1
4
5
2
—
10
9
(1)
(7)
(15)
(1)
5
—
10
—
(9)
(2)
(1)
3
9
—
—
1
(4)
(5)
(3)
—
— $
(8)
—
(2)
(1)
2 $
11
21
9
(1)
(18)
(15)
(1)
6
5
35
(5)
(33)
(3)
(1)
4
13
5
2
1
(12)
(5)
(5)
(1)
2
Balance as of December 31, 2018
$
Other Related Charges
Officer Separation Costs
On May 12, 2017, the Company announced the resignation of David B. Wyshner as the Company’s
President and Chief Financial Officer. In connection with Mr. Wyshner’s departure, the Company recorded
other related charges of $7 million during the year ended December 31, 2017, inclusive of accelerated
stock-based compensation expense of $2 million.
Limited Voluntary Opportunity Plans (“LVOP”)
During 2017, the Company offered voluntary termination programs to certain employees in the Americas’
field operations, shared services, and general and administrative functions for a limited time. These
employees, if qualified, elected resignation from employment in return for enhanced severance benefits to
be settled in cash. During the year ended December 31, 2017, the Company recorded other related
charges of $16 million in connection with LVOP. As of December 31, 2018, 358 qualified employees elected
to participate in the plan and the employment of all participants had been terminated.
F-23
5. Acquisitions and Other Investments
Acquisitions
2018
Turiscar Group
In October 2018, the Company completed the acquisition of Turiscar Group, a provider of vehicle rental
services in Portugal, for €22 million (approximately $25 million), net of acquired cash, of which €23 million
(approximately $26 million) was paid. The remaining €4 million of the purchase price will be paid during the
three months ended December 31, 2020. The investment enabled the Company to strengthen and expand
its commitment in the Portuguese market. 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 International
reportable segment. In connection with this acquisition, approximately $12 million was recorded in goodwill,
and other intangibles of $10 million related to customer relationships and $2 million related to trademarks
were recorded. The customer relationships and trademarks are being amortized over a weighted average
useful life of approximately 11 years. The goodwill is not deductible for tax purposes. The fair value of
assets acquired and liabilities assumed has not been finalized and is therefore subject to change.
Morini S.p.A.
In July 2018, the Company completed the acquisition of Morini S.p.A. (”Morini”) for €35 million
(approximately $40 million), net of acquired cash, plus potential earn-out payments of €5 million
(approximately $6 million) based on Morini’s performance over the next two years. During the year ended
December 31, 2018, the Company paid €28 million (approximately $32 million). The remaining €7 million of
the purchase price will be paid during the three months ended March 31, 2020. The investment enabled the
Company to expand its footprint of vehicle rental services in Northern Italy. 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 International reportable segment. In connection with this acquisition, approximately $42 million
was recorded in goodwill, and other intangibles of $6 million related to customer relationships, $3 million
related to trademarks and $2 million related to license agreements were recorded. The customer
relationships, trademarks and license agreements are being amortized over a weighted average useful life
of approximately six years. The goodwill is not deductible for tax purposes. The fair value of assets acquired
and liabilities assumed has not been finalized and is therefore subject to change.
Avis and Budget Licensees
In 2018, the Company completed the acquisitions of various licensees in Europe and North America, for
approximately $38 million, net of acquired cash. These investments were in line with the Company’s
strategy to re-acquire licensees when advantageous to expand its footprint of Company-operated locations.
The acquired fleet was financed under the Company’s existing financing arrangements. In connection with
these acquisitions, other intangibles of approximately $42 million related to license agreements was
recorded. The license agreements are being amortized over a weighted average useful life of approximately
two years. The fair value of the assets acquired and liabilities assumed has not yet been finalized and is
therefore subject to change.
2017
ACL Hire Limited
In November 2017, the Company completed the acquisition of ACL Hire Limited, a vehicle rental company
in the UK specializing in commercial and mid-size transit vans, for approximately $5 million, net of acquired
cash, and agreed to an additional $2 million of contingent consideration which is contingent on ACL Hire
Limited’s future financial performance. 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 International reportable
segment. In connection with this acquisition, approximately $6 million was recorded in goodwill. The
F-24
goodwill is not deductible for tax purposes. Differences between the preliminary allocation of purchase price
and the final allocation were not material.
Avis and Budget Licensees
During 2017, the Company completed the acquisitions of various licensees in Europe and North America,
for approximately $9 million, plus $4 million for acquired fleet. These investments were in line with the
Company’s strategy to re-acquire licensees when advantageous to expand its footprint of Company-
operated locations. The acquired fleet was financed under the Company’s existing financing arrangements.
In connection with these acquisitions, other intangibles of approximately $12 million related to license
agreements was recorded. The license agreements will be amortized over a weighted average useful life of
approximately three years. In addition, at the time of the acquisitions, the Company recorded $2 million in
non-cash charges within transaction-related costs, net in connection with the license rights reacquired by
the Company. Differences between the preliminary allocation of purchase price and the final allocation were
not material for Avis and Budget Licensees.
2016
FranceCars
In December 2016, the Company completed the acquisition of FranceCars for approximately $45 million,
net of acquired cash. The investment enabled the Company to expand its footprint with a leading provider of
vehicle rental services in France. 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 International reportable segment.
In connection with this acquisition, approximately $22 million was recorded in goodwill, and other
intangibles of $6 million related to customer relationships and $9 million related to trademarks were
recorded. The customer relationships and trademarks are being amortized over a weighted average useful
life of approximately eight years. The goodwill is not deductible for tax purposes. Differences between the
preliminary allocation of purchase price and the final allocation were not material for FranceCars.
Other Investments
2018
In March 2018, the Company made an initial equity investment of €16 million ($20 million) in its licensee in
Greece (“Greece”), for a 20% ownership stake. In June 2018, the Company purchased an additional 20%
equity investment for €17 million ($19 million), including an acceleration premium, and as of June 30, 2018,
had a 40% ownership stake in Greece. The Company’s equity investment is recorded within other non-
current assets. The Company’s share of Greece’s results are reported within operating expenses and is $8
million for the year ended December 31, 2018.
F-25
6. Intangible Assets
Intangible assets consisted of:
Amortized Intangible Assets
License agreements (a)
Customer relationships (b)
Other (c)
As of December 31, 2018
As of December 31, 2017
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
$
$
305
251
52
608
$
$
168
141
21
330
$
$
137
110
31
278
$
$
281
242
51
574
$
$
140
119
18
277
$
$
141
123
33
297
Unamortized Intangible Assets
Goodwill
Trademarks
_________
(a) Primarily amortized over a period ranging from 0 to 40 years with a weighted average life of 16 years.
(b) Primarily amortized over a period ranging from 3 to 20 years with a weighted average life of 12 years.
(c) Primarily amortized over a period ranging from 3 to 10 years with a weighted average life of 9 years.
1,073
553
1,092
547
$
$
$
$
During 2017, the Company recorded an impairment related to the unamortized Zipcar trademark of $2
million based on a combination of observable and unobservable fair value inputs (Level 3), specifically the
Income approach-relief from royalty method, which considers market inputs.
Amortization expense relating to all intangible assets was as follows:
Year Ended December 31,
2017
2016
2018
License agreements
Customer relationships
Other
Total
$
$
36 $
24
5
65 $
33 $
24
5
62 $
35
23
7
65
Based on the Company’s amortizable intangible assets at December 31, 2018, the Company expects
related amortization expense of approximately $56 million for 2019, $48 million for 2020, $34 million for
2021, $26 million for 2022 and $23 million for 2023 excluding effects of currency exchange rates.
The carrying amounts of goodwill and related changes are as follows:
Gross goodwill as of January 1, 2017
Accumulated impairment losses as of January 1, 2017
Goodwill as of January 1, 2017
Acquisitions
Currency translation adjustments and other
Goodwill as of December 31, 2017
Acquisitions
Currency translation adjustments and other
Goodwill as of December 31, 2018
Americas
International
Total
Company
$
$
2,139 $
(1,587)
552
—
—
552
—
(13)
539 $
986 $
(531)
455
5
61
521
54
(22)
553 $
3,125
(2,118)
1,007
5
61
1,073
54
(35)
1,092
F-26
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,
2017
2018
12,548 $
(1,670)
10,878
596
11,474 $
11,652
(1,652)
10,000
626
10,626
$
$
The components of vehicle depreciation and lease charges, net are summarized below:
Year Ended December 31,
2017
2016
2018
Depreciation expense
Lease charges
(Gain) loss on sale of vehicles, net
Vehicle depreciation and lease charges, net
$
$
1,974 $
253
(48)
2,179 $
1,947 $
222
52
2,221 $
1,877
180
(10)
2,047
At December 31, 2018, 2017 and 2016, the Company had payables related to vehicle purchases included
in liabilities under vehicle programs - other of $472 million, $346 million and $321 million, respectively, and
receivables related to vehicle sales included in assets under vehicle programs - receivables from vehicle
manufacturers and other of $622 million, $545 million and $520 million, respectively.
8. Income Taxes
On December 22, 2017 the Tax Act made substantial changes to corporate income tax laws. Among the key
provisions were a U.S. corporate tax rate reduction from 35% to 21% effective for tax years beginning
January 1, 2018 and a one-time transition tax on the deemed repatriation of cumulative earnings from
foreign subsidiaries and changes to U.S. taxation of foreign earnings from a worldwide to a territorial tax
system effective for tax years beginning January 1, 2018. The Company recognized the effects of the Tax
Act in its Consolidated Financial Statements in accordance with Staff Accounting Bulletin No. 118, which
provides SEC staff guidance for the application of FASB Accounting Standards Codification Topic 740,
Income Taxes, in the reporting period that the Tax Act was signed into law.
In 2017 the Company recorded a provisional income tax benefit of $317 million related to the
remeasurement of its net deferred income tax liabilities as a result of the reduced corporate tax rate, and a
provisional tax expense of $104 million for the one-time transition tax on the deemed repatriation of
cumulative foreign subsidiary earnings.
The Company completed the accounting for the effects of the Tax Act during 2018 and recorded an
additional income tax expense of $30 million for the one-time transition tax on the deemed repatriation of
foreign earnings.
F-27
The provision for (benefit from) income taxes consists of the following:
Year Ended December 31,
2017
2016
2018
Current
Federal
State
Foreign
Current income tax provision
Deferred
Federal
State
Foreign
Deferred income tax provision
$
(7) $
36
59
88
63
(39)
(10)
14
Provision for (benefit from) income taxes
$
102 $
Pretax income for domestic and foreign operations consists of the following:
— $
5
37
42
(205)
(5)
18
(192)
(150) $
(1)
3
63
65
51
5
(5)
51
116
Year Ended December 31,
2017
2016
2018
United States
Foreign
Pretax income
$
$
114 $
153
267 $
17 $
194
211 $
127
152
279
Deferred income tax assets and liabilities are comprised of the following:
Deferred income tax assets:
Net tax loss carryforwards
Accrued liabilities and deferred revenue
Tax credits
Depreciation and amortization
Provision for doubtful accounts
Other
Valuation allowance (a)
Deferred income tax assets
Deferred income tax liabilities:
Depreciation and amortization
Prepaid expenses
Other
Deferred income tax liabilities
Deferred income tax assets, net
As of December 31,
2017
2018
$
$
1,390 $
230
17
16
6
38
(311)
1,386
60
20
5
85
1,301 $
1,104
216
24
4
8
50
(331)
1,075
121
20
3
144
931
__________
(a) The valuation allowance of $311 million at December 31, 2018 relates to tax loss carryforwards and certain
deferred tax assets of $283 million and $28 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 $331 million at December 31, 2017 relates to tax loss carryforwards and certain
deferred tax assets of $302 million and $29 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.
F-28
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,
2017
2018
44 $
58
2,005
1,961 $
1,652
1,594
$
$
At December 31, 2018, the Company had U.S. federal net operating loss carryforwards of approximately
$4.9 billion. The majority of the net operating loss carryforwards expire by 2031 and a significant remaining
portion has an indefinite utilization period pursuant to the Tax Act. 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,
2018, the Company had foreign net operating loss carryforwards of approximately $903 million with an
indefinite utilization period.
At December 31, 2018, we have undistributed earnings of certain foreign subsidiaries of approximately
$699 million that we have indefinitely reinvested, and on which we have not recognized deferred taxes.
Estimating the amount of potential tax is not practicable because of the complexity and variety of
assumptions necessary to compute the tax.
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,
2017
2016
2018
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
Taxes on foreign operations at rates different than
statutory U.S. federal rates
Stock-based compensation
Tax Act (benefit) expense
Other non-deductible expenses
Other
21.0%
35.0 %
35.0%
5.5
6.3
(5.2)
(0.8)
11.2
1.1
(0.9)
38.2%
3.8
(4.7)
(3.6)
(3.4)
(100.8)
2.2
0.4
(71.1)%
2.0
(0.2)
3.1
—
—
1.7
—
41.6%
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
Reductions for tax positions for prior years
Settlements
Statute of limitations
Balance at December 31
2018
2017
2016
63 $
8
—
(6)
(3)
(1)
61 $
59 $
6
9
(10)
—
(1)
63 $
56
3
3
(3)
—
—
59
$
$
The Company does not anticipate that total unrecognized tax benefits will change significantly in 2019.
The Company is subject to taxation in the United States and various foreign jurisdictions. As of December
31, 2018, the 2015 through 2017 tax years generally remain subject to examination by the federal tax
authorities. The 2012 through 2017 tax years generally remain subject to examination by various state tax
F-29
authorities. In significant foreign jurisdictions, the 2011 through 2017 tax years generally remain subject to
examination by their respective tax authorities.
Substantially all of the gross amount of the unrecognized tax benefits at December 31, 2018, 2017 and
2016, if recognized, would affect the Company’s provision for, or benefit from, income taxes. As of
December 31, 2018, the Company’s unrecognized tax benefits were offset by tax loss carryforwards in the
amount of $23 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,
2017
2018
$
41 $
29
46
26
__________
(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, 2018 and 2017, $13 million of
unrecognized tax benefits are related to tax contingencies for which the Company believes it is entitled to
indemnification.
(b) 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
years ended December 31, 2018, 2017 and 2016, were not significant and were recognized as a component of the
provision for 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
Projects in process
Buses and support vehicles
Less: Accumulated depreciation and amortization
Property and equipment, net
As of December 31,
2017
2018
$
$
241 $
180
183
604 $
196
174
163
533
As of December 31,
2017
2018
$
49 $
625
613
411
169
95
1,962
(1,226)
$
736 $
49
626
583
387
118
93
1,856
(1,152)
704
Depreciation and amortization expense relating to property and equipment during 2018, 2017 and 2016 was
$191 million, $197 million and $188 million, respectively (including $92 million, $95 million and $87 million,
respectively, of amortization expense relating to capitalized software).
F-30
11. Accounts Payable and Other Current Liabilities
Accounts payable and other current liabilities consisted of:
Accounts payable
Accrued sales and use taxes
Accrued payroll and related
Accrued advertising and marketing
Public liability and property damage insurance liabilities – current
Deferred revenue – current
Accrued insurance
Other
Accounts payable and other current liabilities
12. Long-term Corporate Debt and Borrowing Arrangements
Long-term debt and other borrowing arrangements consisted of:
Floating Rate Term Loan (a)
5 % Senior Notes
5½% Senior Notes
6 % Senior Notes
4 % euro-denominated Senior Notes
Floating Rate Term Loan (a)
5¼% Senior Notes
4½% euro-denominated Senior Notes
4¾% euro-denominated Senior Notes
Other (b)
Deferred financing fees
Total
Less: Short-term debt and current portion of long-term debt
Long-term debt
Maturity
Date
March 2022
June 2022
April 2023
April 2024
November 2024
February 2025
March 2025
May 2025
January 2026
As of December 31,
2017
2018
371 $
208
200
192
149
140
91
342
1,693 $
359
218
176
190
145
135
103
293
1,619
As of December 31,
2017
2018
—
—
675
350
344
1,123
375
287
401
41
(45)
3,551
23
3,528
$
1,136
400
675
350
360
—
375
300
—
49
(46)
3,599
26
3,573
$
$
$
__________
(a)
The floating rate term loan is part of the Company’s senior revolving credit facility, which is secured by pledges of capital stock of
certain subsidiaries of the Company, and liens on substantially all of the Company’s intellectual property and certain other real
and personal property.
(b) Primarily includes capital leases which are secured by liens on the related assets.
Term Loan
Floating Rate Term Loan due 2022. In March 2017, the Company increased its Floating Rate Term Loan
due 2022 to $1.1 billion and reduced the loan interest rate to three-month LIBOR plus 2.00%, for an
aggregate rate of 3.70%; however, the Company entered into an interest rate swap to hedge $700 million of
its interest rate exposure related to the floating rate term loan at an aggregate rate of 3.79%. The Company
used the incremental term loan proceeds to repay all of its outstanding Floating Rate Term Loan due 2019.
In June 2017, the Company used the remaining proceeds to redeem the remainder of its outstanding
Floating Rate Senior Notes due 2017.
Floating Rate Term Loan due 2025. In February 2018, the Company amended its Floating Rate Term Loan
due 2022 and extended its maturity term to 2025. The loan bears interest at one-month LIBOR plus 2.00%,
for an aggregate rate of 4.53%; however, the Company entered into an interest rate swap to hedge $700
million of its interest rate exposure related to the floating rate term loan at an aggregate rate of 3.67%.
Senior Notes
5 % Senior Notes due 2022. In May 2014, the Company issued $400 million of 5 % Senior Notes due
2022. In June 2014, the Company used the proceeds to repurchase the remaining $395 million principal
F-31
amount of its 8¼% Senior Notes. 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 at any time on or after June 1, 2017 at
specified redemption prices plus accrued interest. In October 2018, the Company redeemed its outstanding
$400 million principal amount for $410 million plus accrued interest.
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 accrued interest.
In November 2014, the Company issued $175 million of additional 5½% Senior Notes due 2023 at 99.625%
of their face value, 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 accrued interest. The
Company used the proceeds from the issuance to partially fund the acquisition of its Budget licensee for
Southern California and Las Vegas.
6 % Senior Notes due 2024. In March 2016, the Company issued $350 million of 6 % Senior Notes due
2024 at par, 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 April 1, 2019 at specified redemption prices plus accrued interest. In
May 2016, the Company used the net proceeds from the offering to redeem $300 million principal amount
of its previous 4 % Senior Notes and for general corporate purposes.
4 % euro-denominated Senior Notes due 2024. In September 2016, the Company issued €300 million of
4 % euro-denominated Senior Notes due 2024 at par, 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 November 15, 2019 at
specified redemption prices plus accrued interest. In October 2016, the Company used the net proceeds
from the offering primarily to redeem €275 million of its outstanding 6% euro-denominated Senior Notes due
2021.
5¼% Senior Notes due 2025. In March 2015, the Company issued $375 million of 5¼% Senior Notes due
2025 at par, 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 March 15, 2020 at specified redemption prices plus accrued interest.
In April 2015, the Company used net proceeds from the offering to redeem the remaining $223 million
principal amount of its 9¾% Senior Notes and to partially fund the acquisition of Maggiore.
4½% euro-denominated Senior Notes due 2025. In March 2017, the Company issued €250 million of 4½%
euro-denominated Senior Notes due 2025, at par, with interest payable semi-annually. The Company has
the right to redeem these notes in whole or in part on or after May 15, 2020 at specified redemption prices
plus accrued interest. In April 2017, the Company used the net proceeds from the offering to redeem its
outstanding €175 million principal amount of 6% euro-denominated Senior Notes due 2021 for €180 million
plus accrued interest. In June 2017, the Company used the remaining proceeds to redeem a portion of its
Floating Rate Senior Notes due 2017.
4¾% euro-denominated Senior Notes due 2026. In October 2018, the Company issued €350 million of
4¾% euro-denominated Senior Notes due 2026, at par, with interest payable semi-annually. The Company
has the right to redeem these notes in whole or in part on or after September 30, 2021 at specified
redemption prices plus accrued interest. In October 2018, the Company used the net proceeds from the
offering to redeem its 5 % Senior Notes due June 2022 for $410 million plus accrued interest.
The 5 % Senior Notes, the 5½% Senior Notes, 6 % Senior Notes and the 5¼% Senior Notes 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.
The 4 % euro-denominated Senior Notes, 4½% euro-denominated Senior Notes and 4¾% euro-
denominated Senior 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.
F-32
In connection with the debt amendments and repayments for the years ended December 31, 2018, 2017
and 2016, the Company recorded $19 million, $3 million and $27 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, 2018:
Year
2019
2020
2021
2022
2023
Thereafter
Amount
23
17
16
16
690
2,834
3,596
$
$
Committed Credit Facilities And Available Funding Arrangements
At December 31, 2018, the committed corporate credit facilities available to the Company and/or its
subsidiaries were as follows:
Senior revolving credit facility maturing 2023 (a)
Other facilities (b)
$
1,800
1
Total
Capacity
Outstanding
Borrowings
$
Letters of
Credit Issued
1,167
—
— $
1
Available
Capacity
$
633
—
__________
(a)
The senior revolving credit facility bears interest at one-month LIBOR plus 200 basis points and is part of the Company’s senior
credit facility, which is secured by pledges of capital stock of certain subsidiaries of the Company, and liens on substantially all of
the Company’s intellectual property and certain other real and personal property.
These facilities encompass bank overdraft lines of credit, bearing interest of 3.22% as of December 31, 2018.
(b)
In February 2018, the Company amended the terms of its Senior revolving credit facility maturing 2021 and
extended its maturity to 2023.
At December 31, 2018 and 2017, the Company had various uncommitted credit facilities available, which
bear interest at rates of 0.74% to 6.60%, under which it had drawn approximately $1 million and $2 million,
respectively.
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 also contains a maximum leverage ratio requirement. As
of December 31, 2018, the Company was in compliance with the financial covenants governing its
indebtedness.
F-33
13. 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,
2017
2018
Americas – Debt due to Avis Budget Rental Car Funding
Americas – Debt borrowings
International – Debt borrowings (a)
International – Capital leases
Other
Deferred financing fees (b)
Total
__________
(a) The increase reflects additional borrowings principally to fund increases in the Company's car rental fleet.
(b) Deferred financing fees related to Debt due to Avis Budget Rental Car Funding as of December 31, 2018 and 2017
7,393 $
635
2,060
191
2
(49)
10,232 $
6,516
660
1,942
146
1
(44)
9,221
$
$
were $35 million and $36 million, respectively.
Americas
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,
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, 2018,
approximate $9.0 billion and some 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 investment 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
F-34
results of operations and cash flows are not reflected within the Company’s financial statements.
During March 2017 and December 2017, Avis Budget Rental Car Funding issued approximately $600 million
in asset-backed notes with an expected final payment date of September 2022 and $500 million in asset-
backed notes with an expected final payment date of March 2023, respectively. During April 2018 and
October 2018, Avis Budget Rental Car Funding issued approximately $400 million in asset-backed notes
with an expected final payment date of September 2023 and approximately $550 million in asset-backed
notes with an expected final payment date of March 2024, respectively. The Company used the proceeds
from these borrowings to fund the repayment of maturing vehicle-backed debt and the acquisition of rental
cars in the United States. 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, 2018 and 2017, in each
period.
Debt 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 Company finances the acquisition of fleet for its truck rental
operations in the United States through a combination of debt facilities and leases. These debt borrowings
represent a mix of fixed and floating rate debt and had a weighted average interest rate of 3% as of
December 31, 2018 and 2017, in each period.
International
Debt borrowings. In 2013, the Company entered into a three-year, €500 million (approximately $687 million)
European rental fleet securitization program, which is used to finance fleet purchases for certain of the
Company’s European operations. During 2018, 2017, 2016, 2015 and 2014, the Company increased its
capacity under this program by €150 million (approximately $175 million), €250 million (approximately $281
million), €400 million (approximately $458 million), €210 million (approximately $235 million) and €290 million
(approximately $370 million), respectively, and recently extended the securitization’s maturity to 2021. The
Company finances the acquisition of vehicles used in its International rental car operations through this 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 2% as of December 31, 2018 and 2017.
Capital leases. The Company obtained a portion of its International vehicles under capital lease
arrangements. For the years ended December 31, 2018 and 2017, the weighted average interest rate on
these borrowings was 1%, in each period. All capital leases are on a fixed repayment basis and interest rates
are fixed at the contract date.
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, 2018:
Debt under
Vehicle
Programs (a)
1,502
$
3,810
2,486
947
1,086
450
10,281
$
2019
2020 (b)
2021 (c)
2022
2023
Thereafter
__________
(a) Vehicle-backed debt primarily represents asset-backed securities.
(b)
Includes $2.2 billion of bank and bank-sponsored facilities.
(c)
Includes $1.5 billion of bank and bank-sponsored facilities.
F-35
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, 2018:
Total
Capacity (a)
Outstanding
Borrowings (b)
Available
Capacity
$
Americas – Debt due to Avis Budget Rental Car Funding
Americas – Debt borrowings
International – Debt borrowings
International – Capital leases
Other
Total
__________
(a) Capacity is subject to maintaining sufficient assets to collateralize debt.
(b)
$
8,883
947
3,071
209
2
13,112
$
$
7,393
635
2,060
191
2
10,281
$
$
1,490
312
1,011
18
—
2,831
The outstanding debt is collateralized by vehicles and related assets of $8.8 billion for Americas - Debt due to Avis Budget Rental
Car Funding; $0.7 billion for Americas - Debt borrowings; $2.3 billion for International - Debt borrowings; and $0.2 billion for
International - Capital leases.
Debt Covenants
The agreements under the Company’s vehicle-backed funding programs contain restrictive covenants,
including restrictions on dividends paid to the Company by certain of its subsidiaries and restrictions on
indebtedness, mergers, liens, liquidations and sale and leaseback transactions, and in some cases also
require compliance with certain financial requirements. As of December 31, 2018, the Company is not aware
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.
14. 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, 2018, are as follows:
2019
2020
2021
2022
2023
Thereafter
Amount
835
476
345
253
162
590
2,661
$
$
The future minimum lease payments in the above table have been reduced by minimum future sublease
rental inflows in the aggregate of $4 million for all periods shown in the table.
F-36
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
2018
2017
2016
$
$
709 $
273
982
(5)
977 $
715 $
221
936
(4)
932 $
699
214
913
(5)
908
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 13-Debt Under Vehicle Programs
and Borrowing Arrangements, are not significant.
The Company leases a portion of its vehicles under operating leases, some of which extend through 2025.
As of December 31, 2018, the Company has guaranteed up to $305 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. The Company
does not believe that the impact of any resolution of pre-existing contingent liabilities in connection with the
spin-offs should result in a material liability to the Company in relation to its consolidated financial position
or liquidity, as Realogy and Wyndham each have agreed to assume responsibility for these liabilities. The
Company is also named in litigation that is primarily related to the businesses of its former subsidiaries,
including Realogy and Wyndham. The Company is entitled to indemnification from such entities for any
liability resulting from such litigation.
In February 2017, following a state court trial in Georgia, a jury found the Company liable for damages in a
case brought by a plaintiff who was injured in a vehicle accident allegedly caused by an employee of an
independent contractor of the Company who was acting outside of the scope of employment. In March
2017, the Company was also found liable for damages in a companion case arising from the same
incident. The Company is appealing both verdicts and considers the attribution of liability to the Company,
and the amount of damages awarded, to be unsupported by the facts of these cases. The Company has
recognized a liability for the expected loss related to these cases, net of recoverable insurance proceeds, of
approximately $12 million.
The Company is involved in claims, legal proceedings and governmental inquiries that are incidental to its
vehicle rental and car sharing operations, including, among others, contract and licensee disputes,
competition matters, employment and wage-and-hour claims, insurance and liability claims, intellectual
property claims, business practice disputes and other regulatory, environmental, commercial and tax
matters. Litigation is inherently unpredictable and, although the Company believes that its accruals are
adequate and/or that it has valid defenses in these matters, unfavorable resolutions could occur. The
Company estimates that the potential exposure resulting from adverse outcomes of legal proceedings in
which it is reasonably possible that a loss may be incurred could, in the aggregate, be up to approximately
$45 million in excess of amounts accrued as of December 31, 2018; however, the Company does not
believe that the impact should result in a material liability to the Company in relation to its consolidated
financial condition or results of operations.
Commitments to Purchase Vehicles
The Company maintains agreements with vehicle manufacturers under which the Company has agreed to
purchase approximately $8.7 billion of vehicles from manufacturers over the next 12 months financed
primarily through the issuance of vehicle-backed debt and cash received upon the disposition of vehicles.
F-37
Certain of these commitments are subject to the vehicle manufacturers satisfying their obligations under
their respective repurchase and guaranteed depreciation agreements.
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, computer services and
capital expenditures. As of December 31, 2018, the Company had approximately $178 million of purchase
obligations, which extend through 2023.
Concentrations
Concentrations of credit risk at December 31, 2018, include (i) risks related to the Company’s repurchase
and guaranteed depreciation agreements with domestic and foreign car manufacturers, including Ford, Fiat
Chrysler and General Motors, 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 $27 million and $16 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 gasoline storage tanks at its rental facilities. The liability accrued for
asset retirement obligations was $22 million and $23 million at December 31, 2018 and 2017, respectively.
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,
businesses or activities, (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.
15. Stockholders’ Equity
Cash Dividend Payments
During 2018, 2017 and 2016, 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 its vehicle financing programs.
F-38
Share Repurchases
The Company’s Board of Directors has authorized the repurchase of up to approximately $1.7 billion of its
common stock under a plan originally approved in 2013 and subsequently expanded, most recently in 2018.
During 2018, 2017 and 2016, the Company repurchased approximately 24 million shares of common stock
at a cost of approximately $800 million under the program. As of December 31, 2018, approximately $150
million of authorization remained available to repurchase common stock under this plan.
Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) are as follows:
Currency
Translation
Adjustments
Net Unrealized
Gains (Losses) on
Cash Flow
Hedges (a)
Net Unrealized
Gains (Losses) on
Available-For-Sale
Securities
Minimum Pension
Liability
Adjustment (b)
Accumulated
Other
Comprehensive
Income (Loss)
Balance, January 1, 2016
$
(80) $
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from
accumulated other
comprehensive income (loss)
Net current-period other
comprehensive income (loss)
Balance, December 31, 2016
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from
accumulated other
comprehensive income (loss)
Net current-period other
comprehensive income (loss)
Balance, December 31, 2017
Cumulative effect of accounting
change (c)
Balance, January 1, 2018
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from
accumulated other
comprehensive income (loss)
Net current-period other
comprehensive income (loss)
41
—
41
(39)
110
—
110
71
7
78
(81)
—
(81)
(2) $
—
4
4
2
1
2
3
5
1
6
(2)
(2)
(4)
— $
(65) $
1
—
1
1
1
—
1
2
(2)
—
—
—
—
(57)
4
(53)
(118)
11
5
16
(102)
(12)
(114)
(23)
5
(18)
Balance, December 31, 2018
$
(3) $
2
$
— $
(132) $
(147)
(15)
8
(7)
(154)
123
7
130
(24)
(6)
(30)
(106)
3
(103)
(133)
__________
All components of accumulated other comprehensive income (loss) are net of tax, except currency translation adjustments, which
exclude income taxes related to indefinite investments in foreign subsidiaries (see Note 8-Income Taxes for impacts of the Tax Act) and
include a $64 million gain, net of tax, related to the Company’s hedge of its investment in euro-denominated foreign operations (See
Note 18-Financial Instruments).
(a)
For the years ended December 31, 2018, 2017 and 2016, the amounts reclassified from accumulated other comprehensive
income (loss) into corporate interest expense were $3 million ($2 million, net of tax), $4 million ($2 million, net of tax) and $6
million ($4 million, net of tax), respectively. For the year ended December 31, 2016, amount reclassified from accumulated other
comprehensive income (loss) into vehicle interest expense was $1 million ($0 million, net of tax).
For the years ended December 31, 2018, 2017 and 2016, amounts reclassified from accumulated other comprehensive income
(loss) into selling, general and administrative expenses were $7 million ($5 million, net of tax), $8 million ($5 million, net of tax)
and $6 million ($4 million, net of tax), respectively.
(b)
(c) See Note 2-Summary of Significant Accounting Policies for the impact of adoption of ASU 2016-01 and ASU 2018-02.
16. Stock-Based Compensation
The Company’s Amended and Restated Equity and Incentive 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 20.1 million, with
approximately 3.5 million shares available as of December 31, 2018. The Company typically settles stock-
based awards with treasury shares.
F-39
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 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.
Stock Unit Awards
Stock unit awards entitle the holder to receive shares of common stock upon vesting on a one-to-one basis.
Certain performance-based RSUs vest based upon the level of performance attained, but vesting can
increase (typically 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. During the years ended December 31, 2018 and 2017, the Company did not issue
any stock unit awards containing a market condition. 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
2016
46%
0.98%
3 years
0%
Annual activity related to stock units consisted of (in thousands of shares):
Weighted
Average
Grant Date
Fair Value
Weighted
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic Value
(in millions)
Number of
Shares
Time-based RSUs
Outstanding at January 1, 2018
Granted (a)
Vested (b)
Forfeited
1,160
$
322
(560)
(84)
Outstanding and expected to vest at December 31, 2018 (c)
838
$
Performance-based and market-based RSUs
Outstanding at January 1, 2018
Granted (a)
Vested (b)
Forfeited
Outstanding at December 31, 2018
Outstanding and expected to vest at December 31, 2018 (c)
994
353
—
(178)
1,169
255
$
$
$
34.54
48.41
36.02
36.53
38.67
33.06
48.52
—
50.05
35.14
44.57
0.8
$
19
1.0
1.9
$
$
26
6
__________
(a) Reflects the maximum number of stock units assuming achievement of all performance-, market- and time-vesting criteria and
does not include those for non-employee directors, which are discussed separately below. The weighted-average fair value of
time-based RSUs and performance-based RSUs granted in 2017 was $35.32 and $35.21, respectively, and the weighted-
average fair value of time-based RSUs and performance-based and market-based RSUs granted in 2016 was $25.92 and
$23.33, respectively.
The total fair value of RSUs vested during 2018, 2017 and 2016 was $20 million, $23 million and $31 million, respectively. The
total grant date fair value of cash units vested during the year 2016 was $2 million.
(b)
(c) Aggregate unrecognized compensation expense related to time-based RSUs and performance-based and market-based RSUs
amounted to $28 million and will be recognized over a weighted average vesting period of 1.0 year.
F-40
Stock Options
The annual stock option activity consisted of (in thousands of shares):
Outstanding at January 1, 2018
Granted (a)
Exercised (b)
Forfeited/expired
Outstanding and exercisable at December 31, 2018
Number of
Options
Weighted
Average
Exercise
Price
273
—
(216)
—
57
$
$
7.08
—
8.72
—
0.79
Weighted
Average
Remaining
Contractual
Term (years)
1.7
$
0.1
$
Aggregate
Intrinsic
Value (in
millions)
10
—
8
1
__________
(a) No stock options were granted during 2017 and 2016.
(b) Stock options exercised during 2017 and 2016 had intrinsic values of $21 million and $1 million, respectively. The cash received
from the exercise of options was $2 million in 2018 and insignificant in 2017 and 2016.
Non-employee Directors Deferred Compensation Plan
The Company grants stock awards on a quarterly basis to non-employee directors representing between
50% and 100% of a director’s annual compensation and such awards can be deferred under the Non-
employee Directors Deferred Compensation Plan. During 2018, 2017 and 2016, the Company granted
34,000, 36,000 and 40,000 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 2018, 2017 and 2016, the Company recorded stock-based compensation expense of $24 million
($18 million, net of tax), $10 million ($7 million, net of tax) and $28 million ($18 million, net of tax),
respectively.
17. 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 $33 million, $36 million and $33
million during 2018, 2017 and 2016, respectively.
Defined Benefit Pension Plans
The Company sponsors defined benefit pension plans in the United States and in certain foreign
subsidiaries with some plans offering participation in the plans at the employees’ option. 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 the plans are closed to new employees and participants are no
longer accruing benefits.
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 loss, net of tax.
F-41
The components of net periodic (benefit) cost consisted of the following:
Service cost (a)
Interest cost (b)
Expected return on plan assets (b)
Amortization of unrecognized amounts (b)
Net periodic (benefit) cost
Year Ended December 31,
2017
2016
2018
$
$
6 $
19
(33)
7
(1) $
5 $
19
(30)
8
2 $
4
21
(27)
5
3
__________
(a)
For the year ended December 31, 2018, $4 million and $2 million were included in operating expenses and selling, general and
administrative expenses, respectively.
Included in selling, general and administrative expenses.
(b)
The estimated amount that will be amortized from accumulated other comprehensive loss into net periodic
benefit cost in 2019 is $7 million, which consists primarily of net actuarial losses.
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
Actuarial (gain) loss
Currency translation adjustment
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
Currency translation adjustment
Net benefits paid
Fair value of assets at end of current year
Funded Status
Classification of net balance sheet assets (liabilities):
Non-current assets
Current liabilities
Non-current liabilities
Net funded status
As of December 31,
2017
2018
779 $
6
19
(32)
(24)
(26)
722 $
614 $
(29)
11
(21)
(26)
549 $
720
5
19
15
44
(24)
779
523
59
24
32
(24)
614
As of December 31,
2017
2018
18 $
(4)
(187)
(173) $
24
(3)
(186)
(165)
$
$
$
$
$
$
F-42
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,
2016
2017
2018
3.50%
4.15%
7.00%
2.55%
2.75%
4.50%
3.90%
3.50%
7.00%
2.45%
2.55%
4.70%
4.40%
3.90%
7.00%
3.45%
2.45%
4.45%
To select discount rates for its defined benefit pension plans, the Company uses a modeling process that
involves matching the expected cash outflows of such plans, to yield curves constructed from portfolios of
AA-rated fixed-income debt instruments. The Company uses the average yields of the hypothetical
portfolios as a discount rate benchmark.
The Company’s expected rate of return on plan assets of 7.00% and 4.50% for the U.S. plans and non-U.S.
plans, respectively, used to determine pension obligations and pension costs, are long-term rates based on
historic plan asset returns in individual jurisdictions, over varying long-term periods combined with current
market expectations and broad asset mix considerations.
As of December 31, 2018, plans with benefit obligations in excess of plan assets had accumulated benefit
obligations of $423 million and plan assets of $234 million. As of December 31, 2017, plans with benefit
obligations in excess of plan assets had accumulated benefit obligations of $453 million and plan assets of
$264 million. The accumulated benefit obligation for all plans was $713 million and $769 million as of
December 31, 2018 and 2017, respectively. The Company expects to contribute approximately $7 million to
the U.S. plans and $7 million to the non-U.S. plans in 2019.
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
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 defined benefit pension plans’ investment goals and objectives are managed by the Company or
Company-appointed and member-appointed trustees with consultation from independent investment
advisors. While the objectives may vary slightly by country and jurisdiction, collectively 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. A suitable strategic asset allocation benchmark is determined for each plan to maintain a diversified
portfolio, taking into account government requirements, if any, regarding unnecessary investment risk and
protection of pension plans’ assets. 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 (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 40%-60% of the plans’ assets.
F-43
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 40%-60% of the plans’ assets.
The following table presents the defined benefit pension plans’ assets measured at fair value, as of
December 31:
Asset Class
2018
Level 1
Level 2
Total
Cash equivalents and short-term investments
$
10 $
25 $
U.S. equities
Non-U.S. equities
Real estate
Government bonds
Corporate bonds
Other assets
Total assets
Asset Class
82
49
—
3
89
2
42
80
17
8
31
111
$
235 $
314 $
35
124
129
17
11
120
113
549
2017
Level 1
Level 2
Total
Cash equivalents and short-term investments
$
12 $
29 $
U.S. equities
Non-U.S. equities
Real estate
Government bonds
Corporate bonds
Other assets
Total assets
102
50
—
7
90
3
43
100
18
11
37
112
$
264 $
350 $
41
145
150
18
18
127
115
614
The Company estimates that future benefit payments from plan assets will be $27 million, $28 million, $29
million, $30 million, $31 million and $172 million for 2019, 2020, 2021, 2022, 2023 and 2024 to 2028,
respectively.
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, 2018, 2017 and 2016, the Company contributed a total of $9 million in each
of the periods to multiemployer plans.
18. 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
F-44
acquisitions. The Company primarily hedges a portion of its current-year currency exposure to the
Australian, Canadian and New Zealand dollars, the euro and the British pound sterling. The majority of
forward contracts do not qualify for hedge accounting treatment. The fluctuations in the value of these
forward contracts do, however, largely offset the impact of changes in the value of the underlying risk they
economically hedge. Forward contracts used to hedge forecasted third-party receipts and disbursements up
to 12 months are designated and do qualify as cash flow hedges. The Company has designated its euro-
denominated notes as a hedge of its investment in euro-denominated foreign operations.
The amount of gains or losses reclassified from other comprehensive income (loss) to earnings resulting
from ineffectiveness or from excluding a component of the hedges’ gain or loss from the effectiveness
calculation for cash flow and net investment hedges during 2018, 2017 and 2016 was not material, nor is
the amount of gains or losses the Company expects to reclassify from accumulated other comprehensive
income (loss) 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. The after-tax amount
of gains or losses reclassified from accumulated other comprehensive income (loss) to earnings resulting
from ineffectiveness related to the Company’s cash flow hedges was not material during 2018, 2017 and
2016 to the Company’s results of operations. The Company estimates that $6 million of gains currently
recorded in accumulated other comprehensive income (loss) will be recognized in earnings over the next 12
months.
Commodity Risk. The Company periodically enters into derivative commodity contracts to manage its
exposure to changes in the price of gasoline. These instruments were designated as freestanding
derivatives and the changes in fair value are recorded in the Company’s consolidated results of operations.
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 counterparty or groups of
counterparties at December 31, 2018 or 2017, other than (i) risks related to the Company’s repurchase and
guaranteed depreciation agreements with domestic and foreign car manufacturers, 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 disposition and (iii) risks related to leases
which have been assumed by Realogy 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 caps and commodity contracts.
F-45
The Company held derivative instruments with absolute notional values as follows:
As of December 31,
2017
2018
Interest rate caps (a)
Interest rate swaps
Foreign exchange contracts
__________
(a) Represents $5.7 billion of interest rate caps sold, partially offset by approximately $2.7 billion of interest rate caps
purchased at December 31, 2018 and $8.0 billion of interest rate caps sold, partially offset by approximately $3.0
billion of interest rate caps purchased at December 31, 2017. These amounts exclude $3.0 billion and $5.0 billion
of interest rate caps purchased by the Company’s Avis Budget Rental Car Funding subsidiary at December 31,
2018 and 2017, respectively.
8,431 $
1,500
1,235
10,968
1,000
934
$
Fair values (Level 2) of derivative instruments are as follows:
Derivatives designated as hedging instruments
Interest rate swaps (a)
Derivatives not designated as hedging instruments
Interest rate caps (b)
Foreign exchange contracts (c)
Commodity contracts (c)
Total
As of December 31, 2018
As of December 31, 2017
Fair Value,
Asset
Derivatives
Fair Value,
Liability
Derivatives
Fair Value,
Asset
Derivatives
Fair Value,
Liability
Derivatives
$
$
12
$
8
$
8
$
—
5
—
17
$
2
11
1
22
$
—
3
— $
$
11
—
1
7
—
8
__________
Amounts in this table exclude derivatives issued by Avis Budget Rental Car Funding, as it is not consolidated by the Company;
however, certain amounts related to the derivatives held by Avis Budget Rental Car Funding are included within accumulated other
comprehensive income (loss), as discussed in Note 15-Stockholders’ Equity.
(a)
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.
(b)
(c)
The effects of derivatives recognized in the Company’s Consolidated Financial Statements are as follows:
Financial instruments designated as hedging instruments (a)
Interest rate swaps
Euro-denominated notes
Financial instruments not designated as hedging instruments (b)
Foreign exchange contracts (c)
Interest rate caps (d)
Commodity contracts (e)
Year Ended December 31,
2018
2017
2016
$
(4) $
24
$
3
(50)
4
14
31
(3)
—
48
(42)
(1)
(1)
(91) $
42
(2)
—
58
Total
__________
(a) Recognized, net of tax, as a component of accumulated other comprehensive income (loss) within stockholders’ equity.
(b) Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures
$
$
(c)
being hedged.
For the year ended December 31, 2018, included a $19 million gain included in interest expense and a $12 million gain included
in operating expenses. For the year ended December 31, 2017, included a $23 million loss included in interest expense and a
$19 million loss included in operating expenses. For the year ended December 31, 2016, included a $68 million gain in interest
expense and a $26 million loss included in operating expenses.
(d) Primarily included in vehicle interest, net.
(e)
Included in operating expenses.
F-46
Debt Instruments
The carrying amounts and estimated fair values (Level 2) of debt instruments are as follows:
As of December 31, 2018
Estimated
Carrying
Fair Value
Amount
As of December 31, 2017
Estimated
Carrying
Fair Value
Amount
Corporate debt
Short-term debt and current portion of long-term debt $
Long-term debt
23
3,528
Debt under vehicle programs
Vehicle-backed debt due to Avis Budget Rental Car
Funding
Vehicle-backed debt
Interest rate swaps and interest rate caps (a)
$
7,358
2,871
3
$
$
$
$
23
3,462
7,383
2,881
3
$
$
26
3,573
6,480
2,740
1
26
3,677
6,537
2,745
1
___________
(a) Derivatives in liability position.
19. 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 certain of its operating segments
into its 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 charges, restructuring and other related charges,
early extinguishment of debt costs, non-vehicle related interest, transaction-related costs, net charges for
an unprecedented personal-injury legal matters, non-operational charges related to shareholder activist
activity and income taxes. Net charges for unprecedented personal-injury legal matters are recorded within
operating expenses in the Company’s Consolidated Statements of Operations. The Company has revised
its definition of Adjusted EBITDA to exclude non-operational charges related to shareholder activist activity.
Non-operational charges related to shareholder activist activity include third-party advisory, legal and other
professional service fees and are recorded within selling, general and administrative expenses in the
Company’s Consolidated Statements of Operations. The Company did not revise prior years’ Adjusted
EBITDA amounts because there were no costs similar in nature to these items. The Company’s
presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other
companies.
Year Ended December 31, 2018
Americas
International
Corporate
and Other (a)
Total
Revenues
Vehicle depreciation and lease charges,
net
Vehicle interest, net
Adjusted EBITDA
Non-vehicle depreciation and amortization
Assets exclusive of assets under vehicle
programs
Assets under vehicle programs
Capital expenditures (excluding vehicles)
$
6,186 $
2,938 $
— $
1,568
252
558
152
3,782
9,670
134
611
62
287
104
2,495
3,109
76
—
—
(64)
—
93
—
21
9,124
2,179
314
781
256
6,370
12,779
231
__________
(a) Primarily represents unallocated corporate expenses and receivables from our former subsidiaries.
F-47
Year Ended December 31, 2017
Americas
International
Corporate
and Other (a)
Total
Revenues
Vehicle depreciation and lease charges,
net
Vehicle interest, net
Adjusted EBITDA
Non-vehicle depreciation and amortization
Assets exclusive of assets under vehicle
programs
Assets under vehicle programs
Capital expenditures (excluding vehicles)
$
6,100 $
2,748 $
— $
1,671
226
486
168
3,388
9,017
122
550
60
305
91
2,353
2,862
62
—
—
(56)
—
79
—
13
8,848
2,221
286
735
259
5,820
11,879
197
__________
(a) Primarily represents unallocated corporate expenses and receivables from our former subsidiaries.
Year Ended December 31, 2016
Americas
International
Corporate
and Other (a)
Total
Revenues
Vehicle depreciation and lease charges,
net
Vehicle interest, net
Adjusted EBITDA
Non-vehicle depreciation and amortization
Assets exclusive of assets under vehicle
programs
Assets under vehicle programs
Capital expenditures (excluding vehicles)
$
6,121 $
2,538 $
— $
1,559
226
633
165
4,017
9,210
121
488
58
273
88
1,990
2,368
62
—
—
(68)
—
58
—
7
8,659
2,047
284
838
253
6,065
11,578
190
__________
(a) Primarily represents unallocated corporate expenses and receivables from our former subsidiaries.
Provided below is a reconciliation of Adjusted EBITDA to income before income taxes.
For the Year Ended December 31,
2016
2017
2018
Adjusted EBITDA
Less: Non-vehicle related depreciation and amortization (a)
$
Interest expense related to corporate debt, net
Early extinguishment of corporate debt
Restructuring and other related charges
Transaction-related costs, net
Non-operational charges related to shareholder activist
activity (b)
Impairment
Charges for legal matter, net (c)
Income before income taxes
$
781 $
256
188
19
22
20
9
—
—
267 $
735 $
259
188
3
63
23
—
2
(14)
211 $
838
253
203
27
29
21
—
—
26
279
__________
(a)
Includes amortization of intangible assets recognized in purchase accounting of $61 million in 2018, $58 million in 2017 and $59
million in 2016.
(b) Reported within selling, general and administrative expenses in our Consolidated Statements of Operations.
(c) Reported within operating expenses in our Consolidated Statements of Operations.
F-48
The geographic segment information provided below is classified based on the geographic location of the
Company’s subsidiaries.
United States
All Other
Countries
Total
2018
Revenues
Assets exclusive of assets under vehicle programs
Assets under vehicle programs
Net long-lived assets
2017
Revenues
Assets exclusive of assets under vehicle programs
Assets under vehicle programs
Net long-lived assets
2016
Revenues
Assets exclusive of assets under vehicle programs
Assets under vehicle programs
Net long-lived assets
$
$
$
5,708 $
3,494
9,021
1,476
5,629 $
3,069
8,192
1,451
5,674 $
3,699
8,552
1,489
3,416 $
2,876
3,758
1,177
3,219 $
2,751
3,687
1,176
2,985 $
2,366
3,026
1,073
9,124
6,370
12,779
2,653
8,848
5,820
11,879
2,627
8,659
6,065
11,578
2,562
F-49
20. Guarantor and Non-Guarantor Consolidating Financial Statements
The following consolidating financial information presents Consolidating Condensed Statements of
Operations for the years ended December 31, 2018, 2017 and 2016, Consolidating Condensed Balance
Sheets as of December 31, 2018 and December 31, 2017 and Consolidating Condensed Statements of
Cash Flows for the years ended December 31, 2018, 2017 and 2016 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 the Subsidiary Issuers. See Note 12-Long-term
Corporate 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
guarantor and non-guarantor subsidiaries.
The following table provides a reconciliation of the cash and cash equivalents, program and restricted cash
reported within the Consolidating Condensed Balance Sheets to the amounts shown in the Consolidating
Condensed Statements of Cash Flows.
As of December 31,
2018
2017
Non-
Guarantor
Total
Non-
Guarantor
Total
Cash and cash equivalents
Program cash
Restricted cash (a)
Total cash and cash equivalents, program and
restricted cash
$
$
_________
(a)
Included within other current assets.
601 $
115
5
721 $
615 $
115
5
735 $
593 $
283
7
883 $
611
283
7
901
F-50
Consolidating Condensed Statements of Operations
For the Year Ended December 31, 2018
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
$
— $
— $
5,431
$
6,006
$
(2,313) $
9,124
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 and other related charges
Transaction-related costs, net
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
$
$
4
—
48
—
—
—
(12)
—
—
—
40
(40)
(10)
195
165
62
7
—
11
—
1
153
(11)
19
—
1
181
2,668
2,162
662
229
145
3
26
—
11
4
5,910
1,960
2,102
499
313
110
32
(3)
—
11
—
(2,085)
—
(228)
—
—
—
—
—
15
5,039
—
(2,313)
(181)
(48)
328
195
92
$
$
(479)
93
900
328
228
$
$
$
$
967
67
—
900
806
$
$
—
—
(1,423)
(1,423) $
(1,126) $
4,639
2,179
1,220
314
256
188
—
19
22
20
8,857
267
102
—
165
62
F-51
For the Year Ended December 31, 2017
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 and other related charges
Transaction-related costs, net
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
$
$
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
$
— $
— $
5,312
$
5,931
$
(2,395) $
8,848
3
—
39
—
—
—
(12)
—
—
—
—
30
(30)
(5)
386
361
491
20
—
8
—
1
157
95
4
7
1
—
293
(293)
267
946
386
515
$
$
$
$
2,598
2,226
619
199
160
1
23
—
44
3
2
5,875
(563)
(527)
982
946
1,073
$
$
1,851
2,183
454
294
98
30
(106)
(1)
12
19
—
4,834
1,097
115
—
982
1,103
$
$
—
(2,188)
—
(207)
—
—
—
—
—
—
—
(2,395)
—
—
(2,314)
(2,314) $
(2,691) $
4,472
2,221
1,120
286
259
188
—
3
63
23
2
8,637
211
(150)
—
361
491
F-52
For the Year Ended December 31, 2016
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 and other related charges
Transaction-related costs, net
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
$
$
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
$
— $
— $
5,343
$
5,510
$
(2,194) $
8,659
4
—
38
—
—
—
(13)
—
—
—
29
(29)
(11)
181
163
156
18
—
18
—
2
141
(7)
10
—
2
184
2,622
1,993
631
198
155
3
23
—
9
1
5,635
1,738
2,045
447
289
96
59
(3)
17
20
—
(1,991)
—
(203)
—
—
—
—
—
18
4,726
—
(2,194)
(184)
(70)
295
181
173
$
$
(292)
123
710
295
283
$
$
$
$
784
74
—
710
712
$
$
—
—
(1,186)
(1,186) $
(1,168) $
4,382
2,047
1,134
284
253
203
—
27
29
21
8,380
279
116
—
163
156
F-53
Consolidating Condensed Balance Sheets
As of December 31, 2018
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
Assets
Current assets:
Cash and cash equivalents
$
Receivables, net
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
$
12
$
—
112
124
199
1,015
—
26
39
404
4,786
6,593
—
55
2
—
$
1
239
116
356
319
207
471
475
16
2,104
3,852
7,800
—
54
—
—
1
—
5
6
—
13
—
—
47
159
246
471
—
—
—
—
—
601
716
371
1,688
218
66
621
324
140
1,262
—
$
— $
—
—
—
—
—
—
—
—
(3,929)
(8,884)
615
955
604
2,174
736
1,301
1,092
825
242
—
—
4,319
(12,813)
6,370
115
11,365
629
559
12,668
—
—
—
—
—
115
11,474
631
559
12,779
19,149
471
$
57
6,650
$
54
7,854
$
16,987
$
(12,813) $
16
$
246
$
582
$
849
$
— $
1,693
—
16
—
41
—
57
—
—
—
—
—
414
18
264
2,501
87
3,524
6,376
28
—
—
—
28
246
3
585
3
257
404
1,249
49
—
1,770
—
1,819
4,786
2
851
1,024
382
1
2,258
2,797
7,358
191
531
10,877
3,852
—
—
—
—
(3,929)
(3,929)
—
—
—
—
—
(8,884)
23
1,716
3,528
767
—
6,011
2,874
7,358
1,961
531
12,724
414
Total liabilities and stockholders’ equity $
471
$
6,650
$
7,854
$
16,987
$
(12,813) $
19,149
F-54
As of December 31, 2017
Assets
Current assets:
Cash and cash equivalents
$
Receivables, net
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
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
14
—
89
103
167
704
—
27
29
382
4,681
6,093
—
34
1
—
$
4
—
4
8
—
14
—
—
46
187
381
636
—
—
—
—
—
636
$
$
— $
255
101
356
321
154
471
480
16
1,506
3,938
7,242
—
61
—
—
593
667
339
1,599
216
59
602
343
105
824
—
$
— $
—
—
—
—
—
—
—
—
(2,899)
(9,000)
611
922
533
2,066
704
931
1,073
850
196
—
—
3,748
(11,899)
5,820
283
10,531
546
423
11,783
—
—
—
—
—
$
15,531
$
(11,899) $
283
10,626
547
423
11,879
17,699
35
6,128
$
61
7,303
23
$
207
$
552
$
837
$
— $
1,619
—
23
—
40
—
63
—
—
—
—
—
573
17
224
2,910
83
2,515
5,732
15
—
—
—
15
381
3
555
3
216
382
6
843
660
378
2
—
—
—
—
(2,899)
1,156
1,883
(2,899)
57
—
1,407
2
1,466
4,681
2,669
6,480
187
374
9,710
3,938
—
—
—
—
—
(9,000)
26
1,645
3,573
717
—
5,935
2,741
6,480
1,594
376
11,191
573
Total liabilities and stockholders’ equity $
636
$
6,128
$
7,303
$
15,531
$
(11,899) $
17,699
F-55
Consolidating Condensed Statements of Cash Flows
For the Year Ended December 31, 2018
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
$
210
$
235
$
193
$
2,380
$
(409) $
2,609
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 (advances)
Other, net
Net cash provided by (used in)
investing activities exclusive of
vehicle programs
Vehicle programs:
Investment in vehicles
Proceeds received on disposition of
vehicles
Investment in debt securities of Avis
Budget Rental Car Funding (AESOP)
LLC — related party
Proceeds from debt securities of Avis
Budget Rental Car Funding (AESOP)
LLC — 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
Repurchases of common stock
Intercompany loan borrowings (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, program
and restricted cash
Net increase in cash and cash equivalents,
program and restricted cash
Cash and cash equivalents, program and
restricted cash, beginning of period
Cash and cash equivalents, program
and restricted cash, end of period
$
—
(3)
4
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(216)
—
3
(64)
2
(3)
—
(8)
(73)
(2)
42
—
—
40
(33)
81
(510)
—
(9)
—
404
(167)
(213)
(201)
—
—
—
—
—
(3)
—
(3)
(88)
4
(10)
—
—
(94)
(1)
—
—
—
(1)
(95)
—
(3)
—
—
—
—
(85)
(88)
—
(9)
—
(9)
(79)
11
(78)
(404)
(36)
(586)
(12,586)
9,606
(188)
52
(3,116)
(3,702)
404
(2)
(4)
(6)
—
—
(157)
235
17,339
(16,373)
(25)
941
(213)
(204)
(97)
1,176
—
(2)
14
—
1
—
(16)
(162)
883
—
—
—
404
—
404
—
—
—
—
—
404
—
—
—
—
—
(404)
409
5
—
—
—
—
5
—
—
—
(231)
17
(91)
—
(44)
(349)
(12,589)
9,648
(188)
52
(3,077)
(3,426)
485
(515)
(4)
(15)
(216)
—
3
(262)
17,339
(16,385)
(25)
929
667
(16)
(166)
901
735
$
12
$
1
$
721
$
— $
F-56
For the Year Ended December 31, 2017
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 (advances)
Other, net
Net cash provided by (used in)
investing activities exclusive of
vehicle programs
Vehicle programs:
Investment in vehicles
Proceeds received on disposition of
vehicles
Investment in debt securities of Avis
Budget Rental Car Funding (AESOP)
LLC- 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
Repurchases of common stock
Intercompany loan borrowings (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, program
and restricted cash
Net increase (decrease) in cash and cash
equivalents, program and restricted
cash
Cash and cash equivalents, program and
restricted cash, beginning of period
Cash and cash equivalents, program
and restricted cash, end of period
$
—
—
—
—
100
100
—
—
—
—
100
—
—
—
—
(210)
—
1
(209)
—
—
—
—
(209)
—
1
3
4
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
$
110
$
(89) $
97
$
2,697
$
(167) $
2,648
(49)
1
(1)
—
110
61
(1)
46
—
45
106
325
(406)
—
(5)
—
264
(192)
(81)
—
(5)
—
110
24
—
—
—
—
24
—
(2)
—
—
—
—
(110)
(67)
7
(15)
(264)
5
(334)
(11,537)
9,554
(61)
(2,044)
(2,378)
264
(194)
(4)
(4)
—
—
(185)
—
—
—
264
(320)
(197)
8
(21)
—
5
(56)
(205)
—
—
—
—
(56)
—
—
—
—
—
(264)
487
(11,538)
9,600
(61)
(1,999)
(2,204)
589
(602)
(4)
(9)
(210)
—
1
(235)
45
181
720
901
(14)
(112)
(123)
223
—
(1)
—
(1)
(15)
—
2
12
—
(9)
—
(9)
17,212
(17,259)
(16)
(63)
—
—
—
—
17,212
(17,269)
(16)
(73)
(121)
(186)
223
(308)
—
—
—
45
178
705
—
—
—
$
14
$
— $
883
$
— $
F-57
For the Year Ended December 31, 2016
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 (advances)
Other, net
Net cash provided by (used in)
investing activities exclusive of
vehicle programs
Vehicle programs:
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
Repurchases of common stock
Intercompany loan borrowings (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, program
and restricted cash
Net increase (decrease) in cash and cash
equivalents, program and restricted
cash
Cash and cash equivalents, program and
restricted cash, beginning of period
Cash and cash equivalents, program
and restricted cash, end of period
$
—
—
—
—
118
118
—
—
—
118
—
—
—
—
(398)
—
—
(398)
—
—
—
—
(398)
—
(1)
4
3
Parent
Subsidiary
Issuers
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries Eliminations
Total
$
279
$
(10) $
80
$
2,633
$
(342) $
2,640
(32)
7
—
—
(1)
(26)
(9)
31
22
(4)
557
(525)
—
(15)
—
316
(385)
(52)
8
—
—
8
(44)
—
(58)
70
(89)
4
(4)
28
—
(61)
(4)
—
(4)
(69)
8
(51)
(316)
2
—
—
—
288
(118)
(426)
170
(190)
19
(55)
—
1
(225)
(12,448)
10,473
(1,975)
—
—
—
(12,461)
10,504
(1,957)
(65)
(2,401)
170
(2,182)
—
(5)
—
—
—
—
—
(5)
—
(9)
(1)
(10)
(15)
—
—
—
337
(317)
4
(5)
—
(28)
(75)
(84)
15,761
(15,817)
(24)
(80)
—
—
—
—
—
(288)
460
172
—
—
—
—
894
(847)
4
(20)
(398)
—
—
(367)
15,769
(15,826)
(25)
(82)
(164)
172
(449)
(6)
62
643
—
—
—
(6)
3
717
720
$
12
$
— $
705
$
— $
F-58
21. Selected Quarterly Financial Data—(unaudited)
Provided below are selected unaudited quarterly financial data for 2018 and 2017.
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 and due to the seasonality of the Company’s
earnings, the sum of the quarters’ per share information may not equal the annual amount presented on the
Consolidated Statements of Operations.
Revenues
Net income (loss)
Per share information:
Basic
Net income (loss)
Weighted average shares
Diluted
Net income (loss)
Weighted average shares
Revenues
Net income (loss)
Per share information:
Basic
Net income (loss)
Weighted average shares
Diluted
Net income (loss)
Weighted average shares
First
Second
2018
Third (a)
Fourth
1,968 $
(87)
2,328 $
26
2,778 $
213
2,050
13
(1.08) $
81.0
0.33 $
80.7
2.71 $
78.8
(1.08) $
81.0
0.32 $
81.5
2.68 $
79.5
0.16
76.9
0.16
77.6
First
Second
Third
2017
Fourth (a)
1,839 $
(107)
2,238 $
3
2,752 $
245
2,019
220
(1.25) $
85.7
0.04 $
84.0
2.96 $
82.6
(1.25) $
85.7
0.04 $
85.2
2.91 $
84.0
2.70
81.3
2.65
82.7
$
$
$
$
$
$
__________
(a) Net income for fourth quarter 2017 included provisional amounts for the Tax Act of (i) a tax benefit of $317 million
resulting from the remeasurement of net deferred income tax liabilities as a result of the reduced corporate tax rate
and (ii) a tax provision of $104 million for the one-time transition tax on the deemed repatriation of cumulative
foreign subsidiary earnings. Net income for the third quarter 2018 included additional tax expense of $30 million
resulting from the completion of the accounting for the effects of the Tax Act for the one-time transition tax on the
deemed repatriation of cumulative foreign subsidiary earnings.
22. Subsequent Event
In February 2019, the Company’s Avis Budget Rental Car Funding subsidiary issued approximately $600
million in asset-backed notes with an expected final payment date of March 2022 incurring interest at a
weighted average rate of approximately 4%.
*****
F-59
Balance at
Beginning
of Period
Expense
(Benefit)
Other
Adjustments Deductions
Balance at
End of
Period
34 $
29
27
(3) $
—
17
(2) $
3
(2)
(17) $
13
3
(29) $
(34)
(21)
— $
(39)
(14)
39
36
38
311
331
357
Schedule II – Valuation and Qualifying Accounts
(in millions)
Description
Allowance for Doubtful Accounts:
Year Ended December 31,
2018 (a)
2017 (a)
2016 (a)
$
36 $
38
34
Tax Valuation Allowance:
Year Ended December 31,
2018 (a)
2017 (a)
2016 (a)
__________
(a) Other adjustments relate to currency translation adjustments.
$
331 $
357
351
G-1
EXHIBIT
NO.
DESCRIPTION
2.1
2.2
3.1
3.2
3.3
3.4
4.1
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 By-Laws of Avis Budget Group, Inc. as of May 23, 2018 (Incorporated by reference to
Exhibit 3.2 to the Company’s Current Report on Form 8-K dated May 24, 2018).
Certificate of Designations of Series S Preferred Stock of Avis Budget Group, Inc., as filed with the Secretary of
State of the State of Delaware on January 16, 2018 (Incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K dated January 16, 2018).
Certificate of Elimination of Series S Preferred Stock of Avis Budget Group Inc., dated April 16, 2018
(Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated April 16, 2018).
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).
4.1(a)
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).
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
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 March 11, 2015 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
March 17, 2015).
Form of 5.25% Senior Notes Due 2025 (Incorporated by reference to Exhibit 4.2 to the Company’s Current
Report on Form 8-K dated March 17, 2015).
Indenture dated as of March 29, 2016 for the 6.375% Senior Notes due 2024, 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 Quarterly
Report on Form 10-Q for the quarter ended March 31, 2016, dated May 4, 2016).
Indenture dated as of September 26, 2016 among Avis Budget Finance Plc, as Issuer, the Guarantors from
time to time parties hereto and Deutsche Bank Trust Company Americas as Trustee, Deutsche Bank AG,
London Branch as Paying Agent and Deutsche Bank Luxembourg, S.A. as Registrar (Incorporated by reference
to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016,
dated November 3, 2016).
Form of 4.125% Senior Notes due 2024 (Incorporated by reference to Exhibit 4.2 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2016, dated November 3, 2016).
Indenture dated as of March 8, 2017 among Avis Budget Finance, plc, as Issuer, the Guarantors from time to
time parties hereto, Deutsche Bank Trust Company Americas, as Trustee, Deutsche Bank AG, London Branch,
as Paying Agent and Deutsche Bank Luxembourg S.A., as Registrar (Incorporated by reference to Exhibit 4.2
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, dated May 4, 2017).
Form of 4.50% Senior Notes Due 2025 (Incorporated by reference to Exhibit 4.3 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2017, dated May 4, 2017).
Indenture dated as of October 4, 2018 among Avis Budget Finance, plc, as Issuer, the Guarantors from time to
time parties thereto, Deutsche Bank Trust Company Americas, as Trustee, Deutsche Bank AG, London Branch,
as Paying Agent and Deutsche Bank Luxembourg S.A., as Registrar (Incorporated by reference to Exhibit 4.1
to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 dated
November 6, 2018).
Form of 4.75% Senior Notes Due 2026 (Incorporated by reference to Exhibit 4.2 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2018, dated November 6, 2018).
Rights Agreement, dated as of January 14, 2018, between Avis Budget Group, Inc. and Computershare Trust
Company, N.A., as Rights Agent (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on
Form 8-K dated January 16, 2018).
Amendment No. 1, dated April 16, 2018, to the Rights Agreement, dated as of January 14, 2018, between Avis
Budget Group, Inc. and Computershare Trust Company, N.A., as Rights Agent (Incorporated by reference to
Exhibit 4.1 to the Company’s Current Report on Form 8-K dated April 16, 2018).
H-1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.9(a)
10.9(b)
10.9(c)
10.10
10.11
10.11(a)
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
Employment Agreement between Avis Budget Group, Inc. and Larry D. De Shon dated as of September 15,
2015 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated
September 18, 2015).†
Separation and Consulting Agreement, dated May 23, 2018, between Ronald L. Nelson and Avis Budget
Group, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated
May 24, 2018).†
Agreement between Avis Budget Group, Inc. and Mark J. Servodidio (Incorporated by reference to Exhibit 10.4
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, dated February 24,
2016).†
Agreement between Avis Budget Group, Inc. and Joseph Ferraro (Incorporated by reference to Exhibit 10.5 to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, dated February 24,
2016).†
Employment Letter, between Martyn Smith and Avis Budget Group, Inc. dated as of June 6, 2017,(Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 8, 2017).†
Agreement between Avis Budget Group, Inc. and Michael Tucker.†
Second Amended and Restated Cooperation Agreement, dated April 16, 2018, by and among Avis Budget
Group, Inc. and SRS (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated April 16, 2018).
Avis Budget Group, Inc. Amended and Restated Equity and Incentive Plan (Incorporated by reference to Annex
A to the Company’s Definitive Proxy Statement on Schedule 14A, dated March 29, 2016).†
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).†
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 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).†
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).†
Form of Award Agreement - Restricted Stock Units.†
Form of Award Agreement - Performance Based Restricted Stock Units.†
Form of Non-Employee Director Award Agreement - Restricted Stock Units.†
Form of Avis Budget Group, Inc. Severance Agreement.†
Avis Budget Group, Inc. Non-Employee Directors Deferred Compensation Plan, amended and restated as of
January 1, 2019.†
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 Retirement 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.†
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).
H-2
10.23
10.24
10.25
10.26
10.27
10.28
10.29(a)
10.30
10.30(a)
10.31
10.32
10.33
10.34(a)
10.34(b)
10.34(c)
10.35
10.35(a)
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 to
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).
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 10.2 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 31, 2017 between Avis Budget Car Rental, LLC and General Motors LLC
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 3,
2017).††
Avis Budget Car Rental 2018 Model Year Program Letter dated August 29, 2017 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 August 31, 2017).††
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 to the Company’s Quarterly Report on 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
(Incorporated by reference to Exhibit 10.35(c) to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2013, dated February 20, 2014).
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).
H-3
10.35(b)
10.35(c)
10.36
10.36(a)
10.36(b)
10.36(c)
10.37
10.37a)
10.37(b)
10.37(c)
10.38
10.38(a)
10.38(b)
10.38c)
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 to the Company’s Quarterly Report on 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 (Incorporated by reference to Exhibit 10.36(c) to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2013, dated February 20, 2014).
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).
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 to the Company’s Quarterly Report on 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 (Incorporated by reference to Exhibit 10.37(c) to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2013, dated February 20, 2014).
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 to the
Company’s Quarterly Report on 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 (Incorporated by reference to Exhibit 10.38(c) to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2013, dated February 20, 2014).
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 to the Company’s
Quarterly Report on 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 (Incorporated by reference to Exhibit 10.39(c) to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2013, dated February 20, 2014).
10.39
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 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2013 dated May 8, 2013).
H-4
10.40
10.40(a)
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
10.54
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 (Incorporated by reference to Exhibit 10.41(a) to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2013, dated February 20, 2014).
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).
Third Amended and Restated Series 2010-6 Supplement, dated as of August 16, 2018, by and among Avis
Budget Rental Car Funding (AESOP) LLC, as Issuer, Avis Budget Car Rental, LLC, as Administrator, JPMorgan
Chase Bank, N.A., as Administrative Agent, the Non-Conduit Purchasers, the CP Conduit Purchasers, the
Committed Note Purchasers, the Funding Agents and APA Banks named therein and The Bank of New York
Mellon Trust Company, N.A., as Trustee and as Series 2010-6 Agent.
Amended and Restated Series 2015-3 Supplement, dated as of August 16, 2018, between Avis Budget Rental
Car Funding (AESOP) LLC, as Issuer, Avis Budget Car Rental, LLC, as Administrator, JPMorgan Chase Bank,
N.A., as Administrative Agent, the Non-Conduit Purchasers, the CP Conduit Purchasers, the Committed Note
Purchasers, the Funding Agents and APA Banks named therein, and The Bank of New York Mellon Trust
Company, N.A., as trustee and as Series 2015-3 Agent.
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 (Incorporated by reference to Exhibit 10.54 to the Company’s Annual Report on Form 10-
K for the year ended December 31, 2013, dated February 20, 2014).
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 to the Company’s Current Report on Form 8-K dated February 18,
2014).
Series 2014-2 Supplement, dated as of July 24, 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 2014-2 Agent (Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated July 24, 2014).
Series 2015-1 Supplement, dated as of January 29, 2015, between Avis Budget Rental Car Funding (AESOP)
LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2015-1 Agent
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 30,
2015).
Series 2015-2 Supplement, dated as of May 27, 2015, between Avis Budget Rental Car Funding (AESOP) LLC
and the Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2015-2 Agent (Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 29, 2015).
Series 2016-1 Supplement, dated as of March 30, 2016, between Avis Budget Rental Car Funding (AESOP)
LLC and the Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2016-1 Agent
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 5, 2016).
Series 2016-2 Supplement, dated as of June 1, 2016, between Avis Budget Rental Car Funding (AESOP) LLC
and the Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2016-2 Agent (Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 7, 2016).
Series 2017-1 Supplement, dated as of March 15, 2017, between Avis Budget Rental Car Funding (AESOP)
LLC and the Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2017-1 Agent
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 21,
2017).
Series 2017-2 Supplement, dated as of December 13, 2017, between Avis Budget Rental Car Funding
(AESOP) LLC and the Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2017-2 Agent
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 19,
2017).
Series 2018-1 Supplement, dated as of April 30, 2018, between Avis Budget Rental Car Funding (AESOP) LLC
and The Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2018-1 Agent (Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 4, 2018).
Series 2018-2 Supplement, dated as of October 25, 2018, between Avis Budget Rental Car Funding (AESOP)
LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and as Series 2018-2 Agent
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 30,
2018).
H-5
10.55
10.56
10.56(a)
10.56(b)
10.57
10.58
10.59
10.60
10.61
10.62
10.63
10.64
10.65
Fifth Amended and Restated Credit Agreement dated as of February 13, 2018, among Avis Budget Holdings,
LLC, Avis Budget Car Rental, LLC, Avis Budget Group, Inc., the Subsidiary Borrowers from time to time parties
thereto, the several banks and other financial institutions or entities from time to time parties thereto, JPMorgan
Chase Bank, N.A., as Administrative Agent, Deutsche Bank Securities Inc., as Syndication Agent, Citibank,
N.A., Bank of America, N.A., Barclays Bank plc and Credit Agricole Corporate and Investment Bank, as Co-
Documentation Agents (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-
K dated February 16, 2018).
Amended and Restated Guarantee & Collateral Agreement, dated as of May 3, 2011, among Avis Budget
Holdings, LLC, Avis Budget Car Rental, LLC and certain of its Subsidiaries 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).
Amendment dated as of March 4, 2013, to the Amended and Restated Credit Agreement and the Amended and
Restated Guarantee & Collateral Agreement, each dated as of May 3, 2011, among Avis Budget Holdings, LLC,
Avis Budget Car Rental, LLC and certain of its Subsidiaries, JPMorgan Chase Bank, N.A., as Administrative
Agent and certain other signatories thereto (Incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K dated March 5, 2013).
Second Amendment to the Amended and Restated Guarantee & Collateral Agreement, dated as of October 3,
2014, among Avis Budget Holdings, LLC, Avis Budget Car Rental, LLC and certain of its Subsidiaries, 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 October 6, 2014).
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).
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).
Purchase Agreement, dated as of March 4, 2015, 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 Merrill 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 March 10, 2015).
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).
Amended and Restated Framework Agreement dated May 21, 2014 among CarFin Finance International
Limited, Credit 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,
Caceis Bank France, FCT CarFin, Eurotitrisation, the Senior Noteholders named therein and certain other
entities named therein (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form
10-Q for the period ended June 30, 2014, dated August 5, 2014).††
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 Senior Noteholders named therein and certain other entities named
therein (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the
period ended June 30, 2014, dated August 5, 2014).††
Fourth Master Amendment and Restatement Deed, by and among CarFin Finance International Limited, Credit
Agricole Corporate And Investment Bank, Deutsche Trustee Company Limited, Credit Agricole Corporate And
Investment Bank, the Opcos, Servicers, Lessees and Fleetcos listed therein, Avis Budget Car Rental, LLC, Avis
Finance Company Limited, Avis Budget EMEA Limited, the Account Banks listed therein, Deutsche Bank Ag,
London Branch, the Senior Noteholders listed therein, Structured Finance Management (Ireland) Limited,
CarFin Finance Holdings Limited, Intertrust (Netherlands) B.V. And Vistra B.V., Credit Agricole Corporate And
Investment Bank, FCT CarFin, Caceis Bank France, Caceis Corporate Trust, Deutsche Bank Luxembourg S.A.
and Fiserv Automotive Solutions, Inc., dated December 15, 2014 (Incorporated by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K dated December 19, 2014).††
Seventh Master Amendment and Restatement Deed, by and among CarFin Finance International Limited,
Credit Agricole Corporate And Investment Bank, Deutsche Trustee Company Limited, Credit Agricole Corporate
And Investment Bank, the Opcos, Servicers, Lessees and Fleetcos listed therein, Avis Budget Car Rental, LLC,
Avis Finance Company Limited, Avis Budget EMEA Limited, the Account Banks listed therein, Deutsche Bank
Ag, London Branch, the Senior Noteholders and certain other entities named therein, dated January 22, 2016
(Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K dated April 21,
2016).††
H-6
10.66
10.67
21
23.1
31.1
31.2
32
Ninth Master Amendment and Restatement Deed, by and among CarFin Finance International Limited, Credit
Agricole Corporate And Investment Bank, Deutsche Trustee Company Limited, Credit Agricole Corporate And
Investment Bank, the Opcos, Servicers, Lessees and Fleetcos listed therein, Avis Budget Car Rental, LLC, Avis
Finance Company Limited, Avis Budget EMEA Limited, the Account Banks listed therein, Deutsche Bank Ag,
London Branch, the Senior Noteholders and certain other entities named therein, dated May 16, 2017
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 22,
2017).††
Tenth Master Amendment and Restatement Deed, by and among CarFin Finance International, DAC, Credit
Agricole Corporate and Investment Bank, Deutsche Trustee Company Limited, Credit Agricole Corporate and
Investment Bank, the Opcos, Servicers, Lessees and FleetCos listed herein. Avis Budget Car Rental, LLC,
Avis Finance Company Limited, Avis Budget EMEA Limited, the Account Banks listed therein, Deutsche Bank
Ag. London Branch, the Senior Noteholders and certain other entities named therein, dated May 30, 2018
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 5,
2018).††
Subsidiaries of Registrant.
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.
101.INS
XBRL Instance Document.
101.SCH
XBRL Taxonomy Extension Schema.
101.CAL
XBRL Taxonomy Extension Calculation Linkbase.
101.DEF
XBRL Taxonomy Extension Definition Linkbase.
101.LAB
XBRL Taxonomy Extension Label Linkbase.
101.PRE
XBRL Taxonomy Extension Presentation Linkbase.
____________________
*
**
***
****
*****
†
††
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-7
SECTION 302 CERTIFICATION
I, Larry D. De Shon, 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 21, 2019
/s/ Larry D. De Shon
President and Chief
Executive Officer
Exhibit 31.2
I, Martyn Smith, certify that:
SECTION 302 CERTIFICATION
1.
I have reviewed this annual report on Form 10-K of Avis Budget Group, Inc.;
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 21, 2019
/s/ Martyn Smith
Interim Chief Financial Officer