Form | 10-Q |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Avis Budget Group, Inc. | ||
(Exact name of registrant as specified in its charter) |
Delaware | 06-0918165 | |||||||||||||||||||||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||||||||||||||||||||
6 Sylvan Way | ||||||||||||||||||||||||||
Parsippany, | NJ | 07054 | ||||||||||||||||||||||||
(Address of principal executive offices) | (Zip Code) | |||||||||||||||||||||||||
(973) | 496-4700 | |||||||||||||||||||||||||
(Registrant’s telephone number, including area code) |
Large Accelerated Filer | ☒ | Accelerated Filer | ☐ | Non-accelerated Filer | ☐ | ||||||||||||
Smaller Reporting Company | ☐ | Emerging Growth Company | ☐ |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Common Stock, Par Value $0.01 | CAR | The NASDAQ Global Select Market |
Page | ||||||||
PART I | ||||||||
Item 1. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
PART II | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 2. | ||||||||
Item 6. | ||||||||
•the COVID-19 outbreak and resulting economic conditions, which had, and is expected to continue to have, a significant impact on our operations, including an unprecedented decline in demand, as well as its current, and uncertain future impact, including, but not limited to, its effect on the ability or desire of people to travel due to travel restrictions, and other restrictions and orders, which is expected to continue to impact our results, operations, outlooks, plans, goals, growth, cash flows, liquidity, and stock price; • |
•the absence of an improvement in, or further deterioration of, economic conditions, particularly during our peak season or in key market segments; •an occurrence or threat of terrorism, the current and any future pandemic diseases, natural disasters, military conflict, civil unrest or political instability in the locations in which we operate; • |
1 •our dependence on third-party distribution channels, third-party suppliers of other services and co-marketing arrangements with third parties; • |
•our ability to utilize derivative instruments, and the impact of derivative instruments we utilize, which can be affected by fluctuations in interest rates, gasoline prices and exchange rates, changes in government regulations and other factors; •our exposure to uninsured or unpaid claims in excess of historical levels and our ability to obtain insurance at desired levels and the cost of that insurance; •risks associated with litigation, governmental or regulatory inquiries, or any failure or inability to comply with laws, regulations or contractual obligations or any changes in laws, regulations or contractual obligations, including with respect to personally identifiable information and consumer privacy, labor and employment, and tax; • |
•any impact on us from the actions of our licensees, dealers, third-party vendors and independent operators and independent contractors and/or disputes that may arise out of our agreements with such parties; • |
•risks related to our indebtedness, including our substantial outstanding debt obligations, potential interest rate increases, recent and potential further downgrades by rating agencies and our ability to incur substantially more debt; • |
•our ability to meet the financial and other covenants contained in the agreements governing our indebtedness, or to obtain a waiver or amendment of such covenants should we be unable to meet such covenants; • |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||
Revenues | $ | 2,753 | $ | 2,778 | $ | 7,010 | $ | 7,074 | |||||||||
Expenses | |||||||||||||||||
Operating | 1,291 | 1,294 | 3,534 | 3,561 | |||||||||||||
Vehicle depreciation and lease charges, net | 551 | 587 | 1,579 | 1,693 | |||||||||||||
Selling, general and administrative | 350 | 336 | 947 | 953 | |||||||||||||
Vehicle interest, net | 90 | 85 | 261 | 237 | |||||||||||||
Non-vehicle related depreciation and amortization | 62 | 62 | 195 | 190 | |||||||||||||
Interest expense related to corporate debt, net: | |||||||||||||||||
Interest expense | 49 | 44 | 139 | 139 | |||||||||||||
Early extinguishment of debt | 10 | — | 10 | 5 | |||||||||||||
Restructuring and other related charges | 22 | 4 | 66 | 14 | |||||||||||||
Transaction-related costs, net | — | 11 | 6 | 18 | |||||||||||||
Total expenses | 2,425 | 2,423 | 6,737 | 6,810 | |||||||||||||
Income before income taxes | 328 | 355 | 273 | 264 | |||||||||||||
Provision for income taxes | 139 | 142 | 113 | 112 | |||||||||||||
Net income | $ | 189 | $ | 213 | $ | 160 | $ | 152 | |||||||||
Comprehensive income | $ | 155 | $ | 207 | $ | 119 | $ | 104 | |||||||||
Earnings per share | |||||||||||||||||
Basic | $ | 2.52 | $ | 2.71 | $ | 2.12 | $ | 1.90 | |||||||||
Diluted | $ | 2.50 | $ | 2.68 | $ | 2.10 | $ | 1.88 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||
Revenues | $ | 1,534 | $ | 2,753 | $ | 4,047 | $ | 7,010 | |||||||||||||||||||||
Expenses | |||||||||||||||||||||||||||||
Operating | 825 | 1,291 | 2,505 | 3,534 | |||||||||||||||||||||||||
Vehicle depreciation and lease charges, net | 256 | 551 | 1,089 | 1,579 | |||||||||||||||||||||||||
Selling, general and administrative | 166 | 350 | 549 | 947 | |||||||||||||||||||||||||
Vehicle interest, net | 77 | 90 | 247 | 261 | |||||||||||||||||||||||||
Non-vehicle related depreciation and amortization | 74 | 62 | 214 | 195 | |||||||||||||||||||||||||
Interest expense related to corporate debt, net: | |||||||||||||||||||||||||||||
Interest expense | 64 | 49 | 163 | 139 | |||||||||||||||||||||||||
Early extinguishment of debt | 2 | 10 | 9 | 10 | |||||||||||||||||||||||||
Restructuring and other related charges | 17 | 22 | 89 | 66 | |||||||||||||||||||||||||
Transaction-related costs, net | 0 | 0 | 3 | 6 | |||||||||||||||||||||||||
Total expenses | 1,481 | 2,425 | 4,868 | 6,737 | |||||||||||||||||||||||||
Income (loss) before income taxes | 53 | 328 | (821) | 273 | |||||||||||||||||||||||||
Provision for (benefit from) income taxes | 8 | 139 | (227) | 113 | |||||||||||||||||||||||||
Net income (loss) | $ | 45 | $ | 189 | $ | (594) | $ | 160 | |||||||||||||||||||||
Comprehensive income (loss) | $ | 74 | $ | 155 | $ | (631) | $ | 119 | |||||||||||||||||||||
Earnings (loss) per share | |||||||||||||||||||||||||||||
Basic | $ | 0.64 | $ | 2.52 | $ | (8.40) | $ | 2.12 | |||||||||||||||||||||
Diluted | $ | 0.63 | $ | 2.50 | $ | (8.40) | $ | 2.10 |
September 30, 2020 | December 31, 2019 | |||||||||||||
Assets | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 1,564 | $ | 686 | ||||||||||
Receivables, net | 601 | 911 | ||||||||||||
Other current assets | 470 | 548 | ||||||||||||
Total current assets | 2,635 | 2,145 | ||||||||||||
Property and equipment, net | 692 | 792 | ||||||||||||
Operating lease right-of-use assets | 2,642 | 2,596 | ||||||||||||
Deferred income taxes | 1,443 | 1,662 | ||||||||||||
Goodwill | 1,112 | 1,101 | ||||||||||||
Other intangibles, net | 780 | 798 | ||||||||||||
Other non-current assets | 249 | 217 | ||||||||||||
Total assets exclusive of assets under vehicle programs | 9,553 | 9,311 | ||||||||||||
Assets under vehicle programs: | ||||||||||||||
Program cash | 94 | 211 | ||||||||||||
Vehicles, net | 8,780 | 12,177 | ||||||||||||
Receivables from vehicle manufacturers and other | 499 | 778 | ||||||||||||
Investment in Avis Budget Rental Car Funding (AESOP) LLC—related party | 670 | 649 | ||||||||||||
10,043 | 13,815 | |||||||||||||
Total assets | $ | 19,596 | $ | 23,126 | ||||||||||
Liabilities and stockholders’ equity | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable and other current liabilities | $ | 2,147 | $ | 2,206 | ||||||||||
Short-term debt and current portion of long-term debt | 19 | 19 | ||||||||||||
Total current liabilities | 2,166 | 2,225 | ||||||||||||
Long-term debt | 4,145 | 3,416 | ||||||||||||
Long-term operating lease liabilities | 2,166 | 2,140 | ||||||||||||
Other non-current liabilities | 764 | 757 | ||||||||||||
Total liabilities exclusive of liabilities under vehicle programs | 9,241 | 8,538 | ||||||||||||
Liabilities under vehicle programs: | ||||||||||||||
Debt | 2,234 | 3,132 | ||||||||||||
Debt due to Avis Budget Rental Car Funding (AESOP) LLC—related party | 6,105 | 7,936 | ||||||||||||
Deferred income taxes | 1,685 | 2,189 | ||||||||||||
Other | 407 | 675 | ||||||||||||
10,431 | 13,932 | |||||||||||||
Commitments and contingencies (Note 13) | ||||||||||||||
Stockholders’ equity: | ||||||||||||||
Preferred stock, $0.01 par value—authorized 10 shares; NaN issued and outstanding, respectively | 0 | 0 | ||||||||||||
Common stock, $0.01 par value—authorized 250 shares; issued 137 shares, respectively | 1 | 1 | ||||||||||||
Additional paid-in capital | 6,672 | 6,741 | ||||||||||||
Accumulated deficit | (1,380) | (785) | ||||||||||||
Accumulated other comprehensive loss | (194) | (157) | ||||||||||||
Treasury stock, at cost—67 and 63 shares, respectively | (5,175) | (5,144) | ||||||||||||
Total stockholders’ equity | (76) | 656 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 19,596 | $ | 23,126 |
September 30, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 615 | $ | 615 | ||||
Receivables, net | 872 | 955 | ||||||
Other current assets | 660 | 604 | ||||||
Total current assets | 2,147 | 2,174 | ||||||
Property and equipment, net | 752 | 736 | ||||||
Operating lease right-of-use assets | 2,365 | — | ||||||
Deferred income taxes | 1,360 | 1,301 | ||||||
Goodwill | 1,083 | 1,092 | ||||||
Other intangibles, net | 792 | 825 | ||||||
Other non-current assets | 221 | 242 | ||||||
Total assets exclusive of assets under vehicle programs | 8,720 | 6,370 | ||||||
Assets under vehicle programs: | ||||||||
Program cash | 89 | 115 | ||||||
Vehicles, net | 12,752 | 11,474 | ||||||
Receivables from vehicle manufacturers and other | 905 | 631 | ||||||
Investment in Avis Budget Rental Car Funding (AESOP) LLC—related party | 642 | 559 | ||||||
14,388 | 12,779 | |||||||
Total assets | $ | 23,108 | $ | 19,149 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and other current liabilities | $ | 2,195 | $ | 1,693 | ||||
Short-term debt and current portion of long-term debt | 95 | 23 | ||||||
Total current liabilities | 2,290 | 1,716 | ||||||
Long-term debt | 3,388 | 3,528 | ||||||
Long-term operating lease liabilities | 1,966 | — | ||||||
Other non-current liabilities | 748 | 767 | ||||||
Total liabilities exclusive of liabilities under vehicle programs | 8,392 | 6,011 | ||||||
Liabilities under vehicle programs: | ||||||||
Debt | 3,722 | 2,874 | ||||||
Debt due to Avis Budget Rental Car Funding (AESOP) LLC—related party | 7,870 | 7,358 | ||||||
Deferred income taxes | 2,058 | 1,961 | ||||||
Other | 571 | 531 | ||||||
14,221 | 12,724 | |||||||
Commitments and contingencies (Note 13) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.01 par value—authorized 10 shares; none issued and outstanding, respectively | — | — | ||||||
Common stock, $0.01 par value—authorized 250 shares; issued 137 shares, respectively | 1 | 1 | ||||||
Additional paid-in capital | 6,735 | 6,771 | ||||||
Accumulated deficit | (927 | ) | (1,091 | ) | ||||
Accumulated other comprehensive loss | (173 | ) | (133 | ) | ||||
Treasury stock, at cost—63 and 61 shares, respectively | (5,141 | ) | (5,134 | ) | ||||
Total stockholders’ equity | 495 | 414 | ||||||
Total liabilities and stockholders’ equity | $ | 23,108 | $ | 19,149 |
Nine Months Ended September 30, | |||||||||||||||||
2020 | 2019 | ||||||||||||||||
Operating activities | |||||||||||||||||
Net income (loss) | $ | (594) | 160 | ||||||||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||||
Vehicle depreciation | 1,063 | 1,457 | |||||||||||||||
Amortization of right-of-use assets | 710 | 752 | |||||||||||||||
(Gain) loss on sale of vehicles, net | (123) | (69) | |||||||||||||||
Non-vehicle related depreciation and amortization | 214 | 195 | |||||||||||||||
Stock-based compensation | 6 | 18 | |||||||||||||||
Amortization of debt financing fees | 24 | 23 | |||||||||||||||
Early extinguishment of debt costs | 9 | 10 | |||||||||||||||
Net change in assets and liabilities: | |||||||||||||||||
Receivables | 156 | (65) | |||||||||||||||
Income taxes and deferred income taxes | (239) | 40 | |||||||||||||||
Accounts payable and other current liabilities | (59) | 41 | |||||||||||||||
Operating lease liabilities | (707) | (746) | |||||||||||||||
Other, net | 172 | 115 | |||||||||||||||
Net cash provided by operating activities | 632 | 1,931 | |||||||||||||||
Investing activities | |||||||||||||||||
Property and equipment additions | (75) | (178) | |||||||||||||||
Proceeds received on asset sales | 5 | 7 | |||||||||||||||
Net assets acquired (net of cash acquired) | (63) | (68) | |||||||||||||||
Other, net | 0 | 80 | |||||||||||||||
Net cash used in investing activities exclusive of vehicle programs | (133) | (159) | |||||||||||||||
Vehicle programs: | |||||||||||||||||
Investment in vehicles | (4,749) | (10,621) | |||||||||||||||
Proceeds received on disposition of vehicles | 7,386 | 7,826 | |||||||||||||||
Investment in debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party | (243) | (221) | |||||||||||||||
Proceeds from debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party | 222 | 137 | |||||||||||||||
2,616 | (2,879) | ||||||||||||||||
Net cash provided by (used in) investing activities | 2,483 | (3,038) |
Nine Months Ended September 30, | |||||||||
2019 | 2018 | ||||||||
Operating activities | |||||||||
Net income | $ | 160 | $ | 152 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
Vehicle depreciation | 1,457 | 1,536 | |||||||
Amortization of right-of-use assets | 752 | — | |||||||
(Gain) loss on sale of vehicles, net | (69 | ) | (35 | ) | |||||
Non-vehicle related depreciation and amortization | 195 | 190 | |||||||
Stock-based compensation | 18 | 18 | |||||||
Amortization of debt financing fees | 23 | 21 | |||||||
Early extinguishment of debt costs | 10 | 5 | |||||||
Net change in assets and liabilities: | |||||||||
Receivables | (65 | ) | (140 | ) | |||||
Income taxes and deferred income taxes | 40 | 78 | |||||||
Accounts payable and other current liabilities | 41 | 138 | |||||||
Operating lease liabilities | (746 | ) | — | ||||||
Other, net | 115 | 132 | |||||||
Net cash provided by operating activities | 1,931 | 2,095 | |||||||
Investing activities | |||||||||
Property and equipment additions | (178 | ) | (157 | ) | |||||
Proceeds received on asset sales | 7 | 9 | |||||||
Net assets acquired (net of cash acquired) | (68 | ) | (64 | ) | |||||
Other, net | 80 | (44 | ) | ||||||
Net cash used in investing activities exclusive of vehicle programs | (159 | ) | (256 | ) | |||||
Vehicle programs: | |||||||||
Investment in vehicles | (10,621 | ) | (10,079 | ) | |||||
Proceeds received on disposition of vehicles | 7,826 | 6,752 | |||||||
Investment in debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party | (221 | ) | (116 | ) | |||||
Proceeds from debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party | 137 | 22 | |||||||
(2,879 | ) | (3,421 | ) | ||||||
Net cash used in investing activities | (3,038 | ) | (3,677 | ) |
Avis Budget Group, Inc. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued) (In millions) (Unaudited) | ||||||||||||||||||||||
Nine Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||||||||
Financing activities | Financing activities | Financing activities | ||||||||||||||||||||
Proceeds from long-term borrowings | Proceeds from long-term borrowings | 402 | 81 | Proceeds from long-term borrowings | 991 | 402 | ||||||||||||||||
Payments on long-term borrowings | Payments on long-term borrowings | (427 | ) | (99 | ) | Payments on long-term borrowings | (303) | (427) | ||||||||||||||
Net change in short-term borrowings | — | (4 | ) | |||||||||||||||||||
Issuance of common stock | Issuance of common stock | 15 | 0 | |||||||||||||||||||
Repurchases of common stock | Repurchases of common stock | (65 | ) | (143 | ) | Repurchases of common stock | (119) | (65) | ||||||||||||||
Debt financing fees | Debt financing fees | (6 | ) | (9 | ) | Debt financing fees | (24) | (6) | ||||||||||||||
Other, net | — | 3 | ||||||||||||||||||||
Net cash used in financing activities exclusive of vehicle programs | (96 | ) | (171 | ) | ||||||||||||||||||
Net cash provided by (used in) financing activities exclusive of vehicle programs | Net cash provided by (used in) financing activities exclusive of vehicle programs | 560 | (96) | |||||||||||||||||||
Vehicle programs: | Vehicle programs: | Vehicle programs: | ||||||||||||||||||||
Proceeds from borrowings | 16,042 | 13,371 | Proceeds from borrowings | 12,349 | 16,042 | |||||||||||||||||
Payments on borrowings | (14,838 | ) | (11,727 | ) | Payments on borrowings | (15,280) | (14,838) | |||||||||||||||
Debt financing fees | (18 | ) | (19 | ) | Debt financing fees | (12) | (18) | |||||||||||||||
1,186 | 1,625 | (2,943) | 1,186 | |||||||||||||||||||
Net cash provided by financing activities | 1,090 | 1,454 | ||||||||||||||||||||
Net cash provided by (used in) financing activities | Net cash provided by (used in) financing activities | (2,383) | 1,090 | |||||||||||||||||||
Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash | Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash | (10 | ) | (5 | ) | Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash | 28 | (10) | ||||||||||||||
Net decrease in cash and cash equivalents, program and restricted cash | (27 | ) | (133 | ) | ||||||||||||||||||
Net increase (decrease) in cash and cash equivalents, program and restricted cash | Net increase (decrease) in cash and cash equivalents, program and restricted cash | 760 | (27) | |||||||||||||||||||
Cash and cash equivalents, program and restricted cash, beginning of period | Cash and cash equivalents, program and restricted cash, beginning of period | 735 | 901 | Cash and cash equivalents, program and restricted cash, beginning of period | 900 | 735 | ||||||||||||||||
Cash and cash equivalents, program and restricted cash, end of period | Cash and cash equivalents, program and restricted cash, end of period | $ | 708 | $ | 768 | Cash and cash equivalents, program and restricted cash, end of period | $ | 1,660 | $ | 708 |
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | Balance at June 30, 2020 | 137.1 | $ | 1 | $ | 6,670 | $ | (1,425) | $ | (223) | (67.4) | $ | (5,176) | $ | (153) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive loss: | Comprehensive loss: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | Net income | — | — | — | 45 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | Other comprehensive income | — | 29 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | Total comprehensive income | 74 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net activity related to restricted stock units | Net activity related to restricted stock units | — | — | 2 | — | — | 0 | 1 | 3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | Balance at September 30, 2020 | 137.1 | $ | 1 | $ | 6,672 | $ | (1,380) | $ | (194) | (67.4) | $ | (5,175) | $ | (76) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | 137.1 | $ | 1 | $ | 6,723 | $ | (1,116 | ) | $ | (139 | ) | (61.1 | ) | $ | (5,093 | ) | $ | 376 | Balance at June 30, 2019 | 137.1 | $ | 1 | $ | 6,723 | $ | (1,116) | $ | (139) | (61.1) | $ | (5,093) | $ | 376 | |||||||||||||||||||||||||||||||||||||||||||
Comprehensive income: | Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 189 | — | — | — | Net income | — | — | — | 189 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (34 | ) | — | — | Other comprehensive loss | — | — | — | — | (34) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | 155 | Total comprehensive income | 155 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net activity related to restricted stock units | — | — | (3 | ) | — | — | 0.1 | 10 | 7 | Net activity related to restricted stock units | — | — | (3) | — | — | 0.1 | 10 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Option premiums settled | — | — | 16 | — | — | — | — | 16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Option premiums paid | Option premiums paid | — | — | 16 | — | — | — | — | 16 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity related to employee stock purchase plan | — | — | (1 | ) | — | — | — | 1 | — | Activity related to employee stock purchase plan | — | — | (1) | — | — | — | 1 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | — | — | — | — | — | (2.1 | ) | (59 | ) | (59 | ) | Repurchase of common stock | — | — | — | — | — | (2.1) | (59) | (59) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2019 | 137.1 | $ | 1 | $ | 6,735 | $ | (927 | ) | $ | (173 | ) | (63.1 | ) | $ | (5,141 | ) | $ | 495 | Balance at September 30, 2019 | 137.1 | $ | 1 | $ | 6,735 | $ | (927) | $ | (173) | (63.1) | $ | (5,141) | $ | 495 | |||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2018 | 137.1 | $ | 1 | $ | 6,779 | $ | (1,316 | ) | $ | (72 | ) | (57.4 | ) | $ | (5,020 | ) | $ | 372 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 213 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (6 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | 207 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net activity related to restricted stock units | — | — | (12 | ) | — | — | 0.2 | �� | 16 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity related to employee stock purchase plan | — | — | (1 | ) | — | — | — | 1 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | — | — | — | — | — | (1.9 | ) | (62 | ) | (62 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2018 | 137.1 | $ | 1 | $ | 6,766 | $ | (1,103 | ) | $ | (78 | ) | (59.1 | ) | $ | (5,065 | ) | $ | 521 |
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Stockholders’ Equity | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 | Balance at December 31, 2019 | 137.1 | $ | 1 | $ | 6,741 | $ | (785) | $ | (157) | (63.2) | $ | (5,144) | $ | 656 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of accounting change | Cumulative effect of accounting change | — | — | — | (1) | — | — | — | (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive loss: | Comprehensive loss: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | Net loss | — | — | — | (594) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | Other comprehensive loss | — | — | — | — | (37) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive loss | Total comprehensive loss | (631) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-controlling interest | Non-controlling interest | — | — | (2) | — | — | — | — | (2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net activity related to restricted stock units | Net activity related to restricted stock units | — | — | (82) | — | — | 0.4 | 82 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | Issuance of common stock | — | — | 15 | — | — | 0.4 | — | 15 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | Repurchase of common stock | — | — | — | — | — | (5.0) | (113) | (113) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | Balance at September 30, 2020 | 137.1 | $ | 1 | $ | 6,672 | $ | (1,380) | $ | (194) | (67.4) | $ | (5,175) | $ | (76) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Shares | Amount | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2018 | 137.1 | $ | 1 | (61.5 | ) | $ | (5,134 | ) | Balance at December 31, 2018 | 137.1 | $ | 1 | $ | 6,771 | $ | (1,091) | $ | (133) | (61.5) | $ | (5,134) | $ | 414 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of accounting change | — | — | — | 4 | 1 | — | — | 5 | Cumulative effect of accounting change | — | — | — | 4 | 1 | — | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income: | Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 160 | — | — | — | Net income | — | — | — | 160 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (41 | ) | — | — | Other comprehensive loss | — | — | — | — | (41) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | 119 | Total comprehensive income | 119 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net activity related to restricted stock units | — | — | (30 | ) | — | — | 0.4 | 46 | 16 | Net activity related to restricted stock units | — | — | (30) | — | — | 0.4 | 46 | 16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | (5 | ) | — | — | 0.1 | 5 | — | Exercise of stock options | — | — | (5) | — | — | 0.1 | 5 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity related to employee stock purchase plan | — | — | (1 | ) | — | — | — | 1 | — | Activity related to employee stock purchase plan | — | (1) | — | — | — | 1 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | — | — | — | — | — | (2.1 | ) | (59 | ) | (59 | ) | Repurchase of common stock | — | — | — | — | — | (2.1) | (59) | (59) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2019 | 137.1 | $ | 1 | $ | 6,735 | $ | (927 | ) | $ | (173 | ) | (63.1 | ) | $ | (5,141 | ) | $ | 495 | Balance at September 30, 2019 | 137.1 | $ | 1 | $ | 6,735 | $ | (927) | $ | (173) | (63.1) | $ | (5,141) | $ | 495 | |||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2017 | 137.1 | $ | 1 | $ | 6,820 | $ | (1,222 | ) | $ | (24 | ) | (56.3 | ) | $ | (5,002 | ) | $ | 573 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of accounting change | — | — | — | (33 | ) | (6 | ) | — | — | (39 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 152 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (48 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income | 104 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net activity related to restricted stock units | — | — | (38 | ) | — | — | 0.5 | 48 | 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | (15 | ) | — | — | 0.2 | 17 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity related to employee stock purchase plan | — | — | (1 | ) | — | — | — | 1 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | — | — | — | — | — | (3.5 | ) | (129 | ) | (129 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2018 | 137.1 | $ | 1 | $ | 6,766 | $ | (1,103 | ) | $ | (78 | ) | (59.1 | ) | $ | (5,065 | ) | $ | 521 |
•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. |
As of September 30, | As of September 30, | |||||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||||
Cash and cash equivalents | $ | 615 | $ | 605 | Cash and cash equivalents | $ | 1,564 | $ | 615 | |||||||||
Program cash | 89 | 151 | Program cash | 94 | 89 | |||||||||||||
Restricted cash (a) | 4 | 12 | Restricted cash (a) | 2 | 4 | |||||||||||||
Total cash and cash equivalents, program and restricted cash | $ | 708 | $ | 768 | Total cash and cash equivalents, program and restricted cash | $ | 1,660 | $ | 708 |
(a)Included within other current assets. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Americas | $ | 1,114 | $ | 1,868 | $ | 2,936 | $ | 4,822 | |||||||||||||||
Europe, Middle East and Africa | 363 | 742 | 879 | 1,747 | |||||||||||||||||||
Asia and Australasia | 57 | 143 | 232 | 441 | |||||||||||||||||||
Total revenues | $ | 1,534 | $ | 2,753 | $ | 4,047 | $ | 7,010 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Americas | $ | 1,868 | $ | 1,844 | $ | 4,822 | $ | 4,782 | ||||||||
Europe, Middle East and Africa | 742 | 784 | 1,747 | 1,830 | ||||||||||||
Asia and Australasia | 143 | 150 | 441 | 462 | ||||||||||||
Total revenues | $ | 2,753 | $ | 2,778 | $ | 7,010 | $ | 7,074 |
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
Avis | Avis | $ | 1,580 | $ | 1,599 | $ | 4,008 | $ | 4,095 | Avis | $ | 843 | $ | 1,580 | $ | 2,230 | $ | 4,008 | |||||||||||||||||||||
Budget | Budget | 950 | 953 | 2,417 | 2,372 | Budget | 539 | 950 | 1,425 | 2,417 | |||||||||||||||||||||||||||||
Other | Other | 223 | 226 | 585 | 607 | Other | 152 | 223 | 392 | 585 | |||||||||||||||||||||||||||||
Total revenues | Total revenues | $ | 2,753 | $ | 2,778 | $ | 7,010 | $ | 7,074 | Total revenues | $ | 1,534 | $ | 2,753 | $ | 4,047 | $ | 7,010 |
Nine Months Ended September 30, | |||||||
2019 | 2018 | ||||||
Balance, January 1 | $ | 64 | $ | 69 | |||
Revenue deferred | 19 | 12 | |||||
Revenue recognized | (16 | ) | (9 | ) | |||
Balance, September 30 | $ | 67 | $ | 72 |
Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | |||||||
Americas | $ | 1,856 | $ | 4,792 | ||||
Europe, Middle East and Africa | 717 | 1,684 | ||||||
Asia and Australasia | 140 | 431 | ||||||
Total lease revenues | $ | 2,713 | $ | 6,907 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Americas | $ | 1,099 | $ | 1,856 | $ | 2,896 | $ | 4,792 | |||||||||||||||
Europe, Middle East and Africa | 350 | 717 | 843 | 1,684 | |||||||||||||||||||
Asia and Australasia | 55 | 140 | 224 | 431 | |||||||||||||||||||
Total lease revenues | $ | 1,504 | $ | 2,713 | $ | 3,963 | $ | 6,907 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Avis | $ | 824 | $ | 1,559 | $ | 2,181 | $ | 3,953 | |||||||||||||||
Budget | 532 | 935 | 1,401 | 2,379 | |||||||||||||||||||
Other | 148 | 219 | 381 | 575 | |||||||||||||||||||
Total lease revenues | $ | 1,504 | $ | 2,713 | $ | 3,963 | $ | 6,907 |
Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | |||||||
Avis | $ | 1,559 | $ | 3,953 | ||||
Budget | 935 | 2,379 | ||||||
Other | 219 | 575 | ||||||
Total lease revenues | $ | 2,713 | $ | 6,907 |
Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | ||||||
Property leases (a) | |||||||
Operating lease expense | $ | 184 | $ | 540 | |||
Variable lease expense | 93 | 219 | |||||
Sublease income | (2 | ) | (6 | ) | |||
Total property lease expense | $ | 275 | $ | 753 | |||
Vehicle leases | |||||||
Finance lease expense: | |||||||
Amortization of ROU assets (b) | $ | 8 | $ | 31 | |||
Interest on lease liabilities (c) | 1 | 3 | |||||
Operating lease expense (b) | 72 | 191 | |||||
Total vehicle lease expense | $ | 81 | $ | 225 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Property leases (a) | |||||||||||||||||||||||
Operating lease expense | $ | 130 | $ | 184 | $ | 443 | $ | 540 | |||||||||||||||
Variable lease expense | 51 | 93 | 107 | 219 | |||||||||||||||||||
Total property lease expense | $ | 181 | $ | 277 | $ | 550 | $ | 759 |
(a) Primarily included in operating expense and includes $11 million and $41 million of minimum annual guaranteed rent in excess of concession fees as defined in our rental concession agreement for the three and nine months ended September 30, 2020, respectively. |
As of September 30, 2019 | |||
Property leases | |||
Operating lease ROU assets | $ | 2,365 | |
Short-term operating lease liabilities (a) | $ | 420 | |
Long-term operating lease liabilities | 1,966 | ||
Operating lease liabilities | $ | 2,386 | |
Weighted average remaining lease term | 9.4 years | ||
Weighted average discount rate | 4.50 | % | |
Vehicle leases | |||
Finance | |||
Finance lease ROU assets, gross | $ | 337 | |
Accumulated amortization | (55 | ) | |
Finance lease ROU assets, net (b) | $ | 282 | |
Short-term vehicle finance lease liabilities | $ | 96 | |
Long-term vehicle finance lease liabilities | 164 | ||
Vehicle finance lease liabilities (c) | $ | 260 | |
Weighted average remaining lease term | 1.9 years | ||
Weighted average discount rate | 1.77 | % | |
Operating | |||
Vehicle operating lease ROU assets (d) | $ | 205 | |
Short-term vehicle operating lease liabilities | $ | 136 | |
Long-term vehicle operating lease liabilities | 69 | ||
Vehicle operating lease liabilities (e) | $ | 205 | |
Weighted average remaining lease term | 1.7 years | ||
Weighted average discount rate | 2.91 | % |
As of September 30, 2020 | As of December 31, 2019 | ||||||||||
Property leases | |||||||||||
Operating lease ROU assets | $ | 2,642 | $ | 2,596 | |||||||
Short-term operating lease liabilities (a) | $ | 501 | $ | 479 | |||||||
Long-term operating lease liabilities | 2,166 | 2,140 | |||||||||
Operating lease liabilities | $ | 2,667 | $ | 2,619 | |||||||
Weighted average remaining lease term | 8.7 years | 8.9 years | |||||||||
Weighted average discount rate | 4.01 | % | 4.31 | % |
Nine Months Ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
Cash payments for lease liabilities within operating activities: | |||||||||||
Property operating leases | $ | 554 | $ | 564 | |||||||
Non-cash activities - increase (decrease) in ROU assets in exchange for lease liabilities: | |||||||||||
Property operating leases (a) | 588 | 149 |
Nine Months Ended September 30, 2019 | |||
Cash payments for lease liabilities within operating activities: | |||
Property operating leases | $ | 564 | |
Vehicle operating leases | 182 | ||
Vehicle finance leases | 3 | ||
Cash payments for lease liabilities within financing activities: | |||
Vehicle finance leases | 193 | ||
Non-cash activities - increase (decrease) in ROU assets in exchange for lease liabilities: | |||
Property operating leases (a) | 149 | ||
Vehicle operating leases (a) | 209 | ||
Vehicle finance leases | 247 |
Property Operating Leases | Vehicle Finance Leases | Vehicle Operating Leases | |||||||||
Within 1 year | $ | 517 | $ | 96 | $ | 140 | |||||
Between 1 and 2 years | 424 | 21 | 52 | ||||||||
Between 2 and 3 years | 357 | 138 | 15 | ||||||||
Between 3 and 4 years | 298 | 5 | 4 | ||||||||
Between 4 and 5 years | 215 | — | — | ||||||||
Thereafter | 1,159 | — | — | ||||||||
Total lease payments | 2,970 | 260 | 211 | ||||||||
Less: Imputed interest | (584 | ) | — | (6 | ) | ||||||
Total | $ | 2,386 | $ | 260 | $ | 205 |
Amount | |||
2019 | $ | 835 | |
2020 | 476 | ||
2021 | 345 | ||
2022 | 253 | ||
2023 | 162 | ||
Thereafter | 590 | ||
$ | 2,661 |
Americas | International | Total | ||||||||||||||
Balance as of January 1, 2019 | $ | — | $ | 2 | $ | 2 | ||||||||||
Restructuring expense: | ||||||||||||||||
Brazil | 6 | — | 6 | |||||||||||||
T19 | 34 | 11 | 45 | |||||||||||||
Restructuring payment/utilization: | ||||||||||||||||
Brazil | (4 | ) | — | (4 | ) | |||||||||||
T19 | (34 | ) | (9 | ) | (43 | ) | ||||||||||
Workforce planning | — | (1 | ) | (1 | ) | |||||||||||
Balance as of September 30, 2019 | $ | 2 | $ | 3 | $ | 5 | ||||||||||
Personnel | Facility Related | Other (a) | Total | |||||||||||||
Balance as of January 1, 2019 | $ | 1 | $ | — | $ | 1 | $ | 2 | ||||||||
Restructuring expense: | ||||||||||||||||
Brazil | 1 | 1 | 4 | 6 | ||||||||||||
T19 | 16 | — | 29 | 45 | ||||||||||||
Restructuring payment/utilization: | ||||||||||||||||
Brazil | — | — | (4 | ) | (4 | ) | ||||||||||
T19 | (15 | ) | — | (28 | ) | (43 | ) | |||||||||
Workforce planning | (1 | ) | — | — | (1 | ) | ||||||||||
Balance as of September 30, 2019 | $ | 2 | $ | 1 | $ | 2 | $ | 5 |
Americas | International | Total | ||||||||||||||||||||||||
Balance as of January 1, 2020 | $ | 2 | $ | 4 | $ | 6 | ||||||||||||||||||||
Restructuring expense: | ||||||||||||||||||||||||||
2020 Optimization Plan | 26 | 33 | 59 | |||||||||||||||||||||||
Brazil | 2 | 0 | 2 | |||||||||||||||||||||||
T19 | 4 | 0 | 4 | |||||||||||||||||||||||
Restructuring payment/utilization: | ||||||||||||||||||||||||||
2020 Optimization Plan | (24) | (26) | (50) | |||||||||||||||||||||||
Brazil | (2) | 0 | (2) | |||||||||||||||||||||||
T19 | (6) | (3) | (9) | |||||||||||||||||||||||
Balance as of September 30, 2020 | $ | 2 | $ | 8 | $ | 10 | ||||||||||||||||||||
Personnel | Facility Related | Other (a) | Total | |||||||||||||||||||||||
Balance as of January 1, 2020 | $ | 3 | $ | 1 | $ | 2 | $ | 6 | ||||||||||||||||||
Restructuring expense: | ||||||||||||||||||||||||||
2020 Optimization Plan | 56 | 1 | 2 | 59 | ||||||||||||||||||||||
Brazil | 1 | 1 | 0 | 2 | ||||||||||||||||||||||
T19 | 0 | 0 | 4 | 4 | ||||||||||||||||||||||
Restructuring payment/utilization: | ||||||||||||||||||||||||||
2020 Optimization Plan | (49) | 0 | (1) | (50) | ||||||||||||||||||||||
Brazil | (1) | (1) | 0 | (2) | ||||||||||||||||||||||
T19 | (4) | 0 | (5) | (9) | ||||||||||||||||||||||
Balance as of September 30, 2020 | $ | 6 | $ | 2 | $ | 2 | $ | 10 |
(a)Includes expenses primarily related to the disposition of vehicles. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
Net income (loss) for basic and diluted EPS | $ | 45 | $ | 189 | $ | (594) | $ | 160 | ||||||||||||||||||
Basic weighted average shares outstanding | 69.7 | 75.2 | 70.8 | 75.6 | ||||||||||||||||||||||
Options and non-vested stock (a) | 0.5 | 0.5 | 0 | 0.6 | ||||||||||||||||||||||
Diluted weighted average shares outstanding | 70.2 | 75.7 | 70.8 | 76.2 | ||||||||||||||||||||||
Earnings (Loss) per share: | ||||||||||||||||||||||||||
Basic | $ | 0.64 | $ | 2.52 | $ | (8.40) | $ | 2.12 | ||||||||||||||||||
Diluted | $ | 0.63 | $ | 2.50 | $ | (8.40) | $ | 2.10 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net income for basic and diluted EPS | $ | 189 | $ | 213 | $ | 160 | $ | 152 | ||||||||
Basic weighted average shares outstanding | 75.2 | 78.8 | 75.6 | 80.1 | ||||||||||||
Options and non-vested stock (a) | 0.5 | 0.7 | 0.6 | 0.9 | ||||||||||||
Diluted weighted average shares outstanding | 75.7 | 79.5 | 76.2 | 81.0 | ||||||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 2.52 | $ | 2.71 | $ | 2.12 | $ | 1.90 | ||||||||
Diluted | $ | 2.50 | $ | 2.68 | $ | 2.10 | $ | 1.88 |
5. Acquisitions |
As of September 30, 2020 | As of December 31, 2019 | ||||||||||
Prepaid expenses | $ | 177 | $ | 234 | |||||||
Sales and use taxes | 147 | 173 | |||||||||
Other | 146 | 141 | |||||||||
Other current assets | $ | 470 | $ | 548 |
As of September 30, 2019 | As of December 31, 2018 | ||||||
Prepaid expenses | $ | 259 | $ | 241 | |||
Sales and use taxes | 246 | 180 | |||||
Other | 155 | 183 | |||||
Other current assets | $ | 660 | $ | 604 |
As of September 30, 2019 | As of December 31, 2018 | ||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
Amortized Intangible Assets | |||||||||||||||||||||||
License agreements | $ | 229 | $ | 104 | $ | 125 | $ | 305 | $ | 168 | $ | 137 | |||||||||||
Customer relationships | 250 | 157 | 93 | 251 | 141 | 110 | |||||||||||||||||
Other | 49 | 23 | 26 | 52 | 21 | 31 | |||||||||||||||||
Total | $ | 528 | $ | 284 | $ | 244 | $ | 608 | $ | 330 | $ | 278 | |||||||||||
Unamortized Intangible Assets | |||||||||||||||||||||||
Goodwill | $ | 1,083 | $ | 1,092 | |||||||||||||||||||
Trademarks | $ | 548 | $ | 547 |
As of September 30, 2020 | As of December 31, 2019 | ||||||||||||||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||||||||||||
Amortized Intangible Assets | |||||||||||||||||||||||||||||||||||
License agreements | $ | 271 | $ | 136 | $ | 135 | $ | 241 | $ | 108 | $ | 133 | |||||||||||||||||||||||
Customer relationships | 261 | 186 | 75 | 255 | 165 | 90 | |||||||||||||||||||||||||||||
Other | 52 | 30 | 22 | 50 | 25 | 25 | |||||||||||||||||||||||||||||
Total | $ | 584 | $ | 352 | $ | 232 | $ | 546 | $ | 298 | $ | 248 | |||||||||||||||||||||||
Unamortized Intangible Assets | |||||||||||||||||||||||||||||||||||
Goodwill | $ | 1,112 | $ | 1,101 | |||||||||||||||||||||||||||||||
Trademarks | $ | 548 | $ | 550 |
As of | As of | ||||||
September 30, | December 31, | ||||||
2019 | 2018 | ||||||
Rental vehicles | $ | 13,691 | $ | 12,548 | |||
Less: Accumulated depreciation | (1,524 | ) | (1,670 | ) | |||
12,167 | 10,878 | ||||||
Vehicles held for sale | 585 | 596 | |||||
Vehicles, net | $ | 12,752 | $ | 11,474 |
As of | As of | ||||||||||
September 30, | December 31, | ||||||||||
2020 | 2019 | ||||||||||
Rental vehicles | $ | 9,826 | $ | 13,461 | |||||||
Less: Accumulated depreciation | (1,331) | (1,621) | |||||||||
8,495 | 11,840 | ||||||||||
Vehicles held for sale | 285 | 337 | |||||||||
Vehicles, net | $ | 8,780 | $ | 12,177 | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
Depreciation expense | $ | 315 | $ | 516 | $ | 1,063 | $ | 1,457 | |||||||||||||||||||||||||||
Lease charges | 50 | 72 | 149 | 191 | |||||||||||||||||||||||||||||||
(Gain) loss on sale of vehicles, net | (109) | (37) | (123) | (69) | |||||||||||||||||||||||||||||||
Vehicle depreciation and lease charges, net | $ | 256 | $ | 551 | $ | 1,089 | $ | 1,579 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Depreciation expense | $ | 516 | $ | 540 | $ | 1,457 | $ | 1,536 | |||||||
Lease charges | 72 | 72 | 191 | 192 | |||||||||||
(Gain) loss on sale of vehicles, net | (37 | ) | (25 | ) | (69 | ) | (35 | ) | |||||||
Vehicle depreciation and lease charges, net | $ | 551 | $ | 587 | $ | 1,579 | $ | 1,693 |
As of | As of | ||||||||||
September 30, | December 31, | ||||||||||
2020 | 2019 | ||||||||||
Short-term operating lease liabilities | $ | 501 | $ | 479 | |||||||
Accounts payable | 404 | 378 | |||||||||
Accrued sales and use taxes | 249 | 223 | |||||||||
Public liability and property damage insurance liabilities – current | 179 | 178 | |||||||||
Accrued advertising and marketing | 145 | 191 | |||||||||
Accrued payroll and related | 131 | 195 | |||||||||
Other | 538 | 562 | |||||||||
Accounts payable and other current liabilities | $ | 2,147 | $ | 2,206 |
As of | As of | ||||||
September 30, | December 31, | ||||||
2019 | 2018 | ||||||
Short-term operating lease liabilities | $ | 420 | $ | — | |||
Accounts payable | 382 | 371 | |||||
Accrued sales and use taxes | 267 | 208 | |||||
Accrued advertising and marketing | 206 | 192 | |||||
Accrued payroll and related | 184 | 200 | |||||
Public liability and property damage insurance liabilities – current | 150 | 149 | |||||
Deferred lease revenues – current | 141 | 140 | |||||
Other | 445 | 433 | |||||
Accounts payable and other current liabilities | $ | 2,195 | $ | 1,693 |
As of | As of | ||||||||||||||||
Maturity Date | September 30, | December 31, | |||||||||||||||
2020 | 2019 | ||||||||||||||||
5½% Senior Notes | April 2023 | $ | 0 | $ | 200 | ||||||||||||
6⅜% Senior Notes | April 2024 | 350 | 350 | ||||||||||||||
4⅛% euro-denominated Senior Notes | November 2024 | 352 | 336 | ||||||||||||||
5¼% Senior Notes | March 2025 | 375 | 375 | ||||||||||||||
4½% euro-denominated Senior Notes | May 2025 | 293 | 280 | ||||||||||||||
10½% Senior Secured Notes | May 2025 | 486 | 0 | ||||||||||||||
4¾% euro-denominated Senior Notes | January 2026 | 410 | 393 | ||||||||||||||
5¾% Senior Notes | July 2027 | 723 | 400 | ||||||||||||||
Floating Rate Term Loan (a) | August 2027 | 1,201 | 1,112 | ||||||||||||||
Other (b) | 24 | 28 | |||||||||||||||
Deferred financing fees | (50) | (39) | |||||||||||||||
Total | 4,164 | 3,435 | |||||||||||||||
Less: Short-term debt and current portion of long-term debt | 19 | 19 | |||||||||||||||
Long-term debt | $ | 4,145 | $ | 3,416 |
As of | As of | ||||||||
Maturity Dates | September 30, | December 31, | |||||||
2019 | 2018 | ||||||||
5½% Senior Notes (a) | April 2023 | $ | 275 | $ | 675 | ||||
6⅜% Senior Notes | April 2024 | 350 | 350 | ||||||
4⅛% euro-denominated Senior Notes | November 2024 | 327 | 344 | ||||||
Floating Rate Term Loan (b) | February 2025 | 1,115 | 1,123 | ||||||
5¼% Senior Notes | March 2025 | 375 | 375 | ||||||
4½% euro-denominated Senior Notes | May 2025 | 272 | 287 | ||||||
4¾% euro-denominated Senior Notes | January 2026 | 381 | 401 | ||||||
5¾% Senior Notes | July 2027 | 400 | — | ||||||
Other (c) | 30 | 41 | |||||||
Deferred financing fees | (42 | ) | (45 | ) | |||||
Total | 3,483 | 3,551 | |||||||
Less: Short-term debt and current portion of long-term debt | 95 | 23 | |||||||
Long-term debt | $ | 3,388 | $ | 3,528 |
18 |
Total Capacity | Outstanding Borrowings | Letters of Credit Issued | Available Capacity | ||||||||||||
Senior revolving credit facility maturing 2023 (a) | $ | 1,800 | $ | — | $ | 947 | $ | 853 |
Total Capacity | Outstanding Borrowings | Letters of Credit Issued | Available Capacity | ||||||||||||||||||||
Senior revolving credit facility maturing 2023 (a) | $ | 1,800 | $ | 0 | $ | 982 | $ | 818 |
(a)The senior revolving credit facility bears interest at one-month LIBOR plus 250 basis points and |
As of | As of | ||||||
September 30, | December 31, | ||||||
2019 | 2018 | ||||||
Americas - Debt due to Avis Budget Rental Car Funding (a) | $ | 7,910 | $ | 7,393 | |||
Americas - Debt borrowings (a) | 923 | 635 | |||||
International - Debt borrowings (a) | 2,592 | 2,060 | |||||
International - Finance leases (a) | 217 | 191 | |||||
Other | — | 2 | |||||
Deferred financing fees (b) | (50 | ) | (49 | ) | |||
Total | $ | 11,592 | $ | 10,232 |
As of | As of | ||||||||||
September 30, | December 31, | ||||||||||
2020 | 2019 | ||||||||||
Americas - Debt due to Avis Budget Rental Car Funding | $ | 6,144 | $ | 7,975 | |||||||
Americas - Debt borrowings | 634 | 827 | |||||||||
International - Debt borrowings | 1,449 | 2,100 | |||||||||
International - Finance leases | 157 | 215 | |||||||||
Deferred financing fees (a) | (45) | (49) | |||||||||
Total | $ | 8,339 | $ | 11,068 |
(a)Deferred financing fees related to Debt due to Avis Budget Rental Car Funding as of September 30, 2020 and December 31, 2019 were $39 million and $40 million, respectively |
Debt under Vehicle Programs (a) | |||
Within 1 year | $ | 1,795 | |
Between 1 and 2 years (b) | 4,783 | ||
Between 2 and 3 years | 1,668 | ||
Between 3 and 4 years | 1,088 | ||
Between 4 and 5 years | 1,418 | ||
Thereafter | 890 | ||
Total | $ | 11,642 |
Debt under Vehicle Programs (a) | |||||
Within 1 year (b) | $ | 2,588 | |||
2,038 | |||||
Between 3 and | 1,430 | ||||
Between 4 and 5 years | 1,049 | ||||
Thereafter | 93 | ||||
Total | $ | 8,384 |
Total Capacity (a) | Outstanding Borrowings (b) | Available Capacity | |||||||||
Americas - Debt due to Avis Budget Rental Car Funding | $ | 10,000 | $ | 7,910 | $ | 2,090 | |||||
Americas - Debt borrowings | 935 | 923 | 12 | ||||||||
International - Debt borrowings | 2,889 | 2,592 | 297 | ||||||||
International - Finance leases | 253 | 217 | 36 | ||||||||
Total | $ | 14,077 | $ | 11,642 | $ | 2,435 |
Total Capacity (a) | Outstanding Borrowings (b) | Available Capacity | |||||||||||||||
Americas - Debt due to Avis Budget Rental Car Funding | $ | 8,894 | $ | 6,144 | $ | 2,750 | |||||||||||
Americas - Debt borrowings | 719 | 634 | 85 | ||||||||||||||
International - Debt borrowings | 2,859 | 1,449 | 1,410 | ||||||||||||||
International - Finance leases | 219 | 157 | 62 | ||||||||||||||
Total | $ | 12,691 | $ | 8,384 | $ | 4,307 |
(a) Capacity is subject to maintaining sufficient assets to collateralize debt. (b) The outstanding debt is collateralized by vehicles and related assets of $6.9 billion for Americas - Debt due to Avis Budget Rental Car Funding; $0.9 billion for Americas - Debt borrowings; $1.7 billion for International - Debt borrowings; and $0.2 billion for International - Finance leases. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net income | $ | 189 | $ | 213 | $ | 160 | $ | 152 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Currency translation adjustments (net of tax of $(12), $(1), $(14), and $(6) respectively) | (31 | ) | (8 | ) | (21 | ) | (61 | ) | ||||||||
Net unrealized gain (loss) on cash flow hedges (net of tax of $2, $0, and $9, and $(3) respectively) | (4 | ) | — | (25 | ) | 8 | ||||||||||
Minimum pension liability adjustment (net of tax of $(1), $0, $(1), and $(1), respectively) | 1 | 2 | 5 | 5 | ||||||||||||
(34 | ) | (6 | ) | (41 | ) | (48 | ) | |||||||||
Comprehensive income | $ | 155 | $ | 207 | $ | 119 | $ | 104 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
Net income (loss) | $ | 45 | $ | 189 | $ | (594) | $ | 160 | ||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||
Currency translation adjustments (net of tax of $12, $(12), $12, and $(14), respectively) | 35 | (31) | (9) | (21) | ||||||||||||||||||||||
Net unrealized gain (loss) on cash flow hedges (net of tax of $3, $2, $12, and $9, respectively) | (7) | (4) | (33) | (25) | ||||||||||||||||||||||
Minimum pension liability adjustment (net of tax of $(1), $(1), $(1), and $(1), respectively) | 1 | 1 | 5 | 5 | ||||||||||||||||||||||
29 | (34) | (37) | (41) | |||||||||||||||||||||||
Comprehensive income (loss) | $ | 74 | $ | 155 | $ | (631) | $ | 119 |
Currency Translation Adjustments | Net Unrealized Gains (Losses) on Cash Flow Hedges(a) | Minimum Pension Liability Adjustment(b) | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||
Balance, January 1, 2020 | $ | 9 | $ | (20) | $ | (146) | $ | (157) | ||||||||||||||||||
Other comprehensive income (loss) before reclassifications | (9) | (38) | 1 | (46) | ||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | 0 | 5 | 4 | 9 | ||||||||||||||||||||||
Net current-period other comprehensive income (loss) | (9) | (33) | 5 | (37) | ||||||||||||||||||||||
Balance, September 30, 2020 | $ | 0 | $ | (53) | $ | (141) | $ | (194) | ||||||||||||||||||
Balance, December 31, 2018 | $ | (3) | $ | 2 | $ | (132) | $ | (133) | ||||||||||||||||||
Cumulative effect of accounting change | 0 | 1 | 0 | 1 | ||||||||||||||||||||||
Balance, January 1, 2019 | $ | (3) | $ | 3 | $ | (132) | $ | (132) | ||||||||||||||||||
Other comprehensive income (loss) before reclassifications | (21) | (23) | 1 | (43) | ||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | 0 | (2) | 4 | 2 | ||||||||||||||||||||||
Net current-period other comprehensive income (loss) | (21) | (25) | 5 | (41) | ||||||||||||||||||||||
Balance, September 30, 2019 | $ | (24) | $ | (22) | $ | (127) | $ | (173) |
Currency Translation Adjustments | Net Unrealized Gains (Losses) on Cash Flow Hedges(a) | Net Unrealized Gains (Losses) on Available-for-Sale Securities | Minimum Pension Liability Adjustment(b) | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||
Balance, December 31, 2018 | $ | (3 | ) | $ | 2 | $ | — | $ | (132 | ) | $ | (133 | ) | |||||||
Cumulative effect of accounting change (c) | — | 1 | — | — | 1 | |||||||||||||||
Balance, January 1, 2019 | $ | (3 | ) | $ | 3 | $ | — | $ | (132 | ) | $ | (132 | ) | |||||||
Other comprehensive income (loss) before reclassifications | (21 | ) | (23 | ) | — | 1 | (43 | ) | ||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | (2 | ) | — | 4 | 2 | ||||||||||||||
Net current-period other comprehensive income (loss) | (21 | ) | (25 | ) | — | 5 | (41 | ) | ||||||||||||
Balance, September 30, 2019 | $ | (24 | ) | $ | (22 | ) | $ | — | $ | (127 | ) | $ | (173 | ) | ||||||
Balance, December 31, 2017 | $ | 71 | $ | 5 | $ | 2 | $ | (102 | ) | $ | (24 | ) | ||||||||
Cumulative effect of accounting change | 7 | 1 | (2 | ) | (12 | ) | (6 | ) | ||||||||||||
Balance, January 1, 2018 | $ | 78 | $ | 6 | $ | — | $ | (114 | ) | $ | (30 | ) | ||||||||
Other comprehensive income (loss) before reclassifications | (61 | ) | 9 | — | 1 | (51 | ) | |||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | (1 | ) | — | 4 | 3 | ||||||||||||||
Net current-period other comprehensive income (loss) | (61 | ) | 8 | — | 5 | (48 | ) | |||||||||||||
Balance, September 30, 2018 | $ | 17 | $ | 14 | $ | — | $ | (109 | ) | $ | (78 | ) |
(a)For the three and nine months ended September 30, 2020, the amount reclassified from accumulated other comprehensive income (loss) into corporate interest expense was $3 million ($3 million, net of tax) and $5 million ($4 million, net of tax), respectively. For the three and nine months ended September 30, 2020, the amount reclassified from accumulated other comprehensive income (loss) into vehicle interest expense was $1 million ($0 million, net of tax) and $2 million ($1 million, net of tax), respectively. |
For the three and nine months ended September 30, 2019, the amount reclassified from accumulated other comprehensive income (loss) in corporate interest expense was $1 million ($0 million, net of tax) and $4 million ($2 million, net of tax), respectively. (b)For the three and nine months ended September 30, 2020, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses were $2 million ($1 |
Nine Months Ended September 30, 2020 | |||||||||||
Expected volatility of stock price | 91% | ||||||||||
Risk-free interest rate | 0.18% | ||||||||||
Valuation period | 3 years | ||||||||||
Dividend yield | 0% |
Number of Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in millions) | ||||||||||||||||||||||||||
Time-based RSUs | |||||||||||||||||||||||||||||
Outstanding at January 1, 2020 | 847 | $ | 36.99 | ||||||||||||||||||||||||||
Granted (a) | 798 | 23.14 | |||||||||||||||||||||||||||
Vested (b) | (420) | 37.82 | |||||||||||||||||||||||||||
Forfeited | (81) | 32.90 | |||||||||||||||||||||||||||
Outstanding and expected to vest at September 30, 2020 (c) | 1,144 | $ | 27.31 | 1.2 | $ | 30 | |||||||||||||||||||||||
Performance-based and market-based RSUs | |||||||||||||||||||||||||||||
Outstanding at January 1, 2020 | 1,061 | $ | 38.89 | ||||||||||||||||||||||||||
Granted (a) | 553 | 21.06 | |||||||||||||||||||||||||||
Vested (b) | (73) | 36.64 | |||||||||||||||||||||||||||
Forfeited | (424) | 35.15 | |||||||||||||||||||||||||||
Outstanding at September 30, 2020 | 1,117 | $ | 31.64 | 1.7 | $ | 29 | |||||||||||||||||||||||
Outstanding and expected to vest at September 30, 2020 (c) | 38 | $ | 20.70 | 2.7 | $ | 1 |
Number of Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in millions) | |||||||||||
Time-based RSUs | ||||||||||||||
Outstanding at January 1, 2019 | 838 | $ | 38.67 | |||||||||||
Granted (a) | 606 | 34.17 | ||||||||||||
Vested (b) | (502 | ) | 36.00 | |||||||||||
Forfeited | (56 | ) | 38.76 | |||||||||||
Outstanding and expected to vest at September 30, 2019 (c) | 886 | $ | 37.10 | 1.3 | $ | 25 | ||||||||
Performance-based and market-based RSUs | ||||||||||||||
Outstanding at January 1, 2019 | 1,169 | $ | 35.14 | |||||||||||
Granted (a) | 570 | 34.56 | ||||||||||||
Vested | — | — | ||||||||||||
Forfeited | (430 | ) | 24.85 | |||||||||||
Outstanding at September 30, 2019 | 1,309 | $ | 38.27 | 1.6 | $ | 37 | ||||||||
Outstanding and expected to vest at September 30, 2019 (c) | 524 | $ | 39.31 | 1.9 | $ | 15 |
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in millions) | |||||||||||
Outstanding at January 1, 2019 | 57 | $ | 0.79 | 0.1 | $ | 1 | ||||||||
Granted | — | — | — | |||||||||||
Exercised (a) | (57 | ) | 0.79 | 1 | ||||||||||
Forfeited/expired | — | — | — | |||||||||||
Outstanding and exercisable at September 30, 2019 | — | $ | — | — | $ | — |
As of September 30, 2019 | |||
Foreign exchange contracts | $ | 1,445 | |
Interest rate caps (a) | 7,754 | ||
Interest rate swaps | 1,500 | ||
Commodity contracts (millions of gallons of unleaded gasoline) | 5 |
As of September 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange contracts | $ | 1,309 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate caps (a)
__________ (a)Represents $5.8 billion of interest rate caps sold, partially offset by approximately $2.8 billion of interest rate caps purchased. These amounts exclude $3.0 billion of interest rate caps purchased by the Company’s Avis Budget Rental Car Funding subsidiary as it is not consolidated by the Company. Estimated fair values (Level 2) of derivative instruments were as follows: 24
__________ Amounts in this table exclude derivatives issued by Avis Budget Rental Car Funding, as it is not consolidated by the Company; however, certain amounts related to the derivatives held by Avis Budget Rental Car Funding are included within accumulated other comprehensive income (loss), as discussed in Note 14–Stockholders’ Equity.
The effects of derivatives recognized in the Company’s Consolidated Condensed Financial Statements were as follows:
__________
Debt Instruments The carrying amounts and estimated fair values (Level 2) of debt instruments were as follows: 25
__________
17. Segment Information The Company’s chief operating decision-maker assesses performance and allocates resources based upon the separate financial information from each of the Company’s operating segments. In identifying its reportable segments, the Company considered the nature of services provided, the geographical areas in which the segments operated and other relevant factors. The Company aggregates certain of its operating segments into its reportable segments. Management evaluates the operating results of each of its reportable segments based upon revenues and “Adjusted EBITDA,” which the Company defines as income (loss) from continuing operations before non-vehicle related depreciation and amortization, any impairment charges, restructuring and other related charges, early extinguishment of debt costs, non-vehicle related interest, transaction-related costs, net, charges for unprecedented personal-injury legal matters, non-operational charges related to shareholder activist activity, gain on sale of equity method investment in 26
__________
(b)For three months ended September 30, 2020 consists of $8 million within operating expenses, $1 million within selling, general and administrative expenses and $1 million within vehicle depreciation and lease charges, net. Primarily consisting of $18 million of incremental cleaning supplies to sanitize vehicles and facilities, and overflow parking for idle vehicles and related shuttling costs, $11 million of minimum annual guaranteed rent in excess of concession fees and ($19 million) associated with vehicles damaged in overflow parking lots, net of insurance proceeds.
__________
(c)Reported within selling, general and administrative expenses. (d)Reported within operating expenses. Since December 31,
* * * * 28
The following discussion should be read in conjunction with our Consolidated Condensed Financial Statements and accompanying Notes included in this Quarterly Report on Form 10-Q, and with our
Our Company We operate three of the most globally recognized brands in mobility solutions, Avis, Budget and Zipcar, together with several other Our Segments We categorize our operations into two reportable business segments: Americas, consisting primarily of our vehicle rental operations in North America, South America, Central America and the Caribbean, car sharing operations in certain of these markets, and licensees in the areas in which we do not operate directly; and International, consisting primarily of our vehicle rental operations in Europe, the Middle East, Africa, Asia and Australasia, car sharing operations in certain of these markets, and licensees in the areas in which we do not operate directly. Business and Trends Significant events affecting travel, have historically had an impact on vehicle rental volumes, with the full extent of the impact generally determined by the length of time the event influences travel decisions. COVID-19 and the resulting economic conditions have had, and we believe will continue to have, a significant negative impact on our operations and •The used vehicle market was significantly disrupted in •In April 2020, Moody’s and S&P Global (the “Rating Agencies”) downgraded our long-term corporate debt rating. If we were to experience a further downgrade, this could negatively impact our ability to respond to adverse changes in general economic, industry and competitive conditions, as well as changes in government regulation and changes to our business. 29 •As a result of decreased rental volume, we have parked our vehicles in overflow parking lots. In April 2020, we experienced a fire at an overflow parking lot near Southwest Florida International Airport. As a result, we have lost vehicles with an estimated carrying value of approximately $50 million. We realized a loss of approximately $10 million related to this incident, which has been treated as COVID-19 charges and excluded from Adjusted EBITDA. We could experience similar casualty losses in other overflow parking lots. •We have taken cost removal and mitigation actions by eliminating all non-essential capital and operating expenditures and we are continuing to negotiate with partners and suppliers for further reductions. Expenses for the first nine months of 2020 reflect the reduction or furlough of a large part of our global workforce, reduction of base compensation at the level of vice presidents and above, frozen merit increases, elimination of our 401(k) match for highly compensated employees, and cancellation of future hiring. We aggressively reduced the size of our global fleet beginning in March and ended September with 30% fewer units than the prior year. Our vehicle dispositions will occur through both traditional methods and by utilizing our alternative distribution strategy by selling directly to dealers and consumers. Finally, we have negotiated a significant number of new vehicle cancellations to improve utilization and shrink the fleet size. The momentum from the second quarter carried into the third quarter, during which we generated revenues of $1,534 million, net income of $45 million and Adjusted EBITDA of $220 million. These results were driven by ongoing cost removal and mitigation actions of another approximately $1 billion in savings for the quarter and improved residual values, which resulted from a strong used car market. Our per-unit fleet costs per month, excluding exchange rate effects, decreased to $163, or 35%, compared to third quarter 2019. Rental volumes improved by 60% compared to the previous quarter. Our utilization was 60.6% showing our ability to align our fleet with demand, which is a 25.5 point improvement compared to the previous quarter, and ended September 2020 at 63.1%. Although our revenues are significantly down compared to the prior year, we have taken positive actions to weather the crisis. We continue to look for ways to capitalize on the changes prompted by the pandemic and to expand our business in a post-COVID-19 environment. Although we have seen significant improvement, these trends could be hindered if a another wave of the We have never previously experienced such a decrease in demand, and as a result, our RESULTS OF OPERATIONS We measure performance principally using the following key metrics: (i) rental days, which represent the total number of days (or portion thereof) a vehicle was rented, (ii) revenue per day, which represents revenues divided by rental days, (iii) vehicle utilization, which represents rental days divided by available rental days, with available rental days We assess performance and allocate resources based upon the separate financial information of our operating segments. In identifying our reportable segments, we also consider the nature of services provided by our operating segments, the geographical areas in which our segments operate and other relevant factors. Management evaluates the operating results of each of our reportable segments based upon revenues and “Adjusted EBITDA,” which we define as income from continuing operations before non-vehicle related 30 depreciation and amortization, any impairment charges, restructuring and other related charges, early extinguishment of debt costs, non-vehicle related interest, transaction-related costs, net, charges for unprecedented personal-injury legal matters, non-operational charges related to shareholder activist activity, gain on sale of equity method investment in During the nine months ended September 30, •Our revenues totaled •Our net •We repurchased •We acquired various licensees the United States and Europe. 31 Three Months Ended September 30, Our consolidated condensed results of operations comprised the following:
__________ n/m Not meaningful. Revenues decreased during the three months ended September 30, Operating expenses increased to Our effective tax rates were Following is a more detailed discussion of the results of each of our reportable segments and reconciliation of net income to Adjusted EBITDA: 32
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Americas
Revenues Operating expenses increased to Adjusted EBITDA was
33 International
Revenues decreased 53% during the three months ended September 30, 2020, compared to the similar period in 2019, primarily due to a Operating expenses increased to Adjusted EBITDA was 34 Nine Months Ended September 30, Our consolidated condensed results of operations comprised the following:
__________ n/m Not meaningful. Revenues decreased during the nine months ended September 30, Operating expenses increased to Our effective tax rates were 35 Following is a more detailed discussion of the results of each of our reportable segments and reconciliation of net income (loss) to Adjusted EBITDA:
_________
Americas
Revenues 36 Operating expenses increased to 59.5% of revenue during the nine months ended September 30, 2020 compared to 49.6% during the similar period in 2019, primarily due to impacts directly related to COVID-19, partially offset by strategic cost reduction initiatives to right size the business. Vehicle depreciation and lease charges increased to 26.1% of revenue during the nine months ended September 30, 2020 compared to 23.3% during the similar period in 2019, primarily due to impacts directly related to COVID-19, partially offset by 23% lower per-unit fleet costs. Selling, general and administrative costs decreased to 11.1% of revenue during the nine months ended September 30, 2020 compared to 12.1% during the similar period in 2019, primarily due to strategic cost reduction initiatives to right size the business. Vehicle interest costs increased to 7.1% of revenue during the nine months ended September 30, 2020 compared to 4.5% during the similar period in 2019, primarily due to impacts directly related to COVID-19, partially offset by strategic cost reduction initiatives to right size the business. Adjusted EBITDA was $549 million lower during the nine months ended September 30, 2020 compared to the similar period in 2019, due to lower revenues directly related to COVID-19. International
Revenues decreased 49% during the nine months ended September 30, 2020 compared to the similar period in 2019, primarily due to a 41% decrease in volume and a 13% decrease in revenue per day excluding exchange rate movements as a result of the impact of COVID-19, and an $11 million negative impact from currency exchange rate movements. Operating expenses increased to
Adjusted EBITDA was 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
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The LIQUIDITY AND CAPITAL RESOURCES Our principal sources of liquidity are cash on hand and our ability to generate cash through operations and financing activities, as well as available funding arrangements and committed credit facilities, each of which is discussed below. During the CASH FLOWS The following table summarizes our cash flows:
The decrease in cash provided by operating activities during the nine months ended September 30, The The DEBT AND FINANCING ARRANGEMENTS At September 30, 38 regarding our debt and borrowing arrangements, see Notes 1, 11 and 12 to our Consolidated Condensed 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. Our liquidity position has been impacted by COVID-19 as a result of significant volume declines and we expect the impact of COVID-19 on the U.S. and worldwide economies to continue to affect our volumes even after the outbreak is contained. Our liquidity could be further negatively affected by any financial market disruptions or the absence of a As of September 30, 2020, we had access to $1.6 billion of available cash and cash equivalents and available borrowings under our revolving credit facility of approximately $0.8 billion, providing us with access to an approximate $2.4 billion of total liquidity. See Note 1 to our Consolidated Condensed Financial Statements for detailed information on liquidity and management’s plans. Our liquidity position could also be negatively impacted if we are unable to remain in compliance with the CONTRACTUAL OBLIGATIONS Our future contractual obligations have not changed significantly from the amounts reported within our ACCOUNTING POLICIES The results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex. However, in presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions that we are required to make pertain to matters that are inherently uncertain as they relate to future events. Presented within the section titled “Critical Accounting Policies” of our 39 Goodwill and Other Indefinite-lived Intangible Assets. We perform our annual goodwill and other indefinite-lived intangible assets impairment assessment in the fourth quarter of each year at the reporting unit level, or more frequently if events or circumstances indicate that the carrying amount of goodwill and other indefinite-lived intangible assets may be impaired. As a result of During the quarter ended September 30, 2020, we continued to observe impacts of COVID-19 on our business. We evaluated qualitative Further deterioration in the New Accounting Standards For detailed information regarding new accounting standards and their impact on our business, see Note 1 to our Consolidated Condensed Financial Statements. Item 3. Quantitative and Qualitative Disclosures about Market Risk We are exposed to a variety of market risks, including changes in currency exchange rates, interest rates and gasoline prices. We assess our market risks based on changes in interest and currency exchange rates utilizing a sensitivity analysis that measures the potential impact on earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest and foreign currency exchange rates. We used September 30, Item 4. Controls and Procedures
PART II – OTHER INFORMATION Item 1.Legal Proceedings During the quarter ended September 30, The following risk factors are provided to update the COVID-19 has disrupted, and may continue to The outbreak of COVID-19 in multiple countries and regions across the globe, including in North America, Europe and Australasia, has adversely impacted the global economy and demand for our business. Governmental authorities have taken and continue to take measures to address the outbreak, including restrictions on travel and other orders, including partial shelter-in-place orders. The pandemic is a highly fluid and rapidly evolving situation and we cannot anticipate with The full impact that COVID-19 will have on our business cannot be predicted at this time due to •changes in our revenues and customer demand: Our revenues and profitability have been materially impacted during the •our expenses: To date we have incurred, and expect to continue to incur, increased costs related to COVID-19, such as procurement of overflow parking for our idle vehicles and costs associated with sanitizing our vehicles and facilities. In addition, the industry may be subject to enhanced health and hygiene requirements in attempts to address future outbreaks, which may increase our costs and take a significant amount of time to implement across our global operations. These additional costs may be required by regulators or expected by consumers even after the immediate effects of COVID-19 subside. •our workforce: The COVID-19 outbreak has also caused us to reduce and furlough employees in order to aim to right size our business for vehicle rental demand by reducing operating costs. These actions could create risks, including but not limited to, our ability to manage the size of our workforce given uncertain future demand. Further, we may incur additional costs as a result of negotiations with labor unions that represent our employees or severance payments in the event our workforce is further reduced, and we could experience labor disputes or disruptions as we continue to implement our mitigation plans. 42 •our relationship with, and the financial and operational capacities of, vehicle manufacturers and other suppliers: We could face disruptions in the supply of vehicles from vehicle manufacturers, whether due to outbreaks of COVID-19 at their manufacturing facilities, measures they take in response to COVID-19 or otherwise. We may also face delays in receiving delivery of vehicles or other supplies that may make it difficult to meet consumer demand. •the used car market: We depend on the used car market to sell vehicles and enable us to refresh our fleet. The used car market has faced and may again experience lower demand due to the slowdown in overall global economic activity due to COVID-19, unemployment rates, depressed consumer demand and related factors. •risks associated with our indebtedness (including available borrowing capacity and ability to refinance indebtedness on favorable terms, as well as our ability to meet the quarterly-tested leverage covenant contained in the credit agreement governing our senior credit facilities at the end of the covenant relief period on June 30, 2021, among other things) and the adequacy of our cash flow and earnings and other conditions which may affect our liquidity: We have taken a number of actions in anticipation of, and in response to, COVID-19 that have increased our long-term debt. As we manage through the effects of the pandemic, our level of indebtedness may further increase. A default under our senior secured credit facility would enable the lenders to terminate their commitments thereunder and could trigger a cross-default, acceleration or other consequences under our other indebtedness or financial instruments. There is no guarantee that debt financings will be available in the future to fund our obligations or will be available on terms consistent with our expectations. Our business is generally subject to and impacted by, international, national and local economic conditions and travel demands. We do not expect economic and operating conditions for our business to improve until consumers are once again willing and able to travel without restrictions. This may not occur until well after the broader global economy begins to improve. Additionally, our business is also dependent on consumer sentiment and discretionary spending patterns. To date there have been significant increases in unemployment in the United States and other regions due to the adoption of social distancing and other policies to slow the spread of the virus, which are likely to continue to have a significant negative impact on consumer discretionary spending, including in the mobility industry. Even when economic and operating conditions for our business improve, we cannot predict the long-term effects of the pandemic on our business or the mobility industry as a whole. If the mobility industry is fundamentally changed by the COVID-19 outbreak in ways that are detrimental to our operating model, our business may continue to be adversely affected even as the broader global economy recovers. We believe that business disruption relating to the COVID-19 pandemic will continue to negatively impact the global economy and may materially affect our businesses as outlined above, all of which would adversely impact our business and results of operations. To the extent that the COVID-19 outbreak continues to adversely affect our business and financial performance, including for the reasons outlined above, it may also have the effect of heightening many of the other risks identified below and in the “Risk Factors” section of our 2019 Form We may not realize any or all of our estimated cost savings, which may have a negative effect on our results of operations. We have identified several areas that present opportunities for cost savings and efficiencies to potentially improve our results of operations while our business is being impacted by the COVID-19 crisis, including initiatives related to reductions in fleet, staffing and compensation expense. The potential cost savings that have been estimated based on these opportunities are based on a number of assumptions and expectations which, if achieved, would improve our profitability and cash flows from operating activities. However, there can be no assurance that the expected results will be achieved. These and any future spend reductions, if any, may also negatively impact our other initiatives or our efforts to grow our business in a recovery, which may negatively impact our future results of operations and increase the burden on existing management, systems and resources. In addition, these cost savings may be negated or offset by unexpected or increased costs, including as a result of price declines in the used car market or the increased cost of insurance, among other things, which could impact the contribution of our fleet reduction initiatives. 43 We are dependent on a functioning used vehicle market and highly exposed to residual value risk in the event that vehicle prices decline, which may both be exacerbated by COVID-19. We dispose of a significant number of vehicles in the used car market, including at wholesale automotive auctions, through sales to vehicle dealers, and directly to consumers. The COVID-19 crisis effectively closed temporarily many of the automotive auctions and vehicle dealerships across the globe, as well as retail locations that we operate directly. While such channels have reopened, they could be caused to shut down again in the future. Additionally, unprecedented increases in unemployment rates may severely impact vehicle demand from consumers and increase the number of loan and lease defaults, leading to repossessions which are typically sold by lenders in the wholesale market. Further, car manufacturers may increase incentives to stimulate new vehicle sales, which may depress used vehicle values. In the event our revenue declines do not significantly improve, we would attempt to further reduce the size of our global vehicle fleet. In such event, our competitors may likely also be attempting to sell vehicles. This confluence of events may lead to sharp and sustained declines in vehicle residual values, which may require increased compliance payments pursuant to our ABS securitization facility. In the event of extreme declines in residual values, the sale of vehicle inventory might result in no incremental recovery of our equity capital or even the requirement to fund additional capital to dispose of vehicles, or to choose to continue to keep idle vehicle fleet until demand or market values recover, which cannot be assured. The foregoing factors could have a material adverse impact on our business, financial position and results of operations. Earnings for future periods may be impacted by impairment charges for goodwill and intangible assets. We carry a significant amount of goodwill and identifiable intangible assets on our consolidated balance sheets. Goodwill is the excess of purchase price over the fair value of the net assets of acquired businesses. We assess goodwill and indefinite-lived intangible assets for impairment each year, or more frequently if circumstances suggest an impairment may have occurred. We have determined in the past and may again determine in the future that a significant impairment has occurred in the value of our goodwill. Additionally, we have a significant amount of identifiable intangible assets and fixed assets that could also be subject to impairment. If we determine that a significant impairment has occurred in the value of our unamortized intangible assets or fixed assets, we could be required to write off a portion of our assets, which could adversely affect our consolidated financial condition or our reported results of operations.
The Company’s Board of Directors has authorized the repurchase of up to $1.8 billion of its common stock under a plan originally approved in 2013 and subsequently expanded, most recently in August 2019. The Company’s stock repurchases may occur through open market purchases or trading plans pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors. The repurchase program may be suspended, modified or discontinued at any time without prior notice. The repurchase program has no set expiration or termination date. During the three months ended September 30, 2020, no common stock repurchases were made under the plan and 10,718 shares were withheld by the Company to satisfy employees’ income tax liabilities attributable to the vesting of restricted stock unit awards. Item 6. Exhibits See Exhibit Index. 44 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
45 Exhibit Index
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