Form 10-Q, Quarterly Period Ended March 31, 2021 — Avis Budget Group, Inc.
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Summary
A Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission by Avis Budget Group, Inc., Commission File No. 001-10308, for the quarterly period ended March 31, 2021. The report lists 69,858,812 shares of common stock outstanding as of April 30, 2021 and sets out forward-looking statement risk factors, many tied to the COVID-19 outbreak and its effect on travel demand. Its unaudited consolidated condensed statements report revenues of $1,372 million for the three months ended March 31, 2021, compared with $1,753 million in 2020, and a net loss of $170 million, compared with $158 million. The filing also includes a balance sheet, cash flow statement and notes, and closes with Exhibit 32, the certification of the chief executive officer and chief financial officer under 18 U.S.C. Section 1350, dated May 4, 2021.
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“Form 10-Q, Quarterly Period Ended March 31, 2021 — Avis Budget Group, Inc.”
Original at ir.avisbudgetgroup.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/dr0071-ir-network/
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
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)
Delaware 06-0918165
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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)
Securities registered pursuant to Section 12(b) of the Act:
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
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 and posted pursuant to Rule 405 of Regulation S-
T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company.
See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth 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 Exchange Act). Yes ☐ No ☒
The number of shares outstanding of the issuer’s common stock was 69,858,812 shares as of April 30, 2021.
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PART I Financial Information
Item 1. Financial Statements
Consolidated Condensed Statements of Comprehensive Income for the Three Months Ended March 31, 2021 4
and 2020 (Unaudited)
Consolidated Condensed Balance Sheets as of March 31, 2021 and December 31, 2020 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 6
(Unaudited)
Consolidated Condensed Statements of Stockholders’ Equity for the Three Months Ended March 31, 2021 and 8
2020 (Unaudited)
Notes to Consolidated Condensed Financial Statements (Unaudited) 9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26
Item 3. Quantitative and Qualitative Disclosures about Market Risk 33
Item 4. Controls and Procedures 33
PART II Other Information
Item 1. Legal Proceedings 34
Item 1A. Risk Factors 34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 34
Item 6. Exhibits 34
Signatures 35
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FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q 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.
Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be
amplified by, the Coronavirus (“COVID-19”) outbreak, and the continued restrictions that have been placed on travel in many countries as a
result of the outbreak and the adverse impact on the global economy from the outbreak. These factors include, but are not limited to:
• 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 may
continue to impact our results, operations, outlooks, plans, goals, growth, cash flows, liquidity, and stock price;
• 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, including as a result of a change in the cost of new vehicles, manufacturer recalls, disruption in the
supply of new vehicles, shortages in semiconductors used in new vehicle production, 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 vehicles, 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 vehicles available to us or the mobility industry as a whole on commercially reasonable terms or at
all particularly when COVID-19 related restrictions are lifted and travel demand increases;
• the significant decline in travel demand as a result of COVID-19, including the current and any future disruptions in airline passenger
traffic;
• 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;
• 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 including the current and any future impacts as a result of COVID-19;
• 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;
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• 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 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;
• 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 operators and independent
contractors and/or disputes that may arise out of our agreements with such parties;
• 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, recent and
potential further downgrades by rating agencies 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, or to obtain a waiver
or amendment of such covenants should we be unable to meet such covenants;
• our ability to accurately estimate our future results;
• failure to achieve our business plans, a further deterioration in general economic 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 or intangible assets, which
could result in a significant impairment of our goodwill; 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
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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,” in Item 2 and “Risk Factors” in Item 1A and in
similarly titled sections set forth in Item 7 and in Item 1A and in other portions of our 2020 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on February 17, 2021 (the “2020 Form 10-K”), may cause actual results to differ materially from those
projected in any forward-looking 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.
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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(In millions, except per share data)
(Unaudited)
Three Months Ended
March 31,
2021 2020
Revenues $ 1,372 $ 1,753
Expenses
Operating 832 1,058
Vehicle depreciation and lease charges, net 254 459
Selling, general and administrative 182 251
Vehicle interest, net 75 83
Non-vehicle related depreciation and amortization 68 69
Interest expense related to corporate debt, net:
Interest expense 61 48
Early extinguishment of debt 129 4
Restructuring and other related charges 20 44
Transaction-related costs, net 1 2
Total expenses 1,622 2,018
Loss before income taxes (250) (265)
Benefit from income taxes (80) (107)
Net loss $ (170) $ (158)
Comprehensive loss $ (146) $ (257)
Loss per share
Basic $ (2.43) $ (2.16)
Diluted $ (2.43) $ (2.16)
See Notes to Consolidated Condensed Financial Statements (Unaudited).
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Avis Budget Group, Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions, except par value)
(Unaudited)
March 31,
2021 December 31, 2020
Assets
Current assets:
Cash and cash equivalents $ 576 $ 692
Receivables, net 786 647
Other current assets 506 456
Total current assets 1,868 1,795
Property and equipment, net 611 657
Operating lease right-of-use assets 2,510 2,560
Deferred income taxes 1,348 1,198
Goodwill 1,121 1,137
Other intangibles, net 750 774
Other non-current assets 266 244
Total assets exclusive of assets under vehicle programs 8,474 8,365
Assets under vehicle programs:
Program cash 61 72
Vehicles, net 9,101 8,153
Receivables from vehicle manufacturers and other 307 281
Investment in Avis Budget Rental Car Funding (AESOP) LLC—related party 666 667
10,135 9,173
Total assets $ 18,609 $ 17,538
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other current liabilities $ 2,171 $ 2,034
Short-term debt and current portion of long-term debt 19 19
Total current liabilities 2,190 2,053
Long-term debt 4,264 4,191
Long-term operating lease liabilities 2,025 2,078
Other non-current liabilities 681 731
Total liabilities exclusive of liabilities under vehicle programs 9,160 9,053
Liabilities under vehicle programs:
Debt 1,652 1,777
Debt due to Avis Budget Rental Car Funding (AESOP) LLC—related party 6,149 5,080
Deferred income taxes 1,470 1,383
Other 494 400
9,765 8,640
Commitments and contingencies (Note 12)
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 6,642 6,668
Accumulated deficit (1,640) (1,470)
Accumulated other comprehensive loss (163) (187)
Treasury stock, at cost— 67 shares, respectively (5,156) (5,167)
Total stockholders’ equity (316) (155)
Total liabilities and stockholders’ equity $ 18,609 $ 17,538
See Notes to Consolidated Condensed Financial Statements (Unaudited).
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Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
March 31,
2021 2020
Operating activities
Net loss $ (170) $ (158)
Adjustments to reconcile net loss to net cash provided by operating activities:
Vehicle depreciation 259 414
Amortization of right-of-use assets 236 231
(Gain) loss on sale of vehicles, net (49) (11)
Non-vehicle related depreciation and amortization 68 69
Stock-based compensation 4 (2)
Amortization of debt financing fees 8 8
Early extinguishment of debt costs 129 4
Net change in assets and liabilities:
Receivables 24 163
Income taxes and deferred income taxes (80) (112)
Accounts payable and other current liabilities 181 (96)
Operating lease liabilities (234) (230)
Other, net (40) 90
Net cash provided by operating activities 336 370
Investing activities
Property and equipment additions (12) (43)
Proceeds received on asset sales 2 2
Net assets acquired (net of cash acquired) (4) (51)
Net cash used in investing activities exclusive of vehicle programs (14) (92)
Vehicle programs:
Investment in vehicles (3,032) (3,751)
Proceeds received on disposition of vehicles 1,679 2,497
Investment in debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party (24) (175)
Proceeds from debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party 25 39
(1,352) (1,390)
Net cash used in investing activities (1,366) (1,482)
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Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(In millions)
(Unaudited)
Three Months Ended
March 31,
2021 2020
Financing activities
Proceeds from long-term borrowings 1,100 184
Payments on long-term borrowings (1,101) (92)
Issuance of common stock — 15
Repurchases of common stock (19) (118)
Debt financing fees (12) (3)
Net cash used in financing activities exclusive of vehicle programs (32) (14)
Vehicle programs:
Proceeds from borrowings 3,481 5,461
Payments on borrowings (2,535) (4,479)
Debt financing fees — (6)
946 976
Net cash provided by financing activities 914 962
Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash (10) (29)
Net decrease in cash and cash equivalents, program and restricted cash (126) (179)
Cash and cash equivalents, program and restricted cash, beginning of period 765 900
Cash and cash equivalents, program and restricted cash, end of period $ 639 $ 721
See Notes to Consolidated Condensed Financial Statements (Unaudited).
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Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
(Unaudited)
Common Stock Accumulated Other Treasury Stock
Additional Paid-in Comprehensive Income Total Stockholders’
Shares Amount Capital Accumulated Deficit (Loss) Shares Amount Equity
Balance at December 31, 2020 137.1 $ 1 $ 6,668 $ (1,470) $ (187) (67.3) $ (5,167) $ (155)
Comprehensive loss:
Net loss — — — (170) — — —
Other comprehensive income — 24 — —
Total comprehensive loss (146)
Net activity related to restricted stock units — — (26) — — 0.2 21 (5)
Repurchases of common stock — — — — — (0.1) (10) (10)
Balance at March 31, 2021 137.1 $ 1 $ 6,642 $ (1,640) $ (163) (67.2) $ (5,156) $ (316)
Balance at December 31, 2019 137.1 $ 1 $ 6,741 $ (785) $ (157) (63.2) $ (5,144) $ 656
Cumulative effect of accounting change — — — (1) — — — (1)
Comprehensive loss:
Net loss — — — (158) — — —
Other comprehensive loss — — — — (99) — —
Total comprehensive loss (257)
Net activity related to restricted stock units — — (79) — — 0.3 71 (8)
Issuance of common stock — — 15 — — 0.4 — 15
Repurchases of common stock — — — — — (5.0) (113) (113)
Balance at March 31, 2020 137.1 $ 1 $ 6,677 $ (944) $ (256) (67.5) $ (5,186) $ 292
See Notes to Consolidated Condensed Financial Statements (Unaudited).
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Avis Budget Group, Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
(Unless otherwise noted, all dollar amounts in tables 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 unaudited
Consolidated Condensed 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”),
and have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim financial
reporting.
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 operating results of acquired businesses are included in the accompanying Consolidated Condensed Financial Statements from
the dates of acquisition. Differences between the preliminary allocation of purchase price and the final allocation for the Company’s
2020 acquisitions of various licensees were not material.
In presenting the Consolidated Condensed Financial Statements in accordance with accounting principles generally accepted in the
United States of America (“GAAP”), management makes estimates and assumptions that affect the amounts reported and related
disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from
those estimates. In management’s opinion, the Consolidated Condensed Financial Statements contain all adjustments necessary for a
fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the
results of operations for the entire year or any subsequent interim period. These financial statements should be read in conjunction
with the Company’s 2020 Form 10-K.
Liquidity and Management’s Plans
The continuing cases of COVID-19 and the developments surrounding the pandemic are having a material impact on certain aspects
of the Company’s business. Significant events affecting travel and the overall economy 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 as well
as general economic conditions. The Company believes the ongoing effects of COVID-19 and resulting economic conditions have had,
and will continue to have, an adverse impact on its operations and vehicle rental volumes, and on its financial results and liquidity.
The Company cannot assure its assumptions used to estimate its liquidity requirements will be correct because it has never previously
experienced such a change in demand, and as a consequence, its ability to be predictive is uncertain. In addition, the duration of the
pandemic is uncertain. Therefore, the Company has taken actions to manage its liquidity, including reducing capital expenditures,
operating expenses and the number of vehicles in its fleet. The Company has no meaningful corporate debt maturities until 2023. The
Company plans to finance the routine Asset Backed Securities (“ABS”) maturities with program cash on hand, available revolving debt
capacity, new term note issuances and fleet sales. As a result, based on current operational assumptions, the Company believes it has
adequate liquidity beyond the next twelve months.
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In April 2020, the Company entered into an amendment (the “Amendment”) to its senior credit facilities, consisting of an approximately
$1.2 billion term loan maturing in 2027 and a $1.8 billion revolving credit facility maturing in 2023, which remain in place after the
Amendment. The Amendment provides for relief from the quarterly-tested leverage covenant contained in the credit agreement
governing the senior credit facilities until the end of a specific relief period, including a holiday from such leverage covenant through
June 30, 2021, during which time (i) certain negative covenant exceptions are not available to the Company, (ii) pricing on the senior
credit facilities is increased, (iii) the Company must comply with a liquidity covenant and additional reporting requirements and (iv) the
Company must meet additional conditions to borrow under the revolving credit facility. In February 2021, the Company subsequently
amended the credit agreement to permit refinancing of certain existing indebtedness.
Summary of Significant Accounting Policies
The Company’s significant accounting policies are fully described in Note 2, “Summary of Significant Accounting Policies,” in the 2020
Form 10-K.
Cash and cash equivalents, Program cash and Restricted cash. The following table provides a detail of cash and cash equivalents,
program and restricted cash reported within the Consolidated Condensed Balance Sheets to the amounts shown in the Consolidated
Condensed Statements of Cash Flows.
As of March 31,
2021 2020
Cash and cash equivalents $ 576 $ 679
Program cash 61 39
Restricted cash (a) 2 3
Total cash and cash equivalents, program and restricted cash $ 639 $ 721
________
(a)
Included within other current assets.
Vehicle Programs. 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.
Transaction-related costs, net. Transaction-related costs, net are classified separately in the Consolidated Condensed Statements of
Comprehensive Income. 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.
Currency Transactions. The Company records the gain or loss on foreign-currency transactions on certain intercompany loans and the
gain or loss on intercompany loan hedges within interest expense related to corporate debt, net. During the three months ended March
31, 2021 and 2020, the Company recorded an immaterial amount and a loss of $5 million, respectively, related to such items.
Divestitures. In March 2021, the Company entered into a stock purchase agreement with Urbiz S.A. to sell the Company’s assets in
Argentina. Upon completion of the sale, Urbiz S.A. will pay approximately $4 million, plus interest, over two years for the right to
operate the Avis and Budget brand. The Company had assets held for sale of $15 million within current and non-current assets and
liabilities held for sale of $6 million within non-current liabilities. The Company assessed the fair value of the net assets and recorded a
loss of $13 million within restructuring and other related charges during the three months ended March 31, 2021. Argentina’s
operations are reported within the Company’s Americas segment.
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Investments. As of March 31, 2021 and December 31, 2020, the Company had equity method investments with a carrying value of $64
million and $63 million, respectively, which are recorded within other non-current assets. Earnings from the Company’s equity method
investments are reported within operating expenses. For the three months ended March 31, 2021 and 2020, the Company recorded an
immaterial amount related to its equity method investments.
Nonmarketable Equity Securities. As of March 31, 2021 and December 31, 2020, the Company had nonmarketable equity securities
with a carrying value of $8 million, respectively, which are recorded within other non-current assets. No adjustments were made to the
carrying amounts during the three months ended March 31, 2021 and 2020.
Revenues. Revenues are recognized under “Leases (Topic 842),” with the exception of royalty fee revenue derived from the
Company’s licensees and revenue related to the Company’s customer loyalty program, which were approximately $40 million and $32
million during the three months ended March 31, 2021 and 2020, respectively.
The following table presents the Company’s revenues disaggregated by geography.
Three Months Ended
March 31,
2021 2020
Americas $ 1,080 $ 1,257
Europe, Middle East and Africa 203 357
Asia and Australasia 89 139
Total revenues $ 1,372 $ 1,753
The following table presents the Company’s revenues disaggregated by brand.
Three Months Ended
March 31,
2021 2020
Avis $ 717 $ 985
Budget 524 619
Other 131 149
Total revenues $ 1,372 $ 1,753
________
Other includes Zipcar and other operating brands.
Adoption of New Accounting Pronouncements
Simplifying the Accounting for Income Taxes
On January 1, 2021, as the result of a new accounting pronouncement, the Company adopted ASU 2019-12, “Simplifying the
Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions and improving the
application of existing guidance. The adoption of this accounting pronouncement did not have a material impact on the Company's
Consolidated Financial Statements.
Compensation—Retirement Benefits—Defined Benefit Plans
On January 1, 2021, as the result of a new accounting pronouncement, the Company adopted 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. The adoption of this
accounting pronouncement did not have a material impact on the Company's Consolidated Financial
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Statements.
2. Leases
Lessor
The following table presents the Company’s lease revenues disaggregated by geography.
Three Months Ended
March 31,
2021 2020
Americas $ 1,054 $ 1,244
Europe, Middle East and Africa 192 342
Asia and Australasia 86 135
Total lease revenues $ 1,332 $ 1,721
The following table presents the Company’s lease revenues disaggregated by brand.
Three Months Ended
March 31,
2021 2020
Avis $ 690 $ 968
Budget 516 608
Other 126 145
Total lease revenues $ 1,332 $ 1,721
_______
Other includes Zipcar and other operating brands.
Lessee
The Company has operating and finance leases for rental locations, corporate offices, vehicle rental fleet and equipment. Many of the
Company’s operating leases for rental locations contain concession agreements with various airport authorities that allow the Company
to conduct its vehicle 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, some of which are subject to minimum annual guaranteed amounts.
Concession fees other than minimum annual guaranteed amounts are not included in the measurement of operating lease Right of
Use (“ROU”) assets and operating lease liabilities, and are recorded as variable lease expense as incurred. The Company’s operating
leases for rental locations often also require the Company to pay or reimburse operating expenses.
The components of lease expense are as follows:
Three Months Ended
March 31,
2021 2020
Property leases (a)
Operating lease expense $ 139 $ 185
Variable lease expense 54 36
Total property lease expense $ 193 $ 221
__________
(a)
Primarily included in operating expense and includes $19 million of minimum annual guaranteed rent in excess of concession fees as defined in our rental
concession agreement for the three months ended March 31, 2021.
Supplemental balance sheet information related to leases is as follows:
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As of As of
March 31, 2021 December 31, 2020
Property leases
Operating lease ROU assets $ 2,510 $ 2,560
Short-term operating lease liabilities (a) $ 519 $ 514
Long-term operating lease liabilities 2,025 2,078
Operating lease liabilities $ 2,544 $ 2,592
Weighted average remaining lease term 8.3 years 8.4 years
Weighted average discount rate 3.85 % 3.86 %
_________
(a)
Included in Accounts payable and other current liabilities.
Supplemental cash flow information related to leases is as follows:
Three Months Ended
March 31,
2021 2020
Cash payments for lease liabilities within operating activities:
Property operating leases $ 202 $ 170
Non-cash activities - increase (decrease) in ROU assets in exchange for lease liabilities:
Property operating leases 169 296
3. Restructuring and Other Related Charges
Restructuring
During first quarter 2021, the Company initiated a global restructuring plan to focus on cost discipline by reviewing headcounts,
facilities and contractor agreements. The Company is transforming its business as it prepares to exit the COVID-19 crisis by controlling
fixed costs and matching variable costs to demand (“T21”). During the three months ended March 31, 2021, as part of this process, the
Company formally communicated the termination of employment to approximately 80 employees, and as of March 31, 2021, the
Company terminated approximately 60 of these employees. The Company expects further restructuring expense of approximately
$55 million related to this initiative to be incurred in 2021.
During first quarter 2020, the Company initiated a global restructuring plan to reduce operating costs, such as headcount and facilities,
due to declining reservations and revenue resulting from the COVID-19 outbreak (“2020 Optimization Plan”). The Company expects no
further restructuring expense related to this initiative.
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The following tables summarize the changes to our restructuring-related liabilities and identifies the amounts recorded within the
Company’s reporting segments for restructuring charges and corresponding payments and utilizations:
Americas International Total
Balance as of January 1, 2021 $ 3 $ 6 $ 9
Restructuring expense:
T21 1 6 7
Restructuring payment/utilization:
T21 (1) (4) (5)
2020 Optimization Plan (2) (2) (4)
Balance as of March 31, 2021 $ 1 $ 6 $ 7
Facility
Personnel Related Other (a) Total
Balance as of January 1, 2021 $ 4 $ 2 $ 3 $ 9
Restructuring expense:
T21 5 2 — 7
Restructuring payment/utilization:
T21 (3) (2) — (5)
2020 Optimization Plan (3) — (1) (4)
Balance as of March 31, 2021 $ 3 $ 2 $ 2 $ 7
__________
(a)
Includes expenses primarily related to the disposition of vehicles.
Other Related Charges
Limited Voluntary Opportunity Plan (“LVOP”)
During 2020, the Company offered a voluntary termination program to certain employees in 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 three months ended March 31, 2020, the Company recorded other
related charges of approximately $15 million in connection with the LVOP.
Officer Separation Costs
In March 2020, the Company announced the departure of Michael K. Tucker as Executive Vice President, General Counsel effective
March 27, 2020. In connection with Mr. Tucker’s separation, the Company recorded other related charges of approximately $2 million
for the three months ended March 31, 2020.
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4. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (“EPS”) (shares in millions):
Three Months Ended
March 31,
2021 2020
Net loss for basic and diluted EPS $ (170) $ (158)
Basic weighted average shares outstanding 69.9 72.9
Non-vested stock (a) — —
Diluted weighted average shares outstanding 69.9 72.9
Loss per share:
Basic $ (2.43) $ (2.16)
Diluted $ (2.43) $ (2.16)
__________
(a)
As the Company incurred a net loss for the three months ended March 31, 2021 and 2020, 1.1 million and 1.3 million non-vested stock awards,
respectively, have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding.
5. Other Current Assets
Other current assets consisted of:
As of
March 31, As of December
2021 31, 2020
Prepaid expenses $ 204 $ 161
Sales and use taxes 139 147
Other 163 148
Other current assets $ 506 $ 456
6. Intangible Assets
Intangible assets consisted of:
As of March 31, 2021 As of December 31, 2020
Gross Net Gross Net
Carrying Accumulated Carrying Carrying Accumulated Carrying
Amount Amortization Amount Amount Amortization Amount
Amortized Intangible Assets
License agreements $ 275 $ 159 $ 116 $ 280 $ 151 $ 129
Customer relationships 261 198 63 268 196 72
Other 52 33 19 54 33 21
Total $ 588 $ 390 $ 198 $ 602 $ 380 $ 222
Unamortized Intangible Assets
Goodwill $ 1,121 $ 1,137
Trademarks $ 552 $ 552
For the three months ended March 31, 2021 and 2020, amortization expense related to amortizable intangible assets was
approximately $18 million and $13 million, respectively. Based on the Company’s amortizable intangible assets at March 31, 2021, the
Company expects amortization expense of approximately $40 million for the remainder of 2021, $34 million for 2022, $25 million for
2023, $22 million for 2024, $17 million for 2025 and $15 million for 2026, excluding effects of currency exchange rates.
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7. Vehicle Rental Activities
The components of vehicles, net within assets under vehicle programs were as follows:
As of As of
March 31, December 31,
2021 2020
Rental vehicles $ 10,251 $ 9,210
Less: Accumulated depreciation (1,288) (1,337)
8,963 7,873
Vehicles held for sale 138 280
Vehicles, net $ 9,101 $ 8,153
The components of vehicle depreciation and lease charges, net are summarized below:
Three Months Ended
March 31,
2021 2020
Depreciation expense $ 259 $ 414
Lease charges 44 56
(Gain) loss on sale of vehicles, net (49) (11)
Vehicle depreciation and lease charges, net $ 254 $ 459
At March 31, 2021 and 2020, the Company had payables related to vehicle purchases included in liabilities under vehicle programs -
other of $344 million and $240 million, respectively, and receivables related to vehicle sales included in assets under vehicle programs
- receivables from vehicle manufacturers and other of $195 million and $491 million, respectively.
8. Income Taxes
The Company’s effective tax rate for the three months ended March 31, 2021 and 2020 were benefits of 32.0% and 40.4%,
respectively. Such rates differed from the Federal Statutory rate of 21.0% primarily due to foreign taxes on our International operations
and state taxes.
9. Accounts Payable and Other Current Liabilities
Accounts payable and other current liabilities consisted of:
As of As of
March 31, December 31,
2021 2020
Short-term operating lease liabilities $ 519 $ 514
Accounts payable 458 394
Accrued sales and use taxes 214 215
Public liability and property damage insurance liabilities – current 166 162
Deferred lease revenues – current 151 70
Accrued payroll and related 136 117
Accrued advertising and marketing 124 122
Other 403 440
Accounts payable and other current liabilities $ 2,171 $ 2,034
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10. Long-term Corporate Debt and Borrowing Arrangements
Long-term corporate debt and borrowing arrangements consisted of:
As of As of
Maturity March 31, December 31,
Date 2021 2020
6.375% Senior Notes April 2024 $ — $ 350
4.125% euro-denominated Senior Notes November 2024 351 366
5.250% Senior Notes March 2025 235 375
4.500% euro-denominated Senior Notes May 2025 293 305
10.500% Senior Secured Notes May 2025 — 487
4.750% euro-denominated Senior Notes January 2026 410 428
5.750% Senior Notes July 2027 725 724
4.750% Senior Notes April 2028 500 —
5.375% Senior Notes March 2029 600 —
Floating Rate Term Loan (a) August 2027 1,196 1,199
Other (b) 22 24
Deferred financing fees (49) (48)
Total 4,283 4,210
Less: Short-term debt and current portion of long-term debt 19 19
Long-term debt $ 4,264 $ 4,191
__________
(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. As of March 31, 2021, the floating rate
term loan due 2027 bears interest at one-month LIBOR plus 225 basis points, for an aggregate rate of 2.36%. The Company has entered into a swap to hedge
$700 million of its interest rate exposure related to the floating rate term loan at an aggregate rate of 4.58%.
(b)
Primarily includes finance leases which are secured by liens on the related assets.
In March 2021, the Company issued $600 million of 5.375% Senior Notes due March 2029, at par, with interest paid semiannually. Net
proceeds, together with cash on hand, were used to redeem all of the outstanding 10.5% Senior Secured Notes due 2025 for
$599 million plus accrued interest.
In March 2021, the Company issued $500 million of 4.75% Senior Notes due March 2028, at par, with interest paid semiannually. Net
proceeds, together with cash on hand, were used to redeem all of the outstanding 6.375% Senior Notes due 2024 for $356 million plus
accrued interest and a portion of its outstanding 5.25% Senior Notes due 2025 for $142 million plus accrued interest.
The 5.375% and 4.75% notes are guaranteed on a senior unsecured basis by the Company and certain of the Company’s subsidiaries.
Committed Credit Facilities and Available Funding Arrangements
At March 31, 2021, the committed corporate credit facilities available to the Company and/or its subsidiaries were as follows:
Total Outstanding Letters of Available
Capacity Borrowings Credit Issued Capacity
Senior revolving credit facility maturing 2023 (a) $ 1,800 $ — $ 1,230 $ 570
__________
(a)
The senior revolving credit facility bears interest at one-month LIBOR plus 250 basis points and is part of the Company’s senior credit facilities, which include the
floating rate term loan and the senior revolving credit facility, and which are secured by pledges of capital stock of certain subsidiaries of the Company, liens on
substantially all of the Company’s intellectual property and certain other real and personal property.
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
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transactions. The Company’s senior credit facility also contains a maximum leverage ratio requirement which has been amended to
provide a holiday from such leverage covenant through June 30, 2021 (See Note 1 – Basis of Presentation). As of March 31, 2021, the
Company was in compliance with the financial covenants governing its indebtedness.
11. 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 As of
March 31, December 31,
2021 2020
Americas - Debt due to Avis Budget Rental Car Funding $ 6,181 $ 5,116
Americas - Debt borrowings 499 509
International - Debt borrowings 1,020 1,115
International - Finance leases 140 162
Deferred financing fees (a) (39) (45)
Total $ 7,801 $ 6,857
__________
(a)
Deferred financing fees related to Debt due to Avis Budget Rental Car Funding as of March 31, 2021 and December 31, 2020 were
$32 million and $36 million, respectively.
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 March 31, 2021.
Debt under
Vehicle Programs
(a)
Within 1 year (b) $ 1,858
Between 1 and 2 years (c) 2,171
Between 2 and 3 years (d) 1,253
Between 3 and 4 years 1,598
Between 4 and 5 years 960
Thereafter —
Total $ 7,840
__________
(a)
Vehicle-backed debt primarily represents asset-backed securities.
(b)
Includes $0.4 billion of bank and bank-sponsored facilities.
(c)
Includes $0.9 billion of bank and bank-sponsored facilities.
(d)
Includes $0.1 billion of bank and bank-sponsored facilities.
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Committed Credit Facilities and Available Funding Arrangements
As of March 31, 2021, available funding under the Company’s vehicle programs, including related party debt due to Avis Budget Rental
Car Funding, consisted of:
Total Outstanding Available
Capacity (a) Borrowings (b) Capacity
Americas - Debt due to Avis Budget Rental Car Funding $ 9,011 $ 6,181 $ 2,830
Americas - Debt borrowings 746 499 247
International - Debt borrowings 2,713 1,020 1,693
International - Finance leases 204 140 64
Total $ 12,674 $ 7,840 $ 4,834
__________
(a)
Capacity is subject to maintaining sufficient assets to collateralize debt.
(b)
The outstanding debt is collateralized by vehicles and related assets of $7.4 billion for Americas - Debt due to Avis Budget Rental Car Funding; $0.7 billion for
Americas - Debt borrowings; $1.2 billion for International - Debt borrowings; and $0.2 billion for International - Finance 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 March 31, 2021, the
Company is not aware of any instances of non-compliance with any of the financial covenants contained in the debt agreements under
its vehicle-backed funding programs.
12. Commitments and Contingencies
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 state court trials in Georgia, the Company was found liable for damages in two cases brought by plaintiffs
who were 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 fourth quarter 2019, the Company appealed both verdicts resulting in a reversal of the
judgments rendered. The Georgia Supreme Court granted the plaintiffs’ application to review the appellate court’s reversal of the
judgements entered at the trial court. The Georgia Supreme Court heard oral arguments in December 2020 and on May 3, 2021 issued
a decision affirming the appellate court’s judgments. Following the issuance of this decision, plaintiffs have the ability to file a motion for
reconsideration. The Company has recognized a liability related to these cases, net of recoverable insurance proceeds, of
approximately $12 million.
The Company is currently involved, and in the future may be involved, in claims, legal proceedings, including class actions, 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 current
legal proceedings in which it is reasonably possible that a loss may be incurred could, in the aggregate, be up to approximately $40
million in excess of amounts accrued as of
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March 31, 2021. 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
$6.4 billion of vehicles from manufacturers over the next 12 months, a $2.3 billion decrease compared to December 31, 2020, financed
primarily through the issuance of vehicle-backed debt and cash received upon the disposition of vehicles. Certain of these
commitments are subject to the vehicle manufacturers satisfying their obligations under their respective repurchase and guaranteed
depreciation agreements.
Concentrations
Concentrations of credit risk at March 31, 2021 include (i) risks related to the Company’s repurchase and guaranteed depreciation
agreements with domestic and foreign car manufacturers, 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 $25 million and $15 million, respectively, related to certain contingent, income tax and other
corporate liabilities assumed by Realogy and Wyndham in connection with their disposition.
13. Stockholders’ Equity
Share Repurchases
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. During the first quarter of 2021, the Company has
repurchased approximately 0.1 million shares of common stock at a cost of approximately $10 million under the program. As of
March 31, 2021, approximately $66 million of authorization remains available to repurchase common stock under this plan.
Share Issuances
On February 10, 2020, the Company announced it had appointed a new Chairman of the Board of Directors and in connection with this
appointment, the new Chairman purchased an aggregate $15 million of unregistered shares of the Company’s common stock at a
price per share equal to the closing price of the Company’s common stock on February 7, 2020.
Total Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss) and other gains and losses affecting stockholders’ equity that, under GAAP,
are excluded from net income (loss).
The components of other comprehensive income (loss) were as follows:
Three Months Ended
March 31,
2021 2020
Net loss $ (170) $ (158)
Other comprehensive income (loss):
Currency translation adjustments (net of tax of $(12) and $(4), respectively) (14) (83)
Net unrealized gain (loss) on cash flow hedges (net of tax of $3 and $6, respectively) 35 (18)
Minimum pension liability adjustment (net of tax of $0 and $0, respectively) 3 2
24 (99)
Comprehensive loss $ (146) $ (257)
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__________
Currency translation adjustments exclude income taxes related to indefinite investments in foreign subsidiaries.
Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) were as follows:
Net Unrealized Minimum Accumulated
Currency Gains (Losses) Pension Other
Translation on Cash Flow Liability Comprehensive
Adjustments Hedges(a) Adjustment(b) Income (Loss)
Balance, January 1, 2021 $ 40 $ (51) $ (176) $ (187)
Other comprehensive income (loss) before
reclassifications (14) 32 1 19
Amounts reclassified from accumulated other
comprehensive income (loss) — 3 2 5
Net current-period other comprehensive income
(loss) (14) 35 3 24
Balance, March 31, 2021 $ 26 $ (16) $ (173) $ (163)
Balance, January 1, 2020 $ 9 $ (20) $ (146) $ (157)
Other comprehensive income (loss) before
reclassifications (83) (18) 1 (100)
Amounts reclassified from accumulated other
comprehensive income (loss) — — 1 1
Net current-period other comprehensive income
(loss) (83) (18) 2 (99)
Balance, March 31, 2020 $ (74) $ (38) $ (144) $ (256)
__________
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 and include a $47 million gain, net of tax, as of March 31, 2021 related to the Company’s hedge of its net investment in
euro-denominated foreign operations (see Note 15–Financial Instruments).
(a)
For the three months ended March 31, 2021, the amount reclassified from accumulated other comprehensive income (loss) into corporate interest expense was
$1 million ($0 million, net of tax). For the three months ended March 31, 2021, the amount reclassified from accumulated other comprehensive income (loss) into
vehicle interest expense was $4 million ($3 million, net of tax).
(b)
For the three months ended March 31, 2021 and 2020, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and
administrative expenses were $3 million ($2 million, net of tax) and $2 million ($1 million, net of tax), respectively..
14. Stock-Based Compensation
The Company recorded stock-based compensation expense of $4 million and $(2) million ($3 million and $(1) million, net of tax) during
the three months ended March 31, 2021 and 2020, respectively.
In June 2020, the Company granted market-based restricted stock units (“RSUs”) that vest based on absolute stock price attainment.
The grant date fair value of this award is estimated using a Monte Carlo simulation model.
The weighted average assumptions used in the model are as follows:
Expected volatility of stock price 91%
Risk-free interest rate 0.18%
Valuation period 3 years
Dividend yield —%
The activity related to RSUs consisted of (in thousands of shares):
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Weighted
Weighted Average
Average Remaining Aggregate
Number of Grant Date Contractual Intrinsic Value
Shares Fair Value Term (years) (in millions)
Time-based RSUs
Outstanding at January 1, 2021 1,070 $ 27.47
Granted (a) 240 63.12
Vested (b) (375) 30.05
Forfeited (7) 25.35
Outstanding and expected to vest at March 31, 2021 (c) 928 $ 35.66 1.3 $ 67
Performance-based and market-based RSUs
Outstanding at January 1, 2021 988 $ 32.41
Granted (a) 236 62.27
Vested (b) — —
Forfeited (272) 48.72
Outstanding at March 31, 2021 952 $ 35.14 2.0 $ 69
Outstanding and expected to vest at March 31, 2021 (c) 203 $ 54.59 2.8 $ 15
__________
(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. The weighted-average fair value of time-based RSUs and performance-based and market-based RSUs granted during the three months ended
March 31, 2020 was $21.67 and $21.09, respectively.
(b)
The total fair value of RSUs vested during March 31, 2021 and 2020 was $11 million and $17 million, respectively.
(c)
Aggregate unrecognized compensation expense related to time-based RSUs and performance-based and market-based RSUs amounted to $39 million and will be
recognized over a weighted average vesting period of 1.6 years.
15. Financial Instruments
Derivative Instruments and Hedging Activities
Currency Risk. The Company uses currency exchange contracts to manage its exposure to changes in currency exchange rates
associated with certain of its non-U.S.-dollar denominated receivables and forecasted royalties, forecasted earnings of non-U.S.
subsidiaries and forecasted non-U.S.-dollar denominated acquisitions. The Company primarily hedges a portion of its current-year
currency exposure to the Australian, Canadian and New Zealand dollars, the euro and the British pound sterling. The majority of
forward contracts do not qualify for hedge accounting treatment. The fluctuations in the value of these forward contracts do, however,
largely offset the impact of changes in the value of the underlying risk they economically hedge. Forward contracts used to hedge
forecasted third-party receipts and disbursements up to 12 months are designated and do qualify as cash flow hedges. The Company
has designated its euro-denominated notes as a hedge of its investment in euro-denominated foreign operations.
The estimated net amount of existing gains or losses the Company expects to reclassify from accumulated other comprehensive
income (loss) to earnings for cash flow and net investment hedges over the next 12 months is not material.
Interest Rate Risk. The Company uses various hedging strategies including interest rate swaps and interest rate caps to create what it
deems an appropriate mix of fixed and floating rate assets and liabilities. The Company uses interest rate swaps and interest rate caps
to manage the risk related to its floating rate corporate debt and its floating rate vehicle-backed debt. The Company records the
changes in the fair value of its cash flow hedges to other comprehensive income (loss), net of tax, and subsequently reclassifies these
amounts into earnings in the period during which the hedged transaction affects earnings and is presented in the same income
statement line item as the earnings effect of the hedged item. The Company records the gains or losses related to freestanding
derivatives, which are not designated as a hedge for accounting purposes, currently in earnings and are presented in the same line of
the income statement expected for the hedged item. The Company estimates that approximately $20 million of losses 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
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derivatives and the changes in fair value are recorded in earnings and are presented in the same line of the income statement
expected for the hedged item.
The Company held derivative instruments with absolute notional values as follows:
As of March 31, 2021
Foreign exchange contracts $ 1,711
Interest rate caps (a) 8,686
Interest rate swaps 1,950
__________
(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:
As of March 31, 2021 As of December 31, 2020
Fair Value, Fair Value, Fair Value, Fair Value,
Derivative Derivative Derivative Derivative
Assets Liabilities Assets Liabilities
Derivatives designated as hedging instruments
Interest rate swaps (a) $ 6 $ 43 $ — $ 69
Derivatives not designated as hedging instruments
Foreign exchange contracts (b) 16 11 3 11
Interest rate caps (c) 1 1 — —
Total $ 23 $ 55 $ 3 $ 80
__________
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 13–Stockholders’ Equity.
(a)
Included in other non-current assets or other non-current liabilities.
(b)
Included in other current assets or other current liabilities.
(c)
Included in assets under vehicle programs or liabilities under vehicle programs.
The effects of derivatives recognized in the Company’s Consolidated Condensed Financial Statements were as follows:
Three Months Ended
March 31,
2021 2020
Derivatives designated as hedging instruments (a)
Interest rate swaps (b) $ 35 $ (18)
Euro-denominated notes (c) 33 11
Derivatives not designated as hedging instruments (d)
Foreign exchange contracts (e) (8) 27
Interest rate swap (f) (1) —
Commodity contracts (g) — (7)
Total $ 59 $ 13
__________
(a)
Recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity.
(b)
Classified as a net unrealized gain (loss) on cash flow hedges in accumulated other comprehensive income (loss). Refer to Note 13–Stockholders’ Equity for
amounts reclassified from accumulated other comprehensive income into earnings.
(c)
Classified as a net investment hedge within currency translation adjustment in accumulated other comprehensive income (loss).
(d)
Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures being hedged.
(e)
For the three months ended March 31, 2021, included a $7 million loss in interest expense and a $1 million loss in operating
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expense. For the three months ended March 31, 2020, included $28 million gain in interest expense and a $1 million loss in operating expense.
(f)
Included primarily in vehicle interest, net.
(g)
Included in operating expense.
Debt Instruments
The carrying amounts and estimated fair values (Level 2) of debt instruments were as follows:
As of March 31, 2021 As of December 31, 2020
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
Corporate debt
Short-term debt and current portion of long-term debt $ 19 $ 19 $ 19 $ 18
Long-term debt 4,264 4,408 4,191 4,337
Debt under vehicle programs
Vehicle-backed debt due to Avis Budget Rental Car
Funding $ 6,149 $ 6,429 $ 5,080 $ 5,317
Vehicle-backed debt 1,649 1,668 1,775 1,796
Interest rate swaps and interest rate caps (a) 3 3 2 2
__________
(a)
Derivatives in a liability position.
16. 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 and other legal matters, non-operational charges related to
shareholder activist activity, which include third party advisory, legal and other professional service fees, gain on sale of equity method
investment in China, COVID-19 charges and income taxes. COVID-19 charges include unusual, direct and incremental costs due to
the COVID-19 pandemic such as minimum annual guaranteed rent in excess of concession fees for the period, overflow parking for
idle vehicles and related shuttling costs, incremental cleaning supplies to sanitize vehicles and facilities, and losses associated with
vehicles damaged in overflow parking lots, net of insurance proceeds. The Company’s presentation of Adjusted EBITDA may not be
comparable to similarly-titled measures used by other companies.
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Three Months Ended March 31,
2021 2020
Adjusted Adjusted
Revenues EBITDA Revenues EBITDA
Americas $ 1,080 $ 108 $ 1,257 $ (30)
International 292 (50) 496 (40)
Corporate and Other (a) — (11) — (17)
Total Company $ 1,372 $ 47 $ 1,753 $ (87)
Reconciliation of Adjusted EBITDA to income (loss) before income taxes
2021 2020
Adjusted EBITDA $ 47 $ (87)
Less: Non-vehicle related depreciation and amortization 68 69
Interest expense related to corporate debt, net:
Interest expense 61 48
Early extinguishment of debt 129 4
Restructuring and other related charges 20 44
COVID-19 charges (b) 18 7
Transaction-related costs, net 1 2
Non-operational charges related to shareholder
activist activity (c) — 4
Loss before income taxes $ (250) $ (265)
__________
(a)
Includes unallocated corporate overhead which is not attributable to a particular segment.
(b)
For three months ended March 31, 2021 consists of $17 million within operating expenses and $1 million within selling, general and administrative expenses,
primarily consisting of $19 million of minimum annual guaranteed rent in excess of concession fees, $5 million of other charges and $(6) million associated with
vehicles damaged in overflow parking lots, net of insurance proceeds. For the three months ended March 31, 2020, consists of $7 million within operating
expenses, primarily consisting of $5 million associated with vehicles damaged in overflow parking lots, net of insurance proceeds and $2 million of incremental
cleaning supplies to sanitize vehicles and facilities, and over flow parking.
(c)
Reported within selling, general and administrative expenses.
Since December 31, 2020, there have been no significant changes in segment assets exclusive of assets under vehicle programs. As
of March 31, 2021 and December 31, 2020, Americas’ segment assets under vehicle programs were approximately $8.2 billion and
$7.2 billion, respectively, and International segment assets under vehicle programs were approximately $1.9 billion and $2.0 billion,
respectively. The changes in assets under vehicle programs is primarily due to the increase in the size of our vehicle rental fleet to
meet increase in rental demand.
****
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 2020 Form 10-K. Our actual results of operations may differ materially from
those discussed in forward-looking statements as a result of various factors, including those discussed in “Forward-Looking Statements”. See
“Forward-Looking Statements” for additional information. 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 during 2020 of nearly 533,000 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, 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
The positive momentum from the fourth quarter of 2020 carried into the first quarter 2021, during which we generated revenues of $1,372
million, net loss of $170 million and Adjusted EBITDA of $47 million. These results were driven by disciplined cost removal achieved in 2020
and continued fleet management. Our utilization was 67%, a 5.1 point improvement compared to fourth quarter 2020, showing our ability to
align our fleet with demand, and per-unit fleet costs per month decreased to $205, or 3% compared to fourth quarter 2020. Revenue per day
increased to $55.24, or 2%, compared to fourth quarter 2020.
As the world is looking forward to the easing of restrictions put in place due to COVID-19, there are a number of encouraging developments,
such as widespread distribution of effective vaccines, suggesting a steady return to historic travel trends, and we have positioned ourselves
to capitalize on the expected surge in travel demand. Although our revenues have yet to reach pre-pandemic levels, we have taken actions
to put us on a path of profitability. 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 substantial improvement, these trends could be delayed if the ongoing effects of the virus were to bring a significant
shift in the economy and consumer choices or if travel demand does not return to pre-pandemic levels. 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. As a consequence, we cannot estimate the impact on our business, financial condition or forecast financial
or operational results with reasonable certainty.
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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 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
revenues 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 and other legal matters, non-operational charges related to
shareholder activist activity, which include third party advisory, legal and other professional service fees, gain on sale of equity method
investment in China, COVID-19 charges and income taxes. COVID-19 charges include unusual, direct and incremental costs due to the
COVID-19 pandemic such as minimum annual guaranteed rent in excess of concession fees for the period, overflow parking for idle vehicles
and related shuttling costs, incremental cleaning supplies to sanitize vehicles and facilities, and losses associated with vehicles damaged in
overflow parking lots, net of insurance proceeds. 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.
During the three months ended March 31, 2021:
• Our revenues totaled $1.4 billion and decreased 22% compared to the similar period in 2020, primarily due to reduced rental volume
due to impacts directly related to COVID-19.
• Our net loss was $170 million, representing an increased loss of $12 million year-over-year, primarily due to premiums paid for the
early redemption of our corporate debt, partially offset by strategic cost reduction initiatives to right size the business.
• Our Adjusted EBITDA was $47 million, representing an increase of $134 million year-over-year, primarily due to a 20% decrease in
per-unit fleet costs, excluding exchange rate effects and strategic cost reduction initiatives to right size the business, partially offset
by impacts directly related to COVID-19.
• We repurchased $10 million of our common stock, reducing our shares outstanding by approximately 0.1 million shares.
• We issued $600 million and $500 million of 5.375% Senior Notes due March 2029 and 4.75% Senior Notes due March 2028,
respectively, with proceeds used to redeem our 10.5% Senior Secured Notes due May 2025, our 6.375% Senior Notes due in April
2024 and a portion of our 5.25% Senior Notes due in March 2025.
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Three Months Ended March 31, 2021 vs. Three Months Ended March 31, 2020
Our consolidated condensed results of operations comprised the following:
Three Months Ended
March 31,
2021 2020 $ Change % Change
Revenues $ 1,372 $ 1,753 $ (381) (22 %)
Expenses
Operating 832 1,058 (226) (21 %)
Vehicle depreciation and lease charges, net 254 459 (205) (45 %)
Selling, general and administrative 182 251 (69) (27 %)
Vehicle interest, net 75 83 (8) (10 %)
Non-vehicle related depreciation and amortization 68 69 (1) (1 %)
Interest expense related to corporate debt, net:
Interest expense 61 48 13 27 %
Early extinguishment of debt 129 4 125 n/m
Restructuring and other related charges 20 44 (24) (55 %)
Transaction-related costs, net 1 2 (1) (50 %)
Total expenses 1,622 2,018 (396) (20 %)
Loss before income taxes (250) (265) 15 6%
Benefit from income taxes (80) (107) 27 25 %
Net loss $ (170) $ (158) $ (12) (8 %)
__________
n/m Not meaningful.
Revenues decreased during the three months ended March 31, 2021 compared to the similar period in 2020, primarily due to a 28%
decrease in volume as a result of the impact of COVID-19, partially offset by a 6% increase in revenue per day excluding exchange rate
movements and a $30 million positive impact from currency exchange rate movements. Total expenses decreased during the three months
ended March 31, 2021, compared to the similar period in 2020, primarily due to strategic cost reduction initiatives and reduced operational
activities as a result of the impact of COVID-19. Our effective tax rates were benefits of 32% and 40% for the three months ended March 31,
2021 and 2020, respectively. As a result of these items, our net loss increased by $12 million compared to the similar period in 2020. For the
three months ended March 31, 2021 and 2020, the Company reported losses of $2.43 and $2.16 per diluted share, respectively.
Operating expenses increased to 60.6% of revenue during the three months ended March 31, 2021 compared to 60.3% during the similar
period in 2020, primarily due to impacts directly related to COVID-19. Vehicle depreciation and lease charges decreased to 18.5% of revenue
during the three months ended March 31, 2021 compared to 26.2% during the similar period in 2020, primarily due to 20% lower per-unit
fleet costs per month, excluding exchange rate effects. Selling, general and administrative costs decreased to 13.3% of revenue during the
three months ended March 31, 2021 compared to 14.3% during the similar period in 2020, primarily due to strategic cost reduction initiatives
to right size the business. Vehicle interest costs increased to 5.5% of revenue during the three months ended March 31, 2021 compared to
4.7% during the similar period in 2020, primarily due to impacts directly related to COVID-19.
Following is a more detailed discussion of the results of each of our reportable segments and reconciliation of net loss to Adjusted EBITDA:
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Three Months Ended March 31,
2021 2020
Adjusted Adjusted
Revenues EBITDA Revenues EBITDA
Americas $ 1,080 $ 108 $ 1,257 $ (30)
International 292 (50) 496 (40)
Corporate and Other (a) — (11) — (17)
Total Company $ 1,372 $ 47 $ 1,753 $ (87)
Reconciliation to Adjusted EBITDA
2021 2020
Net loss $ (170) $ (158)
Benefit from income taxes (80) (107)
Loss before income taxes (250) (265)
Add: Non-vehicle related depreciation and amortization 68 69
Interest expense related to corporate debt, net:
Interest expense 61 48
Early extinguishment of debt 129 4
Restructuring and other related charges 20 44
COVID-19 charges (b) 18 7
Non-operational charges related to shareholder activist activity (c) — 4
Transaction-related costs, net 1 2
Adjusted EBITDA $ 47 $ (87)
__________
(a)
Includes unallocated corporate overhead which is not attributable to a particular segment.
(b)
For three months ended March 31, 2021, consists of $17 million within operating expenses and $1 million within selling, general and administrative expenses in our
consolidated condensed results of operations, primarily consisting of $19 million of minimum annual guaranteed rent in excess of concession fees, $5 million of other
charges and $(6) million associated with vehicles damaged in overflow parking lots, net of insurance proceeds. For the three months ended March 31, 2020, consists of $7
million within operating expenses, primarily consisting of $5 million associated with vehicles damaged in overflow parking lots, net of insurance proceeds and $2 million of
incremental cleaning supplies to sanitize vehicles and facilities, and over flow parking.
(c)
Reported within selling, general and administrative expenses in our consolidated condensed results of operations.
Americas
Three Months Ended
March 31,
2021 2020 % Change
Revenues $ 1,080 $ 1,257 (14 %)
Adjusted EBITDA 108 (30) n/m
__________
n/m Not meaningful.
Revenues decreased 14% during the three months ended March 31, 2021 compared to the similar period in 2020, primarily due to a 23%
decrease in volume, partially offset by a 12% increase in revenue per day as a result of the impacts of COVID-19.
Operating expenses decreased to 57.9% of revenue during the three months ended March 31, 2021 compared to 58.7% during the similar
period in 2020, primarily due to strategic cost reduction initiatives to right size the business. Vehicle depreciation and lease charges
decreased to 17.0% of revenue during the three months ended March 31, 2021 compared to 26.4% during the similar period in 2020,
primarily due to 22% lower per-unit fleet costs. Selling, general and administrative costs decreased to 10.6% of revenue during the three
months ended March 31, 2021 compared to 12.3% during the similar period in 2020, primarily due to strategic cost reduction initiatives to
right size the business. Vehicle interest costs increased to 5.8% of revenue during the three months ended March 31, 2021 compared to
5.6% during the similar period in 2020, primarily due to impacts directly related to COVID-19.
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Adjusted EBITDA was $138 million higher during the three months ended March 31, 2021 compared to the similar period in 2020, primarily
due to strategic cost reduction initiatives to right size the business, lower per-unit fleet costs and increased revenue per day.
International
Three Months Ended
March 31,
2021 2020 % Change
Revenues $ 292 $ 496 (41 %)
Adjusted EBITDA (50) (40) 25 %
Revenues decreased 41% during the three months ended March 31, 2021, compared to the similar period in 2020, primarily due to a 38%
decrease in volume and a 13% decrease in revenue per day excluding exchange rate movements as a result of the impacts of COVID-19,
partially offset by a $28 million benefit from currency exchange rate movements.
Operating expenses increased to 71.2% of revenue during the three months ended March 31, 2021 compared to 63.9% during the similar
period in 2020, primarily due to impacts directly related to COVID-19. Vehicle depreciation and lease charges decreased to 24.0% of revenue
during the three months ended March 31, 2021 compared to 25.6% during the similar period in 2020, primarily due to 16% lower per-unit
fleet costs, excluding exchange rate effects. Selling, general and administrative costs increased to 19.0% of revenue during the three months
ended March 31, 2021 compared to 16.0% during the similar period in 2020, primarily due to impacts directly related to COVID-19. Vehicle
interest costs increased to 4.4% of revenue during the three months ended March 31, 2021 compared to 2.6% during the similar period in
2020, primarily due to impacts directly related to COVID-19.
Adjusted EBITDA was $10 million lower in first quarter 2021 compared to the similar period in 2020, primarily due to a $9 million negative
impact from currency exchange rate movements, as lower revenues directly related to COVID-19 were offset by strategic cost reduction
initiatives to right size the business and lower per-unit fleet costs.
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
March 31, 2021 December 31, 2020 Change
Total assets exclusive of assets under vehicle programs $ 8,474 $ 8,365 $ 109
Total liabilities exclusive of liabilities under vehicle programs 9,160 9,053 107
Assets under vehicle programs 10,135 9,173 962
Liabilities under vehicle programs 9,765 8,640 1,125
Stockholders’ equity (316) (155) (161)
The increases in assets under vehicle programs and liabilities under vehicle programs are principally related to the increase in the size of our
vehicle rental fleet to meet increased rental demand. The decrease in stockholders’ equity is primarily due to our comprehensive loss.
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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.
In March 2021, we issued $600 million of 5.375% Senior Notes due March 2029, at par. We used the proceeds, together with cash on hand,
to redeem all of our outstanding 10.5% Senior Secured Notes due 2025. In March 2021, we issued $500 million of 4.75% Senior Unsecured
Notes due March 2028. We used the proceeds, together with cash on hand, to redeem all of our outstanding 6.375% Senior Notes due in
2024 and $140 million in aggregate principal amount of our 5.25% Senior Notes due in 2025. We have no meaningful corporate debt
maturities until 2023.
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 March 31, 2021, we repurchased approximately 0.1 million shares of our outstanding common stock for approximately $10 million.
CASH FLOWS
The following table summarizes our cash flows:
Three Months Ended March 31,
2021 2020 Change
Cash provided by (used in):
Operating activities $ 336 $ 370 $ (34)
Investing activities (1,366) (1,482) 116
Financing activities 914 962 (48)
Effect of changes in exchange rates on cash and cash equivalents, program and
restricted cash (10) (29) 19
Net decrease in cash and cash equivalents, program and restricted cash (126) (179) 53
Cash and cash equivalents, program and restricted cash, beginning of period 765 900 (135)
Cash and cash equivalents, program and restricted cash, end of period $ 639 $ 721 $ (82)
The decrease in cash provided by operating activities during the three months ended March 31, 2021 compared with the same period in
2020 is principally due to the increase in our net loss.
The decrease in cash used in investing activities during the three months ended March 31, 2021 compared with the same period in 2020 is
primarily due to reduced licensee acquisition activity and capital spend.
The decrease in cash provided by financing activities during the three months ended March 31, 2021 compared with the same period in 2020
is primarily due to a decrease in net borrowings under vehicle programs.
DEBT AND FINANCING ARRANGEMENTS
At March 31, 2021, we had approximately $12.1 billion of indebtedness, including corporate indebtedness of approximately $4.3 billion and
debt under vehicle programs of approximately $7.8 billion. For information regarding our debt and borrowing arrangements, see Notes 1, 10
and 11 to our Consolidated Condensed Financial Statements.
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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 recovery or worsening of 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 affected and could further affect the debt ratings assigned to us by credit rating agencies and the cost of our
borrowings. Additionally, a worsening or prolonged downturn in the worldwide economy or a disruption in the credit markets could further
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.
As of March 31, 2021, we had access to $0.6 billion of available cash and cash equivalents and available borrowings under our revolving
credit facility of approximately $0.6 billion, providing us with access to an approximate $1.2 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 our liquidity covenant, the consolidated
first lien leverage ratio requirement after the end of the waiver period on June 30, 2021 and other covenants associated with our senior credit
facilities and other borrowings. As of March 31, 2021, we were in compliance with the financial covenants governing our indebtedness. For
additional information regarding our liquidity risks, see Part I, Item 1A, “Risk Factors” of our 2020 Form 10-K as well as the “Risk Factors”
section in this quarterly report.
CONTRACTUAL OBLIGATIONS
Our future contractual obligations have not changed significantly from the amounts reported within our 2020 Form 10-K with the exception of
our commitment to purchase vehicles, which decreased by approximately $2.3 billion from December 31, 2020, to approximately $6.4
billion at March 31, 2021 due to the COVID-19 impact on our business. Changes to our obligations related to corporate indebtedness and
debt under vehicle programs are presented above within the section titled “Liquidity and Capital Resources—Debt and Financing
Arrangements” and also within Notes 10 and 11 to our Consolidated Condensed Financial Statements.
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 2020 Form 10-K are the accounting policies (related to goodwill and other indefinite-lived
intangible assets, vehicles, income taxes and public liability, property damage and other insurance liabilities) that we believe require
subjective and/or complex judgments that could potentially affect 2021 reported results. There have been no significant changes to those
accounting policies or our assessment of which accounting policies we would consider to be critical accounting policies.
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
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frequently if events or circumstances indicate that the carrying amount of goodwill and other indefinite-lived intangible assets may be
impaired. For our Europe, Middle East and Africa (“EMEA”) reporting unit, the percentage by which the estimated fair value exceeded the
carrying value as of October 1, 2020 was 17% and the amount of goodwill allocated to our reporting unit was $488 million.
During the quarter ended March 31, 2021, we continued to observe impacts of COVID-19 on our business. We evaluated qualitative factors
and determined that an interim impairment test was not required this quarter as we believe it is more likely than not that the fair value of our
goodwill and other indefinite-lived intangible assets exceeds the carrying value.
Further deterioration in the general economic conditions in the travel industry may result in an impairment charge to earnings in future
quarters. We will continue to closely monitor actual results versus our expectations as well as any significant changes in events or conditions,
including the impact of COVID-19 on our business and the travel industry, and the resulting impact to our assumptions about future estimated
cash flows, the weighted average cost of capital and market multiples. If our expectations of the operating results, both in magnitude or
timing, do not materialize, or if our weighed average cost of capital increases or if market multiples decline, we may be required to record
goodwill and indefinite-lived intangible asset impairment charges, which may be material.
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 March 31, 2021 market rates to perform a sensitivity analysis separately for each of these market risk exposures.
We have determined, through such analyses, that the impact of a 10% change in interest or currency exchange rates on our results of
operations, balance sheet and cash flows would not be material. Additionally, we have commodity price exposure related to fluctuations in
the price of unleaded gasoline. We anticipate that such commodity risk will remain a market risk exposure for the foreseeable future. We
determined that a 10% change in the price of unleaded gasoline would not have a material impact on our earnings for the period ended
March 31, 2021. For additional information regarding our long-term borrowings and financial instruments, see Notes 10, 11 and 15 to our
Consolidated Condensed Financial Statements.
Item 4. 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 March 31, 2021.
(b) 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.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
During the quarter ended March 31, 2021, the Company had no material developments to report with respect to its legal proceedings. For
additional information regarding the Company’s legal proceedings, see Note 12 to our Consolidated Condensed Financial Statements and
refer to the Company’s 2020 Form 10-K.
Item 1A. Risk Factors
The following risk factor is provided to update the risk factors of the Company previously disclosed in periodic reports filed with the SEC,
including its 2020 Form 10-K.
We face risks associated with our suppliers of vehicles, including as a result of a global semiconductor supply shortage.
We have faced, and may face additional delays in receiving delivery of new vehicles from vehicle manufacturers for a variety of reasons,
including due to closures at manufacturing facilities or otherwise. In particular, a global semiconductor supply shortage is having wide-ranging
effects across multiple industries, particularly the automotive industry, and it has impacted multiple vehicle manufacturers that supply vehicles
to us. For example, some automobile plants in North America and elsewhere have halted or reduced vehicle production due to the shortage
of semiconductors used in the production of their vehicles. As a result, the semiconductor supply shortage has had, and is expected to
continue to have, an impact on new car deliveries, which may make it challenging to meet consumer demand.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Approximate Dollar Value of Shares
Total Number of Total Number of Shares Purchased That May Yet Be Purchased Under
Shares Purchased Average Price as Part of Publicly Announced the Plans or Programs ($ in
(in millions) Paid per Share Plans or Programs (in millions) millions)
January 2021 — $ — — $ 76
February 2021 — — — 76
March 2021 0.1 66.62 0.1 66
0.1 $ 66.62 0.1 $ 66
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.
Item 6. Exhibits
See Exhibit Index.
34
Table of Contents
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.
AVIS BUDGET GROUP, INC.
Date: May 4, 2021 /s/ Cathleen DeGenova
Cathleen DeGenova
Vice President and
Chief Accounting Officer
35
Table of Contents
Exhibit Index
Exhibit No. Description
3.1 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).
3.2 Amended and Restated Bylaws of Avis Budget Group, Inc., dated as of August 10, 2020 (incorporated by reference to
Exhibit 3.2 to the Company’s Current Report on Form 8-K dated August 13, 2020).
4.1 Indenture, dated as of March 1, 2021, by and among Avis Budget Car Rental, LLC and Avis Budget Finance, Inc., as issuers,
the guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit
4.1 to the Company’s Current Report on Form 8-K dated March 1, 2021).
4.2 Indenture, dated as of March 23, 2021, by and among Avis Budget Car Rental, LLC and Avis Budget Finance, Inc., as
issuers, the guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to
Exhibit 4.1 to the Company’s Current Report on Form 8-K dated March 23, 2021).
10.1 Amendment to the Senior Credit Agreement, dated February 16, 2021, by and among Avis Budget Car Rental, LLC, Avis
Budget Holdings, LLC, Avis Budget Group, Inc., certain of Avis Budget Car Rental, LLC’s subsidiaries, the lenders from time
to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K dated February 16, 2021).
31.1 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.
31.2 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.
32 Certification 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 - the instance document does not appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL 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.
104 Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)
36
Exhibit 31.1
SECTION 302 CERTIFICATION
I, Joseph A. Ferraro, certify that:
1. I have reviewed this quarterly report on Form 10-Q 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 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 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: May 4, 2021
/s/ Joseph A. Ferraro
President and Chief Executive Officer
Exhibit 31.2
SECTION 302 CERTIFICATION
I, Brian Choi, certify that:
1. I have reviewed this quarterly report on Form 10-Q 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 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 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: May 4, 2021
/s/ Brian Choi
Executive Vice President and Chief Financial Officer
Exhibit 32
CERTIFICATION OF CEO AND CFO PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Avis Budget Group, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2021, as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), Joseph A. Ferraro, as Chief Executive Officer of the
Company, and Brian Choi, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/s/ JOSEPH A. FERRARO
Joseph A. Ferraro
President and Chief Executive Officer
May 4, 2021
/s/ BRIAN CHOI
Brian Choi
Executive Vice President and Chief Financial Officer
May 4, 2021
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