Avis 2006 Annual Report Download - page 82

Table of Contents
Franchising revenues, which are recorded within other revenues on the accompanying Consolidated Statements of Operations, amounted to
$37 million, $39 million and $43 million during 2006, 2005 and 2004, respectively.
The number of Company-owned and franchised outlets in operation (excluding independent commissioned dealer locations for the Budget
truck rental business and Avis and Budget locations operated under an arrangement with Avis Europe Holdings, Limited, an independent
third party) is as follows:
In connection with ongoing fees the Company receives from its franchisees pursuant to the franchise agreements, the Company is required
to provide certain services, such as training, marketing and the operation of reservation systems.
During fourth quarter 2006, the Company recorded $10 million of restructuring charges, of which $8 million was incurred in connection
with current restructuring initiatives within the Company’s Truck Rental and Domestic Car Rental operations and $2 million represents a
revision to an estimated charge recorded in connection with restructuring actions undertaken in first quarter 2005.
2006 Restructuring
During fourth quarter 2006, the Company committed to various strategic initiatives targeted principally at reducing costs, enhancing
organizational efficiency and consolidating and rationalizing existing processes and facilities within its Budget Truck Rental and Domestic
Car Rental operations. The more significant areas of cost reduction include the closure of the Budget Truck Rental headquarters and other
facilities and reductions in staff. In connection with these initiatives, the Company recorded a restructuring charge of $8 million in 2006
with an additional $2 million to be recorded in 2007, for a total of $10 million, substantially all of which is anticipated to be cash. The
2007 charge of $2 million will be incurred by the Company’s Truck Rental segment and represents various personnel related costs.
The initial recognition of the restructuring charge and the corresponding utilization from inception are summarized by category as follows:
8.
Franchising Activities
As of December 31,
2006
2005
2004
Company
-
owned
Avis brand
1,268
1,186
1,074
Budget brand
951
902
822
Franchised
Avis brand
847
849
851
Budget brand
1,218
1,221
1,345
9.
Restructuring Charges
Personnel
Related
(a)
Facility
Related
(b)
Total
Initial charge
$
4
$
4
$
8
Cash payments
-
(1
)
(1
)
Balance at December 31, 2006
$
4
$
3
$
7
(a)
The initial charge primarily represents severance benefits resulting from reductions in staff. The Company formally communicated
the termination of employment to approximately 180 employees, representing a wide range of employee groups. As of December 31,
2006, the Company had terminated approximately 25 of these employees.
F
-
25
(b)
The initial charge principally represents costs incurred in connection with facility closures and lease obligations resulting from the
closure of the Truck Rental headquarters, consolidation of Truck Rental operations and the closure of other facilities within the
Company’s Domestic Car Rental operations.