Avis 2007 Annual Report Download - page 51

Table of Contents
reflected declines primarily in commercial volumes and a 5% reduction in the average size of our rental fleet. Despite the reduction in the
average size of our truck rental fleet, reflecting our efforts to focus on newer and more efficient trucks, we incurred $23 million (23%) of
incremental fleet depreciation, interest and lease charges primarily due to higher per-unit fleet costs. EBITDA was also unfavorably impacted
by the absence of a $13 million credit relating to a refinement made during 2005 in how we estimate repair and refurbishment costs of our truck
fleet. During 2006, we recorded $3 million of separation-
related charges, including debt termination and other costs. These items were partially
offset by (i) a $31 million decrease in operating expenses primarily due to operating a smaller and more efficient fleet and reduced rental
volumes, (ii) a $13 million decrease in our public liability and property damage costs as a result of more favorable claims experience and a
reduction in rental days, (iii) a decrease of $12 million in credit card and other commission expense partially associated with decreased T&M
revenue and (iv) the absence of a $5 million restructuring charge recorded in 2005, which represented costs incurred in connection with the
closure of a reservation center and unprofitable rental locations, which was more than offset by an $8 million charge in 2006 principally related
to the closure of the Budget Truck Rental headquarters and other facilities and reductions in staff.
Corporate and Other
Revenues decreased $23 million and the EBITDA loss increased from $213 million in 2005 to $393 million in 2006.
Revenues and EBITDA were unfavorably impacted in 2006 by the absence of an $18 million realized gain on the sale of Homestore stock in
2005. Revenues were also impacted by a $12 million reduction in earnings on a credit card marketing program under which we earned fees
based on a percentage of credit card spending through the date of the completion of the Cendant Separation.
EBITDA was also unfavorably impacted year-over-year by a $182 million increase in general and administrative costs in 2006, including
separation-related charges, unallocated corporate expenses and executive salaries. These increases were partially offset by a $32 million
decrease in incentive compensation costs in 2006, and the absence in 2006 of $19 million of restructuring charges recorded during 2005.
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 are
generally funded through the issuance of debt that is collateralized by such assets. Assets under vehicle programs are funded through
borrowings under asset-backed funding or other similar arrangements. The income generated by these assets is used, in part, to repay the
principal and interest associated with the debt. Cash inflows and outflows relating to the generation or acquisition of such assets and the
principal debt repayment or financing of such assets are classified as activities of our vehicle programs. We believe it is appropriate to
segregate the financial data of our vehicle programs because, ultimately, the source of repayment of such debt is the realization of such assets.
FINANCIAL CONDITION
Total assets exclusive of assets under vehicle programs decreased $1.1 billion principally due to (i) a $1,193 million decrease in goodwill and
(ii) a $99 million decrease in other current assets and other non-current assets
46
December 31,
2007
December 31,
2006
Change
Total assets exclusive of assets under vehicle programs
$
4,493
$
5,571
$
(1,078
)
Total liabilities exclusive of liabilities under vehicle programs
3,889
4,149
(260
)
Assets under vehicle programs
7,981
7,700
281
Liabilities under vehicle programs
7,120
6,679
441
Stockholders
’
equity
1,465
2,443
(978
)