Avis 2008 Annual Report Download - page 48

increase includes $67 million related to foreign currency exchange rate fluctuations on the translation of our international operations results into
U.S. dollars.
Total expenses increased $612 million (10%) due to (i) a $1,195 million charge recorded for the impairment of goodwill at each of our reporting
units to reflect the decline in their fair value as evidenced by a decline in the market value of our common stock, (ii) a $146 million
(5%) increase in operating expense largely due to the 4% increase in car rental days, (iii) an increase in vehicle depreciation and lease charges of
$155 million (11%) resulting from higher per unit vehicle costs and 4% growth in our average car rental fleet and (iv) the adverse impact from
foreign exchange currency rates of $56 million. The increase in expenses was offset by decreases principally due to the $313 million charge for
early extinguishment of debt incurred during 2006 and a $266 million decrease in separation-related costs. The separation costs related primarily
to severance, retention and legal, accounting and other professional fees incurred in connection with the Cendant Separation. We also
experienced (i) a $160 million reduction in selling, general and administrative expenses resulting mainly from unallocated corporate expense in
2006 related to the discontinued operations treatment of our former subsidiaries and (ii) $109 million lower interest expense related to corporate
debt, resulting from the repayment of approximately $3.5 billion of such debt in third quarter 2006. As a result of these items and a $181 million
reduction in our benefit from income taxes, our loss from continuing operations increased $496 million. Our effective tax rate for continuing
operations were benefits of 4.5% and 33.4% for 2007 and 2006, respectively. The decrease in our effective tax rate for 2007 was primarily due to
the non-deductible portion of the goodwill impairment charge.
Income (loss) from discontinued operations decreased $480 million, which principally reflects the absence of net income generated by Realogy,
Wyndham and Travelport prior to the Cendant Separation, which was completed in 2006. The $2 billion increase in gain (loss) on disposal of
discontinued operations, net of tax primarily represents the loss on disposal of discontinued operations in 2006, partially offset by a tax benefit
realized as a result of certain elections made in connection with the Travelport disposition on the income tax returns filed during 2007.
Absent in 2007 were the non-
cash charges recorded in 2006 of $103 million ($64 million, after tax) to reflect the cumulative effect of accounting
changes as a result of our adoption of (i) Statement of Financial Accounting Standards (“SFAS”) No. 152, “Accounting for Real Estate Time-
Sharing Transactions,” and American Institute of Certified Public Accountants’ Statement of Position No. 04-2, “Accounting for Real Estate
Time-Sharing Transactions” on January 1, 2006, which resulted in a non-cash charge of $65 million after tax, and (ii) SFAS No. 123R, “Share-
Based Payment,” on January 1, 2006, which resulted in a non-cash credit of $1 million after tax.
As a result of the above-mentioned items, net loss decreased approximately $1.1 billion.
Following is a more detailed discussion of the results of each of our reportable segments:
43
Revenues
EBITDA
(a)
2007
2006
%
Change
2007
2006
%
Change
Domestic Car Rental
$
4,679
$
4,395
6
%
$
265
$
214
24
%
International Car Rental
873
761
15
131
111
18
Truck Rental
416
472
(12
)
17
45
(62
)
Corporate and Other
(b)
18
61
*
1
(393
)
*
Total Company
$
5,986
$
5,689
414
(23
)
Less: Non
-
vehicle related depreciation and amortization
84
105
Interest expense related to corporate debt, net
(c)
127
549
Goodwill impairment
(d)
1,195
-
Loss before income taxes
$
(992
)
$
(677
)