Avis 2012 Annual Report Download - page 41

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34
Following is a more detailed discussion of the results of each of our reportable segments:
Revenues
Adjusted EBITDA
2012
2011
%
Change
2012
2011
%
Change
North America
$
4,640
$
4,495
3%
$
556
$
442
26%
International
2,342
1,028
128%
234
127
84%
Truck Rental
374
376
(1%)
33
49
(33%)
Corporate and Other (a)
1
1
*
(21)
(13)
*
Total Company
$
7,357
$
5,900
25%
802
605
33%
Less: Non-vehicle related depreciation
and amortization
125
95
Interest expense related to
corporate debt, net:
Interest expense
268
219
Early extinguishment of debt
75
-
Transaction-related costs (b)
34
255
Income before income taxes
$
300
$
36
__________
* Not meaningful.
(a) Includes unallocated corporate overhead and the elimination of transactions between segments.
(b) For 2012, includes $34 million in costs primarily related to the integration of the operations of Avis Europe and for 2011, includes
$255 million in costs related to our acquisition of Avis Europe and our previous efforts to acquire Dollar Thrifty.
North America
Revenues and Adjusted EBITDA increased $145 million (3%) and $114 million (26%), respectively, during 2012 compared
with 2011. Revenues increased primarily due to higher rental volumes, partially offset by decreased pricing. The increase in
Adjusted EBITDA was primarily due to higher revenue and lower fleet costs.
The revenue increase of $145 million was comprised of a $96 million (3%) increase in T&M revenue and a $49 million (4%)
increase in ancillary revenues. The revenue growth includes a $6 million decrease related to Canadian currency exchange
rates, impacting T&M revenue by $4 million and ancillary revenues by $2 million, and was partially offset in Adjusted
EBITDA by the impact of currency exchange rates on expenses of $1 million. The increase in T&M revenue was principally
the result of a 5% increase in rental days, partially offset by a 2% decrease in T&M revenue per day. The $49 million
increase in ancillary revenues primarily reflects (i) a $36 million increase in ancillary revenues from sales of loss damage
waivers and insurance products, emergency road service and other items, reflecting a 1% increase on a per-rental-day basis,
and (ii) a $13 million increase in airport concession and vehicle licensing revenue, which was partially offset in Adjusted
EBITDA by $9 million of higher airport concession and vehicle licensing fees remitted to airport and other regulatory
agencies (such fees continue to be a net cost to us).
Adjusted EBITDA benefited from the increase in revenue and a $25 million (3%) reduction in fleet depreciation and lease
charges, reflecting an 8% decline in per-unit fleet costs and a 6% increase in the average size of our car rental fleet. Adjusted
EBITDA also reflected a $46 million (2%) increase in operating expenses, primarily related to (i) a $51 million (7%) increase
in expenses related to increased volumes, including shuttling, maintenance and damage costs, agency operator commissions,
credit card fees and related costs, (ii) a $23 million (3%) increase in employee costs, rents and other expenses reflecting
inflationary increases and increased staffing levels to accommodate greater rental volumes, and (iii) a $10 million (2%)
increase in selling, general and administrative expenses principally due to increased rental volumes; these operating expense
increases were partially offset by a $19 million decrease in insurance costs due to favorable claims experience and a $17
million decrease in interest expense due to lower borrowing costs on our vehicle-related debt.
In 2012, direct operating expenses decreased to 50.4% of revenue versus 50.6% in the prior year, highlighting our cost-
reduction efforts in an environment where our T&M revenue per day declined. Vehicle depreciation and lease charges
declined to 20.3% of revenue in 2012 from 21.5% in the prior year, primarily due to lower per-unit fleet costs amid strong
used-car residual values during the first half of 2012. Selling, general and administrative expenses decreased to 12.0% of
revenue, compared to 12.1% of revenue for 2011, and vehicle interest expense decreased to 5.3% of revenue versus 5.9% in
the prior year, principally due to lower borrowing rates.