Avis 2012 Annual Report Download - page 43

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36
diligence and other costs related to the acquisition of Avis Europe, including a $117 million non-cash charge related to the
unfavorable license rights we reacquired and $49 million of losses on foreign-currency transactions related to the acquisition
of Avis Europe; (iii) a $187 million (33%) increase in selling, general and administrative expenses primarily because of the
Avis Europe acquisition and our strategic decision to invest in incremental advertising and marketing, as well as increased
agency commissions and other costs related to higher rental volumes; and (iv) a $49 million increase in interest expense on
corporate debt due to increased indebtedness, primarily related to the Avis Europe acquisition. These year-over-year increases
were partially offset by (i) a $64 million (5%) decrease in vehicle depreciation and lease charges resulting from a decline in
our per-unit depreciation, which include gains on sale of vehicles, (ii) the absence of the prior-year $52 million expense
related to the extinguishment of a portion of our corporate debt and associated interest rate swaps, and (iii) an $18 million
decrease in vehicle interest expense. Our expenses also include a $67 million adverse impact from foreign currency exchange
rates. As a result of these items, and a $47 million increase in our provision for income taxes, we incurred a net loss of $29
million.
For 2011, our income tax provision was $65 million due to the non-deductibility of many of the transaction-related costs
related to the acquisition of Avis Europe. For 2010, our effective tax rate was 25%.
Following is a more detailed discussion of the results of each of our reportable segments:
Revenues
Adjusted EBITDA
2011
2010
%
Change
2011
2010
%
Change
North America
$
4,495
$
4,260
6%
$
442
$
266
66%
International
1,028
555
85%
127
114
11%
Truck Rental
376
367
2%
49
34
44%
Corporate and Other (a)
1
3
*
(13)
(16)
*
Total Company
$
5,900
$
5,185
14%
605
398
52%
Less: Non-vehicle related depreciation and
amortization
95
90
Interest expense related to corporate debt,
net:
Interest expense
219
170
Early extinguishment of debt
-
52
Transaction-related costs (b)
255
14
Income before income taxes
$
36
$
72
__________
* Not meaningful.
(a) Includes unallocated corporate overhead and the elimination of transactions between segments.
(b) In 2011, we incurred transaction-related costs of $255 million related to the acquisition of Avis Europe (including a $117 million non-
cash charge related to the reacquired unfavorable license rights, $49 million of losses on foreign-currency transactions related to the
acquisition and $89 million in due-diligence and other costs) and our previous efforts to acquire Dollar Thrifty. In 2010, we incurred
$14 million of transaction-related costs related to our previous efforts to acquire Dollar Thrifty.
North America
Revenues and Adjusted EBITDA increased $235 million (6%) and $176 million (66%), respectively, during 2011 compared
with 2010. 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 $235 million was comprised of a $129 million (4%) increase in T&M revenue and a $106 million
(10%) increase in ancillary revenues. The total revenue increase includes a $17 million increase related to foreign currency
exchange rates and was largely offset in Adjusted EBITDA by the opposite impact on expenses of $15 million. The increase
in T&M revenue was principally the result of a 6% increase in rental days, partially offset by a 2% decrease in T&M revenue
per day. The $106 million increase in ancillary revenues reflects (i) a $54 million increase in ancillary revenues from GPS
rentals, sales of loss damage waivers and insurance products, emergency road service and other items, reflecting a 5%
increase on a per-rental-day basis, (ii) a $30 million increase in airport concession and vehicle licensing revenue, which was
partially offset in Adjusted EBITDA by $18 million higher airport concession and vehicle licensing fees remitted to airport
and other regulatory agencies, and (iii) a $22 million increase in gasoline sales, which was more than offset in Adjusted
EBITDA by $38 million higher gasoline expense.