Avis 2012 Annual Report Download - page 44

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While we continued to achieve significant benefits from our cost-saving initiatives, Adjusted EBITDA reflected a $183
million (9%) increase in operating expenses, primarily related to (i) a $92 million (20%) increase in selling, general and
administrative expenses principally due to our strategic decision to invest in incremental advertising, marketing and selling
expenditures, as well as higher variable costs related to increased rental volumes, (ii) a $55 million (8%) increase in certain
other expenses related to increased volumes, including agency operator commissions, maintenance and damage, shuttling,
credit card fees, and other related costs, and (iii) a $36 million (5%) increase in employee costs, rents and other expenses
related primarily to increased staffing levels due to volume and inflationary increases.
Adjusted EBITDA benefited from (i) $155 million (14%) decreased fleet depreciation and lease charges, reflecting a 20%
improvement in per-unit fleet costs, including significant gains on sale of vehicles amid a particularly strong used car market
for the better part of 2011, partially offset by an 8% increase in the average size of our car rental fleet, and (ii) a $25 million
(9%) decrease in vehicle interest expense due to lower interest rates on our vehicle debt.
International
Revenues and Adjusted EBITDA increased $473 million (85%) and $13 million (11%), respectively, during 2011 compared
to 2010 primarily due to the acquisition of Avis Europe during fourth quarter 2011, movements in currency exchange rates
and increased rental volumes. Avis Europe contributed $359 million to revenue and had no effect on Adjusted EBITDA in
2011.
The revenue increase of $473 million was comprised of a $315 million (88%) increase in T&M revenue and a $158 million
(79%) increase in ancillary revenues. The total increase in revenue includes a $61 million increase related to foreign currency
exchange rates, impacting T&M revenue by $40 million and ancillary revenues by $21 million, and was largely offset in
Adjusted EBITDA by the opposite impact on expenses of $52 million. The increase in T&M revenue was principally driven
by an 86% increase in rental days, mainly due to the inclusion of the revenues after the acquisition, and a 1% increase in
T&M revenue per rental day (the increase in pricing was entirely the result of the foreign currency exchange-rate effects).
The increase in ancillary revenues reflects (i) a $97 million increase from GPS rentals, sales of loss damage waivers,
insurance products and other items, (ii) a $37 million increase in airport concession and vehicle licensing revenues, which
was more than offset in Adjusted EBITDA by $41 million of higher airport concession and vehicle licensing fees remitted to
airport and other regulatory authorities, and (iii) a $24 million increase in gasoline sales, which was principally offset in
Adjusted EBITDA by $19 million higher gasoline expense.
Adjusted EBITDA reflected a $293 million (117%) increase in operating expenses and a $106 million (103%) increase in
fleet depreciation and lease charges. These increases were principally due to the acquisition of Avis Europe, which added to
our operating locations, headcount, fleet and other operating expenses, as well as increased advertising, marketing and sales
commissions, inflationary increases in rent and modestly higher per-unit fleet costs.
Truck Rental
Revenues and Adjusted EBITDA increased $9 million (2%) and $15 million (44%), respectively, in 2011 compared with
2010.
Revenues increased as a result of a 7% increase in rental days, primarily from increased commercial volume, while T&M
revenue per day decreased 3%. The increase in rental days and the decrease in average daily rate both reflect our successful
initiative to increase commercial rental volumes, which carry a lower average daily rate but a longer length-of-rental which
helped us increase vehicle utilization 10% in 2011. Adjusted EBITDA benefited from the increase in revenue and an $18
million (24%) decline in fleet depreciation, interest and lease charges, reflecting a 22% decline in per-unit fleet costs and a
3% decline in our average truck rental fleet. The increase in Adjusted EBITDA was partially offset by a $14 million increase
in maintenance and damage expenditures due to increased rental volumes and incremental vehicle repairs.
Corporate and Other
Revenues decreased $2 million and Adjusted EBITDA increased $3 million in 2011 compared with 2010. Adjusted EBITDA
increased primarily due to a decrease in professional services fees.
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 under vehicle programs are generally funded through the issuance of debt that is collateralized by such assets. The
income generated by these assets is used, in part, to repay the principal and interest associated with the debt. Cash inflows and