Avis 2013 Annual Report Download

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> Strong results: building on the four pillars of our success.
2013 ANNUAL REPORT
ACCELERATE GROWTH
GLOBAL EXPANSION
CUSTOMER FOCUS
DRIVING EFFICIENCY

Table of contents

  • Page 1
    A C C E L E R AT E G R O W T H G LO B A L E X PA N S I O N CUSTOMER FOCUS DRIVING EFFICIENCY 2013 ANNUAL REPORT > Strong results: building on the four pillars of our success.

  • Page 2
    ... about Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information Part III Item 10. Directors, Executive Officers and Corporate Governance...

  • Page 3

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  • Page 5
    ...the world. In addition to Zipcar, we entered the deep-value segment in North America by adding Payless Car Rental to our portfolio. We strengthened our presence in South America's leading economy through a 50% investment in our Avis and Budget licensee for Brazil; and we acquired our Budget licensee...

  • Page 6
    ... customer service awards in all three of our operating regions. We strengthened our customer interactions, both through more effective person-to-person communications and in other ways such as simpler rental agreements available in multiple languages, enhanced websites and new mobile applications...

  • Page 7
    ... 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from COMMISSION FILE NO. 001-10308 to AVIS BUDGET GROUP, INC. (Exact name of Registrant as...

  • Page 8

  • Page 9
    ... of Operations Quantitative and Qualitative Disclosures about Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Directors, Executive Officers and Corporate...

  • Page 10
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  • Page 11
    ... our fleet costs as a result of a change in the cost of new vehicles, disruption in the supply of new vehicles, and/or a change in the price at which we dispose of used vehicles either in the used vehicle market or under repurchase or guaranteed depreciation programs; risks related to our March 2013...

  • Page 12
    ...liabilities and assets; risks associated with litigation or governmental or regulatory inquiries or investigations involving our Company; risks related to tax obligations and the effect of future changes in accounting standards; risks related to our October 2011 acquisition of Avis Europe plc ("Avis...

  • Page 13
    ... HISTORY The Company is a Delaware corporation headquartered in Parsippany, New Jersey. We operate three of the most recognized brands in the global vehicle services industry through Avis, Budget and Zipcar, as well as Budget Truck, one of the leading truck rental businesses in the United States...

  • Page 14
    ... reporting segments: • North America, provides car rentals in the United States and vehicle rentals in Canada, as well as ancillary products and services, and operates the Company's Zipcar car sharing business; International, provides and licenses the Company's brands to third parties for vehicle...

  • Page 15
    ... to small-business and international travelers, increasing the number of rentals that customers book through our own websites, increasing the proportion of transactions in which customers prepay us, and expanding our ancillary revenues derived from offering additional ancillary products and services...

  • Page 16
    ...-operated locations, we will continue to identify opportunities to add new rental locations, to grant licenses to independent third parties for regions where we do not currently operate and/or do not wish to operate directly, to strengthen the presence of the Avis, Budget, Zipcar, Apex and Payless...

  • Page 17
    ... rental and car sharing fleets at times to reduce the number of unutilized Zipcars during the week and to better satisfy Zipcar's unmet weekend demand. We have also continued to implement technology solutions, including self-service voice reservation technology, mobile communications with customers...

  • Page 18
    ... high-quality car rental services at price points generally above nonbranded and value-branded national car rental companies. We operate or license the Avis car rental system (the "Avis System"), one of the largest car rental systems in the world, comprised of approximately 5,450 locations worldwide...

  • Page 19
    ... programs; and supporting online interactions with our customers through each of the four major mobile platforms - Android, Apple, BlackBerry and Microsoft Windows - which Avis in 2012 became the first car rental company to offer. • • • In 2013, Avis was named World's Leading Car Hire...

  • Page 20
    ... revenues increased $87 million (or 78%) in 2013. Budget offers its customers several products and programs similar to Avis, such as portable GPS navigation units, roadside assistance, electronic toll collection, emailed receipts and refueling options, as well as special rental rates for frequent...

  • Page 21
    ... Budget Truck Our Budget Truck rental business is one of the largest local and one-way truck rental businesses in the United States. At December 31, 2013, Budget Truck has a fleet of approximately 23,000 trucks that are rented through a network of approximately 1,300 dealers and 350 Company-operated...

  • Page 22
    ... of our fleet, as we intend to "cascade" certain vehicles that exceed certain Avis and Budget age or mileage thresholds to then be used by Payless. From the date of acquisition until year-end 2013, our Payless car rental operations generated total revenue of approximately $44 million. Our Apex brand...

  • Page 23
    ...us to promote our Avis, Budget, Budget Truck and Payless brands to AARP's base of more than 37 million members. In 2013, we also entered into a new multi-year agreement with Costco Travel to provide more than 45 million Costco Wholesale members in the United States with vehicle rentals and ancillary...

  • Page 24
    ... and loss damage waivers, insurance products such as additional/supplemental liability insurance or personal accident/effects insurance, products for driving convenience such as portable GPS navigation units, optional roadside assistance services, fuel service options, electronic toll collection and...

  • Page 25
    ...as airlines and online travel sites), corporate travel departments and individual consumers through our websites or contact centers. The Wizard system also provides personal profile information to our reservation and rental agents to help us better serve our customers. We also use data supplied from...

  • Page 26
    ... our corporate customers including historical and current rental activity, revenue and booking sources, top renting locations, rate usage categories and customer satisfaction data. We use this information, which is updated weekly and captured on a countryby-country basis, to assess opportunities for...

  • Page 27
    ... vehicles online more quickly than through traditional auctions, as well as through direct-to-dealer sales. In 2013, we also expanded the number of states that can participate in our Ultimate Test Drive retail car sales program, which offers customers the ability to purchase Avis and Budget rental...

  • Page 28
    ...customer satisfaction levels by sending location-specific surveys to recent customers and utilize detailed reports and tracking to assess and identify ways that we can improve our customer service delivery and the overall customer experience. In 2013, we received over 700,000 responses to our online...

  • Page 29
    ... of unaffiliated excess insurers. With respect to our Zipcar operations, in 2013 we transitioned coverage of our fleet from unaffiliated insurers to the Company's insurance program. In Europe, we insure the risk of liability to third parties arising from vehicle rental services in accordance...

  • Page 30
    ... aimed at protecting Company and customer data; a competitive employee benefits program; commitments to equal employment opportunities and diversity; offering fuel-efficient rental vehicles; and a commitment to corporate philanthropy through which we give back to the communities in which we operate...

  • Page 31
    ...found in Item 1A - Risk Factors in this Annual Report. COMPANY INFORMATION Our principal executive office is located at 6 Sylvan Way, Parsippany, New Jersey 07054 (our telephone number is 973-496-4700). The Company files electronically with the Securities and Exchange Commission (the "SEC") required...

  • Page 32
    ...to reduce the size of our truck rental fleet in response to reduced demand. We face risks related to fleet costs. Fleet costs typically represent our single largest expense and can vary from year to year based on the prices that we are able to purchase and dispose of our rental vehicles. In 2013, on...

  • Page 33
    ...year old used vehicles. We currently sell non-program vehicles through auctions, third-party resellers and other channels in the used vehicle marketplace. Such channels may not produce stable used vehicle prices. A reduction in residual values for non-program vehicles in our rental fleet could cause...

  • Page 34
    We face risks related to our Zipcar operations. We expect that the competitive environment for our car sharing services will become more intense as additional companies enter our existing markets or try to expand their operations. Competitors could introduce new solutions with competitive price and ...

  • Page 35
    ...our fleet size over the course of the year to help manage seasonal variations in demand, as well as localized changes in demand that we may encounter in the various regions in which we operate. In 2013, the third quarter accounted for 30% of our total revenue for the year and was our most profitable...

  • Page 36
    ... upon to support our reinsurance efforts, which in turn would adversely impact our financial condition or results of operations. Optional insurance products that we offer to renters in the United States, including, but not limited to, supplemental liability insurance, personal accident insurance and...

  • Page 37
    ... to offer loss damage waivers to our customers, our financial condition or results of operations could be adversely impacted. If the current federal law that pre-empted state laws that imputed tort liability solely based on ownership of a vehicle involved in an accident were to change, our insurance...

  • Page 38
    ... these data security standards could result in substantial increased fees to credit card companies, other liabilities and/or loss of the right to collect credit card payments, which could adversely impact our financial condition or results of operations. We face risks related to environmental laws...

  • Page 39
    ... business. We face risks related to franchising or licensing laws and regulations. We sometimes sell licenses to third parties to operate locations under our brands in exchange for the payment of a royalty by the third-party licensee. Our licensing activities and sales are subject to various state...

  • Page 40
    ..., websites and network infrastructure to attract and retain customers, accept reservations, process rental and sales transactions, manage our fleet of vehicles, account for our activities and otherwise conduct our business. We have centralized our information systems, and we rely on communications...

  • Page 41
    ... of federal or state income taxes allowed for our U.S. vehicle rental fleet. We face risks related to our protection of our intellectual property. We have registered "Avis," "Budget," "Zipcar" and "Payless" and various related marks or designs, such as "We try harder," and "wheels when you want them...

  • Page 42
    ... billion. We maintain asset-backed facilities in the United States, Canada, Australia and Europe. If the asset-backed financing market were to be disrupted for any reason, we may be unable to obtain refinancing for our operations at current levels, or at all, when our assetbacked financings mature...

  • Page 43
    ... of our industry, business or related industries; the operating and stock price performance of other comparable companies; overall market fluctuations; success or failure of competitive service offerings or technologies; tax or regulatory developments in the United States or foreign countries...

  • Page 44
    ..., for corporate offices, contact center activities and other administrative functions, respectively, in Europe. There are approximately 20 other leased office locations throughout the world used for administrative, regional sales and operations activities. We lease or have vehicle rental concessions...

  • Page 45
    ... and car sharing operations, including, among others, business practice disputes, contract and licensee disputes, employment and wage-and-hour claims, competition matters, insurance claims, intellectual property claims and other regulatory, environmental, commercial and tax matters. The Company...

  • Page 46
    ... OF COMMON STOCK Our common stock is currently traded on the NASDAQ Global Select Market ("NASDAQ") under the symbol "CAR." The following table sets forth the quarterly high and low sales prices per share of our common stock as reported by NASDAQ for 2013 and 2012. At January 31, 2014, the number of...

  • Page 47
    ... pursuant to the 2009 Employee Stock Purchase Plan. ISSUER PURCHASES OF EQUITY SECURITIES The following is a summary of the Company's common stock repurchases by month for the quarter ended December 31, 2013: Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs - 359,942...

  • Page 48
    ... common stock against the cumulative total returns of peer group indices, the S&P MidCap 400 Index and the Dow Jones US Transportation Average Index for the period of five fiscal years commencing December 31, 2008 and ending December 31, 2013. The broad equity market indices used by the Company are...

  • Page 49
    ... million for the years ended December 31, 2013, 2012, 2011, 2010 and 2009, respectively. Includes related-party debt due to Avis Budget Rental Car Funding (AESOP) LLC ("Avis Budget Rental Car Funding"). See Note 14 to our Consolidated Financial Statements. In presenting the financial data above in...

  • Page 50
    ... Thrifty. See Notes 2 and 5 to our Consolidated Financial Statements. In 2012, we implemented a restructuring initiative related to our Truck Rental segment, and in 2011, we implemented a restructuring initiative subsequent to the acquisition of Avis Europe. In 2010 and 2009, we implemented cost...

  • Page 51
    ...global vehicle rental and car sharing industry, Avis, Budget and Zipcar. We are a leading vehicle rental operator in North America, Europe, Australia, New Zealand and certain other regions we serve, with a fleet of more than 500,000 vehicles. We also license the use of the Avis and Budget trademarks...

  • Page 52
    ... the acquisition of Payless, the sixth largest car rental company in North America, in July 2013. We acquired a 50% ownership stake in our Brazilian licensee for Avis and Budget in August 2013. Our share price increased 104% to $40.42. • • • RESULTS OF OPERATIONS We measure performance using...

  • Page 53
    ...currency exchange rates had virtually no effect on revenues in 2013 compared to 2012. Total expenses increased as a result of higher vehicle depreciation and lease charges resulting from a 2% increase in our car rental fleet and a 17% increase in our per-unit fleet costs (excluding acquisitions); an...

  • Page 54
    ... businesses and our acquisition of Zipcar and, for 2012, primarily represents costs related to the integration of the operations of Avis Europe. (c) We recorded a charge of $33 million for the impairment of our equity-method investment in our Brazilian licensee. North America 2013 $ 5,083 500 2012...

  • Page 55
    ... fourth quarter 2012. In the year ended December 31, 2013: • • Operating expenses, at 52.9% of revenue, remained level compared to the prior year. Vehicle depreciation and lease costs decreased to 20.2% of revenue from 20.6% in the prior year, principally due to an increase in fleet utilization...

  • Page 56
    ... Operating expenses were 52.0% of revenue, versus 51.3% in the prior year, primarily due to the acquisition of Avis Europe. Vehicle depreciation and lease costs declined to 20.0% of revenue in 2012, from 20.7% in 2011, primarily due to lower per-unit fleet costs in North America amid robust used-car...

  • Page 57
    ... the operations of Avis Europe and, for 2011, primarily represents costs related to our acquisition of Avis Europe and our previous efforts to acquire Dollar Thrifty. North America 2012 $ 4,640 556 2011 $ 4,495 442 % Change 3% 26% Revenue Adjusted EBITDA Revenues increased 3% during 2012 compared...

  • Page 58
    ... revenue from 15.7% in the prior year, primarily due to the acquisition of Avis Europe. Vehicle interest costs increased to 1.6% of revenue compared to 1.1% in 2012, primarily due to the acquisition of Avis Europe. • • • Truck Rental 2012 $ 374 33 2011 $ 376 49 % Change (1%) (33%) Revenue...

  • Page 59
    ... vehicle rental fleet and the acquisitions of Zipcar and Payless. See "Liquidity and Capital Resources-Debt and Financing Arrangements" for a detailed account of the change in our debt related to vehicle programs. The increase in stockholders' equity is primarily due to our net income for the year...

  • Page 60
    .... Cash Flows Year Ended December 31, 2013 vs. Year Ended December 31, 2012 The following table summarizes our cash flows: Year Ended December 31, 2013 2012 Cash provided by (used in): Operating activities Investing activities Financing activities Effects of exchange rate changes Net change in cash...

  • Page 61
    ... and debt under vehicle programs of approximately $7.3 billion). We use various hedging strategies, including derivative instruments, to manage a portion of the risks associated with our floating rate debt. Corporate indebtedness consisted of: Maturity Date May 2014 October 2014 May 2016 November...

  • Page 62
    ...truck fleet. The increase is principally related to Zipcar capital leases. (b) (c) The following table provides the contractual maturities for our corporate debt and our debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding, at December 31, 2013: Corporate...

  • Page 63
    ... 14 to our Consolidated Financial Statements. LIQUIDITY RISK Our primary liquidity needs include the payment of operating expenses, servicing of corporate and vehicle-related debt and procurement of rental vehicles to be used in our operations. The present intention of management is to reinvest the...

  • Page 64
    ... that could potentially affect reported results. However, our businesses operate in environments where we are paid a fee for a service performed, and therefore the results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not...

  • Page 65
    ... of our reporting units. Business Combinations. The Company uses the acquisition method of accounting for business combinations, which requires that the purchase price of acquired companies be allocated to the tangible and intangible assets acquired and the liabilities assumed, as applicable, at...

  • Page 66
    ... thereof on our business, see Note 2 to our Consolidated Financial Statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to a variety of market risks, including changes in currency exchange rates, interest rates and gasoline prices. We manage our exposure to...

  • Page 67
    ...Rate Risk Management Our primary interest rate exposure at December 31, 2013 was interest rate fluctuations in the United States, specifically LIBOR and commercial paper interest rates due to their impact on variable rate borrowings and other interest rate sensitive liabilities. We use interest rate...

  • Page 68
    ... with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2013 of the Company and our report dated February 20, 2014 expressed an unqualified opinion on...

  • Page 69
    ITEM 9B. OTHER INFORMATION None. 59

  • Page 70
    ... - Related Person Transactions" and "Corporate Governance - Functions and Meetings of the Board of Directors - Director Independence" is incorporated herein by reference in response to this item. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information contained in the Company's Annual Proxy...

  • Page 71
    ... ITEM 15(A)(1). FINANCIAL STATEMENTS See Consolidated Financial Statements and Consolidated Financial Statements Index commencing on page F-1 hereof. ITEM 15(A)(2). FINANCIAL STATEMENT SCHEDULES See Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2013, 2012 and 2011...

  • Page 72
    ... Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AVIS BUDGET GROUP, INC. By: /s/ IZILDA P. MARTINS Izilda P. Martins Senior Vice President and Acting Chief Accounting Officer Date: February 20, 2014...

  • Page 73
    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011 Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011 ...

  • Page 74
    ... REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Avis Budget Group, Inc. Parsippany, New Jersey We have audited the accompanying consolidated balance sheets of Avis Budget Group, Inc. and subsidiaries (the "Company") as of December 31, 2013 and 2012, and the related...

  • Page 75
    Avis Budget Group, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) Year Ended December 31, 2013 2012 2011 Revenues Vehicle rental Other Net revenues Expenses Operating Vehicle depreciation and lease charges, net Selling, general and administrative Vehicle interest, ...

  • Page 76
    ... Budget Group, Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Year Ended December 31, 2013 2012 2011 Net income (loss) $ 16 $ 290 $ (29) Other comprehensive income (loss), net of tax Currency translation adjustments, net of tax of $7, $0 and $0, $ respectively Available-for-sale...

  • Page 77
    ...vehicle programs Assets under vehicle programs: Program cash Vehicles, net Receivables from vehicle manufacturers and other Investment in Avis Budget Rental Car Funding (AESOP) LLC-related party Total assets Liabilities and stockholders' equity Current liabilities: Accounts payable and other current...

  • Page 78
    ... debt securities of Avis Budget Rental Car Funding (AESOP)-related party Net cash used in investing activities Financing activities Proceeds from long-term borrowings Payments on long-term borrowings Net change in short-term borrowings Debt financing fees Purchases of warrants Proceeds from sale of...

  • Page 79
    Avis Budget Group, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In millions) Year Ended December 31, 2013 2012 2011 Vehicle programs: Proceeds from borrowings Payments on borrowings Debt financing fees Net cash provided by financing activities Effect of changes in exchange rates on cash ...

  • Page 80
    ... Net activity related to restricted stock units Exercise of stock options Realization of tax benefits for stock-based awards Activity related to employee stock purchase plan Repurchase of warrants Sale of call options, net of tax of $(1) Repurchase of common stock Balance at December 31, 2013 16...

  • Page 81
    ... reportable business segments: • North America-provides car rentals in the United States and vehicle rentals in Canada, as well as ancillary products and services, and operates the Company's Zipcar car sharing business. International-provides and licenses the Company's brands to third parties...

  • Page 82
    ... operation and licensing of the Avis and Budget rental systems and by providing vehicle rentals and other services to business and leisure travelers and others. Other revenue includes sales of loss damage waivers and insurance products, fuel and fuel service charges, rentals of GPS navigation units...

  • Page 83
    ... to repurchase vehicles at a specified price and date, or guarantee the depreciation rate for a specified period of time, subject to certain eligibility criteria (such as car condition and mileage requirements). The Company depreciates vehicles such that the net book value on the date of return to...

  • Page 84
    ... the type of derivative and the nature of the underlying exposure. The Company principally uses discounted cash flows to value these instruments. These models take into account a variety of factors including, where applicable, maturity, commodity prices, interest rate yield curves of the Company and...

  • Page 85
    ... of liabilities associated with retained risks of liability to third parties as of December 31, 2013 and 2012, respectively. Such liabilities relate primarily to public liability and third-party property damage claims, as well as claims arising from the sale of ancillary insurance products including...

  • Page 86
    ... awards. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant and, since the Company does not currently pay or plan to pay a dividend on its common stock, the expected dividend yield was zero. Business Combinations The Company uses the acquisition...

  • Page 87
    ... to better position the business of its Truck Rental segment, in which it closed certain rental locations and decreased the size of the rental fleet, with the intent to increase fleet utilization and reduce costs. During the year ended December 31, 2013, the Company recorded restructuring expense of...

  • Page 88
    ... entire issued share capital of Zipcar, a leading car sharing company, for $473 million, net of acquired cash. The acquisition increased the Company's growth potential and its ability to better serve a greater variety of customer transportation needs. The excess of the purchase price over fair value...

  • Page 89
    ... the license agreements will be amortized over an estimated life of 15 years. Apex Car Rentals In October 2012, the Company completed the acquisition of the assets of Apex, a leading deep-value car rental company in New Zealand and Australia, operating a fleet of approximately 4,000 rental vehicles...

  • Page 90
    ...financial information with GAAP and the Company's accounting policies. In addition, adjustments were made to reflect the impact to amortization expense and related income tax expense for fair value adjustments and revised useful lives assigned to intangible assets as if Avis Europe had been acquired...

  • Page 91
    ... 27 years. The increase primarily relates to the acquisition of Payless. The increase primarily relates to the acquisition of Zipcar. Amortization expense relating to all intangible assets was as follows: Year Ended December 31, 2013 2012 2011 12 $ 13 $ 15 8 27 $ 21 $ License agreements Customer...

  • Page 92
    ... sales of vehicles included in receivables of $378 million, $439 million and $339 million, respectively. 8. Income Taxes The provision for (benefit from) income taxes consists of the following: Year Ended December 31, 2013 2012 2011 Current Federal State Foreign Current income tax provision (benefit...

  • Page 93
    ...December 31, 2013, the Company had U.S. federal net operating loss carryforwards of approximately $3.3 billion, most of which expire in 2031. Such net operating loss carryforwards are primarily related to accelerated depreciation of the Company's U.S. vehicles. Currently, the Company does not record...

  • Page 94
    ... tax benefits for the year: 2013 Balance at January 1 Additions for tax positions related to current year Additions for tax positions for prior years Additions associated with the acquisition of Avis Europe Reductions for tax positions for prior years Settlements Statute of limitations Balance...

  • Page 95
    ... Note 15-Commitments and Contingencies. In 2013, amount includes the Company's (i) 50% ownership of Anji Car Rental and Leasing Company Limited ("Anji"), our joint venture for the Avis brand in China, and (ii) 50% ownership in its Brazilian licensee. In 2012, amounts included (i) 50% ownership of...

  • Page 96
    ... December 31, 2013 2012 344 $ 309 210 198 193 148 136 132 87 60 77 67 75 82 63 66 13 58 281 301 1,479 $ 1,421 Accounts payable Accrued payroll and related Accrued sales and use taxes Public liability and property damage insurance liabilities - current Deferred revenue - current Accrued commissions...

  • Page 97
    ... with the sale of the Floating Rate Notes due December 2017, the Company entered into a registration rights agreement, under which it has agreed to use its reasonable best efforts to file with the Securities and Exchange Commission and cause to become effective a registration statement with respect...

  • Page 98
    ... Floating Rate Senior Notes, the the 5½% Senior Notes, in each case as described above, are senior unsecured obligations of the Company's Avis Budget Car Rental, LLC ("ABCR") subsidiary, are guaranteed by the Company and certain of its domestic subsidiaries and rank equally in right of payment with...

  • Page 99
    ... loans to acquire or finance the acquisition of vehicles used in the Company's rental car operations. By issuing debt through the Avis Budget Rental Car Funding program, the Company pays a lower rate of interest than if it had issued debt directly to third parties. Avis Budget Rental Car Funding is...

  • Page 100
    ... Budget Rental Car Funding. The business activities of Avis Budget Rental Car Funding are limited primarily to issuing indebtedness and using the proceeds thereof to make loans to AESOP Leasing for the purpose of acquiring or financing the acquisition of vehicles to be leased to the Company's rental...

  • Page 101
    ... 31, 2013. For the year ended December 31, 2013, the interest rate on these leases ranged from 3% to 4%. DEBT MATURITIES The following table provides the contractual maturities of the Company's debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding, at...

  • Page 102
    ... and prevailing market rate rents. Future minimum lease payments required under noncancelable operating leases, including minimum concession fees charged by airport authorities, which in many locations are recoverable from vehicle rental customers, as of December 31, 2013, are as follows: 2014 2015...

  • Page 103
    ... others, contract and licensee disputes, wage-and-hour claims, competition matters, employment matters, insurance claims, intellectual property claims and other regulatory, environmental, commercial and tax matters. Litigation is inherently unpredictable and, although the Company believes that its...

  • Page 104
    ... provided to landlords against third-party claims for the use of real estate property leased by the Company, the Company maintains insurance coverage that mitigates its potential exposure. Other Guarantees The Company has provided certain guarantees to, or for the benefit of, subsidiaries of Realogy...

  • Page 105
    ... plan is 16 million, with approximately 3.5 million shares available as of December 31, 2013. The Company typically settles stock-based awards with treasury shares. With limited exception, time-based awards generally vest ratably over a three-year period following the date of grant, and performance...

  • Page 106
    ... - 1.21% 3 - 4 years 0% Expected volatility of stock price Risk-free interest rate Valuation period Dividend yield Annual activity related to stock units and cash units, consisted of (in thousands of shares): Performance-Based and Market Based RSUs Weighted Average Grant Number Date of Shares Fair...

  • Page 107
    ... time. Non-employee Directors Deferred Compensation Plan The Company grants stock awards on a quarterly basis to non-employee directors representing 50% of a director's annual compensation and such awards can be deferred under the Non-employee Directors Deferred Compensation Plan. During 2013, 2012...

  • Page 108
    ...material of the non-U.S. defined benefit pension plans is operated in the United Kingdom. Under these plans, benefits are based on an employee's years of credited service and a percentage of final average compensation. However, the majority of such plans are closed to new employees and are no longer...

  • Page 109
    ...prior service cost. The following assumptions were used to determine pension obligations and pension costs for the principal plans in which the Company's employees participated: For the Year Ended December 31, 2013 2012 2011 U.S. Pension Benefit Plans Discount rate: Net periodic benefit cost Benefit...

  • Page 110
    ... changes would materially affect the amounts reported in the Company's financial statements. The U.S. defined benefit pension plans' investment goals and objectives are managed by the Company with consultation from independent investment advisors. The Company seeks to produce returns on pension plan...

  • Page 111
    ...million, $9 million and $6 million, respectively, to multiemployer plans. 19. Financial Instruments Risk Management Currency Risk. The Company uses currency exchange contracts to manage its exposure to changes in currency exchange rates associated with its non-U.S.-dollar denominated receivables and...

  • Page 112
    ...'s diverse customer base. The Company does not normally require collateral or other security to support credit sales. Fair Value Derivative instruments and hedging activities As described above, derivative assets and liabilities consist principally of currency exchange contracts, interest rate swaps...

  • Page 113
    ... billion of interest rate caps purchased at December 31, 2012. These amounts exclude $5.2 billion and $2.4 billion of interest rate caps purchased by the Company's Avis Budget Rental Car Funding subsidiary at December 31, 2013 and 2012, respectively. Fair values (Level 2) of derivative instruments...

  • Page 114
    ...term debt, excluding convertible debt (a) Convertible debt (a) Debt under vehicle programs Vehicle-backed debt due to Avis Budget Rental Car Funding (a) Vehicle-backed debt (a) Interest rate swaps and interest rate caps (b) As of December 31, 2012 Carrying Estimated Amount Fair Value $ 23 3,305 66...

  • Page 115
    ...31, 2013 North America $ 5,083 1,262 204 500 102 3,748 7,967 99 International $ 2,481 501 48 240 49 1,779 2,136 53 Truck Rental $ 373 48 12 15 1 80 349 - Corporate and Other (a) $ - - - (47) - 225 - - Total 7,937 1,811 264 708 152 5,832 10,452 152 Net revenues Vehicle depreciation and lease charges...

  • Page 116
    ... of the Company's subsidiaries. United States 2013 Net revenues Assets exclusive of assets under vehicle programs Assets under vehicle programs Property and equipment, net 2012 Net revenues Assets exclusive of assets under vehicle programs Assets under vehicle programs Property and equipment, net...

  • Page 117
    ... subsidiaries. Certain reclassifications have been made to the 2012 and 2011 consolidating condensed financial statements to correct the classification of intercompany transactions to report them on a gross basis and to conform to the current year presentation. The reclassified amounts had no impact...

  • Page 118
    ... Statements of Operations For the Year Ended December 31, 2013 NonGuarantor Subsidiaries $ 1,921 3,086 5,007 Parent Revenues Vehicle rental Other Net revenues Expenses Operating Vehicle depreciation and lease charges, net Selling, general and administrative Vehicle interest, net Non-vehicle related...

  • Page 119
    For the Year Ended December 31, 2012 NonGuarantor Subsidiaries $ 1,806 2,130 3,936 Parent Revenues Vehicle rental Other Net revenues Expenses Operating Vehicle depreciation and lease charges, net Selling, general and administrative Vehicle interest, net Non-vehicle related depreciation and ...

  • Page 120
    For the Year Ended December 31, 2011 NonGuarantor Subsidiaries $ 945 1,702 2,647 Parent Revenues Vehicle rental Other Net revenues Expenses Operating Vehicle depreciation and lease charges, net Selling, general and administrative Vehicle interest, net Non-vehicle related depreciation and ...

  • Page 121
    ...long-term debt Total current liabilities Long-term debt Other non-current liabilities Intercompany payables Total liabilities exclusive of liabilities under vehicle programs Liabilities under vehicle programs: Debt Due to Avis Budget Rental Car Funding (AESOP) LLC-related party Deferred income taxes...

  • Page 122
    ...long-term debt Total current liabilities Long-term debt Other non-current liabilities Intercompany payables Total liabilities exclusive of liabilities under vehicle programs Liabilities under vehicle programs: Debt Due to Avis Budget Rental Car Funding (AESOP) LLC-related party Deferred income taxes...

  • Page 123
    ... stock Intercompany loan payments Other, net Net cash provided by (used in) financing activities exclusive of vehicle programs Vehicle programs: Proceeds from borrowings Payments on borrowings Debt financing fees Net cash provided by (used in) financing activities Effect of changes in exchange rates...

  • Page 124
    ... Other, net Net cash provided by (used in) financing activities exclusive of vehicle programs Vehicle programs: Proceeds from borrowings Payments on borrowings Debt financing fees Net cash provided by (used in) financing activities Effect of changes in exchange rates on cash and cash equivalents Net...

  • Page 125
    ... Other, net Net cash provided by (used in) financing activities exclusive of vehicle programs Vehicle programs: Proceeds from borrowings Payments on borrowings Debt financing fees Net cash provided by (used in) financing activities Effect of changes in exchange rates on cash and cash equivalents Net...

  • Page 126
    ...unaudited quarterly financial data for 2013 and 2012. The earnings per share information is calculated independently for each quarter based on the weighted average number of common stock and common stock equivalents outstanding, which may fluctuate, based on quarterly income levels and market prices...

  • Page 127
    ..., net of tax) for amortization expense related to intangible assets recognized in the Avis Europe acquisition. 23. Subsequent Events In February 2014, the Company's Avis Budget Rental Car Funding subsidiary issued approximately $675 million in five-year asset-backed notes with a weighted average...

  • Page 128
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  • Page 129
    ...: Year Ended December 31, 2013 (a) 2012 2011 (a) _____ (a) Expensed Deductions 40 21 16 $ 15 27 9 $ 10 - - $ (15) $ (8) (4) 50 40 21 $ 298 273 192 $ 27 25 16 $ 22 - 65 $ - - - $ 347 298 273 For 2013 and 2011, other adjustments relate to the acquisition of Zipcar and Avis Europe...

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  • Page 131
    ... Company's Current Report on Form 8-K dated November 13, 2012). Indenture dated as of March 7, 2013 among Avis Budget Finance, plc, as Issuer, the Guarantors from time to time parties thereto, Bank of Nova Scotia Trust Company of New York as Trustee and Citibank, N.A., London Branch, as paying agent...

  • Page 132
    ... Budget Car Rental, LLC and Avis Budget Finance, Inc., as Issuers, the Guarantors from time to time parties thereto and Deutsche Bank Trust Company Americas as Trustee (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated December 2, 2013). Form of Floating Rate...

  • Page 133
    ... Exhibit 10.2 to the Company's Current Report on Form 8-K dated June 18, 2009).†Amendment No. 1 to the Avis Budget Group, Inc. Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.17(b) to Avis Budget Car Rental, LLC and Avis Budget Finance, Inc.'s Registration Statement on Form...

  • Page 134
    ... Budget Car Rental 2013 Model Year Program Letter dated November 7, 2012 between Avis Budget Car Rental, LLC and Ford Motor Company (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated November 13, 2012).††Avis Budget Car Rental 2014 Model Year Program...

  • Page 135
    ... Amended and Restated Master Motor Vehicle Finance Lease Agreement, dated as of June 3, 2004. AESOP I Operating Sublease Agreement dated as of March 26, 2013 between Zipcar, Inc. and Avis Budget Car Rental, LLC (Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10...

  • Page 136
    ... BGI Leasing, Inc., Budget Rent A Car System, Inc., Budget Truck Rental LLC, Runabout, LLC, Wizard Services, Inc. and Citigroup Global Markets Inc. for itself and on behalf of the several initial purchasers (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated...

  • Page 137
    ... BGI Leasing, Inc., Budget Rent A Car System, Inc., Budget Truck Rental LLC, Runabout, LLC, Wizard Services, Inc. and Citigroup Global Markets Inc. for itself and on behalf of the several initial purchasers (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated...

  • Page 138
    ... Annual Report on Form 10-K for the year ended December 31, 2010, dated February 24, 2011). Master Motor Vehicle Operating Lease Agreement (Group II), dated March 9, 2010, among, Centre Point Funding, LLC, as Lessor, Budget Truck Rental LLC, as Administrator and as Lessee, and Avis Budget Car Rental...

  • Page 139
    ...Master Lease Agreement dated March 5, 2013 among Avis Budget Italia S.p.A., Fleet Co. S.A.p.A., Avis Budget Italia S.p.A. and Credit Agricole Corporate And Investment Bank (Incorporated by reference to Exhibit 10.10 to the Company's Current Report on Form 8-K dated March 11, 2013). Spanish Servicing...

  • Page 140
    ...now known as Avis Rent A Car System, LLC. Avis Group Holdings, Inc. is now known as Avis Group Holdings, LLC. Denotes management contract or compensatory plan. Confidential treatment has been requested for certain portions of this Exhibit pursuant to Rule 24b-2 of the Securities Exchange Act of 1934...

  • Page 141
    ... I, Ronald L. Nelson, certify that: 1. I have reviewed this annual report on Form 10-K of Avis Budget Group, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the...

  • Page 142
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  • Page 143
    ... information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 20, 2014 /s/ David B. Wyshner Senior Executive Vice President and Chief Financial Officer

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    International Headquarters Avis Budget Group, Inc. 6 Sylvan Way Parsippany, New Jersey 07054 Tel: 973.496.4700 Web: www.avisbudgetgroup.com NASDAQ: CAR