Avis 2013 Annual Report Download - page 89

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F-17
income and non-income based taxes, and residual goodwill are not yet finalized and subject to change. In
connection with this acquisition, $188 million was recorded in identifiable intangible assets (consisting of
$112 million related to trademarks and $76 million related to customer relationships) and $269 million was
recorded in goodwill. The trademark assets are indefinite-lived and the customer relationship intangibles will
be amortized over an estimated life of 8 years.
Brazilian licensee
In August 2013, the Company acquired a 50% ownership stake in its Brazilian licensee for $53 million.
Approximately $47 million of the total consideration was paid in 2013 and the remainder is expected to be
paid by the end of first quarter 2014. The Company’s investment significantly increases its presence in the
Brazilian car rental market.
The Company’s investment in its Brazilian licensee was recorded as an equity investment within Other non-
current assets, and the Company’s share of the Brazilian licensee’s operating results is reported within
Operating expenses. In conjunction with the acquisition, the Company agreed to the payment of contingent
consideration of up to $13 million based on the Brazilian licensee’s future financial performance. The fair
value of the contingent consideration was estimated by utilizing a Monte Carlo simulation technique, based
on a range of possible future results, and no value was attributed to the contingent consideration at the
acquisition date or at December 31, 2013. The Company’s investment, which is recorded in its International
segment, totaled approximately $17 million at December 31, 2013, net of an impairment charge of $33
million ($33 million, net of tax). The impairment charge was recorded at the time of the investment based on
a combination of observable and unobservable fair value inputs (Level 3), specifically a combination of the
Income approach-discounted cash flow method and the Market approach-public company market multiple
method.
Payless Car Rental
In July 2013, the Company completed the acquisition of Payless for $46 million, net of acquired cash. The
acquisition provides the Company with a position in the deep-value segment of the car rental industry.The
excess of the purchase price over preliminary fair value of net assets acquired was allocated to goodwill,
which was assigned to the Company’s North America segment. The goodwill is not expected to be
deductible for tax purposes. The fair value of the assets acquired and liabilities assumed has not yet been
finalized and is therefore subject to change. In connection with this acquisition, $23 million was recorded in
identifiable intangible assets (consisting of $16 million related to trademarks and $7 million related to
license agreements) and $27 million was recorded in goodwill. The trademark assets are indefinite-lived
and 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. In
conjunction with the acquisition, the Company paid $63 million in cash (including the acquisition of fleet)
and agreed to the payment of contingent consideration with an estimated acquisition date fair value of $9
million. The contingent consideration consists of a maximum of $26 million in additional payments that are
contingent on the future financial performance of Apex. The fair value of the contingent consideration at the
acquisition date, and at December 31, 2013, was estimated by utilizing a Monte Carlo simulation technique,
based on a range of possible future results. Any changes in contingent consideration are recorded in
Transaction-related costs. The amount recognized for contingent consideration was $12 million at
December 31, 2013. In connection with this acquisition, $21 million was recorded in trademarks and $16
million was recorded in goodwill, which were allocated to the Company’s International segment. The
goodwill is not expected to be deductible for tax purposes.
Avis Europe
In October 2011, the Company completed the acquisition of the entire issued share capital of Avis Europe
for $976 million and subsequently repaid $649 million of assumed Avis Europe indebtedness. Avis Europe
provides vehicle rental and ancillary products and services in Europe, the Middle East, Africa and Asia. The
acquisition reunited the global operation of the Avis and Budget brands under one corporate umbrella.