Avis 2013 Annual Report Download - page 90

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F-18
The Company recorded a $117 million net, non-cash charge, within transaction-related costs, related to the
reacquired unfavorable license rights that provided Avis Europe with royalty-free license rights within certain
territories. This net charge reflects the difference, as of the acquisition date, between the fair value of the
license rights and their contractual value. The Company used a relief from royalty rate analysis to determine
the fair value. This valuation considered, but was not limited to, (i) the contracted royalty rates, (ii) the
market royalty rate and (iii) the term of the license contracts.
The excess of the purchase price over fair value of net assets acquired was allocated to goodwill, which
was assigned to the Company’s International segment. The goodwill is not expected to be deductible for tax
purposes. The fair value of the assets acquired and liabilities assumed, as set forth in the table below,
reflects various fair value estimates and analyses, including work performed by third-party valuation
specialists. The following summarizes the allocation of the purchase price of Avis Europe:
Cash $ 136
Receivables 245
Other current assets 213
Property and equipment 91
Deferred income taxes 27
Other intangibles 254
Other non-current assets 31
Vehicles 1,706
Receivables from vehicle manufacturers and other 282
Total identifiable assets acquired 2,985
Accounts payable and other current liabilities (552)
Debt (763)
Other non-current liabilities (322)
Liabilities under vehicles program - debt (779)
Total liabilities assumed (2,416)
Net assets acquired 569
Goodwill 290
Non-cash charge related to the reacquired unfavorable license rights 117
Total $ 976
Other intangibles consisted primarily of $188 million related to license agreements and $66 million related to
customer relationships. These license agreements are amortized over a weighted-average life of
approximately 20 years. Customer relationships are amortized over a weighted-average life of
approximately 12 years.
Avis Europe contributed net revenues of $359 million and a net loss of $223 million, including $213 million
of transaction-related costs, net of tax to the Company’s results from October 2011 through
December 2011. The net loss was primarily due to a non-cash charge, recorded at the time of the
acquisition, related to the unfavorable license rights reacquired by the Company. The following unaudited
pro forma summary presents the Company’s consolidated information as if Avis Europe had been acquired
on January 1, 2011. These amounts were calculated after conversion of Avis Europe’s results into U.S.
dollars, applying adjustments to align the 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 on January 1, 2011.
(unaudited)
Pro Forma Summary
for the Year Ended
December 31,
2011
Net revenues $ 7,259
Net income 22
Earnings per share – Diluted 0.17