Avis 2014 Annual Report Download

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Table of Contents
Letter to Shareholders
Form 10-K
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures 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
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Signatures

Table of contents

  • Page 1
    ... 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 2
    Our Purpose is to ensure people connect in the moments that matter Annual Report 2014

  • Page 3
    ...of this Annual Report. As we thought about what truly drives our purpose, we considered that technology has engendered many new and different ways that people can connect, virtually. But that's just never the same experience as being there, live and in person. Whether visiting a special place, being...

  • Page 4
    ...for our customers to manage their reservations and rental requirements. We have enhanced our brand websites, expanded vehicle choice programs, and introduced new ancillary products, such as mobile device chargers in North America and mobile Wi-Fi products in Europe. We launched new brand advertising...

  • Page 5
    ..., adding more than È 0 new locations in North America and more than doubling its revenue. We used our Free Cash Flow to acquire licensees in certain markets that offer compelling synergies. Foremost among these was our acquisition of our Budget licensee for Southern California and Las Vegas...

  • Page 6
    ... to AVIS BUDGET GROUP, INC. (Exact name of Registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 6 SYLVAN WAY PARSIPPANY, NJ (Address of principal executive offices) 06-0918165 (I.R.S. Employer Identification Number) 07054 (Zip Code) 973...

  • Page 7
    ... 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 8
    ...the high level of competition in the vehicle rental industry and the impact such competition may have on pricing and rental volume; a change in travel demand, including changes in airline passenger traffic; a change in our fleet costs as a result of a change in the cost of new vehicles, manufacturer...

  • Page 9
    ..., regulatory, political or technological factors affecting our operations, pricing or services. • • • • • We operate in a continuously changing business environment and new risk factors emerge from time to time. New risk factors, factors beyond our control, or changes in the impact of...

  • Page 10
    ...We and our licensees operate the Avis and Budget brands in approximately 175 countries throughout the world. We generally maintain a leading share of airport car rental revenue in North America, Europe, Australia and New Zealand and we operate one of the leading truck rental businesses in the United...

  • Page 11
    ... of the car rental industry. In 2014, we also acquired our long-standing Budget licensee for Southern California and Las Vegas, which further expanded our Company-operated locations in the United States. We have a long history of innovation in the vehicle rental and car sharing business, including...

  • Page 12
    ...to increase the rental fees we earn per rental day. We have implemented, and plan to continue to implement, new technology systems that strengthen our yield management and enable us to tailor our product and price offerings not only to meet our customers' needs, but also in response to actions taken...

  • Page 13
    ... at these customer "touch points." For example: We offer Avis Preferred Select & Goâ„¢, a vehicle-choice program for customers, and have revised our rental agreements and receipts to improve transparency, introduce mobile applications and significantly expanded customer-service-oriented training...

  • Page 14
    ... 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 15
    ... provides 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...

  • Page 16
    ...electric hybrids; roadside assistance; emailed receipts; a 100% smoke-free car rental fleet in North America; electronic toll collection services that let customers pay highway tolls without waiting in toll booth lines; amenities such as Avis Access, a full range of special products and services for...

  • Page 17
    ... in 2014. 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 renters and Budget's Fastbreak service, an...

  • Page 18
    ... Our Budget Truck rental business is one of the largest local and one-way truck rental businesses in the United States. At December 31, 2014, Budget Truck has a fleet of approximately 22,000 vehicles that are rented through a network of approximately 1,150 dealers and 400 Company-operated locations...

  • Page 19
    ... make Avis, Budget, Budget Truck, Payless and Apex car rental reservations through our brand-specific websites and through our toll-free reservation centers, by calling a specific location directly, through brand-specific mobile applications, through online travel agencies, through travel agents or...

  • Page 20
    ... offer customers the ability to earn frequent traveler points with many major U.S. and European airlines' and hotels' frequent traveler programs. • • In 2014, approximately 64% of vehicle rental transactions from our Company-operated Avis locations were generated by travelers who rented from...

  • Page 21
    ... units, optional roadside assistance services, fuel service options, electronic toll collection and other ancillary products and services, such as access to satellite radio and child safety seats. We also supplement our daily truck rental revenue by offering customers automobile towing equipment and...

  • Page 22
    .... Sales and marketing systems. We have developed a sophisticated system of online data tracking which enables our sales force to analyze key account information of our corporate customers including historical and current rental activity, revenue and booking sources, top renting locations, rate usage...

  • Page 23
    ..., minimize costs and leverage efficiencies. Through this platform, we process new member applications; manage reservations and keyless vehicle access; manage and monitor member interactions; manage billing and payment processing across multiple currencies; manage our car sharing fleet remotely...

  • Page 24
    ...our Ultimate Test Drive retail car sales program, which offers customers the ability to purchase Avis, Budget and Payless rental vehicles through a collaboration with AutoNation, Inc. Alternative disposition channels such as Ultimate Test Drive, online auctions and direct to dealer sales represented...

  • Page 25
    ... management strategy and delivering customer-centric employee training. Our associates and managers at our Company-operated locations are trained and empowered to resolve most customer issues at the location level. In addition, we have simplified our rental agreements for both the Avis and Budget...

  • Page 26
    ... other smaller regional companies. INSURANCE AND RISK MANAGEMENT Our vehicle rental operations and corporate operations expose us to various types of claims for bodily injury, death and property damage related to the use of our vehicles and/or properties, as well as general employmentrelated matters...

  • Page 27
    ... 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 28
    ...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 29
    ...sufficient number of vehicles to operate our business without significantly increasing our fleet costs or reducing our volumes. Automobile manufacturers may not continue to sell program cars to us on terms or at prices consistent with past agreements. Our program car purchases also generally provide...

  • Page 30
    ... two-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...

  • Page 31
    ... 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 32
    ... results of operations, particularly if our customers are unable to access our reservation systems through alternate channels. We face risks related to our leases and vehicle rental concessions. We lease or have vehicle rental concessions at locations throughout the world, including at airports both...

  • Page 33
    ... in currency exchange rates, which could adversely impact our financial condition or results of operations. We face risks related to liability and insurance. Our businesses expose us to claims for bodily injury, death and property damage related to the use of our vehicles, having our customers on...

  • Page 34
    ... in revenue and profitability. Should more of our customers decline purchasing optional liability insurance products as a result of any changes in these laws or otherwise, our financial condition or results of operations could be adversely impacted. We offer loss damage waivers to our customers as...

  • Page 35
    ... our customers' credit card information is protected. Failure to meet 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...

  • Page 36
    ...third-party operators") generally require that they comply with all laws and regulations applicable to their businesses, including our internal policies and standards. Under these agreements, third-party operators retain control over the employment and management of all personnel at their locations...

  • Page 37
    ... 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 38
    ... a replacement for such financing programs. We face risks related to movements or disruptions in the credit and asset-backed securities markets. We finance our operations through the use of asset-backed securities and other debt financing structures available through the credit market. Our total...

  • Page 39
    ... to meet those estimates; changes in investors' and analysts' perceptions 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...

  • Page 40
    ..., among other things, to our vehicle rental 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...

  • Page 41
    ... 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 2014 and 2013. At January 31, 2015, the number of stockholders of...

  • Page 42
    .... 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, 2014: Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 1,370,490 - 320,680 1,691,170 Approximate Dollar Value of...

  • Page 43
    ... the cumulative total returns of peer group indices, the S&P MidCap 400 Index, S&P 500 Index and the Dow Jones US Transportation Average Index for the period of five fiscal years commencing December 31, 2009 and ending December 31, 2014. The broad equity market indices used by the Company are the...

  • Page 44
    ... Item 7 of this Annual Report for a detailed discussion of the accounting policies that we believe require subjective and complex judgments that could potentially affect reported results. TRANSACTION-RELATED COSTS, RESTRUCTURING AND OTHER ITEMS During 2014, 2013, 2012, 2011 and 2010, we recorded $13...

  • Page 45
    ...million for losses on foreign-currency transactions related to the Avis Europe purchase price. In 2010, these costs related to due-diligence and other cost for our previous efforts to acquire Dollar Thrifty. See Notes 2 and 5 to our Consolidated Financial Statements. In 2014, we committed to various...

  • Page 46
    ... relating to our results of operations are presented before taxes. OVERVIEW OUR COMPANY We operate three of the most recognized brands in the global vehicle rental and car sharing industry, Avis, Budget and Zipcar. We are a leading vehicle rental operator in North America, Europe, Australia, New...

  • Page 47
    ... rental and mileage fees charged to our customers, both of which exclude our Zipcar car sharing operations. We also measure our ancillary revenues (rental-transaction revenue other than T&M revenue), such as from the sale of collision and loss damage waivers, insurance products, fuel service options...

  • Page 48
    ... (acquired in March 2013), partially offset by a $43 million negative impact from currency exchange rate movements. Total expenses increased as a result of higher vehicle depreciation and lease charges resulting from a 5% increase in our car rental fleet and a 4% increase in our per-unit fleet costs...

  • Page 49
    ... EBITDA 2013 % Change 2014 2013 % Change $ 5,042 10% $ 607 $ 508 19% 2,522 3% 290 272 7% 373 (2%) 39 36 8% - * (60) (47) * $ 7,937 7% 876 769 14% 180 209 56 26 13 - 392 152 228 147 61 51 33 97 North America International Truck Rental Corporate and Other (a) Total Company Less: Non-vehicle related...

  • Page 50
    ...increased per-unit fleet costs associated with newly acquired rental fleet. Corporate and Other 2014 Revenue Adjusted EBITDA _____ * Not meaningful 2013 $ - $ (60) % Change - * (47) * Adjusted EBITDA decreased $13 million in 2014 compared with 2013, primarily due to greater selling, general and...

  • Page 51
    ... million of revenue from Payless (acquired in July 2013). Movements in 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...

  • Page 52
    ... Adjusted EBITDA 2013 2012 % Change $ 508 $ 557 (9%) 272 270 1% 36 34 6% (47) (21) * 769 840 (8%) 152 228 147 61 51 33 97 125 268 75 38 34 - 300 North America International Truck Rental Corporate and Other (a) Total Company 2013 $ 5,042 2,522 373 - 7,937 $ Less: Non-vehicle related depreciation...

  • Page 53
    ...• Truck Rental 2013 $ 373 36 2012 $ 374 34 % Change 0% 6% Revenue Adjusted EBITDA Revenues decreased $1 million as the effects on volume of having an 8% smaller fleet were largely offset by a 7% increase in pricing. Adjusted EBITDA increased $2 million in 2013 compared with 2012. Corporate and...

  • Page 54
    ...a result of additional borrowings to support the increase in our vehicle rental fleet and our Budget Licensee Acquisitions. See "Liquidity and Capital Resources-Debt and Financing Arrangements" for a detailed account of the change in our debt related to vehicle programs. The decrease in stockholders...

  • Page 55
    ... vehicle programs. Cash Flows Year Ended December 31, 2014 vs. Year Ended December 31, 2013 The following table summarizes our cash flows: Year Ended December 31, 2014 2013 Cash provided by (used in): Operating activities Investing activities Financing activities Effects of exchange rate changes...

  • Page 56
    ...billion and debt under vehicle programs of approximately $8.1 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 October 2014 November 2017 December...

  • Page 57
    ... vehicle programs, including related party debt due to Avis Budget Rental Car Funding: As of December 31, 2014 2013 6,340 $ 5,656 489 400 690 731 314 289 252 226 31 35 8,116 $ 7,337 Change 684 89 (41) 25 26 (4) $ 779 $ North America - Debt due to Avis Budget Rental Car Funding (a) North America...

  • Page 58
    ... to our vehicle programs, including related party debt due to Avis Budget Rental Car Funding, at December 31, 2014: Total Capacity(a) $ 9,130 796 1,768 472 271 31 $ 12,468 Outstanding Borrowings $ 6,340 489 690 314 252 31 $ 8,116 Available Capacity $ 2,790 307 1,078 158 19 - $ 4,352 North America...

  • Page 59
    ... on the rates of return generated from plan assets and other factors (see Note 17 to our Consolidated Financial Statements) and are not included above. Primarily represents commitments under service contracts for information technology, telecommunications and marketing agreements with travel service...

  • Page 60
    ... in the number of incidents for which we are ultimately liable and changes in the cost per incident. Adoption of New Accounting Pronouncements During 2014, we adopted the following standard as a result of the issuance of a new accounting pronouncement: • Accounting Standards Update ("ASU") 2013-04...

  • Page 61
    ... a variety of market risks, including changes in currency exchange rates, interest rates and gasoline prices. We manage our exposure to market risks through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments, particularly...

  • Page 62
    ... our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report. (b) Management's Annual Report on Internal Control Over Financial Reporting. Our management is responsible for...

  • Page 63
    ... OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Avis Budget Group, Inc. Parsippany, New Jersey We have audited the internal control over financial reporting of Avis Budget Group, Inc. and subsidiaries (the "Company") as of December 31, 2014, based on...

  • Page 64
    ITEM 9B. OTHER INFORMATION None. 57

  • Page 65
    ... - 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 66
    ...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, 2014, 2013 and 2012 commencing on page G-1 hereof. ITEM 15(A)(3). EXHIBITS See Exhibit Index commencing on page H-1 hereof...

  • Page 67
    ... behalf by the undersigned, thereunto duly authorized. AVIS BUDGET GROUP, INC. By: /s/ DAVID T. CALABRIA David T. Calabria Vice President and Chief Accounting Officer Date: February 23, 2015 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the...

  • Page 68
    ... CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012 Consolidated Statements of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012 Consolidated...

  • Page 69
    ... 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, 2014 and 2013, and the related...

  • Page 70
    ... data) Year Ended December 31, 2014 2013 2012 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 amortization Interest expense related to corporate...

  • Page 71
    Avis Budget Group, Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Year Ended December 31, 2014 2013 2012 Net income Other comprehensive income (loss), net of tax Currency translation adjustments, net of tax of $(30), $7 and $0, respectively Available-for-sale securities: Net ...

  • Page 72
    ...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 73
    Avis Budget Group, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Year Ended December 31, 2014 2013 2012 Operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Vehicle depreciation Gain on sale of vehicles, net Non-vehicle related ...

  • Page 74
    Avis Budget Group, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In millions) Year Ended December 31, 2014 2013 2012 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 75
    ... of tax benefits for stockbased 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 Comprehensive income: Net income Other comprehensive loss Total comprehensive income...

  • Page 76
    ...Avis Budget Group, Inc. directly or indirectly has a controlling financial interest (collectively, the "Company"). The Company operates the following reportable business segments: • North America-provides car rentals in the United States and vehicle rentals in Canada, as well as ancillary products...

  • Page 77
    ... the 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...

  • Page 78
    ... are recorded as part of vehicle depreciation at the time of sale. Vehicle-related interest expense amounts are net of vehicle-related interest income of $10 million, $9 million and $8 million for 2014, 2013 and 2012, respectively. Advertising Expenses Advertising costs are generally expensed in the...

  • Page 79
    ... Instruments Derivative instruments are used as part of the Company's overall strategy to manage exposure to market risks associated with fluctuations in currency exchange rates, interest rates and gasoline costs. As a matter of policy, derivatives are not used for trading or speculative purposes...

  • Page 80
    ..., 2014 and 2013, 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 but not limited to supplemental liability, personal effects protection and personal accident...

  • Page 81
    ...of the Company's publicly traded, near-the-money stock options, and the valuation period is based on the vesting period of the 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...

  • Page 82
    ... January 1, 2017. The Company is currently evaluating the effect of this accounting pronouncement. In June 2014, the FASB issued ASU 2014-12, "Accounting for Share-Based Payments When the Terms of an Award Allow a Performance Target to Be Achieved After the Requisite Service Period," which requires...

  • Page 83
    ... processes (the "Avis Europe restructuring"). During the years ended December 31, 2014, 2013 and 2012, as part of this process, the Company formally communicated the termination of employment to approximately 230, 580 and 550 employees, respectively. During 2014, 2013 and 2012, the Company recorded...

  • Page 84
    ... of Company-operated locations. The acquired fleet was financed under the Company's existing vehicle financing arrangements. 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 reportable...

  • Page 85
    ...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...

  • Page 86
    ... effects of currency exchange rates. The carrying amounts of goodwill and related changes are as follows: North America $ 1,360 International $ 890 Truck Rental $ 243 Total Company $ 2,493 (2,118) 375 300 16 691 203 (52) 842 Gross goodwill as of January 1, 2013 Accumulated impairment losses...

  • Page 87
    ... assets under vehicle programs - receivables from vehicle manufactures and other of $352 million, $378 million and $439 million, respectively. 8. Income Taxes The provision for (benefit from) income taxes consists of the following: Year Ended December 31, 2014 2013 2012 Current Federal State Foreign...

  • Page 88
    ...December 31, 2014, the Company had U.S. federal net operating loss carryforwards of approximately $3.5 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 89
    .... (b) The Company recognizes potential interest related to unrecognized tax benefits within interest expense related to corporate debt, net on the accompanying Consolidated Statements of Operations. Penalties incurred during the twelve months ended December 31, 2014, 2013 and 2012, were not...

  • Page 90
    ... 31, 2014 2013 328 $ 344 229 210 194 193 121 136 89 87 530 509 1,491 $ 1,479 Accounts payable Accrued payroll and related Accrued sales and use taxes Public liability and property damage insurance liabilities - current Deferred revenue - current Other Accounts payable and other current liabilities...

  • Page 91
    ... hedge was intended to reduce the net number of shares required to be issued upon conversion of the Convertible Notes. The Company repurchased most of the Convertible Notes over time, including the repurchase of $62 million of Convertible Notes at a cost of $115 million in 2013. In conjunction with...

  • Page 92
    ... of its Budget licensee for Southern California and Las Vegas. The Floating Rate Senior Notes, the Senior Notes, the 9¾% Senior Notes, the Senior Notes and the 5½% Senior Notes, in each case as described above, are senior unsecured obligations of the Company's Avis Budget Car Rental, LLC ("ABCR...

  • Page 93
    ... ended December 31, 2014, 2013 and 2012 the Company recorded $56 million, $147 million and $75 million in early extinguishment of debt costs, respectively. DEBT MATURITIES The following table provides contractual maturities of the Company's corporate debt at December 31, 2014: Year 2015 2016 2017...

  • Page 94
    ... 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 95
    ... under the Avis Budget Rental Car Funding program primarily represent fixed rate notes and had a weighted average interest rate of 3% as of December 31, 2014 and 2013. Canadian borrowings. The Company finances the acquisition of vehicles used in its Canadian rental operations through a consolidated...

  • Page 96
    ... to its vehicle programs, including related party debt due to Avis Budget Rental Car Funding, at December 31, 2014: Total Capacity (a) $ 9,130 796 1,768 472 271 31 $ 12,468 Outstanding Borrowings $ 6,340 489 690 314 252 31 $ 8,116 Available Capacity $ 2,790 307 1,078 158 19 - $ 4,352 North America...

  • Page 97
    ...: 2014 Rent expense (including minimum concession fees) Contingent concession expense Less: sublease rental income Total $ 639 $ 193 832 (6) 826 $ 2013 622 $ 173 795 (5) 790 $ 2012 600 155 755 (5) 750 $ Commitments under capital leases, other than those within the Company's vehicle rental programs...

  • Page 98
    .... Concentrations Concentrations of credit risk at December 31, 2014, include (i) risks related to the Company's repurchase and guaranteed depreciation agreements with domestic and foreign car manufacturers, including Ford, General Motors, Chrysler, Peugeot, Volkswagen, Kia, Fiat, Toyota, Mercedes...

  • Page 99
    ... Dividend Payments During 2014, 2013 and 2012, the Company did not declare or pay any cash dividends. The Company's ability to pay dividends to holders of its common stock is limited by the Company's senior credit facility, the indentures governing its senior notes and its vehicle financing programs...

  • Page 100
    ... to a service condition. Cash Unit Awards The fair value of time-based restricted cash units is based on the Company's stock price on the grant date. Market-vesting restricted cash units generally vest depending on the level of relative total shareholder return achieved by the Company during the...

  • Page 101
    ... of stock price Risk-free interest rate Valuation period Dividend yield 2014 40% 0.83% 3 years 0% 2013 43% 0.39% 3 years 0% 2012 50% 0.30% - 0.42% 2½ - 3 years 0% Annual activity related to stock units and cash units, consisted of (in thousands of shares): Performance-Based and Market Based RSUs...

  • Page 102
    ... in 2014, $3 million in 2013 and insignificant in 2012. (c) The Company assumes that substantially all outstanding stock options will vest over time. Non-employee Directors Deferred Compensation Plan The Company grants stock awards on a quarterly basis to non-employee directors representing between...

  • Page 103
    ...employees' option. The most 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...

  • Page 104
    ... 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, 2014 2013 2012 U.S. Pension Benefit Plans Discount rate: Net periodic benefit cost Benefit obligation Long-term rate of return on plan...

  • Page 105
    ... an amount based on the under-funded status of the plan; and (iv) the Company has no involvement in the management of the multiemployer plans' investments. For the years ended December 31, 2014, 2013 and 2012, the Company contributed a total of $9 million, $8 million and $9 million, respectively, to...

  • Page 106
    ...with any individual counterparties or groups of counterparties at December 31, 2014 or 2013, other than (i) risks related to the Company's repurchase and guaranteed depreciation agreements with domestic and foreign car manufacturers, including Ford, General Motors, Chrysler, Peugeot, Volkswagen, Kia...

  • Page 107
    ... billion of interest rate caps purchased at December 31, 2013. These amounts exclude $4.2 billion and $5.2 billion of interest rate caps purchased by the Company's Avis Budget Rental Car Funding subsidiary at December 31, 2014 and 2013, respectively. Fair values (Level 2) of derivative instruments...

  • Page 108
    ... 2014 Carrying Estimated Amount Fair Value Corporate debt Short-term debt and current portion of long-term debt, excluding convertible debt Long-term debt, excluding convertible debt Convertible debt Debt under vehicle programs Vehicle-backed debt due to Avis Budget Rental Car Funding Vehicle-backed...

  • Page 109
    ... vehicle programs Assets under vehicle programs Capital expenditures (excluding vehicles) _____ (a) $ Primarily represents unallocated corporate overhead, receivables from our former subsidiaries and debt financing fees related to our corporate debt. Year Ended December 31, 2013 North America...

  • Page 110
    ...-related costs, net Impairment Income before income taxes $ $ The geographic segment information provided below is classified based on the geographic location of the Company's subsidiaries. United States 2014 Net revenues Assets exclusive of assets under vehicle programs Assets under vehicle...

  • Page 111
    ... For the Year Ended December 31, 2014 NonGuarantor Subsidiaries $ 1,988 3,426 5,414 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 112
    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 depreciation and ...

  • Page 113
    ... 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 amortization Interest expense related to corporate debt, net: Interest expense...

  • Page 114
    ...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 115
    ...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 116
    ... 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 117
    ... 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 118
    ... 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 119
    ...unaudited quarterly financial data for 2014 and 2013. 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 120
    ... Doubtful Accounts: Year Ended December 31, $ 2014 (a) 2013 2012 Expensed Deductions 50 40 21 $ 17 15 27 $ (3) $ 10 - (30) $ (15) (8) 34 50 40 Tax Valuation Allowance: Year Ended December 31, 2014 (a) $ 347 $ (9) $ 2013 (b) 298 27 2012 273 25 _____ (a) Other adjustments relate to currency...

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  • Page 122
    ... 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 123
    ... to the Company's Current Report on Form 8-K dated December 19, 2014). Form of Avis Budget Group, Inc. Severance Agreement (Incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009, dated February 24, 2010).†1997 Stock Option Plan...

  • Page 124
    ... 8-K dated August 7, 2013).††Agreement dated November 13, 2014 between Avis Budget Car Rental, LLC and General Motors LLC. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated November 19, 2014) ††Avis Budget Car Rental 2014 Model Year Program Letter...

  • Page 125
    ...37(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 2013, dated February 20, 2014). Second Amended and Restated Master Motor Vehicle Operating Lease Agreement, dated as of June 3, 2004, among AESOP Leasing L.P., as Lessor, and Cendant Car Rental Group, Inc.**, as Lessee...

  • Page 126
    ...Avis Budget Car Rental, LLC, as Lessee and as the Administrator, to the Second Amended and Restated Master Motor Vehicle Operating Lease Agreement, dated as of June 3, 2004 (Incorporated by reference to Exhibit 10.38(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 2013...

  • Page 127
    ...and as Series 2014-2 Agent (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated July 24, 2014). Third Amended and Restated Credit Agreement, dated as of October 3, 2014, among Avis Budget Holdings, LLC, Avis Budget Car Rental, LLC, Avis Budget Group, Inc., the...

  • Page 128
    ... Agreement, dated as of November 15, 2010, by and among Avis Budget Car Rental, LLC, Avis Budget Finance, Inc., Avis Budget Group, Inc., Avis Budget Holdings, LLC, AB Car Rental Service, Inc., ARACS LLC, Avis Asia and Pacific, Limited, Avis Car Rental Group, LLC, Avis Caribbean, Limited, Avis...

  • Page 129
    ...WTH Car Rental ULC, Montreal Trust Company Of Canada, BNY Trust Company Of Canada as noteholder and Indenture Trustee, and Avis Budget Car Rental, LLC (Incorporated by reference to Exhibit 10.81 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012, dated February 21, 2013...

  • Page 130
    ... 10.85 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010, dated February 24, 2011). Second Amended and Restated Master Motor Vehicle Operating Lease Agreement (Group I), dated March 14, 2012, among, Centre Point Funding, LLC, as Lessor, Budget Truck Rental LLC, as...

  • Page 131
    ... 2013). Master Amendment and Restatement Deed dated May 21, 2014 among CarFin Finance International Limited, Credit Agricole Corporate And Investment Bank, Deutsche Trustee Company Limited, Credit Agricole Corporate and Investment Bank, Avis Budget Car Rental, LLC, Avis Finance Company Limited, Avis...

  • Page 132
    ...L.L.C, is now known as Avis Budget Rental Car Funding (AESOP) LLC. Avis Rent A Car System, Inc. is 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...

  • Page 133
    ... process, summarize and report financial 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 23, 2015 /s/ Ronald L. Nelson Chief Executive Officer

  • Page 134
    ... 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 23, 2015 /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