Avis 2014 Annual Report Download - page 46

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our Consolidated Financial Statements and
accompanying Notes thereto included elsewhere herein. Unless otherwise noted, all dollar amounts in tables are
in millions and those 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 Zealand and
certain other regions we serve, with a rental fleet of more than 545,000 vehicles. We also license the use of the
Avis and Budget trademarks to licensees in the areas in which we do not operate directly. We and our licensees
operate the Avis, Budget and/or Zipcar brands in approximately 175 countries throughout the world.
OUR SEGMENTS
We categorize our operations into three reportable business segments: North America, International and Truck
Rental, as discussed in Part I of this Form 10-K.
BUSINESS AND TRENDS
Our revenues are derived principally from car and truck rentals in our Company-owned operations and include:
• time and mileage (“T&M”) fees charged to our customers for vehicle rentals;
• payments from our customers with respect to certain operating expenses we incur, including gasoline and
vehicle licensing fees, as well as concession fees, which we pay in exchange for the right to operate at
airports and other locations;
• sales of loss damage waivers and insurance and rentals of navigation units and other items in conjunction
with vehicle rentals; and
• royalty revenue from our licensees in conjunction with their vehicle rental transactions.
Our operating results are subject to variability due to seasonality, macroeconomic conditions and other factors.
Car rental volumes tend to be associated with the travel industry, particularly airline passenger volumes, or
enplanements, which in turn tend to reflect general economic conditions. Our vehicle rental operations are also
seasonal, with the third quarter of the year historically having been our strongest due to the increased level of
leisure travel during such quarter. We have a partially variable cost structure and routinely adjust the size, and
therefore the cost, of our rental fleet in response to fluctuations in demand.
We believe that the following factors, among others, may affect our financial condition and results of operations:
• general travel demand, including worldwide enplanements;
• fleet, pricing, marketing and strategic decisions made by us and by our competitors;
• changes in fleet costs and in conditions in the used vehicle marketplace, as well as manufacturer recalls;
• changes in borrowing costs and in market willingness to purchase corporate and vehicle-related debt;
• our acquisitions, our integration of acquired operations and our realization of synergies;
• demand for car sharing services;
• changes in the price of gasoline;