Avis 2015 Annual Report Download - page 87

F-18
was recorded in goodwill, $50 million was recorded in customer relationships, $34 million related to
trademarks were recorded in other intangibles and $11 million was recorded in license agreements. The
customer relationships, trademarks and license agreements will be amortized over a weighted average
useful life of approximately ten years. The goodwill is not 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.
Brazil
In August 2013, the Company made an initial equity investment of $53 million in its Brazilian licensee
(“Brazil”) for a 50% ownership stake. Approximately $47 million of this consideration was paid in 2013 and
the remaining consideration of $6 million was paid in 2014. In April 2015, the Company acquired the
remaining 50% equity interest in Brazil, which is now a wholly-owned subsidiary, for cash consideration of
$8 million plus $46 million principally to acquire debt interests and settle certain debt and accrued interest
obligations. The acquisition enables the Company to significantly increase its presence in the Brazilian car
rental market. The Company’s initial investment in Brazil was recorded as an equity investment within other
non-current assets, and the Company’s share of Brazil’s operating results was reported within operating
expenses. At December 31, 2014, the Company’s investment, which was recorded in its Americas
reportable segment, totaled approximately $12 million, net of an impairment charge of $33 million ($33
million, net of tax). The impairment charge was recorded at the time of the initial 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. Since the Company previously accounted for its 50% interest in Brazil as an equity-method
investment, in order to recognize Brazil as a wholly-owned subsidiary in April 2015, the Company
remeasured its previously held equity method investment to fair value using the Income approach-
discounted cash flow method (Level 3), resulting in a loss of $8 million during 2015 as part of transaction-
related costs. The results of the operations of Brazil and the fair value of its assets and liabilities have been
included in the Company’s Consolidated Financial Statements from the date of the acquisition. As the fair
value of the licensee’s liabilities exceeded its assets, $77 million was allocated to goodwill for the excess of
the purchase price over preliminary fair value of net assets acquired, which was assigned to the Company’s
Americas reportable segment and is not 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.
Avis and Budget Licensees
In November and April 2015, the Company completed the acquisitions of its Avis licensee in Poland and its
Avis and Budget licensees in Norway, Sweden and Denmark, respectively, for approximately $62 million,
net of acquired cash. Additionally, the Company settled debt obligations of approximately $23 million in
Poland. These investments will enable the Company to expand its footprint of Company-operated locations
in Europe. 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 International reportable segment. In connection with
these acquisitions, approximately $36 million was recorded in license agreements, $29 million was recorded
in goodwill and $12 million was recorded in customer relationships. The license agreements and customer
relationships will be amortized over a weighted average useful life of approximately eight years. In addition,
at the time of acquisition, the Company recorded a $25 million non-cash charge within transaction-related
costs, net in connection with license rights reacquired by the Company. The goodwill is not 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.
2014
Budget Licensees
During 2014, the Company completed the acquisition of its Budget licensees for Edmonton, Canada;
Southern California and Las Vegas, and reacquired the right to operate the Budget brand in Portugal, for
approximately $263 million, plus $132 million for acquired fleet. These investments enabled the Company to
expand its footprint 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 Americas reportable