NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
(Unless otherwise noted, all dollar amounts in tables are in millions, except per share amounts)
1. Basis of Presentation
Avis Budget Group, Inc. provides mobility solutions to businesses and consumers worldwide. The accompanying unaudited Consolidated Condensed Financial Statements include the accounts and transactions of Avis Budget Group, Inc. and its subsidiaries, as well as entities in which Avis Budget Group, Inc. directly or indirectly has a controlling financial interest (collectively, the “Company”), and have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim financial reporting.
The Company operates the following reportable business segments:
•Americas—consisting primarily of (i) vehicle rental operations in North America, South America, Central America and the Caribbean, (ii) car sharing operations in certain of these markets, and (iii) licensees in the areas in which the Company does not operate directly.
•International—consisting primarily of (i) vehicle rental operations in Europe, the Middle East, Africa, Asia and Australasia, (ii) car sharing operations in certain of these markets, and (iii) licensees in the areas in which the Company does not operate directly.
The operating results of acquired businesses are included in the accompanying Consolidated Condensed Financial Statements from the dates of acquisition. Differences between the preliminary allocation of purchase price and the final allocation for the Company’s 2020 acquisitions of various licensees were not material.
In presenting the Consolidated Condensed Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”), management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates. In management’s opinion, the Consolidated Condensed Financial Statements contain all adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. These financial statements should be read in conjunction with the Company’s 2020 Form 10-K.
Liquidity and Management’s Plans
The continuing cases of COVID-19 and the developments surrounding the pandemic are having a material impact on certain aspects of the Company’s business. Significant events affecting travel and the overall economy have historically had an impact on vehicle rental volumes, with the full extent of the impact generally determined by the length of time the event influences travel decisions as well as general economic conditions. The Company believes the ongoing effects of COVID-19 and resulting economic conditions have had, and will continue to have, an adverse impact on its operations and vehicle rental volumes, and on its financial results and liquidity.
The Company cannot assure its assumptions used to estimate its liquidity requirements will be correct because it has never previously experienced such a change in demand, and as a consequence, its ability to be predictive is uncertain. In addition, the duration of the pandemic is uncertain. Therefore, the Company has taken actions to manage its liquidity, including reducing capital expenditures, operating expenses and the number of vehicles in its fleet. The Company has no meaningful corporate debt maturities until 2023. The Company plans to finance the routine Asset Backed Securities (“ABS”) maturities with program cash on hand, available revolving debt capacity, new term note issuances and fleet sales. As a result, based on current operational assumptions, the Company believes it has adequate liquidity beyond the next twelve months.
In April 2020, the Company entered into an amendment (the “Amendment”) to its senior credit facilities, consisting of an approximately $1.2 billion term loan maturing in 2027 and a $1.8 billion revolving credit facility maturing in 2023, which remain in place after the Amendment. The Amendment provides for relief from the quarterly-tested leverage covenant contained in the credit agreement governing the senior credit facilities until the end of a specific relief period, including a holiday from such leverage covenant through June 30, 2021, during which time (i) certain negative covenant exceptions are not available to the Company, (ii) pricing on the senior credit facilities is increased, (iii) the Company must comply with a liquidity covenant and additional reporting requirements and (iv) the Company must meet additional conditions to borrow under the revolving credit facility. In February 2021, the Company subsequently amended the credit agreement to permit refinancing of certain existing indebtedness.
Summary of Significant Accounting Policies
The Company’s significant accounting policies are fully described in Note 2, “Summary of Significant Accounting Policies,” in the 2020 Form 10-K.
Cash and cash equivalents, Program cash and Restricted cash. The following table provides a detail of cash and cash equivalents, program and restricted cash reported within the Consolidated Condensed Balance Sheets to the amounts shown in the Consolidated Condensed Statements of Cash Flows.
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
2021
|
|
2020
|
Cash and cash equivalents
|
$
|
576
|
|
|
$
|
679
|
|
Program cash
|
61
|
|
|
39
|
|
Restricted cash (a)
|
2
|
|
|
3
|
|
Total cash and cash equivalents, program and restricted cash
|
$
|
639
|
|
|
$
|
721
|
|
________
(a)Included within other current assets.
Vehicle Programs. The Company presents separately the financial data of its vehicle programs. These programs are distinct from the Company’s other activities since the assets under vehicle programs are generally funded through the issuance of debt that is collateralized by such assets. The income generated by these assets is used, in part, to repay the principal and interest associated with the debt. Cash inflows and outflows relating to the acquisition of such assets and the principal debt repayment or financing of such assets are classified as activities of the Company’s vehicle programs. The Company believes it is appropriate to segregate the financial data of its vehicle programs because, ultimately, the source of repayment of such debt is the realization of such assets.
Transaction-related costs, net. Transaction-related costs, net are classified separately in the Consolidated Condensed Statements of Comprehensive Income. These costs are comprised of expenses related to acquisition-related activities such as due diligence and other advisory costs, expenses related to the integration of the acquiree’s operations with those of the Company, including the implementation of best practices and process improvements, non-cash gains and losses related to re-acquired rights, expenses related to pre-acquisition contingencies and contingent consideration related to acquisitions.
Currency Transactions. The Company records the gain or loss on foreign-currency transactions on certain intercompany loans and the gain or loss on intercompany loan hedges within interest expense related to corporate debt, net. During the three months ended March 31, 2021 and 2020, the Company recorded an immaterial amount and a loss of $5 million, respectively, related to such items.
Divestitures. In March 2021, the Company entered into a stock purchase agreement with Urbiz S.A. to sell the Company’s assets in Argentina. Upon completion of the sale, Urbiz S.A. will pay approximately $4 million, plus interest, over two years for the right to operate the Avis and Budget brand. The Company had assets held for sale of $15 million within current and non-current assets and liabilities held for sale of $6 million within non-current liabilities. The Company assessed the fair value of the net assets and recorded a loss of $13 million within restructuring and other related charges during the three months ended March 31, 2021. Argentina’s operations are reported within the Company’s Americas segment.
Investments. As of March 31, 2021 and December 31, 2020, the Company had equity method investments with a carrying value of $64 million and $63 million, respectively, which are recorded within other non-current assets. Earnings from the Company’s equity method investments are reported within operating expenses. For the three months ended March 31, 2021 and 2020, the Company recorded an immaterial amount related to its equity method investments.
Nonmarketable Equity Securities. As of March 31, 2021 and December 31, 2020, the Company had nonmarketable equity securities with a carrying value of $8 million, respectively, which are recorded within other non-current assets. No adjustments were made to the carrying amounts during the three months ended March 31, 2021 and 2020.
Revenues. Revenues are recognized under “Leases (Topic 842),” with the exception of royalty fee revenue derived from the Company’s licensees and revenue related to the Company’s customer loyalty program, which were approximately $40 million and $32 million during the three months ended March 31, 2021 and 2020, respectively.
The following table presents the Company’s revenues disaggregated by geography.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2021
|
|
2020
|
Americas
|
$
|
1,080
|
|
|
$
|
1,257
|
|
Europe, Middle East and Africa
|
203
|
|
|
357
|
|
Asia and Australasia
|
89
|
|
|
139
|
|
Total revenues
|
$
|
1,372
|
|
|
$
|
1,753
|
|
The following table presents the Company’s revenues disaggregated by brand.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2021
|
|
2020
|
Avis
|
$
|
717
|
|
|
$
|
985
|
|
Budget
|
524
|
|
|
619
|
|
Other
|
131
|
|
|
149
|
|
Total revenues
|
$
|
1,372
|
|
|
$
|
1,753
|
|
________
Other includes Zipcar and other operating brands.
Adoption of New Accounting Pronouncements
Simplifying the Accounting for Income Taxes
On January 1, 2021, as the result of a new accounting pronouncement, the Company adopted ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions and improving the application of existing guidance. The adoption of this accounting pronouncement did not have a material impact on the Company's Consolidated Financial Statements.
Compensation—Retirement Benefits—Defined Benefit Plans
On January 1, 2021, as the result of a new accounting pronouncement, the Company adopted ASU 2018-14, “Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans,” which adds, removes, and clarifies disclosure requirements related to defined benefit pension and other postretirement plans. These changes are part of the FASB’s disclosure framework project, which the Board launched in 2014 to improve the effectiveness of disclosures in notes to financial statements. The adoption of this accounting pronouncement did not have a material impact on the Company's Consolidated Financial
Statements.
2. Leases
Lessor
The following table presents the Company’s lease revenues disaggregated by geography.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2021
|
|
2020
|
Americas
|
$
|
1,054
|
|
|
$
|
1,244
|
|
Europe, Middle East and Africa
|
192
|
|
|
342
|
|
Asia and Australasia
|
86
|
|
|
135
|
|
Total lease revenues
|
$
|
1,332
|
|
|
$
|
1,721
|
|
The following table presents the Company’s lease revenues disaggregated by brand.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2021
|
|
2020
|
Avis
|
$
|
690
|
|
|
$
|
968
|
|
Budget
|
516
|
|
|
608
|
|
Other
|
126
|
|
|
145
|
|
Total lease revenues
|
$
|
1,332
|
|
|
$
|
1,721
|
|
_______
Other includes Zipcar and other operating brands.
Lessee
The Company has operating and finance leases for rental locations, corporate offices, vehicle rental fleet and equipment. Many of the Company’s operating leases for rental locations contain concession agreements with various airport authorities that allow the Company to conduct its vehicle rental operations on site. In general, concession fees for airport locations are based on a percentage of total commissionable revenue as defined by each airport authority, some of which are subject to minimum annual guaranteed amounts. Concession fees other than minimum annual guaranteed amounts are not included in the measurement of operating lease Right of Use (“ROU”) assets and operating lease liabilities, and are recorded as variable lease expense as incurred. The Company’s operating leases for rental locations often also require the Company to pay or reimburse operating expenses.
The components of lease expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2021
|
|
2020
|
Property leases (a)
|
|
|
|
Operating lease expense
|
$
|
139
|
|
|
$
|
185
|
|
Variable lease expense
|
54
|
|
|
36
|
|
Total property lease expense
|
$
|
193
|
|
|
$
|
221
|
|
__________
(a) Primarily included in operating expense and includes $19 million of minimum annual guaranteed rent in excess of concession fees as defined in our rental concession agreement for the three months ended March 31, 2021.
Supplemental balance sheet information related to leases is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
March 31, 2021
|
|
As of
December 31, 2020
|
Property leases
|
|
|
|
Operating lease ROU assets
|
$
|
2,510
|
|
|
$
|
2,560
|
|
|
|
|
|
Short-term operating lease liabilities (a)
|
$
|
519
|
|
|
$
|
514
|
|
Long-term operating lease liabilities
|
2,025
|
|
|
2,078
|
|
Operating lease liabilities
|
$
|
2,544
|
|
|
$
|
2,592
|
|
|
|
|
|
Weighted average remaining lease term
|
8.3 years
|
|
8.4 years
|
Weighted average discount rate
|
3.85
|
%
|
|
3.86
|
%
|
_________
(a) Included in Accounts payable and other current liabilities.
Supplemental cash flow information related to leases is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2021
|
|
2020
|
Cash payments for lease liabilities within operating activities:
|
|
|
|
Property operating leases
|
$
|
202
|
|
|
$
|
170
|
|
Non-cash activities - increase (decrease) in ROU assets in exchange for lease liabilities:
|
|
|
|
Property operating leases
|
169
|
|
|
296
|
|
3. Restructuring and Other Related Charges
Restructuring
During first quarter 2021, the Company initiated a global restructuring plan to focus on cost discipline by reviewing headcounts, facilities and contractor agreements. The Company is transforming its business as it prepares to exit the COVID-19 crisis by controlling fixed costs and matching variable costs to demand (“T21”). During the three months ended March 31, 2021, as part of this process, the Company formally communicated the termination of employment to approximately 80 employees, and as of March 31, 2021, the Company terminated approximately 60 of these employees. The Company expects further restructuring expense of approximately $55 million related to this initiative to be incurred in 2021.
During first quarter 2020, the Company initiated a global restructuring plan to reduce operating costs, such as headcount and facilities, due to declining reservations and revenue resulting from the COVID-19 outbreak (“2020 Optimization Plan”). The Company expects no further restructuring expense related to this initiative.
The following tables summarize the changes to our restructuring-related liabilities and identifies the amounts recorded within the Company’s reporting segments for restructuring charges and corresponding payments and utilizations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
International
|
|
Total
|
Balance as of January 1, 2021
|
|
|
$
|
3
|
|
|
$
|
6
|
|
|
$
|
9
|
|
|
Restructuring expense:
|
|
|
|
|
|
|
|
|
T21
|
|
|
1
|
|
|
6
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring payment/utilization:
|
|
|
|
|
|
|
|
|
T21
|
|
|
(1)
|
|
|
(4)
|
|
|
(5)
|
|
|
2020 Optimization Plan
|
|
|
(2)
|
|
|
(2)
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2021
|
|
|
$
|
1
|
|
|
$
|
6
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
Facility
Related
|
|
Other (a)
|
|
Total
|
Balance as of January 1, 2021
|
$
|
4
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
9
|
|
|
Restructuring expense:
|
|
|
|
|
|
|
|
|
T21
|
5
|
|
|
2
|
|
|
—
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring payment/utilization:
|
|
|
|
|
|
|
|
|
T21
|
(3)
|
|
|
(2)
|
|
|
—
|
|
|
(5)
|
|
|
2020 Optimization Plan
|
(3)
|
|
|
—
|
|
|
(1)
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2021
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
7
|
|
__________
(a)Includes expenses primarily related to the disposition of vehicles.
Other Related Charges
Limited Voluntary Opportunity Plan (“LVOP”)
During 2020, the Company offered a voluntary termination program to certain employees in field operations, shared services, and general and administrative functions for a limited time. These employees, if qualified, elected resignation from employment in return for enhanced severance benefits to be settled in cash. During the three months ended March 31, 2020, the Company recorded other related charges of approximately $15 million in connection with the LVOP.
Officer Separation Costs
In March 2020, the Company announced the departure of Michael K. Tucker as Executive Vice President, General Counsel effective March 27, 2020. In connection with Mr. Tucker’s separation, the Company recorded other related charges of approximately $2 million for the three months ended March 31, 2020.
4. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (“EPS”) (shares in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2021
|
|
2020
|
Net loss for basic and diluted EPS
|
$
|
(170)
|
|
|
$
|
(158)
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
69.9
|
|
|
72.9
|
|
Non-vested stock (a)
|
—
|
|
|
—
|
|
Diluted weighted average shares outstanding
|
69.9
|
|
|
72.9
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
Basic
|
$
|
(2.43)
|
|
|
$
|
(2.16)
|
|
|
Diluted
|
$
|
(2.43)
|
|
|
$
|
(2.16)
|
|
__________
(a)As the Company incurred a net loss for the three months ended March 31, 2021 and 2020, 1.1 million and 1.3 million non-vested stock awards, respectively, have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding.
5. Other Current Assets
Other current assets consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
March 31,
2021
|
|
As of December 31, 2020
|
Prepaid expenses
|
$
|
204
|
|
|
$
|
161
|
|
Sales and use taxes
|
139
|
|
|
147
|
|
Other
|
163
|
|
|
148
|
|
Other current assets
|
$
|
506
|
|
|
$
|
456
|
|
6. Intangible Assets
Intangible assets consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021
|
|
As of December 31, 2020
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Amortized Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
License agreements
|
$
|
275
|
|
|
$
|
159
|
|
|
$
|
116
|
|
|
$
|
280
|
|
|
$
|
151
|
|
|
$
|
129
|
|
Customer relationships
|
261
|
|
|
198
|
|
|
63
|
|
|
268
|
|
|
196
|
|
|
72
|
|
Other
|
52
|
|
|
33
|
|
|
19
|
|
|
54
|
|
|
33
|
|
|
21
|
|
Total
|
$
|
588
|
|
|
$
|
390
|
|
|
$
|
198
|
|
|
$
|
602
|
|
|
$
|
380
|
|
|
$
|
222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
$
|
1,121
|
|
|
|
|
|
|
$
|
1,137
|
|
|
|
|
|
Trademarks
|
$
|
552
|
|
|
|
|
|
|
$
|
552
|
|
|
|
|
|
For the three months ended March 31, 2021 and 2020, amortization expense related to amortizable intangible assets was approximately $18 million and $13 million, respectively. Based on the Company’s amortizable intangible assets at March 31, 2021, the Company expects amortization expense of approximately $40 million for the remainder of 2021, $34 million for 2022, $25 million for 2023, $22 million for 2024, $17 million for 2025 and $15 million for 2026, excluding effects of currency exchange rates.
7. Vehicle Rental Activities
The components of vehicles, net within assets under vehicle programs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
March 31,
|
|
December 31,
|
|
2021
|
|
2020
|
Rental vehicles
|
$
|
10,251
|
|
|
$
|
9,210
|
|
Less: Accumulated depreciation
|
(1,288)
|
|
|
(1,337)
|
|
|
8,963
|
|
|
7,873
|
|
Vehicles held for sale
|
138
|
|
|
280
|
|
Vehicles, net
|
$
|
9,101
|
|
|
$
|
8,153
|
|
|
|
|
|
The components of vehicle depreciation and lease charges, net are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
Depreciation expense
|
$
|
259
|
|
|
$
|
414
|
|
|
|
|
|
|
Lease charges
|
44
|
|
|
56
|
|
|
|
|
|
|
(Gain) loss on sale of vehicles, net
|
(49)
|
|
|
(11)
|
|
|
|
|
|
|
Vehicle depreciation and lease charges, net
|
$
|
254
|
|
|
$
|
459
|
|
|
|
|
|
|
At March 31, 2021 and 2020, the Company had payables related to vehicle purchases included in liabilities under vehicle programs - other of $344 million and $240 million, respectively, and receivables related to vehicle sales included in assets under vehicle programs - receivables from vehicle manufacturers and other of $195 million and $491 million, respectively.
8. Income Taxes
The Company’s effective tax rate for the three months ended March 31, 2021 and 2020 were benefits of 32.0% and 40.4%, respectively. Such rates differed from the Federal Statutory rate of 21.0% primarily due to foreign taxes on our International operations and state taxes.
9. Accounts Payable and Other Current Liabilities
Accounts payable and other current liabilities consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
March 31,
|
|
December 31,
|
|
2021
|
|
2020
|
Short-term operating lease liabilities
|
$
|
519
|
|
|
$
|
514
|
|
Accounts payable
|
458
|
|
|
394
|
|
Accrued sales and use taxes
|
214
|
|
|
215
|
|
Public liability and property damage insurance liabilities – current
|
166
|
|
|
162
|
|
Deferred lease revenues – current
|
151
|
|
|
70
|
|
Accrued payroll and related
|
136
|
|
|
117
|
|
Accrued advertising and marketing
|
124
|
|
|
122
|
|
Other
|
403
|
|
|
440
|
|
Accounts payable and other current liabilities
|
$
|
2,171
|
|
|
$
|
2,034
|
|
10. Long-term Corporate Debt and Borrowing Arrangements
Long-term corporate debt and borrowing arrangements consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
Maturity
Date
|
|
March 31,
|
|
December 31,
|
|
|
2021
|
|
2020
|
6.375% Senior Notes
|
April 2024
|
|
$
|
—
|
|
|
$
|
350
|
|
4.125% euro-denominated Senior Notes
|
November 2024
|
|
351
|
|
|
366
|
|
5.250% Senior Notes
|
March 2025
|
|
235
|
|
|
375
|
|
4.500% euro-denominated Senior Notes
|
May 2025
|
|
293
|
|
|
305
|
|
10.500% Senior Secured Notes
|
May 2025
|
|
—
|
|
|
487
|
|
4.750% euro-denominated Senior Notes
|
January 2026
|
|
410
|
|
|
428
|
|
5.750% Senior Notes
|
July 2027
|
|
725
|
|
|
724
|
|
4.750% Senior Notes
|
April 2028
|
|
500
|
|
|
—
|
|
5.375% Senior Notes
|
March 2029
|
|
600
|
|
|
—
|
|
Floating Rate Term Loan (a)
|
August 2027
|
|
1,196
|
|
|
1,199
|
|
Other (b)
|
|
|
22
|
|
|
24
|
|
Deferred financing fees
|
|
|
(49)
|
|
|
(48)
|
|
Total
|
|
|
4,283
|
|
|
4,210
|
|
Less: Short-term debt and current portion of long-term debt
|
|
|
19
|
|
|
19
|
|
Long-term debt
|
|
|
$
|
4,264
|
|
|
$
|
4,191
|
|
__________
(a)The floating rate term loan is part of the Company’s senior revolving credit facility, which is secured by pledges of capital stock of certain subsidiaries of the Company, and liens on substantially all of the Company’s intellectual property and certain other real and personal property. As of March 31, 2021, the floating rate term loan due 2027 bears interest at one-month LIBOR plus 225 basis points, for an aggregate rate of 2.36%. The Company has entered into a swap to hedge $700 million of its interest rate exposure related to the floating rate term loan at an aggregate rate of 4.58%.
(b)Primarily includes finance leases which are secured by liens on the related assets.
In March 2021, the Company issued $600 million of 5.375% Senior Notes due March 2029, at par, with interest paid semiannually. Net proceeds, together with cash on hand, were used to redeem all of the outstanding 10.5% Senior Secured Notes due 2025 for $599 million plus accrued interest.
In March 2021, the Company issued $500 million of 4.75% Senior Notes due March 2028, at par, with interest paid semiannually. Net proceeds, together with cash on hand, were used to redeem all of the outstanding 6.375% Senior Notes due 2024 for $356 million plus accrued interest and a portion of its outstanding 5.25% Senior Notes due 2025 for $142 million plus accrued interest.
The 5.375% and 4.75% notes are guaranteed on a senior unsecured basis by the Company and certain of the Company’s subsidiaries.
Committed Credit Facilities and Available Funding Arrangements
At March 31, 2021, the committed corporate credit facilities available to the Company and/or its subsidiaries were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capacity
|
|
Outstanding
Borrowings
|
|
Letters of Credit Issued
|
|
Available
Capacity
|
Senior revolving credit facility maturing 2023 (a)
|
$
|
1,800
|
|
|
$
|
—
|
|
|
$
|
1,230
|
|
|
$
|
570
|
|
__________
(a)The senior revolving credit facility bears interest at one-month LIBOR plus 250 basis points and is part of the Company’s senior credit facilities, which include the floating rate term loan and the senior revolving credit facility, and which are secured by pledges of capital stock of certain subsidiaries of the Company, liens on substantially all of the Company’s intellectual property and certain other real and personal property.
Debt Covenants
The agreements governing the Company’s indebtedness contain restrictive covenants, including restrictions on dividends paid to the Company by certain of its subsidiaries, the incurrence of additional indebtedness by the Company and certain of its subsidiaries, acquisitions, mergers, liquidations, and sale and leaseback
transactions. The Company’s senior credit facility also contains a maximum leverage ratio requirement which has been amended to provide a holiday from such leverage covenant through June 30, 2021 (See Note 1 – Basis of Presentation). As of March 31, 2021, the Company was in compliance with the financial covenants governing its indebtedness.
11. Debt Under Vehicle Programs and Borrowing Arrangements
Debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding (AESOP) LLC (“Avis Budget Rental Car Funding”), consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
March 31,
|
|
December 31,
|
|
2021
|
|
2020
|
Americas - Debt due to Avis Budget Rental Car Funding
|
$
|
6,181
|
|
|
$
|
5,116
|
|
Americas - Debt borrowings
|
499
|
|
|
509
|
|
International - Debt borrowings
|
1,020
|
|
|
1,115
|
|
International - Finance leases
|
140
|
|
|
162
|
|
|
|
|
|
Deferred financing fees (a)
|
(39)
|
|
|
(45)
|
|
Total
|
$
|
7,801
|
|
|
$
|
6,857
|
|
__________
(a)Deferred financing fees related to Debt due to Avis Budget Rental Car Funding as of March 31, 2021 and December 31, 2020 were $32 million and $36 million, respectively.
Debt Maturities
The following table provides the contractual maturities of the Company’s debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding, at March 31, 2021.
|
|
|
|
|
|
|
Debt under Vehicle Programs (a)
|
Within 1 year (b)
|
$
|
1,858
|
|
Between 1 and 2 years (c)
|
2,171
|
|
Between 2 and 3 years (d)
|
1,253
|
|
Between 3 and 4 years
|
1,598
|
|
Between 4 and 5 years
|
960
|
|
Thereafter
|
—
|
|
Total
|
$
|
7,840
|
|
__________
(a) Vehicle-backed debt primarily represents asset-backed securities.
(b) Includes $0.4 billion of bank and bank-sponsored facilities.
(c) Includes $0.9 billion of bank and bank-sponsored facilities.
(d) Includes $0.1 billion of bank and bank-sponsored facilities.
Committed Credit Facilities and Available Funding Arrangements
As of March 31, 2021, available funding under the Company’s vehicle programs, including related party debt due to Avis Budget Rental Car Funding, consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capacity (a)
|
|
Outstanding
Borrowings (b)
|
|
Available
Capacity
|
Americas - Debt due to Avis Budget Rental Car Funding
|
$
|
9,011
|
|
|
$
|
6,181
|
|
|
$
|
2,830
|
|
Americas - Debt borrowings
|
746
|
|
|
499
|
|
|
247
|
|
International - Debt borrowings
|
2,713
|
|
|
1,020
|
|
|
1,693
|
|
International - Finance leases
|
204
|
|
|
140
|
|
|
64
|
|
|
|
|
|
|
|
Total
|
$
|
12,674
|
|
|
$
|
7,840
|
|
|
$
|
4,834
|
|
__________
(a) Capacity is subject to maintaining sufficient assets to collateralize debt.
(b) The outstanding debt is collateralized by vehicles and related assets of $7.4 billion for Americas - Debt due to Avis Budget Rental Car Funding; $0.7 billion for Americas - Debt borrowings; $1.2 billion for International - Debt borrowings; and $0.2 billion for International - Finance leases.
Debt Covenants
The agreements under the Company’s vehicle-backed funding programs contain restrictive covenants, including restrictions on dividends paid to the Company by certain of its subsidiaries and restrictions on indebtedness, mergers, liens, liquidations, and sale and leaseback transactions and in some cases also require compliance with certain financial requirements. As of March 31, 2021, the Company is not aware of any instances of non-compliance with any of the financial covenants contained in the debt agreements under its vehicle-backed funding programs.
12. Commitments and Contingencies
Contingencies
In 2006, the Company completed the spin-offs of its Realogy and Wyndham subsidiaries. The Company does not believe that the impact of any resolution of pre-existing contingent liabilities in connection with the spin-offs should result in a material liability to the Company in relation to its consolidated financial position or liquidity, as Realogy and Wyndham each have agreed to assume responsibility for these liabilities. The Company is also named in litigation that is primarily related to the businesses of its former subsidiaries, including Realogy and Wyndham. The Company is entitled to indemnification from such entities for any liability resulting from such litigation.
In February 2017, following state court trials in Georgia, the Company was found liable for damages in two cases brought by plaintiffs who were injured in a vehicle accident allegedly caused by an employee of an independent contractor of the Company who was acting outside of the scope of employment. In fourth quarter 2019, the Company appealed both verdicts resulting in a reversal of the judgments rendered. The Georgia Supreme Court granted the plaintiffs’ application to review the appellate court’s reversal of the judgements entered at the trial court. The Georgia Supreme Court heard oral arguments in December 2020 and on May 3, 2021 issued a decision affirming the appellate court’s judgments. Following the issuance of this decision, plaintiffs have the ability to file a motion for reconsideration. The Company has recognized a liability related to these cases, net of recoverable insurance proceeds, of approximately $12 million.
The Company is currently involved, and in the future may be involved, in claims, legal proceedings, including class actions, and governmental inquiries that are incidental to its vehicle rental and car sharing operations, including, among others, contract and licensee disputes, competition matters, employment and wage-and-hour claims, insurance and liability claims, intellectual property claims, business practice disputes and other regulatory, environmental, commercial and tax matters. Litigation is inherently unpredictable and, although the Company believes that its accruals are adequate and/or that it has valid defenses in these matters, unfavorable resolutions could occur. The Company estimates that the potential exposure resulting from adverse outcomes of current legal proceedings in which it is reasonably possible that a loss may be incurred could, in the aggregate, be up to approximately $40 million in excess of amounts accrued as of
March 31, 2021. The Company does not believe that the impact should result in a material liability to the Company in relation to its consolidated financial condition or results of operations.
Commitments to Purchase Vehicles
The Company maintains agreements with vehicle manufacturers under which the Company has agreed to purchase approximately $6.4 billion of vehicles from manufacturers over the next 12 months, a $2.3 billion decrease compared to December 31, 2020, financed primarily through the issuance of vehicle-backed debt and cash received upon the disposition of vehicles. Certain of these commitments are subject to the vehicle manufacturers satisfying their obligations under their respective repurchase and guaranteed depreciation agreements.
Concentrations
Concentrations of credit risk at March 31, 2021 include (i) risks related to the Company’s repurchase and guaranteed depreciation agreements with domestic and foreign car manufacturers, primarily with respect to receivables for program cars that have been disposed but for which the Company has not yet received payment from the manufacturers and (ii) risks related to Realogy and Wyndham, including receivables of $25 million and $15 million, respectively, related to certain contingent, income tax and other corporate liabilities assumed by Realogy and Wyndham in connection with their disposition.
13. Stockholders’ Equity
Share Repurchases
The Company’s Board of Directors has authorized the repurchase of up to $1.8 billion of its common stock under a plan originally approved in 2013 and subsequently expanded, most recently in August 2019. During the first quarter of 2021, the Company has repurchased approximately 0.1 million shares of common stock at a cost of approximately $10 million under the program. As of March 31, 2021, approximately $66 million of authorization remains available to repurchase common stock under this plan.
Share Issuances
On February 10, 2020, the Company announced it had appointed a new Chairman of the Board of Directors and in connection with this appointment, the new Chairman purchased an aggregate $15 million of unregistered shares of the Company’s common stock at a price per share equal to the closing price of the Company’s common stock on February 7, 2020.
Total Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss) and other gains and losses affecting stockholders’ equity that, under GAAP, are excluded from net income (loss).
The components of other comprehensive income (loss) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2021
|
|
2020
|
Net loss
|
$
|
(170)
|
|
|
$
|
(158)
|
|
Other comprehensive income (loss):
|
|
|
|
|
Currency translation adjustments (net of tax of $(12) and $(4), respectively)
|
(14)
|
|
|
(83)
|
|
|
Net unrealized gain (loss) on cash flow hedges (net of tax of $3 and $6, respectively)
|
35
|
|
|
(18)
|
|
|
Minimum pension liability adjustment (net of tax of $0 and $0, respectively)
|
3
|
|
|
2
|
|
|
|
24
|
|
|
(99)
|
|
Comprehensive loss
|
$
|
(146)
|
|
|
$
|
(257)
|
|
__________
Currency translation adjustments exclude income taxes related to indefinite investments in foreign subsidiaries.
Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
Translation
Adjustments
|
|
Net Unrealized
Gains (Losses)
on Cash Flow
Hedges(a)
|
|
Minimum
Pension
Liability
Adjustment(b)
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2021
|
$
|
40
|
|
|
$
|
(51)
|
|
|
$
|
(176)
|
|
|
$
|
(187)
|
|
|
Other comprehensive income (loss) before reclassifications
|
(14)
|
|
|
32
|
|
|
1
|
|
|
19
|
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
3
|
|
|
2
|
|
|
5
|
|
Net current-period other comprehensive income (loss)
|
(14)
|
|
|
35
|
|
|
3
|
|
|
24
|
|
Balance, March 31, 2021
|
$
|
26
|
|
|
$
|
(16)
|
|
|
$
|
(173)
|
|
|
$
|
(163)
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2020
|
$
|
9
|
|
|
$
|
(20)
|
|
|
$
|
(146)
|
|
|
$
|
(157)
|
|
|
Other comprehensive income (loss) before reclassifications
|
(83)
|
|
|
(18)
|
|
|
1
|
|
|
(100)
|
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Net current-period other comprehensive income (loss)
|
(83)
|
|
|
(18)
|
|
|
2
|
|
|
(99)
|
|
Balance, March 31, 2020
|
$
|
(74)
|
|
|
$
|
(38)
|
|
|
$
|
(144)
|
|
|
$
|
(256)
|
|
__________
All components of accumulated other comprehensive income (loss) are net of tax, except currency translation adjustments, which exclude income taxes related to indefinite investments in foreign subsidiaries and include a $47 million gain, net of tax, as of March 31, 2021 related to the Company’s hedge of its net investment in euro-denominated foreign operations (see Note 15–Financial Instruments).
(a)For the three months ended March 31, 2021, the amount reclassified from accumulated other comprehensive income (loss) into corporate interest expense was $1 million ($0 million, net of tax). For the three months ended March 31, 2021, the amount reclassified from accumulated other comprehensive income (loss) into vehicle interest expense was $4 million ($3 million, net of tax).
(b)For the three months ended March 31, 2021 and 2020, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses were $3 million ($2 million, net of tax) and $2 million ($1 million, net of tax), respectively..
14. Stock-Based Compensation
The Company recorded stock-based compensation expense of $4 million and $(2) million ($3 million and $(1) million, net of tax) during the three months ended March 31, 2021 and 2020, respectively.
In June 2020, the Company granted market-based restricted stock units (“RSUs”) that vest based on absolute stock price attainment. The grant date fair value of this award is estimated using a Monte Carlo simulation model.
The weighted average assumptions used in the model are as follows:
|
|
|
|
|
|
|
|
|
|
Expected volatility of stock price
|
|
91%
|
|
Risk-free interest rate
|
|
0.18%
|
|
Valuation period
|
|
3 years
|
|
Dividend yield
|
|
—%
|
|
The activity related to RSUs consisted of (in thousands of shares):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Weighted Average Remaining Contractual Term (years)
|
|
Aggregate Intrinsic Value
(in millions)
|
Time-based RSUs
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2021
|
1,070
|
|
|
$
|
27.47
|
|
|
|
|
|
|
|
Granted (a)
|
240
|
|
|
63.12
|
|
|
|
|
|
|
|
Vested (b)
|
(375)
|
|
|
30.05
|
|
|
|
|
|
|
|
Forfeited
|
(7)
|
|
|
25.35
|
|
|
|
|
|
|
Outstanding and expected to vest at March 31, 2021 (c)
|
928
|
|
|
$
|
35.66
|
|
|
1.3
|
|
$
|
67
|
|
Performance-based and market-based RSUs
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2021
|
988
|
|
|
$
|
32.41
|
|
|
|
|
|
|
|
Granted (a)
|
236
|
|
|
62.27
|
|
|
|
|
|
|
|
Vested (b)
|
—
|
|
|
—
|
|
|
|
|
|
|
|
Forfeited
|
(272)
|
|
|
48.72
|
|
|
|
|
|
|
Outstanding at March 31, 2021
|
952
|
|
|
$
|
35.14
|
|
|
2.0
|
|
$
|
69
|
|
|
Outstanding and expected to vest at March 31, 2021 (c)
|
203
|
|
|
$
|
54.59
|
|
|
2.8
|
|
$
|
15
|
|
__________
(a)Reflects the maximum number of stock units assuming achievement of all performance-, market- and time-vesting criteria and does not include those for non-employee directors. The weighted-average fair value of time-based RSUs and performance-based and market-based RSUs granted during the three months ended March 31, 2020 was $21.67 and $21.09, respectively.
(b)The total fair value of RSUs vested during March 31, 2021 and 2020 was $11 million and $17 million, respectively.
(c)Aggregate unrecognized compensation expense related to time-based RSUs and performance-based and market-based RSUs amounted to $39 million and will be recognized over a weighted average vesting period of 1.6 years.
15. Financial Instruments
Derivative Instruments and Hedging Activities
Currency Risk. The Company uses currency exchange contracts to manage its exposure to changes in currency exchange rates associated with certain of its non-U.S.-dollar denominated receivables and forecasted royalties, forecasted earnings of non-U.S. subsidiaries and forecasted non-U.S.-dollar denominated acquisitions. The Company primarily hedges a portion of its current-year currency exposure to the Australian, Canadian and New Zealand dollars, the euro and the British pound sterling. The majority of forward contracts do not qualify for hedge accounting treatment. The fluctuations in the value of these forward contracts do, however, largely offset the impact of changes in the value of the underlying risk they economically hedge. Forward contracts used to hedge forecasted third-party receipts and disbursements up to 12 months are designated and do qualify as cash flow hedges. The Company has designated its euro-denominated notes as a hedge of its investment in euro-denominated foreign operations.
The estimated net amount of existing gains or losses the Company expects to reclassify from accumulated other comprehensive income (loss) to earnings for cash flow and net investment hedges over the next 12 months is not material.
Interest Rate Risk. The Company uses various hedging strategies including interest rate swaps and interest rate caps to create what it deems an appropriate mix of fixed and floating rate assets and liabilities. The Company uses interest rate swaps and interest rate caps to manage the risk related to its floating rate corporate debt and its floating rate vehicle-backed debt. The Company records the changes in the fair value of its cash flow hedges to other comprehensive income (loss), net of tax, and subsequently reclassifies these amounts into earnings in the period during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item. The Company records the gains or losses related to freestanding derivatives, which are not designated as a hedge for accounting purposes, currently in earnings and are presented in the same line of the income statement expected for the hedged item. The Company estimates that approximately $20 million of losses currently recorded in accumulated other comprehensive income (loss) will be recognized in earnings over the next 12 months.
Commodity Risk. The Company periodically enters into derivative commodity contracts to manage its exposure to changes in the price of gasoline. These instruments were designated as freestanding
derivatives and the changes in fair value are recorded in earnings and are presented in the same line of the income statement expected for the hedged item.
The Company held derivative instruments with absolute notional values as follows:
|
|
|
|
|
|
|
As of March 31, 2021
|
Foreign exchange contracts
|
$
|
1,711
|
|
Interest rate caps (a)
|
8,686
|
|
Interest rate swaps
|
1,950
|
|
|
|
|
|
__________
(a)Represents $5.8 billion of interest rate caps sold, partially offset by approximately $2.8 billion of interest rate caps purchased. These amounts exclude $3.0 billion of interest rate caps purchased by the Company’s Avis Budget Rental Car Funding subsidiary as it is not consolidated by the Company.
Estimated fair values (Level 2) of derivative instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021
|
|
As of December 31, 2020
|
|
|
Fair Value,
Derivative
Assets
|
|
Fair Value,
Derivative
Liabilities
|
|
Fair Value,
Derivative
Assets
|
|
Fair Value,
Derivative
Liabilities
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
Interest rate swaps (a)
|
$
|
6
|
|
|
$
|
43
|
|
|
$
|
—
|
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Foreign exchange contracts (b)
|
16
|
|
|
11
|
|
|
3
|
|
|
11
|
|
|
Interest rate caps (c)
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
23
|
|
|
$
|
55
|
|
|
$
|
3
|
|
|
$
|
80
|
|
__________
Amounts in this table exclude derivatives issued by Avis Budget Rental Car Funding, as it is not consolidated by the Company; however, certain amounts related to the derivatives held by Avis Budget Rental Car Funding are included within accumulated other comprehensive income (loss), as discussed in Note 13–Stockholders’ Equity.
(a)Included in other non-current assets or other non-current liabilities.
(b)Included in other current assets or other current liabilities.
(c)Included in assets under vehicle programs or liabilities under vehicle programs.
The effects of derivatives recognized in the Company’s Consolidated Condensed Financial Statements were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2021
|
|
2020
|
Derivatives designated as hedging instruments (a)
|
|
|
|
|
Interest rate swaps (b)
|
$
|
35
|
|
|
$
|
(18)
|
|
|
Euro-denominated notes (c)
|
33
|
|
|
11
|
|
Derivatives not designated as hedging instruments (d)
|
|
|
|
|
Foreign exchange contracts (e)
|
(8)
|
|
|
27
|
|
|
Interest rate swap (f)
|
(1)
|
|
|
—
|
|
|
Commodity contracts (g)
|
—
|
|
|
(7)
|
|
|
Total
|
$
|
59
|
|
|
$
|
13
|
|
__________
(a)Recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity.
(b)Classified as a net unrealized gain (loss) on cash flow hedges in accumulated other comprehensive income (loss). Refer to Note 13–Stockholders’ Equity for amounts reclassified from accumulated other comprehensive income into earnings.
(c)Classified as a net investment hedge within currency translation adjustment in accumulated other comprehensive income (loss).
(d)Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures being hedged.
(e)For the three months ended March 31, 2021, included a $7 million loss in interest expense and a $1 million loss in operating
expense. For the three months ended March 31, 2020, included $28 million gain in interest expense and a $1 million loss in operating expense.
(f)Included primarily in vehicle interest, net.
(g)Included in operating expense.
Debt Instruments
The carrying amounts and estimated fair values (Level 2) of debt instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021
|
|
As of December 31, 2020
|
|
|
Carrying
Amount
|
|
Estimated
Fair
Value
|
|
Carrying
Amount
|
|
Estimated
Fair
Value
|
Corporate debt
|
|
|
|
|
|
|
|
|
Short-term debt and current portion of long-term debt
|
$
|
19
|
|
|
$
|
19
|
|
|
$
|
19
|
|
|
$
|
18
|
|
|
Long-term debt
|
4,264
|
|
|
4,408
|
|
|
4,191
|
|
|
4,337
|
|
|
|
|
|
|
|
|
|
|
Debt under vehicle programs
|
|
|
|
|
|
|
|
|
Vehicle-backed debt due to Avis Budget Rental Car Funding
|
$
|
6,149
|
|
|
$
|
6,429
|
|
|
$
|
5,080
|
|
|
$
|
5,317
|
|
|
Vehicle-backed debt
|
1,649
|
|
|
1,668
|
|
|
1,775
|
|
|
1,796
|
|
|
Interest rate swaps and interest rate caps (a)
|
3
|
|
|
3
|
|
|
2
|
|
|
2
|
|
__________
(a) Derivatives in a liability position.
16. Segment Information
The Company’s chief operating decision-maker assesses performance and allocates resources based upon the separate financial information from each of the Company’s operating segments. In identifying its reportable segments, the Company considered the nature of services provided, the geographical areas in which the segments operated and other relevant factors. The Company aggregates certain of its operating segments into its reportable segments.
Management evaluates the operating results of each of its reportable segments based upon revenues and “Adjusted EBITDA,” which the Company defines as income (loss) from continuing operations before non-vehicle related depreciation and amortization, any impairment charges, restructuring and other related charges, early extinguishment of debt costs, non-vehicle related interest, transaction-related costs, net, charges for unprecedented personal-injury and other legal matters, non-operational charges related to shareholder activist activity, which include third party advisory, legal and other professional service fees, gain on sale of equity method investment in China, COVID-19 charges and income taxes. COVID-19 charges include unusual, direct and incremental costs due to the COVID-19 pandemic such as minimum annual guaranteed rent in excess of concession fees for the period, overflow parking for idle vehicles and related shuttling costs, incremental cleaning supplies to sanitize vehicles and facilities, and losses associated with vehicles damaged in overflow parking lots, net of insurance proceeds. The Company’s presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
Revenues
|
|
Adjusted EBITDA
|
|
Revenues
|
|
Adjusted EBITDA
|
Americas
|
$
|
1,080
|
|
|
$
|
108
|
|
|
$
|
1,257
|
|
|
$
|
(30)
|
|
International
|
292
|
|
|
(50)
|
|
|
496
|
|
|
(40)
|
|
Corporate and Other (a)
|
—
|
|
|
(11)
|
|
|
—
|
|
|
(17)
|
|
|
Total Company
|
$
|
1,372
|
|
|
$
|
47
|
|
|
$
|
1,753
|
|
|
$
|
(87)
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA to income (loss) before income taxes
|
|
|
|
2021
|
|
|
|
2020
|
Adjusted EBITDA
|
|
|
$
|
47
|
|
|
|
|
$
|
(87)
|
|
Less:
|
Non-vehicle related depreciation and amortization
|
|
68
|
|
|
|
|
69
|
|
|
|
Interest expense related to corporate debt, net:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
61
|
|
|
|
|
48
|
|
|
|
Early extinguishment of debt
|
|
129
|
|
|
|
|
4
|
|
|
|
Restructuring and other related charges
|
|
20
|
|
|
|
|
44
|
|
|
|
COVID-19 charges (b)
|
18
|
|
|
|
|
7
|
|
|
|
Transaction-related costs, net
|
|
|
1
|
|
|
|
|
2
|
|
|
|
Non-operational charges related to shareholder
activist activity (c)
|
|
—
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
$
|
(250)
|
|
|
|
|
$
|
(265)
|
|
__________
(a)Includes unallocated corporate overhead which is not attributable to a particular segment.
(b)For three months ended March 31, 2021 consists of $17 million within operating expenses and $1 million within selling, general and administrative expenses, primarily consisting of $19 million of minimum annual guaranteed rent in excess of concession fees, $5 million of other charges and $(6) million associated with vehicles damaged in overflow parking lots, net of insurance proceeds. For the three months ended March 31, 2020, consists of $7 million within operating expenses, primarily consisting of $5 million associated with vehicles damaged in overflow parking lots, net of insurance proceeds and $2 million of incremental cleaning supplies to sanitize vehicles and facilities, and over flow parking.
(c)Reported within selling, general and administrative expenses.
Since December 31, 2020, there have been no significant changes in segment assets exclusive of assets under vehicle programs. As of March 31, 2021 and December 31, 2020, Americas’ segment assets under vehicle programs were approximately $8.2 billion and $7.2 billion, respectively, and International segment assets under vehicle programs were approximately $1.9 billion and $2.0 billion, respectively. The changes in assets under vehicle programs is primarily due to the increase in the size of our vehicle rental fleet to meet increase in rental demand.
* * * *