(Source: MARKETWIRE)
Avis Budget Group, Inc. (NYSE: CAR) today announced results for its
third quarter, which ended September 30, 2009. The Company had
revenue of $1.5 billion, a decrease of 14% versus third quarter 2008,
and pretax income of $83 million. Excluding restructuring costs, an
adverse litigation judgment and a 2008 impairment charge, third
quarter EBITDA increased 17% to $165 million and pretax income
increased 17% to $102 million.
"The operating trends that characterized the second quarter continued
into the third quarter, with strong domestic leisure pricing, up 13%
year-over-year, offsetting soft demand levels. Domestic pricing
increased 9% across the Avis and Budget brands, reflecting gains in
both leisure and commercial segments. We remained intensely focused
on controlling expenses throughout our operations and have increased
our forecast of realized cost savings for 2009 to $350-400 million,"
said Ronald L. Nelson, Avis Budget Group Chairman and Chief Executive
Officer.
"The strength of the used car market definitely provided some wind at
our back during the quarter, allowing us to actively manage the fleet
in concert with demand to optimize pricing. Despite revenues that
were almost $240 million lower than last year, the combination of
strong pricing, cost reduction initiatives and aggressive fleet
management enabled us to deliver strong gains in EBITDA versus last
year's third quarter results," Mr. Nelson said.
Executive Summary
In the third quarter, our car rental revenues decreased 14%
year-over-year, driven primarily by a 21% decrease in rental days.
Time and mileage revenue per day increased 9% excluding the effects
of foreign-exchange movements and increased 9% on a reported basis.
Ancillary revenues (excluding gas and customer recoveries) increased
8% per rental day year-over-year.
Our car fleet costs decreased 25% primarily due to a 21% reduction in
our average fleet and a better-than-anticipated 4% decrease in our
per-unit fleet costs. Other operating expenses decreased 140 basis
points to 47.7% of revenue primarily due to lower gasoline costs and
our cost savings initiatives, partially offset by the effects of
lower rental volumes. Selling, general and administrative costs
increased 60 basis points to 10.5% of revenue, primarily due to the
absence of incentive compensation expense accruals in third quarter
2008. Excluding this item, selling, general and administrative
expenses decreased 30 basis points as a percentage of revenue.
Truck rental revenue declined due to a 9% decline in rental days and
a slight decrease in time and mileage revenue per rental day. The
decrease in rental days was driven by decreased commercial and local
consumer rentals, partially offset by an increase in one-way rental
volumes. Truck rental EBITDA increased $7 million due to cost saving
initiatives and lower fleet costs, partially offset by the decline in
revenue.
Business Segment Discussion
The following discussion of third quarter operating results focuses
on revenue and EBITDA for each of our operating segments. Revenue and
EBITDA are expressed in millions.
Domestic Car Rental
(Consisting of the Company's U.S. Avis and Budget car rental operations)
2009 2008 % change
------- ------- --------
Revenue $ 1,109 $ 1,319 (16%)
EBITDA $ 102 $ 67 52%
Revenue declined primarily due to a 23% decrease in rental days
offset by a 9% increase in time and mileage per day rates. EBITDA
increased as the decline in volume was more than offset by the
increase in time and mileage rate per day, a decline in net gasoline
expense and cost saving actions. EBITDA includes $1 million of
restructuring costs in third quarter 2009 and $5 million in third
quarter 2008.
International Car Rental
(Consisting of the Company's international Avis and Budget vehicle rental
operations)
2009 2008 % change
------- ------- --------
Revenue $ 250 $ 265 (6%)
EBITDA $ 56 $ 60 (7%)
Revenue decreased primarily due to a 9% decline in rental days
partially offset by a 4% increase in time and mileage per day rates.
Excluding the impact of foreign exchange, time and mileage per day
rates increased 9%. The reported decrease in EBITDA was entirely due
to the impact of exchange rates ($10 million) as an increase in
per-unit fleet costs was offset by higher pricing.
Truck Rental
(Consisting of the Company's Budget Truck rental business)
2009 2008 % change
------- ------- --------
Revenue $ 106 $ 116 (9%)
EBITDA $ 13 $ 6 117%
Truck rental revenue declined due to a 9% decline in rental days.
EBITDA increased due to lower fleet costs and cost-reduction efforts,
partially offset by the decline in rental days.
Other Items
-- Debt Covenant Compliance - As of September 30, 2009, the Company
remained in compliance with its financial covenant requirements under its
senior credit facility. EBITDA for the latest twelve months for covenant
purposes of approximately $174 million exceeded the minimum requirement of
$80 million.
-- Vehicle Financing - Since June, the Company's Avis Budget Rental Car
Funding (AESOP) LLC subsidiary has completed $2.8 billion of domestic fleet
financing in three separate transactions: in July, we completed an offering
of $450 million three-year asset-backed securities; in early October, we
closed an additional offering of $450 million three-year asset-backed
securities; and in late October, we completed the renewal of our domestic
bank conduit fleet facility, which will provide $1.95 billion in financing.
These transactions substantially complete our domestic fleet financing
requirements for 2010.
-- Corporate Financing - In October, the Company completed an offering of
$345 million 3.50% Convertible Senior Notes, which mature in 2014.
-- Fleet Negotiations - The Company has largely completed its agreements
with auto manufacturers for the purchase of model-year 2010 vehicles.
Based on these agreements, the Company expects that no single manufacturer
will account for more than 25% of its U.S. rental car fleet and that per-
unit vehicle costs will be lower for model-year 2010 vehicles compared to
the prior model-year's.
-- Unusual Item - The Company recorded an $18 million charge in its
Corporate and Other segment in third quarter 2009 as a result of a jury
verdict in a breach-of-contract case filed by one of our licensees in 2003
with respect to our acquisition of our Budget vehicle rental business in
2002. We believe the verdict is unsupported by the evidence and will seek
to vacate or appeal the jury's decision.
-- Carey - Our third quarter results include our equity in the results of
Carey International, the leading international provider of chauffeured
ground transportation services, which declined $4 million year-over-year
due to challenging conditions in the business travel environment. These
results are included in the Corporate and Other segment.
Outlook
While demand for vehicle rentals appears to have
stabilized, the Company expects the macroeconomic climate will remain
challenging and rental volumes in the fourth quarter will again be
lower than in the comparable 2008 period. Based on rental and
reservation activity to date, the Company expects that favorable
year-over-year pricing comparisons will continue in the fourth
quarter. The Company also expects to keep the size of its rental
fleet in line with rental demand, as it has throughout 2009.
The used car market continued to strengthen over the course of the
third quarter. Our domestic fleet costs are now expected to increase
4-6% on a per-unit basis in 2009, including a modest year-over-year
decrease in fourth quarter 2009. The Company is continuing its
efforts to reduce costs and enhance productivity through its
Performance Excellence initiative and expects the benefits of this
program to exceed $100 million over the course of 2009. Such
benefits are expected to be incremental to the more than $270 million
of annual savings generated by the Company's five-point
cost-reduction and efficiency improvement plan and from
cost-reduction actions the Company implemented in third quarter 2008.
Investor Conference Call
Avis Budget Group will host a conference call to discuss third
quarter results on November 3, 2009, at 9:00 a.m. (ET). Investors may
access the call live at www.avisbudgetgroup.com or by dialing (210)
234-0038 and providing the access code "Avis Budget." Investors are
encouraged to dial in approximately ten minutes prior to the call. A
web replay will be available at www.avisbudgetgroup.com following the
call. A telephone replay will be available from 2:00 p.m. (ET) on
November 3, 2009 until 8:00 p.m. (ET) on November 10 at (402)
220-9786, access code: "Avis Budget."
About Avis Budget Group, Inc.
Avis Budget Group is a leading provider of vehicle rental services,
with operations in more than 70 countries. Through its Avis and
Budget brands, the Company is a leading general-use vehicle rental
company in each of North America, Australia, New Zealand and certain
other regions based on published airport statistics. Avis Budget
Group is headquartered in Parsippany, N.J. and has approximately
24,000 employees. For more information about Avis Budget Group,
visit www.avisbudgetgroup.com.
Forward-Looking Statements
Certain statements in this press release constitute "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Statements preceded by, followed by or that otherwise include the
words "believes", "expects", "anticipates", "intends", "projects",
"estimates", "plans", "may increase", "may fluctuate", "forecast" and
similar expressions or future or conditional verbs such as "will",
"should", "would", "may" and "could" are generally forward-looking in
nature and not historical facts. Any statements that refer to
expectations or other characterizations of future events,
circumstances or results, including all statements related to fourth
quarter and full year 2009 results, future fleet costs, refinancing
plans and cost saving initiatives are forward-looking statements.
Various risks that could cause future results to differ from those
expressed by the forward-looking statements included in this press
release include, but are not limited to, a weaker-than-anticipated
economic environment, the high level of competition in the vehicle
rental industry, greater-than-expected costs for new vehicles,
disposition of vehicles not covered by manufacturer repurchase
programs, the financial condition of the manufacturers of our cars, a
greater-than-anticipated downturn in airline passenger traffic, an
occurrence or threat of terrorism, a significant increase in interest
rates or borrowing costs, our ability to obtain financing for our
operations, including the funding of our vehicle fleet via the
asset-backed securities market and the financial condition of
financial-guaranty firms that have insured a portion of our
outstanding vehicle-backed debt, higher-than-expected fuel costs,
fluctuations related to the mark-to-market of derivatives which hedge
our exposure to exchange rates, interest rates and fuel costs, the
Company's ability to meet or amend financial covenants associated
with its borrowings and the Company's ability to accurately estimate
its future results and implement its strategy for cost savings and
growth, particularly in the current environment. Other unknown or
unpredictable factors also could have material adverse effects on
Avis Budget Group's performance or achievements. In light of these
risks, uncertainties, assumptions and factors, the forward-looking
events discussed in this press release may not occur. You are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date stated, or if no date is
stated, as of the date of this press release. Important assumptions
and other important factors that could cause actual results to differ
materially from those in the forward-looking statements are specified
in Avis Budget Group's Annual Report on Form 10-K for the year ended
December 31, 2008 and Quarterly Report on Form 10-Q for the period
ended June 30, 2009 included under headings such as "Forward-Looking
Statements", "Risk Factors" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and in other filings
and furnishings made by the Company with the SEC from time to time.
Except for the Company's ongoing obligations to disclose material
information under the federal securities laws, the Company undertakes
no obligation to release publicly any revisions to any
forward-looking statements, to report events or to report the
occurrence of unanticipated events unless required by law.
This release includes certain non-GAAP financial measures as defined
under SEC rules.
