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8-K - FORM 8-K - AVIS BUDGET GROUP, INC.d231592d8k.htm

Exhibit 99.1

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table presents our summary historical and pro forma financial data and certain other statistical data. The consolidated statement of income data for each of the years in the three-year period ended December 31, 2010 and the consolidated balance sheet data as of December 31, 2010, 2009 and 2008 have been derived from our audited consolidated financial statements. The consolidated statement of income data for the six months ended June 30, 2011 and 2010 and the consolidated balance sheet data as of June 30, 2011 have been derived from our interim unaudited consolidated financial statements. The unaudited pro forma consolidated financial statement of operations data for the twelve month period ended June 30, 2011, which gives effect to the Avis Europe Acquisition, $250 million of senior notes (the “senior notes”) and the other related financing transactions (see “New and/or Increased Financing Agreements”) as if they had occurred on July 1, 2010, and the pro forma consolidated balance sheet as of June 30, 2011, which gives effect to the Avis Europe Acquisition, the senior notes and the other related financing transactions as if they had occurred on June 30, 2011, have been derived from our historical audited and unaudited consolidated financial statements and the audited and unaudited consolidated financial statements of Avis Europe. This pro forma information does not purport to represent what our results of operations or financial position would have been if the Avis Europe Acquisition, the senior notes and the other related financing transactions had occurred as of the dates indicated or what those results will be for future periods and does not include any synergies associated with the acquisition and integration of Avis Europe. Operating results for the six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2011.

The unaudited consolidated statement of income data for the last twelve months (“LTM”) ended June 30, 2011 has been derived by adding the unaudited consolidated statement of income for the six months ended June 30, 2011 and the audited consolidated statement of income data for the year ended December 31, 2010, then subtracting the unaudited consolidated statement of income for the six months ended June 30, 2010. The operating statistics for the last twelve months ended June 30, 2011 have been calculated based on actual rental days, actual average fleet size and actual time and mileage per rental day during the period.

 

 

1


The historical consolidated financial data and other statistical data presented below should be read in conjunction with our consolidated financial statements and the related notes thereto and the sections entitled “Management’s discussion and analysis of financial condition and results of operations” set forth in each of the 2010 10-K and the 2011 Second Quarter 10-Q, each of which are incorporated by reference into this offering memorandum. Our consolidated financial information may not be indicative of our future performance.

 

    Pro forma LTM
ended June 30,

2011
    LTM ended
June  30,

2011
    Six months
ended June 30,
    Year ended December 31,  
        2011     2010     2010     2009     2008  
    (in millions)  

Statement of income data:

             

Vehicle rental

  $ 5,453      $ 4,007      $ 1,952      $ 1,827      $ 3,882      $ 3,906      $ 4,564   

Other

    1,596        1,378        694        619        1,303        1,225        1,420   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net revenues

    7,049        5,385        2,646        2,446        5,185        5,131        5,984   

Expenses

             

Operating

    3,107        2,748        1,383        1,251        2,616        2,636        3,147   

Vehicle depreciation and lease charges, net

    1,633        1,186        535        636        1,287        1,425        1,697   

Selling, general and administrative charges

    1,288        617        322        274        569        551        655   

Vehicle interest, net

    303        286        132        150        304        294        321   

Non-vehicle depreciation and amortization

    123        88        44        46        90        96        88   

Interest expense related to corporate debt, net:

             

Interest expense

    245        183        94        81        170        153        129   

Early extinguishment of debt

    12        12        —          40        52        —          —     

Transaction-related costs

    16        48        36       2        14        —          —     

Restructuring

    8        8        —          3        11        20        28   

Impairment

    —          —          —          —          —          33        1,262   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    6,735        5,176        2,546        2,483        5,113        5,208        7,327   

Income (loss) before income taxes

    314        209        100        (37     72        (77     (1,343

Provision for (benefit from) income taxes

    122        84        41        (25     18        (30     (219
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $ 192      $ 125      $ 59      $ (12   $ 54      $ (47   $ (1,124
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Pro forma
as of
June 30,
2011
     As of
June 30,

2011
     As of December 31,  
           2010      2009      2008  
            (in millions)  

Balance sheet data:

              

Cash and cash equivalents

   $ 275       $ 645       $ 911       $ 482       $ 258   

Restricted cash

     11         406         10         10         10   

Vehicles, net

     10,234         8,185         6,422         5,967         7,164   

Vehicle-backed debt

     6,864         6,287         4,515         4,374         6,034   

Total corporate debt

     3,238         2,498         2,502         2,131         1,789   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total debt

   $ 10,102       $ 8,785       $ 7,017       $ 6,505       $ 7,823   

Total stockholder’s equity

     332         532         410         222         93   

Net corporate debt(a)

     2,963         1,458         1,591         1,649         1,531   

 

 

2


    Pro forma
LTM ended
June 30,

2011
    LTM ended
June  30,

2011
    Six months ended
June 30,
    Year ended December 31,  
        2011     2010     2010     2009     2008  

Other financial data (in millions):

             

Adjusted EBITDA, excluding certain items(b)

  $ 718      $ 548      $ 274      $ 136      $ 410      $ 243      $ 169   

Gross EBITDA(c)

    2,654        2,020        941        922        2,001        1,962        2,187   

Capital expenditures

    79        55        17        23        61        39        83   

Operating statistics(d):

             

Domestic car rental

             

Rental days (000s)

    73,780        73,780        37,162        34,540        71,158        72,811        92,291   

Average fleet size

    279,091        279,091        286,753        263,615        267,522        270,223        338,093   

Time and mileage revenue per rental day

  $ 41.15      $ 41.15      $ 39.94      $ 40.96      $ 41.70      $ 42.22      $ 39.41   

International car rental

             

Rental days (000s)

    41,245        13,393        6,348        5,963        13,008        13,021        14,346   

Average fleet size

    156,219        52,523        51,348        48,317        51,008        51,109        56,726   

Time and mileage revenue per rental day

  $ 42.46      $ 49.88      $ 51.10      $ 46.53      $ 47.75      $ 42.36      $ 43.40   

Truck rental

             

Rental days (000s)

    4,256        4,256        2,033        1,799        4,022        3,840        4,129   

Average fleet size

    26,128        26,128        25,981        26,970        26,623        28,988        29,744   

Time and mileage revenue per rental day

  $ 71.06      $ 71.06      $ 70.50      $ 74.89      $ 73.06      $ 73.08      $ 73.66   

 

(a) We define net corporate debt as total corporate debt less cash and cash equivalents and $395 million of restricted cash in escrow for the Avis Europe Acquisition at June 30, 2011. Avis Budget Group primarily finances its vehicle rental fleet through asset-backed borrowings, while historically a portion of Avis Europe’s vehicle rental fleet has been financed through non-collateralized indebtedness, which accordingly is treated as corporate debt.

 

 

3


(b) Adjusted EBITDA is presented excluding certain items, which for 2010 excludes the early extinguishment of debt, restructuring and an adverse litigation judgment related to the acquisition of our Budget vehicle rental business in 2002. We define Adjusted EBITDA as income from continuing operations before non-vehicle related depreciation and amortization, any impairment charge, transaction-related costs, non-vehicle related interest and income taxes. Adjusted EBITDA should not be considered in isolation or as a substitute for net income or other income statement data prepared in accordance with GAAP and our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies. A reconciliation of Adjusted EBITDA, excluding certain items to net income, is set forth below:

 

    Pro forma
LTM ended
June 30,

2011
    LTM ended
June 30,

2011
    Six months
ended
June 30,
    Year ended
December 31,
 
        2011     2010     2010     2009     2008  
    (in millions)  

Adjusted EBITDA, excluding certain items

  $ 718      $ 548      $ 274      $ 136      $ 410      $ 243      $ 169   

Less certain items:

             

Restructuring charges

    8        8        —          3        11        20        28   

Litigation costs

    —          —          —          1        1        18        5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

    710        540        274        132        398        205        136   

Less: Non-vehicle related depreciation and amortization

    123        88        44        46        90        96        88   

Interest expense related to corporate debt, net:

             

Interest expense

    245        183        94        81        170        153        129   

Early extinguishment of debt

    12        12        —          40        52        —          —     

Transaction-related costs

    16        48        36        2        14        —          —     

Impairment

    —          —          —          —          —          33        1,262   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    314        209        100        (37     72        (77     (1,343

Less: Provision for (benefit from) income taxes

    122        84        41        (25     18        (30     (219
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $ 192      $ 125      $ 59      $ (12   $ 54      $ (47   $ (1,124
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(c) Gross EBITDA represents Adjusted EBITDA, excluding certain items, before vehicle depreciation and lease charges, net and vehicle interest, net. A reconciliation of Gross EBITDA to Adjusted EBITDA, excluding certain items is set forth below:

 

Gross EBITDA

   $ 2,654       $ 2,020       $ 941       $ 922       $ 2,001       $ 1,962       $ 2,187   

Less: Vehicle depreciation and lease charges, net

     1,633         1,186         535         636         1,287         1,425         1,697   

Less: Vehicle interest, net

     303         286         132         150         304         294         321   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA, excluding certain items

   $ 718       $ 548       $ 274       $ 136       $ 410       $ 243       $ 169   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(d) The car rental operating statistics (rental days and time and mileage revenue per rental day) are all calculated based on the actual usage of the vehicle during a 24-hour period. We believe that this methodology, while conservative, provides our management with the most relevant statistics in order to manage the business. Our calculation may not be comparable to other companies’ calculations of similarly titled statistics.

 

 

4


UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Basis of presentation

The unaudited pro forma financial information has been compiled from underlying financial statements prepared in accordance with GAAP and IFRS and gives effect to the Avis Europe Acquisition and related transactions.

The following unaudited pro forma condensed consolidated statements of operations for the twelve and six month periods ended December 31, 2010 and June 30, 2011, respectively, give effect to the Avis Europe Acquisition by Avis Budget Group, the senior notes and the other related financing transactions as if they had occurred on January 1, 2010. The following unaudited pro forma condensed consolidated balance sheet information at June 30, 2011 gives effect to the Avis Europe Acquisition by Avis Budget Group, the senior notes and the other related financing transactions as if they had occurred on June 30, 2011. This information has been derived from the audited consolidated financial statements of Avis Budget Group contained in the 2010 10-K and 2011 Second Quarter 10-Q.

The underlying information for Avis Budget Group has been derived from the audited consolidated financial statements of Avis Budget Group contained in the 2010 10-K and from the unaudited condensed consolidated financial statements as of and for the period ended June 30, 2011 contained in the 2011 Second Quarter 10-Q.

The underlying information for Avis Europe has been derived from the audited consolidated financial statements of Avis Europe for the year ended December 31, 2010 and from their unaudited interim financial statements as of and for the six months ended June 30, 2011. This unaudited pro forma financial information is not intended to reflect the financial position and results which would have actually resulted had the Avis Europe Acquisition, the senior notes and the other related financing transactions been effected on the dates indicated and does not include any synergies associated with the acquisition and integration of Avis Europe. Further, the pro forma results of operations are not necessarily indicative of the results of operations that may be obtained in the future.

The Avis Europe Acquisition by Avis Budget Group will be accounted for as a business combination using the acquisition method of accounting. The pro forma information presented, including the allocation of the purchase price, is based on preliminary estimates of the fair values of assets acquired and liabilities assumed, available information as of the date of this offering memorandum and management assumptions, and will be revised as additional information becomes available. The final purchase price allocation is dependent on, among other things, the finalization of the preliminary asset and liability valuations by our independent appraisal firm. The actual adjustments to our consolidated financial statements upon the closing of the Avis Europe Acquisition, the notes offering and the other related financing transactions will depend on a number of factors, including additional information available and the actual balance of our net assets on the closing date of the transactions. Therefore, the actual adjustments will differ from the pro forma adjustments, and the differences may be material. Any final adjustments will change the allocation of purchase price, which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma condensed consolidated financial information, including a change to goodwill.

The Avis Europe balances have been translated from Euros to US dollars using average exchange rates applicable during the periods presented for the unaudited pro forma consolidated statement of operations and the period end exchange rate for the unaudited pro forma consolidated balance sheet. The pro forma adjustments in this table have been translated from € to $ using historical exchange rates. The average exchange rates applicable during the periods presented for the unaudited pro forma consolidated statements of operations and the period end exchange rate for the unaudited pro forma consolidated balance sheet are:

 

          $/€1  

June 30, 2011

   Average Spot Rate      1.4050   

June 30, 2011

   Period End Rate      1.4502   

December 31, 2010

   Average Spot Rate      1.3266   

December 31, 2010

   Period End Rate      1.3384   

June 30, 2010

   Average Spot Rate      1.3270   

 

5


Summary of significant accounting policies

The unaudited pro forma financial statements have been compiled in a manner consistent with the accounting policies adopted by Avis Budget Group. These accounting policies differ in certain respects from those of Avis Europe. The adjustments made to align Avis Europe’s financial information prepared in accordance with IFRS with Avis Budget Group’s GAAP accounting policies are described in the notes.

 

6


UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME

For the six months ended June 30, 2011

(in millions of U.S. dollars, except share data and as indicated)

 

     Avis
Budget
Group
     Avis
Europe
IFRS (in $)
    Pro forma adjustments   Pro forma
Avis
Budget
Group
 
          Avis Europe U.S.
GAAP
adjustments and
reclassifications
    Note   Other
adjustments
    Note  

Revenues

               

Vehicle rental

   $ 1,952       $ 686      $ —          $ —          $ 2,638   

Other

     694         265        (150   (i)     (7   (a)     802   
  

 

 

    

 

 

   

 

 

     

 

 

     

 

 

 

Net revenues

     2,646         951        (150       (7       3,440   
  

 

 

    

 

 

   

 

 

     

 

 

     

 

 

 

Expenses

               

Operating

     1,383         602        (424   (i)(ii)     (6   (a)     1,555   

Vehicle depreciation and lease charges, net

     535         —          215      (i)(ii)     —            750   

Selling, general and administrative

     322         302        42      (iii)(ii)     —            666   

Vehicle interest, net

     132         —          6      (ii)     4      (b)     142   

Non-vehicle related depreciation and amortization

     44         —          12      (ii)     5      (c)     61   

Interest expense related to corporate debt, net

     94         31        (6   (ii)     3      (b)     122   

Transaction-related costs

     36         —          —            (32   (e)     4   

Other (income) expense

     —           (1     1      (ii)     —            —     
  

 

 

    

 

 

   

 

 

     

 

 

     

 

 

 

Total expenses

     2,546         934        (154       (26       3,300   
  

 

 

    

 

 

   

 

 

     

 

 

     

 

 

 

Income before income taxes

     100         17        4          19          140   

Provision for taxes

     41         5        —            7      (d)     53   
  

 

 

    

 

 

   

 

 

     

 

 

     

 

 

 

Net income

   $ 59       $ 12      $ 4        $ 12        $ 87   
  

 

 

    

 

 

   

 

 

     

 

 

     

 

 

 

Earnings per share

               

Basic

   $ 0.56                 $ 0.83   

Diluted

   $ 0.49                 $ 0.70   

 

7


UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME

For the six months ended June 30, 2010

(in millions of U.S. dollars, except share data and as indicated)

 

     Avis
Budget
Group
    Avis
Europe
IFRS (in $)
    Pro forma adjustments   Pro forma
Avis
Budget
Group
 
         Avis Europe U.S.
GAAP
adjustments and
reclassifications
    Note   Other
adjustments
    Note  

Revenues

              

Vehicle rental

   $ 1,827      $ 613      $ —          $ —          $ 2,440   

Other

     619        308        (207   (i)     (7   (a)     713   
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net revenues

     2,446        921        (207       (7       3,153   
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Expenses

              

Operating

     1,251        609        (446   (i)(ii)     (6   (a)     1,408   

Vehicle depreciation and lease charges, net

     636        —          193      (i)(ii)     —            829   

Selling, general and administrative

     274        280        34      (iii)(ii)     —            588   

Vehicle interest, net

     150        —          5      (ii)     5      (b)     160   

Non-vehicle related depreciation and amortization

     46        —          12      (ii)     5      (c)     63   

Interest expense related to corporate debt, net:

              

Interest expense

     81        42        (5   (ii)     (5   (b)     113   

Early extinguishment of debt

     40        —          —            —            40   

Transaction-related costs

     2        —          —            —            2   

Restructuring charges

     3        —          —            —            3   

Other (income) expense

     —          —          —            —            —     
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total expenses

     2,483        931        (207       (1       3,206   
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Loss before income taxes

     (37     (10     —            (6       (53

Benefit from income taxes

     25        4        —            3      (d)     32   
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net loss

   $ (12   $ (6   $ —          $ (3     $ (21
  

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Earnings (loss) per share

              

Basic

   $ (0.12             $ (0.20

Diluted

   $ (0.12             $ (0.20

 

8


UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME

For the year ended December 31, 2010

(in millions of U.S. dollars, except share data and as indicated)

 

    Avis
Budget
Group
    Avis
Europe
IFRS (in $)
    Pro forma adjustments   Pro forma
Avis
Budget
Group
 
        Avis Europe U.S.
GAAP
adjustments and
reclassifications
    Note   Other
adjustments
    Note  

Revenues

             

Vehicle rental

  $ 3,882      $ 1,373      $ —          $ —          $ 5,255   

Other

    1,303        646        (427   (i)     (15   (a)     1,507   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net revenues

    5,185        2,019        (427       (15       6,762   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

   

 

 

 

 

 

Expenses

             

Operating

    2,616        1,313        (956   (i)(ii)     (13   (a)     2,960   

Vehicle depreciation and lease charges, net

    1,287        —          425      (i)(ii)     —            1,712   

Selling, general and administrative

    569        566        75      (ii)(iii)     —            1,210   

Vehicle interest, net

    304        —          10      (ii)     7      (b)     321   

Non-vehicle related depreciation and amortization

    90        —          24      (ii)     11      (c)     125   

Interest expense related to corporate debt, net:

             

Interest expense

    170        77        (10   (ii)     (1   (b)     236   

Early extinguishment of debt

    52          —            —            52   

Transaction-related costs

    14        —          —            —            14   

Restructuring charges

    11        —          —            —            11   

Other (income) expense

    —          (3     3      (ii)     —            —     
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total expenses

    5,113        1,953        (429       4          6,641   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Income before income taxes

    72        66        2          (19       121   

Provision for (benefit from) taxes

    18        28        —            (9   (d)     37   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net income

  $ 54      $ 38      $ 2        $ (10     $ 84   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Earnings per share

             

Basic

  $ 0.53                $ 0.82   

Diluted

  $ 0.49                $ 0.72   

 

9


UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET

As of June 30, 2011

(in millions of U.S. dollars, except share data and as indicated)

 

    Avis
Budget
Group
    Avis
Europe
IFRS (in $)
    Pro forma adjustments   Pro forma
Avis
Budget
Group
 
        Avis Europe U.S.
GAAP
adjustments and
reclassifications
    Note   Other
adjustments
    Note  

Assets

             

Current assets:

             

Cash and cash equivalents

  $ 645      $ 190      $ —          $ (560   (f)   $ 275   

Restricted cash

    406        —          —            (395   (f)     11   

Receivables

    417        1,925        (1,472   (iv)(v)(vi)     (10   (h)     860   

Deferred income taxes

    132        —          —            —            132   

Other current assets

    306        23        117      (iv)(vi)     (6   (i)     440   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total other current assets

    1,906        2,138        (1,355       (971       1,718   

Property and equipment, net

    405        823        (741   (vi)     —            487   

Deferred income taxes

    639        55        —            (79   (j)     615   

Goodwill

    76        1        —            322      (g)     399   

Other intangibles, net

    484        13        —            218      (g)     715   

Other non-current assets

    275        30        10      (v)     (12   (k)     303   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total assets exclusive of vehicle programs

    3,785        3,060        (2,086       (522       4,237   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Assets under vehicle programs:

             

Program cash

    76        —          —            —            76   

Vehicles, net

    8,185        —          2,049      (iv)(vi)     —            10,234   

Receivables from vehicle manufacturers and other

    79        —          40      (vi)     —            119   

Investment in Avis Budget Rental Car Funding (AESOP) LLC—related party

    316        —          —            —            316   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 
    8,656        —          2,089          —            10,745   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total assets

  $ 12,441      $ 3,060      $ 3        $ (522     $ 14,982   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Liabilities and stockholders’ equity

             

Current liabilities:

             

Accounts payable and other current liabilities

  $ 1,006      $ 1,748      $ (445   (vi)(vii)(viii)   $ (34   (l)(h)   $ 2,275   

Current portion of long-term debt

    6        201        —            (154   (f)     53   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current liabilities

    1,012        1,949        (445       (188       2,328   

Long-term debt

    2,492        470        3      (v)     220      (m)     3,185   

Other non-current liabilities

    530        206        —            (51   (n)     685   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities exclusive of vehicle programs

    4,034        2,625        (442       (19       6,198   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Liabilities under vehicle programs:

             

Debt

    831        —          437      (vi)(viii)     140      (f)     1,408   

Debt due to Avis Budget Rental Car Funding (AESOP) LLC—related party

    5,456        —          —            —            5,456   

Deferred income taxes

    1,430        —          —            —            1,430   

Other

    158        —          —            —            158   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 
    7,875        —          437          140          8,452   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Commitments and contingencies

             

Stockholders’ equity:

             

Preferred stock

    —          —          —            —            —     

Common stock

    1        37        —            (37       1   

Additional paid-in capital

    8,500        553        —            (553       8,500   

Accumulated deficit

    (2,578     (117     8          (92       (2,779

Accumulated other comprehensive income

    148        (31     —            31          148   

Treasury stock, at cost

    (5,539     (8     —            8          (5,539

Noncontrolling interest

    —          1        —            —            1   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total stockholders’ equity

    532        435        8      (vii)     (643   (o)     332   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities and stockholders’ equity

  $ 12,441      $ 3,060      $ 3        $ (522     $ 14,982   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

 

10


 

Notes to Unaudited pro forma condensed consolidated financial statements

 

I Notes to Avis Europe U.S. GAAP adjustments and reclassifications
(i) Reflects the reclassification for treatment of risk vehicle disposition to present consistently with Avis Budget Group’s presentation. Under IFRS, risk vehicles are transferred to inventory once they are no longer being used for rental purposes and are identified as held for sale. Upon sale, Avis Europe includes the proceeds from disposition of risk vehicles in revenues and the related net book value in cost of sales. Any difference between sales proceeds and net book value is then reflected in operating profit. Under GAAP, the Avis Budget Group records the transaction net in depreciation expense with any resulting gain/loss on the sale reflected in depreciation expense.
(ii) Reflects reclassifications that were made to the statement of operations of Avis Europe so that costs within the expense lines are presented consistently with the Avis Budget Group’s presentation. Interest expense related to Avis Europe’s existing indebtedness is primarily reflected as interest expense related to corporate debt and not vehicle interest generally because such existing indebtedness is not collateralized by assets under vehicle programs.
(iii) Reflects the elimination of employment taxes on long term incentive program compensation from Avis Europe’s historical statements of operations to present results in accordance with GAAP.
(iv) Reflects reclassification for treatment of program vehicles to present consistently with Avis Budget Group’s presentation. Under IFRS, vehicles subject to manufacturer repurchase agreements are accounted for as operating leases. The difference between the initial payment and the fair value at inception of the final repurchase price (the obligation of the manufacturer) is considered a deferred charge and is classified as prepaid vehicle operating lease charges within trade and other receivables. This deferred charge is recognized within cost of sales on a straight line basis over the relevant vehicle holding period. At inception of the arrangement, a separate repurchase agreement receivable is recognized within trade and other receivables for the fair value of the final repurchase price. Thereafter this repurchase agreement receivable is recognized at amortized cost with the unwinding of the initial fair value discount also recognized within cost of sales, reflecting the substance of the overall arrangement. Under GAAP, Avis Budget Group recognizes program vehicles on its balance sheet in vehicles, net and records depreciation for the difference between cost and repurchase price on a straight line basis over the relevant vehicle holding period.
(v) Reflects reclassifications of unamortized debt issuance costs from long-term debt and receivables to other non-current assets.
(vi) The following reclassifications were made to the balance sheet of Avis Europe at June 30, 2011 so that items below are presented in conformity with Avis Budget Group’s presentation:

 

Vehicles, net

   $ 741   

Property plant equipment, net

     (741

Other prepayments (included in Receivables)

     (119

Other current assets

     119   

Accounts payable and other current liabilities

     (437

Debt under vehicle programs

     437   

Receivables

     (40

Receivables from vehicle manufacturers and other

     40   

 

(vii) Reflects reversal of accrued liability for employment taxes on long term incentive plan compensation.
(viii) Reflects a reclassification of finance lease obligation from other current liabilities to liabilities under vehicle programs.

 

II Notes to other adjustments:
(a) Reflects the elimination of transactions between Avis Budget Group and Avis Europe.
(b)

Reflects adjustments to vehicle interest, net and interest expense related to corporate debt, net for (i) the senior notes and the other related financing transactions, (ii) amortization of capitalized debt issuance

 

11


  costs, (iii) Avis Europe’s historical interest expense on debt to be repaid in connection with the Avis Europe Acquisition and (iv) the elimination of transactions between Avis Budget Group and Avis Europe. The interest rate of the senior notes has not currently been determined. For every  1/8 percent change in the assumed interest rate, there would be a related $0.3 million change in interest expense.
(c) Reflects incremental amortization expense resulting from the preliminary fair value adjustments and revised useful lives, ranging from 6-25 years, assigned to intangible assets. Any changes to the purchase price allocation to intangible assets will result in changes to amortization expense after the consummation of the Avis Europe Acquisition.
(d) Reflects the pro forma income tax expense (benefit) applicable to the pro forma adjustments based on the respective jurisdictions to which the pro forma adjustments pertain and the associated applicable statutory tax rates.
(e) Reflects removal of transaction-related costs related to the Avis Europe Acquisition as if the Avis Europe Acquisition had occurred on January 1, 2010.
(f) Reflects the estimated sources and use of cash in the Avis Europe Acquisition, the senior notes and other financing transactions assuming they had occurred on June 30, 2011:

 

Sources:

  

Term loan due 2016

   $ 20   

Interim Loan Agreements

     420   

Senior notes

     250   

Liabilities under vehicle programs—Debt

     140   
  

 

 

 

Total sources of funds

     830   
  

 

 

 

Uses:

  

Avis Europe equity consideration

     1,010   

Repayment of Avis Europe existing indebtedness

     631   

Debt breakage fees

     50   

Estimated transaction fees and expenses(i)

     94   
  

 

 

 

Total uses of funds

     1,785   
  

 

 

 

Cash payment out of Avis Budget Group’s cash and restricted cash balances

   $ 955   

 

  (i) Excludes $14 million of estimated transaction fees and expenses which have already been paid.
(g) Reflects the preliminary estimated excess of purchase price over the fair value of assets acquired and liabilities assumed, based on the following allocation of purchase price:

 

Equity purchase price(i)

   $ 1,010   

Adjusted Avis Europe historical equity(ii)

     (428
  

 

 

 

Initial excess purchase price over equity

     582   

Purchase accounting adjustments:

  

Allocation to other intangibles

     (218

Allocation to unfavorable master franchise agreement

     (126

Allocation to deferred taxes

     79   

Allocation to unfavorable license agreement liability

     5   

Goodwill

     322   

 

  (i) Preliminary purchase price is based on the number of Avis Europe shares outstanding as of June 30, 2011 of 199.8 million multiplied by the offer price of £3.15 per Avis Europe share (or $5.06 per share based on June 30, 2011 exchange rate of 1.6053).
  (ii) Adjusted to exclude $10 million of Avis Europe historical debt issuance costs and $5 million of Avis Europe transaction related costs.

 

12


(h) Reflects the elimination of license fees receivable and payable between Avis Budget Group and Avis Europe.
(i) Reflects the reduction of Avis Europe derivative assets, included in Other current assets, upon termination.
(j) Represents the estimated impact on deferred income taxes resulting from (i) the preliminary pro forma purchase accounting adjustments to identifiable intangible assets, (ii) finance fees that were charged to expense, and (iii) reduction of deferred income taxes related to license fees between Avis Budget Group and Avis Europe.

The adjustment related to preliminary purchase accounting was calculated by applying the applicable statutory tax rates to the estimated book-tax basis differences arising from the estimated allocation of the preliminary purchase accounting adjustments to various tax jurisdictions. This adjustment is preliminary and subject to finalization of our purchase accounting and analysis on a jurisdictional basis, the analysis of its deferred tax position and valuation allowances at the closing of the Avis Europe Acquisition.

 

(k) Reflects the net adjustment to other non-current assets as follows (i) the capitalization of estimated financing costs in connection with the indebtedness we will incur in the Avis Europe Acquisition consisting of the new senior secured credit facilities and the senior notes, which will be amortized over the terms of the applicable indebtedness, less (ii) the elimination of Avis Europe’s historical unamortized debt issuance costs and (iii) reduction of non-current portion of Avis Europe’s derivative asset upon termination.
(l) Reflects the net adjustment to accounts payable and other current liabilities as a result of the Avis Europe Acquisition for repayment of Avis Europe indebtedness, reduction of the current portion of Avis Europe’s interest rate swaps liabilities and elimination of receivable/payable for transactions between Avis Budget Group and Avis Europe.
(m) Reflects the repayment of Avis Europe’s long-term debt and Avis Budget Group’s incremental borrowings.
(n) Reflects (i) the reduction of Avis Europe derivative liability included in other non-current liabilities upon termination, (ii) an increase related to the unfavorable license agreement upon preliminary purchase price allocation and (iii) the elimination of long term portion of deferred consideration on Avis Europe’s balance sheet.
(o) Reflects the net adjustment to our equity accounts for transaction costs charged to expense, net of applicable taxes, elimination of Avis Europe’s historical equity and the write-off of unfavorable master franchise agreement between Avis Budget Group and Avis Europe.

 

III One-time expenses:

 

     The pro forma statement of operations data do not reflect the one-time expenses that we will record on or following the closing of the Avis Europe Acquisition. The pro forma financial statements do not reflect any other arrangements that may be entered into at or after closing of the Avis Europe Acquisition. The significant one-time expenses are as follows:

 

Unfavorable master franchise agreement

   $ 126   

Transaction and financing expense

     94   

Debt breakage fees

     50   

Unfavorable license agreements

     5   

 

13