Avis Budget Group Gives Financial Update, Look into 2010
PARSIPPANY, N.J. — Avis Budget Group shared details about its fourth-quarter and full-year financial figures and is projecting lower fleet costs and a healthy used-vehicle market in 2010.
Group executives indicated that full-year revenue totaled $5.1 billion and a pretax loss of $77 million, including $20 million of restructuring charges and $33 million of non-cash impairment charges.
Excluding unusual items, the company said it generated full-year EBITDA of $243 million and a pretax loss of $6 million in 2009.
When looking only at fourth-quarter figures, the group revealed revenue of $1.2 billion and a pretax loss of $88 million, including $5 million of restructuring charges and a $32 million non-cash impairment charge. Officials also mentioned fourth quarter EBITDA of $14 million and a pretax loss of $51 million.
"In the fourth quarter, we saw a continuation of trends from the third quarter, specifically, strong pricing, tepid demand, a healthy used-car market and rigorous cost control throughout our operations. This enabled us to post significant year-over-year improvement in earnings," noted Ronald Nelson, Avis Budget Group chairman and chief executive officer.
"Our decisions to remain tight-fleeted and further reduce unprofitable transactions helped us increase our domestic car rental EBITDA by more than $80 million versus the prior-year quarter, despite lower revenues and lower rental volumes. Our ongoing cost reductions were also critical to our improved results," Nelson continued.
"As we look into 2010, we expect year-over-year rental volume comparisons to improve over the course of the year, cost-saving initiatives to provide incremental benefits and the used-car market to remain healthy. We also expect our per-unit fleet costs to decline year-over-year as we add more model-year 2010 vehicles to our fleet," Nelson went on to state.
Additional Fourth-Quarter Data
More information about the group's fourth-quarter performance indicated that total vehicle rental revenues decreased 9 percent year-over-year. Executives attributed that trend to a 19-percent decrease in rental days and a 13-percent increase in time and mileage revenue per day. They added domestic ancillary revenues grew 9 percent on a per-rental-day basis.
Avis Budget did highlight that fleet costs decreased 21 percent in the fourth quarter due to a 3-percent decrease in our per-unit fleet costs and an 18-percent reduction in its average fleet.
Furthermore, the group's other operating expenses, excluding net gasoline and insurance-related impacts, decreased 80 basis points to 52.6 percent of revenue. Officials said it principally reflected cost-saving and productivity improvement initiatives.
Elsewhere in the fourth quarter, the group's selling, general and administrative costs increased 10 basis points as a percentage of revenue to 10.9 percent primarily due to the absence of incentive compensation expense in the last quarter of 2008.
Company executives also revealed truck rental revenue decreased 2 percent and EBITDA increased as cost savings were partially offset by a 2 percent decline in rental days. However, time and mileage revenue per day was essentially unchanged.
"In the fourth quarter, we recorded a $5 million restructuring charge related to our cost-reduction and efficiency improvement plan, as well as a $32 million non-cash impairment charge related to our investment in Carey Holdings," Avis Budget Group officials noted.
Further Full-Year Analysis
When reviewing its full-year financial data, the company found that total vehicle rental revenues decreased 15 percent versus the previous year. What drove the decline was a 20-percent drop in rental days partially offset by a 6-percent rise in time and mileage revenue per day.
"Leisure pricing was strong, particularly in the second half of 2009," Avis Budget Group executives indicated.
"Commercial pricing also increased modestly. Our rental days declined year-over-year due to the effects of reduced airline passenger volumes and our actions to reduce volume from unprofitable channels and transactions," they added.
Continuing on with that point, the company said off-airport revenues decreased 15 percent to approximately $700 million. It also closed 124 under-performing off-airport locations during the year.
Officials also pointed out that domestic ancillary revenue growth of 15 percent per rental day was driven by pricing actions and higher penetration rates.
Moving on to discussing full-year fleet costs, Avis Budget Group executives revealed they decreased 16 percent. They attributed the decline to a 3-percent increase in per-unit fleet costs and a 19-percent reduction in their average fleet.
Other operating expenses, excluding net gasoline and insurance-related impacts, decreased 40 basis points to 49.9 percent of revenue, according to the company. Officials explained how it was due principally to reflecting cost-saving initiatives and productivity improvements.
Meanwhile, the group's selling, general and administrative costs decreased 20 basis points as a percentage of revenue to 10.5 percent. The company again pointed to cost-saving initiatives, partially offset by the absence of incentive compensation expense in 2008.
In regards to truck rental revenue, executives found it decreased 7 percent as rental days declined 7 percent and time and mileage revenue per day decreased 1 percent. EBITDA increased significantly, according to the company, as it achieved substantial cost savings.
Other Company News
Along with its financial statements, Avis Budget Group executives shared updates on five additional points of their operation.
The company indicated that it remained in compliance with its financial covenant requirements under its senior credit facility. Its EBITDA for the latest 12 months for covenant purposes of approximately $265 million exceeded the requirement of $155 million.
In regards to vehicle financing, executives mentioned that last November they completed a $200 million, two-year vehicle-backed financing facility to fund its domestic and/or Canadian vehicle rental fleet.
In addition, the company also said it completed the annual renewal of its $1.95 billion vehicle-backed conduit financing facility at a reduced interest rate from the prior year
"These transactions substantially completed our domestic fleet financing requirements for 2010," Avis Budget Group executives stated.
When sharing information about its convertible debt, executives emphasized the finished a $345-million, five-year convertible note offering to provide additional corporate liquidity
"The company simultaneously entered into a convertible note hedge and warrant transaction to increase the effective conversion price of the notes from the company's perspective," executives noted.
Avis Budget Group also shared an update on its fleet negotiations.
Executives pointed out that they've completed much of the process for agreements with manufacturers finalizing the purchase of 2010 model-year vehicles. They project that no single OEM will account for more than approximately 25 percent of their domestic rental fleet and per-unit fleet costs are expected to decline compared with the prior year.
Finally, the company also said its annual stockholders meeting will take place on May 26 in Wilmington, Del. Stockholders of record as of the close of business on March 31 will be entitled to vote at the annual meeting.
Avis Budget Group officials shared some of thinking about various business aspects as this year unfolds, touching again on potential rental revenue and fleet costs.
"While demand for vehicle rentals appears to have stabilized, the company expects the macroeconomic climate will remain challenging and rental volumes in the first quarter will again be lower than in the comparable prior-year period," company executives noted.
"Based on rental and reservation activity to date, the company expects year-over-year pricing comparisons will continue to be positive in the first quarter," they pointed out.
"Furthermore, the company expects rental volumes to improve sequentially over the course of 2010. The company also expects to keep the size of its rental fleet in line with rental demand, as it did throughout 2009," they went on to say.
Officials estimated that domestic fleet costs will decline 4 to 6 percent this year on a per-unit basis.
"The company is continuing its efforts to reduce costs and enhance productivity through its performance excellence initiative and five-point cost-reduction and efficiency improvement plan," Avis Budget Group executives maintained.
"The company expects that its cost-saving initiatives will provide an incremental $40 to 60 million of savings in 2010 compared to 2009, and the total annual savings from the company's actions are expected to exceed $450 million in 2010," they concluded.