Avis Budget Group Says Financial Outlook on Track for Record Year

Avis Budget Group Inc. reported Nov. 1 its results for the third quarter that ended Sept. 30, 2012. The company reported net income of $171 million, excluding certain items, compared to 2011 third quarter net income of $129 million.

In addition, the company reported worldwide revenue of $2.2 billion, a 34% increase compared with the prior-year third quarter.

According to Avis Budget Group, these results are primarily due to the company’s increase in international revenue to $703 million. This is an increase of 302% compared to the third quarter of 2011, when the company acquired Avis Europe. For the 2012 third quarter, the acquisition of Avis Europe directly contributed $526 million in revenue and adjusted EBITDA of $102 million, excluding certain items.

For North America, which includes Canada operations, Avis Budget Group’s revenue saw a 2% increase over the same period last year at revenues of almost $1.4 billion and adjusted EBITDA of $232 million. The company said that the revenue increased primarily due to a 4% increase in volume and a 7% increase in ancillary revenues, partially offset by a 3% year-over-year decline in pricing.

Avis Budget Group also reported that in the North America segment, the company experienced lower operating and vehicle interest costs, which were partially offset by a 3% increase in per-unit fleet costs.

"Our third quarter results reflect strong summer volume growth and a significant contribution from the Avis Europe acquisition," said Ronald L. Nelson, Avis Budget Group chairman and CEO. "While our revised earnings estimates acknowledge the softness in European travel demand, the strategic initiatives we laid out more than a year ago continue to pay dividends, and we are well on our way toward reporting record revenue and earnings for 2012."

Overall revenue in the company's Europe, Middle East and Africa (EMEA) operations increased 5% on a constant-currency basis in the third quarter of 2012 compared to the same period last year, and declined 6% on a reported basis. The change in revenue reflects a 9% increase in rental days and a 16% decline in average daily rate, according to Avis Budget. Meanwhile, pricing decreased 6% excluding currency effects and including the impact of the growth in the Budget brand, Avis Budget reported.

Avis Budget Group also commented that it plans to reposition its truck rental business by restructuring the segment over the next several quarters. The company said it will do this by closing certain rental locations and reducing its truck rental fleet, which it believes will improve utilization, lower the cost base and drive better pricing. The company anticipates it will incur costs of approximately $20 million in restructuring this business.

Outlook

Avis Budget Group expects its full-year 2012 revenue to be approximately $7.3 billion — a 24% increase compared to 2011. The company expects its 2012 adjusted EBITDA to be approximately $825 million to $840 million, excluding certain items, an increase of 35% to 38% compared to the prior year.

The narrowing of the estimated EBITDA range reflects recent trends, including difficult economic conditions in Europe, which are impacting travel demand, according to Avis Budget.

As well, North America fleet costs are expected to decline 6-8% on a per-unit basis compared to 2011. The company also continues to expect interest expense related to corporate debt to be approximately $265 million.


You can see more quarterly financial statements from Avis Budget Group and other public car rental companies here. 

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