Avis Budget Group Reports Revenue Dip, Earnings Boost

Avis Budget Group Inc. reported third quarter revenue of $1.5 billion, a decrease of 14 percent 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 percent to $165 million and pretax income increased 17 percent to $102 million. "The operating trends that characterized the second quarter continued into the third quarter, with strong domestic leisure pricing, up 13 percent year-over-year, offsetting soft demand levels. Domestic pricing increased 9 percent 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. The car rental revenues decrease was driven primarily by a 21 percent decrease in rental days. Time and mileage revenue per day increased 9 percent excluding the effects of foreign-exchange movements and increased 9 percent on a reported basis. Ancillary revenues (excluding gas and customer recoveries) increased 8 percent per rental day year-over-year.

Car fleet costs decreased 25 percent primarily due to a 21 percent reduction in average fleet and a better-than-anticipated 4 percent decrease in per-unit fleet costs. Other operating expenses decreased 140 basis points to 47.7 percent 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 percent 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 percent 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.

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