Avis Budget Ups Profit in Q2

Avis Budget Group Inc. reported Wednesday the results for its second quarter, which ended June 30, 2010. The company had revenue of $1.3 billion, a decrease of 1 percent versus second quarter 2009, and pretax income of $29 million in second quarter 2010 compared with a $2 million pre-tax loss in the prior year.

Second quarter adjusted EBITDA was $98 million, excluding restructuring and transaction-related costs, compared with $67 million in the second quarter 2009. Pre-tax income was $34 million, compared with pre-tax income of $6 million in the second quarter 2009, excluding the same items. All three of the company's operating segments reported significant growth in adjusted EBITDA and margins.

"Our second quarter results demonstrate that we are continuing to make progress toward our goal of restoring margins and increasing profitability," said Ronald L. Nelson, Avis Budget Group chairman and chief executive officer. "Our rental-day volume comparisons continue to improve each quarter; our per-unit fleet costs have declined; and our highly profitable ancillary revenues again increased on a per-rental-day basis. In addition, our cost-saving initiatives are generating meaningful benefits amid the current moderate economic recovery. We're encouraged that improving revenue trends, incremental cost savings and declining per-unit fleet costs are providing us with the opportunity to show solid earnings growth this year."

In the second quarter, total car rental revenues decreased 2 percent year-over-year, driven primarily by a 5 percent decrease in rental days, offset by a 1 percent increase in average daily rate. In addition, domestic ancillary revenue increased 5 percent per rental day in the quarter. Average daily rate decreased less than 1 percent compared with the prior year, excluding the effects of foreign currency.

The company's car rental depreciation costs decreased 13 percent due to an 11 percent reduction in per-unit depreciation costs and a 3 percent decline in our average fleet. Excluding gas, other operating expenses decreased 100 basis points to 47.1 percent of revenue, principally reflecting cost-saving and productivity improvement initiatives. Selling, general and administrative costs increased $6 million compared to the prior year, excluding the effects of foreign currency, reflecting higher marketing and other costs, partially offset by cost savings.

Domestic car rental revenue declined 5 percent primarily due to a 6 percent decrease in rental days. Average daily rate decreased less than 1 percent in the quarter, but was up slightly in the month of June, reflecting the benefit of our June 1 price increase.

Despite the decline in rental volumes, adjusted EBITDA increased $15 million as a result of a 14 percent decrease in per-unit depreciation costs and our cost-saving initiatives. In addition, ancillary revenues grew 5 percent on a per-rental-day basis, including a year-over-year increase in where2 GPS rental penetration. Adjusted EBITDA includes $2 million of restructuring costs in second quarter 2010 compared with $6 million in second quarter 2009.

International car rental revenue increased 16 percent primarily due to a 13 percent increase in average daily rate. Excluding foreign-exchange effects, average daily rate was essentially unchanged. Adjusted EBITDA increased 78 percent year-over-year primarily due to lower per-unit depreciation costs on a constant-currency basis, and a $9 million favorable impact from exchange rates. Adjusted EBITDA included $1 million of restructuring costs in second quarter 2009.

Truck rental revenue increased 3 percent primarily due to a 2 percent increase in average daily rate and a 1 percent increase in rental days. Adjusted EBITDA improved due to increased revenue, lower per-unit fleet costs and lower interest costs. Adjusted EBITDA included $1 million of restructuring costs in second quarter 2009.

To view Avis Budget's complete second-quarter report, click here.

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