Avis Budget Group Reports Income Decline in First Quarter

Avis Budget Group Inc. reported results for its first quarter ended March 31, 2013. For the quarter, the company reported revenue of $1.7 billion, a 4% increase compared with the prior-year first quarter. Excluding certain items, adjusted EBITDA declined 22% to $93 million. The company reported net income of $9 million, excluding certain items, and a GAAP net loss of $46 million due to “debt-extinguishment expenses, transaction-related charges and restructuring costs,” the company reported.

"The first quarter progressed largely as we had anticipated, highlighted by strong year-over-year pricing trends in North America, which helped offset expected increases in fleet costs, and marked by challenging economic conditions in Europe," said Ronald L. Nelson, Avis Budget Group Chairman and chief executive officer, in a statement. "Our acquisition of Zipcar is progressing as planned, and we are already implementing actions to capture the benefits we expect to realize from this transaction."

Total company revenue increased 4% in first quarter 2013 compared to first quarter 2012 primarily due to a 2% increase in rental days and a 2% increase in pricing. First quarter Adjusted EBITDA decreased 22% to $93 million, excluding certain items, primarily due to increased costs incurred in the company's international, truck rental and “Corporate & Other” operations. Higher pricing and reduced vehicle-related interest expense largely offset increased fleet costs in North America.

In North America, revenue increased 6% primarily due to a 1% increase in volume and a 4% increase in pricing, including an 8% increase in leisure pricing. Adjusted EBITDA decreased 3% primarily due to a 28% increase in per-unit fleet costs largely offset by higher pricing and reduced vehicle-related interest expense.

Zipcar Immaterial to Results

As previously announced, the company completed its acquisition of Zipcar Inc., the world's largest car sharing network, on March 14, 2013. For the quarter, the acquisition was immaterial to the company's results of operations, contributing approximately $14 million to revenues and $1 million to adjusted EBITDA, the company reported. For the three months ended March 31, 2013, Zipcar's revenue increased 10% year-over-year, to $65 million. Zipcar had approximately 792,000 members as of March 31, 2013, an increase of 12% from a year earlier.

The company expects Zipcar to contribute approximately $260 million to revenue in 2013. The company also expects Zipcar will contribute $25 to $30 million to Adjusted EBITDA this year, including synergies. Primarily because of the estimated $22 million of incremental interest expense associated with the transaction, the company does not expect the Zipcar acquisition to significantly impact its pretax or net income in 2013, excluding certain items.

The company continues to expect to achieve annual synergies of $50 million to $70 million within the first two years of the acquisition.

Outlook

The company expects its full-year 2013 revenue to be $7.8 billion to $8.0 billion, a 6% to 9% increase compared to 2012, and adjusted EBITDA to be $750 million to $855 million. The changes in the company's expected 2013 revenue and adjusted EBITDA are entirely due to the acquisition of Zipcar.
The company continues to expect per-unit fleet costs in its North America segment to increase 15% to 20% to roughly $275 to $290 per month in 2013. Total company fleet costs are also expected to be $275 to $290 per unit per month in 2013, an increase of approximately 11% to 17% compared to 2012.

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