Avis Budget Group reported on Feb. 13 results for its fourth quarter and full-year that ended Dec. 31, 2012. The company reported full-year revenue of $7.4 billion, an increase of 25% compared with 2011.

According to the company, the increase is primarily due to the acquisition of Avis Europe in October 2011, and was also driven by a 26% growth in rental days and a 33% increase in ancillary revenues, partially offset by a 3% decline in pricing. Excluding the acquisition of Avis Europe, revenues increased 3% during 2012.

Excluding certain items, adjusted EBITDA increased 38% to $840 million and pretax income increased to $463 million.

“We delivered record results in 2012, aided by the robust used car market in the first half of the year,” said Ronald L. Nelson, Avis Budget Group chairman and CEO. “Our results reflected organic revenue growth augmented by the additions of Avis Europe and Apex, continued margin expansion, and record earnings per share, excluding certain items.

“As we look forward, not only are we looking to deliver solid results in 2013; we have also set our sights on reaching $1 billion of Adjusted EBITDA by 2015 by focusing relentlessly on profitable growth, enhancing our customers' experience and driving efficiencies throughout our organization.”

Fourth Quarter Results

For the fourth quarter, Avis Budge Group reported revenue of $1.7 billion, a 4% increase compared with the prior-year fourth quarter. Excluding certain items, adjusted EBITDA increased 22% to $78 million, while the company reported a pretax loss of $11 million in the traditionally slower fourth quarter, excluding certain items.

Revenue increased 4% in the 2012 fourth quarter compared to same quarter in 2011, primarily due to a 6% increase in rental day volume and a 2% decrease in pricing. Ancillary revenues, excluding gas and customer recoveries, increased 8% and were driven by higher sales of insurance products and emergency roadside protection.

North America* Operations (in millions)

  2012 2011 % change
Revenue $1,060 $1,011 5%
Adjusted EBITDA $47 $16 194%

*Consisting of Avis Budget Group’s U.S. car rental and Canadian vehicle rental operations.

Revenue in North America increased 5%, primarily due to a 5% increase in volume, while pricing declined less than 1%. Pricing improved over the course of the quarter, and was up 1% in December 2012 compared to December 2011.

Adjusted EBITDA increased $31 million primarily due to higher revenue, a 4% decline in per-unit fleet costs and lower vehicle interest costs. Adjusted EBITDA includes $2 million of restructuring costs in fourth quarter 2011.

International Operations (in millions)

  2012 2011 % change
Revenue $550 $532 3%
Adjusted EBITDA $24 $37 (35%)

Revenue internationally increased 3%, primarily due to a 6% increase in volume and a 5% decrease in pricing partially due to the strong growth of Budget in Europe and the inclusion of New Zealand-based Apex Car Rentals, which was acquired in October 2012.

In its conference call on Feb. 14, Nelson pointed out Latin America and Asia-Pacific regions for significant growth and milestones, which includes the Apex acquisition, 50 new store and service points in China, launching Avis in Taiwan, and launching Budget and expanding Avis in Singapore.

Adjusted EBITDA declined $13 million compared to fourth quarter 2011, but increased $2 million excluding restructuring costs and $7 million of unfavorable currency effects. Adjusted EBITDA includes $11 million of restructuring costs in fourth quarter 2012 versus $3 million in fourth quarter 2011.

Nelson also said on the call that the Avis Europe integration remains on track and that initial synergies came in 50% above the expected rate.

Truck Rental* (in millions)

  2012 2011 % change
Revenue $87 $86 1%
Adjusted EBITDA $1 $9 (89%)

*Consisting of the company's U.S. truck rental operations

Truck rental revenue in the U.S. increased 1%, primarily due to a 2% increase in volume, a 4% decrease in pricing and a 5% increase in ancillary revenue. Adjusted EBITDA declined $8 million due to higher fleet and fleet maintenance costs. Adjusted EBITDA includes $1 million of restructuring costs in fourth quarter 2012.

Zipcar Acquisition

On Jan. 2, Avis Budget announced that it has entered into a definitive agreement to acquire Zipcar Inc. for $12.25 per share in cash, or approximately $500 million in aggregate.

The transaction is subject to approval by Zipcar shareholders — a vote that is expected March 7 — and other customary closing conditions, and is expected to be completed in March or April 2013. The company, which has received antitrust approval, expects to generate $50 million to $70 million in annual synergies as a result of the transaction.

The acquisition is expected to close March or April.


For comparison purposes, the company provided an outlook that excludes the potential effects of the pending acquisition of Zipcar.
The company expects its full-year 2013 revenue to be approximately $7.6 to $7.8 billion, a 3% to 6% increase compared to 2012. The company said it expects its adjusted EBITDA to be approximately $725 million to $825 million, excluding certain items, a decline of 2% to 14%, reflecting increased revenue and the anticipated normalization of per-unit fleet costs.

“We’ll maintain our focus on the fastest growing and most profitable segments, particularly international inbound and small business, along with specialty and premium car classes,” Nelson said. “You should also expect us to leverage marketing technology and mobility to drive reservations to our most profitable booking channels and to continue to expand our prepaid rentals. Our prepaid rentals grew over 40% last year and can only be booked through our proprietary websites.”

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