Avis Budget Group Inc. Reports Operating Results (10-Q)
Avis Budget Group Inc. has a market cap of $1.36 billion; its shares were traded at around $13.35 with and P/S ratio of 0.3. CAR is in the portfolios of Ken Heebner of CAPITAL GROWTH MANAGEMENT LP, Jeremy Grantham of GMO LLC.
Highlight of Business Operations: Total expenses decreased $45 million (4%) principally due to (i) a $58 million (16%) decrease in vehicle depreciation and lease charges resulting from an 11% decline in our average car rental fleet and a reduction in per-unit depreciation costs, (ii) a $28 million (4%) decrease in direct operating expenses largely resulting from the 12% decrease in car rental days, reduced staffing levels and other cost-saving actions and (iii) a $5 million decrease in restructuring charges. These year-over-year decreases were partially offset by (i) a $40 million expense related to the extinguishment of a portion of our corporate debt and associated interest rate swaps and (ii) a $36 million adverse impact from foreign currency exchange rates. As a result of these items, our net loss decreased $11 million.
The revenue decrease of $80 million was comprised of a $79 million (11%) decrease in T&M revenue and a $1 million (0%) decrease in ancillary revenues. The decrease in T&M revenue was principally the result of a 13% decrease in rental days partially offset by a 3% increase in T&M revenue per day. The $1 million decrease in ancillary revenues reflects the reduced rental days offset by a 12% increase in ancillary revenues per rental day from GPS rentals, sales of insurance products and other items.
We continued to achieve significant benefits from our cost-saving initiatives. EBITDA reflected a $44 million (8%) decrease in operating expenses, including a $31 million decrease in maintenance and damage, agency operator commissions, shuttling, credit card fees, and other costs amid lower rental volumes and a $7 million decrease in employee costs, rents and other expenses related primarily to reduced staffing levels and the closure of unprofitable locations. EBITDA also benefited from $59 million (20%) of decreased fleet depreciation and lease charges, reflecting an 11% decrease in the average size of our domestic rental fleet and a 10% decrease in per-unit fleet costs.
The revenue increase of $37 million was comprised of a $26 million (23%) increase in T&M revenue and an $11 million (22%) increase in ancillary revenues. The total increase in revenue includes a $43 million increase related to foreign currency exchange rates, impacting T&M revenue by $29 million and ancillary revenues by $14 million, and was largely offset in EBITDA by the opposite impact on expenses of $36 million. The increase in T&M revenue was principally driven by a 36% increase in T&M revenue per rental day (8% excluding exchange-rate effects), offset by a 10% decrease in rental days.
Assets under vehicle programs increased $170 million primarily due to a $373 million increase in our net vehicles, related mainly to the increase in our Domestic vehicle rental fleet from December 31, 2009, offset by (i) a $154 million decrease in our program cash mainly due to the repayment of certain term notes that reached maturity and (ii) a $62 million decrease in receivables from vehicle manufacturers.
Stockholders equity increased $4 million principally due to a $40 million increase in accumulated other comprehensive income, primarily resulting from the reclassification of $36 million of unrealized losses on our interest rate swaps to earnings in connection with the extinguishment of a portion of our floating rate term loan, offset by an increase in our accumulated deficit due to a $38 million net loss for the period.
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