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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 Form10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June-30-2020

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____

Commission File No. 001-10308
 
Avis Budget Group, Inc.
(Exact name of registrant as specified in its charter) 
Delaware06-0918165
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
6 Sylvan Way
Parsippany,NJ07054
(Address of principal executive offices)(Zip Code)
(973)496-4700
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated FilerNon-accelerated Filer
Smaller Reporting CompanyEmerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, Par Value $0.01CARThe NASDAQ Global Select Market
The number of shares outstanding of the issuer’s common stock was 69,668,363 shares as of July 27, 2020.


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 Page
PART I
Item 1.
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 6.


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FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q may be considered “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained herein are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by any such forward-looking statements. Forward-looking statements include information concerning our future financial performance, business strategy, projected plans and objectives. These statements may be identified by the fact that they do not relate to historical or current facts and may use words such as “believes,” “expects,” “anticipates,” “will,” “should,” “could,” “may,” “would,” “intends,” “projects,” “estimates,” “plans,” and similar words, expressions or phrases. The following important factors and assumptions could affect our future results and could cause actual results to differ materially from those expressed in such forward-looking statements. Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, the Coronavirus (“COVID-19”) outbreak, and the continued restrictions that have been placed on travel in many countries as a result of the outbreak and the adverse impact on the global economy from the outbreak. These factors include, but are not limited to:

the COVID-19 outbreak and resulting economic conditions, which had, and is expected to continue to have, a significant impact on our operations, including an unprecedented decline in demand, as well as its current, and uncertain future impact, including, but not limited to, its effect on the ability or desire of people to travel due to travel restrictions, and other restrictions and orders, which is expected to continue to impact our results, operations, outlooks, plans, goals, growth, cash flows, liquidity, and stock price;

a change in our fleet costs, including as a result of a change in the cost of new vehicles, manufacturer recalls, disruption in the supply of new vehicles, and/or a change in the price at which we dispose of used vehicles either in the used vehicle market or under repurchase or guaranteed depreciation programs;

our ability to realize our estimated cost savings on a timely basis, or at all, and the amount of cash expenditures made in connection with such cost saving efforts;

the high level of competition in the mobility industry, including from new companies or technology, and the impact such competition may have on pricing and rental volume;

the results of operations or financial condition of the manufacturers of our vehicles, which could impact their ability to perform their payment obligations under our agreements with them, including repurchase and/or guaranteed depreciation arrangements, and/or their willingness or ability to make vehicles available to us or the mobility industry as a whole on commercially reasonable terms or at all particularly when COVID-19 related restrictions are lifted and travel demand increases;

the significant decline in travel demand as a result of COVID-19, including the current and any future disruptions in airline passenger traffic;

the absence of an improvement in, or further deterioration of, economic conditions, particularly during our peak season or in key market segments;

an occurrence or threat of terrorism, the current and any future pandemic diseases, natural disasters, military conflict, civil unrest or political instability in the locations in which we operate;

any substantial changes in the cost or supply of fuel, vehicle parts, energy, labor or other resources on which we depend to operate our business including the current and any future impacts as a result of COVID-19;

our ability to continue to successfully implement our business strategies, achieve and maintain cost savings and adapt our business to changes in mobility;

political, economic or commercial instability in the countries in which we operate, and our ability to conform to multiple and conflicting laws or regulations in those countries;

1

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our dependence on third-party distribution channels, third-party suppliers of other services and co-marketing arrangements with third parties;

our dependence on the performance and retention of our senior management and key employees;

risks related to completed or future acquisitions or investments that we may pursue, including the incurrence of incremental indebtedness to help fund such transactions and our ability to promptly and effectively integrate any acquired businesses or capitalize on joint ventures, partnerships and other investments;

our ability to utilize derivative instruments, and the impact of derivative instruments we utilize, which can be affected by fluctuations in interest rates, gasoline prices and exchange rates, changes in government regulations and other factors;

our exposure to uninsured or unpaid claims in excess of historical levels and our ability to obtain insurance at desired levels and the cost of that insurance;

risks associated with litigation, governmental or regulatory inquiries, or any failure or inability to comply with laws, regulations or contractual obligations or any changes in laws, regulations or contractual obligations, including with respect to personally identifiable information and consumer privacy, labor and employment, and tax;

risks related to protecting the integrity of, and preventing unauthorized access to, our information technology systems or those of our third-party vendors, and protecting the confidential information of our employees and customers against security breaches, including physical or cybersecurity breaches, attacks, or other disruptions, and compliance with privacy and data protection regulation;

any impact on us from the actions of our licensees, dealers, third-party vendors and independent operators and independent contractors and/or disputes that may arise out of our agreements with such parties;

any major disruptions in our communication networks or information systems;

risks related to tax obligations and the effect of future changes in tax laws and accounting standards;

risks related to our indebtedness, including our substantial outstanding debt obligations, potential interest rate increases, recent and potential further downgrades by rating agencies and our ability to incur substantially more debt;

our ability to obtain financing for our global operations, including the funding of our vehicle fleet through the issuance of asset-backed securities and the global lending markets;

our ability to meet the financial and other covenants contained in the agreements governing our indebtedness, or to obtain a waiver or amendment of such covenants should we be unable to meet such covenants;

our ability to accurately estimate our future results;

the further deterioration in general economic conditions due to COVID-19, which could be an indicator that our goodwill or other intangible assets are impaired and could result in a future impairment charge to earnings;

risks related to actions by activist stockholders and responses from our Board of Directors and senior management; and

other business, economic, competitive, governmental, regulatory, political or technological factors affecting our operations, pricing or services.

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We operate in a continuously changing business environment and new risk factors emerge from time to time. New risk factors, factors beyond our control, or changes in the impact of identified risk factors may cause actual results to differ materially from those set forth in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. Moreover, we do not assume responsibility for the accuracy and completeness of those statements. Other factors and assumptions not identified above, including those discussed herein, including but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 2 and “Risk Factors” in Item 1A and in similarly titled sections set forth in Item 7 and in Item 1A and in other portions of our 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 20, 2020 (the “2019 Form 10-K”), may contain forward- looking statements and involve uncertainties that could cause actual results to differ materially from those projected in any forward-looking statements. Such statements are based upon assumptions and known risks and uncertainties.

Although we believe that our assumptions are reasonable, any or all of our forward-looking statements may prove to be inaccurate and we can make no guarantees about our future performance. Should unknown risks or uncertainties materialize or underlying assumptions prove inaccurate, actual results could differ materially from past results and/or those anticipated, estimated or projected. We undertake no obligation to release any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(In millions, except per share data)
(Unaudited)
 
 Three Months Ended 
June 30,
Six Months Ended 
June 30,
 2020201920202019
Revenues$760  $2,337  $2,513  $4,257  
Expenses
Operating622  1,172  1,680  2,243  
Vehicle depreciation and lease charges, net374  543  833  1,028  
Selling, general and administrative132  313  383  597  
Vehicle interest, net87  90  170  171  
Non-vehicle related depreciation and amortization71  66  140  133  
Interest expense related to corporate debt, net:
Interest expense51  48  99  90  
Early extinguishment of debt3    7    
Restructuring and other related charges28  23  72  44  
Transaction-related costs, net1  1  3  6  
Total expenses1,369  2,256  3,387  4,312  
Income (loss) before income taxes(609) 81  (874) (55) 
Provision for (benefit from) income taxes(128) 19  (235) (26) 
Net income (loss)$(481) $62  $(639) $(29) 
Comprehensive income (loss)$(448) $60  $(705) $(36) 
Earnings (loss) per share
Basic$(6.91) $0.81  $(8.96) $(0.39) 
Diluted$(6.91) $0.81  $(8.96) $(0.39) 
See Notes to Consolidated Condensed Financial Statements (Unaudited).
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Avis Budget Group, Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions, except par value)
(Unaudited)
June 30, 
2020
December 31, 2019
Assets
Current assets:
Cash and cash equivalents$1,258  $686  
Receivables, net537  911  
Other current assets445  548  
Total current assets2,240  2,145  
Property and equipment, net729  792  
Operating lease right-of-use assets2,714  2,596  
Deferred income taxes1,737  1,662  
Goodwill1,077  1,101  
Other intangibles, net790  798  
Other non-current assets227  217  
Total assets exclusive of assets under vehicle programs9,514  9,311  
Assets under vehicle programs:
Program cash79  211  
Vehicles, net10,810  12,177  
Receivables from vehicle manufacturers and other562  778  
Investment in Avis Budget Rental Car Funding (AESOP) LLC—related party725  649  
12,176  13,815  
Total assets$21,690  $23,126  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other current liabilities$2,084  $2,206  
Short-term debt and current portion of long-term debt19  19  
Total current liabilities2,103  2,225  
Long-term debt3,884  3,416  
Long-term operating lease liabilities2,226  2,140  
Other non-current liabilities735  757  
Total liabilities exclusive of liabilities under vehicle programs8,948  8,538  
Liabilities under vehicle programs:
Debt2,483  3,132  
Debt due to Avis Budget Rental Car Funding (AESOP) LLC—related party8,057  7,936  
Deferred income taxes2,013  2,189  
Other342  675  
12,895  13,932  
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.01 par value—authorized 10 shares; none issued and outstanding, respectively
    
Common stock, $0.01 par value—authorized 250 shares; issued 137 shares, respectively
1  1  
Additional paid-in capital6,670  6,741  
Accumulated deficit(1,425) (785) 
Accumulated other comprehensive loss(223) (157) 
Treasury stock, at cost—67 and 63 shares, respectively(5,176) (5,144) 
Total stockholders’ equity(153) 656  
Total liabilities and stockholders’ equity$21,690  $23,126  

See Notes to Consolidated Condensed Financial Statements (Unaudited).
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Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited) 
 Six Months Ended 
June 30,
 20202019
Operating activities
Net loss$(639) (29) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Vehicle depreciation748  941  
Amortization of right-of-use assets424  486  
(Gain) loss on sale of vehicles, net(13) (32) 
Non-vehicle related depreciation and amortization140  133  
Stock-based compensation2  12  
Amortization of debt financing fees16  16  
Early extinguishment of debt costs7    
Net change in assets and liabilities:
Receivables243  (77) 
Income taxes and deferred income taxes(240) (77) 
Accounts payable and other current liabilities(98) 72  
Operating lease liabilities(422) (483) 
Other, net182  3  
Net cash provided by operating activities350  965  
Investing activities
Property and equipment additions(64) (117) 
Proceeds received on asset sales4  6  
Net assets acquired (net of cash acquired)(60) (54) 
Other, net  81  
Net cash used in investing activities exclusive of vehicle programs(120) (84) 
Vehicle programs:
Investment in vehicles(4,196) (8,715) 
Proceeds received on disposition of vehicles4,709  5,773  
Investment in debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party
(175) (167) 
Proceeds from debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party
99  47  
437  (3,062) 
Net cash provided by (used in) investing activities317  (3,146) 

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Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(In millions)
(Unaudited)
 Six Months Ended 
June 30,
 20202019
Financing activities
Proceeds from long-term borrowings669  2  
Payments on long-term borrowings(198) (12) 
Issuance of common stock15    
Repurchases of common stock(118) (4) 
Debt financing fees(17)   
Other, net  (17) 
Net cash provided by (used in) financing activities exclusive of vehicle programs
351  (31) 
Vehicle programs:
Proceeds from borrowings9,042  11,758  
Payments on borrowings(9,610) (9,688) 
Debt financing fees(7) (12) 
(575) 2,058  
Net cash provided by (used in) financing activities(224) 2,027  
Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash
(4) 4  
Net increase (decrease) in cash and cash equivalents, program and restricted cash
439  (150) 
Cash and cash equivalents, program and restricted cash, beginning of period900  735  
Cash and cash equivalents, program and restricted cash, end of period$1,339  $585  
See Notes to Consolidated Condensed Financial Statements (Unaudited).
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Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
(Unaudited) 
Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance at March 31, 2020137.1  $1  $6,677  $(944) $(256) (67.5) $(5,186) $292  
Comprehensive loss:
Net loss—  —  —  (481) —  —  —  
Other comprehensive income—  33  —  —  
Total comprehensive loss(448) 
Non-controlling interest—  —  (2) —  —  —  —  (2) 
Net activity related to restricted stock units—  —  (5) —  —  0.1  10  5  
Balance at June 30, 2020137.1  $1  $6,670  $(1,425) $(223) (67.4) $(5,176) $(153) 
 
Balance at March 31, 2019137.1  $1  $6,737  $(1,178) $(137) (61.1) $(5,099) $324  
Comprehensive income:
Net income—  —  —  62  —  —  —  
Other comprehensive loss—  —  —  —  (2) —  —  
Total comprehensive income60  
Net activity related to restricted stock units—  —  2  —  —  —  6  8  
Option premiums paid—  —  (16) —  —  —  —  (16) 
Balance at June 30, 2019137.1  $1  $6,723  $(1,116) $(139) (61.1) $(5,093) $376  
Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance at December 31, 2019137.1  $1  $6,741  $(785) $(157) (63.2) $(5,144) $656  
Cumulative effect of accounting change
—  —  —  (1) —  —  —  (1) 
Comprehensive loss:
Net loss—  —  —  (639) —  —  —  
Other comprehensive loss—  —  —  —  (66) —  —  
Total comprehensive loss(705) 
Non-controlling interest—  —  (2) —  —  —  —  (2) 
Net activity related to restricted stock units
—  —  (84) —  —  0.4  81  (3) 
Issuance of common stock
—  —  15  —  —  0.4  —  15  
Repurchase of common stock—  —  —  —  —  (5.0) (113) (113) 
Balance at June 30, 2020137.1  $1  $6,670  $(1,425) $(223) (67.4) $(5,176) $(153) 
Balance at December 31, 2018137.1  $1  $6,771  $(1,091) $(133) (61.5) $(5,134) $414  
Cumulative effect of accounting change
—  —  —  4  1  —  —  5  
Comprehensive loss
Net loss—  —  —  (29) —  —  —  
Other comprehensive loss—  —  —  —  (7) —  —  
Total comprehensive loss(36) 
Net activity related to restricted stock units
—  —  (27) —  —  0.3  36  9  
Exercise of stock options—  —  (5) —  —  0.1  5  —  
Option premiums paid—  —  (16) —  —  —  —  (16) 
Balance at June 30, 2019137.1  $