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car-20210630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021


☐			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)

Delaware

06-0918165

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

6 Sylvan Way

Parsippany,

07054

(Address of principal executive offices)

(Zip Code)

(973)

496-4700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.01	CAR	The NASDAQ Global Select Market

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 Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging 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 ☒

The number of shares outstanding of the issuer’s common stock was 66,542,531 shares as of July 30, 2021.

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		Page
PART I	Financial Information
Item 1.	Financial Statements
	Consolidated Condensed Statements of Comprehensive Income for the Three and Six Months Ended June 30 , 2021 and 2020 (Unaudited)	4
	Consolidated Condensed Balance Sheets as of June 30 , 2021 and December 31, 2020 (Unaudited)	5
	Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30 , 2021 and 2020 (Unaudited)	6
	Consolidated Condensed Statements of Stockholders’ Equity for the Three and Six Months Ended June 30 , 2021 and 2020 (Unaudited)	8
	Notes to Consolidated Condensed Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38
PART II	Other Information
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 6.	Exhibits	39
	Signatures	40

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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”) pandemic, and the continued restrictions that have been placed on travel in many countries and the resulting adverse impact on the global economy. These factors include, but are not limited to:

•COVID-19 and its resulting impact on the global economy, which has had, and is expected to continue to have, a significant impact on our operations, including unprecedented volatility in demand levels, 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, including due to travel restrictions, and other restrictions and orders, which may continue to impact our results, operations, outlooks, plans, goals, growth, cash flows, liquidity, and stock price;

•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;

•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, shortages in semiconductors used in new vehicle production, 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;

•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 as COVID-19 related restrictions are lifted and travel demand increases;

•the significant volatility 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;

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

•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 use of 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;

•failure to achieve our business plans, deterioration in general economic conditions of the countries in which we operate, or significant changes in the assumptions and estimates that are used in our impairment testing for goodwill or intangible assets, which could result in a significant impairment of our goodwill; and

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

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

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those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 2 and “Risk Factors” in Item 1A in this quarterly report and in similarly titled sections set forth in Item 7 and in Item 1A and in other portions of our 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 17, 2021 (the “2020 Form 10-K”), may cause actual results to differ materially from those projected in any forward-looking statements.

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,
		2021		2020		2021		2020
Revenues		$	2,371	$	760	$	3,743	$	2,513

Expenses
	Operating	1,032		622		1,864		1,680
	Vehicle depreciation and lease charges, net	338		374		592		833
	Selling, general and administrative	294		132		476		383
	Vehicle interest, net	77		87		152		170
	Non-vehicle related depreciation and amortization	62		71		130		140
	Interest expense related to corporate debt, net:
	Interest expense	59		51		120		99
	Early extinguishment of debt	—		3		129		7
	Restructuring and other related charges	22		28		42		72
	Transaction-related costs, net	1		1		2		3
Total expenses		1,885		1,369		3,507		3,387

Income (loss) before income taxes		486		(609)		236		(874)
Provision for (benefit from) income taxes		88		(128)		8		(235)

Net income (loss)		$	398	$	(481)	$	228	$	(639)

Comprehensive income (loss)		$	400	$	(448)	$	254	$	(705)

Earnings (loss) per share
	Basic	$	5.69	$	(6.91)	$	3.26	$	(8.96)
	Diluted	$	5.63	$	(6.91)	$	3.23	$	(8.96)

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, 2021		December 31, 2020
Assets
Current assets:
	Cash and cash equivalents	$	1,324	$	692
	Receivables, net	797		647
	Other current assets	615		456
Total current assets		2,736		1,795

Property and equipment, net		578		657
Operating lease right-of-use assets		2,407		2,560
Deferred income taxes		1,349		1,198
Goodwill		1,127		1,137
Other intangibles, net		739		774
Other non-current assets		281		244
Total assets exclusive of assets under vehicle programs		9,217		8,365

Assets under vehicle programs:
	Program cash	84		72
	Vehicles, net	11,728		8,153
	Receivables from vehicle manufacturers and other	215		281
	Investment in Avis Budget Rental Car Funding (AESOP) LLC—related party	769		667
		12,796		9,173
Total assets		$	22,013	$	17,538

Liabilities and stockholders’ equity
Current liabilities:
	Accounts payable and other current liabilities	$	2,446	$	2,034
	Short-term debt and current portion of long-term debt	21		19
Total current liabilities		2,467		2,053

Long-term debt		4,277		4,191
Long-term operating lease liabilities		1,947		2,078
Other non-current liabilities		667		731
Total liabilities exclusive of liabilities under vehicle programs		9,358		9,053

Liabilities under vehicle programs:
	Debt	2,235		1,777
	Debt due to Avis Budget Rental Car Funding (AESOP) LLC—related party	8,173		5,080
	Deferred income taxes	1,537		1,383
	Other	618		400
		12,563		8,640
Commitments and contingencies (Note 12)

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 capital	6,646		6,668
	Accumulated deficit	(1,242)		(1,470)
	Accumulated other comprehensive loss	(161)		(187)
	Treasury stock, at cost— 67 shares, respectively	(5,152)		(5,167)
Total stockholders’ equity		92		(155)
Total liabilities and stockholders’ equity		$	22,013	$	17,538

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,
			2021		2020
Operating activities
Net income (loss)			$	228	$	(639)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Vehicle depreciation		595		748
	Amortization of right-of-use assets		492		424
	(Gain) loss on sale of vehicles, net		(89)		(13)
	Non-vehicle related depreciation and amortization		130		140

	Stock-based compensation		14		2
	Amortization of debt financing fees		17		16
	Early extinguishment of debt costs		129		7
	Net change in assets and liabilities:
		Receivables	(117)		243
		Income taxes and deferred income taxes	(42)		(240)
		Accounts payable and other current liabilities	428		(98)
	Operating lease liabilities		(489)		(422)
	Other, net		(41)		182
Net cash provided by operating activities			1,255		350

Investing activities
Property and equipment additions			(30)		(64)
Proceeds received on asset sales			2		4
Net assets acquired (net of cash acquired)			(5)		(60)
Other, net			(5)		—
Net cash used in investing activities exclusive of vehicle programs			(38)		(120)

Vehicle programs:
	Investment in vehicles		(6,203)		(4,196)
	Proceeds received on disposition of vehicles		2,308		4,709
	Investment in debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party		(163)		(175)
	Proceeds from debt securities of Avis Budget Rental Car Funding (AESOP) LLC—related party		61		99
			(3,997)		437
Net cash provided by (used in) investing activities			(4,035)		317

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Avis Budget Group, Inc.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)

(In millions)

(Unaudited)


		Six Months Ended June 30,
		2021		2020
Financing activities
Proceeds from long-term borrowings		1,100		669
Payments on long-term borrowings		(1,105)		(198)
Net change in short-term borrowings		2		—
Issuance of common stock		—		15
Repurchases of common stock		(22)		(118)
Debt financing fees		(14)		(17)

Net cash provided by (used in) financing activities exclusive of vehicle programs		(39)		351

Vehicle programs:
	Proceeds from borrowings	8,200		9,042
	Payments on borrowings	(4,718)		(9,610)
	Debt financing fees	(13)		(7)
		3,469		(575)
Net cash provided by (used in) financing activities		3,430		(224)

Effect of changes in exchange rates on cash and cash equivalents, program and restricted cash		(4)		(4)

Net increase in cash and cash equivalents, program and restricted cash		646		439
Cash and cash equivalents, program and restricted cash, beginning of period		765		900
Cash and cash equivalents, program and restricted cash, end of period		$	1,411	$	1,339

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 Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount								Shares	Amount
Balance at March 31, 2021	137.1	$	1	$	6,642	$	(1,640)	$	(163)	(67.2)	$	(5,156)	$	(316)


Comprehensive income:
Net income	—	—		—		398		—		—	—
Other comprehensive income						—		2		—	—
Total comprehensive income													400


Net activity related to restricted stock units	—	—		4		—		—		0.1	4		8



Balance at June 30, 2021	137.1	$	1	$	6,646	$	(1,242)	$	(161)	(67.1)	$	(5,152)	$	92

Balance at March 31, 2020	137.1	$	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, 2020	137.1	$	1	$	6,670	$	(1,425)	$	(223)	(67.4)	$	(5,176)	$	(153)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount								Shares	Amount
Balance at December 31, 2020	137.1	$	1	$	6,668	$	(1,470)	$	(187)	(67.3)	$	(5,167)	$	(155)


Comprehensive income:
Net income	—	—		—		228		—		—	—
Other comprehensive income	—	—		—		—		26		—	—
Total comprehensive income													254



Net activity related to restricted stock units	—	—		(22)		—		—		0.3	25		3



Repurchases of common stock	—	—		—		—		—		(0.1)	(10)		(10)
Balance at June 30, 2021	137.1	$	1	$	6,646	$	(1,242)	$	(161)	(67.1)	$	(5,152)	$	92

Balance at December 31, 2019	137.1	$	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

Repurchases of common stock	—	—		—		—		—		(5.0)	(113)		(113)
Balance at June 30, 2020	137.1	$	1	$	6,670	$	(1,425)	$	(223)	(67.4)	$	(5,176)	$	(153)

See Notes to Consolidated Condensed Financial Statements (Unaudited).

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Avis Budget Group, Inc.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

(Unless otherwise noted, all dollar amounts in tables are in millions, except per share amounts)

1. Basis of Presentation

Avis Budget Group, Inc. provides mobility solutions to businesses and consumers worldwide. The accompanying unaudited Consolidated Condensed Financial Statements include the accounts and transactions of Avis Budget Group, Inc. and its subsidiaries, as well as entities in which Avis Budget Group, Inc. directly or indirectly has a controlling financial interest (collectively, the “Company”), and have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim financial reporting.

The Company operates the following reportable business segments:

•Americas—consisting primarily of (i) vehicle rental operations in North America, South America, Central America and the Caribbean, (ii) car sharing operations in certain of these markets, and (iii) licensees in the areas in which the Company does not operate directly.

•International—consisting primarily of (i) vehicle rental operations in Europe, the Middle East, Africa, Asia and Australasia, (ii) car sharing operations in certain of these markets, and (iii) licensees in the areas in which the Company does not operate directly.

The operating results of acquired businesses are included in the accompanying Consolidated Condensed Financial Statements from the dates of acquisition. Differences between the preliminary allocation of purchase price and the final allocation for the Company’s 2020 acquisitions of various licensees were not material.

In presenting the Consolidated Condensed Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”), management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates. In management’s opinion, the Consolidated Condensed Financial Statements contain all adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. These financial statements should be read in conjunction with the Company’s 2020 Form 10-K.

Liquidity and Management’s Plans

The COVID-19 pandemic, which rapidly spread across the globe in 2020, resulted in an economic slowdown and significant disruptions in travel that had a negative impact on our business, specifically a significant decline in vehicle rental volumes. During the first half of 2021, global travel restrictions were eased, leading to an increase in travel demand and an improvement in general economic conditions. The Company believes the full extent of the ongoing impact of this virus on its long-term operational performance and liquidity will depend on future developments, including those outside of its control, such as the spread of new variants of the virus which may be resistant to currently approved vaccines and the implementation of new or continued travel restrictions.

In April 2020, the Company entered into an amendment (the “Amendment”) to its senior credit facilities, consisting of an approximately $1.2 billion term loan maturing in 2027 and a $1.8 billion revolving credit facility maturing in 2023, which remained in place after the Amendment. The Amendment provided for relief from a quarterly-tested leverage covenant contained in the credit agreement governing the senior credit facilities until June 30, 2021, during which time additional restrictions and requirements were also imposed. The Company subsequently further amended the credit agreement in February 2021 to permit refinancing of certain existing indebtedness and in July 2021 to remove the restrictions imposed in April 2020, increase the revolving credit facility to $1.95 billion and extend the maturity of the facility to 2026. As a result, the Company has no meaningful corporate debt maturities until 2024.

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The Company cannot assure its assumptions used to estimate its liquidity requirements will be correct because it has never previously experienced such volatility in demand, and as a consequence, its ability to be predictive is uncertain. The Company plans to finance routine Asset Backed Securities (“ABS”) maturities with program cash on hand, available revolving debt capacity, new term note issuances and fleet sales. As a result, based on current operational assumptions, the Company believes it has adequate liquidity beyond the next twelve months.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are fully described in Note 2, “Summary of Significant Accounting Policies,” in the 2020 Form 10-K.

Cash and cash equivalents, Program cash and Restricted cash. The following table provides a detail of cash and cash equivalents, program and restricted cash reported within the Consolidated Condensed Balance Sheets to the amounts shown in the Consolidated Condensed Statements of Cash Flows.


	As of June 30,
	2021		2020
Cash and cash equivalents	$	1,324	$	1,258
Program cash	84		79
Restricted cash (a)	3		2
Total cash and cash equivalents, program and restricted cash	$	1,411	$	1,339

________

(a)Included within other current assets.

Vehicle Programs. The Company presents separately the financial data of its vehicle programs. These programs are distinct from the Company’s other activities since the assets under vehicle programs are generally funded through the issuance of debt that is collateralized by such assets. The income generated by these assets is used, in part, to repay the principal and interest associated with the debt. Cash inflows and outflows relating to the acquisition of such assets and the principal debt repayment or financing of such assets are classified as activities of the Company’s vehicle programs. The Company believes it is appropriate to segregate the financial data of its vehicle programs because, ultimately, the source of repayment of such debt is the realization of such assets.

Transaction-related costs, net. Transaction-related costs, net are classified separately in the Consolidated Condensed Statements of Comprehensive Income. These costs are comprised of expenses related to acquisition-related activities such as due diligence and other advisory costs, expenses related to the integration of the acquiree’s operations with those of the Company, including the implementation of best practices and process improvements, non-cash gains and losses related to re-acquired rights, expenses related to pre-acquisition contingencies and contingent consideration related to acquisitions.

Currency Transactions. The Company records the gain or loss on foreign-currency transactions on certain intercompany loans and the gain or loss on intercompany loan hedges within interest expense related to corporate debt, net. During the three months ended June 30, 2021 and 2020, the Company recorded an immaterial amount in each period, related to such items. During the six months ended June 30, 2021 and 2020, the Company recorded an immaterial amount and a loss of $6 million, respectively, related to such items.

Divestitures. In May 2021, the Company completed the sale of its operation in Argentina to Urbiz S.A. for $4 million. As part of the sale, Urbiz S.A. agreed to pay the purchase price, plus interest, over two years for the right to operate the Avis and Budget brands. During the six months ended June 30, 2021, the Company recorded a loss of $14 million, net of the impact of foreign currency adjustments, within restructuring and other related charges. In addition, the Company paid severance to terminated employees of $1 million.

Investments. As of June 30, 2021 and December 31, 2020, the Company had equity method investments with a carrying value of $66 million and $63 million, respectively, which are recorded within other non-current assets. Earnings from the Company’s equity method investments are reported within operating expenses. For the three and six months ended June 30, 2021, the Company recorded $2 million, respectively, and for the three and six months ended June 30, 2020, the Company recorded $1 million,

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respectively, related to its equity method investments.

Nonmarketable Equity Securities. As of June 30, 2021 and December 31, 2020, the Company had nonmarketable equity securities with a carrying value of $8 million, respectively, which are recorded within other non-current assets. No adjustments were made to the carrying amounts during the three and six months ended June 30, 2021 and 2020.

Revenues. Revenues are recognized under “Leases (Topic 842),” with the exception of royalty fee revenue derived from the Company’s licensees and revenue related to the Company’s customer loyalty program, which were approximately $19 million and $22 million during the three months ended June 30, 2021 and 2020, respectively and $59 million and $54 million during the six months ended June 30, 2021 and 2020, respectively.

The following table presents the Company’s revenues disaggregated by geography.


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Americas	$	1,974	$	565	$	3,054	$	1,822
Europe, Middle East and Africa	281		159		484		516
Asia and Australasia	116		36		205		175
Total revenues	$	2,371	$	760	$	3,743	$	2,513

The following table presents the Company’s revenues disaggregated by brand.


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Avis	$	1,204	$	402	$	1,921	$	1,387
Budget	985		267		1,509		886
Other	182		91		313		240
Total revenues	$	2,371	$	760	$	3,743	$	2,513

________

Other includes Zipcar and other operating brands.

Adoption of New Accounting Pronouncements

Simplifying the Accounting for Income Taxes

On January 1, 2021, as the result of a new accounting pronouncement, the Company adopted ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions and improving the application of existing guidance. The adoption of this accounting pronouncement did not have a material impact on the Company's Consolidated Condensed Financial Statements.

Compensation—Retirement Benefits—Defined Benefit Plans

On January 1, 2021, as the result of a new accounting pronouncement, the Company adopted ASU 2018-14, “Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans,” which adds, removes, and clarifies disclosure requirements related to defined benefit pension and other postretirement plans. These changes are part of the FASB’s disclosure framework project, which the Board launched in 2014 to improve the effectiveness of disclosures in notes to financial statements. The adoption of this accounting pronouncement did not have a material impact on the Company's Consolidated Condensed Financial Statements.

2. Leases

Lessor

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The following table presents the Company’s lease revenues disaggregated by geography.


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Americas	$	1,972	$	552	$	3,026	$	1,796
Europe, Middle East and Africa	268		151		460		493
Asia and Australasia	112		35		198		170
Total lease revenues	$	2,352	$	738	$	3,684	$	2,459

The following table presents the Company’s lease revenues disaggregated by brand.


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Avis	$	1,201	$	389	$	1,891	$	1,357
Budget	975		261		1,491		869
Other	176		88		302		233
Total lease revenues	$	2,352	$	738	$	3,684	$	2,459

_______

Other includes Zipcar and other operating brands.

Lessee

The Company has operating and finance leases for rental locations, corporate offices, vehicle rental fleet and equipment. Many of the Company’s operating leases for rental locations contain concession agreements with various airport authorities that allow the Company to conduct its vehicle rental operations on site. In general, concession fees for airport locations are based on a percentage of total commissionable revenue as defined by each airport authority, some of which are subject to minimum annual guaranteed amounts. Concession fees other than minimum annual guaranteed amounts are not included in the measurement of operating lease Right of Use (“ROU”) assets and operating lease liabilities, and are recorded as variable lease expense as incurred. The Company’s operating leases for rental locations often also require the Company to pay or reimburse operating expenses.

The components of lease expense are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Property leases (a)
Operating lease expense	$	134	$	128	$	273	$	313
Variable lease expense	112		20		166		56
Total property lease expense	$	246	$	148	$	439	$	369

__________

(a) Primarily within operating expense and includes $(3) million and $30 million for the three months ended June 30, 2021 and 2020, respectively, and $16 million and $30 million for the six months ended June 30, 2021 and 2020, respectively, of minimum annual guaranteed rent in excess of concession fees, net, as defined in our rental concession agreements.

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Supplemental balance sheet information related to leases is as follows:


	As of June 30, 2021			As of December 31, 2020
Property leases
Operating lease ROU assets	$	2,407		$	2,560

Short-term operating lease liabilities (a)	$	495		$	514
Long-term operating lease liabilities	1,947			2,078
Operating lease liabilities	$	2,442		$	2,592

Weighted average remaining lease term	8.3 years			8.4 years
Weighted average discount rate	3.84		%	3.86		%

_________

(a) Included in Accounts payable and other current liabilities.

Supplemental cash flow information related to leases is as follows:


	Six Months Ended June 30,
	2021		2020
Cash payments for lease liabilities within operating activities:
Property operating leases	$	407	$	327
Non-cash activities - increase (decrease) in ROU assets in exchange for lease liabilities:
Property operating leases	269		455

3. Restructuring and Other Related Charges

Restructuring

During first quarter 2021, the Company initiated a global restructuring plan to focus on cost discipline by reviewing headcounts, facilities and contractor agreements. The Company is transforming its business as it prepares to exit the COVID-19 crisis by controlling fixed costs and matching variable costs to demand (“T21”). During the six months ended June 30, 2021, as part of this process, the Company formally communicated the termination of employment to approximately 140 employees, and as of June 30, 2021, the Company terminated approximately 120 of these employees. The Company expects further restructuring expense of approximately $40 million related to this initiative to be incurred in 2021.

During first quarter 2020, the Company initiated a global restructuring plan to reduce operating costs, such as headcount and facilities, due to declining reservations and revenue resulting from the COVID-19 outbreak (“2020 Optimization Plan”). The Company expects no further restructuring expense related to this initiative.

During first quarter 2019, the Company initiated a restructuring plan to drive global efficiency by improving processes and consolidating functions, and to create new objectives and strategies for its truck rental operations in the U.S. by reducing headcount, large vehicles and rental locations (“T19”). This initiative is complete.

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The following tables summarize the changes to our restructuring-related liabilities and identifies the amounts recorded within the Company’s reporting segments for restructuring charges and corresponding payments and utilizations:


				Americas		International		Total
Balance as of January 1, 2021				$	3	$	6	$	9
	Restructuring expense:
	T21			2		10		12


	T19			(2)		—		(2)
	Restructuring payment/utilization:
	T21			(2)		(8)		(10)
	2020 Optimization Plan			(1)		(3)		(4)

	T19			2		—		2
Balance as of June 30, 2021				$	2	$	5	$	7

		Personnel		Facility Related		Other (a)		Total
Balance as of January 1, 2021		$	4	$	2	$	3	$	9
	Restructuring expense:
	T21	10		2		—		12


	T19	—		—		(2)		(2)
	Restructuring payment/utilization:
	T21	(7)		(2)		(1)		(10)
	2020 Optimization Plan	(4)		—		—		(4)

	T19	—		—		2		2
Balance as of June 30, 2021		$	3	$	2	$	2	$	7

__________

(a)Includes expenses primarily related to the disposition of vehicles.

Other Related Charges

Limited Voluntary Opportunity Plan (“LVOP”)

During second quarter 2021, the Company’s operations in International offered a voluntary termination program to certain employees in field operations, shared services and general and administrative functions for a limited time. These employees, if qualified, elected resignation from employment in return for enhanced severance benefits to be settled in cash. During the six months ended June 30, 2021, the Company recorded other related charges of approximately $17 million in connection with the LVOP. As of June 30, 2021, approximately 120 employees elected to participate in the plan and the employment of all participants had been terminated.

During 2020, the Company offered a voluntary termination program to certain employees in field operations, shared services, and general and administrative functions for a limited time. These employees, if qualified, elected resignation from employment in return for enhanced severance benefits to be settled in cash. During the six months ended June 30, 2020, the Company recorded other related charges of approximately $18 million in connection with the LVOP.

Officer Separation Costs

In March 2020, the Company announced the departure of Michael K. Tucker as Executive Vice President, General Counsel effective March 27, 2020. In connection with Mr. Tucker’s separation, the Company recorded other related charges of approximately $2 million for the six months ended June 30, 2020.

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4. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (“EPS”) (shares in millions):


		Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
Net income (loss) for basic and diluted EPS		$	398	$	(481)	228		$	(639)

Basic weighted average shares outstanding		69.9		69.6		69.9		71.3
Non-vested stock (a)		0.7		—		0.7		—
Diluted weighted average shares outstanding		70.6		69.6		70.6		71.3

Earnings (loss) per share:
	Basic	$	5.69	$	(6.91)	$	3.26	$	(8.96)
	Diluted	$	5.63	$	(6.91)	$	3.23	$	(8.96)

(a)For the three and six months ended June 30, 2020, 1.3 million non-vested stock awards, respectively, have an anti-dilutive effect and therefore are excluded from the computation of diluted weighted average shares outstanding.

5. Other Current Assets

Other current assets consisted of:


	As of June 30, 2021		As of December 31, 2020
Sales and use tax	$	263	$	147
Prepaid expenses	248		161
Other	104		148
Other current assets	$	615	$	456

6. Intangible Assets

Intangible assets consisted of:


	As of June 30, 2021						As of December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized Intangible Assets
License agreements	$	276	$	170	$	106	$	280	$	151	$	129
Customer relationships	264		202		62		268		196		72
Other	53		35		18		54		33		21
Total	$	593	$	407	$	186	$	602	$	380	$	222

Unamortized Intangible Assets
Goodwill	$	1,127					$