UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
_________________
FORM
8-K
_________________
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of
Report (Date of Earliest Event Reported): January 24, 2008
(January 23, 2008)
_________________
Avis
Budget Group, Inc.
(Exact
Name of Registrant as Specified in its Charter)
_________________
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Delaware
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1-10308
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06-0918165
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(State
or Other Jurisdiction of Incorporation)
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(Commission
File Number)
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(IRS
Employer Identification Number)
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6
Sylvan Way
Parsippany,
NJ
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07054
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(973)
496-4700
(Registrant's
telephone number, including area code)
N/A
(Former
name or former address if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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[ ]
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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[ ]
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[ ]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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[ ]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
2.02. Results of
Operations and Financial Information.
On
January 23, 2008, we reported our estimated results for year-end
2007. Our estimated 2007 results are discussed in further detail in
the press release attached hereto as Exhibit 99.1, which is incorporated
herein by reference.
The
information in this item, including Exhibit 99.1, is being furnished, not
filed. Accordingly, the information in this item will not be
incorporated by reference into any registration statement filed by Avis Budget
Group under the Securities Act of 1933, as amended, unless specifically
identified therein as being incorporated therein by reference.
Item
9.01. Financial
Statements and Exhibits.
(d)
Exhibits
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Exhibit
No.
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Description
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99.1
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Press
Release dated January 23,
2008.
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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AVIS
BUDGET GROUP, INC.
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By:
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/s/
David B. Wyshner
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David
B. Wyshner
Executive
Vice President and Chief Financial Officer
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Date: January
24, 2008
EXHIBIT
INDEX
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Exhibit
No.
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Description
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99.1
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Press
Release dated January 23,
2008.
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Exhibit
99.1
AVIS
BUDGET GROUP ANNOUNCES ESTIMATED 2007 RESULTS
AND
AUTHORIZES SHARE REPURCHASE
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·
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Estimates
full-year 2007 EBITDA will be $405-410 million and pretax income
will be
approximately $195 million, excluding unusual
items.
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·
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Recent
stock price decline will likely require non-cash goodwill
impairment.
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·
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Projects
revenue and earnings growth in
2008.
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·
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Expects
2008 peak financing to be fully committed by March
1.
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·
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Board
authorizes $50 million share
repurchase.
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Parsippany,
N.J., January 23, 2008 – Avis Budget Group (NYSE: CAR)
today announced that it currently expects its full-year 2007 EBITDA, excluding
unusual items (separation costs and any charge related to goodwill impairment),
will be in the range of $405-410 million, generally in line with the Company’s
prior projection of approximately $410 million. In addition, the
Company estimated that its full-year 2007 pretax income, excluding such unusual
items, will be in line with the Company’s prior projection of approximately $195
million, and announced that its Board has authorized an initial repurchase
of up
to $50 million of the Company’s common stock.
“We
faced
an extremely challenging leisure pricing environment in the latter half of
the
fourth quarter, but with the balance provided by our commercial mix of business
along with the cost control initiatives under way, we believe our full-year
EBITDA (excluding unusual items) will nonetheless exceed $405 million,” said
Avis Budget Group Chairman and Chief Executive Officer Ronald L.
Nelson. “During the fourth quarter, we managed costs assiduously
throughout our organization; in particular, lower-than-expected fleet costs
along with continued favorable experience in insurance and maintenance and
damage expenses offset much of the pricing challenge. In addition,
our experience disposing of risk vehicles was not only consistent with our
expectations but also in line with historical norms of 76-78% of cap
cost. While we share investors’ concerns about the general economic
environment, we also consider our stock to be dramatically oversold and are
eager to repurchase shares.”
As
a
result of the decline in the Company’s stock price, the Company will likely be
required to record a one-time, non-cash charge for goodwill impairment in the
fourth quarter. Under FAS 142, the Company is required on an annual
basis to perform a goodwill impairment assessment, which requires, among other
things, a reconciliation of current equity market capitalization to
shareholders’ equity. At recent stock price levels, the Company’s
total shareholders’ equity significantly exceeds its equity market
capitalization, indicating the possibility of goodwill
impairment. This potential non-cash charge is unrelated to recent
results or management’s long-range forecast, which continues to call for growth
and margin expansion and, consequently, does not by itself indicate an
impairment. However, the Company is required to place greater
emphasis on current trading values than on its forecasts in performing its
impairment assessment. The Company is unable to estimate the amount
of its potential non-cash goodwill impairment charge at this time, but does
expect it to be substantial. Total goodwill is approximately $2.2
billion prior to any impairment. The Company does not expect the
potential goodwill impairment to affect any of its borrowing
arrangements.
Separately,
Avis Budget Group announced that it expects its revenues, EBITDA and pretax
income will increase in 2008 compared to 2007 results excluding unusual items,
based on a forecast of weak, but positive, economic and enplanement growth
in
2008. Results should increasingly benefit from the Company’s
Performance Excellence process-improvement initiative, from growth in on- and
off-airport transaction volumes, from modest car rental rate increases, and
from
continued expansion of ancillary revenues, including increased rentals of
Where2 GPS navigation units.
The
Company noted that, despite maturities of vehicle-backed debt during the year,
it expects that its peak fleet financing requirements in 2008 will be fully
satisfied through an expanded version of its typical seasonal vehicle-backed
bank facility, which it expects to have closed by the end of
February. “We are starting to see the benefits of extended hold
periods and moderation of fleet costs in our capital structure,” said David B.
Wyshner, Avis Budget’s Chief Financial Officer. “In model year 2008,
we will purchase approximately 35,000 fewer cars than in 2007, even with a
forecast of increasing transaction volumes. We may opportunistically
seek to issue intermediate-term asset-backed debt in 2008 if market conditions
improve, but the seasonal facility, combined with the Company’s existing
vehicle-backed facilities, is expected to provide sufficient funding capacity
through our annual peak in the third quarter.”
“We
continue to be the nation’s leading on-airport car rental company, and we are
determined that our focus on winning customers and containing costs
will be second-to-none. We have grown in challenging environments
before, and we are prepared to do so in 2008,” Mr. Nelson said.
The
Company noted that the compilation of its full-year 2007 results has not yet
been completed and that its estimated 2007 results are therefore preliminary
and
subject to change. Avis Budget Group plans to formally announce its
fourth quarter and full-year 2007 results, and to provide additional comments
regarding its outlook for 2008, in mid-February.
Under
the
repurchase authorization, the Company will repurchase shares from time to time
in open market transactions, accelerated stock buyback programs, tender offers,
privately negotiated transactions or by other means. Repurchases may
also be made under a Rule 10b5-1 plan. The timing and amount of
repurchase transactions will be determined by the Company’s management based on
its evaluation of market conditions, share price, legal requirements and other
factors. The program may be suspended, modified or discontinued at
any time without prior notice.
About
Avis Budget Group, Inc.
Avis
Budget Group (NYSE: CAR) is a leading provider of vehicle rental services,
with
operations in more than 70 countries. Through its Avis and Budget
brands, the Company is the largest general-use vehicle rental company in each
of
North America, Australia, New Zealand and certain other regions based on
published airport statistics. Avis Budget Group is headquartered in
Parsippany, N.J. and has more than 30,000 employees. For more
information about Avis Budget Group, visit www.avisbudgetgroup.com.
Forward-Looking
Statements
Certain
statements in this press release constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from
any
future results, performance or achievements expressed or implied by such
forward-looking statements. Statements preceded by, followed by or
that otherwise include the words "believes", "expects", "anticipates",
"intends", "projects", "estimates", "plans", "may increase", "may fluctuate"
and
similar expressions or future or conditional verbs such as "will", "should",
"would", "may" and "could" are generally forward-looking in nature and not
historical facts. Any statements that refer to expectations or other
characterizations of future events, circumstances or results, including all
statements related to full year 2007 and 2008, estimated results, goodwill
impairment and its effects, future fleet costs, cost-saving initiatives and
share repurchases are forward-looking statements.
Various
risks that could cause future results to differ from those expressed by the
forward-looking statements included in this press release include, but are
not
limited to, the high level of competition in the vehicle rental industry,
greater than expected cost increases for new vehicles, disposition of
vehicles
not covered by manufacturer repurchase programs, a downturn in airline passenger
traffic, an occurrence or threat of terrorism, a significant increase in
interest rates or borrowing costs, and the Company’s ability to accurately
estimate its future results and implement its strategy for
growth. Other unknown or unpredictable factors also could have
material adverse effects on Avis Budget Group’s performance or
achievements. In light of these risks, uncertainties, assumptions and
factors, the forward-looking events discussed in this press release may not
occur. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date stated, or if no
date is stated, as of the date of this press release. Important
assumptions and other important factors that could cause actual results to
differ materially from those in the forward-looking statements are specified
in
Avis Budget Group's Annual Report on Form 10-K for the year ended December
31,
2006 and Quarterly Report on Form 10-Q for the quarter ended September 30,
2007,
included under headings such as "Forward-Looking Statements", “Risk Factors” and
"Management’s Discussion and Analysis of Financial Condition and Results of
Operations". Except for the Company's ongoing obligations to disclose
material information under the federal securities laws, the Company undertakes
no obligation to release publicly any revisions to any forward-looking
statements, to report events or to report the occurrence of unanticipated events
unless required by law.
Non-GAAP
Financial Measures
This
press release includes management’s estimate of EBITDA for 2007, excluding
separation costs and goodwill impairment, which is a non-GAAP financial
measure. EBITDA represents income from continuing operations before
non-vehicle related depreciation and amortization, non-vehicle related interest
and income taxes. We believe that EBITDA is useful as a supplemental measure
in
evaluating the aggregate performance of our operating business. EBITDA is
the measure that is used by our management, including our chief operating
decision maker, to perform such evaluation. We exclude separation-related
expenses and goodwill impairment as such items are not representative of the
results of operations of our business. Below is a reconciliation of
this non-GAAP metric to management’s estimate of pretax income for 2007,
excluding separation costs and goodwill impairment. The Company is unable
to reasonably estimate or predict separation costs, the amount of any potential
impairment and certain other items for 2007; therefore, the Company is unable
to
provide a reconciliation to estimated net income for 2007 at this
time.
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Reconciliation
of EBITDA to Income (loss) before Income taxes (in millions)
(Estimated)
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Total
Company EBITDA, excluding separation costs and goodwill
impairment
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$
405 - $410
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Less: Non-vehicle
related depreciation and amortization
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(84)
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Interest
expense related
to corporate debt, net
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(128)
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Income
(loss) before Income taxes, excluding
separation
costs and goodwill impairment
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$
193 - $ 198
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Contacts
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Media
Contact:
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Investor
Contact:
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John
Barrows
973-496-7865
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David
Crowther
973-496-7277
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# # #