Avis Says 3Q Income Shows Hefty Increase

With volumes increasing and cost-containment measures proving to be beneficial, Avis Budget Group showed a double-digit spike in net income for the third quarter.

Specifically, Avis Budget’s net income improved 58 percent year-over-year to $90 million.

When restructuring and transaction-related costs are taken out of the equation, adjusted EBITDA came in at $219 million, up from $165 million in the year-ago period.

Meanwhile, net income — when restructuring and transaction are not considered — reached $97 million, up from $69 million. Avis Budget also said it saw gains in adjusted EBITDA and margins in each of its three operating segments.

Quarterly revenue totaled $1.5 billion, up 3 percent year-over-year.

“We delivered strong earnings growth this quarter, driven by positive volume growth and our vigilant focus on cost containment,” stated Avis Budget chairman and chief executive officer Ronald Nelson.

“Rental day trends turned positive this quarter as demand from both commercial and leisure customers continued to strengthen, and margins expanded significantly, reflecting our emphasis on profitable transactions, our permanently lowered fixed cost base and lower fleet costs,” he added.

Avis Budget also discussed the revenue results for each of its business segments in more detail, beginning with domestic car rental.

Revenue here was $1.127 billion, a gain of 2 percent year-over-year. Avis Budget attributed the upswing to ancillary revenue gains. There was a 4-percent hike in rental days and a 4-percent dip in the average daily rate. Officials said the average daily rate decline was due to “difficult pricing comparisons” against the year-ago period.

This segment’s adjusted EBITDA was $137 million, compared with $102 million in the third quarter of 2009. Pushing 34-percent upswing were the following factors: per-unit depreciation costs dipping 7 percent; ancillary revenues showing a 2-percent uptick on a per-rental-day basis; and the company’s cost-cutting measures.

Included in the third-quarter adjusted EBITDA for this segment are restructuring costs totaling $6 million. The year-ago period had $1 million in restructuring costs.

Next up, Avis Budget said its international car rental business had revenue of $274 million, which marked a 10-percent gain from the year-ago period. This was pushed by rental days climbing 3 percent and average daily rate jumping 4 percent.

When foreign exchange effects are taken out of the equation, there was a 2-percent dip in the average daily rate and ancillary revenues showed a 7-percent hike per rental day. This business segment’s adjusted EBITDA was $62 million, up 11 percent year-over-year.

This gain was driven largely by stronger revenue and exchange-rate movements having a positive impact of $3 million.

Moving along, the company said its truck rental business pulled in revenue of $111 million. This is 5 percent stronger than the year-ago period. Pushing this increase was rental days climbing 5 percent and average daily rate moving up 1 percent.

Meanwhile, adjusted EBITDA was $19 million, compared with $13 million in the prior-year period. Largely driving this gain were revenue gains and the decline in fleet costs (spurred by average rental fleet falling 10 percent).

As far as the company’s expectations for the rest of 2010, Avis Budget is projecting that volume will improve once again in the fourth quarter. The company said it intends to continue to align rental fleet with rental demand.

Moreover, year-over-year pricing comparisons are once again predicted to be “challenging” in the fourth quarter, thanks to the “substantial” upswings in the leisure segment seen in the 2009 period.

Domestic vehicle depreciation costs are likely to dip 9 percent to 11 percent per unit for full-year 2010, according to Avis Budget projections.

The company also believes its cost-cutting measures will be quite beneficial.

“The company is continuing its efforts to reduce costs and enhance productivity and expects that its cost-saving initiatives will provide $60-70 million of incremental savings in 2010 compared to 2009, bringing the total annual savings from the company’s actions to $475–$485 million in 2010,” officials noted.