PARSIPPANY, N.J. -

While again mentioning strides toward securing regulatory approval to acquire Dollar Thrifty Auto Group, Avis Budget Group reported 2010 gains in revenue and all segments of adjusted EBITDA.

Avis shared this week that its full-year revenue came in at $5.2 billion, an increase of 1 percent compared with 2009. Excluding certain items, the company determined its adjusted EBITDA increased 69 percent to $410 million and pretax income increased to $158 million.

Officials indicated their reported pretax income — which includes debt extinguishment costs — was $72 million.

Avis also noted all three of the its operating segments reported significant growth in adjusted EBITDA in 2010, and the company’s adjusted EBITDA margin expanded by 320 basis points compared to the prior year, excluding certain items.

Looking at the fourth quarter alone, the company reported $1.2 billion in revenue — a 6-percent increase compared with the prior-year quarter. Excluding certain items, Avis calculated that its adjusted EBITDA was $54 million compared with $14 million in the fourth quarter of 2009 with margins expanding by 320 basis points.

However, officials computed a pretax loss of $35 million in the traditionally slower fourth quarter compared with a pretax loss of $88 million in fourth quarter of 2009.

“We delivered strong earnings growth in 2010 as a result of the strength of our customer value proposition, the rebound in commercial and leisure travel demand, and our vigilant focus on cost containment,” stated Ronald Nelson, Avis chairman and chief executive officer.

“Our momentum accelerated in the back half of the year resulting in our full year 2010 adjusted EBITDA equaling pre-recession levels, despite revenue that was $800 million lower,” Nelson explained.

“As we move into 2011, we look to invest in initiatives that will allow us to continue to grow revenue, earnings and margins,” he added.

Avis Touches on DTAG Acquisition

Along with going into greater detail about how 2010 shook out financially within the company’s various divisions, Avis reiterated that it continues to pursue the acquisition of Dollar Thrifty.

“Avis Budget Group and Dollar Thrifty have been working together to obtain antitrust clearance for the proposed acquisition,” officials indicated.

“In the fourth quarter, we incurred $15 million of expense related to this potential transaction, including approximately $8 million of acquisition-related interest expense,” they added.

Details on How Avis Arrived at 4Q, Full-Year Totals

Avis explained that its revenue increased 6 percent in fourth quarter compared to same period a year ago because of a 7-percent increase in rental day volume that partially offset by 2 percent lower pricing.

The company mentioned ancillary revenues, excluding gas and customer recoveries, grew 10 percent in the quarter.

Officials emphasized that fourth-quarter adjusted EBITDA more than tripled to $54 million, excluding certain items with margins improving by 320 basis points.

“The increase in margin was primarily due to a 12-percent decline in per-unit fleet costs, lower vehicle financing costs and incremental savings from our cost-saving initiatives,” Avis executives pointed out.

When considering full-year revenue, Avis said it arrived at a 1-percent year-over-year due to a 1-percent increase in average daily rate and a 6-percent increase in ancillary revenues excluding gas and customer recoveries. The company conceded the gain was partially offset by a 2-percent decrease in volume.

As full-year adjusted EBITDA margin improved 320 basis points, excluding certain items, Avis determined the increase in margin was primarily due to a 9-percent decline in per-unit fleet costs and a 60 basis point improvement in direct operating expenses as a percentage of revenue.

Business Segment Discussion

Next, Avis examined how its three business segments performed during the fourth quarter, sharing figures for revenue and adjusted EBITDA.

For domestic vehicle rental, the company enjoyed a 4-percent year-over-year revenue gain in the fourth quarter, climbing from $867 million to $905 million. Meanwhile, fourth quarter adjusted EBITDA settled at a gain of $20 million, a significant turnaround from the $20-million loss in the fourth quarter of 2009.

Officials stated the revenue jump came as a result of a 7-percent uptick in volume that was partially offset by a 3 percent year-over-year decline in pricing.

“The decline in pricing reflects difficult comparisons with the prior year’s fourth quarter when our average daily rate increased 9 percent,” Avis stressed.

The company determined the adjusted EBITDA turnaround was triggered by a 16-percent decline in per-unit fleet costs, 5 percent growth in ancillary revenues on a per-rental-day basis and other cost-saving initiatives. Management added adjusted EBITDA includes $2 million of restructuring costs in fourth quarter compared with $4 million coming in the fourth quarter of the previous year.

Moving over to its international vehicle rental operation, Avis posted an 11-percent revenue spike during the fourth quarter, compiling $235 million after generating $211 million in the year-ago quarter.

In terms of adjusted EBITDA, the company determined this segment actually suffered a 3-percent decline in the fourth quarter, dropping from $33 million to $32 million.

Avis attributed the international vehicle rental revenue increase to a 7-percent uptick in rental days and a 4-percent increase in pricing, excluding foreign-exchange effects. Revenue advanced despite Avis sustaining an average daily rate decline of 2 percent.

“The decline in average daily rate reflects difficult comparisons with the prior year’s fourth quarter when average daily rate increased 10 percent, excluding foreign-exchange effects,” officials pointed out.

Looking at its truck rental division, the company forged a 5-percent fourth-quarter revenue advancement from $81 million to $85 million. The division’s adjusted EBITDA also moved higher, going from $1 million to $3 million in the fourth quarter.

Management pinpointed the revenue jump to a 13-percent increase in rental days and a 4-percent decline in pricing.

“The decline in pricing was primarily due to strong growth in commercial rentals, which have a lower rate and longer length of rental than local consumer and one-way rentals,” Avis explained.

“Adjusted EBITDA improved primarily as a result of increased revenue and increased vehicle utilization,” the company added.

Corporate Debt Update

In the fourth quarter, Avis mentioned that it issued $600 million of corporate debt securities due 2019, redeemed $175 million of corporate debt securities due 2014, and repaid $52 million of term loan borrowings and associated swaps.

Officials indicated the remaining $349 million of proceeds from the fourth quarter debt offerings will be used either to help fund the acquisition of Dollar Thrifty or to repay additional corporate debt.

“Interest expense on such debt, the proceeds of which have not been deployed, is excluded in calculating income excluding certain items,” officials stated.

Avis pointed out that its year-end cash balance was more than $900 million.

Avis Offers Outlook on Depreciation Costs, Fleet Mix

Executives reiterated that they generally do not provide projections of volume, price, revenue or income. However, they does expect that their rental fleet size will move in tandem with rental day volume, which will result in year-over-year utilization comparisons remaining fairly steady.

Avis estimated its per-unit domestic vehicle depreciation costs will be consistent with, and possibly lower than, its prior-year costs.

In addition, the company said it expects that no single manufacturer will account for more than approximately 30 percent of its U.S. rental fleet. Avis believes vehicles obtained under manufacturer repurchase programs will continue to represent approximately half of its average vehicle fleet.

Elsewhere, management asserted that efforts are continuing to reduce costs and enhance productivity with the expectation that such initiatives will provide $45 million to $55 million of incremental savings this year compared to 2010. The projection would bring the company’s annual savings from these actions since 2008 to more than $550 million.

Avis also is expecting that its effective tax rate in 2011 will be approximately 38 to 40 percent.

The company is planning its annual stockholders meeting for May 20 in Wilmington, Del. 

“Stockholders of record as of the close of business on March 24 will be entitled to vote at the annual meeting,” Avis concluded.