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Avis Budget Group Reports First Quarter 2013 Results

About Avis Budget Group, Inc.

Avis Budget Group, Inc. is a leading global provider of vehicle rental services, both through its Avis and Budget brands, which have more than 10,000 rental locations in approximately 175 countries around the world, and through its Zipcar brand, which is the world's leading car sharing network, with more than 790,000 members. Avis Budget Group operates most of its car rental offices in North America, Europe and Australia directly, and operates primarily through licensees in other parts of the world. Avis Budget Group has approximately 29,000 employees and is headquartered in Parsippany, N.J. More information is available at 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", "forecast" and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are based upon then current assumptions and expectations and are generally forward-looking in nature and not historical facts. Any statements that refer to outlook, expectations or other characterizations of future events, circumstances or results, including all statements related to future results, future fleet costs, acquisition synergies and cost-saving initiatives are also 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 Company's ability to promptly and effectively integrate the businesses of Zipcar and Avis Budget, any change in economic conditions generally, particularly during our peak season or in key market segments, the high level of competition in the vehicle rental industry, a change in our fleet costs as a result of a change in the cost for new vehicles and/or the value of used vehicles, disruption in the supply of new vehicles, disposition of vehicles not covered by manufacturer repurchase programs, the financial condition of the manufacturers that supply our rental vehicles which could impact their ability to perform their obligations under our repurchase and/or guaranteed depreciation arrangements, any reduction in travel demand, including any reduction in airline passenger traffic, any occurrence or threat of terrorism, a significant increase in interest rates or borrowing costs, our ability to obtain financing for our operations, including the funding of our vehicle fleet via the asset-backed securities market, any changes to the cost or supply of fuel, any fluctuations related to the mark-to-market of derivatives which hedge our exposure to exchange rates, interest rates and fuel costs, the Company's ability to meet the financial and other covenants contained in the agreements governing our indebtedness, risks associated with litigation, regulation or governmental or regulatory inquiries or investigations involving the Company, and the Company's ability to accurately estimate its future results and implement its strategy for cost savings and growth.  Other unknown or unpredictable factors could also 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, 2012, included under headings such as "Forward-Looking Statements", "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations", and in other filings and furnishings made by the Company with the SEC from time to time. 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.

This release includes certain financial measures such as Adjusted EBITDA, pretax income and diluted earnings per share, which exclude certain items under each measure and are not considered generally accepted accounting principles ("GAAP") measures as defined under SEC rules.  Important information regarding such measures is contained on Table 1 and Table 5 to this release. The Company believes that these non-GAAP measures are useful in measuring the comparable results of the Company period-over-period. The GAAP measures most directly comparable to Adjusted EBITDA, pretax income and diluted earnings per share, excluding certain items under each measure, are net income, pretax income and diluted earnings per share.  Because of the forward-looking nature of the Company's forecasted non-GAAP Adjusted EBITDA, pretax income and diluted earnings per share, excluding certain items, specific quantifications of the amounts that would be required to reconcile forecasted net income, pretax income and diluted earnings per share are not available. The Company believes that there is a degree of volatility with respect to certain of the Company's GAAP measures which preclude the Company from providing accurate forecasted GAAP to non-GAAP reconciliations. Based on the above, the Company believes that providing estimates of the amounts that would be required to reconcile the range of the non-GAAP Adjusted EBITDA, pretax income and diluted earnings per share, excluding certain items, to forecasted net income, pretax income, and diluted earnings per share would imply a degree of precision that would be confusing or misleading to investors for the reasons identified above.

      Table 1
       
Avis Budget Group, Inc.
SUMMARY DATA SHEET
(In millions, except per share data)
       
       
  Three Months Ended March 31,
  2013 2012 % Change
Income Statement and Other Certain Items      
Net revenues   $ 1,691  $ 1,623 4%
Adjusted EBITDA (non-GAAP)  83  112 (26%)
Loss before income taxes  (57) (26) *
Net loss  (46)  (23) *
Earnings (loss) per share - Diluted  (0.43)  (0.22) *
       
Excluding Certain Items (non-GAAP) (A)      
Net revenues   $ 1,691  $ 1,623 4%
Adjusted EBITDA  93  119 (22%)
Income before income taxes  5 19 (74%)
Net income  9 14 (36%)
Earnings per share - Diluted  0.08  0.12 (33%)
       
  As of   
  March 31, 2013 December 31, 2012  
Balance Sheet Items      
Cash and cash equivalents   $ 569  $ 606  
Vehicles, net  10,162  9,274  
Debt under vehicle programs  7,462  6,806  
Corporate debt  3,347  2,905  
Stockholders' equity  694  757  
       
Segment Results      
  Three Months Ended March 31,
  2013 2012 % Change
Net Revenues      
North America  $ 1,100  $ 1,038 6%
International   515  510 1%
Truck Rental  76  75 1%
Corporate and Other  -   -  *
Total Company  $ 1,691  $ 1,623 4%
       
Adjusted EBITDA (B)      
North America  $ 90  $ 93 (3%)
International   14  22 (36%)
Truck Rental  (9)  1 *
Corporate and Other  (12)  (4) *
Total Company  $ 83  $ 112 (26%)
       
Reconciliation of Adjusted EBITDA to Pretax Loss      
Total Company Adjusted EBITDA  $ 83  $ 112  
Less: Non-vehicle related depreciation and amortization  34  32  
  Interest expense related to corporate debt, net:      
      Interest expense   58  73  
                 Early extinguishment of debt  40  27  
Transaction-related costs  8  6  
Loss before income taxes  $ (57)  $ (26) *
_________      
* Not meaningful.      
(A) During the three months ended March 31, 2013, we recorded certain items of $62 million, consisting of $40 million ($39 million, net of tax) for costs related to the early extinguishment of debt, $10 million ($7 million, net of tax) in restructuring costs, $8 million ($6 million, net of tax) for transaction-related costs primarily related to the integration of Avis Europe and the acquisition of Zipcar, and $4 million ($3 million, net of tax) for purchase-accounting effects related to the acquisitions of Avis Europe and Zipcar.
During the three months ended March 31, 2012, we recorded certain items of $45 million, consisting of $27 million ($23 million, net of tax) for costs related to the early extinguishment of debt, $7 million ($5 million, net of tax) in restructuring costs, $6 million ($5 million, net of tax) for transaction-related costs related to the integration of Avis Europe and $5 million ($4 million, net of tax) for amortization expense related to intangible assets recognized in the Avis Europe acquisition.
(B) See Table 5 for a description of Adjusted EBITDA. Adjusted EBITDA includes stock-based compensation expense and deferred financing fee amortization of $10 million in first quarter 2013 and 2012.
       
    Table 2
     
Avis Budget Group, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
     
     
   Three Months Ended March 31, 
  2013 2012
Revenues    
Vehicle rental  $ 1,217  $ 1,168
Other  474  455
Net revenues  1,691  1,623
     
Expenses    
Operating  931  893
Vehicle depreciation and lease charges, net   386  318
Selling, general and administrative  224  219
Vehicle interest, net  57  74
Non-vehicle related depreciation and amortization  34  32
Interest expense related to corporate debt, net:    
 Interest expense   58  73
 Early extinguishment of debt  40  27
Restructuring charges  10  7
Transaction-related costs  8  6
Total expenses  1,748  1,649
     
Loss before income taxes  (57)  (26)
Benefit from income taxes  (11)  (3)
Net loss  $ (46)  $ (23)
     
Earnings (loss) per share    
Basic  $ (0.43)  $ (0.22)
Diluted  $ (0.43)  $ (0.22)
     
Weighted average shares outstanding    
Basic  107.7  105.9
Diluted  107.7  105.9
       Table 3
       
Avis Budget Group, Inc.
SEGMENT REVENUE DRIVER ANALYSIS 
       
       
  Three Months Ended March 31,
  2013 2012 % Change
CAR RENTAL      
       
North America Segment (A)      
       
Rental Days (000's) 19,723 19,440 1%
Time and Mileage Revenue per Day   $ 41.34  $ 39.77 4%
Average Rental Fleet  312,604  305,129 2%
       
International Segment (B)      
       
Rental Days (000's)  7,500 7,339 2%
Time and Mileage Revenue per Day (C)  $ 43.89  $ 45.57 (4%)
Average Rental Fleet  122,250  117,524 4%
       
Total Car Rental (A) (B)      
       
Rental Days (000's)   27,223  26,779 2%
Time and Mileage Revenue per Day   $ 42.05  $ 41.36 2%
Average Rental Fleet  434,854  422,653 3%
       
TRUCK RENTAL SEGMENT      
       
Rental Days (000's)  853 877 (3%)
Time and Mileage Revenue per Day   $ 71.03  $ 68.56 4%
Average Rental Fleet  26,632  25,127 6%
       
_________      
Rental days and time and mileage revenue per day are calculated based on the actual rental of the vehicle during a 24-hour period. Our calculation of rental days and time and mileage revenue per day may not be comparable to the calculation of similarly-titled statistics by other companies.
(A) Excludes Zipcar.  
(B) 2012 amounts have been adjusted to conform and correct Avis Budget EMEA's calculation of first quarter rental days (by -180,000),  time and mileage revenue per day and average rental fleet, having no effect on revenue, Adjusted EBITDA, net income or any other reported financial results.      
(C) Of the change in time and mileage revenue per day, changes in currency exchange rates had no impact in the three months ended March 31, 2013, with time and mileage revenue per day decreasing 4 percentage points excluding currency exchange effects.      
  Table 4
   
Avis Budget Group, Inc.
CONSOLIDATED CONDENSED SCHEDULES OF CASH FLOWS AND FREE CASH FLOWS
(In millions)
   
CONSOLIDATED CONDENSED SCHEDULE OF CASH FLOWS
   
  Three Months Ended March 31, 2013
Operating Activities  
Net cash provided by operating activities  $ 300
   
Investing Activities  
Net cash used in investing activities exclusive of vehicle programs  (467)
Net cash used in investing activities of vehicle programs  (741)
Net cash used in investing activities  (1,208)
   
Financing Activities  
Net cash provided in financing activities exclusive of vehicle programs  407
Net cash provided by financing activities of vehicle programs  466
Net cash provided by financing activities  873
   
Effect of changes in exchange rates on cash and cash equivalents  (2)
Net change in cash and cash equivalents  (37)
Cash and cash equivalents, beginning of period  606
Cash and cash equivalents, end of period  $ 569
   
   
CONSOLIDATED SCHEDULE OF FREE CASH FLOWS (A)
  Three Months Ended March 31, 2013
Pretax loss  $ (57)
Add-back of non-vehicle related depreciation and amortization  34
Add-back of debt extinguishment costs  40
Add-back of transaction-related costs  8
Working capital and other   (53)
Capital expenditures  (21)
Tax payments, net of refunds   (10)
Vehicle programs and related (B)  109
Free Cash Flow  50
   
Acquisition and related payments, net of acquired cash (C)  (494)
Borrowings, net of debt repayments  406
Transaction-related payments  (14)
Financing costs, foreign exchange effects and other  15
Net change in cash and cash equivalents (per above)  $ (37)
   
_____________________________  
(A) See Table 5 for a description of Free Cash Flow.  
(B) Includes vehicle-backed borrowings (repayments) that are incremental to vehicle-backed borrowings (repayments) required to fund incremental (reduced) vehicle and vehicle-related assets.   
(C) Includes acquisition-related payments incurred as a result of the acquisition of Zipcar.  
   
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES
 
  Three Months Ended March 31, 2013
Free Cash Flow (per above)  $ 50
Cash (inflows) outflows included in Free Cash Flow but not reflected in   
Net Cash Provided by Operating Activities (per above)  
Investing activities of vehicle programs  741
Financing activities of vehicle programs  (466)
Capital expenditures  21
Change in restricted cash  (10)
Acquisition-related payments  (18)
Proceeds received on asset sales  (4)
Transaction-related payments  (14)
Net Cash Provided by Operating Activities (per above)  $ 300
   
  Table 5
   
   
Avis Budget Group, Inc.
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP MEASURES
(In millions, except per share data)
   
The accompanying press release includes certain non-GAAP (generally accepted accounting principles) financial measures as defined under SEC rules. To the extent not provided in the press release or accompanying tables, we have provided below the reasons we present these non-GAAP financial measures, a description of what they represent and a reconciliation to the most comparable financial measure calculated and presented in accordance with GAAP.
   
DEFINITIONS
Adjusted EBITDA  
The accompanying press release presents Adjusted EBITDA, which represents income before non-vehicle related depreciation and amortization, any impairment charge, transaction-related costs, non-vehicle related interest, transaction-related costs and income taxes. We believe that Adjusted EBITDA is useful as a supplemental measure in evaluating the aggregate performance of our operating businesses. Adjusted EBITDA is the measure that is used by our management, including our chief operating decision maker, to perform such evaluation. It is also a component of our financial covenant calculations under our credit facilities, subject to certain adjustments. Adjusted EBITDA should not be considered in isolation or as a substitute for net income (loss) or other income statement data prepared in accordance with GAAP and our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies. 
A reconciliation of Adjusted EBITDA to income (loss) before income taxes can be found on Table 1 and a reconciliation of income (loss) before income taxes to net income (loss) can be found on Table 2.
   
Certain items
The accompanying press release and tables present Adjusted EBITDA, income (loss) before income taxes, net income (loss) and diluted earnings per share for the three months ended March 31, 2013, excluding certain items. For the three months ended March 31, 2013, certain items consisted of $40 million ($39 million, net of tax) for costs related to the early extinguishment of debt, $10 million ($7 million, net of tax) in restructuring charges, $8 million ($6 million, net of tax) of expenses primarily related to the integration of Avis Europe and the acquisition of Zipcar, and $4 million ($3 million, net of tax) for purchase-accounting effects related to the acquisitions of Avis Europe and Zipcar.
We believe that the measures referred to above are useful as supplemental measures in evaluating the aggregate performance of the Company. We exclude restructuring-related expenses, costs related to early extinguishment of debt and other certain items as such items are not representative of the results of operations of our business for the three months ended March 31, 2013.
   
Reconciliation of Avis Budget Group, Inc. Adjusted EBITDA, excluding certain items to net loss:  
   
   
  Three Months Ended  March 31, 2013
Adjusted EBITDA, excluding certain items  $ 93
   
Less: Non-vehicle related depreciation and amortization (excluding   
       acquisition-related amortization expense)  30
       Interest expense related to corporate debt, net (excluding early   
       extinguishment of debt)  58
       Income before income taxes, excluding certain items  5
   
Less certain items:  
Early extinguishment of debt  40
Restructuring charges  10
Transaction-related costs  8
Acquisition-related amortization expense  4
Loss before income taxes  (57)
Benefit from income taxes  (11)
Net loss  $ (46)
   
Reconciliation of net income, excluding certain items to net loss:  
   
Net income, excluding certain items  $ 9
Less certain items, net of tax:  
Early extinguishment of debt  39
Restructuring charges  7
Transaction-related costs  6
Acquisition-related amortization expense  3
Net loss  $ (46)
   
Earnings per share, excluding certain items (diluted)  $ 0.08
   
Earnings (loss) per share (diluted)  $ (0.43)
   
Shares used to calculate earnings per share, excluding certain items (diluted)  110.2
_________  
The diluted shares used to calculate earnings per share, excluding certain items, do not include the shares underlying our convertible notes, which in this case have an anti-dilutive effect.  
The accompanying press release and tables present Adjusted EBITDA, income (loss) before income taxes, net income (loss) and diluted earnings per share for the three months ended March 31, 2012, excluding certain items. For the three months ended March 31, 2012, certain items consisted of $27 million ($23 million, net of tax) for costs related to early extinguishment of debt, $7 million ($5 million, net of tax) in restructuring charges, $6 million ($5 million, net of tax) of expenses related to the integration of Avis Europe and $5 million ($4 million, net of tax) for amortization expense related to intangible assets recognized in the Avis Europe acquisition.  
We believe that the measures referred to above are useful as supplemental measures in evaluating the aggregate performance of the Company. We exclude restructuring-related expenses, transaction-related costs and other certain items as such items are not representative of the results of operations of our business for the three months ended March 31, 2012.  
   
Reconciliation of Avis Budget Group, Inc. Adjusted EBITDA, excluding certain items to net loss:  
   
  Three Months Ended  March 31, 2012
Adjusted EBITDA, excluding certain items  $ 119
   
Less: Non-vehicle related depreciation and amortization (excluding   
       acquisition-related amortization expense)  27
       Interest expense related to corporate debt, net (excluding early   
       extinguishment of debt)  73
       Income before income taxes, excluding certain items  19
   
Less certain items:  
Early extinguishment of debt  27
Restructuring charges  7
Transaction-related costs  6
Acquisition-related amortization expense  5
Loss before income taxes  (26)
Benefit from income taxes  (3)
Net loss   $ (23)
   
Reconciliation of net income, excluding certain items to net loss:  
   
Net income, excluding certain items  $ 14
Less certain items, net of tax:  
Early extinguishment of debt  23
Restructuring charges  5
Transaction-related costs  5
Acquisition-related amortization expense  4
Net loss  $ (23)
   
Earnings per share, excluding certain items (diluted)  $ 0.12
   
Earnings (loss) per share (diluted)  $ (0.22)
   
Shares used to calculate earnings per share, excluding certain items (diluted)  127.6
   
Free Cash Flow
Represents Net Cash Provided by Operating Activities adjusted to reflect the cash inflows and outflows relating to capital expenditures and GPS navigational units, the investing and financing activities of our vehicle programs, asset sales, if any, and to exclude debt extinguishment costs and transaction-related costs. We believe that Free Cash Flow is useful to management and investors in measuring the cash generated that is available to be used to repurchase stock, repay debt obligations, pay dividends and invest in future growth through new business development activities or acquisitions. Free Cash Flow should not be construed as a substitute in measuring operating results or liquidity, and our presentation of Free Cash Flow may not be comparable to similarly-titled measures used by other companies. A reconciliation of Free Cash Flow to the appropriate measure recognized under GAAP is provided on Table 4.
CONTACT: Media Contact:
         John Barrows
         (973) 496-7865
         PR@avisbudget.com
         
         Investor Contact:
         Neal Goldner
         (973) 496-5086
         IR@avisbudget.com

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