CAR 10-Q Quarterly Report June 30, 2021

AVIS BUDGET GROUP, INC.

10-Qs and 10-Ks

10-Q	Quarter ended March 31, 2025
10-K	Fiscal year ended Dec. 31, 2024
10-Q	Quarter ended Sept. 30, 2024
10-Q	Quarter ended June 30, 2024
10-Q	Quarter ended March 31, 2024
10-K	Fiscal year ended Dec. 31, 2023
10-Q	Quarter ended Sept. 30, 2023
10-Q	Quarter ended June 30, 2023
10-Q	Quarter ended March 31, 2023
10-K	Fiscal year ended Dec. 31, 2022
10-Q	Quarter ended Sept. 30, 2022
10-Q	Quarter ended June 30, 2022
10-Q	Quarter ended March 31, 2022
10-K	Fiscal year ended Dec. 31, 2021
10-Q	Quarter ended Sept. 30, 2021
10-Q	Quarter ended June 30, 2021
10-Q	Quarter ended March 31, 2021
10-K	Fiscal year ended Dec. 31, 2020
10-Q	Quarter ended Sept. 30, 2020
10-Q	Quarter ended June 30, 2020
10-Q	Quarter ended March 31, 2020
10-K	Fiscal year ended Dec. 31, 2019
10-Q	Quarter ended Sept. 30, 2019
10-Q	Quarter ended June 30, 2019
10-Q	Quarter ended March 31, 2019
10-K	Fiscal year ended Dec. 31, 2018
10-Q	Quarter ended Sept. 30, 2018
10-Q	Quarter ended June 30, 2018
10-Q	Quarter ended March 31, 2018
10-K	Fiscal year ended Dec. 31, 2017
10-Q	Quarter ended Sept. 30, 2017
10-Q	Quarter ended June 30, 2017
10-Q	Quarter ended March 31, 2017
10-K	Fiscal year ended Dec. 31, 2016
10-Q	Quarter ended Sept. 30, 2016
10-Q	Quarter ended June 30, 2016
10-Q	Quarter ended March 31, 2016
10-K	Fiscal year ended Dec. 31, 2015
10-Q	Quarter ended Sept. 30, 2015
10-Q	Quarter ended June 30, 2015
10-Q	Quarter ended March 31, 2015
10-K	Fiscal year ended Dec. 31, 2014
10-Q	Quarter ended Sept. 30, 2014
10-Q	Quarter ended June 30, 2014
10-Q	Quarter ended March 31, 2014
10-K	Fiscal year ended Dec. 31, 2013
10-Q	Quarter ended Sept. 30, 2013
10-Q	Quarter ended June 30, 2013
10-Q	Quarter ended March 31, 2013
10-K	Fiscal year ended Dec. 31, 2012
10-Q	Quarter ended Sept. 30, 2012
10-Q	Quarter ended June 30, 2012
10-Q	Quarter ended March 31, 2012
10-K	Fiscal year ended Dec. 31, 2011
10-Q	Quarter ended Sept. 30, 2011
10-Q	Quarter ended June 30, 2011
10-Q	Quarter ended March 31, 2011
10-K	Fiscal year ended Dec. 31, 2010
10-Q	Quarter ended Sept. 30, 2010
10-Q	Quarter ended June 30, 2010
10-Q	Quarter ended March 31, 2010
10-K	Fiscal year ended Dec. 31, 2009

PROXIES

DEF 14A	Filed on March 27, 2025
DEF 14A	Filed on April 3, 2024
DEF 14A	Filed on April 5, 2023
DEF 14A	Filed on April 8, 2022
DEF 14A	Filed on March 30, 2021
DEF 14A	Filed on March 27, 2020
DEF 14A	Filed on March 26, 2019
DEF 14A	Filed on April 16, 2018
DEF 14A	Filed on March 21, 2017
DEF 14A	Filed on March 29, 2016
DEF 14A	Filed on March 24, 2015
DEF 14A	Filed on March 28, 2014
DEF 14A	Filed on March 26, 2013
DEF 14A	Filed on April 17, 2012
DEF 14A	Filed on March 25, 2011
DEF 14A	Filed on April 1, 2010

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 Statement s
	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 tho se 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					$	1,137
Trademarks	$	553					$	552

For the three months ended June 30, 2021 and 2020, amortization expense related to amortizable intangible assets was approximately $ 14 million and $ 16 million, respectively. For the six months ended June 30, 2021 and 2020, amortization expense related to amortizable intangible assets was approximately $ 32 million and $ 29 million, respectively. Based on the Company’s amortizable intangible assets at June 30, 2021, the Company expects amortization expense of approximately $ 26 million for the remainder of 2021, $ 34 million for 2022, $ 26 million for 2023, $ 23 million for 2024, $ 17 million for 2025 and $ 16 million for 2026, excluding effects of currency exchange rates.

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7. Vehicle Rental Activities

The components of vehicles, net within assets under vehicle programs were as follows:


	As of		As of
	June 30,		December 31,
	2021		2020
Rental vehicles	$	13,164	$	9,210
Less: Accumulated depreciation	( 1,528 )		( 1,337 )
	11,636		7,873
Vehicles held for sale	92		280
Vehicles, net	$	11,728	$	8,153

The components of vehicle depreciation and lease charges, net are summarized below:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Depreciation expense	$	336	$	334	$	595	$	748
Lease charges	42		42		86		98
(Gain) loss on sale of vehicles, net	( 40 )		( 2 )		( 89 )		( 13 )
Vehicle depreciation and lease charges, net	$	338	$	374	$	592	$	833

At June 30, 2021 and 2020, the Company had payables related to vehicle purchases included in liabilities under vehicle programs - other of $ 485 million and $ 150 million, respectively, and receivables related to vehicle sales included in assets under vehicle programs - receivables from vehicle manufacturers and other of $ 104 million and $ 419 million, respectively.

8. Income Taxes

The Company’s effective tax rate for the six months ended June 30, 2021 and 2020 were provision (benefit) of 3.4 % and ( 26.9 )%, respectively. Such rates differed from the Federal Statutory rate of 21.0% primarily due to foreign taxes on our International operations and state taxes.

9. Accounts Payable and Other Current Liabilities

Accounts payable and other current liabilities consisted of:


	As of		As of
	June 30,		December 31,
	2021		2020
Short-term operating lease liabilities	$	495	$	514
Accounts payable	446		394
Deferred lease revenues – current	335		70
Accrued sales and use taxes	260		215
Accrued advertising and marketing	182		122
Accrued payroll and related	175		117
Public liability and property damage insurance liabilities – current	167		162
Other	386		440
Accounts payable and other current liabilities	$	2,446	$	2,034

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10. Long-term Corporate Debt and Borrowing Arrangements

Long-term corporate debt and borrowing arrangements consisted of:


		As of		As of
	Maturity Date	June 30,		December 31,
		2021		2020
6.375 % Senior Notes	April 2024	$	—	$	350
4.125 % euro-denominated Senior Notes	November 2024	356		366
5.250 % Senior Notes	March 2025	235		375
4.500 % euro-denominated Senior Notes	May 2025	296		305
10.500 % Senior Secured Notes	May 2025	—		487
4.750 % euro-denominated Senior Notes	January 2026	415		428
5.750 % Senior Notes	July 2027	726		724
4.750 % Senior Notes	April 2028	500		—
5.375 % Senior Notes	March 2029	600		—
Floating Rate Term Loan (a)	August 2027	1,193		1,199
Other (b)		23		24
Deferred financing fees		( 46 )		( 48 )
Total		4,298		4,210
Less: Short-term debt and current portion of long-term debt		21		19
Long-term debt		$	4,277	$	4,191

__________

(a) The floating rate term loan is part of the Company’s senior revolving credit facility, which is secured by pledges of capital stock of certain subsidiaries of the Company, and liens on substantially all of the Company’s intellectual property and certain other real and personal property. As of June 30, 2021, the floating rate term loan due 2027 bears interest at one-month LIBOR plus 225 basis points, for an aggregate rate of 2.36 %. The Company has entered into a swap to hedge $ 700 million of its interest rate exposure related to the floating rate term loan at an aggregate rate of 4.58 %.

(b) Primarily includes finance leases which are secured by liens on the related assets.

In March 2021, the Company issued $ 600 million of 5.375 % Senior Notes due March 2029, at par, with interest paid semiannually. Net proceeds, together with cash on hand, were used to redeem all of the outstanding 10.5 % Senior Secured Notes due 2025 for $ 599 million plus accrued interest.

In March 2021, the Company issued $ 500 million of 4.75 % Senior Notes du e April 2 028, at par, with interest paid semiannually. Net proceeds, together with cash on hand, were used to redeem all of the outstanding 6.375 % Senior Notes due 2024 for $ 356 million plus accrued interest and a portion of its outstanding 5.25 % Senior Notes due 2025 for $ 142 million plus accrued interest.

The 5.375 % and 4.75 % notes are guaranteed on a senior unsecured basis by the Company and certain of the Company’s subsidiaries.

Committed Credit Facilities and Available Funding Arrangements

At June 30, 2021, the committed corporate credit facilities available to the Company and/or its subsidiaries were as follows:


	Total Capacity		Outstanding Borrowings		Letters of Credit Issued		Available Capacity
Senior revolving credit facility maturing 2023 (a)	$	1,800	$	—	$	1,270	$	530

(a) The senior revolving credit facility bears interest at one-month LIBOR plus 250 basis points and is part of the Company’s senior credit facilities, which include the floating rate term loan and the senior revolving credit facility, and which are secured by pledges of capital stock of certain subsidiaries of the Company, liens on substantially all of the Company’s intellectual property and certain other real and personal property.

Debt Covenants

The agreements governing the Company’s indebtedness contain restrictive covenants, including restrictions on dividends paid to the Company by certain of its subsidiaries, the incurrence of additional indebtedness by the Company and certain of its subsidiaries, acquisitions, mergers, liquidations, and sale and leaseback transactions. The Company’s senior credit facility also contains a maximum leverage ratio requirement (See

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Note 1 – Basis of Presentation). As of June 30, 2021, the Company was in compliance with the financial covenants governing its indebtedness.

11. Debt Under Vehicle Programs and Borrowing Arrangements

Debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding (AESOP) LLC (“Avis Budget Rental Car Funding”), consisted of:


	As of		As of
	June 30,		December 31,
	2021		2020
Americas - Debt due to Avis Budget Rental Car Funding	$	8,216	$	5,116
Americas - Debt borrowings	622		509
International - Debt borrowings	1,443		1,115
International - Finance leases	175		162
Other	1		—
Deferred financing fees (a)	( 49 )		( 45 )
Total	$	10,408	$	6,857

__________

(a) Deferred financing fees related to Debt due to Avis Budget Rental Car Funding as of June 30, 2021 and December 31, 2020 were $ 43 million and $ 36 million, respectively.

In May 2021, the Company’s Avis Budget Rental Car Funding (AESOP) LLC subsidiary issued $ 800 million of asset-backed notes with an expected final payment date of August 2026, with a weighted average interest rate of 1.73 %.

In June 2021, the Company’s Avis Budget Rental Car Funding (AESOP) LLC subsidiary issued $ 96 million, $ 105 million and $ 103 million of asset-backed notes with expected final payment dates of March 2024, September 2024 and August 2025, respectively, with a weighted average interest rate of 3.14 %.

Debt Maturities

The following table provides the contractual maturities of the Company’s debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding, at June 30, 2021:


	Debt under Vehicle Programs (a)
Within 1 year (b)	$	2,026
Between 1 and 2 years (c)	3,311
Between 2 and 3 years (d)	1,564
Between 3 and 4 years	1,675
Between 4 and 5 years	1,531
Thereafter	350
Total	$	10,457

__________

(a) Vehicle-backed debt primarily represents asset-backed securities.

(b) Includes $ 0.6 billion of bank and bank-sponsored facilities.

(d) Includes $ 0.1 billion of bank and bank-sponsored facilities.

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Committed Credit Facilities and Available Funding Arrangements

As of June 30, 2021, available funding under the Company’s vehicle programs, including related party debt due to Avis Budget Rental Car Funding, consisted of:


	Total Capacity (a)		Outstanding Borrowings (b)		Available Capacity
Americas - Debt due to Avis Budget Rental Car Funding	$	10,346	$	8,216	$	2,130
Americas - Debt borrowings	746		622		124
International - Debt borrowings	2,607		1,443		1,164
International - Finance leases	196		175		21
Other	1		1		—
Total	$	13,896	$	10,457	$	3,439

(a) Capacity is subject to maintaining sufficient assets to collateralize debt.

(b) The outstanding debt is collateralized by vehicles and related assets of $ 9.2 billion for Americas - Debt due to Avis Budget Rental Car Funding; $ 0.8 billion for Americas - Debt borrowings; $ 1.7 billion for International - Debt borrowings; and $ 0.2 billion for International - Finance leases.

Debt Covenants

The agreements under the Company’s vehicle-backed funding programs contain restrictive covenants, including restrictions on dividends paid to the Company by certain of its subsidiaries and restrictions on indebtedness, mergers, liens, liquidations, and sale and leaseback transactions and in some cases also require compliance with certain financial requirements. As of June 30, 2021, the Company is not aware of any instances of non-compliance with any of the financial covenants contained in the debt agreements under its vehicle-backed funding programs.

12. Commitments and Contingencies

Contingencies

In 2006, the Company completed the spin-offs of its Realogy and Wyndham subsidiaries. The Company does not believe that the impact of any resolution of pre-existing contingent liabilities in connection with the spin-offs should result in a material liability to the Company in relation to its consolidated financial position or liquidity, as Realogy and Wyndham each have agreed to assume responsibility for these liabilities. The Company is also named in litigation that is primarily related to the businesses of its former subsidiaries, including Realogy and Wyndham. The Company is entitled to indemnification from such entities for any liability resulting from such litigation.

In February 2017, following state court trials in Georgia, the Company was found liable for damages in two cases brought by plaintiffs who were injured in a vehicle accident allegedly caused by an employee of an independent contractor of the Company who was acting outside of the scope of employment. In fourth quarter 2019, the Company appealed both verdicts resulting in a reversal of the judgments rendered. The Georgia Supreme Court granted the plaintiffs’ application to review the appellate court’s reversal of the judgements entered at the trial court. The Georgia Supreme Court heard oral arguments in December 2020 and on May 3, 2021 issued a decision affirming the appellate court’s judgments. Following the issuance of this decision, plaintiffs filed motions for reconsideration, which were denied in June 2021. The Company reversed a previously recognized liability related to these cases, net of recoverable insurance proceeds, of approximately $ 12 million within operating expenses.

The Company is currently involved, and in the future may be involved, in claims and/or legal proceedings, including class actions, and governmental inquiries that are incidental to its vehicle rental and car sharing operations, including, among others, contract and licensee disputes, competition matters, employment and wage-and-hour claims, insurance and liability claims, intellectual property claims, business practice disputes and other regulatory, environmental, commercial and tax matters. Litigation is inherently unpredictable and, although the Company believes that its accruals are adequate and/or that it has valid defenses in these matters, unfavorable resolutions could occur. The Company estimates that the potential exposure resulting from adverse outcomes of current legal proceedings in which it is reasonably possible that a loss may be incurred could, in the aggregate, be up to approximately $ 35 million in excess of amounts accrued as of

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June 30, 2021. The Company does not believe that the impact should result in a material liability to the Company in relation to its consolidated financial condition or results of operations.

Commitments to Purchase Vehicles

The Company maintains agreements with vehicle manufacturers under which the Company has agreed to purchase approximately $ 5.7 billion of vehicles from manufacturers over the next 12 months, a $ 3.0 billion decrease compared to December 31, 2020, financed primarily through the issuance of vehicle-backed debt and cash received upon the disposition of vehicles. Certain of these commitments are subject to the vehicle manufacturers satisfying their obligations under their respective repurchase and guaranteed depreciation agreements.

Concentrations

Concentrations of credit risk at June 30, 2021 include (i) risks related to the Company’s repurchase and guaranteed depreciation agreements with domestic and foreign car manufacturers, primarily with respect to receivables for program cars that have been disposed but for which the Company has not yet received payment from the manufacturers and (ii) risks related to Realogy and Wyndham, including receivables of $ 25 million and $ 15 million, respectively, related to certain contingent, income tax and other corporate liabilities assumed by Realogy and Wyndham in connection with their disposition.

13. Stockholders’ Equity

Share Repurchases

The Company’s Board of Directors has authorized the repurchase of up to $ 2.1 billion of its common stock under a plan originally approved in 2013 and subsequently expanded most recently in June 2021 (the “Stock Repurchase Program”). During the six months ended June 30, 2021, the Company repurchased approximately 0.1 million shares of common stock at a cost of approximately $ 10 million under the program. As of June 30, 2021, approximately $ 391 million of authorization remains available to repurchase common stock under the program.

Share Issuances

On February 10, 2020, the Company announced it had appointed a new Chairman of the Board of Directors and in connection with this appointment, the new Chairman purchased an aggregate $ 15 million of unregistered shares of the Company’s common stock at a price per share equal to the closing price of the Company’s common stock on February 7, 2020.

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Total Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and other gains and losses affecting stockholders’ equity that, under GAAP, are excluded from net income (loss).

The components of other comprehensive income (loss) were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
Net income (loss)		$	398	$	( 481 )	$	228	$	( 639 )
Other comprehensive income (loss):
	Currency translation adjustments (net of tax of $ 3 , $ 4 , $( 9 ) and $ 0 , respectively)	15		39		1		( 44 )
	Net unrealized gain (loss) on cash flow hedges (net of tax of $( 10 ), $ 3 , $( 7 ) and $ 9 , respectively)	( 14 )		( 8 )		21		( 26 )
	Minimum pension liability adjustment (net of tax of $ 0 , $ 0 , $ 0 and $ 0 , respectively)	1		2		4		4
		2		33		26		( 66 )
Comprehensive income (loss)		$	400	$	( 448 )	$	254	$	( 705 )

Currency translation adjustments exclude income taxes related to indefinite investments in foreign subsidiaries.

Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) were as follows:


		Currency Translation Adjustments (a)		Net Unrealized Gains (Losses) on Cash Flow Hedges (b)		Minimum Pension Liability Adjustment (c)		Accumulated Other Comprehensive Income (Loss)


Balance, January 1, 2021		$	40	$	( 51 )	$	( 176 )	$	( 187 )
	Other comprehensive income (loss) before reclassifications	( 10 )		14		1		5
	Amounts reclassified from accumulated other comprehensive income (loss)	11		7		3		21
Net current-period other comprehensive income (loss)		1		21		4		26
Balance, June 30, 2021		$	41	$	( 30 )	$	( 172 )	$	( 161 )

Balance, January 1, 2020		$	9	$	( 20 )	$	( 146 )	$	( 157 )
	Other comprehensive income (loss) before reclassifications	( 44 )		( 28 )		1		( 71 )
	Amounts reclassified from accumulated other comprehensive income (loss)	—		2		3		5
Net current-period other comprehensive income (loss)		( 44 )		( 26 )		4		( 66 )
Balance, June 30, 2020		$	( 35 )	$	( 46 )	$	( 142 )	$	( 223 )

All components of accumulated other comprehensive income (loss) are net of tax, except currency translation adjustments, which exclude income taxes related to indefinite investments in foreign subsidiaries and include $ 37 million gain, net of tax, as of June 30, 2021 related to the Company’s hedge of its investment in euro-denominated foreign operations (see Note 15–Financial Instruments).

(a) For the six months ended June 30, 2021, the amount was reclassified from accumulated other comprehensive income (loss) into restructuring and other related charges.

(b) For the three and six months ended June 30, 2021, the amount reclassified from accumulated other comprehensive income (loss) into corporate interest expense was $ 4 million ($ 3 million, net of tax) and $ 8 million ($ 6 million, net of tax), respectively. For the three and six months ended June 30, 2021, the amount reclassified from accumulated other comprehensive income (loss) into vehicle interest expense was $ 1 million ($ 1 million net of tax) and $ 2 million ($ 1 million, net of tax), respectively. For the three and six months ended June 30, 2020, the amount reclassified from accumulated other comprehensive income (loss) into corporate interest expense and vehicle interest expense was $ 2 million ($ 1 million net of tax) and $ 1 million ($ 1 million, net of tax), respectively, in each period.

(c) For the three and six months ended June 30, 2021, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses were $ 2 million ($ 1 million, net of tax) and $ 5 million ($ 3 million, net of tax), respectively. For the three and six months ended June 30, 2020, the amount reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses was $ 2 million ($ 2 million net of tax) and $ 4 million ($ 3 million, net of tax), respectively.

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14. Stock-Based Compensation

The Company recorded stock-based compensation expense of $ 10 million and $ 4 million ($ 7 million and $ 2 million, net of tax) during the three months ended June 30, 2021 and 2020, respectively, and $ 14 million and $ 2 million ($ 10 million and $ 1 million, net of tax) during the six months ended June 30, 2021 and 2020, respectively.

In June 2020, the Company granted market-based restricted stock units (“RSUs”) that vest based on absolute stock price attainment. The grant date fair value of this award is estimated using a Monte Carlo simulation model.

The weighted average assumptions used in the model are as follows:


Expected volatility of stock price						91 %
Risk-free interest rate						0.18 %
Valuation period						3 years
Dividend yield						— %

The activity related to RSUs consisted of (in thousands of shares):


			Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in millions)
Time-based RSUs
	Outstanding at January 1, 2021		1,070	$	27.47
		Granted (a)	240	63.12
		Vested (b)	( 459 )	28.78
		Forfeited	( 35 )	32.97
	Outstanding and expected to vest at June 30, 2021 (c)		816	$	36.98	1.2	$	64
Performance-based and market-based RSUs
	Outstanding at January 1, 2021		988	$	32.41
		Granted (a)	236	62.27
		Vested (b)	—	—
		Forfeited	( 316 )	46.59
	Outstanding at June 30, 2021		908	$	35.23	1.8	$	71
	Outstanding and expected to vest at June 30, 2021 (c)		563	$	40.63	1.8	$	44

(a) Reflects the maximum number of stock units assuming achievement of all performance-, market- and time-vesting criteria and does not include those for non-employee directors. The weighted-average fair value of time-based RSUs and performance-based and market-based RSUs granted during the six months ended June 30, 2020 was $ 21.67 and $ 21.06 , respectively.

(b) The total fair value of RSUs vested during June 30, 2021 and 2020 wa s $ 13 million and $ 18 million , respectively.

(c) Aggregate unrecognized compensation expense related to time-based RSUs and performance-based and market-based RSUs amounted to $ 40 million and will be recognized over a weighted average vesting period of 1.4 years.

15. Financial Instruments

Derivative Instruments and Hedging Activities

Currency Risk. The Company uses currency exchange contracts to manage its exposure to changes in currency exchange rates associated with certain of its non-U.S.-dollar denominated receivables and forecasted royalties, forecasted earnings of non-U.S. subsidiaries and forecasted non-U.S.-dollar denominated acquisitions. The Company primarily hedges a portion of its current-year currency exposure to the Australian, Canadian and New Zealand dollars, the euro and the British pound sterling. The majority of forward contracts do not qualify for hedge accounting treatment. The fluctuations in the value of these forward contracts do, however, largely offset the impact of changes in the value of the underlying risk they economically hedge. Forward contracts used to hedge forecasted third-party receipts and disbursements up to 12 months are designated and do qualify as cash flow hedges. The Company has designated its euro-denominated notes as a hedge of its investment in euro-denominated foreign operations.

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The estimated net amount of existing gains or losses the Company expects to reclassify from accumulated other comprehensive income (loss) to earnings for cash flow and net investment hedges over the next 12 months is not material.

Interest Rate Risk. The Company uses various hedging strategies including interest rate swaps and interest rate caps to create what it deems an appropriate mix of fixed and floating rate assets and liabilities. The Company uses interest rate swaps and interest rate caps to manage the risk related to its floating rate corporate debt and its floating rate vehicle-backed debt. The Company records the changes in the fair value of its cash flow hedges to other comprehensive income (loss), net of tax, and subsequently reclassifies these amounts into earnings in the period during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item. The Company records the gains or losses related to freestanding derivatives, which are not designated as a hedge for accounting purposes, currently in earnings and are presented in the same line of the income statement expected for the hedged item. The Company estimates that approximately $ 21 million of losses currently recorded in accumulated other comprehensive income (loss) will be recognized in earnings over the next 12 months.

Commodity Risk. The Company periodically enters into derivative commodity contracts to manage its exposure to changes in the price of gasoline. These instruments were designated as freestanding derivatives and the changes in fair value are recorded in earnings and are presented in the same line of the income statement expected for the hedged item.

The Company held derivative instruments with absolute notional values as follows:


	As of June 30, 2021
Foreign exchange contracts	$	1,736
Interest rate caps (a)	8,773
Interest rate swaps	1,950

(a) Represents $ 5.9 billion of interest rate caps sold, partially offset by approximately $ 2.9 billion of interest rate caps purchased. These amounts exclude $ 3.0 billion of interest rate caps purchased by the Company’s Avis Budget Rental Car Funding subsidiary as it is not consolidated by the Company.

Estimated fair values (Level 2) of derivative instruments were as follows:


		As of June 30, 2021				As of December 31, 2020
		Fair Value, Derivative Assets		Fair Value, Derivative Liabilities		Fair Value, Derivative Assets		Fair Value, Derivative Liabilities
Derivatives designated as hedging instruments
	Interest rate swaps (a)	$	—	$	41	$	—	$	69

Derivatives not designated as hedging instruments
	Foreign exchange contracts (b)	8		6		3		11
	Interest rate caps (c)	1		3		—		—

	Total	$	9	$	50	$	3	$	80

__________

Amounts in this table exclude derivatives issued by Avis Budget Rental Car Funding, as it is not consolidated by the Company; however, certain amounts related to the derivatives held by Avis Budget Rental Car Funding are included within accumulated other comprehensive income (loss), as discussed in Note 13–Stockholders’ Equity.

(a) Included in other non-current assets or other non-current liabilities.

(b) Included in other current assets or other current liabilities.

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The effects of derivatives recognized in the Company’s Consolidated Condensed Financial Statements were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
Derivatives designated as hedging instruments (a)
	Interest rate swaps (b)	$	( 14 )	$	( 8 )	$	21	$	( 26 )
	Euro-denominated notes (c)	( 10 )		( 13 )		23		( 2 )
Derivatives not designated as hedging instruments (d)
	Foreign exchange contracts (e)	3		( 8 )		( 5 )		26
	Interest rate caps (f)	( 1 )		( 1 )		( 2 )		( 1 )
	Commodity contracts (g)	—		2		—		( 7 )
	Total	$	( 22 )	$	( 28 )	$	37	$	( 10 )

(a) Recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity.

(b) Classified as a net unrealized gain (loss) on cash flow hedges in accumulated other comprehensive income (loss). Refer to Note 13–Stockholders’ Equity for amounts reclassified from accumulated other comprehensive income into earnings.

(c) Classified as a net investment hedge within currency translation adjustment in accumulated other comprehensive income (loss).

(d) Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures being hedged.

(e) For the three months ended June 30, 2021, included a $ 2 million gain in interest expense and a $ 1 million gain in operating expense and for the six months ended June 30, 2021, included a $ 5 million loss in interest expense. For the three months ended June 30, 2020, included an $ 8 million loss in operating expense and for the six months ended June 30, 2020, included a $ 28 million gain in interest expense and a $ 2 million loss in operating expense.

(f) Included primarily in vehicle interest, net.

(g) Included in operating expense.

Debt Instruments

The carrying amounts and estimated fair values (Level 2) of debt instruments were as follows:


		As of June 30, 2021				As of December 31, 2020
		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Corporate debt
	Short-term debt and current portion of long-term debt	$	21	$	21	$	19	$	18
	Long-term debt	4,277		4,440		4,191		4,337

Debt under vehicle programs
	Vehicle-backed debt due to Avis Budget Rental Car Funding	$	8,173	$	8,450	$	5,080	$	5,317
	Vehicle-backed debt	2,231		2,247		1,775		1,796
	Interest rate swaps and interest rate caps (a)	4		4		2		2

(a) Derivatives in a liability position.

16. Segment Information

The Company’s chief operating decision-maker assesses performance and allocates resources based upon the separate financial information from each of the Company’s operating segments. In identifying its reportable segments, the Company considered the nature of services provided, the geographical areas in which the segments operated and other relevant factors. The Company aggregates certain of its operating segments into its reportable segments.

Management evaluates the operating results of each of its reportable segments based upon revenues and “Adjusted EBITDA,” which the Company defines as income (loss) from continuing operations before non-vehicle related depreciation and amortization, any impairment charges, restructuring and other related

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charges, early extinguishment of debt costs, non-vehicle related interest, transaction-related costs, net, charges for unprecedented personal-injury and other legal matters, net, non-operational charges related to shareholder activist activity, which include third party advisory, legal and other professional service fees, gain on sale of equity method investment in China, COVID-19 charges and income taxes. COVID-19 charges include unusual, direct and incremental costs due to the COVID-19 pandemic such as minimum annual guaranteed rent in excess of concession fees for the period, overflow parking for idle vehicles and related shuttling costs, incremental cleaning supplies to sanitize vehicles and facilities, and losses associated with vehicles damaged in overflow parking lots, net of insurance proceeds. The Company’s presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.


			Three Months Ended June 30,
			2021				2020
			Revenues		Adjusted EBITDA		Revenues		Adjusted EBITDA
Americas			$	1,974	$	634	$	565	$	( 233 )
International			397		8		195		( 140 )
Corporate and Other (a)			—		( 18 )		—		( 9 )
	Total Company		$	2,371	$	624	$	760	$	( 382 )

Reconciliation of Adjusted EBITDA to income (loss) before income taxes:
					2021				2020
Adjusted EBITDA					$	624			$	( 382 )
Less:		Non-vehicle related depreciation and amortization (b)			67				71
		Interest expense related to corporate debt, net:
		Interest expense			59				51
		Early extinguishment of debt			—				3
		Restructuring and other related charges			22				28
		Transaction-related costs, net			1				1
		COVID-19 charges (c)			—				73


		Unprecedented personal-injury and other legal matters, net (d)			( 11 )				—
Income (loss) before income taxes					$	486			$	( 609 )

__________

(a) Includes unallocated corporate overhead which is not attributable to a particular segment.

(b) For the three months ended June 30, 2021 consists of $ 3 million within operating expenses and $ 2 million within selling, general and administrative expenses related to cloud computing costs.


	2021		2020
Minimum annual guaranteed rent in excess of concession fees, net	$	( 3 )	$	30
Vehicles damaged in overflow parking lots, net of insurance proceeds	2		28
Incremental cleaning supplies to sanitize vehicles and facilities, and over flow parking for idle vehicles	—		15
Other charges	1		—
Operating expenses	$	—	$	72
Selling, general and administrative expenses	$	—	$	1

(d) Reported within operating expenses.

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			Six Months Ended June 30,
			2021				2020
			Revenues		Adjusted EBITDA		Revenues		Adjusted EBITDA
Americas			$	3,054	$	742	$	1,822	$	( 263 )
International			689		( 42 )		691		( 180 )
Corporate and Other (a)			—		( 29 )		—		( 26 )
	Total Company		$	3,743	$	671	$	2,513	$	( 469 )

Reconciliation of Adjusted EBITDA to income (loss) before income taxes:
					2021				2020
Adjusted EBITDA					$	671			$	( 469 )
Less:		Non-vehicle related depreciation and amortization (b)			135				140
		Interest expense related to corporate debt, net:
		Interest expense			120				99
		Early extinguishment of debt			129				7
		Restructuring and other related charges			42				72
		COVID-19 charges (c)			18				80
		Transaction-related costs, net			2				3
		Non-operational charges related to shareholder activist activity (d)			—				4

		Unprecedented personal-injury and other legal matters, net (e)			( 11 )				—
Income (loss) before income taxes					$	236			$	( 874 )

__________

(a) Includes unallocated corporate overhead which is not attributable to a particular segment.

(b) For the three and six months ended June 30, 2021 consists of $ 3 million within operating expenses and $ 2 million within selling, general and administrative expenses related to cloud computing costs.


	2021		2020
Minimum annual guaranteed rent in excess of concession fees, net	$	16	$	30
Vehicles damaged in overflow parking lots, net of insurance proceeds	( 4 )		33
Incremental cleaning supplies to sanitize vehicles and facilities, and over flow parking for idle vehicles	—		17
Other charges	6		—
Operating expenses	$	17	$	79
Selling, general and administrative expenses	$	1	$	1

(d) Reported within selling, general and administrative expenses.

(e) Reported within operating expenses.

Since December 31, 2020, there have been no significant changes in segment assets exclusive of assets under vehicle programs. As of June 30, 2021 and December 31, 2020, Americas’ segment assets under vehicle programs were approximately $ 10.3 billion and $ 7.2 billion, respectively, and International segment assets under vehicle programs were approximately $ 2.5 billion and $ 2.0 billion, respectively. The changes in assets under vehicle programs is primarily due to the increase in the size of our vehicle rental fleet to meet increases in rental demand.

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17. Subsequent Events

From July 12, 2021 through August 3, 2021, the Company repurchased approximately 4.1 million shares of common stock at a cost of approximately $ 318 million under the Stock Repurchase Program.

In August 2021, the Company’s Board of Directors approved a $ 1 billion increase in repurchase authorization to the Company’s Stock Repurchase Program.

In August 2021, the Company’s 5.250 % Senior Notes due March 2025 with an aggregate outstanding balance of $ 235 million were called for early redemption.

* * * *

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our Consolidated Condensed Financial Statements and accompanying Notes included in this Quarterly Report on Form 10-Q, and with our 2020 Form 10-K. Our actual results of operations may differ materially from those discussed in forward-looking statements as a result of various factors, including those discussed in “Forward-Looking Statements”. See “Forward-Looking Statements” for additional information. Unless otherwise noted, all dollar amounts in tables are in millions.


OVERVIEW

Our Company

We operate three of the most globally recognized brands in mobility solutions, Avis, Budget and Zipcar, together with several other brands well recognized in their respective markets. We are a leading vehicle rental operator in North America, Europe, Australasia and certain other regions we serve, with an average rental fleet during 2020 of nearly 533,000 vehicles. We also license the use of our trademarks to licensees in the areas in which we do not operate directly. We and our licensees operate our brands in approximately 180 countries throughout the world.

Our Segments

We categorize our operations into two reportable business segments: Americas , consisting primarily of our vehicle rental operations in North America, South America, Central America and the Caribbean, car sharing operations in certain of these markets, and licensees in the areas in which we do not operate directly; and International , consisting primarily of our vehicle rental operations in Europe, the Middle East, Africa, Asia and Australasia, car sharing operations in certain of these markets, and licensees in the areas in which we do not operate directly.

Business and Trends

The positive momentum from the fourth quarter of 2020 carried into the fi rst half of 2021. For the three and six month periods ended June 30, 2021, the Company generated revenues of $2.4 billion and $3.7 billion, respectively, net income of $398 million and $228 million, respectively, and Adjusted EBITDA of $624 million and $671 million, respectively. These results were primarily driven by increased demand for rental vehicles, improved pricing across the industry, disciplined cost removal achieved in 2020 and continued fleet manage ment. Our utilization rate for the second quarter ended June 30, 2021 was 71.3%, a 50 basis point improvement compared to second quarter 2019 and a 36.2% i mprovement over the second quarter of 2020, showing our continued ability to align our fleet with demand. In addition, per-unit fleet costs per month was $221, a 17% improvement compared to second quarter 2019 and a 2% improvement, excluding exchange rate effects, compared to the second quarter of 2020. Revenue per day was $71.74, a 35% improvement over the second quarter of 2019 and a 70% improvement over the second quarter of 2020.

The global economy and our business were significantly impacted by the COVID-19 pandemic in 2020. However, due to the continued distribution of effective vaccines, along with other protective measures, over the past six months travel advisories and restrictions have eased. There are a number of encouraging developments, such as a significant increase in global travel demand, which generated an increase in demand for rental vehicles and improved pricing across the industry, suggesting a steady return to historic travel trends. We have positioned ourselves to capitalize on the continued surge in travel demand. As our revenues begin to reach pre-pandemic levels, we continue to take actions to put us on a path of profitability to exceed such levels. We continue to look for ways to capitalize on the changes prompted by the pandemic and to expand our business in a post-COVID-19 environment. However, the full extent of the ongoing impact of this virus on our long-term operational and financial performance will depend on future developments, including those outside of our control, such as the spread of new variants of the virus and the implementation of new or continued travel restrictions and the overall economic environment. Significant events affecting travel have historically had an impact on vehicle rental volumes, with the full extent of the impact generally determined by the length of time the event influences travel decisions. As a consequence, we cannot estimate the impact on our business, financial condition or forecast financial or operational results with reasonable certainty.

The global semiconductor shortage is causing uncertainty in fleet supply and resulting in tighter fleets throughout the industry. We have historically navigated through significant vehicle recalls, and believe we have the logistics in place to effectively manage our fleet during this disruption in supply. We continue to purchase new vehicles and believe we can increase our fleet utilization efficiency to capture increased demand.

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RESULTS OF OPERATIONS

We measure performance principally using the following key metrics: (i) rental days, which represent the total number of days (or portion thereof) a vehicle was rented, (ii) revenue per day, which represents revenues divided by rental days, (iii) vehicle utilization, which represents rental days divided by available rental days, with available rental days defined as average rental fleet times the number of days in the period, and (iv) per-unit fleet costs, which represent vehicle depreciation, lease charges and gain or loss on vehicle sales, divided by average rental fleet. Our rental days, revenue per day and vehicle utilization metrics are all calculated based on the actual rental of the vehicle during a 24-hour period. We believe that this methodology provides us with the most relevant metrics in order to manage the business. Our calculation may not be comparable to the calculation of similarly-titled metrics by other companies. We present currency exchange rate effects to provide a method of assessing how our business performed excluding the effects of foreign currency rate fluctuations. Currency exchange rate effects are calculated by translating the current-year results at the prior-period average exchange rate plus any related gains and losses on currency hedges.

We assess performance and allocate resources based upon the separate financial information of our operating segments. In identifying our reportable segments, we also consider the nature of services provided by our operating segments, the geographical areas in which our segments operate and other relevant factors. Management evaluates the operating results of each of our reportable segments based upon revenues and “Adjusted EBITDA,” which we define as income (loss) from continuing operations before non-vehicle related depreciation and amortization, any impairment charges, restructuring and other related charges, early extinguishment of debt costs, non-vehicle related interest, transaction-related costs, net, charges for unprecedented personal-injury and other legal matters, net, non-operational charges related to shareholder activist activity, which include third party advisory, legal and other professional service fees, gain on sale of equity method investment in China, COVID-19 charges and income taxes. COVID-19 charges include unusual, direct and incremental costs due to the COVID-19 pandemic such as minimum annual guaranteed rent in excess of concession fees for the period, overflow parking for idle vehicles and related shuttling costs, incremental cleaning supplies to sanitize vehicles and facilities, and losses associated with vehicles damaged in overflow parking lots, net of insurance proceeds. We believe Adjusted EBITDA is useful as a supplemental measure in evaluating the performance of our operating businesses and in comparing our results from period to period. We also believe that Adjusted EBITDA is useful to investors because it allows them to assess our results of operations and financial condition on the same basis that management uses internally. Adjusted EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for net income or other income statement data prepared in accordance with U.S. GAAP. Our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

During the six months ended June 30, 2021

• Our revenues totaled $3.7 billion, an increase of 49% compared to the similar period in 2020, primarily due to a significant increase in pricing and increased demand for rental vehicles . The significant increase in revenues was a direct result of the global effort to combat the incidence and spread of the COVID-19 virus, which led to a significant increase in global travel demand, suggesting a steady return to historic travel levels.

• Our net income was $228 million, representing an increase of $867 million year-over-year, primarily due to significantly higher revenues, as described above, in addition to disciplined cost management in 2021, building upon the cost removal achieved in 2020.

• Our Adjusted EBITDA was $671 million, representing a significant increase of $1.1 billion year-over-year, primarily due to significantly higher revenues and disciplined cost management.

• We repurchased $10 million of our common stock, reducing our shares outstanding by approximately 0.1 million shares.

• We issued $600 million and $500 million of 5.375% Senior Notes due March 2029 and 4.75% Senior Notes due April 2028, respectively, with proceeds used to redeem our 10.5% Senior Secured Notes due May 2025, our 6.375% Senior Notes due in April 2024 and a portion of our 5.25% Senior Notes due in March 2025.

• We issued $1.1 billion in asset-backed notes incurring interest at a blended weighted average rate of 2.1%.

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Three Months Ended June 30, 2021 vs. Three Months Ended June 30, 2020

Our consolidated condensed results of operations comprised the following:


		Three Months Ended June 30,
		2021		2020		$ Change		% Change
Revenues		$	2,371	$	760	$	1,611	212	%

Expenses
	Operating	1,032		622		410		66	%
	Vehicle depreciation and lease charges, net	338		374		(36)		(10	%)
	Selling, general and administrative	294		132		162		123	%
	Vehicle interest, net	77		87		(10)		(11	%)
	Non-vehicle related depreciation and amortization	62		71		(9)		(13	%)
	Interest expense related to corporate debt, net:
	Interest expense	59		51		8		16	%
	Early extinguishment of debt	—		3		(3)		n/m
	Restructuring and other related charges	22		28		(6)		(21	%)
	Transaction-related costs, net	1		1		—		0	%
Total expenses		1,885		1,369		516		38	%

Income (loss) before income taxes		486		(609)		1,095		180	%
Provision for (benefit from) income taxes		88		(128)		216		169	%

Net income (loss)		$	398	$	(481)	$	879	183	%

___________

n/m - Not Meaningful

Revenues increased $1.6 billion during the three months ended June 30, 2021 compared to the similar period in 2020, primarily due to a 67% increase in revenue per day, excluding exchange rate effects, an 84% increase in volume as the mobility industry recovers from the pandemic and a $45 million benefit from currency exchange rate movements. Total expenses increased 38% during the three months ended June 30, 2021, compared to the similar period in 2020 , primarily due to increased demand, partially offset by cost discipline as volume returned. O ur effective tax rates were a provision for (ben efit from) of 18% and (21)% for the three months ended June 30, 2021 and 2020, respectively. As a result of these items, our net income increased by $879 million compared to the similar period in 2020. For the three months ended June 30, 2021 and 2020, the Company reported earnings (loss) per diluted share of $5.63 and $(6.91), respectively.

Operating expenses decreased to 43.5% of revenue during the three months ended June 30, 2021 compared to 81.9% during the similar period in 2020, primarily due to the increased revenues and cost discipline as volume returned . Vehicle depreciation and lease charges decreased to 14.3% of revenue during the three months ended June 30, 2021 compared to 49.3% during the similar period in 2020, primarily due to increased revenues. Selli ng, general and administrative costs decreased to 12.4% of revenue during the three months ended June 30, 2021 compared to 17.4% during the similar period in 2020, primarily due to increased revenues and cost discipline as volume returned. Vehicle interest costs decreased to 3.2% of revenue during the three months ended June 30, 2021 compared to 11.4% during the similar period in 2020, primarily due to increased revenues.

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Following is a more detailed discussion of the results of each of our reportable segments and reconciliation of net income to Adjusted EBITDA:


			Three Months Ended June 30,
			2021				2020
			Revenues		Adjusted EBITDA		Revenues		Adjusted EBITDA
Americas			$	1,974	$	634	$	565	$	(233)
International			397		8		195		(140)
Corporate and Other (a)			—		(18)		—		(9)
	Total Company		$	2,371	$	624	$	760	$	(382)

			Reconciliation to Adjusted EBITDA
							2021		2020
Net income (loss)							$	398	$	(481)
Provision for (benefit from) income taxes							88		(128)
Income (loss) before income taxes							486		(609)

Add:		Non-vehicle related depreciation and amortization (b)					67		71
		Interest expense related to corporate debt, net:
		Interest expense					59		51
		Early extinguishment of debt					—		3
		Restructuring and other related charges					22		28
		Transaction-related costs, net					1		1
		COVID-19 charges (c)					—		73

		Unprecedented personal-injury and other legal matters, net (d)					(11)		—
Adjusted EBITDA							$	624	$	(382)

(a) Includes unallocated corporate overhead which is not attributable to a particular segment.

(b) Includes cloud computing costs of $3 million within operating expenses and $2 million within selling, general and administrative expenses.


	2021		2020
Minimum annual guaranteed rent in excess of concession fees, net	$	(3)	$	30
Vehicles damaged in overflow parking lots, net of insurance proceeds	2		28
Incremental cleaning supplies to sanitize vehicles and facilities, and over flow parking for idle vehicles	—		15
Other charges	1		—
Operating expenses	$	—	$	72
Selling, general and administrative expenses	$	—	$	1

(d) Reported within operating expenses in our consolidated condensed results of operations.

Americas


	Three Months Ended June 30,
	2021		2020		% Change
Revenues	$	1,974	$	565	249	%
Adjusted EBITDA	634		(233)		372	%

Revenues increased $1.4 billion during the three months ended June 30, 2021 compared to the similar period in 2020, primarily due to a 68% increase in revenue per day and a significant increase in volume.

Operating expenses decreased to 40.9% of revenue during the three months ended June 30, 2021 compared to 78.0% during the similar period in 2020 , primarily due to increased revenues and cost discipline as volume returned. Vehicle depreciation and lease charges decreased to 13.1% of revenue during the three months ended June 30, 2021 c ompared to 47.7% during the similar period in 2020 , primarily due to increased revenues, partially offset by a 1% increase in per-unit fleet costs, excluding exchange rate effects. Selling, general and administrative costs decreased to 10.0% of revenue during the three months ended June 30, 2021 compared to 14.2% during the similar period in 2020, primarily due to increased revenues and cost discipline as volume returned. Vehicle interest costs decreased to 3.2% of revenue during the three months ended June 30, 2021 compared to 12.9% during the similar period in 2020 , primarily due to increased revenues.

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Adjusted EBITDA was $867 million higher during the three months ended June 30, 2021 compared to the similar period in 2020, primarily due to increased revenues and cost discipline as volume returned.

International


	Three Months Ended June 30,
	2021		2020		% Change
Revenues	$	397	$	195	104	%
Adjusted EBITDA	8		(140)		106	%

Revenues increased $202 million during the three months ended June 30, 2021, compared to the similar period in 2020, primarily due to a 35% increase in revenue per day excluding exchange rate effects, a 35% increase in volume and a $41 million benefit from currency exchange rate movements.

Operating expenses decreased to 56.4% of revenue during the three months ended June 30, 2021 c ompared to 93.5% during the similar period in 2020, primarily due to increased revenues and cost discipline as volume returned. Vehicle depreciation and lease charges decreased to 19.9% of revenue during the three months ended June 30, 2021 compared to 53.8% during the similar period in 2020, primarily due to increased revenues and a 15% decrease in per-unit fleet costs, excluding exchange rate effects, driven by the continued favorable trend in the used-vehicle market. Selling, general and administrative costs decreased to 19.2% of revenue during the three months ended June 30, 2021 c ompared to 21.5% duri ng the similar period in 2020, primarily due to increased revenues and cost discipline as volume returned. Vehicle interest costs decreased to 3.3% of revenue during the three months ended June 30, 2021 compared to 6.9% during the similar perio d in 2020, primarily due to increased revenues.

Adjusted EBITDA was $148 million higher in second quarter 2021 compared to the similar period in 2020, primarily due to increased revenues, decreased per-unit fleet costs, cost discipline as volume returned and a $9 million benefit from currency exchange rate movements.

Six Months Ended June 30, 2021 vs. Six Months Ended June 30, 2020

Our consolidated condensed results of operations comprised the following:


		Six Months Ended June 30,
		2021		2020		$ Change		% Change
Revenues		$	3,743	$	2,513	$	1,230	49	%

Expenses
	Operating	1,864		1,680		184		11	%
	Vehicle depreciation and lease charges, net	592		833		(241)		(29	%)
	Selling, general and administrative	476		383		93		24	%
	Vehicle interest, net	152		170		(18)		(11	%)
	Non-vehicle related depreciation and amortization	130		140		(10)		(7	%)
	Interest expense related to corporate debt, net:
	Interest expense	120		99		21		21	%
	Early extinguishment of debt	129		7		122		n/m
	Restructuring and other related charges	42		72		(30)		(42	%)
	Transaction-related costs, net	2		3		(1)		(33	%)
Total expenses		3,507		3,387		120		4	%

Income (loss) before income taxes		236		(874)		1,110		127	%
Provision for (benefit from) income taxes		8		(235)		243		103	%

Net income (loss)		$	228	$	(639)	$	867	136	%

____________

n/m - Not Meaningful

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Revenues increased 49% during the six months ended June 30, 2021 compared to the similar period in 2020, primarily due to a 32% increase in revenue per day, excluding exchange rate effects, a 10% increase in volume and a $75 million benefit from currency exchange rate movements. Total expenses increased 4% during the six months ended June 30, 2021, compared to the similar period in 2020, pri marily due to increased demand, partially offset by cost discipline as volume returned. Our effective tax rates were a provision for (benefit from) of 3.4% and (26.9)% for the six months ended June 30, 2021 and 2020, respectively. As a result of these items, our net income increased by $867 million compared to the similar period in 2020. For the six months ended June 30, 2021 and 2020, the Company reported earnings (loss) per diluted share of $3.23 and $(8.96), respectively.

Operating expenses decreased to 49.8% of revenue during the six months ended June 30, 2021 compared to 66.9% during the similar period in 2020 , due to increased revenues and cost discipline as volume returned. Vehicle depreciation and lease charges decreased to 15.8% of revenue during the six months ended June 30, 2021 compared to 33.2% during the similar period in 2020, primarily due to increased revenues and a 12% decrease in per-unit fleet costs per month, excluding exchange rate effects, driven by the continued favorable trend in the used-vehicle market. Selling, general and administrative costs decreased to 12.7% of revenue during the six months ended June 30, 2021 compared to 15.2% during the similar period i n 2020, increased revenues and cost discipline as volume returned. Vehicle interest costs decreased to 4.1% of revenue during the six months ended June 30, 2021 compared to 6.7% during the similar period in 2020, primarily due to increased revenues.

Following is a more detailed discussion of the results of each of our reportable segments and reconciliation of net income to Adjusted EBITDA:


			Six Months Ended June 30,
			2021				2020
			Revenues		Adjusted EBITDA		Revenues		Adjusted EBITDA
Americas			$	3,054	$	742	$	1,822	$	(263)
International			689		(42)		691		(180)
Corporate and Other (a)			—		(29)		—		(26)
	Total Company		$	3,743	$	671	$	2,513	$	(469)

			Reconciliation to Adjusted EBITDA
							2021		2020
Net income (loss)							$	228	$	(639)
Provision for (benefit from) income taxes							8		(235)
Income (loss) before income taxes							236		(874)

Add:		Non-vehicle related depreciation and amortization (b)					135		140
		Interest expense related to corporate debt, net:
		Interest expense					120		99
		Early extinguishment of debt					129		7
		Restructuring and other related charges					42		72
		COVID-19 charges (c)					18		80
		Transaction-related costs, net					2		3
		Non-operational charges related to shareholder activist activity (d)					—		4
		Unprecedented personal-injury and other legal matters, net (e)					(11)		—
Adjusted EBITDA							$	671	$	(469)

(a) Includes unallocated corporate overhead which is not attributable to a particular segment.

(b) Includes cloud computing costs of $3 million within operating expenses and $2 million within selling, general and administrative expenses.


	2021		2020
Minimum annual guaranteed rent in excess of concession fees, net	$	16	$	30
Vehicles damaged in overflow parking lots, net of insurance proceeds	(4)		33
Incremental cleaning supplies to sanitize vehicles and facilities, and over flow parking for idle vehicles	—		17
Other charges	6		—
Operating expenses	$	17	$	79
Selling, general and administrative expenses	$	1	$	1

(d) Reported within selling, general and administrative expenses in our consolidated condensed results of operations.

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(e) Reported within operating expenses in our consolidated condensed results of operations.

Americas


	Six Months Ended June 30,
	2021		2020		% Change
Revenues	$	3,054	$	1,822	68	%
Adjusted EBITDA	742		(263)		382	%

Revenues increased 68% during the six months ended June 30, 2021 compared to the similar period in 2020, primarily due to a 38% increase in revenue per day and a 21% increase in volume.

Operating expenses decreased to 46.9% of revenue during the six months ended June 30, 2021 compared to 64.7% during the similar period in 2020, primarily due to increased revenues and cost discipline as volume returned. Vehicle depreciation and lease charges decreased to 14.5% of revenue during the six months ended June 30, 2021 compa red to 33.0% during the similar perio d in 2020, primarily due to increased revenues and an 11% decrease in per-unit fleet costs, driven by the continued favorable trend in the used-vehicle market. Selling, general and administrative costs decreased to 10.2% of revenue during the six months ended June 30, 2021 compa red to 12.9% during the similar period in 2020, primarily due to increased revenues and cost discipline as volume returned. Vehicle interest costs decreased to 4.1% of revenue during the six months ended June 30, 2021 compa red to 7.9% during the similar p eriod in 2020, primarily due to increased revenues.

Adjusted EBITDA was $1.0 billion higher during the six months ended June 30, 2021 compared to the similar period in 2020, primarily due to increased revenues, decreased per-unit fleet costs and cost discipline as volume returned.

International


	Six Months Ended June 30,
	2021		2020		% Change
Revenues	$	689	$	691	0	%
Adjusted EBITDA	(42)		(180)		77	%

Revenues was relatively unchanged during the six months ended June 30, 2021, compared to the similar period in 2020, primarily due to a 2% increase in revenue per day, excluding exchange rate effects and a $69 million benefit from currency exchange rate movements, partially offset by a 12% decrease in volume as a result of the impacts of COVID-19 from first quarter 2021.

Operating expenses decreased to 62.7% of revenue during the six months ended June 30, 2021 compared to 72.3% during the similar period in 2020, primarily due to cost discipline as volume recovers. Vehicle depreciation and lease charges decreased to 21.6% of revenue during the six months ended June 30, 2021 compared to 33.6% during the similar period in 2020, primarily due to a 16% decrease in per-unit fleet costs, excluding exchange rate effects, driven by the continued favorable trend in the used-vehicle market. Selling, general and administrative costs increased to 19.1% of revenue during the six months ended June 30, 2021 co mpared to 17.5% during the similar pe riod in 2020, primarily due to impacts directly related to COVID-19, partially offset by cost discipline as volume recovers. Vehicle interest costs were at 3.8% of revenue during the six months ended June 30, 2021 compared to 3.8% during the similar period in 2020.

Adjusted EBITDA increased 77% during the six months ended June 30, 2021 compared to the similar period in 2020, primarily due to a cost discipline as volume recovers and decreased per-unit fleet costs.

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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We present separately the financial data of our vehicle programs. These programs are distinct from our other activities as 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 generation or acquisition of such assets and the principal debt repayment or financing of such assets are classified as activities of our vehicle programs. We believe it is appropriate to segregate the financial data of our vehicle programs because, ultimately, the source of repayment of such debt is the realization of such assets.

FINANCIAL CONDITION


	June 30, 2021		December 31, 2020		Change
Total assets exclusive of assets under vehicle programs	$	9,217	$	8,365	$	852
Total liabilities exclusive of liabilities under vehicle programs	9,358		9,053		305
Assets under vehicle programs	12,796		9,173		3,623
Liabilities under vehicle programs	12,563		8,640		3,923
Stockholders’ equity	92		(155)		247

The increases in assets under vehicle programs and liabilities under vehicle programs are principally related to the increase in the size of our vehicle rental fleet to meet increased rental demand.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity are cash on hand and our ability to generate cash through operations and financing activities, as well as available funding arrangements and committed credit facilities, each of which is discussed below.

In March 2021, we issued $600 million of 5.375% Senior Notes due March 2029, at par. We used the proceeds, together with cash on hand, to redeem all of our outstanding 10.5% Senior Secured Notes due 2025. In March 2021, we issued $500 million of 4.75% Senior Unsecured Notes due April 2028. We used the proceeds, together with cash on hand, to redeem all of our outstanding 6.375% Senior Notes due in 2024 and $140 million in aggregate principal amount of our 5.25% Senior Notes due in 2025. In July, we amended our senior credit facilities to remove the restrictions imposed in April 2020, to increase the revolving credit facility to $1.95 billion and to extend the maturity of the facility to 2026. As a result, we have no meaningful corporate debt maturities until 2024.

In May 2021, our Avis Budget Rental Car Funding (AESOP) LLC subsidiary issued $800 million of asset-backed note with an expected final payment date of August 2026, with a weighted average interest rate of 1.73%.

In June 2021, our Avis Budget Rental Car Funding (AESOP) LLC subsidiary issued $96 million, $105 million and $103 million of asset-backed notes with expected final payment dates of March 2024, September 2024 and August 2025, respectively, with a weighted average interest rate of 3.14%.

The Company ’ s Board of Directors has authorized the repurchase of up to $2.1 billion of its common stock under a plan originally approved in 2013 and subsequently expanded, most recently in June 2021 . The Company ’ s stock repurchases may occur through open market purchases or trading plans pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors. The repurchase program may be suspended, modified or discontinued at any time without prior notice. The repurchase program has no set expiration or termination date. D uring the six months ended June 30, 2021, the Company repurchased approximately 0.1 million shares of common stock at a cost of approximately $10 million under the program. As of June 30, 2021, approximately $391 million of authorization remained available to repurchase common stock under the program.

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CASH FLOWS

The following table summarizes our cash flows:


		Six Months Ended June 30,
		2021		2020		Change
Cash provided by (used in):
	Operating activities	$	1,255	$	350	$	905
	Investing activities	(4,035)		317		(4,352)
	Financing activities	3,430		(224)		3,654
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		207
Cash and cash equivalents, program and restricted cash, beginning of period		765		900		(135)
Cash and cash equivalents, program and restricted cash, end of period		$	1,411	$	1,339	$	72

The increase in cash provided by operating activities during the six months ended June 30, 2021 compared with the same period in 2020 is principally due to the increase in our net income.

The increase in cash used in investing activities during the six months ended June 30, 2021 compared with the same period in 2020 is primarily due to an increase in investment in vehicles and a reduction in the disposition of vehicles.

The increase in cash provided by financing activities during the six months ended June 30, 2021 compared with the same period in 2020 is primarily due to a decrease in net payments under vehicle programs.

DEBT AND FINANCING ARRANGEMENTS

At June 30, 2021, we had approximately $14.7 billion of indebtedness, including corporate indebtedness of approximately $4.3 billion and debt under vehicle programs of approximately $10.4 billion. For information regarding our debt and borrowing arrangements, see Notes 1, 10 and 11 to our Consolidated Condensed Financial Statements.

LIQUIDITY RISK

Our primary liquidity needs include the procurement of rental vehicles to be used in our operations, servicing of corporate and vehicle-related debt and the payment of operating expenses. The present intention of management is to reinvest the undistributed earnings of our foreign subsidiaries indefinitely into our foreign operations. Our primary sources of funding are operating revenue, cash received upon the sale of vehicles, borrowings under our vehicle-backed borrowing arrangements and our senior revolving credit facility, and other financing activities.

During 2020, our liquidity position was impacted by COVID-19 as a result of significant volume declines. However, during the first half of 2021, travel advisories and restrictions were eased, which led to a significant increase in global travel demand, resulting in increased demand for rental vehicles and improved pricing across the industry. However, the full extent of the ongoing impact of this virus on the Company’s long-term operational performance and liquidity will depend on future developments, including those outside of our 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.

Our liquidity could be negatively affected by any financial market disruptions or the absence of a recovery or worsening of the U.S. and worldwide economies, which may result in unfavorable conditions in the mobility industry, in the asset-backed financing market and in the credit markets generally. We believe these factors have affected and could further affect the debt ratings assigned to us by credit rating agencies and the cost of our borrowings. Additionally, a worsening or prolonged downturn in the worldwide economy or a disruption in the credit markets could further impact our liquidity due to (i) decreased demand and pricing for vehicles in the used-vehicle market, (ii) increased costs associated with, and/or reduced capacity or increased collateral needs under, our financings, (iii) the adverse impact of vehicle manufacturers being unable or unwilling to honor their obligations to repurchase or guarantee the depreciation on the related program vehicles and (iv) disruption in our ability to obtain financing due to negative credit events specific to us or affecting the overall debt market.

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As of June 30, 2021, we had access to $1.3 billion of available cash and cash equivalents and available borrowings under our revolving credit facility of approximately $0.5 billion, providing us with access to an approximate $1.8 billion of total liquidity. See Note 1 to our Consolidated Condensed Financial Statements for detailed information on liquidity and management’s plans.

Our liquidity position could also be negatively impacted if we are unable to remain in compliance with the consolidated first lien leverage ratio requirement and other covenants associated with our senior credit facilities and other borrowings. As of June 30, 2021, we were in compliance with the financial covenants governing our indebtedness. For additional information regarding our liquidity risks, see Part I, Item 1A, “Risk Factors” of our 2020 Form 10-K as well as the “Risk Factors” section in this quarterly report.

CONTRACTUAL OBLIGATIONS

Our future contractual obligations have not changed significantly from the amounts reported within our 2020 Form 10-K with the exception of our commitment to purchase vehicles, which decreased by approximately $3.0 billion from December 31, 2020, to approximately $5.7 billion at June 30, 2021 due to seasonality. Changes to our obligations related to corporate indebtedness and debt under vehicle programs are presented above within the section titled “Liquidity and Capital Resources—Debt and Financing Arrangements” and also within Notes 10 and 11 to our Consolidated Condensed Financial Statements.

ACCOUNTING POLICIES

The results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex. However, in presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions that we are required to make pertain to matters that are inherently uncertain as they relate to future events. Presented within the section titled “Critical Accounting Policies” of our 2020 Form 10-K are the accounting policies (related to goodwill and other indefinite-lived intangible assets, vehicles, income taxes and public liability, property damage and other insurance liabilities) that we believe require subjective and/or complex judgments that could potentially affect 2021 reported results. There have been no significant changes to those accounting policies or our assessment of which accounting policies we would consider to be critical accounting policies.

Goodwill and Other Indefinite-lived Intangible Assets . We perform our annual goodwill and other indefinite-lived intangible assets impairment assessment in the fourth quarter of each year at the reporting unit level, or more frequently if events or circumstances indicate that the carrying amount of goodwill and other indefinite-lived intangible assets may be impaired. For our Europe, Middle East and Africa (“EMEA”) reporting unit, the percentage by which the estimated fair value exceeded the carrying value as of October 1, 2020 was 17% and the amount of goodwill allocated to our reporting unit was $488 million.

During the six months ended June 30, 2021, we began to see a recovery from the impacts COVID-19 had on our business. However, we continued to observe impacts of COVID-19 in certain areas. We evaluated qualitative factors and determined that an interim impairment test was not required this quarter as we believe it is more likely than not that the fair value of our goodwill and other indefinite-lived intangible assets exceeds the carrying value.

Further deterioration in the general economic conditions in the travel industry may result in an impairment charge to earnings in future quarters. We will continue to closely monitor actual results versus our expectations as well as any significant changes in events or conditions, including the impact of COVID-19 on our business and the travel industry, and the resulting impact to our assumptions about future estimated cash flows, the weighted average cost of capital and market multiples. If our expectations of the operating results, both in magnitude or timing, do not materialize, or if our weighed average cost of capital increases or if market multiples decline, we may be required to record goodwill and indefinite-lived intangible asset impairment charges, which may be material.

New Accounting Standards

For detailed information regarding new accounting standards and their impact on our business, see Note 1 to our Consolidated Condensed Financial Statements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to a variety of market risks, including changes in currency exchange rates, interest rates and gasoline prices. We assess our market risks based on changes in interest and currency exchange rates utilizing a sensitivity analysis that measures the potential impact on earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest and foreign currency exchange rates. We used June 30, 2021 market rates to perform a sensitivity analysis separately for each of these market risk exposures. We have determined, through such analyses, that the impact of a 10% change in interest or currency exchange rates on our results of operations, balance sheet and cash flows would not be material. Additionally, we have commodity price exposure related to fluctuations in the price of unleaded gasoline. We anticipate that such commodity risk will remain a market risk exposure for the foreseeable future. We determined that a 10% change in the price of unleaded gasoline would not have a material impact on our earnings for the period ended June 30, 2021. For additional information regarding our long-term borrowings and financial instruments, see Notes 10, 11 and 15 to our Consolidated Condensed Financial Statements.

Item 4. Controls and Procedures

(a) Disclosure Controls and Procedures. Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2021.

(b) Changes in Internal Control Over Financial Reporting. During the fiscal quarter to which this report relates, there has been no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Table of Contents

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

During the quarter ended June 30, 2021, the Company had no material developments to report with respect to its legal proceedings. For additional information regarding the Company’s legal proceedings, see Note 12 to our Consolidated Condensed Financial Statements and refer to the Company’s 2020 Form 10-K.

Item 1A. Risk Factors

The following risk factor is provided to update the risk factors of the Company previously disclosed in periodic reports filed with the SEC, including its 2020 Form 10-K.

We face risks associated with our suppliers of vehicles, including as a result of a global semiconductor supply shortage.

We have faced and may face additional delays in receiving delivery of new vehicles from vehicle manufacturers for a variety of reasons, including due to closures at manufacturing facilities or otherwise. In particular, a global semiconductor supply shortage is having wide-ranging effects across multiple industries, particularly the automotive industry, and it has impacted multiple vehicle manufacturers that supply vehicles to us. For example, some automobile plants in North America and elsewhere have halted or reduced vehicle production due to the shortage of semiconductors used in the production of their vehicles. As a result, the semiconductor supply shortage has had, and is expected to continue to have, an impact on new car deliveries, which may make it challenging to meet consumer demand.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company ’ s Board of Directors has authorized the repurchase of up to $2.1 billion of its common stock under a plan originally approved in 2013 and subsequently expanded, most recently in June 2021 . The Company ’ s stock repurchases may occur through open market purchases or trading plans pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors. The repurchase program may be suspended, modified or discontinued at any time without prior notice. The repurchase program has no set expiration or termination date. D uring the second quarter of 2021, no common stock repurchases were made under the plan. As of June 30, 2021, approximately $391 million of authorization remained available to repurchase common stock under this plan.

Item 6. Exhibits

See Exhibit Index.

Table of Contents

SIGNATURES

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 thereunto duly authorized.

AVIS BUDGET GROUP, INC.

Date:

August 4, 2021

/s/ Cathleen DeGenova

Cathleen DeGenova

Vice President and

Chief Accounting Officer

Table of Contents

Exhibit Index


Exhibit No.			Description
3.1			Amended and Restated Certificate of Incorporation of Avis Budget Group, Inc. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated September 5, 2006).
3.2			Amended and Restated Bylaws of Avis Budget Group, Inc., dated as of August 10, 2020 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K dated August 13, 2020).
10.1			Series 2021-1 Supplement, dated as of May 18, 2021, between Avis Budget Rental Car Funding (AESOP) LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and Series 2021-1 Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 21, 2021).
10.2			Amended and Restated Series 2018-2 Supplement, dated as of June 18, 2021, between Avis Budget Rental Car Funding (AESOP) LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and Series 2018-2 Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 23, 2021).
10.3			Amended and Restated Series 2019-2 Supplement, dated as of June 18, 2021, between Avis Budget Rental Car Funding (AESOP) LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and Series 2019-2 Agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated June 23, 2021).
10.4			Amended and Restated Series 2020-1 Supplement, dated as of June 18, 2021, between Avis Budget Rental Car Funding (AESOP) LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and Series 2020-1 Agent (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated June 23, 2021).
10.5			Fourth Amended and Restated Series 2010-6 Supplement, dated as of June 18, 2021, by and among Avis Budget Rental Car Funding (AESOP) LLC, as Issuer, Avis Budget Car Rental, LLC, as Administrator, JPMorgan Chase Bank, N.A., as Administrative Agent, the Non-Conduit Purchasers, the CP Conduit Purchasers, the Committed Note Purchasers, the APA Banks and the Funding Agents named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee and as Series 2010-6 Agent (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated June 23, 2021).
10.6			Second Amended and Restated Series 2015-3 Supplement, dated as of June 18, 2021, by and among Avis Budget Rental Car Funding (AESOP) LLC, as Issuer, Avis Budget Car Rental, LLC, as Administrator, JPMorgan Chase Bank, N.A., as Administrative Agent, the Non-Conduit Purchasers, the CP Conduit Purchasers, the Committed Note Purchasers, the APA Banks and the Funding Agents named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee and as Series 2015-3 Agent (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated June 23, 2021).
10.7			Sixth Amended and Restated Credit Agreement, dated as of July 9, 2021, among Avis Budget Holdings, LLC, Avis Budget Car Rental, LLC, Avis Budget Group, Inc., the subsidiary borrowers from time to time party thereto, the financial institutions from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated July 13, 2021).
31.1			Certification of Chief Executive Officer pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
31.2			Certification of Chief Financial Officer pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
32			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			XBRL Taxonomy Extension Schema.
101.CAL			XBRL Taxonomy Extension Calculation Linkbase.
101.DEF			XBRL Taxonomy Extension Definition Linkbase.
101.LAB			XBRL Taxonomy Extension Label Linkbase.
101.PRE			XBRL Taxonomy Extension Presentation Linkbase.
104			Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)

TABLE OF CONTENTS

Part I Financial Informationprint Item 1. Financial Statementsprint Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operationsprint Item 2. Management S Discussion and Analysis Of Financial Condition andprint Item 3. Quantitative and Qualitative Disclosures About Market Riskprint Item 4. Controls and Proceduresprint Part II Other Informationprint Item 1. Legal Proceedingsprint Item 1A. Risk Factorsprint Item 2. Unregistered Sales Of Equity Securities and Use Of Proceedsprint Item 6. Exhibitsprint

Exhibits

3.1 Amended and Restated Certificate of Incorporation of Avis Budget Group, Inc. (Incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K dated September 5, 2006). 3.2 Amended and Restated Bylaws of Avis Budget Group, Inc., dated as of August 10, 2020 (incorporated by reference to Exhibit 3.2 to the Companys Current Report on Form 8-K dated August 13, 2020). 10.1 Series 2021-1 Supplement, dated as of May 18, 2021, between Avis Budget Rental Car Funding (AESOP) LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and Series 2021-1 Agent (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated May 21, 2021). 10.2 Amended and Restated Series 2018-2 Supplement, dated as of June 18, 2021, between Avis Budget Rental Car Funding (AESOP) LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and Series 2018-2 Agent(incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated June 23, 2021). 10.3 Amended and Restated Series 2019-2 Supplement, dated as of June 18, 2021, between Avis Budget Rental Car Funding (AESOP) LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and Series 2019-2 Agent(incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K dated June 23, 2021). 10.4 Amended and Restated Series 2020-1 Supplement, dated as of June 18, 2021, between Avis Budget Rental Car Funding (AESOP) LLC and The Bank of New York Mellon Trust Company, N.A., as trustee and Series 2020-1 Agent(incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K dated June 23, 2021). 10.5 Fourth Amended and Restated Series 2010-6 Supplement, dated as of June 18, 2021, by and among Avis Budget Rental Car Funding (AESOP) LLC, as Issuer, Avis Budget Car Rental, LLC, as Administrator, JPMorgan Chase Bank, N.A., as Administrative Agent, the Non-Conduit Purchasers, the CP Conduit Purchasers, the Committed Note Purchasers, the APA Banks and the Funding Agents named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee and as Series 2010-6 Agent(incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K dated June 23, 2021). 10.6 Second Amended and Restated Series 2015-3 Supplement, dated as of June 18, 2021, by and among Avis Budget Rental Car Funding (AESOP) LLC, as Issuer, Avis Budget Car Rental, LLC, as Administrator, JPMorgan Chase Bank, N.A., as Administrative Agent, the Non-Conduit Purchasers, the CP Conduit Purchasers, the Committed Note Purchasers, the APA Banks and the Funding Agents named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee and as Series 2015-3 Agent(incorporated by reference to Exhibit 10.5 to the Companys Current Report on Form 8-K dated June 23, 2021). 10.7 Sixth Amended and Restated Credit Agreement, dated as of July 9, 2021, among Avis Budget Holdings, LLC, Avis Budget Car Rental, LLC, Avis Budget Group, Inc., the subsidiary borrowers from time to time party thereto, the financial institutions from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated July 13, 2021). 31.1 Certification of Chief Executive Officer pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the Securities Exchange Act of 1934, as amended. 31.2 Certification of Chief Financial Officer pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the Securities Exchange Act of 1934, as amended. 32 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

DIRECTORS	AGE	BIO
Lynn Krominga	74
Karthik Sarma	50	Reflects beneficial ownership of 17,430,882 shares of Common Stock by SRS and Karthik R. Sarma (the “Reporting Persons”), as derived solely from information reported on Schedule 13D/A under the Exchange Act, as filed with the SEC on August 25, 2023. Such Schedule 13D/A indicates that SRS and Mr. Sarma share voting and dispositive power over the shares of Common Stock. SRS serves as investment manager to certain investment funds (the “Funds”) and has investment discretion with respect to the shares of Common Stock held by the Funds. SRS Investment Management, LP (“SRS IM”) is the managing member of SRS. SRS Investment Management GP, LLC (“SRS IM GP”) is the general partner of SRS IM. Mr. Sarma is the managing member and principal of SRS IM GP. In such capacities, Mr. Sarma and SRS may be deemed to have voting and dispositive power with respect to the shares of Common Stock held for the Funds. The Reporting Persons have economic exposure to, and may be deemed to beneficially own, an additional 2,862,283 notional shares of Common Stock pursuant to cash-settled equity swaps, as derived solely from information reported on the Schedule 13D. Such notional shares represent approximately 8.2% of the shares of Common Stock outstanding on February 19, 2025. Such Schedule 13D indicates that the Reporting Persons do not have voting power or dispositive power with respect to the shares referenced in such swaps, and disclaim beneficial ownership of the shares underlying such swaps. Under the terms of the Cooperation Agreement, SRS has committed, with respect to shares of Common Stock SRS holds in excess of 35% of the Company’s outstanding Common Stock, to exercise its voting rights in the same proportion in which other shares of Common Stock are voted.
Jagdeep Pahwa	51
Glenn Lurie	59
Bernardo Hees	55	Following his resignation as Executive Chairman on May 22, 2024, Mr. Hees continues to serve as a member of the Board. The compensation in this table represents his non-employee director compensation after such date.
Anu Hariharan	44	Ms. Martins , age 53, has served as Executive Vice President and Chief Financial Officer since January 2024. Previously, Ms. Martins served as Executive Vice President, Americas from June 2020 until December 2023, after assuming the responsibilities associated with this role on an interim basis in January 2020. Ms. Martins has also held various strategic and financial roles with the Company, including Senior Vice President and Chief Financial Officer, Americas from May 2014 through December 2019, Senior Vice President and Acting Chief Accounting Officer from November 2010 through May 2014, and Vice President of Tax from August 2006 through November 2010. Ms. Martins was Director of Tax Planning and Mergers & Acquisitions of Cendant Corporation (as the Company was formerly known) from November 2004 through August 2006. Prior to joining the Company, Ms. Martins was associated with Deloitte & Touche LLP for seven years.

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Comp ($)	Total ($)
Ferraro, Joseph A. President and CEO	2024	1,300,000	—	5,350,082	—	—	—	272,708	6,922,790
	2023	1,248,000	—	5,200,116	—	2,312,170	—	1,514,635	10,274,921
	2022	1,200,000	—	8,199,867	—	3,348,000	—	262,876	13,010,743
Martins, Izzy EVP, CFO*	2024	700,000	—	1,725,002	—	—	—	89,384	2,514,386
	2023	624,000	—	900,100	—	700,128	—	301,631	2,525,859
	2022	600,000	—	2,400,048	—	1,051,875	—	40,030	4,091,953
Choi, Brian J. EVP and CTO*	2024	675,000		2,000,060	—	—	—	34,036	2,709,096
	2023	624,000	—	1,800,200	—	726,336	—	450,841	3,601,377
	2022	600,000	—	3,300,136	—	1,057,500	—	30,396	4,988,032
Simhambhatla, Ravi EVP, Chief Digital & Innovation Officer	2024	500,000	—	900,050	—	—	—	152,958	1,553,008
	2023	500,000	—	900,100	—	478,404	—	596,312	2,474,816
	2022	252,055	—	5,449,927	—	421,940	—	95,642	6,219,564
Linnen, Edward P. EVP, CHRO	2024	600,000	—	650,098	—	—	—	62,443	1,312,541

Supplier name	Ticker
Tesla, Inc.	TSLA
Toyota Motor Corporation	TM
General Motors Company	GM
Ford Motor Company	F
PACCAR Inc	PCAR
Honda Motor Co., Ltd.	HMC
Expedia Group, Inc.	EXPE

Owner	Position	Direct Shares	Indirect Shares
Ferraro Joseph A.	-	280,358	2,476
Choi Brian J	-	83,603	1,735
Rankin Patrick K	-	59,672	0
Linnen Edward P	-	29,168	3,496
Martins Izilda P	-	21,145	0
Simhambhatla Ravi	-	11,318	0
KROMINGA LYNN	-	1,950	28,404
Simhambhatla Ravi	-	347	0
Hees Bernardo	-	0	3,713
Hariharan Anu	-	0	3,990
Hees Bernardo	-	0	1,525
SRS Investment Management, LLC	-	0	17,430,900

CAR 10-Q Quarter ended June 30, 2021

Exhibits