Avis Announces Three Strategic Initiatives and Strong Earnings
18 April 2000
Avis Announces Three Strategic Initiatives and Strong Earnings Ensuring Continued Growth Momentum
Avis Group and BNP Paribas Group Form Leading Vehicle Management Solutions
Brand in the World, #1 in Europe; BNP Paribas to Acquire an 80% Interest in
Joint Venture in Transaction Valuing PHH Europe at Over $1 Billion
Avis Group Launches Roadsmith.com, Driving into Untapped $100 Billion Small to
Mid-sized Fleet Market, Further Leveraging Avis Group's World Class
Information Technology
Changes Corporate Name to Avis Group From Avis Rent A Car,
Reflecting Breadth of Vehicle Management Solutions and Technologies
Announces First Quarter Record Net Income of $19.6 Million,
Topping Analysts' Consensus for 11th Consecutive Quarter; EPS Up 41%
GARDEN CITY, N.Y., April 18 Avis (NYSE: AVI) today
announced three strategic initiatives that reflect the Company's evolution as
a global business-to-business vehicle management and information solutions
company. Avis also reported its results for the first quarter ended March 31,
2000, marking the 11th consecutive quarter of exceeding analysts' consensus
forecast.
The Company announced these actions:
-- Avis Group is forming a strategic partnership with BNP Paribas to form
a joint venture which creates the leading vehicle management solutions
brand in North America and Europe. As part of the alliance agreement,
BNP Paribas will acquire an 80% interest in a joint venture that will
own PHH Europe with a view toward merging the joint venture with
Arval's European operations within one year. Avis will acquire a 20%
stake in the joint venture, receive $800 million in cash and have
intercompany indebtedness repaid, which Avis will use to pay down all
of its non-fleet bank debt. In addition, Avis Group will license PHH
North America's award-winning, fleet management technology, PHH
InterActive(SM), to the joint venture and Arval and receive an annual
royalty. The transaction is expected to close in the second quarter
and will be immediately accretive to earnings.
-- Avis Group is launching a new venture, Roadsmith.com, which brings
together a community of merchant and content providers aimed directly
at the largely untapped $100 billion small to mid-sized fleet
marketplace. This portal will provide one-stop shopping with
aggregated buying power which will include offering categories of
content information, fleet solutions and return on investment tools.
This single fleet solution, formerly offered only to major corporate
customers, will also provide access to the award-winning Internet based
technology that combines data integration of all fleet activity with
intelligent decision management tools.
-- Avis has changed its legal name to Avis Group Holdings, Inc. from Avis
Rent A Car, Inc. to reflect the Company's new vision and its
transformation to an innovative services and information provider. The
Company will conduct business as Avis Group.
A. Barry Rand, Chairman and Chief Executive Officer said, "These
initiatives reflect the key elements of the Avis Group's compelling strategy
which is designed to increase both customer and shareholder value. The Avis
Group is demonstrating its ability to leverage its new competencies,
capabilities and broader markets, as well as drive to growth in the cyber
economy and execute on initiatives to further improve its financial strength
and flexibility."
Record first quarter diluted EPS of 48 cents with strong outlook into
future
On a historical basis, revenue for the quarter ended March 31, 2000 was
$1.0 billion, up 79 percent over the comparable period in 1999. Net income
was $19.6 million, compared to $15.2 million for the same period in 1999,
which included a previously reported non-recurring $7.5 million pre-tax gain
representing 13 cents diluted earnings per share, resulting from the
curtailment of the Company's defined benefit plans. Excluding the 1999
non-recurring gain, diluted earnings per share increased 41 percent to
48 cents.
On a pro forma basis, revenue and net income for the first quarter 2000
increased 4.6 percent or $44 million and 325 percent or $15 million,
respectively, over the same period in 1999. The pro forma operating results
give effect to the acquisition of PHH North America, PHH Europe and Wright
Express ("Vehicle Management Services or VMS") as if they had occurred on
January 1, 1999.
See attached Financial Results
BNP Paribas alliance to enhance growth, strength and stability
Kevin Sheehan, President of Corporate and Business Affairs, stated, "Our
new alliance with BNP Paribas provides Avis Group with the financial strength
and global distribution necessary to succeed in the growing international
market. Through this accretive alliance, we have taken action to retire all
of our outstanding bank debt from the original VMS transaction and we will
recognize an ongoing royalty for the use of our award-winning fleet management
technology. A 50% increase in our free cash flow after the PHH Europe
transaction, from a previously annualized level of $100 million, will enable
Avis Group to further build meaningful incremental value for our
shareholders." Mr. Sheehan and Mark E. Miller, President and Chief Operating
Officer-Vehicle Management Services, will represent Avis on the Board of
Directors of the new venture.
As part of the alliance, Avis will license PHH North America's fleet
management technology, PHH InterActive(SM), to Arval, BNP Paribas' vehicle
management subsidiary. PHH InterActive provides real time information on
fleet usage to business customers. By linking this system globally, PHH and
Arval business customers will have access to up-to-date information on their
fleets around the world -- a critical management capability unmatched in the
industry. In return, Avis Group will receive an annual royalty. PHH and
Arval will soon be jointly marketed worldwide with a single technological
solution for their customers' fleet needs.
See separate release issued jointly today
Leveraging a great brand name, signaling a new direction
Effective March 27, 2000, Avis created a new identity -- Avis Group, which
reflects the Company's transition to the world's leading service and
information provider of comprehensive automotive transportation and vehicle
management solutions.
"Our adoption of a new corporate name, Avis Group," Mr. Rand said, "allows
us to leverage all of the positive attributes of one of the world's greatest
brands -- such as quality, customer service and our employees -- while
signaling the more growth-oriented, expansive direction of the New Avis. We
are extending our skills and experience beyond rental cars so that we can now
offer leading-edge solutions to our customers in the new mobile world. Avis
Group now provides a full array of vehicle and information-based solutions
with a point of difference in personalized service and powerful Internet-based
management and decision-making tools."
Roadsmith.com: Sophisticated capabilities tailored to the needs of
smaller fleets
Avis's new online venture, Roadsmith.com, will provide an extensive
variety of sophisticated fleet management capabilities tailored expressly to
the needs of smaller fleets. Capitalizing on Avis's award-winning Internet
technology, Roadsmith.com will be the premier online tool for high-efficiency,
low-cost, vehicle management that enables small and mid-sized businesses to
enhance their bottom line by making smarter fleet decisions.
"We are using our information technology to create a comprehensive fleet
management tool and marketplace for a wide variety of fleet-oriented products
and services -- providing small-fleet managers the same key assistance now
available only to large fleets," Mr. Rand stated. "Roadsmith.com will offer
unprecedented empowerment to these smaller companies, enabling them to make
more knowledgeable decisions about all their fleet and driver-related
expenses."
Among its offerings, Roadsmith.com will furnish an electronic "open
marketplace" to facilitate information exchange and transactions benefiting
both fleet managers and leading vendors of fleet management products and
services which has a market of over $100 billion.
Avis operates the second largest general-use car rental business in the
world. In 1999, Avis acquired PHH Vehicle Management Services, the world's
second largest fleet management and leasing company, together with Wright
Express, the world's largest fleet card provider.
This press release contains statements related to future results, which
are forward-looking statements that are made pursuant to the Safe Harbor
Provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve risks and uncertainties, including the
impact of competitive products and pricing, changing market conditions; and
other risks which are detailed from time to time in the Company's
publicly-filed documents, including its Annual Report on Form 10-K for the
period ended December 31, 1999. Actual results may differ materially from
those projected. These forward-looking statements represent the Company's
judgements as of the date of this release.
AVIS GROUP HOLDINGS, INC.
FINANCIAL RESULTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(In thousands, except share and per share amounts)
(Unaudited)
ACTUAL PRO FORMA (a)
2000 1999 1999
Revenue:
Vehicle rental $ 588,876 $ 566,917 $ 566,917
Vehicle management
services:
Vehicle leasing 351,108 341,520
Other fee based
revenue 73,049 60,386
1,013,033 566,917 968,823
Costs and expenses:
Direct operating, net 226,693 218,834 218,834
Vehicle depreciation
and lease charges,
net 400,997 153,054 408,450
Interest 108,964 48,442 96,038
Selling, general and
administrative 180,084 110,801 174,372
916,738 531,131 897,694
EBITDA 96,295 35,786 71,129
Interest - acquisition
debt 35,833 -- 34,461
Amortization of cost
in excess of
net assets acquired 11,832 3,174 11,815
Non-vehicle depreciation
& amortization 13,019 5,782 11,738
Income before provision
for income taxes 35,611 26,830 13,115
Provision for
income taxes 16,025 11,644 8,509
Net income 19,586 15,186 4,606
Preferred stock
dividends 4,668 -- 4,555
Earnings applicable
to common stockholders $ 14,918 $ 15,186 $ 51
Earnings Per Share:
Basic $ 0.48 $ 0.48 $ --
Diluted (b) $ 0.48 $ 0.47 $ --
Cash earnings
per share (c) $ 0.84 $ 0.56 $ 0.35
Weighted average shares outstanding:
Basic 31,131,712 31,873,031 31,873,031
Diluted (b) 31,341,244 32,517,570 32,517,570
(a) Presents the results of operations of the Company as if the
acquisition of PHH North America, PHH Europe and Wright Express
had occurred on January 1, 1999.
(b) Includes dilutive effect of the assumed exercise of stock options.
(c) Cash earnings per share equals earnings applicable to common
stockholders plus amortization of cost in excess of net assets
acquired (net of income tax benefit) divided by the weighted average
diluted shares outstanding.