AVIS BUDGET GROUP, INC. - Annual Report: 2019 (Form 10-K)

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•	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, 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;

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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;

•	a change in travel demand, including changes or disruptions in airline passenger traffic;

•	any change in economic conditions generally, particularly during our peak season or in key market segments;

•	an occurrence or threat of terrorism, pandemic disease, 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;

•	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 those countries;

•	our dependence on third-party distribution channels, third-party suppliers of other services and co-marketing arrangements with third parties;

•	our dependence on the performance and retention of our senior management and key employees;

•	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;

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•	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 contractors;

•	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, 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;

•	our ability to accurately estimate our future results;

•	risks related to actions by activist stockholders and responses from our Board of Directors and senior management; and

•	other business, economic, competitive, governmental, regulatory, political or technological factors affecting our operations, pricing or services.

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•	Americas, which provides and licenses the Company’s brands to third parties for vehicle rentals and ancillary products and services in North America, South America, Central America and the Caribbean, and operates the Company’s car sharing business in certain of these markets; and

•	International, which provides and licenses the Company’s brands to third parties for vehicle rentals and ancillary products and services in Europe, the Middle East, Africa, Asia and Australasia, and operates the Company’s car sharing business in certain of these markets.

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•	Continuing to invest in our connected fleet to benefit from fuel savings and improved utilization, vehicle recovery and damage collections;

•	Expanding our risk vehicle dispositions through our direct-to-consumer sales channels, including online sales channels and strategically positioned Avis vehicle retail car sale lots, and direct-to-dealer sales channels;

•	Achieving fleet cost efficiencies through our mileage optimization initiative, which involves understanding a vehicle’s next best action (rent, rest or hold) based upon current mileage, status and customer demand; and

•	Rigorously controlling costs, reducing expenses and increasing efficiencies through process and other improvements.

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*	Includes Budget Truck.

**	Includes Zipcar and other operating brands.

*	Certain locations support multiple brands.

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the Avis mobile application, which allows customers a unique and innovative way to control many elements of their rental experience via their mobile devices without the need to visit the rental counter. The Avis mobile application also allows customers to track Avis shuttle buses to rental locations, find their vehicle, and locate nearby gas stations and parking facilities. The application also includes the Split My Bill feature, which gives customers the ability to remotely split their bill between two credit cards, allowing, commercial customers to upgrade their car, add an ancillary product or extend their rental on their personal credit card following a business rental;

•	Avis Preferred, a frequent renter rewards program that offers counter-bypass at major airport locations and reward points for every dollar spent on vehicle rentals and related products;

•	the Avis Select Series, a selection of luxury vehicles including Mercedes, Jaguars, Corvettes, and others;

•	invited or earned customer status levels allowing for upgrades and counter bypass;

•	availability of premium, sport and performance vehicles as well as eco-friendly vehicles, including gasoline/electric hybrids;

•	access to portable navigation units, tablets and satellite radio service;

•	Avis rental services such as roadside assistance, fuel service options, e-receipts, electronic toll collection services that allow customers to pay highway tolls without waiting in toll booth lines, and amenities such as Avis Access, a full range of special products and services for drivers and passengers with disabilities;

•	Curbside Delivery, a service that provides customers at select airport locations in the United States with the added convenience of being dropped off at the airport terminal in the same car that they rented; and

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for our corporate customers, Avis Budget Group Business Intelligence, a proprietary customer reporting solution that provides a centralized reporting tool and customer reporting portal for all corporate clients around the globe, enabling them to easily view and analyze their rental activity, permitting them to better manage their travel budgets and monitor employee compliance with applicable travel policies.

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*	Certain locations support multiple brands.

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•	Payless, a leading rental car supplier serving the deep-value segment of the industry, which we license or operate in approximately 250 locations worldwide, including more than 160 locations operated by licensees and approximately 90 Company-operated locations.

◦	Company-operated Payless locations are primarily located in North America, the majority of which are at or near major airports. Payless’ rental fees are often lower than those of larger, more established vehicle rental brands.

◦	The Payless business model allows the Company to extend the life-cycle of a portion of our rental fleet, as we “cascade” certain vehicles that exceed certain Avis and Budget age or mileage thresholds to be used by Payless.

•	Apex, which operates in approximately 30 rental locations at, or near, major airports and in several metropolitan cities in New Zealand and Australia with a separate rental fleet.

◦	Apex generates reservations through proprietary websites as well as a contact center and online travel agencies and typically has a greater-than-average length of rental.

•	Maggiore, a leading vehicle rental brand in Italy, where we operate or license in approximately 145 rental locations throughout the country.

◦	Maggiore has a strong local reputation and benefits from a strong presence at airport, off-airport and railway locations and from the integration of our existing operations and rental fleet management expertise.

•	Morini Rent, a leading vehicle rental brand in Italy, which offers rental of cars, vans and refrigerated vehicles and which we operate or license in approximately 50 rental locations throughout the country.

•	FranceCars, which operates one of the largest light commercial vehicle rental fleets in France in approximately 85 rental locations and leverages our existing operational processes and local customer base.

•	Turiscar, a leading vehicle rental brand in Portugal, which operates primarily in the corporate market, including light commercial vehicles, at more than 25 rental locations throughout the country.

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•	collision and loss damage waivers, under which we agree to relieve a customer from financial responsibility arising from vehicle damage incurred during the rental;

•	additional/supplemental liability insurance or personal accident/effects insurance products which provide customers with additional protections for personal or third-party losses incurred;

•	products for driving convenience such as fuel service options, chauffeur drive services, roadside assistance services, electronic toll collection services, curbside delivery, tablet rentals, access to satellite radio, portable navigation units and child safety seat rentals; and

•	products that supplement truck rental including automobile towing equipment and other moving accessories such as hand trucks, furniture pads and moving supplies.

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•	vehicles subject to agreements requiring automobile manufacturers to repurchase vehicles at a specified price during a specified time period or guarantee our rate of depreciation on the vehicles during a specified period of time; or

•	vehicles subject to operating leases, which are subject to a fixed lease period and interest rate.

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Our People: We believe that our success has its foundation in how we treat our employees. In concert with our core values, we seek to foster an environment where communication among our employees is open, honest, and respectful; performance is recognized; growth is encouraged; and accomplishments - individual and collective - are celebrated. We also seek to support the well-being and development of the people we employ and the communities in which they work. The following initiatives reflect our commitment to achieving these goals:

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Diversity and Inclusion: We are committed to providing equal employment opportunity to all applicants and employees without regard to race, religion, color, sexual orientation, gender, gender identity, age, national origin, ancestry, citizenship, protected veteran or disability status or any factor prohibited by law, and as such we affirm in policy and practice to support and promote the concept of equal employment opportunity and affirmative action, in accordance with all applicable federal, state, provincial and municipal laws. As an equal-opportunity employer, we are proud to provide an inclusive workplace that embraces and celebrates demographic, cultural and lifestyle differences.

•	Employee Benefits: We care about our employees and their families. We strive to offer them comprehensive and high value benefits programs that take care of their health and financial needs.

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Being Prepared When Disaster Strikes: Over the past seventy years, we have developed strong competencies in responding to business disruptions. Whether the disruption is man-made or an extreme weather event such as a hurricane, flood or wildfire, our business continuity programs are central to how we respond in times of crisis. Our program’s focus is on preparing and protecting our people, property and infrastructure. We utilize an “all hands on deck” approach within our incident management and command structure to ensure that we respond as rapidly and effectively as possible. We have also developed longstanding partnerships with leading national disaster response agencies, which strengthen our ability to provide support to affected customers, employees and communities.

•	The Environment: As a responsible corporate citizen, we are committed to monitoring, measuring and managing our environmental impact, and working to reduce it where practicable on an ongoing basis. This enables us to meet customer expectations while building a resilient business for generations to come. The following illustrates these commitments:

•	Environmental Footprint: Through our continuous improvement approach, we work proactively to address the environmental challenges that impact our business. Guided by our Environmental Policy, we focus on the environmental issues most important to us and our stakeholders.

•	Sustainable Operations: We are driving the efficiencies needed to reduce our environmental impact and enhance the sustainability of our operations. These are mainly driven by improvements on vehicle preventive maintenance, the incorporation of green building practices and by complying with all environmental regulations.

•	Carbon Offset Program: We are committed to helping educate both consumers and travel professionals on their environmental impact from rental car use and on how that can be reduced. We also work closely with our corporate customers to help them achieve their environmental impact reduction targets through our carbon offset program.

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Sustainable Fleet: We have been actively anticipating and driving changes in mobility. Connected and autonomous vehicles are likely to become a common feature worldwide, along with an increase use of electric and shared vehicles, which is why we’re building on our core experience, data intelligence and technology to develop entirely new lines of business and extend our offering and capabilities for our customers, businesses and cities. Our efforts include:

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◦	Car Sharing: Our Zipcar car sharing technology was designed and specifically built for our car sharing business and has been continually refined and upgraded. With more than one million members worldwide, Zipcar is taking thousands of vehicles off the road and reducing congestion. In addition, car sharing members report notable reductions in their own driving behavior after joining.

◦	Connected Vehicles: Connected vehicles support our ability to reduce emissions through a steadfast focus on fleet maintenance and optimization.

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Fleet Efficiency: We offer our customers the opportunity to choose from a wide variety of vehicles, including hybrids, electric or fuel efficient vehicles at almost all of our locations. Our fleet consists primarily of vehicles from the current and immediately preceding model year - this ensures the highest possible standards of air emissions control. Our hybrid fleet is one of the largest in our industry with 19,000+ hybrid vehicles globally.

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•	multiple and potentially conflicting laws, regulations, trade policies and agreements that are subject to change;

•	varying tax regimes, including consequences from changes in applicable tax laws;

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•	the imposition of currency restrictions, restrictions on repatriation of earnings or other restraints, as well as difficulties in obtaining financing in foreign countries for local operations;

•	potential changes to import-export laws, trade treaties or tariffs in the countries where we purchase vehicles;

•	international trade disruptions or disputes, including in connection with the ongoing trade negotiations between the United States and China;

•	local ownership or investment requirements, or compliance with local laws, regulations or business practices;

•	uncertainty and changes to political and regulatory regimes as a result of changing social, political, regulatory and economic environments in the United States and internationally;

•	national and international conflict, including terrorist acts; and

•	political and economic instability or civil unrest that may severely disrupt economic activity in affected countries.

•	traditional and online travel agencies, airlines and hotel companies, marketing partners such as credit card companies and membership organizations and other entities that help us attract customers; and

•	global distribution systems (“GDS”), such as Amadeus, Galileo/Apollo, Sabre and Worldspan, that connect travel agents, travel service providers and corporations to our reservation systems.

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•	inconsistencies between our standards, procedures and policies and those of an acquired business, partnership and/or joint venture;

•	costs or inefficiencies associated with the integration of our operational and administrative systems;

•	the increased scope and complexity of our operations could require significant attention from management and could impose constraints on our operations or other projects;

•	unforeseen expenses, delays or conditions, including required regulatory or other third-party approvals or consents, or provisions in contracts with third parties that could limit our flexibility to take certain actions;

•	an inability to retain the customers, employees, suppliers and/or marketing partners of an acquired business, partnership or joint venture or generate new customers or revenue opportunities through a strategic partnership;

•	the costs of compliance with local laws and regulations and the implementation of compliance processes, as well as the assumption of unexpected liabilities, litigation, penalties or other enforcement actions;

•	exposure to undetected malware and viruses embedded in the acquired IT systems of the acquired entity; and

•	higher than expected costs arising due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension policies.

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•	incur additional debt to fund working capital, capital expenditures, debt service requirements, execution of our business strategy or acquisitions and other purposes;

•	provide guarantees in respect of obligations of other persons;

•	pay dividends or distributions, redeem or repurchase capital stock;

•	prepay, redeem or repurchase debt;

•	create or incur liens;

•	make distributions from our subsidiaries;

•	sell assets and capital stock of our subsidiaries;

•	consolidate or merge with or into, or sell substantially all of our assets to, another person; and

•	respond to adverse changes in general economic, industry and competitive conditions, as well as changes in government regulation and changes to our business.

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•	weakness in general economic conditions and credit markets;

•	changes in consumers’, investors’ and analysts’ perceptions of our industry, business or related industries;

•	our quarterly or annual earnings, or those of other companies in our industry, including our key suppliers;

•	financial estimates that we provide to the public, any changes in such estimates, or our failure to meet such estimates;

•	actual or anticipated fluctuations in our operating results;

•	changes in accounting standards, policies, guidance, interpretations or principles;

•	announcements by us or our competitors of acquisitions, dispositions, strategies, management or stockholder changes, marketing affiliations, projections, fleet costs, pricing actions or other competitive actions;

•	changes in earnings estimates by securities analysts or our ability to meet those estimates;

•	the operating and stock price performance of other comparable companies;

•	overall stock market fluctuations;

•	success or failure of competitive service offerings or technologies;

•	tax or regulatory developments in the United States and other countries in which we operate;

•	litigation involving us;

•	actions of activist stockholders and responses from our Board and senior management; and

•	the timing and amount of any share repurchases by us.

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(a)	Includes options and other awards granted under the Amended and Restated Equity and Incentive Plan, which plan was approved by stockholders.

(b)	Represents 5,352,041 shares available for issuance under the Amended and Restated Equity and Incentive Plan and 2,406,886 shares available for issuance pursuant to the 2009 Employee Stock Purchase Plan.

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(a)

The following table reconciles Net Income to Adjusted EBITDA within our Selected Financial Data, 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 legal matters, non-operational charges related to shareholder activist activity, gain on sale of equity method investment in China and income taxes. Net charges for unprecedented personal-injury legal matters and gain on sale of equity method investment in China are recorded within operating expenses in our Consolidated Statements of Operations. Non-operational charges related to shareholder activist activity include third-party advisory, legal and other professional service fees and are recorded within selling, general and administrative expenses in our Consolidated Statements of Operations. We have revised our definition of Adjusted EBITDA to exclude the gain on sale of equity method investment in China. We did not revise prior years’ Adjusted EBITDA because there were no gains similar in nature to this gain. Our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies. See Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7, for an explanation of why we believe Adjusted EBITDA is a useful measure.

(b)	Includes related-party debt due to Avis Budget Rental Car Funding (AESOP) LLC (“Avis Budget Rental Car Funding”). See Note 14 to our Consolidated Financial Statements.

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•	Our revenues totaled $9.2 billion, and increased 1% compared to 2018, due to higher rental volumes, partially offset by 2% negative impact from currency exchange rate movements.

•	Our net income was $302 million and our Adjusted EBITDA was $788 million primarily driven by higher revenues, Americas’ lower per-unit fleet costs and higher utilization, partially offset by higher salaries, wages and other related benefits, higher vehicle registration fees and a $23 million negative impact from currency exchange rate movements.

•	We repurchased $62 million of our common stock, reducing our shares outstanding by approximately 2.2 million shares, or 3%.

•	We issued $400 million of 5¾% Senior Notes due July 2027, the net proceeds of which were used to redeem $400 million principal of our outstanding 5½% Senior Notes due April 2023.

•	We acquired various licensees primarily in North America.

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n/m	Not meaningful.

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

(b)	Other related charges include costs associated with the separation of certain officers of the Company.

(c)	Primarily comprised of acquisition- and integration-related expenses.

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

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

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n/m	Not meaningful.

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(a)

Represents commitments to purchase vehicles, the majority of which are from Ford, Fiat Chrysler and General Motors. These commitments are generally subject to the vehicle manufacturers satisfying their obligations under the repurchase and guaranteed depreciation agreements. The purchase of such vehicles is generally financed through borrowings under vehicle programs in addition to cash received upon the sale of vehicles, some of which were purchased under repurchase and guaranteed depreciation programs (see Note 15 to our Consolidated Financial Statements).

(b)	Represents the expected contributions to our defined benefit pension plans in 2019. The amount of future contributions to our defined benefit pension plans will depend on the rates of return generated from plan assets and other factors (see Note 18 to our Consolidated Financial Statements) and are not included above.

(c)	Primarily represents commitments under service contracts for information technology, telecommunications and marketing agreements with travel service companies.

(d)	Excludes income tax uncertainties of $57 million, $13 million of which is subject to indemnification by Realogy and Wyndham. We are unable to estimate the period in which these income tax uncertainties are expected to be settled.

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(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 (the “Exchange Act”)). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.

(b)

Management’s Annual Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on this assessment, our management believes that, as of December 31, 2019, our internal control over financial reporting was effective. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm. Their attestation report is included below.

(c)

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.

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•	We evaluated the appropriateness and consistency of the Company’s methods, significant assumptions and judgments to calculate the estimated residual market value of risk vehicles and the expected dates of disposition.

•	We tested the effectiveness of controls over vehicle depreciation expense related to risk vehicles and management’s review of the significant assumptions and judgments to calculate the estimated residual market value of risk vehicles, including those over the Company’s monitoring of residual market values and used vehicle market conditions.

•	We assessed the reasonableness of the estimated residual market value of risk vehicles by performing the following procedures on a selection of risk vehicles:

•	We tested the underlying historical data that served as the basis for the Company’s calculation of the estimated residual market value to evaluate that the inputs were reasonable.

•	We tested the mathematical accuracy of the Company’s calculation of the estimated residual market value and vehicle depreciation expense rates.

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We tested significant assumptions and judgments used in the Company’s calculation by developing an independent expectation of residual market values and compared them to the estimated residual market values calculated by the Company. Our independent expectation was calculated using our professional judgment by reference to third party data, information produced by the Company, subsequent vehicle sales, and inquiries of management.

•	We searched for contradictory evidence associated with the significant assumptions and judgments made by management based on our knowledge of the industry and review of third party industry data.

•	We developed an independent expectation of depreciation expense based on, but not limited to, the vehicles’ age and results of our residual value testing and compared it to the amount recorded by the Company as depreciation expense.

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•	We tested the effectiveness of controls over management’s review of significant assumptions, key inputs and methods used to calculate the estimate of the reported claims not yet paid and unreported claims.

•	We tested the underlying data that served as the basis for the Company’s actuarial analysis, including historical claims, to test that the inputs to the actuarial estimate were reasonable.

•	With the assistance of our actuarial specialists, we developed an independent estimate of the self-insurance reserves, including assessment of loss data and claim development factors, and compared our estimate to management’s estimate. In addition, we performed the following:

•	Evaluated the reasonableness of the methodologies used in management’s estimate based on actuarial methods followed in the insurance industry associated with such liabilities.

•	Evaluated the reasonableness of the assumptions used in management’s estimate by comparing prior-year assumptions of expected development and ultimate loss to actuals incurred during the current year to identify potential bias in the determination of the liability.

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1.	Basis of Presentation

•	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.

2.	Summary of Significant Accounting Policies

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(a)	Included within other current assets.

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3.	Leases

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(a)	Primarily included in operating expenses.

(b)	Included in vehicle depreciation and lease charges, net.

(c)	Included in vehicle interest, net.

(a)	Included in Accounts payable and other current liabilities.

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(b)	Included in Vehicles, net within Assets under vehicle programs.

(c)	Included in Debt within Liabilities under vehicle programs.

(d)	Included in Receivables from vehicle manufacturers and other within Assets under vehicle programs.

(e)	Included in Other within Liabilities under vehicle programs.

(a)	ROU assets obtained in exchange for lease liabilities since initial recognition.

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(a)	The weighted average grant date fair value for anti-dilutive non-vested stock for 2019, 2018 and 2017 was $39.48, $48.66 and $38.40, respectively.

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(a)	Includes expenses primarily related to the disposition of vehicles.

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(a)	Primarily amortized over a period ranging from 3 to 40 years with a weighted average life of 19 years.

(b)	Primarily amortized over a period ranging from 3 to 20 years with a weighted average life of 11 years.

(c)	Primarily amortized over a period ranging from 0 to 10 years with a weighted average life of 9 years.

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(a)

The valuation allowance of $214 million at December 31, 2019 relates to tax loss carryforwards and certain deferred tax assets of $192 million and $22 million, respectively. The valuation allowance will be reduced when and if the Company determines it is more likely than not that the related deferred income tax assets will be realized. The valuation allowance of $311 million at December 31, 2018 relates to tax loss carryforwards and certain deferred tax assets of $283 million and $28 million, respectively. The valuation allowance will be reduced when and if the Company determines it is more likely than not that the related deferred income tax assets will be realized.

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(a)	Pursuant to the agreements governing the disposition of certain subsidiaries in 2006, the Company is entitled to indemnification for certain pre-disposition tax contingencies. As of December 31, 2019 and 2018, $13 million, respectively, of unrecognized tax benefits are related to tax contingencies for which the Company believes it is entitled to indemnification.

(b)	The Company recognizes potential interest related to unrecognized tax benefits within interest expense related to corporate debt, net on the accompanying Consolidated Statements of Operations. Penalties incurred during the years ended December 31, 2019, 2018 and 2017, were not significant and were recognized as a component of the provision for income taxes.

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(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.

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

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(a)	The senior revolving credit facility bears interest at one-month LIBOR plus 200 basis points and is part of the Company’s senior 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.

(a)	The increase reflects additional borrowings principally to fund increases in the Company's car rental fleet.

(b)	Deferred financing fees related to Debt due to Avis Budget Rental Car Funding as of December 31, 2019 and 2018 were $40 million and $35 million, respectively.

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

(b)	Includes $1.9 billion of bank and bank-sponsored facilities.

(b)	Includes $1.7 billion of bank and bank-sponsored facilities.

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

(b)	The outstanding debt is collateralized by vehicles and related assets of $9.3 billion for Americas - Debt due to Avis Budget Rental Car Funding; $1.0 billion for Americas - Debt borrowings; $2.6 billion for International - Debt borrowings; and $0.2 billion for International - Finance leases.

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(a)	For the years ended December 31, 2019, 2018 and 2017, the amounts reclassified from accumulated other comprehensive income (loss) into corporate interest expense were $4 million ($3 million, net of tax), $3 million ($2 million, net of tax) and $4 million ($2 million, net of tax), respectively.

(b)	For the years ended December 31, 2019, 2018 and 2017, amounts reclassified from accumulated other comprehensive income (loss) into selling, general and administrative expenses were $8 million ($6 million, net of tax), $7 million ($5 million, net of tax) and $8 million ($5 million, net of tax), respectively.

(c)	See Note 2-Summary of Significant Accounting Policies for the impact of adoption of ASU 2017-12.

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(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, which are discussed separately below. The weighted-average fair value of time-based RSUs and performance-based RSUs granted in 2018 was $48.41 and $48.52, respectively, and the weighted-average fair value of time-based RSUs and performance-based and market-based RSUs granted in 2017 was $35.32 and $35.21, respectively.

(b)	The total fair value of RSUs vested during 2019, 2018 and 2017 was $18 million, $20 million and $23 million, respectively.

(c)	Aggregate unrecognized compensation expense related to time-based RSUs and performance-based and market-based RSUs amounted to $25 million and will be recognized over a weighted average vesting period of 1.2 years.

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(a)	For the year ended December 31, 2019, $4 million and $1 million were included in operating expenses and selling, general and administrative expenses, respectively. For the year ended December 31, 2018, $4 million and $2 million were included in operating expenses and selling, general and administrative expenses, respectively.

(b)	Included in selling, general and administrative expenses.

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(a)

Represents $5.9 billion of interest rate caps sold, partially offset by approximately $2.7 billion of interest rate caps purchased at December 31, 2019 and $5.7 billion of interest rate caps sold, partially offset by approximately $2.7 billion of interest rate caps purchased at December 31, 2018. These amounts exclude $3.2 billion and $3.0 billion of interest rate caps purchased by the Company’s Avis Budget Rental Car Funding subsidiary at December 31, 2019 and 2018, respectively.

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

(b)	Included in assets under vehicle programs or liabilities under vehicle programs.

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

(a)	Recognized, net of tax, as a component of accumulated 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 16-Stockholders’ Equity for amounts reclassified from accumulated other comprehensive income (loss) 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 year ended December 31, 2019, included an $11 million loss included in interest expense and a $4 million gain included in operating expenses. For the year ended December 31, 2018, included a $19 million gain included in interest expense and a $12 million gain included in operating expenses. For the year ended December 31, 2017, included a $23 million loss in interest expense and a $19 million loss included in operating expenses.

(f)	Primarily included in vehicle interest, net.

(g)	Included in operating expenses.

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(a)	Derivatives in liability position.

(a)	Primarily represents unallocated corporate expenses and receivables from our former subsidiaries.

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(a)	Primarily represents unallocated corporate expenses and receivables from our former subsidiaries.

(a)	Primarily represents unallocated corporate expenses and receivables from our former subsidiaries.

(a)	Includes amortization of intangible assets recognized in purchase accounting of $56 million in 2019, $61 million in 2018 and $58 million in 2017.

(b)	Reported within selling, general and administrative expenses in our Consolidated Statements of Operations.

(c)	Reported within operating expenses in our Consolidated Statements of Operations.

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(a)	Included within other current assets.

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(a)	Net income for the third quarter 2018 included additional tax expense of $30 million resulting from the completion of the accounting for the effects of the Tax Act for the one-time transition tax on the deemed repatriation of cumulative foreign subsidiary earnings.

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(a)	Other adjustments relate to currency translation adjustments.

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