What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-02-17 compared with 2020-02-20 · 134 added, 80 removed, 147 unchanged (59% of the section changed)

7 unchanged sentences

We and our licensees operate our brands in approximately 180 countries throughout the world.

During 2019 :

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.

Business and Trends

The spread of the novel coronavirus (“COVID-19”) and the impact on travel demand and the global economy has had significant negative impacts on all aspects of our business.

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.

COVID-19 and the resulting economic conditions have had, and we believe will continue to have, a significant negative impact on our operations and vehicle rental volumes and consequently our financial results, and such negative impact may continue well beyond the containment of this outbreak.

In particular:

• Reservation volume was significantly behind the prior year on a comparable basis as a result of the effects of COVID-19, which impacted our peak summer season.

We are not able to predict the impact that the COVID-19 pandemic may have on the seasonality of our business, particularly if the pandemic's effects increase.

• The used vehicle market was significantly disrupted in the first half of the second quarter, impacting our ability to dispose of used vehicles as a result of COVID-19.

Beginning in the second half of the second quarter and continuing throughout the third and fourth quarters, the used car market improved significantly.

If there are further disruptions due to COVID-19, we may experience a reduction in residual values for risk vehicles in our fleet which could cause us to sustain a substantial loss on the ultimate sale of such vehicles or require us to depreciate those vehicles at a more accelerated rate than we have anticipated.

If our ability to sell vehicles in the used vehicle market becomes severely limited again, we may have difficulty meeting collateral requirements due under our asset-backed financing facilities.

• In April 2020, Moody’s and S&P Global (the “Rating Agencies”) downgraded our long-term corporate debt rating.

If we were to experience a further downgrade, this could negatively impact our ability to respond to adverse changes in general economic, industry and competitive conditions, as well as changes in government regulation and changes to our business.

• As a result of decreased rental volume, we parked our vehicles in overflow parking lots.

In April 2020, we experienced a fire at an overflow parking lot near Southwest Florida International Airport.

As a result, we have lost vehicles with an estimated carrying value of approximately $50 million.

We realized a loss of approximately $10 million related to this incident, which has been treated as COVID-19 charges and excluded from Adjusted EBITDA.

We could experience similar casualty losses in other overflow parking lots.

• We have taken cost removal and mitigation actions by eliminating all non-essential capital and operating expenditures and we are continuing to negotiate with partners and suppliers for further reductions.

Expenses for 2020 reflect the reduction or furlough of a large part of our global workforce, reduction of base compensation at the level of vice presidents and above, frozen merit increases, elimination of our 401(k) match for highly compensated employees, and cancellation of future hiring.

We aggressively reduced the size of our global fleet beginning in March and ended December with 31% fewer units than the prior year.

Our vehicle dispositions will occur through both traditional methods and by utilizing our alternative distribution strategy by selling directly to dealers and consumers.

We also negotiated a significant number of new vehicle cancellations during 2020 to improve utilization and shrink the fleet size.

We have never previously experienced such a decrease in demand, and as a result, our ability to be predictive regarding the impact of such a decrease is uncertain.

In addition, the duration of the pandemic is uncertain.

As a consequence, we cannot estimate the impact on our business, financial condition or financial forecast or operational results with reasonable certainty.

Our results of operations, financial condition, and cash flows were significantly impacted during the year ended December 31, 2020, by the ongoing COVID-19 pandemic.

The trends and results for the year ended December 31, 2020 may not be indicative of results that may be expected in the future due to uncertainty regarding the extent and duration of the COVID-19 pandemic.

RESULTS OF OPERATIONS

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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 revenue and “Adjusted EBITDA,” which we define as income 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 results of operations.

Management evaluates the operating results of each of our reportable segments based upon revenues and “Adjusted EBITDA,” which we define as income 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, non-operational charges related to shareholder activist activity, gain on sale of equity method investment in China, COVID-19 charges and income taxes.

Net charges for unprecedented personal-injury and other legal matters and gain on sale of equity method investment in China are recorded within operating expenses in our consolidated results 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 results 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 amounts because there were no gains similar in nature to this gain.

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.

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 other charges, and losses associated with vehicles damaged in overflow parking lots, net of insurance proceeds, and are primarily recorded within operating expenses in our consolidated results of operations.

We have revised our definition of Adjusted EBITDA to exclude COVID-19 charges.

We did not revise prior years' Adjusted EBITDA amounts because there were no other charges similar in nature to these.

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.

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Our consolidated results of operations comprised the following:

2020 2019 $ Change % Change

Revenues $ 5,402 $ 9,172 $ (3,770) (41 %)

Operating 3,322 4,698 (1,376) (29 %)

Vehicle depreciation and lease charges, net 1,368 2,063 (695) (34 %)

2 unchanged sentences

Non-vehicle related depreciation and amortization

286 263 23 9 %

Interest expense related to corporate debt, net:

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Total expenses 6,358 8,885 (2,527) (28 %)

Income before income taxes

Provision for (benefit from) income taxes

Not meaningful.

Revenues increased during 2019 compared to 2018 , primarily due to a 3% increase in volume, partially offset by a $165 million negative impact from currency exchange rate movements.

Total expenses were primarily unchanged during the year ended December 31, 2019, compared to 2018.

Operating expenses increased to 51.2% of revenue during 2019 compared to 50.8% in 2018 , primarily due to higher salaries, wages, and related benefits and higher vehicle registration fees, partially offset by a gain on the sale of an equity method investment in China.

Vehicle depreciation and lease charges decreased to 22.5% of

revenue during 2019 compared to 23.9% in 2018 , primarily due to Americas’ lower per-unit fleet costs and higher utilization.

Selling, general and administrative costs increased to 13.5% of revenue during 2019 compared to 13.4% in 2018 .

Vehicle interest costs increased to 3.8% of revenue during 2019 compared to 3.4% in 2018 primarily due to higher interest rates.

Our effective tax rates were a benefit of 5% and a provision of 38% for the year ended December 31, 2019 and 2018, respectively, which in 2019 included a $113 million one-time benefit arising from the release of valuation allowances on certain of our foreign deferred tax assets primarily driven by tax planning strategies.

As a result of these items, our net income increased by $137 million compared to 2018.

For 2019 , the Company reported earnings of $3.98 per diluted share, which includes a one-time benefit arising from the release of valuation allowances on certain of our foreign deferred tax assets primarily driven by tax planning strategies of $1.50 per share and a benefit from the impact of our 2019 share repurchases of $0.04 per share.

For 2018 , the Company reported earnings of $2.06 per diluted share, which includes a benefit from the impact of our 2018 share repurchases of $0.05 per share.

Income (loss) before income taxes (956) 287 (1,243) n/m

Provision for (benefit from) income taxes (272) (15) (257) n/m

Net income (loss) $ (684) $ 302 $ (986) n/m

n/m Not meaningful.

Because of the impact of COVID-19, revenues decreased during 2020 compared to 2019, driven by a 38% decrease in volume and a 6% decrease in revenue per day excluding exchange rate movements, partially offset by an $8 million benefit from currency exchange rate movements.

Total expenses during the year ended December 31, 2020 decreased compared to 2019, primarily due to strategic cost reduction initiatives and reduced operational activities because of the impact of COVID-19.

During the year ended December 31, 2020, all expenses increased as a percentage of revenue, with the exception of selling, general and administrative costs, as a result of the impact of COVID-19, partially offset by strategic cost reduction initiatives to right-size the business.

Operating expenses increased to 61.5% of revenue during 2020 compared to 51.2% in 2019.

Vehicle depreciation and lease charges increased to 25.3% of revenue during 2020 compared to 22.5% in 2019.

Selling, general and administrative costs decreased to 13.0% of revenue during 2020 compared to 13.5% in 2019, primarily due to strategic cost reduction initiatives to right-size the business.

Vehicle interest costs increased to 5.9% of revenue during 2020 compared to 3.8% in 2019.

Our effective tax rates were a benefit of 28% and 5% for the year ended December 31, 2020 and 2019, respectively, which in 2019 included a $113 million one-time benefit arising from the release of valuation allowances on certain of our foreign deferred tax assets primarily driven by tax planning strategies.

As a result of these items, our net income decreased compared to 2019.

For 2020, the Company reported losses of $9.71 per diluted share.

For 2019, the Company reported earnings of $3.98 per diluted share, which includes a one-time benefit arising from the release of valuation allowances on certain of our foreign deferred tax assets primarily driven by tax planning strategies of $1.50 per share.

Following is a more detailed discussion of the results of each of our reportable segments:

Adjusted EBITDA

Revenues Adjusted EBITDA Revenues Adjusted EBITDA

Americas $ 3,965 $ 72 $ 6,352 $ 652

International 1,437 (202) 2,820 203

Corporate and Other (a)

— (45) — (67)

Total Company $ 5,402 $ (175) $ 9,172 $ 788

Reconciliation of net income to Adjusted EBITDA

Reconciliation of net income (loss) to Adjusted EBITDA

Net income (loss) $ (684) $ 302

Provision for (benefit from) income taxes (272) (15)

Income before income taxes

Income (loss) before income taxes (956) 287

Non-vehicle related depreciation and amortization 286 263

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Early extinguishment of debt 9 12

Restructuring and other related charges (b)

Transaction-related costs, net (c)

Non-operational charges related to shareholder activist activity (d)

Gain on sale of equity method investment in China (e)

COVID-19 Charges (b)

Restructuring and other related charges (c)

Unprecedented personal-injury and other legal matters, net (d)

Non-operational charges related to shareholder activist activity (e)

Transaction-related costs, net (f)

Gain on sale of equity method investment in China (d)

Adjusted EBITDA $ (175) $ 788

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

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

Primarily comprised of acquisition- and integration-related expenses.

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

Reported within operating expenses in our consolidated results of operations.

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

(b) For the year ended December 31, 2020, consists of $116 million within operating expenses, $5 million within selling, general and administrative expenses and $1 million within vehicle depreciation and lease charges, net in our consolidated results of operations.

Primarily consisting of $60 million of minimum annual guaranteed rent in excess of concession fees, $48 million of incremental cleaning supplies to sanitize vehicles and facilities, overflow parking for idle vehicles and related shuttling costs and other charges and $14 million of losses associated with vehicles damaged in overflow parking lots, net of insurance proceeds.

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

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

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

2020 2019 % Change

Revenues $ 3,965 $ 6,352 (38 %)

Adjusted EBITDA 72 652 (89 %)

Revenues increased 3% during 2019 , compared to 2018 , primarily due to a 3% increase in volume, partially offset by an $11 million negative effect from currency exchange rate movements.

Operating expenses increased to 50.2% of revenue during 2019 compared to 49.7% in 2018 , primarily due to higher salaries, wages and related benefits and higher vehicle registration fees.

Vehicle depreciation and lease charges decreased to 23.0% of revenue during 2019 compared to 25.4% in 2018 , primarily due to an 8%

decrease in per-unit fleet costs excluding exchange rate effects and higher utilization.

Selling, general and administrative costs increased to 12.1% of revenue during 2019 compared to 11.9% in 2018 .

Vehicle interest costs increased to 4.5% of revenue during 2019 compared to 4.1% in 2018 , primarily due to higher interest rates.

Adjusted EBITDA increased 17% during 2019 , compared to 2018 , due to higher revenues, lower per-unit fleet costs, partially offset by higher salaries, wages, and related benefits and higher vehicle registration fees.

Revenues decreased 38% during 2020, compared to 2019, primarily due to a 36% decrease in volume and a 3% decrease in revenue per day excluding exchange rate effects as a result of the impact of COVID-19.

Operating expenses increased to 58.9% of revenue during 2020 compared to 50.2% in 2019, primarily due to impacts directly related to COVID-19, partially offset by strategic cost reduction initiatives to right-size the

Vehicle depreciation and lease charges increased to 24.4% of revenue during 2020 compared to 23.0% in 2019, primarily due to impacts directly related to COVID-19, partially offset by 23% lower per-unit fleet costs.

Selling, general and administrative costs decreased to 10.5% of revenue during 2020 compared to 12.1% in 2019, primarily due to strategic cost reduction initiatives to right-size the business.

Vehicle interest costs increased to 6.9% of revenue during 2020 compared to 4.5% in 2019, primarily due to impacts directly related to COVID-19, partially offset by strategic cost reduction initiatives to right-size the business.

Adjusted EBITDA decreased 89% during 2020, compared to 2019, due to lower revenues directly related to COVID-19.

International

Adjusted EBITDA

Revenues decreased 4% during 2019 , compared to 2018 , primarily due to a $154 million negative impact from currency exchange rate movements and a 1% decrease in revenue per day excluding exchange rate effects, partially offset by a 2% increase in volume.

Operating expenses increased to 53.5% of revenue during 2019 compared to 52.8% in 2018 , primarily due to lower revenue per day excluding exchange rate effects and higher public liability and property damage expense, partially offset by a gain on the sale of an equity method investment in China.

Vehicle depreciation and lease charges increased to 21.3% of revenue during 2019 compared to 20.8% in 2018 , primarily due to lower revenue per day excluding exchange rate effects and a 2% increase in per-unit fleet costs excluding exchange rate effects, partially offset by higher utilization.

Selling, general and administrative costs decreased to 14.3% of revenue during 2019 compared to 14.5% in 2018 .

Vehicle interest costs, at 2.1% of revenue, remained unchanged during 2019 compared to 2018 .

Adjusted EBITDA decreased 29% during 2019 , compared to 2018 , due to lower revenues, a $21 million negative impact from currency exchange rate movements, higher public liability and property damage expense and higher per-unit fleet costs excluding exchange rate effects, partially offset by higher utilization.

2020 2019 % Change

Revenues $ 1,437 $ 2,820 (49 %)

Adjusted EBITDA (202) 203 n/m

Revenues decreased 49% during 2020, compared to 2019, primarily due to a 42% decrease in volume and a 13% decrease in revenue per day excluding exchange rate movements as a result of the impact of COVID-19, partially offset by a $9 million benefit from currency exchange rate movements.

During the year ended December 31, 2020, all expenses increased as a percentage of revenue as a result of the impact of COVID-19, partially offset by strategic cost reduction initiatives to right-size the business.

Operating expenses increased to 68.5% of revenue during 2020 compared to 53.5% in 2019.

Vehicle depreciation and lease charges increased to 27.9% of revenue during 2020 compared to 21.3% in 2019.

Selling, general and administrative costs increased to 16.5% of revenue during 2020 compared to 14.3% in 2019.

Vehicle interest costs increased to 3.1% of revenue during 2020 compared to 2.1% in 2019.

Adjusted EBITDA decreased during 2020, compared to 2019, due to lower revenues directly related to COVID-19.

Corporate and Other

Adjusted EBITDA

Not meaningful.

Adjusted EBITDA decreased $ 3 million during 2019 , compared to 2018 , primarily due to higher selling, general and administrative expenses which are not attributable to a particular segment.

2020 2019 % Change

Revenues $ — $ — n/m

Adjusted EBITDA (45) (67) n/m

n/m Not meaningful.

Adjusted EBITDA decreased $22 million during 2020, compared to 2019, primarily due to lower selling, general and administrative expenses related to cost reduction initiatives, which are not attributable to a particular segment.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

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As of December 31,

2020 2019 Change

Total assets exclusive of assets under vehicle programs $ 8,365 $ 9,311 $ (946)

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Stockholders’ equity (155) 656 (811)

Total assets exclusive of assets under vehicle programs and total liabilities exclusive of liabilities under vehicle programs increased compared to 2018 primarily due to the adoption of ASU 2016-02 (see Note 3 to our Consolidated Financial Statements).

Assets and liabilities under vehicle programs increased compared to 2018 primarily due to an increase in the size of our vehicle rental fleet and operating leases recognized upon adoption of ASU 2016-02 (see Note 3 to our Consolidated Financial Statements).

The increase in stockholders’ equity compared to 2018 is primarily due to our comprehensive income, partially offset by our repurchases of common stock.

The decrease in assets and liabilities under vehicle programs compared to 2019 is primarily related to the reduction of our vehicle rental fleet to right-size our business in response to the COVID-19 pandemic.

The decrease in stockholders’ equity compared to 2019 is primarily due to our comprehensive loss and share repurchases.

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.

During 2019 our Avis Budget Rental Car Funding subsidiary issued approximately $600 million , $650 million , and $650 million in asset-backed notes with an expected final payment date of March 2022, September 2024, and March 2025, and a weighted average interest rate of 3.56% , 3.44% , and 2.45% , respectively.

During 2020, our Avis Budget Rental Car Funding subsidiary issued approximately $700 million and $650 million in asset-backed notes with an expected final payment date of August 2025 and February 2026, and a weighted average interest rate of 2.42% and 2.28%, respectively.

The proceeds from these borrowings were used to fund the repayment of maturing vehicle-backed debt and the acquisition of rental cars in the United States.

In July 2019, we issued $400 million of our 5¾% Senior Notes due July 2027 to redeem $400 million of our outstanding 5 ½ % Senior Notes due April 2023.

In October 2019, we redeemed $75 million of our 5 ½% Senior Notes due April 2023.

We repurchased approximately 2.2 million shares of our outstanding common stock for approximately $62 million during 2019.

In April 2020, we entered into an amendment (the “Amendment”) to our 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 remain in place after the Amendment.

The Amendment provides for relief from the quarterly-tested leverage covenant contained in the credit agreement governing the senior credit facilities until the end of a specific relief period, including a holiday from such leverage covenant through June 30, 2021, during which time (i) certain negative covenant exceptions are not available to the Company, (ii) pricing on the senior credit facilities is increased, (iii) the Company must comply with a liquidity covenant and additional reporting requirements and (iv) the Company must meet additional conditions to borrow under the revolving credit facility.

In May 2020, we issued $500 million of 10 ½ % Senior Secured Notes due May 2025.

We used the proceeds from this offering for general corporate purposes.

In August 2020, we issued $350 million of additional 5¾ % Senior Notes due July 2027 to redeem the outstanding $100 million in aggregate principal amount of our 5½% Senior Notes due 2023, with the remainder being used for general corporate purposes.

During the first quarter of 2020, we repurchased approximately 5.0 million shares of our outstanding common stock for approximately $113 million.

Year Ended December 31, 2020 vs.

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Year Ended December 31,

2020 2019 Change

Cash provided by (used in):

4 unchanged sentences

Net change in cash and cash equivalents, program and restricted cash

(135) 165 (300)

Cash and cash equivalents, program and restricted cash, beginning of period

Cash and cash equivalents, program and restricted cash, end of period

Cash provided by operating activities during 2019 was substantially unchanged compared with 2018 .

The decrease in cash used in investing activities during 2019 compared with 2018 is primarily due to an increase in proceeds received on the disposition of vehicles, partially offset by an increase in investment in vehicles.

$ 765 $ 900 $ (135)

Cash provided by operating activities during 2020 was substantially lower compared with 2019 due to reduced operational activities as a result of the impact of COVID-19.

The decrease in cash used in investing activities during 2020 compared with 2019 is primarily due to a decrease in investment in vehicles.

The decrease in cash provided by financing activities during 2020 compared with 2019 is primarily due to a decrease in net borrowings under vehicle programs.

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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.

As of December 31, 2019 , we have cash and cash equivalents of $0.7 billion , available borrowing capacity under our committed credit facilities of $0.7 billion , and available capacity under our vehicle programs of approximately $2.9 billion .

Our liquidity position could be negatively affected by financial market disruptions or a downturn in the U.S.

Our liquidity position has been impacted by COVID-19 as a result of significant volume declines and we expect the impact of COVID-19 on the U.S.

and worldwide economies to continue to affect our volumes even after the outbreak is contained.

Our liquidity could be further 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 in the past affected and could in the future affect the debt ratings assigned to us by credit rating agencies and the cost of our borrowings.

Additionally, a downturn in the worldwide economy or a disruption in the credit markets could 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 (see Item 1A.

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 (see Item 1A.

Risk Factors for further discussion).

Our liquidity position could also be negatively impacted if we are unable to remain in compliance with the financial and other covenants associated with our senior revolving credit facility and other borrowings, including a maximum leverage ratio.

As of December 31, 2020, we had access to $0.7 billion of available cash and cash equivalents and available borrowings under our revolving credit facility of approximately $0.6 billion, providing us with access to an approximate $1.3 billion of total liquidity.

See Note 1 to our Consolidated 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 new liquidity covenant, the consolidated first lien leverage ratio requirement after the end of the waiver period on June 30, 2021 and other covenants associated with our senior credit facilities and other borrowings.

As of December 31, 2020, we were in compliance with the financial covenants governing our indebtedness.

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The following table summarizes our principal future contractual obligations as of December 31, 2020:

2021 2022 2023 2024 2025 Thereafter Total

Corporate debt $ 19 $ 18 $ 18 $ 732 $ 1,182 $ 2,289 $ 4,258

Debt under vehicle

programs 1,626 2,444 1,224 885 621 102 6,902

Debt interest 481 414 353 276 156 130 1,810

1 unchanged sentence

Commitments to purchase vehicles (a)

8,740 — — — — — 8,740

Defined benefit pension plan contributions (b)

9 — — — — — 9

Other purchase

commitments (c)

Represents commitments to purchase vehicles, the majority of which are from Ford, Fiat Chrysler and General Motors.

86 53 27 7 4 — 177

$ 11,647 $ 3,427 $ 2,046 $ 2,197 $ 2,186 $ 3,602 $ 25,105

(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).

Represents the expected contributions to our defined benefit pension plans in 2019.

(b) Represents the expected contributions to our defined benefit pension plans in 2021.

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.

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

Excludes income tax uncertainties of $57 million , $13 million of which is subject to indemnification by Realogy and Wyndham.

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

(d) Excludes income tax uncertainties of $24 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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In performing this review, we are required to make an assessment of fair value for our goodwill and other indefinite-lived intangible assets.

When determining fair value, we utilize various assumptions, including the fair market trading price of our common stock and management’s projections of future cash flows.

When determining fair value, we utilize various assumptions, including the fair market trading price of our common stock and management’s

projections of future cash flows, which include forecast of future revenue and Adjusted EBITDA.

A change in these underlying assumptions will cause a change in the results of the tests and, as such, could cause the fair value to be less than the respective carrying amount.

2 unchanged sentences

Our goodwill and other indefinite-lived intangible assets are allocated among our reporting units.

During 2019 , 2018 and 2017 , there was no impairment of goodwill and no material impairment of other intangible assets, see

Note 7 to our Consolidated Financial Statements.

During 2020, 2019 and 2018, there was no impairment of goodwill and no material impairment of other intangible assets, see Note 7 to our Consolidated Financial Statements.

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.

In the future, failure to achieve our business plans, a significant deterioration of the macroeconomic 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 and indefinite-lived intangible assets (such as the discount rate) could result in significantly different estimates of fair value that could trigger an impairment of the goodwill of our reporting units or intangible assets.

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 discount rate and market multiples.

In the future, failure to achieve our business plans, a further deterioration of the 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 and indefinite-lived intangible assets (such as the discount rate) could result in significantly different estimates of fair value that could trigger an impairment of the goodwill of our reporting units or intangible assets.

We present vehicles at cost, net of accumulated depreciation, on the Consolidated Balance Sheets.

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The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Tax Act enacted in the fourth quarter of 2017 included a change in the U.S.

federal corporate income tax rate.

For more information regarding the accounting for the effects of the Tax Act, see Note 9 to our Consolidated Financial Statements.

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized.

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis