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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 1999
REGISTRATION NO. 333-84881
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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AVIS RENT A CAR, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7514 11-3347585
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification No.)
of incorporation or organization) Classification Code Number)
</TABLE>
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900 OLD COUNTRY ROAD
GARDEN CITY, NEW YORK 11530
(516) 222-3000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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KAREN C. SCLAFANI, ESQ., VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
AVIS RENT A CAR, INC.
900 OLD COUNTRY ROAD
GARDEN CITY, NY 11530
(516) 222-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
SEAN J. GEARY, ESQ.
WHITE & CASE LLP
1155 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 819-8200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER AND SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 24, 1999
PROSPECTUS
5,885,800 SHARES
AVIS RENT A CAR, INC.
CLASS A COMMON STOCK
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This prospectus relates to a public offering of 5,885,800 shares of class A
common stock of Avis Rent A Car, Inc. by the selling stockholder named in this
prospectus. The selling stockholder may offer shares of this common stock from
time to time. We will not receive any of the proceeds from sales of this common
stock by the selling stockholder.
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The class A common stock is listed on the New York Stock Exchange under the
symbol "AVI." On August 5, 1999, the last reported sale price of the class A
common stock on the NYSE was $26.375 per share.
INVESTING IN THE CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR HAS PASSED UPON
THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
The date of this prospectus is , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Available Information................................................................. 5
Incorporation of Certain Information by Reference..................................... 5
Background and Corporate Developments................................................. 6
Risk Factors.......................................................................... 7
Use of Proceeds....................................................................... 18
Selling Stockholder................................................................... 18
Plan of Distribution.................................................................. 18
Legal Matters......................................................................... 19
Experts............................................................................... 19
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, including, in
particular, statements about our plans, strategies and prospects. Statements
that are included in this prospectus that are prefaced with the heading "may",
"will", "anticipate", "expect", "continue", "estimate", "project", "intend",
"designed", and similar expressions are intended to identify forward-looking
statements regarding events, conditions and financial trends that may affect our
future plans of operations, business strategy, results of operations and
financial condition. We have based these forward-looking statements on our
current assumptions, expectations and projections about future events. Since it
is not possible to predict every factor that may emerge, forward-looking
statements should not be relied upon as a prediction of our actual future
financial condition or operating results. We caution you that a variety of
factors could cause business conditions and results to differ materially from
these forward-looking statements. The forward-looking statements are subject to
risks, uncertainties and assumptions about us, including, among other things:
- our substantial debt and significant debt service obligations;
- our ability to integrate VMS into our operations;
- developments in, or changes to, the laws and regulations governing our
business;
- our ability to finance vehicle purchases in the asset-backed market;
- the increasingly competitive nature of the industries in which we are
operating;
- changes in interest rates, foreign currency exchange rates and other
domestic and international market and industry conditions;
- the cyclicality and seasonality of the car rental industry;
- changes in our relationships with our major suppliers;
- changes in government policy;
- changes in technology;
- developments regarding environmental and tort liability;
- our ability to keep key personnel required to operate the business; and
- the potential effect of Year 2000 compliance issues.
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CERTAIN DEFINITIONS
Unless the context otherwise requires, each reference in this prospectus to
- "Avis Rent A Car" refers to Avis Rent A Car, Inc.;
- "Avis" refers to Avis Rent A Car and its operating subsidiaries and
predecessors other than VMS;
- "we", "our" or "us" refers to the business of Avis together with VMS;
- "VMS" refers to the vehicle management and fuel card businesses which,
prior to the VMS acquisition, were operated by Cendant Corporation through
its PHH subsidiaries in the United States and Canada ("PHH North
America"), its PHH subsidiaries in Europe ("PHH Europe") and Wright
Express Corporation ("WEX");
- "Cendant" refers to Cendant Corporation and its subsidiaries;
- the "Avis System" refers to the Avis worldwide vehicle rental system
including related trademarks, trade names and computer systems, including
the Wizard-Registered Trademark- System, all of which are owned by
Cendant; and
- "Avis Fleet" refers to Avis Fleet Leasing and Management Corporation, the
wholly-owned subsidiary of Avis Rent A Car that acquired VMS.
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AVAILABLE INFORMATION
Avis Rent A Car has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3, of which this prospectus
forms a part, under the Securities Act, in connection with the offering of the
class A common stock. As permitted by the rules and regulations of the
Commission, this prospectus does not contain all of the information in the
registration statement. You will find additional information about Avis Rent A
Car in the registration statement. Any statements made in this prospectus
concerning the provisions of legal documents are not necessarily complete and
you should read the documents that are filed as exhibits to the registration
statement.
Avis Rent A Car is subject to the informational requirements of the Exchange
Act and will file periodic reports, statements and other information with the
Commission. You may inspect and copy the registration statement, including
exhibits, and, when filed, our periodic reports, statements and other
information filed with the Commission at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional offices located at
7 World Trade Center, New York, New York 10048 and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies may be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission also maintains a Web
site at http://www.sec.gov which will contain, when filed, our reports,
statements and other information filed with the Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Commission allows us to "incorporate by reference" in this prospectus
the information in the documents that we file with it, which means that we can
disclose information important to you by referring you to those documents. The
information incorporated by reference is considered to be a part of this
prospectus, and information in documents that we file later with the SEC will
automatically update and supersede information contained in documents filed
earlier with the SEC or contained in this prospectus. We incorporate by
reference in this prospectus the documents listed below and any future filings
that we may make with the Commission under Sections 13(a), 13(c), 14, or 15(d)
of the Securities Exchange Act of 1934 until we sell all of the securities that
may be offered by this prospectus:
- Annual Report on Form 10-K for the year ended December 31, 1998;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
- Current Reports on Form 8-K dated May 25, 1999, July 15, 1999 and August
6, 1999; and
- The description of the class A common stock contained in the registration
statement of Avis Rent A Car on Form S-1, dated June 6, 1997, and as
amended thereafter.
You may request a copy of these documents at no cost to you, by writing or
telephoning us as follows:
Avis Rent A Car, Inc.
900 Old Country Road
Garden City, New York 11530
Attn: Karen C. Sclafani, Vice President,
General Counsel and Secretary
(516) 222-3000
You should rely only on the information incorporated by reference or
provided in this prospectus or in any prospectus supplement. We have not
authorized anyone to provide you with different information. We are not making
an offer of the securities described in this prospectus in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of those documents.
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BACKGROUND AND CORPORATE DEVELOPMENTS
Avis operates the second largest general-use car rental business in the
world, based on total revenue. As the largest Avis System franchisee, Avis rents
vehicles and provides ancillary products and services to business and leisure
travelers through approximately 670 airport and non-airport (downtown or
suburban) locations in the United States, Canada, Puerto Rico, the U.S. Virgin
Islands, Argentina, Australia and New Zealand as of March 31, 1999. During 1998,
Avis completed over 15 million transactions for approximately 56 million rental
days with a fleet that averaged approximately 206,000 vehicles. Avis has
corporate operations at the 50 top domestic airports and will account for
approximately 92% of all domestic rental transactions processed through the Avis
System based on 1998 revenue. Avis provides its services to a broad range of
retail and corporate customers including both domestic and multinational
corporations, among which Avis has many long-standing relationships.
On June 30, 1999, Avis acquired VMS from Cendant for approximately $1.8
billion, plus the refinancing of approximately $3.5 billion of indebtedness. A
subsidiary of Cendant Corporation received $362.0 million of the acquisition
consideration in the form of preferred stock of Avis Fleet, $2.0 million of
which was transferred to a third party. The VMS acquisition has established us
as a leading worldwide provider of comprehensive automotive transportation and
vehicle management solutions.
VMS provides integrated card payment, vehicle leasing and value-added
vehicle management services in North America and Europe, with leading market
shares across many of its product lines. VMS provides comprehensive vehicle
management solutions to its customers which include over 19,000 companies and
government agencies in North America and Europe, including nearly one-third of
the Fortune 500 and approximately one-half of the FTSE 100 companies. VMS'
services consist of vehicle leasing and related asset-based services and a broad
range of fee-based services which include fuel and maintenance cards, accident
management, and various other vehicle-related services, all of which are
designed to allow clients to effectively manage costs and enhance productivity.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING A
DECISION TO INVEST IN THE CLASS A COMMON STOCK. THE RISKS DESCRIBED BELOW ARE
NOT THE ONLY ONES THAT WE WILL FACE. ADDITIONAL RISKS THAT WE DO NOT KNOW ABOUT
OR THAT WE VIEW AS IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS.
WE HAVE A SUBSTANTIAL AMOUNT OF INDEBTEDNESS
Assuming that our acquisition of VMS and the related transactions had been
consummated at March 31, 1999, we would have had approximately $8.2 billion of
indebtedness outstanding at that time, including approximately $6.6 billion
under fleet financing facilities. In addition, we would have had approximately
$788.1 million of additional credit availability under our fleet financing
facilities and approximately $168 million available under our revolving credit
facility (after giving effect to $182.0 million of outstanding but undrawn
letters of credit). We had approximately $95.0 million available under our
revolving credit facility on June 30, 1999 to fund our liquidity requirements
after giving effect to our acquisition of VMS and the related transactions.
Moreover, Avis Fleet has preferred stock outstanding with a $362.0 million
aggregate liquidation preference. As a result, we are highly leveraged.
This high level of indebtedness could have important consequences to our
operations, including the following:
- we may have difficulty borrowing money in the future for working capital,
capital expenditures, acquisitions or other purposes;
- we will need to use a large portion of the money we earn to pay principal
and interest on our debt, which will reduce the amount of money available
to finance our operations and other business activities;
- some of our debt, including our revolving credit facility and our fleet
financing facilities, has variable rates of interest, which exposes us to
the risk of increased interest rates;
- our debt under our revolving credit facility and fleet financing
facilities will be secured;
- we may have a much higher level of debt than certain of our competitors,
which may put us at a competitive disadvantage;
- our debt level will make us more vulnerable to economic downturns and
adverse developments in our businesses;
- our debt level will reduce our flexibility in responding to changing
business and economic conditions, including increased competition in our
industry; and
- our debt level will limit our ability to pursue other business
opportunities, borrow money for operations or capital in the future and
implement our business strategy.
OUR DEBT AGREEMENTS RESTRICT OUR ABILITY TO TAKE SOME ACTIONS
Our agreements with our various lenders include a number of significant
covenants that, among other things, will restrict our ability to:
- incur debt;
- pay dividends on stock or purchase stock;
- make certain types of investments;
- use the proceeds of the sale of certain assets or stock of certain
subsidiaries;
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- engage in certain transactions with affiliates;
- engage in mergers, consolidations and certain sales of assets;
- engage in business activities unrelated to our current businesses; and
- permit restrictions on the ability of certain of our subsidiaries to pay
dividends and make other distributions.
Certain of these agreements also require us to maintain specified financial
ratios. A breach of any of these covenants or our inability to maintain the
required financial ratios could result in a default in respect of the related
indebtedness. In the event of a default, the relevant lenders could elect, among
other options, to declare the indebtedness, together with accrued interest and
other fees, to be immediately due and payable, and proceed against any
collateral securing that indebtedness.
WE WILL RELY ON ASSET-BACKED FINANCING TO PURCHASE VEHICLES
We will rely heavily on asset-backed financing to purchase vehicles. If our
access to asset-backed financing were reduced, we cannot be sure that we would
be able to obtain replacement financing on favorable terms. As a result, any
disruption in the market for asset-backed securities or in our ability to access
that market would have a material adverse effect on our financial condition and
results of operations. In addition, if defaults under leases increase or if
leases do not yield a return equivalent to the cost of our VMS fleet financing
facility, then receivables collections that would have been used for our working
capital requirements could instead be required to be used to pay amounts owing
in respect of our VMS fleet financing facility. If we are successful in our
strategy of penetrating the small fleet market, defaults are likely to increase.
In addition, we may elect to accept lower returns on leases in the future to
successfully sell additional fee services. Both events may increase the amounts
required to support our initial issuance of securities under our VMS fleet
financing facility, through the contribution of cash to the relevant financing
subsidiaries. On the closing date of our VMS fleet financing facility,
approximately $205 million of receivables were used to support the obligations
under the VMS fleet financing facility, providing liquidity to make related
interest and dividend payments.
WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE VMS' AND AVIS' OPERATIONS OR REALIZE
THE EXPECTED BENEFITS FROM THE VMS ACQUISITION OR FUTURE ACQUISITIONS
We cannot be sure that we will be able to successfully integrate VMS' and
Avis' operations without substantial costs, delays or other problems. In
addition, expected synergies may not materialize. Our success in integrating
VMS' and Avis' operations will depend upon our ability to:
- integrate VMS' information processing systems into Avis' systems;
- retain key personnel;
- integrate VMS' general and administrative services into Avis' own; and
- avoid diversion of management's attention from operational matters.
Prior to our acquisition of VMS, Cendant provided VMS with a number of
administrative services. We have entered into agreements with Cendant under
which Cendant has agreed to provide us with certain of these services on a
transitional basis as follows.
Pursuant to the Corporate Services Transition Agreement, dated as of June
30, 1999, by and among Cendant and Avis Fleet, Cendant has agreed to provide us
with certain administrative services relating to the operation of the VMS
entities. These services include: the provision and administration of employee
benefits; processing of corporate accounts payable, payroll and tax filings;
cash management reporting; risk management support services for the invoicing
and underwriting of insurance; fixed asset administration; credit risk
management and corporate financial systems services.
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This agreement expires on December 31, 1999, with some services terminating
prior to that date, except that Cendant must continue to provide corporate
financial systems services until December 31, 2000. We cannot be certain that
after the corporate services transition agreement expires we will be able to
provide any of these services internally or obtain them from third-party
providers on a commercially reasonable basis. If we were unable to perform or
obtain these services on a commercially reasonable basis, it could have a
material adverse effect on our financial condition and results of operations.
Additionally, pursuant to the Information Technology Services Agreement,
dated as of June 30, 1999, by and among PHH Vehicle Management Services, LLC and
Cendant, Cendant has agreed to continue allowing VMS access to Cendant's
mainframe and information technology resources. The information technology
services agreement expires in December 2001. We cannot be certain that upon the
expiration of the information technology services agreement whether we would
require further access to Cendant's mainframe and information technology
resources. If we did and were unable to obtain them from Cendant on commercially
reasonable terms, it could have a material adverse effect on our financial
condition and results of operations.
Moreover, the consolidation and integration of VMS' and Avis' operations may
take longer, and be more disruptive to our business, than originally
anticipated. We may also encounter similar problems with future acquisitions.
AVIS RENT A CAR SYSTEM, INC. IS A FRANCHISEE AND AVIS DEPENDS ON THE AVIS SYSTEM
As an Avis System franchisee, Avis Rent A Car System, Inc. is required to
pay royalties to Cendant Car Rental, Inc. (the "Franchisor"), a wholly-owned
indirect subsidiary of Cendant Corporation, for use of the Avis trademarks and
the Avis System. These royalties are payable pursuant to a 50-year master
license agreement between Avis Rent A Car System, Inc. and the Franchisor and
are based upon Avis Rent A Car System, Inc.'s revenue, not its profits. This
could result in increasing royalty payments even during a period of declining
profits. These royalties resulted in a charge to Avis for the fiscal year ended
December 31, 1998 of $91.9 million and for the quarter ended March 31, 1999 of
$22.7 million.
The Franchisor has the right to terminate Avis Rent A Car System, Inc.'s
franchise for certain violations of the master license agreement, including,
among others, if Avis Rent A Car System, Inc. or Avis Rent A Car purports to
transfer any of its rights or obligations thereunder or in the case of Avis Rent
A Car, more than 10% of the equity interests in Avis Rent A Car System, Inc.,
without compliance with its terms, or if Avis Rent A Car System, Inc. fails,
refuses or neglects to promptly pay certain monies owing to the Franchisor or
other Cendant entities. The Franchisor could also terminate the master license
agreement upon the occurrence of various bankruptcy or insolvency events. Any
such termination would have a material adverse effect on our business.
Additionally, termination of the master license agreement would result in a
termination of the computer services agreement as discussed below.
WE DEPEND ON COMPUTER SYSTEMS OWNED BY CENDANT
We depend on a number of computer systems owned and/or operated by Cendant.
For example, we utilize the Wizard System, a computer system which is owned and
operated by Cendant, pursuant to a 50-year computer services agreement. We use
the Wizard System for global reservation processing, rental agreement generation
and administration and fleet control and accounting. Our data is also processed
by the Wizard System to enable us to plan fleet acquisitions, improve profits,
monitor our competitors' rates and analyze our business mix.
Cendant has the right to terminate the computer services agreement for
certain violations, including, among others, if we fail, refuse or neglect to
promptly pay monies owing to Cendant on two
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or more occasions within a six-month period as well as for a change of control
and various bankruptcy or insolvency events. In addition, termination of the
master license agreement would also result in a termination of the computer
services agreement. A loss of the services provided by the Wizard System would
have a material adverse effect on our financial condition and results of
operations.
Similarly, VMS' SPIN data warehouse and European data warehouse (both of
which are critical components of our information technology systems) are
partially resident on a mainframe computer owned and operated by Cendant. As is
discussed above, VMS has entered into an information technology services
agreement with Cendant, whereby Cendant has agreed to continue allowing VMS
access to Cendant's mainframe and information technology resources. However,
this agreement expires in December 2001. We cannot be certain that upon the
expiration of the information technology services agreement whether we would
require further access to Cendant's mainframe and information technology
resources. If we did and were unable to obtain them from Cendant on commercially
reasonable terms, it could have a material adverse effect on our financial
condition and results of operations.
If we were prevented from having access to our data for any reason,
including a failure of the computer system or an inability to find a supplier of
these services, it could have a material adverse effect on our financial
condition and results of operations.
AN INCREASE IN INTEREST RATES COULD REDUCE OUR PROFITABILITY
A substantial portion of our debt, including our debt under our revolving
credit facility and fleet financing facilities to the extent costs cannot be
passed through, is interest rate sensitive. As a result, an increase in interest
rates, whether because of an increase in market interest rates or an increase in
our own cost of borrowing, may materially reduce our profitability. In addition,
in the event of an increase in prevailing interest rates, lessees with floating
rate leases may have greater difficulty in meeting their increased payment
obligations, which could result in an increase in default rates. Moreover,
lessees generally have the option to convert their floating rate leases to fixed
rate leases which could, if not properly hedged, expose us to additional risks
resulting from interest rate fluctuations.
CHANGES IN REPURCHASE PROGRAMS MAY AFFECT OUR BUSINESS
At March 31, 1999, substantially all of the vehicles in our then existing
rental fleet were covered by vehicle manufacturers' repurchase programs
("Repurchase Programs"). The entities acquired pursuant to the VMS acquisition
do not participate in Repurchase Programs. Under a Repurchase Program, we agree
to purchase a specified minimum number of vehicles directly from franchised
dealers of the manufacturer at a specified price, and the manufacturer agrees to
buy those vehicles back from us at a future date at a price that is based upon
the capitalized cost of the vehicles less an agreed-upon depreciation factor
and, in certain cases, an adjustment for damage and /or excess mileage. The
Repurchase Programs limit our risk of a decline in the residual value of our
fleet and enables us to fix depreciation expense in advance. We expect vehicle
depreciation to continue to be the largest cost factor in our operations. If
automobile manufacturers reduced the availability of Repurchase Programs or
related incentives, it could have a material adverse effect on our financial
condition and results of operations.
In addition, we could be placed at a competitive disadvantage if U.S.
automobile manufacturers selectively restricted eligibility to participate in
their Repurchase Programs. For example, any effort by General Motors to reduce
the scope of our GM Repurchase Program could adversely affect our ability to
compete with those competitors whose access to similar programs is not reduced
or that have well-established alternative vehicle disposition facilities.
Furthermore, we currently obtain a substantial portion of our financing in
reliance on Repurchase Programs. A significant change in the financial condition
of the vehicle manufacturers, particularly
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General Motors Corporation or Daimler Chrysler Corporation, would significantly
affect our ability to continue to obtain this financing on favorable terms. In
addition, under the terms of certain of our credit facilities, including the
Avis fleet financing facilities, various events over which we will have no
control, including:
- the bankruptcy of a repurchase party, and
- a material default of a repurchase party under a Repurchase Program
may result in:
- termination of our credit lines for the purchase of vehicles under a
Repurchase Program from such repurchase party, and
- a requirement to liquidate vehicles purchased from that repurchase party.
WE BEAR THE RESIDUAL RISK ON THE VALUE OF A PORTION OF OUR LEASED VEHICLES
VMS leases vehicles on both closed-end and open-end bases. VMS generally
bears the residual value risk on the value of vehicles leased under closed-end
leases. Therefore, if the market for used vehicles declines, VMS may suffer
losses in remarketing vehicles upon the expiration of closed-end leases. While
PHH North America generally uses open-end leases, PHH Europe has traditionally
relied on closed-end leases. In 1998, as a result of a decline in the used
vehicle market, VMS incurred a $4.4 million charge relating to remarketing
losses. At March 31, 1999, approximately 15% of VMS' total lease portfolio
consisted of closed-end leases. In addition, if we are successful in our
strategy of penetrating the smaller-fleet leasing market, this percentage may
increase.
WE ARE EXPOSED TO FOREIGN CURRENCY RISKS
For the twelve months ended December 31, 1998, pro forma for the acquisition
of VMS, a significant portion of our revenue and operating costs were
denominated in foreign currencies. We are therefore exposed to fluctuations in
the exchange rates between the U.S. dollar and the currencies in which our
foreign operations receive revenues and pay expenses, particularly, the British
pound sterling. Our consolidated financial results will be denominated in U.S.
dollars and therefore require translation adjustments for purposes of reporting
results from foreign operations. Such adjustments, which may arise, for example,
due to an appreciation of the U.S. dollar relative to the pound sterling, may be
significant. In addition, we expect to borrow amounts denominated in foreign
currencies. Although we intend to hedge our exposure under such borrowings to
exchange rate fluctuations, we cannot be sure that such hedges will be
successful or that the costs of such hedges will not be significant.
WE WILL FACE RISKS IN INTERNATIONAL OPERATIONS
The international nature of our existing and planned operations, especially
our extensive presence in the United Kingdom, involves a number of risks,
including changes in U.S. and foreign government regulations, tariffs, taxes,
fuel duties, other trade barriers, the potential for nationalization of
enterprises, economic downturns, inflation, environmental regulations, political
and social instability, foreign exchange risk, difficulties in receivables
collections, and dependence on foreign personnel and foreign unions. Foreign
government regulations may also restrict our ability to own or operate
subsidiaries in those countries, acquire new businesses or repatriate dividends
from foreign subsidiaries back to the United States. We cannot be certain that
we will be able to enter and successfully compete in additional foreign markets
or that we will be able to continue to compete in the foreign markets in which
we currently operate.
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RISING CAR PRICES AND CHANGES IN INDUSTRY POLICIES MAY AFFECT OUR BUSINESS
In recent years the average price of new cars has increased. From time to
time, automobile manufacturers sponsor sales incentive programs that tend to
lower the average cost of vehicles for fleet purchasers like us. We anticipate
that new vehicle prices will continue to increase, and we cannot be sure that
sales incentive programs will remain available, that we will be able to
effectively control the average cost of our rental fleet by purchasing a mix of
less expensive vehicles or that, because of competitive pressures, we will be
able to pass on the increased cost of vehicles to rental customers.
In the United States, VMS receives fees from its dealers, who, in turn,
receive fees from vehicle manufacturers for vehicles purchased directly from the
manufacturers. These fees totalled approximately $38.4 million in 1998. We
cannot be sure that manufacturers will continue to offer these fees at
historical levels.
In addition, if car prices were to decline, we expect that leasing revenues
would decline as well.
AVIS DEPENDS ON GM FOR ITS SUPPLY OF VEHICLES
Whereas VMS has historically purchased vehicles from a broad range of
manufacturers, Avis has historically purchased a substantial majority of its
vehicles from GM. In fact, from January 25, 1989 until October 16, 1996, GM was
a minority shareholder of Avis. The number of vehicles purchased by Avis has
varied from year to year. In model year 1998, approximately 80% of Avis' vehicle
fleet purchases in the United States consisted of GM vehicles. In model year
1999, approximately 87% of Avis' vehicle fleet purchases in the United States
are expected to consist of GM vehicles. During the term of Avis' current
agreement with GM, which expires in 2002, at least 51% of Avis' domestic fleet
must consist of GM vehicles acquired from local GM dealers. Shifting significant
portions of fleet purchases to other manufacturers would require significant
lead time. As a result, GM's inability to supply us with the planned number and
type of vehicles could have a material adverse effect on our financial condition
and results of operations. In addition, if GM is not able to offer competitive
terms and conditions and we are unable to purchase enough vehicles from other
manufacturers on competitive terms and conditions, then we may be forced to
purchase vehicles at higher prices or on otherwise less favorable terms. Such a
situation could adversely affect our financial condition and results of
operations through increased vehicle acquisition and depreciation costs if we
are unable to pass these costs on to our customers through increases in rental
rates.
FLUCTUATIONS IN FUEL COSTS OR REDUCED SUPPLIES COULD HARM OUR BUSINESS
We could be adversely affected by limitations on fuel supplies, the
imposition of mandatory allocations or rationing of fuel or significant
increases in fuel prices. A severe and protracted disruption of fuel supplies or
significant increases in fuel prices could have a material adverse effect on our
financial condition and results of operations. On the other hand, decreases in
fuel costs, including decreases in applicable taxes, could reduce fuel card
revenues, since fuel card fees are generally based on the gross amount of
purchases.
A DECREASE IN AIR TRAVEL COULD HARM OUR BUSINESS
For the twelve months ended December 31, 1998, approximately 85% of Avis'
revenue from U.S. rental operations was generated at airport rental locations. A
sustained decrease in airline passenger traffic in the United States or the loss
of a significant airport concession could have a material adverse effect on our
financial condition and results of operations. Events that could reduce airline
passenger traffic include, in addition to a general economic downturn (as
discussed below), labor unrest, airline bankruptcies and consolidations,
substantially higher air fares, the outbreak of war, high-profile crimes against
tourists and incidents of terrorism. In addition, our leases at several major
airports are renewed on a month-to-month basis.
12
<PAGE>
OUR BUSINESS COULD BE HURT BY AN ECONOMIC DOWNTURN
Our business is affected by a number of economic factors, including the
level of economic activity in the markets in which we operate. A decline in
economic activity either in the United States or in international markets could
materially affect our financial condition and results of operations. In the
vehicle rental business, a decline in economic activity typically results in a
decline in both business and leisure travel, and, accordingly, a decline in the
volume of vehicle rental transactions. In the case of a decline in vehicle
rental activity, we may reduce rental rates to meet competitive pressures, which
could adversely affect our financial condition and results of operations. With
regard to vehicle leasing and other vehicle management services, economic
downturns may result in a decrease in sales volume and fee revenues, as well as
reduced margins.
A decline in economic activity may also adversely affect residual values
realized on the disposition of vehicles that are not covered by Repurchase
Programs. At March 31, 1999, pro forma for the acquisition of VMS, we would have
been subject to residual risk with respect to 15% of the VMS vehicles. In
addition, an economic decline is likely to result in an increase in default
rates, particularly if we are successful in penetrating the smaller fleet
leasing market. Any of the above factors could contribute to a downgrading of
our credit ratings. Any such downgrading could increase our funding costs and
decrease the spread between our cost of borrowing and our lending rates. We
cannot be sure that a decline in economic activity would not have a material
adverse effect on our financial condition and results of operations.
OUR VEHICLE RENTAL BUSINESS IS HIGHLY SEASONAL
Avis' third quarter, which covers the peak summer travel months, has
historically been its strongest, accounting in 1998 for approximately 28% and
47% of its rental revenue and pre-tax income from rental operations,
respectively. Any occurrence that disrupts travel patterns during the summer
period could have a material adverse effect on our annual operating results.
Avis' fourth quarter has generally been its weakest with respect to pre-tax
income because of reduced leisure travel and the greater potential for adverse
weather conditions. Many operating expenses, such as rent, insurance and
personnel, are fixed and cannot be reduced during periods of decreased rental
demand. As a result, we cannot be sure that we will have sufficient liquidity
under all conditions.
OUR BUSINESS IS HIGHLY COMPETITIVE
The vehicle rental industry is highly competitive, particularly with respect
to price and service. In addition, recent changes in ownership of a number of
the major domestic vehicle rental companies could further intensify competition.
In any given location, franchisees may encounter competition from national,
regional and local companies, many of which, particularly those owned by the
major automobile manufacturers, have greater financial resources than we do.
Principal competitors for commercial accounts, unaffiliated business and leisure
travelers in the United States are Hertz Corporation, National Car Rental
System, Inc., Budget Rent A Car Corporation and, particularly, with regard to
leisure travelers, Alamo Rent-A-Car Inc. Similarly, the vehicle leasing and
vehicle management services industries in which VMS operates are also highly
competitive. There are four other major providers of fleet management services
in the United States, hundreds of local and regional competitors and numerous
niche competitors who focus on only one or two products. We cannot be sure that
we will be able to compete successfully with either existing or new competitors.
From time to time, either because of overcapacity or reduced demand, the
major vehicle rental companies have been subject to industry-wide price
pressures, and Avis has, on such occasions, adjusted its rental rates in
response to such pressures. A recurrence of oversupply or a marked reduction in
overall demand could adversely affect our ability to maintain or increase our
rental rates.
13
<PAGE>
TECHNOLOGICAL ADVANCES COULD REDUCE OUR COMPETITIVE ADVANTAGE IN INFORMATION
TECHNOLOGY
We believe that customers, especially in the United States, are demanding
broader and faster access to information in the manner that we will provide
through our SPIN system and other technology platforms. Technological advances
could enable our competitors to develop the ability to deliver information in a
similar manner more quickly than we currently anticipate. If our competitors
developed this ability, it would reduce our competitive advantage in information
technology.
GOVERNMENT ACTION MAY AFFECT SOURCES OF OUR REVENUES
Governmental action could affect several sources of our revenues. For
example, a significant source of profits for the vehicle rental industry has
been the sale of loss damage waivers, by which rental companies agree to relieve
a customer from financial responsibility arising from vehicle damage sustained
during the rental period. Approximately 3.3% of Avis' total revenue during 1998
was generated by the sale of loss damage waivers. The U.S. Congress has from
time to time considered legislation that would regulate the conditions under
which loss damage waivers may be sold by vehicle rental companies. At present,
no legislation is pending. In addition, approximately 40 states have considered
legislation affecting loss damage waivers. To date, 24 states have enacted
legislation regulating the sale of loss damage waivers, most of which requires
disclosure to each customer at the time of rental that damage to the rented
vehicle may be covered by the customer's personal automobile insurance and that
loss damage waivers may not be necessary. In addition, in 1988 New York enacted
legislation which eliminated Avis' right to offer loss damage waivers for sale
and limited potential customer liability to $100. California and Nevada have
capped rates that may be charged for loss damage waivers at $9.00 and $10.00 per
day, respectively. Texas requires that the rate charged for loss damage waivers
be reasonably related to the direct cost of the repairs. In Illinois, Avis is
currently permitted to sell loss damage waivers at fixed rates. If, however, the
customer elects not to purchase the loss damage waiver, the customer's liability
is limited to $9,000 unless the customer violates the prohibited use terms of
the rental agreement, in which case the customer is liable for the fair market
value of the vehicle or the cost of the repairs, whichever is less. Adoption of
national or additional state legislation affecting or limiting the sale of loss
damage waivers could result in the loss of this revenue source and additional
limitations on potential customers' liability could increase our costs. In
addition, any decrease in fuel taxes could reduce fuel card revenues.
In addition, several state legislatures and insurance regulators have
recently begun to require vehicle rental companies or their personnel to obtain
limited licenses in order to sell optional insurance products at the rental
counter. In New York, legislation requires a single corporate license for the
vehicle rental company in order to permit the sale of additional liability
insurance, personal accident insurance and personal effects protection. In Ohio,
regulations now require that one person be licensed at each rental station in
order to sell these insurance products. In 1998, the Texas Insurance
Commissioner reversed earlier policy and imposed a limited licensing plan upon
the entire vehicle rental industry. Further, each company was required to refund
to customers proportions of sales revenues in compensation for operating without
a limited license. Avis' share of this refund program was approximately $2
million. However, we do not believe that fines have been proposed by other state
regulators or that any licensing requirements would have a material adverse
effect on us.
WE MAY HAVE CLEAN-UP COSTS RELATING TO PETROLEUM STORAGE
Approximately 245 of Avis' domestic and international facilities contain
tanks for the storage of petroleum products, such as gasoline, diesel fuel and
waste oils. At approximately 208 of Avis' locations, one or more of these tanks
are located underground. We cannot be sure that these tank systems will at all
times remain free from leaks or that the use of these tanks will not result in
spills. In addition, historical operations at certain of Avis' properties,
including activities relating to automobile and bus maintenance, may have
resulted in leaks or spills into soil or groundwater. Any such leak or
14
<PAGE>
spill, depending on such factors as the material involved, quantity and
environmental setting, could result in interruptions to our operations and
expenditures that could have a material adverse effect on our financial
condition and results of operations. At certain facilities, we are presently
remediating soil and groundwater contamination. Based on currently available
information, we estimate that future expenditures for remediation of known
contamination will be approximately $5.54 million (which has been fully
reserved). Such amount does not take into account possible recoveries under any
insurance that may be available or reimbursement that may be available from
certain state reimbursement programs applicable to leaking underground storage
tanks. In the United States, Canada and Puerto Rico, we carry environmental
impairment liability coverage with annual limits of $4.0 million per incident
and $4.0 million in the aggregate per site and a deductible generally of
$250,000 against liability to third parties and clean-up costs, but this
insurance does not cover internal business interruptions. In addition, we cannot
be sure that our liabilities will not exceed our insurance coverage.
WE MAY BE SUED AS A RESULT OF ACCIDENTS INVOLVING OUR CARS
Our business exposes us to claims for personal injury, death and property
damage resulting from the use of the vehicles rented or leased by us. Avis
currently either self-insures or maintains coverage from a wholly-owned
insurance subsidiary for such risk up to $1.0 million per occurrence and
maintains insurance with unaffiliated carriers in excess of such level up to
$200.0 million per occurrence. VMS also currently maintains liability insurance
with unaffiliated insurance carriers to a limit of $26 million per occurrence.
We intend to keep these insurance programs in place. We cannot, however, be sure
that we will not be exposed to uninsured liability at levels above historical
levels resulting from multiple payouts or otherwise, that liabilities in respect
of existing or future claims will not exceed the level of our insurance, that we
will have sufficient capital available to pay any uninsured claims or that
insurance with unaffiliated carriers will continue to be available to us on
economically reasonable terms. In addition, we cannot be certain that we will be
able to obtain the insurance for VMS on economically reasonable terms.
YEAR 2000 RISK
As has been widely reported, many computer systems process dates based on
two digits for the year of a transaction and may be unable to process dates in
the Year 2000 and beyond. There are many risks associated with the Year 2000
compliance issue, including but not limited to the possible failure of our
systems and hardware with embedded applications. Any such failure could result
in:
- the malfunctioning of the Wizard System, PHH Interactive (which provides
real time data access to certain VMS customers) or the SPIN data warehouse
and other technology platforms;
- an inability to track our vehicles and provide the fleet maintenance
services that account for a majority of the revenue of VMS;
- the malfunctioning of our other service processes;
- an inability to properly bill and collect payments from our customers;
and/or
- errors or omissions in accounting and financial data, any of which could
have a material adverse effect on our results of operations and financial
condition.
In addition, we cannot be sure that the systems of other companies,
including our vendors, utilities and customers, will be compliant in a timely
manner, or that a failure to be compliant by another company, or a conversion
that is incompatible with our systems, would not have a material adverse effect
on our financial condition and results of operations.
Avis has conducted a review of its computer systems including those owned by
Cendant to identify the systems that could be affected by the Year 2000 problem
and believes its mission critical systems
15
<PAGE>
will be Year 2000 compliant in the summer of 1999. VMS has conducted a review of
its computer systems including those owned by Cendant to identify the systems
that could be affected by the Year 2000 problem and believes its mission
critical systems will be Year 2000 compliant in the summer of 1999.
We are developing contingency plans with respect to certain key technology
used in our mission critical systems. The contingency planning process is
ongoing and will require modification as we obtain further information regarding
the results of testing our systems for Year 2000 compliance and the results of
tests performed on our vendors' systems. We cannot be sure that any contingency
plan will effectively mitigate problems caused by the failure of computer
systems to be Year 2000 compliant.
Our inability to remedy any mission critical systems or the failure of third
parties to do so may cause business interruptions or shutdowns, financial loss,
regulatory actions, reputational harm or legal liability. We cannot be sure that
our Year 2000 program will be effective or that our estimates about the timing
and cost of completing our program will be proven accurate.
WE MAY HAVE DIFFICULTY MANAGING FUTURE GROWTH
We expect to continue to experience rapid growth and development as a result
of the implementation of our operating strategy and industry changes. We cannot
be sure that such growth will continue to occur or that our operating strategy
will be successful. If we experience rapid growth, such growth would require the
hiring, retention and training of new personnel, the development and
introduction of new products, the expansion of our management information
systems, the control of expenses related to the expansion of our information
network and customer base, and the management of additional demands on our
customer support, sales and marketing, administrative resources and network
infrastructure. If we are unable to satisfy these requirements, or if we are
otherwise unable to manage growth effectively, our operations and financial
condition could be materially adversely affected.
ATTRACTION AND RETENTION OF KEY PERSONNEL
Our success will depend in large part upon the ability and experience of
certain key management employees, particularly Robert Salerno, Kevin Sheehan and
Mark Miller. In addition, our performance will be highly dependent on our
ability to identify, hire, train, motivate and retain highly qualified
management, technical, sales and marketing personnel. Our need for new personnel
will be heightened as a result of our acquisition of VMS and other attempts to
expand operations. Competition for such personnel is intense, and we cannot be
certain that we will be able to attract, assimilate or retain highly qualified
technical, sales, marketing and managerial personnel. The inability to attract
and retain the necessary management, technical and sales and marketing
personnel, including without limitation, senior management personnel, could have
a material adverse effect on our business, results of operations and financial
condition.
CONFLICTS OF INTEREST WITH CENDANT MAY ARISE
Cendant's ownership of approximately 19% (which may increase to up to
approximately 34% upon the conversion of the preferred stock of Avis Fleet
received by Cendant in connection with the VMS acquisition (based on Cendant's
ownership as of the date hereof)) of our common stock, as well as the service of
certain persons as directors of both Avis Rent A Car and Cendant, could create
conflicts of interest when those directors and officers are faced with decisions
that could have different implications for Cendant and us, including:
- potential acquisitions of businesses;
- the issuance of additional securities;
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<PAGE>
- the election of new or additional directors; and
- the payment of dividends and other matters.
We have not instituted any formal plan or arrangement to address potential
conflicts of interest that may arise among us, Cendant and Cendant's affiliates.
Avis is party to various agreements with Cendant and its affiliates that were
entered into when Cendant beneficially owned all of Avis' outstanding common
stock. In addition, we will be relying on Cendant to provide transitional
services with regard to VMS and to continue to provide access to its mainframe
computers on which the SPIN data warehouse and other data is stored. See "--We
depend on computer systems owned by Cendant."
On April 15, 1998, Cendant publicly announced that it discovered accounting
irregularities in the former business units of CUC International, Inc. As a
result, Cendant restated its previously reported financial results for 1997,
1996 and 1995 and is currently party to more than 70 lawsuits regarding the
same. We are currently not a party to such litigation, and we do not currently
believe that there is any basis for asserting a claim thereunder against us. In
addition, Avis was spun off from Cendant before CUC International, Inc. merged
into Cendant. However, we cannot be certain that claims will not be asserted
against us in the future or that we will not have any liability in respect of
such litigation. In the event that we were subject to any such liability, we
cannot be certain that we would be able to recover any amounts in respect of
such liability from Cendant.
CERTAIN PROVISIONS OF DELAWARE LAW, OUR CERTIFICATE OF INCORPORATION AND OUR
BY-LAWS COULD HINDER A THIRD PARTY FROM TAKING CONTROL OF US.
Certain provisions of Delaware law, our Amended and Restated Certificate of
Incorporation and our Amended and Restated By-laws could delay or impede the
removal of incumbent directors and could make it more difficult for a third
party to acquire, or could discourage a third party from attempting to acquire,
control of us. Such provisions could limit the price that certain investors
might be willing to pay in the future for shares of the class A common stock. In
addition, shares of preferred stock may be issued by our Board of Directors
without stockholder approval on such terms and conditions, and having such
rights, privileges and preferences, as the Board of Directors may determine. The
rights of the holders of the class A common stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock that may
be issued in the future. We have no current plans to issue any shares of
preferred stock.
THE PRICE OF OUR CLASS A COMMON STOCK MAY EXPERIENCE FLUCTUATIONS.
Our class A common stock is traded on the New York Stock Exchange, which has
experienced and may continue to experience significant price and volume
fluctuations that could adversely affect the market price of our class A common
stock without regard to our operating performance. In addition, we believe that
factors such as quarterly fluctuations in financial results, earnings below
analysts' estimates, financial performance and activities of other publicly
traded companies in our industry could cause the price of our class A common
stock to fluctuate.
WE DO NOT ANTICIPATE PAYING ANY CASH DIVIDENDS ON OUR CLASS A COMMON STOCK IN
THE FORESEEABLE FUTURE.
We have never declared or paid dividends on our class A common stock. We
currently do not intend to pay dividends on our class A common stock in the
foreseeable future. Any payment of dividends in the future will be at the
discretion of our board of directors. Moreover, our ability to pay dividends on
our class A common stock is restricted by the terms of some of our debt
agreements.
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USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the class A common
stock by the selling stockholder. See "Selling Stockholder".
SELLING STOCKHOLDER
The following table sets forth certain information with respect to the
selling stockholder:
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY TO BE BENEFICIALLY
OWNED MAXIMUM NUMBER OWNED AFTER OFFERING,
NAME OF SELLING PRIOR TO OF SHARES TO ASSUMING ALL SHARES
STOCKHOLDER THE OFFERING BE OFFERED OFFERED ARE DISTRIBUTED
- --------------------------------------------------- ----------------- ----------------- -------------------------
<S> <C> <C> <C>
Cendant Car Rental Holdings, Inc.(1)............... 5,885,800(2) 5,885,800(2) 0(2)
</TABLE>
- ------------------------
(1) Cendant Car Rental Holdings, Inc. is a wholly-owned subsidiary of Cendant
Corporation.
(2) Does not include 7,200,000 shares of series A preferred stock of Avis Fleet
owned by an affiliate of the selling stockholder. The series A preferred
stock is convertible under certain circumstances into class B non-voting
common stock of Avis Rent A Car. In addition, the class B common stock is
exchangeable for class A common stock under certain circumstances, including
if the conversion would not result in Cendant's ownership of class A common
stock exceeding 20% of the total outstanding.
Cendant is a major publicly-traded international provider of consumer and
business services. Prior to September 24, 1997, Avis was owned by the
Franchisor, a wholly-owned indirect subsidiary of Cendant Corporation. Prior to
our acquisition of VMS, VMS was indirectly owned by Cendant Corporation. The
Franchisor owns the Avis System, of which Avis is a franchisee, as well as the
Avis trademarks, tradenames and the Wizard System. In connection with Avis Rent
A Car's 1997 initial public offering, its operating subsidiary, Avis Rent A Car
System, Inc., entered into a 50-year master license agreement with the
Franchisor to participate in the Avis System and a 50-year computer services
agreement for use of the Wizard System. The master license agreement provides
for certain base and supplemental royalties to be paid to Cendant based on Avis
Rent A Car System, Inc.'s gross revenue, while Cendant provides services under
the computer services agreement at cost. In addition, Cendant has agreed to
provide certain transitional services to us, and we have agreed to provide
certain transitional services to Cendant, in connection with our acquisition of
VMS.
Because the selling stockholder or its transferees may offer all, a portion
or none of the class A common stock offered pursuant to this prospectus, no
estimate can be given as to the amount of class A common stock that will be held
by the selling stockholder upon termination of the offering. See "Plan of
Distribution."
PLAN OF DISTRIBUTION
The class A common stock may be sold from time to time to purchasers
directly by the selling stockholder, including pledgees, donees (including
charitable organizations), transferees or other successors in interest to the
selling stockholder. Alternatively, the selling stockholder may sell the class A
common stock in one or more transactions (which may involve one or more block
transactions) on the New York Stock Exchange, in sales occurring in the public
market off such exchange, in separately negotiated transactions, or in a
combination of such transactions. Each sale may be made either at market prices
prevailing at the time of such sale or at negotiated prices. Some or all of the
class A common stock may be sold directly or through brokers acting on behalf of
the selling stockholder or to dealers for resale by such dealers. In connection
with such sales, such brokers or dealers may receive compensation in the form of
discounts or commissions from the selling stockholder
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and/or the purchasers of such common stock for whom they may act as broker or
agent. The selling stockholder will bear all expenses of registration incurred
in connection with the registration and sale of the class A common stock being
offered by this prospectus.
The selling stockholder and any dealer participating in the distribution of
any class A common stock or any broker executing selling orders on behalf of the
selling stockholder may be deemed to be "underwriters" within the meaning of the
Securities Act, in which case any profit on the sale of any or all of the class
A common stock by the selling stockholder and any discounts or commissions
received by any such brokers or dealers may be deemed to be underwriting
discounts and commissions under the Securities Act.
Any broker or dealer participating in any distribution of the class A common
stock in connection with the offering of the class A common stock may be deemed
to be an "underwriter" within the meaning of the Securities Act and will be
required to deliver a copy of this prospectus to any person who purchases any of
the class A common stock from or through such broker or dealer.
LEGAL MATTERS
The validity of the shares of class A common stock being offered will be
passed upon for us by White & Case LLP, New York, New York.
EXPERTS
The financial statements and the related financial statement schedule of
Avis Rent A Car, Inc., incorporated in this prospectus by reference from Avis
Rent A Car, Inc.'s Annual Report on Form 10-K for the year ended December 31,
1998, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The combined financial statements of PHH Vehicle Management Services as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998, incorporated in this prospectus by reference from Avis Rent A
Car Inc.'s Current Report on Form 8-K, dated July 15, 1999, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All amounts shown are estimates except
the Securities and Exchange Commission registration fee. The selling stockholder
is obligated to reimburse the undersigned Registrant for all such expenses.
<TABLE>
<CAPTION>
TO BE PAID BY THE
REGISTRANT
-----------------
<S> <C>
Securities and Exchange Commission registration fee............................................ $ 43,975
Accounting fees and expenses................................................................... 10,000
Printing expenses.............................................................................. 15,000
Transfer agent and registrar fees.............................................................. 0
Legal fees and expenses........................................................................ 50,000
Other expenses................................................................................. 10,000
--------
Total...................................................................................... $ 128,975
--------
--------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of Title 8 of the General Corporation Law of the State of
Delaware ("GCL") gives a corporation power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, provided
that such director, officer, employee or agent acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, provided
that such director, officer, employee or agent had no reasonable cause to
believe his or her conduct was unlawful. The same Section also gives a
corporation power to indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that such person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if he acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation, unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper. Section 145 of the GCL further provides that, to the extent
that a director, officer, employee or agent of a corporation has been successful
on the merits or otherwise in defense of any such action, suit or proceeding, or
in defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection therewith.
II-1
<PAGE>
The bylaws of Avis Rent A Car Inc. ("Avis Rent A Car") contain specific
authority for indemnification by Avis Rent A Car of current and former
directors, officers, employees or agents of Avis Rent A Car on terms that have
been derived from Section 145 of Title 8 of the GCL.
Avis Rent A Car maintains policies of insurance under which Avis Rent A Car
and its directors and officers are insured, subject to specified exclusions and
deductible and maximum amounts, against loss arising from any claim which may be
made against Avis Rent A Car or any director or officer of Avis Rent A Car by
reason of any breach of duty, neglect, error, misstatement, omission or act done
or alleged to have been done while acting in their respective capabilities.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
4.1 Amended and Restated Certificate of Incorporation of Avis Rent A Car, Inc.*
4.2 Amended and Restated By-laws of Avis Rent A Car, Inc.*
5.1 Opinion of White & Case LLP regarding the legality of the class A common stock being registered
hereby.**
23.1 Consent of Deloitte & Touche LLP relating to Avis Rent A Car, Inc.'s Financial Statements.**
23.2 Consent of Deloitte & Touche LLP relating to PHH Vehicle Management Services Financial Statements.**
23.3 Consent of White & Case LLP (included in Exhibit 5.1).**
24.1 Powers of Attorney.***
</TABLE>
- ------------------------
* Incorporated by reference to the Registrant's registration statement on Form
S-1, 333-46737.
** Filed herewith.
*** Previously filed.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made of
the securities registered hereby, a post-effective amendment to this
registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in this registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in this registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement
or any material change to such information in this registration
statement;
II-2
<PAGE>
provided, however, that the undertakings set forth in paragraphs (i) and
(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Pre-Effective Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
incorporated village of Garden City, County of Nassau and State of New York, on
August 20, 1999.
<TABLE>
<S> <C> <C>
AVIS RENT A CAR, INC.
By /s/ KEVIN M. SHEEHAN
-----------------------------------------
Name: Kevin M. Sheehan
Title: President-Corporate and Business
Affairs and Chief Financial Officer
</TABLE>
Pursuant to the requirements of the Securities Act, this Pre-Effective
Amendment No. 1 to the Registration Statement on Form S-3 has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President and Chief
* Operating
- ------------------------------ Officer--Rental Car August 20, 1999
F. Robert Salerno Group and Director
President--Corporate and
/s/ KEVIN M. SHEEHAN Business Affairs, Chief
- ------------------------------ Financial Officer and August 20, 1999
Kevin M. Sheehan Director
President and Chief
* Operating
- ------------------------------ Officer--Vehicle August 20, 1999
Mark E. Miller Management Services
Group
* Vice President and
- ------------------------------ Controller (Chief August 20, 1999
Timothy M. Shanley Accounting Officer)
*
- ------------------------------ Chairman of the Board and August 20, 1999
Martin L. Edelman Director
*
- ------------------------------ Director August 20, 1999
W. Alun Cathcart
*
- ------------------------------ Director August 20, 1999
Leonard S. Coleman, Jr.
*
- ------------------------------ Director August 20, 1999
Alfonse M. D'Amato
*
- ------------------------------ Director August 20, 1999
Deborah L. Harmon
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ Director August 20, 1999
Stephen P. Holmes
*
- ------------------------------ Director August 20, 1999
Michael J. Kennedy
*
- ------------------------------ Director August 20, 1999
Michael P. Monaco
</TABLE>
*Signed by Kevin M. Sheehan pursuant to a power of attorney contained in the
Registrant's Registration Statement on Form S-3 Registration No. 333-84881 as
filed with the Commission on August 10, 1999.
<TABLE>
<C> <S> <C>
/s/ KEVIN M. SHEEHAN
- ------------------------------ August 20, 1999
Name: Kevin M. Sheehan
</TABLE>
II-5
<PAGE>
EXHIBIT 5.1
August 19, 1999
Avis Rent A Car, Inc.
900 Old Country Road
Garden City, New York 11530
Ladies and Gentlemen:
We refer to the Registration Statement No. 333-84881 on Form S-3, as
heretofore or hereafter amended (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), filed by Avis Rent A
Car, Inc., a Delaware corporation (the "Company"), with the Securities and
Exchange Commission (the "Commission"), relating to the offering by Cendant Car
Rental Holdings, Inc. (the "Selling Stockholder") of up to 5,885,800 shares of
class A common stock of the Company, par value $0.01 per share (the "Common
Stock"). The Common Stock is to be sold from time to time directly to purchasers
or through brokers and dealers.
We have examined such certificates of officers of the Company, and the
originals (or copies thereof, certified to our satisfaction) of such corporate
documents and records of the Company, and such other documents, records and
papers as we have deemed relevant in order to give the opinion hereinafter set
forth. In this connection we have assumed the genuineness of signatures, the
authenticity of all documents submitted to us as originals and the conformity to
authentic original documents submitted to us as certified, conformed, facsimile
or photostatic copies.
Based on our examination described above and subject to the assumptions
stated, it is our opinion that the Common Stock has been duly authorized,
validly issued and is fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to our firm under the caption "Legal Matters" in
the Prospectus forming part of the Registration Statement. In giving this
consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission.
Very truly yours,
/s/ White & Case LLP
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Pre-Effective Amendment
No. 1 to Registration Statement No. 333-84881 of Avis Rent A Car, Inc. on Form
S-3 of our reports dated January 25, 1999 (March 19, 1999 as to Note 21),
appearing in and incorporated by reference in the Annual Report on Form 10-K of
Avis Rent A Car, Inc. for the year ended December 31, 1998 and to the reference
to us under the heading "Experts" in the Prospectus, which is part of such
Registration Statement.
/s/ Deloitte & Touche LLP
New York, New York
August 23, 1999
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Pre-Effective Amendment
No. 1 to Registration Statement No. 333-84881 of Avis Rent A Car, Inc. on Form
S-3 of our report on the combined financial statements of PHH Vehicle Management
Services dated June 18, 1999, appearing in the Current Report on Form 8-K of
Avis Rent A Car, Inc. filed on July 15, 1999 and to the reference to us under
the heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Deloitte & Touche LLP
Parsippany, NJ
August 23, 1999
