8-K 1 0001.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 August 24, 2000 (Date of Report) VIS GROUP HOLDINGS, INC. (Exact name of Registrant as Specified In Its Charter) DELAWARE 1-13315 11-3347585 (State of Incorporation) (Commission File Number) (I.R.S. Employer Identification No.) 900 Old Country Road, Garden City, New York 11530 (Address of Principal Executive Offices) (Zip Code) (516) 222-3000 Registrant's telephone number, including area code: ITEM 1. CHANGES IN CONTROL OF REGISTRANT. Not applicable ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On August 9, 2000, Avis Group Holdings, Inc. ("Avis") and BNP Paribas ("BNP"), the largest listed banking group in France, established a joint venture company in the United Kingdom, Arval PHH Holdings into which Avis contributed the stock of its vehicle lease, vehicle management and fuel card subsidiaries in Europe under the PHH name ("PHH Europe"). As part of the negotiated transaction, Avis received from BNP $800 million in cash plus settlement of inter-company indebtedness owned to Avis by PHH Europe and a 20% interest in the venture. In return, BNP received an 80% controlling interest in the venture company, which within one year, will merge with Arval Service Lease, the vehicle lease and vehicle management subsidiary of BNP which operates in thirteen countries in Europe. ITEM 3. BANKRUPTCY OR RECEIVERSHIP. Not applicable ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT. Not applicable ITEM 5. OTHER EVENTS. Not applicable ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS. Not applicable ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. Reference is made to the News Release of Avis Group Holdings, Inc. and the unaudited pro forma consolidated financial statements filed as Exhibits hereto, which information is incorporated herein by reference. ITEM 8. CHANGE IN FISCAL YEAR. Not applicable SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AVIS GROUP HOLDINGS, INC. (Registrant) Date: August 24, 2000 By: /s/ Kevin M. Sheehan -------------------- Kevin M. Sheehan President-Corporate and Business Affairs and Chief Financial Officer (principal financial officer) EXHIBIT INDEX ITEM 7 7a) News Release of Avis Group Holdings, Inc. dated August 10, 2000. 7b) Unaudited pro forma consoldiated financial statements ITEM 7: Exhibit 7a CONTACTS: Elizabeth Logler - Investor Relations 516-222-4795 Gregory Faulhaber - Media Relations 516-222-3876 AVIS GROUP CLOSES JV TRANSACTION; RETIRES $1 BILLION TERM DEBT; AND ANNOUNCES STOCK REPURCHASE PROGRAM GARDEN CITY, NEW YORK, AUGUST 9, 2000-Avis Group Holdings, Inc. (NYSE:AVI) announced today the following major initiatives that reflect the Company's continued effort to build value for its shareholders: o Avis Group received $800 million in cash plus settlement of inter-company indebtedness from the closing of its joint venture transaction with BNP Paribas. Avis will retain a 20% stake in the global alliance, creating one of the world's leading vehicle management solutions brands in North America and Europe. o With the proceeds from its accretive alliance with BNP Paribas, Avis Group has retired all of the Company's outstanding term debt that was borrowed to fund the original VMS transaction. The elimination of the $1 billion term debt dramatically improves the Company's financial leverage and minimizes its exposure to interest rate changes. The remaining non-fleet obligations will consist of the $500 million senior subordinated notes, $380 million preferred stock and the Company's revolving credit facility. o Avis Group's Board of Directors has authorized the Company to repurchase up to $100 million of its common stock. Currently, there are 31.3 million shares of Avis Group issued and outstanding. This share repurchase initiative will be funded with ongoing cash flow from operations. The timing and amount of share repurchases will be subject to market and business conditions. Avis Group Holdings, Inc. is one of the world's leading service and information providers of comprehensive automotive transportation and vehicle management solutions. Avis Group operates the second largest general-use car rental business in the world, with locations in the United States, Canada, Australia, New Zealand and the Latin American Caribbean region. In 1999, the Company acquired PHH Vehicle Management Services, the world's second largest fleet management and leasing company, together with Wright Express, the world's largest fleet card provider. This press release contains statements related to future results, which are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, including the impact of competitive products and pricing, changing market conditions; and other risks which are detailed from time to time in the Company's publicly-filed documents, including its Annual Report on Form 10-K for the period ended December 31, 1999. Actual results may differ materially from those projected. These forward-looking statements represent the Company's judgments as of the date of this release. ITEM 7: EXHIBIT 7b AVIS GROUP HOLDINGS, INC. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma consolidated financial statements (the "Unaudited Pro Forma Consolidated Financial Statements") have been derived by the application of pro forma adjustments to the historical consolidated financial statements of Avis Group Holdings, Inc. ("Avis"). The unaudited pro forma consolidated statements of operations for the six month period ended June 30, 2000 and for the year ended December 31, 1999, give effect to the formation of the U.K. Joint Venture (as described below) as if it had occurred on January 1, 2000 for the six months ended June 30, 2000 and June 30, 1999, the date of the acquisition of the VMS Acquisition (described below), for the year ended December 31, 1999. The unaudited pro forma statement of financial position as of June 30, 2000 gives effect to this transaction as if it had occurred on such date. The pro forma adjustments are described in the accompanying note to the Unaudited Pro Forma Consolidated Financial Statements. The Unaudited Pro Forma Consolidated Financial Statements give effect to: o The contribution of all the stock of PHH Holdings Ltd. and assets of PHH Deutschland to the newly formed Arval PHH Holdings(the "U.K. Joint Venture"). Avis originally purchased PHH Holdings Ltd. and PHH Deutschland (collectively "PHH Europe"), PHH North America and Wright Express LLC ("WEX"), on June 30, 1999(the "VMS Acquisition"). o The receipt of $800 million from Banque National de Paris ("BNP Paribas") on August 9, 2000 for an 80 percent interest in the U.K. Joint Venture. o The repayment to Avis of intercompany indebtedness, from the U.K. Joint Venture. o The receipt of a annual license fee from the U. K. Joint Venture for the license of the PHH fleet management technology, PHH interactive. o The receipt of a distribution from the U.K. Joint Venture, and o Theutilization of the above proceeds to reduce Avis' indebtedness and pay transaction costs. Collectively, the above transactions are referred to as the Transaction. Any difference between the carrying value of the net assets of PHH Europe and the receipt of $800 million in cash plus settlement of intercompany indebtedness from BNP Pairbas is accounted for as an adjustment to cost in excess of net assets acquired relating to the VMS Acquisition. The Company believes that the accounting used to reflect the above transactions provides a reasonable basis on which to present these Unaudited Pro Forma Consolidated Financial Statements. The pro forma consolidated statement of financial position and pro forma consolidated statements of operations are unaudited and were derived by adjusting the historical financial statements of Avis. The Unaudited Pro Forma Consolidated Financial Statements are provided for informational purposes only and should not be construed to be indicative of the Company's consolidated financial position or results of operations had the Transaction been consummated on the dates assumed and do not project the Company's consolidated financial position or results of operations for any future date or period. The Unaudited Pro Forma Consolidated Financial Statements and accompanying notes should be read in conjunction with the Company's audited annual report and the notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, quarterly reports as of March 31, and June 30, 2000 and the current report on Form 8-K, dated July 14, 2000 filed with the Securities and Exchange Commission. AVIS GROUP HOLDINGS, INC. UNAUDITED PRO FORMA STATEMENT OF FINANCIAL POSITION AS OF JUNE 30, 2000 (In thousands)
Historical Pro Forma Avis Group Avis Group Holdings, Inc. Pro Forma Holdings, Inc. June 30, 2000 Adjustments June 30, 2000 ----------------- --------------- ----------------- ASSETS Cash and cash equivalents.............................. $ 151,114 $ (66,946) (1) $ 84,168 Cash held on deposit with financial institution........ 143,610 143,610 Restricted cash........................................ 243,952 243,952 Accounts receivable, net............................... 681,150 681,150 Assets held for sale, net.............................. 869,222 (869,222) (2) Prepaid expenses....................................... 62,222 62,222 Finance lease receivables.............................. 176,916 176,916 Vehicles, net - rental................................. 4,148,989 4,148,989 Vehicles, net - leasing................................ 3,053,234 3,053,234 Property and equipment, net............................ 182,567 182,567 Other assets........................................... 104,797 104,797 Investment in U.K Joint Venture........................ 167,000 (3) 167,000 Cost in excess of net assets acquired, net............. 1,240,826 31,008 (4) 1,271,834 ----------------- --------------- ----------------- Total assets........................................... $ 11,058,599 $ (738,160) $ 10,320,439 ================= =============== ================= LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY Accounts payable....................................... $ 530,500 $ 32,142 (5) $ 562,642 Accrued liabilities.................................... 354,160 354,160 Due to affiliates, net................................. 76,659 76,659 Current income tax liabilities......................... 20,012 20,012 Deferred income tax liabilities, net................... 161,057 260,000 (6) 421,057 Public liability, property damage and other insurance liabilities, net........................... 257,477 257,477 Vehicle debt........................................... 7,006,064 (61,137) (7) 6,944,927 Acquisition debt....................................... 1,491,500 (991,500) (7) 500,000 Minority interest (preferred membership interest)...... 99,305 99,305 ----------------- --------------- ----------------- Total liabilities...................................... 9,996,734 (760,495) 9,236,239 ----------------- --------------- ----------------- Commitments and contingencies Preferred stock: Class A Preferred stock .............................. 360,000 360,000 Class B Preferred stock............................... 18,225 18,225 Class C Preferred stock............................... 2,000 2,000 ----------------- ----------------- Total Preferred stock............................... 380,225 380,225 ----------------- ----------------- Common stockholders' equity: Class A Common stock ...................................... 359 359 Additional paid-in capital............................. 593,199 593,199 Retained earnings...................................... 223,373 223,373 Accumulated other comprehensive loss................... (31,459) 22,335 (8) (9,124) Treasury stock ........................................ (103,832) (103,832) ----------------- --------------- ----------------- Total common stockholders' equity...................... 681,640 22,335 703,975 ----------------- --------------- ----------------- Total liabilities, preferred stock and common stockholders' equity................................ $ 11,058,599 $ (738,160) $ 10,320,439 ================= =============== =================
See notes to the unaudited pro forma consolidated financial statements. AVIS GROUP HOLDINGS, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (In thousands, except share nd per share data)
Pro Forma PHH Avis Group Avis Group Europe Holdings, Inc. Holdings, Inc. For the For the For the Six Six months Six months ended Months Ended Ended Pro Forma June 30, June 30, 2000 June 30, 2000 (9) Adjustments 2000 -------------------- -------------------- ----------------- -------------------- Revenue: Vehicle rental.................. $ 1,255,473 $ 1,255,473 Vehicle leasing................. 707,158 $ (62,412) 644,746 Other fee based revenue........ 146,870 (73,511) 73,359 -------------------- -------------------- -------------------- 2,109,501 (135,923) 1,973,578 -------------------- -------------------- -------------------- Costs and expenses: Direct operating, net........... 456,008 $ (2,818) (10) 453,190 Vehicle depreciation and lease charges, net................. 827,502 (20,255) 807,247 Selling, general and administrative............... 366,275 (48,019) 318,256 Interest, net................... 305,994 (30,942) (49,918) (11) 225,134 Equity in net earnings of U.K joint venture................. (2,437) (12) (2,437) Non-vehicle depreciation and amortization............. 26,459 (6,935) 19,524 Amortization of cost in excess of net assets acquired.......... 23,594 (2,959) (2,988) (13) 17,647 -------------------- -------------------- ----------------- -------------------- 2,005,832 (109,110) (58,161) 1,838,561 -------------------- -------------------- ----------------- -------------------- Income before provision for income taxes................... 103,669 (26,813) 58,161 135,017 Provision for income taxes........ 46,651 (7,548) 21,517 (14) 60,620 -------------------- -------------------- ----------------- -------------------- Net income........................ 57,018 (19,265) 36,644 74,397 Preferred stock dividends......... 9,335 9,335 Earnings applicable to common -------------------- -------------------- ----------------- -------------------- stockholders................... $ 47,683 $ (19,265) $ 36,644 $ 65,062 ==================== ==================== ================= ==================== Earnings per share: Basic.......................... $ 1.53 $ 2.09 ==================== ==================== Diluted........................ $ 1.52 $ 2.08 ==================== ==================== Basic weighted average shares outstanding.................... 31,131,712 31,131,712 ==================== ==================== Diluted weighted average shares outstanding.................... 31,339,247 31,339,247 ==================== ====================
See notes to the unaudited proforma consolidated financial statements. AVIS GROUP HOLDINGS, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,1999 (In thousands, except share and per share data)
Pro Forma Avis Group PHH Avis Group Holdings, Inc. Europe for Holdings, Inc. For the The period For the Year ended July 1, 1999 Year ended December 31, to December 31, Pro Forma December 31, 1999 1999 (9) Adjustments 1999 ------------------- ------------------- --------------- ------------------ Revenue: Vehicle rental.............. $ 2,500,746 $ 2,500,746 Vehicle leasing............. 692,935 $ (63,118) 629,817 Other fee based............. 139,046 (76,281) 62,765 ------------------- ------------------- ------------------ 3,332,727 (139,399) 3,193,328 ------------------- ------------------- ------------------ Cost and expenses: Direct operating, net........... 957,270 $ (2,818) (10) 954,452 Vehicle depreciation and lease charges, net.................. 1,174,509 (24,211) 1,150,298 Selling, general and administrative................ 582,056 (41,840) 540,216 Interest, net................... 388,193 (29,509) (46,968) (11) 311,716 Equity in net earnings of U.K. joint venture................. (4,778) (12) (4,778) Non-vehicle depreciation and amortization.................. 34,600 (5,473) 29,127 Amortization of cost in excess of net assets acquired........ 30,182 (3,018) (2,988) (13) 24,176 ------------------- ------------------- ------------------- ------------------- 3,166,810 (104,051) (57,552) 3,005,207 ------------------- ------------------- ------------------- ------------------- Income before provision for income taxes.................. 165,917 (35,348) 57,552 188,121 Provision (benefit) for income taxes......................... 73,332 (4,379) 21,280 (14) 90,233 ------------------- ------------------- ------------------- ------------------- Net income...................... 92,585 (30,969) 36,272 97,888 Preferred stock dividends....... 9,110 9,110 ------------------- ------------------- ------------------- ------------------- Earnings applicable to common stockholders.................. $ 83,475 $ (30,969) $ 36,272 $ 88,778 =================== =================== =================== =================== Earnings per share: Basic......................... $ 2.66 $ 2.83 =================== =================== Diluted....................... $ 2.61 $ 2.78 =================== =================== Basic weighted average shares outstanding................... 31,330,536 31,330,536 =================== =================== Diluted weighted average shares outstanding................... 31,985,569 31,985,569 =================== ===================
See notes to the unaudited pro forma consolidated financial statements. AVIS GROUP HOLDINGS, INC. NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share data)
(1) Reclassification of PHH Europe cash to Assets Held for Sale, net................................................ $ (67,338) Remainder of proceeds from Transaction after debt repayment and payment of Transaction cost.................... 392 --------------- $ (66,946) =============== (2) To reflect contribution to the U.K Joint Venture consisting of: - Assets ...................................................... $ 1,895,122 - Liabilities ................................................. 1,025,900 --------------- - Assets Held for Sale......................................... $ 869,222 =============== (3) To record the Avis investment in the U.K Joint Venture........... $ 167,000 =============== (4) To reflect changes in cost in excess of net assets acquired, net: Proceeds received, net of closing costs paid at closing.......... $ (1,053,029) --------------- Less: - Assets Held for Sale, net ................................... 869,222 - PHH Europe cash reclassified to Assets Held for Sale, - PHH Europe accumulated comprehensive loss reclassified to Assets Held for Sale, net .................. 22,335 - 20% investment in U.K. Joint Venture, retained .............. (167,000) --------------- - Adjusted Assets Held for Sale, net .......................... 791,895 - Closing and other Transaction costs ......................... 32,142 - Deferred income tax liability................................ 260,000 --------------- - Adjustment to cost in excess of net assets acquired, net $ 31,008 =============== (5) Represents accruals for: - Transaction costs, net of closing costs paid at closing...... $ 30,738 - Deferred fleet management technology income................. 1,404 --------------- $ 32,142 =============== (6) To record deferred income tax liability arising from the receipt of $800 million in connection with the formation of the U.K. Joint Venture (PHH Europe) ..................... $ 260,000 =============== (7) Reflects the repayment of debt with the Transaction proceeds: - Pay down of the revolving credit facility ................... $ (61,137) =============== Retirement of acquisition debt: - Term Loan A due June 2005.................................... $ (242,500) - Term Loan B due June 2006.................................... (374,500) - Term Loan C due June 2007 ................................... (374,500) --------------- Total acquisition debt retired............................... $ (991,500) =============== (8) To record reversal of accrued accumulated comprehensive loss on foreign currency translation, intercompany loans and the related tax effect................................... $ 22,335 ===============
(9) Represents the adjustment to remove the results of operations of PHH Europe for the period July 1, 1999 to December 31, 1999 and for the six months ended June 30, 2000. (10) To record the fleet management technology fee income for the period July 1, 1999 to December 31, 1999 and for the six months ended June 30, 2000. (11) To record the interest reduction as a result of the retirement of Term Loans A, B, and C totaling $991.5 million, and the paydown of the revolving credit facility of $61.1 million as ollows:
Interest Expense ------------------------------------------------------- July 1, to Six months Average December 31, Average Ended Rates 1999 Rates June 30, 2000 ---------- ------------- ----------- --------------- Principal Term Loan A $ 242,500 8.67% $ 10,518 9.24% $ 11,203 Term Loan B 374,500 8.94% 16,741 9.53% 17,844 Term Loan C 374,500 9.19% 17,202 9.62% 18,013 ------------- ----------- --------------- 44,461 47,060 Revolving Credit Facility 61,137 8.20% 2,507 9.35% 2,858 ========= ------------- --------------- Total interest adjustment $ 46,968 $ 49,918 ============= ===============
July 1, 1999 to January 1, December 31, 2000 to 1999 June 30, 2000 --------------- --------------- (12) To record equity in net earnings of the U.K. Joint Venture as follows: Net income for PHH Europe...................................... $ 30,969 $ 19,265 =============== =============== Avis 20% equity in earnings, net of amortization of cost in excess of net assets acquired.............................. $ 4,778 $ 2,437 ============== ===============
June 30, 2000 -------------- (13) To adjust for decrease in amortization of cost in excess of net assets acquired. as follows: (i) Cost in excess of net assets acquired, net a) Amount included in Assets Held for Sale................ $ (270,113) b) Taxes, Transaction costs and other..................... 31,008 -------------- Adjustment to cost in excess of net assets acquired $ (239,105) ==============
July 1, to January 1, December 31, 2000 to 1999 June 30, 2000 -------------- --------------- (ii)Total decrease in amortization of cost in excess of net assets ($239,105 / 40 years).............................. $ 2,988 $ 2,988 ============== ===============
(14) Represents the income tax effect of the pro forma adjustments. as follows: July 1, to Six months December 31, ended 1999 June 30, 2000 -------------- --------------- Total adjustments $ 57,552 $ 58,161 Less goodwill adjustments (2,988) (2,988) -------------- --------------- 54,564 55,173 -------------- --------------- Tax effected at 39% federal, state and local income rate 21,280 $ 21,517 ============== ===============