Segment Information |
Segment Information
The Company has identified four reportable segments, which are organized based on the products and services provided by its operating segments and the geographic areas in which its operating segments conduct business, as follows:
| | • | U.S. Car Rental - rental of cars, crossovers and light trucks, as well as ancillary products and services, in the United States and consists of the Company's United States operating segment; |
| | • | International Car Rental - rental and leasing of cars, crossovers and light trucks, as well as ancillary products and services, internationally and consists of the Company's Europe and Other International operating segments, which are aggregated into a reportable segment based primarily upon similar economic characteristics, products and services, customers, delivery methods and general regulatory environments; |
| | • | Worldwide Equipment Rental - rental of industrial construction, material handling and other equipment and consists of the Company's worldwide equipment rental operating segment; and |
| | • | All Other Operations - includes the Company's Donlen operating segment which provides fleet leasing and fleet management services and is not considered a separate reportable segment in accordance with applicable accounting standards, together with other business activities. |
In addition to the above reportable segments, the Company has corporate operations ("Corporate") which includes general corporate assets and expenses and certain interest expense (including net interest on corporate debt).
Adjusted pre-tax income (loss) is calculated as income (loss) before income taxes plus non-cash acquisition accounting charges, debt-related charges relating to the amortization and write-off of debt financing costs and debt discounts and certain one-time charges and non-operational items. Adjusted pre-tax income (loss) is important because it allows management to assess operational performance of its business, exclusive of the items mentioned above. It also allows management to assess the performance of the entire business on the same basis as the segment measure of profitability. Management believes that it is important to investors for the same reasons it is important to management and because it allows them to assess the Company's operational performance on the same basis that management uses internally. When evaluating the Company's operating performance, investors should not consider adjusted pre-tax income (loss) in isolation of, or as a substitute for, measures of the Company's financial performance, such as net income (loss) or income (loss) before income taxes.
The contribution of the Company's reportable segments to revenues and adjusted pre-tax income (loss) and the reconciliation to consolidated amounts are summarized below. | | | | | | | | | | | | | | Years Ended December 31, | (In millions) | 2015 | | 2014 | | 2013 | Revenues | | | | | | U.S. car rental | $ | 6,286 |
| | $ | 6,471 |
| | $ | 6,331 |
| International car rental | 2,148 |
| | 2,436 |
| | 2,378 |
| Worldwide equipment rental | 1,518 |
| | 1,571 |
| | 1,539 |
| All other operations | 583 |
| | 568 |
| | 527 |
| Total | $ | 10,535 |
| | $ | 11,046 |
| | $ | 10,775 |
| Adjusted pre-tax income(a) | | | | | | U.S. car rental | $ | 551 |
| | $ | 387 |
| | $ | 1,033 |
| International car rental | 215 |
| | 144 |
| | 134 |
| Worldwide equipment rental | 189 |
| | 258 |
| | 301 |
| All other operations | 68 |
| | 62 |
| | 58 |
| Corporate | (451 | ) | | (448 | ) | | (430 | ) | Total | $ | 572 |
| | $ | 403 |
| | $ | 1,096 |
| Depreciation of revenue earning equipment and lease charges, net | | | | | | U.S. car rental | $ | 1,572 |
| | $ | 1,758 |
| | $ | 1,281 |
| International car rental | 398 |
| | 492 |
| | 528 |
| Worldwide equipment rental | 329 |
| | 329 |
| | 299 |
| All other operations | 463 |
| | 455 |
| | 425 |
| Total | $ | 2,762 |
| | $ | 3,034 |
| | $ | 2,533 |
| Depreciation and amortization, non-fleet assets | | | | | | U.S. car rental | $ | 209 |
| | $ | 222 |
| | $ | 207 |
| International car rental | 37 |
| | 41 |
| | 37 |
| Worldwide equipment rental | 77 |
| | 75 |
| | 74 |
| All other operations | 10 |
| | 11 |
| | 10 |
| Corporate | 19 |
| | 17 |
| | 11 |
| Total | $ | 352 |
| | $ | 366 |
| | $ | 339 |
| Interest expense, net | | | | | | U.S. car rental | $ | 165 |
| | $ | 172 |
| | $ | 187 |
| International car rental | 70 |
| | 95 |
| | 113 |
| Worldwide equipment rental | 57 |
| | 53 |
| | 46 |
| All other operations | 10 |
| | 12 |
| | 14 |
| Corporate | 320 |
| | 316 |
| | 347 |
| Total | $ | 622 |
| | $ | 648 |
| | $ | 707 |
|
| | | | | | | | | | | | | | Years Ended December 31, | (In millions) | 2015 | | 2014 | | 2013 | Revenue earning equipment and capital assets, non-fleet | | | | | | U.S. car rental: | | | | | | Expenditures | $ | (7,930 | ) | | $ | (6,175 | ) | | $ | (6,242 | ) | Proceeds from disposals | 6,280 |
| | 4,530 |
| | 4,385 |
| Net expenditures | $ | (1,650 | ) | | $ | (1,645 | ) | | $ | (1,857 | ) | International car rental: | | | | | | Expenditures | $ | (2,887 | ) | | $ | (3,165 | ) | | $ | (2,640 | ) | Proceeds from disposals | 2,412 |
| | 2,531 |
| | 2,251 |
| Net expenditures | $ | (475 | ) | | $ | (634 | ) | | $ | (389 | ) | Worldwide equipment rental: | | | | | | Expenditures | $ | (670 | ) | | $ | (658 | ) | | $ | (694 | ) | Proceeds from disposals | 156 |
| | 197 |
| | 141 |
| Net expenditures | $ | (514 | ) | | $ | (461 | ) | | $ | (553 | ) | All other operations: | | | | | | Expenditures | $ | (1,397 | ) | | $ | (1,611 | ) | | $ | (1,012 | ) | Proceeds from disposals | 841 |
| | 1,010 |
| | 556 |
| Net expenditures | $ | (556 | ) | | $ | (601 | ) | | $ | (456 | ) | Corporate: | | | | | | Expenditures | $ | (101 | ) | | $ | (54 | ) | | $ | (28 | ) | Proceeds from disposals | 49 |
| | 34 |
| | 4 |
| Net expenditures | $ | (52 | ) | | $ | (20 | ) | | $ | (24 | ) |
| | | | | | | | | | As of December 31, | (In millions) | 2015 | | 2014 | Total assets at end of year | | | | U.S. car rental | $ | 13,614 |
| | $ | 13,712 |
| International car rental | 3,007 |
| | 3,358 |
| Worldwide equipment rental | 3,809 |
| | 3,836 |
| All other operations | 1,522 |
| | 1,458 |
| Corporate | 1,406 |
| | 1,621 |
| Total | $ | 23,358 |
| | $ | 23,985 |
| Revenue earning equipment, net, at end of year | | | | U.S. car rental | $ | 7,600 |
| | $ | 8,070 |
| International car rental | 1,858 |
| | 1,904 |
| Worldwide equipment rental | 2,382 |
| | 2,442 |
| All other operations | 1,288 |
| | 1,237 |
| Total | $ | 13,128 |
| | $ | 13,653 |
| Property and equipment, net, at end of year | | | | U.S. car rental | $ | 730 |
| | $ | 789 |
| International car rental | 135 |
| | 155 |
| Worldwide equipment rental | 247 |
| | 265 |
| All other operations | 5 |
| | 6 |
| Corporate | 131 |
| | 107 |
| Total | $ | 1,248 |
| | $ | 1,322 |
|
The Company operates in the United States and in international countries. International operations are substantially in Europe. The operations within major geographic areas are summarized below: | | | | | | | | | | | | | | Years Ended December 31, | (In millions) | 2015 | | 2014 | | 2013 | Revenues | | | | | | United States | $ | 8,066 |
| | $ | 8,158 |
| | $ | 7,921 |
| International | 2,469 |
| | 2,888 |
| | 2,854 |
| Total | $ | 10,535 |
| | $ | 11,046 |
| | $ | 10,775 |
|
| | | | | | | | | | As of December 31, | (In millions) | 2015 | | 2014 | Total assets at end of year | | | | United States | $ | 18,886 |
| | $ | 19,077 |
| International | 4,472 |
| | 4,908 |
| Total | $ | 23,358 |
| | $ | 23,985 |
| Revenue earning equipment, net, at end of year | | | | United States | $ | 10,938 |
| | $ | 11,235 |
| International | 2,190 |
| | 2,418 |
| Total | $ | 13,128 |
| | $ | 13,653 |
| Property and equipment, net, at end of year | | | | United States | $ | 1,081 |
| | $ | 1,118 |
| International | 167 |
| | 204 |
| Total | $ | 1,248 |
| | $ | 1,322 |
|
| | (a) | The following table reconciles adjusted pre-tax income to income before income taxes. |
| | | | | | | | | | | | | | Years Ended December 31, | (In millions) | 2015 | | 2014 | | 2013 | Adjusted pre-tax income (loss): | | | | | | U.S. car rental | $ | 551 |
| | $ | 387 |
| | $ | 1,033 |
| International car rental | 215 |
| | 144 |
| | 134 |
| Worldwide equipment rental | 189 |
| | 258 |
| | 301 |
| All other operations | 68 |
| | 62 |
| | 58 |
| Total reportable segments | 1,023 |
| | 851 |
| | 1,526 |
| Corporate (1) | (451 | ) | | (448 | ) | | (430 | ) | Consolidated adjusted pre-tax income (loss) | 572 |
| | 403 |
| | 1,096 |
| Adjustments: | | | | | | Acquisition accounting(2) | (124 | ) | | (132 | ) | | (132 | ) | Debt-related charges(3) | (63 | ) | | (53 | ) | | (68 | ) | Restructuring and restructuring related charges(4) | (96 | ) | | (159 | ) | | (99 | ) | Acquisition related costs and charges(5) | (3 | ) | | (10 | ) | | (19 | ) | Integration expenses(6) | (5 | ) | | (9 | ) | | (43 | ) | Equipment Rental spin-off costs(7) | (35 | ) | | (39 | ) | | — |
| Relocation costs(8) | (5 | ) | | (9 | ) | | (7 | ) | Premiums paid on debt(9) | — |
| | — |
| | (29 | ) | Loss on extinguishment of debt(10) | — |
| | (1 | ) | | (35 | ) | Sale of CAR Inc. common stock(11) | 133 |
| | — |
| | — |
| Gain on divestitures(12) | 51 |
| | — |
| | — |
| Impairment charges and asset write-downs(13) | (57 | ) | | (34 | ) | | (40 | ) | Other(14) | (27 | ) | | 20 |
| | (21 | ) | Income (loss) before income taxes | $ | 341 |
| | $ | (23 | ) | | $ | 603 |
|
| | (1) | Represents general corporate expenses, certain interest expense (including net interest on corporate debt), as well as other business activities. |
| | (2) | Represents the increase in amortization of other intangible assets, depreciation of property and equipment and accretion of revalued liabilities relating to acquisition accounting. |
| | (3) | Represents debt-related charges relating to the amortization of deferred debt financing costs and debt discounts and premiums. |
| | (4) | Represents expenses incurred under restructuring actions as defined in U.S. GAAP. For further information on restructuring costs, see Note 11 "Restructuring," to the Notes to our consolidated financial statements. Also represents incremental costs incurred directly supporting the Company's business transformation initiatives. Such costs include transition costs incurred in connection with its business process outsourcing arrangements and incremental costs incurred to facilitate business process re-engineering initiatives that involve significant organization redesign and extensive operational process changes. Amounts in 2015 and 2014 also includes consulting costs and legal fees related to the accounting review and investigation, one time costs to terminate certain marketing and co-branding agreements, and costs associated with the separation of certain executives during the year. |
| | (5) | Acquisition related costs and charges during the period. |
| | (6) | Primarily represents Dollar Thrifty integration related expenses. |
| | (7) | Represents expenses associated with the anticipated HERC spin-off transaction announced in March 2014. In 2015, $26 million were incurred by HERC and $9 million by Corporate. In 2014, $28 million were incurred by HERC and $11 million by Corporate. |
| | (8) | Represents non-recurring costs incurred in connection with the relocation of the Company's corporate headquarters to Estero, Florida that were not included in restructuring expenses. Such expenses primarily include duplicate facility rent, certain moving expenses, and other costs that are direct and incremental due to the relocation. |
| | (9) | In 2013, represents premiums paid to redeem the Company's 8.50% Former European Fleet Notes. |
| | (10) | In 2013, represents extinguishment of debt for Senior Convertible Notes. |
| | (11) | In 2015, represents the pre-tax gain on the sale of approximately 138 million shares of CAR Inc. common stock. |
| | (12) | In 2015, represents the pre-tax gain on the sale of our HERC France and Spain businesses. |
| | (13) | In 2015, primarily comprised of a $40 million write down of the HERC trade name. Also includes a $6 million impairment on the former Dollar Thrifty headquarters in Tulsa, Oklahoma, a $5 million impairment on a building in the U.S. Car Rental segment, $3 million impairment on a held for sale corporate asset, and write downs of $3 million associated with U.S. Car Rental service equipment and assets. In 2014, primarily comprised of a $13 million impairment related to our former corporate headquarters building in New Jersey, a $10 million impairment of HERC revenue earning equipment held for sale and a $10 million impairment of assets related to a contract termination. In 2013, primarily related to a $40 million impairment in the carrying value of the vehicles subleased to FSNA and its subsidiary, Simply Wheelz. |
| | (14) | Includes miscellaneous, non-recurring or non-cash items. For 2015, primarily represents a charge of $23 million recorded in relation to a French road tax matter. In 2014, primarily comprised of a $19 million litigation settlement received in relation to a class action lawsuit filed against an original equipment manufacturer. In 2013, primarily represents cash premiums of $12 million associated with the conversion of the Senior Convertible Notes and $5 million of depreciation expense related to HERC. |
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