Under The Hood - 1997-06-23

Avis Follows Hertz's Bid to Go Public

It's official: The Hertz Corp. is now a publicly held company. Its initial public offering of 20,010,000 shares of Class A Common Stock are priced at $24 per share, and the company will be listed on the New York Stock Exchange under the symbol HRZ.

Meanwhile, HFS, the parent company of number-two player Avis Inc., filed that company's IPO form with the Securities and Exchange Commission earlier this month. The document is a gold mine of information, casting light on the car-rental company's formerly mysterious finances and details on the industry at large. About $225 million of common stock is expected to be offered, and when the offering is complete, HFS will retain a 25 percent interest in Avis.

Here are some of the highlights:

* In 1996 Avis made an after-tax profit of $39,822,000 (that figure does not include the profits of Avis Europe, which is a separate company, or other Avis franchisees). Total 1996 revenues of approximately $1.9 billion--87 percent derived from U.S. revenues--represented a 15.6 percent increase over the amount of $1.6 billion in 1995.

* Avis maintains approximately 540 locations in the United States and Canada, Puerto Rico, the U.S. Virgin Islands, Argentina, Australia and New Zealand. That is a reduction from the high of 693 locations in 1994. The remainder of Avis' 4,200 locations are operated by Avis Europe and franchisees, of which five accounted for 16 percent of the company's U.S. revenues.

* In 1996, Avis cornered a 25 percent share of the U.S. airport market, compared with Hertz's 29 percent share (Hertz itself pegged its share of the market at more than 30 percent). Ranking third in this market was National Car Rental, at 16 percent, with Budget Rent A Car fourth at 11 percent (a decrease from 15 percent in 1993).

* The average number of vehicles in the Avis Avis Rent A Car System Inc. subsidiary, which consists of the former corporate-owned Avis locations and fleet, was 174,813 in 1996, compared with a 1996 peak of 196,077; average number of cars in 1995 was 150,853. Eighty-two percent of the company's vehicles were purchased under a guaranteed buyback agreement with General Motors. In 1997, however, that figure will decline to 69 percent, leading to more "at risk" vehicles--those not covered by a commitment on the manufacturer's part to repurchase them at a set price--in the fleet.

* Business travelers account for 61 percent of Avis' business, with 85 percent of the company's domestic revenues derived from airport locations. Seventy-seven percent of Avis' 1996 rental transactions were generated by travelers who either had a contract with a company or belonged to an organization qualifying them for a special rate. Avis plans to target leisure travelers at its airport locations as a way of increasing the utilization of its fleet during off-peak times, such as weekends--and at the same time gain more multiday rentals.

* Avis chairman and CEO R. Craig Hoenshell, who took the helm in March, earns a base salary of $600,000, plus a bonus of 60 percent of his salary during the first year of employment. In 1996, former CEO Joseph Vittoria earned $550,000, besides receiving a bonus of $251,646 and a cool $5 million from the sale of Avis to HFS.

* Revenues in the car-rental industry have been growing at an annual rate of approximately 11 percent since 1992.


Carey Sells Stock, Buys Manhattan International

Carey International, the sedan and limousine company, has completed its initial public offering of 2,900,000 shares of common stock, priced at $10.50 per share. Carey also has acquired New York-based Manhattan International for $14.2 million.


Alamo Adds Face-To-Face Capability

Alamo Rent A Car has added a new feature to its Website (www.goalamo.com) which enables travel arrangers to speak directly to a reservationist. After clicking on an icon, users receive a phone call almost instantaneously from an Alamo agent. Within the next few months, Alamo agents also will be able to send illustrations or photographs--of such things as car models--directly to a customer's computer in real time. Alamo also has become the first car-rental firm to participate in USA Today's online travel service (http://marketplace.usatoday.com), which links to Alamo's Website.

In other Internet news, Hertz (http://www.hertz.com) now offers direct booking on its Website; National Car Rental (www.nationalcar.com) provides a direct connection to Microsoft's Expedia online booking service, and Budget Rent A Car (www.budgetrentacar.com) is accepting online bookings--for airport locations only--via a link to Travelocity. Online booking for downtown and suburban locations will be added on a later date.