Leases (Notes)

6 Months Ended

Jun. 30, 2019

Leases

Lessor

For periods after January 1, 2019, the Company combines all lease and nonlease components of its vehicle rental contracts for which the timing and pattern of transfer are the same and the lease component meets the classification of an operating lease, and accounts for them in accordance with Topic 842. The Company derives revenues primarily by providing vehicle rentals and other related products and mobility services to

commercial and leisure customers. Other related products and mobility services include sales of collision and loss damage waivers under which a customer is relieved from financial responsibility arising from vehicle damage incurred during the rental; products and services for driving convenience such as fuel service options, chauffeur drive services, roadside safety net, electronic toll collection, tablet rentals, access to satellite radio, portable navigation units and child safety seat rentals; and rentals of other supplemental items including automobile towing equipment and other moving accessories and supplies. The Company also receives payment from customers for certain operating expenses that it incurs, including airport concession fees that are paid by the Company in exchange for the right to operate at airports and other locations, as well as vehicle licensing fees. Vehicle rentals and other related products and mobility services are recognized evenly over the period of rental, which is on average four days. In addition, the Company collects membership leasing fees in connection with its car sharing business. Membership leasing fees are generally nonrefundable, are deferred and recognized ratably over the period of membership.

The following table presents the Company’s lease revenues disaggregated by geography.



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Americas	$	1,617	$	2,936
Europe, Middle East and Africa	553		967
Asia and Australasia	134		291
Total lease revenues	$	2,304	$	4,194

The following table presents the Company’s lease revenues disaggregated by brand.



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Avis	$	1,311	$	2,394
Budget	804		1,444
Other	189		356
Total lease revenues	$	2,304	$	4,194

________

Other includes Zipcar and other operating brands.

Lessee

The Company has operating and finance leases for rental locations, corporate offices, vehicle rental fleet and equipment. Many of the Company’s operating leases for rental locations contain concession agreements with various airport authorities that allow the Company to conduct its vehicle rental operations on site. In general, concession fees for airport locations are based on a percentage of total commissionable revenue as defined by each airport authority, some of which are subject to minimum annual guaranteed amounts. Concession fees other than minimum annual guaranteed amounts are not included in the measurement of operating lease ROU assets and operating lease liabilities, and are recorded as variable lease expense as incurred. The Company’s operating leases for rental locations often also require the Company to pay or reimburse operating expenses.

The Company leases a portion of its vehicles under operating leases, some of which extend through 2025. As of June 30, 2019, the Company has guaranteed up to $278 million of residual values for these vehicles at the end of their respective lease terms. The Company believes that, based on current market conditions, the net proceeds from the sale of these vehicles at the end of their lease terms will equal or exceed their net book values and therefore has not recorded a liability related to guaranteed residual values.

The components of lease expense are as follows:



	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Property leases ^(a)
Operating lease expense	$	179		$	356
Variable lease expense	74			126
Sublease income	(3		)	(4		)
Total property lease expense	$	250		$	478

Vehicle leases
Finance lease expense:
Amortization of ROU assets ^(b)	$	12		$	23
Interest on lease liabilities ^(c)	1			2
Operating lease expense ^(b)	62			119
Total vehicle lease expense	$	75		$	144

__________


^(a)	Primarily included in operating expense.


^(b)	Included in vehicle depreciation and lease charges, net.


^(c)	Included in vehicle interest, net.

Supplemental balance sheet information related to leases is as follows:



	As of June 30, 2019
Property leases
Operating lease ROU assets	$	2,409

Short-term operating lease liabilities ^(a)	$	433
Long-term operating lease liabilities	1,995
Operating lease liabilities	$	2,428

Weighted average remaining lease term	9.5 years
Weighted average discount rate	4.57		%

Vehicle leases
Finance
Finance lease ROU assets, gross	$	332
Accumulated amortization	(53		)
Finance lease ROU assets, net ^(b)	$	279

Short-term vehicle finance lease liabilities	$	105
Long-term vehicle finance lease liabilities	141
Vehicle finance lease liabilities^(c)	$	246

Weighted average remaining lease term	1.6 years
Weighted average discount rate	1.48		%

Operating
Vehicle operating lease ROU assets ^(d)	$	216

Short-term vehicle operating lease liabilities	$	170
Long-term vehicle operating lease liabilities	46
Vehicle operating lease liabilities ^(e)	$	216

Weighted average remaining lease term	2.2 years
Weighted average discount rate	2.89		%

_________


^(a)	Included in Accounts payable and other current liabilities.


^(b)	Included in Vehicles, net within Assets under vehicle programs.


^(c)	Included in Debt within Liabilities under vehicle programs.


^(d)	Included in Receivables from vehicle manufacturers and other within Assets under vehicle programs.


^(e)	Included in Other within Liabilities under vehicle programs.

Supplemental cash flow information related to leases is as follows:



	Six Months Ended June 30, 2019
Cash payments for lease liabilities within operating activities:
Property operating leases	$	378
Vehicle operating leases	105
Vehicle finance leases	2
Cash payments for lease liabilities within financing activities:
Vehicle finance leases	90
Non-cash activities - increase (decrease) in ROU assets in exchange for lease liabilities:
Property operating leases ^(a)	(17		)
Vehicle operating leases ^(a)	136
Vehicle finance leases	133

_________


^(a)	ROU assets obtained in exchange for lease liabilities from initial recognition.

Maturities of lease liabilities as of June 30, 2019 are as follows:



	Property Operating Leases			Vehicle Finance Leases		Vehicle Operating Leases
Within 1 year	$	531		$	105	$	149
Between 1 and 2 years	420			7		56
Between 2 and 3 years	360			129		14
Between 3 and 4 years	297			5		3
Between 4 and 5 years	229			—		—
Thereafter	1,199			—		—
Total lease payments	3,036			246		222
Less: Imputed interest	(608		)	—		(6		)
Total	$	2,428		$	246	$	216

Future minimum lease payments required under noncancelable operating leases, including minimum concession fees charged by airport authorities, which in many locations are recoverable from vehicle rental customers, as of December 31, 2018, were as follows:



	Amount
2019	$	835
2020	476
2021	345
2022	253
2023	162
Thereafter	590
	$	2,661