What factors does Budget consider when identifying reportable segments?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
hicle programs Vehicle-backed debt due to Avis Budget Rental Car Funding Vehicle-backed debt Interest rate swaps and interest rate caps (ii) | $ 14,083 | $ 14,154 | $ 15,441 | 3,435 | | | 3,441 | 3,469 | 3,422 | | | | 12 | 12 | 74 | |
(e) Derivatives in a liability position.
21. Segment Information
Our chief executive officer who also serves as our chief operating decision-maker ("CODM") assesses performance and allocates resources based upon the separate financial information of our operating segments. We aggregate certain of our operating segments into our reportable segments. In identifying our reportable segments, we also consider the management structure of the organization, the nature of services provided by our operating segments, the geographical areas and economic characteristics in which the segments operate, and other relevant factors.
Our CODM evaluates the operating results of each of our reportable segments based upon revenues and Adjusted EBITDA, which we define as income (loss) from continuing operations before non-vehicle related depreciation and amortization; long-lived asset impairment and other related charges; restructuring and other related charges; early extinguishment of debt costs; non-vehicle related interest; transaction-related costs, net; legal matters, net, which includes amounts recorded in excess of $5 million, related primarily to unprecedented self-insurance reserves for allocated loss adjustment expense, class action lawsuits and personal injury matter
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the company considers several factors when identifying its reportable segments. These factors include the management structure of the organization, the nature of services provided by the operating segments, the geographical areas and economic characteristics in which the segments operate, and other relevant factors. The chief operating decision-maker assesses performance and allocates resources based on the separate financial information of the operating segments, aggregating certain segments into reportable ones.
For a prospective franchisee, this means that Budget's financial reporting is organized in a way that reflects how the company is managed and how it operates in different areas. Understanding these reportable segments can provide insights into the different parts of Budget's business and how they contribute to the overall financial performance. This understanding can be valuable when evaluating the potential success and risks associated with investing in a Budget franchise.
The FDD also mentions that the chief operating decision-maker evaluates the operating results of each reportable segment based upon revenues and Adjusted EBITDA. Adjusted EBITDA is defined as income (loss) from continuing operations before non-vehicle related depreciation and amortization; long-lived asset impairment and other related charges; restructuring and other related charges; early extinguishment of debt costs; non-vehicle related interest; transaction-related costs, net; legal matters, net, which includes amounts recorded in excess of $5 million, related primarily to unprecedented self-insurance reserves for allocated loss adjustment expense, class action lawsuits and personal injury matters; non-operational charges related to shareholder activits activity, which includes third-party advisory, legal and other professional fees; COVID-19 charges, net; cloud computing costs; other (income) expense, net; severe weather-related damages in excess of $5 million, net of insurance proceeds; and income taxes. This metric is used internally by Budget's management and is also considered useful for investors to assess the company's operations and financial condition.
It is important for potential franchisees to carefully review Budget's financial statements and segment information in the FDD to gain a comprehensive understanding of the company's financial performance and how different segments contribute to it. Understanding the basis for Adjusted EBITDA and the factors considered in determining reportable segments can help franchisees make informed decisions about their investment.