Good morning and welcome to the Avis Budget Group fourth quarter earnings conference call. Today’s call is being recorded. At this time for opening remarks and introductions I would like to turn the conference over to Mr. David Crowther, Vice President of Investor Relations. Please go ahead sir.

Thank you, [Tonette]. Good morning everyone and thank you for joining us. On the call with me are our Chairman and Chief Executive Officer, Ron Nelson; President and Chief Operating Officer, Bob Salerno; and Executive Vice President and Chief Financial Officer, David Wyshner. Also joining us this morning is Neal Goldner, our new Vice President of Investor Relations. He will be assuming our Investor Relations duties so that I can refocus all of my energies on our Financial Planning and Analysis function. Please join me in welcoming Neal to Avis Budget. As I move to my new role let me also say that while it’s been a sincere pleasure working with all of you, I’m confident that the transition to Neal will be seamless and he will be even more responsive to the investment community. Before we discuss the results for the quarter I would like to remind everyone that the company will be making statements about its future results and expectations, which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Such statements are based on current expectations and the current economic environment and are inherently subject to economic, competitive and other uncertainties and contingencies beyond the control of management. You should be cautioned that these statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements. Important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements are specified in our 10-K and our earnings release issued last night. If you did not receive a copy of our press release, it’s available on our website at www.avisbudgetgroup.com. Also, certain non-GAAP financial measures will be discussed on this call, and these measures are reconciled to the GAAP numbers in our press release. Now I’d like to turn the call over to Avis Budget Group’s Chairman and Chief Executive Officer, Ron Nelson.

Thanks, Dave, and good morning to all of you. As I think back to where we were just a year ago, I can’t help but feel pretty good. Industry fundamentals have improved, the used car market is healthy and the capital markets are once again open to us. We’ve changed as well. We’ve refined our business model to focus even more acutely on pricing and profit, and we have permanently lowered our cost structure by a readily identifiable $400 million. And of course there should be a corollary, an outcome if you will, from those dynamics and there is. Our fourth quarter EBITDA increased $95 million year-over-year, excluding unusual items, despite $100 million decline in revenues. For the year the outcome was just as significant. EBITDA increased 44% to $243 million, again excluding unusual items, despite an $800 million revenue decline. And our report card reflected our progress. Our stock recovered from its mind numbing level of under $1 to close the year north of $13. The steel align from our CFO were pleased but not satisfied. Let’s take a minute and focus on our fourth quarter revenue drivers. I think the key takeaway is straightforward. We again saw an opportunity to trade off of volume in favor of price with an overall positive impact on profitability, and took full advantage of that opportunity. Some additional color is useful. The significant improvement in EBITDA was driven by five things, strong pricing; prudent fleet decisions; a decline in per unit fleet costs; a reduction in unprofitable business; and the benefit of our cost savings programs. On the pricing front, while we reported a domestic volume decline of 21%, we also reported a composite pricing gain of 9%, which was split 4% on the commercial side and 14% on leisure. To be…

Thanks, Ron, and good morning. I’d like to discuss several issues related to our fleet. As Ron mentioned, in the fourth quarter we continued our strategy of keeping our fleet in line with rental volumes. As a result, our average domestic fleet was down 19% for the quarter. It was only some weather related issues and our decision to step away from some unprofitable weekend transactions that caused our fleet to be down slightly less than rental days. And [inaudible] a tight fleet did help us achieve a 9% increase in pricing and enabled us to avoid searching for volume at discount prices to utilize excess fleet. The used car market remained healthy in the fourth quarter but did exhibit its normal seasonality and then some, as the temporary boost from Cash for Clunkers subsided. While the Manheim Index numbers are off the charts on a year-over-year basis due to the unusually easy comps, a more meaningful measure is that the Index was 5% higher in fourth quarter 2009 than in the fourth quarter 2007. Having taken advantage of strong market conditions in the third quarter, we didn’t have to sell as many cars in the fourth quarter and we had no significant gain or loss on vehicle dispositions in the quarter. As we’ve mentioned in the past, we believe a generally strong used car market is likely to persist for some time. The most important factor supporting used car values is supply, and for the third year in a row there were more cars scrapped than built. What’s more, according to [ADESA], the car rental industry purchased 25% fewer cars in 2009 than in 2008. To give you some perspective on the new fleet discipline in the industry, the 1.1 million vehicles purchased by the car rental industry last…

Thanks, Bob, and good morning everyone. I would like to discuss our recent results, our liquidity and our outlook for 2010. My comments this morning will focus on our results, excluding unusual items. As Dave mentioned, these results are reconciled to our GAAP numbers in our press release. In the fourth quarter, revenue decreased 8% to $1.2 billion, EBITDA grew by $95 million to $14 million, and pretax income in this seasonally slow quarter was negative $51 million. All three of our operating segments reported growth in EBITDA, which reflects our company wide cost reduction efforts. At the end of 2009, our total headcount was down nearly 7,000 or 23% compared to the end of 2007. In our domestic segment, EBITDA increased $82 million for the quarter due to higher pricing, lower per unit fleet costs and cost saving initiatives, partially offset by lower volume. Fourth quarter revenue declined 13%, reflecting a 21% drop in rental days and 9% growth in time and mileage revenue per day. Commercial pricing was up 4% year-over-year and leisure pricing was up 14%. We believe the increase in time and mileage rates is a testament to our business model, which has inventory flexibility that makes it quite different from the hospitality and airline industries. Domestic ancillary revenues were up 9% on a per rental day basis in the fourth quarter, driven by growth in loss damage waivers, insurance, electronic toll collection and Where2 GPS rentals. Direct operating expense declined 460 basis points as a percentage of domestic revenue, despite the steep decline in volume, as we continue to benefit from our cost saving action, lower insurance costs and lower gasoline costs compared to 2008. Excluding performance based compensation expense, SG&A costs decreased 80 basis points as a percentage of revenue. In our international operations,…

Thank you. (Operator Instructions) Your first question comes from John Healy - Northcoast Research.

A question for you, Ron, on strategy. You’ve really done a good job this year with showing the pricing discipline and I want to understand the strategy with the Budget brand a little bit. It seems to be that you guys have done a good job of moving pricing kind of even in the middle market of the hierarchal pricing structure in the industry and I wanted to get your thoughts behind how you feel Budget is positioned today. Is it positioned more as an alternative kind of to the middle market of the car rental customer or do you believe it’s still kind of can be an alternative for kind of the lower end customer who’s looking for a rental experience with you guys? Just trying to understand how the brands are positioned today and how you see those brands positioned over the next couple of years.

Yes, you know I think, John, Budget is somewhat unique in the value sector in that they have both a commercial and leisure aspect to their customer profile. And so as a consequence you’ve got to be careful about how you manage your leisure business. We’re pretty happy with how we’re positioned right now. We’re probably at the top end of pricing for the value sector. But given where it’s sitting it’s also an advantage for us in the commercial market where somebody doesn’t really want to pay out for the level of service that Avis provides. I think this is an issue we watch hourly and daily and with Budget we understand that we have to be competitive but we think the brand profile is different enough that it is able to command a premium in the value space and still deliver good value to the commercial customer. So it’s a little bit of a tweener and you know I think we’re pretty happy with where we’re positioned now, but you know the market is so dynamic at the value end that I don’t think you can look at something today and say that it’s going to be that way forever.

And David I was hoping you could try to give us a little color on interest cost as we move into 2010, you know, just kind of how would you think about the incremental expense associated with the new fleet borrowings and some of the corporate debt levels? Just hoping a little color around those items.

Sure, John. You know we expect interest costs to be up this year but the amount that will be due to sort of changes in rates and spread is probably going to be in the $20 to $25 million range, so our hope in addition to that to the extent that volumes are up we’ll also have increased borrowings and increased interest due to higher volumes. But the rate related impact is sort of in the $20 million range we think, so our hope is that the cost savings we have coming in and the lower fleet costs will more than offset the impact of higher rate related interest costs.

When you guys think about the longer term margin goals for this company, is it safe to assume that even if vehicle depreciation expense may be reversed a little bit in the next two years or so and that you guys begin to encounter increased fleet costs on a holding basis, that maybe something the 8, 9% EBITDA margins, is that a realistic goal do you think over the next cycle? Or is it closer to the 6 or 7% level like maybe was seen a few years ago?

No, we actually believe that we can get to the 8 to 9% margin goal with what I would call more normalized increases in fleet costs. You know we built models and they go out three to four years but as you know, John, those are currently math exercises. But the way we build those models are with modest amounts of fleet cost increases as well as very modest amounts of pricing. And you know what it shows is that the impact that we’ve been able to achieve by lowering our fixed cost structure under most reasonable scenarios allows us to get back to 8 to 9% margins without getting back to revenue levels that we had in 2007. So a long answer to a question that could have been answered by yes.

Your next question comes from Christopher Agnew - MKM Partners LLC.

First question on fleet costs, I’m thinking about quarter-to-quarter volatility, you know should we expect a similar pattern on your per unit per month fleet costs to last year? And then maybe finally, what kind of residual value assumptions have you built into your fleet cost estimates? Maybe if we think about where the Manheim Index uses a proxy is today.

We’ll work backward. With respect to the second question, the assumptions we make about our fleet costs and residual value are essentially done on where the market is and has been over the last several quarters. And we update that on a regular basis. And when we set our residual values we’re not taking any view that the market’s going to be significantly different than what we’re seeing and what we’ve seen over time. So I think we try to take a middle of the road approach there. With respect to the fleet costs on a by quarter basis, clearly there was a fair amount of noise in 2009 by quarter and what I think what we would expect to see is that that will normalize a bit this year so that in the first half of the year we have easier comps, in the second half of the year they’re a bit tougher. So the 4 to 6% decline we’re looking at will probably be doing a little bit better than that early on and closer to that or maybe a little bit less down in the back half of the year.

Is it possible to quantify the impact from store closures? The volume impact. And also the volume impact from eliminating these unprofitable transient transactions. So really what I’m trying to get to is as we go through the quarters in 2010, how do you anniversary the impact of your actions last year? How should we be thinking about a kind of a same store number?

You know I think in terms of the impact of store closures, Chris, you ought to figure it’s about a 1% revenue impact. And there’ll be a few more store closures yet this year, but it won’t move that number materially. So that’s one segment. Reducing unprofitable transactions, it’s always hard to get your arms around that because you don’t know what baseline you’re measuring off of but the number that we use is about a 6% revenue hit. So that’s the second category. The third category which you ought to be aware of is that as of January 1 we returned the Budget LAX sub-license back to its license holder. We just weren’t making any money in LA and when we went through and did our analysis of where we’re making money and where we weren’t, this one clearly stuck out like a sore thumb. So as of January 1 the licensee holder is operating Budget and that’s going to have about a $100 million revenue impact. So when you add all that up it’s probably about 2 to 3%, so maybe an 8 to 10% revenue hit from those three things. Like I said, on the LAX thing it’s going to be seamless to the customer. I mean he’s already fleeted and up and running and servicing customers and it’s much easier to make. LA is a tough market to begin with but when you’re not having to pay a royalty to the license holder it’s an easier market to justify the capital you have to invest in the fleet.

Just to clarify, is that Jan. 1 this year so the impact will be for the subsequent quarter this year?

Yes.

And then the 6%, the sort of transactions impact, I mean obviously you started to pare those back last year, so what I’m trying to get at does that sort of, it’s still hitting you 1Q, 2Q this year and then you start to sort of normalize the year-over-year impact?

I think you’re absolutely right. It started to get a lot of traction starting in the third quarter, so you’ll see some year-over-year bigger reductions and then it’ll flatten out by the back half of the year.

Your next question comes from Emily Shanks - Barclays Capital.

David, I have just a housekeeping question to kick off with. How much of the convertible debt is included on the balance sheet debt number in the press release?

All of it is. It was a $345 million issue and that’s in the debt number.

So it didn’t GAAP change that you have to approach differently on your balance sheet?

Not given our structure. All $345 million is reflected.

What was the revolver draw?

There were no revolver borrowings at year end.

And how many LCs were outstanding?

I believe there was about $460 million of LCs outstanding at year end.

As we look at this and then an extend, can you comment at all if you would look to come back to the capital markets, whether it be for equity or debt, to do any refinancing within the capital structure?

Sure. With respect to equity, you know, we never say never but we don’t have any current plans to go to the equity market. With respect to debt, you know it is something we will look at from time to time.

Related to the legacy Cendant IRS settlement. I know we heard from Realogy that they’re looking for the examination to be done by the second or third quarter of this year and I just wanted to see if you could give us an update in terms of your involvement and potential liability there.

Sure. We’re very involved because we’re the legacy taxpayer, but our exposure we think is very limited to the extent that there are any payments related to legacy issues that would have to be made, those would be made by Realogy and Windows so it’s a pass through from our perspective.

Your next question comes from Michael Millman - Millman Research Associates.

First, could you talk about whether the higher costs of doing business currently than was the case a few years ago, primarily financing, require a higher return? And maybe you can quantify that. And then I have some other questions.

Yes, you know the interesting thing is that you know over the last couple of years while spreads have widened, the base interest cost measured in terms of LIBOR have actually been down and on top of that we’re starting to see spreads in the asset backed markets normalize a bit. So in net there really hasn’t been much of a change in overall financing costs between what we were paying a few years ago and what we’re paying currently. A little bit more of it is in spreads now, less of it is in base interest costs and say LIBOR. So I don’t think that’s changed very significantly in the last few years.

On the commercial side, can you talk about why you feel it’s necessary to re-contract if you will 99% of the business? I would think some of that commercial business is trying, if you will. And related to that, can you talk about what the cost differential is, cars and service, for commercial day versus a leisure day of rental?

Well on the commercial side, we do look at each commercial account and look at the profitability of each commercial account. And you’re right, they are all different and some are more profitable, some are less profitable. When we talk about renewing 99% we worked over the years to develop a portfolio that we think is right for us. As I said, some are less profitable and some are much more profitable, but it is our intent to keep and guard our what we view as our core business for Avis and a significant business for Budget. But that’s how we do, we do do it with an eye to the profitability of each account.

And can you talk about the other part of the question, the cost differential between commercial day and a car, service, etc., and leisure day?

We can, Mike, and it’s David. The issue of how to allocate costs and measure them is a complicated one. Perhaps a little bit outside the scope of what we can address here, but let me cover a few points. The first is that the same car may be rented to a commercial traveler during the week and a leisure traveler during the weekend. In fact that’s often the case. And that makes the issue one, more of an allocation question than anything else. But the big difference between the commercial renter and a lot of the leisure business we do is the length of rental. And as a result, we tend to see higher per day pricing but there are a number of costs that really aren’t tied to the number of days but are rather tied to the transaction itself. And that is a big driver of the difference between the two and how we analyze them. There are also differences in terms of commissions that we pay and maintenance and damage. You know maintenance and damage costs tend to be higher on the leisure side. And then lastly, mileage accruals tend to be different with the leisure, particularly weekend travelers, putting on higher numbers of miles per day on average. And that all factors into the relative profitability of transactions. But you’re right in that how you allocate fleet costs does matter quite a bit and there’s no perfect way to do that. You know we look at it based on days and mileage, but one of the questions you always have to try to address is who pays or which transaction pays for a car when it’s not being rented? And that’s what makes the analysis particularly challenging. I hope that helps a bit in what’s a question and an issue we spend a lot of time thinking about and it’s not an easy one to answer.

Could you give just a rough quantification difference?

In terms of either the fleet costs, you know, I don’t think there’s an easy way to allocate the fleet costs. It’s more complicated than just saying business travel tends to be four-and-a-half days of the week and leisure travel happens to be the other two-and-a-half days, you know, for all the reasons I mentioned.

We only have time for one further question. Your last question comes from Yilma Abebe - J.P. Morgan.

I believe you said your volumes in the quarter were down more than the market because of all your fleet’s management. Can you give us a sense for how much you think the market was down in the quarter?

I’m going to have to give a guesstimate. You know we get airport revenue numbers which give us individual airport shares, and the revenue numbers during the quarter at the airport were probably down 3 to 4%. So if you assume that everybody got some pricing during the quarter at the airport, that’s a little hard to tell because people may not break off airport and airport pricing for you, but if you assume there was maybe 4 to 5 points of pricing in there, then your volume’s probably going to be off somewhere in the 7 to 8% range. I mean look at employment. That’s generally a pretty good surrogate.

And you know going forward into the first quarter and beyond, is your expectation that your volumes at the company level will be lower than the overall market, similar to what you saw in the fourth quarter?

Yes. I think they will because we’re continuing to turn away unprofitable business. We’re not aggressively going after unprofitable business. And as I said, we’ve got Budget LAX out of the mix, we’re closing some stores, so I would think that those things are going to have a negative impact. But you know looking at our [res] build it’s clear to us that our commercial volume is improving and that the market is getting better. The other thing that will have a modest impact to the plus side is that part of Easter is going to shift into March into the first quarter.

That’s all I had. Thank you.

All right. With that, I guess we’ll call the call to a close and we look forward to talking to all of you at the end of the first quarter sometime in April. Thanks very much.

This concludes today’s conference call. You may disconnect.