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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
COMMISSION FILE NUMBER: 1-13315

AVIS GROUP HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE (State or other jurisdiction of incorporation or organization)		11-3347585 (I.R.S. Employer Identification No.)
6 SYLVAN WAY PARSIPPANY, NJ (Address of principal executive offices)		07054 (Zip Code)

(973) 496-3500
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed in Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements, for the past 90 days: Yes o No ý

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of the Registrant's common stock was 5,537 shares as of July 31, 2002.

Avis Group Holdings, Inc. meets the conditions set forth in General Instructions H (1) (a) and (b) to Form 10-Q and is therefore filing this form with the reduced disclosure format.

Avis Group Holdings, Inc. and Subsidiaries

Index

		Page
PART I	Financial Information
Item 1.	Financial Statements
	Independent Accountants' Report	1
	Consolidated Condensed Statements of Operations for the three months ended June 30, 2002 and 2001	2
	Consolidated Condensed Statements of Operations for the six months ended June 30, 2002, the period March 1, 2001 (Date of Acquisition) to June 30, 2001 and the two months ended February 28, 2001	3
	Consolidated Condensed Balance Sheets as of June 30, 2002 and December 31, 2001	4
	Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2002, the period March 1, 2001 (Date of Acquisition) to June 30, 2001 and the two months ended February 28, 2001	5
	Notes to the Consolidated Condensed Financial Statements	7
Item 2.	Management's Narrative Analysis of the Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosure about Market Risks	22
PART II	Other Information
Item 6.	Exhibits and Report on Form 8-K	23
	Signatures	24

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

INDEPENDENT ACCOUNTANTS' REPORT

To the Board of Directors and Stockholder of
Avis Group Holdings, Inc.
Parsippany, New Jersey

We have reviewed the accompanying consolidated condensed balance sheet of Avis Group Holdings, Inc. and subsidiaries (successor to Avis Rent A Car System, Inc. and subsidiaries, Avis Fleet Leasing and Management Corp., and subsidiaries and Reserve Claims Management Co., collectively the "Predecessor Companies") (collectively referred to as the "Company") as of June 30, 2002, and the related consolidated condensed statements of operations and cash flows for the three and six month period ended June 30, 2002, the period March 1, 2001 (Date of Acquisition) to June 30, 2001, and as to the Predecessor Companies for the period January 1, 2001 to February 28, 2001. These financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to such consolidated condensed financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of the Company as of December 31, 2001, and the related consolidated statements of operations, common stockholders' equity, and cash flows for the period March 1, 2001 (Date of Acquisition) to December 31, 2001 and as to the Predecessor Companies, the consolidated related statements of operations, common stockholders' equity and cash flows for the period January 1, 2001 to February 28, 2001 (not presented herein); and in our report dated January 23, 2002, we expressed an unqualified opinion (and included an explanatory paragraph relating to a change in accounting for derivative instruments and hedging activities) on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated condensed balance sheet as of December 31, 2001 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP
August 12, 2002
New York, New York

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands)

		Three Months Ended June 30, 2002		Three Months Ended June 30, 2001
Revenues		$	650,631	$	628,893

Expenses
	Operating, net		256,366		232,168
	Vehicle depreciation and lease charges, net		161,401		170,982
	Selling, general and administrative		121,929		116,540
	Vehicle interest, net		51,339		55,899
	Non-vehicle interest, net		10,823		14,577
	Non-vehicle depreciation and amortization		9,445		15,075

Total expenses			611,303		605,241

Income before income taxes			39,328		23,652
Provision for income taxes			16,518		13,753

Net income		$	22,810	$	9,899

See Notes to Consolidated Condensed Financial Statements.

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands)

						Predecessor Companies
				March 1, 2001 (Date of Acquisition) to June 30, 2001		Predecessor Companies
		Six Months Ended June 30, 2002		March 1, 2001 (Date of Acquisition) to June 30, 2001		Two Months Ended February 28, 2001
Revenues		$	1,215,234	$	846,889	$	385,821

Expenses
	Operating, net		480,401		310,979		174,087
	Vehicle depreciation and lease charges, net		321,251		225,172		110,117
	Selling, general and administrative		236,860		154,115		83,229
	Vehicle interest, net		101,986		76,446		43,625
	Non-vehicle interest, net		21,618		19,663		9,167
	Non-vehicle depreciation and amortization		17,943		20,268		7,833

Total expenses			1,180,059		806,643		428,058

Income (loss) before income taxes			35,175		40,246		(42,237	)
Provision (benefit) for income taxes			14,774		21,652		(15,783	)

Income (loss) from continuing operations			20,401		18,594		(26,454	)
Income from discontinued operations, net of tax			—		—		4,947

Income (loss) before cumulative effect of accounting change			20,401		18,594		(21,507	)
Cumulative effect of accounting change, net of tax			—		—		(7,612	)

Net income (loss)		$	20,401	$	18,594	$	(29,119	)

See Notes to Consolidated Condensed Financial Statements.

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share data)

		June 30, 2002			December 31, 2001
ASSETS
	Cash and cash equivalents	$	40,669		$	13,311
	Receivables, net		165,755			168,372
	Prepaid expenses		40,966			42,543
	Deferred income taxes		556,148			548,087
	Property and equipment, net		256,217			245,276
	Goodwill, net		1,254,909			1,271,192
	Other assets		145,054			146,608

Total assets exclusive of assets under management programs			2,459,718			2,435,389

Assets under management programs:
	Restricted cash		9,306			581,187
	Vehicles, net		4,226,575			3,428,893
	Due from vehicle manufacturers		64,492			92,614

			4,300,373			4,102,694

Total assets		$	6,760,091		$	6,538,083

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
	Accounts payable	$	245,132		$	363,891
	Accrued liabilities		447,341			434,665
	Due to Cendant Corporation and affiliates, net		514,007			514,433
	Non-vehicle debt		575,856			588,259
	Public liability, property damage and other insurance liabilities		215,877			228,503

Total liabilities exclusive of liabilities under management programs			1,998,213			2,129,751

Liabilities under management programs:
	Vehicle debt		4,115,860			3,771,341
	Deferred income taxes		307,296			315,905

			4,423,156			4,087,246

Commitments and contingencies (Note 6)
Stockholder's equity:
	Common stock, $.01 par value—authorized 10,000 shares; issued 5,537 shares		—			—
	Additional paid-in-capital		168,832			168,832
	Retained earnings		209,707			189,306
	Accumulated other comprehensive loss		(39,817	)		(37,052	)

Total stockholder's equity			338,722			321,086

Total liabilities and stockholder's equity		$	6,760,091		$	6,538,083

See Notes to Consolidated Condensed Financial Statements.

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)

									Predecessor Companies
						March 1, 2001 (Date of Acquisition) to June 30, 2001			Predecessor Companies
			Six Months Ended June 30, 2002			March 1, 2001 (Date of Acquisition) to June 30, 2001			Two Months Ended February 28, 2001
Operating Activities
Net income (loss)			$	20,401		$	18,594		$	(29,119	)
Adjustments to arrive at income (loss) from continuing operations				—			—			2,665

Income (loss) from continuing operations				20,401			18,594			(26,454	)
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) operating activities:
	Non-vehicle depreciation and amortization			17,943			20,268			7,833
	Net change in operating assets and liabilities, excluding the impact of acquisitions and dispositions:
		Receivables		(12,664	)		(12,108	)		10,108
		Accounts payable		(9,766	)		(12,531	)		(30,518	)
		Accrued liabilities		848			(3,789	)		1,486
		Other, net		(10,935	)		(4,082	)		(30,923	)

Net cash provided by (used in) operating activities exclusive of management programs				5,827			6,352			(68,468	)

Management programs:
	Vehicle depreciation			312,221			211,602			104,336

Net cash provided by operating activities				318,048			217,954			35,868

Investing Activities
Property and equipment additions				(24,807	)		(25,658	)		(5,821	)
Retirements of property and equipment				778			8,375			433
Payment for purchase of rental car franchise licensees				(3,087	)		(19,047	)		—

Net cash used in investing activities exclusive of management programs				(27,116	)		(36,330	)		(5,388	)

Management programs:
	Decrease in restricted cash			571,881			5,208			10,978
	Decrease in due from vehicle manufacturers			29,348			131,813			16,368
	Investment in vehicles			(2,684,823	)		(1,900,052	)		(940,559	)
	Payments received on investment in vehicles			1,472,033			1,412,819			812,647

				(611,561	)		(350,212	)		(100,566	)

Net cash used in investing activities				(638,677	)		(386,542	)		(105,954	)

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)

								Predecessor Companies
					March 1, 2001 (Date of Acquisition) to June 30, 2001			Predecessor Companies
		Six Months Ended June 30, 2002			March 1, 2001 (Date of Acquisition) to June 30, 2001			Two Months Ended February 28, 2001
Financing Activities
Proceeds from borrowings			—			140,000			—
Principal payments on borrowings			(253	)		(457,806	)		(77	)
Increase (decrease) in due to Cendant Corporation and affiliates, net			(2,667	)		316,882			(45,818	)
Payments for debt issuance costs			(131	)		(4,231	)		(12	)
Issuances of common stock			—			—			140

Net cash used in financing activities exclusive of management programs			(3,051	)		(5,155	)		(45,767	)

Management programs:
	Proceeds from borrowings		650,431			916,633			132,294
	Principal payments on borrowings		(299,818	)		(786,470	)		(31,087	)

			350,613			130,163			101,207

Net cash provided by financing activities			347,562			125,008			55,440

Effect of changes in net assets of discontinued operations			—			—			394
Effect of changes in exchange rates on cash and cash equivalents			425			(117	)		(11	)

Net increase (decrease) in cash and cash equivalents			27,358			(43,697	)		(14,263	)
Cash and cash equivalents, beginning of period			13,311			66,105			80,368

Cash and cash equivalents, end of period		$	40,669		$	22,408		$	66,105

Supplemental disclosure of Cash Flow Information:
Interest payments		$	130,775		$	108,764		$	44,315
Income tax payments, net		$	485		$	8,889		$	1,962

See Notes to Consolidated Condensed Financial Statements.

Avis Group Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unless otherwise noted, all amounts are in thousands)

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Consolidated Condensed Financial Statements include the accounts and transactions of Avis Group Holdings, Inc. and its subsidiaries (collectively, "the Company").

Avis Group Holdings, Inc. is a holding company that operates through a wholly-owned subsidiary, Avis Rent A Car System, Inc., the second largest general use car rental brand in the world. On March 1, 2001, all the Company's common stock not then-owned by Cendant Corporation ("Cendant") was acquired by a wholly-owned subsidiary of Cendant for approximately $994 million with the Company emerging as the surviving legal entity. Accordingly, the Consolidated Condensed Financial Statements as of and for the three and six months ended June 30, 2002, for the period March 1, 2001 (Date of Acquisition) to June 30, 2001 and as of December 31, 2001 include the financial statements of Avis Group Holdings, Inc. and its subsidiaries. The Consolidated Condensed Financial Statements for the two months ended February 28, 2001 include the financial statements of the Company and its former fleet management and fuel card businesses, which are presented as a discontinued operation (the "Predecessor Companies").

In management's opinion, the Consolidated Condensed Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. In addition, management is required to make estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates. The Consolidated Condensed Financial Statements should be read in conjunction with the Company's Annual Report on Form 10-K dated March 29, 2002.

Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

Pursuant to certain covenant requirements in an indenture under which the Company issued debt, the Company continues to operate and maintain its status as a separate public reporting entity.

Assets used by the Company to generate revenue are classified as assets under management programs. Funding for such assets is primarily provided by secured financing arrangements, which are classified as liabilities under management programs. Revenues generated from these assets are used, in part, to repay the interest and principal associated with the debt. Cash inflows and outflows relating to the generation and acquisition of assets and the principal debt repayment or financing of such assets are classified as activities of the Company's management programs.

Changes in Accounting Policies

On January 1, 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142 "Goodwill and Other Intangible Assets" in its entirety. Prior to the adoption of SFAS No. 142, all intangible assets were amortized on a straight-line basis over their estimated periods to be benefited. Subsequent to the adoption, the Company did not amortize any goodwill or indefinite-lived intangible assets during 2002.

In connection with the implementation of SFAS No. 142, the Company is required to assess goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. The Company reviewed the carrying value of all its goodwill and other intangible assets by comparing such amounts to their fair value and determined that the carrying amounts of such assets did not exceed their respective fair values. Accordingly, the initial implementation of this standard did not result in a charge and, as such, did not impact the Company's results of operations during 2002.

2. Related Party Transactions

Expenses of the Company include the following items charged by Cendant and affiliates, which include allocations from Cendant for services provided to the Company:

	Three Months Ended June 30, 2002		Three Months Ended June 30, 2001
Royalties	$	27,977	$	26,610
Reservations		16,639		14,031
Data processing		9,475		15,657
Rent, corporate overhead allocations and other		15,300		10,957
Interest, net		2,959		7,011

Total	$	72,350	$	74,266

					Predecessor Companies
			March 1, 2001 (Date of Acquisition) to June 30, 2001		Predecessor Companies
	Six Months Ended June 30, 2002		March 1, 2001 (Date of Acquisition) to June 30, 2001		Two Months Ended February 28, 2001
Royalties	$	52,253	$	35,810	$	16,205
Reservations		29,321		19,186		8,496
Data processing		17,740		20,141		11,395
Rent, corporate overhead allocations and other		29,079		11,629		1,456
Interest, net		6,358		7,011		—

Total	$	134,751	$	93,777	$	37,552

On the Consolidated Condensed Statements of Operations, the royalty and reservation charges are included within selling, general and administration expenses, the rent and other and data processing expenses are included within operating, net and interest expense is included within non-vehicle interest, net. These charges, including corporate overhead allocations, are determined in accordance with various intercompany agreements, which are based upon factors, such as square footage, employee salaries and computer usage time.

3. Restricted Cash

Restricted cash includes cash and investments that are not readily available for normal Company disbursements that have been set aside as required under the Company's debt covenants. The restricted cash balance at December 31, 2001 was held as collateral for outstanding vehicle debt that was not callable and, therefore, could not be immediately repaid. During 2002, the restricted cash was depleted through the normal purchase of vehicles.

4. Intangible Assets

Intangible assets consisted of:

		June 30, 2002				December 31, 2001
		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized Intangible Assets
	Customer lists	$	18,952	$	1,280	$	18,952	$	800

Unamortized Intangible Assets
	Goodwill	$	1,254,909			$	1,297,774	$	26,582

Customer lists are included in other assets on the Company's Consolidated Condensed Balance Sheet. Amortization expense relating to customer lists during the three and six months ended June 30, 2002 was approximately $240 thousand and $480 thousand, respectively. Amortization expense relating to all intangible assets during the two months ended February 28, 2001 and the period March 1, 2001 (Date of Acquisition) to June 30, 2001, was approximately $2.1 million and $10.5 million, respectively, including the amortization of goodwill of $2.1 million and $10.2 million, respectively. The Company expects amortization expense on intangible assets for the remainder of 2002 to approximate $480 thousand and $1 million for each of the succeeding five years.

The changes in the carrying amount of goodwill for 2002 are as follows:

Balance as of January 1, 2002	$	1,271,192
Goodwill acquired during 2002		1,836
Other		(18,119	)

Balance as of June 30, 2002	$	1,254,909

Had the Company applied the non-amortization provisions of SFAS No. 142 for the three months ended June 30, 2001 and for the period March 1, 2001 (Date of Acquisition) to June 30, 2001 and the two months ended February 28, 2001, net income (loss) would have been as follows:

					Predecessor Companies
			March 1, 2001 (Date of Acquisition) to June 30, 2001		Predecessor Companies
	Three Months Ended June 30, 2001		March 1, 2001 (Date of Acquisition) to June 30, 2001		Two Months Ended February 28, 2001
Reported net income (loss)	$	9,899	$	18,594	$	(29,119	)
Add back: Goodwill amortization, net of tax		3,108		4,708		1,307

Pro forma net income (loss)	$	13,007	$	23,302	$	(27,812	)

5. Vehicle Debt

Vehicle debt consisted of:

	June 30, 2002		December 31, 2001
Commercial paper notes	$	299,030	$	119,998
Series 2001-2 auction rate rental car asset-backed notes		385,000		40,000
Series 1997-1B 6.40% asset-backed medium-term notes		566,667		850,000
Series 1998-1 6.14% asset-backed medium-term notes		600,000		600,000
Series 2000-1 floating rate rental car asset-backed notes		250,000		250,000
Series 2000-2 floating rate rental car asset-backed notes		300,000		300,000
Series 2000-3 floating rate rental car asset-backed notes		200,000		200,000
Series 2000-4 floating rate rental car asset-backed notes		500,000		500,000
Series 2001-1 floating rate rental car asset-backed notes		750,000		750,000
Other		265,163		161,343

	$	4,115,860	$	3,771,341

As of June 30, 2002, the Company's asset-backed funding arrangements under the AESOP Funding program provided for the issuance of up to $4.14 billion of debt. Amounts outstanding under the AESOP Funding program approximated $3.85 billion. As of June 30, 2002, the Company had an additional $291 million of availability under the AESOP Funding program. In addition, the Company had other outstanding vehicle debt of approximately $265 million and availability of approximately $112 million under other funding arrangements as of June 30, 2002.

6. Commitments and Contingencies

The Company is involved in pending litigation in the usual course of business. In the opinion of management, such litigation will not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

7. Comprehensive Income (Loss)

The components of comprehensive income (loss) are summarized as follows:

		Three Months Ended June 30, 2002			Three Months Ended June 30, 2001
Net income		$	22,810		$	9,899
Other comprehensive income (loss):
	Currency translation adjustment		3,660			2,239
	Unrealized losses on cash flow hedges, net of tax		(17,466	)		(1,395	)

Total comprehensive income		$	9,004		$	10,743

								Predecessor Companies
					March 1, 2001 (Date of Acquisition) to June 30, 2001			Predecessor Companies
		Six Months Ended June 30, 2002			March 1, 2001 (Date of Acquisition) to June 30, 2001			Two Months Ended February 28, 2001
Net income (loss)		$	20,401		$	18,594		$	(29,119	)
Other comprehensive income (loss):
	Currency translation adjustment		4,451			(1,175	)		(1,758	)
	Unrealized gains (losses) on cash flow hedges, net of tax		(5,880	)		(2,766	)		561
	Minimum pension liability adjustment		(1,336	)		—			—
	Cumulative effect from change in accounting policy for derivative instruments, net of tax		—			—			1,464

Total comprehensive income (loss)		$	17,636		$	14,653		$	(28,852	)

The after-tax components of accumulated other comprehensive income (loss) for the six months ended June 30, 2002 are as follows:

	Currency Translation Adjustments			Unrealized Losses on Cash Flows Hedges			Minimum Pension Liability Adjustment			Accumulated Other Comprehensive Loss
Balance, January 1, 2002	$	(2,469	)	$	(34,583	)	$	—		$	(37,052	)
Current period change		4,451			(5,880	)		(1,336	)		(2,765	)

Balance June 30, 2002	$	1,982		$	(40,463	)	$	(1,336	)	$	(39,817	)

8. Subsequent Event

On July 25, 2002, the Company issued $750 million of rental car asset backed notes under its AESOP Funding Program. Approximately $500 million of such notes bear interest at a fixed rate of 3.85% and approximately $250 million of such notes bear interest at a floating rate of LIBOR plus 29 basis points.

9. Guarantor and Non-Guarantor Consolidating Condensed Financial Statements

The following consolidating condensed financial information presents the Consolidating Condensed Balance Sheets as of June 30, 2002 and December 31, 2001, the Consolidated Condensed Statements of Operations for the three months ended June 30, 2002 and June 30, 2001 and the Consolidating Condensed Statements of Operations and Statements of Cash Flows for the six months ended June 30, 2002, the period March 1, 2001 (Date of Acquisition) to June 30, 2001, and as to the Predecessor Companies for the two months ended February 28, 2001 of (a) Avis Group Holdings, Inc. ("the Parent"); (b) the guarantor subsidiaries; (c) the non-guarantor subsidiaries; (d) elimination entries necessary to consolidate the Parent with the guarantor and non-guarantor subsidiaries; and (e) the Company on a consolidated basis.

Investments in subsidiaries are accounted for using the equity method for purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. Separate financial statements and other disclosures with respect to the subsidiary guarantors have not been provided as management believes the following information is sufficient.

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
For the Three Months ended June 30, 2002

		Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Avis Group Holdings, Inc. Consolidated
Revenues		$	—		$	591,572	$	59,059	$	—		$	650,631

Expenses
	Operating, net		—			227,135		29,231		—			256,366
	Vehicle depreciation and lease charges, net		—			146,991		14,410		—			161,401
	Selling, general and administrative		—			113,735		8,194		—			121,929
	Vehicle interest, net		459			50,544		336		—			51,339
	Non-vehicle interest, net		7,658			3,165		—		—			10,823
	Non-vehicle depreciation and amortization		240			8,439		766		—			9,445

Total expenses			8,357			550,009		52,937		—			611,303

Income (loss) before equity in earnings of subsidiaries			(8,357	)		41,563		6,122		—			39,328
Equity in earnings of subsidiaries			26,166			3,550		—		(29,716	)		—

Income before income taxes			17,809			45,113		6,122		(29,716	)		39,328
Provision (benefit) for income taxes			(5,001	)		18,947		2,572		—			16,518

Net income		$	22,810		$	26,166	$	3,550	$	(29,716	)	$	22,810

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 2001

		Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Avis Group Holdings, Inc. Consolidated
Revenues		$	—		$	570,551	$	58,342	$	—		$	628,893

Expenses
	Operating, net		—			206,665		25,503		—			232,168
	Vehicle depreciation and lease charges, net		—			158,512		12,470		—			170,982
	Selling, general and administrative		—			108,548		7,992		—			116,540
	Vehicle interest, net		3,459			52,015		425		—			55,899
	Non-vehicle interest, net		8,350			6,227		—		—			14,577
	Non-vehicle depreciation and amortization		4,746			9,505		824		—			15,075

Total expenses			16,555			541,472		47,214		—			605,241

Income (loss) before equity in earnings of subsidiaries			(16,555	)		29,079		11,128		—			23,652
Equity in earnings of subsidiaries			14,176			4,674		—		(18,850	)		—

Income (loss) before income taxes			(2,379	)		33,753		11,128		(18,850	)		23,652
Provision (benefit) for income taxes			(12,278	)		19,577		6,454		—			13,753

Net income		$	9,899		$	14,176	$	4,674	$	(18,850	)	$	9,899

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
For the Six Months ended June 30, 2002

		Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Avis Group Holdings, Inc. Consolidated
Revenues		$	—		$	1,098,987	$	116,247	$	—		$	1,215,234

Expenses
	Operating, net		—			422,895		57,506		—			480,401
	Vehicle depreciation and lease charges, net		—			289,810		31,441		—			321,251
	Selling, general and administrative		—			221,329		15,531		—			236,860
	Vehicle interest, net		918			100,524		544		—			101,986
	Non-vehicle interest, net		15,315			6,303		—		—			21,618
	Non-vehicle depreciation and amortization		479			15,919		1,545		—			17,943

Total expenses			16,712			1,056,780		106,567		—			1,180,059

Income (loss) before equity in earnings of subsidiaries			(16,712	)		42,207		9,680		—			35,175
Equity in earnings of subsidiaries			27,737			5,614		—		(33,351	)		—

Income before income taxes			11,025			47,821		9,680		(33,351	)		35,175
Provision (benefit) for income taxes			(9,376	)		20,084		4,066		—			14,774

Net income		$	20,401		$	27,737	$	5,614	$	(33,351	)	$	20,401

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
For the Period March 1, 2001 (Date of Acquisition) to June 30, 2001

		Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Avis Group Holdings, Inc. Consolidated
Revenues		$	—		$	767,986	$	78,903	$	—		$	846,889

Expenses
	Operating, net		—			276,363		34,616		—			310,979
	Vehicle depreciation and lease charges, net		—			206,553		18,619		—			225,172
	Selling, general and administrative		—			143,494		10,621		—			154,115
	Vehicle interest, net		4,612			70,973		861		—			76,446
	Non-vehicle interest, net		11,634			8,029		—		—			19,663
	Non-vehicle depreciation and amortization		6,574			12,599		1,095		—			20,268

Total expenses			22,820			718,011		65,812		—			806,643

Income (loss) before equity in earnings of subsidiaries			(22,820	)		49,975		13,091		—			40,246
Equity in earnings of subsidiaries			25,759			6,022		—		(31,781	)		—

Income before income taxes			2,939			55,997		13,091		(31,781	)		40,246
Provision (benefit) for income taxes			(15,655	)		30,238		7,069		—			21,652

Net income		$	18,594		$	25,759	$	6,022	$	(31,781	)	$	18,594

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Predecessor Companies)
For the Two Months Ended February 28, 2001

		Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Avis Group Holdings, Inc. Consolidated
Revenues		$	—		$	344,496		$	41,325		$	—	$	385,821

Expenses
	Operating, net		—			154,747			19,340			—		174,087
	Vehicle depreciation and lease charges, net		—			100,718			9,399			—		110,117
	Selling, general and administrative		—			77,866			5,363			—		83,229
	Vehicle interest, net		2,306			40,375			944			—		43,625
	Non-vehicle interest, net		9,167			—			—			—		9,167
	Non-vehicle depreciation and amortization		—			7,282			551			—		7,833

Total expenses			11,473			380,988			35,597			—		428,058

Income (loss) before equity in earnings (losses) of subsidiaries			(11,473	)		(36,492	)		5,728			—		(42,237	)
Equity in earnings (losses) of subsidiaries			(25,645	)		9,950			—			15,695		—

Income (loss) before income taxes			(37,118	)		(26,542	)		5,728			15,695		(42,237	)
Provision (benefit) for income taxes			(7,999	)		(9,926	)		2,142			—		(15,783	)

Income (loss) from continuing operations			(29,119	)		(16,616	)		3,586			15,695		(26,454	)
Income (loss) from discontinued operations, net of tax			—			(6,358	)		11,305			—		4,947

Income (loss) before cumulative effect of accounting change			(29,119	)		(22,974	)		14,891			15,695		(21,507	)
Cumulative effect of accounting change, net of tax			—			(2,671	)		(4,941	)		—		(7,612	)

Net income (loss)		$	(29,119	)	$	(25,645	)	$	9,950		$	15,695	$	(29,119	)

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED BALANCE SHEET
June 30, 2002

		Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Avis Group Holdings, Inc. Consolidated
ASSETS
	Cash and cash equivalents	$	98		$	7,887		$	32,684		$	—		$	40,669
	Receivables, net		—			135,094			30,661			—			165,755
	Prepaid expenses		—			33,109			7,857			—			40,966
	Due from affiliate		(328,977	)		178,602			150,375			—			—
	Deferred income taxes		218,280			336,241			1,627			—			556,148
	Property and equipment, net		—			241,383			14,834			—			256,217
	Investment in consolidated subsidiaries		707,986			644,419			—			(1,352,405	)		—
	Goodwill		806,809			444,667			3,433			—			1,254,909
	Other assets		15,541			34,113			95,400			—			145,054

Total assets exclusive of assets under management programs			1,419,737			2,055,515			336,871			(1,352,405	)		2,459,718

Assets under management programs:
	Restricted cash		—			174			9,132			—			9,306
	Vehicles, net		—			(97,824	)		4,324,399			—			4,226,575
	Due from vehicle manufacturers		—			5,399			59,093			—			64,492

			—			(92,251	)		4,392,624			—			4,300,373

Total assets		$	1,419,737		$	1,963,264		$	4,729,495		$	(1,352,405	)	$	6,760,091

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
	Accounts payable	$	(16,459	)	$	166,744		$	94,847		$	—		$	245,132
	Accrued liabilities		107,466			306,005			33,870			—			447,341
	Due to Cendant Corporation and affiliates, net		418,617			275,723			(180,333	)		—			514,007
	Non-vehicle debt		571,391			4,465			—			—			575,856
	Public liability, property damage and other insurance liabilities		—			144,141			71,736			—			215,877

Total liabilities exclusive of liabilities under management programs			1,081,015			897,078			20,120			—			1,998,213

Liabilities under management programs:
	Vehicle debt		—			80,490			4,035,370			—			4,115,860
	Deferred income taxes		—			277,710			29,586			—			307,296

			—			358,200			4,064,956			—			4,423,156

Stockholder's equity			338,722			707,986			644,419			(1,352,405	)		338,722

Total liabilities and stockholder's equity		$	1,419,737		$	1,963,264		$	4,729,495		$	(1,352,405	)	$	6,760,091

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED BALANCE SHEET
December 31, 2001

		Parent		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Avis Group Holdings, Inc. Consolidated
ASSETS
	Cash and cash equivalents	$	18	$	5,210		$	8,083		$	—		$	13,311
	Receivables, net		—		142,386			25,986			—			168,372
	Prepaid expenses		—		34,569			7,974			—			42,543
	Deferred income tax		221,741		326,332			14			—			548,087
	Property and equipment, net		—		230,429			14,847			—			245,276
	Investment in consolidated subsidiaries		677,401		628,280			—			(1,305,681	)		—
	Goodwill		825,234		443,000			2,958			—			1,271,192
	Other assets		16,020		34,791			95,797			—			146,608

Total assets exclusive of assets under management programs			1,740,414		1,844,997			155,659			(1,305,681	)		2,435,389

Assets under management programs:
	Restricted cash		—		9,457			571,730			—			581,187
	Vehicles, net		—		(128,932	)		3,557,825			—			3,428,893
	Due from vehicle manufacturers		—		7,855			84,759			—			92,614

			—		(111,620	)		4,214,314			—			4,102,694

Total assets		$	1,740,414	$	1,733,377		$	4,369,973		$	(1,305,681	)	$	6,538,083

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
	Accounts payable	$	—	$	151,379		$	212,512		$	—		$	363,891
	Accrued liabilities		109,143		300,337			25,185			—			434,665
	Due to Cendant Corporation and affiliates, net		726,645		63,214			(275,426	)		—			514,433
	Non-vehicle debt		583,540		4,719			—			—			588,259
	Public liability, property damage and other insurance liabilities		—		166,432			62,071			—			228,503

Total liabilities exclusive of liabilities under management programs			1,419,328		686,081			24,342			—			2,129,751

Liabilities under management programs:
	Vehicle debt		—		86,004			3,685,337			—			3,771,341
	Deferred income taxes		—		283,891			32,014			—			315,905

			—		369,895			3,717,351			—			4,087,246

Stockholder's equity			321,086		677,401			628,280			(1,305,681	)		321,086

Total liabilities and stockholder's equity		$	1,740,414	$	1,733,377		$	4,369,973		$	(1,305,681	)	$	6,538,083

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2002

		Parent			Guarantor			Non- Guarantor			Eliminations			Avis Group Holdings, Inc. Consolidated
Operating Activities
Net income		$	20,401		$	27,737		$	5,614		$	(33,351	)	$	20,401
Adjustments to reconcile net income to net cash provided by (used in) operating activities exclusive of management programs			(27,692	)		(6,266	)		19,384			—			(14,574	)

Net cash provided by (used in) operating activities exclusive of management programs			(7,291	)		21,471			24,998			(33,351	)		5,827

Management programs:
	Vehicle depreciation		—			291,352			20,869			—			312,221

Net cash provided by (used in) operating activities			(7,291	)		312,823			45,867			(33,351	)		318,048

Investing Activities
Property and equipment additions			—			(23,278	)		(1,529	)		—			(24,807	)
Retirements of property and equipment			—			89			689			—			778
Payment for purchase of rental car franchise licensees			—			(2,835	)		(252	)		—			(3,087	)
Investment in subsidiaries			(27,737	)		(5,614	)		—			33,351			—

Net cash used in investing activities exclusive of management programs			(27,737	)		(31,638	)		(1,092	)		33,351			(27,116	)

Management programs:
	Decrease in restricted cash		—			9,283			562,598			—			571,881
	Decrease in due from vehicle manufacturers		—			2,456			26,892			—			29,348
	Investment in vehicles		—			(57,042	)		(2,627,781	)		—			(2,684,823	)
	Payments received on investment in vehicles		—			(248,886	)		1,720,919			—			1,472,033

			—			(294,189	)		(317,372	)		—			(611,561	)

Net cash used in investing activities			(27,737	)		(325,827	)		(318,464	)		33,351			(638,677	)

Financing Activities
Net decrease in non-vehicle debt			—			(253	)		—			—			(253	)
Increase (decrease) in due to Cendant Corporation and affiliates, net			35,108			16,065			(53,840	)		—			(2,667	)
Payments for debt issuance costs			—			(131	)		—			—			(131	)

Net cash provided by (used in) financing activities exclusive of management programs			35,108			15,681			(53,840	)		—			(3,051	)

Management programs:
	Net increase in vehicle debt		—			—			350,613			—			350,613

Net cash provided by financing activities			35,108			15,681			296,773			—			347,562

Effect of changes in exchange rates on cash and cash equivalents			—			—			425			—			425

Net increase in cash and cash equivalents			80			2,677			24,601			—			27,358
Cash and cash equivalents, beginning of period			18			5,210			8,083			—			13,311

Cash and cash equivalents, end of period		$	98		$	7,887		$	32,684		$	—		$	40,669

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
For the Period March 1, 2001 (Date of Acquisition) to June 30, 2001

		Parent			Guarantor			Non- Guarantor			Eliminations			Avis Group Holdings, Inc. Consolidated
Operating Activities
Net income		$	18,594		$	25,759		$	6,022		$	(31,781	)	$	18,594
Adjustments to reconcile net income to net cash provided by (used in) operating activities exclusive of management programs			(118,194	)		130,934			(24,982	)		—			(12,242	)

Net cash provided by (used in) operating activities exclusive of management programs			(99,600	)		156,693			(18,960	)		(31,781	)		6,352

Management programs:
	Vehicle depreciation		—			195,458			16,144			—			211,602

Net cash provided by (used in) operating activities			(99,600	)		352,151			(2,816	)		(31,781	)		217,954

Investing Activities
Property and equipment additions			—			(24,781	)		(877	)		—			(25,658	)
Retirements of property and equipment			—			8,169			206			—			8,375
Payment for purchase of rental car franchise licensees			—			(18,748	)		(299	)		—			(19,047	)
Investment in subsidiaries			(25,759	)		(6,022	)		—			31,781			—

Net cash used in investing activities exclusive of management programs			(25,759	)		(41,382	)		(970	)		31,781			(36,330	)

Management programs:
	Decrease in restricted cash		—			—			5,208			—			5,208
	(Increase) decrease in due from vehicle manufacturers		—			(3,443	)		135,256			—			131,813
	Investment in vehicles		—			(41,397	)		(1,858,655	)		—			(1,900,052	)
	Payments received on investment in vehicles		—			(182,724	)		1,595,543			—			1,412,819

			—			(227,564	)		(122,648	)		—			(350,212	)

Net cash used in investing activities			(25,759	)		(268,946	)		(123,618	)		31,781			(386,542	)

Financing Activities
Net decrease in non-vehicle debt			(317,650	)		(156	)		—			—			(317,806	)
Increase (decrease) in due to Cendant Corporation and affiliates, net			443,173			(102,192	)		(24,099	)		—			316,882
Payments for debt issuance costs			—			(4,231	)		—			—			(4,231	)

Net cash provided by (used in) financing activities exclusive of management programs			125,523			(106,579	)		(24,099	)		—			(5,155	)

Management programs:
	Net (decrease) increase in vehicle debt		—			(8,744	)		138,907			—			130,163
Net cash provided by (used in) financing activities			125,523			(115,323	)		114,808			—			125,008

Effect of changes in exchange rates on cash a cash equivalents			—			—			(117	)		—			(117	)

Net increase (decrease) in cash and cash equivalents			164			(32,118	)		(11,743	)		—			(43,697	)
Cash and cash equivalents, beginning of period			141			36,745			29,219			—			66,105

Cash and cash equivalents, end of period		$	305		$	4,627		$	17,476		$	—		$	22,408

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
(Predecessor Companies)
For the Two Months Ended February 28, 2001

		Parent			Guarantor			Non- Guarantor			Eliminations			Avis Group Holdings, Inc. Consolidated
Operating Activities
Net income (loss)		$	(29,119	)	$	(25,645	)	$	9,950		$	15,695		$	(29,119	)
Adjustments to arrive at income (loss) from continuing operations			—			9,029			(6,364	)		—			2,665

Income (loss) from continuing operations			(29,119	)		(16,616	)		3,586			15,695			(26,454	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities exclusive of management programs			425			77,124			(119,563	)		—			(42,014	)

Net cash provided by (used in) operating activities exclusive of management programs			(28,694	)		60,508			(115,977	)		15,695			(68,468	)

Management programs:
	Vehicle depreciation		—			96,394			7,942			—			104,336

Net cash provided by (used in) operating activities			(28,694	)		156,902			(108,035	)		15,695			35,868

Investing Activities
Property and equipment additions			—			(5,169	)		(652	)		—			(5,821	)
Retirements of property and equipment			—			165			268			—			433
Investment in subsidiaries			25,645			(9,950	)		—			(15,695	)		—

Net cash provided by (used in) investing activities exclusive of management programs			25,645			(14,954	)		(384	)		(15,695	)		(5,388	)

Management programs:
	Decrease in restricted cash		—			—			10,978			—			10,978
	Decrease in due from vehicle manufacturers		—			—			16,368			—			16,368
	Investment in vehicles		—			378			(940,937	)		—			(940,559	)
	Payments received on investment in vehicles		—			(82,703	)		895,350			—			812,647

			—			(82,325	)		(18,241	)		—			(100,566	)

Net cash provided by (used in) investing activities			25,645			(97,279	)		(18,625	)		(15,695	)		(105,954	)

Financing Activities
Net decrease in non-vehicle debt			—			(77	)		—			—			(77	)
Increase (decrease) in due to Cendant Corporation and affiliates, net			(89,023	)		43,123			82			—			(45,818	)
Payments for debt issuance costs			—			(12	)		—			—			(12	)
Issuances of common stock			140			—			—			—			140

Net cash provided by (used in) financing activities exclusive of management programs			(88,883	)		43,034			82			—			(45,767	)

Management programs:
Net increase (decrease) in vehicle debt			92,000			(2	)		9,209			—			101,207

Net cash provided by financing activities			3,117			43,032			9,291			—			55,440

Effect of changes in net assets of discontinued operations			—			(131,512	)		131,906			—			394
Effect of changes in exchange rates on cash and cash equivalents			—			—			(11	)		—			(11	)

Net increase (decrease) in cash and cash equivalents			68			(28,857	)		14,526			—			(14,263	)
Cash and cash equivalents, beginning of period			73			65,602			14,693			—			80,368

Cash and cash equivalents, end of period		$	141		$	36,745		$	29,219		$	—		$	66,105

Item 2. Management's Narrative Analysis of the Results of Operations

The following discussion should be read in conjunction with our Consolidated Condensed Financial Statements and accompanying Notes thereto included elsewhere herein. Unless otherwise noted, all dollar amounts are in thousands and presented before taxes (as appropriate).

We are the second largest general use car rental brand in the world. On March 1, 2001, all of our outstanding common stock not then-owned by Cendant Corporation ("Cendant") was acquired by a subsidiary of PHH Corporation ("PHH"), a wholly-owned subsidiary of Cendant, for approximately $994 million and we emerged as the surviving legal entity. At such time, our fleet management and fuel card businesses were sold to PHH and, therefore, are presented as a discontinued operation in the accompanying Consolidated Condensed Financial Statements. Accordingly, we are now a wholly-owned subsidiary of Cendant.

RESULTS OF OPERATIONS

The acquisition of us by Cendant resulted in significant changes to the valuation of certain of our assets, liabilities and stockholder's equity. The periods prior to the acquisition have been designated "Predecessor Companies" and the period subsequent to the acquisition has been designated "Successor Company". The results of the Predecessor Companies and the Successor Company have been combined for the six months ended June 30, 2001 since we believe that separate discussions for the two months ended February 28, 2001 and the four months ended June 30, 2001 are not meaningful in terms of our operating results or comparisons to the prior period.

Three Months Ended June 30, 2002 vs. Three Months Ended June 30, 2001

Our comparative results of operations, excluding our former fleet management and fuel card businesses, comprised the following:

	2002		2001		Change
Revenues	$	650,631	$	628,893	$	21,738

Expenses, excluding non-vehicle interest		600,480		590,664		9,816
Non-vehicle interest, net		10,823		14,577		(3,754	)

Total expenses		611,303		605,241		6,062

Income before income taxes		39,328		23,652		15,676
Provision for income taxes		16,518		13,753		2,765

Income from continuing operations	$	22,810	$	9,899	$	12,911

Total revenue increased 3.5% primarily due to a 4.1% increase in vehicle rental revenue per day, which was due principally to strong pricing in our leisure business.

Total expenses increased 1.0% primarily due to higher commission-related expenses associated with higher revenues, the launch of an advertising campaign during the second quarter of 2002 and severance costs related to the relocation of our information technology operations from Garden City, New York to Parsippany, New Jersey.

Non-vehicle interest, net decreased 25.8% primarily due to a decrease in interest rates and the repayment of all amounts outstanding under a revolving credit facility during 2001.

Our overall effective tax rate was 42.0% and 58.1% for the three months ended June 30, 2002 and 2001, respectively. The lower tax rate for the three months ended June 30, 2002 was primarily due to the elimination of goodwill amortization expense.

As a result of the above-mentioned items, income from continuing operations increased $12.9 million, or 130%, in the second quarter 2002.

Six Months Ended June 30, 2002 vs. Six Months Ended June 30, 2001

Our comparative results of operations, excluding our former fleet management and fuel card businesses comprised the following:

	2002		2001			Change
Revenues	$	1,215,234	$	1,232,710		$	(17,476	)

Expenses, excluding non-vehicle interest		1,158,441		1,205,871			(47,430	)
Non-vehicle interest, net		21,618		28,830			(7,212	)

Total expenses		1,180,059		1,234,701			(54,642	)

Income (loss) before income taxes		35,175		(1,991	)		37,166
Provision for income taxes		14,774		5,869			8,905

Income (loss) from continuing operations	$	20,401	$	(7,860	)	$	28,261

Total revenue decreased 1.4% primarily due to a reduction in car rental transaction volume, which resulted primarily from the residual effect of reduced commercial air travel due to the September 11^th terrorist attacks.

Total expenses decreased 4.4% primarily due to a decrease in operating expenses derived from our ability to reduce our operating expenses as a result of reduced car rental transaction volume during the first quarter of 2002. Vehicle depreciation and lease charges and vehicle interest expense also decreased due to a corresponding reduction in average fleet size and the related decrease in average vehicle debt supporting such fleet.

Non-vehicle interest, net decreased 25.0% primarily due to a decrease in interest rates and the repayment of all amounts outstanding under a revolving credit facility during 2001.

The provision for income taxes for the six months ended June 30, 2002 reflects our overall effective tax rate of 42.0% for 2002. The increase in the provision was primarily due to the Company reporting pretax income in 2002 versus a pretax loss of $42.2 million for the two months ended February 28, 2001 at an effective tax rate of 37.4% offset by a pre-tax income of $40.2 million for the period March 1, 2001 (Date of Acquisition) to June 30, 2001 at an effective tax rate of 53.8% and the elimination of goodwill amortization expense.

As a result of the above-mentioned items, income from continuing operations increased $28 million for the six months ended June 30, 2002.

Forward-Looking Statements

Forward-looking statements in our public filings or other public statements are subject to known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements include the information concerning our future financial performance, business strategy, projected plans and objectives.

Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "project", "estimates", "plans", "may increase", "may fluctuate" and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forwardlooking in nature and not historical facts. You should understand that the following important factors and assumptions could affect our future results and could cause actual results to differ materially from those expressed in such forward-looking statements:

•: terrorist attacks, such as the September 11, 2001 terrorist attacks on New York City and Washington, D.C., other attacks, acts of war; or measures taken by governments in response thereto may negatively affect the travel industry, our financial results and could also result in a disruption in our business;
•: the effect of economic conditions and interest rate changes on the economy on a national, regional or international basis and the impact thereof on our business;
•: the effects of a decline in travel, due to political instability, adverse economic conditions or otherwise, on our business;
•: the effects of changes in current interest rates;

•: competition in the car rental industry and the financial resources of, and products available to, competitors;
•: our failure to provide fully integrated disaster recovery technology solutions in the event of a disaster;
•: our ability to obtain financing on acceptable terms to finance our growth strategy and to operate within the limitations imposed by financing arrangements and to maintain our credit ratings;
•: our ability to obtain external financing in the event we are unable to obtain financing from Cendant;
•: competitive and pricing pressures in the car rental industry;
•: changes in vehicle manufacturer repurchase arrangements in the event that used vehicle values decrease;
•: and changes in laws and regulations, including changes in accounting standards and privacy policy regulation.

Other factors and assumptions not identified above were also involved in the derivation of these forward looking statements, and the failure of such other assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our control.

You should consider the areas of risk described above in connection with any forward-looking statements that may be made by us and our businesses generally. Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless required by law. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Item 3. Quantitative And Qualitative Disclosure About Market Risks

As previously discussed in our 2001 Annual Report on Form 10-K, we assess our market risk based on changes in interest rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in earnings, fair values, and cash flows based on a hypothetical 10% change (increase and decrease) in interest rates. We used June 30, 2002 market rates to perform a sensitivity analysis separately for each of our market risk exposures. The estimates assume instantaneous, parallel shifts in interest rate yield curves. We have determined, through such analyses, that the impact of a 10% change in interest on our earnings, fair values and cash flows would not be material.

PART II—OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a): Exhibits

See Exhibit Index

(b): Reports on Form 8-K

None

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		AVIS GROUP HOLDINGS, INC.
		By:		/s/ F. ROBERT SALERNO F. Robert Salerno President and Chief Operating Officer Date: August 14, 2002

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ JOHN W. CHIDSEY (John W. Chidsey)	Chief Executive Officer	August 14, 2002
/s/ F. ROBERT SALERNO (F. Robert Salerno)	President, Chief Operating Officer and Director (Principal Executive Officer)	August 14, 2002
/s/ KURT FREUDENBERG (Kurt Freudenberg)	Senior Vice President and Controller (Principal Financial Officer)	August 14, 2002

EXHIBIT INDEX

Exhibit No.		Description
3.1		Certificate of Incorporation of Avis Rent A Car, Inc. (Incorporated by reference to the Company's Registration Statement on Form S-1, Registration No. 333-46737, dated February 23, 1998).
3.2		By-Laws of Avis Group Holdings, Inc. (Incorporated by reference to the Company's Registration Statement on Form S-1, Registration No. 333-46737, dated February 23, 1998).
12		Statement Re: Computation of Ratio of Earnings to Fixed Charges.

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AVIS GROUP HOLDINGS INC 10-Q