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UNITED STATES
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 September 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 October 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 September 30, 2002 and 2001	2
	Consolidated Condensed Statements of Operations for the nine months ended September 30, 2002, the period March 1, 2001 (Date of Acquisition) to September 30, 2001 and the two months ended February 28, 2001	3
	Consolidated Condensed Balance Sheets as of September 30, 2002 and December 31, 2001	4
	Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 2002, the period March 1, 2001 (Date of Acquisition) to September 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	25
Item 3.	Quantitative and Qualitative Disclosure about Market Risks	27
Item 4.	Controls and Procedures	27
PART II	Other Information
Item 6.	Exhibits and Report on Form 8-K	28
	Signatures	29
	Certifications	30

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 September 30, 2002, and the related consolidated condensed statements of operations for the three and nine month period ended September 30, 2002, the period March 1, 2001 (Date of Acquisition) to September 30, 2001, and as to the Predecessor Companies for the period January 1, 2001 to February 28, 2001 and the related consolidated condensed statement of cash flows for the nine month period ended September 30, 2002, the period March 1, 2001 (Date of Acquisition) to September 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
November 1, 2002
New York, New York

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

		Three Months Ended September 30, 2002		Three Months Ended September 30, 2001
Revenues		$	710,556	$	650,368

Expenses
	Operating, net		279,231		239,123
	Vehicle depreciation and lease charges, net		178,099		191,592
	Selling, general and administrative		116,666		122,094
	Vehicle interest, net		54,241		57,948
	Non-vehicle interest, net		10,788		12,492
	Non-vehicle depreciation and amortization		9,789		15,836
	Unusual charges		—		60,062

Total expenses			648,814		699,147

Income (loss) before income taxes			61,742		(48,779	)
Provision (benefit) for income taxes			25,931		(24,033	)

Income (loss) before extraordinary gains			35,811		(24,746	)
Extraordinary gains, net of tax			274		—

Net income (loss)		$	36,085	$	(24,746	)

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 September 30, 2001			Predecessor Companies
		Nine Months Ended September 30, 2002		March 1, 2001 (Date of Acquisition) to September 30, 2001			Two Months Ended February 28, 2001
Revenues		$	1,925,790	$	1,497,258		$	385,821

Expenses
	Operating, net		759,632		550,101			174,087
	Vehicle depreciation and lease charges, net		499,350		416,765			110,117
	Selling, general and administrative		353,526		276,213			83,229
	Vehicle interest, net		156,227		134,392			43,625
	Non-vehicle interest, net		32,406		32,155			9,167
	Non-vehicle depreciation and amortization		27,732		36,104			7,833
	Unusual charges		—		60,062			—

Total expenses			1,828,873		1,505,792			428,058

Income (loss) before income taxes			96,917		(8,534	)		(42,237	)
Provision (benefit) for income taxes			40,705		(2,381	)		(15,783	)

Income (loss) from continuing operations			56,212		(6,153	)		(26,454	)
Income from discontinued operations, net of tax			—		—			4,947

Income (loss) before extraordinary gains and cumulative effect of accounting change			56,212		(6,153	)		(21,507	)
Extraordinary gains, net of tax			274		—			—

Income (loss) before cumulative effect of accounting change			56,486		(6,153	)		(21,507	)
Cumulative effect of accounting change, net of tax			—		—			(7,612	)

Net income (loss)		$	56,486	$	(6,153	)	$	(29,119	)

See Notes to Consolidated Condensed Financial Statements.

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

		September 30, 2002			December 31, 2001
ASSETS
	Cash and cash equivalents	$	19,165		$	13,311
	Receivables, net		174,402			168,372
	Prepaid expenses		47,375			42,543
	Deferred income taxes		556,140			548,087
	Property and equipment, net		252,767			245,276
	Goodwill, net		1,252,047			1,271,192
	Other assets		159,876			146,608

Total assets exclusive of assets under management programs			2,461,772			2,435,389

Assets under management programs:
	Restricted cash		255,252			581,187
	Vehicles, net		3,949,345			3,428,893
	Due from vehicle manufacturers		242,955			92,614

			4,447,552			4,102,694

Total assets		$	6,909,324		$	6,538,083

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
	Accounts payable	$	226,641		$	363,891
	Accrued liabilities		433,149			434,665
	Due to Cendant Corporation and affiliates, net		538,173			514,433
	Non-vehicle debt		558,334			588,259
	Public liability, property damage and other insurance liabilities		220,857			228,503

Total liabilities exclusive of liabilities under management programs			1,977,154			2,129,751

Liabilities under management programs:
	Vehicle debt		4,263,568			3,771,341
	Deferred income taxes		306,222			315,905

			4,569,790			4,087,246

Commitments and contingencies (Note 8)
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		245,792			189,306
	Accumulated other comprehensive loss		(52,244	)		(37,052	)

Total stockholder's equity			362,380			321,086

Total liabilities and stockholder's equity		$	6,909,324		$	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 September 30, 2001			Predecessor Companies
			Nine Months Ended September 30, 2002			March 1, 2001 (Date of Acquisition) to September 30, 2001			Two Months Ended February 28, 2001
Operating Activities
Net income (loss)			$	56,486		$	(6,153	)	$	(29,119	)
Adjustments to arrive at income (loss) from continuing operations				(274	)		—			2,665

Income (loss) from continuing operations				56,212			(6,153	)		(26,454	)
Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities:
	Non-vehicle depreciation and amortization			27,732			36,104			7,833
	Net change in operating assets and liabilities, excluding the impact of acquisitions and dispositions:
		Receivables		2,480			6,887			10,108
		Accounts payable		34,901			72,632			(30,518	)
		Accrued liabilities		(14,821	)		114,432			1,486
		Other, net		(13,333	)		(30,273	)		(30,923	)

Net cash provided by (used in) operating activities exclusive of management programs				93,171			193,629			(68,468	)

Management programs:
	Vehicle depreciation			478,918			390,720			104,336

Net cash provided by operating activities				572,089			584,349			35,868

Investing Activities
Property and equipment additions				(38,243	)		(33,496	)		(5,821	)
Retirements of property and equipment				3,777			15,484			433
Payment for purchase of rental car franchise licensees				(3,099	)		(28,261	)		—

Net cash used in investing activities exclusive of management programs				(37,565	)		(46,273	)		(5,388	)

Management programs:
	Decrease (increase) in restricted cash			325,935			(36,855	)		10,978
	(Increase) decrease in due from vehicle manufacturers			(150,084	)		(284,433	)		16,368
	Investment in vehicles			(4,388,332	)		(3,396,879	)		(940,559	)
	Payments received on investment in vehicles			3,209,581			3,044,736			812,647

				(1,002,900	)		(673,431	)		(100,566	)

Net cash used in investing activities				(1,040,465	)		(719,704	)		(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 September 30, 2001			Predecessor Companies
		Nine Months Ended September 30, 2002			March 1, 2001 (Date of Acquisition) to September 30, 2001			Two Months Ended February 28, 2001
Financing Activities
Proceeds from borrowings			—			140,000			—
Principal payments on borrowings			(11,270	)		(457,928	)		(77	)
Increase (decrease) in due to Cendant Corporation and affiliates, net			20,942			224,390			(45,818	)
Capital contribution from Cendant			—			125,000			—
Payments for debt issuance costs			(5,369	)		(4,593	)		(12	)
Issuances of common stock			—			—			140

Net cash provided by (used in) financing activities exclusive of management programs			4,303			26,869			(45,767	)

Management programs:
	Proceeds from borrowings		1,629,009			1,111,524			132,294
	Principal payments on borrowings		(1,159,281	)		(1,025,222	)		(31,087	)

			469,728			86,302			101,207

Net cash provided by financing activities			474,031			113,171			55,440

Effect of changes in net assets of discontinued operations			—			—			394
Effect of changes in exchange rates on cash and cash equivalents			199			(900	)		(11	)

Net increase (decrease) in cash and cash equivalents			5,854			(23,084	)		(14,263	)
Cash and cash equivalents, beginning of period			13,311			66,105			80,368

Cash and cash equivalents, end of period		$	19,165		$	43,021		$	66,105

Supplemental disclosure of Cash Flow Information:
Interest payments		$	185,854		$	189,230		$	44,315
Income tax payments, net		$	7,563		$	11,690		$	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 nine months ended September 30, 2002, for the period March 1, 2001 (Date of Acquisition) to September 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.

Restricted Cash

Restricted cash includes cash and investments that are not readily available for normal Company disbursements and which 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. These vehicles have replaced the restricted cash as collateral for outstanding vehicle debt.

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. In connection with the adoption of SFAS No. 142, the Company has not amortized any goodwill or indefinite-lived intangible assets during 2002. 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. Therefore, the results of operations for 2001 reflect the amortization of goodwill and indefinite lived intangible assets, while the results of operations for 2002 do not reflect such amortization (see Note 5—Intangible Assets for a pro forma disclosure depicting the Company's results of operations during 2001 after applying the non-amortization provisions of SFAS No. 142).

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. The Company will perform its annual impairment test during fourth quarter of 2002.

Stock-Based Compensation

As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," the Company currently measures its stock-based compensation using the intrinsic value approach under Accounting Principles Board ("APB") Opinion No. 25. Accordingly, the Company does not recognize compensation expense upon the issuance of its stock options because the option terms are fixed and the exercise price equals the market price of the underlying Cendant common stock on the grant date. The Company complies with the provision of SFAS No. 123 by providing pro forma disclosures of net income and related per share data giving consideration to the fair value method provisions of SFAS No. 123.

On January 1, 2003, the Company plans to adopt the fair value method of accounting for stock-based compensation provisions of SFAS No. 123, which is considered by the Financial Accounting Standards Board ("FASB") to be the preferable accounting method for stock-based employee compensation. Subsequent to adoption of the fair value method provisions of SFAS No. 123, the Company will expense all future employee stock options (and similar awards) over the vesting period based on the fair value of the award on the date of grant. The Company does not expect its results of operations to be impacted in the current year from this prospective change in accounting policy based on the current accounting guidance related to this adoption, which is currently under review by the FASB.

The impact of recording compensation expense at fair value in prior periods have been included in the pro forma disclosures, as required by SFAS No. 123, provided in the Company's Annual Report on Form 10-K filed on March 29, 2002. Prior period compensation expense is not necessarily indicative of future compensation expense that would be recorded by the Company upon its adoption of the fair value method provisions of SFAS No. 123. Future expense may vary based upon factors such as the number of options granted by the Company and the then-current fair market value of such options.

Recently Issued Accounting Pronouncements

During April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." Such standard requires any gain or loss on extinguishments of debt to be presented as a component of continuing operations (unless specific criteria is met) whereas SFAS No. 4 required that such gains and losses be classified as an extraordinary item in determining net income. Upon adoption of SFAS No. 145, the Company expects to reclassify its extraordinary gains or losses on the extinguishments of debt to continuing operations. The Company will adopt these provisions on January 1, 2003.

During June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." Such standard requires costs associated with exit or disposal activities (including restructurings), to be recognized when the costs are incurred, rather than at a date of commitment to an exit or disposal plan. SFAS No. 146 nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Under SFAS No. 146, a liability related to an exit or disposal activity is not recognized until such liability has actually been incurred whereas under EITF Issue No. 94-3 a liability was recognized at the time of a commitment to an exit or disposal plan. The provisions of this standard are effective for disposal activities initiated after December 31, 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 September 30, 2002		Three Months Ended September 30, 2001
Royalties	$	31,017	$	27,495
Reservations		14,050		14,487
Data processing		8,819		15,433
Rent, corporate overhead allocations and other		14,783		11,906
Interest, net		3,321		4,128

Total	$	71,990	$	73,449

					Predecessor Companies
			March 1, 2001 (Date of Acquisition) to September 30, 2001		Predecessor Companies
	Nine Months Ended September 30, 2002		March 1, 2001 (Date of Acquisition) to September 30, 2001		Two Months Ended February 28, 2001
Royalties	$	83,270	$	63,305	$	16,205
Reservations		43,371		33,673		8,496
Data processing		26,559		35,574		11,395
Rent, corporate overhead allocations and other		43,862		23,535		1,456
Interest, net		9,679		11,139		—

Total	$	206,741	$	167,226	$	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. Unusual Charges

During the three months ended September 30, 2001, the Company incurred unusual charges of $60 million related to the September 11, 2001 terrorist attacks. The unusual charges primarily resulted from the rationalization of the Company's fleet and related car rental operations.

4. Acquisition Related

In connection with the acquisition of the Company by Cendant on March 1, 2001, the Company recorded purchase accounting adjustments for costs associated with exiting activities. The recognition of such costs and the corresponding utilization are summarized by category as follows:

	Costs		Cash Payments			Other Reductions			Balance at December 31, 2001		Cash Payments			Other Additions			Balance at September 30, 2002
Personnel related	$	35,925	$	(19,444	)	$	—		$	16,481	$	(18,569	)	$	10,212		$	8,124
Asset fair value adjustments		19,480		—			(18,674	)		806		—			(806	)		—
Facility related		7,692		(136	)		—			7,556		(1,768	)		—			5,788

Total	$	63,097	$	(19,580	)	$	(18,674	)	$	24,843	$	(20,337	)	$	9,406		$	13,912

The Company closed its headquarters, relocated employees and abandoned assets and involuntarily terminated employees in connection with such relocation. The Company formally communicated the termination of employment and paid severance to approximately 475 employees, representing a wide range of employee groups, and as of September 30, 2002, the Company had terminated all such employees. The majority of the remaining personnel related costs are expected to be paid by the end of fourth quarter 2002.

5. Intangible Assets

Intangible assets consisted of:

		September 30, 2002				December 31, 2001
		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized Intangible Assets
	Customer lists	$	18,952	$	1,520	$	18,952	$	800

Unamortized Intangible Assets
	Goodwill	$	1,252,047			$	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 nine months ended September 30, 2002 was approximately $240 thousand and $720 thousand, respectively.

Amortization expense relating to all intangible assets during the three months ended September 30, 2001, the two months ended February 28, 2001 and the period March 1, 2001 (Date of Acquisition) to September 30, 2001, was approximately $8.1 million, $2.1 million and $18.6 million, respectively, including the amortization of goodwill of $7.9 million, $2.1 million and $18.0 million, respectively. The Company expects amortization expense on intangible assets for the remainder of 2002 to approximate $240 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		1,849
Other		(20,994	)

Balance as of September 30, 2002	$	1,252,047

Had the Company applied the non-amortization provisions of SFAS No. 142 for the three months ended September 30, 2001, and for the period March 1, 2001 (Date of Acquisition) to September 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 September 30, 2001			Predecessor Companies
	Three Months Ended September 30, 2001			March 1, 2001 (Date of Acquisition) to September 30, 2001			Two Months Ended February 28, 2001
Reported net loss	$	(24,746	)	$	(6,153	)	$	(29,119	)
Add back: Goodwill amortization, net of tax		7,803			18,031			1,307

Pro forma net income (loss)	$	(16,943	)	$	11,878		$	(27,812	)

6. Non-Vehicle Debt

Non-vehicle debt consisted of:

	September 30, 2002		December 31, 2001
11% senior subordinated notes	$	553,986	$	583,541
Other		4,348		4,718

	$	558,334	$	588,259

The change in the balance of the 11% senior subordinated notes reflects the redemption of $10.0 million in face value of these notes, with a carrying value of $11.4 million, for $10.9 million in cash and $18.2 million related to the amortization of a premium. In connection with such redemption, the Company recorded an extraordinary gain of approximately $470 thousand ($274 thousand, after tax).

7. Vehicle Debt

Vehicle debt consisted of:

	September 30, 2002		December 31, 2001
Commercial paper notes	$	—	$	119,998
Series 2002-2 variable funding rental car asset-backed notes		110,000		—
Series 2001-2 auction rate rental car asset-backed notes		400,000		40,000
Series 1997-1B 6.40% asset-backed medium-term notes		141,667		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
Series 2002-1 3.85% asset-backed medium term notes		499,775		—
Series 2002-1 floating rate rental car asset-backed notes		250,000		—
Other		262,126		161,343

	$	4,263,568	$	3,771,341

As of September 30, 2002, the Company's asset-backed funding arrangements under the AESOP Funding program provided for the issuance of up to $4.69 billion of debt. Amounts outstanding under the AESOP Funding program approximated $4 billion. As of September 30, 2002, the Company had $690 million of availability under the AESOP Funding program. In addition, the Company had other outstanding vehicle debt of approximately $262 million and availability of approximately $127 million under other funding arrangements as of September 30, 2002.

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 $250 million of such notes bear interest at a floating rate of LIBOR plus 29 basis points.

In September 2002, the Company issued $110 million of variable funding rental car asset-backed notes under the AESOP Funding program and repaid all amounts outstanding in commercial paper notes.

8. 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.

9. Stock Plans

During third quarter 2002, the Cendant's Board of Directors accelerated the vesting of certain options previously granted with exercise prices greater than or equal to $15.1875. Cendant's senior executive officers were not eligible for this modification. In connection with such action, approximately

3 million options, which were scheduled to become exercisable substantially between September 2002 and January 2004, became exercisable as of August 27, 2002. In addition, the post-employment exercise period for the modified options was reduced from one year to thirty days. However, if the employee remains employed by the Company through the date on which the option was originally scheduled to become vested, the post-employment exercise period will be one year.

In accordance with the provisions of the FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation (an Interpretation of APB Opinion No. 25)," there is no charge associated with this modification since none of the modified options had intrinsic value because the market price of the underlying Cendant common stock on August 27, 2002 was less than the exercise price of the modified options.

10. Comprehensive Income (Loss)

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

		Three Months Ended September 30, 2002			Three Months Ended September 30, 2001
Net income (loss)		$	36,085		$	(24,746	)
Other comprehensive income (loss):
	Currency translation adjustment		(2,618	)		(2,197	)
	Unrealized losses on cash flow hedges, net of tax		(9,875	)		(38,082	)
	Minimum pension liability adjustments		66			—

Total comprehensive income (loss)		$	23,658		$	(65,025	)

								Predecessor Companies
					March 1, 2001 (Date of Acquisition) to September 30, 2001			Predecessor Companies
		Nine Months Ended September 30, 2002			March 1, 2001 (Date of Acquisition) to September 30, 2001			Two Months Ended February 28, 2001
Net income (loss)		$	56,486		$	(6,153	)	$	(29,119	)
Other comprehensive income (loss):
	Currency translation adjustment		1,833			(3,371	)		(1,758	)
	Unrealized gains (losses) on cash flow hedges, net of tax		(15,755	)		(40,848	)		561
	Minimum pension liability adjustment		(1,270	)		—			—
	Cumulative effect from change in accounting policy for derivative instruments, net of tax		—			—			1,464

Total comprehensive income (loss)		$	41,294		$	(50,372	)	$	(28,852	)

The after-tax components of accumulated other comprehensive income (loss) for the nine months ended September 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		1,833			(15,755	)		(1,270	)		(15,192	)

Balance September 30, 2002	$	(636	)	$	(50,338	)	$	(1,270	)	$	(52,244	)

The increase in unrealized losses on cash flow hedges, net of tax, for the three months ended September 30, 2002 is primarily the result of the effect of the decrease in interest rates during the period

11. Subsequent Events

During October 2002, the Company redeemed approximately $18 million of its 11% senior subordinated notes with a face value of approximately $16 million for approximately $17 million in cash.

On October 28, 2002, the Company entered into an agreement to acquire the licensing rights and vehicles of a domestic licensee for approximately $13 million.

12. Guarantor and Non-Guarantor Consolidating Condensed Financial Statements

The following consolidating condensed financial information presents the Consolidating Condensed Balance Sheets as of September 30, 2002 and December 31, 2001, the Consolidated Condensed Statements of Operations for the three months ended September 30, 2002 and September 30, 2001 and the Consolidating Condensed Statements of Operations and Statements of Cash Flows for the nine months ended September 30, 2002, the period March 1, 2001 (Date of Acquisition) to September 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 September 30, 2002

		Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Avis Group Holdings, Inc. Consolidated
Revenues		$	—		$	631,805	$	78,751	$	—		$	710,556

Expenses
	Operating, net		—			247,030		32,201		—			279,231
	Vehicle depreciation and lease charges, net		—			160,453		17,646		—			178,099
	Selling, general and administrative		—			107,475		9,191		—			116,666
	Vehicle interest, net		9,459			43,766		1,016		—			54,241
	Non-vehicle interest, net		7,582			3,206		—		—			10,788
	Non-vehicle depreciation and amortization		241			8,846		702		—			9,789

Total expenses			17,282			570,776		60,756		—			648,814

Income (loss) before equity in earnings of subsidiaries			(17,282	)		61,029		17,995		—			61,742
Equity in earnings of subsidiaries			41,450			10,437		—		(51,887	)		—

Income before income taxes			24,168			71,466		17,995		(51,887	)		61,742
Provision (benefit) for income taxes			(11,643	)		30,016		7,558		—			25,931

Income before extraordinary gains			35,811			41,450		10,437		(51,887	)		35,811
Extraordinary gains, net of tax			274			—		—		—			274

Net income		$	36,085		$	41,450	$	10,437	$	(51,887	)	$	36,085

Avis Group Holdings, Inc. and Subsidiaries

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

For the Three Months Ended September 30, 2001

		Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations		Avis Group Holdings, Inc. Consolidated
Revenues		$	—		$	575,914		$	74,454	$	—	$	650,368

Expenses
	Operating, net		—			208,192			30,931		—		239,123
	Vehicle depreciation and lease charges, net		—			174,038			17,554		—		191,592
	Selling, general and administrative		—			113,750			8,344		—		122,094
	Vehicle interest, net		3,459			52,792			1,697		—		57,948
	Non-vehicle interest, net		7,657			4,835			—		—		12,492
	Non-vehicle depreciation and amortization		5,037			9,949			850		—		15,836
	Unusual charges		—			60,062			—				60,062

Total expenses			16,153			623,618			59,376		—		699,147

Income (loss) before equity in earnings (losses) of subsidiaries			(16,153	)		(47,704	)		15,078		—		(48,779	)
Equity in earnings (losses) of subsidiaries			(20,320	)		7,649			—		12,671		—

Income (loss) before income taxes			(36,473	)		(40,055	)		15,078		12,671		(48,779	)
Provision (benefit) for income taxes			(11,727	)		(19,735	)		7,429		—		(24,033	)

Net income (loss)		$	(24,746	)	$	(20,320	)	$	7,649	$	12,671	$	(24,746	)

Avis Group Holdings, Inc. and Subsidiaries

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

For the Nine Months Ended September 30, 2002

		Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Avis Group Holdings, Inc. Consolidated
Revenues		$	—		$	1,730,792	$	194,998	$	—		$	1,925,790

Expenses
	Operating, net		—			669,925		89,707		—			759,632
	Vehicle depreciation and lease charges, net		—			450,263		49,087		—			499,350
	Selling, general and administrative		—			328,804		24,722		—			353,526
	Vehicle interest, net		10,377			144,290		1,560		—			156,227
	Non-vehicle interest, net		22,897			9,509		—		—			32,406
	Non-vehicle depreciation and amortization		720			24,765		2,247		—			27,732

Total expenses			33,994			1,627,556		167,323		—			1,828,873

Income (loss) before equity in earnings of subsidiaries			(33,994	)		103,236		27,675		—			96,917
Equity in earnings of subsidiaries			69,187			16,051		—		(85,238	)		—

Income before income taxes			35,193			119,287		27,675		(85,238	)		96,917
Provision (benefit) for income taxes			(21,019	)		50,100		11,624		—			40,705

Income before extraordinary gains			56,212			69,187		16,051		(85,238	)		56,212
Extraordinary gains, net of tax			274			—		—		—			274

Net income		$	56,486		$	69,187	$	16,051	$	(85,238	)	$	56,486

Avis Group Holdings, Inc. and Subsidiaries

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

For the Period March 1, 2001 (Date of Acquisition) to September 30, 2001

		Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Avis Group Holdings, Inc. Consolidated
Revenues		$	—		$	1,343,901	$	153,357	$	—		$	1,497,258

Expenses
	Operating, net		—			484,554		65,547		—			550,101
	Vehicle depreciation and lease charges, net		—			380,592		36,173		—			416,765
	Selling, general and administrative		—			257,307		18,906		—			276,213
	Vehicle interest, net		8,071			123,704		2,617		—			134,392
	Non-vehicle interest, net		19,291			12,864		—		—			32,155
	Non-vehicle depreciation and amortization		11,611			22,548		1,945		—			36,104
	Unusual charges		—			60,062		—		—			60,062

Total expenses			38,973			1,341,631		125,188		—			1,505,792

Income (loss) before equity in earnings of subsidiaries			(38,973	)		2,270		28,169		—			(8,534	)
Equity in earnings of subsidiaries			16,280			20,310		—		(36,590	)		—

Income (loss) before income taxes			(22,693	)		22,580		28,169		(36,590	)		(8,534	)
Provision (benefit) for income taxes			(16,540	)		6,300		7,859		—			(2,381	)

Net income (loss)		$	(6,153	)	$	16,280	$	20,310	$	(36,590	)	$	(6,153	)

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

September 30, 2002

		Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Avis Group Holdings, Inc. Consolidated
ASSETS
	Cash and cash equivalents	$	161		$	6,482		$	12,522		$	—		$	19,165
	Receivables, net		—			147,578			26,824			—			174,402
	Prepaid expenses		—			38,447			8,928			—			47,375
	Due from affiliate		(323,393	)		95,005			228,388			—			—
	Deferred income taxes		216,944			337,575			1,621			—			556,140
	Property and equipment, net		—			238,885			13,882			—			252,767
	Investment in consolidated subsidiaries		747,447			773,006			—			(1,520,453	)		—
	Goodwill		804,035			444,667			3,345			—			1,252,047
	Other assets		15,301			39,980			104,595			—			159,876

Total assets exclusive of assets under management programs			1,460,495			2,121,625			400,105			(1,520,453	)		2,461,772

Assets under management programs:
	Restricted cash		—			218			255,034			—			255,252
	Vehicles, net		—			(97,934	)		4,047,279			—			3,949,345
	Due from vehicle manufacturers		—			9,457			233,498			—			242,955

			—			(88,259	)		4,535,811			—			4,447,552

Total assets		$	1,460,495		$	2,033,366		$	4,935,916		$	(1,520,453	)	$	6,909,324

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
	Accounts payable	$	(18,802	)	$	187,976		$	57,467		$	—		$	226,641
	Accrued liabilities		120,047			286,333			26,769			—			433,149
	Due to Cendant Corporation and affiliates, net		442,884			274,642			(179,353	)		—			538,173
	Non-vehicle debt		553,986			4,348			—			—			558,334
	Public liability, property damage and other insurance liabilities		—			145,605			75,252			—			220,857

Total liabilities exclusive of liabilities under management programs			1,098,115			898,904			(19,865	)		—			1,977,154

Liabilities under management programs:
	Vehicle debt		—			109,305			4,154,263			—			4,263,568
	Deferred income taxes		—			277,710			28,512			—			306,222

			—			387,015			4,182,775			—			4,569,790

Stockholder's equity			362,380			747,447			773,006			(1,520,453	)		362,380

Total liabilities and stockholder's equity		$	1,460,495		$	2,033,366		$	4,935,916		$	(1,520,453	)	$	6,909,324

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, net		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 Nine Months Ended September 30, 2002

		Parent			Guarantor			Non- Guarantor			Eliminations			Avis Group Holdings, Inc. Consolidated
Operating Activities
Net income		$	56,486		$	69,187		$	16,051		$	(85,238	)	$	56,486
Adjustments to arrive at income from continuing operations			(274	)		—			—			—			(274	)

Income from continuing operations			56,212			69,187			16,051			(85,238	)		56,212
Adjustments to reconcile net income to net cash provided by (used in) operating activities exclusive of management programs			(32,548	)		(71,742	)		141,249			—			36,959

Net cash provided by (used in) operating activities exclusive of management programs			23,664			(2,555	)		157,300			(85,238	)		93,171

Management programs:
	Vehicle depreciation		—			444,725			34,193			—			478,918

Net cash provided by operating activities			23,664			442,170			191,493			(85,238	)		572,089

Investing Activities
Property and equipment additions			—			(36,380	)		(1,863	)		—			(38,243	)
Retirements of property and equipment			—			2,974			803			—			3,777
Payment for purchase of rental car franchise licensees			—			(2,835	)		(264	)		—			(3,099	)
Investment in subsidiaries			(69,187	)		(16,051	)		—			85,238			—

Net cash used in investing activities exclusive of management programs			(69,187	)		(52,292	)		(1,324	)		85,238			(37,565	)

Management programs:
	Decrease in restricted cash		—			9,239			316,696			—			325,935
	Increase in due from vehicle manufacturers		—			(1,602	)		(148,482	)		—			(150,084	)
	Investment in vehicles		—			(131,724	)		(4,256,608	)		—			(4,388,332	)
	Payments received on investment in vehicles		—			(350,194	)		3,559,775			—			3,209,581

			—			(474,281	)		(528,619	)		—			(1,002,900	)

Net cash used in investing activities			(69,187	)		(526,573	)		(529,943	)		85,238			(1,040,465	)

Financing Activities
Net decrease in non-vehicle debt			(10,900	)		(370	)		—			—			(11,270	)
Increase (decrease) in due to Cendant Corporation and affiliates, net			56,566			91,414			(127,038	)		—			20,942
Payments for debt issuance costs			—			(5,369	)		—			—			(5,369	)

Net cash provided by (used in) financing activities exclusive of management programs			45,666			85,675			(127,038	)		—			4,303

Management programs:
	Net increase in vehicle debt		—			—			469,728			—			469,728

Net cash provided by financing activities			45,666			85,675			342,690			—			474,031

Effect of changes in exchange rates on cash and cash equivalents			—			—			199			—			199

Net increase in cash and cash equivalents			143			1,272			4,439			—			5,854
Cash and cash equivalents, beginning of period			18			5,210			8,083			—			13,311

Cash and cash equivalents, end of period		$	161		$	6,482		$	12,522		$	—		$	19,165

Avis Group Holdings, Inc. and Subsidiaries

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

For the Period March 1, 2001 (Date of Acquisition) to September 30, 2001

		Parent			Guarantor			Non- Guarantor			Eliminations			Avis Group Holdings, Inc. Consolidated
Operating Activities
Net income (loss)		$	(6,153	)	$	16,280		$	20,310		$	(36,590	)	$	(6,153	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities exclusive of management programs			(113,533	)		190,955			122,360			—			199,782

Net cash provided by (used in) operating activities exclusive of management programs			(119,686	)		207,235			142,670			(36,590	)		193,629

Management programs:
	Vehicle depreciation		—			361,225			29,495			—			390,720

Net cash provided by (used in) operating activities			(119,686	)		568,460			172,165			(36,590	)		584,349

Investing Activities
Property and equipment additions			—			(32,073	)		(1,423	)		—			(33,496	)
Retirements of property and equipment			—			12,522			2,962			—			15,484
Payment for purchase of rental car franchise licensees			—			(27,837	)		(424	)		—			(28,261	)
Investment in subsidiaries			(16,280	)		(20,310	)		—			36,590			—

Net cash provided by (used in) investing activities exclusive of management programs			(16,280	)		(67,698	)		1,115			36,590			(46,273	)

Management programs:
	Increase in restricted cash		—			—			(36,855	)		—			(36,855	)
	(Increase) decrease in due from vehicle manufacturers		—			6,485			(290,918	)		—			(284,433	)
	Investment in vehicles		—			(77,521	)		(3,319,358	)		—			(3,396,879	)
	Payments received on investment in vehicles		—			(343,706	)		3,388,442			—			3,044,736

			—			(414,742	)		(258,689	)		—			(673,431	)

Net cash used in investing activities			(16,280	)		(482,440	)		(257,574	)		36,590			(719,704	)

Financing Activities
Net decrease in non-vehicle debt			(317,650	)		(278	)		—			—			(317,928	)
Increase (decrease) in due to Cendant Corporation and affiliates, net			328,675			(79,498	)		(24,787	)		—			224,390
Payments for debt issuance costs			—			(4,593	)		—			—			(4,593	)
Capital contribution from Cendant			125,000			—			—			—			125,000

Net cash provided by (used in) financing activities exclusive of management programs			136,025			(84,369	)		(24,787	)		—			26,869

Management programs:
	Net (decrease) increase in vehicle debt		—			(8,743	)		95,045			—			86,302

Net cash provided by (used in) financing activities			136,025			(93,112	)		70,258			—			113,171

Effect of changes in exchange rates on cash a cash equivalents			—			—			(900	)		—			(900	)

Net increase (decrease) in cash and cash equivalents			59			(7,092	)		(16,051	)		—			(23,084	)
Cash and cash equivalents, beginning of period			141			36,745			29,219			—			66,105

Cash and cash equivalents, end of period		$	200		$	29,653		$	13,168		$	—		$	43,021

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 nine months ended September 30, 2001 since we believe that separate discussions for the two months ended February 28, 2001 and the seven months ended September 30, 2001 are not meaningful in terms of our operating results or comparisons to the prior period.

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

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

	2002		2001			Change
Revenues	$	710,556	$	650,368		$	60,188

Expenses, excluding non-vehicle interest and unusual charges		638,026		626,593			11,433
Unusual charges		—		60,062			(60,062	)
Non-vehicle interest, net		10,788		12,492			(1,704	)

Total expenses		648,814		699,147			(50,333	)

Income (loss) before income taxes		61,742		(48,779	)		110,521
Provision (benefit) for income taxes		25,931		(24,033	)		49,964

Income (loss) from continuing operations	$	35,811	$	(24,746	)	$	60,557

Total revenue increased 9.3% primarily due to a 6.2% increase in vehicle rental revenue per day and an increase in rental transactions during the month of September 2002 compared with September 2001.

Expenses, excluding non-vehicle interest and unusual charges, increased 1.8% primarily due to higher commission-related expenses associated with higher revenues.

Non-vehicle interest, net decreased 13.6% primarily due the termination of our revolving credit facility in September 2001. Such facility was replaced with intercompany funding from Cendant at variable interest rates, which have decreased in 2002.

The provision for income taxes for the three months ended September 30th reflects our overall effective tax rate of 42.0% for 2002 and 49.3% for 2001. The increase in the provision was primarily due to our pretax income in 2002 versus a pretax loss for the three months ended September 30, 2001 that included the negative effect of the goodwill amortization.

As a result of the above-mentioned items, income from continuing operations increased $60.6 million in the third quarter of 2002.

Nine Months Ended September 30, 2002 vs. Nine Months Ended September 30, 2001

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

	2002		2001			Change
Revenues	$	1,925,790	$	1,883,079		$	42,711

Expenses, excluding non-vehicle interest and unusual charges		1,796,467		1,832,466			(35,999	)
Unusual charges		—		60,062			(60,062	)
Non-vehicle interest, net		32,406		41,322			(8,916	)

Total expenses		1,828,873		1,933,850			(104,977	)

Income (loss) before income taxes		96,917		(50,771	)		147,688
Provision (benefit) for income taxes		40,705		(18,164	)		58,869

Income (loss) from continuing operations	$	56,212	$	(32,607	)	$	88,819

Total revenue increased 2.3% primarily due to a 3.5% increase in vehicle rental revenue per day and an increase in rental transactions during the month of September 2002 compared with September 2001.

Expenses, excluding non-vehicle interest and unusual charges decreased 2.0% primarily due to our ability to control operating expenses in response to a decline in travel offset slightly by higher commission expenses corresponding to the increase in revenue.

Non-vehicle interest, net decreased 21.6% primarily due to the termination of our revolving credit facility in September 2001. Such facility was replaced with intercompany funding from Cendant at variable interest rates, which have decreased in 2002.

The provision for income taxes for the nine months ended September 30th reflects our overall effective tax rate of 42.0% for 2002 and 35.8% for 2001. The increase in the provision was primarily due to our reporting pretax income in 2002 versus a pretax loss in for the nine months ended September 30, 2001 that included the negative effect of the goodwill amortization.

As a result of the above-mentioned items, income from continuing operations increased $88.8 million for the nine months ended September 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 September 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.

Item 4. Controls and Procedures

(a): Evaluation of Disclosure Controls and Procedures. The Company's Chief Executive Officer and Senior Vice President and Controller have evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's reports filed or submitted under the Exchange Act.
(b): Changes in Internal Controls. Since the Evaluation Date, there have not been any significant changes in the Company's internal controls or in other factors that could significantly affect such controls.

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: November 4, 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	November 4, 2002
/s/ F. ROBERT SALERNO (F. Robert Salerno)	President, Chief Operating Officer and Director (Principal Executive Officer)	November 4, 2002
/s/ KURT FREUDENBERG (Kurt Freudenberg)	Senior Vice President and Controller (Principal Financial Officer)	November 4, 2002

CERTIFICATIONS

I, John W. Chidsey, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Avis Group Holdings, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 4, 2002

/s/ John W. Chidsey
Chief Executive Officer

I, Kurt Freudenberg, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Avis Group Holdings, Inc.;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

Date: November 4, 2002

/s/ Kurt Freudenberg
Senior Vice President and Controller

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).
10.3		Series 2002-2 Supplement dated as of September 12, 2002 to the Amended and Restated Based Indenture dated as of July 30, 1997 among AESOP Funding L.L.C., Avis Rent A Car System, Inc., JPMorgan Chase Bank, Certain CP Conduit Purchasers, Certain Funding Agents, Certain APA Banks and The Bank of New York, as trustee.
12		Statement Re: Computation of Ratio of Earnings to Fixed Charges.

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AVIS GROUP HOLDINGS INC 10-Q