Notes to Consolidated Financial Statements
(in thousands, except share and per share amounts)
Nature of the Business
. Zipcar, Inc. (Zipcar or the Company), a Delaware
corporation, and its subsidiaries comprise a membership organization that provides self-service vehicle use by the hour or by the day. The Company places vehicles in convenient parking spaces throughout major metropolitan areas and universities in
North America and in Europe. Through the use of the Companys proprietary software, members are able to reserve vehicles online, through a wireless mobile device or by phone, access the vehicle with an electronic pass card or mobile device, and
receive automatic billings to their credit card.
On April 19, 2011, the Company closed its initial public
offering(IPO), of 11,136,726 shares of common stock at an offering price of $18.00 per share, of which 6,666,667 shares were sold by the Company and 4,470,059 shares were sold by selling stockholders, including 1,452,617 shares pursuant
to the underwriters option to purchase additional shares. Net proceeds to the Company were approximately $108,278, after deducting underwriting discounts and expenses. Upon the closing of the IPO, the Company used $51,358 of the proceeds to
repay all outstanding balances including interest as of the payment date associated with certain debt balances.
Reverse
Stock Split
. On March 23, 2011, the board of directors of the Company and the stockholders of the Company approved a 1-for-2 reverse stock split of the Companys outstanding common stock, which was effected on March 29,
2011. All references to shares in the financial statements and the accompanying notes, including but not limited to the number of shares and per share amounts, unless otherwise noted, have been adjusted to reflect the stock split retroactively.
Previously awarded options and warrants to purchase shares of the Companys common stock have also been retroactively adjusted to reflect the stock split.
Merger Agreement
. On December 31, 2012, the Company, Avis Budget Group, Inc. (Avis Budget) and Millennium Acquisition Sub, Inc., a wholly-owned subsidiary of Avis Budget
(Merger Sub) entered into an Agreement and Plan of Merger (the Merger Agreement), pursuant to which, on the terms and subject to the conditions set forth in the Merger Agreement, Avis Budget agreed to acquire all of the
outstanding shares of the Company for $12.25 per share in cash, without interest, and pursuant to which Merger Sub will be merged with and into the Company with the Company continuing as the surviving corporation and a wholly-owned subsidiary of
Avis Budget (the Merger).
On the terms and subject to the conditions set forth in the Merger Agreement, which has
been unanimously approved by the Companys Board of Directors, at the effective time of the Merger (the Effective Time), and as a result thereof, each share of the Companys common stock that is issued and outstanding
immediately prior to the Effective Time (other than the Companys common stock owned by Avis Budget, Merger Sub or any of their respective subsidiaries, or by the Company or any subsidiary of the Company, which will be canceled without payment
of any consideration, and shares of the Company common stock for which appraisal rights have been validly exercised and not withdrawn) will be converted into the right to receive $12.25 in cash, without interest (the Merger
Consideration). Each outstanding option to purchase the Companys common stock will be accelerated, become fully vested and be cancelled prior to the Effective Time and each holder of an option will be entitled to receive, in cash, the
amount by which the Merger Consideration exceeds the exercise price of such option multiplied by the number of shares of common stock subject to such option. Each outstanding warrant to purchase or otherwise acquire the Companys common stock
will be accelerated, become fully vested and be cancelled at the Effective Time and each holder of a warrant will be entitled to receive, in cash, the amount by which the Merger Consideration exceeds the exercise price of such warrant multiplied by
the number of shares of the Companys common stock subject to such warrant.
Consummation of the Merger is subject to
customary conditions, including (i) adoption of the Merger Agreement by the holders of a majority of the outstanding shares of the Companys common stock, (ii) the
72
absence of any law or order prohibiting the consummation of the Merger, (iii) review of the Merger by the UK competition authorities and compliance with any other applicable antitrust or
competition laws or regulations, and (iv) the absence of a material adverse effect with respect to the Company. The consummation of the Merger is not subject to a financing condition.
The Merger Agreement contains certain termination rights for both Avis Budget and the Company, and further provides that, upon
termination of the Merger Agreement in certain circumstances, the Company would be required to pay Avis Budget a termination fee of $16,807.
A special meeting of Zipcar stockholders is scheduled for March 7, 2013 to consider and vote upon adoption of the Merger Agreement.
2.
|
Summary of Significant Accounting Policies
|
Principles of Consolidation
. The consolidated financial statements include the accounts of the
Company and its wholly-owned and majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
. The preparation of the financial statements in conformity with Generally Accepted Accounting Principles in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting
period. On an ongoing basis, management evaluates these estimates and judgments, including those related to revenue recognition, depreciation, stock-based compensation, software development costs, valuation of long-lived and intangible assets,
including goodwill, acquisition accounting, valuation of marketable securities and income taxes. The Company bases these estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are
reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenue and expenses. Actual results could differ
from those estimates.
Foreign Currency.
The financial statements of the Companys foreign
subsidiaries are measured using the local currency as the functional currency. Accordingly, monetary accounts maintained in currencies other than the U.S. Dollar are remeasured in U.S. Dollars in accordance with authoritative guidance. Assets
and liabilities of these subsidiaries are translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average exchange rates in effect during the year. The resulting cumulative translation adjustments have been
recorded in the other comprehensive income component of stockholders equity. Realized foreign currency transaction gains and losses were not material to the consolidated financial statements.
Fair Value Recognition, Measurement and Disclosure.
The Company measures fair value of assets and liabilities and
discloses the sources for such fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Under applicable
accounting guidance, a fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, that may be used to measure fair value:
Level 1Quoted prices in active markets for identical assets or liabilities.
Level 2Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the
assets or liabilities.
73
The Companys cash and cash equivalents of $45,255 and $61,658 and restricted cash of
$15,785 and $7,658 as of December 31, 2012 and 2011, respectively, are carried at fair value based on quoted market prices, which is a Level 1 measurement in the hierarchy of fair value measurements. Short-term and long-term marketable
securities of $38,496 and $38,597 at December 31, 2012 and 2011, respectively, are carried at fair value also based on Level 1 inputs described above. The Companys interest rate caps entered into in March 2012 and May 2012 were $16 at
December 31, 2012 and carried at fair value based on Level 2 inputs. The change in fair value of the interest rate caps was a net decrease of $110 for the year ended December 31, 2012. Management believes that the Companys debt
obligations approximate fair value based on the terms and characteristics of those instruments using Level 3 inputs. The carrying value of long-term debt approximates fair value as the debt bears variable interest rates that will fluctuate as
changes occur in certain benchmark interest rates such as the 30-day commercial paper conduit interest rate. The non-controlling interest associated with Avancar is also valued using Level 3 inputs. Since there has been no change in fair value due
to the cumulative losses of Avancar, there is no accretion to redemption value as of December 31, 2012.
Derivatives and
Financial Instruments.
The Company entered into interest rate caps to hedge interest rate exposures related to its variable funding notes. These instruments, which do not meet the requirements for hedge accounting, are carried as assets
and marked to market at each reporting period with the change in fair value recorded in other, net within other income (expense).
Equity Investment.
In 2012, the Company made an equity investment in a private company accounted for under the equity method. The equity method is used to account an investment in other
associated entities where the Company has significant influence, generally representing equity ownership of at least 20% and not more than 50%. Under this method, the investment, originally recorded at cost, is adjusted to recognize the
Companys share of net earnings or losses of the affiliate as they occur rather than as dividends or other distributions are received, limited to the extent of our investment in, advances to and commitments for the investee. The Company
periodically reviews the carrying value of its investment to determine if circumstances exist indicating impairment to the carrying value of the investment. If impairment is indicated, an adjustment will be made to the carrying value of the
investment. The Company does not believe that there are any facts or circumstances indicating impairment in the carrying value of its investment.
Cash, Cash Equivalents and Cash Flows.
The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Cash
equivalents are stated at cost, which approximates fair value.
Restricted Cash.
As of December 31,
2012 and 2011, there was $15,785 and $7,658, respectively, of cash that was restricted from withdrawal and held by banks including as pledged accounts to guarantee the Companys letters of credit issued principally to secure certain vehicle
leases or as collateral enhancement for Zipcar Vehicle Financing LLC, or ZVF, as well as pledged for insurance policies. The letters of credit automatically renew annually and support irrevocable standby letters of credit issued to vehicle leasing
companies.
Property and Equipment.
Property and equipment are stated at cost and depreciated to their
estimated residual value over their estimated useful lives. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are relieved from the accounts and the resulting gains or losses are included in operating
income in the consolidated statements of operations. Repairs and maintenance costs are expensed as incurred. Depreciation is provided using the straight-line method over the following estimated useful lives:
|
|
|
|
|
Vehicles
|
|
|
1-3 years
|
|
In-car electronic equipment
|
|
|
3 years
|
|
Office and computer equipment
|
|
|
3 years
|
|
Software
|
|
|
3 years
|
|
Leasehold improvements
|
|
|
Lesser of useful life or lease term
|
|
74
Owned vehicles and vehicles held under capital leases are capitalized as part of property
and equipment and depreciated over their expected useful lives to estimated residual value. The initial cost of the vehicle recorded is net of incentives and allowances from manufactures. The Company estimates what the residual values of these
vehicles will be at the expected time of disposal to determine monthly depreciation rates. The estimation of residual values requires the Company to make assumptions regarding the age and mileage of the car at the time of disposal, as well as
expected used vehicle auction market conditions. The Company reevaluates estimated residual values periodically and adjusts depreciation rates as appropriate. Differences between actual residual values and those estimated result in a gain or loss on
disposal and are recorded as part of fleet operations at the time of sale. Actual timing of disposal either shorter or longer than the life used for depreciation purposes could result in a loss or gain on sale.
Leases.
The Company leases certain of its vehicles under noncancelable operating lease agreements (generally one-year
commitments on the part of the Company). The Company also leases vehicles under various capital leases generally with a 36-month stated term. Under the terms of the leases, the Company guarantees the residual value of the vehicle at the end of the
lease. If the wholesale fair value of the vehicle is less than the guaranteed residual value at the end of the lease, the Company will pay the lessor the difference. If the wholesale fair value is greater than the guaranteed residual value, that
difference will be paid to the Company. The Company believes that, based on current market conditions, the average wholesale value of the vehicles at the end of their lease term will equal or exceed the average guaranteed residual value, and
therefore has not recorded a liability related to guaranteed residual values.
Income Taxes.
Deferred
income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the tax rates anticipated to be in effect when such differences reverse. A
valuation allowance is provided if, based on currently available evidence, it is more likely than not that some or all of the deferred tax assets may not be realized. The Company applies the authoritative guidance in accounting for uncertainty in
income taxes recognized in the financial statements. This guidance prescribes a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained
upon external examination. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that
may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement.
Concentrations of Risk and Accounts Receivable.
Financial instruments that potentially subject the Company to
significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Companys accounts receivable primarily consist of members credit cards and of business accounts with credit terms. The
Company records reserves against its accounts receivable balance using an allowance for doubtful accounts. Increases and decreases in the allowance for doubtful accounts are included as a component of general and administrative expenses.
The activity in the allowance for doubtful accounts for the years ended December 31, 2012, 2011 and 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Beginning balance
|
|
$
|
738
|
|
|
$
|
541
|
|
|
$
|
319
|
|
Provision
|
|
|
3,910
|
|
|
|
2,889
|
|
|
|
2,177
|
|
Write-offs and adjustments
|
|
|
(3,692
|
)
|
|
|
(2,692
|
)
|
|
|
(1,955
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
956
|
|
|
$
|
738
|
|
|
$
|
541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012 and 2011, the Company had substantially all cash and cash equivalent balances
at certain financial institutions in excess of federally insured limits. Cash and cash equivalent balances held outside
75
the United States are not covered by federal insurance. The Company, however, maintains its cash and cash equivalent balances with accredited financial institutions.
The Company depends on third-party service providers to deliver its services to its members. In particular, the Company relies on a
limited number of data center facilities, which are located in the United States and the United Kingdom, and a U.S.-based third-party support service provider to handle most of its routine member support calls. If these third-party service providers
terminate, or do not provide an adequate level of service to the Companys members, it would be disruptive to its business as it seeks to replace the service provider or remedy the inadequate level of service.
For the years ended December 31, 2012, 2011 and 2010, there was no customer that accounted for more than 10% of total revenue.
Long-Lived Assets.
The Company reviews long-lived assets for impairment whenever events or changes in
circumstances, such as service discontinuance or technological obsolescence, indicate that the carrying amount of the long-lived asset may not be recoverable. When such events occur, the Company compares the carrying amount of the asset to the
undiscounted expected future cash flows related to the asset. If the comparison indicates that an impairment is present, the amount of the impairment is calculated as the difference between the excess of the carrying amount over the fair value of
the asset. If a readily determinable market price does not exist, fair value is estimated using discounted expected cash flows attributable to the asset.
Goodwill and Acquired Intangible Assets.
The Company tests goodwill for impairment at least annually. The Company reviews goodwill for impairment on the last day of its fiscal year and
whenever events or changes in circumstances indicate that the carrying amount of this asset may exceed its fair value. The assessment is performed at the reporting unit level. The Company first assesses qualitative factors to determine whether it is
necessary to perform the two-step goodwill impairment test. If determined to be necessary, the two-step impairment test is used to identify potential goodwill impairment.
The Company has determined that it has five reporting units: United States of America, United Kingdom, Canada, Spain and Austria.
The fair value of the Companys U.S. reporting unit, which carries approximately $41,871 in goodwill associated with the Flexcar acquisition, was assessed for impairment using a qualitative analysis
examining key events and circumstances affecting fair value, such as budget-to-actual performance and consistency of operating margins, growth in new members and revenue as well as year over year profitability and overall change in the economic
environment and determined it is more likely than not that the reporting units fair value is greater than its carrying amount. As such, no further analysis was required for purposes of testing the U.S. reporting units goodwill for
impairment.
For the Companys UK reporting unit, which carries approximately $60,440 in goodwill associated with the
Streetcar acquisition, the Company bypassed qualitative analysis based upon the results of our 2011 annual impairment test and assessed goodwill for impairment using the two step model. The process of evaluating goodwill for impairment under the two
step model involves the determination of the fair value of the reporting units. The fair value of the reporting units is determined in part by using a discounted future cash flow method, which involves applying appropriate discount rates to
estimated cash flows including terminal value that are based on forecasts of revenue, costs and capital requirements. The Company estimated future revenue growth for the UK reporting unit based on a number of key assumptions, including membership
growth, frequency of reservations per member, duration of trips, pricing for existing markets and entry into new markets. The cost structure assumptions were based on historic trends, modified for inflation and nonrecurring items, and expected
operational efficiencies. The estimated terminal value was calculated using the Two-Stage Growth model. The cash flows employed in the discounted cash flow analysis are based on the Companys most recent financial plan and various growth rates
have been assumed for years beyond the current financial plan period. The Company
76
used a discount rate in the analysis that was deemed to be commensurate with the underlying uncertainties associated with achieving the estimated cash flows projected. The fair value
determination also includes using a guideline public company method in which the reporting unit is compared to publicly traded companies in the industry group. The companies used for comparison under the guideline public company method were selected
based on a number of factors, including but not limited to, the similarity of their industry, growth rate and stage of development, business model and financial risk.
Based on the analysis, the Company noted that the fair value of the UK reporting unit exceeds the carrying value by approximately 22%, indicating no goodwill impairment. As referenced above, the analysis
incorporates quantitative data and qualitative criteria including new information that can change the result of the impairment test. The most significant assumptions used in the analysis are the discount rate, the terminal value and expected future
revenues, gross margins and operating margins. Unfavorable trends in the membership growth, frequency of reservations per member, duration of trips and related pricing could negatively impact the revenue growth and terminal value. If the future
costs are materially different from the historic cost trends or if the Company does not realize operational efficiencies as expected, the expected gross and operating margins could be negatively impacted. The Companys inability to meet
expected results could increase the underlying uncertainties of future projections, thereby causing an increase in the discount rate. Accordingly, unfavorable changes to the assumptions could impact the conclusion regarding whether existing goodwill
is impaired and result in a material impact on the consolidated financial position or results of operations.
The remainder of
the Companys goodwill, $5,212, relates to the Spain and Austria reporting units which were acquired during 2012. As of December 31, 2012, the Company determined there were no changes in events or circumstances that indicate it is
more-likely-than-not that the fair value of these reporting units have fallen below their carrying amount since the purchase price allocation and goodwill analysis was performed for Spain and Austria at acquisition in February and July 2012,
respectively. Accordingly, no further analysis was required for purposes of testing the Spain and Austria reporting units goodwill for impairment.
Acquired intangible assets consist of identifiable intangible assets, including member relationships, parking spaces in place, tradename, non-compete agreements and reservation system resulting from the
Companys acquisitions. Acquired intangible assets are initially recorded at fair value and reported net of accumulated amortization and are amortized over their estimated useful lives of up to five years based on the pattern in which the
economic benefits of the intangible asset are consumed.
Internal-use Software and Website Development
Costs.
The Company follows authoritative guidance on development costs associated with its online reservation, tracking and reporting system. The costs incurred in the preliminary stages of development are expensed as incurred. Once a
project has reached the application development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Costs related to design or maintenance of
internal-use software are expensed as incurred. Upgrade and enhancements are capitalized to the extent they will result in added functionality. These capitalized costs are amortized over the expected benefit period of three years.
For the years ended December 31, 2012, 2011 and 2010, the Company capitalized $4,775, $2,070 and $1,408, respectively, of costs
associated with internal-use software and website development. Amortization of such costs is recorded in fleet operation and was $1,146, $496 and $330 for the years ended December 31, 2012, 2011 and 2010, respectively.
Redeemable Convertible Preferred Stock Warrants.
Prior to the completion of the IPO, the Company had warrants
outstanding that related to the Companys redeemable convertible preferred stock, which were classified as a liability in accordance with authoritative guidance. The warrants were subject to re-measurement at each balance sheet date and any
change in fair value was recognized as a component of other expense. Fair value was measured using the Black-Scholes option pricing model. The Company continued to adjust the liability for changes in fair value until the IPO when all the preferred
stock warrants were converted into warrants to purchase common stock and, accordingly, the liability reclassified to equity.
77
Revenue Recognition.
The Company recognizes revenue only when the
following four criteria are met: price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.
The Company generates revenue primarily from vehicle usage and membership fees from individuals, university students and faculty,
businesses and government agencies. Vehicle usage revenues are recognized as chargeable hours are incurred. Annual membership fees are nonrefundable and are deferred and recognized ratably over the one-year period of membership. Membership
application fees are recorded as deferred revenue and recognized as revenue over the average life of the member relationship, which is currently estimated to be five years. A change in our member attrition rate would increase or decrease this
estimated average life. Direct and incremental costs associated with the membership application process, consisting of the cost of driving record checks and the cost of providing membership cards, are deferred and recognized as an expense over the
estimated life of the member relationship. Annual damage fee waiver fees to cover the deductible costs are recorded as revenue ratably over the term of the plan. The Company charges a fee for returning the vehicles late. Such fees are recorded as
revenue at the time the fee is charged, which is at the end of the reservation period. Sometimes new members are offered driving credits by the Company as an inducement to joining the Company.
These driving credits generally expire shortly after a new member joins and allow the member to operate the Companys vehicles without paying for the usage of the vehicles until the credits are
exhausted. These driving credits are treated as a deliverable in the arrangement and represent a separate unit of accounting since the credits have value on a stand-alone basis with reliable evidence of fair value. Accordingly, a portion of the
annual fee received is allocated to such credits, based on relative fair value of each deliverable, and recorded as revenue upon utilization of such credits or upon expiration, whichever is earlier.
In 2008, the Company commenced offering a fleet management solution by licensing its proprietary vehicle-on-demand technology on a
software-as-a-service (SaaS) basis, primarily to local, state and federal government agencies. Customers are generally charged an upfront fee and a monthly fee. Monthly fees are recognized ratably. If upfront fees are charged then the
upfront fees are recorded as deferred revenue and recognized as revenue over the expected customer relationship period commencing from the day the customer is granted access to the system.
The Company also provides driving credits to existing members for various reasons, including referring a new member. The cost related to
such driving credits is estimated based on an average cost per hour and applied to the estimated hours of driving a member is eligible for based on the corresponding credits. The amount is recorded in the consolidated statement of operations in
Fleet Operations.
Sales tax amounts collected from customers have been recorded on a net basis.
Stock-Based Compensation.
The Company records stock-based payments under the fair value method for all grants from
January 1, 2006 using the prospective application method. Under this method, the Company is required to record compensation cost based on the fair value estimated for stock-based awards granted or modified after the date of adoption over the
requisite service periods for the individual awards, which generally equals the vesting period. The Company utilizes the straight-line amortization method for recognizing stock-based compensation expense.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model, which requires
the use of highly subjective estimates and assumptions. Historically, as a private company, we lacked company-specific historical and implied volatility information. Therefore, we estimate our expected volatility based on the historical volatility
of our publicly traded peer companies and expect to continue to do so until such time as we have adequate historical data regarding the volatility of our traded stock price. The expected life assumption is based on the simplified method for
estimating expected term for awards that qualify as plain-vanilla options. This option has been elected as we do not have sufficient stock option exercise
78
experience to support a reasonable estimate of the expected term. The risk-free interest rate is the yield currently available on U.S. Treasury zero-coupon issues with a remaining term
approximating the expected term of the option. We recognize compensation expense for only the portion of options that are expected to vest. Accordingly, we have estimated expected forfeitures of stock options based on our historical forfeiture rate
and used these rates in developing a future forfeiture rate. If our actual forfeiture rate varies from our historical rates and estimates, additional adjustments to compensation expense may be required in future periods. Management believes that the
valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of our stock options granted. Estimates of fair value are not intended to predict actual future events or the value
ultimately realized by persons who receive equity awards.
401(k) Savings Plan.
The Company has a defined
contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a
pretax basis. Company contributions to the plan may be made at the discretion of its Board of Directors. There were no contributions made to the plan by the Company during the years ended December 31, 2012, 2011 or 2010.
Net Income (Loss) Per Share Attributable to Common Stockholders.
Basic earnings per share is computed by dividing net
income (loss) by the weighted average number of shares of common stock outstanding. For the purposes of calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock outstanding and the
number of dilutive common stock equivalents such as stock options and warrants, as determined using the treasury stock method.
The following is a summary of the shares used in computing diluted earnings per share for the year ended December 31, 2012:
|
|
|
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
|
(in thousands)
|
|
Weighted-average shares outstandingBasic
|
|
|
39,852
|
|
Effect of dilutive securities:
|
|
|
|
|
Options to purchase common stock
|
|
|
1,285
|
|
Warrants to purchase common stock
|
|
|
409
|
|
|
|
|
|
|
Weighted-average shares outstandingDilutive
|
|
|
41,546
|
|
|
|
|
|
|
The following common stock equivalents were excluded from the computation of diluted earnings per share
attributable to common stockholders because they had an anti-dilutive effect:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
(in thousands)
|
|
Options to purchase common stock
|
|
|
2,649
|
|
|
|
4,473
|
|
|
|
4,706
|
|
Warrants to purchase common stock
|
|
|
2
|
|
|
|
983
|
|
|
|
1,656
|
|
Unvested restricted stock
|
|
|
22
|
|
|
|
108
|
|
|
|
|
|
Redeemable convertible preferred stock upon conversion to common stock
|
|
|
|
|
|
|
|
|
|
|
25,328
|
|
Warrants to purchase redeemable convertible preferred stock
|
|
|
|
|
|
|
|
|
|
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,673
|
|
|
|
5,564
|
|
|
|
31,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising Costs.
The Company expenses advertising costs when incurred. Advertising
expenses totaled $10,890 in 2012, $7,428 in 2011 and $5,426 in 2010.
Segment Information.
The Company
operates in two reportable segments: North America and Europe. Both segments derive revenue primarily from members usage of vehicles.
79
Treasury Stock.
The Company accounts for repurchased common stock under
the cost method and includes such treasury stock as a component of stockholders equity. Retirement of treasury stock is recorded as a reduction of common stock, additional paid-in-capital and accumulated deficit, as applicable.
Other Income.
In 2012, 2011 and 2010, the Company recorded other income of $3,028, $3,361 and $1,173, respectively,
from selling some of its zero emission vehicle (ZEV) credits to a third party. The Company received these credits under a state-based low-emission regulation. These laws provide for the purchase and sale of excess ZEV credits earned.
Because the Company utilizes energy efficient vehicles in its business, the Company was able to earn ZEV credits under state regulations, and recorded the proceeds from the sale of these credits as other income.
New Accounting Guidance.
Effective January 1, 2012, the Company retrospectively adopted ASU 2011-05,
Comprehensive Income: Presentation of Comprehensive Income (ASU 2011-05), authoritative guidance which allows an entity the option to present the total of comprehensive income, the components of net income, and the components
of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the
statement of changes in stockholders equity. Additionally, in December 2011, the FASB issued ASU 2011-12 Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other
Comprehensive Income in Accounting Standards Update No. 2011-05 to defer the new requirement under ASU 2011-05 to present components of reclassifications of other comprehensive income on the face of the income statement. The adoption of
this guidance did not have a material effect on the Companys consolidated financial statements.
Effective
January 1, 2012, the Company adopted ASU 2011-04 Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards (IFRS), which is intended to result
in convergence between GAAP and IFRS requirements for measurement of, and disclosures about, fair value. The new standard clarifies or changes certain fair value measurement principles and enhances the disclosure requirements, particularly for Level
3 fair value measurements. The adoption of this ASU did not have a material effect on the Companys consolidated financial statements.
3.
|
Acquisitions and Other Investments
|
On July 9, 2012, the Company acquired Denzel Mobility CarSharing GmbH (CarSharing.at), a leading car
sharing network in Austria with a presence in Vienna and other cities across Austria. On the date of acquisition CarSharing.at offered approximately 200 vehicles and served 10,000 members. With this acquisition, the Company continues to grow its car
sharing network globally, expanding the Companys geographical footprint further into Europe. As a result of this acquisition, the Company paid $3,426, net of $91 cash acquired, including the payoff of $498 debt. Consideration paid includes
$312 held in escrow which will be released to the pre-acquisition CarSharing.at stockholders if CarSharing.at executes a new commercial agreement with an existing business customer no later than 12 months following the closing of the acquisition.
80
The purchase price allocation is as follows:
|
|
|
|
|
Accounts receivable
|
|
$
|
516
|
|
Prepaid and other
|
|
|
318
|
|
Property and equipment
|
|
|
2,034
|
|
Deposits
|
|
|
15
|
|
Goodwill & other intangibles
|
|
|
3,120
|
|
|
|
|
|
|
Total assets
|
|
|
6,003
|
|
Accounts payable
|
|
|
(114
|
)
|
Accrued expenses
|
|
|
(638
|
)
|
Customer deposits
|
|
|
(19
|
)
|
Capital lease obligations
|
|
|
(1,806
|
)
|
|
|
|
|
|
Total liabilities
|
|
|
(2,577
|
)
|
|
|
|
|
|
Total purchase price allocation
|
|
$
|
3,426
|
|
|
|
|
|
|
The breakout of goodwill and other intangibles was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average
amortization
life (years)
|
|
Member relationships
|
|
$
|
287
|
|
|
|
5
|
|
Tradename
|
|
|
62
|
|
|
|
3
|
|
Parking spaces in place
|
|
|
112
|
|
|
|
3
|
|
Goodwill
|
|
|
2,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill results from expected synergies from the acquisition, including marketing associated with a
consistent brand experience, a common technology platform and reduced administrative costs. Also included in goodwill is assembled workforce, which does not qualify for separate recognition. The acquired intangible assets are being amortized based
upon the pattern in which the economic benefits of the intangible assets are being realized, which are on a straight-line basis for all acquired intangible assets except member relationships because the economic benefit derived from member
relationships declines each year due to member attrition. The goodwill associated with this acquisition is reported within the Europe segment. Goodwill and intangible assets recognized in this transaction are not deductible for tax purposes.
The Company incurred $290 in acquisition costs related to Carsharing.at and has recorded these costs in selling, general and
administrative expenses. The operations of CarSharing.at prior to and since the acquisition were not material to the consolidated results of the Company.
On February 1, 2012, the Company exercised its option to purchase a majority interest in Barcelona-based Catalunya Carsharing S.A., known as Avancar, in order to expand the Companys presence in
Europe. In connection with this investment, the Company funded Avancar with $1,758 and also converted its existing loan of $403 to equity and, as a result, received additional shares such that the value held by existing shareholders remained
unchanged. Combined with the 14% interest purchased in 2009 of $260, the Company now has a controlling interest in Avancar of more than 60% and, accordingly, Avancar is consolidated with the Companys financial statements as of
December 31, 2012. At the acquisition date the Company recognized 100% of the fair value of net identifiable tangible and intangible assets of Avancar, non-controlling interest and the Companys equity interest at fair value, and the
excess as goodwill. The Companys investment was based on a negotiated
81
value for Avancar, hence the amount attributable to the noncontrolling interest, as stated below, is at fair value. The purchase price allocation is as follows:
|
|
|
|
|
Cash acquired
|
|
$
|
2,218
|
|
Accounts receivable
|
|
|
203
|
|
Prepaid and other
|
|
|
44
|
|
Property and equipment
|
|
|
68
|
|
Deposits
|
|
|
16
|
|
Goodwill & other intangibles
|
|
|
2,917
|
|
|
|
|
|
|
Total assets
|
|
|
5,466
|
|
Accounts payable
|
|
|
(66
|
)
|
Accrued expenses
|
|
|
(190
|
)
|
Customer deposits
|
|
|
(502
|
)
|
Notes payable
|
|
|
(739
|
)
|
Non controlling interest
|
|
|
(1,548
|
)
|
|
|
|
|
|
Total liabilities and noncontrolling interest
|
|
|
(3,045
|
)
|
|
|
|
|
|
Total purchase price allocation
|
|
$
|
2,421
|
|
|
|
|
|
|
The breakout of goodwill and other intangibles was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average
amortization
life (years)
|
|
Member relationships
|
|
$
|
313
|
|
|
|
5.0
|
|
Tradename
|
|
|
117
|
|
|
|
3.0
|
|
Parking spaces in place
|
|
|
91
|
|
|
|
3.0
|
|
Reservation system
|
|
|
39
|
|
|
|
0.7
|
|
Goodwill
|
|
|
2,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill results from expected synergies from the acquisition, including marketing associated with a
consistent brand experience, a common technology platform and reduced administrative costs. Also included in goodwill is assembled workforce, which does not qualify for separate recognition. The acquired intangible assets are being amortized based
upon the pattern in which the economic benefits of the intangible assets are being realized, which are on a straight-line basis for all acquired intangible assets except member relationships because the economic benefit derived from member
relationships declines each year due to member attrition. The goodwill associated with this acquisition is reported within the Europe segment. Goodwill and intangible assets recognized in this transaction are not deductible for tax purposes.
During the period from December 2014 through December 2015, the remaining Avancar stockholders have a put option to sell
their shares to the Company, and the Company has a call right to acquire such shares, at an agreed price based on a certain multiple of EBITDA. Since the put and call options are not legally detachable and separately exercisable, they are not
considered free standing instruments and as such will not be accounted for separately from the underlying investment. Accordingly, the put and call options are reflected within the valuation of the non-controlling interest.
The operations of Avancar prior to and since acquisition of controlling interest were not material to the consolidated results of the
Company. Acquisition costs associated with Avancar are recorded in selling, general and administrative expenses and are also not considered material for the year ended December 31, 2012.
82
On April 20, 2010, the Company significantly expanded its London operations with the
acquisition of Streetcar Limited (Streetcar), the United Kingdoms largest car sharing service with over 70,000 members and more than 1,500 vehicles. The Company expects this acquisition will help to establish the Company as the
market leader in London with a base for future expansion opportunities in Europe. The purchase price was $62,766. Following the acquisition, Streetcar became a wholly-owned subsidiary of the Company. The results of Streetcars operations have
been included in the Companys consolidated financial statements from the date of the acquisition. Consolidated statements of operations for the year ended December 31, 2010 include revenue and net loss attributable to Zipcar, Inc. of
$23,300 and $3,790 derived from Streetcar.
The Company issued 4.1 million shares of common stock at a value of $43,274
and warrants to acquire 0.9 million shares of common stock at a value of $6,955 along with $7,587 in cash and $4,950 in notes payable to acquire all of the outstanding capital stock of Streetcar. Common stock issued included 0.9 million
shares held in escrow, which was released to the pre-acquisition Streetcar stockholders in the fourth quarter of 2011, reduced by a $99 claim by the Company for an indemnity set forth in the purchase and sale agreement. This $99 return of escrow was
recorded as other income in the fourth quarter of 2011. During 2010, the Company incurred $1,211 in acquisition costs associated with Streetcar and recorded these costs in selling, general and administrative expenses. The purchase price was
allocated to net tangible and intangible assets acquired. The Company allocated $29,005 to tangible assets, $10,434 to intangible assets including member relationships, trade name, parking spaces, non-compete agreements and reservation system and
the remaining $57,219 to goodwill. The weighted average amortization period for the intangible assets is 4.2 years. Goodwill and intangible assets recognized in this transaction are not deductible for tax purposes.
The purchase price was allocated to the fair values of the assets acquired and liabilities assumed as follows:
|
|
|
|
|
Accounts receivable
|
|
$
|
896
|
|
Prepaid expenses and other current assets
|
|
|
1,334
|
|
Property and equipment
|
|
|
26,775
|
|
Member relationships
|
|
|
7,023
|
|
Parking spaces in place
|
|
|
1,603
|
|
Noncompete agreements
|
|
|
657
|
|
Tradename
|
|
|
870
|
|
Reservation system
|
|
|
281
|
|
Goodwill
|
|
|
57,219
|
|
|
|
|
|
|
Total assets acquired
|
|
|
96,658
|
|
Accounts payable
|
|
|
(1,375
|
)
|
Accrued expenses
|
|
|
(4,527
|
)
|
Bank overdraft
|
|
|
(74
|
)
|
Current portion of capital leases
|
|
|
(15,173
|
)
|
Long term portion of capital leases
|
|
|
(12,743
|
)
|
|
|
|
|
|
Total liabilities assumed
|
|
|
(33,892
|
)
|
|
|
|
|
|
Purchase price
|
|
$
|
62,766
|
|
|
|
|
|
|
Goodwill results from expected synergies from the acquisition, including marketing associated with a
single brand, a common technology platform and reduced administrative costs. Also included in goodwill is assembled workforce. The goodwill associated with this acquisition is reported within the United Kingdom segment. The change in the goodwill
balance from the acquisition date to December 31, 2012 is due to the impact of changes in foreign currency exchange rates.
The valuation of the identifiable intangible assets acquired was based on a valuation using currently available information and
reasonable and supportable assumptions. The purchase price of the acquisition was allocated to the assets acquired and liabilities assumed based on estimates of their fair values as of April 20,
83
2010. The tangible long-lived assets were recorded at their estimated fair value, which approximates their carrying value except for Streetcars in-car equipment, which was retired as of
December 31, 2011 and replaced by the Company as part of a transition plan to move to a single technology platform. The fair value for Streetcars in-car equipment was determined by using estimated resale values for the same type of
equipment. The intangible long-lived assets were valued using a combination of income and cost methods. For the assembled workforce and parking spaces in place, the Company used the cost approach, which included certain lost opportunity costs; key
assumptions included the cost to acquire and train the workforce and the time and expected costs to acquire parking spaces. To value the member relationships, the Company used the income approach, specifically, a variation of the discounted
cash-flow method known as the multiperiod excess earnings method; key assumptions included the future revenue and costs attributable to existing members and their expected attrition rates. To value the non-compete agreements, the Company used a
comparative business valuation method; key assumptions included the probability of the individuals in question competing and the impact of such competition on the business. The relief from royalty method, which considers both the market approach and
the income approach, was used to value both the Streetcar trade name and the reservation system; key assumptions included the future revenue attributable to this trade name and reservation system and a market-based royalty rate. Further, all future
cash flows in applicable valuations have been discounted at an estimated discount rate. The Company believes these methods and assumptions were appropriate because of the lack of comparative market sales data required for the market approach when
measuring the value of these assets. The excess of the aggregate estimated purchase price over the estimated fair value of the tangible and intangible assets and liabilities was recorded as goodwill.
The aggregate purchase price of $62,766 includes $43,274 of common stock issued, which is based on a valuation of the Companys
common stock of $10.68 per share as of April 20, 2010. The valuation analysis of the Companys common stock was conducted under a probability-weighted expected return method as prescribed by the AICPA Practice Aid. Under this methodology,
the fair market value of the Companys common stock is estimated based upon an analysis of future values assuming various outcomes. The value is based on the probability-weighted present value of expected future investment returns considering
each of the possible outcomes available to the Company as well as the rights of each share class. The possible outcomes considered are based upon an analysis of future scenarios such as: completion of an initial public offering; sale to a strategic
acquirer; continuation as a private company; and remote likelihood of dissolution.
The private company scenario and sale
scenario analyses use averages of the guideline public company method and the discounted future cash flow method. The Company estimated the enterprise value under the guideline public company method by comparing the Company to publicly-traded
companies in the industry group. The companies used for comparison under the guideline public company method were selected based on a number of factors, including the similarity of their industry, growth rate and stage of development, business model
and financial risk. The Company also estimated its enterprise value under the discounted future cash flow method, which involves applying appropriate discount rates to estimated cash flows that are based on forecasts of revenue, costs and capital
requirements. The Company estimated future revenue growth based on a number of key assumptions including membership growth, frequency of reservations per member, duration of trips and pricing for existing markets and entry into new markets. The
Companys cost structure assumptions were based on historic trends, modified for inflation and expected operational efficiencies. These assumptions underlying the estimates were consistent with the plans and estimates that the Company uses to
manage its business. The Company used a discount rate in its valuation that was deemed to be commensurate with the underlying uncertainties associated with achieving the estimated cash flows projected.
84
The warrants issued in connection with this acquisition have an exercise price of $5.06 to
$8.74. These warrants are fully vested and exercisable over seven years. The fair value of the warrants was estimated using the Black-Scholes option pricing model. The following assumptions were used in estimating the fair value:
|
|
|
|
|
Stock price on April 20, 2010
|
|
$
|
10.68
|
|
Exercise price
|
|
$
|
5.06 - $8.74
|
|
Expected term (in years)
|
|
|
7.0
|
|
Expected volatility
|
|
|
60
|
%
|
Risk-free interest rate
|
|
|
3.20
|
%
|
Expected dividend
|
|
|
0
|
%
|
Upon the closing of the Streetcar acquisition, the Company settled certain assumed liabilities by the
issuance of 40,929 shares of common stock and warrants to acquire 8,132 shares of common stock at an exercise price of $5.06 per share. The fair value of the warrants was estimated using the Black-Scholes option pricing model under the assumptions
disclosed above.
The following unaudited pro forma revenue, net loss attributable to Zipcar, Inc. and net loss attributable
to common stockholders per sharebasic and diluted, reflect the results of operations of the Company for the year ended December 31, 2010 as if the Streetcar acquisition had occurred on January 1. The pro forma results are not
necessarily indicative of what actually would have occurred had the acquisitions been in effect for each of the full years. The pro forma impact on the reported net loss attributable to Zipcar, Inc. and net loss attributable to common stockholders
per sharebasic and diluted, was primarily related to amortization of acquired intangible assets and interest expense.
|
|
|
|
|
Pro forma
|
|
Years
ended
December 31,
2010
|
|
Revenue
|
|
$
|
194,354
|
|
Net loss attributable to Zipcar, Inc.
|
|
$
|
(17,102
|
)
|
Net loss attributable to common stockholder per share:
|
|
|
|
|
- Basic and diluted
|
|
$
|
(1.85
|
)
|
Equity Investment.
In February 2012, the Company made an equity investment of $8,700
for a minority ownership interest in Wheelz, Inc., a peer-to-peer car sharing company targeting university and other campus communities. This entire investment has been attributed to goodwill associated with equity method investee. Wheelz has
recorded a net loss of $4,941 from the time of the Companys investment. Accordingly, the Company recognized an equity loss of $1,325 for the year ended December 31, 2012, which is reported as other, net within other income (expense). As
of December 31, 2012, this investment had a carrying value of $7,375, which is reported in other noncurrent assets. Summarized Financial Information of Wheelz, Inc is presented below.
Statement of Operations Information
|
|
|
|
|
|
|
|
11 months
ended
December 31,
2012
|
Net sales
|
|
|
$
|
26
|
|
Gross loss
|
|
|
|
(252
|
)
|
Net loss
|
|
|
|
(4,941
|
)
|
Balance Sheet Information
|
|
|
|
|
|
|
|
December 31,
2012
|
Current assets
|
|
|
$
|
8,458
|
|
Non-current assets
|
|
|
|
9,702
|
|
Current liabilities
|
|
|
|
268
|
|
Non-current liabilities
|
|
|
|
0
|
|
85
Redeemable Non-controlling Interest.
In connection with the acquisition of
Flexcar in 2007, the Company obtained 85% ownership in one of Flexcars subsidiaries. The remaining 15% ownership in that subsidiary was held by a third party. The third party representing the redeemable non-controlling interest in the
subsidiary held a put right for the remaining interest in the subsidiary. The put right provided the holder of the redeemable non-controlling interest an option to sell its ownership interest to the Company after September 2011 at a price based on
the fair value at the time of the exercise. Since the redeemable non-controlling interest in the subsidiary had a redemption feature, as a result of the put right, the Company classified the redeemable non-controlling interest in the subsidiary in
the mezzanine section of the Consolidated Balance Sheets. The redeemable non-controlling interest was accreted to the redemption value by recording a corresponding adjustment to accumulated deficit at the end of each reporting period. During the
first quarter of 2012, the third party holding this redeemable non-controlling interest exercised its put option to sell its ownership interest to the Company for $400.
A summary of the changes in redeemable non-controlling interest for the years ended December 31, 2012, 2011 and 2010 is provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Balance at beginning of the period
|
|
$
|
400
|
|
|
$
|
277
|
|
|
$
|
111
|
|
Accretion of non-controlling interest to redemption value
|
|
|
|
|
|
|
119
|
|
|
|
162
|
|
Redemption of non-controlling interest
|
|
|
(400
|
)
|
|
|
|
|
|
|
|
|
Acquisition of redeemable non-controlling interest
|
|
|
1,548
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to redeemable non-controlling interest
|
|
|
(489
|
)
|
|
|
4
|
|
|
|
4
|
|
Foreign currency translation adjustment
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of the period
|
|
$
|
1,073
|
|
|
$
|
400
|
|
|
$
|
277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
Financial InstrumentsCash, Cash Equivalents and Marketable Securities
|
All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash
equivalents. The Companys marketable securities have been classified and accounted for as available-for-sale. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the
available-for-sale designations as of each balance sheet date. The Company classifies its marketable debt securities as either short-term or long-term based on each instruments underlying contractual maturity date. Marketable debt securities
with maturities of 12 months or less are classified as short-term and marketable debt securities with maturities greater than 12 months are classified as long-term.
The following tables summarize the Companys available-for-sale securities adjusted cost, gross unrealized losses and fair value by significant investment category recorded as cash and cash
equivalents, short-term marketable securities or long-term marketable securities as of December 31, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
Adjusted
Cost
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Cash and
Cash
Equivalents
|
|
|
Short-Term
Marketable
Securities
|
|
|
Long-Term
Marketable
Securities
|
|
Cash
|
|
$
|
33,566
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
33,566
|
|
|
$
|
33,566
|
|
|
$
|
|
|
|
$
|
|
|
Level 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
11,689
|
|
|
|
|
|
|
|
|
|
|
|
11,689
|
|
|
|
11,689
|
|
|
|
|
|
|
|
|
|
US Treasury securities
|
|
|
2,499
|
|
|
|
|
|
|
|
|
|
|
|
2,499
|
|
|
|
|
|
|
|
1,499
|
|
|
|
1,000
|
|
US agency securities
|
|
|
19,026
|
|
|
|
6
|
|
|
|
|
|
|
|
19,032
|
|
|
|
|
|
|
|
11,403
|
|
|
|
7,629
|
|
Certificates of deposit and time deposits
|
|
|
16,963
|
|
|
|
9
|
|
|
|
(7
|
)
|
|
|
16,965
|
|
|
|
|
|
|
|
9,336
|
|
|
|
7,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
50,177
|
|
|
|
15
|
|
|
|
(7
|
)
|
|
|
50,185
|
|
|
|
11,689
|
|
|
|
22,238
|
|
|
|
16,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
83,743
|
|
|
$
|
15
|
|
|
$
|
(7
|
)
|
|
$
|
83,751
|
|
|
$
|
45,255
|
|
|
$
|
22,238
|
|
|
$
|
16,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
Adjusted
Cost
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Cash and
Cash
Equivalents
|
|
|
Short-
Term
Marketable
Securities
|
|
|
Long-
Term
Marketable
Securities
|
|
Cash
|
|
$
|
18,463
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
18,463
|
|
|
$
|
18,463
|
|
|
$
|
|
|
|
$
|
|
|
Level 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
43,195
|
|
|
|
|
|
|
|
|
|
|
|
43,195
|
|
|
|
43,195
|
|
|
|
|
|
|
|
|
|
US Treasury securities
|
|
|
9,014
|
|
|
|
2
|
|
|
|
|
|
|
|
9,016
|
|
|
|
|
|
|
|
8,011
|
|
|
|
1,005
|
|
US agency securities
|
|
|
21,531
|
|
|
|
1
|
|
|
|
(6
|
)
|
|
|
21,526
|
|
|
|
|
|
|
|
13,376
|
|
|
|
8,150
|
|
Certificates of deposit and time deposits
|
|
|
8,056
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
8,055
|
|
|
|
|
|
|
|
3,401
|
|
|
|
4,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
81,796
|
|
|
|
3
|
|
|
|
(7
|
)
|
|
|
81,792
|
|
|
|
43,195
|
|
|
|
24,788
|
|
|
|
13,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
100,259
|
|
|
$
|
3
|
|
|
$
|
(7
|
)
|
|
$
|
100,255
|
|
|
$
|
61,658
|
|
|
$
|
24,788
|
|
|
$
|
13,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company may sell certain of its marketable securities prior to their stated maturities for strategic
reasons including, but not limited to, anticipation of credit deterioration and duration management. The Company did not record any material realized gains or losses during the years ended December 31, 2012 and 2011. The maturities of the
Companys long-term marketable securities range from one year to two years.
As of December 31, 2012 gross
unrealized losses were not material. The Company considers the declines in market value of its marketable securities investment portfolio to be temporary in nature. The Companys investment policy requires investments to be U.S. Treasury
securities, overnight sweep bank deposits, securities of U.S. Federal agencies and money market investments that are direct obligations of the U.S. Treasury, with the objective of preserving the principal value of the investment portfolio while
maintaining liquidity to meet anticipated cash flow needs.
Fair values were determined for each individual security in the
investment portfolio. When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any
changes thereto, and the Companys intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investments amortized cost basis. During the years ended December 31, 2012
and 2011, the Company did not recognize any impairment charges. As of December 31, 2012 and 2011, the Company did not consider any of its investments to be other-than-temporarily impaired.
5.
|
Property and Equipment, Net
|
Property and equipment, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Vehicles
|
|
$
|
168,907
|
|
|
$
|
113,250
|
|
In-car electronic equipment
|
|
|
12,251
|
|
|
|
9,469
|
|
Office and computer equipment
|
|
|
6,620
|
|
|
|
5,460
|
|
Software
|
|
|
13,439
|
|
|
|
6,011
|
|
Leasehold improvements
|
|
|
2,547
|
|
|
|
2,112
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
203,764
|
|
|
|
136,302
|
|
Less: accumulated depreciation
|
|
|
(44,414
|
)
|
|
|
(32,513
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
159,350
|
|
|
$
|
103,789
|
|
|
|
|
|
|
|
|
|
|
87
Depreciation expense for the years ended December 31, 2012, 2011 and 2010 was $38,183,
$25,248 and $10,188, respectively. In the first quarter of 2012 and 2011, the Company changed its estimate of the net realizable value at the end of the expected holding period of certain vehicles and as a result increased the depreciation rates,
which resulted in higher depreciation expense during 2012 and 2011 of approximately $1,868, or $0.04 per diluted share and approximately $2,880, or $0.10 per diluted share, respectively, than if the Company had not changed the holding period
estimate.
Cost of vehicles under capital leases were $29,921 as of December 31, 2012 and $23,377 as of December 31,
2011. Accumulated depreciation of vehicles under capital leases was $1,984 as of December 31, 2012 and $1,807 as of December 31, 2011.
6.
|
Goodwill and Other Intangible Assets
|
The following table displays goodwill and other intangible assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
Goodwill
|
|
$
|
107,523
|
|
|
$
|
|
|
|
$
|
99,696
|
|
|
$
|
|
|
|
|
|
|
|
Member relationships
|
|
$
|
11,691
|
|
|
$
|
(9,278
|
)
|
|
$
|
10,748
|
|
|
$
|
(7,124
|
)
|
Parking spaces
|
|
|
2,087
|
|
|
|
(1,751
|
)
|
|
|
1,803
|
|
|
|
(1,096
|
)
|
Trade name
|
|
|
1,106
|
|
|
|
(968
|
)
|
|
|
881
|
|
|
|
(560
|
)
|
Noncompete agreements
|
|
|
695
|
|
|
|
(695
|
)
|
|
|
665
|
|
|
|
(563
|
)
|
Reservation system
|
|
|
336
|
|
|
|
(336
|
)
|
|
|
284
|
|
|
|
(284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,915
|
|
|
$
|
(13,028
|
)
|
|
$
|
14,381
|
|
|
$
|
(9,627
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The changes in the gross carrying amount and accumulated amortization of goodwill are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Adjustments to Goodwill
|
|
|
Balance at
|
|
|
Adjustments to Goodwill
|
|
|
Balance at
|
|
|
|
2010
|
|
|
Acquisitions
|
|
|
Foreign Exchange
|
|
|
2011
|
|
|
Acquisitions
|
|
|
Foreign Exchange
|
|
|
2012
|
|
Europe
|
|
$
|
57,879
|
|
|
$
|
|
|
|
$
|
(54
|
)
|
|
$
|
57,825
|
|
|
$
|
5,016
|
|
|
$
|
2,811
|
|
|
$
|
65,652
|
|
North America
|
|
|
41,871
|
|
|
|
|
|
|
|
|
|
|
|
41,871
|
|
|
|
|
|
|
|
|
|
|
|
41,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
99,750
|
|
|
$
|
|
|
|
$
|
(54
|
)
|
|
$
|
99,696
|
|
|
$
|
5,016
|
|
|
$
|
2,811
|
|
|
$
|
107,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company estimates useful lives for each category of intangible assets based on the period over which
the asset is expected to contribute directly or indirectly to the future cash flows of the Company. The acquired intangible assets subject to amortization are amortized based upon the pattern in which the economic benefits of the intangible assets
are being realized, which are on a straight-line basis for all acquired intangible assets except member relationships. Member relationships are amortized 33% in the first year, 27% in the second year, 20% in the third year, 13% in the fourth year
and 7% in the fifth year primarily because the economic benefit derived from member relationships declines due to member attrition each year. The Company estimated the expected member attrition rate primarily based on historical attrition rates.
The amortization period for the acquired intangible assets subject to amortization is as follows:
|
|
|
|
|
Member relationships
|
|
|
5 years
|
|
Parking spaces in place
|
|
|
3 years
|
|
Trade name
|
|
|
2.7 years
|
|
Noncompete agreements
|
|
|
2 years
|
|
Reservation system
|
|
|
1.5 years
|
|
88
Amortization expenses for the years ended December 31, 2012, 2011 and 2010 were $3,070,
$3,892 and $3,414, respectively.
Future amortization expense is expected to be as follows:
|
|
|
|
|
2013
|
|
$
|
1,624
|
|
2014
|
|
|
915
|
|
2015
|
|
|
283
|
|
2016
|
|
|
53
|
|
2017
|
|
|
12
|
|
|
|
|
|
|
|
|
$
|
2,887
|
|
|
|
|
|
|
Preferred Stock.
The Company has authorized 10,000,000 shares of preferred stock, par value $0.001 per
share, all of which is undesignated.
Common Stock.
The Company has authorized 500,000,000 shares of common
stock, par value $0.001 per share. As of December 31, 2012 and 2011, 40,121,660 and 39,655,840 shares of common stock, respectively, were issued and outstanding. Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of the Companys stockholders. Common stockholders are not entitled to receive dividends unless declared by the Companys Board of Directors.
On March 23, 2011, the Companys Board of Directors and stockholders approved a 1-for-2 reverse stock split of the Companys outstanding common stock, which was effected on March 29,
2011. Stockholders entitled to fractional shares as a result of the reverse stock split received a cash payment for such fractional shares in lieu of receiving fractional shares. Shares of common stock underlying outstanding stock options and
warrants were proportionately reduced and the respective exercise prices were proportionately increased in accordance with the terms of the agreements governing such securities. Shares of common stock reserved for issuance upon the conversion of the
Companys redeemable convertible preferred stock were proportionately reduced and the respective conversion prices were proportionately increased. All references to shares in the financial statements and the accompanying notes, including but
not limited to the number of shares and per share amounts, unless otherwise noted, have been adjusted to reflect the stock split retroactively. Previously awarded options and warrants to purchase shares of the Companys common stock were also
retroactively adjusted to reflect the stock split.
On April 19, 2011, the Company closed its IPO of 11,136,726 shares of
common stock at an offering price of $18.00 per share, of which 6,666,667 shares were sold by the Company and 4,470,059 shares were sold by selling stockholders, including 1,452,617 shares pursuant to the underwriters option to purchase
additional shares, resulting in net proceeds to the Company of approximately $111,600, after deducting underwriting discounts. All outstanding shares of the Companys redeemable convertible preferred stock converted to 25,097,901 shares of
common stock at the closing of the IPO. Redeemable convertible preferred stock warrants were also converted into warrants to purchase common stock and, accordingly, the liability associated with the warrants, aggregating $1,202, was reclassified to
stockholders equity at the closing. At the time of the conversion of the redeemable convertible preferred stock warrants in the second quarter of 2011, the Company recorded a charge of $550 as the final mark to market adjustment.
Warrants.
As of December 31, 2012, the Company had warrants outstanding and exercisable for the purchase of
774,946 shares of common stock at prices ranging from $5.06 to $137.62 per share. During 2012, holders of warrants exercised warrants to purchase an aggregate of 207,895 shares of common stock, a portion of which were exercised via a cashless net
share settlement process, resulting in the forfeiture of 102,162 shares in satisfaction of the warrant exercise price and the issuance of 105,733 shares of common stock.
89
As of December 31, 2011, the Company had warrants outstanding and exercisable for the
purchase of 982,836 shares of common stock at prices ranging from $0.98 to $137.62 per share. During 2011, warrants to purchase 584,656 shares of common stock for an aggregate purchase price of $612 were exercised.
Upon the closing of the Companys IPO on April 19, 2011, the Companys redeemable convertible preferred stock warrants
were converted into warrants to purchase common stock and, accordingly, the liability associated with the warrants aggregating $1,202 was reclassified to stockholders equity. The change in fair value of $724 in 2011 was recorded in other
income (expense), net.
8.
|
Stock-based Compensation
|
Employee Stock-Based Awards.
The Companys 2000 Stock Option/Stock Issuance Plan (the
2000 Plan) and the 2010 Stock Incentive Plan (the 2010 Plan) permitted the Company to make grants of incentive stock options, non-statutory stock options, restricted stock, restricted stock units and other stock-based awards
with a maximum term of ten years. After the effective date of the Companys 2011 Stock Incentive Plan (the 2011 Plan), the Company granted no further stock options or other awards under the 2000 Plan or 2010 Plan.
In March 2011, the Companys Board of Directors and stockholders approved the 2011 Plan, which became effective upon the closing of
the IPO. Under the 2011 Plan, the Company originally reserved up to 2,500,000 shares of its common stock for issuance pursuant to stock options and stock awards, which included shares of common stock reserved for issuance under the 2010 Plan that
remained available for issuance immediately prior to the closing of the IPO. In addition, the 2011 Plan contains an evergreen provision that provides for an annual increase in the number of shares available for issuance under the 2011
Plan on the first day of the fiscal years ending December 31, 2012, 2013 and 2014 equal to the lowest of 1,500,000 shares of common stock, 3% of the number of common shares outstanding on that date or a lesser amount as may be determined by the
Companys Board of Directors. Accordingly, on January 1, 2013 and 2012, the number of shares available for issuance under the 2011 Plan increased by 1,203,650 and 1,189,675 shares, respectively. The number of shares available for issuance
under the 2011 Plan will also be increased by any shares subject to awards previously granted under the 2010 Plan or the 2000 Plan which expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their
original issuance price pursuant to a contractual repurchase right.
As of December 31, 2012 and 2011, 2,522,974 shares
and 2,414,635 shares of common stock, respectively, were available for future issuance under the 2011 Plan. The Company settles share-based compensation awards with newly issued shares.
Stock Options.
Stock options generally vest over 48 months as follows: (i) 25% vest after 12 months, generally
from the date of grant and (ii) the remaining 75% vest thereafter at 2.083% per month.
Stock options have
historically been granted with exercise prices equal to the estimated fair value of the Companys common stock on the date of grant. Commencing in the second quarter 2011, the Company based fair value on the quoted market price of its common
stock. Because there was no public market for the Companys common stock prior to the IPO in April 2011, the Companys Board of Directors determined the fair value of common stock taking into account the Companys most recently
available valuation of common stock.
Beginning in July 2009 through the IPO, the Companys valuation analysis was
prepared using the probability-weighted expected return method as prescribed by the AICPA Practice Aid. Under this methodology, the fair market value of the Companys common stock was estimated based upon an analysis of future values assuming
various outcomes. The share value was based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available to the Company as well as the rights of each share class.
The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The expected
term assumption was based on the simplified method for estimating expected
90
term for awards that qualify as plain-vanilla options under authoritative guidance. This option has been elected as the Company does not have sufficient stock option exercise
experience to support a reasonable estimate of the expected term. Expected volatility is based on volatility of similar entities. The risk-free interest rate is the yield currently available on U.S. Treasury zero-coupon issues with a remaining term
approximating the expected term used as the input to the Black-Scholes model. The relevant data used to determine the value of the stock option grant is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Weighted average risk-free interest rate
|
|
|
1.10
|
%
|
|
|
2.15
|
%
|
|
|
2.45
|
%
|
Expected volatility
|
|
|
58
|
%
|
|
|
59
|
%
|
|
|
61
|
%
|
Expected life (in years)
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
Expected dividends
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Weighted-average fair value of options granted
|
|
$
|
6.81
|
|
|
$
|
8.36
|
|
|
$
|
5.68
|
|
A summary of stock option activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Life
(in years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Options outstanding as of December 31, 2009
|
|
|
3,691,817
|
|
|
$
|
4.21
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
1,362,162
|
|
|
$
|
9.85
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
88,332
|
|
|
$
|
2.75
|
|
|
|
|
|
|
|
|
|
Options expired
|
|
|
24,823
|
|
|
$
|
4.80
|
|
|
|
|
|
|
|
|
|
Options forfeited
|
|
|
235,318
|
|
|
$
|
6.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding as of December 31, 2010
|
|
|
4,705,506
|
|
|
$
|
5.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
811,475
|
|
|
$
|
14.86
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
723,372
|
|
|
$
|
3.78
|
|
|
|
|
|
|
|
|
|
Options expired
|
|
|
41,594
|
|
|
$
|
4.93
|
|
|
|
|
|
|
|
|
|
Options forfeited
|
|
|
279,268
|
|
|
$
|
8.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding as of December 31, 2011
|
|
|
4,472,747
|
|
|
$
|
7.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
1,455,000
|
|
|
$
|
12.73
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
360,087
|
|
|
$
|
4.33
|
|
|
|
|
|
|
|
|
|
Options expired
|
|
|
90,210
|
|
|
$
|
8.95
|
|
|
|
|
|
|
|
|
|
Options forfeited
|
|
|
283,454
|
|
|
$
|
11.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding as of December 31, 2012
|
|
|
5,193,996
|
|
|
$
|
9.01
|
|
|
|
6.8
|
|
|
$
|
8,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable as of December 31, 2010
|
|
|
2,522,482
|
|
|
$
|
3.83
|
|
|
|
|
|
|
|
|
|
Options exercisable as of December 31, 2011
|
|
|
2,766,434
|
|
|
$
|
5.33
|
|
|
|
|
|
|
|
|
|
Options exercisable as of December 31, 2012
|
|
|
3,205,856
|
|
|
$
|
6.79
|
|
|
|
5.6
|
|
|
$
|
8,563
|
|
Vest and expected to vest at December 31, 2012
|
|
|
5,032,975
|
|
|
$
|
8.90
|
|
|
|
6.7
|
|
|
$
|
8,757
|
|
The aggregate intrinsic value in the table above represents the total intrinsic value, based on the
Companys common stock closing price of $8.24 as of December 31, 2012, which would have been received by the option holders had all in-the-money option holders exercised their options as of that date. The total number of in-the-money
options outstanding as of December 31, 2012 was 2,308,271. The total number of in-the-money options exercisable as of December 31, 2012 was 2,120,155.
The total intrinsic value of stock options exercised was $2,232, $9,696 and $592 for the years ended December 31, 2012, 2011 and 2010, respectively. The amount of cash received from the exercise of
options during 2012 was $1,559. No tax benefits were realized in 2012 due to the Companys net operating loss carryforward.
91
Restricted Stock.
On February 24, 2011, the Company issued 173,370
restricted shares of common stock to three board members at a purchase price of $14.42 per share, which was the estimated fair value of the Companys common stock on the date of grant. These shares are subject to a right, but not an obligation,
of repurchase by the Company at the original issuance price, which lapses quarterly over two years from the date of issuance. The Company received proceeds of $2,500 from the issuance of such shares, which was recorded as deposit liability in the
condensed consolidated balance sheet, and is being reclassified to additional paid-in capital over the vesting period. At December 31, 2012, 21,673 shares are restricted and the Company had recorded $312 associated with such shares as a current
liability. There was no restricted stock granted during the year ended December 31, 2012.
Stock-Based
Compensation.
During the years ended December 31, 2012, 2011 and 2010, the Company recognized stock-based compensation expense related to equity awards of $5,681, $4,148 and $2,774, respectively. $120 and $40 of stock-based
compensation expense was capitalized as part of internal-use software and website development costs during 2012 and 2011, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Member services and fulfillment
|
|
$
|
209
|
|
|
$
|
93
|
|
|
$
|
84
|
|
Research and development
|
|
|
205
|
|
|
|
165
|
|
|
|
188
|
|
Selling, general, and administrative
|
|
|
5,147
|
|
|
|
3,850
|
|
|
|
2,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation
|
|
$
|
5,561
|
|
|
$
|
4,108
|
|
|
$
|
2,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrecognized stock-based compensation for all stock-based awards was $11,992 as of
December 31, 2012, net of forfeitures, and is being recognized over a weighted average period of 2.7 years.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Payroll and related benefits
|
|
$
|
5,151
|
|
|
$
|
4,237
|
|
Sales tax
|
|
|
5,145
|
|
|
|
4,899
|
|
Fleet related
|
|
|
4,960
|
|
|
|
3,455
|
|
Insurance
|
|
|
4,617
|
|
|
|
1,852
|
|
Legal, audit, tax, and professional fees
|
|
|
2,372
|
|
|
|
1,382
|
|
Member deposits
|
|
|
1,269
|
|
|
|
803
|
|
Interest and credit card fees
|
|
|
639
|
|
|
|
701
|
|
Marketing
|
|
|
443
|
|
|
|
156
|
|
Rent
|
|
|
369
|
|
|
|
319
|
|
Deposit liability
|
|
|
312
|
|
|
|
1,250
|
|
Other
|
|
|
946
|
|
|
|
949
|
|
|
|
|
|
|
|
|
|
|
Total accrued expenses
|
|
$
|
26,223
|
|
|
$
|
20,003
|
|
|
|
|
|
|
|
|
|
|
In May 2008, June 2009 and March 2010, the Company entered into Loan and Security Agreements (the Loan and
Security Agreements) with two financial institutions, which provided for up to $40,000 in term loans. Amounts borrowed under these facilities were payable in monthly installments ranging between 27 and 36 months. In April 2010, in connection
with the acquisition of Streetcar, the Company issued $5,000 in notes payable to certain former shareholders of Streetcar Limited (the Streetcar Notes), which the Company acquired in 2010.
92
In May 2010, Zipcar Vehicle Financing LLC (ZVF), a bankruptcy-remote
special purpose entity wholly-owned by the Company, completed the closing of a variable funding note facility (the ABS facility), and entered into a base indenture with Deutsche Bank Trust Company Americas as trustee and securities
intermediary for the noteholders of the initial series of notes issued pursuant to the ABS facility (the 2010 Series). The initial committed aggregate principal amount of the 2010 Series was $70,000 from two financial
institutionsCredit Agricole CIB (the 2010 Credit Agricole Note) and Goldman, Sachs & Co. (the Goldman Note). The assets that collateralize the ABS facility are not available to satisfy the claims of the
Companys general creditors.
Upon the closing of the IPO on April 19, 2011, the Company used approximately $51,400
of the proceeds to repay all outstanding balances, including interest as of the payment date, associated with the Loan and Security Agreements, the Streetcar Notes and the Goldman Note. In connection with these repayments, the Company recorded an
aggregate charge to interest expense of approximately $3,300 of which $640 related to unamortized debt issuance costs, $740 related to warrant expenses and the balance of $1,920 was primarily the remaining interest related to the final interest
payments.
On May 11, 2011, ZVF completed the closing of an amendment and extension of the 2010 Series. The committed
aggregate principal amount of the amended and extended series was $50,000. The amended and extended 2010 Series had a revolving period of one year, with an amortization period of an additional two years. The interest rate was 2.0% per annum
above the 30-day commercial paper conduit interest rates in addition to 1.0% per annum on the undrawn portion.
On
December 29, 2011, ZVF issued a new series of variable funding notes pursuant to the ABS facility (the 2011 Series) in the principal amount of $50,000. The 2011 Series has a revolving period of one year followed by an amortization
period of an additional two years. The interest rate is 2.0% per annum above the cost of funds, which approximates the 30-day commercial paper rate payable to conduit investors in addition to up to 0.85% per annum on the undrawn portion.
ZVF expects to continue to use the ABS facility to purchase vehicles. In December 2012, the 2011 Series was extended for an additional 60 day period and in February 2013 was extended through December 31, 2013.
On May 9, 2012, ZVF entered into a second amendment and restatement and extension of the 2010 Series. The committed aggregate
principal amount of the second amended and extended Series remains at $50,000. The amended and extended Series had a revolving period of one year, with an amortization period of an additional two years. The interest rate is 2.0% per annum above
the 30-day commercial paper conduit interest rate. Any undrawn portion of the 2010 Series is assessed a fee of 0.75% per annum. In February 2013, the revolving period was extended to December 31, 2013.
Fees paid towards the debt structure and debt issue costs such as legal expenses associated with the ABS facility are deferred and
amortized to interest expense on a straight-line basis over the expected life of the debt, which is three years. The second amendment and restatement and extension of the 2010 Series was accounted for as a modification of debt and as such
unamortized debt issuance costs associated with this Series are being amortized to interest expense over the expected life of the debt, which is three years. The total unamortized balance of debt issue costs were $2,039 and $1,698 at
December 31, 2012 and 2011, respectively.
ZVF is subject to numerous restrictive covenants and compliance requirements
under the base indenture and the other related agreements governing the ABS facility. The ABS facility agreements include restrictive covenants and compliance requirements applicable to ZVF with respect to liens, further indebtedness, minimum
liquidity amounts, funding ratios, collateral enhancements, vehicle manufacturer mix, timely reporting and payments, use of proceeds, and sale of assets. For example, in order to obtain a funding advance under the ABS facility, the Company is
required to contribute a proportionate amount of cash to ZVF for the exclusive use of vehicle purchases. The Company is in compliance with all restrictive covenants and compliance requirements. The facility is also subject to events of default and
amortization that are customary in nature for automobile asset-backed securitizations of this type. The occurrence of an amortization event or event of default could result
93
in the acceleration of principal and a liquidation of the fleet securing the facility. The Companys interest rates are subject to increase following an amortization event, such as
non-renewal. The carrying amount of vehicles pledged as collateral for the facility was $82,361 and $70,021 as of December 31, 2012 and 2011, respectively.
In May 2012, in connection with the second amendment and restatement and extension of the 2010 Series, the Company liquidated its previous interest rate cap contract and purchased a new interest cap
contract for a 3 year period as required under the terms of the ABS facility. The new interest rate cap, with the same 3.5% cap limit, was purchased at a cost of $39 net of proceeds from the sale of the previous interest rate cap contract.
Additionally, as required under the 2011 Series, in March 2012, the Company purchased an interest rate cap at 3.5% for the entire notional amount of $50,000 to hedge interest rate exposures through the amortization period. These instruments, which
do not meet the requirements for hedge accounting, are marked to market at each reporting period with the change in fair value recorded in other, net within other income (expense).
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
ABS facilities
|
|
|
77,000
|
|
|
$
|
48,000
|
|
Less: current poriton of long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
77,000
|
|
|
$
|
48,000
|
|
|
|
|
|
|
|
|
|
|
Payments due on long-term debt during each of the five fiscal years subsequent to December 31, 2012
are as follows:
|
|
|
|
|
2013
|
|
$
|
|
|
2014
|
|
|
|
|
2015
|
|
|
77,000
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
$
|
77,000
|
|
|
|
|
|
|
The Company had $5,300 outstanding under letters of credit as of December 31, 2012 related to auto
insurance.
11.
|
Commitments and Contingencies
|
Leases.
The Company leases its office spaces under noncancelable lease agreements. The leases
include certain lease incentives, payment escalations and rent holidays, the net effect of which is being recognized as a reduction to rent expense such that rent expense is recognized on a straight-line basis over the term of occupancy. In November
2012, the Company entered into a lease for office space in Boston, Massachusetts. This lease expires on December 31, 2023 and we have the option to extend the lease for two additional five-year periods. The Company also leases certain vehicles
under noncancelable lease agreements (generally one-year commitments). Lease expenses for the Companys office spaces and vehicles under operating leases were $13,845, $24,380 and $32,586 for the years ended December 31, 2012, 2011 and
2010, respectively.
The Company also leases vehicles under various capital leases, generally with a 36-month stated term.
Under the terms of certain leases, the Company guarantees the residual value of the vehicle at the end of the lease. If the wholesale fair value of the vehicle is less than the guaranteed residual value at the end of the lease, the Company will pay
the lessor the difference. If the wholesale fair value is greater than the guaranteed residual value, that difference will be paid to the Company. The Company believes that, based on current market conditions, the average wholesale value of the
vehicles at the end of lease term will equal or exceed the average guaranteed residual value, and therefore has not recorded a liability related to guaranteed residual values.
94
The Company has the option to buy out each lease at any time after a minimum period by
paying the lessor the total principal due under the lease, including the guaranteed residual value and taking title of the leased vehicle. The Company historically has not exercised this option.
Future minimum annual lease payments under noncancelable leases as of December 31, 2012 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Operating
Leases
|
|
|
Capital
Leases
|
|
2013
|
|
|
5,034
|
|
|
|
14,431
|
|
2014
|
|
|
3,397
|
|
|
|
11,382
|
|
2015
|
|
|
3,234
|
|
|
|
5,947
|
|
2016
|
|
|
2,701
|
|
|
|
380
|
|
2017
|
|
|
2,487
|
|
|
|
|
|
Thereafter
|
|
|
11,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total future minimum lease payments
|
|
|
28,592
|
|
|
|
32,140
|
|
|
|
|
|
|
|
|
|
|
Less amounts currently due
|
|
|
|
|
|
|
14,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,709
|
|
|
|
|
|
|
|
|
|
|
Capitalized vehicle leases have interest rates between 3.8% and 5.8%. Under certain capital lease
agreements, the Company is required to maintain prescribed levels of cash and cash equivalents and working capital, which the Company was in compliance with as of December 31, 2012 and 2011.
In 2010, the Company sold some of its recently purchased vehicles for $802 in an operating lease sale-leaseback transaction which
resulted in no gain or loss.
Litigation.
On July 27, 2011, a putative class action lawsuit was filed
against the Company in the United States District Court for the District of Massachusetts, Reed v. Zipcar, Inc., Case No. 1:11-cv-11340-RGS. The lawsuit alleged that the Companys late fees were unlawful penalties. The lawsuit purported to
assert claims against the Company for unjust enrichment, money had and received, for declaratory judgment, and for unfair and deceptive trade practices under Massachusetts General Laws ch. 93A, and requested certification of a class consisting of
all Zipcar members who have incurred late fees at the presently imposed rates. The plaintiff sought unspecified amounts of restitution and disgorgement of the revenues and/or profits that the Company allegedly received from imposing late fees, as
well as a declaration that such late fees were void, unenforceable, and/or unconscionable, and an award of treble damages, attorneys fees and costs. On November 10, 2011, the Company filed a motion to dismiss, and on July 31, 2012,
the court granted the Companys motion to dismiss, dismissing the lawsuit in its entirety with prejudice. On August 29, 2012, the plaintiff filed a notice of appeal with the United States District Court for the District of Massachusetts.
While the Company intends to contest the plaintiffs appeal vigorously, neither the outcome of the appeal nor the amount and range of potential damages or exposure associated with the litigation if the appeal is successful can be assessed at
this time.
The Company is also subject, from time to time, to various other legal proceedings and claims arising in the
ordinary course of business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters will not have a material adverse effect on its business, financial position, results of
operations or cash flows.
95
An analysis of the components of income (loss) before income taxes and the related provision for income taxes is
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
14,603
|
|
|
$
|
1,522
|
|
|
$
|
(7,367
|
)
|
Non-U.S.
|
|
|
(11,353
|
)
|
|
|
(8,940
|
)
|
|
|
(6,443
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,250
|
|
|
|
(7,418
|
)
|
|
|
(13,810
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local
|
|
|
37
|
|
|
|
(270
|
)
|
|
|
311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
37
|
|
|
|
(270
|
)
|
|
|
311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(10,028
|
)
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local
|
|
|
(946
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(10,974
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (benefit) provision for income taxes
|
|
$
|
(10,937
|
)
|
|
$
|
(270
|
)
|
|
$
|
311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2012, income tax benefit totaled $10,937, primarily attributable to
the reduction of the Companys deferred income tax valuation allowance. The (benefit) provision for income taxes for the years ended December 31, 2011 and 2010 were related to state income taxes. The Company did not report a benefit for
federal income taxes in its consolidated financial statements in 2011 or 2010; instead, the deferred tax asset generated from the net operating loss was offset by a full valuation allowance.
Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting
purposes and such amounts as measured by tax laws. Significant components of the Companys deferred tax assets and liabilities as of December 31, 2012 and 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Net operating losses and credit carryforwards
|
|
$
|
22,177
|
|
|
$
|
32,638
|
|
Allowance for doubtful accounts
|
|
|
294
|
|
|
|
210
|
|
Stock-based compensation
|
|
|
3,357
|
|
|
|
1,777
|
|
Accounts payable and accrued expenses
|
|
|
2,429
|
|
|
|
2,012
|
|
Deferred revenue and member deposits
|
|
|
1,417
|
|
|
|
1,331
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
29,674
|
|
|
|
37,968
|
|
Deferred tax asset valuation allowance
|
|
|
(14,870
|
)
|
|
|
(34,844
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
14,804
|
|
|
|
3,124
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Fixed Assets
|
|
|
(2,876
|
)
|
|
|
(1,888
|
)
|
Acquired intangible assets
|
|
|
(954
|
)
|
|
|
(1,236
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(3,830
|
)
|
|
|
(3,124
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
10,974
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
96
As of December 31, 2012, the Company evaluated the likelihood that it would realize the
deferred income taxes to offset future taxable income and concluded that it is more likely than not that substantially all of its U.S. deferred tax assets will be realized through consideration of both the positive and negative evidence. The
evidence consisted primarily of its three year U.S. historical cumulative profitability, projected future taxable income and forecasted utilization of the deferred tax assets. The net change in valuation allowance in 2012 was $19,974 which includes
the reduction in the U.S. valuation allowance as discussed above, a reduction in the valuation allowance associated with net operating losses and credit carryforwards that are unavailable due to ownership changes in the prior years and an increase
in the valuation allowance associated with losses not benefited in foreign jurisdictions. The Company maintains a valuation allowance for certain deferred tax assets of $14,870, primarily related to foreign net operating losses and fixed assets, due
to the uncertainty regarding their realization. Adjustments could be required in the future if the Companys estimate that the amount of deferred tax assets to be realized is more or less than the net amount recorded.
As of December 31, 2012, the Company had U.S. federal net operating loss (NOL) carryforwards of $39,547, net of Section
382 expirations, state NOL carryforwards of $ 29,468, net of Section 382 expirations, and foreign NOL carryforwards of $39,041. The federal NOL carryforwards begin to expire in 2021 and the foreign NOL carryforwards begin to expire in 2026. Certain
state net operating loss carryforwards began to expire in 2007.
The federal and state net operating loss carryforwards
referenced above include excess stock-based compensation deductions in the amount of $8,174 for 2012. The related tax benefits of $ 3,339 will not be recognized until the deduction reduces taxes payable. If and when the excess stock-based
compensation related NOL tax assets are realized, the benefit will be credited to additional paid-in capital.
During 2012,
the Companys valuation allowance decreased by $19,974 due to the release of the U.S. valuation allowance and the reduction of prior year NOLs, as disclosed above, the utilization of the U.S. NOL in the current year, partially offset by
increased valuation allowance on additional foreign NOLs generated. The changes in valuation allowance for the years ended December 31, 2011 and 2010 of $(2,152) and $2,924 respectively, were primarily attributable to changes in NOL
carryforwards, reduction in the temporary differences for fixed assets, and the acquisition of Streetcar.
A reconciliation of
the Companys effective tax rate to the statutory federal income tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Statutory rate
|
|
|
35.0
|
%
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
Valuation allowance
|
|
|
(432.2
|
)
|
|
|
12.3
|
|
|
|
(13.8
|
)
|
State taxes, net of federal benefit
|
|
|
15.6
|
|
|
|
(5.9
|
)
|
|
|
(2.7
|
)
|
Foreign rate differential
|
|
|
34.9
|
|
|
|
(25.7
|
)
|
|
|
(4.2
|
)
|
US Federal Rate Change
|
|
|
(19.3
|
)
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
|
12.8
|
|
|
|
(4.3
|
)
|
|
|
(3.4
|
)
|
Nondeductible expenses
|
|
|
17.6
|
|
|
|
(4.4
|
)
|
|
|
(0.6
|
)
|
Other
|
|
|
(1.0
|
)
|
|
|
(2.4
|
)
|
|
|
(0.9
|
)
|
Transaction cost
|
|
|
|
|
|
|
|
|
|
|
(10.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(336.6
|
)%
|
|
|
3.6
|
%
|
|
|
(2.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company follows the guidance on Accounting for Uncertain Tax Positions. The guidance requires that a
tax position meet a more likely than not threshold for the benefit of the uncertain tax position to be recognized in the financial statements. This threshold is to be met assuming that the tax authorities will examine the uncertain tax
position. It also provides guidance with respect to the measurement of the benefit that is recognized for an uncertain tax position, when that benefit should be derecognized and other matters. The
97
Company had no amounts recorded for any unrecognized tax benefits as of December 31, 2012. The Companys policy is to record estimated interest and penalties related to the underpayment
of income taxes as a component of its income tax provision. As of December 31, 2012, the Company had no accrued interest or tax penalties recorded. The Companys income tax return reporting periods since December 31, 2008 are open to
income tax audit examination by the federal and state tax authorities. The Companys foreign jurisdiction in the United Kingdom is also open for income tax audit examination since December 31, 2009. The Companys foreign
jurisdictions in Canada and Austria are also open for income tax audit examination since December 31, 2008. The Companys foreign jurisdiction Spain is also open for income tax audit examination since December 31, 2006. In
addition, as the Company has NOL carryforwards, the Internal Revenue Service is permitted to audit earlier years and propose adjustments up to the amount of NOL generated in those years.
Utilization of NOL and research and development credit carryforwards may be subject to a substantial annual limitation due to ownership
changes that have occurred previously or that could occur in the future, as provided by Section 382 of the Internal Revenue Code of 1986, as well as similar state provisions. These ownership changes may limit the amount of NOL and research and
development credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company has performed an analysis under Section 382, as well as similar state provisions, in order to determine whether
any limitations might exist on the utilization of NOLs and research and development credits carryforward due to ownership changes that have occurred previously. Based on this analysis, the Company has determined that while ownership changes have
occurred during its history, a substantial portion of the NOLs and credits are available for future utilization net of any limitations.
In accordance with the Companys policy, the remaining undistributed earnings, if any, of its non-U.S. subsidiaries remain indefinitely reinvested as of the end of 2012 as they are required to fund
needs outside the U.S. and may not be repatriated in a manner that is substantially tax free. It is not practicable to estimate the amount of additional tax, if any, that might be payable on this undistributed foreign income.
The Company has identified two reportable segments: North America and Europe. Both segments derive revenue primarily
from self-service vehicle use by its members. The North America segment, which includes the United States and Canada, represented substantially all of the Companys revenue until the acquisition of Streetcar in 2010. The Europe segment includes
the operations of the United Kingdom, Spain, since February 2012 when the Company acquired a majority ownership interest in Avancar, and Austria, since July 2012 when the Company acquired CarSharing.at. The Company does not allocate certain
expenses, including corporate costs and overhead, amortization expense and stock-based compensation, to its segments. Therefore, corporate reconciling items are used to capture the items excluded from segment operating performance measures. No
revenue was recorded from transactions between segments. Asset information by operating segment is not reported to or received by the chief operating decision maker, and therefore, the Company has not disclosed asset information for each of the
operating segments.
98
The Companys segment information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
231,806
|
|
|
$
|
199,288
|
|
|
$
|
157,304
|
|
Europe
|
|
|
47,062
|
|
|
|
42,361
|
|
|
|
28,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment revenue
|
|
|
278,868
|
|
|
|
241,649
|
|
|
|
186,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
48,767
|
|
|
|
38,036
|
|
|
|
26,567
|
|
Europe
|
|
|
(2,666
|
)
|
|
|
(3,799
|
)
|
|
|
(1,524
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment income before income taxes
|
|
|
46,101
|
|
|
|
34,237
|
|
|
|
25,043
|
|
Corporate expenses
|
|
|
(33,435
|
)
|
|
|
(25,945
|
)
|
|
|
(22,844
|
)
|
Acquisition and integration costs
|
|
|
(1,766
|
)
|
|
|
(5,626
|
)
|
|
|
(5,627
|
)
|
Merger related costs
|
|
|
(751
|
)
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
(5,561
|
)
|
|
|
(4,108
|
)
|
|
|
(2,774
|
)
|
Amortization of acquired intangible assets
|
|
|
(3,070
|
)
|
|
|
(3,892
|
)
|
|
|
(3,414
|
)
|
Interest income
|
|
|
367
|
|
|
|
128
|
|
|
|
47
|
|
Interest expense (non-vehicle)
|
|
|
(77
|
)
|
|
|
(5,024
|
)
|
|
|
(5,245
|
)
|
Other income, net
|
|
|
1,442
|
|
|
|
2,812
|
|
|
|
1,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes and noncontrolling interest
|
|
$
|
3,250
|
|
|
$
|
(7,418
|
)
|
|
$
|
(13,810
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
2,950
|
|
|
$
|
2,303
|
|
|
$
|
1,749
|
|
Europe
|
|
|
1,358
|
|
|
|
1,307
|
|
|
|
1,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment interest expense
|
|
|
4,308
|
|
|
|
3,610
|
|
|
|
2,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate interest expense
|
|
|
77
|
|
|
|
5,024
|
|
|
|
5,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,385
|
|
|
$
|
8,634
|
|
|
$
|
8,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
26,826
|
|
|
$
|
15,448
|
|
|
$
|
4,525
|
|
Europe
|
|
|
8,945
|
|
|
|
8,044
|
|
|
|
4,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment depreciation
|
|
|
35,771
|
|
|
|
23,492
|
|
|
|
8,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate depreciation
|
|
|
2,412
|
|
|
|
1,756
|
|
|
|
1,389
|
|
Amortization of acquired intangible assets
|
|
|
3,070
|
|
|
|
3,892
|
|
|
|
3,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
41,253
|
|
|
$
|
29,140
|
|
|
$
|
13,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99
The Companys revenue and long-lived assets by geographic area is included in the
following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
216,721
|
|
|
$
|
185,965
|
|
|
$
|
147,454
|
|
United Kingdom
|
|
|
43,739
|
|
|
|
42,856
|
|
|
|
28,797
|
|
Other
|
|
|
18,408
|
|
|
|
12,828
|
|
|
|
9,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
278,868
|
|
|
$
|
241,649
|
|
|
$
|
186,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
124,032
|
|
|
$
|
76,809
|
|
International
|
|
|
35,318
|
|
|
|
26,980
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
159,350
|
|
|
$
|
103,789
|
|
|
|
|
|
|
|
|
|
|
On February 27, 2013, ZVF completed the closing of an amendment and extension of the 2010 Series and 2011 Series. These
amendments and extensions extend the revolving period of both Series to December 31, 2013 and modify change of control definition in light of the Merger.
Litigation.
On January 4, 2013, a putative class action lawsuit was filed in Suffolk County Superior Court in the Commonwealth of Massachusetts by Robert Karrasch, an alleged stockholder of
the company (
Karrasch v.Zipcar, Inc. et al.
, Civil Action No. 13-0038-BLS2). The lawsuit alleges, among other things: (i) that the members of our board of directors breached their fiduciary duties to stockholders in negotiating and approving
the merger agreement, that the merger consideration negotiated in the merger agreement improperly undervalues the company, that the companys stockholders will not receive adequate or fair value for their Zipcar common stock in the merger, and
that the terms of the merger agreement impose improper deal protection devices that will preclude competing offers, and (ii) that Avis Budget and Merger Sub aided and abetted the purported breaches of fiduciary duties. The lawsuit seeks, among other
things, an injunction against the consummation of the merger until such time as defendants comply with their obligation to maximize shareholder value and disclose all material information regarding the merger, an award of damages, and costs and
expenses, including attorneys and experts fees and expenses. On January 25, 2013, the parties to this lawsuit filed with the court an agreed upon order, which the court signed, in which the plaintiff agreed not to seek any relief in the
Massachusetts courts prior to the closing of the merger, and to seek any such relief in the Delaware courts. In exchange, defendants agreed to provide plaintiff with any discovery provided to the plaintiffs in the pending Delaware proceedings,
described further below, and not to oppose plaintiffs attempt to intervene in the Delaware litigation. On February 21, 2013, the plaintiff moved to intervene in Delaware litigation.
On January 7, 2013, a putative class action lawsuit was filed in Middlesex County Superior Court in the Commonwealth of Massachusetts by
Blair Holbrook, an alleged stockholder of the company (
Holbrook v.
Zipcar, Inc. et al
., Civil Action No. 13-0060). The lawsuit alleges, among other things: (i) that the members of our board of directors breached their fiduciary duties
to stockholders in negotiating and approving the merger agreement that the merger consideration negotiated in the merger agreement improperly undervalues the company, that the companys stockholders will not receive adequate or fair value for
their Zipcar common stock in the merger, and that the terms of the merger agreement impose improper deal protection devices that will preclude competing offers, and (ii) that Zipcar, Avis Budget and Merger Sub aided and abetted the purported
breaches of fiduciary duties. The lawsuit seeks, among other things, an injunction against the consummation of the merger until such time as the company implements a procedure to obtain the highest possible value for
100
stockholders and disclose all material information regarding the merger, rescission of the merger agreement, an award of damages, and costs and expenses, including attorneys and
experts fees and expenses. In connection with the agreed order described above in the Karrasch matter, counsel for plaintiff Holbrook has agreed to consolidate this matter with the Karrasch matter above, and therefore to subject this
litigation to the same terms of the agreed order in that matter. On February 21, 2013, the plaintiff moved to intervene in the Delaware litigation.
On January 8, 2013, a putative class action lawsuit was filed in the Court of Chancery of the State of Delaware, by Martin Bertisch, an alleged stockholder of the company (
Bertisch v. Zipcar, Inc. et
al.
, Transaction ID 48803240, C.A. No. 8185). The lawsuit alleges: (i) that the members of our board of directors breached their fiduciary duties to stockholders in negotiating and approving the merger agreement that the merger consideration
negotiated in the merger agreement improperly undervalues the company, that the companys stockholders will not likely receive adequate or fair value for their Zipcar common stock in the merger, and that the terms of the merger agreement impose
improper deal protection devices that will preclude competing offers, and (ii) that Zipcar, Avis Budget and Merger Sub aided and abetted the purported breaches of fiduciary duty. The lawsuit seeks, among other things, an injunction against the
consummation of the merger, rescission in the event that the merger has already been consummated prior to the entry of the courts final judgment or an award of rescissory damages, and an award of costs and expenses, including attorneys
and experts fees and expenses.
On January 8, 2013, a putative class action lawsuit was filed in the Court of Chancery
of the State of Delaware, by Bruce H. Paul, an alleged stockholder of the company (
Paul v. Zipcar, Inc. et al.
, Transaction ID 48818538, C.A. No. 8192). The lawsuit alleges: (i) that the members of our board of directors breached their
fiduciary duties to stockholders in negotiating and approving the merger agreement, that the merger consideration negotiated in the merger agreement improperly undervalues the company, that the companys stockholders will not likely receive
adequate or fair value for their Zipcar common stock in the merger, and that the terms of the merger agreement impose improper deal protection devices that will preclude competing offers and (ii) that Zipcar, Avis Budget and Merger Sub aided and
abetted the purported breaches of fiduciary duty. The lawsuit seeks, among other things, an injunction against the consummation of the merger, rescission in the event that the merger has already been consummated prior to the entry of the
courts final judgment or an award of rescissory damages, an award of damages and costs and expenses, including attorneys and experts fees and expenses.
On January 9, 2013, a putative class action lawsuit was filed in the Court of Chancery of the State of Delaware, by Joseph Morcos, an alleged stockholder of the company (
Morcos v. Zipcar, Inc. et
al.
, Transaction ID 48840033, C.A. No. 8200). The lawsuit alleges: (i) that the members of our board of directors breached their fiduciary duties to stockholders in negotiating and approving the merger agreement, that the merger consideration
negotiated in the merger agreement improperly undervalues the company, that the companys stockholders will not likely receive adequate or fair value for their Zipcar common stock in the merger, and that the terms of the merger agreement impose
improper deal protection devices that will preclude competing offers and (ii) that Zipcar, Avis Budget and Merger Sub aided and abetted the purported breaches of fiduciary duty. The lawsuit seeks, among other things, an injunction against the
consummation of the merger, rescission in the event that the merger has already been consummated prior to the entry of the courts final judgment or an award of rescissory damages, an award of damages and costs and expenses, including
attorneys and experts fees and expenses.
On January 16, 2013, a putative class action lawsuit was filed in the
Court of Chancery of the State of Delaware, by Allen Srulowitz, an alleged stockholder of the company (
Srulowitz v. Zipcar, Inc. et al.
, Transaction ID 48977007, C.A. No. 8226). The lawsuit alleges: (i) that the members of our board of
directors breached their fiduciary duties to stockholders in negotiating and approving the merger agreement, that the merger consideration negotiated in the merger agreement improperly undervalues the company, that the companys stockholders
will not likely receive adequate or fair value for their Zipcar common stock in the merger, and that the terms of the merger agreement impose improper deal protection devices that will preclude
101
competing offers and (ii) that Zipcar and Avis Budget aided and abetted the purported breaches of fiduciary duty. The lawsuit seeks, among other things, an injunction against the consummation of
the merger until such time as the company implements a procedure to obtain the highest possible value for stockholders, rescission of the merger agreement, and an award of costs and expenses, including attorneys and experts fees and
expenses.
On January 16, 2013, a putative class action lawsuit was filed in the Court of Chancery of the State of Delaware,
by Evan Hecker, an alleged stockholder of the company (
Hecker v. Zipcar, Inc. et al.
, Transaction ID 48980399, C.A. No. 8227). The lawsuit alleges: (i) that the members of our board of directors breached their fiduciary duties to stockholders
in negotiating and approving the merger agreement, that the merger consideration negotiated in the merger agreement improperly undervalues the company, that the companys stockholders will not likely receive adequate or fair value for their
Zipcar common stock in the merger, and that the terms of the merger agreement impose improper deal protection devices that will preclude competing offers and (ii) that Avis Budget and Merger Sub aided and abetted the purported breaches of fiduciary
duty. The lawsuit seeks, among other things, an injunction against the consummation of the merger until such time as the company implements a procedure to obtain the highest possible value for stockholders, rescission in the event that the merger
has already been consummated prior to the entry of the courts final judgment or an award of rescissory damages, and an award of costs and expenses, including attorneys and experts fees.
On January 17, 2013, a putative class action lawsuit was filed in the Court of Chancery of the State of Delaware, by Jim Billups, an
alleged stockholder of the company (
Billups v. Zipcar, Inc. et al.
, Transaction ID 48989086, C.A. No. 8229). The lawsuit alleges: (i) that the members of our board of directors breached their fiduciary duties to stockholders in negotiating
and approving the merger agreement, that the merger consideration negotiated in the merger agreement improperly undervalues the company, that the companys stockholders will not likely receive adequate or fair value for their Zipcar common
stock in the merger, and that the terms of the merger agreement impose improper deal protection devices that will preclude competing offers and (ii) that Avis Budget and Merger Sub aided and abetted the purported breaches of fiduciary duty. The
lawsuit seeks, among other things, an injunction against the consummation of the merger, an order directing our board of directors to maximize shareholder value in any proposed sale of the company, and an award of costs and expenses, including
attorneys and experts fees.
On January 25, 2013, the Court of Chancery of the State of Delaware issued an order
granting the request by each of the six Delaware plaintiffs to have their lawsuits consolidated into one matter, now entitled
In re Zipcar, Inc. Stockholder Litigation
, C.A. No. 8185-VCP, Transaction ID 49105339. On January 30, 2013, the
Delaware plaintiffs filed a verified consolidated amended complaint, or the amended complaint. The amended complaint alleges, among other things: (i) that the members of our board of directors breached their fiduciary duties to stockholders in
negotiating and approving the merger agreement, that the merger consideration negotiated in the merger agreement improperly undervalues the company, that certain members of the board of directors put their financial interest ahead of that of the
stockholders by favoring a sale over an option for long term growth, that the companys stockholders will not likely receive adequate or fair value for their Zipcar common stock in the merger, that the terms of the merger agreement impose
improper deal protection devices that will preclude competing offers, and that the preliminary proxy statement filed with the SEC on January 22, 2013 failed to disclose all material information necessary for stockholders to make an informed vote on
the proposed merger; and (ii) that Avis Budget and Merger Sub aided and abetted the purported breaches of fiduciary duty. The lawsuit seeks, among other things, an injunction against the consummation of the merger, rescission in the event that the
merger has already been consummated prior to the entry of the courts final judgment or an award of rescissory damages, and an award of costs and expenses, including attorneys and experts fees.
On February 26, 2013, solely to avoid the costs, risks and uncertainties inherent in litigation, and without admitting any liability or
wrongdoing, the Company agreed to settle all of the pending litigation relating to the merger with Avis Budget. The settlement provides, among other things, that the parties will seek to enter into a stipulation of settlement which provides for the
conditional certification of the merger-related litigation as a non-opt-out class action pursuant to Court of Chancery Rule 23 on behalf of a class consisting of all record and
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beneficial owners of our common stock during the period beginning on December 31, 2012 through the date of the consummation of the proposed merger, including any and all of their respective
successors in interest, predecessors and representatives, and the release of all asserted claims. As part of the settlement, the Company has agreed to make certain additional disclosures related to the proposed merger and to waive a provision of the
confidentiality agreement between us and one of the other potential acquirers that would prohibit that party from requesting a waiver of its standstill obligations under the confidentiality agreement. The additional disclosures were made in a
Current Report on Form 8-K filed with the SEC on February 26, 2013. The asserted claims will not be released until such stipulation of settlement is approved by the court. There can be no assurance that the parties will ultimately enter into a
stipulation of settlement or that the court will approve such settlement even if the parties were to enter into such stipulation. The settlement will not affect the merger consideration to be received by our stockholders. In connection with the
settlement, the Company may be liable for the plaintiffs attorneys fees and costs; however, as of this time any such fee award is uncertain and no reasonable estimate can be made.
The Company carries a director and officer insurance policy which may cover some or all of the cost of this matter subject to at $500
retention.
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