Welcome to the Avis Budget Group fourth quarter earnings conference call. (Operator Instructions) At this time for opening remarks and introductions, I would like to turn the conference over to Mr. David Crowther, Vice President of Investor Relations.

On the call with me today are our Chairman and Chief Executive Officer, Ron Nelson; our President and Chief Operating Officer, Bob Salerno; and our Executive Vice President and Chief Financial Officer, David Wyshner. If you did not receive a copy of our press release, it’s available on our website at www.AvisBudgetGroup.com. Before we discuss our results for the quarter, I would like to remind everyone that the company will be making statements about its future results which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Statements are based on current expectations in the current economic environment and are inherently subject to significant economic competitive and other uncertainties and contingencies beyond the control of management. You should be cautioned that these statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements. Important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements are specified in our 10-K and our earnings release issued last night. Now I’d like to turn the call over to Avis Budget Group’s Chairman and Chief Executive Officer, Ron Nelson.

We pre-announced our results about three weeks ago, given that they came in line with our guidance. I want to spend the first part of my comments explaining exactly why we pre-announced. Over the course of the fourth quarter and in particular into early January, it became clear that investor anxiety over the issues that were driving industry valuations lower by the day was reaching an almost irrational fever pitch. To be sure, there were legitimate concerns. Fourth quarter results, leisure pricing, and the used car market, all of which added to the longer festering concerns over the macroeconomic outlook in the ABS financing market. We tried to address each of these topics head-on in our release, with as much company specific factual data as we could. One, the fourth quarter was in fact challenged, but with an intense focus on cost savings and the continued positive trending of major cost elements, quarter and full year results were in line with our previously announced expectations. Two, our 2008 business plan calls for growth in revenues and earnings despite a weak economic climate. Three, our disposition of risk vehicles in the fourth quarter was in line with historical norms, and finally while the ABS term debt market is out of sorts, we are finding more than enough capacity in the bank conduit market to meet our needs. In fact, we announced yesterday that we have commitments on an upside seasonal facility that will satisfy our peak financing requirements for the year. We will provide more color on these issues as we go through the call today, but clearly we view these as reasonably good news in an environment where the market seemed to be assuming the worst. To further underscore our conviction, our Board authorized a $50 million share repurchase. Not…

We’re going to spend my time discussing some topics that clearly are important to achieving our plan in ‘08 and not coincidentally are also the topics that are foremost on your mind, those being fleet costs, used car market, our Performance Excellence process improvement initiative and the first quarter environment. In the area of fleet costs, we are continuing to forecast a 4% to 6% per unit fleet cost increase for 2008. We should be clear about what is included in that number. For us, this is our all-in cost, which includes not only depreciation but incentives, gain and loss on disposals, auction fees and other disposition costs. If you are comparing one company to the next, this is an important clarifying issue. If we just look at just depreciation alone for model year 2008, our per-unit cost will be flat year-over-year which we believe is in line or favorable to what the rest of the industry has disclosed. Turning to the used car market, as we disclosed last month, our experience in the fourth quarter was as we expected and in line with historical performance. Risk vehicle disposition averaged 76% to 78% of cap costs, consistent with what we typically see. I would note that as we hold cars longer, this percentage will decline slightly just due to simple math. Again, the devil is in the detail. As Ron mentioned and as noted by Adesa in their recent report, the supply of one-year-old cars entering the market is declining. This is the exact opposite of what happened in ‘01 to ‘03 timeframe which makes that event-driven economic downturn in which the used car market declined a poor proxy for the current situation. In addition, there is a natural tendency in difficult times to over read car rental risks into…

This morning I would like to discuss our recent results, our ABS financing strategy, and our outlook. All the EBITDA and pretax numbers I discuss will be excluding the impact of separation-related and impairment costs. Our earnings release last night provides the relevant reconciliations to our GAAP results. In the fourth quarter, revenue increased 4% to $1.4 billion, EBITDA was $86 million and pretax income was $36 million. EBITDA declined slightly from the pro forma $88 million we reported in fourth quarter 2006 and pretax income was equal to the prior year. For the full year, revenue grew 5% to a record $6 billion. EBITDA of $409 million was in line with both our recent projections and our year earlier results. And importantly, pretax income of $198 million was up 15% versus pro forma 2006. Turning to our domestic car rental operations, fourth quarter revenue increased 4%, reflecting a 3% increase in rental days, a 2% decrease in time and mileage revenue per day, and a 22% increase in ancillary revenues. Domestic EBITDA declined slightly for the quarter as the revenue growth and cost savings were offset by lower time and mileage rates per day and increased fleet costs. Time and mileage rates declined 2% as commercial price increases were offset by weaker leisure prices due to industry-wide over-fleeting, which we believe reflects the seasonal dynamics that Ron discussed. Our length of rental increased 2%, which also contributed to the reported price declines as longer rentals have a lower per day rate. Our fleet size decreased by 16% from the third quarter to the fourth, and was up 3% year-over-year, in line with our volume increase. Fleet costs increased only 4% on a per unit basis as our risk cars continued to perform well and as you will see in…

(Operator Instructions) The first question comes from Chris Agnew - Goldman Sachs.

Off-airport business, you’re seeing good growth particularly in insurance replacement. What gives you confidence you can continue to grow in 2008? What is the reaction from Enterprise, obviously the dominant player there in terms of are they reacting in terms of price?

The truth of the matter is this is our first year in the business. We’re a relatively small factor in the business and I think we can continue to grow with big percentages for a fairly long time before we even become a significant digit in terms of Enterprise’s control over that market. We have not seen any real impact from Enterprise in terms of either pricing or competitive moves. Frankly from a strategic standpoint, we’re not going after the Allstates or the huge insurance companies, which are their bread and butter accounts. We’re actually going for the middle ones where we can refine our service delivery process and then move over to assume some of the other businesses. We’re clearly not primary on these accounts. There are two other suppliers. And so happiness in some respects is a small base in this business, so I think we can continue to grow pretty nicely on a percentage basis without creating any competitive problems.

And then next question is on the fleet costs, and maybe just a bit of clarification from a couple comments that Bob made. I think you said that you’re expecting 4% to 6% in 2008, but did I hear you mention that if you just look at the depreciation cost, it’s flat on a year-over-year basis? Maybe could you expand a little bit more on that? I had been thinking that because you’re making the move and increasing your risk cars from 20% to 50% and those are cheaper that actually you would be able to manage your overall fleet cost increases down below the 4% to 6%, so maybe if you wouldn’t mind providing a little bit more color around those points?

The difference is that on the 4% to 6%, this includes our turn-back costs, what we’re getting for incentives, what it costs to ship it there, the cost of the auction fees, and all of those other things, whereas the flat was just strictly our depreciation. So strict depreciation, the deal we cut with the manufacturers is effectively flat year-to-year. That’s the difference.

And that flat number, does that also on a per unit basis, is that also taking into account the effect of increasing your risk mix, holding cars longer?

Certainly, that’s true.

Your next question comes from Jeffrey Kessler - Lehman Brothers.

Firstly separation costs, they were about $10 million in 2007, obviously down. Do you expect them to go away completely? Are we done with separation costs for 2008?

By and large, we are. Certainly from a substantive perspective, there shouldn’t be anything. There is a possibility if there are tax items that they would show up as separation costs. But in that case, the reimbursement of any tax items in prior periods by Realogy and Wyndham could show up as an inflow from our perspective. But other than that, we don’t expect anything, and if there is anything significant, we’ll obviously break it out because we don’t view it as a regular part of our business.

On two of your what we’ll call other ancillary revenue areas. Number one, clearly there is a take rate limit that you can get to with a number of these products, and I realize we’re not just talking about take rates on Where2. We’re talking about obviously increasing take rates on other products that you have. What do you think over the next two or three years you can get the ancillary revenues number up to? Number two, along with that, you’re going to be hopefully adding in more of Carey to your business. Carey has from what we have seen, at least from any of the disclosures we have seen, higher EBITDA margins than Avis does as a whole. Is Carey going to be a material contributor to earnings in 2009?

On the ancillary revenue question, anecdotally we have heard that Hertz NeverLost has had a penetration rate in the low to mid teens. And we certainly think that we ought to be able to achieve that, particularly now as we have the ability to include NeverLost in the profile of our corporate customers. Though up until the fourth quarter, they essentially had to come to the counter to ask for it. That really inhibits the ability to ramp up the segment. I think the other thing that will drive the life cycle on that product is the new features that we’re going to continue to add every year. We haven’t really released that yet in concert with Garmin, but there’s going to be an upgrade in features in that Garmin will add yet again another benefit that will increase the productivity of the business traveler and will make this product even more attractive. I think on insurance and fuel service penetration, clearly the things we’re doing on PEX are going to help the gas revenue and the fuel service revenues. I think insurance, you’ve got to be careful with percentages because in a number of our corporate accounts, insurance is included, so penetration of that base isn’t going to be quite as robust as it would otherwise be if we were pure leisure where we have the ability to solicit 100% of our customers. That being said, we do think that there is a couple, three points out there that we’re not getting in terms of penetration and we think we can get that over the next couple years. So without really providing any numbers, I think that you can take those percentages and back into the numbers. In terms of Carey, I think we said in our press release when we acquired it that we fully expect to be able to double the revenue of Carey over the next five years, and that is primarily based on increasing the penetration of corporate accounts. But they also have a really terrific events business. Matter of fact, they probably do a better job in the event business than we do, and with every event not only is there a limousine business, but there’s also a fair amount of car rental business. So the packaging opportunities here just don’t begin and end with the corporate customers. So you’re right, Carey’s margins are higher than car rental margins. We don’t see any reason now why those margins ought to decline. Even if we do negotiate harder or negotiate corporate rates, there are also cost efficiencies that we can take out of Carey that will offset any margin that we might belay in terms of bundling these things. So we’re very optimistic about the ability to add to earnings. Is it going to add 30% to our pretax? No. But it’s enough to make a difference.

The horizon of new tax programs, obviously from time to time, we get accelerated depreciation tax programs. We get like kind exchange programs, obviously the basis increases on the like kind exchange program to a point at which you’re going to get limited tax relief by around 2011 or so. If you got a telescopic view on what types of perhaps tax or let’s say capital formation types of programs that you see related to auto rental or others that you might be able to take advantage of that you think Congress might be taking a look at?

The way you’re looking at it is exactly right, Jeff, in that with us not being a Federal cash taxpayer right now or for the next several years, the near term impact on us of any of the things being considered would be fairly limited. Bonus depreciation though could be helpful to us under the like kind exchange program, and we are looking at that, but the benefits associated with that would really be pushing out further when we become a Federal cash taxpayer. And that’s an awfully intricate and complicated transaction. So we’re working through that right now as more information comes out of Washington, but the impact on 2008 and even 2009 or ‘10 would be pretty limited because of our already attractive tax position.

You have been through several recessions already. What is Avis doing specifically, and you’ve gone through some of the programs obviously, but in a general sense, is there anything that you’re doing differently in a downturn now that you have learned or hadn’t done before in the last couple recessions?

I don’t think there is anything dynamically different, Jeff. I’d just say these couple things. One, that a large portion of our cost structure is variable, about 70%. So if you don’t rent the car, there is a whole series of commissions, concessions, credit card fees, etc., reservation costs that don’t show up. Two, our largest expense is to a very great extent variable, and that’s the fleet. Though as we look at our forward-looking reservations, we’re weekly watching the fleet, fleet by fleet by fleet, how much we buy, what we do. I will tell you fleet right now across the industry is very tight, and my bet is that that’s going to be the same across the summer. So we’re look at holding onto some cars which will allow us the opportunity if things go awry economically to shed a good amount of fleet and take out those costs not only on the fleet line but also obviously in the interest. And third, our second largest cost is salaries, and it’s difficult to say that this could be somewhat variable, but it can, and especially in our hourly operations, we have a lot of turnover at the bottom. We’re fairly stagnant at the top in terms of longevity. But at the bottom, we do have a lot of turnover, and we can easily maneuver our salary and wages down just as we have done in the past. So those three things Jeff, there might be little nuances that are a little different in there. There might be some other smaller things that we’re watching and doing things differently, and clearly as we have more risk cars in the fleet, we’re playing the fleet a lot different than we have over the past five or six years, but those are the three big things that we’re going to do.

Jeff, one thing I would add to that is the practical reality of a recession from a timing standpoint. You sit here today and think that well, if there is a recession on the forefront, more than likely you’re going to feel it or see it as we end the second quarter and go into the third quarter, and what you would do is you’d down-fleet over the summer because you’re naturally going to down-fleet going into September and October anyway. So all you’re really doing is accelerating something that you would otherwise do in the fourth quarter. Look, there’s no question you’re going to have less revenue, but I think in terms of being able to flex the fleet from a practical standpoint given where we sit today, timing is not going to be an issue.

Our final question comes from Christina Woo - Morgan Stanley.

The disposition of the risk cars, you have commented that that process has gone very well. With Chrysler holding less value than some of the other brands, how did you come to that conclusion about Chrysler and perhaps you could tell us your source?

Quite honestly, we just looked at our results versus the market, and our residuals versus the market. It was our data. Now, you can certainly go out and get broader data, and it’s out there and available to you, but that’s how we got to it.

Can you give us your one time gain or loss on sale in the quarter from the used vehicles?

Yes, it was a gain of around $3 million.

In the past your domestic revenue mix has been about split between the leisure business and that revenue coming from corporate contracts. With the softness in the leisure market as evidenced by the decline in leisure pricing both in the fourth quarter and into January of this year, is it still fair to think about your revenue mix as a 50/50 split, or should we be adjusting our thinking for 2008?

I think 50/50 give or take a little bit continues to be right. The changes are on the margin and aren’t going to swing that materially.

I’d like to once again thank you all for joining the call. And what I’d like to leave you with is that I hope you’ll think about our Performance Excellence process initiative, the growth in high margin GPS revenues, our strong and growing affinity relationships and our ability to generate free cash flow and our share repurchases and how they’re all going to work together to what we believe will be an improved 2008. And I think when you add on top of that the depth and experience of our management team, having experienced all types of economic environments, it is how I come to the conclusion and get comfortable with that we’re going to grow in a tough economic environment in 2008. So thank you again for joining the call, and look forward to speaking with you over the course of the quarter.