Avis 2006 Annual Report Download - page 109

Table of Contents
tax assets were fully reserved for by TRL Group through a valuation allowance, as TRL Group had not been able to demonstrate future
profitability due to the large marketing expenditures it incurred (new member marketing has historically been TRL Group’s single largest
expenditure). However, given the fact that TRL Group would no longer incur marketing expenses (as they no longer had the ability to
market to new members as a result of this transaction), TRL Group determined that it was more likely than not that it would generate
sufficient taxable income (as it would continue to recognize revenue from TRL Group’s existing membership base in the form of renewals
and the lapsing of the refund privilege period) to utilize its net operating loss carryforwards within the statutory periods. Accordingly, TRL
Group reversed the entire valuation allowance of $121 million in January 2004, which resulted in a reduction to the Company’s tax
provision relating to discontinued operations during 2004 of $121 million, with a corresponding increase in consolidated net income. The
$13 million cash payment the Company made to TRL Group was also recorded by the Company as a component of its discontinued
operations’ provision for income taxes line item on the Consolidated Statement of Operations for 2004.
During the period from January 1, 2004 through January 30, 2004 (the date on which the Company executed various contracts that
provided it managerial control of TRL Group), TRL Group contributed revenues of $44 million and expenses of $39 million (on a stand-
alone basis before eliminations of intercompany entries in consolidation) to discontinued operations.
During January 2007, 76% of the Company’s preferred stock investment in Affinion was redeemed at Affinion’s option, for face value
plus accrued dividends. As a result, the Company received cash proceeds of $106 million representing the investment valued at $96 million
plus $10 million in accrued dividends and distributed such proceeds to Realogy and Wyndham, pursuant to the Separation Agreement.
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24.
Subsequent Event