Avis 2006 Annual Report Download - page 94

Table of Contents
operating leases is estimated to be approximately $440 million. At December 31, 2006, the liability recorded by the Company in
connection with these guarantees was $7 million. To the extent that the Company would be required to perform under any of these
guarantees, Realogy and Wyndham have agreed to indemnify the Company.
The Company has provided certain guarantees to subsidiaries of PHH, which, as previously discussed, was spun-off during first quarter
2005. These guarantees relate primarily to various real estate and product operating leases. The maximum potential amount of future
payments that the Company may be required to make under the guarantees relating to the various real estate and product operating leases is
estimated to be approximately $25 million. At December 31, 2006, the liability recorded by the Company in connection with these
guarantees was $1 million. To the extent that the Company would be required to perform under any of these guarantees, PHH has agreed to
indemnify the Company.
In connection with the Company’s disposition of its Marketing Services division (“MSD”), the Company agreed to provide certain
indemnifications related to, among other things, litigation matters related to various suits brought against MSD by individual consumers
and state regulatory authorities seeking monetary and/or injunctive relief regarding the marketing of certain membership programs and
inquiries from state regulatory authorities related to such programs. Such indemnification entitles the purchaser to reimbursement for a
portion of the actual losses suffered by it in regards to such matters. In addition, pursuant to a number of post-closing commercial
arrangements entered into between certain of the Company’s subsidiaries and MSD, the Company also agreed to provide a minimum
number of call transfers to certain MSD subsidiaries, as well as retaining pre-
existing guarantee obligations for certain real estate operating
lease obligations on behalf of certain MSD subsidiaries. The Company established a liability for the estimated fair value of these
guarantees in the amount of approximately $100 million on the sale date, which reduced the gain on the transaction recorded within
discontinued operations. The maximum potential amount of future payments to be made under these guarantees is approximately $340
million excluding one litigation matter for which there is no limitation to the maximum potential amount of future payments.
Realogy and Wyndham have agreed to assume responsibility for the Company’s liabilities relating to PHH and the former Marketing
Services division.
17. Stockholders’ Equity
Dividend Payments
On July 31, 2006, the Company distributed all of the common stock of Realogy and Wyndham to its stockholders and recorded a resulting
$7.0 billion reduction to stockholders’ equity. The dividend of Realogy and Wyndham is subject to further revision due to various factors,
including the resolution of contingent and other liabilities for which the Company is indemnified by Realogy and Wyndham. During 2006,
the Company paid cash dividends of $113 million ($1.10 per share in first quarter). During 2005, the Company paid cash dividends of
$423 million ($0.90 per share in first and second quarters and $1.10 per share in third and fourth quarters). During 2004, the Company paid
cash dividends of $333 million ($0.70 per share in first and second quarters and $0.90 per share in third and fourth quarters). Such per
share dividend amounts have been adjusted for the 1-for-10 reverse stock split of the Company’s common stock, which became effective
September 5, 2006.
Share Repurchases
During 2006, the Company used $221 million of available cash and $22 million of proceeds primarily received in connection with option
exercises to repurchase $243 million of common stock under its former common stock repurchase program. During 2005, the Company
used $1.1 billion of available cash and $289 million of proceeds primarily received in connection with option exercises to repurchase
approximately $1.3 billion of common stock under its
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