Avis 2010 Annual Report Download - page 97

Table of Contents
its results of operations, financial position or cash flows based on information currently available. However, litigation is inherently
unpredictable and, although the Company believes that its accruals are adequate and/or that it has valid defenses in these matters,
unfavorable resolutions could occur, which could adversely impact the Company’s results of operations or cash flows in a particular
reporting period.
Commitments to Purchase Vehicles
The Company maintains agreements with vehicle manufacturers under which the Company has agreed to purchase approximately $4.6
billion of vehicles from manufacturers over the next twelve months. The majority of these commitments are subject to the vehicle
manufacturers’ satisfying their obligations under the repurchase and guaranteed depreciation agreements. The purchase of such vehicles is
financed primarily through the issuance of vehicle-backed debt in addition to cash received upon the sale of vehicles in the used car market
and under repurchase and guaranteed depreciation programs.
Other Purchase Commitments
In the normal course of business, the Company makes various commitments to purchase goods or services from specific suppliers, including
those related to capital expenditures. None of the purchase commitments made by the Company as of December 31, 2010 (aggregating
approximately $94 million) was individually significant. These purchase obligations extend through 2015.
Concentrations
Concentrations of credit risk at December 31, 2010 include (i) risks related to the Company’s repurchase and guaranteed depreciation
agreements with domestic and foreign car manufacturers, including General Motors Company, Ford Motor Company, Chrysler Group LLC,
Hyundai Motor America and Kia Motors America, Inc., primarily with respect to receivables for program cars that have been returned to the
car manufacturers and (ii) risks related to Realogy and Wyndham, including receivables of $105 million and $74 million, respectively,
related to certain contingent, income tax and other corporate liabilities assumed by Realogy and Wyndham in connection with the
Separation.
Asset Retirement Obligations
The Company maintains a liability for asset retirement obligations. An asset retirement obligation is a legal obligation to perform certain
activities in connection with the retirement, disposal or abandonment of assets. The Company’s asset retirement obligations, which are
measured at discounted fair values, are primarily related to the removal of underground gas storage tanks at its rental facilities. Liabilities
accrued for asset retirement obligations were $18 million and $21 million at December 31, 2010 and 2009, respectively.
Standard Guarantees/Indemnifications
In the ordinary course of business, the Company enters into numerous agreements that contain standard guarantees and indemnities whereby
the Company indemnifies another party, among other things, for breaches of representations and warranties. In addition, many of these
parties are also indemnified against any third-party claim resulting from the transaction that is contemplated in the underlying agreement.
Such guarantees or indemnifications are granted under various agreements, including those governing (i) purchases, sales or outsourcing of
assets or businesses, (ii) leases of real estate, (iii) licensing of trademarks, (iv) access to credit facilities and use of derivatives and
(v) issuances of debt or equity securities. The guarantees or indemnifications issued are for the benefit of the (i) buyers in sale agreements
and sellers in purchase agreements, (ii) landlords in lease contracts, (iii) licensees under licensing agreements, (iv) financial institutions in
credit facility arrangements and derivative contracts and (v) underwriters and placement agents in debt or equity security issuances. While
some of these guarantees extend only for the
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