Avis 2010 Annual Report Download - page 98

Table of Contents
duration of the underlying agreement, many survive the expiration of the term of the agreement or extend into perpetuity (unless subject to a
legal statute of limitations). There are no specific limitations on the maximum potential amount of future payments that the Company could
be required to make under these guarantees, nor is the Company able to develop an estimate of the maximum potential amount of future
payments to be made under these guarantees as the triggering events are not subject to predictability. With respect to certain of the
aforementioned guarantees, such as indemnifications provided to landlords against third-party claims for the use of real estate property
leased by the Company, the Company maintains insurance coverage that mitigates its potential exposure.
Other Guarantees
The Company has provided certain guarantees to, or for the benefit of, subsidiaries of Realogy, Wyndham and Travelport which, as
previously discussed, were disposed of during third quarter 2006. These guarantees relate primarily to various real estate 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 operating leases is estimated to be approximately $176 million. At December 31, 2010, the liability recorded by the Company in
connection with these guarantees was approximately $4 million. To the extent that the Company would be required to perform under any of
these guarantees, the Company is entitled to indemnification by Realogy, Wyndham and Travelport. The Company monitors the credit
ratings and other relevant information for Realogy, Wyndham and Travelport’s parent company in order to assess the status of the
payment/performance risk of these guarantees.
The Company has provided certain guarantees to, or for the benefit of, subsidiaries of PHH Corporation (“PHH”), which was spun-off
during first quarter 2005. These guarantees relate primarily to various real estate 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 leases is estimated to be approximately $7
million. At December 31, 2010, the liability recorded by the Company in connection with these guarantees was less than $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 former Marketing Services division (“MSD”), the Company agreed to provide certain
indemnifications related to, among other things, litigation matters, the substantial majority of which have been settled as of December 31,
2010. In addition, pursuant to a number of commercial arrangements entered into between certain of the Company’s subsidiaries and MSD,
the Company also agreed, among other things, 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 residual liability as of December 31, 2010 was
approximately $7 million. The maximum potential amount of future payments to be made under these guarantees is approximately $28
million.
Realogy and Wyndham have agreed to assume responsibility for the Company’s potential liabilities relating to PHH and MSD (other than
the call transfer obligation). The Company monitors the credit ratings and other relevant information for Realogy and Wyndham in order to
assess the status of the payment/performance risk of these guarantees. The Company also has a letter of credit which covers Realogy’s
portion of these and certain other obligations.
Cash Dividend Payments
During 2010, 2009 and 2008, the Company did not pay cash dividends.
F
-
34
17.
Stockholders
’
Equity