Avis 2012 Annual Report Download - page 28

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We face risks associated with our like-kind exchange program.
We utilize a like-kind exchange program whereby we replace vehicles in a manner that allows tax gains on vehicles sold in
the United States to be deferred. The program has resulted in a material deferral of federal and state income taxes beginning
in 2004. The benefit of deferral is dependent on reinvestment of vehicle disposition proceeds in replacement vehicles within a
prescribed period of time (usually six months). An extended downsizing of our fleet could result in reduced deferrals,
utilization of tax attributes and increased payment of federal and state income taxes that could require us to make material
cash payments. Such a downsizing or reduction in purchases would likely occur if, and to the extent, we are unable to obtain
financing when our asset-backed rental car financings mature or in connection with a significant decrease in demand for
vehicle rentals. Therefore, we cannot offer assurance that the expected tax deferral will continue or that the relevant law
concerning the like-kind exchange program will remain intact in its current form.
Unexpected events, including natural disasters, may increase our cost of doing business or disrupt our operations.
The occurrence of one or more unexpected events, including fires, tornadoes, tsunamis, hurricanes, earthquakes, floods and
other forms of severe weather, general labor strikes and political disruptions in the United States or in other countries in
which we operate or in which our auto manufacturers are located, could adversely affect our operations and financial
performance. Natural disasters, pandemic illness, power outages, gasoline shortages or other unexpected events could result
in physical damage to and complete or partial closure of one or more of our Company-operated and/or licensed locations,
temporary or long-term disruption in the supply of fleet vehicles from the U.S. and international auto manufacturers and
disruption in the transport of our fleet vehicles to Company-operated and/or licensed locations. Existing insurance
arrangements may not provide protection for all of the costs that may arise from such events.
Risks Related to Our Indebtedness
We have a substantial amount of debt, which could impair our financial condition and adversely affect our ability to
react to future changes in our business.
As of December 31, 2012, our total debt was approximately $9.7 billion and we had $869 million of available letter of credit
and borrowing capacity under our senior credit facility. Our indebtedness could have important consequences, including:
 limiting our ability to borrow additional amounts to fund working capital, capital expenditures, debt service
requirements, execution of our business strategy or acquisitions and other purposes;
 requiring us to dedicate a substantial portion of our cash flow from operations to pay principal and interest on our
debt, which would reduce the funds available to us for other purposes; and
 making us more vulnerable to adverse changes in general economic, industry and competitive conditions, as well as
changes in government regulation and changes to our business.
Our ability to satisfy and manage our debt obligations depends on our ability to generate cash flow and on overall financial
market conditions. To some extent, this is subject to prevailing economic and competitive conditions and to certain financial,
business and other factors, many of which are beyond our control. Our business may not generate sufficient cash flow from
operations to permit us to pay principal, premium, if any, or interest on our debt obligations. If we are unable to generate
sufficient cash flow from operations to service our debt obligations and meet our other cash needs, we may be forced to
reduce or delay capital expenditures, sell or curtail assets or operations, seek additional capital or seek to restructure or
refinance our indebtedness. If we must sell or curtail our assets or operations, it may negatively affect our ability to generate
revenue.
Despite our current indebtedness levels, we may still be able to incur substantially more debt. This could further
exacerbate the risks associated with our substantial outstanding indebtedness.
The agreement governing our credit facilities and the indentures governing our senior unsecured notes limit, but do not
prohibit, us from incurring additional indebtedness in the future. As of December 31, 2012, our revolving credit facility
provided us with aggregate capacity of up to $1.5 billion, $869 million of which remains available for borrowings. All of
those borrowings would be secured and the lenders under our senior credit facility would have a prior claim to the assets that
secure such indebtedness. If new debt is added to our current debt levels, the risks described above could intensify.