Avis 2012 Annual Report Download - page 87

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F-31
The Company is also named in various litigation that is primarily related to the businesses of its former subsidiaries,
including Realogy, Wyndham and Travelport and their current or former subsidiaries. The Company is entitled to
indemnification from such entities under the Separation Agreement for any liability resulting from such litigation.
In accordance with the terms of the Separation Agreement, Realogy posted a letter of credit in April 2007 for the benefit
of the Company to cover its estimated share of the Assumed Liabilities discussed above, subject to adjustment, although
there can be no assurance that such letter of credit will be sufficient or effective to cover Realogy’s actual obligations if
and when they arise.
In October 2009, a judgment was entered against the Company in the amount of $16 million following the completion of
a jury trial for damages related to breach of contract in the United States District Court for the District of Alaska. The
lawsuit, which was filed in 2003, involved breach of contract and other claims by one of the Company’s licensees related
to the acquisition of its Budget vehicle rental business in 2002. The Company believes the verdict in this case is
unsupported by the evidence. In addition to the judgment for damages, in June 2010, the district court also entered an
order against the Company in the amount of $3 million, in favor of the plaintiff’s motions for pre-judgment interest and
attorneys’ fees. The Company has filed an appeal of the judgment and attorneys’ fees awarded with the United States
Court of Appeals for the Ninth Circuit.
Additionally, the Company is also involved in claims, legal proceedings and governmental inquiries related, among other
things, to its vehicle rental operations, including, among others, contract and licensee disputes, wage-and-hour claims,
competition matters, insurance claims, intellectual property claims and other regulatory, environmental, commercial and
tax matters. 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 materially impact the
Company’s financial position, results of operations or cash flows.
Commitments to Purchase Vehicles
The Company maintains agreements with vehicle manufacturers under which the Company has agreed to purchase
approximately $5.1 billion of vehicles from manufacturers over the next 12 months. The majority of these commitments
are subject to the vehicle manufacturers’ satisfying their obligations under their respective repurchase and guaranteed
depreciation agreements. The purchase of such vehicles is financed primarily through the issuance of vehicle-backed
debt and cash received upon the disposition of vehicles.
Other Purchase Commitments
In the normal course of business, the Company makes various commitments to purchase other 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, 2012 (aggregating approximately $168 million) was individually significant. These
purchase obligations extend through 2017.
Concentrations
Concentrations of credit risk at December 31, 2012, 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, PSA Peugeot Citroën, Volkswagen Group, Toyota Motor Corporation, Kia Motors
America, Fiat Group Automobiles S.p.A. and Renault S.A., and primarily with respect to receivables for program cars
that have been disposed but for which the Company has not yet received payment from the manufacturers (see Note 2—
Summary of Significant Accounting Policies) and (ii) risks related to Realogy and Wyndham, including receivables of
$64 million and $40 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 $26 million and $28
million at December 31, 2012 and 2011, respectively.