Avis 2012 Annual Report Download - page 89

F-33
approximately 13 million.
Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income is as follows:
Currency
Translation
Adjustments
Net
Unrealized
Gains (Losses)
on Cash Flow
Hedges
Net
Unrealized
Gains
(Losses) on
Available-
For-Sale
Securities
Minimum
Pension
Liability
Adjustment
Accumulated
Other
Comprehensive
Income (Loss)
Balance, January 1, 2010
$
111
$
(106)
$
-
$
(42)
$
(37)
Period change
71
60
-
(2)
129
Balance, December 31, 2010
182
(46)
-
(44)
92
Period change
(23)
33
2
(26)
(14)
Balance, December 31, 2011
159
(13)
2
(70)
78
Period change
34
13
-
(15)
32
Balance, December 31, 2012
$
193
$
-
$
2
$
(85)
$
110
_____________
All components of accumulated other comprehensive income (loss) are net of tax, except currency translation adjustments, which
exclude income taxes related to indefinite investments in foreign subsidiaries.
During 2012, the Company recorded unrealized gains on cash flow hedges of $21 million ($13 million, net of tax) in
accumulated other comprehensive income which primarily related to the derivatives used to manage the interest-rate risk
associated with the Company’s vehicle-backed debt and the Company’s floating rate debt (see Note 20—Financial
Instruments). Such amount in 2012 includes $19 million ($12 million, net of tax) of unrealized gains on cash flow
hedges related to the Company’s vehicle-backed debt and is offset by a corresponding increase in the Company’s
Investment in Avis Budget Rental Car Funding on the Consolidated Balance Sheets.
18. Stock-Based Compensation
The Company may grant stock options, stock appreciation rights (“SARs”), restricted shares, and deferred common stock
units or restricted stock units (collectively, “RSUs”) to its directors, officers, other employees and affiliates. As of
December 31, 2012, the Company’s active stock-based compensation plan consists of the amended and restated 2007
Equity and Incentive Plan, under which the Company is authorized to grant up to 16 million shares of its common stock,
and approximately 5 million shares were available for future grants. The Company may settle employee stock option
exercises with either treasury shares, newly issued shares or shares purchased on the open market. The Company
typically issues shares related to vested RSUs from treasury shares.
The Company applies the direct method and tax law ordering approach to calculate the tax effects of stock-based
compensation. In jurisdictions with net operating loss carryforwards, tax deductions for exercises of stock-based awards
have generated a $36 million tax benefit at December 31, 2012, with a corresponding increase to additional paid-in
capital. Approximately $14 million of incremental tax benefits will be recorded in additional paid-in capital when
realized in these jurisdictions.
Stock Options
In 2010, the Company granted 160,000 stock options under the Company’s amended 2007 Equity and Incentive Plan.
The stock options (i) vest ratably over a five-year term, (ii) expire ten years from the date of grant and (iii) have an
exercise price that was set at the closing price of the Company’s common stock on the date of the grant.
Following the spin-offs of Realogy and Wyndham in 2006, all previously outstanding and unvested stock options vested
and converted into stock options of Avis Budget, Realogy and Wyndham.
The Company used the Black-Scholes option pricing model to calculate the fair value of the time-vesting stock options
granted in 2010, with assumptions including, but not limited to, the options’ expected life and the expected volatility of
the underlying stock. Based on facts and circumstances at the time of the grant, the Company used the implied volatility
of its publicly traded, near-the-money stock options with a remaining maturity of at least one year in 2010. The
Company considered several factors in estimating the life of the options granted, including the historical option exercise