Avis 2012 Annual Report Download - page 95

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F-39
The management of the Company’s non-U.S. defined benefit pension plans’ investment goals and objectives vary
slightly by country, but are managed with consultation and advice from independent investment advisors. The
investment policy is set with the primary objective to provide appropriate security for all beneficiaries; to achieve long-
term growth in the assets sufficient to provide for benefits from the plan; and to achieve an appropriate balance between
risk and return with regards to the cost of the plan and the security of the benefits. A suitable strategic asset allocation
benchmark is determined for the plans to maintain diversified portfolios, taking into account government requirements, if
any, regarding unnecessary investment risk and protection of pension plans’ assets. The defined benefit pension plans’
assets are primarily invested in equities, bonds, absolute return funds and cash.
The Company used significant observable inputs (Level 2 inputs) to determine the fair value of the defined benefit
pension plans’ assets. See Note 2—Summary of Significant Accounting Policies for the Company’s methodology used
to measure fair value. The following table presents the defined benefit pension plans’ assets measured at fair value, as of
December 31:
Asset Class
2012
2011
Cash equivalents
$
3
$
8
Short term investments
7
5
U.S. stock
91
84
Non-U.S. stock
149
124
Real estate investment trusts
6
6
Non-U.S. government securities
70
64
U.S. government securities
20
18
Corporate bonds
105
90
Other assets
14
13
Total assets
$
465
$
412
The Company estimates that future benefit payments from plan assets will be $21 million, $22 million, $23 million, $25
million, $25 million and $147 million for 2013, 2014, 2015, 2016, 2017 and 2018 to 2022, respectively.
Multiemployer Plans
The Company contributes to a number of multiemployer plans under the terms of collective-bargaining agreements that
cover a portion of its employees. The risks of participating in these multiemployer plans are different from single-
employer plans in the following aspects: (i) assets contributed to the multiemployer plan by one employer may be used
to provide benefits to employees of other participating employers; (ii) if a participating employer stops contributing to
the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; (iii) if the
Company elects to stop participating in a multiemployer plan it may be required to contribute to such plan an amount
based on the under-funded status of the plan; and (iv) the Company has no involvement in the management of the
multiemployer plans’ investments. For the years ended December 31, 2012, 2011 and 2010, the Company contributed a
total of $9 million, $6 million and $8 million, respectively, to multiemployer plans.
20. Financial Instruments
Risk Management
Currency Risk. The Company uses currency exchange contracts to manage its exposure to changes in currency exchange
rates associated with its non-U.S.-dollar denominated receivables and forecasted royalties, forecasted earnings of non-
U.S. subsidiaries and forecasted non-U.S.-dollar denominated acquisitions. The Company primarily hedges a portion of
its current-year currency exposure to the Australian, Canadian and New Zealand dollars, the Euro and the British pound
sterling. The majority of forward contracts do not qualify for hedge accounting treatment. The fluctuations in the value
of these forward contracts do, however, largely offset the impact of changes in the value of the underlying risk they
economically hedge. Forward contracts used to hedge forecasted third-party receipts and disbursements up to 12 months
are designated and do qualify as cash flow hedges. The amount of gains or losses reclassified from other comprehensive
income to earnings resulting from ineffectiveness or from excluding a component of the forward contracts’ gain or loss
from the effectiveness calculation for cash flow hedges during 2012, 2011and 2010 was not material, nor is the amount
of gains or losses the Company expects to reclassify from other comprehensive income to earnings over the next 12
months.
Interest Rate Risk. The Company uses various hedging strategies including interest rate swaps and interest rate caps to
create an appropriate mix of fixed and floating rate assets and liabilities. During 2012, 2011 and 2010, the Company