Avis 2013 Annual Report Download - page 104

F-32
Standard Guarantees/Indemnifications
In the ordinary course of business, the Company enters into numerous agreements that contain standard
guarantees and indemnities whereby the Company agrees to indemnify another party, among other things,
for performance under contracts and any breaches of representations and warranties thereunder. In
addition, many of these parties are also indemnified against any third-party claim resulting from the
transaction that is contemplated in the underlying agreement. Such guarantees or indemnifications are
granted under various agreements, including those governing (i) purchases, sales or outsourcing of assets
or businesses, (ii) leases of real estate, (iii) licensing of trademarks, (iv) access to credit facilities and use of
derivatives and (v) issuances of debt or equity securities. The guarantees or indemnifications issued are for
the benefit of the (i) buyers in sale agreements and sellers in purchase agreements, (ii) landlords in lease
contracts, (iii) licensees under licensing agreements, (iv) financial institutions in credit facility arrangements
and derivative contracts and (v) underwriters and placement agents in debt or equity security issuances.
While some of these guarantees extend only for the duration of the underlying agreement, many may
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 sold or spun-off in 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 these leases is estimated to be
approximately $52 million, the majority of which expire by the end of 2015. At December 31, 2013, the
liability recorded by the Company in connection with these guarantees was approximately $1 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 and Wyndham, as applicable. 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.
16. Stockholders’ Equity
Cash Dividend Payments
During 2013, 2012 and 2011, the Company did not declare or pay any cash dividends. The Company’s
ability to pay dividends to holders of its common stock is limited by the Company’s senior credit facility, the
indentures governing its senior notes and vehicle financing programs.
Share Repurchases
In August 2013, the Company obtained Board approval to repurchase up to $200 million of its common
stock. During 2013, the Company repurchased approximately 1,582,000 shares of common stock at a cost
of approximately $50 million under the repurchase program. The Company did not repurchase any of its
common stock during 2012 and 2011.
Convertible Note Hedge and Warrants
In 2009, the Company purchased a convertible note hedge for approximately $95 million, to potentially
reduce the net number of shares required to be issued upon conversion of the Company’s 3½% Convertible
Notes. Concurrently, the Company issued warrants for approximately $62 million to offset the cost of the
convertible note hedge.
The convertible note hedge and warrants, which were to be net-share settled, initially covered the purchase
and issuance, respectively, of approximately 21.2 million shares of common stock, subject to customary
anti-dilution provisions. The initial strike price per share of the convertible note hedge and warrants was