Avis 2013 Annual Report Download - page 111

F-39
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, 2013, 2012 and 2011, the Company contributed a total of $8 million, $9
million and $6 million, respectively, to multiemployer plans.
19. 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 Company has designated its 6% Euro-denominated Notes issued March 2013 as a hedge of its net
investment in Euro-denominated foreign operations. The Company records the effective portion of the gain
or loss on this net investment hedge, net of taxes, in accumulated other comprehensive income as part of
currency translation adjustments. For the year ended December 31, 2013, the Company has recorded an
$11 million loss, net of tax, in accumulated other comprehensive income.
The amount of gains or losses reclassified from other comprehensive income to earnings resulting from
ineffectiveness or from excluding a component of the hedges’ gain or loss from the effectiveness calculation
for cash flow and net investment hedges during 2013, 2012 and 2011 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 2013, 2012 and
2011, the Company recorded net unrealized gains on cash flow hedges of $1 million, $13 million and $33
million, net of tax, respectively, to other comprehensive income. The after-tax amount of gains or losses
reclassified from accumulated other comprehensive income (loss) to earnings resulting from ineffectiveness
for 2013, 2012 and 2011 was not material to the Company’s results of operations.
The amount deferred in accumulated other comprehensive income that the Company expects to be
recognized in earnings in 2014 is not material.
The Company uses interest rate swaps, including freestanding derivatives and derivatives designated as
cash flow hedges, to manage the risk related to its floating rate corporate debt. In connection with such
cash flow hedges, the Company recorded net unrealized gains of $1 million, net of tax, to other
comprehensive income during each of the years 2013, 2012 and 2011.
The Company uses derivatives to manage the risk associated with its floating rate vehicle-backed debt.
These derivatives include freestanding derivatives and derivatives designated as cash flow hedges, which
have maturities ranging from August 2014 to November 2018. In connection with such cash flow hedges,
the Company did not record any net unrealized gains or losses to other comprehensive income during
2013, and during 2012 and 2011, recorded net unrealized gains of $12 million and $32 million, net of tax,