Avis 2013 Annual Report Download - page 40

30
We face risks related to our reliance on communications networks and centralized information systems.
We rely heavily on the satisfactory performance and availability of our information systems, including our
reservation systems, websites and network infrastructure to attract and retain customers, accept reservations,
process rental and sales transactions, manage our fleet of vehicles, account for our activities and otherwise
conduct our business. We have centralized our information systems, and we rely on communications service
providers to link our systems with the business locations these systems were designed to serve. A failure or
interruption that results in the unavailability of any of our information systems, or a major disruption of
communications between a system and the locations it serves, could cause a loss of reservations, interfere with
our fleet management, slow rental and sales processes, create negative publicity that damages our reputation or
otherwise adversely impacts our ability to manage our business effectively. We may experience temporary system
interruptions for a variety of reasons, including network failures, power outages, cyber-attacks, software errors or
an overwhelming number of visitors trying to access our systems during periods of strong demand. Because we
are dependent in part on independent third parties for the implementation and maintenance of certain aspects of
our systems and because some of the causes of system interruptions may be outside of our control, we may not
be able to remedy such interruptions in a timely manner, or at all. Our systems’ business continuity plans and
insurance programs seek to mitigate such risks but they cannot fully eliminate the risk that a disruption could be
experienced in any of our information systems.
We face risks related to protecting the confidential information of our customers against security
breaches, including cyber-security breaches.
Third parties may have the technology or expertise to breach the security of our customer transaction data and
our security measures may not prevent physical security or cyber-security breaches, which could result in
substantial harm to our business, our reputation or our results of operations. We rely on encryption and/or
authentication technology licensed and, at times, administered by independent third parties to secure
transmission of confidential information, including credit card numbers. Our outsourcing agreements with these
third-party service providers generally require that they have adequate security systems in place to protect our
customer transaction data. However, advances in computer capabilities, new discoveries in the field of
cryptography or other cyber-security developments could render our security systems and technology or those
employed by our third-party service providers vulnerable to a breach. In addition, anyone who is able to
circumvent our security measures could misappropriate proprietary information or cause interruptions in our
operations. Cyber-security risks such as malicious software and attempts to gain unauthorized access to data are
rapidly evolving and could lead to disruptions in our reservation system or other data systems, unauthorized
release of confidential or otherwise protected information or corruption of data. Any successful efforts by
individuals to infiltrate, break into, disrupt, damage or otherwise steal from the Company’s, its licensees’ or its
third-party service providers’ security or information systems could damage our reputation and expose us to a risk
of loss or litigation and possible liability that could adversely impact our financial condition or results of operations.
We face risks associated with our like-kind exchange program.
We utilize a like-kind exchange program whereby we replace vehicles in a manner that allows tax gains on
vehicles sold in the United States to be deferred. The program has resulted in a material deferral of federal and
state income taxes beginning in 2004. The benefit of deferral is dependent on reinvestment of vehicle disposition
proceeds in replacement vehicles within a prescribed period of time (usually six months). An extended downsizing
of our fleet could result in reduced deferrals, utilization of tax attributes and increased payment of federal and
state income taxes that could require us to make material cash payments. Such a downsizing or reduction in
purchases would likely occur if, and to the extent, we are unable to obtain financing when our asset-backed rental
car financings mature or in connection with a significant decrease in demand for vehicle rentals. Therefore, we
cannot offer assurance that the expected tax deferral will continue or that the relevant law concerning like-kind
exchange programs will remain intact in its current form.
U.S. federal and state income tax laws, legislation or regulations governing like-kind exchange and accelerated
depreciation deductions and the administrative interpretations of those laws, legislation or regulations are subject
to amendment at any time. We cannot predict when or if any new federal or state income tax laws, legislation,
regulations or administrative interpretations will be adopted and in what manner. Any such change could eliminate
certain tax deferrals that are currently available with respect to like-kind exchange or accelerated depreciation