Avis 2015 Annual Report Download - page 100

F-31
related to the removal of underground gasoline storage tanks at its rental facilities. Liabilities accrued for
asset retirement obligations were $24 million and $25 million at December 31, 2015 and 2014, respectively.
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.
15. Stockholders’ Equity
Cash Dividend Payments
During 2015, 2014 and 2013, 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 its vehicle financing programs.
Share Repurchases
The Company’s Board of Directors has authorized the repurchase of up to $885 million of its common stock
under a plan originally approved in 2013 and subsequently expanded in 2014 and 2015. During 2015, 2014
and 2013, the Company repurchased approximately 16.1 million shares of common stock at a cost of $745
million under the program. As of December 31, 2015, approximately $140 million of authorization remained
available to repurchase common stock under this plan. In January 2016, the Board of Directors authorized a
$300 million increase in the Company’s share repurchase program.
Convertible Note Hedge and Warrants
In October 2009, the Company issued 3½% Convertible Senior Notes due October 2014. Concurrent with
the issuance of the Convertible Notes, 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
Convertible Notes, and 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
$16.25 and $22.50, respectively. The convertible note hedge was exercisable before expiration only to the
extent that corresponding amounts of the Convertible Notes were exercised. The convertible note hedge
and warrant transactions were accounted for as capital transactions and included as a component of
stockholders’ equity.