Avis 2015 Annual Report Download - page 99

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F-30
French airports, the majority of which are controlled by public administrative bodies or the French state,
violated competition law through the distribution of company-specific statistics by airports to car rental
companies operating at those airports; and (ii) two other international car rental companies in a concerted
practice relating to train station surcharges. The Company believes that it has valid defenses and intends to
vigorously defend against the allegations, but it is currently unable to predict the outcome of the
proceedings or range of reasonably possible losses, which may be material.
Additionally, in March 2015, the Canadian Competition Bureau filed an application with the Competition
Tribunal alleging that the Company and two of its Canadian subsidiaries engaged in deceptive marketing
practices with regard to certain charges that consumers are invoiced related to renting a vehicle and
associated products in Canada. The application seeks penalties against the Company and its subsidiaries
totaling approximately $25 million as well as reimbursements to current and former customers of amounts
collected and retained by the Company related to the alleged deceptive marketing practices. The Company
believes that it has valid defenses and intends to vigorously defend against the allegations, but it is currently
unable to predict the outcome of the proceedings or range of reasonably possible losses, which may be
material.
The Company is involved in claims, legal proceedings and governmental inquiries related, among other
things, to its vehicle rental operations, including contract and licensee disputes, competition matters,
employment matters, insurance claims, intellectual property claims, business practice disputes and other
regulatory, environmental, commercial and tax matters. Litigation is inherently unpredictable and, although
the Company believes that its accruals are adequate and/or that it has valid defenses in these matters,
unfavorable resolutions could occur. Excluding the French and Canadian competition matters discussed
above, the Company estimates that the potential exposure resulting from adverse outcomes of legal
proceedings in which it is reasonably possible that a loss may be incurred could, in the aggregate, be up to
approximately $25 million in excess of amounts accrued as of December 31, 2015; however, the Company
does not believe that the impact should result in a material liability to the Company in relation to its
consolidated financial condition or results of operations.
Commitments to Purchase Vehicles
The Company maintains agreements with vehicle manufacturers under which the Company has agreed to
purchase approximately $7.2 billion of vehicles from manufacturers over the next 12 months. The majority
of these commitments are subject to the vehicle manufacturers satisfying their obligations under their
respective repurchase and guaranteed depreciation agreements. The purchase of such vehicles is financed
primarily through the issuance of vehicle-backed debt and cash received upon the disposition of vehicles.
Other Purchase Commitments
In the normal course of business, the Company makes various commitments to purchase other goods or
services from specific suppliers, including those related to marketing, advertising, computer services and
capital expenditures. As of December 31, 2015, the Company had approximately $160 million of purchase
obligations, which extend through 2020.
Concentrations
Concentrations of credit risk at December 31, 2015, include (i) risks related to the Company’s repurchase
and guaranteed depreciation agreements with domestic and foreign car manufacturers, including Ford,
General Motors, Chrysler, Peugeot, Volkswagen, Fiat, Kia, Toyota, Mercedes, Renault and Hyundai, and
primarily with respect to receivables for program cars that have been disposed but for which the Company
has not yet received payment from the manufacturers and (ii) risks related to Realogy and Wyndham,
including receivables of $54 million and $33 million, respectively, related to certain contingent, income tax
and other corporate liabilities assumed by Realogy and Wyndham in connection with their disposition.
Asset Retirement Obligations
The Company maintains a liability for asset retirement obligations. An asset retirement obligation is a legal
obligation to perform certain activities in connection with the retirement, disposal or abandonment of assets.
The Company’s asset retirement obligations, which are measured at discounted fair values, are primarily