Hertz 2007 Annual Report Download - page 121

The funded status (i.e., the dollar amount by which the present value of projected benefit obligations
exceeded the market value of pension plan assets) of our U.S. qualified plan, in which most domestic
employees participate, declined as of December 31, 2007, compared with December 31, 2006. The ratio
of assets to the projected benefit obligation was consistent from December 31, 2006 to December 31,
2007. The primary reason for the decline in dollar terms is that no contributions were made in 2007.
We review our pension assumptions regularly and from time to time make contributions beyond those
legally required. For example, no discretionary contributions were made to our U.S. qualified plan in the
years ended December 31, 2007 and 2006 and a $28.0 million was made to our U.S. qualified plan for
the year ended December 31, 2005. After giving effect to these contributions, based on current interest
rates and on our return assumptions and assuming no additional contributions, we do not expect to be
required to pay any variable-rate premiums to the Pension Benefit Guaranty Corporation before 2010.
For the years ended December 31, 2007 and 2006, we contributed $30.3 million and 28.8 million,
respectively, to our worldwide pension plans, including a discretionary contribution of $5.2 million and
$15.6 million, respectively, to our U.K. defined benefit pension plan and benefit payments made through
unfunded plans.
We participate in various ‘‘multiemployer’’ pension plans administrated by labor unions representing
some of our employees. We make periodic contributions to these plans to allow them to meet their
pension benefit obligations to their participants. In the event that we withdraw from participation in one of
these plans, then applicable law could require us to make an additional lump-sum contribution to the
plan, and we would have to reflect that as an expense in our statement of operations and as a liability on
our balance sheet. Our withdrawal liability for any multiemployer plan would depend on the extent of the
plan’s funding of vested benefits. In the ordinary course of our renegotiation of collective bargaining
agreements with labor unions that maintain these plans, we could decide to discontinue participation in
a plan, and in that event we could face a withdrawal liability. Some multiemployer plans, including one in
which we participate, are reported to have significant underfunded liabilities. Such underfunding could
increase the size of our potential withdrawal liability.
Other Postretirement Benefits
We provide limited postretirement health care and life insurance for employees of our domestic
operations with hire dates prior to January 1, 1990. There are no plan assets associated with this plan.
We provide for these postretirement costs through monthly accruals. The net periodic postretirement
benefit cost for the year ended December 31, 2007 was $0.7 million and the accumulated benefit
obligation as of December 31, 2007 was $13.2 million compared to a net periodic postretirement benefit
cost of $1.1 million for the year ended December 31, 2006 and an accumulated benefit obligation of
$16.6 million as of December 31, 2006. The decrease in the accumulated benefit obligation was primarily
attributable to the increase in the discount rate from 5.7% as of December 31, 2006 to 6.3% as of
December 31, 2007.
Hertz Holdings Stock Incentive Plan
On February 15, 2006, our Board of Directors and that of Hertz jointly approved the Hertz Global
Holdings, Inc. Stock Incentive Plan, or the ‘‘Stock Incentive Plan.’’ The Stock Incentive Plan provides for
the sale of shares of stock of Hertz Holdings to our executive officers, other key employees and directors
as well as the grant of stock options to purchase shares of Hertz Holdings to those individuals.
During the second quarter of 2006, we made an equity offering to approximately 350 of Hertz’s
executives and key employees (not including Craig R. Koch, our former Chief Executive Officer). The
shares sold and options granted to our employees in connection with this equity offering are subject to
and governed by the terms of the Stock Incentive Plan. The offering closed on May 5, 2006. In
connection with this offering, we sold 1,757,354 shares at a purchase price of $10.00 per share and
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