Hertz 2007 Annual Report Download - page 184

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Under the terms of the Master Supply and Advertising Agreement, we will be able to enter into vehicle
advertising and supply agreements with other automobile manufacturers in the United States and in
other countries, and we intend to explore those opportunities. However, we cannot offer assurance that
we will be able to obtain advertising contributions from other automobile manufacturers that will mitigate
the reduction in Ford’s advertising contributions.
Ford subsidiaries and affiliates also supply other brands of cars, including Jaguar, Volvo, Mazda and
Land Rover cars, to us in the United States under arrangements separate from the Master Supply and
Advertising Agreement. In addition, Ford, its subsidiaries and affiliates are significant suppliers of cars to
our international operations.
During the years ended December 31, 2007 and 2006, the Successor period ended December 31, 2005
and the Predecessor period ended December 20, 2005, we purchased cars from Ford and its
subsidiaries at a cost of approximately (in billions of dollars) $2.9, $4.1, $0.1 and $4.7, respectively, and
sold cars to Ford and its subsidiaries under various repurchase programs for approximately (in billions of
dollars) $2.2, $3.1, $0.1 and $3.5, respectively.
Stock option plan
Certain employees of ours participate in the stock option plan of Ford under Ford’s 1998 Long-Term
Incentive Plan. As a result of the Acquisition, all outstanding options issued under this plan became
vested.
Taxes
Prior to the Acquisition, Hertz and its domestic subsidiaries filed a consolidated federal income tax return
with Ford. Pursuant to a tax sharing agreement, or the ‘‘Agreement,’’ with Ford, current and deferred
taxes were reported, and paid to Ford, as if Hertz had filed its own consolidated tax returns with its
domestic subsidiaries. The Agreement provided that Hertz was reimbursed for foreign tax credits in
accordance with the utilization of those credits by the Ford consolidated tax group.
On December 21, 2005, in connection with the Acquisition, the Agreement with Ford was terminated.
Upon termination, all tax payables and receivables with Ford were cancelled and neither Hertz nor Ford
has any future rights or obligations under the Agreement. Hertz may be exposed to tax liabilities
attributable to periods it was a consolidated subsidiary of Ford. While Ford has agreed to indemnify
Hertz for certain tax liabilities pursuant to the arrangements relating to our separation from Ford, we
cannot offer assurance that payments in respect of the indemnification agreement will be available.
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