Hertz 2007 Annual Report Download - page 89

zero. The risk-free interest rate is the implied zero-coupon yield for U.S. Treasury securities having a
maturity approximately equal to the expected term of the options, as of the grant dates. We assume that
in each year, 1% of the options that are outstanding but not vested will be forfeited, based on our U.S.
pension plan withdrawal rate assumptions. The non-cash stock-based compensation expense
associated with the Hertz Global Holdings, Inc. Stock Incentive Plan, or the ‘‘Stock Incentive Plan,’’ is
pushed down from Hertz Holdings and recorded on the books at the Hertz level.
Results of Operations
In the following discussion, comparisons are made between the years ended December 31, 2007 and
December 31, 2006 and December 31, 2006 and December 31, 2005 (combined), notwithstanding the
presentation in our consolidated statements of operations for the years ended December 31, 2007 and
2006, the Successor period ended December 31, 2005 and the Predecessor period ended
December 20, 2005. A split presentation of an annual period is required under GAAP when a change in
accounting basis occurs. Consequently, the combined presentation for 2005 is not a recognized
presentation under GAAP. Accounting for an acquisition requires that the historical carrying values of
assets acquired and liabilities assumed be adjusted to fair value. A resulting higher cost basis
associated with the allocation of the purchase price impacts post-acquisition period results, which
impacts period-to-period comparisons. We believe a discussion of the separate periods presented for
the year ended December 31, 2005 in our consolidated statements of operations may impede
understanding of our operating performance. The impact of the Acquisition on the 11-day Successor
period ended December 31, 2005 does not materially affect the comparison of the annual periods and,
accordingly, we have prepared the discussion of our results of operations by comparing the year ended
December 31, 2005 (combined) with the year ended December 31, 2006 without regard to the
differentiation between Predecessor and Successor results of operations for the Predecessor period
ended December 20, 2005 and the Successor period ended December 31, 2005.
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