Hertz 2009 Annual Report Download - page 111

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
pension plan during 2009 and expect to contribute between $25 million and $95 million to our U.S.
pension plan during 2010. These contributions are necessary primarily because of the significant
decline in asset values.
We review our pension assumptions regularly and from time to time make contributions beyond those
legally required. A discretionary contribution of $1.5 million was made to our U.S. qualified plan in the
year ended December 31, 2008. No discretionary contributions were made to our U.S. qualified plan in
the year ended December 31, 2007. For the years ended December 31, 2009 and 2008, we contributed
$42.6 million and $36.8 million, respectively, to our worldwide pension plans, including a discretionary
contribution of $5.2 million and $8.0 million, respectively, to our U.K. defined benefit pension plan, and
benefit payments made through unfunded plans. Based upon the significant decline in asset values in
2008, which were in line with the overall market declines, it is likely we will have to make cash
contributions in 2010 and future years. In addition, under the Pension Protection Act of 2006, there are a
number of choices in valuing assets and liabilities to determine the required level of funding that can
produce a wide range of potential contributions. The level of 2010 and future contributions will vary, and
is dependant on a number of factors including investment returns, interest rate fluctuations, plan
demographics, funding regulations, and the results of the final actuarial valuation.
We participate in various ‘‘multiemployer’’ pension plans administered 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 consolidated statement of operations and as
a liability on our consolidated 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 loss for the year ended December 31, 2009 was $0.6 million and the accumulated benefit
obligation as of December 31, 2009 was $13.7 million compared to a net periodic postretirement benefit
gain of $2.1 million for the year ended December 31, 2008 and an accumulated benefit obligation of
$12.9 million as of December 31, 2008.
Stock-Based Compensation
On February 28, 2008, our Board of Directors adopted the Omnibus Plan, which was approved by our
stockholders at the annual meeting of stockholders held on May 15, 2008. The Omnibus Plan provides
for grants of both equity and cash awards, including non-qualified stock options, incentive stock options,
stock appreciation rights, performance awards (shares and units), restricted stock, restricted stock units
and deferred stock units to key executives, employees and non-management directors.
The Omnibus Plan provides that no further awards will be granted pursuant to the Stock Incentive Plan
and the Director Plan, or the ‘‘Prior Plans.’’ However, awards that had been previously granted pursuant
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