Hertz 2012 Annual Report Download - page 178

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Foreign Exchange Options
We manage our foreign currency risk primarily by incurring, to the extent practicable, operating and
financing expenses in the local currency in the countries in which we operate, including making fleet and
equipment purchases and borrowing for working capital needs. Also, we have purchased foreign
exchange options to manage exposure to fluctuations in foreign exchange rates for selected marketing
programs. The effect of exchange rate changes on these financial instruments would not materially
affect our consolidated financial position, results of operations or cash flows. Our risks with respect to
foreign exchange options are limited to the premium paid for the right to exercise the option and the
future performance of the option’s counterparty.
The following table summarizes the estimated fair value of derivatives (in millions of dollars):
Fair Value of Derivative Instruments(1)
Asset Derivatives(2) Liability Derivatives(2)
December 31, December 31, December 31, December 31,
2012 2011 2012 2011
Derivatives not designated as hedging
instruments under ASC 815:
Gasoline swaps ................. $— $— $0.1 $0.4
Interest rate caps ................ 0.9 0.5 0.9 0.4
Foreign exchange forward contracts . . 3.4 4.4 4.5 1.9
Interest rate swaps ............... — — — 0.2
Foreign exchange options ......... 0.2 0.1 — —
Total derivatives not designated as
hedging instruments under
ASC 815 ................... $4.5 $5.0 $5.5 $2.9
(1) All fair value measurements were primarily based upon significant observable (Level 2) inputs.
(2) All asset derivatives are recorded in ‘‘Prepaid expenses and other assets’’ and all liability derivatives are recorded in ‘‘Other
accrued liabilities’’ on our consolidated balance sheets.
The following table summarizes the (gains) and losses of derivatives (in millions of dollars):
Amount of Gain or (Loss)
Location of Gain or (Loss) Recognized in Income
Recognized on Derivatives on Derivatives
Years Ended December 31,
2012 2011
Derivatives not designated
as hedging instruments
under ASC 815:
Gasoline swaps ....... Direct operating $ 0.7 $ 2.6
Interest rate caps ...... Selling, general and administrative (0.8) —
Foreign exchange forward
contracts .......... Selling, general and administrative (15.4) (11.0)
Foreign exchange options Selling, general and administrative — (0.2)
Total ............. $(15.5) $ (8.6)
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