Hertz 2014 Annual Report Download - page 88

Table of Contents
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environmental liabilities including liability for environmental indemnities, reflected in our consolidated balance sheets in "Accrued liabilities" were $2
million and $2 million, respectively. The accrual generally represents the estimated cost to study potential environmental issues at sites deemed
to require investigation or clean-up activities, and the estimated cost to implement remediation actions, including on-going maintenance, as
required. Cost estimates are developed by site. Initial cost estimates are based on historical experience at similar sites and are refined over time
on the basis of in-depth studies of the sites. For many sites, the remediation costs and other damages for which we ultimately may be responsible
cannot be reasonably estimated because of uncertainties with respect to factors such as our connection to the site, the materials there, the
involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and
scope of investigations, studies, and remediation to be undertaken (including the technologies to be required and the extent, duration, and success
of remediation).
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We sponsor defined benefit pension plans worldwide. Pension obligations give rise to significant expenses that are dependent on assumptions
discussed in Note 7, "Employee Retirement Benefits," to the Notes to our consolidated financial statements included in this Annual Report under
the caption Item 8, "Financial Statements and Supplementary Data." Effective December 31, 2014, we amended the Hertz Retirement Plan to
permanently discontinue future benefit accruals and participation under the plan for non-union employees. We anticipate that, while compensation
credits will no longer be provided under the Hertz Retirement Plan after 2014 for affected participants, interest credits will continue to be credited
on existing participant account balances under the plan until benefits are distributed and service will continue to be recognized for vesting and
retirement eligibility requirements. In connection with the freezing of the Hertz Retirement Plan, we plan to increase employer contributions under
our qualified 401(k) savings plan (the “401(k) Plan”).
In 2014, the Company changed its method of calculating the market-related value of pension assets for purposes of determining the expected
return on plan assets and accounting for asset gains and losses. The new method uses fair value instead of the calculated market-related value
that has been used historically. This change in accounting principle was applied retrospectively to December 2005 when the Company was sold by
Ford Motor Company to a consortium of private equity investors. In connection with the change in accounting principle, the Company determined
that the calculated market-related value was not properly valued subsequent to the 2005 acquisition accounting and therefore a portion of the
cumulative impact on expense due to the change in asset method has been deemed a correction of an error. The cumulative impact from 2005-
2014 is an increase in accumulated other comprehensive income and a decrease in the accumulated deficit of $27 million, $24 million of which has
been deemed to be due to the change in accounting principle, and $3 million is attributable to the correction of an error. See Exhibit 18.1 to this
Annual Report on Form 10-K for the preferability letter on this matter from our independent registered public accounting firm. See Note 7,
"Employee Retirement Benefits" to the Notes to our consolidated financial statements under the caption Item 8, "Financial Statements and
Supplementary Data” for more details on the impact of the change in accounting principle on the Company's financial statements.
Effective as of December 31, 2014, we permanently discontinued future benefit accruals and participation under the BEP and the SERP II. Service
will continue to be recognized for vesting and retirement eligibility requirements under the BEP and SERP II.
Our 2014 worldwide pre-tax pension expense is $16 million, which represents a decrease of $9 million from 2013. In general, pension expense
decreased in 2014 compared to 2013 due to an increase in the discount rates used to determine plan benefit obligations and an increase in the
long-term expected asset return assumption.
The funded status (i.e., the dollar amount by which the projected benefit obligations exceeded the market value of pension plan assets) of our U.S.
qualified plan, in which most domestic employees participate, improved slightly as of December 31, 2014, compared with December 31, 2013. This
change is partly due to company contributions as well as plan curtailments. We contributed $35 million to the U.S. qualified plan during 2014. We
do not anticipate contributing to the U.S. qualified pension plan during 2015. For the international plans, we anticipate contributing $3 million during
2015. The level of 2015 and future contributions will vary, and is dependent on a number of factors including investment returns, interest rate
fluctuations, plan demographics, funding regulations and the results of the final actuarial valuation.
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Source: HERTZ GLOBAL HOLDINGS INC, 10-K, July 16, 2015 Powered by Morningstar® Document Research℠
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