Hertz 2014 Annual Report Download - page 93

Table of Contents
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to enacted tax rates and changes to the global mix of earnings will result in changes to the tax rates used to calculate deferred taxes and any
related valuation allowances. Provisions are not made for income taxes on undistributed earnings of international subsidiaries that are intended to
be indefinitely reinvested outside the United States or are expected to be remitted free of taxes. Future distributions, if any, from these
international subsidiaries to the United States or changes in U.S. tax rules may require recording a tax on these amounts. We have recorded a
deferred tax asset for unutilized net operating loss carryforwards in various tax jurisdictions. Upon utilization, the taxing authorities may examine
the positions that led to the generation of those net operating losses. If the utilization of any of those losses are disallowed a deferred tax liability
may have to be recorded.
See Note 10, "Taxes on Income (Loss)" to the Notes to our consolidated financial statements included in this Annual Report under the caption
Item 8, "Financial Statements and Supplementary Data.”
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We are exposed to a variety of market risks, including the effects of changes in interest rates, gasoline and diesel fuel prices and foreign currency
exchange rates. We manage exposure to these market risks through regular operating and financing activities and, when deemed appropriate,
through the use of financial instruments. Financial instruments are viewed as risk management tools and have not been used for speculative or
trading purposes. In addition, financial instruments are entered into with a diversified group of major financial institutions in order to manage our
exposure to counterparty nonperformance on such instruments. We account for all financial instruments in accordance with U.S.GAAP, which
requires that they be recorded on the balance sheet as either assets or liabilities measured at their fair value. For financial instruments that are
designated and qualify as hedging instruments, we designate the hedging instrument, based upon the exposure being hedged, as either a fair value
hedge or a cash flow hedge. The effective portion of changes in fair value of financial instruments designated as cash flow hedging instruments is
recorded as a component of other comprehensive income (loss). Amounts included in accumulated other comprehensive income (loss) for cash
flow hedges are reclassified into earnings in the same period that the hedged item is recognized in earnings. The ineffective portion of changes in
the fair value of financial instruments designated as cash flow hedges is recognized currently in earnings within the same line item as the hedged
item, based upon the nature of the hedged item. For financial instruments that are not part of a qualified hedging relationship, the changes in their
fair value are recognized currently in earnings.
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The cost of employee services received in exchange for an award of equity instruments is based on the grant date fair value of the award. The
compensation expense for RSUs and PSUs is recognized ratably over the vesting period. For grants in 2012, 2013 and 2014, the vesting period is
three years at 33 1/3% per year. In addition to the service vesting condition, the PSUs had an additional vesting condition which called for the
number of units that will be awarded based on achievement of a certain level of Corporate EBITDA, or other performance measure as defined in
the applicable award agreements, over the applicable measurement period.
The cost of employee services received in exchange for an award of equity instruments is based on the grant date fair value of the award. That
cost is recognized over the period during which the employee is required to provide service in exchange for the award. We estimated the fair value
of options issued at the date of grant using a Black-Scholes option-pricing model, which includes assumptions related to volatility, expected term,
dividend yield, and risk-free interest rate. These factors combined with the stock price on the date of grant result in a fixed expense which is
recorded on a straight-line basis over the vesting period.
The assumed volatility for our stock is based on our historical stock price data. The assumed dividend yield is 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. The non-cash stock-based compensation expense associated with the Hertz Global Holdings, Inc. Stock Incentive Plan, or the “Stock
Incentive Plan,” the Hertz Global Holdings, Inc. Director Stock Incentive Plan, or the “Director Plan,” and the Hertz Global Holdings, Inc. 2008
Omnibus Incentive Plan, or the “Omnibus Plan,” are pushed down from Hertz Holdings and recorded on the books at the Hertz level. See Note 8,
"Stock-Based Compensation" to the Notes to our consolidated financial statements included in this Annual Report under the caption Item 8,
"Financial Statements and Supplementary Data.”
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Source: HERTZ GLOBAL HOLDINGS INC, 10-K, July 16, 2015 Powered by Morningstar® Document Research℠
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