Car rental company Hertz Global Holdings Inc said it would restate or correct financial results for the past three years to fix accounting errors originating in 2011, sending its shares down as much as 12 per cent on Friday.
First-quarter results are likely to be below market estimates due to costs related to the accounting review, the company said in a regulatory filing that disclosed further accounting issues at the No.2 U.S. car rental firm.
Hertz, which replaced its chief financial officer in December, was scheduled to report results on May 7, but delayed the announcement saying more work was required. The company did not say on Friday when it would release its results.
Hertz’s shareholders include Larry Robbins’ Glenview Capital Management LLC and Daniel Loeb’s Third Point Capital.
Third Point had a stake of about 1.3 per cent in Hertz as of March 31, while Glenview had about 3 per cent.
Hertz said in May that it had identified errors relating to prior periods that could require it to restate 2011 results.
The company had said then that the restatement would likely reduce its 2011 net income by as much as about $10-million, to $174-million.
Hertz’s accounting problems come at a time when the car rental industry is picking up as business and leisure travel increases along with an improving economy in the United States.
However, Hertz has not been able to benefit, partly due to higher expenses. The company’s net earnings fell 13 per cent in the fourth quarter ended Dec. 31.
Hertz said in March that during the quarter, it had identified errors totaling $46.3-million in prior periods.
The company, under pressure from investors to focus on car rentals, said in March that it would spin off its equipment rental business, raising $2.5-billion to reduce debt and fund a $1-billion share buyback.
Hertz operates in a consolidated market, along with Avis Budget Group Inc and privately held Enterprise, which together control about 90 per cent of the U.S. car rental market.
Hertz said on Friday its audit committee had concluded that financial statements for 2011 should no longer be relied upon and that adjustments might be needed for 2012 and 2013 results.
The company said the errors included the treatment of capitalization and depreciation for some non-fleet assets, renter obligations for damaged vehicles and restoration obligations at the end of leases.
Hertz’s accountant is PricewaterhouseCoopers LLP.
The company’s U.S. rental car revenue per day fell 1.6 per cent in the first quarter ended March 31, hurt by excess fleet and a late Easter holiday. Easter fell on April 20 this year, while it fell on March 31 in 2013.
Hertz shares were down 9.1 per cent at $27.72 in late morning trading on the New York Stock Exchange.
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