Hertz Global Holdings, Inc. (NYSE:HTZ) confirmed Friday that it would restate 2012 and 2013 financial results, following an ongoing review that showed accounting errors.
The second largest U.S. car rental group also unveiled a new strategy for its U.S. rental car fleet, with an emphasis on buying more 2015 than 2014 model-year cars.
Restatement for three years
As reported by ValueWalk in June, Hertz Global Holdings, Inc. (NYSE:HTZ) disclosed that following an internal audit, its results for 2011 which were amended in its most recent annual report “should no longer be relied upon”. The company also indicated that financial statements for both 2012 and 2013 will need to be reviewed in order to ensure the errors made in 2011 don’t warrant further restatements.
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However, on Friday, Hertz Global Holdings, Inc. (NYSE:HTZ) confirmed that it will revise all financial statements from 2011 through 2013 and will continue a review that has found $87 million of errors so far. In a filing, the company said the board’s audit committee is “looking into the tone at the top” and management’s influence over those mistakes. The car-rental company said it was advised in June that it was being investigated by the U.S. Securities and Exchange Commission. Hertz has found that its internal controls had at least one material weakness and that it had ineffective procedures as on December 31.
The car-rental company also disclosed in its filing that it “does not currently expect to complete the process and file updated financial statements before mid-2015, and there can be no assurance that the process will be completed at that time, or that no additional adjustments will be identified”.
Hertz Global Holdings, Inc. (NYSE:HTZ) also disclosed Friday that it has implemented a cost-cutting program expected to result in $100 million in savings by the end of next year.
Hertz under shareholder pressure
Following the revelation of accounting errors, Hertz Global Holdings, Inc. (NYSE:HTZ) has been under scrutiny by activist investors. Hertz Global management just ended a protracted struggle with activist Carl Icahn a few months back by agreeing to add three of Icahn’s nominees to its Board. The company said its board of directors believes that the agreement with Icahn and his affiliates is in the best interest of the company and its shareholders.
However, last month, activist investing firm Jana Partners disclosed that it had acquired a 7% stake in Hertz. According to the 13-D filing, Jana Partners now owns over 32 million shares at an aggregate purchase price of approximately $579 million. In its filing, the firm said it may develop plans to pursue stakeholders to engage in “extraordinary transactions” including a merger or proposing new directors for the company’s board of directors.
Last week, Jana Partners said CEO succession is a very important issue confronting the board of directors of Hertz Global Holdings, Inc. (NYSE:HTZ). The activist hedge fund said Scott Thompson, the former CEO of Dollar Thrifty Automotive Group, Inc. (OTCMKTS:DTGF), is a “clear choice” to lead the auto-rental company.