Hertz plunges after accounting goof

The stock tumbles as the company admits its past 3 years of financial statements were wrong.

By MSN Money Partner Jun 6, 2014 11:43AM
Credit: © Matthew Staver/Bloomberg via Getty Images

Caption: A row of rental cars are parked below a sign for Hertz Corp. at Denver International AirportBy Nathan Vardi, Forbes

Hertz Global Holdings (HTZ), a favorite stock in recent months of some closely-watched hedge funds, disclosed on Friday morning that its audit committee had concluded that problems with the company's financial statements for the last three years must be corrected to reflect mistakes.


Shares of Hertz tumbled by 9.3 percent in midday trading to $27.66. 


The stock had recently surged as investors of the car rental company anticipated its split into two companies by next year. Specifically, the company said its 2011 financial statements were no good and must be restated, and that its 2012 and 2013 financial statements need to be fixed.


Hertz's stock has been popular with prominent hedge fund investors. As of the end of March, some of its biggest shareholders included billionaire Larry Robbins' Glenview Capital Management, billionaire James Dinan's York Capital Management, Jeffrey Tannenbaum's Fir Tree and billionaire Dan Loeb's Third Point. It is unclear to what extent those hedge funds still remain in the stock Friday.


"The audit committee has directed the company to conduct a thorough review of the financial records for fiscal years 2011, 2012 and 2013, and this review may require Hertz to make further adjustments to the 2012 and 2013 financial statements," Hertz said in a Securities & Exchange Commission filing. "If these further adjustments to the 2012 and 2013 financial statements are determined to be material adjustments individually or in the aggregate, Hertz will need to also restate and withdraw reliance on those financial statements."


Hertz had already delayed filing its first-quarter financial statements last month after identifying errors related to its capitalization and timing of depreciation for non-fleet assets, allowances for doubtful accounts in Brazil and other items. It also found problems related to allowances for uncollectible amounts with respect to renter obligations for damaged cars. 


Previously this year, the company found $46.3 million in out-of-period accounting mistakes in the past three years.


Hertz said its financial results for the first quarter of 2014 will be impacted by the costs of the accounting review and "other unusual items," likely driving its results below consensus estimates. Hertz said total U.S. rental car revenue per day dropped by 1.6 percent compared with last year, citing excess fleet and issues involving the introduction of its Firefly discount brand.


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Tags: HTZ
37Comments
Jun 6, 2014 11:11PM
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46.3 million in "accounting errors" ,   Really? And no one found it until now ? Must be nice to have so much money that  no one notices that much is missing/lost etc , until after their earnings report..  No competent oversight committee could miss that much , which says very poor management , if not corruption , in my opinion . 
Jun 7, 2014 12:28PM
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as long as mgmt. gets their bonus... all is fair...this IS corporate America today...have worked in acctg for 30 yrs..and have tweeked those numbers since day 1
Jun 9, 2014 7:42AM
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Pay the bonuses then find the error.
Jun 9, 2014 9:02AM
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i'll bet the c.e.o.'s still get their multimillion dollar bonouses though. any takers??
Jun 6, 2014 1:04PM
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The very second you hear the works "accounting discrepancy" or anything close, run, don't walk, to the phone, call you broker, and tell him/her to sell immediately if not sooner. Been there, done that. Fortunately it was only a few hundred dollars loss, but a great lesson.
Jun 6, 2014 9:04PM
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WHAT THE HELL IS WRONG WITH THESE COMPANIES? IS THIS ANY DIFFERENT THAN THE VA WHERE THE HEAD SAID HE WAS LIED TO--HEY ITS YOUR JOB TO FIND OUT THIS CRAP AND NOT LET IT RIDE MORE THAN A YEAR--
Jun 9, 2014 10:19AM
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I wonder what the "accounting discrepancies" would be if our federal government were audited?  I bet it would make Hertz's issue seem like a hiccup in comparison!
Jun 6, 2014 1:47PM
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Well I guess not so many were put in the driver's seat after all were they?


Jun 9, 2014 10:39AM
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All I know is Hertz is one difficult company to work for.
Jun 9, 2014 12:50PM
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What in the world is going on here? Is this where former IRS workers are employed now?
Jun 9, 2014 7:47AM
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I recall some ole neighbors back in the 70s who would rent a Hertz vehicle every now and then. They would pull the motors out and replace them with a more worn out or used when then return them; also with transmissions. Things folks did back then.
Jun 9, 2014 1:30PM
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I understand the Hertz HQ is moving to Fort Myers , Florida . Bet the local authorities down there paid $Millions to entice them to SW Florida. .

So all will be well around the pool with a slight financial discrepancy which can be classed as fun in the sun.

Jun 9, 2014 11:45AM
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Bring back that 1966 Shelby GT350H!
Jun 9, 2014 12:57PM
Jun 9, 2014 1:58PM
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Accounting error indeed.  46 million is like losing loose change in the couch. Someone in a top financial position had found a way to "round up", like the scheme on Office Space and someone has now caught them.  No one will get punished except the poor folks invested in their stocks.  And why would the person who has gotten fat off the accounting error care? 

 

Any given company, any given circumstance, any given situation when finances are being handled by one with the human psyche, there will be accounting errors accompanied by someone getting insanely rich for all the wrong reasons. 

Jun 9, 2014 6:39PM
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If I, as a commoner, had accounting discrepancies like this, my **** would already be in jail
Jun 9, 2014 3:49PM
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BETTER BOTTOM LINE ON FINANCIAL STATEMENTS COULD MEAN

BIGGER SALARIES & BONUS'S FOR THE TOP BRASS.  THEY SHOULD

GO TO JAIL FOR THESE "WHITE COLLAR CRIMES".

Jun 9, 2014 5:51AM
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I believe assuming this does not mean profit is understated is reasonably safe.  Now, with great regret, this must be added to the list of stocks I'm glad I don't own.  Although, given the markets potential for overreacting this could be a good buy in a few weeks if the fundamentals prove out.
Jun 9, 2014 9:11AM
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Must be using "Obamanomics" accounting practices


Jun 9, 2014 9:27AM
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Joe Biden says to get a shotgun for all your needs.
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