Hertz Global Holdings Inc. estimated an additional $125 million of errors in its ongoing review of financial statements and doubled its cost-saving target to $200 million.
The errors had a cumulative effect on pretax income under generally accepted accounting principles of about $28 million in 2013, $74 million in 2012 and $51 million in 2011, including $28 million that had been previously disclosed. Those figures may change before the investigation is complete, which probably won’t happen before July, the company said Wednesday in a statement.
Chief Executive Officer John Tague, who was hired in November, said the company is attacking waste in the organization, adding $100 million to the annual cost-saving target. The Naples, Florida-based company said it’s also reviewing its leadership, organizational talent, data integrity and decision-support systems.
“While the full benefit of these and other actions will take time, I am confident that Hertz is on the right path to deliver improved performance and value creation,” Tague said in the statement.
Hertz rose 0.2 percent to $22.80 at 10:13 a.m. New York time. The stock had dropped 8.7 percent this year through Tuesday’s close.
The company is “taking a more disciplined approach to fleet capacity” allowing it to accelerate used-car sales and complete its fleet transformation about a month sooner than its original mid-year target, according to the statement.
Hertz said consolidated revenue in the fourth quarter slipped 0.4 percent to $2.55 billion, citing unaudited results. Full-year earnings before interest, taxes, depreciation and amortization will probably be at the lower end of the $1.3 billion to $1.45 billion range given in November, the company said, adding that the accounting review may affect 2014 results.
Revenue per day for Hertz’s U.S. rental-car fleet fell 2 percent in the fourth quarter as non-airport vehicle hiring increased as a percentage of overall volume, the company said. Hertz said last year revenue per day was declining because of an increase in discounted rentals to a large, contracted customer.
The contract is with State Farm Mutual Automobile Insurance Co., which provides rental cars for customers whose vehicles are being repaired, three people familiar with the contract have said. It obligates Hertz to rent cars at a range of $13 to $23 a day, depending on the vehicle’s size, said two of the people, who asked not to be identified revealing private information. By comparison, a compact car for rent next weekend in Atlanta is available for $17 to $30 a day, according to Expedia.com.
Tague took over about two months after Mark Frissora stepped down after investors had pushed for his removal, citing accounting and operational missteps. This month, Frissora was named CEO-designate of Caesars Entertainment Corp, and will take over in July as CEO of the largest owner of casinos in the U.S.
Hertz was unable to report financial results last year and has said investors can no longer rely on its prior three years of financial statements. Investor discontent increased in August after the company withdrew its 2014 forecasts.
The company is also lessening its reliance on so-called risk vehicles and buying more vehicles that it sells back to the manufacturer at agreed-upon prices. Risk vehicles, those that are bought outright, will make up 70 percent of the fleet this year, compared with 79 percent as of Dec. 31, Hertz said.
Frissora had touted the increased risk fleet as a positive for investors because the sale of such vehicles can be more profitable.
With assistance from Janet Freund in New York.
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