NEW YORK (TheStreet) -- Hertz Global Holdings (HTZ - Get Report) said on Friday it will need to restate its 2011 earnings and may have to restate its annual earnings for the past two years, as a result of errors in its accounting for depreciation of non-fleet assets, allowances for doubtful accounts in Brazil and other items. Those accounting errors could delay Hertz's spinoff of its equipment rental business and throws the company's 2014 strategy in doubt.

Read More: Hertz Revamps Capital Structure In Equipment Rental Spin

Hertz shares were tumbling nearly 10% in early Friday trading on the announced accounting errors and looming restatement.

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Hertz said on May 14 it was unable to file its 10-Q with the Securities and Exchange Commission for the first quarter, citing a review of its accounting for depreciation and non-fleet expenditures. Hertz also said at that time it had identified some accounting errors that might cause the company to restate 2011 results.

On April 25, Hertz said in a filing with the SEC that Jatindar Kapur, a SVP of finance and the company's Corporate Controller, had resigned for personal reasons and not any disagreement with the company. As a result, Hertz hired Robin Kramer, a former partner at Deloitte & Touche, to replace Kapur as an become the company's Chief Accounting Officer.

Accounting Restatements

On Friday, Hertz said that its Audit Committee, in consultation with auditor PriceWaterhouseCoopers, concluded that the company's 2011 financial statements should not be relied upon and that the company will also have to correct errors in its 2012 and 2013 financial statements. However, Hertz hasn't yet decided whether it will be forced to restate its 2012 and 2013 results.

After a review, Hertz said it had decided its capitalization and timing of depreciation for certain non-fleet assets, allowances for doubtful accounts in Brazil, and other items were erroneous. The company also found errors related to allowances for noncollectable amounts on renter obligations for damaged vehicles and restoration obligations at the end of facility leases.

Versus the company's May disclosure, it latter errors that analysts took as new developments.

As such, the company will have to restate at least one-years' worth of financial results, with the prospect its last three years of financial reports may need to be restated.

Hertz also said it has discovered at least one material weakness in its internal accounting controls, another new development.

Recently appointed Chief Financial Officer Thomas C. Kennedy, the company's new Chief Accounting Officer, Robin Kramer, and another recent hire, Randy Walford, head of SOX/Compliance will work to strengthen the company's financial controls.

Equipment Rental Spin

Hertz said on Friday its accounting issues could impact the timing of its announced separation of the company's equipment rental business, however, the spin-off remains on track. "While it is possible that the efforts to resolve the various accounting issues could impact the timing of the actual separation, plans to separate the equipment rental business remain on track," Hertz said.

To continue pushing forward an equipment rental spinoff, Hertz has hired Brian MacDonald, the former CEO of Sunoco, to lead the business.

"Mr. MacDonald brings a proven record and extensive experience in strategic planning, financial and operational management, and business development across geographies. HERC has also implemented a separation hiring plan, including the recruitment of other senior leaders," Hertz said in a statement.

Previously, Hertz had said it expected the equipment rental spin-off to happen in early 2015.

Poor Guidance

The car rental giant also said on Friday its preliminary first quarter earnings are likely to be below consensus, as a result of costs to conduct an accounting review, in addition to weaker operating results. For the first quarter, car rental revenue increased about 4.5% year-over-year, however, U.S. rental car total revenue per day was down 1.6% as a result of an oversupply of fleet and a changing business mix.

Hertz also said on Friday its fleet costs are expected to show sequential improvement as the company right sizes its business and takes deliveries of lower-cost program cars. April results also indicate positive pricing for Hertz's airport rental brands due to tighter supply, Hertz said.

Still, the company indicated that second quarter pricing will continue to be impacted by a changing mix of its rental volumes off-airports, in addition to an increasing market share of its discounted Firefly brand.

International car rental revenue increased 1.7% in the first quarter, reflecting 12 new airport locations and rising Firefly revenue. For coming quarters, Hertz said its international business will be positively impacted by macroeconomic improvements in European and Asia Pacific markets. Added rental locations through its Thrifty, Firefly and Hertz-branded stores should also help the top-line, while refinancing and stronger resale channels should rein in costs.

The company's equipment rental business saw revenue increase about 2.4% in the first quarter, with North American equipment rentals rising 7.4% on a recovery in construction and industrial activity. Those figures also reflected growth off of an unusually high level of equipment rentals in the first quarter of 2013 as governments and businesses on the Eastern Seaboard cleaned up after Super-storm Sandy.

Hedge Fund Standoff

In December 2013, Hertz adopted a poison pill citing unusual trading in the company's shares, leading to speculation that hedge fund investors might take a stake in the company and call for change. For years, analysts had argued Hertz was sitting on too much cash and too little debt and that the company should spin its equipment rental business.

While no activist investor formally took on Hertz, the company decided in March to spin its equipment rental business in a move the company said would generate $2.5 billion in cash could be used to pay down the company's debt and support a $1 billion share repurchase. That buyback would equate to roughly 20% of Hertz's outstanding shares.

The company's targeted net debt ratio of 2.5-to-3.5 times earnings before interest, taxes, depreciation and amortization (EBITDA) post an equipment rental spin also indicated further capital returns were possible. Now, however, the buyback and equipment rental spin may be delayed as a result of Hertz's looming accounting restatement.

Bloomberg compilations SEC filings shows that Fir Tree Management, Glenview Capital Management, York Capital Management, SAB Capital Management and Third Point Management all held over 1% stakes in Hertz total outstanding shares as of the first quarter.

-- Written by Antoine Gara in New York.