Hertz Global Holdings Inc. HTZ, already under pressure from activists, said Friday it will revise financial statements dating back to 2011 and take steps to cut costs after a review found $87 million of cumulative accounting errors spread over three years.
Naples, Fla.-based Hertz, which is operating under an interim CEO after Mark Frissora resigned in September, in a regulatory filing said its board audit committee, working with PricewaterhouseCoopers LLP, has found "at least one material weakness" existed in Hertz's internal control over financial reporting.
The audit committee according to the filing "has been looking into the tone at the top influence and the involvement and oversight that members of the Hertz organization may have had on those potential errors." The most material errors identified so far relate primarily to the capitalization and timing of depreciation of certain non-fleet assets as well as allowances for doubtful accounts in Brazil and other issues.
The disclosures come as Hertz faces continued pressure from activists. Carl Icahn in August disclosed an 8% stake in the company and in September reached an agreement to add three directors to the company's board. Meanwhile, Jana Partners LLC around the same time announced its own 7% stake and said it wishes to talk to officials about management succession and board composition.
Jana has suggested former Dollar Thrifty Automotive Group Inc. CEO Scott Thompson to lead Hertz. Dollar Thrifty was acquired by Hertz in 2012 for $2.3 billion. Two other activist investors, Corvex Management LP and Third Point LLC, also reportedly own stakes in Hertz.
Hertz also on Friday said it was working to slash costs by about $100 million annually, primarily through reducing administrative expenses, trim IT spending and reduce external adviser expenses. The cuts, which also include a previously-announced freeze to pension plans, should be achieved by the end of next year.
The company at the same time said it would modify its fleet purchasing strategy, pledging to purchase about 350,000 model year 2015 vehicles in the U.S. That would be about 60% more than its 2014 model year purchase, with financing for the purchases to come from Hertz's revolving credit facilities.
Hertz interim CEO Brian MacDonald said the refresh "is necessary to establish a more competitive product position, improve the customer experience, provide greater flexibility for demand fluctuations and better protect against a fluctuating used-car sales cycle."
A planned split of Hertz's equipment rental business will be delayed until the accounting review, which Hertz said should occur by mid-2015.