Hertz Global Holdings Inc. said it would have to restate and correct results from the past three years, according to a regulatory filing Friday that indicated more widespread accounting problems at the auto-rental company than had been thought.
Hertz, citing the results of an internal audit, said its results for 2011, most recently included in its annual report filed for 2013, "should no longer be relied upon," and that the company must restate them.
The disclosure follows the company's warning last month that it may have to restate 2011's results, as well as the detection of reporting errors in March and its naming of a new chief financial officer at the end of last year.
Shares of Hertz fell 9% Friday as the company also warned that its delayed first-quarter results would come in below estimates.
The company said it must correct its 2012 and 2013 financial statements to further reflect the errors in 2011. The results for those years may also be restated if further adjustments are determined to be material. The company added that it is reviewing if the issues have had any impact on results in 2014.
"It will take time to complete this process, and previously reported information is likely to change, although the actual size of any adjustments has yet to be determined and some adjustments may offset others," the company said in its filing with the U.S. Securities and Exchange Commission.
Hertz said management and the board's audit committee have determined that "at least one material weakness" was present in the company's internal financial-reporting controls, and that disclosure procedures and controls were ineffective at the conclusion of last year.
The company said it is continuing a review that began when it was preparing its first-quarter report.
The review "recently identified other errors related to allowances for uncollectable amounts with respect to renter obligations for damaged vehicles and restoration obligations at the end of facility leases," Hertz said.
Hertz said the chairman of its audit committee has discussed the matter with the company's external accountant, PricewaterhouseCoopers LLP, and that it "expects to receive an adverse opinion" from the firm on its internal controls over financial reporting as of Dec. 31.
A representative for PwC wasn't immediately available for comment.
In March, Hertz identified $46.3 million in reporting errors that dated back to 2011. At the time, PwC said, according to Hertz's filing, the car-rental company fairly presented its results and that the company "maintained, in all material respects, effective internal control over financial reporting."
PwC's expected shift in opinion on Hertz's internal controls shouldn't come as a surprise, given the restatement and revisions, said Charles K. Whitehead, a Cornell University professor who specializes in corporate and financial law.
"The real question is whether Hertz's managers and PwC reasonably should have been aware of the problems earlier, and how those problems were discovered," Mr. Whitehead said.
"Were they uncovered by Hertz and brought to PwC's attention, or did PwC's review--and potential change of opinion--prompt Hertz to get ahead of the problem?"
Hertz last month delayed the filing of its first-quarter financial results after identifying errors relating to conclusions about the capitalization and timing of depreciation for some non-fleet assets as well as allowances for doubtful accounts in Brazil, among other items.
At the time, the company expected to release results June 9 but said Friday that it doesn't expect to hold its planned conference call on that date. The company said it would file and report its first-quarter results when it files the amendment to its annual report.
Hertz earlier this year sought more time to file its results for 2013, saying it faced "significant issues" after implementing a system meant to improve financial disclosures.
The delayed report came as the company appointed a new chief financial officer, former Hilton Worldwide Inc. executive Thomas Kennedy, who was named to the post following the resignation of Elyse Douglas.
Hertz on Friday also warned that its attempt to resolve its accounting issues could delay the separation of its equipment-rental business, although the plans "remain on track."
In addition, the company said its results for the first quarter of this year are likely to come in below consensus analyst estimates, as they will reflect costs associated with the accounting review. Analysts polled by Thomson Reuters had recently projected per-share earnings of nine cents and revenue of $2.57 billion for the quarter.
Standard & Poor's Ratings Services said its ratings and outlook for Hertz aren't affected by the company's announcement and said it expects the company's credit metrics will "improve modestly" through 2015.
