Is This the Beginning or End of Hertz’s Accounting Woes?

PricewaterhouseCoopers is working closely with Hertz as its independent registered public accounting firm and “is putting all of the necessary resources and efforts into resolving these accounting matters.”

The company announced in its press release:

[T]hat although its accounting review and investigation are ongoing, the Audit Committee of the Hertz Board of Directors has concluded that additional proposed adjustments arising out of the accounting review are material to the Company’s 2012 and 2013 financial statements. Therefore, in addition to the 2011 financial statements, the 2012 and 2013 annual and quarterly financial statements must be restated and should no longer be relied upon. The financial information set forth in this release is subject to change based on the completion of the investigation and review, and such changes may be significant.

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The requirement to restate both the 2012 and 2013 financial statements will extend the period for completion of the applicable accounting activities even further. This process of filing updated financial statements is not expected to be completed before mid-2015, and there is no assurance that the process will be completed at that time or if additional adjustments may be identified.

Hertz made a point of noting in its press release that 2014 and 2015 should not be viewed as a base for the company’s go-forward financial results, given the unusual costs incurred associated with the accounting and financial review. Ultimately these changes are being implemented to improve the competitive position of the company.

Activist investor Carl Icahn also has put pressure on the car rental giant to fix its accounting irregularities and to find new executives. The former Rental Car Group president, Scott Sider, and Lead Independent Director, George Tamke, announced their “retirement” in an SEC filing when everything seemingly started to head south. CEO Mark Fissora stepped down as well in early September.

Icahn and his affiliates disclosed roughly an 8% stake in the company in August, which paved the way for the appointment of Vincent Intrieri, Samuel Merksamer and Daniel Ninivaggi to the board of directors. The board, going forward, will be responsible for appointing a new permanent CEO.

As 24/7 Wall St. has stated earlier, when companies enter the confession booth to disclose that they have accounting irregularities or that their financial books can no longer be trusted, it just seems to bring problems for much longer than a few weeks or months.

Before this accounting issue came to light, shares were at a 52-week high of $31.61 in mid-August. Since that time, shares have fallen 28% to Thursday’s close of $22.73.

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Shares of Hertz were down over 10% at $20.44 following this news in the noon hour Friday. The question remains for some investors, is this really the bottom and can Hertz turn itself around?

The consensus analyst price target is $27.75, and the 52-week trading range is $18.50 to $31.61. The market cap is about $9 billion.