Hertz Global Holdings, Inc. released 2014 fourth quarter operating results and updated the status of its fleet strategy and cost reduction initiatives.
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The previously issued financial statements must be restated and should no longer be relied upon.
Although the company is still working to determine how the accounting issues will impact its profitability for 2014, the company expects its consolidated corporate EBITDA will likely be at the lower end of the $1.30 billion to $1.45 billion range it gave on November 14, 2014.
The impact on GAAP pre-tax income of cumulative errors identified to date, on an unaudited basis, is approximately $28 million, $74 million and $51 million for 2013, 2012 and 2011, respectively, inclusive of $9 million in 2012 and $19 million in 2011, previously disclosed and reflected in the financials included in the company's 2013 10-K/A.
The review and investigation of its financial records are ongoing, and numbers are therefore subject to change. 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.
In addition, Hertz continues to expect that it will not be able to file updated financial statements before mid-2015, and there can be no assurance that the process will be completed at that time, or that no additional adjustments will be identified.
John P. Tague, president and chief executive officer of Hertz, said, "The necessity to improve performance at Hertz is clear, as is the opportunity. We are committed to achieving the company's full potential, which I believe is significant. However, in order to realize that potential, we need to strengthen our foundation and build on our capabilities as an organization.
"To that end, we have made key appointments to our leadership team to complement and expand existing expertise. We also are working to remediate the execution and system issues that are impeding the current operating performance. Additionally, we are aggressively addressing areas of inefficiency and waste within the organization.
"Early initiatives have enabled us to increase our cost reduction commitment from $100 million to a $200 million run rate by year-end 2015, and we continue to pursue opportunities to deliver even greater savings. 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."
As part of the actions underway to enhance the competitiveness of the company's revenue quality and drive improved profitability in the car rental business, Hertz also is undertaking a comprehensive assessment of the company's revenue execution capabilities. This effort includes a full review of the decision support systems, data integrity, organizational talent and leadership, training programs and performance management.
In addition, the company has begun taking a more disciplined approach to fleet capacity by selectively pursuing more profitable demand through a variety of means, including reduced participation in opaque channels and higher minimum-rate thresholds. This action has allowed the company to accelerate used car sales, resulting in more moderate fleet growth in 2015 as compared to its preliminary plan.
Consequently, the company now expects to finalize the fleet transformation that was announced last November, about one month ahead of the original mid-year target.
Concurrent with these priorities, the company is committed to completing work already in the pipeline, including the restatement of previously issued financial statements and remediation of control deficiencies, the integration of Dollar Thrifty, the separation of the equipment rental business and the headquarter relocation. ■