What: Shares of car rental company Hertz Global (NYSE:HTZ) soared on Friday after the company announced that it had finished its accounting review and filed its 2014 annual report, along with restatements of its results from 2011, 2012, and 2013. Up as much as 20% in the first few minutes of trading, the stock had settled a bit by 10:45 AM, up about 12% at that time.
So what: A little more than one year ago, accounting issues became apparent at Hertz. The company delayed filing its quarterly results, replaced its CEO, and eventually announced that it would need to restate results for the past three years. That restatement is now complete.
The restated results reduce Hertz's net income by $31 million, $62 million, and $51 million in 2011, 2012, and 2013 respectively. The company also filed a 10-Q for the first quarter of 2014, bringing Hertz up to date with its financial filings.
In addition to finishing its accounting review, Hertz reiterated its commitment to a previously announced $1 billion share repurchase program. A portion of this program will be funded with the proceeds of the planned spin-off of Hertz Equipment Rental, which had been held up by the accounting review.
Hertz also announced that it is making progress on its cost reduction initiative, which the company first announced late last year. Hertz expects to achieve annualized cost savings of $300 million by the end of 2015, driven by reductions in overhead, increased fleet management efficiencies, and disciplined sales and marketing spending.
Now what: The period of uncertainty that has plagued Hertz over the past year is over, and investors now have a clear view of the company's financials. It's clear from Hertz's 2014 results that the company has a lot of work to do. Revenue increased in 2014, but both operating costs and depreciation of Hertz's fleet rose substantially, leading to a net loss for the year.
Hertz's stock rose today not due to the content of the announcement, but the announcement itself. Investors have been waiting for a long time to get this painful accounting review done with, and now that it's in the past, Hertz's stock can begin to trade on the company's fundamentals once again.