NEW YORK (CNNfn) - Cendant Corp. on Tuesday said the accounting irregularities at its business units of the former CUC International Inc. were greater than initially discovered, and that it will have to restate its financial results for the last three years to correct the discrepancies.
Cendant, a real estate and travel services giant, is a result of the merger of CUC International and HFS Inc. In April, the company said it discovered accounting irregularities in former CUC units and estimated it would impact 1997 earnings by 11 cents to 13 cents a share.
Cendant now says it believes its restatement will lower 1997 net income by 22 cents to 28 cents per share.
The company also said its investigation confirmed accounting irregularities existed in CUC's financial statements in years prior to 1997.
"We have now received evidence that for at least the last three years, the financial results of the former CUC reflected a continuing program of false entries, which misrepresented the financial performance and condition of that company," said Michael P. Monaco, Cendant vice chairman and chief financial officer.
"These accounting practices were widespread and systemic and affected the accounting records of all the major business units of CUC."
The news sent Cendant (CD) shares reeling to 15-1/2 in pre-open trading, off 3-1/4 from Monday's close of 18-7/8.
Cendant said along with 1997 financial results, 1996 and 1995 results will be restated to correct irregularities.
The company also said it now expects its 1998 earnings per share from continuing operations to be 5 cents to 6 cents lower than previously expected.
Cendant cited irregular charges against merger reserves, false coding of services sold to customers and quarterly recording of fictitious revenues among the most significant irregularities it has confirmed.