Cendant Finds Accounting Problems

Cendant Corp., one of the nation’s largest direct marketers, said it will restate last year’s earnings because it uncovered accounting irregularities at CUC International, one of two companies that combined in December in a $13.5-billion merger to form Cendant. Cendant said it expects to revise its 1997 operating income downward by about $100 million, to $115 million, or 11 cents to 13 cents a share. The direct marketer and owner of such brands as Avis car rentals and Howard Johnson hotels had previously reported 1997 net income of $872 million, or $1 a share. Cendant said it has hired outside auditors to begin an investigation and is contemplating taking legal action against former CUC officials and other potential defendants. The company said it still expects to meet or exceed the Wall Street consensus estimate of 25 cents per share for the first quarter of 1998. Cendant shares tumbled almost $10 to close at $26 in after-hours trading.