SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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April 17, 1998 (April 9, 1998)
(Date of Report (date of earliest event reported))
Cendant Corporation
(Exact name of Registrant as specified in its charter)
Delaware 1-10308 06-0918165
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation or organization) Identification Number)
6 Sylvan Way
Parsippany, New Jersey 07054
(Address of principal executive office) (Zip Code)
(973) 428-9700
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if applicable)
<PAGE>
Item 5. Other
Restatement of Earnings. On April 15, 1998, Cendant Corporation (the "Company")
announced that in the course of transferring responsibility for the Company's
accounting functions from former CUC International Inc. personnel to former HFS
Incorporated accounting personnel and preparing for the reporting of first
quarter 1998 results, it has discovered potential accounting irregularities in
certain former CUC business units which are part of the Company's Alliance
Marketing division (formerly the Membership segment). Accordingly, the Company
expects to restate annual and quarterly net income and earnings per share for
1997 and may restate certain other previous periods related to the former CUC
businesses.
Based on presently available information, the effect on 1997 results is expected
to be a reduction to net income prior to restructuring and unusual charges of
approximately $100 to $115 million and earnings per share by about 11 to 13
cents, respectively. In 1997, the Company had previously reported net income
prior to restructuring and unusual charges of $872 million and earnings per
share of $1.00.
The potential accounting irregularities are limited to certain former CUC
businesses, which accounted for less than one third of the Company's net income
in 1997. All of the Company's current businesses continue to perform strongly
and the Company's anticipated percentage growth of earnings per share in 1998
over restated 1997 appear achievable. The Company expects to meet or exceed the
currently forecasted Wall Street consensus estimate of 25 cents per share for
the quarter of 1998. However, since 1997 earnings per share will be reduced by
about 11 to 13 cents, the Company anticipates that 1998 full-year earnings
expectations will be reduced from current levels by approximately the same
amount.
Resignations. On April 9, 1998, the Company announced that Kirk Shelton, one of
six vice chairmen of the Company, Amy N. Lipton, executive vice president and
deputy general counsel and Cosmo Corigliano, executive vice president, will
resign from the Company to pursue other interests.
Termination of Executive. On April 17, 1998, the Company terminated the
employment of Cosmo Corigliano, executive vice president of the Company.
The Company further announced that John Fullmer, Cendant's executive vice
president and chief marketing officer, Tony Menchaca, president of the Company's
Comp-U-Card Division, have been named co-chairman and co-chief executives of the
Company's newly named Alliance Marketing Division and will succeed Mr. Shelton.
In addition, John W. Chidsey, currently executive vice president of business
development, has been named president and chief operating officer of this
division. These changes have been initiated and jointly endorsed by Walter A.
Forbes, Chairman and Henry R. Silverman, President and CEO to ensure the stable
management base which is currently functioning well.
The information set forth in the press releases attached hereto as Exhibits
99.1, 99.2 and 99.3 are incorporated herein by reference in their entirety.
<PAGE>
Item 7. Exhibits
Exhibit
No. Description
99.1 Press Release: Cendant Confirms Report that Shelton, Lipton and
Corigliano to Resign, dated April 9, 1998.
99.2 Press Release: Cendant Corporation to Restate Earnings, dated April
15, 1998.
99.3 Press Release: Cendant Terminated Executive, dated April 17, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENDANT CORPORATION
By: /s/ James E. Buckman
James E. Buckman
Senior Executive Vice President
and General Counsel
Date: April 17, 1998
<PAGE>
CENDANT CORPORATION
CURRENT REPORT ON FORM 8-K
Report Dated April 17, 1998 (April 9, 1998)
EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release: Cendant Confirms Report that Shelton, Lipton
and Corigliano to Resign, dated April 9, 1998.
99.2 Press Release: Cendant Corporation to Restate Earnings, dated
April 15, 1998.
99.3 Press Release: Cendant Terminated Executive, dated April 17,
1998.
EXHIBIT 99.1
Cendant Confirms Report that Shelton, Lipton and Corigliano to Resign
PARSIPPANY, N.J. and STAMFORD, Conn., April 9 -- Cendant Corporation (NYSE:
CD- news) confirmed a Dow Jones report that Kirk Shelton, one
of six vice chairmen of Cendant; Amy Lipton, executive vice president and deputy
general counsel; and Cosmo Corigliano, executive vice president, will resign
from the company to pursue other interests.
The company further announced that John Fullmer, Cendant's executive vice
president and chief marketing officer, and Tony Menchaca, president of Cendant's
Comp-U-Card Division, have been named co-chairman and co-chief executives of
Cendant's newly named Alliance Marketing Division and will succeed Mr. Shelton.
In addition, John W. Chidsey, currently executive vice president of business
development, has been named president and chief operating officer of this
division. These changes have been initiated and jointly endorsed by Walter A.
Forbes, Chairman and Henry R. Silverman, President and CEO to ensure the stable
management base which is currently functioning well.
Mr. Forbes and Mr. Silverman said: "We thank Kirk, Cosmo and Amy for their
service. These types of management changes are inevitable when any two large
companies merge."
In response to market rumors, Mr. Forbes and Mr. Silverman stated that they will
remain with the company in their respective positions.
Cendant expects to report first quarter 1998 earnings on May 5th and expects to
meet or exceed current Street estimates.
"Our fundamentals remain extremely strong. We continue to be excited about our
businesses," stated Mr. Forbes and Mr. Silverman.
Cendant is the world's premier provider of consumer and business services. With
a market capitalization of approximately $30 billion, it ranks among the 100
largest U.S. corporations. Cendant operates in three principal segments:
Membership, Travel and Real Estate Services. In Membership Services, Cendant
provides access to travel, shopping, auto, dining and other services through
more than 66.5 million memberships worldwide. In Travel Services, Cendant is the
leading franchisor of hotels and rental car agencies worldwide, the premier
provider of vacation exchange services and the second largest fleet management
company. In Real Estate Services, Cendant is the world's largest franchisor of
residential real estate brokerage offices, a major provider of mortgage services
to consumers and a global leader in corporate employee relocation. Headquartered
in Stamford, CT and Parsippany, NJ, Cendant has more than 34,000 employees,
operates in over 100 countries and makes approximately 100 million customer
contacts annually.
EXHIBIT 99.2
CENDANT CORPORATION TO RESTATE EARNINGS
Stamford, CT and Parsippany, NJ, April 15, 1998 - Cendant Corporation (NYSE:
CD) today reported that, in the course of transferring
responsibility for the Company's accounting functions from former CUC
International Inc. personnel to former HFS Incorporated accounting personnel and
preparing for the reporting of first quarter 1998 results, it has discovered
potential accounting irregularities in certain former CUC business units which
are part of Cendant's Alliance Marketing division (formerly the Membership
segment). Accordingly, Cendant said it expects to restate annual and quarterly
net income and earnings per share for 1997 and may restate certain other
previous periods related to the former CUC businesses.
Based on presently available information, the effect on 1997 results is expected
to be a reduction to net income prior to restructuring and unusual charges of
approximately $100 to $115 million and earnings per share by about 11 to 13
cents, respectively. In 1997, the Company had previously reported net income
prior to restructuring and unusual charges of $872 million and earnings per
share of $1.00.
Cendant said that the potential accounting irregularities are limited to certain
former CUC businesses, which accounted for less than one third in Cendant's net
income in 1997. it said all its current businesses continue to perform strongly
and that its anticipated percentage growth of earnings per share in 1998 over
restated 1997 appeared achievable. Cendant expects to meet or exceed the
currently forecasted Wall Street consensus estimate of 25 cents per share for
the quarter of 1998. However, since 1997 earnings per share will be reduced by
about 11 to 13 cents, the Company anticipates that 1998 full-year earnings
expectations will be reduced from current levels by approximately the same
amount.
Henry R. Silverman, President and CEO, said: "Cendant remains a strong and
highly liquid company. Our businesses are very healthy and growing, but we're
growing off a lower base than we had been previously led to believe by certain
members of the former CUC management."
The Company also stated it remains committed to completion of the previously
announced American Bankers, National Parking Corporation and Providian Insurance
transactions.
The Company said that upon discovering the potential accounting irregularities,
it, together with its counsel, Skadden, Arps, Slate Meagher & Flom LLP, assisted
by auditors, immediately began an intensive investigation. As a result of the
discovery and information developed to date, Cendant has taken a number of
actions:
o It has informed the appropriate regulatory authorities;
o The Audit Committee of the Board of Directors has engaged Willkie Farr &
Gallagher as special legal counsel, and Willkie Farr has engaged Arthur
Andersen LLP to perform an independent investigation;
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o The Company has assigned all accounting, finance, financial reporting,
budget, systems and control functions to the former HFS finance staff; and
o The Company has asked counsel to explore litigation against certain
officers of the former CUC as well as other potential defendants.
In addition, the Company will take appropriate action, including immediate
terminations, with respect to those individuals whom the investigation
establishes have had any involvement in or knowledge of the potential accounting
irregularities. The Company expects that the investigation its Audit Committee
has commenced will establish the identity of such individuals.
Silverman said: "We're outraged by the actions of a small number of former CUC
employees who betrayed the trust that was placed in them by the Company and our
fellow shareholders. We are taking the appropriate steps to address those
actions. The Company will continue to pursue aggressively the independent and
internal investigations that are underway and will take whatever further actions
are necessary based on the results of that comprehensive inquiry."
The Company said it would not comment further on this matter until the ongoing
investigation has been completed and the results presented to its Audit
Committee and Board of Directors.
In accordance with SAS No. 1, the Company's previously issued financial
statements and auditors' reports should not be relied upon. Revised financial
statements and auditors' reports will be issued upon completion of the
investigation.
Cendant is the world's premier provider of consumer and business services.
Cendant operates in three principal segments: Alliance Marketing, Travel and
Real Estate Services. In Alliance Marketing, Cendant provides access to travel,
shopping, auto, dining and other services through more than 66.5 million
memberships worldwide. In Travel Services, Cendant is the leading franchisor of
hotels and rental car agencies worldwide, the premier provider of vacation
exchange services and the second largest fleet management company. In Real
Estate Services, Cendant is the world's largest franchisor of residential real
estate brokerage offices, a major provider of mortgage services to consumers and
a global leader in corporate employee relocation. Headquartered in Stamford, CT
and Parsippany, NJ, Cendant has more than 34,000 employees, operates in over 100
countries and makes approximately 100 million customer contacts annually.
Certain matters discussed in the news release are forward-looking statements, as
defined in the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to a number of known and unknown risks
and uncertainties including, but not limited to, the outcome of the Audit
Committee's investigation; uncertainty as to the Company's future profitability;
the Company's ability to develop and implement operational and financial systems
to manage rapidly growing operations; competition in the Company's existing and
potential future lines of business; the Company's ability to integrate and
operate successfully acquired businesses
<PAGE>
and the risks associated with such businesses; the Company's ability to obtain
financing on acceptable terms to finance the Company's growth strategy and for
the Company to operate within the limitations imposed by financing arrangements;
uncertainty as to the future profitability of acquired businesses; and other
factors. Other factors and assumptions not identified above were also involved
in the derivation of these forward-looking statements, and the failure of such
other assumptions to be realized as well as other factors may also cause actual
results to differ materially from those projected. The Company assumes no
obligation to update these forward- looking statements to reflect actual
results, changes in assumptions or changes in other factors affecting such
forward-looking statements.
CENDANT TERMINATES EXECUTIVE
Stamford, Conn. and Parsippany, N.J.--(BUSINESS WIRE)-- April 17, 1998-- Cendant
Corporation (NYSE: (CD) announced today that it has terminated the employment
of Cosmo Corigliano executive vice president of the company.
Mr. Corigliano had been executive vice president and chief financial officer of
CUC International Inc. prior to its merger with HFS Incorporated on December 17,
1997 forming Cendant.
The Company said that the independent investigation by the Audit Committee of
its Board of Directors, assisted by independent legal and auditing firms, is
continuing.
Cendant is the world's premier provider of consumer and business services.
Cendant operates in three principal segments: Alliance Marketing, Travel and
Real Estate Services. In Alliance Marketing, Cendant provides access to travel,
shopping, auto, dining and other services through more than 66.5 million
memberships worldwide. In Travel Services, Cendant is the leading franchisor of
hotels and rental car agencies worldwide, the premier provider of vacation
exchange services and the second largest fleet management company. In Real
Estate Services, Cendant is the world's largest franchisor of residential real
estate brokerage offices, a major provider of mortgage services to consumers and
a global leader in corporate employee relocation. Headquartered in Stamford, CT
and Parsippany, NJ, Cendant has more than 34,000 employees, operates in over 100
countries and makes approximately 100 million customer contacts annually.
