<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------
February 16, 1998 (February 16, 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 (I.R.S. Employer
of incorporation or organization) File No.) 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 Events
This Current Report on Form 8-K is being filed by Cendant Corporation
("Cendant") for purposes of incorporating by reference the exhibit listed in
Item 7 hereof in certain Registration Statements filed with the Securities and
Exchange Commission.
Item 7. Exhibits
Exhibit
No. Description
- ------- -----------
99.1 Unaudited Pro Forma Consolidated Statement of Income of Cendant
for the year ended December 31, 1996.
<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/ Scott E. Forbes
Scott E. Forbes
Senior Vice President
and Chief Accounting Officer
Date: February 16, 1998
<PAGE>
CENDANT CORPORATION
CURRENT REPORT ON FORM 8-K
REPORT DATED FEBRUARY 16, 1998 (FEBRUARY 16, 1998)
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
99.1 Unaudited Pro Forma Consolidated Statement of Income of Cendant
for the year ended December 31, 1996.
<PAGE>
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
OF CENDANT CORPORATION FOR THE YEAR ENDED DECEMBER 31, 1996
The pro forma consolidated statement of income of Cendant Corporation
("Cendant") for the year ended December 31, 1996 is presented as if the
following transactions had occurred on January 1, 1996: (i) the acquisition
of Avis, Inc. ("Avis") and the November 1996 issuance of Cendant common stock
(the "Avis Offering") as partial consideration for Avis; (ii) the September
1997 initial public offering of a majority interest in the corporation which
owns all company-owned Avis car rental locations ("ARAC"); (iii) the
acquisition of Resort Condominiums International, Inc. and its affiliates
("RCI") and the issuance of Cendant common stock as partial consideration for
RCI; (iv) the May, 1996 acquisition of the common stock of Coldwell Banker
Corporation ("Coldwell Banker") and the related contribution of Coldwell
Banker's owned real estate brokerage offices (the "Owned Brokerage Business")
to a newly created independent trust (the "Trust"); (v) the receipt of
proceeds from an offering of Cendant common stock (the "Second Quarter 1996
Offering") to the extent necessary to fund (a) the acquisition of Coldwell
Banker and the related repayment of indebtedness and acquisition expenses and
(b) the cash consideration portion in the Avis acquisition; (vi) the
acquisitions of: the six Century 21 non-owned regions ("Century 21 NORS")
during the second quarter of 1996, Travelodge in January, 1996 and Electronic
Realty Associates ("ERA") in February, 1996 (collectively, the "Other 1996
Acquisitions"); and (vii) the February, 1996 issuance of $240 million of 4
3/4% Convertible Senior Notes Due 2003 to the extent such proceeds were used
to finance the Other 1996 Acquisitions.
All of Cendant's aforementioned acquisitions have been accounted for using
the purchase method of accounting. Accordingly, assets acquired and
liabilities assumed have been recorded at their estimated fair values, with
appropriate recognition given to the effect of current interest rates and
income taxes. Management believes that the accounting used to reflect the
above transactions provides a reasonable basis on which to present the
unaudited pro forma statement of income of Cendant for the year ended
December 31, 1996. Cendant has entered into certain immaterial transactions
which are not reflected in the pro forma consolidated statement of income.
The pro forma consolidated statement of income does not purport to present
the results of operations of Cendant had the transactions and events assumed
therein occurred on the dates specified, nor are they necessarily indicative
of the results of operations that may be achieved in the future. The pro
forma statement of income does not reflect cost savings and revenue
enhancements that management believes have been and may continue to be
realized following the acquisitions. No assurances can be made as to the
amount of cost savings or revenue enhancements, if any, that were actually
realized or will be realized.
The pro forma consolidated statement of income is based on certain
assumptions and adjustments described in the Notes to Unaudited Pro Forma
Consolidated Statement of Income and should be read in conjunction therewith
and with the consolidated financial statements and related notes thereto of
Cendant, as included in the Current Report on Form 8-K of Cendant Corporation
dated January 29, 1998, and the financial statements and related notes of the
acquired companies previously filed with the Securities and Exchange Commission
pursuant to Regulation S-X Rule 3-05, "Financial Statements of Businesses
Acquired or to be Acquired."
F-10
<PAGE>
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------
ACQUIRED PRO FORMA
CENDANT COMPANIES ADJUSTMENTS PRO FORMA
------------ ----------- -------------- ------------
<S> <C> <C> <C> <C>
NET REVENUES
Membership and service fees--net ..... $3,433,917 $623,159 $ 11,835 (A) $4,009,382
(235,625)(B)
176,096 (D)
Fleet leasing (net of depreciation
and interest costs of $1,132,408) ... 56,660 56,660
Other................................. 421,919 5,718 (18,417)(D) 409,220
------------ ----------- -------------- -----------
Net revenues........................... 3,912,496 628,877 (66,111) 4,475,262
------------ ----------- -------------- -----------
EXPENSES
Operating............................. 1,396,504 479,075 79,886 (D) 1,652,466
(75,636)(E)
(227,363)(F)
Marketing and reservation............. 1,089,482 128,607 1,218,089
General and administrative............ 339,543 6,114 (416)(I) 345,241
Merger related costs and other unsual
charges (L) ......................... 179,945 179,945
Depreciation and amortization......... 167,907 40,884 25,517 (G) 234,308
Interest, net......................... 25,445 (17,728) 11,718 (H) 48,210
6,000 (D)
22,775 (C)
------------ ----------- -------------- -----------
Total expenses......................... 3,198,826 636,952 (157,519) 3,678,259
------------ ----------- -------------- -----------
Income (loss) before income taxes ..... 713,670 (8,075) 91,408 797,003
Provision (benefit) for income taxes .. 290,059 (6,689) 40,204 (J) 323,574
------------ ----------- -------------- -----------
Net income (loss)...................... $ 423,611 $ (1,386) $ 51,204 $ 473,429
============ =========== ============== ===========
PER SHARE INFORMATION (PRIMARY)
Net income............................ $ .53 $ .57
============ ===========
Weighted average shares outstanding .. 814,292 30,505 (K) 844,797
============ ============== ===========
PER SHARE INFORMATION (FULLY DILUTED)
Net income............................ $ .52 $ .56
============ ===========
Weighted average shares outstanding .. 820,586 30,505 (K) 851,091
============ ============== ===========
</TABLE>
See notes to unaudited pro forma consolidated statement of income.
F-11
<PAGE>
CENDANT CORPORATION
UNAUDITED HISTORICAL CONSOLIDATING STATEMENT OF OPERATIONS
OF ACQUIRED COMPANIES
FOR THE YEAR ENDED DECEMBER 31, 1996
(in thousands)
<TABLE>
<CAPTION>
HISTORICAL (1)
----------------------------------------------------
AVIS, (2) COLDWELL OTHER 1996 TOTAL
AS ADJUSTED RCI BANKER ACQUISITIONS HISTORICAL
------------- ---------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
NET REVENUES
Service fees......................... $32,335 $284,996 $295,478 $10,350 $623,159
Other................................ 4,067 1,651 5,718
------------- ---------- ----------- -------------- ------------
Net revenues........................ 32,335 284,996 299,545 12,001 628,877
------------- ---------- ----------- -------------- ------------
EXPENSES
Operating............................ 25,379 130,113 312,348 11,235 479,075
Marketing and reservation............ 128,607 128,607
Depreciation and amortization ....... 15,345 16,097 9,021 421 40,884
Interest, net........................ (22,376) 3,155 1,493 (17,728)
Other................................ 4,838 512 764 6,114
------------- ---------- ----------- -------------- ------------
Total expenses...................... 40,724 257,279 325,036 13,913 636,952
------------- ---------- ----------- -------------- ------------
Income (loss) before income taxes .... (8,389) 27,717 (25,491) (1,912) (8,075)
Provision (benefit) for income
taxes................................ 99 3,644 (10,432) (6,689)
------------- ---------- ----------- -------------- ------------
Net income (loss)..................... $(8,488) $ 24,073 $(15,059) $(1,912) $ (1,386)
============= ========== =========== ============== ============
</TABLE>
- ------------
(1) Reflects results of operations for the period from January 1, 1996
to the respective dates of acquisition.
(2) The historical consolidated statement of operations of Avis, as
adjusted, has been adjusted to present only the historical operating
results of the portion of Avis intended to be retained by Cendant.
Note: Certain reclassifications have been made to the historical results
of acquired companies to conform to Cendant's pro forma
classification.
F-12
<PAGE>
CENDANT CORPORATION
UNAUDITED HISTORICAL CONSOLIDATING STATEMENT OF OPERATIONS
OF OTHER 1996 ACQUISITIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(in thousands)
<TABLE>
<CAPTION>
HISTORICAL (1)
-------------------------------------
CENTURY 21 TOTAL
NORS TRAVELODGE ERA HISTORICAL
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
NET REVENUES
Service fees..................... $6,668 $688 $ 2,994 $10,350
Other............................ 449 1,202 1,651
------------ ------------ ---------- ------------
Net revenues.................... 7,117 688 4,196 12,001
------------ ------------ ---------- ------------
EXPENSES
Operating........................ 7,566 552 3,117 11,235
Depreciation and amortization ... 285 136 421
Interest, net.................... 2 1,491 1,493
Other............................ 764 764
------------ ------------ ---------- ------------
Total expenses.................. 7,853 552 5,508 13,913
------------ ------------ ---------- ------------
Income (loss) before income
taxes............................. (736) 136 (1,312) (1,912)
Provision for income taxes ......
------------ ------------ ---------- ------------
Net income (loss)................. $ (736) $136 $(1,312) $(1,912)
============ ============ ========== ============
</TABLE>
- ------------
(1) Reflects results of operations for the period from January 1, 1996
to the respective dates of acquisition.
Note: Certain reclassifications have been made to the historical results
of acquired companies to conform to Cendant's pro forma
classification.
F-13
<PAGE>
CENDANT CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
A. SERVICE FEE REVENUE:
The pro forma adjustment reflects the elimination of franchise revenue
paid by the Century 21 NORS to Century 21 under sub-franchise agreements
(offset against operating expense--see Note E) and the addition of franchise
fees to be received under franchise contracts with owned brokerage offices
upon contribution of the Owned Brokerage Business to the Trust. Pro forma
adjustments to service fee revenue consist of the following ($000's):
Eliminate:
Century 21 revenue included as Century 21 NORS
operating expense................................... $(1,003)
Add:
Franchise fees from Owned Brokerage Business ......... 12,838
----------
Total................................................. $11,835
==========
The Franchise fees from the Owned Brokerage Business, which are based on
the franchise contracts with the Trust, are calculated at approximately 5.7%
of gross commissions earned by the Owned Brokerage Business on sales of real
estate properties.
B. OWNED BROKERAGE BUSINESS REVENUE:
The pro forma adjustment reflects the elimination of revenue generated
from Coldwell Banker's 318 formerly owned brokerage offices. Cendant
contributed the net assets of the Owned Brokerage Business to the Trust upon
consummation of the Coldwell Banker acquisition.
C. OTHER REVENUE:
The pro forma adjustment reflects the elimination of revenue associated
with investment income generated from RCI cash and marketable securities
which were distributed in the form of a dividend to the former shareholder of
RCI prior to consummation of the RCI acquisition.
D. CAR RENTAL OPERATING COMPANY OPERATIONS:
At the time Cendant acquired Avis, it had developed and announced a plan
(the "Plan") to do the following:
1. Retain certain assets acquired including; the reservation system,
franchise agreements, trademarks, tradenames and certain liabilities.
2. Segregate the assets used in the car rental operations of ARAC and
dispose of approximately 75% of ARAC within one year through an
initial public offering ("IPO") thereby diluting Cendant's interest to
approximately 25%. All of the proceeds from the IPO would be retained
by ARAC.
3. Enter into a license agreement with ARAC licensing its use of the
trademarks and tradename under which Cendant is to provide other
franchise services.
In September 1997, ARAC completed an IPO which diluted Cendant's equity
interest in ARAC to approximately 27.5%. The actual results of the IPO and its
related impact on the unaudited pro forma consolidated statement of income for
the year ended December 31, 1996 does not differ materially from the pro forma
effects of the assumptions and estimates used in the preparation of such
financial statement.
F-14
<PAGE>
CENDANT CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
The pro forma adjustments are comprised of the following ($000's):
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
JANUARY 1, 1996 OCTOBER 17, 1996
THROUGH THROUGH
OCTOBER 16, 1996 DECEMBER 31, 1996 TOTAL
----------------------- ----------------------- ------------
<S> <C> <C> <C> <C> <C>
Historical income before taxes from ARAC
car rental operations...................... $ 69,799
ADJUSTMENTS TO ARAC:
ELIMINATION OF HISTORICAL EXPENSE
ASSOCIATED WITH:
Reservation and information technology
services (Cendant Expense)(i)............. $ 63,594 $ 16,292 $ 79,886
============
Depreciation and amortization.............. 27,425
ADDITION OF PRO FORMA EXPENSES ASSOCIATED
WITH:
Depreciation and amortization (ii) ........ (14,504)
Increased financing costs (iii)............ (803) 75,712 $ 16,292
---------- ---------- -----------
CENDANT SERVICE FEE ADJUSTMENTS:
Reservation and information technology
services (i)............................. (63,594) (16,292)
Service fees from franchised
locations (iv)........................... (15,562) (4,289)
Royalty payment from Avis Inc. to
Cendant (v).............................. (61,505) (140,661) (14,854) (35,435) $(176,096)
---------- ----------- ---------- ----------- ============
Adjusted income (loss) before taxes from
ARAC....................................... 4,850 (19,143)
Provision for income taxes................. 1,945
----------- -----------
Adjusted net income (loss) from ARAC ....... 2,905 (19,143)
Cendant's ownership percentage.............. 25% 100%
----------- -----------
Cendant's equity in earnings (loss) of Avis
Inc.'s car rental operations............... $ 726 $(19,143) $ (18,417)
=========== =========== ============
OTHER REVENUE ADJUSTMENT:
Elimination of historical interest income
related to cash consideration portion of
Avis acquisition (vi)..................... $ 6,000 $ -- $ 6,000
=========== =========== ============
</TABLE>
- ------------
(i) Subsequent to the IPO, Cendant retained and operates the
telecommunications and computer processing system which services ARAC
for reservations, rental agreement processing, accounting and fleet
control. The pro forma adjustment reflects a planned contractual
agreement with ARAC, under which Cendant charges ARAC at cost for
reservation and information technology services provided.
(ii) The estimated fair value of Avis property and equipment intended to
be retained by ARAC is $101.0 million, comprised primarily of
furniture, fixtures, and leasehold improvements, which is amortized
on a straight-line basis over the estimated useful lives, which
average seven years. Goodwill acquired by ARAC is valued at $154.0
million and is amortized on a straight line basis over a benefit
period of 40 years.
F-15
<PAGE>
CENDANT CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
(iii) In connection with the acquisition of Avis, approximately $1 billion
of tax-advantaged debt was repaid and replaced by a similar amount of
non tax-advantaged debt. This resulted in an increase in interest
rates, due to the loss of tax benefits from the Employee Stock
Ownership Plan ("ESOP") financing which were passed through from
various lenders to Avis ($000's):
Eliminate former
facilities.................. $(127,018)
Add current facilities ..... 127,821
------------
Increased financing cost ... $ 803
============
(iv) Reflects historical franchise fee revenue from third parties.
(v) In connection with the IPO of ARAC, Cendant entered into a 50-year
master license agreement with ARAC for ARAC's use of the Avis
trademarks and tradename and receives royalty fees based upon 4% of
ARAC revenue, escalating to 4.5% of ARAC revenue over a 5-year
period. The pro forma adjustment reflects the royalty payment to be
made to Cendant from ARAC which is calculated at 4.0% of the revenues
generated by ARAC. Such payments are calculated as follows ($000's):
Revenues generated by ARAC.. $1,908,985
Royalty percentage.......... 4.0%
------------
Royalty payment to
Cendant.................... $ 76,359
============
(vi) The pro forma adjustment eliminates historical interest income on the
portion of cash generated from the Second Quarter 1996 Offering which
was used to finance the Avis acquisition.
E. OPERATING EXPENSE:
The pro forma adjustments reflects the elimination of; (i) royalty
payments made by the Century 21 NORS to Century 21 under subfranchise
agreements (offset against service fee revenue--see Note A); (ii) the payment
of Coldwell Banker stock options as a result of change in control provisions
in connection with the acquisition of Coldwell Banker by Cendant and; (iii) a
one-time bonus payment paid to RCI employees by the former shareholder of RCI
pursuant to the stock purchase agreement in connection with the acquisition
of RCI by Cendant ($000's).
Franchise fees........ $ 1,003
Stock option expense.. 40,801
Bonus payment......... 33,832
--------
Total................. $75,636
========
F. OPERATING EXPENSE:
The pro forma adjustment reflects the elimination of expenses associated
with Coldwell Banker's formerly owned brokerage offices (see Note B). The
majority of Owned Brokerage Business expenses are directly attributable to
such business. Based on Cendant's due diligence of Coldwell Banker, Cendant
determined that common expenses were allocated to the Owned Brokerage
Business based on a reasonable allocation method. Such allocations were based
on the ratio of number of employees, the amount of space occupied and revenue
generated by the Owned Brokerage Business relative to Coldwell Banker in the
aggregate and multiplied by corresponding common costs as appropriate to
determine allocable expenses.
F-16
<PAGE>
CENDANT CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
G. DEPRECIATION AND AMORTIZATION:
The pro forma adjustment for depreciation and amortization is comprised of
($000's):
<TABLE>
<CAPTION>
COLDWELL OTHER 1996
RCI AVIS BANKER ACQUISITIONS TOTAL
----------- ----------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Elimination of historical expense .... $(16,097) $(15,345) $(9,021) $ (421) $(40,884)
Property, equipment and furniture and
fixtures............................. 6,686 4,924 482 -- 12,092
Intangible assets..................... 20,114 24,658 8,495 1,042 54,309
----------- ----------- ---------- -------------- -----------
Total................................. $ 10,703 $ 14,237 $ (44) $ 621 $ 25,517
=========== =========== ========== ============== ===========
</TABLE>
RCI
The fair value of RCI's property and equipment is estimated at
approximately $55.7 million and is amortized on a straight-line basis over
the estimated useful lives, ranging from 7 to 30 years.
RCI's intangible assets consist of customer lists and goodwill. The fair
value of RCI's customer lists are approximately $100 million and are
amortized on a straight-line basis over the period to be benefited which is
10 years. The fair value ascribed to customer lists is determined based on
the historical renewal rates of RCI members. Goodwill is valued at
approximately $477.7 million and is determined to have a benefit period of 40
years, which is based on RCI being a leading provider of services to the
timeshare industry, which includes being the world's largest provider of
timeshare exchange programs.
Avis
The estimated fair value of Avis's property and equipment retained by
Cendant is $96.0 million, comprised primarily of reservation equipment and
related assets and to the Avis Headquarters office. Such property and
equipment is amortized on a straight-line basis over the estimated benefit
periods ranging from 5 to 30 years. Avis's intangible assets recorded by
Cendant (not applicable to ARAC) are comprised of the Avis trademark, a
reservation system and customer data base, and goodwill. The fair value of
the Avis trademark is approximately $400 million and is amortized on a
straight-line basis over a benefit period of 40 years. The reservation system
and customer data base are valued at approximately $95.0 million and $14.0
million, respectively and are amortized on a straight line basis over the
periods to be benefited which are 10 years and 6.5 years, respectively.
Goodwill applicable to the allocated portion of the business to be
retained by Cendant is valued at approximately $334.0 million and is
determined to have a benefit period of 40 years. This benefit period is based
on Avis' position as the second largest car rental system in the world, the
recognition of its brand name in the car rental industry and the longevity of
the car rental business.
Coldwell Banker
The fair value of Coldwell Banker's property and equipment (excluding
land) of $15.7 million, is amortized on a straight-line basis over the
estimated benefit periods ranging from 5 to 25 years. Coldwell Banker's
intangible assets are comprised of franchise agreements and goodwill. The
franchise agreements with the brokerage offices comprising the Trust are
valued independently of all other franchise agreements with Coldwell Banker
affiliates. Franchise agreements within the Trust and independent of the
Trust are valued at $218.5 million and $218.7 million, respectively, and are
amortized on a straight line basis over the respective benefit periods of 40
years and 35 years, respectively. The benefit period associated with Trust
franchise agreements was based upon a long history of gross commission
sustained by the Trust. The benefit period associated with the Coldwell
Banker affiliates' franchise agreements was based upon the historical
profitability of such agreements and historical renewal rates. Goodwill is
valued
F-17
<PAGE>
CENDANT CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
at approximately $351.8 million and is determined to have a benefit period of
40 years. This benefit period is based on Coldwell Banker's position as the
largest gross revenue producing real estate company in North America, the
recognition of its brand name in the real estate brokerage industry and the
longevity of the real estate brokerage business.
Other 1996 Acquisitions
The fair values of Other 1996 Acquisitions franchise agreements aggregate
$61.0 million and are being amortized on a straight-line basis over the
periods to be benefited, which range from 12 to 30 years. The estimated fair
values of Other Acquisitions goodwill aggregate $187.4 million and are each
being amortized on a straight-line basis over the periods to be benefited,
which are 40 years.
H. INTEREST EXPENSE:
Elimination of historical interest expense of ($000's):
Coldwell Banker....................................... (3,155)
RCI................................................... (399)
Other 1996 Acquisitions............................... $(1,493)
RCI.................................................... 15,495
4-3/4% Notes to finance Other 1996 Acquisitions ....... 1,270
----------
Total................................................ $11,718
==========
RCI
The pro forma adjustment reflects the recording of interest expense on
$285 million of borrowings under Cendant's revolving credit facilities at an
interest rate of 6.3% which is the variable rate in effect on the date of
borrowing. Borrowings represent the amount used as partial consideration in
the RCI acquisition.
4-3/4% Notes
The pro forma adjustment reflects interest expense and amortization of
deferred financing costs related to the February 1996 issuance of the 4-3/4%
Notes (5.0% effective interest rate) to the extent that such proceeds were
used to finance the acquisitions of ERA ($36.8 million), Travelodge ($39.3
million), and the Century 21 NORS ($95.0 million).
Effect of a 1/8% variance in variable interest rates
As mentioned above, interest expense was incurred on borrowings under the
Cendant's revolving credit facility which partially funded the acquisition of
RCI. Cendant recorded interest expense using the variable interest rate in
effect on the respective borrowing dates. The effect on pro forma net income
assuming a 1/8% variance in the variable interest rate used to calculate
interest expense is immaterial.
I. OTHER EXPENSES:
The pro forma adjustment eliminates charitable contributions made by the
former stockholder of RCI.
F-18
<PAGE>
CENDANT CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
J. INCOME TAXES:
The pro forma adjustment to income taxes is comprised of ($000's):
Reversal of historical (provision) benefit of:
Cendant.............. $(290,059)
RCI.................. (3,644)
Avis................. (99)
Coldwell Banker ..... 10,432
Pro forma provision.... 323,574
------------
Total.............. $ 40,204
============
The pro forma provisions for taxes were computed using pro forma pre-tax
amounts and the provisions of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes."
K. WEIGHTED AVERAGE SHARES OUTSTANDING:
The pro forma adjustment to weighted average shares outstanding consist of
the following (000's):
<TABLE>
<CAPTION>
ISSUANCE WEIGHTED
PRICE PER AVERAGE ACQUISITION
SHARE SHARES DATE
----------- ---------- -----------------
<S> <C> <C> <C>
Avis Offering................................. $30.82 8,701 October 17, 1996
RCI........................................... $31.21 2,074 November 12, 1996
Second Quarter 1996 Offering--Coldwell Banker $24.96 12,857 May 31, 1996
Second Quarter 1996 Offering--Avis............ $24.96 6,128 October 17, 1996
Century 21 NORS............................... $20.74 745 April 3, 1996
----------
Total....................................... 30,505
==========
</TABLE>
The unaudited Pro Forma Statement of Income of Cendant for the year ended
December 31, 1996 is presented as if the acquisitions took place at the
beginning of the period thus, the stock issuances referred to above are
considered outstanding as of the beginning of the period for purposes of per
share calcuations.
L. DAVIDSON, SIERRA AND IDEON MERGER RELATED COSTS AND OTHER UNUSUAL CHARGES
Includes merger related costs and other unusual charges of $179.9 million
($118.7 million, after-tax), recorded by Cendant in connection with its 1996
mergers with Davidson and Associates, Inc., Sierra On-Line, Inc. and Ideon
Group Inc.
CENDANT MERGER RELATED COSTS AND OTHER UNUSUAL CHARGES
Cendant, formerly CUC International, Inc. ("CUC"), incurred merger related
costs and other unusual charges of $844.9 million ($589.8 million, after-tax)
coincident with the merger of CUC with HFS Incorporated on December 17, 1997.
F-19
