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
Commission File No. 1-10308
June 22, 1999 (May 22, 1999)
(Date of Report (date of earliest event reported))
Cendant Corporation
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction 06-0918165
of incorporation or (I.R.S. Employer
organization) Identification Number)
9 West 57th Street
New York, New York 10019
(Address of principal executive (Zip Code)
office)
(212) 413-1800
(Registrant's telephone number, including area code)
Not Applicable
(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 for purposes of incorporating by reference the
exhibit listed in Item 7 hereof in Registration Statements
currently on file or to be filed with the Securities and
Exchange Commission.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- --------------------------------------------------------------
99.1 Unaudited pro forma financial statements of Cendant
Corporation giving effect to the disposition of the Company's
Fleet management segment and the purchase of 50 million shares
of Cendant Corporation common stock for: (i) the year ended
December 31, 1998; and (ii) as of and for the three months
ended March 31, 1999.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the
undersigned hereunto duly authorized.
CENDANT CORPORATION
BY: /s/ Jon F. Danski
Jon F. Danski
Executive Vice President, Finance
(Principal Accounting Officer)
Date: June 22, 1999
<PAGE>
CENDANT CORPORATION
CURRENT REPORT ON FORM 8-K
REPORT DATED JUNE 22, 1999 (MAY 22, 1999)
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------
99.1 Unaudited pro forma financial statements of Cendant
Corporation giving effect to the disposition of the
Company's Fleet management segment and the purchase
of 50 million shares of Cendant Corporation common
stock for: (i) the year ended December 31, 1998; and
(ii) as of and for the three months ended March 31,
1999.
Exhibit 99.1
CENDANT CORPORATION
UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated financial statements of
Cendant Corporation ("Cendant" or the "Company") give effect to the proposed
disposition of the Company's Fleet management segment. PHH Corporation ("PHH"),
a wholly-owned subsidiary of the Company has executed an agreement with Avis
Rent A Car, Inc. ("Avis") pursuant to which Avis will acquire the net assets of
the Company's Fleet management segment for $1.44 billion in assumed intercompany
debt of PHH Holdings, a wholly-owned subsidiary of PHH, which will then be
subsequently repaid to PHH and the issuance of $360 million in convertible
preferred stock of Avis Fleet Leasing and Management Corporation ("Avis Fleet"),
a wholly-owned subsidiary of Avis. The unaudited pro forma consolidated
financial statements also give effect to the use of proceeds from the
disposition of the Company's Fleet management segment for : (i) the purchase of
50 million shares of Cendant common stock, par value $ .01 per share ("Shares"),
pursuant to a tender offer by Cendant Stock Corporation, a wholly-owned
subsidiary of the Company, to purchase such shares from existing shareholders of
the Company (the "Offer") and (ii) the repayment of debt under management and
mortgage programs (collectively, the "Transactions"). The unaudited pro forma
information assumes that shares of Cendant common stock are purchased by Cendant
Stock Corporation pursuant to the Offer at prices of $19.75 per share and $22.50
per share, respectively. Currently, Cendant beneficially owns approximately 19%
of Avis' outstanding Class A common stock and accounts for such investment
utilizing the equity method. The unaudited pro forma consolidated balance sheet
as of March 31, 1999 is presented as if the Transactions had occurred on March
31, 1999. The unaudited pro forma consolidated statements of income for the year
ended December 31, 1998 and for the three months ended March 31, 1999 are
presented as if the Transactions had occurred on January 1, 1998. Such financial
statements do not purport to present the results of operations of Cendant had
the disposition of the Company's Fleet management segment occurred on the dates
specified nor are they necessarily indicative of the operating results that may
be achieved in the future.
The accompanying Unaudited Pro Forma Consolidated Financial Statements of
Cendant are based on certain assumptions and adjustments described in the Notes
thereto, and should be read in conjunction therewith and with the consolidated
financial statements and related notes thereto of Cendant, as included in
Cendant's (i) Annual Report on Form 10K/A for the year ended December 31, 1998,
which was filed with the Securities and Exchange Commission (the "Commission")
on May 13, 1999; and (ii) Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1999, which was filed with the Commission on May 17, 1999.
<PAGE>
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(IN MILLIONS)
<TABLE>
<CAPTION>
Assuming a $19.75 Purchase Price
--------------------------------
Historical Pro Forma
Cendant Adjustments Pro Forma
------------- ---------------- -------------
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 520.7 $ 1,390.0 (B) $ 520.7
(1,390.0)(C)
Receivables, net 1,600.8 (504.5)(A) 1,096.3
Deferred membership commission costs 252.5 - 252.5
Deferred income taxes 302.7 (14.8)(A) 287.9
Other current assets 874.5 (19.2)(A) 855.3
Net assets of discontinued operations 61.8 - 61.8
------------- ------------- -------------
Total current assets 3,613.0 (538.5) 3,074.5
------------- ------------- -------------
Property and equipment, net 1,399.9 (96.9)(A) 1,303.0
Franchise agreements, net 1,353.4 - 1,353.4
Goodwill, net 3,874.7 (181.0)(A) 3,693.7
Other intangibles, net 734.2 (47.4)(A) 686.8
Other assets 698.4 (4.9)(A) 1,053.5
360.0 (B)
------------- ------------ -------------
Total assets exclusive of assets
under programs 11,673.6 (508.7) 11,164.9
------------- ------------ -------------
Assets under management and mortgage programs
Net investment in leases and leased vehicles 3,873.5 (3,873.5)(A) -
Relocation receivables 620.9 - 620.9
Mortgage loans held for sale 1,955.6 - 1,955.6
Mortgage servicing rights 743.5 - 743.5
------------- ------------- -------------
7,193.5 (3,873.5) 3,320.0
------------- ------------- -------------
Total assets $ 18,867.1 $ (4,382.2) $ 14,484.9
============= ============= =============
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
<PAGE>
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Assuming a $19.75 Purchase Price
--------------------------------
Historical Pro Forma
Cendant Adjustments Pro Forma
------------- ---------------- -------------
<S> <C> <C> <C>
Liabilities and shareholders' equity
Current liabilities
Accounts payable and other current
liabilities $ 1,585.2 $ (852.2)(A) $ 744.4
11.4 (B)
Deferred income 1,342.1 (23.1)(A) 1,319.0
------------- ------------- ------------
Total current liabilities 2,927.3 (863.9) 2,063.4
------------- ------------ ------------
Deferred income 234.7 - 234.7
Long-term debt 3,357.7 (20.8)(A) 3,336.9
Deferred income taxes 38.2 33.9 (B) 64.3
(7.8)(A)
Other non-current liabilities 86.4 - 86.4
Deferred gain - 180.9 (B) 180.9
------------- ------------- ------------
Total liabilities exclusive of liabilities
under programs 6,644.3 (677.7) 5,966.6
------------- ------------- ------------
Liabilities under management and mortgage
programs (3,022.0)(A)
Debt 6,327.3 (402.5)(C) 2,902.8
------------- ------------- ------------
Deferred income taxes 328.6 (130.4)(A) 198.2
------------- ------------- ------------
Mandatorily redeemable preferred securities
issued by subsidiary 1,473.5 - 1,473.5
Shareholders' equity
Preferred stock, $.01 par value - authorized
10 million shares; none issued and outstanding - - -
Common stock, $.01 par value - authorized
2 billion shares; issued 863,046,029 8.6 - 8.6
Additional paid-in capital 3,960.3 15.9 (B) 3,976.2
Retained earnings 1,842.2 776.5 (B) 2,618.7
Accumulated other comprehensive loss (120.2) 45.5 (A) (74.7)
Treasury stock, at cost, 85.3 million shares -
historical and 135.3 million shares
- pro forma (1,597.5) (987.5)(C) (2,585.0)
------------- ------------ ------------
Total shareholders' equity 4,093.4 (149.6) 3,943.8
------------ ------------- ------------
Total liabilities and shareholders' equity $ 18,867.1 $ (4,382.2) $ 14,484.9
============ ============= ============
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
<PAGE>
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Assuming a $19.75 Purchase Price
--------------------------------
Historical Pro Forma
Cendant Adjustments Pro Forma
------------- ---------------- -------------
<S> <C> <C> <C>
Revenues
Membership and service fees, net $ 4,883.5 $ (293.9)(A) $ 4,613.2
23.6 (D)
Fleet leasing (net of depreciation
and interest costs of $1,279.4 - historical) 88.7 (88.7)(A) -
Other 114.4 18.0 (E) 130.4
4.5 (F)
(6.5)(G)
----------- -------------- -------------
Net revenues 5,086.6 (343.0) 4,743.6
----------- -------------- -------------
Expenses
Operating 1,721.5 (91.6)(A) 1,629.9
Marketing and reservation 1,158.5 (20.3)(A) 1,138.2
General and administrative 648.7 (94.2)(A) 554.5
Depreciation and amortization 314.0 (22.2)(A) 291.8
Other charges
Litigation settlement 351.0 - 351.0
Termination of proposed acquisitions 433.5 - 433.5
Executive terminations 52.5 - 52.5
Investigation-related costs 33.4 - 33.4
Merger-related costs and other unusual
charges (credits) (67.2) 1.3 (A) (65.9)
Financing costs 35.1 - 35.1
Interest, net 113.9 (3.7)(A) 110.2
----------- -------------- -------------
Total expenses 4,794.9 (230.7) 4,564.2
----------- -------------- -------------
Income from continuing operations before
income taxes and minority interest 291.7 (112.3) 179.4
Provision for income taxes 95.4 (36.8)(H) 58.6
Minority interest, net of tax 50.6 - 50.6
----------- --------------- -------------
Income from continuing operations $ 145.7 $ (75.5) $ 70.2
----------- --------------- -------------
Per Share Information:
Income from continuing operations
Basic $ 0.17 $ 0.09
Diluted $ 0.16 $ 0.08
Weighted Average Shares
Basic 848.4 (50.0)(C) 798.4
Diluted 880.4 (50.0)(C) 830.4
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
<PAGE>
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Assuming a $19.75 Purchase Price
--------------------------------
Historical Pro Forma
Cendant Adjustments Pro Forma
------------- ---------------- ------------
<S> <C> <C> <C>
Revenues
Membership and service fees, net $ 1,247.9 $ (81.0) (A) $ 1,172.6
5.7 (D)
Fleet leasing (net of depreciation
and interest costs of $326.4 -
historical) 18.6 (18.6) (A) -
Other 38.4 4.5 (E) 41.5
1.1 (F)
(2.5) (G)
------------- --------------- -----------
Net revenues 1,304.9 (90.8) 1,214.1
------------- --------------- -----------
Expenses
Operating 432.4 (30.4) (A) 402.0
Marketing and reservation 262.2 (5.0) (A) 257.2
General and administrative 160.6 (24.7) (A) 135.9
Depreciation and amortization 91.0 (8.1) (A) 82.9
Other charges
Termination of proposed acquisition 7.0 - 7.0
Investigation-related costs 1.7 - 1.7
Merger-related costs and other unusual
charges (credits) (1.3) - (1.3)
Interest, net 48.3 (0.8) (A) 47.5
------------- -------------- ----------
Total expenses 1,001.9 (69.0) 932.9
------------- --------------- ----------
Income from continuing operations before
income taxes and minority interest 303.0 (21.8) 281.2
Provision for income taxes 106.5 (7.7) (H) 98.8
Minority interest, net of tax 15.1 - 15.1
------------- -------------- -----------
Income from continuing operations $ 181.4 $ (14.1) $ 167.3
------------ -------------- -----------
Per Share Information:
Income from continuing operations
Basic $ 0.23 $ 0.22
Diluted $ 0.22 $ 0.21
Weighted Average Shares
Basic 800.1 (50.0) (C) 750.1
Diluted 854.4 (50.0) (C) 804.4
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
<PAGE>
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(IN MILLIONS)
<TABLE>
<CAPTION>
Assuming a $22.50 Purchase Price
--------------------------------
Historical Pro Forma
Cendant Adjustments Pro Forma
------------- ---------------- -------------
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 520.7 $ 1,390.0 (B) $ 520.7
(1,390.0)(C)
Receivables, net 1,600.8 (504.5)(A) 1,096.3
Deferred membership commission costs 252.5 - 252.5
Deferred income taxes 302.7 (14.8)(A) 287.9
Other current assets 874.5 (19.2)(A) 855.3
Net assets of discontinued operations 61.8 - 61.8
------------- ------------ -------------
Total current assets 3,613.0 (538.5) 3,074.5
------------- ------------ -------------
Property and equipment, net 1,399.9 (96.9)(A) 1,303.0
Franchise agreements, net 1,353.4 - 1,353.4
Goodwill, net 3,874.7 (181.0)(A) 3,693.7
Other intangibles, net 734.2 (47.4)(A) 686.8
Other assets 698.4 (4.9)(A) 1,053.5
360.0 (B)
------------- ------------- -------------
Total assets exclusive of assets under programs 11,673.6 (508.7) 11,164.9
------------- ------------ -------------
Assets under management and mortgage programs
Net investment in leases and leased vehicles 3,873.5 (3,873.5)(A) -
Relocation receivables 620.9 - 620.9
Mortgage loans held for sale 1,955.6 - 1,955.6
Mortgage servicing rights 743.5 - 743.5
------------- ------------ -------------
7,193.5 (3,873.5) 3,320.0
------------- ------------ -------------
Total assets $ 18,867.1 $ (4,382.2) $ 14,484.9
============= ============ =============
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
<PAGE>
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Assuming a $22.50 Purchase Price
--------------------------------
Historical Pro Forma
Cendant Adjustments Pro Forma
------------- ---------------- -------------
<S> <C> <C> <C>
Liabilities and shareholders' equity
Current liabilities
Accounts payable and other current
liabilities $ 1,585.2 $ (852.2) (A) $ 744.4
11.4 (B)
Deferred income 1,342.1 (23.1) (A) 1,319.0
------------- ------------- ------------
Total current liabilities 2,927.3 (863.9) 2,063.4
------------- ------------- ------------
Deferred income 234.7 - 234.7
Long-term debt 3,357.7 (20.8) (A) 3,336.9
Deferred income taxes 38.2 33.9 (B) 64.3
(7.8) (A)
Other non-current liabilities 86.4 - 86.4
Deferred gain - 180.9 (B) 180.9
------------ ------------- ------------
Total liabilities exclusive of liabilities
under programs 6,644.3 (677.7) 5,966.6
------------ ------------ ------------
Liabilities under management and mortgage
programs
Debt 6,327.3 (3,022.0) (A) 3,040.3
(265.0) (C)
------------ ------------- ------------
Deferred income taxes 328.6 (130.4) (A) 198.2
------------ ------------- ------------
Mandatorily redeemable preferred securities
issued by subsidiary 1,473.5 - 1,473.5
Shareholders' equity
Preferred stock, $.01 par value -authorized
10 million shares; none issued and outstanding - - -
Common stock, $.01 par value - authorized
2 billion shares; issued 863,046,029 8.6 - 8.6
Additional paid-in capital 3,960.3 15.9 (B) 3,976.2
Retained earnings 1,842.2 776.5 (B) 2,618.7
Accumulated other comprehensive loss (120.2) 45.5 (A) (74.7)
Treasury stock, at cost, 85.3 million shares -
historical and 135.3 million shares
- pro forma (1,597.5) (1,125.0) (C) (2,722.5)
------------- ------------ ------------
Total shareholders' equity 4,093.4 (287.1) 3,806.3
------------ ------------ ------------
Total liabilities and shareholders' equity $ 18,867.1 $ (4,382.2) $ 14,484.9
============ ============= ============
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
<PAGE>
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Assuming a $22.50 Purchase Price
--------------------------------
Historical Pro Forma
Cendant Adjustments Pro Forma
------------- ---------------- -------------
<S> <C> <C> <C>
Revenues
Membership and service fees, net $ 4,883.5 $ (293.9) (A) $ 4,605.2
15.6 (D)
Fleet leasing (net of depreciation
and interest costs of $1,279.4 - historical) 88.7 (88.7) (A) -
Other 114.4 18.0 (E) 130.4
4.5 (F)
(6.5) (G)
----------- ------------ -------------
Net revenues 5,086.6 (351.0) 4,735.6
----------- ------------ -------------
Expenses
Operating 1,721.5 (91.6) (A) 1,629.9
Marketing and reservation 1,158.5 (20.3) (A) 1,138.2
General and administrative 648.7 (94.2) (A) 554.5
Depreciation and amortization 314.0 (22.2) (A) 291.8
Other charges
Litigation settlement 351.0 - 351.0
Termination of proposed acquisitions 433.5 - 433.5
Executive terminations 52.5 - 52.5
Investigation-related costs 33.4 - 33.4
Merger-related costs and other unusual
charges (credits) (67.2) 1.3 (A) (65.9)
Financing costs 35.1 - 35.1
Interest, net 113.9 (3.7) (A) 110.2
----------- ------------ -------------
Total expenses 4,794.9 (230.7) 4,564.2
----------- ------------ -------------
Income from continuing operations before
income taxes and minority interest 291.7 (120.3) 171.4
Provision for income taxes 95.4 (39.4) (H) 56.0
Minority interest, net of tax 50.6 - 50.6
----------- ------------ -------------
Income from continuing operations $ 145.7 $ (80.9) $ 64.8
----------- ------------ -------------
Per Share Information:
Income from continuing operations
Basic $ 0.17 $ 0.08
Diluted $ 0.16 $ 0.08
Weighted Average Shares
Basic 848.4 (50.0) (C) 798.4
Diluted 880.4 (50.0) (C) 830.4
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
<PAGE>
CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Assuming a $22.50 Purchase Price
--------------------------------
Historical Pro Forma
Cendant Adjustments Pro Forma
------------- ---------------- -------------
<S> <C> <C> <C>
Revenues
Membership and service fees, net $ 1,247.9 $ (81.0) (A) $ 1,170.7
3.8 (D)
Fleet leasing (net of depreciation
and interest costs of $326.4 - historical) 18.6 (18.6) (A) -
Other 38.4 4.5 (E) 41.5
1.1 (F)
(2.5) (G)
------------ ------------ ------------
Net revenues 1,304.9 (92.7) 1,212.2
------------ ------------ ------------
Expenses
Operating 432.4 (30.4) (A) 402.0
Marketing and reservation 262.2 (5.0) (A) 257.2
General and administrative 160.6 (24.7) (A) 135.9
Depreciation and amortization 91.0 (8.1) (A) 82.9
Other charges
Termination of proposed acquisition 7.0 - 7.0
Investigation-related costs 1.7 - 1.7
Merger-related costs and other unusual
charges (credits) (1.3) - (1.3)
Interest, net 48.3 (0.8) (A) 47.5
------------ ------------ ------------
Total expenses 1,001.9 (69.0) 932.9
------------ ------------ ------------
Income from continuing operations before
income taxes and minority interest 303.0 (23.7) 279.3
Provision for income taxes 106.5 (8.3) (H) 98.2
Minority interest, net of tax 15.1 - 15.1
------------ ------------ ------------
Income from continuing operations $ 181.4 $ (15.4) $ 166.0
------------ ------------ ------------
Per Share Information:
Income from continuing operations
Basic $ 0.23 $ 0.22
Diluted $ 0.22 $ 0.21
Weighted Average Shares
Basic 800.1 (50.0) (C) 750.1
Diluted 854.4 (50.0) (C) 804.4
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
<PAGE>
CENDANT CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, unless otherwise noted)
(A) The pro forma balance sheet adjustments reflect the elimination of
the historical balance sheet amounts and operating results of the
Company's Fleet management segment.
(B) The pro forma adjustments reflect the consideration to be received from
Avis in connection with the disposition of the Company's Fleet
management segment and the anticipated gain on disposition, which is
calculated as follows:
Gross cash proceeds $ 1,440.0
Avis Fleet series A cumulative participating 5%
redeemable convertible preferred stock
(7.2 million shares) 360.0
----------
Total consideration 1,800.0
Historical net book value of Fleet management segment 731.4
Transaction costs (i) 65.9
Income taxes payable (ii) 11.4
Deferred tax liabilities (ii) 33.9
----------
Anticipated gain on disposition 957.4
Less: Deferred gain on disposition (iii) 180.9
----------
Anticipated gain on disposition to be recognized upon
consummation (iv) $ 776.5
==========
(i) Consists of: (a) $50.0 of cash payments made for professional
fees and bonuses directly related to the Transactions; and (b)
a $15.9 charge to equity for the accelerated vesting of
Cendant stock options held by employees of the Company's Fleet
management segment.
(ii) Reflects the anticipated income tax effects from the
disposition of the Company's Fleet management segment.
(iii) Reflects a deferral of 18.9% of the anticipated gain on
disposition, which is equivalent to the Company's common stock
investment in Avis.
(iv) The anticipated gain on the disposition of the Company's Fleet
management segment is reflected as a pro forma adjustment to
retained earnings in the unaudited pro forma consolidated
balance sheet as of March 31, 1999, and is not included in the
unaudited pro forma consolidated statements of income.
(C) The pro forma adjustment reflects the utilization of $1,390.0 of net
proceeds ($1,440.0 gross proceeds less $50.0 of transaction costs) to
repurchase 50.0 million shares of Company common stock pursuant to the
Offer and the remaining proceeds used to repay debt under management
and mortgage programs.
The utilization of proceeds at the assumed purchase prices of Cendant
common stock is as follows:
<TABLE>
<CAPTION>
At $19.75 At $22.50
---------- ---------
<S> <C> <C>
Purchase of 50.0 million shares of Cendant common stock $ 987.5 $ 1,125.0
Repayment of debt under management
and mortgage programs 402.5 265.0
---------- ---------
Net proceeds $ 1,390.0 $ 1,390.0
========== =========
</TABLE>
<PAGE>
(D) The pro forma income statement adjustment reflects a reduction of
interest expense from the assumed repayment of debt used to finance
assets under management and mortgage programs (See Note C). The
interest rate for the three months ended March 31, 1999 and the year
ended December 31, 1998 was 5.71% and 5.87%, respectively, the weighted
average interest rates in effect for such periods. The reduction of
interest expense is calculated as follows:
<TABLE>
<CAPTION>
Year ended
December 31, 1998
At $19.75 At $22.50
Purchase Price Purchase Price
-------------- --------------
<S> <C> <C>
Repayment of debt under management
and mortgage programs $ 402.5 $ 265.0
Weighted average annual interest rate 5.87% 5.87%
--------- ----------
Pro Forma Adjustment $ 23.6 $ 15.6
========== ==========
Three months ended
March 31, 1999
At $19.75 At $22.50
Purchase Price Purchase Price
-------------- --------------
Repayment of debt under management
and mortgage programs $ 402.5 $ 265.5
Weighted average annual interest rate 5.71% 5.71%
--------- ----------
Annualized amount $ 23.0 $ 15.1
---------- ----------
Pro Forma Adjustment $ 5.7 $ 3.8
========== ==========
</TABLE>
(E) The pro forma income statement adjustment reflects the preferred stock
dividend payable from Avis Fleet to Cendant on the $360.0 of Avis Fleet
series A cumulative participating convertible preferred stock at a rate
of 5% per annum.
(F) The pro forma income statement adjustment reflects the recognition of a
proportional amount of the deferred gain on disposition of the
Company's Fleet management segment to Avis. The deferred gain is
recognized into income over forty years, which is consistent with the
period in which Avis is expected to amortize the goodwill generated
from their purchase of the Company's Fleet management segment.
(G) The pro forma income statement adjustment represents Cendant's equity
interest in Avis' pro forma change in their historical earnings giving
effect to Avis' acquisition of the Company's Fleet management segment.
The pro forma adjustment was determined as follows:
<PAGE>
<TABLE>
<CAPTION>
Year ended Three months ended
December 31, 1998 March 31, 1999
-------------------- ------------------
<S> <C> <C>
Historical net income of Avis $ 63.5 $ 15.2
Avis' pro forma income available to
common shareholders giving effect
to Avis' acquisition of the Company's Fleet
management segment 34.8 2.8
--------- ---------
Pro forma differences 28.7 12.4
Cendant's weighted equity ownership percentage
in Avis 22.74% 20.00%
--------- ----------
Pro forma adjustment $ 6.5 $ 2.5
========= ==========
</TABLE>
(H) The pro forma adjustment reflects the income tax effects related to the
disposition of the Company's Fleet management segment. The pro forma
effective tax rate approximates the historical effective tax rate of
Cendant.
