<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 10, 1999 (FEBRUARY 10, 1999)
(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)
9 WEST 57TH STREET - 37TH FLOOR
NEW YORK, NY 10019
(Address of principal executive office) (Zip Code)
(212) 413-1800
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if applicable)
==============================================================================
<PAGE>
ITEM 5. OTHER EVENTS
Earnings Release. On February 10, 1999, we reported our 1998 fourth quarter and
full year results. Attached hereto as Exhibit 99.1 is the press release
relating to the fourth quarter and full year earnings release which is
incorporated herein by reference in its entirety.
In addition, attached hereto as Exhibit 99.2 are financial schedules
summarizing revenue and EBITDA by business segment for all four quarters of
1998, and 1997 giving effect to the Company adopting Statement of Accounting
Standards ("SFAS") No. 131 "Disclosures About Segments of an Enterprise and
Related Information". Each segment is also presented with revenues and revenue
drivers for lines of business within the segment.
ITEM 7. EXHIBITS
Exhibit
No. Description
- ------- -----------
99.1 Press Release: Cendant Corporation Reports 1998 fourth quarter and
full year results
99.2 Revenue Drivers
<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/ David M. Johnson
--------------------
David M. Johnson
Senior Executive Vice
President and Chief
Financial Officer
Date: February 10, 1999
3
<PAGE>
CENDANT CORPORATION
CURRENT REPORT ON FORM 8-K
REPORT DATED FEBRUARY 10, 1999 (FEBRUARY 10, 1999)
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
99.1 Press Release: Cendant Corporation Reports 1998 fourth quarter and
full year results
99.2 Revenue Drivers
<PAGE>
CENDANT REPORTS 1998 FOURTH QUARTER RESULTS
Adjusted Continuing Operations $0.22 vs. $0.13, up 69%
Reported Continuing Operations Loss $0.36 vs. Loss $0.22
Gain on Sale of Discontinued Operations $0.46
Reiteration of Strategy to Focus on Core Businesses, Sell Non-Strategic Assets
Company Articulates Strategy for Internet Business
Company Confident to Reach Analysts Range of 1999 Earnings Estimates
New York, NY, February 10, 1999 - Cendant Corporation (NYSE: CD) today reported
1998 full year and fourth quarter results. Results from continuing operations,
adjusted for certain charges and credits, for the quarter ended December 31,
1998 were as follows:
o Revenues were $1.4 billion, up 29% from $1.1 billion
o EBITDA was $422 million, up 55%
o EBITDA margins increased to 30% from 25% Net income was $190 million,
up 65%
o Earnings per share were $0.22, up 69% from $0.13
Adjusted earnings from continuing operations for the fourth quarter exclude the
impact of the following items ("Adjustments"): $0.33 per share for the costs of
terminating the proposed acquisitions of American Bankers Insurance Group, Inc.
and Providian Auto & Home Insurance Company; $0.27 per share charge associated
with the preliminary agreement in principle to settle the PRIDES securities
class action suit ; and a $0.03 per share credit for merger related costs and
other unusual charges which primarily reflects adjustments to the original
estimate of costs to be incurred.
Adjusted fourth quarter results also exclude a gain of $0.46 per share
associated with the sales of Hebdo Mag International and Cendant Software. The
Company expects to record an additional gain in the first quarter of 1999
associated with the sale of Cendant Software. Adjusted for the gain on the
sales of Hebdo Mag and Software, reported earnings per share for the fourth
quarter would be $0.10. Including all Adjustments, Cendant reported a fourth
quarter 1998 loss from continuing operations of $302 million or $0.36 per
share. (See Table 1of 8 for adjusted results and Table 2 of 8 and Table 3 of 8
for reported results.)
"We are extremely pleased to report fourth quarter results that reflect the
underlying strength of our core businesses," said Henry R. Silverman, chairman,
president and chief executive officer.
1
<PAGE>
"1998 was a year of significant challenge resulting from the accounting
irregularities discovered at the former CUC International. The Company's
financial results demonstrate the commitment of our management team to drive
performance and reestablish value for our shareholders. We have redirected the
Company's strategy to focus on growth in our core businesses, to sell
non-strategic assets and to use the proceeds, as well as cash flow generated
from operations, to buy back stock and retire debt."
The 55% increase in adjusted EBITDA from continuing operations in the fourth
quarter reflects improvement in all nine business segments. The three largest
contributors to EBITDA growth were Mortgage Services, which more than tripled
to $60 million from $20 million because of increased mortgage origination
levels; Other Consumer and Business Services, which increased three-fold to $29
million from $10 million primarily because of the acquired National Car Park
and Green Flag operations; and Individual Membership, which improved $26
million from a loss of $17 million last year to a profit of $9 million this
year, principally because of lower marketing costs. (For a quarterly
presentation of segment performance see the Company's Form 8-K filed with the
Securities and Exchange Commission on February 10, 1999.)
REVIEW OF FULL YEAR 1998 RESULTS
Full year revenues from continuing operations were $5.3 billion, up 25% from
$4.2 billion in 1997. Adjusted EBITDA and net income from continuing operations
were $1.6 billion and $705 million, respectively. Adjusted earnings per share
from continuing operations were $0.80 in 1998, up 21% from $0.66 in 1997.
Adjusted full year 1998 results exclude or reflect the impact of the following
items ("Adjustments"). (Full year per share Adjustments may vary from fourth
quarter per share Adjustments due to differences in weighted average shares
outstanding for the quarter vs. the full year.):
o Includes $0.04 per share for the non-cash write-off of the Company's
equity investment in Net Grocer and the goodwill associated with the
National Library of Poetry
o Excludes $0.32 per share for the cost of terminating the proposed
acquisition of American Bankers and Providian
o Excludes $0.26 per share associated with the preliminary agreement in
principle to settle the PRIDES securities class action suit
o Excludes $0.09 per share for the cost of the Company's investigations
into previously discovered accounting irregularities at the former CUC
International including the separation payments to the Company's
former chairman
o Excludes $0.05 per share credit to merger related costs and other
unusual charges primarily as a result of changes to the original
estimate of costs to be incurred
Adjusted full year results also exclude gains of $0.44 per share associated
with the sales of Hebdo Mag International and Cendant Software. Excluding all
Adjustments, Cendant reported full year EBITDA from continuing operations of
$787 million, net income of $160 million and earnings per share of $0.18. (See
Table 4 of 8, Table 5 of 8 and Table 6 of 8)
2
<PAGE>
NEW STRATEGY AND OTHER DEVELOPMENTS
o The Company completed the repurchase of $1 billion of common stock in the
repurchase program authorized in October 1998. The Company also announced
recently that its Board of Directors has authorized a $200 million increase
in its share repurchase program, which the Company expects to execute
through open-market and/or privately negotiated transactions as
opportunities present themselves in the future. As of February 10, the
Company has reduced its outstanding shares by about 60 million shares or
about 7% (including the 7.1 million shares acquired as part of the sale of
Hebdo Mag International).
o During the fourth quarter the Company continued to reduce its debt and to
lengthen maturities. This debt restructuring has served to materially
strengthen the Company's balance sheet.
The Company's $3.25 billion term loan due May 1999 was retired through the
proceeds of (1) a $1.55 billion Senior Notes offering ($400 million due
December 2000 and $1.15 billion due December 2003), (2) a new $1.25 billion
term loan due February 2001, and (3) proceeds from the sales of
discontinued businesses. In addition, the Company's $150 million 5 7/8%
Senior Notes due December 1998 were retired. As a result, debt outstanding
(excluding debt related to management and mortgage programs) declined from
$4.0 billion at September 30, 1998 to $3.4 billion at December 31, 1998 and
none of the Company's aforementioned debt is short-term. As of such dates,
the Company's debt to total capital ratio improved from 39% to 35%.
o The Company completed the sales of Hebdo Mag and Cendant Software for an
aggregate of approximately $1.3 billion including $1.2 billion in cash and
the receipt of 7.1 million shares of Cendant common stock. The Company
continues to evaluate the sale of non-strategic businesses where it does
not have a comparative advantage and which may have more value to another
company.
o As recently announced, the Company will not proceed with the acquisition of
RAC Motoring Services in the UK because of the material conditions attached
to its approval by the UK Secretary of State for Trade and Industry. The
Company's intention is to build on the already successful record of Green
Flag in the UK roadside assistance market and to use funds earmarked for
the RAC acquisition for share repurchase and further debt repayment
o The Company also articulated its Internet strategy, which includes the
proposed sale of three of its Internet companies: RentNet, Match.com and
Bookstacks, Inc. (Books.com, MusicSpot.com and GoodMovies.com). The
strategy also includes continued investment in the Company's remaining
Internet membership business, particularly NetMarket, which is an integral
part of its overall individual membership business; the continued pursuit
of strategic partnerships that will leverage its Internet membership
assets, accelerate growth and maximize shareholder value; and the
establishment of an outsourcing services business that manages fulfillment
and distribution for non-competing third-party e-commerce providers. (See
accompanying backgrounder issued by the Company on PR Newswire.)
3
<PAGE>
1999 OUTLOOK
Silverman said, "Our expectations for 1999 earnings are consistent with the
strong growth targets we articulated in December. We are confident that we will
deliver earnings per share in line with Wall Street expectations of between
$1.00 to $1.13 for the year. Our business units are performing well thus far in
1999, giving us further confirmation that each unit should deliver 1999
quarterly results in line with our expectations."
Cendant has restructured its mix of businesses and operating strategies in the
past twelve months and will continue to do so in 1999 when opportunities
present themselves. This will affect the seasonal pattern of the Company's
earnings. "The most exciting of these opportunities is in Individual
Membership, where our new management team is pursuing a strategic vision of
maximizing real, sustainable earnings growth over the long term. This will
produce a different earnings progression, even versus the restated historical
results of the unit," said David M. Johnson, chief financial officer. "Our
successful 1998 acquisitions, particularly Harpur Group, National Parking
Corporation and Green Flag in the UK, will now enter the earnings stream for a
full year, creating a shift in net income to the second half, which
historically produces somewhat higher volume. 1999 results will also not
benefit from certain one-time events in 1998's first quarter, in particular,
the benefit of a larger gain on sale of Avis-Rent-A-Car stock. Also, systems
investments in long-term cost savings will increase our annual depreciation
expense while increasing operating leverage and profits in our peak summer
periods. As a result, the summer months will assume even greater importance in
1999, and we anticipate approximately 60% to 65% of earnings will occur during
the second half of the year as a result of this shift. It is likely that
earnings per share in the first quarter of 1999 may not exceed and, in fact,
may be lower than earnings per share in the first quarter of 1998."
CLASS ACTION LITIGATION
On January 7, 1999 the Company announced it had reached a preliminary agreement
in principle with plaintiff's counsel representing the class of holders of its
PRIDES securities who purchased their securities on or prior to April 15, 1998
to settle the substantial portion of their class action lawsuit against Cendant
through the issuance of a new "Right" for each PRIDES security held. Under the
preliminary agreement only persons who owned Income or Growth PRIDES ("PRIDES")
at the close of business on April 15, 1998 will be eligible to receive a new
"Right" for each PRIDES security held. Current holders of PRIDES will not
receive any Rights (unless they also held PRIDES on April 15, 1998).
In connection with this transaction, the Company recorded an after tax charge
of approximately $230 million, or $0.27 per share in the fourth quarter of 1998
and increased Shareholders' Equity by approximately $75 million, net, as a
result of the prospective issuance of the Rights. In addition this transaction
is expected to have minimal impact on 1999 earnings per share and only if
Cendant common stock materially appreciates in price. There is no assurance
that a definitive agreement will be reached and any such agreement is subject
to court approval and will be subject to certain conditions. There can be no
assurance that the court will approve the agreement or that the conditions
contained in any definitive agreement will be fulfilled.
4
<PAGE>
With respect to litigation relating to claims of common shareholders, the
Company does not believe that it is feasible to predict or determine the final
outcome or resolution of these proceedings or to estimate the amounts or
potential range of loss with respect to the resolution of these proceedings. In
addition, the timing of the final resolution of these proceedings is uncertain.
The possible outcomes or resolutions of these proceedings could include
judgments against Cendant or settlements and could require substantial payments
by the Company. Management believes that material adverse outcomes in such
proceedings and investigations or any other resolutions (including settlements)
could have a material impact on Cendant's financial condition, results of
operations and cash flows.
On January 25, 1999 the Company filed a suit against Ernst & Young LLP, the
auditors of the former CUC International for damages to the Company and for any
damages from the class actions brought against the Company for accounting
irregularities initially disclosed in April 1998.
Statements about future results made in this release may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are based on current
expectations and the current economic environment. The Company cautions that
these statements are not guarantees of future performance. They involve a
number of risks and uncertainties that are difficult to predict. Actual results
could differ materially from those expressed or implied in the forward-looking
statements. Important assumptions and other important factors that could cause
actual results to differ materially from those in the forward-looking
statements are specified in the Company's Prospectus Supplement dated November
24, 1998, including the resolution of the pending class action litigation and
the Company's ability to implement its plan to divest non-core assets.
Cendant Corporation is one of the world's foremost providers of consumer and
business services. The Company operates in four principal divisions: Travel
Related Services, Real Estate Related Services, Alliance Marketing Related
Services and Other Consumer and Business Services. In Travel Related Services,
Cendant is the leading franchisor of hotels and rental car agencies worldwide;
the largest provider of vacation exchange services; and a leading fleet
management company. In Real Estate Related 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. In Alliance Marketing Related Services, Cendant provides
access to insurance, travel, shopping, auto and other services, primarily
through direct marketing to customers of its affinity partners. Other Consumer
and Business Services include a leading tax preparation service franchise
system in the US; the UK's largest private car park operator; and a leading
motorist assistance group in the UK. Headquartered in New York, NY, the Company
has more than 35,000 employees and operates in over 100 countries.
Media Contact: Investor Contact:
Elliot Bloom Denise L. Gillen
212-413-1832 212-413-1833
Samuel J. Levenson
212-413-1834
<PAGE>
TABLE 1 OF 8
Continuing Operations
Fourth Quarter Financial Results - As Adjusted (Dollars in millions, except per
share amounts)
The underlying 1998 results are adjusted to exclude the following unusual
charges: (i) $433.5 million ($281.7 million, after tax or $0.33 per share) for
the costs of terminating the proposed acquisitions of American Bankers
Insurance Group, Inc. and Providian Auto and Home Insurance Company; and (ii)
$351.0 million ($228.2 million, after tax, or $0.27 per share) associated with
the preliminary agreement in principle to settle the PRIDES securities class
action suit. Such charges are partially offset by a credit of $42.8 million
($27.5 million, after tax or $.03 per share) associated with changes to the
original estimate of 1997 merger-related costs and other unusual charges. The
underlying 1997 results are adjusted to exclude merger-related costs and other
unusual charges of $425.2 million ($296.3 million, after tax or $0.34 per
share) substantially associated with the Cendant Merger.
<TABLE>
<CAPTION>
1998 1997 % change
------------- ------------- -----------
<S> <C> <C> <C>
Revenues $ 1,418.7 $ 1,100.2 29
Expenses 1,118.8 903.5 24
------------- ------------
Income before income taxes and minority interest 299.9 196.7 52
EBITDA (1) 422.3 273.3 55
Income from continuing operations 190.3 115.2 65
Earnings per share:
Basic and diluted $ .22 $ .13 69
Weighted average shares - diluted 890.9 893.0 --
</TABLE>
(1) Earnings before interest, taxes, depreciation and amortization.
<PAGE>
TABLE 2 OF 8
CENDANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FROM CONTINUING OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTERLY PERIOD ENDED
DECEMBER 31,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
REVENUES
Membership and service fees - net $ 1,346.1 $ 1,056.2
Fleet leasing (net of depreciation and interest costs of
$324.8 and $313.0) 31.2 16.6
Other 41.4 27.4
------------- -------------
Net revenues 1,418.7 1,100.2
------------- -------------
EXPENSES
Operating 512.2 364.2
Marketing and reservation 305.3 281.5
General and administrative 178.9 181.2
Depreciation and amortization 81.4 62.3
Other charges:
Litigation settlement 351.0 -
Termination of proposed acquisitions 433.5
Executive terminations 2.1 -
Merger-related costs and other unusual charges (credits) (42.8) 425.2
Investigation-related costs 2.4 -
Financing costs 7.9 -
Interest - net 41.0 14.3
------------- -------------
Total expenses 1,872.9 1,328.7
------------- -------------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND
MINORITY INTEREST (454.2) (228.5)
Benefit from income taxes (168.5) (47.4)
Minority interest - net 16.3 -
------------- -------------
LOSS FROM CONTINUING OPERATIONS $ (302.0) $ (181.1)
============== ==============
LOSS PER SHARE FROM CONTINUING OPERATIONS
BASIC AND DILUTED $ (0.36) $ (0.22)
============== ==============
</TABLE>
<PAGE>
TABLE 3 OF 8
Continuing Operations
Fourth Quarter Financial Results - As Reported (Dollars in millions, except
per share amounts)
<TABLE>
<CAPTION>
1998 (1) 1997 (2) % change
------------- ------------- -----------
<S> <C> <C> <C>
Revenues $ 1,418.7 $ 1,100.2 29
Expenses 1,872.9 1,328.7 41
------------- ------------
Loss before income taxes and minority interest (454.2) (228.5) (99)
EBITDA (3) (323.9) (151.9) (113)
Loss from continuing operations (302.0) (181.1) (67)
Loss per share:
Basic and diluted $ (.36) $ (.22) (64)
Weighted average shares - diluted 850.0 828.4 --
</TABLE>
(1) Includes charges of: (i) $433.5 million ($281.7 million, after tax or
$0.33 per share) for the costs of terminating the proposed acquisitions of
American Bankers Insurance Group, Inc. and Providian Auto and Home
Insurance Company; and (ii) $351.0 million ($228.2 million, after tax or
$0.27 per share) associated with the preliminary agreement in principle to
settle the PRIDES securities class action suit. Such charges are partially
offset by a credit of $42.8 million ($27.5 million, after tax or $0.03 per
share) associated with changes to the original estimate of 1997
merger-related costs and other unusual charges.
(2) Includes merger-related costs and other unusual charges of $425.2 million
($296.3 million, after tax or $0.34 per share) substantially associated
with the merger of HFS Incorporated and CUC International Inc. to form
Cendant Corporation (the "Cendant Merger").
(3) Earnings (loss) before interest, taxes, depreciation and amortization.
<PAGE>
TABLE 4 OF 8
Continuing Operations
Year Ended December 31 Financial Results - As Adjusted (Dollars in millions,
except per share amounts)
The underlying 1998 results are adjusted to exclude the following unusual
charges or credits: (i) $433.5 million ($281.7 million, after tax or $0.32 per
share) for the costs of terminating the proposed acquisitions of American
Bankers Insurance Group, Inc. and Providian Auto and Home Insurance Company;
(ii) $351.0 million ($228.2 million, after tax or $0.26 per share) associated
with the preliminary agreement in principle to settle the PRIDES securities
class action suit; (iii) $121.0 million ($78.7 million, after tax or $0.09 per
share) comprised of the costs of the investigations into previously discovered
accounting irregularities at the former CUC business units and separation
payments, principally to the Company's former chairman; (iv) a credit of $67.2
million ($43.7 million, after tax or $0.05 per share) associated with changes
to the original estimate of 1997 merger-related costs and other unusual
charges. The underlying 1997 results are adjusted to exclude merger-related
costs and other unusual charges of $704.1 million ($504.7 million, after tax or
$0.58 per share) primarily associated with and coincident to the Cendant Merger
and the Company's merger with PHH Corporation.
<TABLE>
<CAPTION>
1998 1997 % change
------------- ------------- -----------
<S> <C> <C> <C>
Revenues $ 5,283.8 $ 4,240.0 25
Expenses 4,130.5 3,278.6 26
------------- ------------
Income before income taxes and minority interest 1,153.3 961.4 20
EBITDA (1) 1,589.9 1,249.7 27
Income from continuing operations 704.9 571.0 23
Earnings per share:
Basic $ .83 $ .70 19
Diluted $ .80 $ .66 21
Weighted average shares - diluted 899.1 885.5 --
</TABLE>
(1) Earnings before interest, taxes, depreciation and amortization.
<PAGE>
TABLE 5 OF 8
CENDANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FROM CONTINUING OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1998 1997 1996
------------- ------------- --------------
<S> <C> <C> <C>
REVENUES
Membership and service fees - net $ 5,024.9 $ 3,988.7 $ 3,138.0
Fleet leasing (net of depreciation and interest costs of
$1,279.4, $1,205.2 and $1,132.4) 88.7 59.5 56.7
Other 170.2 191.8 43.0
------------- ------------ -------------
Net revenues 5,283.8 4,240.0 3,237.7
------------- ------------ -------------
EXPENSES
Operating 1,869.1 1,322.3 1,183.2
Marketing and reservation 1,158.5 1,031.8 910.8
General and administrative 666.3 636.2 341.0
Depreciation and amortization 322.7 237.7 145.5
Other charges:
Litigation settlement 351.0 -- --
Termination of proposed acquisitions 433.5 -- --
Executive terminations 52.5 -- --
Merger-related costs and other unusual charges (credits) (67.2) 704.1 109.4
Investigation-related costs 33.4 -- --
Financing costs 35.1 -- --
Interest - net 113.9 50.6 14.3
------------- ------------ -------------
Total expenses 4,968.8 3,982.7 2,704.2
------------- ------------ -------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND MINORITY INTEREST 315.0 257.3 533.5
Provision for income taxes 104.5 191.0 220.2
Minority interest - net 50.6 - -
------------- ------------- -------------
INCOME FROM CONTINUING OPERATIONS $ 159.9 $ 66.3 $ 313.3
============= ============ =============
INCOME PER SHARE FROM CONTINUING OPERATIONS
BASIC $ 0.19 $ 0.08 $ 0.41
DILUTED $ 0.18 $ 0.08 $ 0.39
</TABLE>
<PAGE>
TABLE 6 OF 8
Continuing Operations
Year Ended December 31 Financial Results - As Reported (Dollars in millions,
except per share amounts)
<TABLE>
<CAPTION>
1998 (1) 1997 (2) % change
------------- ------------- -----------
<S> <C> <C> <C>
Revenues $ 5,283.8 $ 4,240.0 25
Expenses 4,968.8 3,982.7 25
------------- ------------
Income before income taxes and minority interest 315.0 257.3 22
EBITDA (3): 786.7 545.6 44
Income from continuing operations 159.9 66.3 141
Earnings per share:
Basic $ .19 $ .08 138
Diluted $ .18 $ .08 125
Weighted average shares - diluted 880.4 851.7 --
</TABLE>
(1) Includes charges of: (i) $433.5 million ($281.7 million, after tax or
$0.32 per share) for the costs of terminating the proposed acquisitions of
American Bankers Insurance Group, Inc. and Providian Auto and Home
Insurance Company; (ii) $351.0 million ($228.2 million, after tax or $0.26
per share) associated with the preliminary agreement in principle to
settle the PRIDES securities class action suit; (iii) $121.0 million
($78.7 million, after tax or $0.09 per share) comprised of the costs of
the investigations into previously discovered accounting irregularities at
the former CUC business units and separation payments, principally to the
Company's former chairman; and (iv) a $50.0 million ($32.2 million, after
tax or $0.04 per share) non-cash write-off of the Company's equity
investments in interactive businesses and the goodwill associated with the
National Library of Poetry, a Company subsidiary. The aforementioned
charges were partially offset by a credit of $67.2 million ($43.7 million,
after tax or $0.05 per share) associated with changes to the original
estimate of 1997 merger-related costs and other unusual charges.
(2) Includes merger-related costs and other unusual charges of $704.1 million
($504.7 million, after tax or $0.58 per share) primarily associated with
and coincident to the Cendant Merger and the Company's merger with PHH
Corporation.
(3) Earnings before interest, taxes, depreciation and amortization.
<PAGE>
TABLE 7 OF 8
Continuing Operations
Segment Revenues and EBITDA - As adjusted
(Dollars in Millions)
Fourth Quarter Ended December 31,
<TABLE>
<CAPTION>
Revenues EBITDA, as adjusted (1) EBITDA
----------------------------------- --------------------------------------- Margin
% % ------------------
1998 1997 change 1998 (2) 1997 change 1998 1997
--------- --------- --------- -------- --------- --------- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Travel $ 236.8 $ 217.5 9% $ 115.4 $ 102.6 12% 49% 47%
Fleet Management 99.9 79.6 26% 42.0 25.1 67% 42% 32%
Real Estate 113.2 97.2 16% 84.2 68.1 24% 74% 70%
Relocation 103.4 101.6 2% 26.9 21.8 23% 26% 21%
Mortgage Services 101.6 51.5 97% 59.9 19.8 203% 59% 38%
Individual
Membership 271.8 206.7 31% 9.7 (16.7) 158% 4% (8%)
Insurance/
Wholesale 137.7 133.5 3% 31.1 25.4 22% 23% 19%
Entertainment
Publications 86.3 71.8 20% 24.4 17.1 43% 28% 24%
Other 268.0 140.8 90% 28.7 (2) 10.1 184% 11% 7%
--------- --------- --- -------- -------- ---- --- ---
Total $ 1,418.7 $ 1,100.2 29% $ 422.3 $ 273.3 55% 30% 25%
========== ========= === ======== ======== === === ===
</TABLE>
Year Ended December 31,
<TABLE>
<CAPTION>
Revenues EBITDA, as adjusted (1) EBITDA
----------------------------------- --------------------------------------- Margin
% % -------------------
1998 1997 change 1998 (3) 1997 change 1998 1997
--------- --------- --------- -------- --------- --------- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Travel $ 1,063.3 $ 971.6 9% $ 542.5 $ 467.3 16% 51% 48%
Fleet Management 387.4 324.1 20% 173.8 120.5 44% 45% 37%
Real Estate 455.8 334.6 36% 348.6 226.9 54% 76% 68%
Relocation 444.0 401.6 11% 124.5 92.6 34% 28% 23%
Mortgage Services 353.4 179.2 97% 187.6 74.8 151% 53% 42%
Individual
Membership 929.1 778.7 19% (57.8) 5.3 (6%) 1%
Insurance/
Wholesale 544.0 482.7 13% 137.8 111.0 24% 25% 23%
Entertainment
Publications 197.2 189.5 4% 32.1 30.0 7% 16% 16%
Other 909.6 578.0 57% 100.8 (3) 121.3 (17%) 11% 21%
--------- --------- --- -------- -------- ---- --- ---
Total $ 5,283.8 $ 4,240.0 25% $1,589.9 $1,249.7 27% 30% 29%
========= ========= === ======== ======== ==== === ===
</TABLE>
(1) Earnings before interest, taxes, depreciation and amortization exclusive of
unusual charges.
(2) Excludes the following unusual charges or credits: (i) $433.5 million for
the costs of terminating the proposed acquisitions of American Bankers
Insurance Group, Inc. and Providian Auto and Home Insurance Company; (ii)
$351.0 million associated with the preliminary agreement in principle to
settle the PRIDES securities class action suit; and (iii) $12.4 million
comprised of the costs of the investigations into previously discovered
accounting irregularities at the former CUC business units and separation
payments, principally to the Company's former chairman.
(3) Excludes the following unusual charges or credits: (i) $433.5 million for
the costs of terminating the proposed acquisitions of American Bankers
Insurance Group, Inc. and Providian Auto and Home Insurance Company; (ii)
$351.0 million associated with the preliminary agreement in principle to
settle the PRIDES securities class action suit; and (iii) $121.0 million
comprised of the costs of the investigations into previously discovered
accounting irregularities at the former CUC business units and separation
payments, principally to the Company's former chairman.
<PAGE>
TABLE 8 OF 8
CENDANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN BILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1998 1997
------------- --------------
<S> <C> <C>
ASSETS
Total current assets $ 4.4 $ 2.6
----- -----
Property and equipment - net 1.4 .5
Goodwill - net 3.9 2.2
Other assets 3.0 2.3
----- -----
Total assets exclusive of assets under programs 12.7 7.6
----- -----
Assets under management and mortgage programs 7.5 6.4
----- -----
TOTAL ASSETS $20.2 $14.0
===== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
Total current liabilities $ 2.9 $ 2.5
----- -----
Long-term debt 3.4 1.2
Other noncurrent liabilities .4 .5
----- -----
Total liabilities exclusive of liabilities under programs 6.7 4.2
----- -----
Liabilities under management and mortgage programs 7.2 5.9
Mandatorily redeemable preferred securities issued by subsidiaries 1.5 -
Commitments and contingencies
Total shareholders' equity 4.8 3.9
----- -----
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $20.2 $14.0
===== =====
</TABLE>
<PAGE>
CONTINUING OPERATIONS
SEGMENT SUMMARY -- AS REPORTED
(DOLLARS IN MILLIONS)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER
-----------------------------------------------------------
% %
1997 1998 CHANGE 1997 1998 CHANGE
-------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Travel $221.6 $ 265.6 20 $ 252.8 $ 263.6 4
Fleet 91.5 96.6 6 79.2 96.0 21
Real Estate Franchise 55.4 84.3 52 83.7 131.5 57
Relocation 85.2 99.7 17 102.7 110.2 7
Mortgage 33.6 78.0 132 42.5 94.0 121
Individual Membership 196.7 204.1 4 181.1 209.6 16
Wholesale / Insurance 111.9 134.0 20 118.7 136.8 15
Entertainment
Publications 17.0 9.6 (43) 9.3 5.9 (37)
Other 140.8 157.5 12 129.6 230.4 78
-------- --------- --------- ---------
Total 953.7 1,129.4 18 999.6 1,278.0 28
======== ========= ========= =========
EBITDA
Travel $ 95.3 $ 149.1 56 $ 113.2 $ 141.1 25
Fleet 38.3 47.6 24 (0.9) 45.0 5100
Real Estate Franchise 28.9 59.2 105 46.5 104.1 124
Relocation 15.9 25.6 61 (22.2) 22.7 202
Mortgage 14.2 35.6 151 19.1 43.0 125
Individual Membership 21.4 (15.9) (175) 6.7 (40.9) (710)
Wholesale / Insurance 26.7 39.2 46 30.7 35.5 16
Entertainment
Publications (12.1) (20.7) (72) (17.2) (13.8) 20
Other 29.5 61.3 108 (149.6) 47.6 132
-------- --------- --------- ---------
Total 258.1 381.0 48 26.3 384.3
======== ========= ========= =========
SEGMENT SUMMARY -- AS ADJUSTED
EBITDA (1)
Travel $ 95.3 $ 149.1 56 $ 124.9 $ 135.7 9
Fleet 38.3 47.6 24 31.7 43.8 38
Real Estate Franchise 28.9 59.2 105 57.3 103.1 80
Relocation 15.9 25.6 61 20.9 26.4 26
Mortgage 14.2 37.5 164 19.9 44.8 125
Individual Membership 21.4 (15.9) (175) 6.7 (40.9) (710)
Wholesale / Insurance 26.7 39.2 46 30.7 35.5 16
Entertainment
Publications (12.1) (20.7) (72) (17.2) (13.8) 20
Other 29.5 62.6 112 30.2 41.7 38
-------- --------- --------- ---------
Total 258.1 384.2 49 305.1 376.3 23
======== ========= ========= =========
</TABLE>
(1) Earnings before interest, taxes, depreciation and amortization as
adjusted for certain items discussed in the February 10, 1999 earnings
release.
<PAGE>
CONTINUING OPERATIONS
SEGMENT SUMMARY -- AS REPORTED
(DOLLARS IN MILLIONS)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
3RD QUARTER 4TH QUARTER
------------------------------------------------------------
% %
1997 1998 CHANGE 1997 1998 CHANGE
--------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Travel $ 279.7 $ 297.3 6 $ 217.5 $ 236.8 9
Fleet 73.9 94.8 28 79.6 99.9 26
Real Estate Franchise 98.3 126.7 29 97.2 113.2 16
Relocation 112.0 130.8 17 101.6 103.4 2
Mortgage 51.6 79.9 55 51.5 101.6 97
Individual Membership 194.3 243.6 25 206.7 271.8 31
Wholesale / Insurance 118.5 135.5 14 133.5 137.7 3
Entertainment
Publications 91.4 95.4 4 71.8 86.3 20
Other 166.8 253.8 52 140.8 268.0 90
--------- --------- --------- ---------
Total 1,186.5 1,457.8 23 1,100.2 1,418.7 29
========= ========= ========= =========
EBITDA
Travel $ 144.5 $ 142.3 (2) $ (10.7) $ 115.5 1179
Fleet 25.4 40.5 59 (3.3) 42.0 1373
Real Estate Franchise 72.6 102.1 41 48.1 84.6 76
Relocation 34.0 45.6 34 31.1 46.7 50
Mortgage 20.8 45.4 118 19.8 59.9 203
Individual Membership (6.0) (10.7) (77) (19.8) 9.7 149
Wholesale / Insurance 28.1 32.2 14 25.4 31.1 22
Entertainment
Publications 42.1 42.2 0 17.1 24.4 43
Other 51.6 (94.3) (283) (259.6) (737.8) (184)
--------- --------- --------- ---------
Total 413.1 345.3 (16) (151.9) (323.9) (113)
========= ========= ========= =========
SEGMENT SUMMARY -- AS ADJUSTED
EBITDA (1)
Travel $ 144.5 $ 142.3 (2) $ 102.6 $ 115.4 12
Fleet 25.4 40.5 59 25.1 42.0 67
Real Estate Franchise 72.6 102.1 41 68.1 84.2 24
Relocation 34.0 45.6 34 21.8 26.9 23
Mortgage 20.8 45.4 118 19.8 59.9 203
Individual Membership (6.0) (10.7) (77) (16.7) 9.7 158
Wholesale / Insurance 28.1 32.2 14 25.4 31.1 22
Entertainment
Publications 42.1 42.2 0 17.1 24.4 43
Other 51.6 (32.5) (162) 10.1 28.7 184
--------- --------- --------- ---------
Total 413.1 407.1 (1) 273.3 422.3 55
========= ========= ========= =========
</TABLE>
(1) Earnings before interest, taxes, depreciation and amortization as
adjusted for certain items discussed in the February 10, 1999 earnings
release (See Exhibit 99.1).
<PAGE>
CONTINUING OPERATIONS
SEGMENT SUMMARY -- AS REPORTED
(DOLLARS IN MILLIONS)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FULL YEAR
-------------------------------
%
1997 1998 CHANGE
--------- ---------- --------
<S> <C> <C> <C>
Revenue
Travel $ 971.6 $1,063.3 9
Fleet 324.1 387.4 20
Real Estate Franchise 334.6 455.8 36
Relocation 401.6 444.0 11
Mortgage 179.2 353.4 97
Individual Membership 778.7 929.1 19
Wholesale / Insurance 482.7 544.0 13
Entertainment
Publications 189.5 197.2 4
Other 578.0 909.6 57
--------- ----------
Total 4,240.0 5,283.8 25
========= ==========
EBITDA
Travel $ 342.4 $ 548.0 60
Fleet 59.4 175.1 195
Real Estate Franchise 196.1 350.0 78
Relocation 58.9 140.6 139
Mortgage 73.9 183.8 149
Individual Membership 2.2 (57.8)
Wholesale / Insurance 111.0 137.8 24
Entertainment
Publications 30.0 32.1 7
Other (328.3) (722.9) (120)
--------- ----------
Total 545.6 786.7 44
========= ==========
SEGMENT SUMMARY--AS ADJUSTED
EBITDA (1)
Travel $ 467.3 $ 542.5 16
Fleet 120.5 173.8 44
Real Estate Franchise 226.9 348.6 54
Relocation 92.6 124.5 34
Mortgage 74.8 187.6 151
Individual Membership 5.3 (57.8)
Wholesale / Insurance 111.0 137.8 24
Entertainment
Publications 30.0 32.1 7
Other 121.3 100.8 (17)
--------- ----------
Total 1,249.7 1,589.9 27
========= ==========
</TABLE>
(1) Earnings before interest, taxes, depreciation and amortization as
adjusted for certain items discussed in the February 10, 1999 earnings
release (See Exhibit 99.1).
<PAGE>
CENDANT CORPORATION
SEGMENT REVENUE DRIVER ANALYSIS
(REVENUE DOLLARS IN MILLIONS)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER
------------------------------------------------------------------------
% %
1997 1998 CHANGE 1997 1998 CHANGE
------------ ------------ -------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
TRAVEL SEGMENT
Domestic Rooms
Month End Actual Rooms 473,036 476,242 1 480,284 487,168 1
Weighted Average Rooms Available 460,036 465,794 1 466,574 474,662 2
Franchise Fee per Weighted Average
Room $ 165.52 $ 175.44 6 $ 210.50 $ 220.86 5
------------ ------------ ------------ ------------
Total Franchise Fees 76.1 81.7 7 98.2 104.8 7
Car Rental days 12,821,008 12,464,857 (3) 13,340,886 13,867,489 4
Franchise Fee per Rental day $ 2.58 $ 2.79 8 $ 2.77 $ 2.87 4
------------ ------------ ------------ ------------
Total Franchise Fees 33.1 34.8 5 37.0 39.8 8
Sub-Total Franchise Fees $ 109.2 $ 116.5 7 $ 135.2 $ 144.6 7
Number of Timeshare Exchanges 475,086 492,436 4 405,120 411,711 2
Annualized Number of Exchanges 1,900,344 1,969,744 4 1,620,480 1,646,844 2
Average Subscriptions 2,039,811 2,177,050 7 2,049,972 2,186,424 7
------------ ------------ ------------ ------------
Total Exchanges and Subscriptions 3,940,155 4,146,794 5 3,670,452 3,833,268 4
Average Fee $ 20.47 $ 21.01 3 $ 20.11 $ 20.87 4
------------ ------------ ------------ ------------
Total Exchange/Subscription Fees 80.7 87.1 8 73.8 80.0 8
Other Revenue $ 31.7 $ 62.0 96 $ 43.8 $ 39.0 (11)
------------ ------------ ------------ ------------
TOTAL TRAVEL REVENUE $ 221.6 $ 265.6 20 $ 252.8 $ 263.6 4
============ ============ ============ ============
FLEET SEGMENT
Number of Cars / Cards 2,660,407 3,877,657 46 2,804,170 4,054,128 45
Revenue per Car/ Card $ 34.39 $ 24.91 (28) $ 28.24 $ 23.68 (16)
------------ ------------ ------------ ------------
Total Revenue $ 91.5 $ 96.6 6 $ 79.2 $ 96.0 21
============ ============ ============ ============
REAL ESTATE FRANCHISE SEGMENT
Closed sides Domestic 265,896 322,995 21 402,386 498,893 24
Average Price 118,362 135,445 14 122,285 142,735 17
Adjusted Royalty Rate 0.15% 0.16% 0.15% 0.15%
------------ ------------ ------------ ------------
Total Royalties 48.3 71.1 47 74.6 108.7 46
Other 7.1 13.2 86 9.1 22.8 151
------------ ------------ ------------ ------------
Total Revenue $ 55.4 $ 84.3 52 $ 83.7 $ 131.5 57
============ ============ ============ ============
MORTGAGE SERVICES SEGMENT
Production Loan Closings $ 1,783 $ 4,615 159 $ 2,480 $ 6,576 165
Avg Servicing Loan Portfolio $ 25,103 $ 30,908 23 $ 25,636 $ 34,004 33
</TABLE>
<PAGE>
CENDANT CORPORATION
SEGMENT REVENUE DRIVER ANALYSIS
(REVENUE DOLLARS IN MILLIONS)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
3RD QUARTER 4TH QUARTER
------------------------------------------------------------------------
% %
1997 1998 CHANGE 1997 1998 CHANGE
------------ ------------ -------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
TRAVEL SEGMENT
Domestic Rooms
Month End Actual Rooms 488,782 493,911 1 469,774 499,585 6
Weighted Average Rooms Available 475,517 477,120 0 481,717 486,280 1
Franchise Fee per Weighted Average
Room $ 243.93 $ 253.83 4 $ 173.19 $ 184.34 6
------------ ------------ ------------ ------------
Total Franchise Fees 116.0 121.1 4 83.4 89.6 7
Car Rental days 15,021,195 15,996,768 6 12,506,732 13,714,430 10
Franchise Fee per Rental day $ 2.62 $ 2.71 3 $ 2.76 $ 2.76 (0)
------------ ------------ ------------ ------------
Total Franchise Fees 39.3 43.4 10 34.5 37.8 10
Sub-Total Franchise Fees $ 155.3 $ 164.5 6 $ 117.9 $ 127.5 8
Number of Timeshare Exchanges 406,936 419,725 3 360,825 384,282 7
Annualized Number of Exchanges 1,627,744 1,678,900 3 1,443,300 1,537,128 7
Average Subscriptions 2,074,412 2,207,678 6 2,089,700 2,226,123 7
------------ ------------ ------------ ------------
Total Exchanges and Subscriptions 3,702,156 3,886,578 5 3,533,000 3,763,251 7
Average Fee $ 20.83 $ 21.64 4 $ 20.44 $ 21.12 3
------------ ------------ ------------ ------------
Total Exchange/Subscription Fees 77.1 84.1 9 72.2 79.5 10
Other Revenue $ 47.3 $ 48.7 3 $ 27.3 $ 29.8 9
------------ ------------ ------------ ------------
TOTAL TRAVEL REVENUE $ 279.7 $ 297.3 6 $ 217.5 $ 236.8 9
============ ============ ============ ============
FLEET SEGMENT
Number of Cars / Cards 3,162,740 4,134,422 31 3,215,953 4,132,244 28
Revenue per Car / Card $ 23.37 $ 22.93 (2) $ 24.75 $ 24.18 (2)
------------ ------------ ------------ ------------
Total Revenue $ 73.9 $ 94.8 28 $ 79.6 $ 99.9 26
============ ============ ============ ============
REAL ESTATE FRANCHISE SEGMENT
Closed sides Domestic 438,120 540,981 23 431,423 477,723 11
Average Price 131,285 146,366 11 130,909 144,565 10
Adjusted Royalty Rate 0.15% 0.15% 0.15% 0.14%
------------ ------------ ------------ ------------
Total Royalties 85.8 116.8 36 85.2 99.5 17
Other 12.5 9.9 (21) 12.0 13.7 15
------------ ------------ ------------ ------------
Total Revenue $ 98.3 $ 126.7 29 $ 97.2 $ 113.2 17
============ ============ ============ ============
MORTGAGE SERVICES SEGMENT
Production Loan Closings $ 3,547 $ 6,936 96 $ 3,907 $ 7,883 102
Avg Servicing Loan Portfolio $ 27,074 $ 38,398 42 $ 28,999 $ 41,753 44
</TABLE>
<PAGE>
CENDANT CORPORATION
SEGMENT REVENUE DRIVER ANALYSIS
(REVENUE DOLLARS IN MILLIONS)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FULL YEAR
------------------------------------
%
1997 1998 CHANGE
------------ ------------ --------
<S> <C> <C> <C>
TRAVEL SEGMENT
Domestic Rooms
Month End Actual Rooms 469,774 499,585 6
Weighted Average Rooms Available 471,033 475,459 1
Franchise Fee per Weighted Average
Room $ 793.55 $ 835.62 5
------------ ------------
Total Franchise Fees 373.8 397.3 6
Car Rental days 53,689,821 56,043,544 4
Franchise Fee per Rental day $ 2.68 $ 2.78 4
------------ ------------
Total Franchise Fees 143.8 155.8 8
Sub-Total Franchise Fees $ 517.6 $ 553.1 7
Number of Timeshare Exchanges 1,647,967 1,708,154 4
Annualized Number of Exchanges 1,647,967 1,708,154 4
Average Subscriptions 2,155,795 2,296,451 7
------------ ------------
Total Exchanges and Subscriptions 3,803,762 4,004,605 5
Average Fee $ 79.86 $ 82.58 3
------------ ------------
Total Exchange/Subscription Fees 303.8 330.7 9
Other Revenue $ 150.2 $ 179.5 20
------------ ------------
TOTAL TRAVEL REVENUE $ 971.6 $ 1,063.3 9
============ ============
FLEET SEGMENT
Number of Cars / Cards 2,960,817 4,049,612 37
Revenue per Car/ Card $ 109.49 $ 95.66 (13)
------------ ------------
Total Revenue $ 324.2 $ 387.4 19
============ ============
REAL ESTATE FRANCHISE SEGMENT
Closed sides Domestic 1,537,825 1,840,592 20
Average Price 126,590 142,996 13
Adjusted Royalty Rate 0.15% 0.15%
------------ ------------
Total Royalties 293.9 396.1 35
Other 40.7 59.7 47
------------ ------------
Total Revenue $ 334.6 $ 455.8 36
============ ============
MORTGAGE SERVICES SEGMENT
Production Loan Closings $ 11,717 26,010 122
Avg Servicing Loan Portfolio $ 26,703 $ 36,266 36
</TABLE>
