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[GRAPHIC OMITTED]
Cendant to Spin-Off Individual Membership Businesses
Transaction Expected to Facilitate Aggressive Marketing Growth at Unit
Business Reclassified as Discontinued Operation
Scott W. Bernstein Named CEO of New Company
NEW YORK, NY, OCTOBER 25, 2000- Cendant Corporation (NYSE: CD) announced today
it intends to distribute 100% of the stock of a new company incorporating its
individual membership and loyalty businesses to Cendant's shareholders in a
tax-free distribution. Cendant expects the process, which includes formation of
the company, registration of its shares and distribution of the shares to
shareholders, to be completed by mid 2001. Cendant will immediately reclassify
its individual membership business segment as a discontinued operation.
The principal operating units of the new company (which has not yet been named)
will be Cendant Membership Services (CMS), currently headquartered in Stamford,
Connecticut and Cendant Incentives, headquartered in Richmond, Virginia. The
spin-off does not include the direct marketing businesses (FISI Madison,
Benefits Consultants Inc., CIMS and Long-Term Preferred Care) whose results are
reported in Cendant's Insurance/Wholesale business segment.
The Company also announced that Scott W. Bernstein, 40, currently president of
Cendant Membership Services, has been named CEO of the new company. The company
will be headquartered in the Norwalk, Connecticut area and will be led by its
current senior management team.
"We are doing this so CMS can again grow its membership base," said Henry
Silverman, Chairman, President and CEO of Cendant. "This decision culminates two
years of hard work and investment by the management and employees of CMS. During
that time, we purposely focused our spending to minimize risk and maximize
returns while we gained confidence that aggressive marketing made sense in this
business. We tested numerous programs to improve member cancellation rates - the
critical variable in determining the base-line profitability and growth
potential of this business. Without a firm view on cancel rates, aggressive
marketing was imprudent. We now have that firm view."
"We believe our team can generate good returns by deploying significant new
marketing dollars to materially increase members," continued Silverman. "The
cash receipts generated from this activity quickly recover its cash cost - cash
is not an issue. Unfortunately, the conservative accounting methods required for
this business prevent us from recording the revenue produced by the marketing
until more than one year following our receipt of the cash membership fees. The
expense of this marketing, however, is largely recorded up front. As a result,
growth results in volatile and, initially, significantly lower GAAP earnings."
"We do not believe that Cendant's shareholders will welcome financial results on
such a disparate model from Cendant's traditional P&L," concluded Silverman. "As
an independent company, CMS will be able to better explain its cash flow
advantages to investors and receive a better valuation. We also believe that as
an independent company, CMS can explore acquisition and other strategic
opportunities in the direct marketing industry."
In 1999, the discontinued membership businesses produced comparable revenues of
$721 million and comparable adjusted EBITDA of $150 million. In the first nine
months of 2000, the discontinued operations produced comparable revenues of $540
million and comparable adjusted EBITDA of $142 million. As a result of the
5
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reclassification of the financial results of the individual membership business
to discontinued operations, Cendant expects fourth quarter comparable revenues
from continuing operations to be lower by approximately $200 million than would
otherwise be the case, comparable adjusted EBITDA to be approximately $40
million to $50 million lower and earnings per share to be approximately $0.04
lower than would have otherwise been the case.
In the fourth quarter of 2000, Cendant expects the discontinued operations to
accelerate marketing expenses to higher levels than originally planned as CMS
launches its new strategic plan to accelerate member acquisition. Consequently,
the reported fourth quarter income from discontinued operations will be less
than it would have been without the acceleration of marketing expenses. The new
company will include the assets and operations of Netmarket Group, Inc., an
on-line membership company reacquired by CMS in the fall of 2000. CMS will
continue to market individual membership services to consumers who are customers
of Cendant's other business units under the terms of an affinity marketing
contract. Cendant expects to receive an opinion from tax counsel on the tax-free
status of the distribution and will thus not make the spin-off contingent on
receipt of an IRS ruling.
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. These statements are not
guarantees of future performance. They involve a number of risks and
uncertainties that are difficult to predict including the outcome of litigation.
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 Form 10-Q for the quarter ended
June 30, 2000, including completion of the settlement of the class action
litigation.
Cendant Corporation is a global provider of real estate, travel and direct
marketing related consumer and business services. The Company's core
competencies include building franchise systems, providing outsourcing solutions
and direct marketing. As a franchiser, Cendant is among the world's leading
franchisers of real estate brokerage offices, hotels, rental car agencies, and
tax preparation services. The Company's real estate-related operations also
include Move.com Group, Cendant's relocation, real estate and home-related
services portal on the Internet. As a provider of outsourcing solutions, Cendant
is a major provider of mortgage services to consumers, the global leader in
employee relocation, and the world's largest vacation exchange service. In
direct marketing, Cendant provides access to insurance, travel, shopping, auto,
and other services primarily to customers of its affinity partners. In addition,
Cendant Internet Group is pursuing a convergence strategy for the Company's
off-line and online businesses. Other business units include NCP, the UK's
largest private car park operator, and Wizcom, an information technology
services provider. Headquartered in New York, NY, the Company has approximately
28,000 employees and operates in over 100 countries.
More information about Cendant, its companies, brands and current SEC filings
may be obtained by calling 877-4INFO-CD (877-446-3623) or by visiting the
Company's Web site at www.cendant.com.
###
Media Contact: Investor Contacts:
Elliot Bloom Denise Gillen
212-413-1832 212-413-1833
Sam Levenson
212-413-1834
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CENDANT CORPORATION
Financial Results of Operations (1)
(In millions, except per share amounts)
-------------------------------------------------------------------------------
DISCONTINUED INDIVIDUAL MEMBERSHIP BUSINESS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------------
9 MONTHS
3 MONTHS ENDED ENDED
------------------------------------------ -----------
March 31, June 30, Sept 30, Sept 30,
2000 2000 2000 2000
<S> <C> <C> <C> <C>
Revenues $ 187 $ 168 $ 185 $ 540
Adjusted EBITDA (3) 53 44 45 142
Net Income 16 23 26 65
Income per CD Diluted Share $ 0.02 $ 0.03 $ 0.04 $ 0.09
Net Income, as Adjusted (4) 30 23 26 79
Income per CD Diluted Share, as Adjusted (4) $ 0.04 $ 0.03 $ 0.04 $ 0.10
</TABLE>
<TABLE>
<CAPTION>
COMPARABLE BASIS (2)
-------------------------------------------------------
9 MONTHS
3 MONTHS ENDED ENDED
----------------------------------------- ------------
March 31, June 30, Sept 30, Sept 30,
2000 2000 2000 2000
<S> <C> <C> <C>
$ 187 $ 168 $ 185 $ 540
53 44 45 142
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL
----------
12 MONTHS
3 MONTHS ENDED ENDED
------------------------------------------------------------- --------------
March 31, June 30, Sept 30, Dec 31, Dec 31,
1999 1999 1999 1999 1999
<S> <C> <C> <C> <C> <C>
Revenues $ 218 $ 224 $ 261 $ 192 $ 895
Adjusted EBITDA (3) 11 17 52 55 135
Net Income 2 28 (24) 98 104
Income per CD Diluted Share $ - $ 0.03 $ (0.03) $ 0.14 $ 0.14
Net Income, as Adjusted (4) 3 6 28 29 66
Income per CD Diluted Share, as Adjusted (4) $ - $ 0.01 $ 0.04 $ 0.04 $ 0.08
</TABLE>
<TABLE>
<CAPTION>
COMPARABLE BASIS (2)
----------------
12 MONTHS
3 MONTHS ENDED ENDED
---------------------------------------------------- ------------
March 31, June 30, Sept 30, Dec 31, Dec 31,
1999 1999 1999 1999 1999
<S> <C> <C> <C> <C>
$ 165 $ 167 $ 200 $ 189 $ 721
19 25 52 55 151
</TABLE>
<PAGE>
-------------------------------------------------------------------------------
CONTINUING OPERATIONS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
----------
9 MONTHS
3 MONTHS ENDED ENDED
------------------------------------------ -------------
March 31, June 30, Sept 30, Sept 30,
2000 2000 2000 2000
<S> <C> <C> <C> <C>
Revenues $ 945 $ 973 $ 1,044 $ 2,962
Adjusted EBITDA (3) 360 360 444 1,164
Income from Continuing Operations 111 151 188 450
Income per CD Diluted Share $ 0.15 $ 0.21 $ 0.25 $ 0.60
Income from Continuing Operations, as Adjusted (4) 167 169 204 540
Income per CD Diluted Share, as Adjusted (4) $ 0.22 $ 0.23 $ 0.27 $ 0.72
</TABLE>
<TABLE>
<CAPTION>
COMPARABLE BASIS (2)
----------------
9 MONTHS
3 MONTHS ENDED ENDED
------------------------------------------ -------------
March 31, June 30, Sept 30, Sept 30,
2000 2000 2000 2000
<S> <C> <C> <C>
$ 931 $ 957 $ 1,029 $ 2,917
385 392 464 1,241
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL
----------
12
MONTHS
3 MONTHS ENDED ENDED
----------------------------------------------------------- ---------------
March 31, June 30, Sept 30, Dec 31, Dec 31,
1999 1999 1999 1999 1999
<S> <C> <C> <C> <C> <C>
Revenues $ 1,102 $ 1,171 $ 1,154 $ 1,094 $ 4,521
Adjusted EBITDA (3) 422 441 475 445 1,783
Income from Continuing Operations 167 846 233 (1,579) (333)
Income per CD Diluted Share $ 0.20 $ 1.03 $ 0.30 $ (2.22) $ (0.44)
Income from Continuing Operations, as Adjusted (4) 172 181 212 196 761
Income per CD Diluted Share, as Adjusted (4) $ 0.20 $ 0.22 $ 0.28 $ 0.26 $ 0.96
</TABLE>
<TABLE>
<CAPTION>
COMPARABLE BASIS (2)
----------------
12
MONTHS
3 MONTHS ENDED ENDED
--------------------------------------------------------- --------------
March 31, June 30, Sept 30, Dec 31, Dec 31,
1999 1999 1999 1999 1999
<S> <C> <C> <C> <C>
$ 891 $ 944 $ 1,008 $ 944 $ 3,787
382 395 452 403 1,632
</TABLE>
--------------
(1) Beginning in the third quarter of 2000, the operations of
Cendant Travel, a subsidiary of Cendant which facilitates travel arrangements
for travel-related and membership businesses of Cendant, began being managed by
Cendant's Travel segment. Accordingly, the operations of these businesses have
been reclassified out of the individual membership business and as such, are no
longer reflected in the results of operations for CMS.
(2) Comparable Basis reflects the results of operations adjusted to exclude
certain items that are of a non-recurring or unusual nature and the results of
operations of disposed businesses and Move.com Group.
(3) Adjusted EBITDA is defined as earnings before non-operating interest, income
taxes, depreciation and amortization adjusted to exclude certain items that are
of a non-recurring or unusual nature. In connection with CMS being reported as a
discontinued operation of Cendant, general corporate overhead of Cendant which
had previously been allocated to CMS, has been excluded from the results of
operations for CMS, in accordance with GAAP. General corporate overhead
previously allocated to CMS for the three months ended March 31, June 30 and
September 30, 2000 was $2 million, $2 million and $2 million, respectively.
General corporate overhead previously allocated to CMS for the three months
ended March 31, June 30, September 30 and December 31, 1999 was $4 million, $4
million, $4 million and $3 million, respectively.
(4) As Adjusted reflects the results of operations adjusted to exclude certain
items that are of a non-recurring or unusual nature and the results of
operations of Move.com Group, if applicable.
