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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________
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COMMISSION FILE NO. 1-10308
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CENDANT MEMBERSHIP SERVICES, INC.
SAVINGS INCENTIVE PLAN
(Full title of the Plan)
CENDANT CORPORATION
(Name of issuer of the securities held pursuant to the Plan)
9 WEST 57TH STREET
NEW YORK, NEW YORK 10019
(Address of principal executive office)
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CENDANT MEMBERSHIP SERVICES, INC.
SAVINGS INCENTIVE PLAN
TABLE OF CONTENTS
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PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
Statements of Net Assets Available for Benefits
as of December 31, 1999 and 1998 2
Statements of Changes in Net Assets Available for
Benefits for the Years Ended December 31, 1999 and 1998 3
Notes to Financial Statements 4-8
SUPPLEMENTAL SCHEDULES:
Item 27a - Schedule of Assets Held for Investment Purposes
as of December 31, 1999 9
Item 27d - Schedule of Reportable Transactions
for the Year Ended December 31, 1999 10
Schedules required under the Employee Retirement Income Security Act of 1974
("ERISA"), other than the schedules listed above, are omitted because of the
absence of the conditions under which they are required.
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INDEPENDENT AUDITORS' REPORT
To the Trustees and Participants of
Cendant Membership Services, Inc. Savings Incentive Plan
We have audited the accompanying statements of net assets available for benefits
of Cendant Membership Services, Inc. Savings Incentive Plan (the "Plan") as of
December 31, 1999 and 1998, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1999 and 1998, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of (1) assets
held for investment purposes as of December 31, 1999 and (2) reportable
transactions for the year ended December 31, 1999 are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These schedules are the responsibility
of the Plan's management. Such supplemental schedules have been subjected to the
auditing procedures applied in our audit of the basic 1999 financial statements
and, in our opinion, are fairly stated in all material respects when considered
in relation to the basic financial statements taken as a whole.
/s/ Deloitte & Touche LLP
-------------------------
Deloitte & Touche LLP
New York, New York
June 23, 2000
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CENDANT MEMBERSHIP SERVICES, INC.
SAVINGS INCENTIVE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999 AND 1998
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<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
ASSETS
Investments, at fair value $156,892,006 $133,512,866
Contributions receivable from:
Participants 14,292 392,679
Employer 6,494 148,345
Interest and dividends receivable 28,529 22,769
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Total receivables 49,315 563,793
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NET ASSETS AVAILABLE FOR BENEFITS $156,941,321 $134,076,659
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</TABLE>
See notes to financial statements.
2
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CENDANT MEMBERSHIP SERVICES, INC.
SAVINGS INCENTIVE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1999 AND 1998
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<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Contributions from:
Participants $ 10,795,854 $ 12,999,827
Employer 3,558,900 4,607,701
Rollovers 937,197 10,984,632
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Total contributions 15,291,951 28,592,160
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Investment income:
Net appreciation (depreciation) in fair value of investments 29,387,454 (14,161,742)
Interest and dividends 2,626,598 2,225,798
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Total investment income (loss) 32,014,052 (11,935,944)
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Total additions 47,306,003 16,656,216
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DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to participants (24,441,341) (20,631,854)
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NET INCREASE (DECREASE) IN
NET ASSETS AVAILABLE FOR BENEFITS 22,864,662 (3,975,638)
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NET ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR 134,076,659 138,052,297
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NET ASSETS AVAILABLE FOR BENEFITS,
END OF YEAR $ 156,941,321 $ 134,076,659
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</TABLE>
See notes to financial statements.
3
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CENDANT MEMBERSHIP SERVICES, INC.
SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
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1. DESCRIPTION OF PLAN
The following description of the Cendant Membership Services, Inc. Savings
Incentive Plan (the "Plan") provides only general information. Participants
should refer to the Summary Plan Description or the Plan documents, which
are available from Cendant Membership Services, Inc. (the "Company" or the
"Plan Sponsor"), a wholly owned subsidiary of Cendant Corporation
("Cendant"), for a more complete description of the Plan's provisions.
The Plan is a defined contribution plan that provides retirement benefits to
eligible employees of the Company and its subsidiaries. The Plan is subject
to the provisions of the Employee Retirement Income Security Act of 1974
("ERISA"). The Plan was amended various times during 1998 to allow for
existing plans of companies acquired by the Company to be combined into the
Plan (See "Rollovers").
The following is a summary of certain Plan provisions:
a. Eligibility - The Plan covers substantially all full-time employees and
certain part-time employees of the Company and certain of its
subsidiaries and who have been employed for at least six months and are
age twenty-one or older.
b. Employee contributions - Participants may elect to make pre-tax
contributions of up to fifteen percent of pre-tax annual compensation,
up to a maximum of $10,000 for 1999 and 1998. Plan participants may
change their deferral elections under the Plan on a monthly basis.
c. Employer contributions - The Company matches each participant's
bi-weekly contribution dollar for dollar of the first $27.69, $0.60 for
each dollar of the next $36.93, and $0.40 for each dollar of the next
$27.69 up to a maximum of 6% of pre-tax annual compensation, as defined
in the Plan, for a total maximum match of $60.92 per bi-weekly pay
period.
d. Rollovers - All employees, upon commencement of employment, are
provided the option of making a rollover contribution to the Plan in
accordance with Internal Revenue Service ("IRS") regulations.
Additionally, Plan assets associated with the qualified plans of
companies acquired by the Company, including Davidson and Associates,
Inc., Ideon Group, Inc. and North American Outdoor Group, were
transferred into the Plan. Accordingly, approximately $9.5 million was
merged into the Plan during 1998, and is included in Contributions From
- Rollovers in the statements of changes in net assets available for
benefits for the year ended December 31, 1998.
4
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e. Vesting - Participants are immediately vested in their contributions
plus actual earnings thereon. Vesting in the Company matching portion
of their accounts (plus actual earnings thereon) is based on years of
credited service as follows:
YEARS OF CREDITED SERVICE PERCENTAGE VESTING
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Less than one 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
f. Loan Provision - Participants may borrow from their fund accounts up to
the lesser of $50,000 or 50% of their vested balance. Loan terms range
from 1-5 years or up to 15 years for the purchase of a primary
residence and are secured by the balance in the participant's account.
The loans bear interest at a rate commensurate with prime rate plus one
percent. Interest rates on outstanding loans as of December 31, 1999
ranged from 7% to 11%. Principal and interest is paid ratably through
payroll deductions.
g. Participant Accounts - Each participant's account is credited with the
participant's contributions and allocations of the Company's
contribution and Plan earnings. Allocations are based on participant
earnings or account balances, as defined. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's vested account.
h. Benefits Paid to Participants - Upon termination of employment, a
participant may receive a lump-sum amount equal to the vested value of
his or her account balance. Distributions to terminated employees are
recorded in each fund when paid. Participants are entitled to withdraw
all or any portion of their after-tax contributions. Participants may
make full or partial withdrawals of funds in any of their accounts upon
attaining age 59 1/2 or for financial hardship from certain accounts,
as defined in the Plan, before that age. Amounts payable to
participants who have terminated participation in the Plan were
$918,750 and $620,817 at December 31, 1999 and 1998, respectively.
In May 1999, the Company disposed of National Leisure Group, Inc.
("NLG"). In connection with the sale, Plan assets of approximately
$251,000, which related to certain NLG employees, were transferred from
the Plan into the acquiring company's plan during 1999. Such transfer
is included in Benefits Paid to Participants in the statement of
changes in net assets available for benefits for the year ended
December 31, 1999.
In December 1997, the Company disposed of Interval International, Inc.
("Interval"), a timeshare exchange business. In connection with the
sale, Plan assets of approximately $7.5 million, which related to
Interval employees, were transferred from the Plan into the acquiring
company's plan during 1998. Such distribution of Plan assets is
included in Benefits Paid to Participants in the statement of changes
in net assets available for benefits for the year ended December 31,
1998.
5
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i. Forfeited Accounts - Forfeited balances of terminated participants'
nonvested accounts are used at the discretion of the Plan
administrative committee either to pay administrative expenses of the
plan or to reduce future Company contributions. During the years ended
December 31, 1999 and 1998, forfeited account balances amounted to
$545,000 and $361,000, respectively. Also, in 1999 and 1998, employer
contributions were reduced by $545,000 and $711,000 from forfeited
nonvested accounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Accounting - The accompanying financial statements are
prepared on the accrual basis of accounting. All administrative costs
of the Plan, other than costs incurred to maintain the participant loan
accounts, were paid by the Company.
b. Valuation of Investments and Income Recognition - The Plan's
investments are stated at fair value. Securities traded on a national
securities exchange are valued at the last reported sales price on the
last business day of the plan year. Investments traded on the
over-the-counter market for which no sale was reported on that date are
valued at the average of the last reported bid and ask prices. The
shares of registered investment companies are valued at the quoted
market price, which represent the net asset value of shares held by the
Plan at year-end. Loans to participants are valued at cost, which
approximates fair value. Purchases and sales of securities are recorded
on a trade-date basis. Dividends are recorded on the ex-dividend date.
c. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect reported
amounts of assets, liabilities, and changes therein, and disclosure of
contingent assets and liabilities. Actual results could differ from
those estimates.
d. Recently Issued accounting Pronouncements - In 1999, the Plan adopted
the American Institute of Certified Public Accountants' Statement of
Position ("SOP") 99-3, "Accounting and Reporting of Certain Defined
Contribution Benefit Plan Investments and Other Disclosure Matters".
SOP 99-3 simplifies the disclosures for certain investments and
eliminates the requirement to disclose by investment fund option the
statement of net assets available for benefits and the changes in net
assets available for benefits for all years presented. Accordingly,
certain reclassifications have been made in the prior year's financial
statements to correspond to the current year's presentation.
3. INVESTMENTS
The following investments represent five percent or more of the Plan's net
assets available for benefits as of December 31, 1999 and 1998:
6
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1999 1998
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Neuberger & Berman Equity Separate Account $ 50,873,478 $ 49,438,016
Cendant Corporation Common Stock Fund 36,131,041 30,296,338
First Union Evergreen Money Market Fund 17,665,755 16,443,650
MetLife Stock Market Index Guarantee Fund 9,812,983 -
Neuberger & Berman Limited Maturity Bond Fund 9,692,690 11,282,657
Neuberger & Berman International Equity Fund 8,470,320 -
Neuberger & Berman Genesis Fund 8,131,366 10,076,330
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$140,777,633 $117,536,991
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During 1999, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year)
appreciated in value as follows:
Mutual Funds $ 19,572,855
Cendant Stock 10,295,947
Corporate Bond Funds (481,348)
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$ 29,387,454
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4. TAX STATUS
The Plan is qualified under section 401(a) of the Internal Revenue Code of
1986 (the "Code") and is exempt from taxation under section 501(a) of the
Code. The Plan received a favorable IRS determination letter dated September
7, 1995. The Plan has been amended since receiving that determination
letter. However, the Plan administrator believes that the Plan is currently
designed and operated in compliance with the applicable requirements of the
Code and the related trust was tax exempt as of the financial statement
dates. Therefore, no provision for income taxes has been included in the
Plan's financial statements.
5. CENDANT LITIGATION
Since the April 15, 1998 announcement by Cendant of the discovery of
accounting irregularities in the former business units of CUC International
Inc. ("CUC"), approximately 70 lawsuits claiming to be class actions, two
lawsuits claiming to be brought derivatively on Cendant's behalf and several
individual lawsuits and arbitration proceedings have commenced in various
courts and other forums against Cendant and other defendants by or on behalf
of persons claiming to have purchased or otherwise acquired securities or
options issued by CUC or Cendant between May 1995 and August 1998.
The Securities and Exchange Commission ("SEC") and the United States
Attorney for the District of New Jersey are also conducting investigations
relating to the matters referenced above. The SEC advised Cendant that its
inquiry should not be construed as an indication by the SEC or its staff
that any violations of law have occurred. As a result of the findings from
Cendant's internal investigations, Cendant made all adjustments considered
necessary, which are reflected in Cendant's previously filed restated
financial statements for the years ended December 31, 1997, 1996 and 1995
and for the six months ended June 30, 1998. Although Cendant can provide no
assurances that additional adjustments will not be necessary as a result of
the government investigations, Cendant does not expect that additional
adjustments will be necessary.
7
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On December 7, 1999, Cendant announced that they had reached a preliminary
agreement to settle the principal securities class action pending against
Cendant in the U.S. District Court in Newark, New Jersey brought on behalf
of purchasers of all Cendant and CUC publicly traded securities, other than
PRIDES, between May 1995 and August 1998. Under the agreement, Cendant would
pay the class members approximately $2.85 billion in cash. The settlement
remains subject to approval by the court. If the settlement is not approved
by the court, Cendant can make no assurances that the final outcome or other
settlement of this litigation will not be for an amount greater than that
set forth in the preliminary agreement.
The proposed settlement does not encompass all litigation asserting claims
associated with Cendant's accounting irregularities. Cendant does not
believe that it is feasible to predict or determine the final outcome or
resolution of these unresolved proceedings. An adverse outcome from such
unresolved proceedings could be material with respect to Cendant's earnings
in any given reporting period. However, Cendant does not believe that the
impact of such unresolved proceedings should result in a material liability
to Cendant's consolidated financial position or liquidity. Furthermore,
Cendant does not expect the outcome of these proceedings to have any
material adverse impact on the Plan.
In connection with the aforementioned matters, it has come to the attention
of Cendant that certain former fiduciaries of the Plan may have committed
acts that constitute either negligence in their administration of the Plan
or a breach of their fiduciary duties.
6. PARTY-IN-INTEREST
A portion of the Plan's investments are shares in the MetLife Stock Market
Index Guarantee Fund, a fund managed by MetLife. MetLife is the custodian of
these investments as defined by the Plan and therefore, these transactions
qualify as party-in-interest transactions.
7. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
to discontinue its contributions and to terminate the Plan, subject to the
provisions of ERISA. In the event of Plan termination, participants will
become fully vested and will receive lump-sum distributions in an amount
equal to the value of their accounts.
8. SUBSEQUENT EVENTS
Plan Merger
Effective January 1, 2000, subject to sections 401(a), 411(d)(6) and 414(l)
of the Internal Revenue Code, the Plan was merged with and into the Cendant
Corporation Employee Savings Plan (the "Cendant Plan"). As of the date of
this report, the Plan's assets have not been transferred to the Cendant
Plan. In anticipation of the merger and subject to the provisions of ERISA,
the Company discontinued all employee and employer contributions to the Plan
as of January 1, 2000.
8
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SUPPLEMENTAL SCHEDULES
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CENDANT MEMBERSHIP SERVICES, INC.
SAVINGS INCENTIVE PLAN
ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1999
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<TABLE>
<CAPTION>
CONTRACT OR
NUMBER OF CURRENT
DESCRIPTION UNITS/SHARES COST VALUE
----------- ------------ ---- -----
<S> <C> <C> <C>
Neuberger & Berman Equity Separate Account 2,479,167 $ 30,697,614 $ 50,873,478
Cendant Corporation Company Stock Fund 3,543,089 31,390,521 36,131,041
Neuberger & Berman Limited Maturity Bond Fund 1,079,364 10,185,887 9,692,690
Neuberger & Berman International Equity Fund 348,429 5,641,574 8,470,320
Neuberger & Berman Genesis Fund 386,472 7,673,354 8,131,366
First Union Evergreen Money Market Fund 17,665,755 17,665,755 17,665,755
MetLife Stock Market Index Guarantee Fund 18,722 7,918,993 9,812,983
Kobrick Capital Fund 251,578 4,380,235 5,652,958
Kobrick Emerging Growth Fund 162,871 2,762,442 3,578,277
Kobrick Growth Fund 138,747 2,221,511 2,951,148
Loans to participants* 3,931,990 3,931,990 3,931,990
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Total 30,006,184 $124,469,876 $156,892,006
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</TABLE>
* Maturity dates range from September 2000 to November 2014. Interest rates
range from 7% to 11%.
9
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CENDANT MEMBERSHIP SERVICES, INC.
SAVINGS INCENTIVE PLAN
ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
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<TABLE>
<CAPTION>
PURCHASES SALES
IDENTITY OF DESCRIPTION PURCHASE NUMBER OF SELLING NUMBER OF NET GAIN
PARTY INVOLVED OF ASSET PRICE TRANSACTIONS PRICE TRANSACTIONS OR (LOSS)
-------------- -------- ----- ------------ ----- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
A SERIES OF TRANSACTIONS IN EXCESS OF 5% OF THE BEGINNING VALUE OF PLAN ASSETS
Cendant Corporation Company Stock Fund Common Stock $ - - $10,114,906 238 $(2,555,258)
Neuberger & Berman Equity
Separate Account Mutual Fund - - 16,696,779 248 5,211,398
First Union Evergreen Money Market Fund Money Market 11,239,324 224 10,017,220 248 -
</TABLE>
10
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SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the Plan
Committee has duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cendant Membership Services, Inc.
Savings Incentive Plan
Date: June 28, 2000 By: /s/ David M. Johnson
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David M. Johnson
Plan Committee Member
Cendant Membership Services, Inc.
Savings Incentive Plan
