Press Release: Cendant Corporation
February 7, 2002
NEW YORK, NY -- Cendant Corporation (NYSE: CD) yesterday reported better than expected fourth quarter 2001 adjusted
results and raised its adjusted earnings projection for 2002 by $0.03 to $1.29, a 23% increase over 2001. Adjusted
earnings per share was $0.23 in the fourth quarter and reported loss per share was $0.31 (adjusted EPS excludes
non-recurring or unusual items and the effect of an equity ownership in Homestore.com).
``We are pleased to report adjusted earnings per share for the fourth quarter ahead of the revised projections
we announced on December 10, as our mortgage and travel distribution businesses outperformed our expectations,''
said Cendant Chairman, President and Chief Executive Officer, Henry R. Silverman. ``Additionally, we are confident
that we will meet or exceed our raised 2002 projection based on recent trends in our businesses, in particular,
the continuing recovery in travel.''
2002 Full Year Outlook
Based on its current view, and absent major additional external disruptions, the Company continues to expect cash
flow and EBITDA to increase significantly in 2002 compared with 2001. The Company has increased its projection
of 2002 adjusted EPS to $1.29 based on positive operating results and a reduction in the expected 2002 tax rate
to 33%, resulting from additional income from non-U.S. sources due to the growth of the Company's operations outside
the United States.
Fourth Quarter 2001 and Recent Activities
Consistent with its strategic agenda, the Company announced several events
during the quarter:
* The completion in October 2001 of the acquisition of Galileo
International, Inc., a leading provider of electronic computer
reservation services for the travel industry, for approximately
$1.8 billion in common stock and cash plus the repayment of
approximately $540 million of Galileo's existing net debt. The
transaction was immediately accretive to adjusted earnings per share,
and is expected to be significantly more accretive as air travel
continues to rebound.
* The completion in October 2001 of the acquisition of Cheap Tickets,
Inc., a leading seller of discount leisure travel products, for a net
purchase price of approximately $280 million.
* The increase in October 2001 of the Company's revolving credit
facilities to $2.9 billion (not including $1.9 billion of credit
facilities related to our PHH subsidiary) and the repayment of
$810 million of debt.
* The pending acquisition of Equivest Finance, Inc., which markets and
sells vacation ownership interests, for approximately $98 million in
cash, plus the repayment of approximately $60 million of existing
corporate debt.
* The formation of a ten year, $1.4 billion technology services
relationship with IBM, under which IBM will manage IT data operations,
desktop support and other IT services for Cendant, resulting in
significant annual cost reductions.
* The issuance of $1.2 billion of convertible senior debentures due
November 2011 in a private offering to qualified institutional buyers.
The notes are convertible, under certain circumstances, into Cendant
common stock at a price per share of $24.05. Proceeds from the notes
have been or will be used to repay the Company's 3% $550 million
subordinated convertible notes due in February 2002 and to prepay a
portion of the principal securities class action litigation settlement.
(See Table 7 for a schedule of the Company's debt outstanding at
December 31, 2001 and 2000 and the related conversion features on the
Company's convertible securities.)
Fourth Quarter Segment Results
The underlying discussion of operating results addresses segment revenue and adjusted EBITDA, which is defined
as earnings before non-operating interest, income taxes, non-vehicle depreciation and amortization, minority interest
and equity in Homestore.com, adjusted to exclude certain items that are of a non-recurring or unusual nature and
are not measured in assessing segment performance or are not segment specific. Such discussion is the most informative
representation of how management evaluates performance and allocates resources.
In connection with the acquisition of Galileo International, Inc. in October 2001, the Company has realigned the
operations and management of certain of its businesses and accordingly the Company has added a new Travel Distribution
segment to its segment structure. In the fourth quarter of 2001, the Company had the following reportable operating
segments: Real Estate Services (consisting of the Company's real estate brands, mortgage and relocation services);
Hospitality (consisting of the Company's nine lodging brands, timeshare exchange and interval sales, and cottage
rental); Travel Distribution (consisting of electronic global distribution services for the travel industry and
travel agency-related services); Vehicle Services (consisting of car rental, vehicle management services and car
park services); and Financial Services (consisting of individual membership products, insurance-related services,
financial services enhancement products and tax preparation services). Additionally, Corporate and Other includes
unallocated corporate overhead and the operating results of certain other non-strategic business units, most of
which have been disposed. (See Table 2 for Revenues and Adjusted EBITDA by Segment for fourth quarter and full
year 2001 and 2000; Table 4 for Segment Revenue Driver Analysis for fourth quarter 2001 and 2000; and Table 5 for
Revenues and Adjusted EBITDA by Segment for the quarters and full-years of 2001, 2000 and 1999.)
Real Estate Services
2001 2000 % change
Revenues $532 $376 41%
Adjusted EBITDA $289 $203 42%
The increase in operating results was primarily driven by a significant increase in mortgage loan production and
profitability from higher levels of refinancings.
Hospitality
2001 2000 % change
Revenues $369 $215 72%
Adjusted EBITDA $103 $85 21%
Revenues and adjusted EBITDA increased primarily from the acquisitions of Fairfield Resorts and Holiday Cottages
in 2001. RCI revenues grew due to an increase in the number of members and timeshare exchange transactions. These
increases were partially offset by higher RCI staffing costs to support anticipated volume growth and lower fee
income and royalties from lodging franchise operations as revenues per available room declined following September
11.
Travel Distribution
2001 2000 % change
Revenues $362 $21 N/M
Adjusted EBITDA $102 $ 1 N/M
N/M = not meaningful
This segment includes the operating results of Galileo International, Inc. and Cheap Tickets Inc., which were both
acquired in October 2001, and the Company's pre-existing travel agency operations. While revenues in the quarter
were negatively affected by the events of September 11, the impact was not as significant as we originally estimated.
Additionally, in response to September 11, we took certain management actions which we expect will result in annual
cash operating savings of approximately $180 million, or more than double our original cost savings estimate.
Vehicle Services
2001 2000 % change
Revenues $966 $150 N/M
Adjusted EBITDA $40 $86 N/M
N/M = not meaningful
In March 2001, the Company acquired the remaining 82% of the outstanding common shares of Avis Group Holdings that
it did not already own. Segment results in 2001 include Avis' operations from the acquisition date through year
end. Prior to the acquisition, revenues and adjusted EBITDA principally consisted of Avis royalties, earnings from
our equity investment in Avis and the operations of National Car Parks. Avis results have been affected throughout
2001 by a general slowdown in commercial travel, which then significantly worsened due to the events of September
11. In response, the Company rightsized its operations to meet anticipated business levels, which included significant
reductions in workforce and fleet.
Financial Services
2001 2000 % change
Revenues $342 $345 (1%)
Adjusted EBITDA $51 $71 (28%)
The decrease in adjusted EBITDA is principally due to the initial impact of outsourcing our individual membership
operations to Trilegiant. Royalties to be received on new Trilegiant members will begin in the third quarter of
2002, upon expiration of the initial membership period, while the Trilegiant marketing activities, which the Company
is initially supporting, are expensed as incurred. New memberships resulting from solicitation efforts in the fourth
quarter of 2001 are expected to add incremental royalties to Cendant in future periods. Had the Company not incurred
the expenses for Trilegiant's marketing efforts, adjusted EBITDA would have been $107 million, or 51% higher than
2000.
Balance Sheet and Other Items
* As of December 31, 2001, we had approximately $2.0 billion of cash and
cash equivalents and $6.5 billion of debt and minority interest. In
addition, the Company has $863 million of mandatorily convertible Upper
DECS securities.
* As of December 31, 2001, the net debt to total capital ratio was 36%.
The ratio of adjusted EBITDA to net interest expense (non-vehicle and
program related) was 8 to 1 for fourth quarter 2001.
* As of December 31, 2001, the Company had unused lines of credit of
$2.6 billion (not including unused lines of credit of $1.1 billion
related to our PHH subsidiary).
* In the fourth quarter of 2001, we paid $310 million to a settlement
trust, reducing the net outstanding funding obligation associated with
the principal common stock class action litigation settlement at
December 31, 2001 to $1.4 billion. We expect to completely fund the
balance of this obligation over the next several quarters by utilizing
the proceeds from the convertible senior debentures issued in November
2001 and available cash flow.
* Weighted average common shares outstanding, including dilutive
securities, were 1.02 billion for the fourth quarter of 2001 compared
with 757 million for fourth quarter 2000. The increase was primarily
from the issuance of 61 million shares in connection with the
retirement of $1.7 billion of Feline PRIDES in February 2001, the sale
of 46 million shares in February 2001 and the issuance of 117 million
shares in connection with the acquisition of Galileo International in
October 2001.
* As it has for the last four quarters, the Company will file a
Consolidated Schedule of Free Cash Flow, which is a simplified cash
flow statement intended to increase investors' understanding of the
Company's cash flow dynamics and economic growth, with the SEC on Form
8-K next week.
Reconciliation of Fourth Quarter Adjusted EPS to Reported EPS
Adjusted EPS is a non-GAAP (generally accepted accounting principles) measure, but the Company believes that it
is useful to assist investors in gaining an understanding of the trends and results of operations for the Company's
core businesses. Adjusted EPS should be viewed in addition to the Company's reported results and not in lieu of
reported results. Reported loss per share was $0.31 in the fourth quarter of 2001 compared with earnings per share
of $0.20 in the fourth quarter of 2000. The following are the significant items reflected in reported results that
are considered to be of an unusual or non-recurring nature for purposes of deriving adjusted EPS:
Fourth Quarter 2001
* An after tax charge of $73 million, or $0.07 per share, of which
$28 million is non-cash, primarily related to rightsizing the Company
in response to developments in the travel industry and the economy as a
whole, since the attacks of September 11, 2001.
* An after tax charge of $65 million, or $0.07 per share, related to the
integration of Galileo International and Cheap Tickets, which were
acquired in the fourth quarter of 2001.
* An after tax, non-cash charge of $55 million, or $0.06 per share, to
adjust the carrying value of the Company's mortgage servicing rights,
caused by substantial unexpected reductions in interest rates following
the events of September 11.
* After tax, non-cash charges of $285 million, or $0.29 per share,
related to the prior disposition of certain non-strategic businesses
and investment impairments, primarily the write-off of the Company's
investment in Homestore.com. This impairment was caused by a
substantial reduction in Homestore's market value and the resulting
investment write-off substantially offset the gain recognized in the
first quarter of 2001 on the sale of move.com to Homestore.com.
* An after tax loss of $21 million, or $0.02 per share, related to the
Company's proportionate ownership in Homestore.com.
* An after tax charge of $37 million, or $0.04 per share, for litigation
settlement and related costs. This includes $31 million, or $0.03 per
share, associated with the recent settlement of the largest outstanding
claim other than the principal class action claim (which has been
previously settled) relating to the former CUC International accounting
irregularities.
Fourth Quarter 2000
* An after tax charge of $5 million, or $0.01 per share, for litigation
settlement-related costs.
* An after tax loss of $14 million, or $0.02 per share, related to
move.com's operating results.
Full Year 2001 Results
Adjusted EPS was $1.05 in 2001 compared with $1.04 in 2000. Adjusted EBITDA was $2.2 billion in 2001 and $1.8 billion
in 2000. Reported EPS, before extraordinary loss and cumulative effect of accounting change, was $0.45 in 2001
compared with $0.89 in 2000.
2002 Detailed Outlook
The Company updated the following financial projections for 2002:
* Adjusted EBITDA is projected to be approximately $2.8 billion compared
with $2.2 billion in 2001.
* Depreciation and amortization (non-vehicle and program related) is
projected to be between $460 million and $475 million compared with
$501 million in 2001. The decrease is principally due to the
elimination of goodwill amortization partially offset by the 2001
acquisitions of Galileo and Cheap Tickets.
* Net interest expense (non-vehicle and program related) is projected to
be between $300 million and $325 million compared with $249 million in
2001. The increase is principally due to the Company's 2001
acquisitions.
* The Company's full year 2002 tax rate on adjusted pretax income is now
projected to be 33.0% compared with 33.2% in 2001.
* Minority interest expense is projected to be approximately $12 million
compared with $24 million in 2001. The reduction is primarily a result
of the retirement of the Feline PRIDES in February 2001.
* Weighted average shares outstanding are projected to be between
1.05 billion and 1.07 billion compared with 917 million in 2001. The
increase in the average share balance is primarily the result of the
issuance of 117 million shares of common stock in October 2001 in
connection with the acquisition of Galileo and the issuance in February
2001 of contingently convertible securities with 49 million underlying
shares of common stock.
2002 Quarterly Outlook
The Company projects adjusted EPS of $0.30 in the first quarter of 2002 compared with $0.21 in 2001 and $0.34 in
the second quarter of 2002 compared with $0.30 in 2001. The Company announced the following financial projections
for the first and second quarters of 2002:
The Company stated that it expects adjusted EPS to be in the range of $0.36 to $0.38 in the third quarter of
2002 compared with $0.32 in 2001, and $0.27 to $0.29 in the fourth quarter of 2002 compared with $0.23 in 2001.
Investor Conference Call
Cendant will host a conference call to discuss fourth quarter results on Thursday, February 7, 2002, at 1:00 p.m.
Eastern Time. Investors may access the call live at www.Cendant.com or dial in to 913-981-4900. A web replay will
be available at www.Cendant.com following the call. A telephone replay will be available from 4:00 p.m. Eastern
Time on February 7, 2002 until 6:00 p.m. on February 12 at 719-457-0820, access code: 551936.
Cendant Corporation is primarily a provider of travel and residential real estate services. With approximately
60,000 employees, New York City-based Cendant provides these services to businesses and consumers in over 100 countries.
More information about Cendant, its companies, brands and current SEC filings may be obtained by visiting the Company's
Web site at http://www.Cendant.com or by calling 877-4-INFOCD (877-446-3623).
Statements about future results made in this release 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.
Actual results may 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 Cendant's Form 10-Q filed on November 14, 2001.
Such forward-looking statements include projections. Such projections were not prepared in accordance with published
guidelines of the American Institute of Certified Public Accountants or the SEC regarding projections and forecasts,
nor have such projections been audited, examined or otherwise reviewed by independent auditors of Cendant or its
affiliates. In addition, such projections are based upon many estimates and are inherently subject to significant
economic and competitive uncertainties and contingencies, many of which are beyond the control of management of
Cendant and its affiliates. Accordingly, actual results may be materially higher or lower than those projected.
The inclusion of such projections herein should not be regarded as a representation by Cendant or its affiliates
that the projections will prove to be correct.
Table 1
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In millions)
Twelve Months
Three Months Ended Ended
December 31, December 31,
2001 2000 2001 2000
Revenues
Service fees and membership-
related, net $1,657 $1,050 5,456 $4,215
Vehicle-related 905 81 3,426 292
Other 18 38 68 152
Net revenues 2,580 1,169 8,950 4,659
Expenses
Operating 912 320 2,937 1,350
Vehicle depreciation, lease charges
and interest, net 514 -- 1,799 --
Marketing and reservation 269 223 1,021 896
General and administrative 314 207 989 688
Non-vehicle depreciation and
amortization 154 94 501 352
Other charges:
Restructuring and other unusual
charges 116 -- 379 109
Acquisition and integration
related costs 104 -- 112 --
Mortgage servicing rights
impairment 94 -- 94 --
Litigation settlement and related
costs 58 8 86 2
Non-vehicle interest, net 73 62 249 148
Total expenses 2,608 914 8,167 3,545
Net loss on dispositions of
businesses and impairment of
investments (459) (1) (24) (8)
Income (loss) before income taxes,
minority interest and
equity in Homestore.com (487) 254 759 1,106
Provision (benefit) for income taxes (203) 86 235 362
Minority interest, net of tax 2 23 24 84
Losses related to equity in
Homestore.com, net of tax 21 -- 77 --
Income (loss) before extraordinary
loss and cumulative effect
of accounting change (307) 145 423 660
Extraordinary loss, net of tax -- -- -- (2)
Income (loss) before cumulative
effect of accounting change (307) 145 423 658
Cumulative effect of accounting
change, net of tax -- -- (38) (56)
Net income (loss) $(307) $145 $385 $602
CD common stock income per share
Basic
Income (loss) before
extraordinary loss and
cumulative effect
of accounting change $(0.31) $0.20 $0.47 $0.92
Net income (loss) (0.31) 0.20 0.42 0.84
Diluted
Income (loss) before
extraordinary loss and
cumulative effect
of accounting change $(0.31) $0.20 $0.45 $0.89
Net income (loss) (0.31) 0.20 0.41 0.81
Weighted average shares
Basic 978 731 869 724
Diluted 978 757 917 762
Table 2
Cendant Corporation and Subsidiaries
REVENUES AND ADJUSTED EBITDA BY SEGMENT
(Dollars in millions)
Three Months Ended December 31,
Revenues Adjusted EBITDA (A)
% %
2001 2000 Change 2001 (C) 2000 Change
Real Estate Services $532 $376 41% $289 (D) $203 42%
Hospitality 369 215 72% 103 (E) 85 21%
Vehicle Services 966 150 * 40 (F) 86 *
Travel Distribution 362 21 * 102 (G) 1 *
Financial Services 342 345 (1%) 51 (H) 71 (28%)
Total Reportable Segments 2,571 1,107 585 446
Corporate and Other (B) 9 62 * (14)(I) (27) (N) *
Total Company 2,580 1,169 121% 571 419 36%
Move.com Group -- 18 * -- (20) *
Total Company Excluding
Move.com Group $2,580 $1,151 124% $571 $439 30%
Twelve Months Ended December 31,
Revenues Adjusted EBITDA (A)
% %
2001 2000 Change 2001(J) 2000(O) Change
Real Estate Services $1,859 $1,461 27% $939 (K) $752 25%
Hospitality 1,522 918 66% 513 (E) 385 (P) 33%
Vehicle Services 3,659 568 * 403 (L) 306 *
Travel Distribution 437 99 * 108 (G) 10 *
Financial Services 1,402 1,380 2% 310 (H) 373 (17%)
Total Reportable
Segments 8,879 4,426 2,273 1,826
Corporate and Other(B) 71 233 * (69) (M) (101) (Q) *
Total Company 8,950 4,659 92% 2,204 1,725 28%
Move.com Group 10 59 * (9) (94) *
Total Company
Excluding Move.com
Group $8,940 $4,600 94% $2,213 $1,819 22%
* Not meaningful.
(A) Defined as earnings before non-operating interest, income taxes,
non-vehicle depreciation and amortization, minority interest and
equity in Homestore.com, adjusted to exclude certain items which are
of a non-recurring or unusual nature and not measured in assessing
segment performance or are not segment specific.
(B) Includes Move.com Group operating results.
(C) Excludes a charge of $116 million primarily in connection with
restructuring and other initiatives undertaken as a result of the
September 11th terrorist attacks ($31 million, $48 million,
$6 million, $9 million and $25 million of charges were recorded within
Real Estate Services, Hospitality, Travel Distribution, Financial
Services and Corporate and Other, respectively, and $3 million of net
credits were recorded in Vehicle Services).
(D) Excludes a charge of $94 million related to the impairment of the
Company's mortgage servicing rights portfolio.
(E) Excludes a charge of $11 million related to the impairment of certain
of the Company's investments in part due to the September 11th
terrorist attacks.
(F) Excludes charges of $2 million related to the impairment of certain of
the Company's investments due to the September 11th terrorist attacks
and $1 million related to the acquisition and integration of Avis
Group Holdings, Inc ("Avis").
(G) Excludes charges of $23 million related to the acquisition and
integration of Galileo International, Inc. ("Galileo") and Cheap
Tickets, Inc. ("Cheap Tickets").
(H) Excludes a charge of $1 million related to the impairment of certain
of the Company's investments due to the September 11th terrorist
attacks.
(I) Excludes charges of (i) $427 million primarily related to the
impairment of the Company's investment in Homestore.com, Inc.
("Homestore"), (ii) $80 million related to the outsourcing of the
Company's information technology operations to IBM in connection with
the acquisition of Galileo, (iii) $18 million related to the
dispositions of certain non-strategic businesses in 1999 and (iv)
$58 million for litigation settlement and related costs.
(J) Excludes a charge of $192 million primarily in connection with
restructuring and other initiatives undertaken as a result of the
September 11th terrorist attacks ($31 million, $51 million,
$58 million, $7 million, $10 million and $35 million of charges were
recorded within Real Estate Services, Hospitality, Vehicle Services,
Travel Distribution, Financial Services and Corporate and Other,
respectively).
(K) Excludes charges of $95 million related to the funding of an
irrevocable contribution to an independent technology trust
responsible for providing technology initiatives for the benefit of
current and future franchisees at Century 21, Coldwell Banker and ERA
and $94 million related to the impairment of the Company's mortgage
servicing rights portfolio.
(L) Excludes charges of $5 million related to the acquisition and
integration of Avis and $2 million related to the impairment of
certain of the Company's investments due to the September 11th
terrorist attacks.
(M) Excludes charges of (i) $427 million primarily related to the
impairment of the Company's investment in Homestore, (ii) $85 million
related to the funding of Trip Network, Inc., an affiliated company
that was created to pursue the development of an online travel
business for the benefit of certain current and future franchisees,
(iii) $80 million related to the outsourcing of the Company's
information technology operations to IBM in connection with the
acquisition of Galileo, (iv) $86 million for net litigation settlement
and related costs, (v) $19 million related the dispositions of certain
non-strategic businesses in 1999, (vi) $7 million related to a
non-cash contribution to the Cendant Charitable Foundation and (vii)
$4 million related to the acquisition and integration of Avis Group.
Such charges were partially offset by a gain of $436 million primarily
related to the sale of Move.com Group to Homestore.
(N) Excludes a charge of $8 million for litigation settlement and related
costs.
(O) Excludes a charge of $109 million in connection with restructuring and
other initiatives ($2 million, $63 million, $31 million and
$13 million of charges were recorded within Real Estate Services,
Hospitality, Financial Services and Corporate and Other,
respectively).
(P) Excludes $12 million of losses related to the dispositions of
businesses.
(Q) Excludes a non-cash credit of $41 million in connection with a change
to the original estimate of the number of Rights to be issued in
connection with the PRIDES settlement resulting from unclaimed and
uncontested Rights and a gain of $35 million, which represents the
recognition of a portion of the Company's previously recorded deferred
gain from the sale of its fleet business due to the disposition of VMS
Europe by Avis Group Holdings, Inc. in August 2000. Such amounts were
partially offset by $31 million of losses related to the disposition
of certain non-strategic businesses and $43 million of litigation
settlement and related costs.
Table 3
Cendant Corporation and Subsidiaries
RECONCILIATION OF REPORTED EPS TO ADJUSTED EPS
(in millions, except per share amounts)
Three Months Ended
December 31,
2001 2000
Income Income
from from
Continuing Continuing
Operations - Diluted Operations - Diluted
Diluted EPS Diluted EPS
Reported Amounts (A) $(307) $(0.31) $149 $0.20
Adjustments (after-tax):
Restructuring and other unusual
charges (B) 73 0.07 -- --
Acquisition and integration
related costs (C) 65 0.07 -- --
Mortgage servicing rights
impairment (D) 55 0.06 -- --
Litigation settlement and
related costs (E) 37 0.04 5 0.01
Net loss on dispositions of
businesses and impairment of
investments (F) 285 0.29 1 0.00
Losses related to equity in
Homestore.com 21 0.02 -- --
Effect of change in weighted average
shares due to change in
income levels (G) 3 (0.01) -- --
Retained interest in
Move.com Group -- -- 12 0.01
Adjusted Amounts $232 $0.23 $167 $0.22
Twelve Months Ended
December 31,
2001 2000
Income Income
from from
Continuing Continuing
Operations - Diluted Operations - Diluted
Diluted EPS Diluted EPS
Reported Amounts (A) $413 $0.45 $677 $0.89
Adjustments (after-tax):
Restructuring and other
unusual charges (H) 243 0.26 69 0.09
Acquisition and integration
related costs (I) 70 0.08 -- --
Mortgage servicing rights
impairment (D) 55 0.06 -- --
Litigation settlement and related
costs (J) 55 0.06 -- --
Net loss (gain) on dispositions
of businesses and impairment of
investments (K) 24 0.03 (8) (0.01)
Losses related to equity in
Homestore.com 77 0.08 -- --
Retained interest in Move.com Group 27 0.03 56 0.07
Adjusted Amounts $964 $1.05 $794 $1.04
(A) Includes Cendant's retained interest in Move.com Group.
(B) Represents 2001 pre-tax charges of $116 million primarily in
connection with restructuring and other initiatives undertaken as a
result of the September 11th terrorist attacks.
(C) Represents 2001 pre-tax charges of $104 million related to the
acquisition and integration of Galileo International, Inc. ("Galileo")
and Cheap Tickets, Inc. ("Cheap Tickets").
(D) Represents a 2001 pre-tax charge of $94 million related to the
impairment of the Company's mortgage servicing rights portfolio.
(E) Represents 2001 and 2000 pre-tax charges of $58 million and
$8 million, respectively.
(F) Represents 2001 and 2000 pre-tax losses of $459 million and
$1 million, respectively. The 2001 pre-tax losses related to the
impairment of certain of the Company's investments ($441 million)
and the dispositions of certain non-strategic businesses in 1999
($18 million).
(G) Represents in 2001 (i) an adjustment in the number of shares used to
calculate EPS due to the addition of dilutive common share equivalents
resulting from a change in loss from continuing operations on as As
Reported basis compared to income from continuing operations on an As
Adjusted basis and (ii) the related add-back of interest expense on
convertible debt securities.
(H) Represents 2001 and 2000 pre-tax charges of $379 and $109 million,
respectively. The 2001 pre-tax charges related to (i) restructuring
and other initiatives primarily undertaken as a result of the
September 11th terrorist attacks ($192 million), (ii) the funding of
an irrevocable contribution to an independent technology trust
($95 million), (iii) the creation of Trip Network, Inc. ($85 million)
and (iv) a non-cash contribution to the Cendant Charitable Foundation
($7 million). The 2000 charges primarily related to restructuring and
other initiatives.
(I) Represents 2001 pre-tax charges of $112 million primarily related to
the acquisition and integration of Galileo and Cheap Tickets.
(J) Represents 2001 and 2000 pre-tax charges of $86 million and
$2 million, respectively.
(K) Represents 2001 and 2000 pre-tax losses of $24 million and $8 million.
The 2001 pre-tax losses related to the impairment of certain of the
Company's investments ($441 million) and the dispositions of certain
non-strategic businesses in 1999 ($19 million). Such losses were
partially offset by a gain primarily related to the sale of Move.com
Group to Homestore ($436 million).
Table 4
Cendant Corporation and Subsidiaries
Segment Revenue Driver Analysis
(Revenue dollars in thousands)
Three Months Ended December 31,
2001 2000 % Change
REAL ESTATE SERVICES SEGMENT
Real Estate
Closed Sides - Domestic (000's) 452,593 465,072 (3%)
Average Price $172,397 $172,061 --
Royalty and Marketing Revenue $137,631 $129,682 6%
Total Revenue $152,856 $144,306 6%
Relocation
Service Based Revenue (Referrals,
Outsourcing, etc.) $63,037 $70,047 (10%)
Asset Based Revenue (Corporate
and Government Home Sale
Closings and Financial Income) $40,435 $45,755 (12%)
Total Revenue $103,472 $115,802 (11%)
Mortgage
Production Loans Sold (millions) $10,040 $5,883 71%
Production Revenue $231,514 $78,014 197%
Average Servicing Loan Portfolio
(millions) $95,157 $69,052 38%
Net Servicing Revenue (A) $43,997 $38,558 14%
Total Revenue $275,393 $116,749 136%
HOSPITALITY SEGMENT
Lodging
RevPar ($) $21.79 (D) $25.33 (14%)
Weighted Average Rooms Available 516,476 506,240 2%
Royalty, Marketing and
Reservation Revenue $71,569 (D) $89,240 (20%)
Total Revenue $88,235 (D) $108,701 (19%)
RCI
Average Subscriptions 2,755,134 2,428,172 13%
Number of Timeshare Exchanges 383,279 355,537 8%
Total Revenue $125,239 (B) $106,410 18%
Fairfield Resorts
Average Revenue per Transaction $12,479 $11,905 5%
Total Revenue $153,203 (C) n/a
VEHICLE SERVICES SEGMENT
Car Rental
Rental Days (000's) 12,799 14,963 (14%)
Time and Mileage Revenue per Day $36.47 $38.99 (6%)
Average Length of Rental Days 3.75 3.60 4%
Total Revenue $510,969 (C) n/a
Vehicle Management and Fuel Card
Services
Average Fleet (Leased) 317,423 306,670 4%
Average Number of Cards (000's) 3,836 3,397 13%
Total Revenue $368,356 (C) n/a
TRAVEL DISTRIBUTION SEGMENT
Galileo
Domestic Booking Volume (000's)
Air 17,935 23,637 (24%)
Non-air 4,033 5,377 (25%)
International Booking Volume
(000's)
Air 36,781 43,971 (16%)
Non-air 1,660 1,972 (16%)
Worldwide Booking Volume (000's)
Air 54,716 67,608 (19%)
Non-air 5,693 7,349 (23%)
Total Galileo Revenue $336,697 (C) n/a
FINANCIAL SERVICES SEGMENT
Insurance/Wholesale-related
Revenue $142,622 $132,750 7%
Other Revenue $198,594 $212,741 (7%)
Total Revenue $341,216 $345,491 (1%)
(A) Includes gross recurring service fees of $97 million and $69 million
for 2001 and 2000, respectively. Such fees are net of the non-cash
amortization of mortgage servicing rights ($47 million and
$39 million, respectively), which was accelerated due to a higher
volume of refinancing activity, and interest (expense) income
(($16) million and $1 million, respectively), which also increased due
to a higher volume of refinancing activity as the Company's mortgage
business is required to pay the investor interest on loans refinanced,
which is calculated from the loan payoff date through the end of the
month.
(B) Includes property management revenues of $12 million for 2001
resulting from the acquisition of Fairfield Communities, Inc.
("Fairfield"). Subsequent to the acquisition, Fairfield's property
management operations were included within the RCI business structure,
as RCI is the Company's service provider for the timeshare industry.
(C) The operations of these businesses were acquired during 2001.
Accordingly, prior period revenues are not comparable to the current
period amounts.
(D) The Company initially estimated a decline in third quarter royalty
revenue resulting from the September 11th terrorist attacks. The
amounts presented herein exclude the royalty true-up that relates to
actual third quarter results, which was recorded by the Company in the
fourth quarter. Including such adjustment, the as reported RevPar,
Royalty, Marketing and Reservation Revenues and Total Revenues for
2001 are $20.50, $66,630 and $83,296, respectively.
Table 5
Cendant Corporation and Subsidiaries
REVENUES AND ADJUSTED EBITDA BY SEGMENT (A)
(In millions)
Year Ended December 31, 2001
Revenues
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year
Real Estate
Services $339 $474 $514 $532 $1,859
Hospitality 240 448 465 369 1,522
Vehicle
Services 454 1,112 1,127 966 3,659
Travel
Distribution 25 26 24 362 437
Financial
Services 390 332 338 342 1,402
Total Reportable
Segments 1,448 2,392 2,468 2,571 8,879
Corporate and
Other 38 11 13 9 71
Total
Company $1,486 $2,403 $2,481 $2,580 $8,950
Adjusted EBITDA
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year
Real Estate
Services $132 $231 $287 $289 $939
Hospitality 102 156 152 103 513
Vehicle
Services 93 142 128 40 403
Travel
Distribution 2 3 1 102 108
Financial
Services 131 70 58 51 310
Total Reportable
Segments 460 602 626 585 2,273
Corporate and
Other (17) (15) (23) (14) (69)
Total Company $443 $587 $603 $571 $2,204
Year Ended December 31, 2000
Revenues
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year
Real Estate
Services $289 $377 $419 $376 $1,461
Hospitality 219 231 253 215 918
Vehicle
Services 137 135 146 150 568
Travel
Distribution 25 27 26 21 99
Financial
Services 381 321 333 345 1,380
Total Reportable
Segments 1,051 1,091 1,177 1,107 4,426
Corporate and
Other 77 46 48 62 233
Total Company $1,128 $1,137 $1,225 $1,169 $4,659
Adjusted EBITDA
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year
Real Estate
Services $114 $193 $242 $203 $752
Hospitality 89 99 112 85 385
Vehicle Services 72 67 81 86 306
Travel
Distribution 2 4 3 1 10
Financial
Services 133 83 86 71 373
Total Reportable
Segments 410 446 524 446 1,826
Corporate and
Other 2 (42) (34) (27) (101)
Total Company $412 $404 $490 $419 $1,725
Year Ended December 31, 1999
Revenues
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year
Real Estate
Services $281 $372 $392 $338 $1,383
Hospitality 218 231 248 223 920
Vehicle Services 562 584 150 134 1,430
Travel
Distribution 26 26 23 16 91
Financial
Services 395 374 407 342 1,518
Total Reportable
Segments 1,482 1,587 1,220 1,053 5,342
Corporate and
Other 164 150 190 230 734
Total Company $1,646 $1,737 $1,410 $1,283 $6,076
Adjusted EBITDA
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year
Real Estate
Services $133 $198 $226 $170 $727
Hospitality 105 106 116 93 420
Vehicle Services 107 107 81 69 364
Travel
Distribution 4 4 1 (2) 7
Financial
Services 71 54 91 89 305
Total Reportable
Segments 420 469 515 419 1,823
Corporate and
Other 13 (11) 12 82 96
Total Company $433 $458 $527 $501 $1,919
(A) In connection with the acquisitions of Galileo International, Inc.
and Cheap Tickets, Inc. during October 2001, the Company realigned
the operations and management of certain of its businesses.
Accordingly, the Company's segment reporting structure now
encompasses the following five reportable segments: Real Estate
Services, Hospitality, Vehicle Services, Travel Distribution and
Financial Services. The periods presented herein have been
reclassified to reflect this change in the Company's segment
structure.
Table 6
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(In billions)
December 31, December 31,
2001 2000
Assets
Current assets
Cash and cash equivalents $2.0 $0.9
Stockholder litigation
settlement trust 1.4 --
Other current assets 3.1 1.8
Total current assets 6.5 2.7
Property and equipment, net 2.0 1.3
Goodwill, net 8.0 3.2
Stockholder litigation settlement trust -- 0.4
Other assets 5.0 4.6
Total assets exclusive of assets
under programs 21.5 12.2
Assets under management and
mortgage programs 12.0 2.9
Total assets $33.5 $15.1
Liabilities and stockholders'
equity
Current liabilities
Current portion of long-term debt $0.4 $--
Stockholder litigation settlement 2.9 --
Other current liabilities 4.4 2.5
Total current liabilities 7.7 2.5
Long-term debt, excluding Upper
DECS 5.7 1.9
Upper DECS 0.9 --
Stockholder litigation settlement -- 2.9
Other noncurrent liabilities 0.8 0.4
Total liabilities exclusive of
liabilities under programs 15.1 7.7
Liabilities under management and
mortgage programs 10.9 2.5
Mandatorily redeemable preferred
securities issued by subsidiaries 0.4 2.1
Total stockholders' equity 7.1 2.8
Total liabilities and
stockholders' equity $33.5 $15.1
Table 7
Cendant Corporation and Subsidiaries
SCHEDULE OF TOTAL CORPORATE DEBT OUTSTANDING (A)
(In millions)
Maturity December 31,
Date 2001 2000
February 2002 (B) 3% convertible
subordinated notes $390 $548
December 2003 7-3/4% notes 1,150 1,149
August 2006 6-7/8% notes 850 --
May 2009 11% senior subordinated
notes 584 --
November 2011 (C) 3-7/8% convertible
senior debentures 1,200 --
February 2021 (D) Zero coupon senior
convertible contingent
notes 920 --
May 2021 (E) Zero coupon convertible
debentures 1,000 --
Term loan facility -- 250
Other 38 1
Total debt, excluding
Upper DECS 6,132 1,948
Less: current portion 401 --
Long-term debt,
excluding Upper DECS 5,731 1,948
May 2004 (F) Upper DECS 863 --
$6,594 $1,948
(A) Amounts presented herein exclude liabilities under management and
mortgage programs.
(B) Each $1,000 principal amount is convertible into 32.65 shares of CD
common stock. Redeemable at the Company's option.
(C) Each $1,000 principal amount is convertible into 41.58 shares of CD
common stock during 2002 if the average price of CD common stock
exceeds $28.86 during the stipulated measurement periods. The average
price of CD common stock at which the debentures are convertible
decreases annually by a stipulated percentage. Redeemable by the
Company after November 27, 2004. Holders may require the Company to
repurchase the notes on November 27, 2004 and 2008.
(D) Each $1,000 principal amount is convertible into 33.4 shares of CD
common stock during Q1, Q2, Q3 and Q4 of 2002 if the average price of
CD common stock exceeds $20.54, $20.67, $20.80 and $20.93,
respectively, during the stipulated measurement periods. The average
price of CD common stock at which the notes are convertible increases
on a quarterly basis by a stipulated percentage. Redeemable by the
Company after February 13, 2004. Holders may require the Company to
repurchase the notes on February 13, 2004, 2009 and 2014. Issued at a
discount resulting in a yield-to-maturity of 2.5%.
(E) Each $1,000 principal amount is convertible into 39.08 shares of CD
common stock if the average price of CD common stock exceeds $28.15
during the stipulated measurement periods. Redeemable by the Company
after May 4, 2004. Holders may require the Company to repurchase the
notes on May 4, 2002, 2004, 2006, 2008, 2011 and 2016. This debt is
classified as long-term based upon the Company's intent and ability to
refinance such amount with existing lines of credit if holders require
the Company to repurchase the notes on May 4, 2002.
(F) The forward purchase contracts require the holder to purchase a
minimum of 1.7593 shares (if the average price of CD common stock is
greater than $28.42 during a stipulated period) and a maximum of
2.3223 shares (if the average price of CD common stock is less than
$21.53 during a stipulated period) of CD common stock in August 2004.
The minimum and maximum number of shares to be issued under the
forward purchase contracts are 30.3 million and 40.1 million shares,
respectively.
SOURCE: Cendant Corporation