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Press Release: Cendant Corporation
April 21, 2004
NEW YORK, NY -- Cendant Corporation (NYSE: CD) yesterday reported record first quarter 2004 EPS of $0.42, versus
$0.30 in first quarter 2003, an increase of 40%. The first quarter results exceeded the Company's most recent projection
of $0.41 and its prior projection of $0.37 - $0.38. As previously announced, first quarter EPS included a one-time
tax benefit of $0.10 per share related to the modification of our relationship with Trilegiant Corporation.
As a result of the Company's higher than anticipated first quarter results, Cendant tightened the range of its
projection of EPS for full year 2004 to $1.69 - $1.74, representing year-over-year growth of 20% - 23%. The Company
had previously raised its estimate on March 31, 2004 to $1.68 - $1.74 from $1.65 - $1.72. The Company also continues
to forecast 2004 Net Cash Provided by Operating Activities of approximately $5 billion and Free Cash Flow of more
than $2 billion.
Cendant's Chairman, Chief Executive Officer and President, Henry R. Silverman, stated: "We are very encouraged
by our first quarter performance. Improving travel trends and continued strength in residential real estate, coupled
with superb execution by our management team, enabled our business units to outperform our original expectations,
and to overcome a significant negative year-over-year comparison in our Mortgage Services segment. The fundamental
strength and diversity of our operations are readily apparent in the first quarter's results, which continued to
demonstrate the growth of our businesses."
First Quarter 2004 Results of Reportable Segments
The following discussion of operating results focuses on revenue and EBITDA for each of our reportable operating
segments. EBITDA is defined as net income before non-program related depreciation and amortization, non- program
related interest, amortization of pendings and listings, income taxes and minority interest. EBITDA is the measure
that we use to evaluate performance in each of our reportable operating segments in accordance with generally accepted
accounting principles. Our presentation of EBITDA may not be comparable to similar measures used by other companies.
Revenue and EBITDA are expressed in millions.
As previously announced, in order to improve the transparency of our financial results, beginning this quarter,
we will report our mortgage and settlement services businesses, which were previously included in our former Real
Estate Services segment, as one separate reportable segment, Mortgage Services. The information presented below
for first quarter 2003 has been revised to reflect this change.
Real Estate Franchise and Operations
(Consisting of the Company's real estate franchise brands, brokerage operations and relocation services)
2004 2003 % change
Revenue $1,156 $985 17%
EBITDA $129 $113 14%
Revenue and EBITDA increased principally due to strong growth in royalties earned by our real estate franchise
businesses and real estate brokerage commissions earned by NRT. Real estate franchise royalty and marketing fund
revenue increased 14%, primarily due to a 12% increase in average price and a 7% increase in home sale transactions.
Revenue generated by our NRT real estate brokerage business increased 21%, due to increases in both home sale transactions
and average price.
Mortgage Services
(Consisting of mortgage services and settlement services)
2004 2003 % change
Revenue $238 $370 (36%)
EBITDA $8 $113 (93%)
As expected, revenue and EBITDA declined primarily due to substantially lower mortgage refinancing volumes and
margins on securitized loan sales as compared to the high levels experienced in first quarter 2003. In addition,
continuing low interest rates as compared with 2003 resulted in higher amortization and impairment of our mortgage
servicing rights asset during the quarter, but also resulted in increased application volumes that will benefit
mortgage production revenue in the second quarter. We expect that first quarter 2004 results will not be representative
of our full year 2004 results and that year-over-year comparisons will improve significantly as the year progresses.
Hospitality Services
(Consisting of the Company's nine franchised lodging brands, timeshare exchange and timeshare sales and marketing,
and vacation rental businesses)
2004 2003 % change
Revenue $681 $580 17%
EBITDA $168 $144 17%
Revenue and EBITDA increased primarily due to strong growth in our timeshare sales and exchange businesses. Timeshare
sales revenue increased 25%, reflecting the benefit of marketing investments made in 2003, and timeshare exchange
and subscription revenue increased 10%. Year-over-year comparisons were negatively impacted by the absence in first
quarter 2004 of gain-on-sale accounting for the securitization of timeshare receivables. As previously announced,
beginning in third quarter 2003, we no longer recognize gains on the securitization of timeshare receivables due
to the consolidation of our principal timeshare securitization structure, which we believe has improved the transparency
of our operating results. Instead, we recognize interest income from such receivables.
Travel Distribution Services
(Consisting primarily of electronic global distribution services for the travel industry and travel agency services)
2004 2003 % change
Revenue $452 $416 9%
EBITDA $124 $128 (3%)
Revenue increased primarily due to an 8% increase in Galileo booking fees and the March 2003 acquisition of Trip
Network, Inc., which operates the rapidly growing on-line travel business of Cheap Tickets. Year-over-year EBITDA
amounts are not comparable due to the acquisition of CheapTickets.com on March 31, 2003 (the operating results
of which are included in first quarter 2004 but not in first quarter 2003). Excluding the acquisition of CheapTickets.com,
the year-over-year comparison in first quarter 2004 would have been favorable. Moreover, we anticipate favorable
year-over-year comparisons for the remainder of 2004.
Vehicle Services
(Consisting of vehicle rental, vehicle management services and fleet card services)
2004 2003 % change
Revenue $1,394 $1,357 3%
EBITDA $100 $50 100%
Revenue and EBITDA increased principally due to growth in our car rental businesses and our Wright Express fuel
card management business. Avis benefited from a 2% increase in car rental day volume and a 5% increase in price.
The significant increase in EBITDA reflects synergies from the successful integration of Budget, which is substantially
complete.
Financial Services
(Consisting of individual membership products, insurance-related services, financial services enhancement products
and tax preparation services)
2004 2003 % change
Revenue $526 $389 35%
EBITDA $177 $165 7%
Year-over-year revenue and EBITDA amounts are not comparable due to the consolidation of TRL Group (formerly
Trilegiant Corporation) beginning on July 1, 2003, pursuant to FASB Interpretation No. 46. Revenue and EBITDA were
positively impacted by growth in our Jackson Hewitt Tax Service business. EBITDA was negatively impacted by our
resumption in February 2004 of marketing to solicit new members in our individual membership business pursuant
to the modification of our relationship with TRL Group. We expect to realize revenue from these marketing expenses
in future periods.
Corporate and Other
Revenue and EBITDA included a previously disclosed pretax gain of $33 million from the sale of Homestore, Inc.
common stock in first quarter 2004, versus a previously disclosed $30 million gain from the sale of the Company's
ownership interest in Entertainment Publications, Inc. in first quarter 2003.
Recent Achievements - Strategic Initiatives
During the first quarter, the Company made considerable progress toward its cash flow generation, debt reduction
and share repurchase goals:
* Generated Net Cash Provided by Operating Activities of $830 million and
Free Cash Flow of $356 million. See Table 8 for a description of Free
Cash Flow and a reconciliation to Net Cash Provided by Operating
Activities.
* Reduced corporate debt, net of cash on the balance sheet, by $140
million (corporate debt excludes Debt under Management and Mortgage
Programs). As of March 31, 2004, the Company had $632 million of cash
and cash equivalents and $5.65 billion of corporate debt outstanding,
including $863 million of Upper DECS securities, which will
mandatorily convert to common stock in August 2004. See Table 6 for
more detailed information.
* Issued a notice to redeem on May 1, 2004 the approximately $310 million
of outstanding 11% Senior Subordinated Notes Due 2009.
* Utilized $405 million of cash for the repurchase of common stock, net
of proceeds from option exercises. This amount included the use of
cash that had been earmarked for redemption of our Zero Coupon Senior
Convertible Contingent Debt Securities ("CODES") to instead repurchase
common stock issued upon their conversion.
In addition, during the quarter, the Company:
* Paid its first-ever regular quarterly cash dividend of $0.07 per common
share.
* Filed a registration statement with the Securities and Exchange
Commission for the sale of 100% of its ownership interest in Jackson
Hewitt Tax Service Inc. in an initial public offering expected to take
place in the second quarter of 2004.
* Acquired the residential real estate brokerage operations of Sotheby's
International Realty and entered into a fifty-year licensing agreement
(renewable for an additional fifty-years) with Sotheby's.
* Amended its contractual relationship with Trilegiant Corporation, now
known as TRL Group Inc., and re-assumed responsibility for marketing
membership clubs, as well as servicing members.
Subsequent to March 31, 2004, the Company has:
* Acquired Australia-based Flairview Travel, a leading online hotel
distributor that specializes in the distribution of international
hotel content throughout Europe and the Asia Pacific region through
its merchant hotel brand, www.HotelClub.com, and its last-minute Web
site, www.RatesToGo.com.
2004 Outlook
The Company projects the following EPS for 2004:
Second Third Fourth Full
Quarter Quarter Quarter Year
2004 $0.42 - $0.44 $0.53 - $0.55 $0.33 - $0.35 $1.69 - $1.74(a)
2003(b) $0.37 $0.47 $0.28 $1.41
% Increase 14% - 19% 13% - 17% 18% - 25% 20% - 23%
(a) Includes the one-time tax benefit of $0.10 per share recorded in
first quarter 2004 related to the transaction with Trilegiant.
(b) 2003 amounts are for continuing operations only.
The Company also announced the following detailed financial projections for full year 2004 (in millions):
Full Year 2003 Full Year 2004
Actual Projected
Revenue
Real Estate Franchise $5,258 $5,850 - 6,000
and Operations
Mortgage Services 1,483 1,150 - 1,250
Total Real Estate 6,741 7,000 - 7,250
Services
Hospitality Services 2,523 2,825 - 2,925
Travel Distribution 1,659 1,900 - 2,000
Services
Vehicle Services 5,851 6,000 - 6,225
Total Travel 10,033 10,725 - 11,150
Services
Financial Services 1,401 1,650 - 1,750
Total Reportable $18,175 $19,550 - 19,975
Corporate and Other 17 50 - 100
Total Company $18,192 $19,600 - 20,075
EBITDA
Real Estate Franchise $892 $930 - 980
and Operations
Mortgage Services 380 230 - 280
Hospitality Services 633 740 - 790
Travel Distribution 459 485 - 525
Services
Vehicle Services 442 600 - 650
Financial Services 363 400 - 450
Total Reportable $3,169 $3,515 - 3,585
Segments
Corporate and (35) (60 - 50)
Other
Depreciation and (518) (580 - 565)
amortization (a)
Amortization of (20) (25 - 20)
pendings/listings
Interest expense, net (a) (b) (365) (280 - 270)
Pretax income $2,231 $2,570 - 2,680
Provision for income taxes (c) (745) (745 - 785)
Minority interest (21) (10 - 5)
Income from continuing $1,465 $1,815 - 1,890
operations
Diluted weighted average 1,040 1,085 - 1,075
shares outstanding (d)
* Projections do not total because we do not expect the actual results
of all segments to be at the lowest or highest end of any projected
range simultaneously.
(a) Depreciation and amortization excludes amounts related to our assets
under management and mortgage programs, and interest expense
excludes amounts related to our debt under management and mortgage
programs, both of which are already reflected in EBITDA.
(b) 2004 and 2003 interest expense includes $14 million and $58 million,
respectively, of losses on the early extinguishment of debt.
(c) Includes the one-time tax benefit of $109 million recorded in first
quarter 2004 related to the transaction with Trilegiant. Excluding
this benefit, the effective tax rate is expected to be approximately
33.3% in 2004.
(d) Diluted weighted average shares outstanding forecasted for 2004
reflect conversion of the Upper DECS and incremental dilution from
employee stock options, partially offset by actual and anticipated
common stock repurchases.
Investor Conference Call
Cendant will host a conference call to discuss the first quarter results on Tuesday, April 20, 2004, at 11:00 a.m.
(EDT). Investors may access the call live at www.cendant.com or by dialing (719) 457-2694. A web replay will be
available at www.cendant.com following the call. A telephone replay will be available from 2:00 p.m. (EDT) on April
20, 2004 until 8:00 p.m. (EDT) on April 27, 2004 at (719) 457-0820, access code: 141252.
Cendant Corporation is primarily a provider of travel and residential real estate services. With approximately
90,000 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 www.cendant.com or by calling 877-4-INFOCD (877-446-3623).
Statements about future results made in this release, including the projections, and the statements attached hereto
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 Annual
Report on Form 10-K for the fiscal year ended December 31, 2003.
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, competitive and other uncertainties and contingencies, including but not limited to the impact of war
or terrorism, 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.
This release includes certain non-GAAP financial measures as defined under SEC rules. As required by SEC rules,
we have provided a reconciliation of those measures to the most directly comparable GAAP measures, which is contained
in the tables to this release and on our web site at www.cendant.com.
Table 1
Cendant Corporation and Subsidiaries
SUMMARY DATA SHEET
(Dollars in millions, except per share data)
First Quarter
%
2004 2003 Change
Income Statement Items
Net Revenues $4,477 $4,128 8%
Pretax Income (A) 503 470 7%
Net Income 441 309 43%
Net Income per Share (diluted) 0.42 0.30 40%
Balance Sheet Items as of March 31,
2004 and December 31, 2003
Total Corporate Debt (Excluding
Upper DECS) $4,791 $5,139
Cash and Cash Equivalents 632 840
Total Stockholders' Equity 10,637 10,186
Cash Flow Items
Net Cash Provided by Operating
Activities $830 $1,166
Free Cash Flow (B) 356 440
Net Cash Provided by Management
and Mortgage Program Activities
(C) 100 139
Payments Made for Current Period
Acquisitions, Net of Cash
Acquired (142) (27)
Net Debt Borrowings 6 249
Net Repurchases of Common Stock (405) (120)
Payment of Dividends (72) -
Reportable Operating Segment Results
First Quarter
2004 2003 %
Change
Net Revenues
Real Estate Franchise and Operations $1,156 $985 17%
Mortgage Services 238 370 (36%)
Total Real Estate Services 1,394 1,355 3%
Hospitality Services 681 580 17%
Travel Distribution Services 452 416 9%
Vehicle Services 1,394 1,357 3%
Total Travel Services 2,527 2,353 7%
Financial Services 526 389 35%
Total Reportable Segments 4,447 4,097 9%
Corporate and Other 30 31 *
Total Company $4,477 $4,128 8%
EBITDA
Real Estate Franchise and Operations $129 $113 14%
Mortgage Services 8 113 (93%)
Hospitality Services 168 144 17%
Travel Distribution Services 124 128 (3%)
Vehicle Services 100 50 100%
Financial Services 177 165 7%
Total Reportable Segments 706 713 (1%)
Corporate and Other 13 16
Total Company $719 $729
Reconciliation of EBITDA to Pretax
Income
Total Company EBITDA $719 $729
Less: Non-program related
depreciation and amortization 131 129
Non-program related interest
expense, net 81 79
Early extinguishment of debt - 48
Amortization of pendings and
listings 4 3
Pretax Income (A) $503 $470 7%
* Not meaningful.
(A) Referred to as "Income before income taxes and minority interest" on
the Consolidated Condensed Statements of Income presented on Table 2.
(B) See Table 8 for the underlying calculations and reconciliations.
(C) Included as a component of Free Cash Flow. This amount represents the
net cash flows from the operating, investing and financing activities
of management and mortgage programs.
Table 2
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In millions, except per share data)
Three Months Ended
March 31,
2004 2003(*)
Revenues
Service fees and membership, net $3,099 $2,790
Vehicle-related 1,334 1,301
Other 44 37
Net revenues 4,477 4,128
Expenses
Operating 2,240 2,046
Vehicle depreciation, lease
charges and interest, net 614 597
Marketing and reservation 502 408
General and administrative 399 341
Non-program related depreciation
and amortization 131 129
Non-program related interest,
net:
Interest expense, net 81 79
Early extinguishment of debt - 48
Acquisition and integration
related costs:
Amortization of pendings and
listings 4 3
Other 3 7
Total expenses 3,974 3,658
Income before income taxes and
minority interest 503 470
Provision for income taxes 58 155
Minority interest, net of tax 4 6
Net income $441 $309
Net income per share
Basic $0.43 $0.30
Diluted 0.42 0.30
Weighted average shares
Basic 1,015 1,028
Diluted 1,059 1,040
(*) Certain reclassifications have been made to conform to the current
presentation.
Table 3
Cendant Corporation and Subsidiaries
2003 REVENUES AND EBITDA BY SEGMENT
(In millions)
On January 1, 2004, the Company changed its segment reporting structure
to enable greater transparency into its results of operations. The
Company's Real Estate Franchise and Operations segment includes its
real estate brokerage, real estate franchise and relocation businesses
and the Company's Mortgage Services segment includes its mortgage and
settlement services businesses. These two segments were previously
combined and reported as the former Real Estate Services segment. The
following information has been revised to reflect this change.
Revenues
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Full Year
Real Estate Franchise and
Operations $985 $1,388 $1,593 $1,292 $5,258
Mortgage Services 370 394 411 308 1,483
Total Real Estate Services 1,355 1,782 2,004 1,600 6,741
Hospitality Services 580 635 696 612 2,523
Travel Distribution Services 416 426 424 393 1,659
Vehicle Services 1,357 1,499 1,610 1,385 5,851
Total Travel Services 2,353 2,560 2,730 2,390 10,033
Financial Services 389 275 370 367 1,401
Total Reportable Segments 4,097 4,617 5,104 4,357 18,175
Corporate and Other 31 - (6) (8) 17
Total Company $4,128 $4,617 $5,098 $4,349 $18,192
EBITDA
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Full Year
Real Estate Franchise and
Operations $113 $262 $325 $192 $892
Mortgage Services 113 92 111 64 380
Hospitality Services 144 150 189 150 633
Travel Distribution Services 128 104 119 108 459
Vehicle Services 50 132 187 73 442
Financial Services 165 75 62 61 363
Total Reportable Segments 713 815 993 648 3,169
Corporate and Other 16 (14) (42) 5 (35)
Total Company $729 $801 $951 $653 $3,134
Reconciliation of EBITDA to
Pretax Income
Total Company EBITDA $729 $801 $951 $653 $3,134
Less: Non-program related
depreciation and
amortization 129 129 129 131 518
Non-program related
interest expense, net 79 80 75 73 307
Early extinguishment of
debt 48 6 4 - 58
Amortization of pendings
and listings 3 4 5 8 20
Pretax Income $470 $582 $738 $441 $2,231
Table 4
(page 1 of 2)
Cendant Corporation and Affiliates
SEGMENT REVENUE DRIVER ANALYSIS
(Revenue dollars in thousands)
First Quarter
2004 2003 % Change
REAL ESTATE FRANCHISE AND OPERATIONS
SEGMENT
Real Estate Franchise
Closed Sides - Domestic 436,862 408,446 7%
Average Price $224,017 $199,355 12%
Royalty and Marketing Revenue (A) $156,234 $136,739 14%
Total Revenue (A) $162,121 $142,699 14%
Real Estate Brokerage
Net Revenue from Real Estate
Transactions $940,013 $778,083 21%
Other Revenue $11,697 $10,906 7%
Total Revenue $951,710 $788,989 21%
Relocation
Service Based Revenue
(Referrals, Outsourcing, etc.) $65,150 $63,013 3%
Asset Based Revenue (Home Sale
Closings and Financial Income) $40,555 $44,641 (9%)
Total Revenue $105,705 $107,654 (2%)
MORTGAGE SERVICES SEGMENT
Mortgage
Production Loans Closed to be
Securitized (millions) $7,189 $12,217 (41%)
Other Production Loans Closed
(millions) $4,062 $5,628 (28%)
Production Loans Sold (millions) $6,638 $12,673 (48%)
Average Servicing Loan Portfolio
(millions) $133,213 $115,780 15%
Production Revenue $121,237 $291,951 (58%)
Gross Recurring Servicing
Revenue $120,290 $108,614 11%
Amortization and Impairment of
Mortgage Servicing Rights $(263,862) $(196,691) *
Hedging Activity for Mortgage
Servicing Rights $170,800 $63,053 *
Other Servicing Revenue (B) $3,937 $1,421 *
Total Revenue $152,402 $268,348 (43%)
Settlement Services
Title and Appraisal Units 94,629 127,754 (26%)
Total Revenue $85,539 $101,198 (15%)
HOSPITALITY SERVICES SEGMENT
Lodging
RevPAR (C) $22.31 $22.06 1%
Weighted Average Rooms Available 474,198 498,594 (5%)
Royalty, Marketing and
Reservation Revenue (C) $77,830 $76,048 2%
Total Revenue (C) $93,063 $88,199 6%
RCI
Average Subscriptions 2,994,799 2,929,136 2%
Number of Exchanges (D) 481,264 467,037 3%
Exchange and Subscription
Revenue (D) $115,878 $105,047 10%
Points and Rental Transaction
Revenue (D) $31,232 $19,843 57%
Other Revenue (D) $22,432 $17,198 30%
Total Revenue $169,542 $142,088 19%
Fairfield Resorts
Tours 101,108 95,378 6%
Total Revenue $199,321 $161,976 23%
Trendwest Resorts
Tours 79,930 100,970 (21%)
Total Revenue $151,129 $128,907 17%
Vacation Rental Group
Cottage Weeks Sold 240,985 232,262 4%
Total Revenue $68,343 $58,440 17%
* Not meaningful.
(A) Includes intercompany royalties of $64 million and $54 million for
the three months ended March 31, 2004 and 2003, respectively, paid
by Real Estate Brokerage.
(B) Includes net interest expense of $14 million and $16 million for
the three months ended March 31, 2004 and 2003, respectively.
(C) Due to the normal delay in receiving data from franchisees, we
estimate royalty revenue for the last month of each quarter and
reflect subsequent adjustments in the following quarter. In first
quarter 2003, our estimate did not fully reflect the impact
associated with the war in Iraq. Therefore, the second quarter of
2003 includes a downward revision of approximately $2 million in
royalty revenue to reflect actual results. Giving consideration
to this adjustment, RevPAR would have been $21.43, royalty,
marketing and reservation revenue would have been $73,896 thousand
and total revenue would have been $86,047 thousand.
(D) The 2003 amounts have been revised to reflect a new presentation
of drivers during 2004.
Table 4
(page 2 of 2)
Cendant Corporation and Affiliates
SEGMENT REVENUE DRIVER ANALYSIS
(Revenue dollars in thousands)
First Quarter
2004 2003 % Change
TRAVEL DISTRIBUTION SERVICES SEGMENT
Galileo Domestic Booking Volume
(000's)
Air 22,970 22,570 2%
Car/Hotel 4,100 4,224 (3%)
Galileo International Booking
Volume (000's)
Air 45,930 43,276 6%
Car/Hotel 1,272 1,162 9%
Galileo Worldwide Booking Volume
(000's)
Air 68,900 65,846 5%
Car/Hotel 5,372 5,386 -
Galileo Revenue $409,884 $386,285 6%
Travel Services On-line Gross
Bookings (000's) $262,718 $225,026 17%
Travel Services Off-line Gross
Bookings (000's) $231,682 $253,070 (8%)
Total Revenue (A) $452,065 $416,263 9%
VEHICLE SERVICES SEGMENT
Avis
Rental Days (000's) 13,340 13,093 2%
Time and Mileage Revenue per Day $41.80 $39.93 5%
Average Length of Rental (stated
in Days) 3.62 3.70 (2%)
Total Revenue (B) $625,007 $582,775 7%
Budget (C)
Car Rental Days (000's) 6,650 6,753 (2%)
Time and Mileage Revenue per Day $35.88 $35.64 1%
Average Length of Rental (stated
in Days) 4.09 4.12 (1%)
Car Rental Revenue (B) $284,138 $290,144 (2%)
Truck Rental Revenue (B) $91,888 $108,348 (15%)
Total Revenue (B) $376,026 $398,492 (6%)
Vehicle Management and Fuel Card
Services
Average Fleet (Leased) 313,572 317,790 (1%)
Average Number of Cards (000's) 3,970 3,708 7%
Service Based Revenue $62,459 $55,032 13%
Asset Based Revenue $330,257 $321,187 3%
Total Revenue $392,716 $376,219 4%
FINANCIAL SERVICES SEGMENT
Loyalty/Insurance Marketing
Revenue $157,254 $149,211 5%
Individual Membership Revenue
(D) $200,975 $107,145 *
Jackson Hewitt
Total Returns 2,694,670 2,431,049 11%
Average Royalty Fee per
Franchise Return $27.98 $24.17 16%
Total Revenue $168,868 $132,679 27%
* Not meaningful.
(A) The 2004 amount includes the revenues of businesses acquired
during or subsequent to the first quarter of 2003. Accordingly,
first quarter 2003 revenue is not comparable to the current period
amount.
(B) Certain reclassifications have been made to the 2003 amounts to
conform to the current presentation.
(C) The 2003 amounts have been revised to reflect a new presentation
of drivers during 2004 consistent with the methodology used for
the Avis business now that Budget has been integrated onto our
system.
(D) The 2004 amounts reflect the results of operations of TRL Group,
Inc. (formerly Trilegiant Corporation) pursuant to the July 1,
2003 adoption of FIN 46, while the 2003 amounts do not reflect the
results of TRL Group, Inc. Accordingly, first quarter 2003
revenues are not comparable to current period amounts.
Table 5
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(In billions)
As of As of
March 31, December 31,
2004 2003
Assets
Current assets:
Cash and cash equivalents $0.6 $0.8
Other current assets 3.7 3.7
Total current assets 4.3 4.5
Property and equipment, net 1.8 1.8
Goodwill 11.2 11.1
Other non-current assets 4.1 4.0
Total assets exclusive of assets under
programs 21.4 21.4
Assets under management and mortgage
programs 18.4 17.6
Total assets $39.8 $39.0
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $1.2 $1.6
Other current liabilities 5.5 5.6
Total current liabilities 6.7 7.2
Long-term debt, excluding Upper DECS 3.6 3.5
Upper DECS 0.9 0.9
Other non-current liabilities 1.2 1.1
Total liabilities exclusive of
liabilities under programs 12.4 12.7
Liabilities under management and
mortgage programs 16.8 16.1
Total stockholders' equity 10.6 10.2
Total liabilities and stockholders'
equity $39.8 $39.0
Table 6
Cendant Corporation and Subsidiaries
SCHEDULE OF CORPORATE DEBT (A)
(In millions)
Earliest Maturity
Manda- Date
tory
Redemp- March 31, December 31,
tion 2004 2003
February Net Debt
2004 n/a Zero coupon senior
convertible
contingent notes(B) $- $430
May 2004 May 2021 Zero coupon
convertible
debentures (C) 7 7
November November
2004 2011 3 7/8% convertible
senior debentures (D) 804 804
August August
2006 2006 6 7/8% notes 849 849
January January
2008 2008 6 1/4% notes 797 797
May 2009 May 2009 11% senior
subordinated notes
(E) 329 333
March March
2010 2010 6 1/4% notes 348 348
January January
2013 2013 7 3/8% notes 1,190 1,190
March March
2015 2015 7 1/8% notes 250 250
Net hedging gains (F) 99 31
Other 118 100
Total corporate debt,
excluding Upper DECS 4,791 5,139
Plus: Upper DECS 863 863
Total Debt 5,654 6,002
Less: Cash and cash
equivalents 632 840
Net Debt $5,022 $5,162
Net Capitalization
Total Stockholders'
Equity $10,637 $10,186
Total Debt (per
above) 5,654 6,002
Total
Capitalization 16,291 16,188
Less: Cash and
cash
equivalents 632 840
Net Capitalization $15,659 $15,348
Net Debt to Net
Capitalization Ratio
(G) 32.1% 33.6%
Total Debt to Total
Capitalization Ratio 34.7% 37.1%
(A) Amounts presented herein exclude debt under management and mortgage
programs.
(B) On February 13, 2004, these notes were converted into approximately 22
million shares of CD common stock.
(C) Each $1,000 principal amount is convertible into 39.08 shares of CD
common stock. The Company has given notice that it will redeem these
debentures during second quarter 2004.
(D) Each $1,000 principal amount is convertible into 41.58 shares of CD
common stock during 2004 if the average price of CD common stock
exceeds $28.32 during the stipulated measurement periods. Redeemable
by the Company after November 27, 2004. Holders may require the
Company to repurchase the debentures on November 27, 2004 and 2008.
The Company intends to redeem these debentures during fourth quarter
2004, at which time holders will have the right to convert their
debentures into shares of CD common stock.
(E) Redeemable by the Company after May 1, 2004. The Company has given
notice that it will redeem these notes during second quarter 2004.
(F) As of March 31, 2004, this balance represents $190 million of realized
gains resulting from the termination of interest rate hedges, which
will be amortized by the Company to reduce future interest expense,
partially offset by $91 million of mark to market adjustments on
current interest rate hedges.
(G) The "Net Debt to Net Capitalization Ratio" is useful in measuring the
Company's leverage and indicating the strength of its financial
condition. This ratio is calculated by dividing (i) net corporate
debt (which reflects total debt adjusted to assume the application of
available cash to reduce outstanding indebtedness) by (ii) net
capitalization (which reflects total capitalization also adjusted for
the application of available cash). A reconciliation of the "Net
Debt to Net Capitalization Ratio" to the appropriate measure
recognized under generally accepted accounting principles (Total Debt
to Total Capitalization Ratio) is presented in the above table.
Table 7
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
Three Months Ended
March 31,
2004 2003
Operating Activities
Net cash provided by operating
activities exclusive of management
and mortgage programs $342 $316
Net cash provided by operating
activities of management
and mortgage programs 488 850
Net Cash Provided by Operating
Activities 830 1,166
Investing Activities
Property and equipment additions (104) (97)
Net assets acquired, net of cash
acquired, and acquisition-related
payments (165) (81)
Proceeds received on asset sales 18 82
Proceeds from disposition of business,
net of transaction-related payments 42 -
Other, net 45 53
Net cash used in investing activities
exclusive of management
and mortgage programs (164) (43)
Management and mortgage programs:
Net change in program cash 207 (17)
Net investment in vehicles (1,813) (693)
Net relocation receivables 19 (12)
Net mortgage servicing rights,
related derivatives and mortgage-
backed securities 141 (7)
(1,446) (729)
Net Cash Used in Investing Activities (1,610) (772)
Financing Activities
Proceeds from borrowings 19 2,650
Principal payments on borrowings (13) (2,401)
Issuances of common stock 207 32
Repurchases of common stock (612) (152)
Payment of dividends (72) -
Other, net 1 (64)
Net cash provided by (used in)
financing activities exclusive of
management
and mortgage programs (470) 65
Management and mortgage programs:
Proceeds from borrowings 3,661 7,086
Principal payments on borrowings (2,727) (6,584)
Net change in short-term borrowings 129 (471)
Other (5) (13)
1,058 18
Net Cash Provided by Financing
Activities 588 83
Effect of changes in exchange rates on
cash and cash equivalents (16) (23)
Net increase (decrease) in cash and
cash equivalents (208) 454
Cash and cash equivalents, beginning
of period 840 126
Cash and cash equivalents, end of
period $632 $580
Table 8
Cendant Corporation and Subsidiaries
CONSOLIDATED SCHEDULES OF FREE CASH FLOWS
(In millions)
Free Cash Flow is useful to management and the Company's investors in
measuring the cash generated by the Company that is available to be used
to repurchase stock, repay debt obligations, pay dividends and invest in
future growth through new business development activities or
acquisitions. Free Cash Flow should not be construed as a substitute in
measuring operating results or liquidity. Such metric may not be
comparable to similarly titled measures used by other companies and is
not a measurement recognized under generally accepted accounting
principles. A reconciliation of Free Cash Flow to the appropriate
measure recognized under generally accepted accounting principles (Net
Cash Provided by Operating Activities) is presented below.
Three Months Ended
March 31,
2004 2003
Pretax income $503 $470
Addback of non-cash depreciation and
amortization:
Non-program related 131 129
Pendings and listings 4 3
Tax payments, net of refunds (59) (20)
Working capital (226) (233)
Capital expenditures (104) (97)
Other 7 49
Management and mortgage programs (*) 100 139
Free Cash Flow 356 440
Current period acquisitions, net of
cash acquired (142) (27)
Payments related to prior period
acquisitions (23) (54)
Proceeds from disposition of
business, net 42 -
Net repurchases of common stock (405) (120)
Payment of dividends (72) -
Investments and other 30 (34)
Net borrowings 6 249
Net increase (decrease) in cash and
cash equivalents (per Table 7) $(208) $454
(*) Cash flows related to management and mortgage programs may fluctuate
significantly from period to period due to the timing of the
underlying management and mortgage program transactions (i.e.,
timing of mortgage loan origination versus sale). For the three
months ended March 31, 2004 and 2003, the net cash flows from the
activities of management and mortgage programs is reflected on Table
7 as follows: (i) net cash provided by operating activities of $488
million and $850 million, respectively, (ii) net cash used in
investing activities of $1,446 million and $729 million,
respectively, and (iii) net cash provided by financing activities of
$1,058 million and $18 million, respectively.
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
(In millions)
Three Months Ended
March 31,
2004 2003
Free Cash Flow (per above) $356 $440
Cash (inflows) outflows included
in Free Cash Flow but not reflected
in Net Cash Provided by Operating
Activities:
Investing activities of
management and mortgage
programs 1,446 729
Financing activities of
management and mortgage
programs (1,058) (18)
Capital expenditures 104 97
Proceeds received on asset
sales (18) (82)
Net Cash Provided by Operating
Activities (per Table 7) $830 $1,166
Full Year 2004
Projected
Free Cash Flow $2,000 - $2,300
Cash outflows included in
Free Cash Flow but not reflected
in Net Cash Provided by Operating
Activities:
Investing and financing
activities of management
and mortgage programs 1,975 - 2,625
Capital expenditures 525 - 575
Net Cash Provided by Operating
Activities $4,500 - $5,500
Source: Cendant Corporation