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Press Release: Cendant Corporation
October 21, 2004
NEW YORK, Oct. 20 /PRNewswire-FirstCall/ -- Cendant Corporation (NYSE: CD - News) today reported record results
for third quarter 2004. EPS from Continuing Operations increased 19% to $0.56, versus $0.47 in third quarter 2003.
Both of the Company's core residential real estate and travel services verticals reported record operating results,
despite weather related challenges in the Southeast, which affected real estate and travel alike. Driving the results
was continued strong performance from the Company's real estate franchise and brokerage businesses, double-digit
growth at the Company's hospitality businesses, and continuing margin improvement in car rental.
Cendant's President and Chief Financial Officer, Ronald L. Nelson, stated: "In addition to another quarter
of record results, we also have made substantial progress toward our strategic objective to focus on our core travel
and real estate businesses, reduce complexity and increase financial transparency. First, we will secure a leading
position in the rapidly growing online travel business through the pending acquisition of Orbitz, using the proceeds
from our prior sale of Jackson Hewitt and cash on hand. Second, we announced that the Company intends to spin-off
its mortgage and fleet operations, and establish a mutually beneficial joint venture with Cendant Mortgage designed
to preserve the cross-selling benefits that exist between it and the Company's residential real estate, relocation
and settlement services businesses. We believe these actions will both enhance the Company's growth rate and help
to unlock shareholder value."
Cendant projects fourth quarter 2004 EPS of $0.32 - $0.33, an increase of 10% - 14% versus the $0.29 earned in
fourth quarter 2003. In addition, the Company has narrowed the range of its projected EPS from Continuing Operations
for full year 2004 to $1.70 - $1.71, a 23% - 24% increase versus 2003. Excluding the one-time tax benefit of $0.10
per share recorded in first quarter 2004, EPS from Continuing Operations is projected to increase 16% - 17% in
2004 as compared with 2003. 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.
Third 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 income from continuing operations 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. Our presentation
of EBITDA may not be comparable to similarly titled measures used by other companies. Revenue and EBITDA are expressed
in millions.
Real Estate Franchise and Operations
(Consisting of the Company's real estate franchise brands, brokerage operations and relocation services)
2004 2003 % change
Revenue $1,774 $1,593 11%
EBITDA $358 $325 10%
Revenue and EBITDA increased principally due to strong growth in royalties earned by our real estate franchise
businesses and real estate commissions earned by NRT, our real estate brokerage unit. Real estate franchise royalty
and marketing fund revenue increased 15%, primarily due to an 11% increase in the average price of homes sold and
an 8% increase in the number of homes sold. Revenue generated by NRT increased 12%, principally due to a 17% increase
in average price.
Mortgage Services
(Consisting of mortgage services and settlement services)
2004 2003 % change
Revenue $283 $411 (31%)
EBITDA $55 $111 (50%)
Revenue and EBITDA decreased due to lower production revenues resulting from the industry-wide decline in mortgage
refinancing volumes, as expected, and also, we believe, due to the temporary uncertainty created by our July announcement
that we were considering strategic alternatives for the mortgage business. These effects were partially offset
by a $206 million increase in net revenues from mortgage servicing activities, driven by a 12% increase in the
average size of the servicing portfolio, substantially lower amortization and an increase in the value of our servicing
asset, net of hedging activity.
Hospitality Services
(Consisting of the Company's franchised lodging brands, timeshare exchange, timeshare sales and marketing, and
vacation rental businesses)
2004 2003 % change
Revenue $789 $696 13%
EBITDA $211 $189 12%
Revenue and EBITDA increased due to growth in virtually all of our hospitality businesses. Revenue from the European
Vacation Rental Group increased substantially, due primarily to the May 2004 acquisition of Landal Green Parks,
the largest vacation rental company in Holland. Revenue from RCI, the Company's timeshare exchange business, increased
13% and revenue from lodging franchise increased 7%. Revenue from the Timeshare Resort Group increased 3%, reflecting
higher close rates and revenue per tour. This was partially offset by the negative effects of the recent hurricanes
in Florida on Fairfield's tour flow and of telemarketing restrictions on Trendwest's tour flow. In addition, year-over-year
EBITDA comparisons were negatively impacted by $10 million due to the absence of gain on sale accounting and the
consolidation of the timeshare securitization structures effective in third quarter 2003.
Travel Distribution Services
(Consisting of electronic global distribution services for the travel industry, corporate and consumer online travel
services, and travel agency services)
2004 2003 % change
Revenue $437 $424 3%
EBITDA $123 $119 3%
Revenue and EBITDA were positively impacted principally by the acquisitions of Flairview Travel in second quarter
2004 and Travel 2/Travel 4 in fourth quarter 2003. The impact of these acquisitions was partially offset by a 1%
decrease in Galileo worldwide booking fees, which was driven by a 3% decline in global volume partially offset
by improvements in global yield. Booking volumes were affected by labor uncertainty surrounding an air carrier
in Italy where we have a significant presence and by continued soft travel demand in Europe. In addition, revenue
and EBITDA were positively impacted by a 39% increase in global gross online travel bookings, including a 51% increase
at our CheapTickets.com site, where conversion rates and gross margins also significantly improved.
Vehicle Services
(Consisting of vehicle rental, vehicle management services and fleet card services)
2004 2003 % change
Revenue $1,693 $1,610 5%
EBITDA $221 $187 18%
EBITDA increased in part due to operating efficiencies realized from the successful integration of Budget, as well
as growth in car rental volume, particularly at Budget. Revenue and EBITDA were also positively impacted by growth
in our Wright Express fuel card management business and by our PHH Fleet Management unit's February 2004 acquisition
of First Fleet Corporation. Avis and Budget car rental experienced increases in car rental day volume of 1% and
9%, respectively, which were offset by decreases in price of 2% and 7%, respectively. The increased volume and
reduced pricing at Budget resulted primarily from the Company's strategic decision to reduce its cost structure
and pricing to be more competitive with other leisure-focused car rental brands. In addition, pricing at both Avis
and Budget was negatively impacted by higher industry fleet levels due to increased incentives from car manufacturers.
The impact of lower prices was partially offset in EBITDA by lower fleet costs.
Marketing Services
(Consisting of individual membership products, insurance-related services and financial services enhancement products)
2004 2003 % change
Revenue $389 $358 9%
EBITDA $111 $67 66%
Revenue and EBITDA were positively impacted by $34 million due to the early termination of a contractual relationship
originally expected to extend into 2005, which resulted in a cash payment to the Company of $51 million. This early
termination will cause the fourth quarter results of the Marketing Services segment to be modestly reduced. In
addition, EBITDA was positively impacted by reduced operating costs at Cims, the Company's international membership
business.
Other Items
The early termination of a contractual relationship in the Marketing Services segment positively impacted third
quarter EPS by approximately $0.02. However, this benefit was offset by the negative impact of the recent hurricanes
on many of the Company's businesses in Florida and the adverse consequences to the Company's mortgage business
arising from our announcement that we were exploring strategic alternatives for that business.
Recent Achievements and Strategic Initiatives
During the third 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 $2.4 billion
and Free Cash Flow of $729 million. See Table 7 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
$1.2 billion (corporate debt excludes Debt under Management and
Mortgage Programs). As of September 30, 2004, the Company had Net
Debt of approximately $2.8 billion, consisting of $1.6 billion of cash
and cash equivalents and $4.5 billion of corporate debt outstanding.
This cash balance includes approximately $863 million received in
August 2004 in connection with the Company's issuance of approximately
38 million shares of common stock pursuant to the terms of its Upper
DECS securities. See Table 5 for more detailed information. The
Company projects year-end corporate debt, net of cash on the balance
sheet, to be approximately $4 billion, including the impact of the
Orbitz acquisition.
-- Utilized $103 million of cash for the repurchase of common stock,
net of proceeds from option exercises. For the nine months ended
September 30, 2004, the Company has utilized $669 million of cash for
the repurchase of common stock, net of proceeds from option exercises.
In addition, the Company recently:
-- Announced that it intends to distribute the mortgage and fleet
operations of PHH Corporation to its shareholders. The transaction
will be structured as a tax-free distribution of the common stock of
PHH Corporation. The Company's relocation and fuel card businesses
will remain a part of Cendant. The Company anticipates it will
establish a joint venture with Cendant Mortgage designed to preserve
the mutual cross-selling benefits that exist between the mortgage
business and the Company's residential real estate, relocation and
settlement services businesses. The spin-off is expected to take place
in the first quarter of 2005.
-- Announced an agreement to acquire Orbitz, a leading online travel
agency, for approximately $1.25 billion in cash. Orbitz is debt-free
and, as of June 30, 2004, had approximately $200 million of cash on
hand. The acquisition will place Cendant in a leading position in the
domestic online travel distribution business and is expected to be
accretive to EPS by $0.00 - $0.01 in 2005 and $0.07 - $0.09 in 2006.
It is expected to close in fourth quarter 2004 and adversely impact
2004 EPS by approximately $0.02 due to transaction related expenses and
integration costs.
-- Announced a regular quarterly cash dividend of $0.09 per common
share payable December 14, 2004 to stockholders of record as of
November 22, 2004 and an increase in the Company's stock repurchase
program by $500 million plus an additional repurchase amount equal to
the principal amount of any of the Company's 3-7/8 % convertible senior
debentures due 2011 which are converted into shares of Cendant common
stock in the fourth quarter of 2004.
-- Announced its intent to purchase Ramada International Hotels & Resorts,
primarily a franchised brand of 204 hotels in 26 countries and
territories, from Marriott International Inc. This transaction will
complete the acquisition of all worldwide trademark rights for the
Ramada(R) brand by Cendant's Hotel Group. Cendant has operated the
Ramada franchise system in the United States since 1990.
2004 Outlook
The Company projects the following EPS for 2004:
Fourth Full
Quarter(a) Year(a)
2004 EPS $0.32 - $0.33(b) $1.95 - $1.96(d)(e)
2004 EPS from Continuing Operations $0.32 - $0.33(b) $1.70 - $1.71(c)(e)
2003 EPS from Continuing Operations $0.29(c) $1.38(c)
% Increase in EPS from
Continuing Operations 10% - 14% 23% - 24%
(a) 2003 results and 2004 projections do not reflect any impact from the
planned distribution of the mortgage and fleet operations of PHH
Corporation to the Company's shareholders.
(b) Projection reflects a negative $0.02 impact from transaction-related
expenses and integration costs associated with the Orbitz acquisition,
more than offset by a positive impact from the favorable resolution of
certain tax matters. It also reflects a $0.02 - $0.03 reduction due
primarily to lower mortgage production volumes and a car rental
pricing environment consistent with the third quarter.
(c) 2003 results and full year 2004 projections have been revised to
recast the results of Jackson Hewitt Tax Service as a discontinued
operation as required by GAAP.
(d) Includes $0.06 EPS from Discontinued Operations from Jackson Hewitt
recorded in first and second quarter 2004 and the $0.19 gain on sale
of Jackson Hewitt recorded in second quarter 2004.
(e) Includes the one-time tax benefit of $0.10 per share recorded in first
quarter 2004 related to the transaction with Trilegiant. Excluding
this benefit, 2004 EPS from Continuing Operations is expected to
increase 16% - 17% year-over-year.
The Company also announced the following detailed financial projections for full year 2004 (in millions):
Full Year 2003 Full Year 2004
Actual(a) Projected(a)(b)
Revenue
Real Estate Franchise and Operations $5,258 $6,125 - 6,175
Mortgage Services 1,483 1,100 - 1,160
Total Real Estate Services 6,741 7,225 - 7,335
Hospitality Services 2,523 2,830 - 2,900
Travel Distribution Services 1,659 1,800 - 1,850
Vehicle Services 5,851 6,100 - 6,150
Total Travel Services 10,033 10,730 -10,900
Marketing Services 1,224 1,450 - 1,500
Total Reportable Segments $17,998 $19,480 -19,600
Corporate and Other 17 20 - 50
Total Company $18,015 $19,500 -19,650
EBITDA
Real Estate Franchise and Operations $892 $1,030 - 1,050
Mortgage Services 380 200 - 225
Hospitality Services 633 740 - 765
Travel Distribution Services 459 470 - 500
Vehicle Services 442 600 - 625
Marketing Services 296 340 - 365
Total Reportable Segments $3,102 $3,440 - 3,460
Corporate and Other (38) (5)- 0
Depreciation and amortization (c) (507) (565 - 560)
Amortization of pendings/listings (20) (20 - 15)
Interest expense, net (c) (d) (364) (270 - 265)
Pretax income $2,173 $2,580 - 2,620
Provision for income taxes (e) (722) (749 - 765)
Minority interest (21) (10 - 5)
Income from continuing operations $1,430 $1,821 - 1,850
Diluted weighted average shares outstanding (f) 1,040 1,080 - 1,070
(a) Full year 2003 results and 2004 projections have been revised to
recast the results of Jackson Hewitt Tax Service as a discontinued
operation as required by GAAP, but do not reflect any impact from
the planned distribution of the mortgage and fleet operations of
PHH Corporation to the Company's shareholders.
(b) 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.
(c) 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.
(d) 2003 and 2004 interest expense includes approximately $58 million and
$18 million, respectively, of losses on the early extinguishment of
debt. In addition, 2004 interest expense reflects interest income of
approximately $26 million in the third quarter related to a federal
tax refund, which had been included in our prior projections.
(e) 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.
(f) Forecasted diluted weighted average shares outstanding for 2004
reflect the settlement of the Upper DECS, the treatment of the
Company's 3-7/8% notes under the "if converted" method in fourth
quarter 2004, and incremental dilution from employee stock options,
net of actual and anticipated common stock repurchases.
Investor Conference Call
Cendant will host a conference call to discuss the second quarter results on Thursday, October 21, 2004, at 11:00
a.m. (EDT). Investors may access the call live at http://www.cendant.com or by dialing (312) 461-9314. A web replay
will be available at http://www.cendant.com following the call. A telephone replay will be available from 2:00
p.m. (EDT) on October 21, 2004 until 8:00 p.m. (EDT) on October 28, 2004 at (719) 457-0820, access code: 813979.
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 http://www.cendant.com or by calling 877-4-INFOCD (877-446-3623).
Statements about future results made in this release, including the projections, the planned spin-off of PHH Corporation
and the pending acquisition of Orbitz, 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 Form 10-Q for the quarter ended June 30,
2004 and Forms 8-K dated September 29, 2004 and October 13, 2004 regarding the acquisition of Orbitz and the spin-off
of PHH Corporation, respectively.
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 http://www.cendant.com.
Table 1
Cendant Corporation and Subsidiaries
SUMMARY DATA SHEET
(Dollars in millions, except per share data)
Third Quarter
2004 2003 % Change
Income Statement Items
Net Revenues $5,363 $5,085 5%
Pretax Income (A) 890 746 19%
Income from
Continuing Operations 593 490 21%
EPS from Continuing
Operations (diluted) 0.56 0.47 19%
Cash Flow Items
Net Cash Provided by
Operating Activities $2,363 $1,218
Free Cash Flow (B) 729 1,011
Payments Made for Current
Period Acquisitions,
Net of Cash Acquired (48) (36)
Net Debt Repayments (228) (444)
Issuance of Common Stock in
Connection with the Upper DECS 863 -
Net Repurchases of Common Stock (103) (128)
Payment of Dividends (93) -
As of As of
September 30, 2004 December 31, 2003
Balance Sheet Items
Total Corporate Debt $4,465 $6,002
Cash and Cash Equivalents 1,633 839
Total Stockholders' Equity 12,411 10,186
Reportable Operating Segment Results
Third Quarter
2004 2003 % Change
Net Revenues
Real Estate Franchise
and Operations $1,774 $1,593 11%
Mortgage Services 283 411 (31%)
Total Real Estate Services 2,057 2,004 3%
Hospitality Services 789 696 13%
Travel Distribution Services 437 424 3%
Vehicle Services 1,693 1,610 5%
Total Travel Services 2,919 2,730 7%
Marketing Services 389 358 9%
Total Reportable Segments 5,365 5,092 5%
Corporate and Other (2) (7) *
Total Company $5,363 $5,085 5%
EBITDA
Real Estate Franchise
and Operations $358 $325 10%
Mortgage Services 55 111 (50%)
Hospitality Services 211 189 12%
Travel Distribution Services 123 119 3%
Vehicle Services 221 187 18%
Marketing Services 111 67 66%
Total Reportable Segments 1,079 998 8%
Corporate and Other (15) (43) *
Total Company $1,064 $955
Reconciliation of EBITDA
to Pretax Income
Total Company EBITDA $1,064 $955
Less: Non-program related
depreciation and amortization 136 126
Non-program related
interest expense, net 33 74
Early extinguishment of debt - 4
Amortization of pendings
and listings 5 5
Pretax Income (A) $890 $746 19%
* 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 7 for the underlying calculations and reconciliations.
Table 2
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003(*) 2004 2003(*)
Revenues
Service fees and membership, net $3,727 $3,503 $10,363 $9,305
Vehicle-related 1,630 1,574 4,449 4,317
Other 6 8 69 49
Net revenues 5,363 5,085 14,881 13,671
Expenses
Operating 2,777 2,621 7,717 7,063
Vehicle depreciation, lease
charges and interest, net 667 651 1,882 1,865
Marketing and reservation 517 489 1,514 1,292
General and administrative 347 354 1,122 1,024
Non-program related depreciation
and amortization 136 126 395 378
Non-program related interest, net:
Interest expense, net 33 74 184 235
Early extinguishment of debt - 4 18 58
Acquisition and integration
related costs:
Amortization of pendings
and listings 5 5 13 12
Other (9) 15 (3) 30
Total expenses 4,473 4,339 12,842 11,957
Income before income taxes and
minority interest 890 746 2,039 1,714
Provision for income taxes 296 252 570 566
Minority interest, net of tax 1 4 6 17
Income from continuing operations 593 490 1,463 1,131
Income (loss) from discontinued
operations, net of tax - (4) 64 46
Gain on disposal of discontinued
operations, net of tax - - 198 -
Income before cumulative effect of
accounting changes 593 486 1,725 1,177
Cumulative effect of accounting
changes, net of tax - (293) - (293)
Net income $593 $193 $1,725 $884
Earnings per share
Basic
Income from continuing
operations $0.57 $0.48 $1.43 $1.11
Income from discontinued
operations - - 0.06 0.04
Gain on disposal of discontinued
operations - - 0.20 -
Cumulative effect of accounting
changes - (0.29) - (0.28)
Net income $0.57 $0.19 $1.69 $0.87
Diluted
Income from continuing
operations $0.56 $0.47 $1.38 $1.09
Income from discontinued
operations - - 0.06 0.04
Gain on disposal of
discontinued operations - - 0.19 -
Cumulative effect of
accounting changes - (0.28) - (0.28)
Net income $0.56 $0.19 $1.63 $0.85
Weighted average shares
Basic 1,036 1,013 1,024 1,019
Diluted 1,064 1,039 1,059 1,039
(*) Certain reclassifications have been made to conform to the current
presentation.
Table 3
(page 1 of 2)
Cendant Corporation and Affiliates
SEGMENT REVENUE DRIVER ANALYSIS
(Revenue dollars in thousands)
Third Quarter
2004 2003 % Change
REAL ESTATE FRANCHISE AND OPERATIONS SEGMENT
Real Estate Franchise (A)
Closed Sides 516,747 478,308 8%
Average Price $201,952 $181,232 11%
Royalty and Marketing Revenue $145,477 $126,367 15%
Total Revenue $152,553 $135,467 13%
Real Estate Brokerage
Closed Sides 137,805 142,259 (3%)
Average Price $412,058 $353,611 17%
Net Revenue from
Real Estate Transactions $1,481,887 $1,327,563 12%
Total Revenue $1,494,002 $1,338,617 12%
Relocation
Service Based Revenue
(Referrals, Outsourcing, etc.) $90,120 $81,657 10%
Asset Based Revenue (Home Sale
Closings and Financial Income) $37,831 $37,562 1%
Total Revenue $127,951 $119,219 7%
MORTGAGE SERVICES SEGMENT
Mortgage
Production Loans Closed to be
Securitized (millions) $8,217 $21,121 (61%)
Other Production Loans Closed
(millions) $4,469 $6,473 (31%)
Production Loans Sold (millions) $8,686 $19,228 (55%)
Average Servicing Loan Portfolio
(millions) $140,208 $125,244 12%
Production Revenue $122,256 $428,206 (71%)
Gross Recurring Servicing Revenue $122,038 $112,096 9%
Amortization and Impairment of
Mortgage Servicing Rights $(321,026) $(282,285) *
Hedging Activity for Mortgage
Servicing Rights $240,026 $18,295 *
Other Servicing Revenue (B) $11,913 $(1,064) *
Net Revenue from Mortgage
Servicing Activities $52,951 $(152,958) *
Total Revenue $175,207 $275,248 (36%)
Settlement Services
Title and Appraisal Units 97,762 157,305 (38%)
Total Revenue $107,823 $135,889 (21%)
HOSPITALITY SERVICES SEGMENT
Lodging
RevPAR $33.39 $30.97 8%
Weighted Average Rooms Available 469,387 485,491 (3%)
Royalty, Marketing and
Reservation Revenue $112,765 $108,828 4%
Total Revenue $132,349 $123,124 7%
RCI
Average Subscriptions 3,073,811 2,954,236 4%
Number of Exchanges (C) 325,189 357,003 (9%)
Exchange and Subscription
Revenue (C) $94,676 $93,053 2%
Points and Rental Transaction
Revenue (C) $25,814 $22,210 16%
Other Revenue (C) $26,734 $15,498 72%
Total Revenue $147,224 $130,761 13%
Fairfield Resorts
Tours 160,239 164,880 (3%)
Total Revenue $274,657 $253,225 8%
Trendwest Resorts
Tours 85,581 109,863 (22%)
Total Revenue $149,368 $157,663 (5%)
Vacation Rental Group
Cottage Weeks Sold 223,850 132,148 69%
Total Revenue (D) $85,871 $31,807 170%
* Not meaningful.
(A) The 2003 amounts have been revised to reflect a new presentation of
drivers adopted during second quarter 2004 whereby contributions from
NRT, our wholly-owned real estate brokerage firm, have been excluded.
All prior period amounts have been revised to reflect this new
presentation and are available on the Cendant website, which may be
accessed at http://www.cendant.com. During the three months ended
September 30, 2004 and 2003, intercompany royalties paid by NRT were
$96 million and $87 million, respectively.
(B) Includes net interest expense of $1 million and $16 million for the
three months ended September 30, 2004 and 2003, respectively.
(C) The 2003 amounts have been revised to reflect a new presentation of
drivers during 2004. All prior period amounts have been revised to
reflect this new presentation and are available on the Cendant
website, which may be accessed at http://www.cendant.com.
(D) The 2004 amount includes the revenues of businesses acquired during
or subsequent to the third quarter of 2003 and is therefore not
comparable to the 2003 amount.
Table 3
(page 2 of 2)
Cendant Corporation and Affiliates
SEGMENT REVENUE DRIVER ANALYSIS
(Revenue dollars in thousands)
Third Quarter
2004 2003 % Change
TRAVEL DISTRIBUTION SERVICES SEGMENT (A)
Transaction Volume, by Region (000's)
United States 25,349 25,203 1%
International 41,926 43,836 (4%)
Transaction Volume, by Channel (000's)
Traditional Agency 60,381 64,319 (6%)
Online 6,894 4,720 46%
Air/Non-Air Transaction Volume (000's)
Air 61,319 63,006 (3%)
Car and Hotel 5,956 6,033 (1%)
Galileo GDS/Other Volume (000's)
Galileo GDS 66,885 68,779 (3%)
Other 390 260 50%
Galileo Revenue $370,822 $379,277 2%
Online Gross Bookings (000's) (C) $380,919 $274,128 39%
Offline Gross Bookings (000's) (C) $173,567 $253,257 (31%)
Total Revenue (B) $437,010 $423,968 3%
VEHICLE SERVICES SEGMENT
Avis
Rental Days (000's) 15,983 15,784 1%
Time and Mileage Revenue per Day $40.55 $41.21 (2%)
Average Length of Rental
(stated in Days) 3.83 3.81 1%
Total Revenue (C) $733,438 $731,181 -
Budget (D)
Car Rental Days (000's) 8,600 7,896 9%
Time and Mileage Revenue per Day $34.43 $37.21 (7%)
Average Length of Rental
(stated in Days) 4.22 4.21 -
Car Rental Revenue (C) $348,519 $351,790 (1%)
Truck Rental Revenue (C) $160,952 $150,934 7%
Total Revenue (C) $509,471 $502,724 1%
Vehicle Management and Fuel Card Services
Average Fleet (Leased) 317,943 313,858 1%
Average Number of Cards (000's) 4,127 3,833 8%
Service Based Revenue $67,840 $58,824 15%
Asset Based Revenue $382,672 $317,282 21%
Total Revenue $450,512 $376,106 20%
MARKETING SERVICES SEGMENT
Loyalty/Insurance Marketing Revenue $157,445 $155,472 1%
Individual Membership Revenue $233,464 $203,178 15%
* Not meaningful.
(A) The 2003 drivers have been revised to reflect a new presentation
adopted during third quarter 2004. All prior period drivers have
been revised to reflect this new presentation and are available on
the Cendant website, which may be accessed at http://www.cendant.com.
(B) The 2004 amounts include the revenues of businesses acquired during
or subsequent to the third quarter of 2003 and is therefore not
comparable to the 2003 amount.
(C) Certain reclassifications have been made to the 2003 amounts to
conform to the current presentation. All prior period amounts have
been revised to reflect this new presentation and are available on
the Cendant website, which may be accessed at http://www.cendant.com.
(D) 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 the
Company's system. All prior period amounts have been revised to
reflect this new presentation and are available on the Cendant
website, which may be accessed at http://www.cendant.com.
Table 4
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(In billions)
As of As of
September 30, 2004 December 31, 2003
Assets
Current assets:
Cash and cash equivalents $1.6 $0.8
Assets of discontinued operations - 0.6
Other current assets 3.3 3.6
Total current assets 4.9 5.0
Property and equipment, net 1.7 1.8
Goodwill 11.0 10.7
Other non-current assets 5.1 4.4
Total assets exclusive of
assets under programs 22.7 21.9
Assets under management and
mortgage programs 18.9 17.6
Total assets $41.6 $39.5
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $0.9 $1.6
Liabilities of
discontinued operations - 0.1
Other current liabilities 5.2 5.5
Total current liabilities 6.1 7.2
Long-term debt 3.6 4.4
Other non-current liabilities 1.2 1.2
Total liabilities exclusive of
liabilities under programs 10.9 12.8
Liabilities under management
and mortgage programs (*) 18.3 16.5
Total stockholders' equity 12.4 10.2
Total liabilities and
stockholders' equity $41.6 $39.5
(*) Liabilities under management and mortgage programs includes deferred
income tax liabilities of $2.7 billion and $1.4 billion as of
September 30, 2004 and December 31, 2003, respectively.
Table 5
Cendant Corporation and Subsidiaries
SCHEDULE OF CORPORATE DEBT (A)
(In millions)
Earliest
Mandatory September, June, March, December,
Redemption Maturity 30, 30, 31, 31,
Date Date 2004 2004 2004 2003
Net Debt
February n/a Zero coupon senior $- $- $- $430
2004 convertible
contingent notes
May n/a 11% senior - - 329 333
2009 subordinated notes
May n/a Zero coupon - - 7 7
2004 convertible debentures
November November 3-7/8% convertible
2004 2011 senior debentures(B) 804 804 804 804
August August
2006 2006 6-7/8% notes 849 849 849 849
January January
2008 2008 6-1/4% notes 797 797 797 797
March March
2010 2010 6-1/4% notes 349 348 348 348
January January
2013 2013 7-3/8% notes 1,191 1,190 1,190 1,190
March March
2015 2015 7-1/8% notes 250 250 250 250
August August
2006 2006 4.89% notes (C) 100 100 - -
Net hedging gains
(losses) (D) 28 (41) 99 31
Other 97 320 118 100
Total corporate
debt, excluding
Upper DECS 4,465 4,617 4,791 5,139
Plus: Upper DECS(E) - - 863 863
Total Debt 4,465 4,617 5,654 6,002
Less: Cash and
cash equivalents 1,633 566 631 839
Net Debt $2,832 $4,051 $5,023 $5,163
Net Capitalization
Total Stockholders'
Equity $12,411 $11,114 $10,637 $10,186
Total Debt
(per above) 4,465 4,617 5,654 6,002
Total
Capitalization 16,876 15,731 16,291 16,188
Less: Cash and
cash equivalents 1,633 566 631 839
Net
Capitalization $15,243 $15,165 $15,660 $15,349
Net Debt to
Net Capitalization
Ratio (F) 18.6% 26.7% 32.1% 33.6%
Total Debt to
Total Capitalization
Ratio 26.5% 29.3% 34.7% 37.1%
(A) Amounts presented herein exclude debt under management and mortgage
programs.
(B) 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.
(C) Represents amount of senior notes outstanding following the Company's
remarketing in May 2004 of the $863 million principal amount of
senior notes forming a part of the Company's Upper DECS securities.
These notes were previously pledged to the Company as security for
the holders' obligations under the forward purchase contract
component of the Upper DECS. The Company did not receive any
proceeds from the remarketing; rather, the proceeds were used to
purchase a portfolio of U.S. Treasury securities, which was pledged
to the Company as collateral for the forward purchase contracts until
the settlement of those contracts in August 2004.
(D) As of September 30, 2004, this balance represents $162 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 $134 million of mark to market
adjustments on current interest rate hedges.
(E) In May 2004, these senior notes were remarketed and as a result no
longer formed a portion of the Upper DECS. In connection with such
remarketing, the Company purchased and retired $763 million principal
amount of notes (see Note (C) above).
(F) 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 6
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Operating Activities
Net cash provided by operating
activities exclusive of management
and mortgage programs $921 $1,040 $2,240 $2,307
Net cash provided by operating
activities of management and
mortgage programs 1,442 178 1,854 1,198
Net Cash Provided by Operating
Activities 2,363 1,218 4,094 3,505
Investing Activities
Property and equipment additions (111) (111) (311) (307)
Net assets acquired, net of
cash acquired, and
acquisition-related payments (65) (99) (443) (234)
Proceeds received on asset sales 6 34 30 120
Proceeds from disposition of
businesses, net of transaction-
related payments (5) - 821 -
Other, net 2 20 42 90
Net cash provided by (used in)
investing activities exclusive of
management and mortgage programs (173) (156) 139 (331)
Management and mortgage programs:
Net change in program cash (87) 24 87 66
Net investment in vehicles 939 (285) (2,395) (1,904)
Net change in relocation receivables (47) 36 (62) (56)
Net change in mortgage servicing
rights, related derivatives and
mortgage-backed securities 130 (595) (215) (514)
935 (820) (2,585) (2,408)
Net Cash Provided by (Used in)
Investing Activities 762 (976) (2,446) (2,739)
Financing Activities
Proceeds from borrowings 7 - 26 2,588
Principal payments on borrowings (235) (444) (1,353) (3,215)
Issuances of common stock 951 121 1,347 247
Repurchases of common stock (191) (249) (1,153) (710)
Payment of dividends (93) - (237) -
Other, net - - (22) (86)
Net cash provided by (used in)
financing activities exclusive of
management and mortgage programs 439 (572) (1,392) (1,176)
Management and mortgage programs:
Proceeds from borrowings 3,701 8,945 12,145 22,570
Principal payments on borrowings (5,297) (8,216) (11,679) (21,041)
Net change in short-term borrowings (864) (38) 50 (276)
Other (4) (1) (21) (10)
(2,464) 690 495 1,243
Net Cash Provided by (Used in)
Financing Activities (2,025) 118 (897) 67
Effect of changes in exchange rates
on cash and cash equivalents (33) 10 5 (10)
Cash provided by discontinued
operations - 7 38 56
Net increase in cash
and cash equivalents 1,067 377 794 879
Cash and cash equivalents,
beginning of period 566 627 839 125
Cash and cash equivalents,
end of period $1,633 $1,004 $1,633 $1,004
Table 7
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 Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Pretax income $890 $746 $2,039 $1,714
Addback of non-cash
depreciation and amortization:
Non-program related 136 126 395 378
Pendings and listings 5 5 13 12
Tax payments, net of refunds (30) 107 (127) 58
Working capital and other (74) 90 (50) 265
Capital expenditures (111) (111) (311) (307)
Management and mortgage programs (A) (87) 48 (236) 33
Free Cash Flow 729 1,011 1,723 2,153
Current period acquisitions,
net of cash acquired (48) (36) (370) (80)
Payments related to prior
period acquisitions (17) (63) (73) (154)
Proceeds from disposition of
businesses, net (5) - 821 -
Issuance of common stock in
connection with the Upper DECS 863 - 863 -
Net repurchases of common stock (103) (128) (669) (463)
Payment of dividends (93) - (237) -
Investments and other (B) (31) 37 63 50
Net debt repayments (228) (444) (1,327) (627)
Net increase in cash and cash
equivalents (per Table 6) $1,067 $377 $794 $879
(A) 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 September 30, 2004 and 2003, the net cash flows from the
activities of management and mortgage programs are reflected on
Table 6 as follows: (i) net cash provided by operating activities of
$1,442 million and $178 million, respectively, (ii) net cash provided
by (used in) investing activities of $935 million and ($820) million,
respectively, and (iii) net cash provided by (used in) financing
activities of ($2,464) million and $690 million, respectively. For
the nine months ended September 30, 2004 and 2003, the net cash flows
from the activities of management and mortgage programs are reflected
on Table 6 as follows: (i) net cash provided by operating activities
of $1,854 million and $1,198 million, respectively, (ii) net cash
used in investing activities of ($2,585) million and ($2,408)
million, respectively, and (iii) net cash provided by financing
activities of $495 million and $1,243 million, respectively.
(B) Includes net cash provided by (used in) discontinued operations, the
effects of exchange rates on cash and cash equivalents and other
investing and financing activities.
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES
(In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Free Cash Flow (per above) $729 $1,011 $1,723 $2,153
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 (935) 820 2,585 2,408
Financing activities of
management and mortgage
programs 2,464 (690) (495) (1,243)
Capital expenditures 111 111 311 307
Proceeds received on
asset sales (6) (34) (30) (120)
Net Cash Provided by Operating
Activities (per Table 6) $2,363 $1,218 $4,094 $3,505
Full Year 2004 Projected
Free Cash Flow $2,000 - $2,100
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 490 - 540
Cash inflows included in Free
Cash Flow but not reflected
in Net Cash Provided by
Operating Activities:
Proceeds received
on asset sales (50) - (30)
Net Cash Provided by
Operating Activities $4,415 - $5,235
Source: Cendant Corporation