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Press Release: Cendant Corporation
July 27, 2005
NEW YORK, July 25 /PRNewswire-FirstCall/ -- Cendant Corporation (NYSE: CD - News) today reported results for second
quarter 2005. Revenue totaled $4.7 billion, an increase of 8% over second quarter 2004, reflecting growth in the
Company's core real estate and travel services businesses. EPS from Continuing Operations was $0.37 and Net Income
was $387 million.
Cendant's President and Chief Financial Officer, Ronald L. Nelson, stated: "During the second quarter we benefited
from continuing strength in our residential real estate businesses and improving trends in our travel operations,
which not only enabled us to generate record second quarter revenues in virtually all of our business units, but
also caused us to exceed our earnings per share projection.
"The underlying health of each of our businesses is clearly demonstrated by their organic revenue growth during
the second quarter. EBITDA growth also was strong, despite our comparison to 2004 being challenged by a number
of items, including the absence of earnings from our former mortgage business, an unusually robust real estate
market in second quarter 2004 and the absence of certain one-time benefits recorded in our Travel Content and Real
Estate divisions in 2004. Looking ahead to the second half of 2005 and full year 2006, we expect growth to accelerate
as we begin to reap the benefits of the investments we have been making in our core businesses in 2005.
"We have also announced today that, concurrent with the close of the anticipated sale of our Marketing Services
Division, we intend, subject to Board approval, to increase our common stock repurchase target from $1 billion
during 2005 to $2 billion over the next 18 months."
Second Quarter 2005 Results of Core Operating Segments
The following discussion of operating results focuses on revenue and EBITDA for each of our core operating segments.
Revenue and EBITDA are expressed in millions.
Real Estate Services
(Consisting of the Company's real estate franchise brands, brokerage operations, relocation services, settlement
services and, subsequent to January 31, 2005, the mortgage origination venture with PHH Corporation)
2005 2004 % change
Revenue $ 2,043 $ 1,908 7%
EBITDA $ 393 $ 383 3%
Revenue and EBITDA increased primarily due to growth in royalties earned by our real estate franchise businesses,
commissions earned by our NRT real estate brokerage unit, and fees earned by Cendant Mobility, our relocation services
business. Real estate franchise royalty revenue increased 13%, primarily due to a 14% increase in the average price
of homes sold and a 2% increase in closed sides volume. Revenue generated by NRT increased 7% due to tuck-in acquisitions
as well as organic growth resulting from a 13% increase in the average price of homes sold, partially offset by
an expected 8% decline in closed sides volume reflecting unusually low inventories of homes for sale in the coastal
regions where NRT is concentrated. Revenue generated by Cendant Mobility increased 18%, reflecting higher government
homesale volume and an overall increase in transaction fees. In addition, year-over-year EBITDA comparisons were
negatively impacted by the absence of the previously disclosed gain on the sale of non-core assets within our settlement
services business recorded in second quarter 2004; by operating costs that were borne in 2004 by PHH; and by the
timing of certain marketing campaigns and certain other expense increases incurred primarily to support growth
in our brokerage and relocation services businesses.
Hospitality Services
(Consisting of the Company's franchised lodging brands, timeshare exchange and vacation rental businesses)
2005 2004 % change
Revenue $ 367 $ 320 15%
EBITDA $ 100 $ 120 (17%)
During the quarter, revenue increased in all of our hospitality services businesses. Revenue from RCI, our timeshare
exchange business, increased 7%, reflecting a 6% increase in exchange and subscription fee revenue and a 19% increase
in other timeshare points and rental transaction revenues. Revenue from our lodging business grew 12%, including
a 7% increase in revenue per available room on an organic basis, the addition of Ramada International and an incremental
$3 million of revenue from TripRewards. Revenue from our vacation rental business increased 38% due to the 2004
acquisitions of Landal GreenParks and Canvas Holidays Limited (without a material contribution to EBITDA due to
the timing of the acquisitions) as well as organic growth in our remaining vacation rental businesses of 6%. The
favorable impact of revenue growth on EBITDA was offset by $11 million of incremental investment in marketing programs,
including TripRewards, and the timing of certain other expenses. EBITDA comparisons were also negatively impacted
by the absence of a previously disclosed $15 million settlement of a lodging franchisee receivable recorded in
second quarter 2004.
Timeshare Resorts
(Consisting of the Company's timeshare sales and development businesses)
2005 2004 % change
Revenue $ 436 $ 381 14%
EBITDA $ 73 $ 58 26%
Revenue and EBITDA increased primarily due to a 10% increase in tour volume and an 8% increase in average price
per sales transaction partially offset by a 5% reduction in close rate. Tour flow and average price were enhanced
by our expansion in premium destinations including Hawaii, Las Vegas and Orlando and the opening of new sales offices.
In addition, revenue and EBITDA were positively impacted by increased consumer financing income and by proceeds
received in connection with the disposal of a parcel of land that was no longer needed for development. The gain
on the disposal of land was consistent with the Company's previous forecast.
Vehicle Rental
(Consisting of the Company's car and truck rental businesses)
2005 2004 % change
Revenue $ 1,224 $ 1,119 9%
EBITDA $ 128 $ 140 (9%)
Revenue increased in our domestic and international car rental operations as well as our truck rental business.
Car rental revenue grew 10% worldwide due to a 15% increase in rental day volume, which was partially offset by
a 5% decrease in price. The reduced pricing resulted in part from the Company's repositioning of Budget to be more
competitive with other leisure-focused car rental brands, which in turn had a positive impact on rental day volume
growth. In addition, pricing at both Avis and Budget was negatively impacted by higher industry-wide fleet levels.
EBITDA, however, declined due to higher vehicle depreciation and other volume-related costs resulting from growth
in our rental fleet to support increased demand and the absence of significant incentives from car manufacturers
available in second quarter 2004. Excluding the impact of these incentives, the EBITDA margin would be consistent
with the prior year period. Fleet costs are expected to rise throughout the balance of 2005 and into 2006 as the
model year 2006 vehicles cycle into our inventory. In order to offset these increased vehicle costs in future periods,
we recently raised our car rental pricing at both Avis and Budget. To date, these price increases appear to have
been successful.
Travel Distribution Services
(Consisting of electronic global distribution services for the travel industry, corporate and consumer online travel
services, and travel agency services)
2005 2004 % change
Revenue $ 661 $ 448 48%
EBITDA $ 143 $ 118 21%
Revenue and EBITDA increased due to growth both in our online travel agency and other consumer travel businesses
and in our Galileo GDS business. The acquisitions of Orbitz, Gullivers and ebookers contributed $202 million of
revenue and $25 million of EBITDA, despite costs incurred to integrate these businesses. For the balance of 2005,
these acquisitions are expected to contribute more than $125 million to EBITDA as synergies begin to be realized.
Apart from these acquisitions, revenue in our owned travel agency businesses increased $14 million, or 40% organically,
primarily driven by 47% growth in online gross bookings, substantially at CheapTickets.com, which also achieved
higher margins. Revenue from GDS and Supplier Services grew $13 million, or 3%, primarily due to a 6% increase
in global GDS segments and increased hosting services revenue, partially offset by a decline in domestic air yield.
In addition, revenue and EBITDA comparisons were negatively impacted by $16 million and $4 million, respectively,
due to the transfer of our membership travel business to the discontinued Marketing Services Division effective
January 1, 2005. EBITDA comparisons were also negatively impacted by $10 million reduction in expenses in 2004
relating to a benefit plan change.
Recent Achievements and Strategic Initiatives
During the second quarter, the Company made progress toward its cash flow generation and share repurchase goals:
* Generated Net Cash Provided by Operating Activities of $1 billion and
Free Cash Flow of $702 million. Year-to-date, the Company generated
Net Cash Provided by Operating Activities of $1.6 billion and Free Cash
Flow of $916 million. For the full year 2005, the Company projects
more than $3 billion of Net Cash Provided by Operating Activities and
$1.8 to $2.0 billion of Free Cash Flow.
* Utilized $229 million of cash for the repurchase of common stock
($158 million net of proceeds from option exercises). Year-to-date,
the Company utilized $460 million of cash for the repurchase of common
stock ($269 million net of proceeds from option exercises).
In addition, the Company has:
* Received an upgrade of its senior debt rating from Standard & Poor's,
from BBB to BBB+.
* Completed a substantial portion of the integration of Orbitz'
operations into Cendant's, including the successful migration of
CheapTickets.com to Orbitz' technology platform, and made progress
toward the integration of ebookers plc and Gullivers Travel Associates
consistent with the Company's plans to rationalize those businesses and
to achieve synergies.
* Declared a quarterly dividend of $0.11 per share in the third quarter,
a 22% increase versus the dividend previously paid to shareholders.
Other Items
* Depreciation and Amortization - Second quarter 2005 results include
$28 million of incremental depreciation and amortization related to the
Orbitz, Gullivers and ebookers acquisitions. This amount exceeds the
expected longer-term depreciation and amortization expense associated
with these businesses, due to the impact of purchase accounting and
integration activities.
* Discontinued Operations - Includes income from the Company's Marketing
Services Division and, in prior periods, results of operations of the
Company's former Jackson Hewitt, Wright Express, fleet and appraisal
units, which have been disposed.
Outlook
The Company's outlook for the remainder of the year remains unchanged as the $0.02 per share of incremental earnings recorded in the second quarter is offset by a reduction in the range by $0.01 per share in each of the last two quarters. These reductions reflect anticipated increases in the Company's costs for rental cars and the likely delay in receipt of a contractual payment, anticipated to be recorded in Corporate and Other, from the fourth quarter into 2006.
Third Fourth Full
Quarter Quarter Year
2005 EPS from Continuing
Operations before
Transaction Related Charges $0.46 - $0.50 $0.28 - $0.32 $1.35 - $1.42
2005 Transaction
Related Charges(a) - - ($0.20)
2005 EPS from
Continuing Operations(a) $0.46 - $0.50 $0.28 - $0.32 $1.15 - $1.22
2006 EPS from
Continuing Operations $1.62 - $1.72
(a) Includes a non-cash impairment charge of $0.17 per share in connection
with the spin-off of PHH and a $0.03 per share charge related to
restructuring activities and other transaction related costs, both of
which were recorded in first quarter 2005.
The Company announced the following detailed financial projections for
full year 2005:
(in millions) Full Year 2004 Full Year 2005
Actual Projected (a)
Revenue
Real Estate Services $6,552 $7,150 - 7,350
Hospitality Services 1,340 1,500 - 1,575
Timeshare Resorts 1,544 1,650 - 1,725
Vehicle Rental 4,424 4,750 - 5,000
Total Travel Content $7,308 $7,900 - 8,300
Travel Distribution Services 1,788 2,600 - 2,700
Total Travel $9,096 $10,500 - 11,000
Total Core Operating Segments $15,648 $17,650 - 18,350
Mortgage Services (b) 700 46
Corporate and Other 56 4 - 54
Total Company $16,404 $17,700 - 18,450
EBITDA (c)
Real Estate Services $1,131 $1,175 - 1,225
Hospitality Services 460 485 - 510
Timeshare Resorts 254 265 - 290
Vehicle Rental 467 450 - 500
Total Travel Content $1,181 $1,200 - 1,300
Travel Distribution Services 466 640 - 670
Total Travel $1,647 $1,840 - 1,970
Total Core Operating Segments $2,778 $3,070 - 3,130
Mortgage Services (b) (d) 97 (181)
Corporate and Other (66) (180 - 150)
Depreciation and amortization (e) (483) (550 - 530)
Amortization of pendings/listings (16) (27 - 20)
Interest expense, net (e) (f) (263) (200 - 180)
Pretax income (c) (d) $2,047 $1,932 - 2,069
Provision for income taxes (674) (710 - 760)
Minority interest (8) (2 - 4)
Income from continuing operations(c)(d) $1,365 $1,220 - 1,305
Diluted weighted average shares outstanding(g) 1,064 1,070 - 1,060
(a) 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.
(b) Reflects the results of the Company's former mortgage unit for the
full year in 2004 but only for the month of January in 2005, due to
the spin-off of PHH Corporation on January 31, 2005.
(c) 2005 includes approximately $54 million of pretax charges related to
restructuring activities and other transaction related costs,
approximately $51 million of which was recorded in the first six
months of 2005.
(d) 2005 includes the previously disclosed non-cash impairment charge
recorded in connection with the spin-off of PHH of $180 million
($0.17 per share).
(e) Depreciation and amortization excludes amounts related to our assets
under management programs, and interest expense excludes amounts
related to our debt under management programs, both of which are
already reflected in EBITDA.
(f) 2005 interest expense includes the reversal of $73 million of accrued
interest in the first quarter related to a litigation settlement.
(g) Diluted weighted average shares outstanding is expected to increase
modestly in 2005 due primarily to the full-year impact of the
settlement of the Upper DECS securities in August 2004, which resulted
in the issuance of 38 million shares of Cendant common stock. Our
diluted shares outstanding are expected to decrease throughout 2005
due to share repurchases. However, diluted shares outstanding may be
influenced by factors outside of the Company's control, including
Cendant's stock price.
Investor Conference Call
Cendant will host a conference call to discuss the second quarter results on Tuesday, July 26, 2005, at 11:00 a.m.
(ET). Investors may access the call live at http://www.cendant.com or by dialing 913-981-5532. 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.
(ET) on July 26, 2005 until midnight (ET) on August 2, 2005 at 719-457-0820, access code: 4681275.
Cendant Corporation is primarily a provider of travel and residential real estate services. With approximately
85,000 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
Forward Looking Statements
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 Form
10-Q for the period ended March 31, 2005.
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. 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.
In connection with the disposition of the Marketing Services Division, the transaction is subject to a number of
uncertainties and there can be no assurances that a transaction will be consummated during the time period expected
by Cendant. The ability to enter into the transaction is subject to execution of definitive documentation relating
to the transaction, the ability of such purchasers to finance the transaction, changes in the business or prospects
of the Marketing Services Division and receipt of any necessary consents and/or regulatory approvals.
This release includes certain non-GAAP financial measures as defined under SEC rules. As required by SEC rules,
important information regarding such measures is contained on Table 9 to this release.
Table 1
(part 1 of 2)
Cendant Corporation and Subsidiaries
SUMMARY DATA SHEET
(Dollars in millions, except per share data)
Second Quarter
2005 2004 % Change
Income Statement Items
Net Revenues $4,735 $4,404 8%
Pretax Income (A) 588 633 (7%)
Income from Continuing Operations 392 420 (7%)
EPS from Continuing Operations (diluted) 0.37 0.40 (8%)
Cash Flow Items
Net Cash Provided by
Operating Activities $1,035 $580
Free Cash Flow (B) 702 553
Payments Made for Current Period
Acquisitions, Net of Cash Acquired (1,111) (175)
Net Debt Repayments (64) (1,106)
Net Repurchases of Common Stock (158) (161)
Payment of Dividends (96) (72)
As of As of
June 30, December 31,
2005 2004
Balance Sheet Items
Total Corporate Debt $4,922 $4,330
Cash and Cash Equivalents 623 467
Total Stockholders' Equity 11,234 12,695
Segment Results
Second Quarter
2005 2004 % Change
Net Revenues
Real Estate Services $2,043 $1,908 7%
Hospitality Services 367 320 15%
Timeshare Resorts 436 381 14%
Vehicle Rental 1,224 1,119 9%
Total Travel Content 2,027 1,820 11%
Travel Distribution Services 661 448 48%
Total Travel 2,688 2,268 19%
Total Core Operating Segments 4,731 4,176 13%
Mortgage Services - 217 *
Corporate and Other 4 11 *
Total Company $4,735 $4,404 8%
EBITDA ©
Real Estate Services $393 $383 3%
Hospitality Services 100 120 (17%)
Timeshare Resorts 73 58 26%
Vehicle Rental 128 140 (9%)
Total Travel Content 301 318 (5%)
Travel Distribution Services 143 118 21%
Total Travel 444 436 2%
Total Core Operating Segments 837 819 2%
Mortgage Services - 58 *
Corporate and Other (36) (39) *
Total Company $801 $838 (4%)
Reconciliation of EBITDA to Pretax Income
Total Company EBITDA $801 $838
Less: Non-program related depreciation
and amortization 140 113
Non-program related interest
expense, net 70 70
Early extinguishment of debt - 18
Amortization of pendings and listings 3 4
Pretax Income (A) $588 $633 (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.
See Table 2 for a reconciliation of Pretax Income to Net Income.
(B) See Table 9 for a description of Free Cash Flow and Table 8 for the
underlying calculations.
© See Table 9 for a description of EBITDA.
Table 1
(part 2 of 2)
Cendant Corporation and Subsidiaries
SUMMARY DATA SHEET
(Dollars in millions, except per share data)
Six Months Ended June 30,
2005 2004 % Change
Income Statement Items
Net Revenues $8,612 $7,943 8%
Pretax Income (A) 767 929 (17%)
Income from Continuing Operations 454 620 (27%)
EPS from Continuing Operations (diluted) 0.42 0.59 (29%)
Cash Flow Items
Net Cash Provided by
Operating Activities $1,598 $926
Free Cash Flow (B) 916 815
Payments Made for Current Period
Acquisitions, Net of Cash Acquired (1,504) (275)
Net Debt Borrowings (Repayments) 533 (1,097)
Net Repurchases of Common Stock (269) (566)
Payment of Dividends (192) (144)
As of As of
June 30, December 31,
2005 2004
Balance Sheet Items
Total Corporate Debt $4,922 $4,330
Cash and Cash Equivalents 623 467
Total Stockholders' Equity 11,234 12,695
Segment Results
Six Months Ended June 30,
2005 2004 % Change
Net Revenues
Real Estate Services $3,452 $3,124 10%
Hospitality Services 762 651 17%
Timeshare Resorts 805 731 10%
Vehicle Rental 2,312 2,120 9%
Total Travel Content 3,879 3,502 11%
Travel Distribution Services 1,213 900 35%
Total Travel 5,092 4,402 16%
Total Core Operating Segments 8,544 7,526 14%
Mortgage Services 46 370 *
Corporate and Other 22 47 *
Total Company $8,612 $7,943 8%
EBITDA ©
Real Estate Services $554 $515 8%
Hospitality Services 225 246 (9%)
Timeshare Resorts 113 101 12%
Vehicle Rental 194 208 (7%)
Total Travel Content 532 555 (4%)
Travel Distribution Services 272 241 13%
Total Travel 804 796 1%
Total Core Operating Segments 1,358 1,311 4%
Mortgage Services (D) (181) 59 *
Corporate and Other (75) (44) *
Total Company $1,102 $1,326 (17%)
Reconciliation of EBITDA to Pretax Income
Total Company EBITDA $1,102 $1,326
Less: Non-program related
depreciation and amortization 276 224
Non-program related interest
expense, net 53 147
Early extinguishment of debt - 18
Amortization of pendings and listings 6 8
Pretax Income (A) $767 $929 (17%)
* Not meaningful.
(A) Referred to as "Income before income taxes and minority interest" on
the Consolidated Condensed Statements of Income presented on Table 2.
See Table 2 for a reconciliation of Pretax Income to Net Income.
(B) See Table 9 for a description of Free Cash Flow and Table 8 for the
underlying calculations.
© See Table 9 for a description of EBITDA.
(D) The 2005 amount includes a $180 million non-cash valuation charge
associated with the PHH spin-off.
Table 2
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In millions, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Revenues
Service fees and membership, net $3,501 $3,267 $6,258 $5,763
Vehicle-related 1,224 1,119 2,312 2,120
Other 10 18 42 60
Net revenues 4,735 4,404 8,612 7,943
Expenses
Operating 2,734 2,576 4,986 4,626
Vehicle depreciation, lease charges
and interest, net 373 284 697 593
Marketing and reservation 456 382 880 737
General and administrative 359 322 695 656
Non-program related depreciation
and amortization 140 113 276 224
Non-program related interest, net:
Interest expense, net 70 70 53 147
Early extinguishment of debt - 18 - 18
Acquisition and integration
related costs:
Amortization of pendings
and listings 3 4 6 8
Other 10 2 21 5
Restructuring and transaction-
related charges 2 - 51 -
Valuation charge associated with
PHH spin-off - - 180 -
Total expenses 4,147 3,771 7,845 7,014
Income before income taxes and
minority interest 588 633 767 929
Provision for income taxes 195 212 311 303
Minority interest, net of tax 1 1 2 6
Income from continuing operations 392 420 454 620
Income (loss) from discontinued
operations, net of tax (*) (9) 73 (15) 314
Gain (loss) on disposal of
discontinued operations, net of tax:
PHH valuation and transaction-
related charges - - (312) -
Gain on disposal 4 198 179 198
Net income $387 $691 $306 $1,132
Earnings per share
Basic
Income from continuing operations $0.37 $0.41 $0.43 $0.61
Income (loss) from discontinued
operations - 0.07 (0.01) 0.31
Gain (loss) on disposal of
discontinued operations - 0.20 (0.13) 0.19
Net income $0.37 $0.68 $0.29 $1.11
Diluted
Income from continuing operations $0.37 $0.40 $0.42 $0.59
Income (loss) from discontinued
operations (0.01) 0.07 (0.01) 0.29
Gain (loss) on disposal of
discontinued operations - 0.19 (0.13) 0.19
Net income $0.36 $0.66 $0.28 $1.07
Weighted average shares outstanding
Basic 1,050 1,020 1,052 1,018
Diluted 1,072 1,053 1,075 1,056
(*) Includes the results of operations of (i) the Company's Marketing
Services division, for which the Board of Directors formally approved
a disposition plan in March 2005, (ii) the Company's former fuel card
business, Wright Express Corporation, through date of disposition
(February 2005), (iii) the Company's former fleet leasing and
appraisal businesses through date of spin-off (January 2005) and
(iv) in 2004, the Company's former tax preparation business, Jackson
Hewitt Tax Service Inc., through date of disposition (June 2004).
Table 3
(part 1 of 2)
Cendant Corporation and Subsidiaries
ORGANIC GROWTH BY SEGMENT
(In millions)
REVENUES
Second Quarter
2005 2004 %*
Real Estate Services (A) $1,985 $1,896 5%
Hospitality Services (B) 342 320 7%
Timeshare Resorts 436 381 14%
Vehicle Rental 1,224 1,119 9%
Total Travel Content 2,002 1,820 10%
Travel Distribution Services © 459 432 6%
Total Travel 2,461 2,252 9%
Total Core Operating Segments $4,446 $4,148 7%
EBITDA
Second Quarter
2005 2004 %*
Real Estate Services (A) $385 $372 3%
Hospitality Services 100 120 (17%)
Timeshare Resorts 73 58 26%
Vehicle Rental 128 140 (9%)
Total Travel Content 301 318 (5%)
Travel Distribution Services © 119 113 5%
Total Travel 420 431 (3%)
Total Core Operating Segments $805 $803 -
Reconciliation of Organic EBITDA to Pretax Income
Pretax Income (D) $588 $633
Add: Non-program related
depreciation and amortization 140 113
Non-program related interest expense, net 70 70
Early extinguishment of debt - 18
Amortization of pendings and listings 3 4
Total Company EBITDA 801 838
Less: Mortgage Services - 58
Corporate and Other (36) (39)
EBITDA for Total Core Operating Segments 837 819
Adjustments to arrive at Organic
EBITDA for Total Core Operating Segments (32) (16)
Organic EBITDA for Total Core
Operating Segments (per above) $805 $803
* Amounts may not calculate due to rounding in millions.
(A) Includes a reduction to revenue growth of $46 million and an increase
to EBITDA growth of $3 million primarily related to the acquisitions
of significant real estate brokerage businesses during or subsequent
to second quarter 2004 partially offset by the sale of certain non-
core assets by our settlement services business in June 2004.
(B) Includes a reduction to revenue growth of $25 million primarily
related to the acquisitions of Landal GreenParks in May 2004, Canvas
Holidays Limited in October 2004 and Ramada International, Inc. in
December 2004.
© Includes a reduction to revenue and EBITDA growth of $186 million and
$19 million, respectively, primarily related to the acquisitions of
Orbitz, Inc. in November 2004, ebookers plc in February 2005 and
Gullivers Travel Associates in April 2005, partially offset by the
transfer of the Company's membership travel business to the
discontinued Marketing Services division.
(D) See Table 2 for a reconciliation of Pretax Income to Net Income.
Table 3
(part 2 of 2)
Cendant Corporation and Subsidiaries
ORGANIC GROWTH BY SEGMENT
(In millions)
REVENUES
Six Months Ended June 30,
2005 2004 %*
Real Estate Services (B) $3,330 $3,107 7%
Hospitality Services © 693 651 6%
Timeshare Resorts (D) 805 725 11%
Vehicle Rental 2,312 2,120 9%
Total Travel Content 3,810 3,496 9%
Travel Distribution Services(E) 897 869 3%
Total Travel 4,707 4,365 8%
Total Core Operating
Segments $8,037 $7,472 8%
EBITDA EBITDA Excluding
Restructuring Charges
Six Months Ended Six Months Ended
June 30, June 30,
2005 2004 %* 2005(A) 2004 %*
Real Estate Services (B) $536 $499 7% $541 $499 8%
Hospitality Services © 227 246 (8%) 232 246 (6%)
Timeshare Resorts (D) 113 96 18% 114 96 19%
Vehicle Rental 194 208 (7%) 202 208 (3%)
Total Travel Content 534 550 (3%) 548 550 (1%)
Travel Distribution Services(E) 237 236 - 248 236 5%
Total Travel 771 786 (2%) 796 786 1%
Total Core Operating
Segments $1,307 $1,285 2% $1,337 $1,285 4%
Reconciliation of Organic
EBITDA to Pretax Income
Pretax Income (F) $767 $929 $767 $929
Add: Non-program related
depreciation and
amortization 276 224 276 224
Non-program related
interest expense, net 53 147 53 147
Early extinguishment of debt - 18 - 18
Amortization of pendings
and listings 6 8 6 8
Total Company EBITDA 1,102 1,326 1,102 1,326
Less: Mortgage Services (181) 59 (181) 59
Corporate and Other (75) (44) (75) (44)
EBITDA for Total Core
Operating Segments 1,358 1,311 1,358 1,311
Adjustments to arrive at
Organic EBITDA for Total Core
Operating Segments (51) (26) (21) (26)
Organic EBITDA for Total Core
Operating Segments
(per above) $1,307 $1,285 $1,337 $1,285
* Amounts may not calculate due to rounding in millions.
(A) Excludes restructuring charges of $5 million, $5 million, $1 million,
$8 million and $11 million within the Real Estate Services,
Hospitality Services, Timeshare Resorts, Vehicle Rental and Travel
Distribution Services segments, respectively.
(B) Includes a reduction to revenue and EBITDA growth of $105 million and
$2 million, respectively, primarily related to the acquisition of
Sotheby's International Realty in February 2004, the acquisitions of
significant real estate brokerage businesses during or subsequent to
second quarter 2004 and a refinement during first quarter 2005 to how
we estimate transactions that closed during the quarter when those
transactions have not yet been reported to us by our franchisees
partially offset by the sale of certain non-core assets by our
settlement services business in June 2004.
© Includes a reduction to revenue growth of $69 million and an increase
to EBITDA growth of $2 million primarily related to the acquisitions
of Landal GreenParks in May 2004, Canvas Holidays Limited in
October 2004 and Ramada International, Inc. in December 2004.
(D) Includes an increase to revenue and EBITDA growth of $6 million and
$5 million, respectively, related to the sale of Equivest Capital in
March 2004.
(E) Includes a reduction to revenue and EBITDA growth of $285 million and
$30 million, respectively, primarily related to the acquisitions of
Orbitz, Inc. in November 2004, ebookers plc in February 2005,
Gullivers Travel Associates in April 2005 and Flairview Travel in
April 2004, partially offset by the transfer of the Company's
membership travel business to the discontinued Marketing Services
division.
(F) See Table 2 for a reconciliation of Pretax Income to Net Income.
Table 4
(part 1 of 2)
Cendant Corporation and Affiliates
SEGMENT REVENUE DRIVER ANALYSIS (*)
(Revenue dollars in thousands)
Second Quarter
2005 2004 % Change
REAL ESTATE SERVICES SEGMENT
Real Estate Franchise
Closed Sides 521,471 512,247 2%
Average Price $221,737 $195,346 14%
Royalty Revenue (A) $141,553 $125,348 13%
Total Revenue (A) $160,366 $140,093 14%
Real Estate Brokerage
Closed Sides 135,173 144,384 (6%)
Average Price $470,404 $409,807 15%
Net Revenue from
Real Estate Transactions $1,638,710 $1,541,363 6%
Total Revenue $1,654,855 $1,553,206 7%
Relocation
Transaction Volume 28,655 27,103 6%
Total Revenue $135,108 $114,164 18%
Settlement Services
Purchase Title and Closing Units 42,954 43,344 (1%)
Refinance Title and Closing Units 12,776 18,417 (31%)
Total Revenue $92,312 $100,710 (8%)
HOSPITALITY SERVICES SEGMENT
Lodging
RevPAR (B) $31.91 $29.08 10%
Weighted Average Rooms Available (B) 511,998 510,696 -
Royalty, Marketing and
Reservation Revenue © $104,281 $97,959 6%
Total Revenue © $128,953 $115,574 12%
RCI
Average Number of Subscribers 3,185,419 3,030,969 5%
Subscriber Related Revenue $148,735 $137,995 8%
Total Revenue $154,565 $144,245 7%
Vacation Rental Group (D)
Cottage Weeks Sold 246,002 242,102 2%
Total Revenue $83,401 $60,567 38%
(*) Certain of the 2004 amounts presented herein have been revised to
reflect the new segment reporting structure and a new presentation of
drivers. All comparable quarterly amounts for 2003 and 2004 are
available on the Cendant website, which may be accessed at
www.cendant.com.
(A) Excludes $110 million and $104 million of intercompany royalties paid
primarily by our NRT real estate brokerage business during the three
months ended June 30, 2005 and 2004, respectively.
(B) We acquired the Ramada International Hotels and Resorts trademark on
December 10, 2004. The 2004 drivers do not include RevPAR and
Weighted Average Rooms Available of Ramada International. On a
comparable basis (excluding Ramada International from the 2005
amounts), RevPAR would have increased 7% and Weighted Average Rooms
Available would have decreased 5%.
© The 2005 amounts include the revenues of businesses acquired during
or subsequent to second quarter 2004 and are therefore not comparable
to the 2004 amounts.
(D) We acquired Landal GreenParks on May 5, 2004. Revenue generated by
Landal prior to acquisition is not reflected in the revenue data
presented herein and, therefore, the revenue data are not comparable.
However, the number of cottage weeks sold for second quarter 2004 has
been adjusted to include 42,402 cottage weeks sold by Landal so as to
present comparable driver data.
Table 4
(part 2 of 2)
Cendant Corporation and Affiliates
SEGMENT REVENUE DRIVER ANALYSIS (*)
(Revenue dollars in thousands)
Second Quarter
2005 2004 % Change
TIMESHARE RESORTS SEGMENT
Tours 250,231 227,070 10%
Total Revenue $436,183 $381,000 14%
VEHICLE RENTAL SEGMENT
Car
Rental Days (000's) 25,809 22,510 15%
Time and Mileage Revenue per Day $36.13 $38.01 (5%)
Total Car Revenue $1,079,129 $982,301 10%
Truck
Total Truck Revenue $144,780 $136,521 6%
TRAVEL DISTRIBUTION SERVICES SEGMENT
Transaction Volume, by Region (000's) (A)
United States 28,394 27,085 5%
International 47,804 45,059 6%
Transaction Volume, by Channel (000's)
Traditional Agency 66,605 64,749 3%
Online (A) 9,593 7,395 30%
Online Gross Bookings ($000's) (B) $1,954,982 $1,618,697 21%
Offline Gross Bookings ($000's) (B) $161,478 $179,783 (10%)
GDS and Supplier Services Revenue © $409,822 $396,399 3%
Owned Travel Agency Revenue (D) $251,079 $51,172 391%
(*) Certain of the 2004 amounts presented herein have been revised to
reflect the new segment reporting structure and a new presentation of
drivers. All comparable quarterly amounts for 2003 and 2004 are
available on the Cendant website, which may be accessed at
www.cendant.com.
(A) Includes supplier link and merchant hotel transactions not booked
through the Galileo GDS system.
(B) We acquired Gullivers Travel Associates on April 1, 2005, ebookers
plc on February 28, 2005 and Orbitz, Inc. on November 12, 2004.
Revenue generated by these businesses prior to acquisition is not
reflected in the revenue data presented herein and, therefore, the
revenue data are not comparable. However, the online gross bookings
and offline gross bookings data for second quarter 2004 have been
adjusted to include aggregate bookings of approximately $1.2 billion
and $100 million, respectively, by ebookers and Orbitz so as to
present comparable driver data. The bookings data for Gullivers have
not been reflected in the 2005 or 2004 driver data.
© We refer to this as our "Order Taker" business. Includes Galileo
revenue of $401.3 million and $388.1 million for second quarter 2005
and 2004, respectively.
(D) We refer to this as our "Order Maker" business, which is primarily
comprised of Gullivers, ebookers, Orbitz, Flairview, Cheaptickets and
Lodging.com.
Table 5
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(In billions)
As of As of
June 30, 2005 December 31, 2004
Assets
Current assets:
Cash and cash equivalents $0.6 $0.5
Assets of discontinued operations 1.1 6.6
Other current assets 3.3 2.6
Total current assets 5.0 9.7
Property and equipment, net 1.7 1.7
Goodwill 12.2 11.1
Other non-current assets 4.3 5.4
Total assets exclusive of
assets under programs 23.2 27.9
Assets under management programs 12.9 14.7
Total assets $36.1 $42.6
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $1.3 $0.7
Liabilities of discontinued operations 0.8 5.3
Other current liabilities 4.9 4.4
Total current liabilities 7.0 10.4
Long-term debt 3.6 3.6
Other non-current liabilities 1.4 1.5
Total liabilities exclusive of
liabilities under programs 12.0 15.5
Liabilities under management programs(*) 12.9 14.4
Total stockholders' equity 11.2 12.7
Total liabilities and stockholders' equity $36.1 $42.6
(*) Liabilities under management programs includes deferred income tax
liabilities of $1.8 billion and $2.2 billion as of June 30, 2005 and
December 31, 2004, respectively.
Table 6
Cendant Corporation and Subsidiaries
SCHEDULE OF CORPORATE DEBT (*)
(In millions)
Maturity Date June 30, March 31, December 31,
Net Debt 2005 2005 2004
August 2006 6-7/8% notes $850 $850 $850
August 2006 4.89% notes 100 100 100
January 2008 6-1/4% notes 798 798 797
March 2010 6-1/4% notes 349 349 349
January 2013 7-3/8% notes 1,191 1,191 1,191
March 2015 7-1/8% notes 250 250 250
November 2009 Revolver borrowings 284 1,310 650
Commercial paper
borrowings 975 - -
Net hedging gains
(losses)(A) 29 (29) 17
Other 96 89 126
Total Debt 4,922 4,908 4,330
Less: Cash and
cash equivalents 623 1,341 467
Net Debt $4,299 $3,567 $3,863
Net Capitalization
Total Stockholders'
Equity $11,234 $11,195 $12,695
Total Debt (per above) 4,922 4,908 4,330
Total Capitalization 16,156 16,103 17,025
Less: Cash and cash
equivalents 623 1,341 467
Net Capitalization $15,533 $14,762 $16,558
Net Debt to Net
Capitalization Ratio(B) 27.7% 24.2% 23.3%
Total Debt to Total
Capitalization Ratio 30.5% 30.5% 25.4%
(*) Amounts presented herein exclude assets and liabilities under
management programs.
(A) As of June 30, 2005, this balance represents $122 million of net
gains resulting from the termination of interest rate hedges, which
will be amortized by the Company to reduce future interest expense,
partially offset by $93 million of mark-to-market adjustments on
current interest rate hedges.
(B) See Table 9 for a description of this ratio.
Table 7
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Operating Activities
Net cash provided by operating
activities exclusive of management
programs $859 $950 $1,156 $1,086
Net cash provided by (used in)
operating activities of management
programs 176 (370) 442 (160)
Net Cash Provided by Operating
Activities 1,035 580 1,598 926
Investing Activities
Property and equipment additions (115) (89) (193) (180)
Net assets acquired, net of cash
acquired, and acquisition-related
payments (1,134) (214) (1,589) (337)
Proceeds received on asset sales 7 6 13 24
Proceeds from disposition of
businesses, net of transaction-
related payments 7 784 965 826
Other, net 13 1 34 46
Net cash provided by (used in)
investing activities exclusive of
management programs (1,222) 488 (770) 379
Management programs:
Net change in program cash 82 1 (61) 145
Net change in investment in
vehicles (1,079) (1,163) (2,572) (2,603)
Net change in relocation
receivables (115) (34) (118) (15)
Net change in mortgage servicing
rights, related derivatives and
mortgage-backed securities - (491) 21 (390)
Other, net (11) 5 (20) 45
(1,123) (1,682) (2,750) (2,818)
Net Cash Used in Investing Activities (2,345) (1,194) (3,520) (2,439)
Financing Activities
Proceeds from borrowings 6 - 6 19
Principal payments on borrowings (26) (1,106) (89) (1,116)
Net change in short-term borrowings (44) - 616 -
Issuances of common stock 71 189 191 396
Repurchases of common stock (229) (350) (460) (962)
Payments of dividends (96) (72) (192) (144)
Cash reduction due to spin-off of PHH - - (259) -
Other, net 2 (21) 4 (22)
Net cash used in financing activities
exclusive of management programs (316) (1,360) (183) (1,829)
Management programs:
Proceeds from borrowings 3,137 3,832 6,983 6,871
Principal payments on borrowings (2,456) (2,866) (4,907) (4,905)
Net change in short-term borrowings 223 785 184 914
Other, net (6) (13) (12) (17)
898 1,738 2,248 2,863
Net Cash Provided by
Financing Activities 582 378 2,065 1,034
Effect of changes in exchange rates
on cash and cash equivalents (2) 52 (29) 38
Cash provided by discontinued
operations 12 103 42 146
Net increase (decrease) in cash and
cash equivalents (718) (81) 156 (295)
Cash and cash equivalents, beginning
of period 1,341 532 467 746
Cash and cash equivalents, end of
period $623 $451 $623 $451
Table 8
Cendant Corporation and Subsidiaries
CONSOLIDATED SCHEDULES OF FREE CASH FLOWS (*)
(In millions)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Pretax income $588 $633 $767 $929
Addback of non-cash depreciation and
amortization:
Non-program related 140 113 276 224
Pendings and listings 3 4 6 8
Addback of non-cash valuation charge
associated with PHH spin-off - - 180 -
Tax payments, net of refunds (82) (32) (104) (88)
Working capital and other 217 238 44 37
Capital expenditures (115) (89) (193) (180)
Management programs (A) (49) (314) (60) (115)
Free Cash Flow 702 553 916 815
Current period acquisitions, net of
cash acquired (1,111) (175) (1,504) (275)
Payments related to prior period
acquisitions (23) (39) (85) (62)
Proceeds from disposition of
businesses, net 7 784 965 826
Net repurchases of common stock (158) (161) (269) (566)
Payment of dividends (96) (72) (192) (144)
Investments and other (B) 25 135 51 208
Cash reduction due to spin-off of PHH - - (259) -
Net debt borrowings (repayments) (64) (1,106) 533 (1,097)
Net increase (decrease) in cash and
cash equivalents (per Table 7) $(718) $(81) $156 $(295)
(*) See Table 9 for a description of Free Cash Flow.
(A) Cash flows related to management programs may fluctuate significantly
from period to period due to the timing of the underlying
transactions. For the three months ended June 30, 2005 and 2004, the
net cash flows from the activities of management programs are
reflected on Table 7 as follows: (i) net cash provided by (used in)
operating activities of $176 million and $(370) million, respectively,
(ii) net cash used in investing activities of $1,123 million and
$1,682 million, respectively, and (iii) net cash provided by financing
activities of $898 million and $1,738 million, respectively. For the
six months ended June 30, 2005 and 2004, the net cash flows from the
activities of management programs are reflected on Table 7 as follows:
(i) net cash provided by (used in) operating activities of
$442 million and $(160) million, respectively, (ii) net cash used in
investing activities of $2,750 million and $2,818 million,
respectively, and (iii) net cash provided by financing activities of
$2,248 million and $2,8
(B) Represents net cash provided by 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 Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Free Cash Flow (per above) $702 $553 $916 $815
Cash (inflows) outflows included in
Free Cash Flow but not reflected
in Net Cash Provided by
Operating Activities:
Investing activities of
management programs 1,123 1,682 2,750 2,818
Financing activities of
management programs (898) (1,738) (2,248) (2,863)
Capital expenditures 115 89 193 180
Proceeds received on asset sales (7) (6) (13) (24)
Net Cash Provided by Operating
Activities (per Table 7) $1,035 $580 $1,598 $926
Full Year 2005
Projected
Free Cash Flow $1,800 - $2,000
Cash outflows included in
Free Cash Flow but not reflected
in Net Cash Provided
by Operating Activities:
Investing and financing
activities of
management programs 800 - 1,000
Capital expenditures 450 - 500
Net Cash Provided by
Operating Activities $3,050 - $3,500
Table 9
Cendant Corporation and Subsidiaries
Definitions of Non-GAAP Measures
The accompanying press release includes certain non-GAAP financial measures as defined under SEC rules. As required
by SEC rules, we have provided below the reasons we present these non-GAAP financial measures and a description
of what they represent.
EBITDA Represents 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. We believe that EBITDA is useful as a
supplemental measure in evaluating the aggregate
performance of our operating businesses. EBITDA is
the measure that is used by our management,
including our chief operating decision maker, to
perform such evaluation, and it is a factor in
measuring performance in our incentive compensation
plans. It is also a component of our financial
covenant calculations under our credit facilities,
subject to certain adjustments. EBITDA should not
be considered in isolation or as a substitute for
net income or other income statement data prepared
in accordance with generally accepted accounting
principles and our presentation of EBITDA may not be
comparable to similarly titled measures used by
other companies. A reconciliation of EBITDA to
pretax income is included in Table 1 and a
reconciliation of pretax income to net income is
included in Table 2, both of which accompany this
press release.
Net Debt to Net Represents (i) net corporate debt (which reflects
Capitalization Ratio total corporate debt adjusted to assume the
application of available cash to reduce outstanding
indebtedness) divided by (ii) net capitalization
(which reflects total capitalization also adjusted
for the application of available cash). We believe
that this ratio is useful in measuring the Company's
leverage and indicating the strength of its
financial condition. We also believe that adjusting
corporate debt to assume the application of
available cash to reduce outstanding indebtedeness
eliminates the effect of timing differences relating
to the use of debt proceeds. 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 Table 6, which
accompanies this press release.
Free Cash Flow Represents Net Cash Provided by Operating Activities
adjusted to include the cash inflows and outflows
relating to (i) capital expenditures, (ii) the
investing and financing activities of our management
programs, and (iii) asset sales. We believe that
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, and our presentation of Free Cash Flow
may not be comparable to similarly titled measures
used by other companies. A reconciliation of Free
Cash Flow to the appropriate measure recognized
under generally accepted accounting principles (Net
Cash Provided by Operating Activities) is presented
in Table 8, which accompanies this press release.
Organic Growth Represents the results of our reportable operating
segments excluding the impact of acquisitions and
dispositions. We believe that Organic Growth is
useful to management and the Company's investors in
evaluating the operating performance of its
reportable segments on a comparable basis. We also
present Organic EBITDA growth excluding charges
associated with the 2005 restructuring activities
undertaken following the PHH spin-off and initial
public offering of Wright Express. Our management
believes this metric is useful in measuring the
normalized performance of the Company's reportable
operating segments. The reconciliations of Organic
revenue and EBITDA growth to the comparable measures
recognized under generally accepted accounting
principles are presented in Table 3, which
accompanies this press release.
2005 EPS from Represents EPS from Continuing Operations adjusted
Continuing to exclude the non-cash impairment charge of $0.17
Operations before per share and restructuring and transaction-related
Transaction costs of $0.03 per share. We believe that by
Related Charges providing the calculation of EPS from Continuing
Operations both including and excluding these
charges, we are enhancing an investor's ability to
analyze our financial results on a comparable basis,
thereby providing greater transparency. We also
believe that excluding the impairment charge is
useful to investors because it is a non-cash charge
directly resulting from the spin-off of PHH and will
not recur in subsequent periods. EPS from
Continuing Operations before Transaction Related
Charges should not be considered in isolation or as
a substitute for EPS from Continuing Operations
prepared in accordance with generally accepted
accounting principles. A reconciliation of EPS from
Continuing Operations before Transaction Related
Charges to the most comparable measure (EPS from
Continuing Operations) recognized under generally
accepted accounting principles is presented within
the body of the accompanying press release.
Source: Cendant Corporation