Cendant Reports Results for First Quarter 2006
1Q 2006 Revenue Increased 7% to $4.2 Billion versus $4.0 Billion in 1Q 2005
1Q 2006 EPS from Continuing Operations was $0.13 versus $0.06 in 1Q 2005
1Q 2006 EPS from Continuing Operations, Excluding Separation Costs, was $0.16
Company Reiterates Its Previously Announced Full Year 2006 Financial Estimates
NEW YORK, April 26 -- Cendant Corporation today reported results for first quarter 2006. Revenue totaled $4.2 billion, an increase of 7% over first quarter 2005, reflecting growth across each of the Company's core operating segments. EPS from Continuing Operations was $0.13, versus $0.06 in first quarter 2005. (See Other Items for matters impacting comparability.) Excluding separation costs, EPS from Continuing Operations was $0.16, which was at the high end of the Company's most recent estimate of $0.11 - $0.16.
Cendant's President and Chief Financial Officer, Ronald L. Nelson, stated: "Our first quarter 2006 earnings were at the high end of our most recent estimate primarily due to better than expected results at Realogy (formerly Real Estate Services). While home sales in California and Florida declined as forecasted, the balance of the country exhibited overall stability in a moderating environment. Our Timeshare Resorts segment generated double-digit revenue and EBITDA growth, and each of our other reportable segments showed positive revenue trends. In particular, our online travel businesses generated 29% growth in gross bookings, lodging RevPAR increased 10% organically, and car rental produced 15% revenue growth, including the first year-over-year price gain since 2004."
With respect to Cendant's plan to separate the Company into four independent, pure play companies, Mr. Nelson further commented: "Each of the spin-offs remains on track, with Realogy expected in June, Wyndham Worldwide in the summer and Travel Distribution Services (TDS) in October. As noted in our press release earlier this week, we are also exploring the possibility of a sale of TDS, which could be consummated by late summer, as an alternative means to maximize shareholder value."
First Quarter 2006 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.
Realogy (Formerly Real Estate Services)
(Consisting of the Company's real estate franchise brands, brokerage operations, relocation services and settlement services businesses)
2006 2005 % change Revenue $1,425 $1,410 1% EBITDA $121 $161 (25%)
Revenue increased modestly primarily due to the acquisition of Texas American Title Company and related companies in January 2006. EBITDA decreased 25%, which was a lower decline than expected. In our real estate franchise and NRT real estate brokerage businesses, home prices increased 9% and 6%, respectively. These increases were offset by closed sides decreases of 10% and 6%, respectively (excluding the impact of a previously disclosed, one-time benefit at real estate franchise in first quarter 2005). The decline in closed sides volume reflects the expected moderation of the residential real estate market, particularly in some of the areas where NRT is more concentrated such as Florida and California, partially offset by the impact of tuck-in acquisitions at NRT. EBITDA declined because higher fixed costs at NRT in the seasonally weakest first quarter, primarily as a result of growth in offices, were not offset by revenue increases. Because the first quarter is the residential real estate brokerage industry's weakest, NRT typically operates at a loss during that quarter and, therefore, we expect that the percentage decrease in EBITDA is not indicative of Realogy's results for the remainder of the year.
Hospitality Services
(Consisting of the Company's franchised lodging brands, hotel management, timeshare exchange and vacation rental businesses)
2006 2005 % change Revenue $409 $395 4% EBITDA $116 $125 (7%)
Revenue increased primarily due to growth in our lodging business. The largest contributor to revenue growth was the inclusion of approximately $31 million of revenue resulting from the acquisition of Wyndham Hotels and Resorts, which also contributed $2 million to EBITDA. Lodging revenue was also positively impacted by a 10% improvement in RevPAR, excluding Wyndham Hotels and Resorts. Year-over-year EBITDA is not comparable and declined, as expected, due to the timing of certain revenue at our European vacation rental business, which will be recognized later in 2006 upon the arrival of our customers. In addition, year-over-year EBITDA comparisons were negatively impacted by the absence of a previously disclosed $7 million gain on the sale of an investment within our lodging business in first quarter 2005. We expect double digit year-over-year revenue and EBITDA growth at Hospitality Services in second quarter 2006.
Timeshare Resorts
(Consisting of the Company's timeshare sales and development businesses)
2006 2005 % change
Revenue $407 $368 11%
EBITDA $67 $40 68%
Revenue and EBITDA increased principally due to growth in timeshare sales and increased consumer financing income. In addition, revenue was negatively impacted and EBITDA was positively impacted by a timing benefit due to the adoption of a new accounting standard for the recognition of timeshare sales revenue and expenses (SFAS No. 152). Excluding the impact of this item, revenue and EBITDA increased 18% and 38%, respectively. Growth in timeshare sales revenue was driven by a 7% increase in tour flow and a 9% increase in revenue per guest. Revenue per guest benefited from increased sales of premium inventory, and tour flow was positively impacted by the continued development of the Trendwest in-house sales program and continued improvement in local marketing efforts.
Avis Budget (Formerly Vehicle Rental)
(Consisting of the Company's car and truck rental businesses)
2006 2005 % change
Revenue $1,319 $1,166 13%
EBITDA $55 $66 (17%)
Revenue increased due to growth in our domestic and international car rental operations. Car rental revenue grew 15% worldwide due to a 13% increase in rental day volume and a 1% increase in time and mileage revenue per day. As expected, EBITDA comparisons were negatively impacted by increased fleet and interest costs for newer vehicles and 13% growth in our car rental fleet to support increased demand. We expect year-over-year price increases for the remainder of 2006, which should offset the impact of higher fleet and interest costs beginning in the second half of the year.
Travel Distribution Services
(Consisting of electronic global distribution services for the travel industry, corporate and consumer online travel services, and travel agency services)
2006 2005 % change Revenue $645 $552 17% EBITDA $105 $129 (19%)
Revenue increased due to growth in our online travel agency and other consumer travel businesses and in our GDS business. On an organic basis, our online travel businesses grew worldwide gross bookings by 27% and achieved higher EBITDA margins. In addition, revenue from GDS and supplier services increased 5%, driven principally by a 7% increase in worldwide air booking fees, partially offset by decreased subscriber fee income. Year-over-year segment results are not comparable due to the acquisitions of Gullivers on April 1, 2005 and ebookers on February 28, 2005, which contributed a total of $66 million to revenue but reduced EBITDA by $13 million. This was due to these businesses being seasonally weakest in the first quarter. In addition, EBITDA was negatively impacted by higher expenses at our GDS business, including infrastructure improvements to support growth, higher technology costs in our online businesses and $7 million of separation costs.
Recent Achievements and Strategic Initiatives
During the first quarter, the Company achieved the following with respect to cash flow generation, share repurchases and dividend payments:
-- Generated Net Cash Provided by Operating Activities of $243 million and
Free Cash Flow of ($83) million. Each was negatively impacted by the
previously disclosed timing benefits in fourth quarter 2005. The
Company currently projects second quarter 2006 Net Cash Provided by
Operating Activities to be higher than in the first quarter and Free
Cash Flow to be positive.
-- Utilized $243 million of cash for the repurchase of common stock
($221 million net of proceeds from option exercises). The Company's
fully diluted weighted average shares outstanding in first quarter 2006
decreased by 63 million shares, or 6%, versus first quarter 2005,
principally reflecting our repurchase of $1.6 billion of common stock
($1.3 billion net of proceeds from option exercises) since
January 1, 2005. Further stock repurchases have been suspended due to
the planned separation of Cendant into four independent companies.
-- Utilized $113 million of cash to pay its quarterly dividend of $0.11
per share. As previously announced, further cash dividends have been
suspended due to the planned separation of Cendant into four
independent companies.
In addition, the Company recently:
-- Acquired the Baymont Inn & Suites(R) mid-scale lodging brand and system
of 115 franchised properties.
-- Hired Gordon Bethune, former CEO and Chairman of Continental Airlines,
to be Non-Executive Chairman of Travel Distribution Services (TDS) and
Jeff Clarke, chief operating officer of CA, formerly Computer
Associates, Inc., to be CEO and President of TDS.
-- Filed a registration statement on Form 10 with the Securities and
Exchange Commission in connection with Realogy's planned spin-off from
Cendant, expected in June 2006.
-- Completed $3.375 billion of financing, including the issuance of senior
notes and new revolving and term loan facilities, at Avis Budget Car
Rental to permit Avis Budget to finance its operations on a standalone
basis.
-- Announced that, in addition to its plan to spin-off TDS to
shareholders, it will also consider a sale of that division as an
alternative way to maximize shareholder value.
Other Items
-- Separation Costs -- First quarter 2006 EBITDA includes separation costs
of $43 million, including $34 million recorded in Corporate and Other,
$7 million recorded in TDS, $1 million recorded in Realogy and
$1 million recorded in Hospitality Services. These costs consist
primarily of legal, accounting, other professional and consulting fees,
and employee costs.
-- Restructuring and Transaction-Related Charges -- First quarter 2005
income from continuing operations includes a previously disclosed
restructuring charge of $46 million related to restructuring activities
undertaken following the PHH spin-off and the IPO of Wright Express and
$3 million of transaction costs incurred in connection with the PHH
spin-off.
-- Valuation Charge Associated with PHH Spin-Off -- First quarter 2005
income from continuing operations includes a previously disclosed,
non-cash impairment charge of $180 million ($0.17 per share) incurred
in connection with the spin-off of PHH.
-- Non-Program Related Interest Expense (Income) -- First quarter 2005
interest expense includes a previously disclosed reversal of
$73 million of accrued interest related to a litigation settlement.
-- Provision for Income Taxes -- The Company's effective tax rate for
first quarter 2006 includes a net $12 million benefit, which was
primarily due to foreign taxes. The Company does not anticipate this
tax benefit to recur in subsequent quarters.
Outlook
For second quarter 2006, the Company expects revenue from core operations to increase 4% - 6% and EBITDA from core operations (before separation costs) to increase marginally versus second quarter 2005. The Company expects EBITDA (before separation costs) to increase at Hospitality Services and Timeshare Resorts, to be flat at TDS, and to be down at Realogy and Avis Budget, consistent with the Company's prior expectations, many of which were discussed at its Investor Day on March 21, 2006.
Based on current trends, the full year 2006 financial outlook for Realogy, Wyndham Worldwide, TDS and Avis Budget remains substantially unchanged from the estimates announced at Cendant's Investor Day on March 21, 2006. The presentations containing these estimates may be accessed on the Company's Web site at www.cendant.com.
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 www.cendant.com.
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 8 to this release.
Table 1
Cendant Corporation and Subsidiaries
SUMMARY DATA SHEET
(Dollars in millions, except per share data)
First Quarter
2006 2005 % Change
Income Statement Items
Net Revenues $4,217 $3,954 7%
Pretax Income (A) 192 179 7%
Income from Continuing Operations 135 63 114%
EPS from Continuing Operations
(diluted) 0.13 0.06 117%
Cash Flow Items
Net Cash Provided by Operating
Activities $243 $558
Free Cash Flow (B) (83) 214
Payments Made for Current Period
Acquisitions, Net of Cash
Acquired (138) (393)
Net Borrowings 211 597
Net Repurchases of Common Stock (221) (111)
Payment of Dividends (113) (96)
As of As of
March 31, December 31,
2006 2005
Balance Sheet Items
Total Corporate Debt $4,115 $3,936
Cash and Cash Equivalents 445 835
Total Stockholders' Equity 11,098 11,291
Segment Results
First Quarter
2006 2005 % Change
Net Revenues
Realogy (formerly known as Real
Estate Services) $1,425 $1,410 1%
Hospitality Services 409 395 4%
Timeshare Resorts 407 368 11%
Wyndham Worldwide 816 763 7%
Avis Budget Group (formerly known as
Vehicle Rental) (D) 1,319 1,166 13%
Travel Distribution Services 645 552 17%
Total Core Operating Segments 4,205 3,891 8%
Mortgage Services - 46 *
Corporate and Other 12 17 *
Cendant Corporation $4,217 $3,954 7%
EBITDA (C)
Realogy (formerly known as Real
Estate Services) $121 $161 (25%)
Hospitality Services 116 125 (7%)
Timeshare Resorts 67 40 68%
Wyndham Worldwide 183 165 11%
Avis Budget Group (formerly known as
Vehicle Rental) 55 66 (17%)
Travel Distribution Services 105 129 (19%)
Total Core Operating Segments 464 521 (11%)
Mortgage Services - (181) *
Corporate and Other (58) (39) *
Cendant Corporation $406 $301 35%
Reconciliation of EBITDA to Pretax
Income
Total Company EBITDA $406 $301
Less: Non-program related depreciation
and amortization 138 137
Non-program related interest
expense, net 70 (18)
Amortization of pendings and
listings 6 3
Pretax Income (A) $192 $179 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
(loss).
(B) See Table 8 for a description of Free Cash Flow and Table 7 for the
underlying calculations.
(C) See Table 8 for a description of EBITDA.
(D) For comparability purposes, 2005 vehicle rental revenue has been
grossed-up by $77 million to reflect a change in accounting
presentation during fourth quarter 2005 to be consistent with industry
competitors. This change had no impact on EBITDA.
Table 2
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In millions, except per share data)
Three Months Ended
March 31,
2006 2005
Revenues
Service fees and membership, net $2,884 $2,756
Vehicle-related 1,319 1,166
Other 14 32
Net revenues 4,217 3,954
Expenses
Operating 2,473 2,329
Vehicle depreciation, lease
charges and interest, net 421 324
Marketing and reservation 477 424
General and administrative 396 336
Non-program related depreciation
and amortization 138 137
Non-program related interest
expense (income), net 70 (18)
Acquisition and integration
related costs:
Amortization of pendings and
listings 6 3
Other 1 11
Separation costs (A) 43 -
Restructuring and transaction-
related charges - 49
Valuation charge associated with
PHH spin-off - 180
Total expenses 4,025 3,775
Income before income taxes and
minority interest 192 179
Provision for income taxes 57 115
Minority interest, net of tax - 1
Income from continuing operations 135 63
Loss from discontinued operations,
net of tax (B) - (8)
Gain (loss) on disposal of
discontinued operations, net of tax:
PHH valuation and transaction-
related charges - (312)
Gain (loss) on disposals (1) 175
Income (loss) before cumulative
effect of accounting changes 134 (82)
Cumulative effect of accounting
changes, net of tax (C) (64) -
Net income (loss) $70 $(82)
Earnings per share
Basic
Income from continuing
operations $0.13 $0.06
Loss from discontinued
operations - (0.01)
Loss on disposals of
discontinued operations - (0.13)
Cumulative effect of accounting
changes (0.06) -
Net income (loss) $0.07 $(0.08)
Diluted
Income from continuing
operations $0.13 $0.06
Loss from discontinued
operations - (0.01)
Loss on disposals of
discontinued operations - (0.13)
Cumulative effect of accounting
changes (0.06) -
Net income (loss) $0.07 $(0.08)
Weighted average shares outstanding
Basic 1,006 1,053
Diluted 1,016 1,079
(A) Represents costs we incurred in connection with the execution of our
plan to separate Cendant into four independent, publicly traded
companies ($34 million, $7 million, $1 million and $1 million for
Corporate and Other, Travel Distribution Services, Realogy and
Hospitality Services, respectively).
(B) Includes the results of operations of the Company's (i) former
Marketing Services division, which was disposed of in October 2005,
(ii) former fuel card business, Wright Express Corporation, through
the date of disposition (February 2005) and (iii) former fleet leasing
and appraisal businesses through the date of spin-off (January 2005).
(C) Represents non-cash charges to reflect the cumulative effect of
adopting (i) Statement of Financial Accounting Standards ("SFAS")
No. 152, "Accounting for Real Estate Time-Sharing Transactions," and
American Institute of Certified Public Accountants' Statement of
Position No. 04-2, "Accounting for Real Estate Time-Sharing
Transactions" on January 1, 2006, which resulted in a non-cash charge
of $65 million, after tax, and (ii) SFAS No. 123R, "Share Based
Payment," on January 1, 2006, which resulted in a non-cash credit of
$1 million, after tax.
Table 3
(page 1 of 2)
Cendant Corporation and Affiliates
SEGMENT REVENUE DRIVER ANALYSIS
(Revenue dollars in thousands)
First Quarter
2006 2005 % Change
REAL ESTATE SERVICES SEGMENT
Real Estate Franchise
Closed Sides (A) 334,897 372,541 (10%)
Average Price $227,024 $208,412 9%
Royalty Revenue (B) $95,205 $104,846 (9%)
Total Revenue (B) $121,740 $122,338 -
Real Estate Brokerage
Closed Sides 85,826 91,757 (6%)
Average Price $490,947 $463,177 6%
Net Revenue from Real Estate
Transactions $1,086,399 $1,097,687 (1%)
Total Revenue $1,101,830 $1,113,164 (1%)
Relocation
Transaction Volume 18,705 18,629 -
Total Revenue $110,346 $105,626 4%
Settlement Services (C)
Purchase Title and Closing Units 35,781 29,323 22%
Refinance Title and Closing Units 10,366 11,914 (13%)
Total Revenue $91,282 $68,430 33%
HOSPITALITY SERVICES SEGMENT
Lodging (D)
RevPAR $30.45 $25.53 19%
Weighted Average Rooms Available 520,624 517,354 1%
Royalty, Marketing and
Reservation Revenue $102,741 $84,704 21%
Total Revenue $143,653 $111,727 29%
Vacation Exchange and Rental
Average Number of Exchange
Subscribers 3,291,963 3,147,721 5%
Subscriber Related Revenue $179,518 $173,451 3%
European Cottage Weeks Sold 311,120 321,616 (3%)
Total Revenue $265,564 $283,505 (6%)
(A) The 2005 amount has been adjusted to exclude 16,833 closed sides
related to a refinement instituted in first quarter 2005 regarding
how we estimate transactions that closed during the quarter when
those transactions had not yet been reported to us by our
franchisees.
(B) Excludes $72 million and $76 million of intercompany royalties paid
primarily by our NRT real estate brokerage business during first
quarter 2006 and 2005, respectively.
(C) The 2006 amounts include Texas American Title Company, which we
acquired on January 6, 2006. Therefore, the revenue and driver
amounts for 2006 are not presented on a comparable basis to the 2005
amounts. On a comparable basis (excluding Texas American Title
Company from the 2006 amounts), Purchase Title and Closing Units and
Refinance Title and Closing Units would have decreased 4% and 16%,
respectively.
(D) The 2006 amounts include Wyndham hotel brand and franchise system,
which we acquired on October 12, 2005. Therefore, the revenue and
driver amounts for 2006 are not presented on a comparable basis to
the 2005 amounts. On a comparable basis (excluding Wyndham from the
2006 amounts), RevPAR would have increased 10% and Weighted Average
Rooms Available would have decreased 4%.
Table 3
(page 2 of 2)
Cendant Corporation and Affiliates
SEGMENT REVENUE DRIVER ANALYSIS
(Revenue dollars in thousands)
First Quarter
2006 2005 % Change
TIMESHARE RESORTS SEGMENT
Tours 207,805 194,818 7%
Total Revenue $406,992 $368,458 10%
VEHICLE RENTAL SEGMENT
Car
Rental Days (000's) 24,919 22,044 13%
Time and Mileage Revenue per Day $39.36 $38.84 1%
Total Car Revenue (A) $1,218,636 $1,061,962 15%
Truck
Total Truck Revenue (A) $100,586 $102,929 (2%)
TRAVEL DISTRIBUTION SERVICES (B)
Transaction Volume, by Region
(000's) (C)
United States 32,692 30,395 8%
International 48,005 45,856 5%
Transaction Volume, by Channel
(000's)
Traditional Agency 67,843 66,404 2%
Online (C) 12,854 9,847 31%
Online Gross Bookings ($000's)
(D) $2,430,298 $1,889,283 29%
Offline Gross Bookings ($000's)
(D) $455,520 $172,158 165%
GDS and Supplier Services Revenue
(E) $416,270 $397,697 5%
Owned Travel Agency Revenue (F) $229,120 $153,911 49%
(A) For comparability purposes, 2005 vehicle rental revenue has been
grossed-up by $77 million to reflect a change in accounting
presentation adopted during fourth quarter 2005 to be consistent with
industry competitors.
(B) We acquired Gullivers Travel Associates on April 1, 2005 and ebookers
plc on February 28, 2005. Revenue generated by these businesses
prior to acquisition are not reflected in the revenue data presented
herein and, therefore, the revenue data are not comparable. However,
the driver data for first quarter 2005 have been adjusted, as
applicable, to include driver data for these newly acquired
businesses so as to present comparable driver data.
(C) Includes Galileo GDS transactions and supplier link and merchant
hotel transactions not booked through the Galileo GDS system.
(D) The online gross bookings and offline gross bookings data for first
quarter 2005 have been adjusted to include aggregate bookings of
approximately $145 million and $65 million, respectively, by ebookers
so as to present comparable driver data. The online gross bookings
and offline gross bookings data for Gullivers have been reflected in
the first quarter 2006 driver data (approximately $90 million and
$295 million, respectively), but not in the first quarter 2005 driver
data due to the absence of available driver data prior to our
acquisition of Gullivers.
(E) Includes Galileo revenue of $408.6 million and $390.4 million for
first quarter 2006 and 2005, respectively.
(F) Primarily comprised of Orbitz, Cheaptickets, ebookers, Flairview and
Gullivers.
Table 4
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(In billions)
As of As of
March 31, 2006 December 31, 2005
Assets
Current assets:
Cash and cash equivalents $0.4 $0.8
Other current assets 3.2 2.6
Total current assets 3.6 3.4
Property and equipment, net 1.8 1.8
Goodwill 12.2 12.0
Other non-current assets 4.4 4.5
Total assets exclusive of assets
under programs 22.0 21.7
Assets under management programs 12.8 12.4
Total assets $34.8 $34.1
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $1.3 $1.0
Other current liabilities 4.9 4.7
Total current liabilities 6.2 5.7
Long-term debt 2.8 2.9
Other non-current liabilities 1.5 1.6
Total liabilities exclusive of
liabilities under programs 10.5 10.2
Liabilities under management programs(*) 13.2 12.6
Total stockholders' equity 11.1 11.3
Total liabilities and stockholders'
equity $34.8 $34.1
(*) Liabilities under management programs includes deferred income tax
liabilities of $1.8 billion and $1.7 billion as of March 31, 2006 and
December 31, 2005, respectively.
Table 5
Cendant Corporation and Subsidiaries
SCHEDULE OF CORPORATE DEBT (*)
(In millions)
Maturity March 31, December 31,
Date 2006 2005
Net Debt
August 2006 6 7/8% notes $850 $850
August 2006 4.89% notes 100 100
January 2008 6 1/4% notes 798 798
March 2010 6 1/4% notes 349 349
January 2013 7 3/8% notes 1,192 1,192
March 2015 7 1/8% notes 250 250
November 2009 Revolver borrowings (A) 575 357
Net hedging gains
(losses) (B) (91) (47)
Other 92 87
Total Debt 4,115 3,936
Less: Cash and cash equivalents 445 835
Net Debt $3,670 $3,101
Net Capitalization
Total Stockholders' Equity $11,098 $11,291
Total Debt (per above) 4,115 3,936
Total Capitalization 15,213 15,227
Less: Cash and cash equivalents 445 835
Net Capitalization $14,768 $14,392
Net Debt to Net
Capitalization Ratio (C) 24.9% 21.5%
Total Debt to Total
Capitalization Ratio 27.0% 25.8%
(*) Amounts presented herein exclude assets and liabilities under
management programs.
(A) Approximately $350 million of the balance at March 31, 2006
represents borrowings in fourth quarter 2005 to repatriate foreign
earnings under the American Jobs Creation Act of 2004.
(B) As of March 31, 2006, this balance represents $189 million of mark-
to-market adjustments on current interest rate hedges, partially
offset by $98 million of net gains resulting from the termination of
interest rate hedges, which will be amortized by the Company to
reduce future interest expense.
(C) See Table 8 for a description of this ratio.
Table 6
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
Three Months Ended
March 31,
2006 2005
Operating Activities
Net cash provided by operating activities
exclusive of management programs $11 $292
Net cash provided by operating activities of
management programs 232 266
Net Cash Provided by Operating Activities 243 558
Investing Activities
Property and equipment additions (93) (78)
Net assets acquired, net of cash acquired,
and acquisition-related payments (156) (455)
Proceeds received on asset sales 14 6
Proceeds from disposition of businesses,
net of transaction-related payments (19) 958
Other, net (6) 26
Net cash provided by (used in) investing
activities exclusive of management programs (260) 457
Management programs:
Net change in program cash (33) (143)
Net change in investment in vehicles (841) (1,493)
Net change in relocation receivables 30 (3)
Net change in mortgage servicing
rights, related derivatives and
mortgage-backed securities - 12
Other, net (7) -
(851) (1,627)
Net Cash Used in Investing Activities (1,111) (1,170)
Financing Activities
Principal payments on borrowings (7) (63)
Net change in short-term borrowings 218 660
Issuances of common stock 22 120
Repurchases of common stock (243) (231)
Payments of dividends (113) (96)
Cash reduction due to spin-off of PHH - (259)
Other, net (2) 2
Net cash provided by (used in) financing
activities exclusive of management programs (125) 133
Management programs: 4,091 3,846
Proceeds from borrowings (3,526) (2,451)
Principal payments on borrowings 43 (39)
Net change in short-term borrowings (4) (6)
Other, net 604 1,350
Net Cash Provided by Financing
Activities 479 1,483
Effect of changes in exchange rates on
cash and cash equivalents (1) (27)
Cash provided by discontinued operations - 30
Net increase (decrease) in cash and
cash equivalents (390) 874
Cash and cash equivalents, beginning
of period 835 467
Cash and cash equivalents, end of period $445 $1,341
Table 7
Cendant Corporation and Subsidiaries
CONSOLIDATED SCHEDULES OF FREE CASH FLOWS (*)
(In millions)
Three Months Ended
March 31,
2006 2005
Pretax income $192 $179
Addback of non-cash depreciation and
amortization:
Non-program related 138 137
Pendings and listings 6 3
Addback of non-cash valuation charge
associated with PHH spin-off - 180
Tax payments, net of refunds (101) (22)
Working capital and other (178) (174)
Capital expenditures (93) (78)
Management programs (A) (15) (11)
Free Cash Flow before Stockholder
Litigation Payments (51) 214
Stockholder litigation payments (32) -
Free Cash Flow (83) 214
Current period acquisitions, net of
cash acquired (138) (393)
Payments related to prior period
acquisitions (18) (62)
Proceeds from disposition of
businesses, net (19) 958
Net repurchases of common stock (221) (111)
Payment of dividends (113) (96)
Investments and other (B) (9) 26
Cash reduction due to spin-off of PHH - (259)
Net borrowings 211 597
Net increase (decrease) in cash and
cash equivalents (per Table 6) $(390) $874
(*) See Table 8 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 March 31, 2006 and 2005, the
net cash flows from the activities of management programs are
reflected on Table 6 as follows: (i) net cash provided by operating
activities of $232 million and $266 million, respectively, (ii) net
cash used in investing activities of $851 million and $1,627 million,
respectively, and (iii) net cash provided by financing activities of
$604 million and $1,350 million, respectively.
(B) Represents net cash provided by discontinued operations, the effects
of exchange rates on cash and cash equivalents, other investing and
financing activities and the change in restricted cash.
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
(In millions)
Three Months Ended
March 31,
2006 2005
Free Cash Flow (per above) $(83) $214
Cash (inflows) outflows included
in Free Cash Flow but not
reflected in Net Cash Provided
by Operating Activities:
Investing activities of
management programs 851 1,627
Financing activities of
management programs (604) (1,350)
Capital expenditures 93 78
Proceeds received on asset
sales (14) (6)
Change in restricted cash - (5)
Net Cash Provided by Operating
Activities (per Table 6) $243 $558
Table 8
(page 1 of 2)
Cendant Corporation and Subsidiaries
Definitions of Non-GAAP Measures
The accompanying press release includes certain non-GAAP (generally accepted accounting principles) 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 GAAP
and our presentation of EBITDA may not be comparable to
similarly titled measures used by other companies.
Net Debt to Net Represents (i) net corporate debt (which reflects total
Capitalization corporate debt adjusted to assume the application of
Ratio 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 indebtedness
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 GAAP (Total Debt to Total
Capitalization Ratio) is presented in Table 5, 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,
(iii) asset sales and (iv) the change in restricted cash.
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 GAAP (Net Cash Provided by Operating Activities) is
presented in Table 7, which accompanies this press
release.
Table 8
(page 2 of 2)
Cendant Corporation and Subsidiaries
Definitions of Non-GAAP Measures
First Quarter 2006 Represents first quarter 2006 EPS from Continuing
EPS from Operations excluding $43 million of costs that were
Continuing incurred in connection with the execution of our plan
Operations before to separate Cendant into four independent publicly-
Separation Costs traded companies. Management believes the most
directly comparable GAAP measure for EPS from
Continuing Operations before Separation Costs would
be EPS from Continuing Operations. We exclude
separation costs as such costs are not representative
of the results of operations of our core businesses.
Additionally, management believes excluding such cost
presents our first quarter 2006 results on a more
comparable basis to 2005, thereby providing greater
transparency into the results of operations of our
core businesses.
Second Quarter Represents our estimates of second quarter 2006
2006 EBITDA EBITDA excluding costs that will be incurred in
before Separation connection with our plan to separate Cendant into
Costs four independent publicly-traded companies.
Management believes the most directly comparable GAAP
measure for EBITDA before Separation Costs would be
Net Income. We exclude separation costs due to the
difficulty in forecasting and quantifying an
estimated amount for such costs as a result of the
uncertainty related to the timing and impact of the
planned separation. Therefore, we are not providing
an estimate for Net Income.
Second Quarter Represents our estimate of 2006 EBITDA growth over
2006 EBITDA 2005 (second quarter) excluding costs that will be
Growth before incurred in connection with our plan to separate
Separation Costs Cendant into four independent publicly-traded
companies. We exclude separation costs due to the
difficulty in forecasting and quantifying an
estimated amount for such costs as a result of the
uncertainty related to the timing and impact of the
planned separation. Management believes the most
directly comparable GAAP measure for EBITDA would be
Net Income. However, due to the difficulty in
forecasting and quantifying an estimated amount for
separation costs as a result of the uncertainty
related to the timing and impact of the planned
separation, we are not providing an estimate for Net
Income.