Cendant Reports Results for Second Quarter 2006
NEW YORK, Aug. 9, 2006 -- Cendant Corporation today reported results for second quarter 2006. Revenue totaled $4.3 billion, an increase of 2% over second quarter 2005, reflecting growth across Wyndham Worldwide and the Company's Avis Budget businesses. EPS from Continuing Operations was $0.17, which excludes the results of Travelport, formerly the Company's Travel Distribution Services division, which are classified as discontinued operations due to the pending sale of that business. As previously announced, the Company completed the spin-offs of Realogy and Wyndham Worldwide in tax-free distributions to its stockholders on July 31, 2006. Excluding separation and restructuring costs and the previously disclosed tax accrual at Wyndham Worldwide, EPS from Continuing Operations was $0.24.
Cendant's Chairman and CEO, Henry R. Silverman, stated: "The past several months were a period of strategic milestones for Cendant. We completed the spin-offs of Realogy and Wyndham Worldwide to our shareholders and each is now an independent, publicly-traded company. The sale of Travelport is expected to be completed this month, after which Avis Budget Group will be an independent, publicly-traded company. These companies are leaders in their respective industries and we are excited about the prospects for each to grow, prosper and create long-term value for its shareholders."
Second Quarter 2006 Results of Core Operating Segments
The following discussion of operating results focuses on revenue and EBITDA for each of the Company's core operating segments as of June 30, 2006. Revenue and EBITDA are expressed in millions.
Realogy (formerly Real Estate Services)
(Consisting of the Company's former real estate franchise brands, brokerage operations, relocation services and settlement services businesses)
2006 2005 % change Revenue $1,903 $2,043 (7%) EBITDA $306 $393 (22%)
Revenue and EBITDA declined in line with Realogy's expectations principally due to lower revenue at Realogy's real estate franchise and NRT real estate brokerage businesses, partially offset by growth in its settlement services business due to the acquisition of Texas American Title Company and related companies in January 2006. Home prices increased 5% at both real estate franchise and NRT. These increases were offset by closed sides decreases of 16% and 13% at real estate franchise and NRT, respectively. The decreases in closed sides were impacted by the acquisitions of brokerages by NRT. Excluding this impact, closed sides would have decreased 14% and 17% at real estate franchise and NRT, respectively. The decline in closed sides volume reflects moderation of the residential real estate market, particularly in some of the areas where NRT is concentrated such as Florida and California. In addition, EBITDA comparisons were negatively impacted by an incremental $13 million of separation and restructuring costs. Excluding these costs, EBITDA would have been down 19%.
Hospitality Services (now part of Wyndham Worldwide)
(Consisting of the Company's former franchised lodging brands, hotel management, timeshare exchange and vacation rental businesses)
2006 2005 % change Revenue $421 $367 15% EBITDA $77 $100 (23%)
Revenue increased due to growth in Wyndham Worldwide's lodging and Vacation Network Group (VNG) businesses. The largest contributor to revenue growth was the inclusion of approximately $35 million of revenue resulting from the acquisition of Wyndham Hotels and Resorts, of which approximately $28 million had no impact on EBITDA because it related to reimbursable expenses. Lodging revenue was also positively impacted by a 10% improvement in RevPAR, excluding Wyndham Hotels and Resorts and Baymont Hotels, both of which were recently acquired. EBITDA declined principally due to a previously announced $25 million foreign tax accrual that was recorded in the European vacation rental operations.
Timeshare Resorts (now part of Wyndham Worldwide)
(Consisting of the Company's former timeshare sales and development businesses)
2006 2005 % change Revenue $479 $436 10% EBITDA $84 $73 15%
Revenue and EBITDA increased principally due to growth in timeshare sales and increased consumer financing income. Growth in timeshare sales revenue was driven by an 11% increase in revenue per guest and a 9% increase in tour flow. Revenue per guest benefited from higher pricing and increased conversion of tours into sales, and tour flow was positively impacted by the continued development of the Trendwest in-house sales program and continued improvement in local marketing efforts. Operating results were negatively impacted by the adoption in first quarter 2006 of a new accounting standard for the recognition of timeshare sales revenue and expenses (SFAS No. 152), and the absence of $11 million of income that was recognized in second quarter 2005 in connection with a previously disclosed disposal of land that was no longer needed for development. Excluding the impact of these items, revenue and EBITDA would have increased 24% and 39%, respectively.
Avis Budget (formerly Vehicle Rental)
(Consisting of the Company's car and truck rental businesses)
2006 2005 % change
Revenue $1,439 $1,312 10%
EBITDA $111 $128 (13%)
Revenue increased due to growth in our domestic and international car rental operations. Car rental revenue grew 12% worldwide due to a 9% increase in price and a 3% increase in rental day volume. As expected, EBITDA comparisons were negatively impacted by increased fleet costs. We expect continuing year-over-year price increases for the remainder of 2006 as we seek to offset the impact of higher fleet costs.
Other Items
-- Completion of Spin-Offs -- We have completed the spin-offs of Realogy
and Wyndham Worldwide in tax-free distributions to the Company's
shareholders. Realogy and Wyndham Worldwide are now independent,
publicly-traded companies listed on the New York Stock Exchange under
the ticker symbols "H" and "WYN," respectively. As a result, Cendant
will classify Realogy and Wyndham Worldwide as discontinued operations
when it reports its third quarter results.
-- Sale of Travelport -- We agreed to sell Travelport to an affiliate of
The Blackstone Group for $4.3 billion in cash and confirmed that the
net proceeds (after taxes, fees and expenses, and retirement of
Travelport borrowings) from such sale will be used to reduce the
initial indebtedness of Realogy and Wyndham Worldwide. The sale is
expected to close this month.
-- Repayment of Corporate Debt -- In connection with our separation plan,
we repurchased approximately $2.5 billion aggregate principal amount
under our 6.25% Senior Notes due 2008 and 2010, 7.375% Senior Notes due
2013, and 7.125% Senior Notes due 2015. We also pre-funded the payment
of $950 million under our 4.89% and 6 7/8% Notes Due 2006 and repaid
amounts outstanding under our $2.0 billion revolving credit facility.
-- Cendant Name Change and Reverse Stock Split -- We have submitted
several proposals to be voted upon at our annual stockholders meeting
scheduled for August 29, 2006, including one to change Cendant's name
to Avis Budget Group, Inc. and another to authorize a 1-for-10 reverse
stock split of Cendant's common stock. If approved, these proposals
are expected to become effective on September 5, 2006 and at such time
we expect that our New York Stock Exchange ticker symbol will be
changed to "CAR".
-- Discontinued Operations -- Income from discontinued operations includes
results of the Company's Travelport unit and, in prior periods, results
of operations of the Company's former Marketing Services Division,
Wright Express fuel card business, and fleet and appraisal units, all
of which have been disposed. In addition, the loss on disposal of
discontinued operations in second quarter 2006 includes a previously
announced, non-cash impairment charge of approximately $1.0 billion in
connection with the sale of Travelport.
-- Separation Costs -- Second quarter 2006 EBITDA includes separation
costs of $49 million, including $42 million recorded in Corporate and
Other, $2 million recorded in Realogy, $2 million recorded in
Hospitality Services, $2 million recorded in Timeshare Resorts and
$1 million recorded in Avis Budget. These costs consist primarily of
legal, accounting, other professional and consulting fees, and employee
costs.
-- Foreign Tax Accrual -- Second quarter 2006 results include a previously
announced $36 million pretax accrual for foreign taxes related to
Wyndham Worldwide's European vacation rental operations. $25 million
of this accrual is recorded in the segment results for Hospitality
Services and $11 million is recorded as interest expense, below EBITDA.
-- Free Cash Flow -- Free cash flow in second quarter 2006 is not
comparable to second quarter 2005 due to the impact of the repayment of
certain vehicle related debt using the proceeds from the $1.875 billion
of corporate borrowings completed in April 2006. See Table 7.
Outlook for Avis Budget
The following table presents the previously announced pro forma 2005 and expected pro forma 2006 financial data for Avis Budget Car Rental, LLC and its subsidiaries, the companies that comprise Cendant's vehicle rental business.
($ millions) 2005 (1) 2006E (1)(2) Revenue $5,316 $5,600 - 5,800 EBITDA $497 $400 - 440 Corporate interest expense, net 141 140 - 145 EBITDA less corporate interest expense 356 260 - 295 Non-vehicle depreciation and amortization 98 90 - 100 Pretax income $258 $165 - 200
(1) The expected pro forma results provided above give effect to the $1.875 billion of corporate borrowings completed in April 2006 and repayment of vehicle-backed debt with a portion of the net proceeds of such financing, removal of Cendant-allocated general overhead costs, the incurrence of stand- alone public company costs, elimination of the approximately $802 million intercompany balance with Cendant and the associated interest income, and increased truck lease financing costs due to the separation.
(2) Full year estimates may not total because actual results are not expected to be at the lowest or highest of the expected range.
Investor Conference Call
Cendant will host a conference call to discuss the second quarter results on Thursday, August 10, 2006, at 11:00 a.m. (ET). Investors may access the call live at www.cendant.com or by dialing (913) 981-5509. A web replay will be available at www.cendant.com following the call. A telephone replay will be available from 2:00 p.m. (ET) on August 10, 2006 until 8:00 p.m. (ET) on August 17, 2006 at (719) 457-0820, access code: 6465003.
About Cendant Corporation
Cendant is now comprised of its Travelport and Avis Budget Group businesses. Travelport is classified as a discontinued operation due to its impending sale. Avis Budget Group is a leading provider of vehicle rental services with operations in more than 50 countries. Through its Avis and Budget brands, Avis Budget Group is the largest general-use vehicle rental operator in each of North America, Australia, New Zealand and certain other regions. Avis Budget Group is headquartered in Parsippany, NJ and has more than 30,000 employees.
About Realogy Corporation
Realogy Corporation is the world's largest residential real estate brokerage franchisor, the largest U.S. residential real estate brokerage firm, a leading global provider of outsourced employee relocation services, and a provider of title and settlement services. Realogy's brands include Century 21, Coldwell Banker, Coldwell Banker Commercial, ERA, Sotheby's International Realty, NRT Incorporated, Cartus and Title Resource Group. Realogy is headquartered in Parsippany, NJ and has more than 15,000 employees.
About Wyndham Worldwide Corporation
Wyndham Worldwide Corporation is one of the world's largest hospitality companies offering individual consumers and business-to-business customers a broad suite of hospitality products and services including lodging, vacation exchange and rental services, and vacation ownership interests in resorts. Wyndham Worldwide is headquartered in Parsippany, NJ, and is supported by approximately 28,800 employees around the world.
Forward-Looking Statements
Certain statements in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "projects", "estimates", "plans", "may increase", "may fluctuate" and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements. The Company cannot provide any assurances that the remaining proposed transactions related to the separation, principally the proposed sale of Travelport, will be completed, nor can it give assurances as to the terms on which such transactions will be consummated.
Various risks that could cause future results to differ from those expressed by the forward-looking statements included in this press release include, but are not limited to risks related to the proposed sale of Travelport, the high level of competition in the vehicle rental industry, increased costs for new vehicles, a downturn in airline passenger traffic, an occurrence or threat of terrorism, a significant increase in interest rates or borrowing costs and the Company's ability to make changes necessary to operate following completion of the separation plan. Other unknown or unpredictable factors also could have material adverse effects on Cendant's and its companies' performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this press release. 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 Quarterly Report on Form 10-Q for the period ended June 30, 2006, including under headings such as "Forward-Looking Statements," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Except for the Company's ongoing obligations to disclose material information under the federal securities laws, the Company undertakes no obligation to release publicly any revisions to any forward- looking statements, to report events or to report the occurrence of unanticipated events unless required by law.
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.
Tables Follow
Table 1
page 1 of 2
Cendant Corporation and Subsidiaries
SUMMARY DATA SHEET
(Dollars in millions, except per share data)
Second Quarter
2006 2005 % Change
Income Statement Items
Net Revenues $4,257 $4,170 2%
Pretax Income (A) 277 505 (45%)
Income from Continuing Operations 174 316 (45%)
EPS from Continuing Operations
(diluted) 0.17 0.29 (41%)
Cash Flow Items
Net Cash Provided by Operating
Activities 724 869
Free Cash Flow (B) (1,488) 549
Payments Made for Current Period
Acquisitions, Net of Cash
Acquired (66) (56)
Net Borrowings 1,838 (45)
Net Repurchases of Common Stock 14 (158)
Payment of Dividends - (96)
As of As of
June 30, December 31,
2006 2005
Balance Sheet Items
Total Corporate and Other Debt $3,694 $3,578
Total Avis Budget Car Rental
Corporate Debt 1,875 -
Cash and Cash Equivalents 441 730
Total Stockholders' Equity 10,501 11,291
Segment Results
Second Quarter
2006 2005 % Change
Net Revenues
Realogy (formerly known as Real
Estate Services) $1,903 $2,043 (7%)
Hospitality Services 421 367 15%
Timeshare Resorts 479 436 10%
Wyndham Worldwide 900 803 12%
Avis Budget Group (formerly known as
Vehicle Rental) (C) 1,439 1,312 10%
Total Core Operating Segments 4,242 4,158 2%
Corporate and Other 15 12 *
Cendant Corporation $4,257 $4,170 2%
EBITDA (D)
Realogy (formerly known as Real
Estate Services) $306 $393 (22%)
Hospitality Services 77 100 (23%)
Timeshare Resorts 84 73 15%
Wyndham Worldwide 161 173 (7%)
Avis Budget Group (formerly known as
Vehicle Rental) 111 128 (13%)
Total Core Operating Segments 578 694 (17%)
Corporate and Other (95) (35) *
Cendant Corporation $483 $659 (27%)
Reconciliation of EBITDA to Pretax Income
Total Company EBITDA $483 $659
Less: Non-program related depreciation
and amortization 94 85
Non-program related interest
expense, net 110 66
Amortization of pendings and
listings 2 3
Pretax Income (A) $277 $505 (45%)
* 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) For comparability purposes, 2005 vehicle rental revenue has been
grossed-up by $88 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.
(D) See Table 8 for a description of EBITDA.
Table 1
page 2 of 2
Cendant Corporation and Subsidiaries
SUMMARY DATA SHEET
(Dollars in millions, except per share data)
Six Months Ended June 30,
2006 2005 % Change
Income Statement Items
Net Revenues $7,834 $7,580 3%
Pretax Income (A) 420 609 (31%)
Income from Continuing Operations 255 358 (29%)
EPS from Continuing Operations
(diluted) 0.25 0.33 (24%)
Cash Flow Items
Net Cash Provided by Operating
Activities 754 1,264
Free Cash Flow (B) (1,763) 626
Payments Made for Current Period
Acquisitions, Net of Cash
Acquired (180) (87)
Net Borrowings 2,051 576
Net Repurchases of Common Stock (207) (269)
Payment of Dividends (113) (192)
As of As of
June 30, 2006 December 31, 2005
Balance Sheet Items
Total Corporate and Other Debt $3,694 $3,578
Total Avis Budget Car Rental
Corporate Debt 1,875 -
Cash and Cash Equivalents 441 730
Total Stockholders' Equity 10,501 11,291
Segment Results
Six Months Ended June 30,
2006 2005 % Change
Net Revenues
Realogy (formerly known as Real
Estate Services) $3,329 $3,452 (4%)
Hospitality Services 830 762 9%
Timeshare Resorts 886 805 10%
Wyndham Worldwide 1,716 1,567 10%
Avis Budget Group (formerly known as
Vehicle Rental) (C) 2,758 2,477 11%
Total Core Operating Segments 7,803 7,496 4%
Mortgage Services - 46 *
Corporate and Other 31 38 *
Cendant Corporation $7,834 $7,580 3%
EBITDA (D)
Realogy (formerly known as Real
Estate Services) $427 $554 (23%)
Hospitality Services 194 225 (14%)
Timeshare Resorts 151 113 34%
Wyndham Worldwide 345 338 2%
Avis Budget Group (formerly known as
Vehicle Rental) 166 194 (14%)
Total Core Operating Segments 938 1,086 (14%)
Mortgage Services - (181) *
Corporate and Other (158) (72) *
Cendant Corporation $780 $833 (6%)
Reconciliation of EBITDA to Pretax Income
Total Company EBITDA $780 $833
Less: Non-program related depreciation
and amortization 183 172
Non-program related interest
expense, net 168 46
Amortization of pendings and
listings 9 6
Pretax Income (A) $420 $609 (31%)
* 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) For comparability purposes, 2005 vehicle rental revenue has been
grossed-up by $165 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.
(D) See Table 8 for a description of EBITDA.
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,
2006 2005 2006 2005
Revenues
Service fees and membership, net $2,813 $2,847 $5,064 $5,060
Vehicle-related 1,439 1,312 2,758 2,477
Other 5 11 12 43
Net revenues 4,257 4,170 7,834 7,580
Expenses
Operating 2,602 2,539 4,825 4,647
Vehicle depreciation, lease charges
and interest, net 439 373 860 697
Marketing and reservation 359 321 683 617
General and administrative 324 276 599 564
Non-program related depreciation
and amortization 94 85 183 172
Non-program related interest
expense, net 110 66 168 46
Acquisition and integration
related costs:
Amortization of pendings and
listings 2 3 9 6
Other 1 1 2 2
Separation costs (A) 49 - 85 -
Restructuring and transaction-
related charges - 1 - 40
Valuation charge associated with
PHH spin-off - - - 180
Total expenses 3,980 3,665 7,414 6,971
Income before income taxes and
minority interest 277 505 420 609
Provision for income taxes 103 188 164 249
Minority interest, net of tax - 1 1 2
Income from continuing operations 174 316 255 358
Income from discontinued operations,
net of tax (B) 53 67 106 81
Gain (loss) on disposal of
discontinued operations, net of tax: (981) 4 (981) (133)
Income (loss) before cumulative effect
of accounting changes (754) 387 (620) 306
Cumulative effect of accounting
changes, net of tax (C) - - (64) -
Net income (loss) $(754) $387 $(684) $306
Earnings per share
Basic
Income from continuing operations $0.17 $0.30 $0.25 $0.34
Income from discontinued
operations 0.06 0.07 0.11 0.08
Gain (loss) on disposal of
discontinued operations (0.98) - (0.98) (0.13)
Cumulative effect of accounting
changes - - (0.06) -
Net income (loss) $(0.75) $0.37 $(0.68) $0.29
Diluted
Income from continuing operations $0.17 $0.29 $0.25 $0.33
Income from discontinued
operations 0.05 0.07 0.11 0.08
Gain (loss) on disposal of
discontinued operations (0.97) - (0.97) (0.13)
Cumulative effect of accounting
changes - - (0.06) -
Net income (loss) $(0.75) $0.36 $(0.67) $0.28
Weighted average shares outstanding
Basic 1,002 1,050 1,004 1,052
Diluted 1,011 1,072 1,014 1,075
(A) Represents costs we incurred in connection with the execution of our
plan to separate Cendant into four independent companies. For the
three months ended June 30, 2006, the Company incurred $42 million,
$2 million, $2 million, $2 million and $1 million of such costs within
Corporate and Other, Realogy, Timeshare, Hospitality Services and Avis
Budget Group, respectively. For the six months ended June 30, 2006,
the Company incurred $75 million, $4 million, $2 million, $2 million
and $2 million of such costs within Corporate and Other, Realogy,
Timeshare, Hospitality Services and Avis Budget Group, respectively.
(B) Includes the results of operations of the Company's (i) Travelport
business, the sale of which is anticipated to close in August 2006,
(ii) former Marketing Services division, which was disposed of in
October 2005, (iii) former fuel card business, Wright Express
Corporation, which was disposed of in February 2005 and (iv) former
fleet leasing and appraisal businesses which were spun-off in 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
Cendant Corporation and Affiliates
SEGMENT REVENUE DRIVER ANALYSIS
(Revenue dollars in thousands)
Second Quarter
2006 2005 % Change
REALOGY SEGMENT
Real Estate Franchise
Closed Sides 439,914 521,471 (16%)
Average Price $233,457 $221,737 5%
Royalty Revenue (A) $128,233 $141,553 (9%)
Total Revenue (A) $158,035 $160,366 (1%)
Real Estate Brokerage
Closed Sides 117,799 135,173 (13%)
Average Price $492,809 $470,404 5%
Net Revenue from Real Estate
Transactions $1,485,603 $1,638,710 (9%)
Total Revenue $1,501,245 $1,654,855 (9%)
Cartus (formerly "Relocation")
Transaction Volume 26,771 28,655 (7%)
Total Revenue $131,333 $135,108 (3%)
Title Resource Group (formerly
"Settlement Services") (B)
Purchase Title and Closing Units 47,163 42,954 10%
Refinance Title and Closing Units 10,639 12,776 (17%)
Total Revenue $112,837 $92,312 22%
HOSPITALITY SERVICES SEGMENT
Lodging (C)
RevPAR $36.97 $31.91 16%
Weighted Average Rooms Available 531,019 511,998 4%
Royalty, Marketing and
Reservation Revenue $125,409 $104,281 20%
Total Revenue $176,368 $128,953 37%
Vacation Exchange and Rental
Average Number of Exchange
Subscribers 3,327,129 3,185,419 4%
Subscriber Related Revenue $152,316 $148,735 2%
European Cottage Weeks Sold 256,860 246,002 4%
Total Revenue $244,525 $237,966 3%
TIMESHARE RESORTS SEGMENT
Tours 273,343 250,231 9%
Total Revenue $479,285 $436,183 10%
AVIS BUDGET GROUP SEGMENT
Car
Rental Days (000's) 26,526 25,809 3%
Time and Mileage Revenue per Day $39.30 $36.13 9%
Total Car Revenue (D) $1,309,575 $1,165,574 12%
Truck
Total Truck Revenue (D) $129,543 $146,513 (12%)
(A) Excludes $96 million and $110 million of intercompany royalties paid
primarily by our NRT real estate brokerage business during second
quarter 2006 and 2005, respectively.
(B) 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 10% and 19%,
respectively.
(C) The 2006 amounts include Wyndham hotel brand and franchise system,
which we acquired on October 11, 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 1%.
(D) For comparability purposes, 2005 vehicle rental revenue has been
grossed-up by $88 million to reflect a change in accounting
presentation adopted during fourth quarter 2005 to be consistent with
industry competitors.
Table 4
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(In billions)
As of As of
June 30, 2006 December 31, 2005
Assets
Current assets:
Cash and cash equivalents $0.4 $0.7
Assets of discontinued operations 6.3 6.9
Other current assets 2.5 2.0
Total current assets 9.2 9.6
Property and equipment, net 1.2 1.3
Goodwill 8.1 7.9
Other non-current assets 3.0 2.9
Total assets exclusive of assets
under programs 21.5 21.7
Assets under management programs 13.7 12.4
Total assets $35.2 $34.1
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $3.6 $1.0
Liabilities of discontinued
operations 1.8 1.6
Other current liabilities 3.9 3.8
Total current liabilities 9.3 6.4
Long-term debt 2.0 2.6
Other non-current liabilities 1.2 1.2
Total liabilities exclusive of
liabilities under programs 12.5 10.2
Liabilities under management programs(*) 12.2 12.6
Total stockholders' equity 10.5 11.3
Total liabilities and stockholders'
equity $35.2 $34.1
(*) Liabilities under management programs includes deferred income tax
liabilities of $1.8 billion and $1.7 billion as of June 30, 2006 and
December 31, 2005, respectively.
Table 5
Cendant Corporation and Subsidiaries
SCHEDULE OF CORPORATE DEBT (*)
(In millions)
June 30,
Maturity Date 2006 Pro June 30, March 31, December 31
forma (A) 2006 2006 2005
Corporate debt:
August 2006 6 7/8% notes (B) $ - $850 $850 $850
August 2006 4.89% notes (B) - 100 100 100
January 2008 6 1/4% notes (C) 30 799 798 798
March 2010 6 1/4% notes (C) 12 349 349 349
January 2013 7 3/8% notes (C) 18 1,192 1,192 1,192
March 2015 7 1/8% notes (C) 3 250 250 250
November 2009 Revolver
borrowings (C)(D) - 200 225 7
Net hedging
losses (E) - (123) (91) (47)
63 3,617 3,673 3,499
Avis Budget Car Rental
Corporate debt: (F)
April 2012 Floating rate
term loan 875 875 - -
May 2014 Floating rate
senior notes 250 250 - -
May 2014 7 5/8% notes 375 375 - -
May 2016 7 3/4% notes 375 375 - -
1,875 1,875 - -
Other (G) 11 77 85 79
Total Debt $1,949 $5,569 $3,758 $3,578
(*) Amounts presented herein exclude assets and liabilities under
management programs. In addition, amounts as of March 31, 2006 and
December 31, 2005 have been restated to exclude debt and cash
balances related to Travelport, which is accounted for as a
discontinued operation.
(A) Presents our Corporate debt and Avis Budget Car Rental Corporate
Debt on a pro forma basis after giving effect to (i) the repayment
of certain Corporate debt, discussed in (B) and (C), below, (ii) the
settlement of derivatives associated with our Corporate debt and
(iii) the distributions of Realogy and Wyndham to our stockholders
on July 31, 2006.
(B) During July 2006, we funded the aggregate principal amount of
$950 million due in August 2006 under the 6 7/8% notes and 4.89%
notes.
(C) In connection with the execution of our separation plan, on July 28,
2006, we repurchased approximately $2.5 billion aggregate principal
under our 6 1/4% notes due in January 2008 and March 2010, 7 3/8%
notes due in January 2013 and 7 1/8% notes due in March 2015 and
repaid outstanding borrowings under our corporate revolving credit
facility.
(D) The outstanding borrowings do not include $265 million of borrowings
for which our Travelport subsidiary is the primary obligor. This
amount is included within liabilities of discontinued operations on
our Consolidated Condensed Balance Sheet at June 30, 2006.
(E) As of June 30, 2006, this balance represents $212 million of
mark-to-market adjustments on current interest rate hedges, partially
offset by $89 million of net gains resulting from the termination of
interest rate hedges.
(F) The floating rate term loan and fixed and floating rate notes were
issued in April 2006 by Avis Budget Car Rental, LLC, the parent
company of our vehicle rental subsidiary. The proceeds from these
borrowings were utilized to repay vehicle-backed debt under
management programs.
(G) The pro forma amount at June 30, 2006 excludes $66 million related
to Realogy and Wyndham.
Table 6
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Operating Activities
Net cash provided by operating
activities exclusive of management
programs $559 $693 $357 $822
Net cash provided by operating
activities of management programs 165 176 397 442
Net Cash Provided by Operating
Activities 724 869 754 1,264
Investing Activities
Property and equipment additions (86) (80) (148) (133)
Net assets acquired, net of cash
acquired, and acquisition-related
payments (169) (75) (303) (127)
Proceeds received on asset sales 7 7 11 13
Proceeds from sale of available-for-
sale securities - - - 18
Proceeds (payments) from disposition
of businesses, net of transaction-
related payments (9) 6 (28) 964
Other, net (23) (12) (32) (1)
Net cash provided by (used in)
investing activities exclusive of
management programs (280) (154) (500) 734
Management programs:
(Increase) decrease in program cash (42) 82 (75) (61)
Net change in investment in
vehicles (691) (1,079) (1,532) (2,572)
Net change in relocation
receivables (104) (115) (74) (118)
Net change in mortgage servicing
rights, related derivatives and
mortgage-backed securities - - - 21
Other, net 1 (11) (6) (20)
(836) (1,123) (1,687) (2,750)
Net Cash Used in Investing Activities (1,116) (1,277) (2,187) (2,016)
Financing Activities
Proceeds from borrowings 1,875 4 1,875 4
Principal payments on borrowings (11) (5) (16) (44)
Net change in short-term borrowings (26) (44) 192 616
Issuances of common stock 14 71 36 191
Repurchases of common stock - (229) (243) (460)
Cash reduction due to spin-off of PHH - - - (259)
Payment of dividends - (96) (113) (192)
Other, net (27) 1 (30) 4
Net cash provided by (used in)
financing activities exclusive of
management programs 1,825 (298) 1,701 (140)
Management programs:
Proceeds from borrowings 3,217 3,137 7,011 6,983
Principal payments on borrowings (4,541) (2,456) (7,769) (4,907)
Net change in short-term borrowings 61 223 104 184
Other, net (17) (6) (22) (12)
(1,280) 898 (676) 2,248
Net Cash Provided by Financing
Activities 545 600 1,025 2,108
Effect of changes in exchange rates
on cash and cash equivalents - (14) - (20)
Cash provided by (used in)
discontinued operations 62 2 119 (1,397)
Net increase (decrease) in cash and
cash equivalents 215 180 (289) (61)
Cash and cash equivalents, beginning
of period 226 226 730 467
Cash and cash equivalents, end of
period $441 $406 $441 $406
Table 7
Cendant Corporation and Subsidiaries
CONSOLIDATED SCHEDULES OF FREE CASH FLOWS (*)
(In millions)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Pretax income $277 $505 $420 $609
Addback of non-cash depreciation and
amortization:
Non-program related 94 85 183 172
Pendings and listings 2 3 9 6
Addback of non-cash valuation charge
associated with PHH spin-off - - - 180
Tax payments, net of refunds (159) (82) (251) (99)
Working capital and other 335 167 22 (49)
Capital expenditures (86) (80) (148) (133)
Free Cash Flow before Management
Programs and Stockholder Litigation
Payments 463 598 235 686
Management programs (A) (D) (1,951) (49) (1,966) (60)
Stockholder litigation payments - - (32) -
Free Cash Flow (B) (1,488) 549 (1,763) 626
Current period acquisitions, net of
cash acquired (66) (56) (180) (87)
Payments related to prior period
acquisitions (103) (19) (123) (40)
Proceeds from disposition of
businesses, net (9) 6 (28) 964
Net repurchases of common stock 14 (158) (207) (269)
Payment of dividends - (96) (113) (192)
Investments and other (C) 29 (1) 74 (1,380)
Cash reduction due to spin-off of PHH - - - (259)
Net borrowings (D) 1,838 (45) 2,051 576
Net increase (decrease) in cash and
cash equivalents (per Table 6) $215 $180 $(289) $(61)
(*) 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 June 30, 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 $165 million and $176 million, respectively, (ii) net
cash used in investing activities of $836 million and $1,123 million,
respectively, and (iii) net cash provided by (used in) financing
activities of $(1,280) million and $898 million, respectively. For
the six months ended June 30, 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 $397 million
and $442 million, respectively, (ii) net cash used in investing
activities of $1,687 million and $2,750 million, respectively, and
(iii) net cash provided by (used in) financing activities of
$(676) million and $2,248 million, respectively.
(B) Free cash flow amounts for the three and six months ended June 30,
2006 are not comparable to the corresponding amounts in 2005 due to
the repayment of debt under management programs with proceeds
generated from corporate financings of Avis Budget Car Rental, LLC,
which is described in (D), below.
(C) 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.
(D) Includes the repayment of our vehicle-related debt utilizing proceeds
of $1,875 million received in connection with the issuance of
$1,000 million of unsecured fixed rate notes and floating rate notes
and an $875 million secured floating rate term loan under a senior
credit facility by Avis Budget Car Rental, LLC, the parent company of
our vehicle rental operations.
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
(In millions)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Free Cash Flow (per above) $(1,488) $549 $(1,763) $626
Cash (inflows) outflows included
in Free Cash Flow but not
reflected in Net Cash Provided
by Operating Activities:
Investing activities of
management programs 836 1,123 1,687 2,750
Financing activities of
management programs 1,280 (898) 676 (2,248)
Capital expenditures 86 80 148 133
Proceeds received on asset
sales (7) (7) (11) (13)
Change in restricted cash 17 22 17 16
Net Cash Provided by Operating
Activities (per Table 6) $724 $869 $754 $1,264
Table 8
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.
Second Quarter Represents second quarter 2006 EPS from Continuing
2006 EPS from Operations excluding pre-tax charges of (i) $49 million
Continuing that were incurred in connection with the execution of
Operations our plan to separate Cendant into four independent
before companies, (ii) $14 million related to restructuring
Separation initiatives primarily within our Realogy segment and
and (iii) $36 million related to local taxes payable in
Restructuring certain international jurisdictions in our Hospitality
Costs and segment. The most directly comparable GAAP measure for
Wyndham EPS from Continuing Operations before Separation and
Worldwide Restructuring Costs and Wyndham Worldwide tax accrual is
tax accrual EPS from Continuing Operations, which is presented in the
earnings release. We exclude separation and
restructuring costs and the Wyndham Worldwide tax accrual
as such costs are not representative of the results of
operations of our core businesses at June 30, 2006.
Additionally, management believes excluding such costs
presents our second quarter 2006 results on a more
comparable basis to 2005, thereby providing greater
transparency into the results of operations of our core
businesses at June 30, 2006.
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.