Cendant Corporation Reports Third Quarter Results
4 November 1998
Cendant Corporation Reports Third Quarter Results
Adjusted EPS $0.24 vs. $0.20
Reported EPS $0.14 vs. $0.23
PARSIPPANY, N.J., Nov. 4 -- Cendant Corporation
today reported third quarter results. Revenues from continuing operations
were $1.46 billion, a 23% increase over $1.19 billion in 1997. Adjusted
earnings from continuing operations were $0.24 per share, up 20% from
$0.20 per share in the third quarter of 1997.
Adjusted third quarter 1998 results reflect the impact of $0.06 per share
for the cost of the Company's investigation of previously disclosed accounting
irregularities at the former CUC International including the severance payment
to the Company's former chairman and $0.04 per share with respect to the non-
cash write-off of the Company's equity investment in NetGrocer and the
goodwill associated with the National Library of Poetry. Adjusted 1997
results reflect $0.03 per share from the reduction in the Company's ownership
of Avis-Rent-A-Car from 100% in 1997 to 20% in 1998 and certain one-time
gains.
"Once again, the Travel and Real Estate businesses performed extremely
well," said Henry R. Silverman, chairman, president and chief executive
officer. "As recently announced, we have restructured the management and
reporting relationships of the former CUC businesses and anticipate
significant improvement in future periods. Together with continued superior
performance from our Travel and Real Estate segments, we are confident that
the Cendant growth story remains intact, and anticipate increases in operating
earnings per share in the fourth quarter of 1998 and in fiscal 1999."
Third quarter EBITDA benefited from a 39% improvement in the Travel
segment, to $209.2 million in 1998 from $150.5 million in 1997, and a 51%
increase in the Real Estate segment to $197.0 million in 1998 from
$130.8 million in 1997, reflecting increases in all lines of business within
these segments. Alliance Marketing reported EBITDA of $29.7 million in
1998 compared with $73.9 million in 1997, a 60% decrease primarily due to
the non-cash write-down of intangible assets in the National Library of Poetry
business and higher marketing expenses, including a higher level of investment
in the Company's Interactive Membership Services unit, which were incurred in
the current period without a corresponding revenue benefit under the new
accounting policy. EBITDA in the Company's Other segment was a loss of
$28.7 million in 1998, excluding investigation costs, compared with income of
$57.9 million in 1997, driven primarily by the reduction of the Company's
interest in Avis-Rent-A-Car and the write-off of NetGrocer. Net income in the
Other segment was affected by a $26.6 million after tax increase in interest
expense and minority interest, due to the Company's 1998 acquisitions of
Harpur Group, Jackson Hewitt and National Parking Corp., and additional
investments in NRT Incorporated.
Statements about future results made in this release may 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. They involve a
number of risks and uncertainties that are difficult to predict. Actual
results could 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-look statements are specified in the Company's Annual Report on Form
10-K/A for the year ended December 31, 1997.
Cendant is the world's premier provider of consumer and business services.
The Company operates in three principal segments: Travel Services, Real Estate
Services and Alliance Marketing. In Travel Services, Cendant is the leading
franchisor of hotels and rental car agencies worldwide; the largest provider
of vacation exchange services; a leading fleet management company; the UK's
largest private car park operator; and a leading motorist assistance group in
the UK. In Real Estate Services, Cendant is the world's largest franchisor of
residential real estate brokerage offices, a major provider of mortgage
services to consumers and a global leader in corporate employee relocation.
In Alliance Marketing, Cendant provides access to insurance, travel, shopping,
auto, and other services, primarily through direct marketing to customers of
its affinity partners. Headquartered in Parsippany, NJ, the Company has more
than 40,000 employees and operates in over 100 countries.
Third Quarter Financial Results - As Reported
(Dollars in millions, except per share amounts)
1998 1997 % change
Revenues 1,457.8 1,186.5 23
Expenses (1) 1,247.0 845.8 47
Income before income
taxes and minority interest 210.8 340.7 (38)
Income from continuing
operations 123.1 203.0 (40)
Loss from discontinued
operations (2) (12.1) (.4) --
Net income 111.0 202.6 (46)
EBITDA - continuing
operations (3) 330.7 413.1 (20)
Earnings per share - diluted
Continuing operations .14 .23 (39)
Discontinued operations (.01) -- --
Net income .13 .23 (43)
Earnings per share - basic
Continuing operations .14 .25 (44)
Discontinued operations (.01) -- --
Net income .13 .25 (48)
Weighted average
shares - diluted 877.3 889.0 --
(1) 1998 includes $76.4 million of costs associated with the investigation
of previously disclosed irregularities at the former CUC International
including the severance payment to the Company's former chairman and
$50.0 million with respect to the non-cash write-off of the Company's
equity investment in NetGrocer and the goodwill associated with the
National Library of Poetry.
(2) Discontinued operations include Hebdo Mag classified advertising unit
and the Cendant Software unit.
(3) Earnings before interest, taxes, depreciation and amortization.
Third Quarter Financial Results - As Adjusted
(Dollars in millions, except per share amounts)
The following 1998 results were adjusted for a third quarter pre-tax
charge of $76.4 million, or $0.06 per share after tax, associated with
the investigation of previously disclosed accounting irregularities and
related charges at the former CUC International and a third quarter
non-cash pre-tax charge of $50.0 million, or $0.04 per share after tax,
associated with the write-off of the Company's investment in NetGrocer
and the goodwill associated with the National Library of Poetry. The
following 1997 results were adjusted to exclude $0.03 per share reflecting
the reduction in the Company's ownership of Avis-Rent-A-Car from 100% in
1997 to 20% in 1998, and certain one-time gains.
1998 1997 % change
Revenues 1,457.8 1,111.1 31
Expenses 1,120.6 822.6 36
Income before income
taxes and minority interest 337.2 288.5 17
Income from continuing
operations 203.9 171.9 19
Loss from discontinued
operations (1) (12.1) (.4) --
Net income 191.8 171.5 12
EBITDA - continuing
operations (2) 457.1 359.8 27
Earnings per share - diluted
Continuing operations .24 .20 20
Discontinued operations (.01) -- --
Net income .23 .20 15
Earnings per share - basic
Continuing operations .24 .21 14
Discontinued operations (.01) -- --
Net income .23 .21 10
Weighted average
shares - diluted 877.3 889.0 --
(1) Discontinued operations include Hebdo Mag classified advertising unit
and the Cendant Software unit.
(2) Earnings before interest, taxes, depreciation and amortization.
Nine Months Ended September 30 Financial Results - As Reported
(Dollars in millions, except per share amounts)
1998 1997 % change
Revenues 3,865.1 3,139.8 23
Expenses (1) 3,095.8 2,654.1 17
Income before income
taxes and minority interest 769.3 485.7 58
Income from continuing
operations before cumulative
effect of accounting change 461.9 247.3 87
Cumulative effect of
accounting change -- (283.1) --
Loss from discontinued
operations (2) (25.0) (12.2) (104)
Net income 436.9 (48.0) --
EBITDA - continuing
operations (3) 1,083.4 697.4 55
Earnings per share - diluted
Continuing operations .53 .29 83
Discontinued operations (.03) (.01) (2)
Income before cumulative
effect of accounting change .50 .28 79
Cumulative effect of
accounting change -- (.32) --
Net income .50 (.04) --
Earnings per share - basic
Continuing operations .55 .31 77
Discontinued operations (.03) (.02) (50)
Income before cumulative
effect of accounting change .52 .29 79
Cumulative effect of
accounting change -- (.35) --
Net income .52 (.06) --
Weighted average
shares - diluted 895.0 877.1 --
(1) 1998 includes $108.6 million of costs associated with the
investigation of previously disclosed irregularities at the former CUC
International including the severance payment to the Company's former
chairman and $50.0 million with respect to the non-cash write-off of
the Company's equity investment in NetGrocer and the goodwill
associated with the National Library of Poetry.The nine months ended
September 30, 1998 also includes a net credit of $24.4 million to
merger related costs and other unusual charges primarily as a result
of changes to the original estimate of costs to be incurred.
(2) Discontinued operations includes Hebdo Mag classified advertising
unit and the Cendant Software unit.
(3) Earnings before interest, taxes, depreciation and amortization.
Segment Results -- As Reported
(Dollars in Millions)
Third Quarter Ended September 30, 1998
Revenues
1998 1997 % change
Travel 564.4 354.9 59
Real Estate 360.0 281.2 28
Alliance Marketing 499.1 437.6 14
Other 34.3 112.8 (70)
Continuing Operations (1) 1,457.8 1,186.5 23
Discontinued Operations (3) 184.6 142.0 30
Total 1,642.4 1,328.5 24
Third Quarter Ended September 30, 1998
EBITDA (2) EBITDA Margin
1998 1997 % change 1998 1997
Travel 209.2 150.5 39 37 42
Real Estate 196.9 130.8 51 55 47
Alliance
Marketing 29.7 73.9 (60) 6 17
Other (105.1) 57.9 -- -- 51
Continuing
Operations (1) 330.7 413.1 (20) 23 35
Discontinued
Operations (3) (2.8) 11.4 125 (2) 8
Total 327.9 424.5 (23) 20 32
Nine Months Ended September 30, 1998
Revenues
1998 1997 % change
Travel 1,415.4 1,015.0 40
Real Estate 993.9 726.7 37
Alliance Marketing 1,248.3 1,123.9 11
Other 207.5 274.2 (24)
Continuing Operations (1) 3,865.1 3,139.8 23
Discontinued Operations (3) 548.1 407.2 35
Total 4,413.2 3,547.0 24
Nine Months Ended September 30, 1998
EBITDA (2) EBITDA Margin
1998 1997 % change 1998 1997
Travel 595.3 384.3 55 42 38
Real Estate 490.3 237.6 106 49 33
Alliance
Marketing 18.3 136.6 (87) 2 12
Other (20.5) (61.1) (67) (10) (22)
Continuing
Operations (1)1,083.4 697.4 55 28 22
Discontinued
Operations (3) 22.3 18.7 20 4 5
Total 1,105.7 716.1 54 25 20
(1) 1998 includes $76.4 million and $108.6 million of costs associated
with the investigation of previously disclosed irregularities at the
former CUC International including the severance payment to the
Company's former chairman for the three months and nine months,
respectively. The three months and nine months ended September 30,
1998 also includes $50.0 million with respect to the non-cash write-
off of the Company's equity investment in NetGrocer and the goodwill
associated with the National Library of Poetry. The nine months ended
September 30, 1998 also includes a net credit of $24.4
million to merger related costs and other unusual charges primarily as
a result of changes to the original estimate of costs to be incurred.
(2) Earnings before interest, taxes, depreciation and amortization.
(3) Discontinued operations includes Hebdo Mag classified advertising
unit and the Cendant Software unit.
Segment Revenues - As Reported
(Dollars in Millions)
Nine Months Ended
3Q Ended September 30 September 30
% %
1998 1997 Change 1998 1997 Change
Travel
Lodging 137.5 124.5 10 349.3 322.4 8
Timeshare 106.7 86.9 23 307.1 265.9 16
Car Rental 47.0 41.4 14 140.2 114.5 23
Fleet 94.8 73.9 28 287.5 244.6 18
Other 178.4 28.2 532 331.3 67.6 390
Total Travel 564.4 354.9 59 1,415.4 1,015.0 40
Real Estate
Franchise 126.7 98.3 29 342.5 237.4 44
Relocation 130.8 112.0 17 340.7 308.2 11
Mortgage 79.9 51.6 55 251.8 127.8 97
Other 22.6 19.3 17 58.9 53.3 10
Total Real Estate 360.0 281.2 28 993.9 726.7 37
Alliance Marketing
Individual 201.6 171.0 18 548.5 493.7 11
Insurance
Wholesale 135.5 118.5 14 406.3 349.1 16
Lifestyle 162.0 148.1 9 293.5 281.1 4
Total Alliance
Marketing 499.1 437.6 14 1,248.3 1,123.9 11
Other 34.3 112.8 (70) 207.5 274.2 (24)
Total
Continuing 1,457.8 1,186.5 23 3,865.1 3,139.8 23
Discontinued
Operations
Hebdo Mag 65.2 51.3 27 202.4 145.8 39
Software 119.4 90.7 32 345.7 261.4 32
Total 184.6 142.0 30 548.1 407.2 35
Total
Company 1,642.4 1,328.5 24 4,413.2 3,547.0 24