Cendant Reports Third Quarter 2001 Results
NEW YORK, Oct. 17 / Cendant Corporation
"We are pleased to report adjusted earnings per share for the third quarter in line with the revised projections we announced on September 28, reflecting what we believed to be the financial effect of the September 11 terrorist attacks," said Cendant Chairman, President and Chief Executive Officer, Henry R. Silverman. "Prior to September 11, we had been performing above plan for the quarter in a difficult economic environment largely because of the diversity of our business model and our ability to lower our effective tax rate. We are confident in our long-term outlook, as the Company's fundamental financial strengths remain intact with its diversified business portfolio, substantial cash flow, excellent profit margins and adequate capital for liquidity and growth."
The Company announced that third quarter adjusted earnings per share (adjusted EPS excludes non-recurring or unusual items and the effect of an equity ownership in
Third Quarter and Recent Activities
Consistent with its strategic agenda, the Company announced several events:
-- The completion in October 2001 of the acquisition of Galileo
International, Inc., a diversified global technology leader providing
electronic computer reservation services for the travel industry, for
approximately $1.8 billion in common stock and cash plus the repayment
of approximately $540 million of existing net debt. The Company expects
the transaction to be accretive to its earnings per share immediately,
and significantly more accretive as air travel approaches levels
experienced prior to the events of September 11, 2001.
-- The completion in October 2001 of the acquisition of Cheap Tickets,
Inc., a leading seller of discount leisure travel products, for a net
purchase price of approximately $280 million.
-- The completion in July 2001 of an offering of $863 million of Upper
DECS, consisting of senior notes and forward purchase contracts to
purchase Cendant common stock. The offering will result in the
issuance of common stock at a price ranging between $21.53 and
$28.42 per share depending upon the price of Cendant common stock in
July 2004.
-- The completion in August 2001 of a private offering of $850 million of
senior notes.
-- In October 2001, the Company increased its revolving credit facilities
to $2.9 billion and repaid $650 million of bank term debt.
Third Quarter Segment Results
The underlying discussion of operating results focuses on adjusted EBITDA, which is defined as earnings before non-operating interest, income taxes, non-vehicle depreciation and amortization, minority interest and equity in
In the third quarter, the Company had the following reportable operating segments: Real Estate Services (consisting of the Company's real estate brands, mortgage and relocation services); Hospitality (consisting of the Company's nine lodging brands, timeshare exchange and interval sales, travel agency and cottage rental); Vehicle Services (consisting of car rental, vehicle management services and car park facility services); and Financial Services (consisting of individual membership, insurance related services, financial services enhancement products and tax preparation services). Additionally, Corporate and Other includes unallocated corporate overhead and the operating results of certain other non-strategic business units, some of which have been disposed. (See Table 2 for third quarter 2001 and 2000 Revenues and Adjusted EBITDA by Segment and Table 3 for third quarter 2001 and 2000 Segment Revenue Driver Analysis.)
Real Estate Services
2001 2000 % change
Revenues $514 $419 23%
EBITDA $287 $242 19%
The increase in operating results was primarily driven by a significant increase in mortgage loan production and increased franchise fees from our real estate franchise brands.
Hospitality
2001 2000 % change
Revenues $488 $278 76%
EBITDA $152 $115 32%
Revenues and EBITDA increased primarily from the acquisition of Fairfield Resorts in 2001. RCI revenues grew due to an increase in the number of members and timeshare exchange transactions. These increases were partially offset by higher RCI staffing costs to support volume growth and lower lodging results principally from lower room occupancy.
Vehicle Services
2001 2000 % change
Revenues $1,119 $146 N/M
EBITDA $127 $81 57%
N/M = not meaningful
In March 2001, we acquired the remaining 82% of the outstanding common shares of Avis Group Holdings that we did not already own. Prior to the acquisition, revenues and EBITDA principally consisted of Avis royalties and earnings from our equity investment in Avis and the operations of National Car Parks. Avis results were lower than expected principally from a decline in commercial travel compounded by the effects of reduced demand at airport locations in the aftermath of the September 11 terrorist attacks.
Financial Services
2001 2000 % change
Revenues $338 $333 2%
EBITDA $58 $86 (33%)
Increased revenues principally reflect contributions from the individual membership businesses which were supported by the favorable operations of Netmarket Group, an online membership business. The decrease in EBITDA is principally due to the previously disclosed transaction-related expenses associated with the outsourcing and licensing of the Company's individual membership and loyalty business to Trilegiant Corporation.
Excluding these costs, adjusted EBITDA increased 22%.
Balance Sheet and Other Items
-- As of September 30, 2001, we had approximately $3.2 billion of cash and
cash equivalents and $6.1 billion of debt and minority interest,
exclusive of the mandatorily convertible Upper DECS securities.
-- As of September 30, 2001, the net debt to total capital ratio was 30%.
The ratio of adjusted EBITDA to net interest expense (non-vehicle and
program related) was 11 to 1 for third quarter 2001.
-- In third quarter 2001, we paid $250 million to a settlement trust,
reducing the net outstanding principal obligation associated with the
principal common stock class action litigation settlement at
September 30, 2001 to $1.75 billion.
-- Weighted average common shares outstanding were 912 million for third
quarter 2001 compared with 759 million for third quarter 2000. The
increase was primarily from the issuance of 61 million shares in
connection with the retirement of $1.7 billion of Feline PRIDES and the
sale of 46 million shares in February 2001.
Third Quarter EPS ItemsReported EPS for CD common stock includes Cendant Group operations and, in
third quarter 2000, a retained interest in
Reported EPS for CD common stock was $0.23 in third quarter 2001 and $0.29 in third quarter 2000. The following are the significant items reflected in reported results that are considered to be of an unusual or non-recurring nature for purposes of deriving adjusted EPS:
Third Quarter 2001
-- An after tax charge of approximately $50 million, or $0.05 per share,
reflecting certain effects on our operations of the September 11
terrorist attacks. This loss principally related to costs incurred to
reduce Avis' fleet size.
-- An after tax loss of $0.02 per share related to Cendant's proportionate
ownership in
The Company announced the following financial projections for fourth quarter 2001:
-- Adjusted EBITDA is projected to be between $485 million and $520
million compared with $439 million, excluding
Investor Conference Call
Cendant will host a conference call to discuss third quarter results on Thursday, October 18, 2001 at 1:00 p.m. Eastern Time. Investors may access the call live at
Cendant Corporation is primarily a provider of travel and residential real estate services. With approximately 60,000 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
Statements about future results made in this release 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 8-K filed on October 15, 2001.
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 and competitive uncertainties and contingencies, many of which are beyond the control of management of Cendant and its affiliates. Accordingly, actual results may be materially higher or lower than those projected. The inclusion of such projections herein should not be regarded as a representation by Cendant or its affiliates that the projections will prove to be correct.