Cendant Reports Record Results For First Quarter 2002; Raises Full Year 2002 Projection
NEW YORK, Cendant Corporation CD today reported record first quarter 2002 results. Adjusted earnings per share was $0.34 and reported earnings per share was $0.34 (adjusted EPS excludes non-recurring or unusual items). The Company raised its projection for adjusted earnings per share for 2002 by $0.07 to $1.36, a 30% increase over the results for 2001.
- 1Q 2002 Adjusted EPS of $0.34 Exceeded Projection by $0.04
- 1Q 2002 Adjusted EBITDA Increased 54% to $697 Million vs. 1Q 2001
- Adjusted EPS Increased 62% to $0.34 in 1Q 2002 vs. $0.21 in 1Q 2001
- Reported EPS $0.34 in 1Q 2002 vs. $0.30 in 1Q 2001
- Revenue Increased 84% to $2.7 Billion vs. $1.5 Billion in 1Q 2001
- Company Increases Projected Full Year 2002 Adjusted EPS by $0.07 to $1.36, A 30% Increase Over 2001
Cendant's Chairman, President and CEO, Henry R. Silverman, stated: "Simply put, we had an outstanding quarter. All of our operating segments reported year-over-year EBITDA growth of at least 10%, and performed ahead of our expectations. In addition, our operating leverage, which increased due to our cost reductions after September 11th, produced the expected outcome-a substantial portion of every incremental dollar of revenue dropped to the bottom line. Our organic growth exceeded our long term targets.
"I am particularly pleased that we now expect to attain our previously announced stretch goal of adjusted earnings per share of $1.35 to $1.40 for 2002."
Recent Developments
The Company has announced several activities during 2002:
- The Company completed the acquisition of Equivest Finance, Inc. for approximately $100 million in cash and the assumption of approximately $65 million of corporate debt, and signed a definitive agreement to acquire all of the outstanding common stock of Trendwest Resorts through a tax-free exchange of approximately $890 million of Cendant common stock and the assumption of $70 million of net corporate debt. Equivest and Trendwest market, sell and finance vacation ownership interests.
- The Company announced today that it acquired NRT Incorporated, the largest residential real estate brokerage firm in the United States, for approximately $230 million in Cendant common stock, plus the assumption of $300 million of net debt, and NRT subsequently acquired Arvida Realty Services, the largest residential real estate brokerage firm in Florida, for approximately $160 million in cash.
- Rating agencies Fitch, Moody's and Standard & Poor's recently affirmed the Company's senior unsecured credit ratings of BBB Plus, Baa1 and BBB, respectively, and removed Cendant from credit watch.
First Quarter 2002 Segment Results
The following discussion of operating results addresses segment revenue and Adjusted EBITDA, which is defined as earnings before non-program-related interest, income taxes, non-program-related depreciation and amortization and minority interest, adjusted to exclude certain items that are of a non- recurring or unusual nature and are not measured in assessing segment performance. Such discussion is the most informative representation of how management evaluates performance and allocates resources. During the first quarter of 2002, the segment results contained no adjustments of a non- recurring or unusual nature. Revenue and Adjusted EBITDA are expressed in millions.
Real Estate Services
(Consisting of the Company's real estate brokerage brands, mortgage and
relocation services.)
2002 2001 % change
Revenues $410 $339 21%
Adjusted EBITDA $182 $132 38%
The increase in operating results was driven primarily by increased franchise fees from our Century 21, Coldwell Banker and ERA franchise brands and continued growth in mortgage loan production during the first quarter of 2002.
Hospitality
(Consisting of the Company's nine lodging brands, timeshare exchange and
interval sales, and vacation rental.)
2002 2001 % change
Revenues $403 $240 68%
Adjusted EBITDA $112 $102 10%
Revenues and Adjusted EBITDA increased primarily due to the acquisitions of Fairfield Resorts in April 2001 and Equivest in February 2002, and organic growth in our timeshare exchange and vacation rental businesses.
Travel Distribution
(Consisting of electronic global distribution services for the travel
industry and travel agency services.)
2002 2001 % change
Revenues $444 $25 N/M
Adjusted EBITDA $146 $ 2 N/M
N/M = not meaningful
The October 2001 acquisitions of Galileo International, Inc. and Cheap Tickets Inc. drove the substantial revenue and Adjusted EBITDA increases in the first quarter of 2002. While the terrorist incidents of September 11 caused a significant decrease in the demand for travel-related services and, accordingly, reduced the booking volumes of Galileo and our travel agency businesses during the third and fourth quarters of 2001, travel bookings improved during the first quarter of 2002.
Vehicle Services
(Consisting of car rental, vehicle management services and car park
services.)
2002 2001 % change
Revenues $1,030 $454 127%
Adjusted EBITDA $104 $93 12%
Revenues and Adjusted EBITDA increased substantially due to the acquisition of Avis Group Holdings as of March 1, 2001 and improved results at our National Car Parks subsidiary. Our Avis car rental business, which was significantly impacted by reduced travel volumes after September 11, reported stronger-than-expected results throughout the first quarter of 2002.
Financial Services
(Consisting of individual membership products, insurance-related services, financial services enhancement products and tax preparation services.)
2002 2001 % change
Revenues $419 $390 7%
Adjusted EBITDA $164 $131 25%
Revenues and Adjusted EBITDA increased in the first quarter primarily due to increased tax preparation volume.
Balance Sheet and Other Items
- As of March 31, 2002, we had approximately $1.1 billion of cash and cash equivalents and $6.1 billion of debt and preferred minority interest. In addition, the Company has $863 million of mandatorily convertible Upper DECS securities outstanding.
- As of March 31, 2002, the net debt to total capital ratio was 37%. The ratio of adjusted EBITDA to net interest expense (non-program related) was 10.5 to 1 for first quarter 2002.
- As of March 31, 2002, the Company had undrawn lines of credit of $2.6 billion (not including undrawn lines of credit of $1.6 billion related to our PHH subsidiary).
- In the first quarter of 2002, we paid $250 million to a settlement trust, reducing the liability associated with the principal common stock class action litigation settlement at March 31, 2002 to $1.2 billion. We anticipate funding the balance of this obligation by July 16, 2002.
- Weighted average common shares outstanding, including dilutive securities, were 1.02 billion for the first quarter of 2002 compared with 830 million for first quarter 2001. The increase was primarily from the issuance of 61 million shares in connection with the retirement of $1.7 billion of Feline PRIDES in February 2001, the sale of 46 million shares in February 2001 and the issuance of 117 million shares in connection with the acquisition of Galileo International in October 2001.
Reconciliation of First Quarter Adjusted EPS to Reported EPS
Adjusted EPS excludes items that are of a non-recurring or unusual nature and
The only item reflected in first quarter 2002 reported results that is considered to be of an unusual or non-recurring nature for purposes of deriving adjusted EPS is an after tax charge of $6 million for costs related to securities litigation. In the first quarter of 2001, unusual or non-recurring items included: net income of $210 million, or $0.26 per share, associated with
2002 Quarterly Outlook
The Company projects adjusted EPS of $0.36 for the second quarter of 2002 compared with $0.30 in 2001; $0.39 for the third quarter of 2002 compared with $0.32 in 2001; and $0.27 for the fourth quarter of 2002 compared with $0.23 in 2001. The acquisitions of Trendwest, NRT and Arvida will cause the seasonality of Cendant's earnings to be weighted to the second and third quarters of the year. The Company announced the following financial projections for the second and third quarters of 2002: (in millions)
Second Quarter 2002 Third Quarter 2002
Adjusted EBITDA $780 - $790 $885 - $900
Percentage increase vs. prior year 33% - 35% 47% - 49%
Depreciation and amortization $115 - $120 $120 - $125
Interest expense, net $85 - $95 $100 - $110
Minority interest $7 $7
Weighted average shares outstanding 1,050 - 1,070 1,130 - 1,150
In the table above, depreciation and interest expense exclude program-related amounts. The Company's 2002 tax rate is expected to be between 33.0% and 33.5%. The increase in weighted average shares outstanding is due to the Trendwest and NRT acquisitions and the assumption that the Company's CODES securities will become convertible in the third quarter. Adjusted EBITDA for the balance of 2002 will exclude acquisition and integration-related costs, including the non-cash amortization of pendings and listings from real estate brokerage acquisitions, and securities litigation costs.
Investor Conference Call
Cendant will host a conference call to discuss first quarter results on Thursday, April 18, 2002, at 11:00 a.m. (EDT). Investors may access the call live at
Cendant Corporation is primarily a provider of travel and residential real estate services. With approximately 70,000 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 10-K for the year ended December 31, 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.
Table 1
Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In millions, except per share data)
Three Months Ended
March 31,
2002 2001
Revenues
Service fees and membership-related, net $1,715 $1,076
Vehicle-related 961 398
Other 37 12
Net revenues 2,713 1,486
Expenses
Operating 945 427
Vehicle depreciation, lease
charges and interest, net 502 180
Marketing and reservation 290 249
General and administrative 279 187
Non-program related depreciation
and amortization 107 101
Other charges:
Litigation settlement and related costs, net 11 11
Restructuring and other unusual charges -- 185
Acquisition and integration related costs -- 8
Non-program related interest, net 66 60
Total expenses 2,200 1,408
Net gain on dispositions of businesses -- 435
Income before income taxes, minority
interest and equity in