SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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April 21, 1999 (April 21, 1999)
(Date of Report (date of earliest event reported))
Cendant Corporation
(Exact name of Registrant as specified in its charter)
Delaware 1-10308 06-0918165
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation or Identification Number)
organization)
9 West 57th Street
New York, NY 10019
(Address of principal (Zip Code)
executive office)
(212) 413-1800
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if applicable)
Item 5. Other Events
Earnings Release. On April 21, 1999, we reported our 1999 first quarter results.
Attached hereto as Exhibit 99.1 is the press release relating to the first
quarter earnings release which is incorporated herein by reference in its
entirety.
Item 7. Exhibits
Exhibit
No. Description
- -------- -----------------------------------------------------------------
99.1 Press Release: Cendant Corporation Reports 1999 First Quarter
Results
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENDANT CORPORATION
By: /s/ David M. Johnson
David M. Johnson
Senior Executive Vice President and
Chief Financial Officer
Date: April 21, 1999
CENDANT CORPORATION
CURRENT REPORT ON FORM 8-K
Report Dated April 21, 1999 (April 21, 1999)
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------------------------------------------------------------
99.1 Press Release: Cendant Corporation Reports 1999 First Quarter
Results
CENDANT REPORTS 1999 FIRST QUARTER RESULTS
EPS from Continuing Operations $0.22 in 1999 vs. $0.22 in 1998
Net Income per Share $0.43 in 1999 vs. $0.20 in 1998
Adjusted EBITDA from Continuing Operations Increased 12% to $450 Million
Company Repurchased 60 Million Shares in First Quarter
Performance on Track to Meet 1999 Plan
New York, NY, April 21, 1999 - Cendant Corporation (NYSE: CD) today reported
1999 first quarter results. Results of operations reflect the reclassification
of Entertainment Publications as a discontinued operation. Operating results for
the quarter ended March 31, 1999, as compared with the prior year first quarter
results were as follows:
o Revenues from continuing operations were $1.3 billion, up 17% from $1.1
billion
o Adjusted EBITDA from continuing operations was $450 million, up 12%
o Net income was $362 million, up 109%
o Net income per share was $0.43 compared with $0.20
o Income from continuing operations per share was $0.22, equal to the first
quarter of 1998
If Entertainment Publications had not been reclassified as a discontinued
operation, income from continuing operations per share would have been $0.21,
equal to $0.21 in the first quarter of 1998. A major component of the increase
in revenues is the acquisition of National Parking Corporation in the UK in the
second quarter of last year, which lowered EBITDA margins in the first quarter
of 1999 compared with the first quarter of 1998. Net income from continuing
operations reflects increased interest expense in the first quarter of 1999 as
the Company used excess cash to repurchase approximately 60 million shares of
Cendant common stock in the first quarter of 1999.
Net income and net income per share in 1999 include a gain on the sale of
Cendant Software of $193 million, or $0.22 per share. (Adjusted EBITDA excludes
certain unusual charges. See Table 1 for adjusted results and Table 1 and Table
2 for reported results.)
Business Unit Performance on Track
Cendant Chairman, President and Chief Executive Officer, Henry R. Silverman
stated: "First quarter results were slightly higher than our forecasts,
confirming our confidence in our business plan. We continue to be highly
confident that we will deliver earnings per share in line with Wall Street
expectations of between $1.04 to $1.10 for the year. We remain committed to our
strategy to focus on growth in our core businesses, to sell non-strategic assets
and to use the proceeds, as well as cash flow generated from operations, to buy
back stock and retire debt."
Share Repurchase and Asset Sales
Under the current share repurchase program, the Company repurchased
approximately 60 million shares of Cendant common stock on the open market in
the first quarter. To date, the Company has repurchased 80 million shares under
the program and, including the 7.1 million shares acquired as part of the sale
of Hebdo Mag International, has reduced its shares outstanding by over 10%. The
Company expects to continue to use excess financial resources, including cash
flow from operations and proceeds from asset sales, to repurchase shares and
retire debt. The Company's stated objective is to maintain a target debt to
total capital ratio of 40% or less.
In addition to the previously announced proposed sale of three Internet
companies (Rent.Net, Match.com and Bookstacks, Inc.) and Entertainment
Publications, the Company is in preliminary discussions concerning the possible
divestiture of other non-strategic businesses. Although no assurances can be
given, the Company currently expects that it could announce the sale of certain
non-strategic businesses as early as the second quarter with closings in the
third quarter of 1999. If consummated, these transactions are expected to
produce gross proceeds at least equivalent to the $1.3 billion realized from
sales closed to date.
The Company is also exploring the possible sale of a minority equity interest in
its on-line membership unit and anticipates that, if consummated, the
transaction will be structured to preserve the option of an IPO in the future.
The Company today separately announced that it has reached a definitive
agreement to sell its National Leisure Group vacation package subsidiary to The
Leisure Company, a subsidiary of America West Holdings Corporation, for an
undisclosed cash amount.
Segment Results
See Table 3 for Revenues and Adjusted EBITDA by segment and Table 4 for Segment
Revenue Driver Analysis.
Travel
Revenues increased $6.4 million, or 2%, to $272.0 million as a result of a
collective 10% increase in lodging royalties, timeshare memberships and
exchanges, and car rental royalties. The increase in core revenues was partially
offset by non-recurring items primarily comprised of a $10.7 million lower gain
on the sale of Avis Rent A Car, Inc. stock in the first quarter of 1999 compared
with the first quarter of 1998. Such non-recurring items contributed to an
EBITDA decrease of $4.4 million, or 3%, to $144.7 million. Excluding the Avis
gains from both periods, EBITDA increased 5%.
Fleet
Revenues increased $5.2 million, or 5%, to $101.8 million, primarily as a result
of higher service fee revenues. EBITDA decreased $7.9 million, or 17%, to $39.7
million primarily because of higher operating costs associated with the
development of new products and higher borrowing costs. The negative variance on
borrowing costs in the first quarter reflects the Company's credit ratings being
placed under review in April 1998. As a result, this negative year-over-year
variance is expected to improve during the remainder of 1999.
Real Estate Franchise
Revenues increased $12.3 million, or 15%, to $96.6 million, primarily from
higher royalty revenues. Royalty revenues rose as a result of a 14% increase in
homes sold through Cendant franchisees, an 8% increase in the average price of
homes sold by those franchisees and expansion of the Company's franchise
systems. EBITDA increased $12.2 million, or 21%, to $71.4 million, as a result
of higher royalty revenues.
Relocation
Revenues decreased $8.8 million, or 9%, to $90.9 million. This decrease was due
in part to the third quarter 1998 sale of certain asset management operations.
Additionally, lower volumes on certain relocation services in 1999 were offset
by higher average fees as a result of management's efforts to renegotiate
certain contracts. EBITDA decreased $7.7 million, or 30%, to $17.9 million,
primarily as a result of the absence of EBITDA from the sold asset management
operations, increased investment in information technology and higher borrowing
costs.
Mortgage
Revenues increased $15.2 million, or 19%, to $93.2 million, due to substantial
growth in mortgage origination volume, which increased $1.9 billion, or 40%, to
$6.8 billion. While revenues per loan were lower than 1998 because of increased
competitive pressure in the mortgage lending market, profitability per loan
benefited from a shift to more profitable processing channels. Adjusted EBITDA
increased $6.5 million, or 17%, to $44.0 million, reflecting higher revenues
partially offset by higher operating expenses related to a previously announced
increase in the number of personnel hired at the beginning of the year to
support continued growth for the remainder of the year.
Individual Membership
Revenues increased $39.3 million, or 19%, to $243.4 million, because of a larger
membership base, higher average membership prices, the acquisition of a company
in April 1998 that provides members access to their personal credit information,
and increased product sales and service fees from new and existing individual
members. EBITDA increased $27.8 million from a loss of $15.9 million last year
to a profit of $11.9 million this year, primarily as a result of increased
revenues and reduced marketing spending.
Insurance/Wholesale
Revenues increased $5.7 million, or 4%, to $139.7 million, primarily because of
international customer growth. EBITDA decreased $0.9 million, or 2%, to $38.3
million, due to non-recurring favorable claims adjustments recorded in the first
quarter of 1998. Excluding this non-recurring item, EBITDA would have increased
6%.
Other Consumer and Business Services
Revenues increased $109.7 million, or 70%, to $267.3 million, primarily as a
result of the April 1998 acquisition of National Parking Corporation (NPC) in
the UK. Adjusted EBITDA increased $22.7 million, or 38%, to $81.8 million,
primarily from the NPC acquisition, incremental gains related to the Company's
financial investments and from a joint venture agreement originated in the
second quarter of 1998. These increases were partially offset by increased
investment in information technology in 1999.
Entertainment Publications - Discontinued Operations
The Company separately announced today that it has reclassified Entertainment
Publications (EPub) as a discontinued operation and has reported financial
results for this unit on this basis. Revenues increased $3.0 million, or 32%, to
$12.5 million, and EBITDA improved $0.3 million to a loss of $16.9 million. Due
to the seasonal nature of the business, earnings per share from EPub was a loss
of $0.01 in both the first quarter of 1999 and 1998, therefore the effect of the
reclassification to discontinued operations is an increase in earnings per share
from continuing operations of $0.01 in the first quarter of both years. For 1998
as a whole, EPub reported revenues of $197.2 million and EBITDA of $32.1
million.
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, including without limitation statements as to
discussions relating to the sale of certain businesses. 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-looking statements are specified in the Company's Form 10-K for the year
ended December 31, 1998, including the resolution of the pending class action
litigation against the Company and the Company's ability to implement its plan
to divest non-strategic assets.
Cendant Corporation is a global provider of consumer and business services. The
Company's core competencies include building franchise systems, providing
outsourcing solutions and direct marketing. As a franchisor, Cendant is the
world's leading franchisor of hotels, rental car agencies and residential real
estate brokerage offices; and the second largest franchisor of tax preparation
service. As a provider of outsourcing solutions, Cendant is a leading fleet
management company; the world's largest vacation exchange service; a major
provider of mortgage services to consumers; and the global leader in employee
relocation. In direct marketing, Cendant provides access to insurance, travel,
shopping, auto and other services primarily to customers of its affinity
partners. Other consumer and business services include NCP, the UK's largest
private car park operator; and Green Flag, a leading motorist assistance group
in the UK. Headquartered in New York, NY, the Company has more than 35,000
employees and operates in over 100 countries.
More information about Cendant, its companies, brands and current SEC filings
may be obtained by visiting our Web site at www.cendant.com or by calling
877-4INFO-CD (877-446-3623).
Media Contact: Investor Contacts:
Elliot Bloom Denise L. Gillen
212-413-1832 212-413-1833
Samuel J. Levenson
212-413-1834
Table 1
Cendant Corporation and Subsidiaries
Continuing Operations
First Quarter Financial Results
(Dollars and shares in millions, except per share amounts)
As Adjusted
- -----------
The 1999 results are adjusted to exclude $7.0 million ($4.4 million, after tax)
of costs incurred in connection with the termination of the proposed acquisition
of RAC Motoring Services, $1.7 million ($1.1 million, after tax) of
investigation-related costs and a $1.3 million gain ($0.8 million, after tax) on
the sale of Essex Corporation, a Company subsidiary. The 1998 results are
adjusted to exclude merger-related costs and other unusual charges of $3.1
million ($2.4 million, after tax).
1999 1998 % change
--------- --------- ----------
Revenues $ 1,304.9 $ 1,119.9 17%
Expenses 994.5 801.0 24%
--------- ---------
Income before income taxes and minority interest 310.4 318.9 (3%)
EBITDA (1) 449.7 401.4 12%
Income from continuing operations 186.0 198.6 (6%)
Earnings per share:
Basic $ 0.23 $ 0.24 (4%)
Diluted 0.22 0.22 -
Weighted average shares - diluted 854.4 908.5 (6%)
As Reported
- -----------
1999 1998 % change
--------- --------- -----------
Revenues $ 1,304.9 $ 1,119.9 17%
Expenses 1,001.9 804.1 25%
--------- ---------
Income before income taxes and minority interest 303.0 315.8 (4%)
EBITDA (1) 442.3 398.3 11%
Income from continuing operations 181.4 196.3 (8%)
Earnings per share:
Basic $ 0.23 $ 0.23 -
Diluted 0.22 0.22 -
Weighted average shares - diluted 854.4 908.5 (6%)
(1) Earnings before non-operating interest, taxes, depreciation and
amortization.
Table 2
Cendant Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
Quarterly Period Ended
March 31,
----------------------------
1999 1998
----------- -----------
Revenues
Membership and service fees, net $ 1,247.9 $ 1,048.8
Fleet leasing (net of depreciation and interest costs of $326.4 and $311.6) 18.6 19.9
Other 38.4 51.2
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Net revenues 1,304.9 1,119.9
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Expenses
Operating 432.4 311.6
Marketing and reservation 262.2 264.8
General and administrative 160.6 142.1
Depreciation and amortization 91.0 63.6
Other charges
Termination of proposed acquisition 7.0 -
Investigation-related costs 1.7 -
Merger-related costs and other unusual charges (credits) (1.3) 3.1
Interest, net 48.3 18.9
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Total expenses 1,001.9 804.1
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Income from continuing operations before income taxes and
minority interest 303.0 315.8
Provision for income taxes 106.5 114.6
Minority interest, net of tax 15.1 4.9
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Income from continuing operations 181.4 196.3
Loss from discontinued operations, net of tax (12.1) (23.4)
Gain on sale of discontinued operations, net of tax 192.7 -
---------- -----------
Net income $ 362.0 $ 172.9
========== ===========
Income (loss) per share
Basic
Income from continuing operations $ 0.23 $ 0.23
Loss from discontinued operations (0.02) (0.02)
Gain on sale of discontinued operations 0.24 -
----------- -----------
Net income $ 0.45 $ 0.21
=========== ===========
Diluted
Income from continuing operations $ 0.22 $ 0.22
Loss from discontinued operations (0.01) (0.02)
Gain on sale of discontinued operations 0.22 -
---------- -----------
Net income $ 0.43 $ 0.20
========== ===========
Weighted average shares
Basic 800.1 838.7
Diluted 854.4 908.5
Table 3
Cendant Corporation and Subsidiaries
Continuing Operations
Revenues and Adjusted EBITDA by Segment
(Dollars in millions)
Quarterly Period Ended March 31,
Revenues Adjusted EBITDA (1)
----------------------------------- -----------------------------------
% %
1999 1998 Change 1999 1998 Change
--------- --------- --------- -------- --------- ---------
Travel $ 272.0 $ 265.6 2 $ 144.7 $ 149.1 (3)
Fleet 101.8 96.6 5 39.7 47.6 (17)
Real Estate
Franchise 96.6 84.3 15 71.4 59.2 21
Relocation 90.9 99.7 (9) 17.9 25.6 (30)
Mortgage 93.2 78.0 19 44.0 37.5 (3) 17
Individual
Membership 243.4 204.1 19 11.9 (15.9) *
Insurance/
Wholesale 139.7 134.0 4 38.3 39.2 (2)
Other 267.3 157.6 70 81.8 (2) 59.1 (3) 38
--------- --------- -------- --------
Total $ 1,304.9 $ 1,119.9 17 $ 449.7 $ 401.4 12
========= ========= ========= ========
* Not meaningful
(1) Earnings before non-operating interest, taxes, depreciation and
amortization, adjusted to exclude non-recurring or unusual items.
(2) Excludes $7.0 million of costs incurred in connection with the termination
of the proposed acquisition of RAC Motoring Services, $1.7 million of
investigation-related costs and a $1.3 million gain on the sale of Essex
Corporation, a Company subsidiary.
(3) Excludes $3.1 million of merger-related costs and other unusual charges
comprised of $1.9 million and $1.2 million incurred within the Mortgage
segment and Other segment, respectively.
Table 4
Cendant Corporation and Subsidiaries
Segment Revenue Driver Analysis
(Revenue dollars in millions)
1st Quarter
---------------------------------------------
%
1999 1998 Change
-------------- ------------- -------------
Travel Segment
Domestic Rooms
Month End Actual Rooms 502,613 476,242 6
------------- -------------
Weighted Average Rooms Available 492,625 465,794 6
Franchise Fee per Weighted Average Room $ 179.00 $ 175.44 3
------------- -------------
Total Franchise Fees $ 88.2 $ 81.7 8
------------- -------------
Car Rental days 13,872,196 12,464,857 11
Franchise Fee per Rental day $ 2.82 $ 2.79 1
------------- -------------
Total Franchise Fees $ 39.1 $ 34.8 12
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Sub-Total Franchise Fees $ 127.3 $ 116.5 9
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Number of Timeshare Exchanges 533,359 492,436 8
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Annualized Number of Exchanges 2,133,436 1,969,744 8
Average Subscriptions 2,298,726 2,177,050 6
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Total Exchanges and Subscriptions 4,432,162 4,146,794 7
Average Fee $ 21.59 $ 21.01 3
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Total Exchange/Subscription Fees $ 95.7 $ 87.1 10
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Other Revenue $ 49.0 $ 62.0 (21)
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Total Travel Revenue $ 272.0 $ 265.6 2
============= =============
Fleet Segment
Number of Cars/Cards 4,462,136 3,877,657 15
Revenue per Car/Card $ 22.81 $ 24.91 (8)
------------- -------------
Total Revenue $ 101.8 $ 96.6 5
============= =============
Real Estate Franchise Segment
Closed sides - Domestic 368,333 322,995 14
Average Price $ 146,517 $ 135,445 8
Adjusted Royalty Rate 0.15% 0.16%
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Total Royalties $ 83.2 $ 71.1 17
Other 13.4 13.2 2
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Total Revenue $ 96.6 $ 84.3 15
============= =============
Mortgage Segment
Production Loan Closings (1) $ 6,779 $ 4,836 40
Avg. Servicing Loan Portfolio $ 45,405 $ 30,908 47
(1) 1998 production loan closings reflect acquisitions of First Capital and
Burnet Home Loans in the fourth quarter of 1997 and first quarter of 1998,
respectively.
Table 5
Cendant Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In billions)
March 31, December 31,
1999 1998
----------- -------------
Assets
- ------
Cash $ 0.5 $ 1.0
Other current assets 3.1 3.6
---------- -----------
Total current assets 3.6 4.6
Property and equipment - net 1.4 1.4
Goodwill - net 3.9 3.9
Other assets 2.8 2.8
---------- -----------
Total assets exclusive of assets under programs 11.7 12.7
Assets under management and mortgage programs 7.2 7.5
---------- -----------
Total assets $ 18.9 $ 20.2
========== ===========
Liabilities and shareholders' equity
- ------------------------------------
Total current liabilities $ 2.9 2.9
Long-term debt 3.4 3.4
Other non-current liabilities 0.3 0.4
---------- -----------
Total liabilities exclusive of liabilities under programs 6.6 6.7
Liabilities under management and mortgage programs 6.7 7.2
Mandatorily redeemable preferred securities issued by subsidiaries 1.5 1.5
Commitments and contingencies
Total shareholders' equity 4.1 4.8
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Total liabilities and shareholders' equity $ 18.9 $ 20.2
========== ===========