NEW YORK, Oct. 24 /PRNewswire-FirstCall/ -- Cendant Corporation today reported results for third quarter 2005. Revenue totaled $5.0 billion, an increase of 12% over third quarter 2004, reflecting growth in the Company's core real estate and travel services businesses. EPS from Continuing Operations was $0.44 and Net Income was $514 million, versus $593 million in third quarter 2004. Disruptions in the global travel environment, primarily as a consequence of the hurricanes in the Gulf Coast, are estimated to have negatively impacted EPS by approximately $0.03.
The following discussion of operating results focuses on revenue and EBITDA for each of our core operating segments. Revenue and EBITDA are expressed in millions.
Revenue and EBITDA increased due to growth in all of our real estate services businesses. Revenue growth at real estate franchise and NRT was driven principally by home price increases and tuck-in acquisitions at NRT. Home prices increased 15% at real estate franchise and 16% at NRT. Revenue generated by Cendant Mobility increased 9%, driven by higher fixed fee revenues and an overall increase in transaction fees, and revenue generated by Cendant Settlement Services Group increased 9%, due to growth in title and closing volumes.
Revenue and EBITDA increased due to growth in all of our hospitality services businesses. Revenue from our lodging business grew 12%, including a 7% increase in revenue per available room on an organic basis, the addition of Ramada International and continuing growth in our TripRewards loyalty program. Revenue from RCI, our timeshare exchange business, increased 3%, driven by a 5% increase in subscribers. Revenue from our vacation rental business increased 21%, due primarily to the acquisition of Canvas Holidays Limited in October 2004 as well as organic growth in our remaining vacation rental businesses of 9%.
Revenue increased due to 10% growth in tour volume and a 6% increase in revenue per guest. Tour flow and revenue per guest were enhanced by our expansion in premium destinations including Hawaii, Las Vegas and Orlando and the opening of new sales offices. In addition, revenue and EBITDA were positively impacted by increased consumer financing income. EBITDA remained unchanged, year-over-year, due to $14 million of expenses resulting from the hurricanes in the Gulf Coast, which primarily include a provision for timeshare contract receivable losses and estimated costs to repair timeshare properties, some of which we expect will ultimately be recovered through insurance claims.
Revenue increased due to growth in our domestic and international car rental operations as well as our truck rental business. Car rental revenue grew 17% worldwide due to a 17% increase in rental day volume. EBITDA was negatively impacted by $10 million of expenses reflecting the effects of the hurricanes in the Gulf Coast, which primarily include the impairment of rental car assets, most of which we expect will ultimately be recovered through insurance claims. EBITDA was also negatively impacted by higher vehicle depreciation and other volume-related costs resulting from 14% growth in our rental fleet to support increased demand, the absence of significant incentives from car manufacturers available in third quarter 2004 and increased fleet costs for model year 2006 vehicles. We initiated price increases in the second and third quarters of 2005 in order to attempt to partially offset the increased fleet costs as model year 2006 vehicles cycle into our inventory. To date, these price increases generally appear to be succeeding and we anticipate positive year-over-year pricing comparisons beginning in fourth quarter 2005, which should partially offset increased fleet costs.
Revenue and EBITDA increased primarily due to growth in our online travel agency and other consumer travel businesses. The acquisitions of Orbitz, Gullivers and ebookers contributed $215 million of revenue and $46 million of EBITDA, despite costs incurred to integrate these businesses. The revenue and EBITDA contribution from acquisitions was partially offset by $14 million and $3 million, respectively, due to the transfer of our membership travel business to the discontinued Marketing Services division effective January 1, 2005. The integration of Orbitz is substantially complete and the integrations of ebookers and Gullivers remain on track for completion during 2006. Apart from these transactions, gross bookings at our online travel agencies increased 15% and these businesses also achieved higher margins. Revenue from GDS and Supplier Services grew 1%, driven primarily by a 5% increase in global GDS segments and increased hosting services and other revenue, which was partially offset by a decline in domestic air yield and subscriber fees.
Based upon current trends in the Company's consumer-oriented travel businesses, EBITDA from core operating segments (excluding restructuring charges) is expected to increase approximately 14%, year-over-year, in fourth quarter 2005, as compared with our previous projected growth of approximately 25%.
President and Chief Financial Officer Ronald L. Nelson commented, "Several of our leisure travel units began to show signs of slowing growth during the third quarter. Although some of what we experienced can be directly attributed to the impact of terrorism, devastating hurricanes and higher gasoline prices, we also began to feel the impact of, among other things, the slowdown in the rate of growth currently affecting all online travel businesses, as well as the ongoing channel shift to supplier sites, demand weakness in certain key markets in the global distribution business, and continued economic weakness in Europe.
"In addition, we combined our timeshare exchange business, RCI, and our Vacation Rental Group to create the new Vacation Network Group. This combination is expected to save the Company approximately $9 million annually, as well as broaden the marketing capability of our European travel business, but will result in severance and facility closing costs of approximately $0.01 per share in fourth quarter 2005."
As a result of this restructuring and the slower growth noted above, the Company reduced its projection for fourth quarter 2005 EPS by $0.03 - $0.04, to a range of $0.23 - $0.26. This projection does not include any potential charges associated with the contemplated separation of the Company into four separately traded public companies announced this morning.
Mr. Nelson continued, "The effect of these items on 2006 is not yet clear. However, based upon the current trends noted above, together with increased fleet costs and higher interest cost in the rental car business, we preliminarily project revenue to grow by approximately 10% and EBITDA from core operating segments to grow by 11% - 13% in 2006 versus 2005, down from our previous estimate of 11% revenue growth and 19% EBITDA growth."
Fourth Full Quarter Year 2005 EPS from Continuing Operations before Transaction Related Charges(a) $0.23 - $0.26 $1.28 - $1.31 2005 Transaction Related Charges(b) -- ($0.20) 2005 EPS from Continuing Operations(a)(b) $0.23 - $0.26 $1.08 - $1.11 (a) Includes a $0.01 per share charge in connection with combining the management and operations of our vacation rental business in Europe with our timeshare exchange business to create the newly formed Vacation Network Group. Excludes any potential charges associated with the contemplated separation of the Company into four separately traded public companies announced this morning. (b) Includes a non-cash impairment charge of $0.17 per share in connection with the spin-off of PHH and a $0.03 per share charge related to restructuring activities and other transaction related costs, both of which were recorded in first quarter 2005.
Cendant will host a conference call to discuss the third quarter results on Tuesday, October 25, 2005, at 11:00 a.m. (ET). Investors may access the call live at http://www.cendant.com/ or by dialing (913) 981-5542. A web replay will be available at http://www.cendant.com/ following the call. A telephone replay will be available from 2:00 p.m. (ET) on October 25, 2005 until midnight (ET) on November 1, 2005 at (719) 457-0820, access code: 1047115.
Cendant Corporation is primarily a provider of travel and residential real estate services. With approximately 85,000 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 http://www.cendant.com/.
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 contemplated separation or any of the proposed transactions related thereto will be completed, nor can it give assurances as to the terms on which such transactions will be consummated. The contemplated separation is subject to certain conditions precedent, including final approval by the Board of Directors of Cendant.
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 inherent in the contemplated separation and related transactions and borrowings and costs related to the proposed transactions; distraction of the Company and its management as a result of the proposed transactions; changes in business, political and economic conditions in the United States and in other countries in which Cendant and its companies currently do business; changes in governmental regulations and policies and actions of regulatory bodies; changes in operating performance; and access to capital markets and changes in credit ratings, including those that may result from the proposed transactions. 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 10-Q for the quarter ended June 30, 2005, including under headings such as "Forward-Looking Statements" 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 9 to this release. This press release also includes management's estimate of EBITDA growth from core operating segments for the year ended December 31, 2006. Management believes the most directly comparable GAAP measure would be "Net income." Due to the difficulty in forecasting and quantifying the amounts that would be required to be included in this comparable GAAP measure, the Company is not providing an estimate of 2006 Net Income at this time.
Table 1 (page 1 of 2) Cendant Corporation and Subsidiaries SUMMARY DATA SHEET (Dollars in millions, except per share data) Third Quarter 2005 2004 % Change Income Statement Items Net Revenues $5,046 $4,505 12% Pretax Income (A) 720 736 (2%) Income from Continuing Operations 468 497 (6%) EPS from Continuing Operations (diluted) 0.44 0.47 (6%) Cash Flow Items Net Cash Provided by Operating Activities $937 $1,919 Free Cash Flow (B) 665 540 Payments Made for Current Period Acquisitions, Net of Cash Acquired (166) (53) Net Debt Repayments (63) (214) Issuance of Common Stock in Connection with the Upper DECS -- 863 Net Repurchases of Common Stock (521) (103) Payment of Dividends (117) (93) As of As of September 30, December 31, 2005 2004 Balance Sheet Items Total Corporate Debt $4,814 $4,330 Cash and Cash Equivalents 356 467 Total Stockholders' Equity 11,230 12,695 Segment Results Third Quarter 2005 2004 % Change Net Revenues Real Estate Services $2,068 $1,856 11% Hospitality Services 404 365 11% Timeshare Resorts 484 424 14% Vehicle Rental 1,433 1,243 15% Total Travel Content 2,321 2,032 14% Travel Distribution Services 646 437 48% Total Travel 2,967 2,469 20% Total Core Operating Segments 5,035 4,325 16% Mortgage Services -- 175 * Corporate and Other 11 5 * Total Company $5,046 $4,505 12% EBITDA (C) Real Estate Services $409 $379 8% Hospitality Services 144 131 10% Timeshare Resorts 80 80 -- Vehicle Rental 183 179 2% Total Travel Content 407 390 4% Travel Distribution Services 160 123 30% Total Travel 567 513 11% Total Core Operating Segments 976 892 9% Mortgage Services -- 29 * Corporate and Other (50) (30) * Total Company $926 $891 4% Reconciliation of EBITDA to Pretax Income Total Company EBITDA $926 $891 Less: Non-program related depreciation and amortization 134 118 Non-program related interest expense, net 66 32 Amortization of pendings and listings 6 5 Pretax Income (A) $720 $736 (2%) * 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. (B) See Table 9 for a description of Free Cash Flow and Table 8 for the underlying calculations. (C) See Table 9 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) Nine Months Ended September 30, 2005 2004 % Change Income Statement Items Net Revenues $13,658 $12,449 10% Pretax Income (A) 1,487 1,664 (11%) Income from Continuing Operations 922 1,116 (17%) EPS from Continuing Operations (diluted) 0.86 1.05 (18%) Cash Flow Items Net Cash Provided by Operating Activities $2,541 $2,771 Free Cash Flow (B) 1,581 1,355 Payments Made for Current Period Acquisitions, Net of Cash Acquired (1,670) (328) Net Debt Borrowings (Repayments) 470 (1,311) Issuance of Common Stock in Connection with the Upper DECS -- 863 Net Repurchases of Common Stock (790) (669) Payment of Dividends (309) (237) As of As of September 30, December 31, 2005 2004 Balance Sheet Items Total Corporate Debt $4,814 $4,330 Cash and Cash Equivalents 356 467 Total Stockholders' Equity 11,230 12,695 Segment Results Nine Months Ended September 30, 2005 2004 % Change Net Revenues Real Estate Services $5,520 $4,980 11% Hospitality Services 1,166 1,017 15% Timeshare Resorts 1,288 1,155 12% Vehicle Rental 3,745 3,363 11% Total Travel Content 6,199 5,535 12% Travel Distribution Services 1,858 1,337 39% Total Travel 8,057 6,872 17% Total Core Operating Segments 13,577 11,852 15% Mortgage Services 46 545 * Corporate and Other 35 52 * Total Company $13,658 $12,449 10% EBITDA (C) Real Estate Services $963 $894 8% Hospitality Services 369 378 (2%) Timeshare Resorts 192 180 7% Vehicle Rental 377 387 (3%) Total Travel Content 938 945 (1%) Travel Distribution Services 432 364 19% Total Travel 1,370 1,309 5% Total Core Operating Segments 2,333 2,203 6% Mortgage Services (D) (181) 88 * Corporate and Other (124) (75) * Total Company $2,028 $2,216 (8%) Reconciliation of EBITDA to Pretax Income Total Company EBITDA $2,028 $2,216 Less: Non-program related depreciation and amortization 411 341 Non-program related interest expense, net 118 180 Early extinguishment of debt -- 18 Amortization of pendings and listings 12 13 Pretax Income (A) $1,487 $1,664 (11%) * 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. (B) See Table 9 for a description of Free Cash Flow and Table 8 for the underlying calculations. (C) See Table 9 for a description of EBITDA. (D) The 2005 amount includes a $180 million non-cash valuation charge associated with the PHH spin-off. Table 2 Cendant Corporation and Subsidiaries CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In millions, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Revenues Service fees and membership, net $3,606 $3,255 $9,864 $9,018 Vehicle-related 1,433 1,243 3,745 3,363 Other 7 7 49 68 Net revenues 5,046 4,505 13,658 12,449 Expenses Operating 2,868 2,604 7,853 7,233 Vehicle depreciation, lease charges and interest, net 428 342 1,126 935 Marketing and reservation 446 383 1,325 1,119 General and administrative 369 294 1,065 950 Non-program related depreciation and amortization 134 118 411 341 Non-program related interest, net: Interest expense, net 66 32 118 180 Early extinguishment of debt -- -- -- 18 Acquisition and integration related costs: Amortization of pendings and listings 6 5 12 13 Other 8 (9) 29 (4) Restructuring and transaction- related charges 1 -- 52 -- Valuation charge associated with PHH spin-off -- -- 180 -- Total expenses 4,326 3,769 12,171 10,785 Income before income taxes and minority interest 720 736 1,487 1,664 Provision for income taxes 251 238 562 541 Minority interest, net of tax 1 1 3 7 Income from continuing operations 468 497 922 1,116 Income from discontinued operations, net of tax (*) 43 96 28 411 Gain (loss) on disposal of discontinued operations, net of tax: PHH valuation and transaction- related charges -- -- (312) -- Gain on disposal 3 -- 181 198 Net income $514 $593 $819 $1,725 Earnings per share Basic Income from continuing operations $0.45 $0.48 $0.88 $1.09 Income from discontinued operations 0.05 0.09 0.03 0.40 Gain (loss) on disposal of discontinued operations -- -- (0.13) 0.20 Net income $0.50 $0.57 $0.78 $1.69 Diluted Income from continuing operations $0.44 $0.47 $0.86 $1.05 Income from discontinued operations 0.05 0.09 0.03 0.39 Gain (loss) on disposal of discontinued operations -- -- (0.12) 0.19 Net income $0.49 $0.56 $0.77 $1.63 Weighted average shares outstanding Basic 1,037 1,036 1,047 1,024 Diluted 1,057 1,064 1,069 1,059 (*) Includes the results of operations of (i) the Company's Marketing Services division, which was sold on October 17, 2005, (ii) the Company's former fuel card business, Wright Express Corporation, through date of disposition (February 2005), (iii) the Company's former fleet leasing and appraisal businesses through date of spin-off (January 2005) and (iv) in 2004, the Company's former tax preparation business, Jackson Hewitt Tax Service Inc., through date of disposition (June 2004). Table 3 (page 1 of 2) Cendant Corporation and Subsidiaries ORGANIC GROWTH BY SEGMENT (In millions) REVENUES Third Quarter 2005 2004 %* Real Estate Services (A) $2,005 $1,851 8% Hospitality Services (B) 389 365 7% Timeshare Resorts (C) 482 424 14% Vehicle Rental 1,433 1,243 15% Total Travel Content 2,304 2,032 13% Travel Distribution Services (D) 431 423 2% Total Travel 2,735 2,455 11% Total Core Operating Segments $4,740 $4,306 10% EBITDA Third Quarter 2005 2004 %* Real Estate Services (A) $401 $375 7% Hospitality Services (B) 139 131 6% Timeshare Resorts (C) 79 80 -- Vehicle Rental 183 179 2% Total Travel Content 401 390 3% Travel Distribution Services (D) 114 120 (5%) Total Travel 515 510 1% Total Core Operating Segments $916 $885 4% Reconciliation of Organic EBITDA to Pretax Income Pretax Income (E) $720 $736 Add: Non-program related depreciation and amortization 134 118 Non-program related interest expense, net 66 32 Amortization of pendings and listings 6 5 Total Company EBITDA 926 891 Less: Mortgage Services -- 29 Corporate and Other (50) (30) EBITDA for Total Core Operating Segments 976 892 Adjustments to arrive at Organic EBITDA for Total Core Operating Segments (60) (7) Organic EBITDA for Total Core Operating Segments (per above) $916 $885 * Amounts may not calculate due to rounding in millions. (A) Includes a reduction to revenue and EBITDA growth of $58 million and $4 million, respectively, primarily related to the acquisitions of significant real estate brokerage businesses during or subsequent to third quarter 2004. (B) Includes a reduction to revenue and EBITDA growth of $15 million and $5 million, respectively, primarily related to the acquisitions of Canvas Holidays Limited in October 2004 and Ramada International, Inc. in December 2004. (C) Includes a reduction to revenue and EBITDA growth of $2 million and $1 million, respectively, related to the acquisition of a timeshare resort property in August 2005. (D) Includes a reduction to revenue and EBITDA growth of $201 million and $43 million, respectively, primarily related to the acquisitions of Orbitz, Inc. in November 2004, ebookers plc in February 2005 and Gullivers Travel Associates in April 2005, partially offset by the transfer of the Company's membership travel business to the discontinued Marketing Services division. (E) See Table 2 for a reconciliation of Pretax Income to Net Income. Table 3 (page 2 of 2) Cendant Corporation and Subsidiaries ORGANIC GROWTH BY SEGMENT (In millions) REVENUES Nine Months Ended September 30, 2005 2004 %* Real Estate Services (B) $5,335 $4,959 8% Hospitality Services (C) 1,085 1,017 7% Timeshare Resorts (D) 1,286 1,149 12% Vehicle Rental 3,745 3,363 11% Total Travel Content 6,116 5,529 11% Travel Distribution Services (E) 1,327 1,292 3% Total Travel 7,443 6,821 9% Total Core Operating Segments $12,778 $11,780 8% EBITDA Excluding EBITDA Restructuring Charges Nine Months Ended Nine Months Ended September 30, September 30, 2005 2004 %* 2005(A) 2004 %* Real Estate Services (B) $938 $874 7% $944 $874 8% Hospitality Services (C) 366 378 (3%) 371 378 (2%) Timeshare Resorts (D) 192 175 10% 193 175 10% Vehicle Rental 377 387 (3%) 385 387 (1%) Total Travel Content 935 940 (1%) 949 940 1% Travel Distribution Services(E) 351 358 (2%) 362 358 1% Total Travel 1,286 1,298 (1%) 1,311 1,298 1% Total Core Operating Segments $2,224 $2,172 2% $2,255 $2,172 4% Reconciliation of Organic EBITDA to Pretax Income Pretax Income (F) $1,487 $1,664 $1,487 $1,664 Add: Non-program related depreciation and amortization 411 341 411 341 Non-program related interest expense, net 118 180 118 180 Early extinguishment of debt -- 18 -- 18 Amortization of pendings and listings 12 13 12 13 Total Company EBITDA 2,028 2,216 2,028 2,216 Less: Mortgage Services (181) 88 (181) 88 Corporate and Other (124) (75) (124) (75) EBITDA for Total Core Operating Segments 2,333 2,203 2,333 2,203 Adjustments to arrive at Organic EBITDA for Total Core Operating Segments (109) (31) (78) (31) Organic EBITDA for Total Core Operating Segments (per above) $2,224 $2,172 $2,255 $2,172 * Amounts may not calculate due to rounding in millions. (A) Excludes restructuring charges of $6 million, $5 million, $1 million, $8 million and $11 million within the Real Estate Services, Hospitality Services, Timeshare Resorts, Vehicle Rental and Travel Distribution Services segments, respectively. (B) Includes a reduction to revenue and EBITDA growth of $163 million and $5 million, respectively, primarily related to the acquisition of Sotheby's International Realty in February 2004, the acquisitions of significant real estate brokerage businesses during or subsequent to second quarter 2004 and a refinement during first quarter 2005 to how we estimate transactions that closed during the quarter when those transactions have not yet been reported to us by our franchisees, partially offset by the sale of certain non-core assets by our settlement services business in June 2004. (C) Includes a reduction to revenue and EBITDA growth of $81 million and $3 million, respectively, primarily related to the acquisitions of Landal GreenParks in May 2004, Canvas Holidays Limited in October 2004 and Ramada International, Inc. in December 2004. (D) Includes an increase to revenue and EBITDA growth of $4 million and $5 million, respectively, related to the sale of Equivest Capital in March 2004, partially offset by the acquisition of a timeshare resort property in August 2005. (E) Includes a reduction to revenue and EBITDA growth of $486 million and $75 million, respectively, primarily related to the acquisitions of Orbitz, Inc. in November 2004, ebookers plc in February 2005, Gullivers Travel Associates in April 2005 and Flairview Travel in April 2004, partially offset by the transfer of the Company's membership travel business to the discontinued Marketing Services division. (F) See Table 2 for a reconciliation of Pretax Income to Net Income. Table 4 (page 1 of 2) Cendant Corporation and Affiliates SEGMENT REVENUE DRIVER ANALYSIS (*) (Revenue dollars in thousands) Third Quarter 2005 2004 % Change REAL ESTATE SERVICES SEGMENT Real Estate Franchise Closed Sides 516,534 516,747 -- Average Price $233,211 $201,952 15% Royalty Revenue (A) $147,268 $131,062 12% Total Revenue (A) $168,900 $148,776 14% Real Estate Brokerage Closed Sides 135,463 137,805 (2%) Average Price $476,636 $412,058 16% Net Revenue from Real Estate Transactions $1,649,607 $1,481,887 11% Total Revenue $1,666,738 $1,494,002 12% Relocation Transaction Volume 25,149 24,863 1% Total Revenue $139,202 $127,951 9% Settlement Services Purchase Title and Closing Units 43,613 40,618 7% Refinance Title and Closing Units 14,222 11,590 23% Total Revenue $93,440 $85,406 9% HOSPITALITY SERVICES SEGMENT Lodging RevPAR (B) $36.86 $34.04 8% Weighted Average Rooms Available (B) 511,531 507,330 1% Royalty, Marketing and Reservation Revenue (C) $119,829 $112,765 6% Total Revenue (C) $148,215 $132,349 12% RCI Average Number of Subscribers 3,232,901 3,073,811 5% Subscriber Related Revenue $144,723 $140,958 3% Total Revenue $151,737 $147,224 3% Vacation Rental Group Cottage Weeks Sold 242,899 223,850 9% Total Revenue $104,106 $85,871 21% (*) Certain of the 2004 amounts presented herein have been revised to reflect the new segment reporting structure and a new presentation of drivers. All comparable quarterly amounts for 2003 and 2004 are available on the Cendant website, which may be accessed at http://www.cendant.com/. (A) Excludes $110 million and $100 million of intercompany royalties paid primarily by our NRT real estate brokerage business during the three months ended September 30, 2005 and 2004, respectively. (B) We acquired the Ramada International Hotels and Resorts trademark on December 10, 2004. The 2004 drivers do not include RevPAR and Weighted Average Rooms Available of Ramada International. On a comparable basis (excluding Ramada International from the 2005 amounts), RevPAR would have increased 7% and Weighted Average Rooms Available would have decreased 4%. (C) The 2005 amounts include the revenues of businesses acquired during or subsequent to third quarter 2004 and are therefore not comparable to the 2004 amounts. Table 4 (page 2 of 2) Cendant Corporation and Affiliates SEGMENT REVENUE DRIVER ANALYSIS (*) (Revenue dollars in thousands) Third Quarter 2005 2004 % Change TIMESHARE RESORTS SEGMENT Tours 271,591 245,820 10% Total Revenue $483,748 $423,831 14% VEHICLE RENTAL SEGMENT Car Rental Days (000's) 28,720 24,583 17% Time and Mileage Revenue per Day $38.29 $38.41 -- Total Car Revenue $1,265,600 $1,081,957 17% Truck Total Truck Revenue $167,118 $160,952 4% TRAVEL DISTRIBUTION SERVICES SEGMENT Transaction Volume, by Region (000's) (A) United States 27,894 26,541 5% International 43,722 41,924 4% Transaction Volume, by Channel (000's) Traditional Agency 61,542 60,500 2% Online (A) 10,074 7,965 26% Online Gross Bookings ($000's)(B) $1,922,369 $1,656,119 16% Offline Gross Bookings ($000's)(B) $455,935 $221,600 106% GDS and Supplier Services Revenue(C) $382,563 $378,306 1% Owned Travel Agency Revenue (D) $263,192 $58,704 348% (*) Certain of the 2004 amounts presented herein have been revised to reflect the new segment reporting structure and a new presentation of drivers. All comparable quarterly amounts for 2003 and 2004 are available on the Cendant website, which may be accessed at http://www.cendant.com/. (A) Includes supplier link and merchant hotel transactions not booked through the Galileo GDS system. (B) We acquired Gullivers Travel Associates on April 1, 2005, ebookers plc on February 28, 2005 and Orbitz, Inc. on November 12, 2004. Revenue generated by these businesses prior to acquisition is not reflected in the revenue data presented herein and, therefore, the revenue data are not comparable. However, the online gross bookings and offline gross bookings data for third quarter 2004 have been adjusted to include aggregate bookings of approximately $1.3 billion and $135 million, respectively, by ebookers and Orbitz so as to present comparable driver data. The online gross bookings and offline gross bookings data for Gullivers have been reflected in the third quarter 2005 driver data (approximately $70 million and $300 million, respectively), but not in the third quarter 2004 driver data due to the absence of available driver data prior to our acquisition of Gullivers on April 1, 2005. (C) We refer to this as our "Order Taker" business. Includes Galileo revenue of $375 million and $370 million for third quarter 2005 and 2004, respectively. (D) We refer to this as our "Order Maker" business, which is primarily comprised of Gullivers, ebookers, Orbitz, Flairview, Cheaptickets and Lodging.com. Table 5 Cendant Corporation and Subsidiaries CONSOLIDATED CONDENSED BALANCE SHEETS (In billions) As of September As of December 30, 2005 31, 2004 Assets Current assets: Cash and cash equivalents $0.4 $0.5 Assets of discontinued operations 1.1 6.6 Other current assets 3.1 2.6 Total current assets 4.6 9.7 Property and equipment, net 1.7 1.7 Goodwill 12.3 11.1 Other non-current assets 4.3 5.4 Total assets exclusive of assets under programs 22.9 27.9 Assets under management programs 12.5 14.7 Total assets $35.4 $42.6 Liabilities and stockholders' equity Current liabilities: Current portion of long-term debt $2.2 $0.7 Liabilities of discontinued operations 0.6 5.3 Other current liabilities 4.6 4.4 Total current liabilities 7.4 10.4 Long-term debt 2.6 3.6 Other non-current liabilities 1.6 1.5 Total liabilities exclusive of liabilities under programs 11.6 15.5 Liabilities under management programs(*) 12.6 14.4 Total stockholders' equity 11.2 12.7 Total liabilities and stockholders' equity $35.4 $42.6 (*) Liabilities under management programs includes deferred income tax liabilities of $1.9 billion and $2.2 billion as of September 30, 2005 and December 31, 2004, respectively. Table 6 Cendant Corporation and Subsidiaries SCHEDULE OF CORPORATE DEBT (*) (In millions) September June March December Maturity 30, 2005 30, 2005 31, 2005 31, 2004 Date Net Debt August 2006 6 7/8% notes $850 $850 $850 $850 August 2006 4.89% notes 100 100 100 100 January 2008 6 1/4% notes 798 798 798 797 March 2010 6 1/4% notes 349 349 349 349 January 2013 7 3/8% notes 1,191 1,191 1,191 1,191 March 2015 7 1/8% notes 250 250 250 250 November 2009 Revolver borrowings (A) 381 284 1,310 650 Commercial paper borrowings (A) 800 975 -- -- Net hedging gains (losses)(B) (25) 29 (29) 17 Other 120 96 89 126 Total Debt 4,814 4,922 4,908 4,330 Less: Cash and cash equivalents 356 623 1,341 467 Net Debt $4,458 $4,299 $3,567 $3,863 Net Capitalization Total Stockholders' Equity $11,230 $11,234 $11,195 $12,695 Total Debt (per above) 4,814 4,922 4,908 4,330 Total Capitalization 16,044 16,156 16,103 17,025 Less: Cash and cash equivalents 356 623 1,341 467 Net Capitalization $15,688 $15,533 $14,762 $16,558 Net Debt to Net Capitalization Ratio (C) 28.4% 27.7% 24.2% 23.3% Total Debt to Total Capitalization Ratio 30.0% 30.5% 30.5% 25.4% (*) Amounts presented herein exclude assets and liabilities under management programs. (A) On October 17, 2005, we received approximately $1.7 billion of cash from the sale of our Marketing Services division. Approximately $1.2 billion of such cash has already been or will be used during October 2005 to repay the outstanding revolver and commercial paper borrowings. The Net Debt to Net Capitalization and Total Debt to Total Capitalization ratios after giving effect to the sale of the Marketing Services division and the utilization of $1.2 billion of those proceeds will be 19.2% and 23.6%, respectively. (B) As of September 30, 2005, this balance represents $139 million of mark-to-market adjustments on current interest rate hedges, partially offset by $114 million of net gains resulting from the termination of interest rate hedges, which will be amortized by the Company to reduce future interest expense. (C) See Table 9 for a description of this ratio. Table 7 Cendant Corporation and Subsidiaries CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In millions) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Operating Activities Net cash provided by operating activities exclusive of management programs $722 $773 $1,884 $1,785 Net cash provided by operating activities of management programs 215 1,146 657 986 Net Cash Provided by Operating Activities 937 1,919 2,541 2,771 Investing Activities Property and equipment additions (110) (100) (303) (280) Net assets acquired, net of cash acquired, and acquisition-related payments (205) (65) (1,794) (402) Proceeds received on asset sales 30 5 43 29 Proceeds from disposition of businesses, net of transaction- related payments 4 (5) 969 821 Other, net 73 (2) 101 118 Net cash provided by (used in) investing activities exclusive of management programs (208) (167) (984) 286 Management programs: Net change in program cash (4) (137) (65) 8 Net change in investment in vehicles 252 1,202 (2,320) (1,401) Net change in relocation receivables (39) (47) (157) (62) Net change in mortgage servicing rights, related derivatives and mortgage-backed securities -- 121 21 (269) Other, net (1) 9 (21) 54 208 1,148 (2,542) (1,670) Net Cash Provided by (Used in) Investing Activities -- 981 (3,526) (1,384) Financing Activities Proceeds from borrowings 159 6 165 25 Principal payments on borrowings (67) (220) (156) (1,336) Net change in short-term borrowings (155) -- 461 -- Issuances of common stock 37 951 228 1,347 Repurchases of common stock (558) (191) (1,018) (1,153) Payments of dividends (117) (93) (309) (237) Cash reduction due to spin-off of PHH -- -- (259) -- Other, net 4 (1) 8 (23) Net cash provided by (used in) financing activities exclusive of management programs (697) 452 (880) (1,377) Management programs: Proceeds from borrowings 2,644 2,330 9,627 9,201 Principal payments on borrowings (3,019) (3,893) (7,926) (8,798) Net change in short-term borrowings (86) (864) 98 50 Other, net (10) (2) (22) (19) (471) (2,429) 1,777 434 Net Cash Provided by (Used in) Financing Activities (1,168) (1,977) 897 (943) Effect of changes in exchange rates on cash and cash equivalents (15) (34) (44) 4 Cash provided by (used in) discontinued operations (21) 215 21 361 Net increase (decrease) in cash and cash equivalents (267) 1,104 (111) 809 Cash and cash equivalents, beginning of period 623 451 467 746 Cash and cash equivalents, end of period $356 $1,555 $356 $1,555 Table 8 Cendant Corporation and Subsidiaries CONSOLIDATED SCHEDULES OF FREE CASH FLOWS (*) (In millions) Three Months Nine Months Ended Ended September 30, September 30, 2005 2004 2005 2004 Pretax income $720 $736 $1,487 $1,664 Addback of non-cash depreciation and amortization: Non-program related 134 118 411 341 Pendings and listings 6 5 12 13 Addback of non-cash valuation charge associated with PHH spin-off -- -- 180 -- Tax payments, net of refunds (44) (28) (148) (116) Working capital and other 7 (56) 50 (17) Capital expenditures (110) (100) (303) (280) Management programs (A) (48) (135) (108) (250) Free Cash Flow 665 540 1,581 1,355 Current period acquisitions, net of cash acquired (166) (53) (1,670) (328) Payments related to prior period acquisitions (39) (12) (124) (74) Proceeds from disposition of businesses, net 4 (5) 969 821 Issuance of common stock in connection with the Upper DECS -- 863 -- 863 Net repurchases of common stock (521) (103) (790) (669) Payment of dividends (117) (93) (309) (237) Investments and other (B) (30) 181 21 389 Cash reduction due to spin-off of PHH -- -- (259) -- Net debt borrowings (repayments) (63) (214) 470 (1,311) Net increase (decrease) in cash and cash equivalents (per Table 7) $(267) $1,104 $(111) $809 (*) See Table 9 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 September 30, 2005 and 2004, the net cash flows from the activities of management programs are reflected on Table 7 as follows: (i) net cash provided by operating activities of $215 million and $1,146 million, respectively, (ii) net cash provided by investing activities of $208 million and $1,148 million, respectively, and (iii) net cash used in financing activities of $471 million and $2,429 million, respectively. For the nine months ended September 30, 2005 and 2004, the net cash flows from the activities of management programs are reflected on Table 7 as follows: (i) net cash provided by operating activities of $657 million and $986 million, respectively, (ii) net cash used in investing activities of $2,542 million and $1,670 million, respectively, and (iii) net cash provided by financing activities of $1,777 million and $434 million, respectively. (B) 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.
The accompanying press release includes certain non-GAAP 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.
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