Cendant Reports Third Quarter 2001 Results
Adjusted EPS of $0.32 Meets Current Projection
3Q01 Adjusted EBITDA Increased 18% to $603 Million
Adjusted EPS $0.32 in 2001 vs. $0.31 in 2000
Reported EPS $0.23 in 2001 vs. $0.29 in 2000
Company Reiterates Fourth Quarter 2001 Outlook
NEW YORK, Oct. 17 /PRNewswire/ -- Cendant Corporation (NYSE: CD) today reported third quarter 2001 results and reiterated its outlook for fourth quarter 2001.
"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 Homestore.com) met its projection of $0.32. Adjusted EPS in third quarter 2001 excludes the effect of unusual charges of approximately $50 million, net of tax, related to the events of September 11. The Company also reiterated that it projects fourth quarter adjusted EPS, before unusual charges primarily related to the impact of the September 11 events and the acquisition and integration of Galileo and Cheap Tickets, to be in the range of $0.15 to $0.19 resulting in adjusted EPS in the range of $0.98 to $1.02 for full year 2001. Based on its current view, planned management actions, and absent major additional external disruptions, the Company expects cash flow and EBITDA to significantly increase in 2002 and adjusted EPS is projected to be between $1.15 and $1.25 in 2002, depending upon the extent to which business and consumer spending increases and the levels of travel volume.
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 Homestore.com, adjusted to exclude certain items which are of a non-recurring or unusual nature and are not measured in assessing segment performance or are not segment specific. Such discussion is the most informative representation of how management evaluates performance and allocates resources.
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 Items
Reported EPS for CD common stock includes Cendant Group operations and, in third quarter 2000, a retained interest in Move.com Group. 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 Homestore.com.
-- An after tax charge of $0.01 per share for litigation
settlement-related costs.
Third Quarter 2000
-- An after tax loss of $0.02 per share related to move.com's operating
results.
-- An after tax gain of $0.02 per share related to the dispositions of
certain non-strategic businesses.
-- An after tax charge of $0.02 per share for litigation
settlement-related costs.
Fourth Quarter Outlook
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 move.com, in 2000.
-- Depreciation and amortization (non-vehicle and program related) is
projected to be between $155 million and $165 million compared with
93 million in 2000. The increase is principally due to the 2001
acquisitions of Avis, Fairfield Resorts, Galileo and Cheap Tickets.
-- Net interest expense (non-vehicle and program related) is projected to
be between $75 million and $85 million compared with $63 million in
2000. The increase is principally due to the Company's 2001
acquisitions.
-- The Company's fourth quarter and full year 2001 tax rates on adjusted
pretax income are projected to be 33.2% compared with 34.0% in 2000.
The decrease is principally due to the recognition of certain foreign
tax credits in 2001.
-- Minority interest is projected to be approximately $3 million compared
with $23 million in 2000. The reduction is primarily a result of the
retirement of the Feline PRIDES in February 2001.
-- Weighted average shares outstanding are projected to be between
1.01 billion and 1.025 billion compared with 757 million in 2000. The
increase in the average share balance is primarily the result of the
issuance of 61 million shares of common stock in connection with the
retirement of the Feline PRIDES, the issuance of 46 million shares of
common stock in February 2001 and the issuance of 117 million shares of
common stock in connection with the acquisition of Galileo.
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.com or dial in to 913-981-5571. A web replay will be available at cendant.com following the call. A telephone replay will be available from 4:00 p.m. Eastern Time on October 18, 2001 until 8:00 p.m. on October 22 at 719-457-0820, access code: 614080. |
