EXHIBIT 99.1
HFS Incorporated and Subsidiaries
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The pro forma consolidated balance sheet as of June 30, 1996 is presented
as if the acquisition of Avis, Inc. ("Avis") and issuance of Company common
stock (the "Avis Offering") as partial consideration for Avis occurred on June
30, 1996. Closing of the acquisition is subject to the favorable vote of Avis
participants in the Avis Employee Stock Option Plan ("ESOP"), the receipt of
regulatory approvals and completion of fleet financing arrangements. The Company
intends to undertake an initial public offering of a majority interest in the
corporation which owns all company-owned Avis car rental locations (the
"Operating Company") in 1997 and to enter into franchise, information technology
and other agreements to provide services to the Operating Company based on terms
to be determined. Accordingly, the pro forma financial statements reflect the
acquired net assets and results of operations of the Avis rental car operating
subsidiary intended to be sold as "Investment in car rental operating company"
and "other revenue", respectively.
The pro forma statements of operations for the year ended December 31, 1995
and the six months ended June 30, 1996 are presented as if the acquisition of
Avis and the following transactions had occurred on January 1, 1995: (i) the May
31, 1996 acquisition of the common stock of Coldwell Banker Corporation
("Coldwell Banker") and the related contribution of Coldwell Banker's owned real
estate brokerage offices (the "Owned Brokerage Business") to an independent
trust (the "Trust") (the "Coldwell Banker Transaction"); (ii) the receipt of
proceeds from an offering of the Company's common stock (the "CB Offering") to
the extent necessary to fund the acquisition of Coldwell Banker and the related
repayment of indebtedness and acquisition expenses; (iii) the acquisitions of:
the six non-owned Century 21 regions ("Century 21 NORS") during the second
quarter of 1996, the Travelodge franchise system ("Travelodge") on January 23,
1996 and the Electronic Realty Associates franchise system ("ERA") on February
12, 1996 (collectively, the "Other Acquisitions"); and (iv) the February 22,
1996 issuance of $240 million of 4-3/4% convertible senior notes due 2003 to the
extent such proceeds were used to finance the Other Acquisitions. The pro forma
statement of operations for the year ended December 31, 1995 is also presented
as if the August 1, 1995 acquisition of Century 21 Real Estate Corporation
("Century 21") and the acquisition by merger (the "CCI Merger") in May 1995 of
Casino & Credit Services, Inc's gambling patron credit information business,
Central Credit Inc. ("CCI") had occurred on January 1, 1995.
The acquisitions have been or will be accounted for using the purchase
method of accounting. Accordingly, assets acquired and liabilities assumed have
been or will be recorded at their estimated fair values which are subject to
further refinement, including appraisals and other analyses, with appropriate
recognition given to the effect of current interest rates and income taxes.
Management does not expect that the final allocation of the purchase price for
the above acquisitions will differ materially from the preliminary allocations.
The Company has entered into certain immaterial transactions which are not
reflected in the pro forma statements of operations.
The pro forma consolidated financial statements do not purport to present
the financial position or results of operations of the Company had the
transactions and events assumed therein occurred on the dates specified, nor are
they necessarily indicative of the results of operations that may be achieved in
the future. In addition to the cost savings reflected in the pro forma
consolidated statements of operations, the pro forma consolidated statements of
operations do not reflect certain additional cost savings and revenue
enhancements that management believes may be realized following the
acquisitions. These savings are expected to be realized primarily through the
restructuring of franchise services of the acquired companies as well as revenue
enhancements expected through leveraging of the Company's preferred vendor
programs. No assurances can be made as to the amount of cost savings or revenue
enhancements, if any, that actually will be realized. In addition, there can be
no assurance the Company will complete the acquisition of Avis.
The pro forma consolidated financial statements are based on certain
assumptions and adjustments described in the Notes to Pro Forma Consolidated
Balance Sheet and Statements of Operations and should be read in conjunction
therewith and with the consolidated financial statements and related notes of
the Company included in its 1995 Annual Report on Form 10-K and in its June 30,
1996 Quarterly Report on Form 10-Q, as amended and the financial statements and
related notes of the acquired or to be acquired companies included elsewhere
herein or previously filed in Current Reports on Form 8-K.
HFS Incorporated and Subsidiaries
PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 1996
(In thousands)
Historical
Pro Forma
HFS Avis (1) Adjustment (A) Pro Forma
----------------------------------------------------------
Assets
Current assets
Cash and cash equivalents ........ $ 387,837 $ -- $ (336,611) $ 51,226
Royalty accounts and notes
receivable, net ................ 82,765 636 -- 83,401
Relocation receivables ........... 113,075 -- -- 113,075
Marketing and reservation
receivables, net ............... 43,351 -- -- 43,351
Other current assets ............. 32,337 779 -- 33,116
Deferred income taxes ............ 36,456 -- 36,456
Total current assets ................ 695,821 1,415 (336,611) 360,625
Property and equipment-net .......... 99,411 34,024 57,976 191,411
Franchise agreements-net ............ 599,631 -- -- 599,631
Excess of cost over fair value of
net assets acquired-net .......... 1,316,146 -- -- 1,316,146
Intangible assets-Avis .............. -- 503,037 115,133 618,170
Investment in car rental
operating company, net............ -- (187,743) 262,743 75,000
Deferred income taxes-net ........... -- 28,033 (28,033) --
5,200 5,200
Other assets ........................ 78,609 59,614 (9,614) 128,609
----------- ---------- ---------- -----------
Total ............................... $ 2,789,618 $ 438,380 $ 66,794 $ 3,294,792
=========== ========== ========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and other
accrued liabilities ............ $ 172,064 $ 1,785 $ -- $ 173,849
Income taxes payable ............. 62,421 -- -- 62,421
Accrued acquisition obligations .. 32,002 -- 44,000 76,002
Current portion of long-term debt 29,562 -- 97,900 127,462
Total current liabilities ........... 296,049 1,785 141,900 439,734
Long-term debt ...................... 540,530 -- -- 540,530
Other non-current liabilities ....... 30,894 -- -- 30,894
Deferred income taxes ............... 85,400 -- -- 85,400
Preferred Stock - Avis .............. -- 2,412 (72,412) --
Redeemable portion of common
stock - ESOP .................... -- 295,465 (295,465) --
Unearned compensation-ESOP .......... -- (261,702) 261,702 --
Stockholders' Equity
Participating convertible
preferred stock ................ -- 132,000 (132,000) --
Common stock ..................... 1,232 290 (234) 1,288
Additional paid-in capital ....... 1,690,347 217,445 143,988 2,051,780
Retained earnings ................ 145,166 79,120 (79,120) 145,166
Treasury stock ................... -- (102,269) 102,269 --
Foreign currency equity adjustment -- 3,834 (3,834) --
Total stockholders' equity .......... 1,836,745 330,420 31,069 2,198,234
----------- ----------- ----------- -----------
Total ............................... $ 2,789,618 $ 438,380 $ 66,794 $ 3,294,792
=========== =========== =========== ===========
- ------------
(1) See Consolidated Historical Balance Sheet of Avis, Inc. as adjusted as of May 31, 1996.
See notes to pro forma consolidated balance sheet and statements of operations.
HFS Incorporated and Subsidiaries
CONSOLIDATED HISTORICAL BALANCE SHEET
OF AVIS, INC. AS ADJUSTED
As of May 31, 1996
(In thousands)
Historical Reclassification Avis,
Avis Adjustment As Adjusted
-----------------------------------------------------
Assets
Current Assets
Cash and cash equivalents ........ $ 75,122 $ (75,122) $ --
Royalty accounts and notes
receivable, net ................ 152,224 (151,588) 636
Vehicles, net .................... 2,330,630 (2,330,630) --
Due from affiliated company ...... 44,098 (44,098) --
Other current assets ............. 45,755 (44,976) 779
Deferred income taxes ............ -- -- --
Total current assets ................ 2,647,829 (2,646,414) 1,415
Property and equipment-net .......... 150,538 (116,514) 34,024
Franchise agreements-net ............ --
Excess of cost over fair value of
net assets acquired-net .......... --
Intangible assets-Avis .............. 503,037 -- 503,037
Investment in car rental
operating company, net........... -- (187,743) (187,743)
Deferred income taxes ............... -- 28,033 28,033
Other assets ........................ 165,881 (106,267) 59,614
----------- ----------- -----------
Total ............................... $ 3,467,285 $(3,028,905) $ 438,380
=========== =========== ===========
Liabilities and Stockholders' Equity
Accounts Payable and other ....... $ 400,814 $ (399,029) $ 1,785
----------- ----------- -----------
Long-term debt ...................... 2,262,223 (2,262,223) --
Public liability and property damage 208,692 (208,692) --
Due to affiliated company ........... 122,002 (122,002) --
Other non-current liabilities
Deferred income taxes ............ 36,959 (36,959) --
Preferred stock - Avis ....... 72,412 -- 72,412
Redeemable portion of common
stock - ESOP ................... 295,465 -- 295,465
Unearned compenstion-ESOP ........ (261,702) -- (261,702)
Stockholders' Equity
Participating convertible
preferred stock ................ 132,000 -- 132,000
Common stock ..................... 290 -- 290
Additional paid-in capital ....... 217,445 -- 217,445
Retained earnings ................ 79,120 -- 79,120
Treasury stock ................... (102,269) -- (102,269)
Foreign currency equity adjustment 3,834 -- 3,834
Total stockholders' Equity .......... 330,420 -- 330,420
----------- ----------- -----------
Total ............................... $ 3,467,285 $(3,028,905) $ 438,380
=========== =========== ===========
____________
Note: The reclassification adjustment made to the historical balance sheet of Avis, Inc. is to
present the historical net assets of the car rental operations as "investment in car rental
operating company - net".
See notes to pro forma consolidated balance sheet and statements of operations.
HFS Incorporated and Subsidiaries
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(In thousands, except per share amounts)
Historical
----------------------------------------------------
Other
Avis, (1) Coldwell Acquired Pro Forma
HFS As Adjusted Banker Companies Adjustments Pro Forma
--------------------------------------------------------------------------------------------
Revenue
Franchise .......... $ 361,238 $ -- $ 68,064 $ 128,233 $ 25,950 (B) $ 583,485
Owned brokerage
business ......... -- -- 535,207 -- (535,207) (C) --
Relocation services 8,204 -- 75,866 6,514 -- 90,584
Other .............. 43,541 62,808 20,264 29,848 (4,421) 191,118
39,078 (D)
-------- -------- -------- -------- -------- --------
Total revenue .... 412,983 62,808 699,401 164,595 (474,600) 865,187
======== ======== ======== ======== ========= ========
Expenses
Marketing and
reservation ...... 143,965 -- -- 20,996 -- 164,961
Selling, general and
administrative ... 55,538 7,205 32,367 102,857 (61,218) (E) 136,749
Ramada license fee . 18,911 -- -- -- -- 18,911
Owned brokerage .... -- -- 521,376 -- (521,376) (C) --
Depreciation and
amortization ..... 30,857 19,683 22,425 8,483 21,299 (F) 102,747
Interest ........... 21,789 461 5,329 6,227 1,773 (G) 35,579
Relocation ......... 3,783 -- 62,439 4,881 -- 71,103
Other .............. 3,235 410 -- 14,757 (399) (H) 18,003
-------- ------- -------- -------- -------- --------
Total expenses ... 278,078 27,759 643,936 158,201 (559,921) 548,053
-------- ------- -------- -------- -------- --------
Income before
income taxes ....... 134,905 35,049 55,465 6,394 85,321 317,134
Provision for
income taxes ....... 55,175 23,977 24,385 3,542 29,289 (I) 136,368
--------- --------- --------- --------- --------- ---------
Net income ............ $ 79,730 $ 11,072 $ 31,080 $ 2,852 $ 56,032 $ 180,766
========= ========= ========= ========= ========= =========
Per Share Information
(fully diluted)
Net income ......... $ 0.73 -- -- -- -- $ 1.34
========= =========
Weighted average
common and
common equivalent
shares outstanding 115,654 -- -- -- 22,552 (J) 138,206
======= ====== =======
_______________
Note:Certain reclassifications have been made to the historical results of
acquired companies to conform with the Company's classification.
(1) The historical financial statements of operations of Avis, as adjusted, has
been adjusted to include the historical results of Avis operations intended
to be retained by the Company and the operating results of the car
rental operating company, which are included in "Other Revenue". See Historical
Consolidated Statement of Operations, as adjusted of Avis, Inc. for the year
ended February 29, 1996.
See notes to pro forma consolidated balance sheet and statement of operations.
HFS Incorporated and Subsidiaries
HISTORICAL CONSOLIDATED STATEMENT OF OPERATIONS
OF AVIS, INC. AS ADJUSTED
For the Year Ended February 29, 1996
(In thousands)
Adjustments
---------------------------------
Rental Car Avis
Historical Reclassifications Subsidiary As Adjusted
--------------------------------------------------------------------
Revenue .............................................. $ 1,716,677 $ -- $(1,653,869) $ 62,808
Expenses:
Selling, general & administrative ................. 1,119,888 (16,865) (1,095,818) 7,205
Depreciation & amortization ....................... 411,796 16,404 (408,517) 19,683
Interest .......................................... 149,534 461 (149,534) 461
Other ............................................. 410 -- -- 410
----------- ----------- ----------- -----------
Total expenses .................................. 1,681,628 -- (1,653,869) 27,759
----------- ----------- ----------- -----------
Income before income taxes ........................... 35,049 -- -- 35,049
Provision for income taxes ........................... 23,977 -- -- 23,977
----------- ----------- ----------- -----------
Net income ........................................... $ 11,072 $ -- $ -- $ 11,072
=========== =========== =========== ===========
_______________
See notes to pro forma consolidated balance sheet and statements of operations.
HFS Incorporated and Subsidiaries
HISTORICAL CONSOLIDATED STATEMENT OF OPERATIONS
OF OTHER ACQUIRED COMPANIES
For the Year Ended December 31, 1995
(In thousands, except per share amounts)
Century 21
CCI(1) Century 21(1) NORS Travelodge ERA Total
----------------------------------------------------------------------------------
Revenue
Franchise ........ $ -- $ 53,992 $ 29,021 $ 18,361 $ 26,859 $128,233
Relocation ....... -- 6,514 -- -- -- 6,514
Other ............ 3,326 10,164 403 79 15,876 29,848
------ -------- -------- -------- ------- --------
Total revenue .. 3,326 70,670 29,424 18,440 42,735 164,595
------ -------- -------- -------- ------- --------
Expenses
Marketing and
reservation .... -- 5,128 2,912 12,956 -- 20,996
Selling, general &
administrative . -- 47,232 22,851 2,648 30,126 102,857
Depreciation &
amortization ... 529 5,217 578 8 2,151 8,483
Interest ......... -- 2,904 54 -- 3,269 6,227
Relocation ....... -- 4,881 -- -- -- 4,881
Other ............ 1,917 2,751 -- -- 10,089 14,757
------ ------- ------- -------- -------- --------
Total expenses . 2,446 68,113 26,395 15,612 45,635 158,201
------ ------- ------- -------- -------- --------
Income (loss) before
income taxes ..... 880 2,557 3,029 2,828 (2,900) 6,394
Provision for
income taxes ..... 313 2,097 -- 1,132 -- 3,542
------ ------- -------- -------- -------- --------
Net income (loss) ... $ 567 $ 460 $ 3,029 $ 1,696 $ (2,900) $ 2,852
====== ======= ======== ======== ======== ========
_______________
Note: Certain reclassifications have been made to the historical results of acquired companies to conform with the Company's
classification.
(1) Reflects results of operations for the period from January 1, 1995 to the
respective date of acquisition.
See notes to pro forma consolidated balance sheet and statements of operations.
HFS Incorporated and Subsidiaries
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996
(In thousands, except per share amounts)
Historical
------------------------------------------------------
Avis, (1) Coldwell Other (2) Pro Forma
HFS As Adjusted Banker (2) Acquisitions Adjustments Pro Forma
----------------------------------------------------------------------------------------
Revenue
Franchise .......... $ 240,135 $ -- $ 25,694 $ 9,631 $ 11,835 (B) $ 287,295
Owned brokerage .... -- -- 235,625 -- (235,625) (C) --
Relocation ......... 15,179 -- 34,159 719 -- 50,057
Other .............. 48,896 32,077 4,067 1,651 15,760 (D) 102,451
-------- -------- --------- --------- --------- ---------
Total revenue .... 304,210 32,077 299,545 12,001 (208,030) 439,803
-------- -------- --------- --------- --------- ---------
Expenses
Marketing and
reservation ...... 75,491 -- -- 1,134 -- 76,625
Selling, general
& administrative . 60,311 3,703 57,455 9,460 (52,025) (E) 78,904
Ramada license fee . 10,045 -- -- -- -- 10,045
Owned brokerage .... -- -- 227,363 -- (227,363) (C) --
Depreciation and
amortization ..... 23,405 9,905 9,021 421 9,804 (F) 52,556
Interest ........... 14,574 251 3,155 1,493 (3,287) (G) 16,186
Relocation ......... 10,184 -- 27,530 641 -- 38,355
Other .............. 6,892 18 512 764 -- 8,186
-------- ------- -------- -------- --------- --------
Total expenses ... 200,902 13,877 325,036 13,913 (272,871) 280,857
-------- ------- -------- -------- --------- --------
Income (loss) before
income taxes ....... 103,308 18,200 (25,491) (1,912) 64,841 158,946
Provision for
income taxes ....... 41,746 8,883 (10,432) -- 25,130 (I) 65,327
--------- --------- --------- --------- --------- ---------
Net income (loss) ..... $ 61,562 $ 9,317 $ (15,059) $ (1,912) $ 39,711 $ 93,619
========= ========= ========= ========= ========= =========
Per Share Information
(fully diluted)
Net income ......... $ .51 $ .67
========== =========
Weighted average
common and
common equivalent
shares outstanding 126,275 16,771 (J) 143,046
======= ====== =======
_______________
Note:Certain reclassifications have been made to the historical results of
acquired companies to conform with the Company's classification.
(1) The historical financial statement of operations of Avis, as adjusted, has
been adjusted to include the historical results of operations intended to be
retained by the Company and the operating results of the car rental operating
company, which are included in "Other Revenue". See Historical Consolidated
Statement of Operations of Avis, Inc. as adjusted, for the six months ended May 31, 1996.
(2) Reflects results of operations for the period from January 1, 1996 to the
respective dates of acquisition.
See notes to pro forma consolidated balance sheet and statements of operations.
HFS Incorporated and Subsidiaries
HISTORICAL CONSOLIDATED STATEMENT OF OPERATIONS
OF AVIS, INC. AS ADJUSTED
For the Six Months Ended May 31, 1996
(In thousands)
Adjustments
----------------------------------
Rental Car Avis
Historical (1) Reclassifications Subsidiary As Adjusted
--------------------------------------------------------------------
Revenue ............................ $ 918,698 $ -- $(886,621) $ 32,077
Expenses:
Selling, general & administrative 624,543 (9,168) (611,672) 3,703
Depreciation & amortization ..... 199,924 8,917 (198,936) 9,905
Interest ........................ 76,013 251 (76,013) 251
Other ........................... 18 -- -- 18
--------- ------- --------- --------
Total expenses ................ 900,498 -- (886,621) 13,877
--------- ------- --------- --------
Income before income taxes ......... 18,200 -- -- 18,200
Provision for income taxes ......... 8,883 -- -- 8,883
--------- ------- --------- --------
Net income ......................... $ 9,317 $ -- $ -- $ 9,317
========= ======= ========= =========
_______________
(1) The historical financial statements of Avis, Inc. are for the six months
ended May 31, 1996. The three months ended February 29, 1996 are included
in the six months ended May 31, 1996 and the year ended February 29, 1996.
Revenue and net loss for the three months ended February 29, 1996 are
$421.7 million and $9.7 million, respectively.
See notes to pro forma consolidated balance sheet and statements of operations.
HFS Incorporated and Subsidiaries
HISTORICAL CONSOLIDATING STATEMENT OF OPERATIONS
OF OTHER ACQUISITIONS
For the Six Months Ended June 30, 1996
(In thousands)
Century 21
NORS (1) Travelodge (1) ERA (1) Total
----------------------------------------------------------
Revenue:
Franchise ....................... $ 6,668 $ 688 $ 2,275 $ 9,631
Relocation ...................... -- -- 719 719
Other ........................... 449 -- 1,202 1,651
-------- -------- -------- -------
Total revenue ................. 7,117 688 4,196 12,001
-------- -------- -------- -------
Expenses:
Marketing and reservation ...... 681 453 -- 1,134
Selling, general & administrative 6,885 99 2,476 9,460
Depreciation & amortization ..... 285 -- 136 421
Interest ........................ 2 -- 1,491 1,493
Relocation ...................... -- -- 641 641
Other ........................... -- -- 764 764
------- -------- -------- -------
Total expenses ................ 7,853 552 5,508 13,913
------- -------- -------- -------
Income (loss) before
income taxes .................... (736) 136 (1,312) (1,912)
Provision for income taxes ......... -- -- -- --
-------- -------- -------- --------
Net income (loss) .................. $ (736) $ 136 $ (1,312) $ (1,912)
======== ======== ======== ========
_______________
Note:Certain reclassifications have been made to the historical results of
acquired companies to conform with the Company's classification.
(1) Reflects results of operations for the period from January 1, 1996 to the
respective dates of acquisition.
See notes to pro forma consolidated balance sheet and statements of operations.
HFS Incorporated and Subsidiaries
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET AND
STATEMENTS OF OPERATIONS
A. Acquisition of Avis:
The purchase price for Avis has been allocated to assets acquired and
liabilities assumed at their estimated fair values. Pro forma adjustments
consist of the elimination of certain acquired assets and assumed liabilities,
net of the fair value ascribed to such assets and liabilities.
The Company acquired Avis for the following consideration ($000's):
Cash consideration $ 336,611
Issuance of approximately 5.6 million shares of Company
common stock 361,489
Issuance of note to ESOP 97,900
---------
Total pro forma acquisition cost 796,000
---------
Fair value of net assets acquired:
Historical book value of acquired company 330,420
Elimination of net assets (liabilities) not acquired or assumed:
Deferred income taxes (28,033)
Other assets (9,614)
Preferred stock - Avis 72,412
Intangible assets - Avis (503,037)
Redeemable portion of common stock - ESOP 295,465
Unearned compensation - ESOP (261,702)
Fair value adjustments to assets acquired and liabilities assumed:
Deferred income tax asset, net (i) 5,200
Property and equipment 57,976
Investment in car rental operating company 262,743
Accrued acquisition obligations (44,000)
----------
Fair value of identifiable net assets acquired 177,830
----------
Intangible assets-Avis (ii) $ 618,170
==========
(i) The pro forma adjustment to deferred income taxes recorded in connection
with the acquisition results from differences in the fair values of assets
acquired and liabilities assumed and their respective income tax bases.
(ii) The Company has not completed the valuation of identifiable intangible
assets.
A. Acquisition of Avis (continued)
The pro forma adjustments include the elimination of Avis stockholders'
equity and the issuance of approximately 5.6 million shares of the Company's
common stock to finance the acquisition. The number of Company shares of common
stock issued in connection with the acquisition assumes a market value of
Company common stock of $65 per share. The adjustment to stockholders' equity is
calculated as follows ($000's):
Stockholders' Equity
---------------------------------------------
Issuance of Eimination of Adjustment to
Company Stockholders' Stockholders'
Common Stk. Equity Equity
----------------------------------------------
Participating convertible preferred stock $ -- $ 132,000 $(132,000)
Common stock ............................ 56 290 (234)
Additional paid-in capital .............. 361,433 217,445 143,988
Retained earnings ....................... -- 79,120 (79,120)
Treasury stock .......................... -- (102,269) 102,269
Foreign currency equity adjustment ...... -- 3,834 (3,834)
Redeemable portion of common stock ...... -- -- --
Unearned compensation ................... -- -- --
--------- --------- ---------
$ 361,489 $ 330,420 $ 31,069
========= ========= =========
B. Franchise revenue:
The pro forma adjustment reflects the elimination of franchise revenue
associated with discontinued Century 21 international based operations, the
elimination of franchise revenue paid by the Century 21 NORS to Century 21 under
sub-franchise agreements and the addition of franchise fees to be received under
franchise contracts with owned brokerage offices upon contribution of the Owned
Brokerage Business to the Trust. Pro forma adjustments to franchise revenue
consists of the following:
For the Year For the Six Months
Ended Ended
December 31, 1995 June 30, 1996
---------------------------------------------
Eliminate:
Discontinued operations ........... $ (57) $ -
Century 21 revenue included as
Century 21 NORS SG&A ........... (4,500) (1,003)
Add:
Franchise fees from Owned Brokerage
Business ....................... 30,507 12,838
-------- --------
Total .................................. $ 25,950 $ 11,835
======== ========
C. Owned brokerage revenue and expenses:
The pro forma adjustments reflect the elimination of revenue and expenses
for Coldwell Banker's 318 formerly owned brokerage offices. The Company
contributed the net assets of the Owned Brokerage Business to the Trust upon
consummation of the Coldwell Banker Transaction. The free cash flow of the Trust
will be expended at the discretion of the trustees to enhance the growth of
funds available for advertising and promotion.
D. Other revenue
The pro forma adjustment is comprised of the following adjustments to
rental car operations which have been classified as other revenue:
For the Year For the Six Months
Ended Ended
December 31, 1995 June 30, 1996
------------------------------------------
Elimination of historical expense
associated with:
Long-term incentive
compensation plans (i)...... $ 4,700 $ 3,549
Fleet costs ..................... 33,411 10,234
Depreciation and amortization ... 29,016 15,337
Debt financing costs ............ 2,853 1,645
Addition of pro forma expenses
associated with:
Depreciation and amortization of
property, equipment and other
intangibles ................. (22,898) (11,449)
Increased financing costs ........... (8,004) (3,556)
-------- -------
Total ............................... $ 39,078 $ 15,760
======== ========
(i) Relates to stock appreciation rights of former owner.
E. Selling, general and administrative expense:
The pro forma adjustments eliminate redundant costs associated with the
restructuring of franchise services and other businesses and the resulting
termination of certain functions and positions in connection with Company
acquisitions. Adjustments are comprised of the following ($000's):
For the year ended December 31, 1995:
Century Coldwell Century 21
21 Banker NORS Travelodge ERA Total
-----------------------------------------------------------------------
Payroll and related ... $ 10,885 $ 10,681 $ 7,706 $ 1,110 $ 7,236 $ 37,618
Professional .......... 2,693 1,500 1,486 154 387 6,220
Occupancy ............. 3,628 -- 2,754 186 1,172 7,740
Conventions & meetings 1,302 -- 410 -- -- 1,712
Franchise fees (Note B) -- -- 4,500 -- -- 4,500
Other ................. 1,826 (1,517) 1,916 167 1,036 3,428
-------- -------- -------- -------- -------- --------
Total ................. $ 20,334 $ 10,664 $ 18,772 $ 1,617 $ 9,831 $ 61,218
======== ======== ======== ======== ======== ========
For the six months ended June 30, 1996:
Coldwell Century 21
Banker NORS Travelodge ERA Total
--------------------------------------------------------------
Payroll and related ... $ 4,451 $ 2,424 $ 25 $ 222 $ 7,122
Stock option expense .. 40,801 -- -- -- 40,801
Professional .......... 1,055 705 4 -- 1,764
Occupancy ............. -- 603 4 102 709
Conventions & meetings -- 472 -- -- 472
Franchise fees (Note B) -- 1,003 -- -- 1,003
Other ................. (604) 597 4 157 154
-------- -------- -------- -------- --------
Total ................. $ 45,703 $ 5,804 $ 37 $ 481 $ 52,025
======== ======== ======== ======== ========
F. Depreciation and amortization:
The pro forma adjustment for depreciation and amortization is comprised of
($000's):
For the year ended December 31, 1995:
CCI Coldwell Other
Merger Century 21 Avis Banker Acquisitions Total
-----------------------------------------------------------------------------
Elimination of historical
expense ............. $ (529) $ (5,217) $(19,683) $(22,425) $ (2,737) $(50,591)
Property, equipment &
furniture & fixtures 100 534 12,400 1,295 -- 14,329
Information data base ... 375 -- -- -- -- 375
Intangible assets ....... 289 3,669 20,327 25,877 7,024 57,186
-------- -------- -------- -------- -------- --------
Total ................... $ 235 $ (1,014) $ 13,044 $ 4,747 $ 4,287 $ 21,299
======== ======== ======== ======== ======== ========
For the six months ended June 30, 1996:
Coldwell Other
Avis Banker Acquisitions Total
-------------------------------------------------------------
Elimination of historical expense $ (9,905) $ (9,021) $ (421) $(19,347)
Property, equipment and
furniture and fixtures ...... 6,200 540 -- 6,740
Intangible assets ............... 10,164 10,775 1,472 22,411
-------- -------- -------- --------
Total ........................... $ 6,459 $ 2,294 $ 1,051 $ 9,804
======== ======== ======== ========
CCI Merger
The estimated fair values of CCI's information data base, property and
equipment and excess of cost over fair value of net assets acquired are $7.5
million, $1.0 million and $33.8 million, respectively, and are amortized on a
straight-line basis over the periods to be benefited which are ten , five and
forty years, respectively. The benefit periods associated with the excess cost
over fair value of net assets acquired were determined based on CCI's position
as the dominant provider of gambling patron credit information services since
1956, its ability to generate operating profits and expansion of its customer
base and the longevity of the casino gaming industry.
Century 21
The estimated fair values of Century 21 property and equipment, franchise
agreements and excess cost over fair value of net assets acquired are $5.5
million, $33.5 million and $140.0 million, respectively, and are amortized on a
straight-line basis over the periods to be benefited which are seven, twelve and
forty years, respectively. The benefit periods associated with the excess cost
over fair value of net assets acquired were determined based on Century 21's
position as the world's largest franchisor of residential real estate brokerage
offices, the most recognized brand name in the residential real estate brokerage
industry and the longevity of the residential real estate brokerage business.
Avis
The estimated fair value of Avis' property and equipment intended to be
retained by the Company, is $92 million, comprised primarily of a reservation
system and related assets. Such property and equipment is amortized on a
straight-line basis over the estimated benefit periods ranging from five to
eight years. The estimated fair values of Avis' intangible assets, comprised
principally of excess of cost over fair value of net assets acquired, are $617
million and are amortized on a straight-line basis over the respective assets
benefit periods which range between ten to forty years.
The excess of cost over fair value of net assets acquired was determined to
have a benefit period of forty years, which was based on Avis' position as the
second largest car rental system in the world, the recognition of its broad name
in the car rental industry and the longevity of the car rental business.
Coldwell Banker
The estimated fair value of Coldwell Banker's property and equipment
(excluding land) of $16.7 million, is amortized on a straight-line basis over
the estimated benefit periods ranging from five to twenty-five years. The
estimated fair value of Coldwell Banker's intangible assets, comprised of
franchise agreements and excess of cost over fair value of net assets acquired,
is $768.4 million and is amortized on a straight-line basis over the periods to
be benefited. The excess of cost over fair value of net assets acquired was
determined to have a benefit period of forty years, which was based on Coldwell
Banker's position as the largest gross revenue producing real estate company in
North American, the recognition of its brand name in the real estate brokerage
industry and the longevity of the real estate brokerage business.
Other Acquisitions
The estimated fair values of Other Acquisitions franchise agreements
aggregate $61.0 million and are being amortized on a straight line basis over
the periods to be benefited, which range from twelve to thirty years. The
estimated fair values of Other Acquisitions excess of cost over fair value of
net assets acquired aggregate $164.2 million and are each being amortized on a
straight line basis over the periods to benefited which are forty years.
G. Interest expense:
For the Year For the Six Months
Ended Ended
December 31, 1995 June 30, 1996
-----------------------------------------
Elimination of historical interest expense of
Other Acquisitions and Century 21 ........ $(6,227) $(1,493)
Reversal of Coldwell Banker ................. (5,329) (3,155)
Century 21 .................................. 2,835 --
Minority interest - preferred dividends ..... 1,796 --
4-3/4% Notes ............................... 8,698 1,361
------- -------
Total ....................................... $ 1,773 $(3,287)
======= =======
Century 21
The pro forma adjustment reflects the recording of interest expense on $60
million of borrowings under the Company's revolving credit facility at an
interest rate 6.3%. Borrowings represent the amount necessary to finance the
initial cash of purchase price net of $10.2 million of acquired cash.
Coldwell Banker
The pro forma adjustment reflects the reversal of interest expense relating
to the following ($000's):
For the Year For the Six Months
Ended Ended
December 31, 1995 June 30, 1996
-------------------------------------------
Expense associated with the Owned
Brokerage Business ..................... $ 138 $ (179)
Expense associated with revolving credit
facility borrowings which will be repaid
with proceeds from offering ............ 5,191 3,334
------- -------
Total ....................................... $ 5,329 $ 3,155
======= =======
Minority interest - preferred dividends:
The pro forma adjustment represents dividends on the redeemable Series A
Adjustable Rate Preferred Stock of Century 21. Preferred dividends are
calculated based on an $80 million face value and a 4.9% dividend rate.
4-3/4% Notes
The pro forma adjustment reflects interest expense and amortization of
deferred financing costs related to the February 22, 1996 issuance of the 4-3/4%
Notes to the extent that such proceeds were used to finance the Other
Acquisitions.
H. Other expenses
The pro forma adjustment eliminates $399,000 of accounting, legal and other
administrative expenses allocated to CCI which would not have been incurred by
the Company.
I. Income Taxes
The pro forma adjustment to income taxes is comprised of ($000's):
For the Year For the Six Months
Ended Ended
December 31, 1995 June 30, 1996
--------------------------------------------
Reversal of historical (provision) benefit of:
Company ................................. $ (55,175) $ (41,746)
CCI ..................................... (313) --
Century 21 .............................. (2,097) --
Avis .................................... (23,977) (8,883)
Coldwell Banker ......................... (24,385) 10,432
Travelodge .............................. (1,132) --
Pro forma provision .......................... 136,368 65,327
--------- ---------
Total ........................................ $ 29,289 $ 25,130
========= =========
The pro forma effective tax rates are approximately 1% higher than the
Company's historical effective tax rates due to non-deductible excess of cost
over fair vaue of net assets acquired to be recorded in connection with the
acquisition of Avis.
J. Weighted average common and common equivalent shares outstanding
The pro forma adjustment to weighted average shares consists of the
following (000's):
For the Year For the Six Months
Ended Ended
December 31, 1995 June 30, 1996
----------------------------------------
CCI .......................................... 896 --
Century 21 ................................... 2,334 --
Avis Offering ................................ 5,561 5,561
Coldwell Banker Offering ..................... 12,838 10,581
Century 21 NORS .............................. 923 629
------ ------
Total ........................................ 22,552 16,771
====== ======
The unaudited Pro Forma Consolidated Statement of Operations is presented
as if the acquisitions took place at the beginning of the period presented;
thus, the stock issuances referred to above are considered outstanding as of the
beginning of the period for purposes of per share calculations.