- -----------------------------------------------------------------------------

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                 FORM 10-Q/A
           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934
              For the quarterly period ended September 30, 1999
                         Commission File No. 1-10308

                             CENDANT CORPORATION
            (Exact name of Registrant as specified in its charter)

                  DELAWARE
         (State or other jurisdiction        06-0918165 (I.R.S. Employer
      of incorporation or organization)        Identification Number)
               9 W 57TH STREET
                 NEW YORK, NY                           10019
   (Address of principal executive office)           (Zip Code)

                                (212) 413-1800
             (Registrant's telephone number, including area code)

                                NOT APPLICABLE
     (Former name, former address and former fiscal year, if applicable)

   Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed in Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:                  Yes [X] No [ ]

                    APPLICABLE ONLY TO CORPORATE ISSUERS:

   The number of shares outstanding of each of the Registrant's classes of
common stock was 711,025,187 shares of Common Stock outstanding as of October
26, 1999.

- -----------------------------------------------------------------------------


                     CENDANT CORPORATION AND SUBSIDIARIES

                                    INDEX



                                                                                           PAGE NO.
                                                                                        ------------
                                                                                  
PART I       Financial Information

Item 1.      Financial Statements

             Consolidated Statements of Income--Three and Nine Months Ended September
             30, 1999 and 1998..........................................................       3

             Consolidated Balance Sheets--September 30, 1999 and December 31, 1998 .....       4

             Consolidated Statements of Cash Flows--Nine Months Ended September 30,
             1999 and 1998..............................................................       6

             Notes to Consolidated Financial Statements.................................       8

             Management's Discussion and Analysis of Financial Condition and Results of
Item 2.      Operations.................................................................      22

Item 3.      Quantitative and Qualitative Disclosures About Market Risks................      46

PART II      Other Information

Item 1.      Legal Proceedings..........................................................      48

Item 6.      Exhibits and Reports on Form 8-K...........................................      49


   Certain statements in this Quarterly Report on Form 10-Q constitute
"forward looking statements" within the meaning of the Private 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. These forward looking statements were based on
various factors and were derived utilizing numerous important assumptions and
other important factors that could cause actual results to differ materially
from those 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, include, but are not limited to: the
resolution or outcome of the pending litigation and government investigation
relating to the previously announced accounting irregularities; uncertainty
as to the Company's future profitability; the Company's ability to develop
and implement operational and financial systems to manage rapidly growing
operations; competition in the Company's existing and potential future lines
of business; the Company's ability to integrate and operate successfully
acquired and merged businesses and the risks associated with such businesses,
including the merger that created Cendant and the National Parking
Corporation acquisition; the Company's plan to create a tracking stock for
the Company's real estate portal; the Company's ability to obtain financing
on acceptable terms to finance the Company's growth strategy and for the
Company to operate within the limitations imposed by financing arrangements;
and the ability of the Company and its vendors to complete the necessary
actions to achieve a year 2000 conversion for its computer systems and
applications and other factors. Other factors and assumptions not identified
above were also involved in the derivation of these forward looking
statements, and the failure of such other assumptions to be realized as well
as other factors may also cause actual results to differ materially from
those projected. The Company assumes no obligation to publicly correct or
update these forward looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting such forward looking
statements or if the Company later becomes aware that they are not likely to
be achieved.

                                2

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                     CENDANT CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF INCOME
                     (IN MILLIONS, EXCEPT PER SHARE DATA)



                                                               THREE MONTHS ENDED     NINE MONTHS ENDED
                                                                 SEPTEMBER 30,          SEPTEMBER 30,
                                                             ---------------------- ----------------------
                                                                1999        1998       1999        1998
                                                             ---------- ----------  ---------- ----------
                                                                                   
REVENUES
 Membership and service fees, net...........................  $1,372.3    $1,433.6   $3,972.1    $3,735.3
 Fleet leasing (net of depreciation and interest costs of
  $0, $324.9, $669.7, and $954.6)...........................        --        18.5       29.9        57.5
 Other......................................................      38.1         5.7      116.7        72.3
                                                             ---------- ----------  ---------- ----------
Net revenues................................................   1,410.4     1,457.8    4,118.7     3,865.1
                                                             ---------- ----------  ---------- ----------
EXPENSES
 Operating..................................................     443.6       565.9    1,355.4     1,356.9
 Marketing and reservation..................................     270.5       297.2      820.6       853.2
 General and administrative.................................     169.6       187.6      525.1       487.4
 Depreciation and amortization..............................      87.4        88.9      277.0       241.3
 Other charges
  Merger-related costs and other unusual charges (credits) .      89.9          --      111.6       (24.4)
  Termination of proposed acquisition.......................        --          --        7.0          --
  Other investigation-related costs.........................       4.6        11.5       12.8        31.0
  Investigation-related financing costs.....................        --        14.5         --        27.2
  Executive termination.....................................        --        50.4         --        50.4
 Interest, net..............................................      51.5        31.0      153.8        72.9
                                                             ---------- ----------  ---------- ----------
Total expenses..............................................   1,117.1     1,247.0    3,263.3     3,095.9
                                                             ---------- ----------  ---------- ----------
Net gain on disposition of businesses.......................      75.3          --      824.8          --
                                                             ---------- ----------  ---------- ----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND
 MINORITY INTEREST .........................................     368.6       210.8    1,680.2       769.2
Provision for income taxes..................................     144.3        73.2      382.2       273.0
Minority interest, net of tax...............................      15.7        14.5       46.1        34.3
                                                             ---------- ----------  ---------- ----------
INCOME FROM CONTINUING OPERATIONS ..........................     208.6       123.1    1,251.9       461.9
Loss from discontinued operations, net of tax ..............        --       (12.1)        --       (25.0)
Gain (loss) on sale of discontinued operations, net of tax        (6.9)         --      174.1          --
                                                             ---------- ----------  ---------- ----------
NET INCOME .................................................  $  201.7    $  111.0   $1,426.0    $  436.9
                                                             ========== ==========  ========== ==========
INCOME (LOSS) PER SHARE
 BASIC
  Income from continuing operations.........................  $   0.29    $   0.14   $   1.64    $   0.55
  Loss from discontinued operations.........................        --       (0.01)        --       (0.03)
  Gain (loss) on sale of discontinued operations ...........     (0.01)         --       0.22          --
                                                             ---------- ----------  ---------- ----------
  NET INCOME ...............................................  $   0.28    $   0.13   $   1.86    $   0.52
                                                             ========== ==========  ========== ==========
 DILUTED
  Income from continuing operations.........................  $   0.27    $   0.14   $   1.54    $   0.53
  Loss from discontinued operations.........................        --       (0.01)        --       (0.03)
  Gain (loss) on sale of discontinued operations ...........     (0.01)         --       0.21          --
                                                             ---------- ----------  ---------- ----------
  NET INCOME ...............................................  $   0.26    $   0.13   $   1.75    $   0.50
                                                             ========== ==========  ========== ==========


         See accompanying notes to consolidated financial statements.

                                3

                     CENDANT CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                                (IN MILLIONS)



                                                  SEPTEMBER 30,    DECEMBER 31,
                                                       1999            1998
                                                 --------------- --------------
                                                           
ASSETS
Current assets
 Cash and cash equivalents......................    $   623.5       $ 1,008.7
 Receivables, net...............................      1,301.6         1,536.4
 Deferred membership commission costs...........        195.8           253.0
 Deferred income taxes..........................           --           466.6
 Other current assets...........................      1,367.9           908.6
 Net assets of discontinued operations .........           --           373.6
                                                 --------------- --------------
Total current assets............................      3,488.8         4,546.9
                                                 --------------- --------------
Property and equipment, net.....................      1,352.0         1,432.8
Franchise agreements, net.......................      1,392.7         1,363.2
Goodwill, net...................................      3,590.3         3,923.1
Other intangibles, net..........................        694.9           757.1
Other assets....................................      1,068.3           681.5
                                                 --------------- --------------
Total assets exclusive of assets under
 programs.......................................     11,587.0        12,704.6
                                                 --------------- --------------
Assets under management and mortgage programs
 Net investment in leases and leased vehicles ..           --         3,801.1
 Relocation receivables.........................        571.1           659.1
 Mortgage loans held for sale...................      1,786.0         2,416.0
 Mortgage servicing rights......................        968.7           635.7
                                                 --------------- --------------
                                                      3,325.8         7,511.9
                                                 --------------- --------------
TOTAL ASSETS ...................................    $14,912.8       $20,216.5
                                                 =============== ==============


         See accompanying notes to consolidated financial statements.

                                4

                     CENDANT CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED BALANCE SHEETS (CONTINUED)
                       (IN MILLIONS, EXCEPT SHARE DATA)



                                                                                 SEPTEMBER 30,    DECEMBER 31,
                                                                                      1999            1998
                                                                                --------------- --------------
                                                                                          
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
 Accounts payable and other current liabilities................................    $ 1,276.1       $ 1,517.5
 Deferred income...............................................................      1,230.0         1,354.2
                                                                                --------------- --------------
Total current liabilities......................................................      2,506.1         2,871.7
                                                                                --------------- --------------
Deferred income................................................................        428.8           233.9
Long-term debt.................................................................      3,344.3         3,362.9
Deferred income taxes..........................................................        263.6            77.2
Other non-current liabilities..................................................         75.7           125.3
                                                                                --------------- --------------
Total liabilities exclusive of liabilities under programs......................      6,618.5         6,671.0
                                                                                --------------- --------------
Liabilities under management and mortgage programs
 Debt..........................................................................      2,793.6         6,896.8
 Deferred income taxes.........................................................        175.5           341.0
Mandatorily redeemable preferred securities issued by subsidiary holding
 solely senior debentures issued by the Company ...............................      1,475.9         1,472.1
Commitments and contingencies (Note 10)
Shareholders' equity
 Preferred stock, $.01 par value -authorized 10 million shares; none issued
  and outstanding..............................................................           --              --
 Common stock, $.01 par value -authorized 2 billion shares; issued 867,189,539
  and 860,551,783 shares.......................................................          8.7             8.6
 Additional paid-in capital....................................................      4,025.0         3,863.4
 Retained earnings ............................................................      2,906.2         1,480.2
 Accumulated other comprehensive loss..........................................        (15.1)          (49.4)
 Treasury stock, at cost, 155,070,397 and 27,270,708 shares....................     (3,075.5)         (467.2)
                                                                                --------------- --------------
Total shareholders' equity.....................................................      3,849.3         4,835.6
                                                                                --------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ....................................    $14,912.8       $20,216.5
                                                                                =============== ==============


         See accompanying notes to consolidated financial statements.

                                5

                     CENDANT CORPORATION AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN MILLIONS)



                                                                                     NINE MONTHS ENDED
                                                                                       SEPTEMBER 30,
                                                                                 --------------------------
                                                                                     1999          1998
                                                                                 ------------ ------------
                                                                                        
OPERATING ACTIVITIES
Net income......................................................................  $  1,426.0    $    436.9
Adjustments to reconcile net income to net cash provided by operating
 activities from continuing operations:
Loss from discontinued operations, net of tax...................................          --          25.0
Gain on sale of discontinued operations, net of tax.............................      (174.1)           --
Depreciation and amortization...................................................       277.0         241.3
Other charges -asset impairments and termination benefits.......................          --          62.5
Merger-related costs and other unusual charges (credits)........................         3.8         (24.4)
Payments of merger-related costs and other unusual charge liabilities ..........       (23.5)       (127.2)
Net gain on disposition of businesses...........................................      (824.8)           --
Other, net......................................................................       (12.3)        (50.5)
                                                                                 ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS EXCLUSIVE OF
 MANAGEMENT AND MORTGAGE PROGRAMS...............................................       672.1         563.6
                                                                                 ------------ ------------
Management and mortgage programs:
 Depreciation and amortization..................................................       668.4         944.9
 Origination of mortgage loans..................................................   (20,841.0)    (18,599.3)
 Proceeds on sale and payments from mortgage loans held for sale ...............    21,471.0      17,874.9
                                                                                 ------------ ------------
                                                                                     1,298.4         220.5
                                                                                 ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS  ............     1,970.5         784.1
                                                                                 ------------ ------------
INVESTING ACTIVITIES
Property and equipment additions................................................      (212.8)       (240.8)
Net change in marketable securities.............................................        45.3         (74.7)
Net assets acquired (net of cash acquired) and acquisition-related payments ....      (145.8)     (2,658.2)
Net proceeds from sale of subsidiaries..........................................     2,771.9            --
Other, net......................................................................        33.8          62.2
                                                                                 ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES OF CONTINUING OPERATIONS
 EXCLUSIVE OF MANAGEMENT AND MORTGAGE PROGRAMS..................................     2,492.4      (2,911.5)
                                                                                 ------------ ------------
Management and mortgage programs:
 Investment in leases and leased vehicles.......................................    (2,378.1)     (1,876.4)
 Proceeds from disposal of leases and leased vehicles...........................     1,529.2         765.5
 Proceeds from sales and transfers of leases and leased vehicles to third
  parties.......................................................................        74.8         136.8
 Equity advances on homes under management......................................    (6,025.7)     (5,186.5)
 Repayment on advances on homes under management................................     6,032.5       5,333.8
 Additions to mortgage servicing rights.........................................      (559.2)       (338.7)
 Proceeds from sales of mortgage servicing rights...............................        83.7          49.6
                                                                                 ------------ ------------
                                                                                    (1,242.8)     (1,115.9)
                                                                                 ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES OF CONTINUING OPERATIONS ...     1,249.6      (4,027.4)
                                                                                 ------------ ------------


         See accompanying notes to consolidated financial statements.

                                6

                     CENDANT CORPORATION AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                (IN MILLIONS)



                                                                                   NINE MONTHS ENDED
                                                                                     SEPTEMBER 30,
                                                                                ------------------------
                                                                                    1999        1998
                                                                                ----------- -----------
                                                                                      
FINANCING ACTIVITIES
Proceeds from borrowings.......................................................  $     4.0    $ 3,279.6
Principal payments on borrowings...............................................         --       (420.5)
Issuance of common stock.......................................................       75.6        160.4
Purchases of common stock......................................................   (2,634.9)          --
Proceeds from mandatorily redeemable preferred securities issued by
 subsidiary, net...............................................................         --      1,446.7
                                                                                ----------- -----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES OF CONTINUING OPERATIONS
 EXCLUSIVE OF MANAGEMENT AND MORTGAGE PROGRAMS.................................   (2,555.3)     4,466.2
                                                                                ----------- -----------
Management and mortgage programs:
 Proceeds received for debt repayment in connection with fleet segment
  disposition..................................................................    3,016.9           --
 Proceeds from debt issuance or borrowings.....................................    4,157.0      2,455.1
 Principal payments on borrowings..............................................   (6,483.5)    (2,215.7)
 Net change in short-term borrowings...........................................   (1,772.1)       347.0
                                                                                ----------- -----------
                                                                                  (1,081.7)       586.4
                                                                                ----------- -----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES OF CONTINUING OPERATIONS ..   (3,637.0)     5,052.6
                                                                                ----------- -----------
Effect of changes in exchange rates on cash and cash equivalents ..............       31.7         (9.7)
                                                                                ----------- -----------
Cash used in discontinued operations...........................................         --       (255.4)
                                                                                ----------- -----------
Net (decrease) increase in cash and cash equivalents...........................     (385.2)     1,544.2
Cash and cash equivalents, beginning of period.................................    1,008.7         67.0
                                                                                ----------- -----------
Cash and cash equivalents, end of period.......................................  $   623.5    $ 1,611.2
                                                                                =========== ===========


         See accompanying notes to consolidated financial statements.

                                7

                     CENDANT CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

   The consolidated balance sheet of Cendant Corporation and subsidiaries
(the "Company") as of September 30, 1999, the consolidated statements of
income for the three and nine months ended September 30, 1999 and 1998 and
the consolidated statements of cash flows for the nine months ended September
30, 1999 and 1998 are unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such financial statements
are included. There were no adjustments of an unusual nature except for those
discussed in Note 6. During the second quarter of 1999, the Company changed
the amortization period for customer acquisition costs related to accidental
death and dismemberment insurance products, which resulted in a reduction in
expenses of $8.2 million ($5.3 million, after tax or $0.01 per diluted
share). The change was based upon new information becoming available to
determine customer retention rates. The accompanying consolidated financial
statements include the accounts and transactions of the Company and all
wholly owned subsidiaries and have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions of Form 10-Q and Rule 10-01 of Regulation S-X promulgated under
the Securities Exchange Act of 1934. The December 31, 1998 consolidated
balance sheet was derived from the Company's audited financial statements
included in the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1998, filed with the Securities and Exchange Commission ("SEC")
on October 12, 1999, and should be read in conjunction with such consolidated
financial statements and footnotes thereto. The consolidated financial
statements of the Company include the assets and liabilities of Ramada
Franchise Systems, Inc., an entity controlled by the Company by virtue of its
ownership of 100% of common stock of such entity. The assets of Ramada
Franchise Systems, Inc. are not available to satisfy the claims of any
creditors of the Company or any of its other affiliates, except as otherwise
specifically agreed by Ramada Franchise Systems, Inc. Operating results for
the three and nine months ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1999 or any subsequent interim periods.

   Certain reclassifications have been made to the 1998 consolidated
financial statements to conform with the presentation used in 1999.

2. EARNINGS PER SHARE

   Basic earnings per share ("EPS") is computed based solely on the weighted
average number of common shares outstanding during the period. Diluted EPS
reflects all potential dilution of common stock, including the assumed
exercise of stock options using the treasury method and convertible debt. At
September 30, 1999, 58.9 million stock options outstanding with a weighted
average exercise price of $25.50 per option were excluded from the
computation of diluted EPS because the options' exercise prices were greater
than the average market price of the Company's common stock and would
therefore be antidilutive. Basic and diluted EPS from continuing operations
are calculated as follows:



                                         THREE MONTHS ENDED  NINE MONTHS ENDED
                                           SEPTEMBER 30,       SEPTEMBER 30,
                                         ------------------ --------------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)    1999      1998      1999       1998
                                         -------- --------  ---------- --------
                                                           
Income from continuing operations ....    $208.6    $123.1   $1,251.9    $461.9
Convertible debt interest, net of
 tax..................................       2.9       2.8        8.5       8.6
                                         -------- --------  ---------- --------
Income from continuing operations, as
 adjusted.............................    $211.5    $125.9   $1,260.4    $470.5
                                         ======== ========  ========== ========
Weighted average shares
 Basic................................     725.8     850.8      764.8     844.8
 Potential dilution of common stock:
  Stock options.......................      36.5       8.6       36.2      31.2
  Convertible debt....................      18.0      18.0       18.0      19.0
                                         -------- --------  ---------- --------
 Diluted..............................     780.3     877.4      819.0     895.0
                                         ======== ========  ========== ========


                                8

3. COMPREHENSIVE INCOME

   Components of comprehensive income are summarized as follows:



                                       THREE MONTHS ENDED  NINE MONTHS ENDED
                                         SEPTEMBER 30,       SEPTEMBER 30,
                                       ------------------ --------------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)  1999      1998      1999       1998
                                       -------- --------  ---------- --------
                                                         
Net income............................  $201.7    $111.0   $1,426.0    $436.9
Other comprehensive income (loss):
 Currency translation adjustment .....    92.3      45.6       39.0      35.5
 Net unrealized loss on marketable
  securities, net of tax..............   (12.3)     (4.2)      (4.7)     (4.0)
                                       -------- --------  ---------- --------
Comprehensive income..................  $281.7    $152.4   $1,460.3    $468.4
                                       ======== ========  ========== ========


   The components of accumulated other comprehensive loss for the nine months
ended September 30, 1999 are as follows:



                             NET UNREALIZED                  ACCUMULATED
                                 LOSS ON       CURRENCY         OTHER
                               MARKETABLE     TRANSLATION   COMPREHENSIVE
(IN MILLIONS)                  SECURITIES     ADJUSTMENT         LOSS
                             -------------- -------------  ---------------
                                                  
Balance, January 1, 1999 ...      $  --         $(49.4)         $(49.4)
Current period change.......       (4.7)          39.0            34.3
                             -------------- -------------  ---------------
Balance, September 30,
 1999.......................      $(4.7)        $(10.4)         $(15.1)
                             ============== =============  ===============


4. PRO FORMA INFORMATION

   The following table reflects the operating results of the Company for the
nine months ended September 30, 1998 on a pro forma basis, which gives effect
to the April 1998 acquisition of National Parking Corporation Limited
("NPC"). The pro forma results are not necessarily indicative of the
operating results that would have occurred had the NPC acquisition been
consummated on January 1, 1998, nor are they intended to be indicative of
results that may occur in the future. The underlying pro forma information
includes the amortization expense associated with the assets acquired, the
Company's financing arrangements, certain purchase accounting adjustments and
related income tax effects.



(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)  NINE MONTHS ENDED
                                        SEPTEMBER 30, 1998
                                        ------------------
                                     
Net revenues..........................       $4,066.6
Income from continuing operations ....          459.3
Net income (1)........................          434.3
Per share information:
Basic
 Income from continuing operations ...       $   0.54
 Net income (1).......................           0.51
 Weighted average shares..............          844.8
Diluted
 Income from continuing operations ...       $   0.52
 Net income (1).......................           0.50
 Weighted average shares..............          895.0


- ------------
(1) Includes a loss from discontinued operations, net of tax, of $25.0
million ($0.03 per diluted share).

                                9

5. DISCONTINUED OPERATIONS

   On April 21, 1999 (the "Measurement Date"), the Company announced that its
Board of Directors approved management's plan to pursue the sale of its
Entertainment Publications, Inc. ("EPub") business unit, a wholly-owned
subsidiary of the Company. At such time, the Company reclassified EPub to
discontinued operations for all prior-reporting periods. The Company expected
to realize a gain on sale and, accordingly, $6.9 million of EPub's net
operating losses were deferred subsequent to the Measurement Date through
June 30, 1999.

   In September 1999, the Company entered into a definitive agreement to sell
EPub. However, the sale transaction was structured in a manner that precluded
EPub from being classified as a discontinued operation. As a result, the
deferral of EPub's operating results of $6.9 million was reclassified to
continuing operations during the second quarter of 1999 with a corresponding
gain recognized on sale of discontinued operations in order to properly
reflect the results of continuing operations. The impact to net income,
however, was not required to be recognized until the third quarter of 1999.
Accordingly, the gain recognized on sale of discontinued operations in the
second quarter was reversed.

   On January 12, 1999, the Company completed the sale of Cendant Software
Corporation ("CDS") for $800.0 million in cash. The Company realized an after
tax gain of $371.9 million on the disposition of CDS of which $192.7 million
was recognized in the first quarter of 1999, coincident with the closing of
the transaction. The Company recorded an $18.6 million reduction to the gain
during the second quarter of 1999, in connection with the settlement of
certain post closing adjustments. The net gain in 1999 of $174.1 million is
reported as gain on sale of discontinued operations in the consolidated
statements of income for the nine months ended September 30, 1999. The
remaining $197.8 million of realized after tax net gain was recognized in the
fourth quarter of 1998, substantially in the form of a tax benefit and
corresponding deferred tax asset. CDS was a developer, publisher and
distributor of educational and entertainment software.

   In December 1998, the Company completed the sale of Hebdo Mag
International, Inc. ("Hebdo Mag"), the Company's former business unit which
published and distributed classified advertising information.

   Summarized financial data of discontinued operations are as follows:

STATEMENT OF INCOME:



                                             THREE MONTHS ENDED     NINE MONTHS ENDED
                                             SEPTEMBER 30, 1998     SEPTEMBER 30, 1998
                                           ---------------------- ----------------------
(IN MILLIONS)                                 CDS      HEBDO MAG     CDS      HEBDO MAG
                                           --------- -----------  --------- -----------
                                                                
Net revenues..............................   $119.5      $65.2      $345.8     $202.4
                                           --------- -----------  --------- -----------
Income (loss) before income taxes ........    (20.2)      (0.2)      (57.3)      20.4
Provision for (benefit from) income
 taxes....................................     (9.7)       1.4       (22.9)      11.0
                                           --------- -----------  --------- -----------
Net income (loss).........................   $(10.5)     $(1.6)     $(34.4)    $  9.4
                                           ========= ===========  ========= ===========


   The Company allocated $0.3 million and $13.8 million of interest expense
to discontinued operations for the nine months ended September 30, 1999 and
1998, respectively. Such interest expense represents the cost of funds
associated with businesses acquired by the discontinued business segments at
an interest rate consistent with the Company's consolidated effective
borrowing rate.

                               10

BALANCE SHEET:



                                       DECEMBER 31, 1998
(IN MILLIONS)                                 CDS
                                       -----------------
                                    
Current assets........................      $ 284.9
Goodwill..............................        105.7
Other assets..........................         88.2
Total liabilities ....................       (105.2)
                                       -----------------
Net assets of discontinued
 operations...........................      $ 373.6
                                       =================


6. OTHER CHARGES

   MERGER-RELATED COSTS AND OTHER UNUSUAL CHARGES (CREDITS). On September 15,
1999, Netmarket Group, Inc. ("NGI") began operations as an independent
company that will pursue the development of the interactive businesses
formerly within the Company's direct marketing division. NGI will own,
operate, develop and expand the on-line membership businesses, which
collectively have 1.3 million on-line members. Prior to September 15, 1999,
the Company's ownership of NGI was restructured into common stock and
preferred stock interests. The fair market value of the NGI common stock on
the date of donation was approximately $20 million. On September 15, 1999,
(the "donation date") the Company donated NGI's outstanding common stock to a
charitable trust, and NGI issued additional shares of its common stock to
certain of its marketing partners. Accordingly, as a result of the change in
ownership of NGI's common stock from the Company to independent third
parties, prospective from the donation date, NGI's operating results were no
longer be included in the Company's consolidated financial statements. The
Company retained an ownership in a convertible preferred stock of NGI, which
is ultimately exchangeable, at the Company's option until after September 14,
2001, into approximately 78% of NGI's diluted common shares which has a $5
million annual preferred dividend. The convertible preferred stock will be
accounted for using the cost method of accounting. The preferred stock
dividend will be recorded in income if and when it becomes realizable.
Subsequent to the Company's contribution of NGI's common stock to the trust,
the Company provided a development advance of $77.0 million to NGI which is
contingently repayable to the Company if certain financial targets related to
NGI are achieved. The purpose of the development advance was to provide NGI
with the funds necessary to develop internet related products and systems,
that if successful, would significantly increase the value of NGI. Without
these funds, NGI would not have sufficient funds for development activities
contemplated in its business plans. Repayment of the advance is therefore
solely dependent on the success of these development efforts. The Company
recorded a charge, inclusive of transaction costs, of $84.8 million ($48.4
million, after tax) in the third quarter of 1999, in connection with the
donation of NGI shares to the charitable trust and the subsequent development
advance.

   In the third quarter of 1999, the Company incurred $4.0 million of costs
resulting from further consolidation of European call centers in Cork,
Ireland and $1.1 million of other reorganization related costs. In the second
quarter of 1999, the Company incurred a $23.0 million non-recurring charge to
fund a contribution to the trust responsible for completing the transition of
the Company's lodging franchisees to a Company-sponsored property management
system.

   In January 1999, the Company completed the sale of its Essex Corporation
("Essex") subsidiary for $8.0 million and recognized a $1.3 million gain on
sale. Such gain was reported as a credit to merger-related costs and other
unusual charges in the consolidated statement of income for the nine months
ended September 30, 1999. Coincident with the Cendant merger, the Company
previously recorded an unusual charge related to certain intangible assets of
Essex which were determined to be impaired.

   During the nine months ended September 30, 1998, the Company recorded a
net credit of $24.4 million associated with changes in the estimate of
liabilities previously recorded in connection with merger-related costs and
other unusual charges.

   EXECUTIVE TERMINATION. The Company incurred $50.4 million of costs on July
28, 1998 related to the termination of Walter A. Forbes, who resigned as
Chairman of the Company and as a member of the

                               11

Board of Directors. The severance agreement reached with Mr. Forbes entitled
him to the benefits required by his employment contract relating to a
termination of Mr. Forbes' employment with the Company for reasons other than
for cause. Aggregate benefits given to Mr. Forbes resulted in a charge of
$50.4 million comprised of $37.9 million in cash payments and 1.3 million
Company stock options, with a Black-Scholes value of $12.5 million. Such
options were immediately vested and expire on July 28, 2008. The main benefit
to the Company from Mr. Forbes' termination was the resolution of the
division of the governance issues that existed at that time between the
members of the Board of Directors formerly associated with CUC International
Inc. ("CUC") and the members of the Board formerly associated with HFS
Incorporated.

   INVESTIGATION-RELATED COSTS. During the three and nine months ended
September 30, 1999, the Company incurred $4.6 million and $12.8 million,
respectively, of professional fees (primarily litigation-related) and other
miscellaneous expenses in connection with accounting irregularities in the
former business units of CUC and resulting investigations into such matters
("investigation-related costs").

   TERMINATION OF PROPOSED ACQUISITION. On February 4, 1999, the Company
announced its intention not to proceed with the acquisition of RAC Motoring
Services ("RACMS") due to certain conditions imposed by the UK Secretary of
State of Trade and Industry that the Company determined to be commercially
infeasible. The Company originally announced on May 21, 1998 its definitive
agreement with the Board of Directors of Royal Automobile Club Limited to
acquire RACMS for approximately $735.0 million in cash. The Company wrote-off
$7.0 million of deferred acquisition costs in the first quarter of 1999 in
connection with the termination of the proposed acquisition of RACMS.

7. DISPOSITION OF BUSINESSES

   CENTRAL CREDIT, INC. On September 3, 1999, the Company completed the sale
of its Central Credit, Inc. ("CCI") business unit for $44.0 million in cash
and realized a gain on sale of $3.9 million ($12.1 million, after tax loss).
Upon the initial execution of the definitive agreement to sell CCI, the
Company recorded an additional tax provision of $14.5 million with a
corresponding deferred tax liability in the second quarter of 1999, which was
when the recognition of such deferred tax liability became apparent. CCI is
the leading provider of gaming patron credit information services to casinos.

   GLOBAL REFUND GROUP. On August 24, 1999, the Company completed the sale of
its Global Refund Group subsidiary ("Global Refund") for approximately $160.0
million in cash. Global Refund, formerly known as Europe Tax Free Shopping,
is the world's largest value-added tax refund services company. The Company
realized a gain on sale of $73.3 million ($25.3 million, after tax) during
the third quarter of 1999.

   SPARK SERVICES, INC. On August 12, 1999, the Company completed the sale of
its Spark Services, Inc. ("Spark") business unit for approximately $34.6
million in cash and realized a gain on sale of $7.6 million ($2.3 million,
after tax) during the third quarter of 1999. Spark is a leading provider of
dating and personals services to the radio industry.

   FLEET. On June 30, 1999, the Company completed the disposition of the
fleet business segment ("fleet segment" or "fleet businesses"), which
included PHH Vehicle Management Services LLC, Wright Express Corporation, The
Harpur Group, Ltd., and other subsidiaries pursuant to an agreement between
PHH Corporation ("PHH"), a wholly-owned subsidiary of the Company, and Avis
Rent A Car, Inc. ("ARAC"). Pursuant to the agreement, ARAC acquired the net
assets of the fleet businesses through the assumption and subsequent
repayment of $1.44 billion of intercompany debt and the issuance of $360.0
million of convertible preferred stock of Avis Fleet Leasing and Management
Corporation ("Avis Fleet"), a wholly-owned subsidiary of ARAC. The
transaction followed a competitive bidding process. Coincident to the closing
of the transaction, ARAC refinanced the assumed debt under management
programs which was payable to the Company. Accordingly, on June 30, 1999, the
Company received additional consideration from ARAC of $3,047.5 million
comprised of $3,016.9 million of cash proceeds and a $30.6 million note
receivable. On such date, the Company used proceeds of $1,809.4 million to
repay outstanding fleet segment financing arrangements. Additionally, in July
1999, the Company utilized cash proceeds from the transaction of $1,033.0
million (received in the form of a dividend payment from PHH) to
substantially execute the "Dutch Auction" tender offer by the Company to
purchase 50 million shares

                               12

of Company common stock (See Note 11 -- Shareholders' Equity). As of June 30,
1999, the remaining proceeds were designated to repay outstanding debt as it
matures (the borrowings of which had been loaned to the fleet segment to
finance the purchases of leased vehicles and to finance other assets under
management and mortgage programs.

   The convertible preferred stock of Avis Fleet is convertible into common
stock of ARAC at the Company's option upon the satisfaction of certain
conditions, including the per share price of ARAC Class A common stock
equaling or exceeding $50 per share and the fleet segment attaining certain
EBITDA (earnings before interest, taxes, depreciation and amortization)
thresholds, as defined. There are additional circumstances upon which the
shares of Avis Fleet convertible preferred stock are automatically or
mandatorily convertible into ARAC common stock. At September 30, 1999, the
Company beneficially owned approximately 18% of the outstanding Class A
common stock of ARAC. If all of the Avis Fleet convertible preferred stock
was converted into common stock of ARAC, as of the closing date, the Company
would have owned approximately 33% of ARAC's outstanding common equity
(although the voting interest would be limited, in most instances to 20%).

   The Company realized a net gain on the disposition the fleet business
segment of $881.4 million ($865.7 million, after tax) of which $714.8 million
($702.1 million, after tax) was recognized in the second quarter of 1999 and
$166.6 million ($163.6 million, after tax) was deferred at June 30, 1999. The
Company deferred the portion of the realized net gain which was equivalent to
its common equity ownership percentage in ARAC at the time of closing. During
the third quarter of 1999, the Company recognized $9.7 million ($9.3 million,
after tax) of the deferred portion of the realized net gain due to the sale
of a portion of the Company's ownership of ARAC. The realized gain is net of
approximately $90.0 million of transaction costs. The deferred net gain is
included in deferred income as presented in the consolidated balance sheet at
September 30, 1999. The fleet segment disposition was structured to be
treated as a tax-free reorganization and, accordingly, no tax provision has
been recorded on a majority of the gain. However, based upon a recent
interpretive ruling, the Internal Revenue Service may challenge this
treatment. Should the transaction be deemed taxable, the resultant tax
liability could be material. Notwithstanding, the Company believes that based
upon analysis of relevant tax law, the Company's position would prevail.

   See Note 13 -- Segment Information -- Fleet for a description of the
services which were provided within the fleet segment.

   OTHER BUSINESSES. During the second quarter of 1999, the Company completed
the dispositions of certain businesses, including Match.com, National Leisure
Group and National Library of Poetry. Aggregate consideration received on the
dispositions of such businesses was comprised of $27.4 million in cash and
$43.3 million of common stock. The Company realized a net gain of $34.9
million ($21.5 million, after tax), which is included in net gain on the
disposition of businesses in the consolidated statements of income for the
nine months ended September 30, 1999.

8. PENDING ISSUANCE OF TRACKING STOCK

   On September 30, 1999, the Company's Board of Directors approved a new
series of Cendant common stock "tracking stock" intended to reflect the
performance of the Move.com Group, a group of businesses owned by the Company
which will be engaged in providing a broad range of home-related services
through a new internet services portal. The tracking stock is subject to
shareholder approval. There is currently no tracking stock outstanding. The
Company has filed a proxy statement with the SEC, which contains detailed
financial information as well as more specific plans concerning the
transaction. Although the Move.com Group tracking stock is intended to track
the performance of the Move.com Group, holders, if any, will be subject to
all of the risks associated with an investment in the Company and all of its
businesses, assets and liabilities. The tracking stock offering, if approved
by the shareholders, will enable the Company to issue the tracking stock in
one or more private or public financings and perhaps creating a public
trading market for the tracking stock. In connection with this announcement,
the Company will report the Move.com Group as a separate business segment.
See Note 13 -- Segment Information -- Move.com for a description of the
services provided.

                               13

   See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Pending Issuance
of Tracking Stock" for summarized income state-ment data presented for
Cendant Consolidated, the Move.com Group and Cendant excluding the Move.com.
Group

9. LITIGATION SETTLEMENT

   On March 17, 1999, the Company reached a final agreement to settle the
class action lawsuit that was brought on behalf of the holders of Income or
Growth FELINE PRIDES ("PRIDES") securities who purchased their securities on
or prior to April 15, 1998, the date on which the Company announced the
discovery of accounting irregularities in the former business units of CUC.
Under the terms of the final agreement only holders who owned PRIDES at the
close of business on April 15, 1998 will be eligible to receive a new
additional "Right" for each PRIDES security held. Right holders may (i) sell
them or (ii) exercise them by delivering to the Company, three Rights
together with two PRIDES in exchange for two New PRIDES (the "New PRIDES"),
for a period beginning upon distribution of the Rights and concluding upon
expiration of the Rights (February 2001).

   The terms of the New PRIDES will be the same as the original PRIDES except
that the conversion rate will be revised so that, at the time the Rights are
distributed, each New PRIDES will have a value equal to $17.57 more than each
original PRIDES, or, in the aggregate, approximately $351.0 million. The
final agreement also requires the Company to offer to sell four million
additional PRIDES (having identical terms to currently outstanding PRIDES) to
holders of Rights for cash, at a value which will be based on the valuation
model that will be utilized to set the conversion rate of the New PRIDES. The
offering of additional PRIDES will be made only pursuant to a prospectus
filed with the SEC. The Company currently expects to use the proceeds of such
offering to repay indebtedness, repurchase Company common stock and for other
general corporate purposes. The arrangement to offer additional PRIDES is
designed to enhance the trading value of the Rights by removing up to six
million Rights from circulation via exchanges associated with the offering
and to enhance the open market liquidity of New PRIDES by creating four
million New PRIDES via exchanges associated with the offering. If holders of
Rights do not acquire all such additional PRIDES, under certain circumstances
they will be offered to the public. Under the settlement agreement, the
Company has also filed a shelf registration statement for an additional 15
million special PRIDES, which could be issued by the Company at any time for
cash. However, during the last 30 days prior to the expiration of the Rights
in February 2001, the Company will be required to offer these special
additional PRIDES to holders of Rights at a price in cash equal to 105% of
their theoretical value. The special PRIDES, if issued, would have the same
terms as the currently outstanding PRIDES and could be used to exercise
Rights.

   Based on an average market price of $15.75 per share of Company common
stock (calculated based on the average closing price per share of Company
common stock for the consecutive five-day period ended October 22, 1999), the
effect of the issuance of the New PRIDES will be to distribute approximately
22 million more shares of Company common stock when the mandatory purchase of
Company common stock associated with the PRIDES occurs in February 2001.

   On June 15, 1999, the United States District Court for the District of New
Jersey entered an order and judgment approving the settlement described above
and awarding fees to counsel to the class. One objector, who objected to a
portion of the settlement notice concerning fees to be sought by counsel to
the class and the amount of fees to be sought by counsel to the class, has
filed an appeal to the U.S. Court of Appeals for the Third Circuit from the
District Court order approving the settlement and awarding fees to counsel to
the class. Although under the settlement the Rights are required to be
distributed following the conclusion of court proceedings, including appeals,
the Company believes that the appeal is without merit. As a result, the
Company currently intends to distribute the Rights in November 1999 after the
final list of eligible claimants has been determined by the court.

10. COMMITMENTS AND CONTINGENCIES

 LITIGATION

   Accounting Irregularities. Since the April 15, 1998 announcement of the
discovery of accounting irregularities in the former business units of CUC,
approximately 70 lawsuits claiming to be class actions,

                               14

two lawsuits claiming to be brought derivatively on the Company's behalf and
several individual lawsuits and arbitration proceedings have been commenced
in various courts and other forums against the Company and other defendants
by or on behalf of persons claiming to have purchased or otherwise acquired
securities or options issued by CUC or the Company between May 1995 and
August 1998. The Court has ordered consolidation of many of the actions.

   In addition, in October 1998, an action claiming to be a class action was
filed against the Company and four of the Company's former officers and
directors by persons claiming to have purchased American Bankers' stock
between January and October 1998. The complaint claimed that the Company made
false and misleading public announcements and filings with the SEC in
connection with the Company's proposed acquisition of American Bankers
allegedly in violation of Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934, as amended, and that the plaintiff and the alleged class members
purchased American Bankers' securities in reliance on these public
announcements and filings at inflated prices. On April 26, 1999, the United
States District Court for New Jersey found that the class action failed to
state a claim upon which relief could be granted and, accordingly, dismissed
the complaint. The plaintiff has appealed the District Court's findings to
the U.S. Court of Appeals for the Third Circuit.

   As previously disclosed, the Company reached a final agreement with
plaintiffs' counsel representing the class of holders of its PRIDES
securities who purchased their securities on or prior to April 15, 1998 to
settle their class action lawsuit against the Company through the issuance of
a new "Right" for each PRIDES security held. (See Note 9 -- Litigation
Settlement for a more detailed description of the settlement).

   The SEC and the United States Attorney for the District of New Jersey are
conducting investigations relating to the matters referenced above. The SEC
advised the Company that its inquiry should not be construed as an indication
by the SEC or its staff that any violations of law have occurred. As a result
of the findings from the investigations, the Company made all adjustments
considered necessary by the Company, which are reflected in its restated
financial statements. Although the Company can provide no assurances, the
Company does not expect that additional adjustments will be necessary.

   SEE NOTE 14 -- Subsequent Events -- Common Stock Litigation Settlement.

   Other Pending Litigation. The Company and its subsidiaries are involved in
pending litigation in the usual course of business. In the opinion of
management, such other litigation will not have a material adverse effect on
the Company's consolidated financial position, results of operations or cash
flows.

11. SHAREHOLDERS' EQUITY

   During 1999, the Company's Board of Directors authorized an additional
$1.8 billion of Company common stock to be repurchased under a common share
repurchase program, increasing the total authorized amount to be repurchased
under the program to $2.8 billion. The Company has executed this program
through open market purchases or privately negotiated transactions, subject
to bank credit facility covenants and certain rating agency constraints. As
of September 30, 1999, the Company repurchased approximately $1.8 billion
(93.6 million shares) of Company common stock under the program.

   On July 21, 1999, pursuant to a Dutch Auction self-tender offer to its
shareholders, the Company purchased 50 million shares of Company common stock
through its wholly-owned subsidiary Cendant Stock Corporation at a price of
$22.25 per share (the "Dutch Auction").

   SEE NOTE 14 -- Subsequent Events -- Share Repurchases.

12. NEW ACCOUNTING STANDARDS

   In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101
"Revenue Recognition in Financial Statements". SAB No. 101 draws upon the
existing accounting rules and explains those rules, by analogy, to other
transactions that the existing rules do not specifically address. SAB No. 101
requires that revenue generally is realized or realizable when all of the
following criteria are met:

                               15

persuasive evidence of an arrangement exists, delivery has occurred or
services have been rendered, the seller's price to the buyer is fixed or
determinable and collectibility is reasonably assured. The Company has not
yet determined what impact the adoption of SAB No. 101 will have on its
consolidated financial statements. The Company will adopt SAB No. 101 as
required for its first quarterly filing of fiscal 2000.

   In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 requires the
Company to record all derivatives in the consolidated balance sheet as either
assets or liabilities measured at fair value. If the derivative does not
qualify as a hedging instrument, the change in the derivative fair values
will be immediately recognized as a gain or loss in earnings. If the
derivative does qualify as a hedging instrument, the gain or loss on the
change in the derivative fair values will either be recognized (i) in
earnings as offsets to the changes in the fair value of the related item
being hedged or (ii) be deferred and recorded as a component of other
comprehensive income and reclassified to earnings in the same period during
which the hedged transactions occur. The Company has not yet determined what
impact the adoption of SFAS No. 133 will have on its financial statements.
Implementation of this standard has recently been delayed by the FASB for a
twelve month period. The Company will adopt SFAS No. 133 as required for its
first quarterly filing of fiscal year 2001.

13. SEGMENT INFORMATION

   Management evaluates each segment's performance on a stand-alone basis
based on a modification of earnings before interest, income taxes,
depreciation and amortization. For this purpose, Adjusted EBITDA is defined
as earnings before non-operating interest, income taxes, depreciation and
amortization, adjusted to exclude net gain on disposition of businesses and
other items which are of a non-recurring or unusual nature, and are not
measured in assessing segment performance or are not segment specific. The
Company determined its reportable operating segments based primarily on the
types of services it provides, the consumer base to which marketing efforts
are directed and the methods used to sell services. Although the Company
disposed of its fleet segment on June 30, 1999, the Company added the
Move.com Group as an additional reportable operating segment, thereby
maintaining the eight reportable operating segments which collectively
comprise the Company's continuing operations. Included in the Move.com Group
is RentNet, Inc. ("RentNet"), a company acquired during January 1996 and
National Home Connection LLC acquired in May 1999. Prior to the formation of
the Move.com Group, RentNet's historical financial information was included
in our Individual Membership segment. The Company reclassified the financial
results of RentNet for the nine months ended September 30, 1998 into the
Move.com Group segment. Inter-segment net revenues were not significant to
the net revenues of any one segment. A description of the services provided
within each of the Company's reportable operating segments is as follows:

 TRAVEL

   Travel services include the franchising of lodging properties and car
rental locations, as well as vacation/timeshare exchange services. As a
franchisor of guest lodging facilities and car rental agency locations, the
Company licenses the independent owners and operators of hotels and car
rental agencies to use its brand names. Operational and administrative
services are provided to franchisees, which include access to a national
reservation system, national advertising and promotional campaigns,
co-marketing programs and volume purchasing discounts. As a provider of
vacation and timeshare exchange services, the Company enters into affiliation
agreements with resort property owners/developers (developers) to allow
owners of weekly timeshare intervals (subscribers) to trade their owned weeks
with other subscribers. In addition, the Company provides publications and
other travel-related services to both developers and subscribers.

 REAL ESTATE FRANCHISE

   The Company licenses the owners and operators of independent real estate
brokerage businesses to use its brand names. Operational and administrative
services are provided to franchisees, which are designed to increase
franchisee revenue and profitability. Such services include advertising and
promotions, referrals, training and volume purchasing discounts.

                               16

 RELOCATION

   Relocation services are provided to client corporations for the transfer
of their employees. Such services include appraisal, inspection and selling
of transferees' homes and providing equity advances to transferees (generally
guaranteed by the corporate customer). Additional services provided include
certain home management services, assistance in locating a new home at the
transferee's destination, consulting services and other related services.

 MORTGAGE

   Mortgage services primarily include the origination, sale and servicing of
residential mortgage loans. Revenues are earned from the sale of mortgage
loans to investors as well as from fees earned on the servicing of loans for
investors. The Company markets a variety of mortgage products to consumers
through relationships with corporations, affinity groups, financial
institutions, real estate brokerage firms and other mortgage banks.

   The Company customarily sells all mortgages it originates to investors
(which include a variety of institutional investors) either as individual
loans, as mortgage-backed securities or as participation certificates issued
or guaranteed by Fannie Mae, the Federal Home Loan Mortgage Corporation or
the Government National Mortgage Association while generally retaining
mortgage servicing rights. Mortgage servicing consists of collecting loan
payments, remitting principal and interest payments to investors, holding
escrow funds for payment of mortgage-related expenses such as taxes and
insurance, and otherwise administering the Company's mortgage loan servicing
portfolio.

 INDIVIDUAL MEMBERSHIP

   Individual membership provides customers with access to a variety of
services and discounted products in such areas as retail shopping, travel,
auto, dining, home improvement, credit information and special
interest/outdoor clubs. The Company affiliates with business partners such as
leading financial institutions and retailers to offer membership as an
enhancement to their credit card customers. Individual memberships are
marketed primarily using direct marketing techniques. Through the Company's
membership based on-line consumer sites, similar products and services are
offered over the internet.

 INSURANCE/WHOLESALE

   Insurance/Wholesale markets and administers competitively priced insurance
products, primarily accidental death and dismemberment insurance and term
life insurance. The Company also provides services such as checking account
enhancement packages, various financial products and discount programs to
financial institutions, which in turn provide these services to their
customers. The Company affiliates with financial institutions, including
credit unions and banks, to offer their respective customer bases such
products and services.

 MOVE.COM GROUP

   The Move.com Group is a real estate services Internet portal that
encompasses all aspects of the home experience, including finding a home,
buying or renting a home, moving and post-closing home improvements. The
Move.com Group's business consists of three primary sources of revenue:
rental directory services, e-commerce/advertising and real estate related
products including mortgage brokerage. The Move.com Group integrates and
enhances the on-line efforts of the Company's residential real estate brand
names and those of the Company's other real estate business units.

 OTHER SERVICES

   In addition to the previously described business segments, the Company
also derives revenues from providing a variety of other consumer and business
products and services which include the Company's tax preparation services
franchise, information technology services, car park facilities, vehicle
emergency

                               17

support and rescue services, discount coupon books, credit information
services, financial products, published products, welcoming packages to new
homeowners, value added-tax refund services to travelers and other
consumer-related services.

 FLEET

   As disclosed in Note 7, on June 30, 1999, the Company completed the
disposition of its fleet segment for aggregate consideration of $1.8 billion.
The fleet segment provided fleet and fuel card related products and services
to corporate clients and government agencies. These services included
management and leasing of vehicles, fuel card payment and reporting and other
fee-based services for clients' vehicle fleets. The Company leased vehicles
primarily to corporate fleet users under operating and direct financing lease
arrangements.

                               18

SEGMENT INFORMATION
(IN MILLIONS)



                                 THREE MONTHS ENDED SEPTEMBER 30,
                       ----------------------------------------------------
                                 1999                      1998
                       ------------------------ ---------------------------
                                     ADJUSTED                   ADJUSTED
                        REVENUES      EBITDA      REVENUES       EBITDA
                       ---------- ------------  ----------- --------------
                                                
Travel................  $  311.6      $162.7      $  297.3       $142.2
Real Estate
 Franchise............     161.4       124.4         126.7        102.1
Relocation............     116.8        42.2         130.8         45.6
Mortgage..............     113.8        59.3          79.9         45.4
Individual
 Membership...........     279.6        48.3 (2)     239.6        (10.4)
Insurance/Wholesale ..     143.5        48.3         135.5         32.1
Move.com..............       5.2        (7.7)          3.2         (0.2)
Other Services........     278.5        49.2 (3)     350.0          9.8 (4,5)
Fleet.................        --          --          94.8         40.5
                       ---------- ------------  ----------- --------------
Total.................  $1,410.4      $526.7      $1,457.8       $407.1
                       ========== ============  =========== ==============




                                 NINE MONTHS ENDED SEPTEMBER 30,
                       ----------------------------------------------------
                                 1999                      1998
                       ------------------------ ---------------------------
                                     ADJUSTED                   ADJUSTED
                        REVENUES      EBITDA      REVENUES    EBITDA (10)
                       ---------- ------------  ----------- --------------
                                                
Travel................  $  873.2     $  453.9 (6) $  826.5      $  427.0
Real Estate
 Franchise............     416.9        309.7        342.5         264.4
Relocation............     314.5         94.3        340.7          97.6
Mortgage..............     313.6        153.0        251.9         127.7
Individual
 Membership...........     766.8         77.3 (2)    650.1         (68.4)
Insurance/Wholesale ..     426.2        136.6 (7)    406.3         106.7
Move.com..............      11.3        (13.6)         7.8           0.5
Other Services........     788.8        125.6 (8)    751.9 (1)      80.3 (1,5,9)
Fleet.................     207.4         80.8        287.4         131.8
                       ---------- ------------  ----------- --------------
Total.................  $4,118.7     $1,417.6     $3,865.1      $1,167.6
                       ========== ============  =========== ==============


- ------------
(1)    Includes the financial results of NPC from the April 27, 1998
       acquisition date.
(2)    Excludes an $84.8 million non-recurring charge associated with the
       formation of NGI.
(3)    Excludes (i) $4.6 million of investigation-related costs; (ii) $4.0
       million of costs resulting from further consolidation of European call
       centers in Cork, Ireland; and (iii) $1.1 million of other
       reorganization related costs.
(4)    Excludes (i) $50.4 million of costs associated with separation
       payments to the Company's former chairman; and (ii) $26.0 million of
       investigation-related costs.
(5)    Includes a $50.0 million non-cash write-off of impaired goodwill
       associated with the Company's National Library of Poetry subsidiary
       and certain equity investments in interactive membership businesses.
(6)    Excludes a $23.0 million non-recurring charge in connection with the
       transition of the Company's lodging franchisees to a Company-sponsored
       property management system.
(7)    Includes an $8.2 million reduction in expenses resulting from a change
       in the estimated amortization lives of accidental death and
       dismemberment customer acquisition costs.
(8)    Excludes (i) $12.8 million of investigation-related costs; (ii) $4.0
       million of costs resulting from further consolidation of European call
       centers in Cork, Ireland; (iii) $1.1 million of costs associated with
       certain reorganization; (iv) a $7.0 million write-off of deferred
       acquisition costs incurred in connection with the termination of the
       proposed acquisition of RACMS; and (v) a $1.3 million gain on the sale
       of Essex which has been recorded as a credit to merger-related costs
       and other unusual charges.
(9)    Excludes (i) $50.4 million of costs associated with separation
       payments to the Company's former chairman; and (ii) $58.2 million of
       investigation-related costs.
(10)   Excludes a net credit of $24.4 million associated with changes in the
       estimate of liabilities previously recorded in connection with
       merger-related costs and other unusual charges. The aforementioned net
       credit was comprised of $5.4 million, $1.0 million, $24.1 million and
       $1.3 million of credits within the Travel, Real Estate Franchise,
       Other Services and Fleet segments, respectively, and $3.7 million of
       charges incurred within the Relocation and Mortgage segments,
       respectively.

                               19

   Provided below is a reconciliation of total Adjusted EBITDA for reportable
operating segments for the three and nine months ended September 30, 1999 and
1998 to income from continuing operations before income taxes and minority
interest.



                                                         THREE MONTHS ENDED
                                                           SEPTEMBER 30,
                                                         ------------------
(IN MILLIONS)                                              1999      1998
                                                         -------- --------
                                                            
Adjusted EBITDA for reportable segments................. $  526.7  $  407.1
Depreciation and amortization...........................     87.4      88.9
Other charges
 Merger-related costs and other unusual charges
  (credits).............................................     89.9        --
 Other investigation-related costs......................      4.6      11.5
 Investigation-related financing costs..................       --      14.5
 Executive termination..................................       --      50.4
Interest, net...........................................     51.5      31.0
Net gain on disposition of businesses...................     75.3        --
                                                         -------- --------
Income from continuing operations before income taxes
 and minority interest.................................. $  368.6  $  210.8
                                                         ======== ========




                                                         NINE MONTHS ENDED
                                                           SEPTEMBER 30,
                                                         ------------------
(IN MILLIONS)                                              1999      1998
                                                         -------- --------
                                                            
Adjusted EBITDA for reportable segments................. $1,417.6  $1,167.6
Depreciation and amortization...........................    277.0     241.3
Other charges
 Merger-related costs and other unusual charges
  (credits).............................................    111.6     (24.4)
 Termination of proposed acquisition....................      7.0        --
 Other investigation-related costs......................     12.8      31.0
 Investigation-related financing costs..................       --      27.2
 Executive termination..................................       --      50.4
Interest, net...........................................    153.8      72.9
Net gain on disposition of businesses...................    824.8        --
                                                         -------- --------
Income from continuing operations before income taxes
 and minority interest.................................. $1,680.2  $  769.2
                                                         ======== ========


14. SUBSEQUENT EVENTS

 COMMON SHARE REPURCHASES

   As of January 7, 2000, the Company repurchased a total of $3.3 billion
(162.3 million shares) of its common stock, inclusive of the stock repurchase
program, the Dutch Auction, and the 7.1 million shares of the common stock
received as partial consideration in connection with the sale of the Hebdo
Mag business unit.

 STRATEGIC ALLIANCE

   On December 15, 1999 the Company entered into a strategic alliance with
Liberty Media Corporation ("Liberty Media"). Specifically, the Company has
agreed to work with Liberty Media to develop internet and related
opportunities associated with the Company's travel, mortgage, real estate and
membership businesses. Such efforts may include the creation of joint
ventures with Liberty Media, and others as well as equity investments in each
others businesses.

                               20

   The Company will also assist Liberty Media in creating, and will receive a
participation in, a new venture that will seek to provide broadband video,
voice and data content to the Company's hotels and their guests on a
worldwide basis. The Company will also pursue opportunities within the cable
industry with Liberty Media to leverage the Company's direct marketing
resources and capabilities.

   In addition, Liberty Media has agreed to invest $400 million in cash to
purchase 18 million shares of Company common stock and two-year warrants to
purchase approximately 29 million shares of Company common stock at an
exercise price of $23.00 per share. The transaction is subject to customary
conditions, and is expected to close in January of 2000. The Company also
announced that Liberty Media Chairman, Dr. John C. Malone, Ph.D., will join
the Company's board of directors.

 DEBT REDEMPTION

   On December 10, 1999, the Board of Directors approved the redemption of
all outstanding $400 million 7 1/2% Senior Notes on January 21, 2000. The
redemption price is the greater of par or the make whole call option plus 50
basis points.

 COMMON STOCK LITIGATION SETTLEMENT

   On December 7, 1999, the Company announced that it reached a preliminary
agreement to settle the principal securities class action pending against the
Company in the U.S. District Court in Newark, New Jersey relating to the
Common Stock class action lawsuits. Under the agreement, the Company would
pay the class members $2.83 billion in cash. The settlement remains subject
to execution of a definitive settlement agreement and approval by the U.S.
District Court. If the preliminary settlement is not approved by the U.S.
District Court, the Company can make no assurances that the final outcome or
settlement of such proceedings will not be for an amount greater than that
set forth in the preliminary agreement. Please see the Company's Form 8-K,
dated December 7, 1999, for a description of the preliminary agreement to
settle the common stock class action litigation.

 DISPOSITION OF BUSINESSES

   Disposition of EPub. On November 30, 1999, the Company completed the
disposition of approximately 85% of its EPub business unit for $281.0 million
in cash, inclusive of certain adjustments. The Company will retain
approximately 15% of EPub's equity in connection with the transaction. In
addition, the Company will have a designee on EPub's Board of Directors. EPub
is a marketer and publisher of coupon books and discount programs which
provides customers with unique products and services that are designed to
enhance a customer's purchasing power.

   Subsequent to the consummation of the transaction, the Company will
account for the investment in EPub using the equity method of accounting
because, in accordance with Accounting Principles Board Opinions No. 18, the
Company believes that its ownership interest combined with our representation
on the Board of Directors of EPub gives the Company the ability to exercise
significant influence on EPub. Under the equity accounting method, the
Company's investments will be increased or reduced to reflect the Company's
share of EPub's income or losses. In addition, the Company's earlier
classification of EPub as a discontinued operation was reversed in accordance
with generally accepted accounting principles.

   Disposition of Green Flag. On November 26, 1999, the Company completed the
disposition of its Green Flag business unit for approximately $400 million.
Green Flag is a roadside assistance organization based in the UK, which
provides a wide range of emergency support and rescue services.

   North American Outdoor Group. On October 8, 1999, the Company completed
the disposition of approximately 94% of its North American Outdoor Group
("NAOG") business unit for approximately $140.0 million in cash. The Company
will retain approximately 6% of NAOG's equity in connection with the
transaction. Subsequent to consummation, the Company will account for its
investment in NAOG using the cost method. NAOG is one of the largest
lifestyle affinity membership organizations.

                               21

ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

OVERVIEW

   We are one of the foremost providers of real estate related, travel
related, and membership-based consumer and business services in the world. We
provide business services to our customers, many of which are consumer
services companies, and also provide fee-based services directly to
consumers, generally without owning the assets or sharing the risks
associated with the underlying businesses of our customers or collaborative
partners.

   Our businesses provide a wide range of complementary consumer and business
services which together consists of four principal divisions -travel related
services, real estate related services, direct marketing services and other
consumer and business services. Although the Company disposed of its Fleet
segment on June 30, 1999, we added Move.com as an additional reportable
operating segment in the third quarter 1999, thereby maintaining eight
business segments. The travel services businesses facilitate vacation
timeshare exchanges, and franchise car rental and hotel businesses; the real
estate related services division franchise real estate brokerage businesses,
provide home buyers with mortgages and assist in employee relocation; and the
direct marketing services businesses provide an array of value driven
products and services. Our other consumer and business services include our
tax preparation services franchise, information technology services, car
parking facility services, vehicle emergency support and rescue services,
discount coupon books (sale pending), credit information services, financial
products and other consumer-related services.

   As a franchisor of hotels, real estate brokerage offices, car rental
operations and tax preparation services, we license the owners and operators
of independent businesses to use our brand names. We do not own or operate
hotels, real estate brokerage offices, car rental operations or tax
preparation offices. Instead, we provide our franchisee customers with
services designed to increase their revenue and profitability.

   In connection with our previously announced program to focus on maximizing
the opportunities and growth potential of our existing businesses, we
divested or announced our intention to divest several non-strategic
businesses and assets and have completed or commenced certain other strategic
initiatives related to our internet businesses. Pursuant to such program, we
completed the dispositions of North American Outdoor Group, Global Refund
Group, the Fleet businesses, Central Credit, Inc., Spark Services, Inc.,
Match.com, National Leisure Group, National Library of Poetry, Cendant
Software Corporation and Hebdo Mag International, Inc. and have entered into
definitive agreements to dispose of the Green Flag Group ("Green Flag") and
Entertainment Publications, Inc. ("EPub"). The Green Flag and EPub
transactions are expected to close during the fourth quarter of 1999. The
divestiture program will ultimately generate approximately $4.5 billion in
proceeds. (see "Liquidity and Capital Resources -- Divestitures"). As a
result of the divesture program, we divested former CUC International Inc.
("CUC") businesses representing 45% of CUC's revenues in 1997, the year in
which we merged with HFS Incorporated ("HFS").

   In addition to the above mentioned divestitures, we recently initiated
certain internet strategies outlined below.

   On September 30, 1999, we announced that our Board of Directors approved a
new series of Cendant common stock to track the performance of the Move.com
Group, a group of businesses owned by us which will be engaged in providing a
broad range of home-related services through a new internet services portal.
The Move.com Group commenced operations in the third quarter of 1999 with the
Internet site scheduled to become functional during January 2000. The Board
of Directors approved the creation of the Move.com Group and the tracking
stock without reviewing financial information related thereto since this was
a new venture based upon an existing business, RentNet, Inc. ("RentNet").
Prior to the formation of the Move.com Group, RentNet's historical financial
information was included in our Individual Membership segment. Beginning in
the third quarter 1999 coincident with our Board of Directors approval to
create a new class of common stock, we are providing separate footnote
disclosure of the Move.com Group's separate financial information within our
Consolidated Financial Statements. We have

                               22

filed a proxy statement with the Securities and Exchange Commission("SEC"),
which contains financial details as well as more specific plans concerning
the transaction. If we obtain shareholder approval for the tracking stock, we
currently intend to issue such tracking stock in a public offering in the
second quarter of 2000. The Move.com Group will integrate and enhance the
on-line efforts of our residential real estate brands and those of our other
real estate business units. The Move.com Group encompasses all aspects of the
home experience including finding a home, buying or renting home, moving and
post-closing home improvements.

   The Move.com Group's business consists of three primary sources of
revenue: rental directory services, e-commerce/advertising and real estate
related products including mortgage brokerage. Although the tracking stock is
intended to track the performance of the Move.com Group, holders, if any,
will still be subject to all the risks associated with an investment in the
Company and all of its businesses, assets and liabilities. In addition to the
Move.com site itself, the Move.com Group assets include RentNet, a company we
originally acquired in 1996, National Home Connections LLC, a company we
acquired in May 1999 and the assets of Metro Rent which we acquired in the
fourth quarter of 1999.

   On September 15, 1999, we donated the outstanding common stock of
Netmarket, Inc. ("NGI") to a charitable trust and NGI began operations as an
independent company that will pursue the development of the interactive
on-line businesses formerly within our direct marketing division. NGI will
own, operate, develop and expand the on-line membership businesses. We
donated NGI's outstanding common stock to a charitable trust and retained an
ownership of a convertible preferred stock of NGI, which is ultimately
exchangeable, at our option, after September 14, 2001, into approximately 78%
of NGI's diluted common shares which has a $5 million annual preferred
dividend (see "Liquidity and Capital Resources -- Investment in Netmarket,
Inc."). Accordingly, as a result of the change of ownership, NGI's operating
results will no longer be included in our consolidated financial statements
on a prospective basis.

                               23

RESULTS OF OPERATIONS -- THREE MONTHS ENDED SEPTEMBER 30, 1999
                                    VS.
                     THREE MONTHS ENDED SEPTEMBER 30, 1998

CONSOLIDATED RESULTS



                                                           THREE MONTHS ENDED SEPTEMBER 30,
                                                          ----------------------------------
(DOLLARS IN MILLIONS)                                        1999        1998     % CHANGE
                                                          ---------- ----------  ----------
                                                                            
Net revenues.............................................  $1,410.4    $1,457.8       (3)%
                                                          ---------- ----------
Expenses
 Operating...............................................     443.6       565.9      (22)%
 Marketing and reservation...............................     270.5       297.2       (9)%
 General and administrative..............................     169.6       187.6      (10)%
                                                          ---------- ----------
                                                              883.7     1,050.7      (16)%
                                                          ---------- ----------
Other charges
 Merger-related costs and other unusual charges
  (credits)..............................................      89.9          --       *
 Other investigation-related costs.......................       4.6        11.5       *
 Investigation-related financing costs...................        --        14.5       *
 Executive termination...................................        --        50.4       *
Depreciation and amortization expense....................      87.4        88.9       (2)%
Interest expense, net....................................      51.5        31.0       66%
Net gain on disposition of businesses....................      75.3          --       *
                                                          ---------- ----------
Pre-tax income from continuing operations before
 minority interest.......................................     368.6       210.8       *
Provision for income taxes...............................     144.3        73.2       97%
Minority interest, net of tax............................      15.7        14.5        8%
                                                          ---------- ----------
Income from continuing operations........................     208.6       123.1       *
Loss from discontinued operations, net of tax ...........        --       (12.1)      *
Loss on sale of discontinued operations, net of tax .....      (6.9)         --       *
                                                          ---------- ----------
Net income...............................................  $  201.7    $  111.0       *
                                                          ========== ==========


- ------------
* Not meaningful.

 REVENUES

   Revenues decreased $47.4 million (3%) in third quarter 1999 compared with
second quarter 1998. Revenues grew in substantially all of our reportable
operating segments, however the disposition of non-strategic businesses
during 1999 resulted in the consolidated revenue decrease. Significant
contributing factors which gave rise to growth in substantially all of our
reportable operating segments included growth in the volume of mortgage
services provided and an increase in the amount of royalty fees received from
our franchised brands, within both our travel and real estate franchise
segments. In addition, we experienced strong growth and efficiencies within
our direct marketing businesses. A detailed discussion of revenue trends from
1998 to 1999 is included in the section entitled "Results of Reportable
Operating Segments -- Third Quarter 1999 vs. Third Quarter 1998."

 OTHER CHARGES

   Executive Terminations. We incurred $50.4 million of costs on July 28,
1998 related to the termination of Walter A. Forbes, who resigned as our
Chairman and as a member of our Board of Directors in July 1998. The
severance agreement reached with Mr. Forbes entitled him to the benefits
required by his employment contract relating to a termination of Mr. Forbes'
employment with us for reasons other than for cause. Aggregate benefits given
to Mr. Forbes resulted in a charge of $50.4 million comprised of $37.9
million in cash payments and 1.3 million of immediately vested Company stock
options, with a Black-Scholes value of $12.5 million. The main benefit to us
from Mr. Forbes' termination

                               24

was the resolution of the division of the governance issues that existed at
that time between the members of the Board of Directors formerly associated
with CUC and the members of the Board formerly associated with HFS.

   Investigation-Related Costs. During third quarter 1999, we incurred $4.6
million of professional fees and other miscellaneous expenses in connection
with accounting irregularities in the former business units of CUC and the
resulting investigations into such matters ("investigation-related costs").

   Merger-Related Costs and Other Unusual Charges (Credits). During third
quarter 1999, we recorded a net charge of $89.9 million ($51.6 million, after
tax), comprised of an $84.8 million ($48.4 million, after tax) non-recurring
charge in connection with the donation of NGI shares to the charitable trust,
$4.0 million of costs resulting from further consolidation of European call
centers in Cork, Ireland and $1.1 million of other reorganization related
costs.

 DEPRECIATION AND AMORTIZATION EXPENSE

   Depreciation and amortization expense decreased $1.5 million (2%) in third
quarter 1999 compared to third quarter 1998 primarily as a result of the
impact of the disposed businesses offset by increased depreciation on the
continuing business due to continued capital spending.

 INTEREST EXPENSE, NET AND MINORITY INTEREST, NET OF TAX

   Interest expense, net, increased $20.5 million (66%) while minority
interest, net of tax, increased slightly in third quarter 1999 compared to
third quarter 1998. The increase in interest expense is principally
attributable to higher borrowing costs during 1999 as compared to 1998. The
average debt balances in 1999 were comprised of longer-term fixed rate debt
as compared to 1998, which substantially contributed to the increase in cost
of funds. Minority interest, net of tax, reflects the preferred dividends
payable in cash on our FELINE PRIDES and the trust preferred securities
issued in March 1998 (see "Liquidity and Capital Resources -- Financing
Exclusive of Management and Mortgage Financing -- FELINE PRIDES and Trust
Preferred Securities").

 NET GAIN ON DISPOSITION OF BUSINESSES

   See "Liquidity and Capital Resources -- Divestitures" for a discussion
regarding the dispositions of certain businesses during third quarter 1999
and the resulting net gain from such dispositions.

 PROVISION FOR INCOME TAXES

   Our effective tax rate was increased from 34.7% in 1998 to 39.1% in 1999
due to income taxes provided on the net gain realized upon the disposition of
Global Refund Group and Spark Services, Inc. at a higher tax rate than that
of continuing operations.

 DISCONTINUED OPERATIONS

   Pursuant to our program to divest non-strategic businesses and assets, we
sold our consumer software and classified advertising businesses in January
1999 and December 1998, respectively (see "Liquidity and Capital Resources --
Divestitures -- Discontinued Operations").

   On April 21, 1999 (the "Measurement Date"), we announced that our Board of
Directors approved management's plan to pursue the sale of our Entertainment
Publications, Inc. ("EPub") business unit, our wholly-owned subsidiary. At
such time we reclassified EPub to discontinued operations for all
prior-reporting periods. We expected to realize a gain on sale and,
accordingly, $6.9 million of EPub's net operating losses were deferred
subsequent to the Measurement Date through June 30, 1999.

   In September 1999, we entered into a definitive agreement to sell EPub.
However, the sale transaction was structured in a manner that precluded EPub
from being classified as a discontinued operation. As a result, the deferral
of EPub's operating results of $6.9 million was reclassified to continuing
operations during the second quarter of 1999 with a corresponding gain
recognized on sale of

                               25

discontinued operations in order to properly reflect the results of
continuing operations. The impact to net income, however, was not required to
be recognized until the third quarter of 1999. Accordingly, the gain
recognized on sale of discontinued operations in the second quarter was
reversed.

   The operating results of the consumer software business during 1999,
through the date of sale (January 12, 1999) were not material. In 1998, loss
from discontinued operations, net of tax, was $12.1 million and was comprised
of the following operating results:



                                                 THREE MONTHS ENDED
                                                 SEPTEMBER 30, 1998
                                             -------------------------
(IN MILLIONS)                                  SOFTWARE   ADVERTISING
                                             ----------  -------------
                                                   
Net revenues................................    $119.5       $65.2
Net loss....................................     (10.5)       (1.6)


RESULTS OF REPORTABLE OPERATING SEGMENTS -- THREE MONTHS ENDED SEPTEMBER 30,
                                                                       1999
                                                     VS.
                                      THREE MONTHS ENDED SEPTEMBER 30, 1998

   The underlying discussions of each segment's operating results focuses on
Adjusted EBITDA, which is defined as earnings before non-operating interest,
income taxes, depreciation and amortization, adjusted to exclude net gain on
disposition of businesses and other items which are of a non-recurring or
unusual nature, and are not measured in assessing segment performance or are
not segment specific. Our management believes such discussion is the most
informative representation of how management evaluates performance. However,
our presentation of Adjusted EBITDA may not be comparable with similar
measures used by other companies. We identified our reportable operating
segments based primarily on the types of services we provide, the consumer
base to which marketing efforts are directed and the methods we use to sell
services. Although we disposed of our fleet segment on June 30, 1999, we
added the Move.com Group as an additional reportable operating segment,
thereby maintaining the eight reportable operating segments which
collectively comprise our continuing operations. For additional information,
including a description of the services provided in each of our reportable
operating segments, see Note 13 to the consolidated financial statements.

                               26

Three Months Ended September 30,
(Dollars in millions)



                                                                                   ADJUSTED
                                                                                    EBITDA
                            REVENUES                    ADJUSTED EBITDA             MARGIN
                --------------------------------------------------------------- --------------
                                           %                              %
                   1999        1998     CHANGE     1999       1998      CHANGE   1999    1998
                ---------- ----------  -------- ---------  ---------- --------  ------ ------
                                                               
Travel.........  $  311.6    $  297.3       5%    $162.7     $142.2       14%     52%     48%
Real Estate
 Franchise.....     161.4       126.7      27%     124.4      102.1       22%     77%     81%
Relocation.....     116.8       130.8     (11%)     42.2       45.6       (7%)    36%     35%
Mortgage.......     113.8        79.9      42%      59.3       45.4       31%     52%     57%
Individual
 Membership....     279.6       239.6      17%      48.3(1)   (10.4)        *     17%     (4%)
Insurance/
 Wholesale.....     143.5       135.5       6%      48.3       32.1       50%     34%     24%
Move.com.......       5.2         3.2      63%      (7.7)      (0.2)        *       *       *
Other
 Services......     278.5       350.0     (20%)     49.2(2)     9.8(3,4)    *     18%      3%
Fleet..........        --        94.8        *        --       40.5         *       *     43%
                ---------- ----------           ---------  ----------
Total..........  $1,410.4    $1,457.8      (3%)   $526.7     $407.1       29%     37%     28%
                ========== ==========           =========  ==========


- ------------
(1)    Excludes an $84.8 million non-recurring charge associated with the
       formation of NGI.
(2)    Excludes (i) $4.6 million of investigation-related costs; (ii) $4.0
       million of costs resulting from further consolidation of European call
       centers in Cork, Ireland; and (iii) $1.1 million of other
       reorganization related costs.
(3)    Includes a $50.0 million non-cash write off of certain equity
       investments in interactive membership businesses and impaired goodwill
       associated with our National Library of Poetry ("NLP") subsidiary.
(4)    Excludes $76.4 million of investigation-related items, including
       incremental financing costs, and separation payments to our former
       chairman.
       * Not meaningful.

TRAVEL

   Revenues and Adjusted EBITDA increased $14.3 million (5%) and $20.5
million (14%), respectively, in third quarter 1999 compared to third quarter
1998. Contributing to the revenue and Adjusted EBITDA increases were $6.6
million (4%) increase in franchise fees, consisting of increases in lodging
and car rental franchise fees of $3.6 million (3%) and $3.0 million (7%),
respectively, as well as higher Preferred Alliances revenues. Our franchise
businesses experienced incremental growth in third quarter 1999 compared to
third quarter 1998 primarily due to increases in available rooms (22,600
incremental rooms domestically), and car rental days. Timeshare subscription
and exchange revenue increased $3.0 million (4%) as a result of increased
volume. The Adjusted EBITDA margin improved to 52% in 1999 from 48% in the
same quarter in 1998. The improvement in Adjusted EBITDA margin is
attributable to continued expense management and operating leverage.

REAL ESTATE FRANCHISE

   Revenues and Adjusted EBITDA increased $34.7 million (27%) and $22.3
million (22%), respectively, in third quarter 1999 compared to third quarter
1998. Royalty fees increased for the CENTURY 21, COLDWELL BANKER and ERA
franchise brands collectively by $24.6 million (21%) primarily as a result of
a 4% increase in home sale transactions by franchisees and a 7% increase in
the average price of homes sold. Home sales by franchisees benefited from
strong third quarter 1999 existing domestic home sales, as well as from
expansion of our franchise systems. Beginning in second quarter 1999, the
financial results of the national advertising funds for the COLDWELL BANKER
and ERA brands (the "Advertising Funds") were consolidated into the segment's
financial results. This increased third quarter revenues by $8.3 million and
increased expenses by the like amount, with no impact on Adjusted EBITDA. The
Advertising Funds spend most of their revenues on marketing and advertising
expenses for their respective franchise brands. The consolidation of the
Advertising Funds reduced the 1999 Adjusted EBITDA margin to 77%, versus 81%
in 1998.

                               27

RELOCATION

   Revenues and Adjusted EBITDA decreased $14.0 million (11%) and $3.4
million (7%), respectively in the third quarter 1999 compared to the third
quarter 1998. Certain niche-market asset management operations, which were
sold in third quarter 1998, benefited third quarter 1998 revenues and
Adjusted EBITDA by $10.6 million and $8.9 million, respectively. Without this
non-recurring item, revenues were down 37% and Adjusted EBITDA increased 15%.
Ancillary service fees have generally increased, partially offsetting reduced
home sale revenue and reflecting a trend from asset-based to service-based
fees. The Adjusted EBITDA margin increased from 35% in 1998 to 36% in 1999
primarily due to operating expense reductions of $10.6 million (12%),
comprised of cost savings in information technology, regional operations,
sales and the sale of certain asset management operations discussed above.

MORTGAGE

   Revenues and Adjusted EBITDA increased $33.9 million (42%) and $13.9
million (31%), respectively, in third quarter 1999 compared to third quarter
1998, primarily due to growth in both mortgage origination revenue and
servicing revenue. The Adjusted EBITDA margin decreased from 57% in 1998 to
52% in 1999, as higher revenues were offset by higher operating expenses
including technology, infrastructure expenditures and teleservices costs to
support our "Phone-in, Move-in" and "Log-in, Move-in" programs. Mortgage
closings decreased $0.4 billion (6%) to $6.6 billion, due to lower refinance
volumes partially offset by continued increases in the origination of
mortgages for home purchases. The average production fee increased 28.6 basis
points, resulting in a $14.6 million increase in production revenues. The
increase in the average production fee resulted from a shift to more
profitable sales and processing channels and growth in servicing origination
revenues. The average servicing portfolio grew $9.0 billion (23%) and
recurring servicing revenue increased $21.9 million, with the average
servicing fee increasing 4.5 basis points.

INDIVIDUAL MEMBERSHIP

   Revenues and Adjusted EBITDA increased $40.0 million (17%) and $58.7
million, respectively, in third quarter 1999 compared to third quarter 1998.
The Adjusted EBITDA margin improved to positive 17% from negative 4% for the
same period. The revenue growth is principally due to a greater number of
members and increases in the average price of a membership. The increase in
Adjusted EBITDA margin is primarily due to the revenue increases, since many
of the infrastructure costs associated with providing services to members are
not dependent on revenue volume. Results also benefited from reduced
solicitation spending, as we further refined the targeted audiences for our
direct marketing efforts and achieved greater efficiencies in reaching
potential new members. Beginning September 15, 1999, Individual Membership's
principal on-line businesses are no longer consolidated into our operations
as a result of the formation of NGI, which will own, operate, develop and
expand those businesses. In the third quarter of 1999, the on-line membership
business contributed $15.9 million in revenues but reduced Adjusted EBITDA by
$7.2 million.

INSURANCE/WHOLESALE

   Revenues and Adjusted EBITDA increased $8.0 million (6%) and $16.2 million
(50%), respectively, in third quarter 1999 compared to third quarter 1998.
The increase in revenues was principally attributable to international
expansion, while the Adjusted EBITDA improvement was due to improved
profitability in international markets and a $7.3 million marketing expense
decrease related to longer amortization periods for certain customer
acquisition costs. International revenues and Adjusted EBITDA increased $6.7
million (22%) and $5.2 million, respectively, primarily due to a 35% increase
in customers. The Adjusted EBITDA margin increased from 24% in 1998 to 34% in
1999. The Adjusted EBITDA margin for domestic operations was 40% in 1999,
versus 30% in 1998. The Adjusted EBITDA margin for international operations
was 15% for 1999, versus 1% in 1998. Domestic operations, which represented
74% of segment revenues in 1999, generated higher Adjusted EBITDA margins
than international operations as a result of continued expansion costs
incurred internationally to penetrate new markets. International operations,
however, have become increasingly profitable as they have expanded over the
last 18 months.

                               28

MOVE.COM GROUP

   The Move.com Group is our new internet real estate services portal. We
announced in the third quarter of 1999, that we plan to create a new series
of common stock intended to reflect the performance of the Move.com Group.
The plan to create a new series of tracking stock is subject to stockholder
approval. The tracking stock proposal, if adopted, will enable us to issue
the Move.com Group tracking stock in one or more private or public financings
and perhaps creating a public trading market for the Move.com Group tracking
stock. Accordingly, the Move.com Group is reported as a separate business
segment beginning third quarter 1999. Revenues increased $2.0 million (63%)
to $5.2 million, while Adjusted EBITDA decreased $7.9 million to a loss of
$7.7 million in third quarter 1999 compared to third quarter 1998. These
results reflect our increased investment in marketing and development of the
portal. The revenues and expenses include those of RentNet, which has been
contributed to the Move.com Group and were previously included in the
Individual Membership segment.

OTHER SERVICES

   Revenues decreased $71.5 million (20%) and Adjusted EBITDA increased $39.4
million, respectively, in third quarter 1999 compared to third quarter 1998.
Revenues decreased primarily as a result of the disposition of certain
operations including Essex Corporation, ("Essex") in January 1999, National
Leisure Group ("NLG") and NLP in May 1999, Spark Services, Inc. ("Spark") in
August 1999, Global Refund Group ("Global Refund") in August 1999, and
Central Credit, Inc. ("CCI") in September 1999. In addition, EPub revenues
decreased due to the timing of field sales. The revenue decreases were
partially offset by income from financial investments in 1999 versus a
significant loss in 1998. The increase in Adjusted EBITDA was primarily due
to a $50.0 million non-cash write-off of assets in 1998 and a $13.0 million
increase in the Adjusted EBITDA of our National Car Parks subsidiary in 1999.
These increases were partially offset by the revenue items discussed above.

FLEET

   On June 30, 1999, we completed the disposition of our fleet segment for
aggregate consideration of $1.8 billion (see "Liquidity and Capital Resources
- -- Divestitures --Disposition of Fleet Segment"). Revenues and Adjusted
EBITDA were $94.8 million and $40.5 million, respectively, in third quarter
1998.

                               29

RESULTS OF OPERATIONS -- NINE MONTHS ENDED SEPTEMBER 30, 1999
                             VS.
                     NINE MONTHS ENDED SEPTEMBER 30, 1998

CONSOLIDATED RESULTS



                                                           NINE MONTHS ENDED SEPTEMBER 30,
                                                          ----------------------------------
(DOLLARS IN MILLIONS)                                        1999        1998     % CHANGE
                                                          ---------- ----------  ----------
                                                                        
Net revenues.............................................  $4,118.7    $3,865.1        7%
                                                          ---------- ----------  ----------
Expenses
 Operating...............................................   1,355.4     1,356.9         *
 Marketing and reservation...............................     820.6       853.2       (4%)
 General and administrative..............................     525.1       487.4        8%
                                                          ---------- ----------  ----------
                                                            2,701.1     2,697.5         *
                                                          ---------- ----------  ----------
Other charges
 Merger-related costs and other unusual charges
  (credits)..............................................     111.6       (24.4)        *
 Termination of proposed acquisition.....................       7.0          --         *
 Other investigation-related costs.......................      12.8        31.0         *
 Investigation-related financing costs ..................        --        27.2         *
 Executive termination...................................        --        50.4         *
Depreciation and amortization expense....................     277.0       241.3       15%
Interest expense, net....................................     153.8        72.9      111%
Net gain on disposition of businesses....................     824.8          --         *
                                                          ---------- ----------  ----------
Pre-tax income from continuing operations before
 minority interest.......................................   1,680.2       769.2         *
Provision for income taxes...............................     382.2       273.0       40%
Minority interest, net of tax............................      46.1        34.3       34%
                                                          ---------- ----------  ----------
Income from continuing operations........................   1,251.9       461.9         *
Loss from discontinued operations, net of tax ...........        --       (25.0)        *
Net gain on sale of discontinued operations, net of tax .     174.1          --         *
                                                          ---------- ----------  ----------
Net income...............................................  $1,426.0    $  436.9         *
                                                          ========== ==========  ==========


- ------------

*      Not meaningful.

REVENUES

   Revenues increased $253.6 million (7%) during the nine months ended
September 30, 1999 compared to the nine months ended September 30, 1998,
which reflected growth in substantially all of our reportable operating
segments despite the effects of the disposition of non-strategic businesses.
Significant contributing factors which gave rise to such increase included
substantial growth in the volume of mortgage services provided and an
increase in the amount of royalty fees received from our franchised brands,
within both our travel and real estate franchise segments. In addition, we
experienced strong growth and efficiencies within our direct marketing
businesses. Revenues included the operating results of NPC, which was
acquired in April 1998, for all nine months in 1999 compared to the post
acquisition period in 1998. A detailed discussion of revenue trends from 1998
to 1999 is included in the section entitled "Results of Reportable Operating
Segments -- Nine Months Ended September 30, 1999 vs. Nine Months Ended
September 30, 1998."

OTHER CHARGES

   Merger-Related Costs and Other Unusual Charges (Credits). During the nine
months ended September 30, 1999, we recorded a net charge of $111.6 million
which was comprised of an $84.8 million

                               30

non-recurring charge in connection with the donation of NGI shares to the
charitable trust and the subsequent development advance (see "Overview"
discussion regarding the creation of NGI on September 15, 1999), a $23.0
million non-recurring charge in connection with the transition of our lodging
franchisees to a Company-sponsored property management system, $4.0 million
of costs resulting from further consolidation of European call centers in
Cork, Ireland and $1.1 million of other reorganization related costs,
partially offset by a $1.3 million pre-tax gain on the sale of Essex. In
January 1999, we completed the sale of Essex for $8.0 million. Coincident
with the Cendant merger, we previously recorded an unusual charge related to
certain intangible assets of Essex which were determined to be impaired.

   During the nine months ended September 30, 1998, we recorded a net credit
of $24.4 million associated with changes in the estimate of liabilities
previously recorded in connection with merger-related costs and other unusual
charges.

   Termination of Proposed Acquisition. On February 4, 1999, we announced our
intention not to proceed with the acquisition of RAC Motoring Services
("RACMS") due to certain conditions imposed by the UK Secretary of State for
Trade and Industry that we determined to be commercially infeasible. We
wrote-off $7.0 million of deferred acquisition costs in the first quarter of
1999 in connection with the termination of the proposed acquisition of RACMS.

   Investigation-Related Costs. During the nine months ended September 30,
1999, we incurred $12.8 million of investigation-related costs.

   Executive Termination. See "Other charges" discussion for three months
ended September 30, 1999, regarding the termination of Walter A. Forbes in
July 1998.

DEPRECIATION AND AMORTIZATION EXPENSE

   Depreciation and amortization expense increased $35.7 million (15%) during
the nine months ended September 30, 1999 compared to the prior year period as
a result of incremental amortization of goodwill and other intangible assets
from 1998 acquisitions and continued capital spending primarily to support
growth and enhance marketing opportunities in our businesses, partially
offset by the impact of the disposed businesses.

INTEREST EXPENSE, NET AND MINORITY INTEREST, NET OF TAX

   Interest expense, net, increased $80.9 million (111%) primarily as a
result of higher borrowing costs as well as an increase in the average debt
balances outstanding during the nine months ended September 30, 1999 when
compared with the same period in 1998. The composition of average debt
balances during 1999 included longer-term fixed rate debt carrying higher
interest rates as compared to 1998. The higher average debt balance carried
during 1999 is principally reflective of incremental borrowings used to
finance the April 1998 acquisition of NPC. In addition, minority interest,
net of tax, increased $11.8 million (34%). Minority interest, net of tax, is
primarily related to the preferred dividends payable in cash on our FELINE
PRIDES and the trust preferred securities issued in February 1998 (see
"Liquidity and Capital Resources -- Financing Exclusive of Management and
Mortgage Financing -- FELINE PRIDES and Trust Preferred Securities").

NET GAIN ON DISPOSITION OF BUSINESSES

   See "Liquidity and Capital Resources -- Divestitures" for a discussion
regarding the dispositions of certain businesses during the nine months ended
September 30, 1999 and the resulting net gain from such dispositions.

PROVISION FOR INCOME TAXES

   Our effective tax rate was decreased from 35.5% in 1998 to 22.7% in 1999
primary due to the impact of the disposition of our fleet businesses which
were accounted for as a tax-free merger for tax purposes. Accordingly,
minimal income taxes were provided on the net gain realized upon disposition.

                               31

DISCONTINUED OPERATIONS

   Pursuant to our program to divest non-strategic businesses and assets, we
sold our consumer software and classified advertising businesses in January
1999 and December 1998, respectively. We recorded a $192.7 million gain, net
of tax, on the sale of discontinued operations in the first quarter of 1999,
related to the disposition of our consumer software business, coincident with
the closing of the transaction. We recorded an $18.6 million reduction to the
gain in the second quarter of 1999 in connection with certain post-closing
adjustments.

   Loss from discontinued operations, net of tax, was $25.0 million in 1998
and was comprised of the following operating results:



                       NINE MONTHS ENDED
                      SEPTEMBER 30, 1998
                   -------------------------
                    CONSUMER    CLASSIFIED
(IN MILLIONS)       SOFTWARE    ADVERTISING
                   ---------- -------------
                        
Net revenues......   $345.8       $202.4
Net income
 (loss)...........    (34.4)         9.4


RESULTS OF REPORTABLE OPERATING SEGMENTS -NINE MONTHS ENDED SEPTEMBER 30,
                                                                    1999
                                                 VS.
                                      NINE MONTHS ENDED SEPTEMBER 30, 1998

Nine Months Ended September 30,
(Dollars in millions)



                                                                                    ADJUSTED EBITDA
                            REVENUES                       ADJUSTED EBITDA               MARGIN
                ------------------------------------------------------------------- ---------------
                                            %                                 %
                   1999        1998      CHANGE      1999       1998 (1)    CHANGE   1999    1998
                ---------- -----------  -------- -----------  ----------- --------  ------ -------
                                                                   
Travel.........  $  873.2    $  826.5       6%     $  453.9(2)  $  427.0       6%     52%      52%
Real Estate
 Franchise.....     416.9       342.5      22%        309.7        264.4      17%     74%      77%
Relocation.....     314.5       340.7      (8%)        94.3         97.6      (3%)    30%      29%
Mortgage.......     313.6       251.9      24%        153.0        127.7      20%     49%      51%
Individual
 Membership....     766.8       650.1      18%         77.3(3)     (68.4)       *     10%     (11%)
Insurance/
 Wholesale.....     426.2       406.3       5%        136.6        106.7      28%     32%      26%
Move.com ......      11.3         7.8      45%        (13.6)         0.5        *       *        *
Other
 Services......     788.8       751.9       5%        125.6(4)      80.3(5,6) 56%     16%      11%
Fleet .........     207.4       287.4        *         80.8        131.8        *     39%      46%
                ---------- -----------           -----------  -----------
Total..........  $4,118.7    $3,865.1       7%     $1,417.6     $1,167.6      21%     34%      30%
                ========== ===========           ===========  ===========


- ------------
(1)    Excludes a net credit of $24.4 million associated with changes in the
       estimate of liabilities previously recorded in connection with
       merger-related costs and other unusual charges. The aforementioned net
       credit was comprised of $5.4 million, $1.0 million, $24.1 million and
       $1.3 million of credits within the Travel, Real Estate Franchise, Other
       Services and Fleet segments, respectively, and $3.7 million of charges
       incurred within each of the Relocation and Mortgage segments,
       respectively.
(2)    Excludes a $23.0 million non-recurring charge in connection with the
       transition of our lodging franchisees to a Company-sponsored property
       management system.
(3)    Excludes an $84.8 million non-recurring charge associated with the
       formation of NGI.
(4)    Excludes (i) $12.8 million of investigation-related costs; (ii) $4.0
       million of costs resulting from further consolidation of European call
       centers in Cork, Ireland; (iii) $1.1 million of other reorganization
       related costs; (iv) a $7.0 million write-off of deferred acquisition
       costs incurred in connection with the termination of the proposed
       acquisition of RACMS; and (v) a $1.3 million gain on the sale of Essex.
(5)    Includes a $50.0 million non-cash write off of certain equity
       investments in interactive membership businesses and impaired goodwill
       associated with NLP.
(6)    Excludes $108.6 million of investigation-related items, including
       incremental financing costs, and separation payments to the Company's
       former chairman.
       * Not meaningful.

                               32

TRAVEL

   Revenues and Adjusted EBITDA increased $46.7 million (6%) and $26.9
million (6%), respectively, in the first nine months of 1999 compared to the
first nine months of 1998. Excluding a $6.9 million decrease in gains from
the sale of portions of our equity investment in Avis Rent A Car, Inc.
("ARAC") from $17.7 million in 1998 to $10.8 million in 1999, revenues
increased $53.6 million (7%) and Adjusted EBITDA increased $33.7 million
(8%). Contributing to the revenue and Adjusted EBITDA growth were increases
in lodging and car rental franchise fees of $18.4 million (6%) and $12.2
million (10%), respectively. Our franchise businesses experienced incremental
growth in the first nine months of 1999 compared to the first nine months of
1998, primarily due to increases in average available rooms (23,800
incremental rooms domestically), revenue per available room and car rental
days. Timeshare subscription and exchange revenue increased $16.8 million
(7%) as a result of increased volume. Increased operating expenses and
increased marketing and reservation fund expenses, which were attributable to
increased volumes and were offset by increased marketing and reservation
revenues received from franchisees, substantially contributed to a $19.8
million (5%) increase in total expenses. The Adjusted EBITDA margin remained
unchanged at 52%.

REAL ESTATE FRANCHISE

   Revenues and Adjusted EBITDA increased $74.4 million (22%) and $45.3
million (17%), respectively, in the first nine months of 1999 compared to the
first nine months of 1998. Royalty fees increased for the CENTURY 21,
COLDWELL BANKER and ERA franchise brands collectively by $49.9 million (17%)
primarily as a result of a 7% increase in both home sale transactions by
franchisees and the average price of homes sold. Home sales by franchisees
benefited from strong existing domestic home sales in the first nine months
of 1999, as well as from expansion of our franchise system. Beginning in
second quarter 1999, the financial results of the Advertising Funds for the
COLDWELL BANKER and ERA brands were consolidated into the results of the Real
Estate Franchise segment, which increased revenues by $23.0 million and
increased expenses by a like amount, with no impact on Adjusted EBITDA.
Revenues from Preferred Alliance declined $6.7 million compared to the first
nine months of 1998. This decrease was offset by a $10.0 million gain on the
sale of preferred stock of NRT Incorporated, the independent company we
helped form in 1997 to serve as a consolidator of residential real estate
brokerages. Since most costs associated with the real estate franchise
business do not vary significantly with home sale volume or revenues, the
increase in revenues contributed to an improvement of the Adjusted EBITDA
margin from 77% in 1998 to 79% in 1999, prior to the consolidation of the
Advertising Funds.

RELOCATION

   Revenues and Adjusted EBITDA decreased $26.2 million (8%) and $3.3 million
(3%), respectively, in the first nine months of 1999 compared to the first
nine months of 1998. Certain niche-market asset management operations which
were sold in the third quarter of 1998 benefited the first nine months of
1998 revenues and Adjusted EBITDA by $19.6 million and $14.5 million,
respectively. This was partially offset by the second quarter 1999 sale of a
minority interest in our Fairtide insurance subsidiary, which resulted in
$7.2 million of additional revenue and Adjusted EBITDA. Referral fees
increased $10.2 million, nearly offsetting an $11.5 million decline in home
sale revenue and reflecting a trend from asset-based to service-based fees.
In 1998, revenues and Adjusted EBITDA benefited from an improvement in
receivable collections, which permitted a $7.5 million reduction in billing
reserve requirements. Operating expenses decreased $22.9 million (9%),
comprised of cost savings in regional operations, reduced government home
sale expenses and the sale of certain asset management operations discussed
above. The Adjusted EBITDA margin increased 30% in 1999 from 29% in 1998
primarily due to the previously discussed operating expense reductions.

MORTGAGE

   Revenues and Adjusted EBITDA increased $61.7 million (24%) and $25.3
million (20%), respectively, in the first nine months of 1999 compared to the
first nine months of 1998, primarily due to substantial growth in both
mortgage origination revenue and servicing revenue. The Adjusted EBITDA

                               33

margin decreased from 51% in 1998 to 49% in 1999, as higher revenues were
partially offset by higher operating expenses related to increases in hiring,
technology and capacity to support continued growth. Mortgage closings
increased $2.8 billion (15%) to $21.2 billion, while the average production
fee increased 3.6 basis points, resulting in a $39.0 million net increase in
production revenues. The increase in the average production fee resulted from
a shift to more profitable sales and processing channels and growth in
servicing origination revenues. The average servicing portfolio grew $11.1
billion (32%) and recurring servicing revenue increased $27.5 million (83%),
with the average servicing fee increasing 3.7 basis points.

INDIVIDUAL MEMBERSHIP

   Revenues and Adjusted EBITDA increased $116.7 million (18%) and $145.7
million, respectively, in the first nine months of 1999 compared to the first
nine months of 1998. The Adjusted EBITDA margin improved to positive 10% from
negative 11% for the same periods. The revenue growth is principally due to a
greater number of members added year over year and increases in the average
price of a membership. Also contributing to the revenue growth was a $12.8
million increase due to the acquisition of a company in April 1998 that,
among other services, provides members with access to their personal credit
information. The increase in Adjusted EBITDA margin is primarily due to the
revenue increases, since many of the infrastructure costs associated with
providing services to members are not dependent on revenue volume. Results
also benefited from a reduction in solicitation spending, as we further
refined the targeted audiences for our direct marketing efforts and achieved
greater efficiencies in reaching potential new members. Beginning September
15, 1999, Individual Membership's principal on-line businesses are no longer
consolidated into our operations as a result of the formation of NGI, which
will own, operate, develop and expand those businesses. Through its September
15 disposition date, on-line membership business contributed $48.8 million in
revenues, but reduced Adjusted EBITDA by $23.5 million.

INSURANCE/WHOLESALE

   Revenues and Adjusted EBITDA increased $19.9 million (5.0%) and $29.9
million (28%), respectively, in the nine months of 1999 compared to the nine
months of 1998 primarily due to customer growth, which resulted from
increases in affiliations with financial institutions. The increase in
revenues was attributable principally to international expansion, while the
Adjusted EBITDA increase was due to improved profitability in international
markets as well as an $18.2 million expense decrease related to longer
amortization periods for certain customer acquisition costs. International
revenues and Adjusted EBITDA increased $22.1 million (26%) and $11.8 million
(257%), respectively, primarily due to a 41% increase in customers. For the
segment as a whole, the Adjusted EBITDA margin increased to 32% in 1999 from
26% in 1998. The Adjusted EBITDA margin for domestic operations was 38% in
1999, versus 32% in 1998. The Adjusted EBITDA margin for international
operations was 15% for 1999, versus 5% in 1998. Domestic operations, which
represented 75% of segment revenues in 1999, generated higher Adjusted EBITDA
margins than international operations as a result of continued expansion
costs incurred internationally to penetrate new markets. International
operations, however, have become increasingly profitable as they have
expanded over the last 18 months.

MOVE.COM GROUP

   Revenues increased $3.5 million (45%) to $11.3 million, while Adjusted
EBITDA decreased $14.1 million to a loss of $13.6 million in the first nine
months of 1999 compared to the first nine months of 1998. These results
reflect our increased investment in marketing and development of the portal.
The revenues and expenses include those of RentNet, which has been
contributed to the Move.com Group and were previously included in the
Individual Membership segment.

OTHER SERVICES

   Revenues and Adjusted EBITDA increased $36.9 million (5%) and $45.3
million (56%), respectively in the nine months of 1999 compared to the nine
months of 1998. Revenues increased primarily as a result of the April 1998
acquisition of NPC, which contributed $135.1 million of additional revenues
in 1999 compared to 1998. The revenue increase attributable to the NPC
acquisition was partially offset by the

                               34

impact of divested operations, including Essex in January 1999, NLG and NLP
in May 1999, Spark and Global Refund in August 1999 and CCI in September
1999. In addition, EPub revenues were reduced due to the timing of field
sales. The increase in Adjusted EBITDA was primarily due to the revenue items
discussed above and partially offset by increased operating and
infrastructure costs.

FLEET

   On June 30, 1999, we completed the disposition of our fleet segment (see
"Liquidity and Capital Resources -- Divestitures -- Disposition of Fleet
Segment"). Revenues and Adjusted EBITDA were $207.4 million and $80.8
million, respectively, in the first six months of 1999 and $287.4 million and
$131.8 million, respectively, in the first nine months of 1998.

LIQUIDITY AND CAPITAL RESOURCES

   STRATEGIC ALLIANCE

   On December 15, 1999 we entered into a strategic alliance with Liberty
Media Corporation ("Liberty Media"). Specifically, we have agreed to work
with Liberty Media to develop internet and related opportunities associated
with our travel, mortgage, real estate and membership businesses. Such
efforts may include the creation of joint ventures with Liberty Media and
others as well as equity investments in each others businesses.

   We will also assist Liberty Media in creating, and will receive a
participation in, a new venture that will seek to provide broadband video,
voice and data content to our hotels and their guests on a worldwide basis.
We will also pursue opportunities within the cable industry with Liberty
Media to leverage our direct marketing resources and capabilities.

   In addition, Liberty Media has agreed to invest $400 million in cash to
purchase 18 million shares of our common stock and two-year warrants to
purchase approximately 29 million shares of our common stock at an exercise
price of $23.00 per share. The transaction is subject to customary
conditions, and is expected to close in January of 2000. We also announced
that Liberty Media Chairman, Dr. John C. Malone, Ph.D., will join our board
of directors.

   PENDING ISSUANCE OF TRACKING STOCK

   On September 30, 1999, our Board of Directors approved a new series of
Cendant common stock ("tracking stock") to track the performance of the
Move.com Group, a group of businesses owned by us which will be engaged in
providing a broad range of home-related services through a new internet
services portal. The tracking stock is subject to shareholder approval. There
is currently no common stock outstanding related to the Move.com Group. We
have filed a proxy statement with the SEC, which contains detailed financial
information as well as more specific plans concerning the transaction.
Although the Move.com Group tracking stock is intended to track the
performance of the Move.com Group, holders, if any, will be subject to all of
the risks associated with an investment in the Company and all of its
businesses, assets and liabilities. The tracking stock offering, if approved
by the shareholders, will enable us to sell all or part of the Move.com Group
tracking stock in one or more private or public financings and perhaps
creating a public trading market for the Move.com Group tracking stock. In
connection with this announcement, we will report the Move.com Group as a
separate business segment. See Note 13 -- Segment Information -- Move.com
Group for a description of the services provided.

   Below is the summarized income statement data of Cendant Consolidated,
Move.com Group, and Cendant excluding Move.com Group. Prior to the issuance
of the Move.com Group tracking stock, all financial results of the Move.com
Group will be allocated to the traditional Cendant stockholders.

                               35

                    THREE MONTHS ENDED SEPTEMBER 30, 1999



                                                    CENDANT      MOVE.COM  CENDANT EXCLUDING
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)          CONSOLIDATED     GROUP      MOVE.COM GROUP
                                                -------------- ----------  -----------------
                                                                  
Net revenues...................................    $1,410.4       $ 5.2         $1,405.2
Expenses.......................................     1,117.1        13.4          1,103.7
Net gain on disposition of businesses .........        75.3                         75.3
                                                -------------- ----------  -----------------
Income (loss) before income taxes and minority
 interest......................................       368.6        (8.2)           376.8
Income (loss) from continuing operations ......       208.6        (5.3)           213.9
Earnings per share from continuing operations
 Basic.........................................    $   0.29                     $   0.29
 Diluted.......................................        0.27                         0.28


                    THREE MONTHS ENDED SEPTEMBER 30, 1998



                                                    CENDANT      MOVE.COM  CENDANT EXCLUDING
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)          CONSOLIDATED     GROUP      MOVE.COM GROUP
                                                -------------- ----------  -----------------
                                                                  
Net revenues...................................    $1,457.8       $ 3.2         $1,454.6
Expenses.......................................     1,247.0         3.9          1,243.1
                                                -------------- ----------  -----------------
Income (loss) before income taxes and minority
 interest......................................       210.8        (0.7)           211.5
Income (loss) from continuing operations ......       123.1        (0.4)           123.5
Earnings per share from continuing operations
 Basic.........................................    $   0.14                     $   0.14
 Diluted ......................................        0.14                         0.14


                     NINE MONTHS ENDED SEPTEMBER 30, 1999



                                                    CENDANT      MOVE.COM  CENDANT EXCLUDING
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)          CONSOLIDATED     GROUP      MOVE.COM GROUP
                                                -------------- ----------  -----------------
                                                                  
Net revenues...................................    $4,118.7       $ 11.3        $4,107.4
Expenses.......................................     3,263.3         26.5         3,236.8
Net gain on disposition of businesses .........       824.8                        824.8
                                                -------------- ----------  -----------------
Income (loss) before income taxes and minority
 interest......................................     1,680.2        (15.2)        1,695.4
Income (loss) from continuing operations ......     1,251.9         (9.9)        1,261.8
Earnings per share from continuing operations
 Basic.........................................    $   1.64                     $   1.65
 Diluted.......................................        1.54                         1.55


                     NINE MONTHS ENDED SEPTEMBER 30, 1998



                                                    CENDANT      MOVE.COM  CENDANT EXCLUDING
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)          CONSOLIDATED     GROUP      MOVE.COM GROUP
                                                -------------- ----------  -----------------
                                                                  
Net revenues...................................    $3,865.1       $ 7.8         $3,857.3
Expenses.......................................     3,095.9         8.7          3,087.2
                                                -------------- ----------  -----------------
Income (loss) before income taxes and minority
 interest......................................       769.2        (0.9)           770.1
Income (loss) from continuing operations ......       461.9        (0.5)           462.4
Earnings per share from continuing operations
 Basic.........................................    $   0.55                     $   0.55
 Diluted.......................................        0.53                         0.53


                               36

 DIVESTITURES

   During 1998, we implemented a program to divest non-strategic businesses
and assets in order to focus on our core businesses, repay debt and
repurchase our common stock. Pursuant to such program, we completed or have
pending the following dispositions:

   Disposition of EPub. On November 30, 1999, we completed the disposition of
approximately 85% of our EPub business unit for $281.0 million in cash,
inclusive of certain adjustments. We will retain approximately 15% of EPub's
equity in connection with the transaction. In addition, we will have a
designee on the EPub's Board of Directors. EPub is a marketer and publisher
of coupon books and discount programs which provides customers with unique
products and services that are designed to enhance a customer's purchasing
power.

   We will account for our investment in EPub using the equity method of
accounting because, in accordance with Accounting Principles Board Opinions
No. 18, we believe that our ownership interest combined with our
representation on the Board of Directors of EPub gives us the ability to
exercise significant influence on EPub. Under the equity accounting method,
our investments will be increased or reduced to reflect our share of EPub's
income or losses. In addition, our earlier classification of EPub as a
discontinued operation was reversed in accordance with generally accepted
accounting principles.

   Disposition of Green Flag. On November 26, 1999, we completed the
disposition of Green Flag business unit for approximately $400 million. Green
Flag is a roadside assistance organization based in the UK, which provides a
wide range of emergency support and rescue services.

   North American Outdoor Group. On October 8, 1999, we completed the
disposition of approximately 94% of our North American Outdoor Group ("NAOG")
business unit for approximately $140.0 million in cash and we will retain
approximately 6% of NAOG's equity in connection with the transaction. NAOG is
the world's largest lifestyle affinity membership organization.

   Central Credit, Inc. On September 3, 1999, we completed the sale of our
Central Credit, Inc. ("CCI") business unit for $44.0 million in cash. We
realized a gain on sale of $3.9 million ($12.1 million, after tax loss). CCI
is the leading provider of gaming patron credit information services to
casinos.

   Global Refund Group. On August 24, 1999, we completed the sale of our
Global Refund Group subsidiary ("Global Refund") for approximately $160.0
million in cash. Global Refund, formerly known as Europe Tax Free Shopping,
is the world's largest value-added tax refund services company. We realized a
gain on sale of approximately $73.3 million ($25.3 million, after tax) during
the third quarter of 1999.

   Spark Services, Inc. On August 12, 1999, we completed the sale of our
Spark Services, Inc. ("Spark") business unit for approximately $34.6 million
in cash and realized a gain on sale of $7.6 million ($2.3 million, after tax)
during the third quarter of 1999. Spark is the leading provider of dating and
personal services to the radio industry.

   Fleet. On June 30, 1999, we completed the disposition of our fleet
business segment ("fleet segment" or "fleet businesses"), which included PHH
Vehicle Management Services LLC, Wright Express Corporation, The Harpur
Group, Ltd., and other subsidiaries pursuant to an agreement between PHH
Corporation ("PHH"), our wholly-owned subsidiary, and Avis Rent A Car, Inc.
("ARAC"). Pursuant to the agreement, ARAC acquired the net assets of our
fleet businesses through the assumption and subsequent repayment of $1.44
billion of intercompany debt and the issuance of $360.0 million of
convertible preferred stock of Avis Fleet Leasing and Management Corporation
("Avis Fleet"), a wholly-owned subsidiary of ARAC. The transaction followed a
competitive bidding process. Coincident to the closing of the transaction,
ARAC refinanced the assumed debt under management programs which was payable
to us. Accordingly, on June 30, 1999, we received additional consideration
from ARAC of $3,047.5 million comprised of $3,016.9 million of cash proceeds
and a $30.6 million note receivable. On such date, we used proceeds of
$1,809.4 million to repay outstanding fleet segment financing arrangements.
Additionally, in July 1999, we utilized cash proceeds from the transaction of
$1,033.0 million (received in the form of a dividend payment from PHH) to
substantially execute the "Dutch Auction" tender offer by us to purchase 50
million shares of our common stock (See "Common Share Repurchases"). As of
June 30, 1999, proceeds remaining from the transaction were designated to
repay outstanding corporate debt as it matures (the borrowings of which had
been loaned to the fleet segment to finance the purchases of leased vehicles)
and to finance other assets under management and mortgage programs.

                               37

   The convertible preferred stock of Avis Fleet is convertible into common
stock of ARAC at our option upon the satisfaction of certain conditions,
including the per share price of ARAC Class A common stock equaling or
exceeding $50 per share and the fleet segment attaining certain EBITDA
(earnings before interest, taxes, depreciation and amortization) thresholds,
as defined. There are additional circumstances upon which the shares of Avis
Fleet convertible preferred stock are automatically or mandatorily
convertible into ARAC common stock. At September 30 1999, we beneficially
owned approximately 18% of the outstanding Class A common stock of ARAC. If
all of the Avis Fleet convertible preferred stock was converted into common
stock of ARAC, as of the closing date, we would have owned approximately 33%
of ARAC's outstanding common equity (although the voting interest would be
limited, in most instances to 20%). At December 31, 1999, our ownership
percentage of outstanding Class A Common Stock of ARAC was 18%.

   We realized a net gain on disposition of $881.4 million ($865.7 million,
after tax) of which $714.8 million ($702.1 million, after tax) was recognized
in the second quarter of 1999 and $166.6 million ($163.6 million, after tax)
was deferred at June 30, 1999. During the third quarter of 1999, we
recognized $9.7 million ($9.3 million, after tax) of the deferred portion of
the realized net gain. The realized gain is net of approximately $90.0
million of transaction costs. We deferred the portion of the realized net
gain which was equivalent to our common equity ownership percentage in ARAC
at the time of closing. The fleet segment disposition was structured to be
treated as a tax-free reorganization and, accordingly, no tax provision has
been recorded on a majority of the gain. However, based upon a recent
interpretive ruling, the Internal Revenue Service may challenge this
treatment. Should the transaction be deemed taxable, the resultant tax
liability could be material. Notwithstanding, we believe that based upon our
analysis of relevant tax law, our position would prevail.

   Other Businesses. During the second quarter of 1999, we completed the
dispositions of certain businesses, including Match.com, NLG and NLP.
Aggregate consideration received on the dispositions of such businesses was
comprised of $27.4 million in cash and $43.3 million of common stock. We
realized a net gain of $34.9 million ($21.5 million, after tax) on the
dispositions of the businesses.

   Discontinued Operations. On January 12, 1999, we completed the sale of
Cendant Software Corporation ("CDS") for approximately $800.0 million in
cash. We realized an after tax net gain of $371.9 million on the disposition
of CDS of which $192.7 million was recognized in the first quarter of 1999,
coincident with the closing of the transaction. We recorded an $18.6 million
reduction to the gain during the second quarter of 1999, in connection with
the settlement of certain post closing adjustments. The remaining $197.8
million of such realized after tax net gain was recognized in the fourth
quarter of 1998, substantially in the form of a tax benefit and corresponding
deferred tax asset. CDS was a developer, publisher and distributor of
educational and entertainment software.

   In December 1998, we completed the sale of Hebdo Mag International, Inc.
("Hebdo Mag") to its former 50% owners for $314.8 million in cash and 7.1
million shares of our common stock. Hebdo Mag was our former business unit
which published and distributed classified advertising information.

 INVESTMENT IN NETMARKET GROUP, INC.

   On September 15, 1999, Netmarket Group, Inc. ("NGI") began operations as
an independent company that will pursue the development of the interactive
businesses formerly within our direct marketing division. NGI will own,
operate, develop and expand the on-line membership businesses, including
Netmarket.com, Travelers Advantage, Auto Vantage, Privacy Guard and
Hagglezone.com, which collectively have 1.3 million on-line members (and are
expected to produce approximately $70.0 million of revenues in 1999). Prior
to September 15, 1999, our ownership of NGI was restructured into common
stock and preferred stock interests. On September 15, 1999 (the "donation
date"), we donated NGI's outstanding common stock to a charitable trust (the
"Trust") and, NGI intended to issue additional shares of its common stock to
certain of its marketing partners. This structure would allow NGI to use its
equity to attract, retain and incent employees, to permit NGI to pursue
strategic alliances and acquisitions and to make operational and strategic
decisions without the need to consider the impact of those decisions on us.
In addition, the contribution would establish a charitable foundation that
would enhance our image in the marketplace. Although no assurances can be
given, we believe the donation of NGI to a separate autonomous entity will
increase the likelihood that NGI will be successful and increase in value
thereby increasing the value of our investment. Our shareholders should
benefit from the

                               38

potential increased value. The beneficiaries of the Trust include The Inner
City Games Foundation, The Susan G. Komen Breast Cancer Foundation, Inc. and
Community Funds, Inc. The fair market value of NGI common stock on the date
of contribution was estimated to be approximately $20 million. Accordingly,
as a result of the change in ownership of NGI's common stock from us to
independent third parties, prospective from the donation date, NGI'S
operating results were no longer included in our consolidated financial
statements. We retained the opportunity to participate in NGI's value through
the ownership of a convertible preferred stock of NGI, which is ultimately
exchangeable, at our option, until after September 14, 2001, into
approximately 78% of NGI's diluted common shares which has a $5 million
annual preferred dividend. The convertible preferred stock will be accounted
for using the cost method of accounting. The preferred stock dividend will be
recorded in income if and when it becomes realizable. Subsequent to our
contribution of NGI's common stock to the trust, we provided a development
advance of $77.0 million to NGI, which is contingently repayable to us if
certain financial targets related to NGI are achieved. The purpose of the
development advance was to provide NGI with the funds necessary to develop
internet related products and systems, that if successful, would
significantly increase the value of NGI. Without these funds, NGI would not
have sufficient funds for development activities contemplated in its business
plans. Repayment of the advance is therefore solely dependent on the success
of these development efforts. We recorded a charge, inclusive of transaction
costs of $84.8 million ($48.4 million, after tax), during the third quarter
of 1999, in connection with the donation of NGI shares to the charitable
trust and the subsequent development advance.

FINANCING (EXCLUSIVE OF MANAGEMENT AND MORTGAGE PROGRAM FINANCING)

   We believe that we have sufficient liquidity and access to liquidity
through various sources, including our ability to access public equity and
debt markets and financial institutions. We currently have a $1.25 billion
term loan facility in place as well as committed back-up facilities totaling
$1.75 billion, which is currently undrawn and available and $2.45 billion of
availability under existing shelf registration statements. Our long-term debt
was $3.3 billion at September 30, 1999 which substantially consisted of $2.1
billion of publicly issued fixed rate debt and $1.25 billion of borrowings
under a term loan facility. In addition, we had $1.5 billion of equity-linked
FELINE PRIDES securities outstanding at September 30, 1999.

 CREDIT FACILITIES

   Our primary credit facility consists of (i) a $750 million, five-year
revolving credit facility (the "Five Year Revolving Credit Facility") and
(ii) a $1 billion, 364-day revolving credit facility (the "364-Day Revolving
Credit Facility") (collectively the "Revolving Credit Facilities"). The
364-Day Revolving Credit Facility will mature on October 27, 2000 but may be
renewed on an annual basis for an additional 364 days upon receiving lender
approval. The Five-Year Revolving Credit Facility will mature on October 1,
2001. Borrowings under the Revolving Credit Facilities, at our option, bear
interest based on competitive bids of lenders participating in the
facilities, at prime rates or at LIBOR, plus a margin of approximately 75
basis points. We are required to pay a per annum facility fee of .175% and
 .15% of the average daily unused commitments under the Five Year Revolving
Credit Facility and 364 Day Revolving Credit Facility, respectively. The
interest rates and facility fees are subject to change based upon credit
ratings on our senior unsecured long-term debt by nationally recognized debt
rating agencies. The Revolving Credit Facilities contain certain restrictive
covenants including restrictions on indebtedness, mergers, liquidations and
sale and leaseback transactions and requires the maintenance of certain
financial ratios, including a 3:1 minimum interest coverage ratio (14:1 as of
September 30, 1999) and a maximum debt-to-capitalization ratio of 0.5:1
(0.4:1 as of September 30, 1999).

 TERM LOAN FACILITIES

   On February 9, 1999, we replaced a 364-day, $3.25 billion term loan
facility with a new two-year term loan facility (the "Term Loan Facility")
which provides for borrowings of up to $1.25 billion. The Term Loan Facility
bears interest at LIBOR plus a margin of approximately 100 basis points and
is payable in five consecutive quarterly installments beginning on the first
anniversary of the closing date. At September 30, 1999, borrowings under the
Term Loan Facility which were due within one year were

                               39

classified as long-term based on our intent and ability to refinance such
borrowings on a long-term basis. The Term Loan Facility contains certain
restrictive covenants, which are substantially similar to and consistent with
the covenants in effect for our Revolving Credit Facilities. We used $1.25
billion of the proceeds from the Term Loan Facility to refinance a portion of
the outstanding borrowings under the former term loan facility.

 7 1/2% AND 7 3/4% SENIOR NOTES

   We filed a shelf registration statement with the SEC, effective November
1998, which provided for the aggregate issuance of up to $3 billion of debt
and equity securities. Pursuant to such registration statement, we issued
$1.55 billion of Senior Notes (the "Notes") in two tranches, consisting of
$400 million principal amount of 7 1/2% Senior Notes due December 1, 2000 and
$1.15 billion principal amount of 7 3/4% Senior Notes due December 1, 2003.
Interest on the Notes is payable on June 1 and December 1 of each year,
beginning on June 1, 1999. The Notes may be redeemed, in whole or in part, at
any time, at our option at a redemption price plus accrued interest to the
date of redemption. The redemption price is equal to the greater of (i) the
face value of the Notes or (ii) the sum of the present values of the
remaining scheduled payments discounted at the treasury rate plus a spread as
defined in the indenture. The offering was a component of a plan designed to
refinance an aggregate of $3.25 billion of borrowings under our former term
loan facility, based on provisions contained in the indenture. Net proceeds
from the offering were used to repay $1.3 billion of borrowings under such
term loan facility and for general corporate purposes, which included the
purchase of our common stock.

   On December 10, 1999, our Board of Directors approved the redemption of
all outstanding $400 million 7 1/2% Senior Notes on January 21, 2000. The
redemption price is the greater of par or the make whole call option plus 50
basis points.

 FELINE PRIDES AND TRUST PREFERRED SECURITIES

   Through our wholly owned subsidiary, Cendant Capital I (the "Trust"), a
statutory business Trust formed under the laws of the State of Delaware, we
have an outstanding issuance of 29.9 million FELINE PRIDES, each with a face
amount of $50 per PRIDE and 2.3 million trust preferred securities. Proceeds
of $1.5 billion from the original issuance of the FELINE PRIDES were invested
by the Trust in our 6.45% Senior Debentures due 2003 (the "Debentures"),
which represents the sole asset of the Trust. The obligations of the Trust
related to the FELINE PRIDES and trust preferred securities are
unconditionally guaranteed by us to the extent we make payments pursuant to
the Debentures. The issuance of the FELINE PRIDES and trust preferred
securities, resulted in the utilization of approximately $3 billion of
availability under a $4 billion shelf registration statement. At September
30, 1999, the FELINE PRIDES consisted of approximately 27.8 million Income
PRIDES and 2.1 million Growth PRIDES (Income PRIDES and Growth PRIDES
hereinafter referred to as "PRIDES"). The Income PRIDES consist of trust
preferred securities and forward purchase contracts under which the holders
are required to purchase our common stock in February 2001. The Growth PRIDES
consist of zero coupon U.S. Treasury securities and forward purchase
contracts under which the holders are required to purchase our common stock
in February 2001. The stand-alone trust preferred securities and the trust
preferred securities forming a part of the Income PRIDES, each with a face
amount of $50, bear interest, in the form of preferred stock dividends, at
the annual rate of 6.45%, payable in cash. Payments under the forward
purchase contract forming a part of the Income PRIDES are made by us in the
form of a contract adjustment payment at an annual rate of 1.05%. Payments
under the forward purchase contract forming a part of the Growth PRIDES are
made by us in the form of a contract adjustment payment at an annual rate of
1.30%. The forward purchase contracts require the holder to purchase a
minimum of 1.0395 shares and a maximum of 1.3514 shares of our common stock
per PRIDES security, depending upon the average of the closing price per
share of our common stock for a 20 consecutive day period ending in
mid-February of 2001. We have the right to defer the contract adjustment
payments and the payment of interest on its Debentures to the Trust. Such
election will subject us to certain restrictions, including restrictions on
making dividend payments on our common stock until all such payments in
arrears are settled.

                               40

   On March 17, 1999, we reached a final agreement to settle a class action
lawsuit that was brought on behalf of the holders of PRIDES securities who
purchased their securities on or prior to April 15, 1998. Under the terms of
the final agreement, only holders who owned PRIDES at the close of business
on April 15, 1998 will be eligible to receive a new additional "Right" for
each PRIDES security held. At any time during the life of the Rights (expires
February 2001), holders may (i) sell them or (ii) exercise them by delivering
to us three Rights together with two PRIDES in exchange for two new PRIDES
(the "New PRIDES"). The terms of the New PRIDES will be the same as the
original PRIDES except that the conversion rate will be revised so that, at
the time the Rights are distributed, each New PRIDES will have a value equal
to $17.57 more than each original PRIDES, or, in the aggregate, approximately
$351.0 million. The final agreement also requires us to offer to sell four
million additional PRIDES (having identical terms to currently outstanding
PRIDES) to holders of Rights for cash, at a value which will be based on the
valuation model that was utilized to set the conversion rate of the New
PRIDES. The offering of additional PRIDES will be made only pursuant to a
prospectus filed with the SEC. We currently expect to use the proceeds of
such an offering for general corporate purposes. The arrangement to offer
additional PRIDES is designed to enhance the trading value of the Rights by
removing up to six million Rights from circulation via exchanges associated
with the offering and to enhance the open market liquidity of New PRIDES by
creating four million New PRIDES via exchanges associated with the offering.
If holders of Rights do not acquire all such PRIDES, they will be offered to
the public. Under the settlement agreement, we also agreed to file a shelf
registration statement for an additional 15 million special PRIDES, which
could be issued by us at any time for cash. However, during the last 30 days
prior to the expiration of the Rights in February 2001, we will be required
to make these additional PRIDES available to holders of Rights at a price in
cash equal to 105% of their theoretical value. The special PRIDES, if issued,
would have the same terms as the currently outstanding PRIDES and could be
used to exercise Rights. Based on a market price of $15.75 on (calculated
based on the average closing price per share of our common stock for the
consecutive five day period ended October 22, 1999), the effect of the
issuance of the New PRIDES will be to distribute approximately 22 million
more shares of our common stock when the mandatory purchase of our common
stock associated with the PRIDES occurs in February 2001.

   On June 15, 1999, the United States District Court for the District of New
Jersey entered an order and judgment approving the settlement described above
and awarding fees to counsel to the class. One objector, who objected to a
portion of the settlement notice concerning fees to be sought by counsel to
the class and the amount of fees to be sought by counsel to the class, has
filed an appeal to the U.S. Court of Appeals for the Third Circuit from the
District Court order approving the settlement and awarding fees to counsel to
the class. Although under the settlement the Rights are required to be
distributed following the conclusion of court proceedings, including appeals,
we believe that the appeal is without merit. As a result, we currently intend
to distribute the Rights in November 1999 after the final list of eligible
claimants has been determined by the court.

 3% CONVERTIBLE SUBORDINATED NOTES

   We have an outstanding issuance of $550.0 million principal amount of 3%
Convertible Subordinated Notes (the "3% Notes") due 2002. Each $1,000
principal amount of 3% Notes is convertible into 32.6531 shares of our common
stock subject to adjustment in certain events. The 3% Notes may be redeemed
at our option at any time on or after February 15, 2000, in whole or in part,
at the appropriate redemption prices (as defined in the indenture governing
the 3% Notes) plus accrued interest to the redemption date. The 3% Notes will
be subordinated in right of payment to all existing and future Senior Debt
(as defined in our indenture governing the 3% Notes).

FINANCING RELATED TO MANAGEMENT AND MORTGAGE PROGRAMS

   Our PHH subsidiary operates our mortgage and relocation services
businesses as a separate public reporting entity and supports originated
mortgages and advances under relocation contracts primarily by issuing
commercial paper and medium term notes and maintaining securitized
obligations. Such financing is not classified based on contractual
maturities, but rather is included in liabilities under management and

                               41

mortgage programs rather than long-term debt since such debt corresponds
directly with high quality related assets. Prior to the June 30, 1999
disposition of our fleet segment, fleet business operations were also funded
using such financing arrangements. Upon the disposition, we received cash
proceeds equivalent to the outstanding debt applicable to our fleet segment
(see "Liquidity and Capital Resources -- Divestitures -- Disposition of Fleet
Segment"). PHH continues to pursue opportunities to reduce its borrowing
requirements by securitizing increasing amounts of its high quality assets.
We currently have an agreement, expiring 2001 under which an unaffiliated
buyer, Bishops Gate Residential Mortgage Trust, a special purpose entity,
(the "Buyer") commits to purchase, at our option, mortgage loans originated
by us on a daily basis, up to the Buyer's asset limit of $2.4 billion. Under
the terms of this sale agreement, we retain the servicing rights on the
mortgage loans sold to the Buyer and provide the Buyer with options to sell
or securitize the mortgage loans into the secondary market. At September 30,
1999, we were servicing approximately $997.7 million of mortgage loans owned
by the Buyer.

   PHH debt is issued without recourse to the parent company. Our PHH
subsidiary expects to continue to maximize its access to global capital
markets by maintaining the quality of its assets under management. This is
achieved by establishing credit standards to minimize credit risk and the
potential for losses. PHH minimizes its exposure to interest rate and
liquidity risk by effectively matching floating and fixed interest rate and
maturity characteristics of funding to related assets, varying short and
long-term domestic and international funding sources, and securing available
credit under committed banking facilities. Depending upon asset growth and
financial market conditions, our PHH subsidiary utilizes the United States
and European commercial paper markets, as well as other cost-effective
short-term instruments. In addition, our PHH subsidiary will continue to
utilize the public and private debt markets as sources of financing.
Augmenting these sources, our PHH subsidiary will continue to manage
outstanding debt with the potential sale or transfer of managed assets to
third parties while retaining fee-related servicing responsibility. PHH's
aggregate borrowings at the underlying balance sheet dates were as follows:



                                   SEPTEMBER 30,    DECEMBER 31,
(IN BILLIONS)                           1999            1998
                                  --------------- --------------
                                            
Commercial paper.................       $0.6            $2.5
Medium-term notes................        1.3             2.3
Securitized obligations..........        0.8             1.9
Other............................        0.1             0.2
                                  --------------- --------------
                                        $2.8            $6.9
                                  =============== ==============


   PHH has an effective shelf registration statement on file with the SEC
providing for the aggregate issuance of up to $3.0 billion of medium-term
note debt securities. These securities may be offered from time to time,
together or separately, based on terms to be determined at the time of sale.
As of September 30, 1999, PHH had approximately $1.2 billion of medium-term
notes outstanding under this shelf registration statement. Proceeds from
future offerings will continue to be used to finance assets PHH manages for
its clients and for general corporate purposes.

 SECURITIZED OBLIGATIONS

   Our PHH subsidiary maintains three separate financing facilities, the
outstanding borrowings of which are securitized by corresponding assets under
management and mortgage programs. Such securitized obligations are described
below.

   Mortgage Facility. Our PHH subsidiary maintains a 364-day financing
agreement, expiring in December 1999, to sell mortgage loans under an
agreement to repurchase such mortgages (the "Mortgage Agreement"). The
Mortgage Agreement is collateralized by the underlying mortgage loans held in
safekeeping by the custodian to the Mortgage Agreement. The total commitment
under the Mortgage Agreement is $500.0 million and is renewable on an annual
basis at the discretion of the Lender in accordance with the securitization
agreement. Mortgage loans financed under the Mortgage Agreement at September
30, 1999 totaled $439.8 million.

                               42

   Relocation Facilities. Our PHH subsidiary maintains a 364-day asset
securitization agreement, expiring in December 1999 under which an
unaffiliated buyer has committed to purchase an interest in the rights to
payment related to certain relocation receivables of PHH. The revolving
purchase commitment provides for funding up to a limit of $325.0 million and
is renewable on an annual basis at the discretion of the lender in accordance
with the securitization agreement. Under the terms of this agreement, our PHH
subsidiary retains the servicing rights related to the relocation
receivables. At September 30, 1999, our PHH subsidiary was servicing $248.3
million of assets which were funded under this agreement.

   Our PHH subsidiary had maintained an asset securitization agreement, with
a separate unaffiliated buyer, which had a purchase commitment up to a limit
of $350.0 million. The terms of this agreement were similar to the
aforementioned facility, with PHH retaining the servicing rights on the right
of payment related to certain relocation receivables of PHH. At September 30,
1999, PHH was servicing $85.0 million of assets eligible for purchase under
this agreement.

   This facility matured and approximately $85.0 million was repaid on
October 5, 1999. We are currently in the process of creating a new
securitization facility to purchase interests in the rights to payment
related to our relocation receivables, which will replace the existing
securitizations.

 OTHER CREDIT FACILITIES

   To provide additional financial flexibility, PHH's current policy is to
ensure that minimum committed facilities aggregate 100 percent of the average
outstanding commercial paper. This policy will be maintained subsequent to
the divestiture of the fleet businesses. PHH maintains $2.65 billion of
unsecured committed credit facilities, which are backed by a consortium of
domestic and foreign banks. The facilities are comprised of $1.25 billion of
syndicated lines of credit maturing in March 2000 and $1.25 billion of
syndicated lines of credit maturing in the year 2002. In addition, PHH has a
$150 million revolving credit facility, which matures in December 1999, and
other uncommitted lines of credit with various financial institutions, which
were unused at September 30, 1999. Our management closely evaluates not only
the credit of the banks but also the terms of the various agreements to
ensure ongoing availability. Our management believes that our current policy
provides adequate protection should volatility in the financial markets limit
PHH's access to commercial paper or medium-term notes funding. PHH
continuously seeks additional sources of liquidity to accommodate PHH asset
growth and to provide further protection from volatility in the financial
markets.

   In the event that the public debt market is unable to meet PHH's funding
needs, we believe that PHH has appropriate alternative sources to provide
adequate liquidity, including current and potential future securitized
obligations and its $2.65 billion of revolving credit facilities.

   Pursuant to a covenant in PHH's Indenture with the trustee relating to
PHH's medium-term notes, PHH is restricted from paying dividends, making
distributions or making loans to us to the extent that such payments are
collectively in excess of 40% of PHH's consolidated net income (as defined in
the covenant) for each fiscal year, provided however, that PHH can distribute
to us 100% of any extraordinary gains from asset sales and capital
contributions previously made to PHH by us. Notwithstanding the foregoing,
PHH is prohibited under such covenant from paying dividends or making loans
to us if upon giving effect to such dividends and/or loan, PHH's debt to
equity ratio exceeds 8 to 1, at the time of the dividend or loan, as the case
may be.

LITIGATION

   Accounting Irregularities. Since the April 15, 1998 announcement of the
discovery of potential accounting irregularities in the former business units
of CUC, approximately 70 lawsuits claiming to be class actions, two lawsuits
claiming to be brought derivatively on our behalf and several individual
lawsuits and arbitration proceedings have been commenced in various courts
and other forums against us and other defendants by or on behalf of persons
claiming to have purchased or otherwise acquired securities or options issued
by CUC or us between May 1995 and August 1998. The Court has ordered
consolidation of many of the actions.

                               43

   In addition, in October 1998, an action claiming to be a class action was
filed against us and four of our former officers and directors by persons
claiming to have purchased American Bankers' stock between January and
October 1998. The complaint claimed that we made false and misleading public
announcements and filings with the SEC in connection with our proposed
acquisition of American Bankers allegedly in violation of Sections 10(b) and
20(a) of the Securities Exchange Act of 1934, as amended, and that the
plaintiff and the alleged class members purchased American Bankers'
securities in reliance on these public announcements and filings at inflated
prices. On April 26, 1999, the United States District Court for New Jersey
found that the class action failed to state a claim upon which relief could
be granted and, accordingly, dismissed the complaint. The plaintiff has
appealed the District Court's findings to the U.S. Court of Appeals for the
Third Circuit.

   As previously disclosed, we reached an agreement with plaintiffs' counsel
representing the class of holders of our PRIDES securities who purchased
their securities on or prior to April 15, 1998 to settle their class action
lawsuit against us through the issuance of a new "Right" for each PRIDES
security held. See "Liquidity and Capital Resources -- FELINE PRIDES and
Trust Preferred Securities" for a more detailed description of the
settlement.

   The SEC and the United States Attorney for the District of New Jersey are
conducting investigations relating to the matters referenced above. The SEC
advised us that its inquiry should not be construed as an indication by the
SEC or its staff that any violations of law have occurred. As a result of the
findings from the investigations, we made all adjustments considered
necessary by us, which are reflected in our restated financial statements.
Although we can provide no assurances, we do not expect that additional
adjustments will be necessary.

   On December 7, 1999, we announced that we reached a preliminary agreement
to settle the principal securities class action pending against us in the
U.S. District Court in Newark, New Jersey relating to the common stock class
action lawsuits. Under the agreement, we would pay the class members $2.83
billion in cash. The settlement remains subject to execution of a definitive
settlement agreement and approval by the U.S. District Court. If the
preliminary settlement is not approved by the U.S. District Court, we can
make no assurances that the final outcome or settlement of such proceedings
will not be for an amount greater than that set forth in the preliminary
agreement. Please see our Form 8-K, dated December 7, 1999, for a description
of the preliminary agreement to settle the common stock class action
litigation.

   Our plan to finance the settlement reflects the existence of a range of
financing alternatives which we have considered to be potentially available
to us. At a minimum, these alternatives entail using various combinations of
(i) available cash, (ii) debt securities and/or (iii) equity securities. The
choice among alternatives will depend on numerous factors, including the
timing of the actual settlement payment, the relative costs of various
securities, our cash balance, our projected post-settlement cash flows and
market conditions.

   Other Pending Litigation. We and our subsidiaries are involved in pending
litigation in the usual course of business. In the opinion of management,
such other litigation will not have a material adverse effect on our
consolidated financial position, results of operations or cash flows.

CREDIT RATINGS

   Our long-term debt credit ratings by Duff & Phelps Credit Rating Co.
("DCR"), Standard & Poor's Corporation ("S&P") and Moody's Investors Service
Inc. ("Moody's") remain A-, BBB and Baa1, respectively.

   Following the execution of our agreement to dispose of our fleet segment,
Fitch IBCA lowered PHH's long-term debt rating from A+ to A and affirmed
PHH's short-term debt rating at F1, and S&P affirmed PHH's long-term and
short-term debt ratings at A-/A2. Also in connection with the closing of the
transaction, DCR lowered PHH's long-term debt rating from A+ to A and PHH's
short-term debt rating was reaffirmed at D1. Moody's lowered PHH's long-term
debt rating from A3 to Baa1 and affirmed PHH's short-term debt rating at P2.
(A security rating is not a recommendation to buy, sell or hold securities
and is subject to revision or withdrawal at any time).

                               44

COMMON SHARE REPURCHASES

   During 1999, our Board of Directors authorized an additional $1.8 billion
of our common stock to be repurchased under a common share repurchase
program, increasing the total authorized amount that can be repurchased under
the program to $2.8 billion. We have executed this program through
open-market purchases or privately negotiated transactions.

   In July 21, 1999, pursuant to a Dutch Auction self-tender offer to our
shareholders, we purchased 50 million shares of our common stock through our
wholly owned subsidiary Cendant Stock Corporation at a price of $22.25 per
share. We financed the purchase of shares costing $1.1 billion with proceeds
received from our June 30, 1999 disposition of our fleet segment.

   As of January 7, 2000, we repurchased a total of $3.3 billion (162.3
million shares) of our common stock inclusive of the program, the Dutch
Auction, and the 7.1 million shares of our common stock received as partial
consideration in connection with the sale of our Hebdo Mag subsidiary.

CASH FLOWS

   We generated $2.0 billion of cash flows from operations during the nine
months ended September 30, 1999 representing a $1.3 billion increase from the
nine months ended September 30, 1998. The increase in cash flows from
operations was primarily due to a $1.1 billion net reduction in mortgage
loans held for sale which reflects larger loan sales to the secondary markets
in proportion to loan originations.

   We generated $1.2 billion in cash flows from investing activities during
the nine months ended September 30, 1999 representing a $5.2 billion increase
from the nine months ended September 30, 1998. The incremental cash flows
from investing activities was primarily attributable to $2.8 billion of net
cash proceeds received from the disposition of the net assets of our fleet
segment as well as the disposition of other businesses during 1999. See
"Liquidity and Capital Resources --Divestitures" for more detailed
information concerning these dispositions. In addition, during 1998, we used
net cash of $2.7 billion for the purchases of businesses and other
acquisition related payments. Companies acquired in 1998 included NPC and
Jackson Hewitt.

   We used net cash of $3.6 billion in financing activities during the nine
months ended September 30, 1999 compared to providing net cash of $5.1
billion from such activities in the comparable prior year period. Cash flows
used in financing activities during 1999 included $2.6 billion in Company
common stock repurchases pursuant to our share repurchase program partially
offset by $2.8 billion related to the timing of debt repayments to third
parties in connection with our fleet segment disposition. Cash flows provided
by financing activities during 1998 principally consisted of $3.3 billion of
proceeds from borrowings under a term loan facility and proceeds of $1.5
billion from the issuance of our FELINE PRIDES. During 1999, we had net
repayments of $1.1 billion representing fundings of our investments in assets
under management programs compared to net borrowings of $0.6 billion in 1998.

CAPITAL EXPENDITURES

   During the nine months ended September 30, 1999, $212.8 million was
invested in property and equipment to support operational growth and enhance
marketing opportunities. In addition, technological improvements were made to
improve operating efficiencies. Capital spending in 1999 has included the
development of integrated business systems and other investments in
information systems within several of our segments as well as additions to
car park properties for our NPC subsidiary. We anticipate investing
approximately $270 million in capital expenditures in 1999.

YEAR 2000 COMPLIANCE

   The Year 2000 presents the risk that information systems will be unable to
recognize and process date-sensitive information properly beginning and after
January 1, 2000. To minimize or eliminate the effect of the Year 2000 risk on
our business systems and applications, we are continually identifying,
evaluating, implementing and testing changes to our computer systems,
applications and software necessary to achieve Year 2000 compliance. As part
of our Year 2000 initiative, we selected a team of

                               45

managers (the "Project Managers") to identify, evaluate and implement a plan
to bring all of our critical business systems and applications into Year 2000
compliance prior to December 31, 1999. The Year 2000 initiative consists of
four phases: (i) identification of all critical business systems subject to
Year 2000 risk (the "Identification Phase"); (ii) assessment of such business
systems and applications to determine the method of correcting any Year 2000
problems (the "Assessment Phase"); (iii) implementing the corrective measures
(the "Implementation Phase"); and (iv) testing and maintaining system
compliance (the "Testing Phase"). As of November 30, 1999 we have
substantially completed each of the above stated Phases and have identified
and assessed five areas of risk: (i) internally developed business
applications, of which 99% of the mission critical business applications have
been corrected/replaced; (ii) third party vendor software, such as business
applications, operating systems and special function software, of which 99%
of the mission critical vendor software has been upgraded/replaced; (iii)
computer hardware components, of which 98% of the mission critical hardware
components have been upgraded/replaced; (iv) electronic data transfer systems
between our customers, third party providers and us, of which 99% of the
mission critical electronic interfaces have been corrected/replaced; and (v)
embedded systems, such as phone switches, check writers and alarm systems, of
which 99% of the mission critical embedded systems have been
upgraded/replaced and nearly 100% of the mission critical telecommunications
systems have been upgraded/replaced. In addition, as part of our assessment
process we have developed contingency plans as considered necessary.

   We rely on third party providers for services such as telecommunications,
Internet service, utilities, components for our embedded and other systems
and other key services. Interruption of those services due to Year 2000
issues could have a material adverse impact on our operations. However, we
cannot directly control the Year 2000 compliance of third party provider
systems. During the Identification Phase we sent written inquiries on Year
2000 readiness to third party providers requiring from them a formal written
response. In the Assessment Phase we identified mission critical third party
providers/suppliers and determined that approximately 35% of software vendors
were mission critical, 28% of hardware vendors were mission critical, 77% of
data interfaces were mission critical (this percentage includes Cendant data
interfaces), 74% of telecommunications systems were mission critical, 5% of
embedded systems were mission critical, and 20% of all suppliers were
considered to be mission critical; percentages of readiness are cited in the
first paragraph for all providers except suppliers, with respect to
suppliers, 95% of the mission critical suppliers have provided readiness
statements; to confirm readiness with key suppliers follow-up confirmation
activities have been taken such as on-site visits and tests on a selected
basis, in addition, we worked with other key third party providers to test
and remediate such systems for Year 2000 compliance. For mission critical
third party providers who did not supply readiness information, the Project
Managers have taken actions such as follow up phone calls or communications,
site visits or change in third party providers. Furthermore, we have also
made significant progress toward joint contingency planning with regard to
our third party providers. We are confident that the contingency planning
phases will be completed prior to December 31, 1999.

   The total cost of the Company's Year 2000 compliance plan is anticipated
to be $55 million. Approximately $49 million of these costs were incurred
through September 30, 1999, and the Company expects to incur the balance of
such costs to complete the compliance plan. The Company has been expensing
and capitalizing the costs to complete the compliance plan in accordance with
appropriate accounting policies. Variations from anticipated expenditures and
the effect on the Company's future results of operations are not anticipated
to be material in any given year. However, if Year 2000 modifications and
conversions are not made, or are not completed in time, the Year 2000 problem
could have a material impact on the operations and financial condition of the
Company.

   The estimates and conclusions herein are forward-looking statements and
are based on management's best estimates of future events. Risks of
completing the plan include the availability of resources, the ability to
discover and correct the potential Year 2000 sensitive problems which could
have a serious impact on certain operations and the ability of the Company's
service providers to bring their systems into Year 2000 compliance.

   The above is a "Year 2000 Readiness Disclosure" as defined in, and in
conformance with, the Year 2000 Information and Readiness Disclosure Act of
1998 (Pub. L. 105-271, 112 Stat. 2386).

                               46

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

   In June 1999, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 requires us to
record all derivatives in the consolidated balance sheet as either assets or
liabilities measured at fair value. If the derivative does not qualify as a
hedging instrument, the change in the derivative fair values will be
immediately recognized as gain or loss in earnings. If the derivative does
qualify as a hedging instrument, the gain or loss on the change in the
derivative fair values will either be recognized (i) in earnings as offsets
to the changes in the fair value of the related item being hedged or (ii) be
deferred and recorded as a component of other comprehensive income and
reclassified to earnings in the same period during which the hedged
transactions occur. We have not yet determined what impact the adoption of
SFAS No. 133 will have on our financial statements. Implementation of this
standard has recently been delayed by the FASB for a twelve month period. We
will adopt SFAS No. 133 as required for our first quarterly filing of fiscal
year 2001.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

   The Company uses various financial instruments, particularly interest rate
and currency swaps, forward delivery commitments, futures and options
contracts and currency forwards, to manage and reduce the interest rate risk
related specifically to its committed mortgage pipeline, mortgage loan
inventory, mortgage servicing rights, mortgage-backed securities, and debt.
Such financial instruments are also used to manage and reduce the foreign
currency exchange rate risk related to its foreign currency denominated
translational and transactional exposures. The Company is exclusively an end
user of these instruments, which are commonly referred to as derivatives. The
Company does not engage in trading, market-making, or other speculative
activities in the derivatives markets. The Company's derivative financial
instruments are designated as hedges of underlying exposures, as those
instruments demonstrate high correlation in relation to the asset or
transaction being hedged. More detailed information about these financial
instruments is provided in Notes 15 and 16 to the Consolidated Financial
Statements.

   Interest and currency rate risks are the principal market exposures of the
Company.

   o     Interest rate movements in one country as well as relative interest
         rate movements between countries can materially impact the Company's
         profitability. The Company's primary interest rate exposure is to
         interest rate fluctuations in the United States, specifically
         long-term U.S. Treasury and mortgage interest rates due to their
         impact on mortgagor prepayments, mortgage loans held for sale, and
         anticipated mortgage production arising from commitments issued and
         LIBOR and commercial paper interest rates due to their impact on
         variable rate borrowings. The Company anticipates that such interest
         rates will remain a primary market exposure of the Company for the
         foreseeable future.

   o     The Company's primary foreign currency rate exposure is to exchange
         rate fluctuations of the British pound sterling. The Company
         anticipates that such foreign currency exchange rate will remain a
         primary market exposure of the Company for the foreseeable future.

   The Company assesses its market risk based on changes in interest and
foreign currency exchange rates utilizing a sensitivity analysis. The
sensitivity analysis measures the potential loss in earnings, fair values,
and cash flows based on a hypothetical 10% change (increase and decrease) in
interest and currency rates.

   The Company uses a discounted cash flow model in determining the fair
market value of relocation receivable, equity advances on homes, mortgages,
commitments to fund mortgages, mortgage servicing rights and mortgage-backed
securities. The primary assumptions used in these models are prepayment
speeds and discount rates. In determining the fair market value of mortgage
servicing rights and mortgage-backed securities, the models also utilize as
primary assumptions credit losses and mortgage servicing revenues and
expenses. In addition, for commitments to fund mortgages, the borrowers
propensity to close their mortgage loan under the commitment is used as a
primary assumption. For mortgages and commitments to fund mortgages forward
delivery contracts and options, the Company uses an option-adjusted spread
("OAS") model in determining the impact of interest rate shifts. The

                               47

Company also utilizes the OAS model to determine the impact of interest rate
shifts on mortgage servicing rights and mortgage-backed securities. The
primary assumption in an OAS model is the implied market volatility of
interest rates and prepayment speeds and the same primary assumptions used in
determining fair market value.

   The Company uses a duration-based model in determining the impact of
interest rate shifts on its debt portfolio and interest rate derivatives
portfolios. The primary assumption used in these models is that a 10%
increase or decrease in the benchmark interest rate produces a parallel shift
in the yield curve across all maturities.

   The Company uses a current market pricing model to assess the changes in
the value of the U.S. dollar on foreign currency denominated derivatives and
monetary assets and liabilities. The primary assumption used in these models
is that the U.S. dollar uniformly weakened or strengthened by a 10% change
against all currency exposures of the Company at September 30, 1999.

   The Company's total market risk is influenced by a wide variety of factors
including the volatility present within the markets and the liquidity of the
markets. There are certain limitations inherent in the sensitivity analyses
presented. While probably the most meaningful analysis permitted, these
"shock tests" are constrained by several factors, including the necessity to
conduct the analysis based on a single point in time and the inability to
include the complex market reactions that normally would arise from the
market shifts modeled.

   The Company used September 30, 1999 market rates on its instruments to
perform the sensitivity analyses separately for each of the Company's market
risk exposures -interest and currency rate instruments. The estimates are
based on the market risk sensitive portfolios described in the preceding
paragraphs above and assuming instantaneous, parallel shifts in interest rate
yield curves and exchange rates.

   The Company has determined that the impact of a 10% change in interest and
foreign currency exchange rates and prices on its earnings, fair values and
cash flows would not be material.

   While these results may be used as benchmarks, they should not be viewed
as forecasts.

                               48

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

   The discussions contained under the headings "Litigation Settlement" in
Note 9 and "Litigation -- Accounting Irregularities" in Note 10 contained in
PART I -- FINANCIAL INFORMATION, Item 1 -- Financial Statements, are
incorporated herein by reference in their entirety.

                               49

ITEM 6. EXHIBITS AND REPORT ON FORM 8-K

   (a)    Exhibits

          27  Financial data schedule (electronic transmission only)

   (b)    Reports on Form 8-K

          Form 8-K, dated July 9, 1999, reporting in Item 2 the disposition
          of our fleet business segment and reporting in Item 5 the
          resignation of three directors.

          Form 8-K, dated July 16, 1999, reporting in Item 5 the preliminary
          results of our Dutch Auction self-tender offer.

          Form 8-K, dated July 23, 1999, reporting on Item 5 our 1999 second
          quarter results.

          Form 8-K, dated September 16, 1999, reporting in Item 5 the sale of
          our Entertainment Publications unit and the creation of the
          Netmarket Group.

                               50

                                    SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

                                      CENDANT CORPORATION

                                      By: /s/ David M. Johnson
                                      ----------------------------------------
                                      David M. Johnson Senior Executive Vice
                                      President and Chief Financial Officer

                                      By: /s/ Jon F. Danski
                                      Jon F. Danski Executive Vice President,
                                      Finance and
Date: February 4, 2000                Chief Accounting Officer

                               51