EXHIBIT 99.3 PRO FORMA FINANCIAL INFORMATION (unaudited) The following Unaudited Pro Forma Condensed Combined Balance Sheet gives effect to the planned acquisition of Galileo International, Inc. ("Galileo"). The following Unaudited Pro Forma Condensed Combined Statements of Operations give effect to the planned acquisition of Galileo and the Company's March 1, 2001 acquisition of Avis Group Holdings, Inc. ("Avis"). Both transactions have been accounted for under the purchase method of accounting. Since the acquisition of Avis occurred prior to March 31, 2001, the financial position of Avis has been included in the Company's historical balance sheet as of March 31, 2001. The Unaudited Pro Forma Condensed Combined Balance Sheet assumes the acquisition of Galileo occurred on March 31, 2001. The Unaudited Pro Forma Condensed Combined Statements of Operations assume the acquisitions of Avis and Galileo occurred on January 1, 2000. The unaudited pro forma financial data is based on the historical consolidated financial statements of the Company, Avis and Galileo under the assumptions and adjustments set forth in the accompanying explanatory notes. The Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2000 also gives effect to various significant finance-related activities that occurred during the first quarter of 2001 (the "Financing Activities"), which comprise the issuance of debt securities (net of debt retirements) and equity securities, the conversion of PRIDES to CD common stock and the issuance of zero-coupon convertible notes. The Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2000 assumes the Financing Activities occurred on January 1, 2000. In addition, the Unaudited Pro Forma Condensed Combined Balance Sheet also gives effect to the May 2001 issuance of zero-coupon zero-yield senior convertible notes, which are assumed to be issued on March 31, 2001. For purposes of developing the Unaudited Pro Forma Condensed Combined Balance Sheet, Galileo's assets and liabilities were recorded at their estimated fair market values and the excess purchase price was assigned to goodwill and other identifiable intangibles. The fair market values were based on preliminary estimates which are subject to revision upon consummation of the acquisition of Galileo. Since Avis was consolidated with the Company as of March 1, 2001, the results of operations of Avis between January 1, 2001 and February 28, 2001 were combined with the Company's results of operations to report the combined pro forma results of operations for the three months ended March 31, 2001. The pro forma results of the combined company were then added to Galileo's results of operations for the three months ended March 31, 2001 and for the year ended December 31, 2000, subject to certain pro forma adjustments, to provide the Unaudited Pro Forma Condensed Combined Statements of Operations. All intercompany transactions were eliminated on a pro forma basis. Historically, Avis paid the Company for services the Company provided related to call centers and information technology and for the use of the Company's trademarks and Avis paid Galileo for services Galileo provided related to reservations for vehicle rentals. The Unaudited Pro Forma Condensed Combined Balance Sheet reflects the disbursement of $33 in cash to Avis stockholders for each share of Avis common stock acquired. The Company made payments totaling approximately $994 million, including payments of $937 million to Avis stockholders, direct expenses of $40 million related to the transaction and the net cash obligation of $17 million related to Avis stock options settled prior to consummation. The purchase price also included the fair value of CD common stock options exchanged with certain fully-vested Avis stock options. The Unaudited Pro Forma Condensed Combined Balance Sheet reflects the purchase price being funded by the issuance of $600 million in debt, with the remaining amount provided in cash. The pro forma adjustments relating to the acquisition of Galileo assume a combination of a disbursement of CD common stock and cash aggregating an expected value of $33 for each share of Galileo common stock outstanding and the conversion of Galileo stock options to CD common stock options. Cendant will pay aggregate consideration and expenses totaling $3,052 million, including payments of cash and stock totaling $2,895 million to Galileo stockholders, expenses of $48 million related to the conversion of Galileo stock options to CD common stock options and estimated transaction expenses of $109 million directly related to the acquisition of Galileo. Approximately $2,330 million of the merger consideration is expected to be funded through the issuance of CD common stock, with the remainder being financed by debt issuances. The Unaudited Pro Forma Condensed Combined Statements of Operations reflect incremental interest expense based upon an assumed rate of 7.5% for any new debt issuances. In addition, Cendant's assumption of Galileo's net debt of approximately $620 million is reflected in the Unaudited Pro Forma Condensed Combined Balance Sheet. The unaudited pro forma financial information has been prepared assuming that the price of CD common stock is $19 on the date of the acquisition of Galileo, which reflects the market value of CD common stock on the date the planned acquisition of Galileo was announced. The purchase price may change based on fluctuations in the price of CD common stock, but is subject to a collar as described in Notes (k) and (p) to the Unaudited Pro Forma Condensed Combined Statements of Operations for the three months ended March 31, 2001 and for the year ended December 31, 2000, respectively. In August 2000, Avis contributed its European vehicle management and leasing business ("PHH Europe") to a newly formed joint venture in exchange for cash, settlement of intercompany debt and a 20% interest in the venture (the "PHH Europe Transaction"). The accompanying Supplemental Unaudited Pro Forma Condensed Combined Statement of Operations of Avis for the year ended December 31, 2000 has been adjusted to reflect the PHH Europe Transaction. In connection with various acquisitions, the Company intends to review acquired operations, which may result in a plan to realign or reorganize certain of those operations. The cost of implementing such a plan, if it were to occur, have not been reflected in the accompanying pro forma financial information. The impact of a potential realignment could increase or decrease the amount of goodwill and intangible assets and the related amortization in the accompanying pro forma financial information. The Unaudited Pro Forma Condensed Combined Statements of Operations exclude any benefits that might result from the acquisitions due to synergies that may be derived or from the elimination of duplicate efforts. The Company's management believes that the assumptions used provide a reasonable basis on which to present the unaudited pro forma financial information. The Company has completed other acquisitions and dispositions which are not significant and, accordingly, have not been included in the accompanying unaudited pro forma financial information. The unaudited pro forma financial information may not be indicative of the financial position or results of operations that would have occurred if the acquisition of Avis, the planned acquisition of Galileo and the Financing Activities had been in effect on the dates indicated or which might be obtained in the future. The unaudited pro forma financial information should be read in conjunction with the historical consolidated financial statements and accompanying notes thereto for the Company, Avis and Galileo, which have been incorporated by reference or included herein. Certain reclassifications have been made to the historical amounts of Galileo to conform with the Company's classification 2 UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 2001 (IN MILLIONS) PURCHASE HISTORICAL HISTORICAL AND OTHER COMBINED CENDANT GALILEO ADJUSTMENTS PRO FORMA ---------- ---------- ----------- --------- ASSETS Current assets Cash and cash equivalents $ 2,092 $ 11 $ 986 (a) $ 3,089 Receivables, net 1,380 271 - 1,651 Other current assets 1,030 52 1,082 -------- ------- ------- -------- Total current assets 4,502 334 986 5,822 Property and equipment, net 1,508 373 22 (c) 1,903 Stockholder litigation settlement trust 600 - - 600 Deferred income taxes 1,358 - - 1,358 Franchise agreements, net 1,514 - - 1,514 Goodwill, net 4,950 300 2,313 (c) 7,563 Other intangibles, net 764 455 308 (c) 1,527 Other assets 1,738 81 14 (b) 1,833 -------- ------- ------- -------- Total assets exclusive of assets under programs 16,934 1,543 3,643 22,120 -------- ------- ------- -------- Assets under management and mortgage programs Relocation receivables 329 - - 329 Mortgage loans held for sale 917 - - 917 Mortgage servicing rights 1,667 - - 1,667 Vehicle-related, net 7,747 - - 7,747 -------- ------- ------- -------- 10,660 - - 10,660 -------- ------- ------- -------- TOTAL ASSETS $ 27,594 $ 1,543 $ 3,643 $ 32,780 ======== ======= ======= ======== Liabilities and stockholders' equity Current liabilities Accounts payable and other current liabilities $ 2,258 $ 287 $ - $ 2,545 Current portion of long-term debt 267 188 1,000 (a) 1,455 Deferred income 1,046 - - 1,046 Deferred income taxes 227 - 82 (c) 309 -------- ------- ------- -------- Total current liabilities 3,798 475 1,082 5,355 Long-term debt 3,903 434 674 (d) 5,011 Stockholder litigation settlement 2,850 - - 2,850 Other liabilities 706 143 - 849 -------- ------- ------- -------- Total liabilities exclusive of liabilities under programs 11,257 1,052 1,756 14,065 -------- ------- ------- -------- Liabilities under management and mortgage programs Debt 9,589 - - 9,589 Deferred income taxes 1,030 - - 1,030 -------- ------- ------- -------- 10,619 - - 10,619 -------- ------- ------- -------- Mandatorily redeemable preferred interest in a subsidiary 375 - - 375 -------- ------- ------- -------- Stockholders' equity 5,343 491 1,887 (e) 7,721 -------- ------- ------- -------- Total liabilities and stockholders' equity $ 27,594 $ 1,543 $ 3,643 $ 32,780 ======== ======= ======= ======== See accompanying Notes to Unaudited Pro Forma Condensed Combined Balance Sheet. 3 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 2001 (DOLLARS IN MILLIONS) The accompanying Unaudited Pro Forma Condensed Combined Balance Sheet was prepared to reflect the planned acquisition of Galileo, which will be accounted for under the purchase method of accounting, and the issuance of zero-coupon zero-yield senior convertible notes. The purchase price of $3,052 (including $109 of estimated expenses directly attributable to the acquisition of Galileo and $48 of the estimated fair value of CD common stock options issued in exchange for Galileo stock options) was based on acquiring 100% of the Galileo common stock outstanding at $33 per share. (a) Represents debt associated with the May 2001 issuance of the zero-coupon zero-yield senior convertible notes for gross proceeds of $1,000 (net proceeds of $986). (b) Represents deferred financing costs of $14 associated with the May 2001 issuance of the zero-coupon zero-yield senior convertible notes. (c) Represents the excess of the cost over the preliminary estimate of the fair value of the identifiable net assets acquired, calculated as follows: Calculation of acquisition goodwill Cash consideration $ 674 Issuance of CD common stock 2,330 Preliminary estimate of fair value of CD common stock options issued in exchange for Galileo stock options 48 ------- Total purchase price 3,052 ------- Preliminary estimate of fair value of identifiable net assets acquired Book value of Galileo 491 Elimination of Galileo goodwill (300) Preliminary estimate of adjustments to fair value of identifiable intangible assets 308 Preliminary estimate of adjustment to fair value of computer software 22 Deferred tax liability on fair value adjustments and transaction costs (82) ------- Preliminary estimate of fair value of identifiable net assets acquired 439 ------- Acquisition goodwill $ 2,613 ======= Calculation of acquisition goodwill adjustment Acquisition goodwill $ 2,613 Historical Galileo goodwill (300) ------- Acquisition goodwill adjustment $ 2,313 ======= (d) Represents the issuance of $674 of debt to finance a portion of the acquisition price ($565) and to pay fees directly associated with the acquisition ($109). (e) Represents the issuance of CD common stock valued at $2,330 in exchange for outstanding shares of Galileo common stock, the issuance of CD common stock options valued at $48 in exchange for Galileo stock options and the elimination of Galileo equity balances aggregating $491. 4 UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) HISTORICAL AVIS HISTORICAL AVIS PURCHASE ADJUSTED CENDANT JAN 1- FEB 28, 2001 ADJUSTMENTS CENDANT ---------- ------------------- ----------- -------- REVENUES Membership and service fees, net $ 1,076 $ 27 $ (34) (A) $ 1,069 Vehicle-related 398 594 - 992 Global distribution services - - - - Other 12 20 - (B) 32 ------- ----- ----- ------- Net revenues 1,486 641 (34) 2,093 EXPENSES Operating 451 174 (34) (A) 591 Vehicle depreciation, lease charges and interest, net 181 284 - 465 Selling, general and administrative 411 115 - 526 Non-vehicle depreciation and amortization 101 23 2 (D) 126 Other charges, net 204 - - 204 Non-vehicle interest, net 60 78 1 (C) 139 Other, net - - - - ------- ----- ----- ------- Total expenses 1,408 674 (31) 2,051 ------- ----- ----- ------- Net gain on dispositions of businesses 435 - - 435 ------- ----- ----- ------- INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST AND EQUITY IN HOMESTORE.COM 513 (33) (3) 477 Provision (benefit) for income taxes 205 (10) (2) (E) 193 Minority interest, net of tax 13 - - 13 Losses related to equity in Homestore.com, net of tax 18 - - 18 ------- ----- ----- ------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 277 $ (23) $ (1) $ 253 ======= ===== ===== ======= CD COMMON STOCK INCOME PER SHARE INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE Basic $ 0.32 $ 0.29 Diluted 0.30 0.28 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 790 790 Diluted 830 830 MOVE.COM COMMON STOCK INCOME PER SHARE INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE Basic $ 10.41 $ 10.41 Diluted 10.13 10.13 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 2 2 Diluted 3 3 GALILEO HISTORICAL PURCHASE COMBINED GALILEO ADJUSTMENTS PRO FORMA ---------- ----------- --------- REVENUES Membership and service fees, net $ - $ - $ 1,069 Vehicle-related - - 992 Global distribution services 443 (3)(F) 440 Other 23 - 55 ----- ---- ------- Net revenues 466 (3) 2,556 EXPENSES Operating 104 (3)(F) 692 Vehicle depreciation, lease charges and interest, net - - 465 Selling, general and administrative 191 - 717 Non-vehicle depreciation and amortization 67 (4)(G) 189 Other charges, net - - 204 Non-vehicle interest, net 10 13 (H) 162 Other, net 4 - 4 ----- ---- ------- Total expenses 376 6 2,433 ----- ---- ------- Net gain on dispositions of businesses - 435 ----- ---- ------- INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST AND EQUITY IN HOMESTORE.COM 90 (9) 558 Provision (benefit) for income taxes 40 (3)(I) 230 Minority interest, net of tax - 13 Losses related to equity in Homestore.com, net of tax - 18 ----- ---- ------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 50 $ (6) $ 297 ===== ==== ======= CD COMMON STOCK INCOME PER SHARE INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE Basic $ 0.30 (K) Diluted 0.29 (K) WEIGHTED AVERAGE SHARES OUTSTANDING Basic 123 (J) 913 Diluted 123 (J) 953 MOVE.COM COMMON STOCK INCOME PER SHARE INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE Basic $ 10.41 Diluted 10.13 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 2 Diluted 3 SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS. 5 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) The following pro forma adjustments relate to the acquisition of Avis and the Financing Activities. (a) Represents the elimination of amounts paid by Avis to the Company for services provided related to call centers and information technology and for the use of trademarks. (b) Represents the elimination of the Company's earnings attributable to its investment in Avis for which the combined effect is zero. (c) Represents interest expense on debt issued to finance the acquisition of Avis ($7), net of the amortization of the fair value adjustment on acquired debt ($4) and the reversal of Avis' amortization of debt-related costs ($2). (d) Represents the amortization of goodwill generated on the excess of fair value over the net assets acquired on a straight-line basis over 40 years, net of the reversal of Avis' amortization of pre-acquisition goodwill and other identifiable intangibles resulting from the allocation of purchase price on a straight-line basis over 20 years. (e) Represents the income tax effect of the purchase adjustments and other pro forma adjustments at an estimated statutory rate of 38.5% (not including adjustments for non-deductible goodwill). The following pro forma adjustments relate to the acquisition of Galileo. (f) Represents the elimination of amounts paid by Avis to Galileo for services provided related to reservations for vehicle rentals. (g) Represents the amortization of goodwill generated on the estimated excess of fair value over the net assets acquired on a straight-line basis over 40 years ($16) and the amortization of the estimated identifiable intangibles on a straight-line basis with lives ranging from 5 to 20 years ($11), net of the reversal of Galileo's amortization of pre-acquisition goodwill and other identifiable intangibles ($31). (h) Represents interest expense relating to the assumed issuance of debt used to finance a portion of the acquisition of Galileo. Assuming interest rates changed by .125%, the related interest expense and pre-tax impact on earnings would be $0.2. (i) Represents the income tax effect of the purchase adjustments and other pro forma adjustments at an estimated statutory rate of 38.5% (not including adjustments for non-deductible goodwill). (j) Represents the issuance of 123 million shares of CD common stock used to fund a portion of the acquisition of Galileo. (k) The purchase price is subject to a collar for fluctuations in the price of CD common stock between $17 and $20. The total purchase price is fixed for price fluctuations between $17 and $20, but the number of shares of CD common stock to be issued will change to equal $2,330 in value. The impact on earnings per share is approximately $.002 for each dollar movement between $17 and $20. The impact for fluctuations outside the collar would result only from changes in the annual goodwill amortization as the number of shares of CD common stock to be issued is fixed outside the collar. The related impact on earnings per share would be less than $.002 for each dollar movement outside the collar. The earnings per share reflected herein is based on an estimated price of CD common stock of $19, which reflects the market value of CD common stock on the date the planned acquisition of Galileo was announced. 6 UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) AVIS HISTORICAL ADJUSTED PURCHASE CENDANT AVIS(*) ADJUSTMENTS ------------ ---------- ---------------- REVENUES Membership and service fees, net $4,512 $ 155 $ (173)(a) Vehicle-related -- 3,783 -- Global distribution services -- -- -- Other 147 151 (39)(b) ------- ------- ------- Net revenues 4,659 4,089 (212) EXPENSES Operating 1,426 966 (173)(a) Vehicle depreciation, lease charges and interest, net -- 1,671 -- Selling, general and administrative 1,508 637 -- Non-vehicle depreciation and amortization 352 74 16(c) Other charges, net 111 -- -- Non-vehicle interest, net 148 482 6(e) Other, net -- -- -- ------- ------- ------- Total expenses 3,545 3,830 (151) ------- ------- ------- Net loss on dispositions of businesses (8) -- (35)(e) --------- ------- ------- Income before income taxes, minority interest and equity in Homestore.com 1,106 29 (96) Provision for income taxes 362 117 (30)(f) Minority interest, net of tax 84 7 -- -------- ------- ------- Income before extraordinary loss and cumulative effect of accounting change $ 660 $ 135 $ (66) ======== ======= ======= CD COMMON STOCK INCOME PER SHARE INCOME BEFORE EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE Basic $ 0.92 Diluted 0.89 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 724 Diluted 762 MOVE.COM COMMON STOCK INCOME PER SHARE INCOME BEFORE EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE Basic $(1.76) Diluted (1.76) WEIGHTED AVERAGE SHARES OUTSTANDING Basic 3 Diluted 3 OTHER GALILEO PRO FORMA ADJUSTED HISTORICAL PURCHASE COMBINED ADJUSTMENTS CENDANT GALILEO ADJUSTMENTS PRO FORMA --------------- ---------- ------------ ------------- -------------- REVENUES Membership and service fees, net $ -- $ 4,494 $ -- $ -- $ 4,494 Vehicle-related -- 3,783 -- -- 3,783 Global distribution services -- -- 1,561 (12)(k) 1,549 Other -- 259 82 -- 341 ------- ------- ------- ------- ------- Net revenues -- 8,536 1,643 (12) 10,167 EXPENSES Operating -- 2,219 368 (12)(i) 2,575 Vehicle depreciation, lease charges and interest, net -- 1,671 -- -- 1,671 Selling, general and administrative -- 2,145 678 -- 2,823 Non-vehicle depreciation and amortization -- 442 241 2(l) 685 Other charges, net -- 111 28 -- 139 Non-vehicle interest, net 54(g,i) 690 45 51(m) 786 Other, net -- -- 17 -- 17 ------- ------- ------- ------- ------- Total expenses 54 7,278 1,377 41 8,696 ------- ------- ------- ------- ------- Net loss on dispositions of businesses -- (43) -- -- (43) ------- ------- ------- ------- ------- Income before income taxes, minority interest and equity in Homestore.com (54) 1,215 266 (53) 1,428 Provision for income taxes (20)(f) 429 117 (13)(n) 533 Minority interest, net of tax (66)(h) 25 -- -- 25 ------- ------- ------- ------- ------- Income before extraordinary loss and cumulative effect of accounting change $ 32 $ 761 $ 149 $ (40) $ 870 ======= ======= ======= ======= ======= CD COMMON STOCK INCOME PER SHARE INCOME BEFORE EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE Basic $ 0.92 $ 0.92(p) Diluted 0.90 0.89 (p) WEIGHTED AVERAGE SHARES OUTSTANDING Basic 107(j) 831 123(o) 954 Diluted 107(j) 869 123(o) 992 MOVE.COM COMMON STOCK INCOME PER SHARE INCOME BEFORE EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE Basic $ (1.76) $ (1.76) Diluted (1.76) (1.76) WEIGHTED AVERAGE SHARES OUTSTANDING Basic 3 3 Diluted 3 3 - ---------- (*) See Supplemental Unaudited Condensed Combined Statemend of Operation and Notes included herein. SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS. 7 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) The following pro forma adjustments relate to the acquisition of Avis and the Financing Activities. (a) Represents the elimination of amounts paid by Avis to the Company for services provided related to call centers and information technology and for the use of trademarks. (b) Represents the elimination of the Company's earnings attributable to its investment in Avis. (c) Represents the amortization of goodwill generated on the excess of fair value over the net assets acquired on a straight-line basis over 40 years, net of the reversal of Avis' amortization of pre-acquisition goodwill and other identifiable intangibles resulting from the allocation of purchase price on a straight-line basis over 20 years. (d) Represents interest expense on debt issued to finance the acquisition of Avis ($44), net of amortization of the fair value adjustment on acquired debt ($23) and the reversal of Avis' amortization of debt related costs ($13). (e) Represents the reversal of a gain of $35 million recorded by the Company, which represents the recognition of a portion of its previously recorded deferred gain from the 1999 sale of its fleet business due to the disposition of PHH Europe by Avis in August 2000. (f) Represents the income tax effect of the purchase adjustments and other pro forma adjustments at an estimated statutory rate of 37.5% (not including adjustments for non-deductible goodwill), except Note (e) above where the tax effect was approximately 2%, which represented the rate at which taxes were provided on the related gain. (g) Represents interest expense relating to the issuance of the zero-coupon convertible notes, medium-term notes, borrowing under a $650 million term loan agreement and the repayment of an existing term loan, net of interest expense allocated to the acquisition of Avis (See Note (d) above). (h) Represents the reduction in preferred stock dividends resulting from the conversion of the PRIDES to CD common stock. (i) No adjustment has been made to reduce interest expense for interest income on the incremental cash of $1,587 raised through the Financing Activities. Assuming the incremental cash was invested at 5%, which represents the Company's current rate for cash investments, interest expense would have been reduced by $79. Additionally, income before extraordinary loss and cumulative effect of accounting change and income per share before extraordinary loss and cumulative effect of accounting change would have improved by $49 and $0.06, respectively. (j) Represents the issuance of CD common stock of 61 million shares and 46 million shares relating to the conversion of PRIDES to CD common stock and the issuance of CD common stock, respectively. The following pro forma adjustments relate to the acquisition of Galileo. (k) Represents the elimination of amounts paid by Avis to Galileo for services provided related to reservations for vehicle rentals. (l) Represents the amortization of goodwill generated on the excess of fair value over the net assets acquired on a straight-line basis over 40 years ($65) and the amortization of the estimated identifiable intangibles on a straight-line basis with lives ranging from 5 to 20 years ($46), net of the reversal of Galileo's amortization of pre-acquisition goodwill and other identifiable intangibles ($109). (m) Represents interest expense relating to the assumed issuance of debt used to fund the acquisition of Galileo. Assuming interest rates changed by .125%, the related interest expense and pre-tax impact on earnings would be $0.8. (n) Represents the income tax effect of the purchase adjustments and other pro forma adjustments at an estimated statutory rate of 37.5% (not including adjustments for non-deductible goodwill). (o) Represents the issuance of 123 million shares of CD common stock used to fund a portion of the acquisition of Galileo. (p) The purchase price is subject to a collar for fluctuations of the price of CD common stock between $17 and $20. The total purchase price is fixed for price fluctuations between $17 and $20, but the number of shares of CD common stock to be issued will change to equal $2,330 in value. The impact on earnings per share is approximately $.006 for each dollar movement between $17 and $20. The impact for fluctuations outside the collar would result only from changes in the annual goodwill amortization as the number of shares of CD common stock to be issued is fixed outside the collar. The related impact on earnings per share would be less than $.007 for each dollar movement outside the collar. The earnings per share reflected herein is based on an estimated price of CD common stock of $19, which reflects the market value of CD common stock on the date the planned acquisition of Galileo was announced. 8 SUPPLEMENTAL UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 (IN MILLIONS) The following unaudited pro forma financial information was prepared to reflect the historical consolidated financial statements of Avis, excluding the PHH Europe Transaction. Avis will receive an annual license fee in connection with the PHH Europe Transaction from the joint venture for the license of the PHH fleet management technology, PHH interactive. Avis utilized the proceeds of the PHH Europe Transaction to reduce their indebtedness and to pay transaction costs. HISTORICAL SALE OF PRO FORMA ADJUSTED AVIS PHH EUROPE(A) ADJUSTMENTS AVIS ----------- --------------- ------------- ---------- REVENUES Service fees, net $ 241 $ (86) $ -- $ 155 Vehicle rental 2,467 -- -- 2,467 Vehicle leasing and other fees 1,389 (73) -- 1,316 Other 146 -- 5(b) 151 ------ ----- ------ ------ Net revenues 4,243 (159) 5 4,089 EXPENSES Operating 966 -- -- 966 Vehicle depreciation and lease charges 1,695 (224) -- 1,671 Selling, general and administrative 693 (56) -- 637 Interest, net 577 (37) (58)(c) 482 Depreciation and amortization 89 (12) (3)(d) 74 ------ ----- ------ ------ Total expenses 4,020 (129) (61) 3,830 INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST 223 (30) 66 259 Provision (benefit for income taxes 95 (3) 25(e) 117 Minority interest 7 -- -- 7 ------ ------- ------ ------ INCOME (LOSS) BEFORE EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 121 $ (27) $ 41 $ 135 ====== ======= ====== ====== SEE ACCOMPANYING NOTES TO SUPPLEMENTAL UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS. 9 NOTES TO SUPPLEMENTAL UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 (DOLLARS IN MILLIONS) (a) Represents adjustments to pro forma the results of operations of PHH Europe, assuming that the PHH Europe Transaction occurred on January 1, 2000. (b) Represents fleet management technology fee income and the equity in the earnings of the joint venture formed pursuant to the PHH Europe Transaction, net of the amortization of the excess of cost over the assets acquired. (c) Represents a reduction in interest expense resulting from the retirement of acquisition debt and revolving credit facilities related to the application of proceeds of $1,053 from the PHH Europe Transaction. (d) Represents a decrease in amortization expense relating to goodwill generated from the PHH Europe Transaction, net of the reversal of PHH Europe goodwill. (e) Represents the income tax effect of the pro forma adjustments at an estimated statutory rate of 39% (not including adjustments for non-deductible goodwill). 10