70 EXHIBIT 99.2 RESTATEMENT OF QUARTERLY PERIODS ENDED JUNE 30, 1997 AND 1996 71 CENDANT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) JUNE 30, DECEMBER 31, 1997 1996 --------------- --------------- ASSETS Current assets Cash and cash equivalents $ 791,001 $ 633,903 Marketable securities 473,501 94,200 Receivables, net 1,409,026 1,290,625 Other current assets 581,973 510,865 --------------- --------------- Total current assets 3,255,501 2,529,593 --------------- --------------- Deferred membership acquisition costs 382,081 401,564 Franchise agreements, net 948,753 995,947 Goodwill, net 1,868,438 2,302,226 Other intangibles, net 1,192,028 636,230 Other assets 1,180,159 993,574 --------------- --------------- Total assets exclusive of assets under programs 8,826,960 7,859,134 --------------- --------------- Assets under management and mortgage programs Net investment in leases and leased vehicles 3,643,601 3,418,666 Relocation receivables 579,575 773,326 Mortgage loans held for sale 820,615 1,248,299 Mortgage servicing rights and fees 272,042 288,943 --------------- --------------- 5,315,833 5,729,234 --------------- --------------- TOTAL ASSETS $ 14,142,793 $ 13,588,368 =============== =============== See accompanying notes to supplemental consolidated financial statements. 72 CENDANT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA) JUNE 30, DECEMBER 31, 1997 1996 ---------------- --------------- LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable, accrued expenses and other current liabilities $ 1,768,450 $ 1,664,946 --------------- --------------- Deferred income 944,149 1,099,393 Long-term debt 1,928,394 1,004,584 Other noncurrent liabilities 131,684 124,885 --------------- --------------- Total liabilities exclusive of liabilities under programs 4,772,677 3,893,808 --------------- --------------- Liabilities under management and mortgage programs Debt 4,776,153 5,089,943 Deferred income taxes 301,200 281,948 --------------- --------------- 5,077,353 5,371,891 --------------- --------------- Commitments and contingencies SHAREHOLDERS' EQUITY Preferred stock, $1.00 par value - authorized 10 million shares; none issued and outstanding -- -- Common stock, $.01 par value - authorized 2 billion shares; issued 818,401,590 and 804,655,850 shares, respectively 8,184 8,047 Additional paid-in capital 2,939,075 2,870,422 Retained earnings 1,642,188 1,556,300 Net unrealized gain on marketable securities -- 4,334 Currency translation adjustment (21,064) (12,452) Restricted stock, deferred compensation (27,714) (28,212) Treasury stock, at cost (13,587,712 and 6,911,757 shares, respectively) (247,906) (75,770) ---------------- ----------------- Total shareholders' equity 4,292,763 4,322,669 --------------- --------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 14,142,793 $ 13,588,368 =============== =============== See accompanying notes to supplemental consolidated financial statements. 73 CENDANT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------------- ----------------------------- 1997 1996 1997 1996 -------------- ----------- ------------- ------------- REVENUES Membership and service fees, net $ 1,084,475 $ 764,972 $ 2,015,473 $ 1,427,975 Fleet leasing (net of depreciation and interest costs of $298,200, $272,871, $584,275 and $555,994, respectively) 65,786 62,822 146,581 133,770 Other 150,252 107,845 296,657 195,305 ------------ ------------- ------------- ----------- Net revenues 1,300,513 935,639 2,458,711 1,757,050 ------------ ------------- ------------- ----------- EXPENSES Operating 438,541 334,446 853,356 640,965 Marketing and reservation 315,756 254,044 602,449 493,379 General and administrative 112,984 94,423 218,217 171,954 Merger and related costs and other unusual charges 303,000 28,635 303,000 28,635 Depreciation and amortization 59,422 37,402 120,359 69,626 Interest, net 15,957 7,259 28,358 14,761 ------------ ------------- ------------- ----------- Total expenses 1,245,660 756,209 2,125,739 1,419,320 ------------ ------------- ------------- ----------- Income before income taxes 54,853 179,430 332,972 337,730 Provision for income taxes 68,290 78,366 180,540 140,692 ------------ ------------- ------------- ------------- Net income (loss) $ (13,437) $ 101,064 $ 152,432 $ 197,038 ============== ============= ============= ============= PER SHARE INFORMATION Net income (loss) per share Primary $ (0.02) $ 0.13 $ 0.18 $ 0.25 ============== ============= ============= =========== Fully diluted $ (0.02) $ 0.13 $ 0.18 $ 0.25 ============== ============= ============= =========== Weighted average common and common equivalent shares outstanding Primary 804,246 797,678 875,496 784,106 Fully diluted 804,246 803,484 878,391 792,694 See accompanying notes to supplemental consolidated financial statements. 74 CENDANT CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) SIX MONTHS ENDED JUNE 30, ------------------------------- 1997 1996 ------------- ------------- OPERATING ACTIVITIES: Net income $ 152,432 $ 197,038 Merger related charge 303,000 -- Merger related payments (132,500) -- Depreciation and amortization 107,033 53,219 Increase (decrease) from changes in assets under management programs: Depreciation and amortization under management and mortgage programs 531,646 483,578 Mortgage loans held for sale 427,684 (351,657) Other (224,306) 39,407 ------------- ------------ Net cash provided by operating activities 1,164,989 421,585 ------------- ------------ INVESTING ACTIVITIES: Assets under management and mortgage programs: Investment in leases and leased vehicles (1,179,905) (936,225) Payments received on investment in leases and leased vehicles 437,239 339,680 Equity advances on homes under management (2,136,739) (1,415,655) Repayment of advances on homes under management 2,203,671 1,498,277 Additions to originated mortgage servicing rights (85,995) (89,872) Proceeds from sales of mortgage servicing rights 29,134 7,113 Property and equipment additions (61,676) (51,087) Loans and investments (16,325) (10,000) Proceeds from sales of marketable securities 60,260 75,460 Purchases of marketable securities (458,088) (66,947) Due to Avis Rent A Car, Inc. (47,285) -- Net assets acquired, exclusive of cash acquired (344,030) (1,004,137) Other 40,199 35,099 ---------- ------------ Net cash used in investing activities (1,559,540) (1,618,294) ----------- ------------- FINANCING ACTIVITIES: Proceeds from borrowings 1,284,196 1,073,675 Principal payments on borrowings (1,174,217) (612,144) Net proceeds from issuance of convertible notes 566,083 -- Redemption of series A preferred stock -- (80,000) Net change in short-term borrowings under management and mortgage programs (54,948) 78,958 Issuance of common stock, net 66,778 1,182,454 Purchases of common stock (171,318) -- Stock option plan transactions 22,014 7,074 Payment of dividends of pooled entities (6,644) (14,556) ----------- ------------- Net cash provided by financing activities 531,944 1,635,461 ----------- ----------- Effect of changes in exchange rates on cash and cash equivalents 19,705 (3,003) ----------- ------------ Net increase in cash and cash equivalents 157,098 435,749 Cash and cash equivalents, beginning of period 633,903 355,959 ----------- ------------ Cash and cash equivalents, end of period $ 791,001 $ 791,708 =========== ============ See accompanying notes to supplemental consolidated financial statements. 75 CENDANT CORPORATION AND SUBSIDIARIES - ------------------------------------------------------------------------------- NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION The supplemental consolidated balance sheet of Cendant Corporation and subsidiaries, formerly CUC International Inc. (the "Company"), as of June 30, 1997, the supplemental consolidated statements of income for the three and six months ended June 30, 1997 and 1996, and the supplemental consolidated statements of cash flows for the six months ended June 30, 1997 and 1996, 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 recorded during the three and six months ended June 30, 1997 and 1996, except for a one-time charge of $303.0 million ($227.0 million after tax), recorded in the second quarter of 1997 representing merger and related costs incurred in connection with the merger of HFS Incorporated ("HFS") with PHH Corporation ("PHH") and a non-recurring charge of $28.6 million ($25.1 million after tax), recorded in the second quarter of 1996, representing merger and related costs incurred in connection with the 1996 mergers of the Company with Davidson & Associates, Inc. ("Davidson") and Sierra-On-Line, Inc. ("Sierra") (See Note 3) and a $5.0 million restructuring charge recorded in June 1996, related primarily to the contribution of owned Coldwell Banker brokerage offices to an independent trust. The accompanying supplemental consolidated financial statements include the accounts and transactions of the Company and all wholly-owned and majority owned subsidiaries and joint ventures, except for the Company's ownership of Avis Rent A Car, Inc. ("ARAC"), which is accounted for under the equity method (See Note 5). The accompanying supplemental consolidated financial statements have been restated for the business combinations accounted for as poolings of interests (See Note 2) as if such combined companies had operated as one entity since inception. All material intercompany balances and transactions have been eliminated in consolidation. These supplemental consolidated financial statements will become the Company's primary historical financial statements for the periods presented. The accompanying supplemental consolidated financial statements and notes thereto are presented in accordance with interim financial reporting requirements as required by Form 10-Q and do not include all of the information and the notes required by generally accepted accounting principles for complete financial statements. The December 31, 1996 supplemental consolidated balance sheet was derived from the Company's audited supplemental consolidated financial statements. For further information, refer to the audited supplemental consolidated financial statements and notes thereto included herein as Exhibit 99.1 in this Form 8-K. Interim results are not necessarily indicative of results for a full year. Certain reclassifications have been made to the historical financial statements of the pooled companies to conform to the restated presentation. 2. BUSINESS COMBINATIONS 1997 POOLINGS On December 17, 1997, the Company completed a merger with HFS Incorporated ("HFS") (the "Cendant Merger") by issuing 440.0 million shares of its common stock in exchange for all of the 76 outstanding common stock of HFS. Pursuant to the terms of the agreement and plan of merger, HFS stockholders received 2.4031 shares of Company common stock for each share of HFS common stock. Upon consummation of the Cendant Merger, the Company changed its name from CUC International Inc. to Cendant Corporation. In connection with the Cendant Merger, the Company changed its fiscal year end from January 31 to December 31. HFS has a calendar year end and the Company has only recalendarized its 1997 results. Accordingly, the HFS statements of income for the three and six months ended June 30, 1997 and 1996 have been combined with the Company's statements of income for the three and six months ended June 30, 1997 and July 31, 1996, respectively. On October 3,1997, the Company, through a wholly-owned subsidiary ("Acquisition Sub"), acquired all of the outstanding capital stock of Hebdo Mag International Inc. ("Hebdo Mag") pursuant to the terms of a share purchase agreement dated August 13, 1997 among the Company, Acquisition Sub, Hebdo Mag and other parties thereto. The purchase price of approximately $440.0 million was satisfied by the issuance of 14.2 million shares of Company common stock. Hebdo Mag is a leading publisher and distributor of classified advertising information. On April 30, 1997, prior to being merged with and into the Company, HFS acquired PHH by merger (the "HFS/PHH Merger") which was satisfied by the issuance of 72.8 million equivalent shares of Company common stock in exchange for all of the outstanding common stock of PHH. PHH is the world's largest provider of corporate relocation services and also provides mortgage services and fleet management services. In connection with the HFS/PHH Merger, PHH changed its fiscal year end from April 30 to December 30. During February 1997, the Company acquired substantially all of the assets and assumed specific liabilities of Numa Corporation ("Numa") for $73.5 million. The purchase price was satisfied by the issuance of 3.4 million shares of Company common stock. Numa publishes personalized heritage publications and markets and sells personalized merchandise. The following table presents the historical results of the Company and the respective pooled entities for the last complete periods prior to their respective mergers ($000's): THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------------- ----------------------------- 1997 1996 1997 1996 ------------- ------------- ------------- ------------- Net revenues The Company $ 666,586 $ 555,744 $ 1,265,530 $ 1,071,223 HFS (inclusive of PHH) 579,620 345,317 1,099,597 623,044 Hebdo Mag 54,307 34,578 93,584 62,783 ------------- ------------- ------------- ------------- $ 1,300,513 $ 935,639 $ 2,458,711 $ 1,757,050 ============= ============= ============= ============= 77 THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------------- ----------------------------- 1997 1996 1997 1996 ------------- ------------- ------------- ------------- Net income (loss) The Company $ 90,905 $ 40,461 $ 164,529 $ 92,582 HFS (inclusive of PHH) (106,449) 59,939 (15,344) 103,617 Hebdo Mag 2,107 664 3,247 839 ------------- ------------- ------------- ------------- $ (13,437) $ 101,064 $ 152,432 $ 197,038 ============= ============= ============= ============= The following table presents the historical results of HFS and PHH for the periods prior to the HFS/PHH Merger ($000's): THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, 1997 JUNE 30, 1996 -------------------- --------------------- Net revenues HFS $ 347,962 $ 300,403 PHH 177,923 322,641 ------------- ------------- Total $ 525,885 $ 623,044 ============= ============= Net income HFS $ 58,940 $ 61,619 PHH 32,164 41,998 ------------- ------------- Total $ 91,104 $ 103,617 ============= ============= PURCHASE BUSINESS COMBINATIONS During the six months ended June 30, 1997, the Company acquired certain entities for an aggregate purchase price of $49.0 million, satisfied by the payment of $11.2 million in cash and the issuance of 1.5 million shares of Company common stock. The goodwill resulting from these acquisitions aggregated $68.8 million. These acquisitions were accounted for in accordance with the purchase method of accounting and, accordingly, the results of operations have been included in the consolidated results of operations from the respective dates of acquisitions. The results of operations for the periods prior to the respective dates of acquisition were not significant to the Company's operations. 3. MERGER AND RELATED COSTS AND OTHER UNUSUAL CHARGES PHH MERGER CHARGE HFS recorded a one-time merger and related charge (the "PHH Merger Charge") of $303.0 million ($227.0 million, after tax) during the second quarter of 1997 in connection with the HFS/PHH Merger. Excluding the PHH Merger Charge, net income was $213.6 million and $379.4 million for the three and six months ended June 30, 1997, respectively. The PHH Merger Charge is summarized by type as follows (in millions): 78 Personnel related $ 142.4 Professional fees 36.8 Business terminations 44.7 Facility related 57.1 Other costs 22.0 ----------- Total $ 303.0 =========== Personnel related charges are comprised of costs incurred in connection with employee reductions associated with the combination of HFS's relocation service business and the consolidation of corporate activities. Personnel related charges include termination benefits such as severance, medical and other benefits. Also included in personnel related charges are supplemental retirement benefits resulting from the change of control. Several grantor trusts were established and funded by HFS to pay such benefits in accordance with the terms of the HFS/PHH merger agreement. Full implementation of the restructuring plan will result in the termination of approximately 500 employees substantially all of whom are located in North America, of which 126 employees were terminated as of June 30, 1997. Professional fees are primarily comprised of investment banking, accounting and legal fees incurred in connection with the HFS/PHH Merger. Business termination charges relate to the exit from certain activities associated with fleet management, mortgage services and ancillary operations. Facility related expenses include costs associated with contract and lease terminations, asset disposals and other charges incurred in connection with the consolidation and closure of excess space. The Company anticipates that approximately $236.0 million will be paid in cash in connection with the PHH Merger Charge of which $132.5 million was paid through June 30, 1997. The remaining cash portion of the PHH Merger Charge will be financed through cash generated from operations and borrowings under the Company's revolving credit facilities. It is currently anticipated that the restructuring plan will be completed during the first quarter of 1998. Revenue and operating results from activities that will not be continued are not material to the results of operations of the Company. 1996 POOLINGS Principally in connection with the Company's 1996 acquisitions of Davidson, Sierra and Ideon Group, Inc. ("Ideon"), which were accounted for as poolings of interests, the Company recorded a non-recurring charge of approximately $179.9 million ($118.7 million, after tax) for the year ended December 31, 1996. Such charge is comprised of transaction costs, exit costs and a provision relating to certain litigation matters giving consideration to the Company's intended approach to these matters. As of June 30, 1997, such charges amounted to $125.9 million. 4. PRO FORMA INFORMATION The following table reflects the unaudited operating results of the Company for the six months ended June 30, 1996 on a pro forma basis, which gives effect to HFS's 1996 acquisitions, accounted for under the purchase method of accounting as if they occurred on January 1, 1996. Net revenues $ 2,097,948 Net income 262,690 Net income per share (fully diluted) $ 0.31 79 5. INVESTMENT IN ARAC Upon entering into a definitive merger agreement to acquire Avis, Inc. in July 1996, HFS announced its strategy to dilute its interest in ARAC's car rental operations while retaining assets associated with the franchise business, including trademarks, reservation system assets and franchise agreements with ARAC and other licensees. Since HFS's control was planned to be temporary, HFS accounted for its 100% investment in ARAC under the equity method. Summarized financial information for ARAC is as follows ($000's): AVIS RENT A CAR, INC. Balance sheet data: JUNE 30, 1997 DECEMBER 31, 1996 -------------- ----------------- Vehicles $ 2,312,109 $ 2,243,492 Total assets 3,029,073 3,131,357 Debt 2,183,769 2,295,474 Total liabilities 2,941,987 3,054,817 Shareholders' equity 87,086 76,540 THREE MONTHS SIX MONTHS ENDED ENDED Statement of income data: JUNE 30, 1997 JUNE 30, 1997 -------------- ------------- Revenues $ 489,633 $ 945,647 Income before provision for income taxes 17,374 24,360 Net income 9,733 13,106 6. SOFTWARE RESEARCH AND DEVELOPMENT COSTS AND COSTS OF SOFTWARE REVENUE Software research and development costs are included in operating expenses and aggregated $26.6 million and $15.3 million for the three months ended June 30, 1997 and 1996, respectively, and $49.7 million and $30.2 million for the six months ended June 30, 1997 and 1996, respectively. Software net revenue included in Other was $174.0 million and $129.1 million for the six months ended June 30, 1997 and 1996, respectively. Costs of software revenue are included in operating expenses and aggregated $28.3 million and $21.1 million for the three months ended June 30, 1997 and 1996, respectively, and $55.4 million and $45.9 million for the six months ended June 30, 1997 and 1996, respectively. 7. ISSUANCE OF 3% CONVERTIBLE SUBORDINATED NOTES On February 11, 1997, the Company issued $550.0 million in principal amount of 3% Convertible Subordinated Notes (the "3% Notes") due February 15, 2002. Interest on the 3% Notes is payable semi-annually. Each $1,000 principal amount of 3% Notes is convertible into 32.6531 shares of Company common stock subject to adjustment in certain events. The 3% Notes may be redeemed at the option of the Company 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 the indenture governing the 3% Notes) of the Company. Issuance costs are being amortized on a straight-line basis over five years. 80 8. SHAREHOLDERS' EQUITY A. AUTHORIZED SHARES In conjunction with the Cendant Merger effective on December 17, 1997, the Company's shareholders approved an amendment to the Company's restated certificate of incorporation to increase the number of authorized shares of common stock and preferred stock to 2 billion shares and 10 million shares, respectively. The Company has never issued shares of preferred stock. B. TREASURY PURCHASES In January 1997, HFS's Board of Directors authorized the purchase of 6.2 million equivalent shares of Company common stock to satisfy stock option exercises and conversions of convertible debt securities and to fund future acquisitions. The Company acquired approximately 6.2 million equivalent treasury shares in January and February 1997 for $179.4 million with revolving credit borrowings. 9. CONTINGENCIES - IDEON On June 13, 1997, the Company entered into an agreement (the "Agreement") with Peter Halmos, the co-founder of SafeCard Services, Incorporated ("SafeCard"), which was reorganized in 1995 as Ideon. The Agreement calls for the dismissal with prejudice of certain outstanding litigation matters between Peter Halmos and certain of the Company's subsidiaries and the payment to Peter Halmos, over a six-year period, of $70.5 million. Specifically, the Agreement requires that the Company pay Peter Halmos one up-front payment of $13.5 million and six subsequent annual payments of $9.5 million each. For additional disclosure, see Footnote 13 --Commitments and Contingencies to Exhibit 99.1 -- Supplemental Consolidated Financial Statements. 81