CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated financial statements
give effect to the acquisition of National Parking Corporation Limited ("NPC")
by Cendant Corporation ("Cendant" or the "Company"). The acquisition of NPC was
accounted for under the purchase method of accounting and, accordingly, assets
acquired and liabilities assumed were recorded at their estimated fair values
which are subject to further refinement, including appraisals and other
analyses, with appropriate recognition given to the effect of current interest
rates and income taxes. Management does not expect that the final allocation of
the purchase price for the NPC acquisition will differ materially from the
initial allocation. The unaudited pro forma consolidated statements of income
for the year ended December 31, 1997, and six months ended June 30, 1998 were
presented as if the acquisition of NPC occurred on January 1, 1997. Such
financial statements do not purport to present the results of operations of
Cendant had the acquisition of NPC occurred on the dates specified, nor are
they necessarily indicative of the operating results that may be achieved in
the future.
The unaudited pro forma consolidated financial statements of Cendant are
based on certain assumptions and adjustments described in the Notes to
Unaudited Pro Forma Consolidated Financial Statements, as set forth herein, and
should be read in conjunction therewith and with the consolidated financial
statements and related notes thereto of Cendant, as included in the Company's
(i) Annual Report on Form 10-K/A for the year ended December 31, 1997 which was
filed with the Securities and Exchange Commission ("SEC") on September 29,
1998; and (ii) Quarterly Reports on Form 10-Q/A for the quarterly periods ended
March 31, 1998 and June 30, 1998 which were filed with the Securities and
Exchange Commission on October 13, 1998. The unaudited pro forma consolidated
financial statements should also be read in conjunction with NPC's consolidated
financial statements and related notes thereto for the 52 week period ended
March 27, 1998 included herein as Exhibit 99.1.
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CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
CENDANT HISTORICAL NPC
-------------------- --------------------
YEAR ENDED 52 WEEK PERIOD ENDED PRO FORMA
DECEMBER 31, 1997(1) MARCH 27, 1998(2) ADJUSTMENTS(a) PRO FORMA
-------------------- ----------------- -------------- ---------
REVENUES
Membership and service fees, net ....................... $ 3,988.7 $ 575.9 $ 4,564.6
Fleet leasing (net of depreciation and interest costs
of $1,205.2).......................................... 59.5 -- 59.5
Other .................................................. 191.8 22.4 $ (0.9)(b) 213.3
--------- -------- -------- ---------
Net revenues ............................................ 4,240.0 598.3 (0.9) 4,837.4
--------- -------- -------- ---------
EXPENSES
Operating .............................................. 1,322.3 371.8 1,694.1
Marketing and reservation .............................. 1,031.8 -- 1,031.8
General and administrative ............................. 636.2 119.2 (8.7)(c) 746.7
Merger-related costs and other unusual charges ......... 704.1 -- 704.1
Depreciation and amortization .......................... 237.7 17.5 28.2 (d) 283.4
Interest, net .......................................... 50.6 14.6 75.9 (e) 141.1
--------- -------- -------- ---------
Total expenses .......................................... 3,982.7 523.1 95.4 4,601.2
--------- -------- -------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTEREST ..................... 257.3 75.2 (96.3) 236.2
Provision (benefit) for income taxes .................... 191.0 42.2 (50.3)(f) 182.9
Minority interest, net .................................. 0.4 0.4
--------- -------- -------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS ................ $ 66.3 $ 32.6 $ (46.0) $ 52.9
========= ======== ======== =========
PER SHARE INFORMATION:
INCOME FROM CONTINUING OPERATIONS
Basic ............................................... $ 0.08 $ 0.07
Diluted ............................................. 0.08 0.06
WEIGHTED AVERAGE SHARES
Basic ............................................... 811.2 811.2
Diluted ............................................. 851.7 851.7
- ----------
(1) The following items have been reported in the Cendant historical
consolidated statement of operations for the year ended December 31, 1997
but are excluded from the unaudited pro forma consolidated statement of
income presented above:
Loss from discontinued operations, net of taxes $ (26.8)
Extraordinary gain, net of tax 26.4
Cumulative effect of accounting change, net of tax (283.1)
(2) The historical statement of income for NPC includes certain adjustments
to conform generally accepted accounting principles ("GAAP") in the
United Kingdom to United States GAAP. NPC's statement of income has been
converted to U.S. dollars at the average exchange rate for the twelve
month period presented.
See notes to unaudited pro forma consolidated financial statements.
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CENDANT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
CENDANT NPC
--------------------- ------------------------
SIX MONTHS ENDED FOR THE PERIOD 4/27/98
JUNE 30, 1998(1)(2) THROUGH 6/30/98(1)
--------------------- ------------------------
REVENUES
Membership and service fees--net .................. $ 2,262.5 $ (111.5)
Fleet leasing (net of depreciation and interest
costs of $629.7).................................. 39.0
Other ............................................. 105.8
--------- --------
Net revenues ....................................... 2,407.3 (111.5)
--------- --------
EXPENSES
Operating ......................................... 791.0 (70.3)
Marketing and reservation ......................... 556.0 --
General and administrative ........................ 299.8 (20.0)
Depreciation and amortization ..................... 152.4 (8.4)
Other charges:
Merger related costs and other unusual
charges ........................................ (24.4)
Investigation related costs ...................... 19.5
Financing costs .................................. 12.7
Interest--net ..................................... 41.9 (0.4)
---------- --------
Total expenses ..................................... 1,848.9 (99.1)
---------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST ......... 558.4 (12.4)
Provision (benefit) for income taxes ............... 199.8 (4.9)
Minority interest, net ............................. 19.8 (0.1)
---------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS ........... $ 338.8 $ (7.4)
========== ========
PER SHARE INFORMATION:
INCOME FROM CONTINUING OPERATIONS
Basic ........................................... $ 0.40
Diluted ......................................... 0.38
WEIGHTED AVERAGE SHARES
Basic ........................................... 844.8
Diluted ......................................... 907.8
HISTORICAL
NPC
-----------------
SIX MONTHS ENDED
SEPTEMBER 30, PRO FORMA
1998(3)(4) ADJUSTMENTS(a) PRO FORMA
----------------- ---------------- -------------
REVENUES
Membership and service fees--net .................. $ 294.6 $ 2,445.6
Fleet leasing (net of depreciation and interest
costs of $629.7).................................. -- 39.0
Other ............................................. 12.5 $ (9.0)(b) 109.3
-------- -------- ---------
Net revenues ....................................... 307.1 (9.0) 2,593.9
-------- -------- ---------
EXPENSES
Operating ......................................... 196.5 917.2
Marketing and reservation ......................... -- 556.0
General and administrative ........................ 61.2 341.0
Depreciation and amortization ..................... 9.2 14.1 (d) 167.3
Other charges:
Merger related costs and other unusual
charges ........................................ -- (24.4)
Investigation related costs ...................... -- 19.5
Financing costs .................................. -- 12.7
Interest--net ..................................... 3.5 28.2 (e) 73.2
-------- -------- ----------
Total expenses ..................................... 270.4 42.3 2,062.5
-------- -------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST ......... 36.7 (51.3) 531.4
Provision (benefit) for income taxes ............... 10.8 (14.6)(f) 191.1
Minority interest, net ............................. 0.2 -- 19.9
-------- -------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS ........... $ 25.7 $ (36.7) $ 320.4
======== ======== ==========
PER SHARE INFORMATION:
INCOME FROM CONTINUING OPERATIONS
Basic ........................................... $ 0.38
Diluted ......................................... 0.36
WEIGHTED AVERAGE SHARES
Basic ........................................... 844.8
Diluted ......................................... 907.8
- ---------
(1) Historical Cendant for the six months ended June 30, 1998 includes the
financial results of NPC from April 27, 1998 (the acquisition date)
through June 30, 1998.
(2) The historical financial results of Cendant for the six months ended June
30, 1998 included a loss from discontinued operations, net of taxes, of
$12.9 million which is excluded from the unaudited pro forma consolidated
statement of income presented above.
(3) The NPC historical statement of income for the six months ended September
30, 1998 is presented exclusive of the resulting financial statement
impact from the fair value adjustments that were recorded in the
allocation of purchase price at the acquisition date. The impact of such
fair value adjustments for the full six month period are reflected in the
pro forma adjustment column.
(4) The historical statement of income for NPC includes certain adjustments
to conform generally accepted accounting principles ("GAAP") in the
United Kingdom to United States GAAP. NPC's statement of income has been
converted to U.S. dollars at the average exchange rate for the six month
period presented.
See notes to unaudited pro forma consolidated financial statements.
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CENDANT CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
(IN MILLIONS, UNLESS OTHERWISE NOTED)
(A) ACQUISITION OF NATIONAL PARKING CORPORATION LIMITED
Certain of the underlying pro forma adjustments to the statements of
income for the year ended December 31, 1997 and six months ended June 30, 1998
are calculated from the fair market value adjustments which were made in the
allocation of the purchase price. The consideration paid and the fair value of
net assets acquired in connection with the acquisition of NPC were as follows:
Cash consideration (i) ................................. $ 1,591.9
----------
Fair value of net assets acquired:
Historical net book value of NPC ...................... 476.8
Fair value adjustments to net assets acquired:
Assets:
Property and Equipment ................................ (1.5)
Other Intangible ...................................... 11.6
Other Assets .......................................... (3.6)
Liabilities:
Accrued Expenses and Other (ii) ....................... 205.9
Deferred Income Taxes (iii) ........................... (95.7)
----------
FAIR VALUE OF IDENTIFIABLE NET ASSETS ACQUIRED ......... 593.5
----------
GOODWILL .............................................. $ 998.4
==========
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(i) Cash consideration of $1.6 billion was financed from borrowings
under the Company's revolving credit facilities.
(ii) Primarily comprised of $227 million of NPC indebtedness which was
repaid by the Company on the date of acquisition.
(iii) Reflects deferred income taxes associated with the difference
between the fair value of liabilities accrued and their respective
tax bases.
(B) OTHER REVENUE
The pro forma adjustment reflects the elimination of gains recognized on
the sale of disposed properties. As such, properties would have been adjusted
to their fair market values at the acquisition date.
(C) GENERAL AND ADMINISTRATIVE
The pro forma adjustment for the year ended December 31, 1997 of $8.7
million reflects the reversal of non-recurring professional fees incurred by
NPC during the 52 week period ended March 27, 1998 directly associated with the
acquisition of NPC by the Company.
(D) DEPRECIATION AND AMORTIZATION
The pro forma adjustment for depreciation and amortization is comprised of
the following:
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1998
-------------- -----------
Elimination of historical NPC goodwill amortization ......... $ (1.8) $ (0.9)
Goodwill .................................................... 25.0 12.5
Other intangibles ........................................... 4.6 2.3
Property and equipment ...................................... 0.4 0.2
------- -------
$ 28.2 $ 14.1
======= =======
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CENDANT CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, UNLESS OTHERWISE NOTED)
(D) DEPRECIATION AND AMORTIZATION (CONTINUED)
Goodwill of approximately $1.0 billion (see note (a)) is determined to
have a benefit period of forty years, which is based on NPC's position as the
largest private (non municipal) car park operator in the United Kingdom ("UK")
and the third largest roadside assistance company in the UK.
NPC's intangible assets represents the estimated value which has been
attributed to the membership base comprising the roadside assistance portion of
NPC's business. This intangible asset is amortized on an accelerated basis with
amortization in the initial year calculated based on a 2.5 year benefit period.
The valuation of the intangible asset was based on the historical lives and
profitability of NPC's membership bases.
(E) INTEREST EXPENSE--NET
The pro forma adjustment is calculated as follows:
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1998
-------------- -----------
Elimination of historical NPC interest expense (i)........................ $ (16.7) $ (1.5)
Interest expense incurred on debt used to finance NPC acquisition (ii)..... 92.6 29.7
------- -------
$ 75.9 $ 28.2
======= =======
(i) Coincident with the acquisition of NPC, the Company repaid $227
million of NPC indebtedness. The elimination adjustment for the year ended
December 31, 1997 assumed an interest rate of 7.37% which was the weighted
average interest rate on NPC borrowings for the 52 week period ended March 27,
1998. The elimination adjustment during the six months ended June 30, 1998
represents the reversal of interest expense incurred by NPC during the period
March 28, 1998 through the acquisition date (April 27, 1998) which was
calculated at an interest rate of 7.85%, representing the weighted average
interest rate in effect for such one month period. Since NPC's six month pro
forma results are through the period ended September 30, 1998, only one month
of interest expense related to the $227 million of NPC indebtedness was
included in its historical results.
(ii) Reflects interest expense incurred on $1.6 billion of borrowings
under the Company's revolving credit facilities at an interest rate of 5.82%
which was the weighted average variable rate in effect on the date of
borrowing. The Company financed the acquisition of NPC with borrowings under
its revolving credit facilities. Interest expense on the $1.6 billion of
borrowings for the six months ended June 30, 1998 was calculated from January
1, 1998 through the acquisition date (April 27, 1998). Interest expense on such
borrowings subsequent to the acquisition date is included in the six month
results of Historical Cendant.
(F) INCOME TAXES
The pro forma adjustment was calculated at the applicable statutory rate
in effect for the periods presented with consideration given to the
deductibility of the pre-tax pro forma adjustments and the relative statutory
jurisdictions to which such pro forma adjustments pertain.
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