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

                       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 March 31, 1999
                           Commission File No. 1-10308


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


                    DELAWARE                           06-0918165
          (State or other jurisdiction              (I.R.S. Employer
              of incorporation or                    Identification
                 organization)                          Number)

                9 W 57TH STREET                          10019
                  NEW YORK, NY                         (Zip Code)
             (Address of principal
               executive office)

                                 (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 712,119,142 shares of Common Stock outstanding as of September 30,
1999.

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








                      CENDANT CORPORATION AND SUBSIDIARIES

                                      INDEX


                                                                        PAGE NO.
                                                                        --------
PART 1    Financial Information

Item 1.   Financial Statements

          Consolidated Statements of Income - Three Months Ended
          March 31, 1999 and 1998                                           3

          Consolidated Balance Sheets - March 31, 1999 and
          December 31, 1998                                                 4

          Consolidated Statements of Cash Flows - Three Months Ended
          March 31, 1999 and 1998                                           6

          Notes to Consolidated Financial Statements                        8

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                        19

Item 3.   Quantitative and Qualitative Disclosures About Market Risk       35

PART II   Other Information

Item 1.   Legal Proceedings                                                36

Item 6.   Exhibits and Reports on Form 8-K                                 37

Certain statements in this Quarterly Report on Form 10-Q/A 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 ability to successfully divest the remaining non-core
businesses and assets and implement 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





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



                                                                                      THREE MONTHS ENDED
                                                                                           MARCH 31,
                                                                                  ----------------------------
                                                                                     1999              1998
                                                                                  -----------      -----------
                                                                                             
REVENUES
   Membership and service fees, net                                               $  1,253.0       $   1,058.3
   Fleet leasing (net of depreciation and interest costs of $326.4 and $311.6)          18.6              19.9
   Other                                                                                45.8              51.2
                                                                                  ----------       -----------
Net revenues                                                                         1,317.4           1,129.4
                                                                                  ----------       -----------

EXPENSES
   Operating                                                                           456.9             334.5
   Marketing and reservation                                                           262.2             264.8
   General and administrative                                                          165.5             146.0
   Depreciation and amortization                                                        93.1              65.8
   Other charges
     Termination of proposed acquisition                                                 7.0               -
     Investigation-related costs                                                         1.7               -
     Merger-related costs and other unusual charges (credits)                           (1.3)              3.1
   Interest, net                                                                        48.2              18.9
                                                                                  ----------       -----------
Total expenses                                                                       1,033.3             833.1
                                                                                  ----------       -----------

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND
   MINORITY INTEREST                                                                   284.1             296.3
Provision for income taxes                                                              99.9             107.5
Minority interest, net of tax                                                           14.9               4.9
                                                                                  ----------       -----------
INCOME FROM CONTINUING OPERATIONS                                                      169.3             183.9
Loss from discontinued operations, net of tax                                            -               (11.0)
Gain on sale of discontinued operations, net of tax                                    192.7               -
                                                                                  ----------       -----------
NET INCOME                                                                        $    362.0       $     172.9
                                                                                  ===========      ===========

INCOME (LOSS) PER SHARE
   BASIC
     Income from continuing operations                                            $     0.21       $      0.22
     Loss from discontinued operations                                                  -                (0.01)
     Gain on sale of discontinued operations                                            0.24              -
                                                                                  ----------       -----------
     NET INCOME                                                                   $     0.45       $      0.21
                                                                                  ==========       ===========

   DILUTED
     Income from continuing operations                                            $     0.20              0.21
     Loss from discontinued operations                                                  -                (0.01)
     Gain on sale of discontinued operations                                            0.23               -
                                                                                  ----------       -----------
     NET INCOME                                                                   $     0.43       $      0.20
                                                                                  ==========       ===========



          See accompanying notes to consolidated financial statements.


                                        3




                      CENDANT CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                  (IN MILLIONS)





                                                        MARCH 31,       DECEMBER 31,
                                                          1999              1998
                                                      -------------    -------------
                                                                 
ASSETS
Current assets
   Cash and cash equivalents                          $      520.5     $     1,008.7
   Receivables, net                                        1,613.5           1,536.4
   Deferred membership commission costs                      252.5             253.0
   Deferred income taxes                                     308.7             466.6
   Other current assets                                      890.5             908.6
   Net assets of discontinued operations                         -             373.6
                                                      -------------    -------------

Total current assets                                       3,585.7           4,546.9
                                                      ------------     -------------

   Property and equipment, net                             1,411.1           1,432.8
   Franchise agreements, net                               1,353.4           1,363.2
   Goodwill, net                                           3,886.6           3,923.1
   Other intangibles, net                                    747.0             757.1
   Other assets                                              699.5             681.5
                                                      ------------     -------------

Total assets exclusive of assets under programs           11,683.3          12,704.6
                                                      ------------     -------------

Assets under management and mortgage programs
   Net investment in leases and leased vehicles            3,873.5           3,801.1
   Relocation receivables                                    620.9             659.1
   Mortgage loans held for sale                            1,955.6           2,416.0
   Mortgage servicing rights                                 743.5             635.7
                                                      ------------     -------------

                                                           7,193.5           7,511.9
                                                      ------------     -------------

TOTAL ASSETS                                          $   18,876.8     $    20,216.5
                                                      ============     =============





          See accompanying notes to consolidated financial statements.




                                       4



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





                                                                                  MARCH 31,      DECEMBER 31,
                                                                                    1999              1998
                                                                                -------------    -------------
                                                                                           
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
   Accounts payable and other current liabilities                               $    1,595.7     $     1,517.5
   Deferred income                                                                   1,342.1           1,354.2
                                                                                ------------     -------------

Total current liabilities                                                            2,937.8           2,871.7
                                                                                ------------     -------------

   Deferred income                                                                     234.7             233.9
   Long-term debt                                                                    3,357.7           3,362.9
   Deferred income taxes                                                                38.0              77.2
   Other non-current liabilities                                                        85.8             125.3
                                                                                ------------     -------------

Total liabilities exclusive of liabilities under programs                            6,654.0           6,671.0
                                                                                ------------     -------------

Liabilities under management and mortgage programs
   Debt                                                                              6,327.3           6,896.8
                                                                                ------------     -------------
   Deferred income taxes                                                               328.6             341.0
                                                                                ------------     -------------

Mandatorily redeemable preferred securities issued by subsidiary                     1,473.5           1,472.1

Commitments and contingencies (Note 8)

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 863,046,029 and 860,551,783 shares                                           8.6               8.6
   Additional paid-in capital                                                        3,960.3           3,863.4
   Retained earnings                                                                 1,842.2           1,480.2
   Accumulated other comprehensive loss                                               (120.2)            (49.4)
   Treasury stock, at cost, 85,302,899 and 27,270,708 shares                        (1,597.5)           (467.2)
                                                                                -------------    -------------


Total shareholders' equity                                                           4,093.4           4,835.6
                                                                                ------------     -------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                      $   18,876.8     $    20,216.5
                                                                                ============     =============



          See accompanying notes to consolidated financial statements.


                                       5



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



                                                                                     THREE MONTHS ENDED
                                                                                          MARCH 31,
                                                                                ------------------------------
                                                                                    1999              1998
                                                                                -------------    -------------
                                                                                           
OPERATING ACTIVITIES
Net income                                                                      $      362.0     $       172.9
Adjustments to reconcile net income to net cash
    provided by operating activities from continuing operations:
Loss from discontinued operations, net of tax                                            -                11.0
Gain on sale of discontinued operations, net of tax                                   (192.7)              -
Depreciation and amortization                                                           93.1              65.8
Payments of merger-related costs and other unusual
   charge liabilities                                                                   (5.4)            (97.0)
Other, net                                                                             (93.7)            (88.6)
                                                                                -------------    --------------
NET CASH PROVIDED BY CONTINUING OPERATIONS EXCLUSIVE OF
   MANAGEMENT AND MORTGAGE PROGRAMS                                                    163.3              64.1
                                                                                ------------     -------------

Management and mortgage programs:
   Depreciation and amortization                                                       312.4             278.5
   Origination of mortgage loans                                                    (6,819.0)         (4,779.3)
   Proceeds on sale and payments from mortgage loans
     held for sale                                                                   7,279.4           4,619.9
                                                                                ------------     --------------
                                                                                       772.8             119.1
                                                                                ------------     -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES OF
   CONTINUING OPERATIONS                                                               936.1             183.2
                                                                                ------------     -------------

INVESTING ACTIVITIES
Property and equipment additions                                                       (62.7)           (58.8)
Investments                                                                              -              (139.2)
Net assets acquired (net of cash acquired) and
   acquisition-related payments                                                        (64.3)           (943.2)
Net proceeds from sale of subsidiary                                                   800.0               -
Other, net                                                                              41.9              38.8
                                                                                ------------     -------------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES OF CONTINUING OPERATIONS
   EXCLUSIVE OF MANAGEMENT AND MORTGAGE PROGRAMS                                       714.9          (1,102.4)
                                                                                ------------     --------------

Management and mortgage programs:
   Investment in leases and leased vehicles                                           (560.8)           (626.2)
   Proceeds from disposal of leases and leased vehicles                                132.6             222.0
   Proceeds from sales and transfers of leases and leased vehicles
     to third parties                                                                   44.6              27.3
   Equity advances on homes under management                                        (1,461.9)         (1,436.8)
   Repayment on advances on homes under management                                   1,501.5           1,564.5
   Additions to mortgage servicing rights                                             (183.4)           (109.5)
   Proceeds from sales of mortgage servicing rights                                     56.6              39.9
                                                                                ------------     -------------
                                                                                      (470.8)           (318.8)
                                                                                ------------     -------------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES OF CONTINUING OPERATIONS           244.1          (1,421.2)
                                                                                ------------     -------------




          See accompanying notes to consolidated financial statements.



                                       6


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



                                                                                     THREE MONTHS ENDED
                                                                                         MARCH 31,
                                                                                ------------------------------
                                                                                    1999              1998
                                                                                -------------    -------------
                                                                                           
FINANCING ACTIVITIES
Principal payments on borrowings                                                $       (9.0)    $      (205.1)
Issuance of common stock                                                                29.9             144.2
Purchases of common stock                                                           (1,141.7)              -
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                         (1,120.8)          1,385.8
                                                                                -------------    --------------

Management and mortgage programs:
   Proceeds from debt issuance or borrowings                                         1,830.5             983.8
   Principal payments on borrowings                                                 (2,101.8)           (449.1)
   Net change in short-term borrowings                                                (299.1)           (340.4)
                                                                                -------------    --------------

                                                                                      (570.4)            194.3
                                                                                -------------    --------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES OF CONTINUING
   OPERATIONS                                                                       (1,691.2)          1,580.1
                                                                                -------------    --------------

Effect of changes in exchange rates on cash and cash
   equivalents                                                                          22.8             (24.3)

Cash used in discontinued operations                                                     -              (232.5)
                                                                                -------------    --------------

Net (decrease) increase in cash and cash equivalents                                  (488.2)             85.3

Cash and cash equivalents, beginning of period                                       1,008.7              67.0
                                                                                -------------    --------------

Cash and cash equivalents, end of period                                        $      520.5     $       152.3
                                                                                =============    ==============




          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 March 31, 1999 and the consolidated statements of income
     and cash flows for the three months ended March 31, 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. All
     intercompany balances and transactions have been eliminated in
     consolidation. The accompanying consolidated financial statements include
     the accounts and transactions of the Company and all wholly owned
     subsidiaries and have been amended to reverse the classification of
     Entertainment Publications, Inc. ("EPub"), a company subsidiary, as a
     discontinued operation. In September 1999, the Company entered into a
     definitive agreement to sell EPub. However, the transaction was structured
     in a manner that precluded EPub from being classified as a discontinued
     operation (see Note 12 "Subsequent Events Dispositions of Businesses -
     EPub"). Accordingly, the operating results of EPub have been reclassified
     from discontinued operations to continuing operations for all reporting
     periods presented. The amended consolidated financial statements presented
     herein are the Company's historical financial statements for the periods
     presented.

     The accompanying unaudited consolidated financial statements 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, as amended, and
     should be read in conjunction with such consolidated financial statements
     and notes 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 months ended
     March 31, 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") are 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 March 31, 1999, 61.9 million stock options outstanding with a weighted
     average exercise price of $25.36 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. Basic
     and diluted EPS from continuing operations are calculated as follows:


                                        8



                                                         THREE MONTHS ENDED
                                                              MARCH 31,
                                                     --------------------------
        (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)        1999              1998
                                                     ----------     -----------
     Income from continuing operations               $    169.3     $     183.9
     Convertible debt interest, net of tax                  2.8             3.1
                                                     ----------     -----------
     Income from continuing operations, as adjusted  $    172.1     $     187.0
                                                     ==========     ===========

     Weighted average shares
       Basic                                              800.1           838.7
       Potential dilution of common stock:
          Stock options                                    36.3            49.7
          Convertible debt                                 18.0            20.1
                                                     ----------     -----------
       Diluted                                            854.4           908.5
                                                     ==========     ===========

     EPS - continuing operations
       Basic                                         $     0.21     $      0.22
                                                     ==========     ===========
       Diluted                                       $     0.20     $      0.21
                                                     ==========     ===========

3.   COMPREHENSIVE INCOME

     Components of comprehensive income (loss) are summarized as follows:

                                                           THREE MONTHS ENDED
                                                                MARCH 31,
                                                          --------------------
        (IN MILLIONS)                                        1999      1998
                                                          --------   ---------
     Net income                                           $  362.0     $172.9
     Other comprehensive losses:
       Currency translation adjustment                       (68.4)     (10.3)
       Unrealized holding losses on marketable securities     (2.4)       -
                                                          --------   ---------
     Comprehensive income                                 $  291.2   $  162.6
                                                          ========   =========

     The components of accumulated other comprehensive loss for the three months
     ended March 31, 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             (2.4)            (68.4)          (70.8)
                               --------------     -----------   -------------

     Balance, March 31, 1999   $       (2.4)      $    (117.8)  $      (120.2)
                               ==============     ===========   =============

4.   PRO FORMA INFORMATION

     The following table reflects the operating results of the Company for the
     three months ended March 31, 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.

                                                        THREE MONTHS ENDED
     (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)               MARCH 31, 1998
                                                        ------------------
     Net revenues                                         $       1,277.6
     Income from continuing operations                              183.8
     Net income (1)                                                 172.8


                                       9




     Per share information:
     Basic
         Income from continuing operations                $          0.22
         Net income (1)                                   $          0.21
         Weighted average shares                                    838.7
     Diluted
         Income from continuing operations                $          0.21
         Net income (1)                                   $          0.20
         Weighted average shares                                    908.5

- --------------
     (1)  Includes a loss from discontinued operations, net of tax, of $11.0
          million ($0.01 per diluted share).

5.   DISCONTINUED OPERATIONS

     On January 12, 1999, the Company completed the sale of Cendant Software
     Corporation ("CDS") for approximately $800.0 million in cash. The Company
     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. The recognized gain of
     $192.7 million is reported as gain on sale of discontinued operations in
     the consolidated statement of income for the three months ended March 31,
     1999. Subsequently, 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 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, 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 DATA:

                                               THREE MONTHS ENDED MARCH 31, 1998
                                               ---------------------------------
     (IN MILLIONS)                                   CDS            HEBDO MAG
                                               ----------------  --------------
     Net revenues                              $           95.9  $         62.8
                                               ----------------  --------------

     Income (loss) before income taxes                    (26.5)            9.2
     Provision for (benefit from) income taxes             (9.6)            3.3
                                               ----------------  --------------
     Net income (loss)                         $          (16.9) $          5.9
                                               ================  ==============


     The Company allocated $0.3 million and $1.8 million of interest expense to
     discontinued operations for the three months ended March 31, 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.

     BALANCE SHEET DATA:
                                                     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
                                                     ==================


                                       10


6.   OTHER CHARGES

     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.

     INVESTIGATION-RELATED COSTS. The Company incurred $1.7 million of
     professional fees (primarily litigation-related) and other miscellaneous
     expenses in connection with accounting irregularities in the former
     business units of CUC International Inc. ("CUC") and resulting
     investigations into such matters.

     MERGER-RELATED COSTS AND OTHER UNUSUAL CHARGES (CREDITS). 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 has been reported as a credit to merger-related costs and other
     unusual charges in the consolidated statement of income for the three
     months ended March 31, 1999. Coincident to the merger which formed Cendant
     Corporation (the "Cendant Merger"), the Company had previously recorded an
     unusual charge related to certain intangible assets of Essex which were
     determined to be impaired. In first quarter 1998, the Company recorded an
     additional $3.1 million of merger-related costs and other unusual charges
     associated with a change in estimate of costs to be incurred in connection
     with the Cendant Merger.

7.   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 Securities and Exchange Commission
     ("SEC"). 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 also
     agreed to file a shelf registration statement for an additional 15 million
     special PRIDES, which could be issued by the


                                       11


     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 $17.53 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 September 30, 1999)
     the effect of the issuance of the New PRIDES will be to distribute
     approximately 19 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, 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 presently intends to distribute the
     Rights in October 1999 after the effectiveness of the registration
     statement filed with the SEC covering the New PRIDES.

8.   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,
     70 lawsuits claiming to be class actions, 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 30, 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 such appeal is pending.

     As previously disclosed, the Company reached a final agreement with
     plaintiff's 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 7 - Litigation
     Settlement for a more detailed description of the settlement).


                                       12



     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 which are reflected in its
     restated financial statements. Although the Company can provide no
     assurances that additional adjustments will not be necessary as a result of
     these government investigations, the Company does not expect that
     additional adjustments will be necessary.

     Other than with respect to the PRIDES class action litigation, the Company
     does not believe it is feasible to predict or determine the final outcome
     or resolution of these proceedings or investigations or to estimate the
     amounts or potential range of loss with respect to these proceedings or
     investigations. In addition, the timing of the final resolution of the
     proceedings or investigations is uncertain. The possible outcomes or
     resolutions of the proceedings could include a judgement against the
     Company or settlements and could require substantial payments by the
     Company. Management believes that material adverse outcomes with respect to
     such proceedings or investigations could have a material impact on the
     Company's financial position, results of operations or cash flows.

     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.

9.   SHAREHOLDERS' EQUITY

     During the first quarter of 1999, the Company's Board of Directors
     authorized an additional $600.0 million 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 $1.6 billion. (See
     Note 12 - Subsequent Events - Common Share Repurchases.)

     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 March 31, 1999, the
     Company repurchased $1.4 billion (72.5 million shares) of Company common
     stock under the program.

10.  NEW ACCOUNTING STANDARD

     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 12-month period. The Company will now adopt SFAS No. 133 as
     required for its first quarterly filing of fiscal year 2001.

11.  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



                                       13


     EBITDA is defined as earnings before non-operating interest, income taxes,
     depreciation and amortization, adjusted for other charges which are of a
     non-recurring or unusual nature, which 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. Subsequent to the Company's June 30, 1999
     disposition of its fleet segment, the Company has seven reportable
     operating segments which collectively comprise the Company's continuing
     operations. Inter-segment net revenues were not significant to the net
     revenues of any one segment or the consolidated net revenues of the
     Company. 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
     franchiser 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.

     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



                                       14


     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 online 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.

     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 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 12, on June 30, 1999, the Company completed the
     disposition of its fleet segment for aggregate consideration of $1.8
     billion. The fleet segment primarily consisted of fleet and fuel card
     related products and services provided 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.

     SEGMENT INFORMATION
                                         THREE MONTHS ENDED MARCH 31,
                              ------------------------------------------------
                                       1999                      1998
                              -----------------------    ---------------------
                                           ADJUSTED                  ADJUSTED
     (IN MILLIONS)            REVENUES      EBITDA       REVENUES     EBITDA
                              --------    -----------    --------   ----------
     Travel (1)               $  272.0    $     144.7    $  265.6   $    149.1
     Real Estate Franchise        96.6           71.4        84.3         59.2
     Relocation                   90.9           17.9        99.7         25.6
     Mortgage                     93.2           44.0        78.0         37.5
     Individual Membership       243.4           11.9       204.1        (15.9)
     Insurance/Wholesale         139.7           38.3       134.0         39.2
     Other Services              279.8(2)        64.9(2)    167.1         41.8
     Fleet                       101.8           39.7        96.6         47.6
                              --------    -----------    --------   ----------

     Total                    $1,317.4    $     432.8    $1,129.4   $    384.1
                              ========    ===========    ========   ==========

         (1)  Revenues and Adjusted EBITDA for the three months ended March 31,
              1999 and 1998 include pre-tax gains of $7.0 million and $17.7
              million, respectively, from sales of Avis Rent A Car, Inc. stock
              in each quarter.
         (2)  Includes the financial results of National Parking Corporation,
              which was acquired in April 1998 and was accounted for under the
              purchase method of accounting.

     Provided below is a reconciliation of total Adjusted EBITDA for reportable
     operating segments to the consolidated amounts.


                                       15





                                                                   THREE MONTHS ENDED MARCH 31,
                                                                   ----------------------------
     (IN MILLIONS)                                                     1999             1998
                                                                   -----------       ----------
                                                                               
     Adjusted EBITDA for reportable segments                       $     432.8       $    384.1
     Depreciation and amortization                                        93.1             65.8
     Other charges
       Termination of proposed acquisition                                 7.0               -
       Investigation-related costs                                         1.7               -
       Merger-related costs and other unusual charges (credits)           (1.3)             3.1
     Interest, net                                                        48.2             18.9
                                                                   -----------       ----------
     Consolidated income from continuing operations before
       income taxes and minority interest                          $     284.1           $296.3
                                                                   ===========       ==========


12.    SUBSEQUENT EVENTS

       A.  DISPOSITIONS OF BUSINESSES

           Pending disposition of Green Flag. On October 8, 1999, the Company
           entered into a definitive agreement to dispose of its Green Flag
           business unit for approximately $410 million in cash. The
           transaction, subject to customary regulatory approval in the United
           Kingdom ("UK"), is expected to be consummated in the fourth quarter
           of 1999. Green Flag is a roadside assistance organization based in
           the UK, which provides a wide range of emergency support and rescue
           services.

           Pending disposition of EPub. On April 21, 1999, the Company announced
           that its Board of Directors approved management's plan to pursue the
           sale of its 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.

           On September 14, 1999, the Company entered into a definitive
           agreement to sell 84% of EPub for $325.0 million in cash and will
           retain approximately 16% of EPub's equity in connection with the
           transaction. In addition, the Company will have a designee on EPub's
           Board of Directors. The Company's original intention was to dispose
           of 100% of EPub. The transaction is subject to customary regulatory
           approvals and customary conditions and is expected to be consummated
           in fourth quarter of 1999. The sale of EPub is expected to generate
           an after-tax gain of approximately $140.0 million.

           In connection with the Company's agreement to retain a minority
           voting interest in EPub and as a result of the Company's ability to
           exert significant influence over the operating and financial policies
           of EPub, the classification of EPub as a discontinued operations was
           reversed and, accordingly, EPub's operating results for all
           prior-reporting periods have been reclassified back to continuing
           operations and are included within the Company's Other Services
           business segment. In addition, subsequent to the consummation of the
           transaction, the Company will account for its investment in EPub
           using the equity method. EPub is the world's largest 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.

           North American Outdoor Group. On October 8, 1999, the Company
           completed the disposition of 94% of its North American Outdoor Group
           ("NAOG") business unit for approximately $140.0 million in cash and
           will retain approximately 6% of NAOG's equity in connection with the
           transaction. The sale of NAOG is expected to generate a pre-tax gain
           of approximately $107.0 million. Subsequent to consummation, the
           Company will account for its investment in NAOG using the cost
           method. NAOG is the world's largest lifestyle affinity membership
           organization.

           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.


                                       16


           Fleet. On June 30, 1999, the Company completed the disposition of its
           fleet business segment ("fleet segment" or "fleet businesses"), which
           included PHH Vehicle Management Services Corporation, 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 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.

           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 June 30, 1999, the Company
           beneficially owned approximately 19% 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 34% 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 of $881.4 million
           ($865.7 million, after tax). The realized gain is net of
           approximately $90.0 million of transaction costs. 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. The fleet segment disposition was structured in accordance
           with applicable tax law to be treated as a tax-free reorganization
           and, accordingly, no tax provision has been recorded on a majority of
           the gain. Should the transaction be deemed taxable, the resultant tax
           liability could be material.

           See Note 11 - Segment Information - Fleet for a description of the
           services which were provided within the fleet segment.

           Other Businesses. Subsequent to the quarter ended March 31, 1999, the
           Company completed the dispositions of certain other businesses,
           including Central Credit, Inc., Spark Services, Inc., Match.com,
           National Leisure Group and National Library of Poetry. Aggregate
           consideration received on the dispositions of such businesses was
           comprised of $106.0 million in cash and $43.3 million of common
           stock. The Company realized a net gain of $46.2 million ($26.4
           million, after tax) on the dispositions of such businesses.

       B.  INVESTMENT IN NETMARKET, INC.

           On September 15, 1999, Netmarket, Inc. ("NGI") began operations as an
           independent company that will pursue the development of 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. On
           September 15, 1999, 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, NGI's operating results will 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, into 78% of NGI's diluted common shares. Subsequent
           to the Company's


                                       17


           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 Company recorded a charge, inclusive of transaction
           costs, of $85.0 million ($48.0 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.

       C.  COMMON SHARE REPURCHASES

           In July 1999, the Company's Board of Directors authorized an
           additional $200.0 million of Company common stock to be repurchased
           under the common share repurchase program, increasing the total
           authorized amount to be repurchased under the program to $1.8
           billion. As of September 30, 1999, the Company repurchased
           approximately $1.8 billion (93.6 million shares) under the program.
           Additionally, in July 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. Under the terms of
           the offer, which commenced June 16, 1999 and expired July 15, 1999,
           the Company had invited shareholders to tender their shares at prices
           of Company common stock between $19.75 and $22.50 per share.


                                       18


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

OVERVIEW

We are one of the foremost consumer and business services companies 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.

We operate in four principal divisions - travel related services, real estate
related services, direct marketing services and other consumer and business
services. Our businesses provide a wide range of complementary consumer and
business services, which together represent eight business segments. The travel
related services businesses facilitate vacation timeshare exchanges, manage
corporate and government vehicle fleets and franchise car rental and hotel
businesses; the real estate related services businesses 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, 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 (except for
certain company-owned Jackson Hewitt offices, which we intend to franchise).
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").

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

We recently announced that our Board of Directors approved a plan to create a
new class of common stock to track the performance of CompleteHome.com, our new
real estate portal. The plan to create a tracking stock, subject to shareholder
approval, anticipates the initial public offering of CompleteHome.com in the
second quarter of 2000. CompleteHome.com will integrate and enhance the online
efforts of our residential real estate brands and those of our other real estate
business units drawing on the success of our Rent Net online apartment guide
business model. CompleteHome.com encompasses all aspects of the home experience
including finding a home, buying or renting a home, moving and post-closing home
improvements. CompleteHome.com's business consists of three primary sources of
revenue: rental directory services, e-commerce/advertising and real estate
related products including mortgage brokerage. We plan to file a proxy with the
Securities and Exchange Commission


                                       19


("SEC"), which will contain financial details as well as more specific plans
concerning the transaction. Beginning in the third quarter 1999, we will provide
footnote disclosure of CompleteHome.com's financial information within our
consolidated financial statements.

On September 15, 1999, we donated Netmarket, Inc. ("NGI") outstanding common
stock to a charitable trust and NGI began operations as an independent company
that will pursue the development of our 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, into 78% of NGI's diluted
common shares (see "Liquidity and Capital Resources - Investment in Netmarket,
Inc."). Accordingly, as a result of the change in ownership NGI's operating
results will no longer be included in our consolidated financial statements.

RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999
                                         VS.
                        THREE MONTHS ENDED MARCH 31, 1998

Our operating results and the operating results of certain of our underlying
business segments are comprised of business combinations accounted for under the
purchase method of accounting. Accordingly, the results of operations of such
acquired companies have been included in our consolidated operating results and
our applicable business segments from the respective dates of acquisition.

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 for other charges which
are of a non-recurring or unusual nature and are not included in assessing
segment performance or are not segment-specific. Our management believes such
discussion is the most informative representation of how management evaluates
performance. 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. Subsequent to the June 30,
1999 disposition of our fleet segment, we have seven reportable operating
segments, which collectively will comprise our continuing operations. For
additional information, including a description of the services provided in each
of our reportable operating segments, see Note 11 to the consolidated financial
statements.



CONSOLIDATED RESULTS
(Dollars in millions)                                          THREE MONTHS ENDED MARCH 31,
                                                          --------------------------------------
                                                             1999          1998       % CHANGE
                                                          ----------   -----------   -----------
                                                                           
Net revenues                                              $  1,317.4   $   1,129.4          17%
                                                          ----------   -----------

Expenses:
   Operating                                                   456.9         334.5          37%
   Marketing and reservation                                   262.2         264.8          (1%)
   General and administrative                                  165.5         146.0          13%
                                                          ----------   -----------
                                                               884.6         745.3          19%
                                                          ----------   -----------

Adjusted EBITDA                                                432.8         384.1          13%
Depreciation and amortization expense                           93.1          65.8          41%
Other charges
   Termination of proposed acquisition                           7.0           -             *
   Investigation-related costs                                   1.7           -             *
   Merger-related costs and other unusual
     charges (credits)                                          (1.3)          3.1           *
Interest expense, net                                           48.2          18.9         155%
                                                          ----------   -----------
Pre-tax income from continuing operations
   before minority interest                                    284.1         296.3          (4%)
Provision for income taxes                                      99.9         107.5          (7%)
Minority interest, net of tax                                   14.9           4.9           *
                                                          ----------   -----------
Income from continuing operations                              169.3         183.9          (8%)


                                       20



Loss from discontinued operations, net of tax                    -           (11.0)          *
Gain on sale of discontinued operations, net of tax            192.7           -             *
                                                          ----------   -----------
Net income                                                $    362.0   $     172.9           *
                                                          ==========   ===========


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


REVENUES AND ADJUSTED EBITDA

Revenues increased $188.0 million (17%) in first quarter 1999 compared to first
quarter 1998, which reflected growth in substantially all of our reportable
operating segments. Adjusted EBITDA also increased $48.7 million (13%) for the
same periods. Significant contributing factors which gave rise to such increases
included substantial growth in the volume of mortgage services provided and an
increase in the amount of royalty fees received from our franchised brands,
principally within the real estate franchise segment. In addition, revenues and
Adjusted EBITDA in 1999 included the operating results of National Parking
Corporation Limited ("NPC"), which was acquired in April 1998. A detailed
discussion of revenues and Adjusted EBITDA trends from 1998 to 1999 is included
in the section entitled "Results of Reportable Operating Segments - 1999 vs.
1998."

DEPRECIATION AND AMORTIZATION EXPENSE

Depreciation and amortization expense increased $27.3 million (41%) in first
quarter 1999 versus the comparable prior year quarter as a result of incremental
amortization of goodwill and other intangible assets from 1998 acquisitions and
increased capital spending primarily to accommodate growth in our businesses.

OTHER 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 first quarter 1999, we incurred $1.7 million
of professional fees (primarily litigation related) and other miscellaneous
expenses in connection with our previously announced discovery of accounting
irregularities in the former business units of CUC International Inc.
("CUC") and the resulting investigations into such matters.

Merger-Related Costs and Other Unusual Charges (Credits). In January 1999, we
completed the sale of our Essex Corporation subsidiary ("Essex") for $8.0
million and recognized a $1.3 million pre-tax gain on sale. Such gain has been
reported as a credit to merger-related costs and other unusual charges.
Coincident to the merger which formed Cendant Corporation (the "Cendant
Merger"), we had previously recorded an unusual charge related to certain
intangible assets of Essex which were determined to be impaired. In first
quarter 1998, we recorded an additional $3.1 million of merger-related costs and
other unusual charges associated with a change in estimate of the costs to be
incurred in connection with the Cendant Merger.

INTEREST EXPENSE, NET AND MINORITY INTEREST, NET OF TAX

Interest expense, net, increased $29.3 million (155%) primarily as a result of
an increase in the average debt balance outstanding of approximately $1.7
billion during the three months ended March 1999 when

                                       21


compared with the same period in 1998. Such increase is principally reflective
of incremental borrowings used to finance the April 1998 acquisition of NPC. In
addition to interest expense on long-term debt, we also incurred $14.9 million
of minority interest, net of tax, primarily related to 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").

PROVISION FOR INCOME TAXES

Our effective tax rate was reduced from 36.3% in 1998 to 35.2% in 1999 due to
the favorable impact in 1999 of reduced rates in international tax jurisdictions
in which we commenced business operations during 1998.

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"). 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 $11.0
million and was comprised of the following operating results:

                                  THREE MONTHS ENDED MARCH 31, 1998
                                 -----------------------------------
                                    CONSUMER             CLASSIFIED
(IN MILLIONS)                       SOFTWARE             ADVERTISING
                                 --------------        -------------
Net revenues                     $        95.9         $        62.8
Net income (loss)                        (16.9)                  5.9

We recorded a $192.7 million gain, net of tax, on the sale of discontinued
operations in 1999, related to the disposition of our consumer software
business.

RESULTS OF REPORTABLE OPERATING SEGMENTS - FIRST QUARTER 1999 VS. FIRST QUARTER
1998

(Dollars in millions)


                               REVENUES                             ADJUSTED EBITDA               ADJUSTED EBITDA
                  -----------------------------------     -----------------------------------         MARGIN
                                                 %                                      %        ------------------
                    1999          1998        CHANGE        1999         1998        CHANGE        1999       1998
                  ---------     ---------    ---------     -------      -------     ---------    ---------  -------
                                                                                    
Travel            $   272.0      $  265.6          2%      $ 144.7      $ 149.1         (3%)        53%       56%
Real Estate
  Franchise            96.6          84.3         15%         71.4         59.2         21%         74%       70%
Relocation             90.9          99.7         (9%)        17.9         25.6        (30%)        20%       26%
Mortgage               93.2          78.0         19%         44.0         37.5(2)      17%         47%       48%
Individual
  Membership          243.4         204.1         19%         11.9        (15.9)         *           5%       (8%)
Insurance/
  Wholesale           139.7         134.0          4%         38.3         39.2         (2%)        27%       29%
Other Services        279.8         167.1         67%         64.9(1)      41.8(2)      55%         23%       25%
Fleet                 101.8          96.6          5%         39.7         47.6        (17%)        39%       49%
                  ---------    ----------                  -------      -------
Total             $ 1,317.4      $1,129.4         17%      $ 432.8      $ 384.1         13%         33%       34%
                  =========     =========                  =======      =======

- -----------------
(1)  Excludes (i) a $7.0 million write-off of deferred acquisition costs in
     connection with the termination of the proposed acquisition of RACMS; (ii)
     $1.7 million of investigation-related costs; and (iii) a $1.3 million
     pre-tax gain on the sale of Essex.

(2)  Excludes $3.1 million of merger-related costs and other unusual charges
     comprised of $1.9 million and $1.2 million incurred within the Mortgage
     segment and Other Services segment, respectively.

*    Not meaningful.


                                       22




TRAVEL

Revenues increased $6.4 million (2%) and Adjusted EBITDA decreased $4.4 million
(3%) in first quarter 1999 compared to first quarter 1998. Excluding a $10.7
million decrease in gains from the sale of portions of our equity investment in
the car rental operations of Avis Rent A Car, Inc. ("ARAC") from $17.7 million
in 1998 to $7.0 million in 1999, revenues increased $17.0 million (7%) and
Adjusted EBITDA increased $6.3 million (5%) in 1999 over 1998. Contributing to
the revenue and Adjusted EBITDA increase was a $10.8 million (9%) increase in
franchise fees, consisting of increases in lodging and car rental franchise fees
of $6.5 million (8%) and $4.3 million (12%), respectively. Our franchise
businesses experienced incremental growth in first quarter 1999 compared to
first quarter 1998, primarily due to increases in available rooms (26,000
incremental rooms domestically), revenue per available room and car rental days.
Timeshare subscription and exchange revenue increased $8.5 million (10%) as a
result of a 6% increase in average membership volume and an 8% increase in the
number of exchanges. Average combined fees per timeshare member increased 3%,
which was attributable to increases in both exchange fees and membership fees. A
17% increase in operating expenses and a 10% increase in 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 $10.7 million increase in total
expenses. The Adjusted EBITDA margin decreased to 53% in 1999 from 56% in 1998.
Excluding the decrease in gains from our aforementioned sales of ARAC stock, the
Adjusted EBITDA margin was 52% in 1999 and 53% in 1998.

REAL ESTATE FRANCHISE

Revenues and Adjusted EBITDA increased $12.3 million (15%) and $12.2 million
(21%), respectively, in first quarter 1999 compared to first quarter 1998.
Royalty fees increased for the CENTURY 21(REGISTERED TRADEMARK), COLDWELL
BANKER(REGISTERED TRADEMARK) and ERA(REGISTERED TRADEMARK) franchise brands
collectively by $12.1 million (17%) primarily as a result of a 14% increase in
home sales by franchisees and an 8% increase in the average price of homes sold.
Home sales by franchisees benefited from strong first quarter 1999 existing U.S.
home sales, as well as from expansion of our franchise system. Since most costs
associated with the Real Estate Franchise business do not vary significantly
with home sale volume or royalty revenues, the increase in royalty revenues
contributed to an improvement of the Adjusted EBITDA margin from 70% to 74%.

RELOCATION

Revenues and Adjusted EBITDA decreased $8.8 million (9%) and $7.7 million (30%),
respectively, in first quarter 1999 compared to first quarter 1998. The Adjusted
EBITDA margin decreased from 26% to 20%. The primary cause of the revenue and
Adjusted EBITDA declines was the sale in the third quarter of 1998 of certain
niche-market asset management operations, which reduced revenues and Adjusted
EBITDA by $5.7 million and $4.0 million, respectively. Additionally in 1998,
revenues and Adjusted EBITDA benefited from an improvement in receivable
collections, which permitted a $4.7 million reduction in billing reserve
requirements. Excluding these two items in 1998, revenues and Adjusted EBITDA
increased modestly in 1999 over 1998. As a result of management's efforts to
renegotiate certain contracts, average fees have increased offsetting reduced
volumes in home sales, revenue producing referrals to third parties and
household goods moves. In addition, global services revenue and Adjusted EBITDA
improved in 1999. Also in 1999, revenues and Adjusted EBITDA were negatively
impacted by higher borrowing costs and lower interest income from customers.
Operating expenses decreased $4.5 million, principally from cost savings in
regional operations, reduced government home sale expenses and the sale of the
asset management operations discussed above. These expense reductions were
partially offset by increased investment in information technology.



                                       23





MORTGAGE

Revenues and Adjusted EBITDA increased $15.2 million (19%) and $6.5 million
(17%), respectively, in first quarter 1999 compared to first quarter 1998,
primarily due to substantial growth in mortgage origination. The Adjusted EBITDA
margin decreased from 48% to 47%, as higher revenues were offset by higher
operating expenses related to increases in hiring, technology and capacity,
which we planned to support continued growth. Mortgage closings increased,
including a shift to more profitable sales and processing channels, and were
responsible for the majority of the segment's revenue growth. Mortgage closings
increased $1.9 billion (40%) to $6.8 billion, while average production fees
decreased 6 basis points, resulting in a $17.6 million net increase in
production revenues. The decrease in the average fees resulted from the shift to
more profitable processing channels being offset by increased competitive
pressures in the mortgage lending market. Although the servicing portfolio grew
$14.5 billion (47%), net servicing revenue decreased $1.7 million, with average
servicing fees declining 3 basis points due to increased amortization of the
servicing asset.

INDIVIDUAL MEMBERSHIP

Revenues and Adjusted EBITDA increased $39.3 million (19%) and $27.8 million,
respectively, in first quarter 1999 compared to first quarter 1998. The Adjusted
EBITDA margin improved from negative 8% to 5% for the same period. The revenue
growth resulted principally from an $18.5 million increase in billings due to an
increase in the average price of a membership and 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. Also
contributing to the revenue growth were increased product sales and service fees
from newly acquired and existing individual members. The increase in the
Adjusted EBITDA margin is due primarily to the revenue increases, since many of
the infrastructure costs associated with providing services to members are not
dependent on revenue volume. There was also a reduction in solicitation
spending, as we further refined the targeted audiences for our direct marketing
efforts.

INSURANCE/WHOLESALE

Revenues increased $5.7 million (4%) in first quarter 1999 compared to first
quarter 1998 due primarily to customer growth, which resulted from increases in
affiliations with financial institutions. Adjusted EBITDA decreased $0.9 million
(2%) for the same periods. Domestic revenues and Adjusted EBITDA decreased $2.2
million (2%) and $2.5 million (7%), respectively. These decreases were due
primarily to non-recurring benefits in the first quarter of 1998 related to the
negotiation of new terms on a primary reinsurance contract. Excluding such
benefit, domestic revenues increased $3.3 million (3%) while Adjusted EBITDA
increased $3.0 million (10%) in 1999 over 1998. International revenues and
Adjusted EBITDA increased $7.8 million (29%) and $1.6 million (45%),
respectively, due primarily to a 45% increase in customers. Domestic operations,
which comprised 75% and 80% of segment revenues in 1999 and 1998, respectively,
are generating higher Adjusted EBITDA margins than international operations as a
result of continued expansion costs incurred internationally to penetrate new
markets. For the segment as a whole, the Adjusted EBITDA margin decreased from
29% in 1998 to 27% in 1999. The Adjusted EBITDA margin for domestic operations
was 32% in 1999, versus 33% in 1998, (including the 1998 non-recurring
reinsurance contract benefit). The Adjusted EBITDA margin for international
operations was 15% for 1999, versus 13% in 1998.

OTHER SERVICES

Revenues and Adjusted EBITDA increased $112.7 million (67%) and $23.1 million
(55%), respectively, in first quarter 1999 compared to first quarter 1998.
Revenues increased primarily as a result of the April 1998 acquisition of NPC,
the largest private car park operator in the UK, which contributed $130.1



                                       24




million to 1999 revenues. The revenue increase attributable to the NPC
acquisition was partially offset by $6.5 million of revenue reductions related
to our NUMA genealogy subsidiary exiting less profitable channels, $4.9 million
of revenue reductions in our information technology business unit ("WizCom"),
primarily due to the expiration of certain licensing agreements, and $4.5
million due to the sale of our Essex financial products distribution business in
January 1999. The $23.1 million increase in Adjusted EBITDA was primarily due to
$36.4 million related to the NPC acquisition, a $7.1 million increase in income
and gains related to our financial investments and $6.5 million from an
agreement which originated in the second quarter of 1998. These increases were
partially offset by $9.7 million in gains (primarily insurance recoveries) in
the first quarter of 1998, an $8.3 million increase in corporate technology and
infrastructure costs and $5.7 million related to reduced WizCom revenues
combined with increased costs.

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 - Fleet Segment"). Fleet segment revenues increased $5.2 million
(5%) and Adjusted EBITDA decreased $7.9 million (17%) in first quarter 1999
compared to first quarter 1998. Contributing to the revenue increase was a 10%
increase in service fee revenue and a 1% increase in fleet leasing revenue. The
number of service cards and leased vehicles increased by approximately 562,300
(16%) and 22,100 (7%), respectively. Increased operating expenses associated
with the development of new products, higher borrowing costs and the receipt in
1998 of access fees related to a key vendor arrangement contributed to the
decrease in Adjusted EBITDA from first quarter 1998 to first quarter 1999. The
Adjusted EBITDA margin decreased to 39% in 1999 from 49% in 1998.

LIQUIDITY AND CAPITAL RESOURCES

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 (see "Overview"). Pursuant to such program, we completed or have
pending the following dispositions through October 8, 1999:

Pending disposition of Green Flag. On October 8, 1999, we entered into a
definitive agreement to dispose of our Green Flag business unit for
approximately $410 million in cash. The transaction, subject to customary
regulatory approval in the United Kingdom ("UK"), is expected to be consummated
in the fourth quarter of 1999. Green Flag is a roadside assistance organization
based in the UK, which provides a wide range of emergency support and rescue
services.

Pending disposition of Entertainment Publications, Inc. On September 14, 1999,
we entered into a definitive agreement to sell 84% of our EPub business unit for
$325.0 million in cash. We will retain approximately 16% of EPub's equity in
connection with the transaction. In addition, we will have a designee on EPub's
Board of Directors. The transaction is subject to customary regulatory approvals
and customary conditions and is expected to be consummated in the fourth quarter
of 1999. The sale of EPub is expected to generate an after-tax gain of
approximately $140.0 million. We have determined that the size and nature of our
retained equity stake in EPUB, including the retention of board representation,
will require us to account for our ongoing investment in EPUB using the equity
accounting method. In addition, our earlier classification of EPUB as a
discontinued operation was reversed in accordance with generally accepted
accounting principles. EPub is the world's largest 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.

North American Outdoor Group. On October 8, 1999, we disposed of 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. The sale of NAOG is expected to generate a
pre-tax gain of approximately $107.0 million. NAOG is the world's largest
lifestyle affinity membership organization.


                                       25




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.

Fleet Segment. Pursuant to our program to divest non-strategic businesses and
assets, on June 30, 1999, we completed the disposition of our fleet business
segment ("fleet segment" or "fleet businesses"), which included PHH Vehicle
Management Services Corporation, 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 (received in the form of
a dividend from PHH) to substantially execute the "Dutch Auction" tender offer
by us to repurchase 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.

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 June 30,
1999, we beneficially owned approximately 19% 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 34% of ARAC's outstanding common equity (although the voting
interest would be limited, in most instances to 20%).

We realized a net gain on disposition of $881.4 million ($865.7 million, after
tax). 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 in accordance with applicable tax law to be
treated as a tax-free reorganization and, accordingly, no tax provision has been
recorded on a majority of the gain. Should the transaction be deemed taxable,
the resultant tax liability could be material.

Other Businesses. Subsequent to the quarter ended March 31, 1999, we completed
the dispositions of certain other businesses, including Central Credit, Inc.,
Spark Services, Inc., Match.com, National Leisure Group and National Library of
Poetry. Aggregate consideration received on the dispositions of such businesses
was comprised of $106.0 million in cash and $43.3 million of common stock. We
realized a net gain of $46.2 million ($26.4 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



                                       26




the disposition of CDS , of which $192.7 million was recognized in the first
quarter of 1999 coincident with the closing of the transaction. Subsequently, 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. 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, INC.
On September 15, 1999, Netmarket, Inc. ("NGI") began operations as an
independent company that will pursue the development of 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, we 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 us to independent third parties, NGI's operating results will
no longer be 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, into
78% of NGI's diluted common shares. 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. We recorded a charge, inclusive of transaction costs of
$85.0 million ($48.0 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, of
which $1.70 billion is currently undrawn and available and $2.45 billion of
availability under existing shelf registration statements. Our long-term debt
was $3.4 billion at March 31, 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 March 31, 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 29, 1999 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


                                       27




indebtedness, mergers, liquidations and sale and leaseback transactions and
requires the maintenance of certain financial ratios, including a 3:1 minimum
interest coverage ratio and a maximum debt-to-capitalization ratio of 0.5:1.

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. 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 $3.0 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 $400.0
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.

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 March 31, 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



                                       28




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.


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 an average
market price of $17.53 per share of our common stock (calculated based on the
average closing price per share of our common stock for the consecutive five-day
period ended September 30, 1999), the effect of the issuance of the New PRIDES
will be to distribute approximately 19 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, 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 presently intend to
distribute the Rights in October 1999 after the effectiveness of the
registration statement filed with the SEC covering the New PRIDES.

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).



                                       29




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 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 - 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 March 31, 1999, we were servicing approximately $1.8 billion 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, European and Canadian
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:

                                      MARCH 31,       DECEMBER 31,
     (IN BILLIONS)                       1999             1998
                                    -------------     -------------
     Commercial paper               $         2.2     $        2.5
     Medium-term notes                        2.3              2.3
     Securitized obligations                  1.7              1.9
     Other                                    0.1              0.2
                                    -------------     ------------
                                    $         6.3     $        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 March 31,
1999, PHH had approximately $2.3 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 four separate financing facilities, the outstanding
borrowings of which are securitized by corresponding assets under management and
mortgage programs. Such securitized obligations are described below.



                                       30




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 agreement is collateralized by the underlying
mortgage loans held in safekeeping by the custodian to the agreement. The total
commitment under this 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 this Agreement at March 31, 1999
totaled $336.5 million.

Relocation Facilities. Our PHH subsidiary maintains a 364-day asset
securitization agreement, expiring 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 March 31,
1999, our PHH subsidiary was servicing $248.3 million of assets which were
funded under this agreement.

Our PHH subsidiary also maintains an asset securitization agreement, with a
separate unaffiliated buyer, which has a purchase commitment up to a limit of
$350.0 million. The terms of this agreement are similar to the aforementioned
facility, with PHH retaining the servicing rights on the right of payment
related to certain relocation receivables of PHH. At March 31, 1999, PHH was
servicing $100.0 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. Although no
assurances can be given, we expect that such facility will be in place prior to
December 31, 1999.

Fleet Facilities. Our PHH subsidiary maintains two secured financing
transactions each expiring December 2003 through its two wholly owned
subsidiaries, TRAC Funding and TRAC Funding II. Such subsidiaries hold secured
leased assets (specified beneficial interests in a trust, which owns the leased
vehicles and the leases). Secured leased assets held by the subsidiaries
totaling $600.0 million and $725.3 million, respectively, were initially
contributed by PHH. At March 31, 1999, outstanding loans to TRAC Funding and
TRAC Funding II, amounted to $446.9 million and $536.9 million, respectively,
and were secured by the specified beneficial interests in the trust. Monthly
loan repayments conform to the amortization of the leased vehicles with the
repayment of the outstanding loan balance required at time of disposition of the
vehicles. Interest on the loans is based upon the conduit commercial paper
issuance cost and committed bank lines priced on a LIBOR basis. Repayments of
loans are limited to the cash flows generated from the leases represented by the
specified beneficial interests in the trust. At June 30, 1999, the outstanding
balances under the securitized fleet financing facilities were repaid and such
securitized facilities were retired coincident with the fleet segment
disposition.

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 amount of
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 March 31, 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.



                                       31




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 First National Bank of
Chicago, as 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 accounting irregularities in the former business units of CUC and
prior to the date of the Annual Report on Form 10-K/A, 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.

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 30, 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 such appeal is pending.

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
which are reflected in our restated financial statements. Although we can
provide no assurances that additional adjustments will not be necessary as a
result of these government investigations, we do not expect that additional
adjustments will be necessary.

Other than with respect to the PRIDES class action litigation, we do not believe
it is feasible to predict or determine the final outcome of these proceedings or
investigations or to estimate the amounts or potential range of loss with
respect to these proceedings or investigations. The possible outcomes or
resolutions of



                                       32




the proceedings could include a judgement against us or settlements and could
require substantial payments by us. In addition, the timing of the final
resolution of the proceedings or investigations is uncertain. We believe that
material adverse outcomes with respect to such proceedings or investigations
could have a material impact on our financial position, results of operations or
cash flows.

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).

COMMON SHARE REPURCHASES

Our Board of Directors authorized a common share repurchase program pursuant to
which the aggregate authorized amount that can be repurchased under the program
has been incrementally increased to $1.8 billion. We have executed this program
through open-market purchases or privately negotiated transactions. As of
September 30, 1999, we repurchased approximately $1.8 billion (93.6 million
shares) of our common stock under the program. Subject to bank credit facility
covenants, certain rating agency constraints and authorization from our Board of
Directors, we anticipate expanding the program, although we can give no
assurance with respect to the timing, likelihood or amount of future repurchases
under the program.

In July 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. Under the
terms of the offer, which commenced June 16, 1999 and expired July 15, 1999, we
had invited shareholders to tender their shares of our common stock at prices
between $19.75 and $22.50 per share. We financed the purchase of shares costing
$1.11 billion with proceeds received from our June 30, 1999 disposition of our
fleet segment.

Since the inception of our share repurchase program and, inclusive of our
self-tender offer and including the 7.1 million shares of our common stock
received as partial consideration in connection with the sale of our Hebdo Mag
subsidiary, we have reduced our shares outstanding by approximately 18%.

CASH FLOWS

We generated $936.1 million of cash flows from operations in first quarter 1999
representing a $752.9 million increase from first quarter 1998. The increase in
cash flows from operations was primarily due to a $619.8 million net decrease in
mortgage loans held for sale which reflects larger loan sales to the secondary
markets in proportion to loan originations.



                                       33




We generated $244.1 million in cash flows from investing activities in first
quarter 1999 representing a $1.7 billion increase from first quarter 1998. The
incremental cash flows from investing activities was primarily attributable to
$800.0 million of cash proceeds received in first quarter 1999 from the sale of
CDS, our former software segment, and first quarter 1998 acquisitions, including
Jackson Hewitt, Inc. and The Harpur Group Ltd. Cash flows used in financing
activities of approximately $1.7 billion consisted primarily of $1.1 billion in
Company common stock repurchases pursuant to our share repurchase program and
$570.4 million of net repayments on fundings of our investments in assets under
management and mortgage programs.

CAPITAL EXPENDITURES

In first quarter 1999, $62.7 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 $260.0 million in capital expenditures in 1999.

YEAR 2000 COMPLIANCE

The following disclosure is a Year 2000-readiness disclosure statement pursuant
to the Year 2000 Readiness and Disclosure Act.

The Year 2000 presents the risk that information systems will be unable to
recognize and process date-sensitive information properly from 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. We implemented a Year 2000
initiative in March 1996 that has now been adopted by all of our business units.
As part of such initiative, we have selected a team of 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"). We have substantially
completed the Identification and Assessment Phases and have identified and
assessed five areas of risk: (i) internally developed business applications;
(ii) third party vendor software, such as business applications, operating
systems and special function software; (iii) computer hardware components; (iv)
electronic data transfer systems between our customers and us; and (v) embedded
systems, such as phone switches, check writers and alarm systems. Although no
assurances can be made, we believe that substantially all of our systems,
applications and related software that are subject to Year 2000 compliance risk
have been identified and that we have either implemented or initiated the
implementation of a plan to correct such systems that are not Year 2000
compliant. In addition, as part of our assessment process we are developing
contingency plans as considered necessary. Substantially all of our mission
critical systems have been remediated during 1998. However, we cannot directly
control the timing of certain Year 2000 compliant vendor products and in certain
situations, exceptions to the December 1998 date have been authorized. We are
closely monitoring those situations and intend to complete testing efforts and
any contingency implementation efforts prior to December 31, 1999. Although we
have begun the Testing Phase, we do not anticipate completion of the Testing
Phase until sometime prior to December 1999.

We rely on third party service providers for services such as
telecommunications, internet service,



                                       34




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. We initiated an evaluation of the status of
such third party service providers' efforts to determine alternative and
contingency requirements. While approaches to reducing risks of interruption of
business operations vary by business unit, options include identification of
alternative service providers available to provide such services if a service
provider fails to become Year 2000 compliant within an acceptable timeframe
prior to December 31, 1999.

The total cost of our Year 2000 compliance plan is anticipated to be $55
million. Approximately $37 million of these costs had been incurred through
March 31, 1999, and we expect to incur the balance of such costs to complete the
compliance plan. We have 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 our future results of
operations are not anticipated to be material in any given year. However, if
Year 2000 modifications and conversions are not made, including modifications by
our third party service providers, or are not completed in time, the Year 2000
problem could have a material impact on our operations, cash flows and financial
condition. At this time we believe the most likely "worst case" scenario
involves potential disruptions in our operations as a result of the failure of
services provided by third parties.

The estimates and conclusions herein are forward-looking statements and are
based on our 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 our service providers to bring their
systems into Year 2000 compliance.


IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

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 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
12-month period. We will now adopt SFAS No. 133 as required for our first
quarterly filing of fiscal year 2001.



                                       35






ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

In recurring operations, we must deal with effects of changes in interest rates
and currency exchange rates. The following discussion presents an overview of
how such changes are managed and a view of their potential effects.

We use various financial instruments, particularly interest rate and currency
swaps and currency forwards, to manage our respective interest rate and currency
risks. We are exclusively an end user of these instruments, which are commonly
referred to as derivatives. We do not engage in trading, market making or other
speculative activities in the derivatives markets. Established practices require
that derivative financial instruments relate to specific asset, liability or
equity transactions or to currency exposures.

The SEC requires that registrants include information about potential effects of
changes in interest rates and currency exchange in their financial statements.
Although the rules offer alternatives for presenting this information, none of
the alternatives is without limitations. The following discussion is based on
so-called "shock tests," which model effects of interest rate and currency
shifts on the reporting company. Shock tests, while probably the most meaningful
analysis permitted, are constrained by several factors, including the necessity
to conduct the analysis based on a single point in time and by their inability
to include the extraordinarily complex market reactions that normally would
arise from the market shifts modeled. While the following results of shock tests
for interest rate and currencies may have some limited use as benchmarks, they
should not be viewed as forecasts.

o    One means of assessing exposure to interest rate changes is a
     duration-based analysis that measures the potential loss in net earnings
     resulting from a hypothetical 10% change in interest rates across all
     maturities (sometimes referred to as a "parallel shift in the yield
     curve"). Under this model, it is estimated that, all else constant, such a
     decrease would not materially impact our 1999 net earnings based on current
     positions.

o    One means of assessing exposure to changes in currency exchange rates is to
     model effects on future earnings using a sensitivity analysis. Year-end
     1998 consolidated currency exposures, including financial instruments
     designated and effective as hedges, were analyzed to identify our assets
     and liabilities denominated in other than their relevant functional
     currency. Net unhedged exposures in each currency were then remeasured
     assuming a 10% change in currency exchange rates compared with the U.S.
     dollar. Under this model, it is estimated that, all else constant, such a
     decrease would not materially impact our 1999 net earnings based on current
     positions.

The categories of primary market risk exposure to us are: (i) long-term U.S.
interest rates due to mortgage loan origination commitments and an investment in
mortgage loans held for resale; (ii) short-term interest rates as they impact
vehicle and relocation receivables; and (iii) LIBOR and commercial paper
interest rates due to their impact on variable rate borrowings.



                                       36



PART II. OTHER INFORMATION

ITEM 1 -   LEGAL PROCEEDINGS

      The discussions contained under the headings "Litigation Settlement" in
Note 7 and "Litigation Accounting Irregularities" in Note 8 contained in Part 1
- - FINANCIAL INFORMATION, Item 1 - Financial Statements, are incorporated herein
by reference in their entirety.



                                       37







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 January 8, 1999, reporting in Item 5 the preliminary
     settlement of the PRIDES Securities Class Action Suit

     Form 8-K, dated February 3, 1999, reporting in Item 5 an increase in our
     stock repurchase program

     Form 8-K, dated February 9, 1999, reporting in Item 5 the termination of
     RAC Motoring Services acquisition

     Form 8-K, dated February 10, 1999, reporting in Item 5 our 1998 fourth
     quarter and full year 1998 financial results

     Form 8-K, dated February 16, 1999, reporting in Item 5 our entering into a
     new $1.25 billion term loan facility

     Form 8-K, dated March 19, 1999, reporting in Item 5 the final settlement of
     the PRIDES Class Action Litigation




                                       38




                                   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
Date:  October 8, 1999                   (Principal Accounting Officer)





                                       39