EXHIBIT 99.1
[CENDANT LOGO]
CENDANT REPORTS RECORD RESULTS FOR FOURTH QUARTER AND FULL YEAR 2002
4Q 2002 Adjusted EPS from Continuing Operations Increased 38% to $0.29
4Q 2002 Reported EPS from Continuing Operations Was $0.24,
Versus a Loss of ($0.33) in 4Q 2001
4Q 2002 Revenue Increased 54% (5% Organically) and
Adjusted EBITDA Increased 22% (16% Organically)
Full Year 2002 Adjusted EPS from Continuing Operations Increased 31% to $1.26
Full Year 2002 Reported EPS from Continuing Operations Was $1.04 Versus
$0.36 in 2001
Company Reiterates its Projection of 2003 Reported EPS from Continuing
Operations of $1.46, representing a 40% Increase Over 2002
NEW YORK, NY, FEBRUARY 5, 2003 - Cendant Corporation (NYSE: CD) today reported
record fourth quarter 2002 Adjusted EPS from continuing operations of $0.29, an
increase of 38% year over year, in line with the Company's projection. Reported
EPS from continuing operations was $0.24, up from a loss of ($0.33) last year.
Reported EPS from continuing operations in fourth quarter 2002 includes a $0.06
per share non-cash charge to reserve for the Company's estimated liability for
all remaining CUC-related securities litigation. As previously disclosed, the
Company also recognized a $0.03 per share D&O insurance recovery benefit in
connection with the settlement of CUC-related shareholder derivative actions.
The Company also affirmed that it expects reported EPS from continuing
operations of $1.46 in 2003, an increase of 40% over 2002.
Cendant's Chairman, President and CEO, Henry R. Silverman, stated: "The
diversity and scale of our business model, which we use to manage risk, proved
successful again in the fourth quarter. Despite the continued challenging
environment for travel and corporate spending, the majority of our businesses
performed at or ahead of plan, enabling us to achieve record results.
"During the fourth quarter, we continued to deploy our free cash flow primarily
to strengthen our balance sheet. Exclusive of the approximately $600 million we
temporarily drew on our revolving credit facility to complete the Budget
transaction,
1
we retired approximately $240 million in long-term debt and repurchased $79
million in stock. We also renewed and upsized our revolving credit facility and,
in January, we issued $2 billion in medium-term notes, which, along with our
expected 2003 free cash flow of approximately $2 billion, should give us
significant financial flexibility to continue to repay debt and repurchase
stock. (Net cash provided by operating activities exclusive of management and
mortgage programs is projected to be at least $2 billion.)
"I am also pleased to report that, for the full year 2002, we generated revenue
growth of 64%, including 3% organic growth, and Adjusted EBITDA growth of 32%,
including 11% organic growth. During the fourth quarter, our revenue growth was
54%, including 5% organic growth, and our Adjusted EBITDA growth was 22%,
including 16% organic growth." See Table 10 for more information regarding our
organic growth.
RECONCILIATION OF FOURTH QUARTER REPORTED EPS TO ADJUSTED EPS
Adjusted EPS excludes items that are of a non-recurring or unusual nature,
including securities litigation costs and acquisition and integration related
costs consisting primarily of the non-cash amortization of the pendings and
listings intangible asset from real estate brokerage acquisitions. In 2001,
Adjusted EPS also excludes certain effects on our operations from the September
11 terrorist attacks and Homestore.com related items. Because Adjusted EPS
excludes non-recurring and unusual items, management believes it is a useful
measure of the Company's operating performance in 2001 and 2002. Adjusted EPS is
a non-GAAP (generally accepted accounting principles) measure and should be
viewed in addition to, and not in lieu of, the Company's reported EPS. The
following table reconciles reported EPS from continuing operations to Adjusted
EPS from continuing operations, identifying the items reflected in reported EPS
that are considered to be of an unusual or non-recurring nature for purposes of
deriving Adjusted EPS. Fourth quarter 2002 will be the last quarter that Cendant
provides Adjusted EPS figures. Hereafter, the Company's disclosures will focus
on reported EPS. Fourth quarter 2001 amounts do not add due to a change in the
weighted average shares used in calculating EPS for reported and Adjusted
results:
FOURTH FOURTH FIRST CALL
QUARTER QUARTER % CONSENSUS
2002 2001(4) CHANGE ESTIMATE
---------- -------- ------- --------
Reported EPS from Continuing Operations $ 0.24 ($0.33) $ 0.29
Shareholder litigation and related
costs(1) 0.05 0.04
Acquisition and integration related
costs(2) 0.01 0.07
Costs related to 9/11 terrorist attacks(3) (0.01) 0.13
Losses related to equity in Homestore.com -- 0.31
-------- -------
ADJUSTED EPS FROM CONTINUING OPERATIONS $ 0.29 $ 0.21 38% $ 0.29
======== ======= ======= ========
(1) In 2002, this amount includes a non-cash charge of $0.06 per share to
reserve for the Company's estimated liability in all remaining
CUC-related securities litigation and ongoing costs related to the CUC
related securities litigation, partially offset by a credit of $0.03
per share related to the D&O liability insurance recovery in connection
with settlement of the CUC related shareholder derivative actions.
(2) In 2002, this charge is primarily the non-cash amortization of the
pendings and listings intangible asset from real estate brokerage
acquisitions.
2
(3) In 2002, this amount represents a non-cash credit related to changes in
the Company's restructuring costs incurred as a result of the September
11, 2001 terrorist attacks, compared to original estimates.
(4) Please see the Company's fourth quarter 2001 earnings release dated
February 6, 2002 for a detailed description of the reconciling items
between reported and Adjusted EPS for fourth quarter 2001.
FOURTH QUARTER ACCOMPLISHMENTS
The Company had several important accomplishments during the fourth quarter of
2002:
o Retired approximately $240 million of long-term debt including
$143 million carrying amount of our zero coupon convertible
debentures due May 2021, $76 million of our 7 3/4% notes due
December 2003, and $24 million of our 11% senior subordinated
notes due May 2009. See Table 6 for more detailed information.
o Repurchased $79 million in common stock at an average price of
$11.42 per share.
o Renewed and upsized our revolving credit facility to $2.9 billion
with a three-year term.
o Completed the acquisition of certain assets of Budget Group, Inc.
for a total transaction cost of approximately $600 million.
o Announced that, beginning in 2003, the Company will discontinue
reporting Adjusted EPS and Adjusted EBITDA.
FOURTH QUARTER 2002 SEGMENT RESULTS
The following discussion of operating results addresses segment revenue and
Adjusted EBITDA, which is defined as earnings from continuing operations before
non-program related interest, income taxes, non-program related depreciation and
amortization, minority interest and, in 2001, Homestore.com related items.
Adjusted EBITDA also excludes certain items that are of a non-recurring or
unusual nature and are not measured in assessing segment performance including,
in 2001, certain effects on our operations from the September 11 terrorist
attacks. See Table 2 for a detailed description of each item excluded from
Adjusted EBITDA. We believe this metric is the most informative presentation of
how management evaluated performance and allocated resources in 2001 and 2002.
Fourth quarter 2002 will be the last quarter that Cendant provides Adjusted
EBITDA figures. Hereafter, the Company's disclosures will focus on reported
EBITDA and that is how we will measure and allocate resources to our segments
prospectively. Revenue and Adjusted EBITDA are expressed in millions.
3
REAL ESTATE SERVICES
(Consisting of the Company's real estate franchise brands, brokerage operations,
mortgage services and relocation services.)
2002 2001 % CHANGE
- -------------------------------------------------------------------------------
REVENUES $1,506 $532 183%
- -------------------------------------------------------------------------------
ADJUSTED EBITDA $ 279 $289 (3%)
- -------------------------------------------------------------------------------
Revenues and Adjusted EBITDA were positively impacted by real estate brokerage
acquisitions (primarily NRT in April 2002) and by growth in our real estate
franchise business due to increases in transaction volume and price. Strong
growth in mortgage production revenue was offset by increased mortgage servicing
amortization due to continued high refinancing activity. Although mortgage
revenues were below the record levels achieved in fourth quarter 2001, the
mortgage business was significantly profitable during fourth quarter 2002.
Revenues and Adjusted EBITDA were also negatively impacted by a modest decline
in relocation volumes, owing to a continued weak corporate spending environment.
HOSPITALITY
(Consisting of the Company's nine franchised lodging brands, timeshare exchange
and interval sales, and vacation rental.)
2002 2001 % CHANGE
- -------------------------------------------------------------------------------
REVENUES $541 $369 47%
- --------------------------------------------------------------------------------
ADJUSTED EBITDA $135 $103 31%
- --------------------------------------------------------------------------------
Revenues and Adjusted EBITDA increased primarily due to the acquisitions of
Trendwest and Equivest in 2002. In addition, operating results were favorably
impacted by organic growth in RCI timeshare exchange revenues, Fairfield
timeshare unit sales and higher revenues per available room at our franchised
lodging operations.
TRAVEL DISTRIBUTION
(Consisting of electronic global distribution services for the travel industry
and travel agency services.)
2002 2001 % CHANGE
- -------------------------------------------------------------------------------
REVENUES $381 $362 5%
- -------------------------------------------------------------------------------
ADJUSTED EBITDA $119 $102 17%
- -------------------------------------------------------------------------------
Revenues and Adjusted EBITDA increased primarily due to growth in Galileo
booking volumes and the acquisition of Galileo distribution partners in Italy
and Ireland. Adjusted EBITDA also benefited from the success of cost reduction
efforts in connection with the integration of Galileo and Cheap Tickets.
VEHICLE SERVICES
(Consisting of car rental, vehicle management services and fuel card services.)
2002 2001 % CHANGE
- -------------------------------------------------------------------------------
REVENUES $1,127 $879 28%
- -------------------------------------------------------------------------------
ADJUSTED EBITDA $ 72 $ 14 414%
- -------------------------------------------------------------------------------
4
Revenues and Adjusted EBITDA increased primarily due to strong results at the
Avis car rental business, reflecting continued increases in both pricing and
market share. Operating results also were modestly benefited by the acquisition
of certain assets of Budget Group, Inc. in November 2002.
FINANCIAL SERVICES
(Consisting of individual membership products, insurance-related services,
financial services enhancement products and tax preparation services.)
2002 2001 % CHANGE
- -------------------------------------------------------------------------------
REVENUES $273 $342 (20%)
- -------------------------------------------------------------------------------
ADJUSTED EBITDA $ 75 $ 51 47%
- -------------------------------------------------------------------------------
Revenue declined while Adjusted EBITDA increased primarily due to the 2001
outsourcing of portions of the individual membership business to Trilegiant. As
expected, the retained base of membership customers existing prior to the
Trilegiant transaction continued to decline, resulting in lower revenues and
lower corresponding operating costs to Cendant, and, therefore, higher margins.
In addition, marketing expenses were lower quarter over quarter due to
incremental solicitation efforts by Trilegiant during fourth quarter 2001, which
were funded and expensed by the Company in connection with the transaction.
OTHER ITEMS
o Free cash flow for the twelve months ended December 31, 2002 was
approximately $1.62 billion. See Table 8 for a reconciliation of free cash
flow to net cash provided by operating activities.
o As of December 31, 2002, the Company had approximately $125 million of cash
and cash equivalents, $5.6 billion of debt (including $600 million drawn on
its revolving credit facility) and $375 million of preferred minority
interest. In addition, the Company had $863 million of mandatorily
convertible Upper DECS securities outstanding.
o As of December 31, 2002, the Company's net debt to total capital ratio was
36%. The Company's ratio of Adjusted EBITDA to net non-program related
interest expense was 10 to 1 for the fourth quarter 2002.
o As of December 31, 2002, the Company had unused credit facilities of $1.3
billion. In addition, the Company had unused credit facilities of $1.5
billion related to its PHH subsidiary.
o Weighted average common shares outstanding, including dilutive securities,
used to calculate Adjusted EPS from continuing operations, were 1.04
billion for the fourth quarter 2002 compared with 1.02 billion for the
fourth quarter 2001. The increase was primarily from the issuance of common
shares in connection with the acquisitions of Trendwest and NRT in 2002.
5
FULL YEAR 2002 RESULTS
Adjusted EPS from continuing operations was $1.26 in 2002 versus $0.96 in 2001,
an increase of 31%. Reported EPS from continuing operations was $1.04 in 2002
versus $0.36 in 2001, an increase of 189%. Revenue was $14.1 billion in 2002
versus $8.6 billion in 2001, an increase of 64%. Adjusted EBITDA was $2.8
billion in 2002 versus $2.1 billion in 2001, an increase of 32%.
SUBSEQUENT EVENTS
Since December 2002, the Company has:
o Issued a total of $2 billion in five-year and ten-year maturity
bonds.
o Utilized proceeds from the $2 billion bond issue to retire $1.7
billion of debt, including $600 million drawn on its revolving
credit facility primarily to complete the Budget acquisition,
$334 million carrying amount of our zero coupon convertible
debentures due May 2021, $737 million of our 7 3/4% notes due
December 2003, and $33 million of our 11% senior subordinated
notes due May 2009.
o Repurchased $33 million in common stock at an average price of
$11.39 per share.
o Acquired the common interests of FFD Development Company, LLC
(FFD) from an independent trust for approximately $27 million in
cash plus approximately $58 million in acquired debt. FFD is the
primary developer of timeshare inventory for Fairfield Resorts.
2003 OUTLOOK
As previously announced, the Company will no longer report Adjusted EBITDA or
Adjusted EPS beginning with the results of the first quarter of 2003. The
company projects the following range of reported EPS from continuing operations
for 2003:
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
------------ -------------- ------------- -------------- -------
2003 $0.29 - 0.30 $0.42 - 0.44 $0.45 - 0.47 $0.27 - 0.29 $1.46
2002 $0.31 $0.25 $0.24 $0.24 $1.04
% CHANGE (6% - 3%) 68% - 76% 88% - 96% 12% - 21% 40%
2002 (PRO FORMA)(1) $0.31 $0.23 $0.24 $0.24 $1.01
% CHANGE (6% - 3%) 83% - 91% 88% - 96% 12% - 21% 45%
* The comparability of the Company's earnings from 2002 to 2003 reflects
the acquisitions of NRT and Budget's car and truck rental operations,
the mortgage servicing rights asset write-down in third quarter 2002,
the securities litigation charge recorded in fourth quarter 2002, and
the debt extinguishment costs being incurred in first quarter 2003,
which will be offset by reduced interest expense during the remainder
of 2003. Additionally, reported EPS in any quarter may be impacted
positively or negatively by non-recurring events not subject to
forecasting.
6
(1) 2002 pro forma results reflect reported EPS from continuing operations
giving effect to the change in accounting policy effective in 2003
under generally accepted accounting principles whereby losses on the
early extinguishment of debt are required to be reclassified to
continuing operations, consistent with our presentation of 2003
projected reported EPS.
The Company also announced the following detailed financial projections for full
year 2003 (in millions):
FULL YEAR 2002 FULL YEAR 2003
ACTUAL PROJECTED
-------------- --------------
REVENUE
Real Estate Services $4,687 $6,300 - 6,500
Hospitality 2,180 2,600 - 2,700
Travel Distribution 1,695 1,800 - 1,900
Vehicle Services 4,175 5,800 - 6,000
Financial Services 1,325 1,150 - 1,200
Corporate and Other 26 25 - 50
-- ----------------
Total Revenue $14,088 $17,675 - 18,350
REPORTED EBITDA
Real Estate Services $832 $1,150 - 1,225
Hospitality 625 725 - 775
Travel Distribution 526 550 - 600
Vehicle Services 408 450 - 500
Financial Services 450 350 - 375
Corporate and Other (198) (75 - 50)
------ ---------------
Total Reported EBITDA $2,643 $3,200 - 3,375
Depreciation and amortization(1) (466) (565 - 580)
Amortization of pendings/listings (256) (25 - 30)
------ ---------------
Operating Income $1,921 $2,610 - 2,765
Interest expense, net (262) (330 - 360)
Interest expense, net (pro forma)(2) (304) (330 - 360)
Minority interest (22) (20 - 25)
Diluted weighted average shares outstanding(3) 1,043 1,050 - 1,060
* Projections do not reflect any potential impact from war, additional
terrorist attacks or substantial changes to current economic
conditions.
* The effective tax rate is expected to be approximately 33% in 2003.
(1) Depreciation and amortization and interest expense exclude
program-related amounts, which are already reflected in reported
EBITDA.
(2) 2002 pro forma interest expense gives effect to the change in
accounting policy effective in 2003 under generally accepted accounting
principles whereby losses on the early extinguishment of debt are
required to be reclassified to interest expense, consistent with our
presentation of 2003 interest expense.
(3) Diluted weighted average shares outstanding are expected to increase
marginally in 2003 due to the full-year impact of the Trendwest and NRT
acquisitions, which were completed in 2002 for stock, partially offset
by anticipated stock repurchases.
7
INVESTOR CONFERENCE CALL
Cendant will host a conference call to discuss the fourth quarter results on
Thursday, February 6, 2003, at 11:00 a.m. (EST). Investors may access the call
live at www.cendant.com or by dialing (913) 981-4900. A web replay will be
available at www.cendant.com following the call. A telephone replay will be
available from 2:00 p.m. (EST) on February 6, 2003 until 8:00 p.m. (EST) on
February 13, 2003 at (719) 457-0820, access code: 605198.
Cendant Corporation is primarily a provider of travel and residential real
estate services. With approximately 85,000 employees, New York City-based
Cendant provides these services to businesses and consumers in over 100
countries.
More information about Cendant, its companies, brands and current SEC filings
may be obtained by visiting the Company's Web site at www.cendant.com or by
calling 877-4-INFOCD (877-446-3623).
STATEMENTS ABOUT FUTURE RESULTS MADE IN THIS RELEASE, INCLUDING THE PROJECTIONS,
AND THE STATEMENTS ATTACHED HERETO CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE
STATEMENTS ARE BASED ON CURRENT EXPECTATIONS AND THE CURRENT ECONOMIC
ENVIRONMENT. THE COMPANY CAUTIONS THAT THESE STATEMENTS ARE NOT GUARANTEES OF
FUTURE PERFORMANCE. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR
IMPLIED 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 ARE SPECIFIED IN CENDANT'S FORM 10-Q/A
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002.
SUCH FORWARD-LOOKING STATEMENTS INCLUDE PROJECTIONS. SUCH PROJECTIONS WERE NOT
PREPARED IN ACCORDANCE WITH PUBLISHED GUIDELINES OF THE AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS OR THE SEC REGARDING PROJECTIONS AND FORECASTS, NOR
HAVE SUCH PROJECTIONS BEEN AUDITED, EXAMINED OR OTHERWISE REVIEWED BY
INDEPENDENT AUDITORS OF CENDANT OR ITS AFFILIATES. IN ADDITION, SUCH PROJECTIONS
ARE BASED UPON MANY ESTIMATES AND ARE INHERENTLY SUBJECT TO SIGNIFICANT
ECONOMIC, COMPETITIVE AND OTHER UNCERTAINTIES AND CONTINGENCIES, INCLUDING BUT
NOT LIMITED TO THE POTENTIAL IMPACT OF WAR OR TERRORISM, MANY OF WHICH ARE
BEYOND THE CONTROL OF MANAGEMENT OF CENDANT AND ITS AFFILIATES. ACCORDINGLY,
ACTUAL RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE PROJECTED. THE
INCLUSION OF SUCH PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS A REPRESENTATION
BY CENDANT OR ITS AFFILIATES THAT THE PROJECTIONS WILL PROVE TO BE CORRECT.
MEDIA CONTACT: INVESTOR CONTACTS:
Elliot Bloom Sam Levenson
212-413-1832 212-413-1834
Henry A. Diamond
212-413-1920
# # #
Tables Follow
8
<Page>
TABLE 1
CENDANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------- --------------------
2002 2001 2002 2001
-------- -------- -------- --------
REVENUES
Service fees and membership-related, net $ 2,762 $ 1,648 $ 10,062 $ 5,426
Vehicle-related 1,075 827 3,979 3,134
Other 12 19 47 53
-------- -------- -------- --------
Net revenues 3,849 2,494 14,088 8,613
-------- -------- -------- --------
EXPENSES
Operating 2,021 837 6,721 2,658
Vehicle depreciation, lease charges and interest, net 561 511 2,094 1,789
Marketing and reservation 333 328 1,392 1,114
General and administrative 270 275 1,120 965
Non-program related depreciation and amortization 129 148 466 477
Other charges (credits):
Acquisition and integration related costs (A) 22 104 285 112
Litigation and related costs, net 77 58 103 86
Restructuring and other unusual charges (14) 116 (14) 379
Mortgage servicing rights impairment -- 94 -- 94
Non-program related interest, net 69 73 262 252
-------- -------- -------- --------
Total expenses 3,468 2,544 12,429 7,926
-------- -------- -------- --------
Gains on dispositions of businesses -- 5 -- 443
-------- -------- -------- --------
Losses on dispositions of businesses -- (23) -- (26)
-------- -------- -------- --------
Impairment of investments -- (441) -- (441)
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST AND
EQUITY IN HOMESTORE.COM 381 (509) 1,659 663
Provision (benefit) for income taxes 128 (206) 556 220
Minority interest, net of tax 6 2 22 24
Losses related to equity in Homestore.com, net of tax -- 21 -- 77
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS 247 (326) 1,081 342
Income from discontinued operations, net of tax -- 19 51 81
Loss on disposal of discontinued operations, net of tax (B) -- -- (256) --
-------- -------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSSES AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 247 (307) 876 423
Extraordinary losses, net of tax -- -- (30) --
-------- -------- -------- --------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 247 (307) 846 423
Cumulative effect of accounting changes, net of tax -- -- -- (38)
-------- -------- -------- --------
NET INCOME (LOSS) $ 247 $ (307) $ 846 $ 385
======== ======== ======== ========
CD COMMON STOCK INCOME (LOSS) PER SHARE
BASIC
Income (loss) from continuing operations $ 0.24 $ (0.33) $ 1.06 $ 0.37
Net income (loss) 0.24 (0.31) 0.83 0.42
DILUTED
Income (loss) from continuing operations $ 0.24 $ (0.33) $ 1.04 $ 0.36
Net income (loss) 0.24 (0.31) 0.81 0.41
WEIGHTED AVERAGE SHARES
Basic 1,034 978 1,019 869
Diluted 1,045 978 1,043 917
</Table>
- ---------
(A) Includes non-cash amortization of pendings and listings of $17 million
during the three months ended December 31, 2002 principally related to the
acquisitions of real estate brokerages and $256 million during the twelve
months ended December 31, 2002 principally related to the acquisition of
NRT Incorporated.
(B) Includes $245 million of non-cash currency translation adjustment, which
was previously reflected within stockholders' equity.
<Page>
TABLE 2
CENDANT CORPORATION AND SUBSIDIARIES
REVENUES AND ADJUSTED EBITDA BY SEGMENT (A)
(Dollars in millions)
<Table>
<Caption>
THREE MONTHS ENDED DECEMBER 31,
------------------------------------------------------------------------
REVENUES ADJUSTED EBITDA
------------------------------- ------------------------------------
2002 2001 % CHANGE 2002 (C) 2001 (I) % CHANGE
------- ------- -------- --------- ---------- --------
Real Estate Services $ 1,506 $ 532 183% $ 279 (D) $ 289 (J) (3%)
Hospitality 541 369 47% 135 103 (K) 31%
Travel Distribution 381 362 5% 119 102 (L) 17%
Vehicle Services 1,127 879 28% 72 14 414%
Financial Services 273 342 (20%) 75 51 47%
------- ------- ------- -------
Total Reportable Segments 3,828 2,484 680 559
Corporate and Other (B) 21 10 * (16)(E) (16)(M) *
------- ------- ------- -------
CONTINUING OPERATIONS $ 3,849 $ 2,494 54% $ 664 $ 543 22%
======= ======= ======= =======
TWELVE MONTHS ENDED DECEMBER 31,
------------------------------------------------------------------------
REVENUES ADJUSTED EBITDA
------------------------------- ------------------------------------
2002 2001 % CHANGE 2002 (C) 2001 (N) % CHANGE
------- ------- -------- --------- ---------- --------
Real Estate Services $ 4,687 (F) $ 1,859 152% $ 853 (G) $ 939 (O) (9%)
Hospitality 2,180 1,522 43% 625 513 (K) 22%
Travel Distribution 1,695 437 288% 524 108 (L) 385%
Vehicle Services 4,175 3,322 26% 408 290 (P) 41%
Financial Services 1,325 1,402 (5%) 449 310 45%
------- ------- ------- -------
Total Reportable Segments 14,062 8,542 2,859 2,160
Corporate and Other (B) 26 71 * (98)(H) (73)(Q) *
------- ------- ------- -------
CONTINUING OPERATIONS 14,088 8,613 64% 2,761 2,087 32%
Less: Move.com Group - 10 * - (9) *
------- ------- ------- -------
CONTINUING OPERATIONS EXCLUDING MOVE.COM GROUP $ 14,088 $ 8,603 64% $ 2,761 $ 2,096 32%
======= ======= ======= =======
</Table>
- ------
* Not meaningful.
(A) In connection with the sale of the Company's car parking facility business,
National Car Parks ("NCP"), on May 22, 2002, the account balances and
activities of NCP have been segregated from the Company's Vehicle Services
segment and reported as a discontinued operation for all periods presented.
(B) Principally reflects unallocated corporate overhead and, in the twelve
months ended December 31, 2001, includes Move.com Group operating results.
(C) Excludes non-cash credits of $14 million related to changes in the original
estimates of costs to be incurred in connection with the Company's
restructuring initiatives undertaken during 2001 as a result of the
September 11, 2001 terrorist attacks ($6 million, $1 million and $7 million
of credits were recorded within Real Estate Services, Vehicle Services and
Corporate and Other, respectively).
(D) Excludes a charge of $8 million principally related to the acquisition and
integration of NRT Incorporated and other real estate brokerage businesses.
(E) Excludes a charge of $119 million for litigation and related costs,
partially offset by a credit of $42 million related to the recovery from
the Company's directors' and officers' liability insurance in connection
with the principal securities litigation settled in 1999.
(F) Includes a write-down of $275 million (pre-tax) related to the impairment
of the Company's mortgage servicing rights asset.
(G) Excludes a charge of $26 million principally related to the acquisition and
integration of NRT and other real estate brokerage businesses and includes
a write-down of $275 million (pre-tax) related to the impairment of the
Company's mortgage servicing rights asset.
(H) Excludes $145 million of litigation and related costs and $4 million of
acquisition and integration related costs. Such charges were partially
offset by a credit of $42 million related to the recovery from the
Company's directors' and officers' liability insurance in connection with
the principal securities litigation settled in 1999.
(I) Excludes a charge of $116 million primarily in connection with
restructuring and other initiatives undertaken as a result of the September
11, 2001 terrorist attacks ($31 million, $48 million, $6 million, $9
million and $25 million of charges were recorded within Real Estate
Services, Hospitality, Travel Distribution, Financial Services and
Corporate and Other, respectively, and $3 million of net credits were
recorded within Vehicle Services).
(J) Excludes a charge of $94 million related to the impairment of the Company's
mortgage servicing rights asset.
(K) Excludes a charge of $11 million related to the impairment of investments
due in part to the September 11, 2001 terrorist attacks.
(L) Excludes charges of $23 million related to the acquisition and integration
of Galileo International, Inc. and Cheap Tickets, Inc.
(M) Excludes charges of (i) $427 million primarily related to the impairment
of the Company's investment in Homestore.com, Inc., (ii) $80 million
related to the outsourcing of the Company's information technology
operations to IBM in connection with the acquisition of Galileo,
(iii) $58 million for litigation and related costs and (iv) $23 million
related to the dispositions of non-strategic businesses in 1999. Such
charges were partially offset by a gain of $5 million on the dispositions
of non-strategic businesses.
(N) Excludes charges of $192 million primarily in connection with
restructuring and other initiatives undertaken as a result of the
September 11, 2001 terrorist attacks ($31 million, $51 million, $58
million, $7 million, $10 million and $35 million of charges were
recorded within Real Estate Services, Hospitality, Vehicle Services,
Travel Distribution, Financial Services and Corporate and Other,
respectively).
(O) Excludes charges of $95 million related to the funding of an
irrevocable contribution to the Real Estate Technology Trust and
$94 million related to the impairment of the Company's mortgage
servicing rights asset.
(P) Excludes charges of $5 million related to the acquisition and
integration of Avis Group Holdings, Inc. and $2 million related to
the impairment of investments due to the September 11, 2001
terrorist attacks.
(Q) Excludes charges of (i) $427 million primarily related to the
impairment of the Company's investment in Homestore, (ii) $100 million
for litigation and related costs, (iii) $85 million related to the
funding of Trip Network, Inc., (iv) $80 million related to the outsourcing
of the Company's information technology operations to IBM in connection
with the acquisition of Galileo, (v) $26 million related to losses on the
dispositions of non-strategic businesses in 1999, (vi) $7 million related
to a non-cash contribution to the Cendant Charitable Foundation and (vii)
$4 million related to the acquisition and integration of Avis. Such
charges were partially offset by (i) a gain of $436 million related to
the sale of the Company's real estate Internet portal, move.com, (ii) a
gain of $7 million related to the dispositions of non-strategic businesses
and (iii) a credit of $14 million to reflect an adjustment to the
settlement charge recorded in the fourth quarter of 1998 for the PRIDES
class action litigation.
<Page>
TABLE 3
CENDANT CORPORATION AND SUBSIDIARIES
EPS BY QUARTER
<Table>
<Caption>
ADJUSTED
YEAR ENDED DECEMBER 31, 2002
----------------------------------------------------------------------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year
-------- -------- -------- -------- ---------
Continuing Operations $ 0.32 $ 0.38 $ 0.28 $ 0.29 $ 1.26
Discontinued Operations 0.03 0.02 -- -- 0.05
-------- -------- -------- -------- --------
TOTAL * $ 0.34 $ 0.40 $ 0.28 $ 0.29 $ 1.31
======== ======== ======== ======== ========
YEAR ENDED DECEMBER 31, 2001
----------------------------------------------------------------------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year
-------- -------- -------- -------- ---------
Continuing Operations $ 0.19 $ 0.27 $ 0.29 $ 0.21 $ 0.96
Discontinued Operations 0.02 0.02 0.02 0.02 0.09
-------- -------- -------- -------- --------
TOTAL * $ 0.21 $ 0.30 $ 0.32 $ 0.23 $ 1.05
======== ======== ======== ======== ========
REPORTED
YEAR ENDED DECEMBER 31, 2002
----------------------------------------------------------------------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year
-------- -------- -------- -------- ---------
Continuing Operations $ 0.31 $ 0.25 $ 0.24 $ 0.24 $ 1.04
Discontinued Operations 0.03 0.02 -- -- 0.05
-------- -------- -------- -------- --------
TOTAL * $ 0.34 $ 0.27 $ 0.24 $ 0.24 $ 1.09
======== ======== ======== ======== ========
YEAR ENDED DECEMBER 31, 2001
----------------------------------------------------------------------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year
-------- -------- -------- -------- ---------
Continuing Operations $ 0.28 $ 0.25 $ 0.21 $ (0.33) $ 0.36
Discontinued Operations 0.02 0.02 0.02 0.02 0.09
-------- -------- -------- -------- --------
TOTAL * $ 0.30 $ 0.27 $ 0.23 $ (0.31) $ 0.45
======== ======== ======== ======== ========
PROJECTED REPORTED
YEAR ENDED DECEMBER 31, 2003
-----------------------------------------------------------------------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year
------------- ------------- ------------- ------------- ---------
Continuing Operations $0.29 - $0.30 $0.42 - $0.44 $0.45 - $0.47 $0.27 - $0.29 $1.46
</Table>
- ------
* May not add due to rounding. Not comparable to net income per share as such
amounts do not include the losses on disposal of discontinued operations,
extraordinary losses or cumulative effect of accounting changes.
<Page>
TABLE 4
(PAGE 1 OF 2)
CENDANT CORPORATION AND AFFILIATES
SEGMENT REVENUE DRIVER ANALYSIS
(REVENUE DOLLARS IN THOUSANDS)
<Table>
<Caption>
THREE MONTHS ENDED DECEMBER 31,
-------------------------------------------
2002 2001 % CHANGE
----------- ----------- -----------
REAL ESTATE SERVICES SEGMENT
REAL ESTATE FRANCHISE
Closed Sides - Domestic 507,704 452,593 12%
Average Price $ 197,084 $ 172,397 14%
Royalty and Marketing Revenue $ 162,670 $ 137,631 18%
Total Revenue (A) $ 169,363 $ 152,856 11%
REAL ESTATE BROKERAGE
Revenue from Real Estate Transactions (B) $ 874,952 (C)
Other Revenue $ 20,426 (C)
Total Revenue $ 895,378 (C)
RELOCATION
Service Based Revenue (Referrals, Outsourcing, etc.) $ 61,426 $ 63,037 (3%)
Asset Based Revenue (Home Sale Closings and Financial Income) $ 35,936 $ 40,435 (11%)
Total Revenue $ 97,362 $ 103,472 (6%)
MORTGAGE
Production Loans Closed to be Securitized (millions) (D) $ 13,158 $ 10,695 23%
Other Production Loans Closed (millions) (D) $ 6,044 $ 3,156 92%
Production Loans Sold (millions) (D) $ 12,225 $ 10,040 22%
Average Servicing Loan Portfolio (millions) $ 112,250 $ 95,157 18%
Production Revenue $ 303,523 $ 222,993 36%
Gross Recurring Servicing Revenue $ 108,134 $ 94,436 15%
Amortization and Impairment of Mortgage Servicing Rights $ (263,887) $ (155,426)(E) 70%
Hedging Activity for Mortgage Servicing Rights $ 98,942 $ 14,610 *
Other Servicing Revenue (F) $ (394) $ (5,572) *
Total Revenue $ 246,318 $ 264,641 (G) *
SETTLEMENT SERVICES
Title and Appraisal Units 127,875 123,514 4%
Total Revenue (H) $ 98,979 $ 10,751 *
HOSPITALITY SEGMENT
LODGING
RevPar $ 22.01 $ 21.79 (I) 1%
Weighted Average Rooms Available 508,414 516,476 (2%)
Royalty, Marketing and Reservation Revenue $ 76,722 $ 71,569 (I) 7%
Total Revenue $ 100,669 $ 88,235 (I) 14%
RCI (J)
Average Subscriptions 2,915,764 2,852,316 2%
Average Subscription Fee $ 55.77 $ 56.08 (1%)
Subscription Revenue $ 40,650 $ 39,993 2%
Timeshare Exchanges 372,153 355,944 5%
Average Exchange Fee $ 150.58 $ 140.22 7%
Exchange Fee Revenue $ 56,038 $ 49,909 12%
Total Revenue $ 130,733 $ 125,239 4%
FAIRFIELD RESORTS
Tours 119,504 109,487 9%
Total Revenue (K) $ 167,503 $ 153,203 9%
TRENDWEST RESORTS
Tours 84,731 86,412 (2%)
Total Revenue $ 112,929 (C)
</Table>
- ----------
* Not meaningful.
(A) In 2001, includes a $9 million preferred dividend from NRT.
(B) Net of royalties paid to Real Estate Franchise.
(C) The operations of these businesses were acquired in, or subsequent to, the
fourth quarter of 2001. Accordingly, fourth quarter 2001 revenues are not
comparable to the current period amounts.
(D) Loan closings increased at a faster rate than loan sales due to an increase
in the mix of loans produced on a private label basis (referred to as Other
Production Loans Closed above) which are originated for the Company's
private label partners or other investors for which the Company is paid a
fee.
(E) Includes $94 million of mortgage servicing rights impairment during fourth
quarter 2001, which was not recorded within revenues and is not included in
Adjusted EBITDA.
(F) Includes net interest expense of $18 million and $16 million for 2002 and
2001, respectively.
(G) In 2001, excludes $94 million of mortgage servicing rights impairment.
(H) In 2001, includes only the revenue of the existing settlement services
operations prior to the Company's acquisition of NRT.
(I) The Company initially under-estimated the decline in third quarter royalty
revenue resulting from the September 11, 2001 terrorist attacks. The
amounts presented herein exclude the royalty true-up that relates to actual
third quarter results, but was recorded by the Company in fourth quarter
2001. Including such adjustment, the RevPar, Royalty, Marketing and
Reservation Revenues and Total Revenues (as reported) for 2001 are $20.50,
$66,630 and $83,296, respectively.
(J) Includes weeks and points members.
(K) In 2002, includes $20 million of revenues from Equivest.
<Page>
TABLE 4
(PAGE 2 OF 2)
CENDANT CORPORATION AND AFFILIATES
SEGMENT REVENUE DRIVER ANALYSIS
(REVENUE DOLLARS IN THOUSANDS)
<Table>
<Caption>
THREE MONTHS ENDED DECEMBER 31,
--------------------------------
2002 2001 % CHANGE
-------- -------- --------
TRAVEL DISTRIBUTION SEGMENT
GALILEO
Domestic Booking Volume (000's)
Air 19,574 17,612 11%
Car/Hotel 4,199 3,849 9%
International Booking Volume (000's)
Air 37,816 36,726 3%
Car/Hotel 1,243 1,221 2%
Worldwide Booking Volume (000's)
Air 57,390 54,338 6%
Car/Hotel 5,442 5,070 7%
Total Galileo Revenue $353,223 $336,697 5%
VEHICLE SERVICES SEGMENT
CAR RENTAL (AVIS ONLY)
Rental Days (000's) 13,670 12,799 7%
Time and Mileage Revenue per Day $ 40.04 $ 37.04 8%
Average Length of Rental (stated in Days) 3.60 3.75 (4%)
Total Revenue $592,772 $510,969 16%
VEHICLE MANAGEMENT AND FUEL CARD SERVICES
Average Fleet (Leased) 316,966 317,423 --
Average Number of Cards (000's) 3,904 3,836 2%
Service Based Revenue $ 52,408 $ 43,200 21%
Asset Based Revenue (A) $321,390 $325,156 (1%)
Total Revenue $373,798 $368,356 1%
FINANCIAL SERVICES SEGMENT
Insurance/Wholesale-related Revenue $143,580 $142,622 1%
Individual Membership Royalty Revenue (B) $ 4,326 $ -- 100%
Other Individual Membership Revenue (C) $119,298 $195,224 (39%)
Total Revenue $273,290 $341,216 (20%)
</Table>
- ----------
(A) Reflects a decline in revenue due to lower interest expense on vehicle
funding, which is substantially passed through to clients and therefore
results in lower revenues but has a minimal EBITDA impact.
(B) Reflects Cendant's royalty received on revenues generated by members who
joined the clubs and programs subsequent to July 2001. The revenue
generated by these new members is recognized by Trilegiant and is not
included in the above table. Cendant receives a royalty of 5% (growing to
approximately 16% over 10 years), with minimal associated expenses, on the
revenues recognized by Trilegiant in connection with the new members.
(C) Reflects a decline due to the outsourcing of the Company's individual
membership business in July 2001 to Trilegiant. While the Company continues
to collect membership fees from its existing members as of July 2001, it
does not collect the membership fees from new members who joined the clubs
and programs subsequent to July 2001. Trilegiant recognizes the revenues
generated by these new members (see (B) above). Accordingly, the Company
expects revenues for this segment to continue to trend down in future
quarters.
<Page>
TABLE 5
CENDANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN BILLIONS)
<Table>
<Caption>
DECEMBER 31, 2002 DECEMBER 31, 2001
----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 0.1 $ 1.9
Stockholder litigation settlement trust -- 1.4
Assets of discontinued operations -- 1.3
Other current assets 3.3 3.1
------ ------
Total current assets 3.4 7.7
Property and equipment, net 1.8 1.4
Goodwill, net 10.6 7.2
Other non-current assets 5.1 5.3
------ ------
Total assets exclusive of assets under programs 20.9 21.6
Assets under management and mortgage programs 15.0 11.9
------ ------
TOTAL ASSETS $ 35.9 $ 33.5
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ -- $ 0.4
Stockholder litigation settlement -- 2.9
Liabilities of discontinued operations -- 0.2
Other current liabilities 5.0 4.3
------ ------
Total current liabilities 5.0 7.8
Long-term debt, excluding Upper DECS 5.6 5.7
Upper DECS 0.9 0.9
Other non-current liabilities 0.9 0.7
------ ------
Total liabilities exclusive of liabilities under programs 12.4 15.1
Liabilities under management and mortgage programs 13.8 10.9
Mandatorily redeemable preferred interest in a subsidiary 0.4 0.4
Total stockholders' equity 9.3 7.1
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 35.9 $ 33.5
====== ======
</Table>
<Page>
TABLE 6
<Table>
<Caption>
CENDANT CORPORATION AND SUBSIDIARIES
SCHEDULE OF CORPORATE DEBT AND NET STOCKHOLDER LITIGATION SETTLEMENT OBLIGATION (A)
(IN MILLIONS)
EARLIEST
MANDATORY
REDEMPTION MATURITY DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31,
DATE DATE 2002 2002 2002 2002 2001
- -------------- ------------- ------------ ------------- -------- --------- ------------
CORPORATE DEBT:
December 2003 December 2003 7 3/4% notes $ 966 $1,042 $1,071 $1,150 $1,150
August 2006 August 2006 6 7/8% notes 850 850 850 850 850
May 2009 May 2009 11% senior subordinated
notes 530 554 571 577 584
November 2004 November 2011 3 7/8% convertible
senior debentures (B) 1,200 1,200 1,200 1,200 1,200
February 2004 February 2021 Zero coupon senior convertible
contingent notes (C) 420 417 678 925 920
May 2003 May 2021 Zero coupon convertible
debentures (D) 857 1,000 1,000 1,000 1,000
December 2005 Revolver borrowings 600 -- -- -- --
February 2002 3% convertible subordinated
notes -- -- -- -- 390
Net hedging gains (losses) (E) 89 95 44 (6) 11
Other 89 51 52 24 27
------ ------ ------ ------ ------
Total corporate debt,
excluding Upper DECS 5,601 5,209 5,466 5,720 6,132
------ ------ ------ ------ ------
NET STOCKHOLDER LITIGATION
SETTLEMENT OBLIGATION:
Stockholder litigation
settlement obligation -- -- -- 2,850 2,850
Less: Payments made to the
stockholder litigation
settlement trust -- -- -- 1,660 1,410
------ ------ ------ ------ ------
Net stockholder litigation
settlement obligation -- -- -- 1,190 1,440
------ ------ ------ ------ ------
TOTAL CORPORATE DEBT AND NET
STOCKHOLDER LITIGATION
SETTLEMENT OBLIGATION $5,601 $5,209 $5,466 $6,910 $7,572
====== ====== ====== ====== ======
NET DEBT TO TOTAL
CAPITALIZATION RATIO (F) 36% 35% 35% 37% 37%
</Table>
- ----------
(A) Amounts presented herein exclude liabilities under management and mortgage
programs and the Company's mandatorily convertible Upper DECS securities.
(B) Each $1,000 principal amount is convertible into 41.58 shares of CD common
stock during 2003 if the average price of CD common stock exceeds $28.59
during the stipulated measurement periods. The average price of CD common
stock at which the debentures are convertible decreases annually by a
stipulated percentage. Redeemable by the Company after November 27, 2004.
Holders may require the Company to repurchase the notes on November 27,
2004 and 2008.
(C) Each $1,000 principal amount is convertible into 33.4 shares of CD common
stock during Q1, Q2, Q3 and Q4 of 2003 if the average price of CD common
stock exceeds $21.06, $21.19, $21.32 and $21.45, respectively, during the
stipulated measurement period. The average price of CD common stock at
which the notes are convertible increases on a quarterly basis by a
stipulated percentage. Redeemable by the Company after February 13, 2004.
Holders may require the Company to repurchase the notes on February 13,
2004, 2009 and 2014. Issued at a discount resulting in a yield-to-maturity
of 2.5%.
(D) Each $1,000 principal amount is convertible into 39.08 shares of CD common
stock if the average price of CD common stock exceeds $28.15 during the
stipulated measurement periods. Redeemable by the Company after May 4,
2004. Holders may require the Company to repurchase the notes on May 4,
2003, 2004, 2006, 2008, 2011 and 2016. Amended to provide for cash interest
payments of 3% per annum beginning May 5, 2002 and continuing through May
4, 2003 payable on a semi-annual basis.
(E) Represents derivative gains (losses) resulting from fair value hedges, $52
million of which have been realized as of December 31, 2002 and will be
amortized by the Company to offset future interest expense.
(F) Reflects the Company's net debt (net of cash and cash equivalents and
excluding the Upper DECS, debt related to management and mortgage programs
and net stockholder litigation settlement obligation) to total
capitalization ratio (including net debt and the Upper DECS).
<Page>
TABLE 7
CENDANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<Table>
<Caption>
TWELVE MONTHS ENDED
DECEMBER 31,
-------------------------
2002 2001
-------- --------
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities exclusive of management
and mortgage programs $ (890)(A) $ 1,398
Net cash provided by operating activities of management
and mortgage programs 2,147 1,389
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,257 2,787
-------- --------
INVESTING ACTIVITIES
Property and equipment additions (399) (329)
Proceeds from (payments to) stockholder litigation settlement trust 1,410 (1,060)
Net assets acquired (net of cash acquired) and acquisition-related payments (1,371) (2,757)
Net proceeds from dispositions of businesses 1,151 109
Other, net (23) (169)
-------- --------
Net cash provided by (used in) investing activities exclusive of management
and mortgage programs 768 (4,206)
-------- --------
MANAGEMENT AND MORTGAGE PROGRAMS:
Investment in vehicles (17,168) (14,906)
Payments received on investment in vehicles 15,141 13,324
Origination of timeshare receivables (1,118) (497)
Principal collection of timeshare receivables 1,046 538
Equity advances on homes under management (5,968) (6,306)
Repayment on advances on homes under management 6,028 6,340
Net additions to mortgage servicing rights (377) (760)
Net additions to hedge of mortgage servicing rights (285) (42)
Proceeds from sales of mortgage servicing rights 16 58
-------- --------
(2,685) (2,251)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,917) (6,457)
-------- --------
FINANCING ACTIVITIES
Proceeds from borrowings 637 5,608
Principal payments on borrowings (2,111) (2,213)
Issuances of common stock 112 877
Repurchases of common stock (288) (254)
Other, net (64) (153)
-------- --------
Net cash provided by (used in) financing exclusive of management
and mortgage programs (1,714) 3,865
-------- --------
MANAGEMENT AND MORTGAGE PROGRAMS:
Proceeds from borrowings 15,171 9,460
Principal payments on borrowings (14,614) (8,798)
Net change in short-term borrowings (114) 116
-------- --------
443 778
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,271) 4,643
-------- --------
Effect of changes in exchange rates on cash and cash equivalents 41 (8)
Cash provided by discontinued operations 74 121
-------- --------
Net increase (decrease) in cash and cash equivalents (1,816) 1,086
Cash and cash equivalents, beginning of period 1,942 856
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 126 $ 1,942
======== ========
</Table>
- ---------
(A) Net cash provided by operating activities exclusive of management and
mortgage programs is $2.0 billion when excluding the application of the
prior payments to the stockholder litigation settlement trust of $2.85
billion ($1.41 billion in 2001, the first quarter 2002 payment of $250
million and the funding of the remaining settlement liability balance,
including interest, of $1.19 billion on May 24, 2002).
<Page>
TABLE 8
CENDANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF FREE CASH FLOWS (A)
(IN MILLIONS)
<Table>
<Caption>
TWELVE MONTHS ENDED
DECEMBER 31,
-----------------------
2002 2001
------- -------
Adjusted EBITDA (B) $ 2,761 $ 2,087
Interest expense, including minority interest (C) (277) (269)
Tax payments, net of refunds (62) (36)
------- -------
CASH FLOW 2,422 1,782
Working capital (227) 108
Capital expenditures (399) (329)
Restructuring and other unusual payments (81) (132)
------- -------
FREE CASH FLOW BEFORE MANAGEMENT AND MORTGAGE PROGRAMS (D) 1,715 1,429
Management and mortgage programs (E) (F) (95) (84)
------- -------
FREE CASH FLOW 1,620 1,345
Acquisitions, net of cash acquired (1,371) (2,757)
Net (repurchases)/issuances of equity securities (176) 623
Net proceeds from dispositions of businesses 1,151 109
Funding of stockholder litigation settlement (1,440) (1,060)
Investments and other (G) (126) (569)
Net (repayments of)/proceeds from borrowings (1,474) 3,395
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $(1,816) $ 1,086
======= =======
</Table>
- -------
(A) Free cash flow is a measure used by the Company's management to evaluate
liquidity and financial condition. Free cash flow represents cash available
for the repayment of debt and other corporate purposes such as acquisitions
and investments. The Company has provided the Consolidated Schedules of
Free Cash Flows as it reflects the measure by which management evaluates
the performance of its cash flows. Such measure of performance may not be
comparable to similarly titled measures used by other companies and is not
a measurement recognized under generally accepted accounting principles.
Therefore, free cash flow should not be construed as a substitute for
income or cash flow from operations in measuring operating results or
liquidity. A reconciliation of free cash flow to the appropriate measure
recognized under generally accepted accounting principles is included
within footnote (D) herein. The Consolidated Schedules of Free Cash Flows
for the twelve months ended December 31, 2002 and 2001 should be read in
conjuction with the Company's Consolidated Condensed Statements of Cash
Flows and Consolidated Condensed Statements of Operations in Tables 7
and 1, as well as the Company's Consolidated Statements of Cash Flows
and Consolidated Statements of Operations included within the Company's
Annual Report on Form 10-K/A for the year ended December 31, 2001 filed
with the Securities and Exchange Commission on December 19, 2002.
(B) See Table 2 for items excluded from Adjusted EBITDA.
(C) Excludes non-cash accretion recorded on the Company's zero-coupon senior
convertible notes and includes the before tax amounts of minority interest.
(D) The reconciliation of Free Cash Flow before Management and Mortgage
Programs to Net Cash Provided by (Used in) Operating Activities Exclusive
of Management and Mortgage Programs is as follows:
<Table>
<Caption>
TWELVE MONTHS ENDED
DECEMBER 31,
-----------------------
2002 2001
------- -------
FREE CASH FLOW BEFORE MANAGEMENT AND MORTGAGE PROGRAMS $ 1,715 $ 1,429
Reconciling items:
Capital expenditures 399 329
Funding of stockholder litigation settlement liability (2,850) --
Restricted cash used in insurance operations (49) (75)
Unusual charges (30) (192)
Other, including interest on litigation settlement liability (75) (93)
------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES EXCLUSIVE OF
MANAGEMENT AND MORTGAGE PROGRAMS (SEE TABLE 7) $ (890) $ 1,398
======= =======
</Table>
(E) Net Change in Cash from Management and Mortgage Programs is as follows:
<Table>
<Caption>
TWELVE MONTHS ENDED
DECEMBER 31,
----------------------
2002 2001
------- -------
MANAGEMENT AND MORTGAGE PROGRAMS (E)
Net investment in vehicles $(245) $(171)
Net mortgage originations and sales (558) (320)
Net mortgage servicing rights 277 (446)
Net timeshare receivables (72) 41
Net relocation receivables 60 34
Net financing for assets under management and mortgage programs 443 778
----- -----
NET CHANGE IN CASH FROM MANAGEMENT AND MORTGAGE PROGRAMS $ (95) $ (84)
===== =====
</Table>
(F) Cash flows related to management and mortgage programs may fluctuate
significantly from period to period due to the timing of the underlying
management and mortgage program transactions (i.e., timing of mortgage loan
origination versus sale). For the twelve months ended December 31, 2002,
the net change in cash from management and mortgage programs represents (i)
$2,147 million of net cash provided by operating activities, (ii) $2,685
million of net cash used in investing activities and (iii) $443 million of
net cash provided by financing activities, as detailed on Table 7. For the
twelve months ended December 31, 2001, the net change in cash from
management and mortgage programs represents (i) $1,389 million of net cash
provided by operating activities, (ii) $2,251 million of net cash used in
investing activities and (iii) $778 million of net cash provided by
financing activities, as detailed on Table 7.
(G) The activity for the twelve months ended December 31, 2002 primarily
relates to cash payments associated with (i) interest on the stockholder
litigation settlement, (ii) the insurance operations of subsidiaries and
(iii) the repurchase of loans in foreclosure, net of cash received on the
sale of marketable securities. The activity for the twelve months ended
December 31, 2001 includes cash payments associated with (i) the funding of
marketing expenses incurred by Trilegiant Corporation ($104 million), (ii)
an investment in NRT Incorporated ($94 million), (iii) the contribution to
the technology trust ($95 million), (iv) the creation of Trip Network, Inc.
($45 million) and (v) other payments, primarily related to preferred stock
investments.
<Page>
TABLE 9
CENDANT CORPORATION AND SUBSIDIARIES
REVENUES AND ADJUSTED EBITDA BY SEGMENT (A)
(IN MILLIONS)
<Table>
<Caption>
YEAR ENDED DECEMBER 31, 2002
REVENUES ADJUSTED EBITDA
------------------------------------------------ -------------------------------------------------
FULL FULL
1ST QTR 2ND QTR 3RD QTR 4TH QTR YEAR 1ST QTR 2ND QTR 3RD QTR 4TH QTR YEAR
------- ------- ------- ------- ------- ------ ------ ------ ------- -------
Real Estate Services $ 410 $ 1,440 $ 1,331 1,506 $ 4,687 $ 182 $ 323 $ 69 279 $ 853
Hospitality 403 565 671 541 2,180 112 173 205 135 625
Travel Distribution 444 438 432 381 1,695 146 130 129 119 524
Vehicle Services 933 1,030 1,085 1,127 4,175 70 123 143 72 408
Financial Services 419 311 322 273 1,325 164 88 122 75 449
------- ------- ------- ------- ------- ------ ------ ------ ------- -------
Total Reportable Segments 2,609 3,784 3,841 3,828 14,062 674 837 668 680 2,859
Corporate and Other 7 -- (2) 21 26 (12) (38) (32) (16) (98)
------- ------- ------- ------- ------- ------ ------ ------ ------- -------
CONTINUING OPERATIONS $ 2,616 $ 3,784 $ 3,839 $ 3,849 $14,088 $ 662 $ 799 $ 636 $ 664 $ 2,761
======= ======= ======= ======= ======= ====== ====== ====== ======= =======
YEAR ENDED DECEMBER 31, 2001
REVENUES ADJUSTED EBITDA
------------------------------------------------ -------------------------------------------------
FULL FULL
1ST QTR 2ND QTR 3RD QTR 4TH QTR YEAR 1ST QTR 2ND QTR 3RD QTR 4TH QTR YEAR
------- ------- ------- ------- ------- ------ ------ ------ ------- -------
Real Estate Services $ 339 $ 474 $ 514 $ 532 $ 1,859 $ 132 $ 231 $ 287 $ 289 $ 939
Hospitality 240 448 465 369 1,522 102 156 152 103 513
Travel Distribution 25 26 24 362 437 2 3 1 102 108
Vehicle Services 379 1,028 1,036 879 3,322 69 112 95 14 290
Financial Services 390 332 338 342 1,402 131 70 58 51 310
------- ------- ------- ------- ------- ------ ------ ------ ------- -------
Total Reportable Segments 1,373 2,308 2,377 2,484 8,542 436 572 593 559 2,160
Corporate and Other 38 11 12 10 71 (18) (16) (23) (16) (73)
------- ------- ------- ------- ------- ------ ------ ------ ------- -------
CONTINUING OPERATIONS 1,411 2,319 2,389 $ 2,494 8,613 418 556 570 543 2,087
Move.com Group 10 -- -- -- 10 (9) -- -- -- (9)
------- ------- ------- ------- ------- ------ ------ ------ ------- -------
CONTINUING OPERATIONS
EXCLUDING MOVE.COM GROUP $ 1,401 $ 2,319 $ 2,389 $ 2,494 $ 8,603 $ 427 $ 556 $ 570 $ 543 $ 2,096
======= ======= ======= ======= ======= ====== ====== ====== ======= =======
</Table>
- --------------
(A) In connection with the sale of the Company's car parking facility business,
National Car Parks ("NCP"), on May 22, 2002, the account balances and
activities of NCP have been segregated from the Company's Vehicle Services
segment and reported as a discontinued operation for all periods presented.
<Page>
TABLE 10
CENDANT CORPORATION AND SUBSIDIARIES
ORGANIC SEGMENT GROWTH FOR THE THREE MONTHS ENDED DECEMBER 31, 2002
(IN MILLIONS)
<Table>
<Caption>
REVENUES ADJUSTED EBITDA
---------------------------------- ----------------------------------
2002 2001 % 2002 2001 %
------ ------ ------ ------ ------ ------
Real Estate Services $ 605 (B) $ 523 (G) 16% (G) $ 268 (B) $ 280 (G) (4%) (G)
Hospitality 388 (C) 369 5% 116 (C) 103 13%
Travel Distribution 358 (D) 362 (1%) 111 (D) 102 9%
Vehicle Services (A) 967 (E) 879 10% 65 (E) 14 364%
Financial Services 273 (F) 342 (20%) 80 (F) 51 57%
------ ------ ------ ------
Total Reportable Segments $2,591 $2,475 5% $ 640 $ 550 16%
====== ====== ====== ======
</Table>
NOTE: REFER TO TABLE 2 FOR TOTAL SEGMENT GROWTH.
(A) In connection with the sale of the Company's car parking facility business,
National Car Parks ("NCP"), on May 22, 2002, the account balances and
activities of NCP have been segregated from the Company's Vehicle Services
segment and reported as a discontinued operation for all periods presented.
(B) Includes revenue and Adjusted EBITDA of $78 million and $12 million,
respectively, related to NRT Incorporated (acquired in April 2002). These
amounts represent the revenue and Adjusted EBITDA recorded by NRT during
the period that were in excess of the amounts forecasted in the original
acquisition model and hence are viewed by the Company as organic growth.
(C) Excludes aggregate revenues and Adjusted EBITDA of $153 million and $19
million, respectively, related to Trendwest Resorts, Inc. (acquired in
April 2002), Equivest Finance, Inc. (acquired in February 2002), Novasol
A.S. (acquired in April 2002), Welcome Holidays Limited (acquired in June
2002) and The International Life Group (acquired in October 2002).
(D) Excludes aggregate revenues and Adjusted EBITDA of $23 million and $8
million, respectively, related to Sigma (a Galileo distribution partner in
Italy acquired in June 2002), Trust International (acquired in July 2002),
Lodging.com (acquired in August 2002), TIMAS Ltd (a Galileo distribution
partner in Ireland acquired in September 2002) and a venture with Marriot
International, Inc. (formed in March 2002).
(E) Excludes revenues and Adjusted EBITDA of $160 million and $7 million,
respectively, related to Budget Group, Inc. (acquired in November 2002).
(F) Excludes Adjusted EBITDA losses of $5 million (the revenue impact was de
minimis) related to Tax Services of America, Inc. (acquired in January
2002).
(G) Excludes NRT preferred dividends of $9 million and a charge of $94 million
related to the impairment of Company's mortgage servicing rights asset.
Including the $94 million impairment charge, organic growth for revenues
and Adjusted EBITDA would be 41% and 44%, respectively.
<Page>
TABLE 11
CENDANT CORPORATION AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA TO REPORTED EBITDA AND OPERATING INCOME
(DOLLARS IN MILLIONS)
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
<Table>
<Caption>
2002 2001
------- ------
Adjusted EBITDA $ 664 $ 543
Less:
Acquisition and integration related costs (A) 5 104
Litigation and related costs, net 77 58
Restructuring and other unusual charges (14) 116
Mortgage servicing rights impairment -- 94
Plus: Gains on dispositions of businesses -- 5
Less: Losses on dispositions of businesses -- 23
Less: Impairment of investments -- 441
----------- -------
REPORTED EBITDA 596 (288)
Less: Non-program related depreciation and amortization 129 148
Less: Amortization of pendings and listings 17 --
------------ ---------
OPERATING INCOME $ 450 $ (436)
============ =========
TWELVE MONTHS ENDED DECEMBER 31,
--------------------------------
2002 2001
------------ --------
Adjusted EBITDA $ 2,761 $ 2,087
Less:
Acquisition and integration related costs (A) 29 112
Litigation and related costs, net 103 86
Restructuring and other unusual charges (14) 379
Mortgage servicing rights impairment -- 94
Plus: Gains on dispositions of businesses -- 443
Less: Losses on dispositions of businesses -- 26
Less: Impairment of investments -- 441
----------- --------
REPORTED EBITDA 2,643 1,392
Less: Non-program related depreciation and amortization 466 477
Less: Amortization of pendings and listings 256 --
------------ --------
OPERATING INCOME $ 1,921 $ 915
============ ========
</Table>
- -------
(A) Does not include the non-cash amortization of pendings and listings of $17
million and $256 million during the three and twelve months ended December
31, 2002 as such amounts represent amortization and are therefore not
included in Reported EBITDA.