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Cendant Reports Results for Second Quarter 2006 |
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Cendant Corporation (NYSE:CD) today reported results for second quarter 2006. Revenue totaled $4.3 billion, an increase of 2% over second quarter 2005, reflecting growth across Wyndham Worldwide and the Company's Avis Budget businesses. |
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EPS from Continuing Operations was $0.17, which excludes the results of Travelport, formerly the Company's Travel Distribution Services division, which are classified as discontinued operations due to the pending sale of that business. As previously announced, the Company completed the spin-offs of Realogy and Wyndham Worldwide in tax-free distributions to its stockholders on July 31, 2006. Excluding separation and restructuring costs and the previously disclosed tax accrual at Wyndham Worldwide, EPS from Continuing Operations was $0.24.
Cendant's Chairman and CEO, Henry R. Silverman, stated: "The past several months were a period of strategic milestones for Cendant. We completed the spin-offs of Realogy and Wyndham Worldwide to our shareholders and each is now an independent, publicly-traded company. The sale of Travelport is expected to be completed this month, after which Avis Budget Group will be an independent, publicly-traded company. These companies are leaders in their respective industries and we are excited about the prospects for each to grow, prosper and create long-term value for its shareholders."
Second Quarter 2006 Results of Core Operating Segments
The following discussion of operating results focuses on revenue and EBITDA for each of the Company's core operating segments as of June 30, 2006. Revenue and EBITDA are expressed in millions.
Realogy (formerly Real Estate Services)
(Consisting of the Company's former real estate franchise brands, brokerage operations, relocation services and settlement services businesses)
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Revenue and EBITDA declined in line with Realogy's expectations principally due to lower revenue at Realogy's real estate franchise and NRT real estate brokerage businesses, partially offset by growth in its settlement services business due to the acquisition of Texas American Title Company and related companies in January 2006. Home prices increased 5% at both real estate franchise and NRT. These increases were offset by closed sides decreases of 16% and 13% at real estate franchise and NRT, respectively. The decreases in closed sides were impacted by the acquisitions of brokerages by NRT. Excluding this impact, closed sides would have decreased 14% and 17% at real estate franchise and NRT, respectively. The decline in closed sides volume reflects moderation of the residential real estate market, particularly in some of the areas where NRT is concentrated such as Florida and California. In addition, EBITDA comparisons were negatively impacted by an incremental $13 million of separation and restructuring costs. Excluding these costs, EBITDA would have been down 19%.
Hospitality Services (now part of Wyndham Worldwide)
(Consisting of the Company's former franchised lodging brands, hotel management, timeshare exchange and vacation rental businesses)
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Revenue increased due to growth in Wyndham Worldwide's lodging and Vacation Network Group (VNG) businesses. The largest contributor to revenue growth was the inclusion of approximately $35 million of revenue resulting from the acquisition of Wyndham Hotels and Resorts, of which approximately $28 million had no impact on EBITDA because it related to reimbursable expenses. Lodging revenue was also positively impacted by a 10% improvement in RevPAR, excluding Wyndham Hotels and Resorts and Baymont Hotels, both of which were recently acquired. EBITDA declined principally due to a previously announced $25 million foreign tax accrual that was recorded in the European vacation rental operations.
Timeshare Resorts (now part of Wyndham Worldwide)
(Consisting of the Company's former timeshare sales and development businesses)
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Aug 9, 2006 16:13 ET
Cendant Reports Results for Second Quarter 2006
NEW YORK, Aug. 9 /PRNewswire-FirstCall/ -- Cendant Corporation (NYSE:CD) today reported results for second quarter 2006. Revenue totaled $4.3 billion, an increase of 2% over second quarter 2005, reflecting growth across Wyndham Worldwide and the Company's Avis Budget businesses. EPS from Continuing Operations was $0.17, which excludes the results of Travelport, formerly the Company's Travel Distribution Services division, which are classified as discontinued operations due to the pending sale of that business. As previously announced, the Company completed the spin-offs of Realogy and Wyndham Worldwide in tax-free distributions to its stockholders on July 31, 2006. Excluding separation and restructuring costs and the previously disclosed tax accrual at Wyndham Worldwide, EPS from Continuing Operations was $0.24.
Cendant's Chairman and CEO, Henry R. Silverman, stated: "The past several months were a period of strategic milestones for Cendant. We completed the spin-offs of Realogy and Wyndham Worldwide to our shareholders and each is now an independent, publicly-traded company. The sale of Travelport is expected to be completed this month, after which Avis Budget Group will be an independent, publicly-traded company. These companies are leaders in their respective industries and we are excited about the prospects for each to grow, prosper and create long-term value for its shareholders."
Second Quarter 2006 Results of Core Operating Segments
The following discussion of operating results focuses on revenue and EBITDA for each of the Company's core operating segments as of June 30, 2006. Revenue and EBITDA are expressed in millions.
Realogy (formerly Real Estate Services)
(Consisting of the Company's former real estate franchise brands, brokerage operations, relocation services and settlement services businesses)
2006 2005 % change
Revenue $1,903 $2,043 (7%)
EBITDA $306 $393 (22%)
Revenue and EBITDA declined in line with Realogy's expectations principally due to lower revenue at Realogy's real estate franchise and NRT real estate brokerage businesses, partially offset by growth in its settlement services business due to the acquisition of Texas American Title Company and related companies in January 2006. Home prices increased 5% at both real estate franchise and NRT. These increases were offset by closed sides decreases of 16% and 13% at real estate franchise and NRT, respectively. The decreases in closed sides were impacted by the acquisitions of brokerages by NRT. Excluding this impact, closed sides would have decreased 14% and 17% at real estate franchise and NRT, respectively. The decline in closed sides volume reflects moderation of the residential real estate market, particularly in some of the areas where NRT is concentrated such as Florida and California. In addition, EBITDA comparisons were negatively impacted by an incremental $13 million of separation and restructuring costs. Excluding these costs, EBITDA would have been down 19%.
Hospitality Services (now part of Wyndham Worldwide)
(Consisting of the Company's former franchised lodging brands, hotel management, timeshare exchange and vacation rental businesses)
2006 2005 % change
Revenue $421 $367 15%
EBITDA $77 $100 (23%)
Revenue increased due to growth in Wyndham Worldwide's lodging and Vacation Network Group (VNG) businesses. The largest contributor to revenue growth was the inclusion of approximately $35 million of revenue resulting from the acquisition of Wyndham Hotels and Resorts, of which approximately $28 million had no impact on EBITDA because it related to reimbursable expenses. Lodging revenue was also positively impacted by a 10% improvement in RevPAR, excluding Wyndham Hotels and Resorts and Baymont Hotels, both of which were recently acquired. EBITDA declined principally due to a previously announced $25 million foreign tax accrual that was recorded in the European vacation rental operations.
Timeshare Resorts (now part of Wyndham Worldwide)
(Consisting of the Company's former timeshare sales and development businesses)
2006 2005 % change
Revenue $479 $436 10%
EBITDA $84 $73 15%
Revenue and EBITDA increased principally due to growth in timeshare sales and increased consumer financing income. Growth in timeshare sales revenue was driven by an 11% increase in revenue per guest and a 9% increase in tour flow. Revenue per guest benefited from higher pricing and increased conversion of tours into sales, and tour flow was positively impacted by the continued development of the Trendwest in-house sales program and continued improvement in local marketing efforts. Operating results were negatively impacted by the adoption in first quarter 2006 of a new accounting standard for the recognition of timeshare sales revenue and expenses (SFAS No. 152), and the absence of $11 million of income that was recognized in second quarter 2005 in connection with a previously disclosed disposal of land that was no longer needed for development. Excluding the impact of these items, revenue and EBITDA would have increased 24% and 39%, respectively.
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Revenue increased due to growth in our domestic and international car rental operations. Car rental revenue grew 12% worldwide due to a 9% increase in price and a 3% increase in rental day volume. As expected, EBITDA comparisons were negatively impacted by increased fleet costs. We expect continuing year-over-year price increases for the remainder of 2006 as we seek to offset the impact of higher fleet costs.
Other Items
• Completion of Spin-Offs -- We have completed the spin-offs of Realogy and Wyndham Worldwide in tax-free distributions to the Company's shareholders. Realogy and Wyndham Worldwide are now independent, publicly-traded companies listed on the New York Stock Exchange under the ticker symbols "H" and "WYN," respectively. As a result, Cendant will classify Realogy and Wyndham Worldwide as discontinued operations when it reports its third quarter results.
• Sale of Travelport -- We agreed to sell Travelport to an affiliate of The Blackstone Group for $4.3 billion in cash and confirmed that the net proceeds (after taxes, fees and expenses, and retirement of Travelport borrowings) from such sale will be used to reduce the initial indebtedness of Realogy and Wyndham Worldwide. The sale is expected to close this month.
• Repayment of Corporate Debt -- In connection with our separation plan, we repurchased approximately $2.5 billion aggregate principal amount under our 6.25% Senior Notes due 2008 and 2010, 7.375% Senior Notes due 2013, and 7.125% Senior Notes due 2015. We also pre-funded the payment of $950 million under our 4.89% and 6 7/8% Notes Due 2006 and repaid amounts outstanding under our $2.0 billion revolving credit facility.
• Cendant Name Change and Reverse Stock Split -- We have submitted several proposals to be voted upon at our annual stockholders meeting scheduled for August 29, 2006, including one to change Cendant's name to Avis Budget Group, Inc. and another to authorize a 1-for-10 reverse stock split of Cendant's common stock. If approved, these proposals are expected to become effective on September 5, 2006 and at such time we expect that our New York Stock Exchange ticker symbol will be changed to "CAR".
• Discontinued Operations -- Income from discontinued operations includes results of the Company's Travelport unit and, in prior periods, results of operations of the Company's former Marketing Services Division, Wright Express fuel card business, and fleet and appraisal units, all of which have been disposed. In addition, the loss on disposal of discontinued operations in second quarter 2006 includes a previously announced, non-cash impairment charge of approximately $1.0 billion in connection with the sale of Travelport.
• Separation Costs -- Second quarter 2006 EBITDA includes separation costs of $49 million, including $42 million recorded in Corporate and Other, $2 million recorded in Realogy, $2 million recorded in Hospitality Services, $2 million recorded in Timeshare Resorts and $1 million recorded in Avis Budget. These costs consist primarily of legal, accounting, other professional and consulting fees, and employee costs.
• Foreign Tax Accrual -- Second quarter 2006 results include a previously announced $36 million pretax accrual for foreign taxes related to Wyndham Worldwide's European vacation rental operations. $25 million of this accrual is recorded in the segment results for Hospitality Services and $11 million is recorded as interest expense, below EBITDA.
• Free Cash Flow -- Free cash flow in second quarter 2006 is not comparable to second quarter 2005 due to the impact of the repayment of certain vehicle related debt using the proceeds from the $1.875 billion of corporate borrowings completed in April 2006. See Table 7.
Outlook for Avis Budget
The following table presents the previously announced pro forma 2005 and expected pro forma 2006 financial data for Avis Budget Car Rental, LLC and its subsidiaries, the companies that comprise Cendant's vehicle rental business.
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New York City-based Cendant Corporation (NYSE:CD) provides travel and residential real estate services to businesses and consumers in more than 100 countries. Cendant Hotel Group, based in Parsippany, N.J., is one of the world's largest integrated lodging franchise and management companies with more than 6,300 hotels on six continents under the Wyndham(R), Super 8(R), Days Inn(R), Ramada(R), Travelodge(R), Howard Johnson(R), Knights Inn(R), Wingate Inn(R) and AmeriHost Inn(R) brands. All hotels are individually owned, and they are operated under franchise agreements with Cendant subsidiaries.
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