================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------
FEBRUARY 14, 2002 (FEBRUARY 14, 2002)
(DATE OF REPORT (DATE OF EARLIEST EVENT
REPORTED)
CENDANT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-10308 06-0918165
(STATE OR OTHER JURISDICTION (COMMISSION FILE NO.) (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
9 WEST 57TH STREET 10019
NEW YORK, NY (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
(212) 413-1800
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
================================================================================
ITEM 5. OTHER EVENTS
This Current Report on Form 8-K is being filed by the Company to make
available its historical Consolidated Schedules of Free Cash Flows (see
Exhibit 99.1) and Consolidated Condensed Statements of Cash Flows (see
Exhibit 99.2) for the years ended December 31, 2000 and 2001 and its
projected Consolidated Schedules of Free Cash Flows for the years ended
December 31, 2002, 2003 and 2004.
Free cash flow is a measure used by 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 free 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. The Consolidated Schedules of Free Cash Flows for the years
ended December 31, 2000 and 2001 should be read in conjunction with the
Company's Consolidated Condensed Statements of Cash Flows attached hereto
as well as the Company's Consolidated Statements of Operations included
within Company's Annual Report on Form 10-K/A for the year ended December
31, 2000 filed with the Securities and Exchange Commission on July 3, 2001
and the Company's earnings release of fourth quarter results filed on Form
8-K on February 7, 2002, respectively.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
See Exhibit Index.
SIGNATURES
Pursuant to the requirements 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/ Tobia Ippolito
--------------------------------------
Tobia Ippolito
Executive Vice President, Finance and
Chief Accounting Officer
Date: February 14, 2002
2
CENDANT CORPORATION
CURRENT REPORT ON FORM 8-K
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
99.1 Historical Consolidated Schedules of Free Cash Flows for the
years ended December 31, 2000 and 2001 and Projected
Consolidated Schedules of Free Cash Flows for the years ended
December 31, 2002, 2003 and 2004
99.2 Consolidated Condensed Statements of Cash Flows for the years
ended December 31, 2000 and 2001
99.3 Note Regarding Forward-Looking Statements
3
EXHIBIT 99.1
CENDANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF FREE CASH FLOWS
(IN MILLIONS)
HISTORICAL PROJECTED
--------------------- ----------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
--------------------- ----------------------------------
2000 2001 2002(I) 2003(J) 2004(J)
------- ------- ------- ------- -------
Adjusted EBITDA, excluding Move.com Group(*) $ 1,819(A) $ 2,213(B) $ 2,800 $ 3,080 $ 3,390
Interest expense, net (C) (148) (229) (300) (260) (180)
Minority interest, excluding tax benefit (D) (133) (39) (20) (20) (20)
Tax payments (42) (64) (80) (100) (300)
------- ------- ------- ------- -------
CASH FLOW 1,496 1,881 2,400 2,700 2,890
Tax refunds 109 11 -- -- --
Restructuring and other unusual payments (64) (132) (60) (10) (10)
Working capital and other (30) 9 (55) (60) (65)
Capital expenditures (E) (229) (349) (375) (395) (415)
------- ------- ------- ------- -------
FREE CASH FLOW 1,282 1,420 $ 1,910(K) $ 2,235 $ 2,400
======= ======= =======
NON-OPERATING ACTIVITIES:
Investments (F) (224) (426)
Acquisitions, net of cash acquired (111) (2,757)
Funding of stockholder litigation settlement trust (350) (1,060)
Other (G) (396) 69
------- -------
(1,081) (4,174)
------- -------
FINANCING ACTIVITIES:
Net proceeds from (repayments on) borrowings (H) (523) 3,238
Net issuances of equity securities and other 313 627
------- -------
(210) 3,865
------- -------
NET CHANGE IN CASH BEFORE MANAGEMENT AND MORTGAGE
PROGRAMS (9) 1,111
MANAGEMENT AND MORTGAGE PROGRAMS:
Net investment in vehicles -- (171)
Net mortgage origination and sales 232 (320)
Net mortgage servicing rights (541) (446)
Net contract receivables -- 41
Net relocation receivables 372 34
Net financing for assets for management
and mortgage programs (274) 778
------- -------
Net change in cash from management and mortgage
programs (211) (84)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (220) $ 1,027
======= =======
See Notes to Consolidated Schedules of Free Cash Flows.
1
NOTES TO CONSOLIDATED SCHEDULES OF FREE CASH FLOWS
(*) Represents adjusted EBITDA excluding Move.com operating losses. Adjusted
EBITDA is defined as earnings before non-operating interest, income taxes,
non-vehicle depreciation and amortization, minority interest and equity in
Homestore.com, adjusted to exclude certain items which are of a
non-recurring or unusual nature and not measured in assessing segment
performance or are not segment specific.
(A) Excludes (i) a charge of $109 million ($52 million of which is non-cash)
in connection with restructuring and other initiatives, (ii) $8 million of
net non-cash losses related to the disposition of certain non-strategic
businesses and (iii) $2 million of net litigation settlement and related
costs. The cash payments are included in "Restructuring and other unusual
payments."
(B) Excludes (i) a $441 million non-cash charge primarily related to the
impairment of the Company's investment in Homestore.com, Inc., (ii) a $192
million charge ($51 million of which is non-cash) primarily in connection
with restructuring and other initiatives undertaken as a result of the
September 11th terrorist attacks, (iii) a $95 million charge related to
the funding of an irrevocable contribution to an independent technology
trust, (iv) a $94 million non-cash charge related to the impairment of the
Company's mortgage servicing rights portfolio, (v) an $86 million charge
($48 million of which is non-cash) for net litigation settlement and
related costs, (vi) an $85 million charge related to the funding of Trip
Network, Inc., (vii) a $112 million charge ($37 million of which is
non-cash) primarily related to the acquisition and integration of Galileo
International, Inc. and Cheap Tickets, Inc. and (viii) $26 million other
non-cash charges. Such amounts were partially offset by a non-cash gain of
$436 million primarily related to the sale of Move.com Group to Homestore.
The cash payments are included in "Restructuring and other unusual
payments" and "Investments." See Note (F) below.
(C) Excludes non-cash accretion recorded on the Company's zero-coupon senior
convertible notes.
(D) Represents the before tax amounts of minority interest.
(E) Represents total capital expenditures exclusive of Move.com Group capital
expenditures ($18 million in 2000).
(F) Represents investment activity during 2000 and 2001. The 2000 activity
includes cash payments associated with (i) investments in marketable
securities ($63 million), (ii) an investment in NRT Incorporated, an
unconsolidated affiliated company that acquires residential real estate
brokerage firms ($50 million) and (iii) other, primarily related to
preferred stock investments. The 2001 activity includes cash payments
associated with (i) a contribution to the independent technology trust
responsible for providing technology initiatives for the benefit of
current and future franchisees at Century 21, Coldwell Banker and ERA ($95
million), (ii) an investment in NRT Incorporated ($94 million) and (iii)
other, primarily related to the funding of a marketing advance to
Trilegiant Corporation, a newly formed company that provides fulfillment
services to members of the Company's individual membership business, and
the creation of Trip Network, Inc., a Company that was created to pursue
the development of an online travel business for the benefit of certain
current and future franchisees.
(G) Includes net cash used in Move.com Group operations, the effects of
changes in exchange rates and other.
(H) Represents debt borrowings, net of debt repayments and financing costs
(including the issuance of a mandatorily redeemable preferred interest in
a subsidiary during 2000).
(I) All projections represent management's estimates based upon current
available information.
(J) All projections represent management's estimates and include adjusted
EBITDA based upon 2002 projected with an annual growth rate of 10% and
capital expenditures based upon 2002 projected with an annual growth rate
of 5%.
(K) Excluding restructuring and other unusual payments related to charges
recorded in 2001 and prior periods, Free Cash Flow for 2002 is projected
to be $1,970 million.
2
EXHIBIT 99.2
CENDANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
YEAR ENDED
DECEMBER 31,
--------------------
2000 2001
-------- --------
OPERATING ACTIVITIES
Net cash provided by operating activities exclusive of management
and mortgage programs $ 1,032 $ 1,437
Net cash provided by operating activities of management
and mortgage programs 385 1,347
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,417 2,784
-------- --------
INVESTING ACTIVITIES
Property and equipment additions (246) (349)
Net assets acquired (net of cash acquired) and acquisition-related payments (111) (2,757)
Funding of stockholder litigation settlement trust (350) (1,060)
Other, net (143) (23)
-------- --------
Net cash used in investing activities exclusive of management
and mortgage programs (850) (4,189)
-------- --------
MANAGEMENT AND MORTGAGE PROGRAMS:
Investment in vehicles -- (14,921)
Payments received on investment in vehicles -- 13,331
Origination of timeshare receivables -- (497)
Principal collection of timeshare receivables -- 538
Equity advances on homes under management (7,637) (6,306)
Repayment on advances on homes under management 8,009 6,340
Additions to mortgage servicing rights, net of hedge activity (778) (752)
Proceeds from sales of mortgage servicing rights 84 58
-------- --------
(322) (2,209)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,172) (6,398)
-------- --------
FINANCING ACTIVITIES
Proceeds from borrowings -- 5,608
Principal payments on borrowings (897) (2,213)
Issuances of common stock 603 877
Repurchases of common stock (381) (254)
Proceeds from mandatorily redeemable preferred securities issued by
subsidiary holding solely senior debentures issued by the Company 91 --
Proceeds from mandatorily redeemable preferred interest in a subsidiary 375 --
Other, net -- (153)
-------- --------
Net cash provided by (used in) financing activities exclusive of
management and mortgage programs (209) 3,865
-------- --------
MANAGEMENT AND MORTGAGE PROGRAMS:
Proceeds from borrowings 4,133 9,460
Principal payments on borrowings (5,320) (8,798)
Net change in short-term borrowings 913 116
-------- --------
(274) 778
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (483) 4,643
-------- --------
Effect of changes in exchange rates on cash and cash equivalents 18 (2)
-------- --------
Net increase (decrease) in cash and cash equivalents (220) 1,027
Cash and cash equivalents, beginning of period 1,164 944
-------- --------
Cash and cash equivalents, end of period $ 944 $ 1,971
======== ========
EXHIBIT 99.3
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Forward-looking statements in our public filings or other public statements are
subject to known and unknown risks, uncertainties and other factors which may
cause our actual results, performance or achievements 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. Forward-looking statements include
the information concerning our future financial performance, business strategy,
projected plans and objectives.
Statements preceded by, followed by or that otherwise include the words
"believes", "expects", "anticipates", "intends", "project", "estimates",
"plans", "may increase", "may fluctuate" and similar expressions or future or
conditional verbs such as "will", "should", "would", "may" and "could" are
generally forward-looking in nature and not historical facts. You should
understand that the following important factors and assumptions could affect our
future results and could cause actual results to differ materially from those
expressed in such forward-looking statements:
o the impacts of the September 11, 2001 terrorist attacks on New York City
and Washington, D.C. on the travel industry in general, and our travel
businesses in particular, are not known at this time, but are expected to
include negative impacts on financial results due to reduced demand for
travel in the near term; other attacks, acts of war; or measures taken by
governments in response thereto may negatively affect the travel industry,
our financial results and could also result in a disruption in our
business;
o the impact of the anthrax attacks through the United States mail system on
the marketing programs of our FISI Madison/BCI subsidiaries and on
Trilegiant are not known at this time, but may have negative impacts on
the financial results of such businesses if consumers become reluctant to
open and respond to such programs;
o the effect of economic conditions and interest rate changes on the economy
on a national, regional or international basis and the impact thereof on
our businesses;
o the effects of a decline in travel, due to political instability, adverse
economic conditions or otherwise, on our travel related businesses;
o the effects of changes in current interest rates, particularly on our real
estate franchise and mortgage businesses;
o the resolution or outcome of our unresolved pending litigation relating to
the previously announced accounting irregularities and other related
litigation;
o our ability to develop and implement operational, technological and
financial systems to manage growing operations and to achieve enhanced
earnings or effect cost savings;
o competition in our existing and potential future lines of business and the
financial resources of, and products available to, competitors;
o failure to reduce quickly our substantial technology costs in response to
a reduction in revenue, particularly in our computer reservations and
global distribution systems businesses;
o our failure to provide fully integrated disaster recovery technology
solutions in the event of a disaster;
o our ability to integrate and operate successfully acquired and merged
businesses and risks associated with such businesses, including the
acquisitions of Avis Group Holdings, Inc., Fairfield Resorts, Inc.,
Galileo International, Inc. and Cheap Tickets, Inc., the compatibility of
the operating systems of the combining companies, and the degree to which
our existing administrative and back-office functions and costs and those
of the acquired companies are complementary or redundant;
o our ability to obtain financing on acceptable terms to finance our growth
strategy and to operate within the limitations imposed by financing
arrangements and rating agencies;
o competitive and pricing pressures in the vacation ownership and travel
industries, including the car rental industry;
o changes in the vehicle manufacturer repurchase arrangements in our Avis
car rental business in the event that used vehicle values decrease;
o and changes in laws and regulations, including changes in accounting
standards and privacy policy regulation.
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. Most of these factors are
difficult to predict accurately and are generally beyond our control.
You should consider the areas of risk described above in connection with any
forward-looking statements that may be made by us and our businesses generally.
Except for our ongoing obligations to disclose material information under the
federal securities laws, we undertake no obligation to release publicly any
revisions to any forward-looking statements, to report events or to report the
occurrence of unanticipated events unless required by law. For any
forward-looking statements contained in any document, we claim the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
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
and competitive uncertainties and contingencies, 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.
1
