UNITED
STATES
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
____________
Date of
report (Date of earliest event reported) December 13, 2005
Cendant
Corporation
(Exact
name of Registrant as specified in Charter)
|
Delaware
(State
or Other Jurisdiction
of
Incorporation)
9
West 57th Street
New
York, NY
(Address
of principal
executive
office) |
1-10308
(Commission
File No.) |
06-0918165
(I.R.S.
Employer
Identification
Number)
10019
(Zip
Code) |
Registrant's
telephone number, including area code (212) 413-1800
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
□ Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
□
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
□
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
□
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Item
7.01. Regulation FD Disclosure.
On December 13, 2005, Cendant Corporation (the “Company”) announced
an update to its financial projections. The Company also announced specific
actions to address certain challenges at its Travel Distribution Services
Division (TDS) and said its previously announced plan to separate Cendant into
four independent, publicly traded, pure-play companies remains on track, with
certain modifications.
In addition, the Company announced changes in the planned executive
leadership at two of the four standalone companies including that Samuel L. Katz
will no longer serve as Chairman and CEO of TDS, effective immediately, and
that Henry R. Silverman will now become Chairman and CEO of the new Real Estate
Services company upon its expected spin-off in the spring of 2006.
The Company also announced that the new Hospitality company will
now include the Company’s Vacation Network Group that was previously proposed to
become a part of the new TDS company.
Attached hereto as Exhibit 99.1 and incorporated herein by
reference is a copy of the press release issued today.
Item
9.01 Financial Statements and
Exhibits.
(d) Exhibits.
|
Exhibit
No. |
Description |
||
|
99.1 |
Press
release dated December 13, 2005. |
SIGNATURE
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 hereunto
duly authorized.
|
CENDANT
CORPORATION
|
||||
|
By: |
/s/
Eric J. Bock | |||
|
Eric
J. Bock
Executive
Vice
President, Law and
Corporate
Secretary
| ||||
Date:
December 13, 2005
CENDANT
CORPORATION
CURRENT
REPORT ON FORM 8-K
Report
Dated December 13, 2005
EXHIBIT
INDEX
|
Exhibit
No. |
Description |
||
|
99.1 |
Press
release dated December 13, 2005. |
Exhibit
99.1
CENDANT
CORPORATION ANNOUNCES UPDATED EARNINGS PROJECTIONS AND STEPS TO ADDRESS
CHALLENGES
AT
TRAVEL DISTRIBUTION BUSINESS
Projects
4th Quarter 2005 EPS of $0.23 from Continuing Operations, Excluding Separation
Costs, Expected Non-Cash Intangibles Impairment Charge at Travel Distribution
Services Division, and Gain on Sale of Marketing Services
Division
Company
Taking Action to Address Specific Execution Challenges at Travel Distribution
Businesses and Projects TDS 2006 EBITDA Growth of 11% Over Estimated 2005
Results
Separation
Plan Remains on Track, With Spin-offs of Real Estate Services and Hospitality
Planned for the Spring and Summer of 2006, Respectively
NEW
YORK, December 13, 2005 - Cendant Corporation (NYSE:
CD) today announced an update to its financial projections that
reflects continuing challenges at its Travel Distribution Services (TDS)
division. The Company also announced specific actions to address these
challenges and said its previously announced plan to separate Cendant into four
independent, publicly traded, pure-play companies remains on track, with certain
modifications.
Cendant’s
Chairman and CEO, Henry R. Silverman, said, “We are moving aggressively to
address continuing challenges at TDS through management changes and technology
development. We are facing specific, identifiable issues that mainly affect our
international online operations and that we believe will be addressed by the
actions we are taking. Despite the recent and unacceptable setbacks in its
performance compared to our expectations, TDS is a growing and profitable
business that will be well positioned to compete successfully as a standalone
company. Cendant’s three other new companies continue to meet their performance
goals. In fact, for the full year 2006, if Cendant had remained together, our
preliminary projections indicate growth in revenue and EBITDA, excluding the
Company’s former mortgage business, of approximately 10-12% over estimated 2005
results.”
Cendant
expects the new Real Estate Services company to be spun off in the spring of
2006, the new Hospitality company in early summer of 2006, and the new Travel
Distribution Services company in early October 2006.
Fourth
Quarter 2005 and 2006 Outlook
Due to
challenges in TDS resulting in that division’s earnings increasing at a lower
rate in the fourth quarter than previously projected, the Company projects
fourth quarter 2005 EPS from continuing operations of $0.23, at the low end of
the range of $0.23-$0.26 projected on October 24, 2005. The updated projection
does not include any costs associated with the contemplated separation of the
Company into four separate public companies, which Cendant estimates to be
approximately $0.01 per share in the fourth quarter, nor does it include an
expected non-cash intangibles impairment charge at TDS of approximately $200 to
$300 million, pre-tax, which the Company said was due largely to reduced return
expectations at its ebookers business. It further does not include a pre-tax
gain of approximately $1.2 billion resulting from the previously announced sale
of the Company’s Marketing Services Division in October.
Cendant
also announced, for the first quarter of 2006, estimates for its year-over-year
growth in revenue and EBITDA, excluding the Company's former mortgage business,
of approximately 8-10%. EPS from continuing operations (before separation costs)
is expected to be $0.18 to $0.20 per share. The first quarter of 2006 is
anticipated to be the last quarter that Cendant reports consolidated results.
Following
a final budget review conducted over the past two weeks, the Company now
projects TDS full-year 2006 EBITDA in the range of $575 to $625 million,
including the estimated effect of renegotiations of content agreements with U.S.
airlines. This represents an approximate 11% increase over TDS’s current 2005
EBITDA forecast of $535-$545 million. Projected 2006 financial results at
Cendant’s other businesses remain unchanged from the Company’s previous
announcement on October 24, 2005. Full year 2006 projections for each new
company will be furnished at Cendant’s annual Investor Day, planned for the
first quarter of 2006.
Commenting
on the downward revision to Cendant’s projections of TDS EBITDA during 2005, Mr.
Silverman said, “TDS has clearly fallen short of its 2005 targets due
principally to our international online businesses, particularly ebookers. We
face company-specific issues that we have identified and are addressing, not
with quick fixes but with significant new investments, including the development
of a single, global online platform.”
“While
with hindsight our past projections were too high,” Mr. Silverman continued,
“the fact is that TDS is a strong business that we expect will achieve
approximately 11% EBITDA growth next year. Its strengths have been widely
recognized, most recently at the World Travel Awards in November, where we were
named ‘Best Travel Distribution Services Company’ in a category that included
the industry’s toughest competitors. With its global scale, powerful brands and
deep industry expertise, TDS has the fundamental strengths to compete
successfully in its markets.”
Executive
Changes
The
Company announced changes in the planned executive leadership of two of the four
standalone companies. Samuel L. Katz will no longer serve as Chairman and CEO of
Cendant’s Travel Distribution Services division, effective immediately. After a
short transition, he will be leaving the Company to pursue other business
interests. Mr. Katz has been with the Company for 10 years and assumed the
leadership of TDS in October 2001.
The
Company has begun a search for a new CEO of TDS, which it expects to conclude
well in advance of its planned spin-off. Cendant’s President and CFO, Ronald L.
Nelson, will assume responsibility for the TDS business during the leadership
transition as interim CEO, with Mr. Katz’s immediate direct reports reporting to
Mr. Nelson. To give the Company flexibility in attracting the most suitable
candidate to lead TDS, Mr. Silverman will not become CEO of TDS, as previously
indicated, upon its spin-off in October 2006.
With Mr.
Silverman no longer to lead the new TDS company, Cendant’s Board of Directors
has determined that Mr. Silverman will become Chairman and CEO of the new Real
Estate Services company upon its expected spin-off in the spring of 2006.
Previously, Mr. Silverman was to become non-executive Chairman of the Real
Estate Services company. Richard A. Smith, who was initially to be the CEO of
the new Real Estate Services company, will now serve as Vice Chairman and
President of that company following its spin-off. Effective January 1, 2008, Mr.
Silverman is expected to step down as CEO, and Mr. Smith is expected to assume
that title. Mr. Silverman will remain as Chairman and CEO of Cendant until the
Company has separated into four public companies.
“The
Board, my colleagues, our advisors and our lenders felt it was important for me
to remain involved as CEO of one of the new companies, and Richard Smith and I
agreed that I could provide the greatest benefit at the Real Estate Services
company,” Mr. Silverman said.
The
Company further stated that, as previously announced, Mr. Silverman will not
receive any compensation as an executive of any of the new
companies.
Organization
and Timing
The
Company also announced that the proposed Hospitality company will now include
Cendant’s Vacation Network Group (VNG), comprised of its leading timeshare
exchange business, RCI, and the Vacation Rental Group. These businesses were
previously proposed to become part of the new TDS company.
Addressing
this change, Mr. Silverman said, “The Company decided to retain VNG within the
Hospitality company for two primary reasons. Most importantly, given the
challenges we are addressing at TDS and the management change under way there,
we concluded that it would be preferable for VNG to remain as part of the
Hospitality company, rather than give the new TDS management the additional
challenges of integrating a large, global business. Also, because Hospitality
and Real Estate Services are expected to be spun off months before TDS, by
including VNG in Hospitality, we will be able to distribute about two-thirds of
our EBITDA to our shareholders more quickly.”
Refinancings
The
Company also said that upon the completion of the spin-offs of Real Estate
Services and Hospitality, Cendant will refinance its public corporate debt
securities. Cendant expects that the refinancing of these debt securities and
Cendant’s other corporate debt at the time of the spin-offs will be allocated
among the new Real Estate Services, Hospitality and TDS companies, generally
based upon the expected ability of each new company to service its
debt load. The Company believes that the retention of VNG by Hospitality will
not only enhance that new company’s performance, but also increase its financial
flexibility. Further, Hospitality will share with Real Estate Services and TDS
responsibility for Cendant’s contingent liabilities and participate in the
Company’s contingent assets. Initially, only Real Estate Services and TDS were
to share these responsibilities and benefits. Consistent with the original plan,
the Vehicle Rental company will have no legacy corporate debt but will be
responsible for the existing securitized debt related to rental vehicle
assets.
Investor
Conference Call
Cendant
will host a conference call to discuss this announcement today, Tuesday,
December 13, 2005, at 9:00 AM (ET). Investors may access the call live at
www.cendant.com or by dialing 800-988-9352 within the United States, or
773-756-4619 for international callers, using the access code: “Cendant”.
A Web replay will be available at www.cendant.com following the call. A
telephone replay will be available from 12:00 PM (ET) on December 13, 2005 until
midnight (ET) on December 27, 2005 at 866-415-8408 within the United States, or
at 203-369-0701 for international callers.
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.
Forward-Looking
Statements
Certain
statements in this press release constitute “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Statements
preceded by, followed by or that otherwise include the words “believes”,
“expects”, “anticipates”, “intends”, “projects”, “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. Any statements that refer to
expectations or other characterizations of future events, circumstances or
results are forward-looking statements. The Company cannot provide any
assurances that the separation or any of the proposed transactions related
thereto will be completed, nor can it give assurances as to the terms on which
such transactions will be consummated. The transaction is subject to certain
conditions precedent, including final approval by the Board of Directors of
Cendant.
Various
risks that could cause future results to differ from those expressed by the
forward-looking statements included in this press release include, but are not
limited to: risks inherent in the contemplated separation and related
transactions and borrowings and costs related to the proposed transactions;
distraction of the Company and its management as a result of the proposed
transactions; risks and challenges associated with management changes, including
identifying a new CEO of TDS; costs and risks related to technology investments
and development for TDS; risks that projected growth rates, volume growth and
acquisition synergies may not be realized; results of continuing negotiations
with domestic airlines relating to GDS participation and fees; changes in
business, political and economic conditions in the U.S. and in other countries
in which Cendant and its companies currently do business; changes in
governmental regulations and policies and actions of regulatory bodies; changes
in operating performance, including changes in projected performance; and access
to capital markets and changes in credit ratings, including those that may
result from the proposed transaction. Other unknown or unpredictable factors
also could have material adverse effects on Cendant’s and its companies’
performance or achievements. In light of these risks, uncertainties, assumptions
and factors, the forward-looking events discussed in this press release may not
occur. You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date stated, or if no date is stated, as
of the date of this press release. 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 10-Q for the quarter
September 30, 2005, including under headings such as “Forward-Looking
Statements” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.” Except for the Company’s ongoing obligations to disclose
material information under the federal securities laws, the Company undertakes
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.
This
press release includes management’s estimate of earnings per share from
continuing operations before separation costs and an expected non-cash
intangibles impairment charge at TDS for the fourth quarter of 2005, which is a
non-GAAP financial measure. Provided below is a reconciliation of this non-GAAP
metric to earnings per share before the expected non-cash intangibles impairment
charge at TDS, which is also a non-GAAP financial measure. Management believes
the most directly comparable GAAP measure for the expected earnings per share
from continuing operations before an expected non-cash intangibles impairment
charge at TDS would be “Earnings per share from continuing operations”. Due to
the difficulty in forecasting and quantifying the tax amounts that would be
included in the per share calculation for the expected non-cash intangibles
impairment charge at TDS, the Company is not providing an estimate of fourth
quarter 2005 “Earnings per share from continuing operations”.
|
Earnings
per share from continuing operations
before
separation costs and TDS expected
intangibles
impairment charge |
$ 0.23 |
||
|
Less:
Estimated separation costs |
0.01
|
||
|
Earnings
per share from continuing operations
before TDS
expected intangibles impairment charge |
$
0.22 |
This
press release also includes management’s estimate of earnings per share from
continuing operations before separation costs for first quarter 2006, which is a
non-GAAP financial measure. Management believes the most directly comparable
GAAP measure for earnings per share from continuing operations before separation
costs would be “Earnings per share from continuing operations”. Due to the
uncertainty regarding the timing and the amount of separation costs to be
incurred in first quarter 2006, the Company is not providing an estimate of
first quarter 2006 “Earnings per share from continuing operations” at this time.
Depending on the ultimate timing of the separation, the separation costs may be
material during the first quarter of 2006.
This
press release includes management's estimate of total company EBITDA growth for
first quarter 2006 and full year 2006, excluding the results of the former
Mortgage segment, which was spun-off on January 31, 2005. Such metric is a
non-GAAP financial measure. Management believes that total company EBITDA
excluding the results of the former Mortgage segment is useful in measuring the
comparable results of the Company period-over-period. Provided below are
reconciliations of first quarter 2006, full year 2006 and full year 2005 total
company EBITDA excluding Mortgage to Total company EBITDA, which is also a
non-GAAP financial measure. Management believes the most directly
comparable GAAP measure for total company EBITDA would be “Net income”.
Due to the difficulty in forecasting and quantifying the amounts that would be
required to be included in “Net income” for these periods, the Company is not
providing an estimate of first quarter 2006, full year 2006 and full year 2005
“Net income” at this time.
|
First Quarter |
||||||
|
2006 |
2005 |
Growth |
||||
|
Total company EBITDA excluding Mortgage |
$ 530 |
$ 482 |
10% |
|||
|
Mortgage results |
- |
|
(181) |
|||
|
Total company EBITDA |
$ 530 |
$ 301 |
(*) |
|||
|
Less: Non-program related depreciation and
amortization |
137 |
|||||
|
Non-program related interest income, net |
(18) |
|||||
|
Amortization of pendings and listings |
3 |
|||||
|
Income before income taxes and minority interest |
179 |
|||||
|
Provision for income taxes |
115 |
|||||
|
Minority interest, net of tax |
1 |
|||||
|
Income from continuing operations |
63 |
|||||
|
Loss from discontinued operations |
(145) |
|||||
|
Net loss |
$ (82) |
|||||
|
Full Year |
||||||
|
2006 |
2005 |
Growth |
||||
|
Total company EBITDA excluding Mortgage |
$ 3,020 |
$ 2,720 |
11% |
|||
|
Mortgage results |
- |
(181) |
||||
|
Total company EBITDA |
$ 3,020 |
$ 2,539 |
(*) |
|||
|
_____ |
|
|||||
|
(*) Not meaningful. |
||||||
|
Media
Contact:
|
Investor
Contacts: |
||
| Elliot Bloom
212-413-1832
|
Sam
Levenson
212-413-1834 |
||
| Henry A. Diamond
212-413-1920
|