Cendant Corp. reported net revenues of $1.43 billion for its real estate services segment in the first quarter, up 1 percent from first-quarter 2005, and total net revenues of $4.22 billion, up 7 percent from first-quarter 2005.

Earnings before interest, income taxes, depreciation and amortization, also known as EBITDA, dropped 25 percent in the real estate segment from first-quarter 2005 to first quarter 2006 – falling from $161 million to $121 million.

Total revenue for Cendant’s real estate franchise business fell slightly from $122.34 million in first-quarter 2005 to $121.74 million in first-quarter 2006. Total revenue also dropped 1 percent to $1.1 billion for the company’s real estate brokerage business in first-quarter 2006 compared to first-quarter 2005. The company’s relocation business had total revenue of $110.35 million in the first quarter, a 4 percent gain from first-quarter 2006. And the company’s settlement services segement had total revenue of $91.28 million in first-quarter 2006, a 33 percent gain over $68.43 million in first-quarter 2005.

While home prices increased 9 percent for Cendant Corp.’s real estate franchise business and 6 percent for subsidiary NRT Inc.’s brokerage business, those increases were offset by a 10 percent drop in franchise business and a 6 percent drop in company-owned business, Cendant reported.

“The decline in closed sides volume reflects the expected moderation of the residential real estate market, particularly in some of the areas where NRT is more concentrated such as Florida and California,” the company reported. The 25 percent year-over-year drop in EBITDA for the quarter is a result of “higher fixed costs at NRT in the seasonally weakest first quarter, primarily as a result of growth in offices … not offset by revenue increases.

“Because the first quarter is the residential real estate brokerage industry’s weakest, NRT typically operates at a loss during that quarter,” the company announced. Cendant does not expect the first-quarter results to be indicative of the segments results for the rest of the year, according the earnings announcement.

Ronald L. Nelson, Cendant president and chief financial officer, said in a statement, “Our first-quarter 2006 earnings were at the high end of our most recent estimate primarily due to better than expected results at Realogy. While home sales in California and Florida declined as forecasted, the balance of the country exhibited overall stability in a moderating environment.”

Cendant earlier this year announced that it is planning to spin-off its real estate segment and other business segments as independent companies, and Nelson said in a statement, “Each of the spin-offs remains on track, with Realogy expected in June, Wyndham Worldwide in the summer and Travel Distribution Services in October.”

The company is also considering a sale of its Travel Distribution Services segment as an alternative to the spin-off. That sale “could be consummated by late summer,” Nelson stated.

Cendant reported that earnings per share from continuing operations was 13 cents in the first quarter, compared with 6 cents in first-quarter 2005. Excluding separation costs, earnings per share from continuing operations was 16 cents for the quarter.

Cendant also reported total expenses of $4.03 billion in the first quarter, up 6.6 percent from first-quarter 2005, and total net income of $70 million for the quarter, compared to a net loss of $82 million in first-quarter 2005.

The company’s Hospitality Services segment, which includes franchised lodging brands, hotel management, timeshare exchange and vacation rental businesses, reported revenue of $409 million in the first quarter, up 4 percent from first-quarter 2005, while EBITDA dropped 7 percent from $125 million in first-quarter 2005 to $116 million in first-quarter 2006.

Revenue for the company’s Timeshare Resorts segment, which includes timeshare sales and development business, increased 11 percent to $407 million in first-quarter 2006 compared to first-quarter 2005, while EBITDA for the segment increased 68 percent.

The Avis Budget segment, which includes Cendant car and truck rental businesses, increased from $1.17 billion in first-quarter 2005 to $1.32 billion in first-quarter 2006, a gain of 13 percent, while EBITDA dropped 17 percent.

The Travel Distribution Services segment had revenue of $645 million in first-quarter 2006, a gain of 17 percent over first-quarter 2005, while EBITDA dropped 19 percent for the segment.

The company also reported:

  • Generated net cash provided by operating activities of $243 million and negative free cash flow of $83 million. “Each was negatively impacted by the previously disclosed timing benefits in fourth-quarter 2005. The company currently projects second quarter 2006 net cash provided by operating activities to be higher than in the first quarter and free cash flow to be positive.

  • Utilized $243 million of cash for the repurchase of common stock ($221 million net of proceeds from option exercises). The company’s fully diluted weighted average shares outstanding in first quarter 2006 decreased by 63 million shares, or 6 percent, versus first quarter 2005, principally reflecting a repurchase of $1.6 billion of common stock ($1.3 billion net of proceeds from option exercises) since Jan. 1, 2005. Further stock repurchases have been suspended due to the planned separation of Cendant into four independent companies.

  • Utilized $113 million of cash to pay its quarterly dividend of 11 cents per share. Further cash dividends have been suspended due to the planned separation of Cendant into four independent companies.

  • First-quarter EBITDA includes separation costs of $43 million, including $34 million recorded in Corporate and Other, $7 million recorded in TDS, $1 million recorded in Realogy and $1 million recorded in Hospitality Services, consisting primarily of legal, accounting, other professional and consulting fees, and employee costs, Cendant reported.

  • First-quarter income from continuing operations includes a previously disclosed restructuring charge of $46 million related to restructuring activities undertaken following the PHH spin-off and the IPO of Wright Express and $3 million of transaction costs incurred in connection with the PHH spin-off.

In the second quarter, Cendant expects revenue from core operations to increase 4 percent to 6 percent and EBITDA from core operations (before separation costs) to increase marginally compared to second-quarter 2005.

The company expects EBITDA (before separation costs) to increase at Hospitality Services and Timeshare Resorts segments, to be flat for its Travel Distribution Services segment, and to be down at Realogy and Avis Budget.

Based on current trends, the full year 2006 financial outlook for Realogy, Wyndham Worldwide, TDS and Avis Budget remains substantially unchanged from the estimates announced at Cendant’s Investor Day on March 21, 2006.

Cendant is hosting a conference call at 11 a.m. eastern time today to discuss the first-quarter results. Investors can access the call live at www.cendant.com or by calling (719) 457-2080. A Web replay will be available at www.cendant.com following the call. A telephone replay will be available from 2 p.m. Eastern Time on April 27 until 8 p.m. Eastern Time on May 5 at (719) 457-0820, access code: 8485681.


Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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