Avis 2006 Annual Report Download - page 37

Table of Contents
In 2004 and 2005, we undertook a strategic realignment to simplify our business model through exiting non-core businesses or businesses that
produced volatility to our earnings inconsistent with our business model and the remainder of our core businesses. We began this strategic
realignment by completing the initial public offering of Jackson Hewitt Tax Service Inc. in June 2004. We completed the spin-
off of our former
mortgage, fleet leasing and appraisal businesses in a tax-free distribution of the common stock of PHH Corporation to our stockholders in
January 2005. In February 2005, we completed the initial public offering of Wright Express Corporation, raising $964 million of cash. In
October 2005, we completed the sale of our Marketing Services division, which was comprised of our former individual membership and
loyalty/insurance marketing businesses, for approximately $1.7 billion of cash (approximately $1.8 billion of gross proceeds), representing the
culmination of our 2004 and 2005 strategic realignment.
Following this strategic realignment, our management team and Board of Directors, with the aid of financial and legal advisors, performed a
comprehensive review of the growth opportunities and estimated market valuations for each of our core businesses. As a result of this review,
from October 2005 to July 2006, our Board of Directors approved a plan to separate Cendant into four independent companies:
On July 31, 2006, we completed the spin-offs of Realogy Corporation and Wyndham Worldwide Corporation in tax-free distributions of one
share each of Realogy and Wyndham common stock for every four and five shares, respectively, of then outstanding Cendant common stock
held on July 21, 2006. On August 1, 2006, Realogy and Wyndham stock began regular-way trading on the New York Stock Exchange under
the symbols “H” and “WYN,” respectively. Prior to the completion of the spin-offs, we received special cash dividends of $2,225 million and
$1,360 million from Realogy and Wyndham, respectively, and utilized such proceeds to fund a portion of the repayment of our outstanding
debt, as discussed below. On August 23, 2006, we completed the sale of Travelport for proceeds of approximately $4.1 billion, net of closing
adjustments, of which approximately $1.8 billion was used to repay indebtedness of Travelport. Pursuant to the Separation and Distribution
Agreement, during third quarter 2006, we distributed $1,423 million and $760 million of such proceeds to Realogy and Wyndham,
respectively. In connection with executing our plan, we incurred costs of $574 million and $15 million during 2006 and 2005, respectively.
These costs consist primarily of legal, accounting, other professional and consulting fees and various employee costs, and for 2006 include
costs associated with the retirement of corporate debt.
In connection with our execution of the separation plan, we repaid certain corporate and other debt and entered into new financing
arrangements, including (i) the completion of $1,875 million of fixed and floating rate
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•
Rising per
-
unit car fleet costs, which we began to experience in 2005 and anticipate will continue with model
-
year 2007 vehicles;
• Pricing increases, which we instituted throughout 2006 in response to rising fleet costs and intend to continue to pursue, where
appropriate; and
•
Our continued expansion in off
-
airport, or local market segments, including insurance replacement rentals.
•
Realogy Corporation –
encompasses our former Realogy segment, which is now presented as a discontinued operation.
•
Wyndham Worldwide Corporation
–
encompasses our former Hospitality Services and Timeshare Resorts segments, which are
now presented as discontinued operations.
• Travelport, Inc. – encompasses our former Travel Distribution Services segment, which is now presented as a discontinued
operation.
•
Avis Budget Group, Inc.
–
encompasses our vehicle rental operations.