Avis Budget Group Inc (CAR) 2006 Q1 法說會逐字稿

Good morning and welcome to the Cendant Corporation first quarter 2006 conference call.

As a reminder, today's conference is being recorded.

At this time for opening remarks and introductions, I would like to turn the conference over to Mr. Sam Levenson, Senior Vice President of Corporate and Investor Relations.

Please go ahead, Sir.

Thank you, Melinda.

Good morning everyone, and thank you all for joining us.

On the call with me today are our Chairman and CEO, Henry Silverman, our President and Chief Financial Officer, Ron Nelson, and our Group Vice President of Investor Relations, Hank Diamond.

Before we discuss our results for the quarter, I would like to remind everyone of four things.

First, the rebroadcast, reproduction and retransmission of this conference call and webcast without the express written consent of Cendant Corporation are strictly prohibited.

Second, if you did not receive a copy of our press release, it is available on our website at www.cendant.com or on the First Call system.

Third, the Company will be making statements about its future results and other forward-looking statements during this call.

Statements about future results made during the call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements are based on current expectations in the current economic environment.

Forward-looking statements and projections are inherently subject to significant economic, competitive and other uncertainties and contingencies which are beyond the control of management.

The Company cautions that these statements are not guarantees of future performance.

Actual results may differ materially from those expressed or implied in the forward-looking statements.

Important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements and projections are specified in the Company's 2005 annual report on Form 10-K, including under headings such as “Risk Factors”, and in our earnings release issued last night and filed under Form 8-K.

Finally, during the call the Company will be using certain non-GAAP financial measures as defined under SEC rules.

Where required, we have provided a reconciliation of those measures to the most directly comparable GAAP measures and the tables in the press release and on our website.

Before I turn the call over to our Chairman, let me briefly review the headlines of yesterday's press release. • Revenue for the first quarter increased 7 % to $4.2 billion. • First quarter earnings per share from the Continuing Operations was $0.13 and EPS and Continuing Operations, excluding separation costs, was $0.16, which was at the high end of our most recent estimate. • We also reiterated the full year 2006 financial estimates that we had announced at our Investor Day on March 21st.

Now, I'd like to turn the call over to Cendant's Chairman and CEO, Henry Silverman.

Thank you, Sam.

I am going to quickly update you on the status of our plan to separate Cendant into four pure plays and the status of the strategic alternatives for TDS.

Then Ron will discuss our financial results and outlook.

With respect to the timing of the separation, much has been accomplished and the spin-offs are proceeding according to our plan.

As previously announced, we filed the Form 10 for the Realogy spin-off earlier this month, and we anticipate receiving comments from the SEC in the next few days.

The Form 10 for Wyndham Worldwide is on track to be filed mid-May.

So, assuming a normal process at the SEC, our expectation remains that Realogy will be spun off in June and we remain optimistic that Wyndham Worldwide will be spun off in July.

We have completed the financing for Avis Budget, which was required to facilitate the spins, and we expect to complete the Realogy and Wyndham Worldwide financings in May and June, respectively.

With respect to TDS, we announced on Monday that, in addition to moving forward with the spin-off , which remains on track for completion in October, we are also exploring the alternative of a sale.

This was precipitated by four factors;

• First, we have received unsolicited inquiries from a number of interested buyers, • Second, unlike the other three companies, TDS could be sold without significant tax leakage due to the relatively high tax basis of that company. • Third, we and our advisors believe that selling TDS at an appropriate price and using the proceeds to reduce the liabilities and indebtedness allocated to Realogy and Wyndham could potentially create greater shareholder value than the spin-off of TDS. • And, last, the lenders who have agreed to provide financing to a potential private equity buyer have indicated that this is an extremely favorable capital markets environment for this type of transaction.

With respect to the potential sale, we have engaged Citigroup, J.P.

Morgan and Evercore as our advisors, and the first two have also indicated that they will provide financing to qualified buyers.

We have sent offering memoranda to a number of interested parties.

Again, if a sale cannot be completed under terms that we believe would enhance shareholder value, we are on track to complete the spin-off in October, and with the recent hirings of Gordon Bethune as Chairman and Jeff Clarke as CEO and President, TDS is well positioned to do well as either a public or private entity.

Finally, this is likely my last Cendant conference call in our present iteration.

We know some investors have been on these calls since the HFS IPO in 1992, and I want to personally thank you and all our other shareholders for your support and your trust and confidence over the last 13 years.

With that, I will now turn the call over to Ron.

Thanks, Henry.

Given the depth of our review on Investor Day last month, my comments today will be relatively brief.

I want to highlight some of the current trends in our real estate business, and then provide some greater clarity on the performances of Wyndham and TDS that may not be immediately apparent from a quick read of our press release.

First, in terms of our EPS, we came in at the high end of our projections due to better than expected results at Realogy.

The primary reason why we had a $0.05 range in our first quarter projection was uncertainty over how long it would take for real estate sellers' and buyers' expectations to reach equilibrium in the areas which had seen the biggest drop off in volumes starting in the late fourth quarter, such as California and Florida.

Although these regions remain significantly challenged, they performed towards the high end of our expectations in the first quarter and the balance of the country showed stability.

Overall price, while clearly moderating, was still up 9 % at franchise and 6 % at NRT, while transactions were down 10 % at franchise and 6 % at NRT, excluding the impact of a one-time benefit at franchise in the first quarter of 2005.

So while our prior estimate was that EBITDA could be down in the 30 to 40 % range in the first quarter, the actual result was a decline of 25 %, which contributed to our achieving the high end of our earnings projection.

There are a few observations to be taken away from this.

First, is the state of the market.

There is no question certain markets that were over heated are feeling the pressure of reduced transaction volume but, at the risk of disappointing the bubble theorists, sides and price activity across the country simply do not reflect a widespread downturn in the housing market.

Second as we discussed at Investor Day, the first quarter is the seasonally weakest for the residential real estate brokerage industry.

This is particularly magnified at NRT, which has the highest operating leverage, up or down, and typically operates at a loss in the first quarter.

NRT's profits are highly seasonal, with 96 % of its 2005 EBITDA earned in the second and third quarters.

With sides and price essentially canceling each other out, what drove the EBITDA decline is not so much the marketplace, but rather higher fixed costs in a seasonally slow period.

As we discussed in our February call, we are addressing our fixed costs through office consolidation, headcount reduction and other moves, and expect to generate a $50 million annual run rate benefit in the back half of the year.

The takeaway here is that we do not expect the first quarter's EBITDA comparisons to be in any way indicative of how the rest of the year will look.

Third, the importance of our acquisition program is clearly shown in the results - with sides in California and Florida off in the mid 20’s in the aggregate, the impact of acquired sides allowed NRT to improve its revenue performance in an otherwise softening market.

And, finally, our franchise results, which geographically encompass a more national footprint, demonstrate the moderation in the market and reflect a more stable national housing environment.

Based on these trends, we continue to expect a soft landing for the real estate market in 2006, with price up in mid-single digits and volume down in the high-single digits, which is consistent with the views of NAR and Fannie Mae.

We expect that our real estate businesses should outperform these metrics by a couple percent through franchise sales, NRT broker acquisitions and continuation of the price out-performance we experienced in the first quarter.

As the year progresses and sellers and buyers continue to adjust to the moderating market, we would expect year-over-year pricing comparisons to continue to moderate but year-over-year transaction comparisons to improve.

So, assuming current trends continue, we would expect Realogy EBITDA to be down, year-over-year, in the second quarter and, consistent with projections we gave at Investor Day, to be about flat for the full year 2006, excluding separation costs.

Turning to our travel businesses, let me start with Timeshare Resorts, which continues to fire on all cylinders.

Excluding the impact of the adoption of a new accounting rule, SFAS No. 152, which impacts the timing of when timeshare companies recognize revenue and expenses, revenue was up 18 % and EBITDA was up 38 %.

This outstanding performance was the result of management's decision to pursue a new Trendwest in-house sales program, also continued improvement in local marketing efforts and other sales initiatives.

The timeshare industry has gained considerable visibility and momentum over the past year with many of our competitors now showcasing the business as an important part of their growth strategy.

We're positioned somewhat differently than our competition with our points-based timeshare product, which allows our customers to purchase our products in various increments and at variable price points, as opposed to the traditional fixed-week timeshare, which offers limited flexibility through a "one size fits all" approach.

Our points-based products enable us to target virtually all consumer segments through established distribution channels, as well as continue to up-sell past purchasers as their demand for our product increases over time.

This continuing opportunity to up-sell past customers is a very profitable endeavor, requiring a fraction of the marketing cost, and is why we view our industry-leading customer base of more than 750,000 as a very important asset.

With respect to the accounting change, we should note that the adoption of SFAS 152 should continue to benefit our Timeshare EBITDA in the second quarter but will reduce EBITDA in the back half of the year.

Let me spend the balance of my comments on Hospitality and TDS.

First, in Hospitality, the reported results at first blush may seem disappointing.

However, the drivers for most of the businesses actually paint a different picture - a picture characterized by growth.

In Lodging, the Wyndham acquisition contributed revenue of $31 million and EBITDA of $2 million in its first full quarter of operation.

Our legacy franchise business also grew its RevPar, excluding Wyndham, by 10 % - .a very strong performance by any measure, and a reflection of the field based and quality initiatives management previously implemented.

And Trip Rewards, our loyalty program, grew its revenue by 55 %, year-over-year, reflecting an increase in both member stays and members.

This loyalty program typically operates on a breakeven basis, as such the incremental revenue was invested in the program.

In RCI, our traditional exchange business experienced year-over-year growth in subscribers, accompanied by an increase in subscription and transaction revenue.

However, despite the topline growth at RCI and Lodging, Hospitality's overall EBITDA did decline.

This was a result of several factors, including: • A combination of a weak European travel market and the timing of revenues for our European vacation rental business, which resulted in an 18 % revenue decline in that business and depressed growth for hospitality overall. • A one time gain in last year's first quarter of $7 million that had to be overcome. • And, finally, increased investment relating to Asian growth initiatives.

Were it not for these items, Hospitality Services’ EBITDA would have been up for the quarter.

Looking ahead, however, the first quarter decline in our European vacation rental revenue was mostly a timing issue and will turn around later in the year, and our Asian initiatives should similarly give rise to income on a longer term basis as we expand our business into the fast-growing Asian markets.

And our loyalty program is already a significant asset to our franchisees: length of stay and average daily rates of TripRewards members are well above the overall average for our brands.

Let me now address Travel Distribution.

First and foremost, let me reiterate Henry's sentiments of how pleased we are to have hired Gordon Bethune as Chairman and Jeff Clarke as CEO and President.

This is really a powerhouse duo, with a perfect combination of experience in the airline/travel industry and in the technology industry.

Whether TDS becomes a separate publicly traded or privately held company, it will be well positioned to grow under their leadership.

Second, the strategy of investing in online is starting to show its merits.

In our domestic online business during the quarter, we: • Grew our gross bookings by approximately 30 %; up from approximately 20 % in the fourth quarter of 2005; • Grew Packaging gross bookings by 67 %; including 94 % at Orbitz alone; • And, finally, we grew our hotel merchant mix by 13 percentage points versus the prior year.

We also made great strides in creating brand differentiation and in providing the value-added services that are key to building customer loyalty: • We launched our first-ever package-focused advertising; • We launched the “Win with Orbitz” campaign; • We launched the Orbitz TLC sub brand; and • We launched the the Orbitz TLC flight delay alert program.

All of these appear to have given us greater traction in the marketplace and were accomplished with only an approximate 4 % increase in marketing and promotion spend.

At ebookers, we believe we have a clear picture of the bottom.

We are also confident that we now have the right management team in place and, while meaningful improvements won't be seen until the new platform is up and operational, which is expected in the fourth quarter, we still have made significant positive strides.

More specifically, at ebookers:

• We've refocused its offline long haul business, Travelbag, re-positioned its marketing and seen average transaction values rise over 30 %; • Hotel sales, while admittedly off a low base, are up 50 % from a year ago; and • Our search speed, while a long way from optimal, has been improved by some 10 seconds; a nonetheless noticeable improvement for our customers.

Overall, our organic gross bookings are down internationally, but the majority of the decline is attributable to the natural decline in web-enabled offline bookings; fewer people are searching online and booking offline as that industry matures.

This is clearly the phenomena that CheapTickets experienced in undergoing the transition to a purely online site some three years ago.

So….. why did EBITDA at TDS decline?

As we alluded to at Investor Day, much of the decline had little to do with performance.

Some of the component parts included:

• $7 million of separation expenses; • $11 million impact from various contractual arrangements including UAL Hosting, Trilegiant license fees and step-downs with the founding airlines at Orbitz, which we have now lapped in terms of the unfavorable impact on year-over-year comparisons; • Over $12 million of non-comparable items resulting from the fact that we did not own Gullivers in the first quarter of last year nor did we own E-bookers for most of the quarter, these businesses currently operate at seasonal losses in the first quarter.

These three factors alone aggregate $30 million of challenges that even Orbitz’ strong performance couldn't overcome.

Galileo and our supplier services business also had a solid quarter, with revenue increasing 5 %, primarily due to an 8 % growth in international air booking fees and 2 % growth in domestic air booking fees.

Negotiations with the airlines for contract renewals are proceeding, and, as you know, we have already entered into five-year agreements with United and U.S. Airways.

For the second quarter, we expect TDS's EBITDA, excluding separation costs, to be about flat but to grow in the back half of 2006.

We remain comfortable with the full year 2006 projections we gave for TDS at Investor Day, with EBITDA growth likely around the middle of the range.

Just a quick note on vehicle rental, our 15 % growth in car rental revenue reflects both volume and pricing growth.

Volume grew 13 %, principally reflecting increased airport share for both Avis and Budget.

EBITDA was slightly better than we had expected.

At the same time, year-over-year pricing increased for the first time since 2004; year-over-year price increases will become more obvious as we lap the low point in pricing in last year's second quarter.

In contrast to last year, when we aggressively committed to fleet growth and as a result grew rental day volume in the mid-teens in both brands throughout the second through the fourth quarters, we will not grow our fleet by the same amounts this year, and as a consequence, our revenue growth will be more driven by price than volume increases in those same periods this year.

Leisure price increases are continuing to hold in the market place; since June of last year seven have been instituted and all have held with some consistency; commercial increases are coming more slowly, but they have been coming.

On the strategic front we are making good progress in our off-airport initiative: during the quarter, we achieved growth of more than 20 % in our off-airport business.

In the second quarter, we expect year-over-year pricing growth to improve further, particularly as corporate contracts continue to cycle through renewal.

However, as we said at Investor Day, we don't expect pricing to reach equilibrium with higher fleet costs until later in 2006.

As a result, prior to consummating our new financing arrangements, we expected that EBITDA, as measured on a Cendant basis, would be down in the second quarter but approximately flat in the back half of the year.

As you'll see, as a result of our recently completed financing, we have replaced secured debt with our newly issued unsecured debt, which will result in lower interest expense above the EBITDA line but higher interest expense below the EBITDA line so, on a reported basis, Vehicle Rental’s EBITDA will actually be up significantly for the back half of the year.

Last, we indicated on Investor Day that we were unlikely to generate positive free cash flow in the first quarter and as I am sure you noted in the press release, we generated negative $83 million of free cash flow.

First quarter is historically our softest free cash flow quarter and you'll see from looking at our financials that approximately $250 million of the $300 million variance from last year was explained by a decline in pretax income after adding back the non-cash valuation charge that was associated with the PHH spin-off in the first quarter of 2005 and an $79 million year-over-year increase in tax payments the total of $101 million of tax payments in the quarter represented taxes due in connection with the sale of Marketing Services and Wright Express in 2005.

Nevertheless, we did complete our share repurchase program, through which we've repurchased $1.3 billion of stock, net of option exercises, since January 1 of 2005 which has enabled us to reduce our diluted share count by 6 % in the first quarter of 2006 versus the first quarter of 2005.

In the second quarter we expect operating cash flow to increase versus the first quarter and free cash flow to be significantly positive.

With that, Henry and I would be pleased to take your questions.

Jeff Kessler of Lehman Brothers.

Thank you, I have a couple questions.

First, I realize that Dollar/Thrifty has a very different business model than the Avis/Budget group.

They said on their conference call they expected high depreciation costs to be hitting them throughout the rest of this year and that they were going to offset that in various ways.

And obviously with a more leisure base, they can do it on a day-to-day basis.

What is your view with regard to the possibility that the auto manufacturers may try to stick the industry with another big price increase in the form of depreciation; or do you think that they have gotten it?

Has the industry basically pushed back hard enough and given them enough indication of how many cars you are going to buy if they do it again?

I think it's hard to handicap what the car manufacturers are going to do in the 2007 model year.

We are just beginning our negotiations with all the manufacturers.

I think it's unlikely that there will not be any fleet increases, but I think it is too early to tell whether they are going to stick it to us or whether they are going to be more moderate in their pricing.

I read the Dollar/Thrifty review and the good news that I took away from it is that they are principally leisure rental.

They had a good quarter and it tells you that the leisure price increases are actually delivering some positive contribution to the bottom line.

But they clearly do have a different fleet strategy than we do.

Their fleet was up, I think 2 or 3 %, whereas ours is up in the 13 % range in the quarter.

So it is a different strategy.

Switching over to real estate, I know that you folks had a very aggressive acquisition campaign in NRT in the latter part of 2005.

And, indeed, you actually bought seasonal losses for the fourth quarter and the first quarter.

Can you quantify how much more losses you actually bought and then, essentially, how much more revenue or EBITDA you were hoping to generate in the second and third quarter out of those NRT acquisitions?

Well, we increased the number of offices in NRT by about 10% and since as you point out they lose money seasonally, you can argue we increased the losses of NRT by 10%.

Correspondingly since NRT makes virtually all its profit in the second and third quarter, all things being equal, we should be able to increase the EBITDA by 10% in those quarters.

Now, obviously size, price and a variety of other issues factor into that, but we continue to believe that NRT will be flat for the year.

So if we are saying it's off in the first quarter, as it was, and then it's off marginally in the second quarter, as we said in our press release, the math would tell you that we expect to be up in Q3 and Q4.

On the franchise side, can you give some indication of how large or what type of increase in franchisees you guys have, relative to 2005?

We are targeting about $600 million of incremental GCI from franchising this year, the pipeline would indicate that's a good number,in round numbers $30 to $35 million of annual royalties assuming a 5 to 6 % royalty range.

And there's virtually no incremental cost against that assuming you get half of it in 2006 (it's all the franchisees that open on January 1, obviously).

That's a big benefit to 2007 upside.

Now, if I'm getting my numbers right, about two-thirds of the EBITDA in real estate is generated by the franchisees.

Does that have a broader base, geographically less skewed toward the coast than NRT does?

Yes, 65 to 70 % comes out of royalty income from the franchisees.

Remember that about 40% of that comes from NRT but that simply neither increases or decreases NRT's EBITDA.

Yes, the skewing of our franchise model excluding NRT is much more U.S.-centric than the NRT model.

But let me make a point that I think investors may be missing and that is, there's a reason why we are so heavily concentrated on both coasts and the high-end markets.

The demographics are unbelievably compelling.

So if you get away from the fact that the comparisons last year were skewed to the upside because of those markets (we said last year, if you recall, that 39 % increases in EBITDA, which we were reporting were not sustainable in the real estate business particularly considering how big we are) but that the demographics are going to make this the right markets to be in over the short-, intermediate, and for sure the longer-term.

You want to be in Florida, California, New York and Boston if you're going to have a successful real estate franchise and brokerage business.

One final question on NRT.

Last year, at least in the Form 10 that was filed, it was shown that NRT actually was down slightly in terms of EBITDA or in earnings in 2005, and there were a number of investment costs that went into NRT to get those lower numbers.

What is your investment schedule in NRT and at what point in time, assuming all things are equal in the real estate business, does NRT began to grow its bottom line again?

We consistently try to buy about $300 million of GCI every year for NRT, Which is between $150 and $200 million of investment.

I would assume that that would be the same level we would target for this year.

It might be slightly higher or slightly lower.

Obviously anything larger than that, we would certainly not do pre-spin because we do want to get through the SEC process and material acquisition.

Not that there is anything we are planning but a material acquisition would change that.

But I think you should assume as we said on Investor Day plus or minus a couple $100 million going into NRT deals during 2006.

Okay.

Thank you very much.

Justin Post of Merrill Lynch.

Hi Henry.

I had a question on potentially selling TDS or going private.

Why do you feel like going private is a better option?

Do you feel like the valuations in the private market could be higher than the public market?

Then I have a follow-up on Orbitz's growth in the quarter.

Well, we don't know whether the valuations will be higher, but that's the purpose of basically conducting a strategic alternative process to see whether or not the valuations will be higher than what we,and our advisors, believe the values may be for TDS post-spin.

Basically, look at the multiples of Expedia and Sabre and assume we trade somewhere in that range and then your guess is probably as good as mine as to whether we will achieve those levels, or higher, from the premium standpoint in terms of a private equity buyer.

We don't know whether we are going to sell TDS or spin it but we will do whatever it is going to create the greatest amount of shareholder value.

Great.

The U.S. numbers look strong.

We expect you to gain share based on your numbers.

Has it been that you've been able to take share of hotel bookings or do you from your competitors or do you think your side has just been undermonetized as far as hotel and package offerings and you are in a catch-up phase right now?

I think it's more the latter than the former, Justin.

We had enormously effective marketing this quarter.

Our traffic was up substantially all across the board in airline, car, and hotel transactions were up.

I do think that a good portion of it has to do with the fact that Orbitz is just now getting into the packaging business in a meaningful way.

They are stepping up their efforts in the merchant hotel business since they weren't historically in the merchant hotel business until sometime late in 2004.

And so I think it is just the combination of our moving up the growth curve plus various effective marketing in the quarter.

I think we did probably take some share from our competitors but I don't think that was the primary driver.

Michael Millman of Soleil Securities.

I was wondering if there was an impact on the growth from hosting of some of the supplier corporate sites that you've been getting into over the last year?

You know we do host some of the corporate sites and I think that does contribute to the growth.

But I think we're a little too early to put any real strong numbers against them in terms of how much they actually contributed.

You know this principally a fee-based business when we host these sites.

In that connection you would think that that would add to your raw margin but in fact you still have a very low raw margin.

Anything in the numbers that we are missing?

Keep in mind that the agreement that we inherited from the four founding airlines pays a lower fee to Orbitz on those bookings than some of the other OTAs would get on the same bookings and that agreement also had a step down in it over the course of the past year which is impacting Orbitz's numbers.

So I think that's probably why you are looking at a lower revenue conversion on that.

I guess last year you forecast or at least guided that the new agreements might cost Galileo and Apollo something on the order of $50 million this year.

Is that number still seem good and what would you think the effect would be on the 2007?

I don't think we ever gave guidance for what the impact of the new agreements with the airlines would be.

I think all we have said is that we feel comfortable with the numbers that we put in our business plan and continue to grow comfortable, having now completed two agreements.

But I don't believe we've ever quantified what the impact of those agreements were and are.

Would you care to quantify them now?

No.

Can you give us an idea of what the Galileo margin is likely to be this year and whether you think that will go down next year?

There are two things that are coming into play, Mike, and I do think Galileo margins will be modestly down.

We are certainly entering into agreements that give the airlines additional discounts over the next few years which will impact margins.

Again, keep in mind that domestic airlines are only a third of Galileo's business.

The other two-thirds are outside the United States so it's going to be diluted by that percentage.

And, secondly, you know there continues to be pressure on FA and you know Galileo has gotten modestly more aggressive over the past year in terms of trying to regain some of the share it lost by stepping up to the plate on FA.

So both those things taken together will have an impact on margins.

And so, it would not be wrong to assume that they are going to go down but I think we are talking modestly because of the proportion of domestic revenue in our income statement.

Question on lodging.

The number of rooms was down sequentially and down more year-over-year I guess again than it was in the fourth quarter.

Can you give us an idea of why?

When that is going to turn around?

I'm a little hesitant.

We keep saying it is going to turn around every quarter.

You know we had forecast that it would slow down in the third quarter of last year and then the fourth quarter.

The rate at which room are (indiscernible) is reducing in every quarter and I think as we start to lap the years they will start to flatten out.

I do think that the acquisition of Wyndham and the acquisition of Baymont is going to give us the opportunity to retain non-controllable terms where people are moving or rotating into upscale brands.

So I think that is going to help us hang on to the better franchisees that are rotating out.

At the end of the date we are so big in rooms, Mike,that the focus for us really needs to be RevPar.

We are not likely to move the needle much on 517,000 rooms up or down quite honestly.

So, REVPAR is really the story.

Thank you.

Chris Gutek of Morgan Stanley.

I got a couple questions.

First one for Henry.

Big picture question.

Now that you are officially considering a sale of the TDS business once the other three businesses get separated post-spin on a tax-free basis, could you comment on your receptiveness to potential sales of those businesses if they don't get valuations as public companies that you find satisfactory?

First of all, let me repeat for the record and for anyone on the call that we can't have any arrangement pre-spin to sell something post-spin; and we have no such arrangement plan, scheme, or hope or dream.

That said, I can only speak for Realogy where I will be the Chairman and CEO for the first 18 months.

The Board, I would assume and I certainly as a CEO, would recommend that we monetize that asset at an appropriate value if the marketplace is not willing to do that.

I have to assume, knowing many of the directors of the rental car business and of the hospitality business, that they would feel similarly.

But I do not want to speak for Ron or for Steve Holmes and their Boards.

And as you know I will not be on those Boards.

But we are determined to enhance value.

We would not be going through the brain damage of this four-way split up unless we thought there was a very significant upside for all this activity that people are going through.

Thanks, Henry.

And I might be pushing my luck by following up on the question but in the past, on occasion, you shared some of the valuation assumptions that Cendant's national advisers have made regarding the value as public company entities.

Have your advisers also done valuation assumptions in a sales scenario for the businesses and, if so, would you be willing to share some of those numbers?

They are higher than the breakup analysis on a stand-alone basis.

I think that goes without saying; but I don't think it really is relevant as to the specific as to whether it's nine times, 11 times, 10 times EBITDA or whatever.

But it obviously is higher, we and our advisers think, than on a stand-alone basis.

That's why we are looking at the opportunity for TDS.

Fair enough.

Couple of quick follow-ups on the fundamentals.

So for the realty business I'm looking at the industry data, we've seen some pretty good numbers; relatively healthy numbers for existing as well as new home sales recently.

I'm curious if you think that's more weather-driven or if you've actually seen similar trends in your business, including trends if you've seen numbers so far for April?

Would you characterize the business as maybe performing a little bit better than you thought at the Analyst Day or is that being optimistic?

I think it's probably being optimistic.

I think that at the Analyst Day, and as I said earlier on the call, we said that the market would moderate through the first half of the year.

We also thought our share would get better in the second half as well as the market getting better enabling us to be flat for the year as a whole, and we haven't changed that forecast.

As you and I have discussed in the past, I'm not sure the NAR data is terribly relevant.

They typically sample, and I repeat the word sample, only 20 % of the MLSs and then they adjust those numbers with a number of variables.

I think that with 30 % of the market, as we believe we have at least on price and side, in terms of dollar volume that statistically you could argue we are the market.

So our results are much more likely to be accurate as to the market than whatever NAR is projecting or has reported.

One more on the E-bookers business; in the press release, you reported the aggregate loss between E-bookers and Gullivers.

I'm curious if you could give us just the ebookers' component of that for Q1 and what your latest expectation is for the E-bookers' loss for the full year of 2006?

You know we generally don't break out operating unit losses.

I think at Investor Day we did say that we expected E-bookers to lose about $30 million this year.

And you know I don't think we've changed our outlook on that for the balance of the year.

I do think we feel much better about it, having looked at some of the positive steps that the new management has taken over the past quarter and some of the improvements that they're making.

But that's really the only number that we've disclosed.

Okay.

Thanks.

Gentlemen, there are no further questions.

We will turn the conference back over to you for any additional or closing remarks.

Thank you very much for what probably is the last Cendant conference call, at least in this iteration, and if there is another conference call in August, we look forward to seeing you then.

That does conclude today's conference.

We do thank you for your participation.

Have a wonderful day.