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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

Commission File No. 1-10308

Cendant Corporation
(Exact name of Registrant as specified in its charter)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed in Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements, for the past 90 days: Yes ý    No o

APPLICABLE ONLY TO CORPORATE ISSUERS:

        The number of shares outstanding of the Registrant's common stock was 1,036,488,745 shares as of September 30, 2002.

Cendant Corporation and Subsidiaries
Index

PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements

INDEPENDENT ACCOUNTANTS' REPORT

To the Board of Directors and Stockholders of
Cendant Corporation
New York, New York

        We have reviewed the accompanying consolidated condensed balance sheet of Cendant Corporation and subsidiaries (the "Company") as of September 30, 2002, the related consolidated condensed statements of income for the three and nine month periods ended September 30, 2002 and 2001, and the related consolidated condensed statements of cash flows for the nine month periods ended September 30, 2002 and 2001. These financial statements are the responsibility of the Company's management.

        We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

        Based on our review, we are not aware of any material modifications that should be made to such consolidated condensed financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

        We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of the Company as of December 31, 2001, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 7, 2002 (April 1, 2002 as to the subsequent events described in Note 28 and August 12, 2002 as to the effects of the discontinued operation described in Notes 1 and 5 and as to the pro forma effect of the non-amortization of goodwill disclosed in Note 1), we expressed an unqualified opinion (and included explanatory paragraphs with respect to the modification of the accounting treatment relating to securitization transactions, the accounting for derivative instruments and hedging activities and the revision of certain revenue recognition policies, as discussed in Note 1 and as to the effects of the discontinued operation as discussed in Notes 1 and 5 to the consolidated financial statements) on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated condensed balance sheet as of December 31, 2001 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Deloitte & Touche LLP
New York, New York
November 1, 2002

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Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In millions, except per share data)

See Notes to Consolidated Condensed Financial Statements.

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Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions, except share data)

See Notes to Consolidated Condensed Financial Statements.

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Cendant Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)

See Notes to Consolidated Condensed Financial Statements

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Cendant Corporation and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unless otherwise noted, all amounts are in millions, except per share amounts)

1. Summary of Significant Accounting Policies

Basis of Presentation

        The accompanying unaudited Consolidated Condensed Financial Statements include the accounts and transactions of Cendant Corporation and its subsidiaries (collectively, the "Company" or "Cendant").

        In management's opinion, the Consolidated Condensed Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. In addition, management is required to make estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates.

        On May 22, 2002, the Company sold its car parking facility business, National Car Parks ("NCP"). In connection with such disposition, the account balances and activities of NCP have been segregated and reported as a discontinued operation for all periods presented. In addition, certain other reclassifications have been made to prior period amounts to conform to the current period presentation. The Consolidated Condensed Financial Statements should be read in conjunction with the Company's Annual Report on Form 10-K/A filed on November 4, 2002.

Revenue Recognition for Real Estate Brokerage Businesses

        Real estate commissions earned by the Company's real estate brokerage businesses, primarily NRT Incorporated ("NRT"), are recorded as revenue on a gross basis upon the closing of a purchase or sale of a home. The amounts paid to real estate agents, which approximated $724 million and $1.4 billion during the three and nine months ended September 30, 2002, respectively, are recorded as a component of operating expenses on the Consolidated Condensed Statement of Income. See Note 3—Acquisitions for a detailed discussion of the Company's acquisition of NRT.

Restricted Cash

        The Company is required to set aside cash primarily in relation to agreements entered into by its mortgage, car rental and fleet management businesses. Restricted cash amounts classified as current assets primarily relate to (i) accounts held for the capital fund requirements of and potential claims related to mortgage reinsurance agreements, (ii) fees collected and held for pending mortgage closings, (iii) insurance claim payments related to the car rental business and (iv) fees collected and held for pending real estate transactions. Restricted cash amounts classified as assets under management and mortgage programs primarily relate to the collateralization requirements of outstanding debt for the Company's fleet management and car rental businesses.

Changes in Accounting Policies

        On January 1, 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," in its entirety. In connection with the adoption of SFAS No. 142, the Company has not amortized any goodwill or indefinite-lived intangible assets during 2002. Prior to the adoption, all intangible assets were amortized on a straight-line basis over their estimated periods to be benefited. Therefore, the results of operations for 2001 reflect the amortization

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of goodwill and indefinite-lived intangible assets, while the results of operations for 2002 do not reflect such amortization (see Note 6—Intangible Assets for a pro forma disclosure depicting the Company's results of operations during 2001 after applying the non-amortization provisions of SFAS No. 142).

        In connection with the implementation of SFAS No. 142, the Company is required to assess goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. The Company reviewed the carrying value of all its goodwill and other intangible assets by comparing such amounts to their fair value and determined that the carrying amounts of such assets did not exceed their respective fair values. Accordingly, the initial implementation of this standard did not result in a charge and, as such, did not impact the Company's results of operations during 2002. The Company will perform its annual impairment test during fourth quarter 2002.

Change in Accounting Estimate

        The value of mortgage servicing rights is based on expected future cash flows considering, among other factors, estimated future prepayment rates and interest rates. The Company estimates future prepayment rates based on current interest rate levels, other economic conditions and market forecasts, as well as relevant characteristics of the servicing portfolio, such as loan types, interest rate stratification and recent prepayment experience. To the extent that fair value is less than carrying value, the Company would record a provision for the impairment of the mortgage servicing rights portfolio.

        During third quarter 2002, the Company recorded a provision for impairment of $275 million ($175 million, after tax, or $0.17 per diluted share) relating to its mortgage servicing rights asset ("MSRs") resulting from lower interest rates and prepayment rates used in the estimates of future cash flows. Such changes were the direct result of continued declines in interest rates on ten-year Treasury notes and 30-year mortgages, which declined to the lowest level in 41 years. In addition, the Company updated the third-party model used to estimate prepayment rates to reflect more current borrower prepayment behavior. The combination of these factors resulted in increases to the Company's estimated future loan prepayment rates, which negatively impacted the carrying value of the mortgage servicing rights asset, hence requiring the provision for the impairment of the mortgage servicing rights asset.

Stock-Based Compensation

        As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," the Company currently measures its stock-based compensation using the intrinsic value approach under Accounting Principles Board ("APB") Opinion No. 25. Accordingly, the Company does not recognize compensation expense upon the issuance of its stock options because the option terms are fixed and the exercise price equals the market price of the underlying CD common stock on the grant date. The Company complies with the provision of SFAS No. 123 by providing pro forma disclosures of net income and related per share data giving consideration to the fair value method provisions of SFAS No. 123.

        On January 1, 2003, the Company plans to adopt the fair value method of accounting for stock-based compensation provisions of SFAS No. 123, which is considered by the Financial Accounting Standards Board ("FASB") to be the preferable accounting method for stock-based employee compensation. Subsequent to adoption of the fair value method provisions of SFAS No. 123, the Company will expense all future employee stock options (and similar awards) over the vesting period based on the fair value of the award on the date of grant. The Company does not expect its results of operations to be impacted in the current year from this prospective change in accounting policy based on the current accounting guidance related to this adoption, which is currently under review by the FASB.

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        The impact of recording compensation expense at fair value in prior periods has been included in the pro forma disclosures, as required by SFAS No. 123, provided in the Company's Annual Report on Form 10-K/A filed on November 4, 2002. Prior period compensation expense is not necessarily indicative of future compensation expense that would be recorded by the Company upon its adoption of the fair value method provisions of SFAS No. 123. Future expense may vary based upon factors such as the number of options granted by the Company and the then-current fair market value of such options.

Recently Issued Accounting Pronouncements

        During April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." Such standard requires any gain or loss on extinguishments of debt to be presented as a component of continuing operations (unless specific criteria is met) whereas SFAS No. 4 required that such gains and losses be classified as an extraordinary item in determining net income. Upon adoption of SFAS No. 145, the Company expects to reclassify its extraordinary gains or losses on the extinguishments of debt to continuing operations. The Company will adopt these provisions on January 1, 2003.

        During June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." Such standard requires costs associated with exit or disposal activities (including restructurings) to be recognized when the costs are incurred, rather than at a date of commitment to an exit or disposal plan. SFAS No. 146 nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Under SFAS No. 146, a liability related to an exit or disposal activity is not recognized until such liability has actually been incurred whereas under EITF Issue No. 94-3 a liability was recognized at the time of a commitment to an exit or disposal plan. The provisions of this standard are effective for disposal activities initiated after December 31, 2002.

2. Earnings Per Share

        Earnings per share ("EPS") for the nine months ended September 30, 2001 was calculated using the two-class method as shares of Move.com common stock were outstanding during such period. The Company ceased using the two-class method upon the repurchase of all outstanding Move.com shares on June 30, 2001. Accordingly, the calculations for the three months ended September 30, 2001 and the three and nine months ended September 30, 2002 do not reflect the application of the two-class method.

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        Income per common share from continuing operations for CD common stock was computed as follows:

(a)

Represents the change in Cendant Group's retained interest in Move.com Group due to the dilutive impact of Move.com common stock options.

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        The following table summarizes the Company's outstanding common stock equivalents, which were antidilutive and therefore, excluded from the computation of diluted EPS for CD common stock:

(a)

The weighted average exercise prices for antidilutive options at September 30, 2002 and 2001 were $21.56 and $24.37, respectively.

(b)

The weighted average exercise price for antidilutive warrants at September 30, 2002 and 2001 was $21.31.

(c)

The appreciation price for antidilutive Upper DECS at September 30, 2002 was $28.42.

        The Company's zero coupon senior convertible contingent notes issued during first quarter 2001, which provided for the potential issuance of approximately 22 million and 49 million shares of CD common stock as of September 30, 2002 and 2001, respectively, were not included in the computation of diluted EPS for the three and nine months ended September 30, 2002 and 2001, respectively, as the related contingency provisions were not satisfied during such periods. Additionally, the Company's zero coupon convertible debentures issued during the second quarter of 2001, which provide for the potential issuance of 39 million shares of CD common stock as of September 30, 2002 and 2001, were not included in the computation of diluted EPS for the three and nine months ended September 30, 2002 and 2001 as the related contingency provisions were not satisfied during such periods. Further, the Company's 3⁷/8% convertible senior debentures issued during the fourth quarter of 2001, which provide for the potential issuance of approximately 50 million shares of CD common stock as of September 30, 2002, were not included in the computation of diluted EPS for the three and nine months ended September 30, 2002 as the related contingency provisions were not satisfied during such periods.

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        Income per common share from continuing operations for Move.com common stock was computed as follows:

(a)

Represents the change in Cendant Group's retained interest in Move.com Group due to the dilutive impact of Move.com common stock options.

3. Acquisitions

Pending Acquisitions

        Budget Group, Inc.    On August 22, 2002, the Company announced that it had entered into a definitive agreement to acquire substantially all of the assets of Budget Group, Inc. ("Budget"), a general car and truck rental company in the United States, for approximately $110 million in cash plus transaction costs and expenses. As part of the acquisition, the Company will assume certain contracts and trade payables, as well as refinance approximately $2.6 billion in Budget asset-backed vehicle related debt. The acquisition is subject to certain conditions, including bankruptcy court and regulatory approval outside the United States. The acquisition has received clearance under U.S. antitrust regulations. Subject to the satisfaction of the closing conditions, the Company currently expects to complete the acquisition during the fourth quarter of 2002.

Consummated Acquisitions

        The assets acquired and liabilities assumed were recorded on the Company's Consolidated Condensed Balance Sheet as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of businesses acquired by the Company have been included in the Company's Consolidated Condensed Statements of Income since their respective dates of acquisition.

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        The excess of the purchase price over the estimated fair values of the underlying assets acquired and liabilities assumed was allocated to goodwill. In certain circumstances, the allocations of the excess purchase price are based upon preliminary estimates and assumptions. Accordingly, the allocations are subject to revision when the Company receives final information, including appraisals and other analyses. In addition, for certain acquisitions, the Company has identified pre-acquisition contingencies for which it is awaiting information to finalize its quantification of such contingencies. Accordingly, revisions to the fair values, which may be significant, will be recorded by the Company as further adjustments to the purchase price allocations. The Company is also in the process of integrating the operations of all its acquired businesses and expects to incur costs relating to such integrations. These costs may result from integrating operating systems, relocating employees, closing facilities, reducing duplicative efforts and exiting and consolidating certain other activities. These costs will be recorded on the Company's Consolidated Condensed Balance Sheets as adjustments to the purchase price or on the Company's Consolidated Condensed Statements of Income as expenses, as appropriate.

        NRT Incorporated.    On April 17, 2002, the Company acquired all of the outstanding common stock of NRT, the largest residential real estate brokerage firm in the United States, for $230 million (including $3 million of estimated transaction costs and expenses and $11 million related to the conversion of NRT employee stock appreciation rights to CD common stock options). The acquisition consideration was funded through an exchange of 11.5 million shares of CD common stock then-valued at $216 million, which included approximately 1.5 million shares of CD common stock then-valued at $30 million in exchange for existing NRT options. As part of the acquisition, the Company also assumed approximately $320 million of NRT debt, which was subsequently repaid. Prior to the acquisition, NRT operated as a joint venture between the Company and Apollo Management, L.P. that acquired independent real estate brokerages, converted them to one of the Company's real estate brands and operated them under the brand pursuant to two 50-year franchise agreements with the Company. Management believes that NRT as a wholly-owned subsidiary of the Company will be a more efficient acquisition vehicle and achieve greater financial and operational synergies.

        The preliminary allocation of the purchase price is summarized as follows:

(*)

Primarily represents the allocation of the purchase price to the pendings and listings intangible asset of $197 million.

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        The following table summarizes the estimated fair values of the NRT assets acquired and liabilities assumed at the date of acquisition:

        The goodwill, of which $160 million is expected to be deductible for tax purposes, was assigned to the Company's Real Estate Services segment.

        Trendwest Resorts, Inc.    On April 30, 2002, the Company acquired approximately 90% of the outstanding common stock of Trendwest Resorts, Inc. ("Trendwest") for $849 million (including $20 million of estimated transaction costs and expenses and $25 million related to the conversion of Trendwest employee stock options into CD common stock options). The acquisition consideration was funded through a tax-free exchange of 42.6 million shares of CD common stock then-valued at $804 million. As part of the acquisition, the Company assumed $89 million of Trendwest debt, of which $78 million was subsequently repaid. The Company purchased the remaining 10% of the outstanding Trendwest shares through a short form merger on June 3, 2002 for approximately $87 million, which was funded through a tax-free exchange of 4.8 million shares of CD common stock then-valued at $87 million. The minority interest recorded in connection with Trendwest's results of operations between April 30, 2002 and June 3, 2002 was not material. Trendwest markets, sells and finances vacation ownership interests. Management believes that this acquisition will provide the Company with significant geographic diversification and global presence in the timeshare industry.

        The preliminary allocation of the purchase price is summarized as follows:

(*)

Primarily represents the allocation of the purchase price to identifiable intangible assets of $62 million, primarily offset by deferred tax liabilities for book-tax differences of $42 million.

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        The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

        The goodwill was assigned to the Company's Hospitality segment. The Company does not expect any of this goodwill to be deductible for tax purposes.

        Other.    During 2002, the Company also completed 22 other acquisitions for aggregate consideration of approximately $850 million in cash, resulting in goodwill of $606 million. Such other acquisitions included (i) Arvida Realty Services, a residential real estate brokerage and mortgage services firm, for approximately $160 million in cash; (ii) The DeWolfe Companies, a residential real estate brokerage and mortgage services firm, for approximately $146 million in cash; (iii) Equivest Finance, Inc., a timeshare developer, for approximately $98 million in cash; (iv) Novasol AS, a marketer of privately owned vacation properties, for approximately $66 million; (v) Sigma, a distribution partner of the Company's Galileo International, Inc. subsidiary, for approximately $94 million in cash and (vi) 17 other businesses for approximately $286 million in cash. None of these acquisitions were significant to the Company's results of operations, financial position or cash flows. The $606 million of goodwill resulting from these acquisitions was allocated as follows:

2001 Acquisitions

        Avis Group Holdings, Inc.    In connection with the Company's acquisition of Avis Group Holdings, Inc. ("Avis") on March 1, 2001, the Company recorded purchase accounting adjustments for

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costs associated with exiting activities. The recognition of such costs and the corresponding utilization are summarized by category as follows:

        The Company closed the Avis Corporate headquarters, relocated Avis employees, abandoned assets and involuntarily terminated Avis employees in connection with such relocation. The Company formally communicated the termination of employment to approximately 550 employees, representing a wide range of employee groups, and as of September 30, 2002, the Company had terminated all such employees. The majority of the remaining personnel related costs are expected to be paid by the end of fourth quarter 2002.

        Galileo International, Inc.    In connection with the Company's acquisition of Galileo International, Inc. ("Galileo") on October 1, 2001, the Company recorded purchase accounting adjustments for costs associated with exiting activities. The recognition of such costs and the corresponding utilization are summarized by category as follows:

        The Company closed the Galileo Corporate headquarters, relocated Galileo employees, involuntarily terminated Galileo employees, merged numerous offices in Europe to a single European headquarters, abandoned assets in connection with such relocation and terminated contractual service agreements associated with the activities to be exited. The Company formally communicated the termination of employment to approximately 570 employees, representing a wide range of employee groups, and as of September 30, 2002, the Company had terminated substantially all such employees. The majority of these remaining personnel related costs are expected to be paid by the end of the fourth quarter 2002.

        Reflected in the September 30, 2002 balance are additional purchase accounting adjustments recorded by the Company subsequent to December 31, 2001 reflecting the Company's integration plan to streamline Galileo's worldwide operations. Consistent with the original integration plan and due to the extent and breadth of these global efforts, the full evaluation of exiting activities was not completed until third quarter 2002. Such purchase accounting adjustments primarily relate to severance for involuntarily terminated employees and lease obligations for closed facilities. In connection with these additional costs, the Company formally communicated the termination of employment to approximately 310 additional employees, representing a wide range of employee groups, substantially all of which are expected to be terminated during fourth quarter 2002. Accordingly, substantially all of the remaining personnel related costs for these employees are expected to be paid by the end of the first quarter of 2003.

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Pro Forma Results of Operations

        Net revenues, income from continuing operations, net income and the related per share data would have been as follows had the acquisitions of NRT and Trendwest occurred on January 1st of each period presented and the acquisitions of Avis and Galileo occurred on January 1, 2001:

        These pro forma results do not give effect to any synergies expected to result from the acquisitions of NRT, Trendwest, Avis and Galileo. Additionally, the amortization of the pendings and listings intangible asset is reflected in the above pro forma results for each period presented ($217 million in both the nine months ended September 30, 2002 and 2001) since the acquisitions of NRT and Trendwest were assumed to have occurred on January 1^st of each period. In actuality, due to the short-term amortization period of the pendings and listings intangible asset, the amortization of this asset would only impact one of the periods presented. Accordingly, these pro forma results are not necessarily indicative of what actually would have occurred if the acquisitions had been consummated on January 1st of each period, nor are they necessarily indicative of future consolidated results.

4. Discontinued Operations

        As previously discussed in Note 1—Summary of Significant Accounting Policies, on May 22, 2002, the Company sold its car parking facility business, NCP, a then-wholly-owned subsidiary within its Vehicle Services segment, for approximately $1.2 billion in cash. The Company recorded an after-tax loss of approximately $256 million on the sale of this business. NCP operated off-street commercial parking facilities and managed on-street parking and related operations on behalf of town and city administration in England.

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        Summarized statement of income data for NCP consisted of:

        Summarized balance sheet data for NCP consisted of: