EX-99.1 2 ex991.htm PRESS RELEASE DATED MAY 1, 2013 March 31, 2013 Press Release
Exhibit 99.1


REALOGY REPORTS FINANCIAL RESULTS
FOR FIRST QUARTER 2013
Transaction Volume Growth Of 14% Drives Revenue Increase Year Over Year;
Strong Housing Demand Supports Average Homesale Price Growth
MADISON, N.J., May 1, 2013 - Realogy Holdings Corp. (NYSE: RLGY), a global leader in residential real estate franchising and provider of real estate brokerage, relocation, and title and settlement services, today reported financial results for the first quarter ended March 31, 2013, including the following:
Realogy's net revenue for first quarter 2013 was $957 million, a 9% increase compared to the same period in 2012.
The Company's Adjusted EBITDA1 was $71 million in the first quarter, which was an increase of 34% year-over-year. The increase was primarily due to a 14% year-over-year increase in sales volume (homesale transaction sides times average sale price) at the franchised and company-owned real estate services segments combined.
Net loss attributable to the Company in the first quarter was $75 million, which was after $89 million of interest expense, $42 million of depreciation and amortization and $3 million of debt extinguishment charges.
The Company's combined transaction volume was up 14% for the first quarter of 2013. RFG, our franchise segment, and NRT, the operator of our company-owned brokerage offices, reported closed homesale side increases of 6% and 5%, respectively. Average homesale price increased 9% at RFG and NRT's average homesale price, which is generally twice the national average, increased 6% compared with the first quarter of 2012.
"Our transaction volume, which was at the top end of the range of the guidance we provided in February, and our first quarter performance, continue to support our firm belief in the strength of the housing recovery," said Richard A. Smith, Realogy's chairman, chief executive officer and president. "The first quarter results were particularly encouraging given the seasonally lower transaction volume typically seen in the first quarter of any year."
In our relocation business, Cartus experienced a 10% increase in broker referrals and a 4% year-over-year decrease in initiations compared with 2012. In our title and settlement services segment, Title Resource Group (TRG) experienced a 5% increase in purchase title and closing units compared to the first quarter of 2012 and an 11% increase in refinance title and closing units.
"We expect continued growth in transaction volume, with 14% to 17% increases in the second quarter," said Tony Hull, Realogy's executive vice president, chief financial officer and treasurer. "On a combined basis, RFG and NRT transaction sides are anticipated to increase 7% to 9% and average sale price is expected to increase 7% to 8% year-over-year in the second quarter."





1 See Tables 6c and 8 for a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA for the three months ended March 31, 2013 and 2012.



Realogy Reports Financial Results for First Quarter 2013                        2

Business Highlights
RFG generated new franchise sales totaling $68 million in gross commission income, which was an increase of 42% from first quarter 2012.
Earlier today, NRT was ranked as the No. 1 residential real estate brokerage firm in the nation by REAL Trends for the 16th consecutive year, ranking highest by sales volume and closed transaction sides. NRT's 2012 sales volume of $128.7 billion (pro forma for acquisitions) is three times higher than the next largest brokerage.
In late March and early April, NRT completed three accretive tuck-in acquisitions in Florida. These acquisitions enabled NRT to expand its footprint into two new markets.
During the first quarter of 2013, Cartus signed 32 new corporate clients and expanded the scope of services provided for over 80 existing clients, the impact of which is expected to benefit future quarters.
TRG's title and settlement capture rates on NRT homesales improved to 41% in the first quarter, up from 39% in the first quarter of 2012. TRG's underwriter reported a 22% increase in first quarter net premiums year over year, and its underwriting claims experience for the quarter was less than 1%, which continues to substantially outperform the industry average loss ratio.
Balance Sheet Information as of March 31, 2013
The Company ended the quarter with a cash balance of $366 million, and $135 million of outstanding borrowings on its revolving credit facility under its senior secured credit agreement.
"Since the end of the first quarter, we have redeemed approximately $330 million of senior subordinated notes and senior notes funded mostly from our remaining IPO proceeds," said Hull. "We also will redeem all $492 million of our 11.50% Senior Notes in May 2013 using the net proceeds from our recently completed $500 million offering of 3.375% senior unsecured notes due 2016 and short-term borrowings under our revolver. After giving effect to this transaction as well as the refinancing of our senior secured credit facility in March 2013, we expect cash interest expense for 2013 to be approximately $300 million – down from the previous guidance of $315 million to $320 million."
A consolidated balance sheet is included as Table 2 of this press release.
As of March 31, 2013, the senior secured leverage ratio (SSLR) under the Realogy Group LLC senior secured credit agreement was 3.38 to 1, well below the 4.75 to 1 maximum ratio required to be in compliance under the agreement. (See Tables 6a, 6b, and 6c for a reconciliation of Adjusted EBITDA to the most comparable GAAP financial measure, net loss attributable to the Company.)
Investor Conference Call
Today, May 1 at 5:00 p.m. (EDT), Realogy will hold a conference call via webcast to review its first quarter results. The call will be hosted by Richard A. Smith, chairman, chief executive officer and president, and Anthony E. Hull, executive vice president, chief financial officer and treasurer, and will conclude with an investor Q&A period with management.
Investors may access the conference call live via webcast at www.realogy.com under "Investors" or by dialing (888) 895-2010 (toll free); international participants should dial (706) 679-2250. Please dial in at least 5 to 10 minutes prior to start time. A webcast replay also will be available from May 1 through May 15.
About Realogy Holdings Corp.
Realogy Holdings Corp. (NYSE: RLGY) is a global leader in real estate franchising with company-owned real estate brokerage operations doing business under its franchise systems as well as relocation and title services. Realogy's brands and business units include Better Homes and Gardens® Real Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, The Corcoran Group®, ERA®, Sotheby's International Realty®, NRT



Realogy Reports Financial Results for First Quarter 2013                        3

LLC, Cartus and Title Resource Group. Collectively, Realogy's franchise system members operate approximately 13,600 offices with 239,000 independent sales associates doing business in 102 countries around the world. Realogy is headquartered in Madison, N.J.
Forward-Looking Statements
Certain statements in this press release constitute “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Realogy Holdings Corp. 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” and “plans” 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.
Various factors that could cause actual future results and other future events to differ materially from those estimated by management include, but are not limited to: adverse developments or the absence of sustained improvement in general business, economic and political conditions; adverse developments or the absence of improvement in the residential real estate markets including but not limited to the lack of sustained improvement in the number of home sales and/or stagnant or declining home prices, low levels of consumer confidence, the impact of slow economic growth or future recessions and related high levels of unemployment in the U.S. and abroad, continued low inventory levels, renewed high levels of foreclosures, seasonal fluctuations in the residential real estate brokerage business, and increasing mortgage rates and down payment requirements and/or constraints on the availability of mortgage financing; the Company's geographic and high-end market concentration, particularly with respect to its Company-owned brokerage operations; the Company's failure to enter into or renew franchise agreements or maintain its brands; risks relating to our substantial amount of outstanding debt and interest obligations; variable rate indebtedness which subjects the Company to interest rate risk; the Company's inability to access capital; any outbreak or escalation of hostilities on a national, regional or international basis; government regulation as well as legislative, tax or regulatory changes that would adversely impact the residential real estate market, including but not limited to potential reform of the financing of the U.S. housing and mortgage markets and/or the Internal Revenue Code; the Company's inability to realize benefits from future acquisitions; the Company's inability to sustain improvements in its operating efficiency; and the final resolution or outcomes with respect to Cendant's remaining contingent liabilities.
Consideration should be given to the areas of risk described above, as well as those risks set forth under the headings “Forward-Looking Statements” and “Risk Factors” in our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K for the year ended December 31, 2012, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, and in our other filings made from time to time, in connection with considering any forward-looking statements that may be made by us and our businesses generally. Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law.
This release includes certain non-GAAP financial measures as defined under SEC rules. As required by SEC rules, important information regarding such measures is contained in the Tables attached to this release.
Investor Contacts:
 
Media Contact:
Alicia Swift
 
Mark Panus
(973) 407-4669
 
(973) 407-7215
alicia.swift@realogy.com
 
mark.panus@realogy.com
 
 
 
Jennifer Pepper
 
 
(973) 407-7487
 
 
jennifer.pepper@realogy.com
 
 



Realogy Reports Financial Results for First Quarter 2013                        4



Table 1

REALOGY HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)

 
Three Months Ended
 
March 31,
 
2013
 
2012
Revenues
 
 
 
Gross commission income
$
676

 
$
606

Service revenue
183

 
172

Franchise fees
57

 
54

Other
41

 
43

Net revenues
957

 
875

Expenses
 
 
 
Commission and other agent-related costs
454

 
402

Operating
327

 
318

Marketing
50

 
51

General and administrative
67

 
77

Former parent legacy costs (benefit), net
1

 
(3
)
Restructuring costs

 
3

Depreciation and amortization
42

 
45

Interest expense, net
89

 
170

Loss on the early extinguishment of debt
3

 
6

Other (income)/expense, net

 
1

Total expenses
1,033

 
1,070

Loss before income taxes, equity in earnings and noncontrolling interests
(76
)
 
(195
)
Income tax expense
7

 
7

Equity in earnings of unconsolidated entities
(9
)
 
(10
)
Net loss
(74
)
 
(192
)
Less: Net income attributable to noncontrolling interests
(1
)
 

Net loss attributable to Realogy Holdings and Realogy Group
$
(75
)
 
$
(192
)
 
 
 
 
Earnings (loss) per share attributable to Realogy Holdings:
 
 
 
Basic loss per share:
$
(0.52
)
 
$
(23.95
)
Diluted loss per share:
$
(0.52
)
 
$
(23.95
)
Weighted average common and common equivalent shares of Realogy Holdings outstanding:
 
 
Basic:
145.1

 
8.0

Diluted:
145.1

 
8.0







Realogy Reports Financial Results for First Quarter 2013                        5

Table 2

REALOGY HOLDINGS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
 
March 31,
2013
 
December 31, 2012
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
366

 
$
376

Trade receivables (net of allowance for doubtful accounts of $50 and $51)
118

 
122

Relocation receivables
321

 
324

Relocation properties held for sale
5

 
9

Deferred income taxes
53

 
54

Other current assets
99

 
93

Total current assets
962

 
978

Property and equipment, net
190

 
188

Goodwill
3,306

 
3,304

Trademarks
732

 
732

Franchise agreements, net
1,613

 
1,629

Other intangibles, net
390

 
399

Other non-current assets
222

 
215

Total assets
$
7,415

 
$
7,445

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
147

 
$
148

Securitization obligations
239

 
261

Due to former parent
70

 
69

Revolving credit facilities and current portion of long-term debt
154

 
110

Accrued expenses and other current liabilities
381

 
427

Total current liabilities
991

 
1,015

Long-term debt
4,317

 
4,256

Deferred income taxes
448

 
444

Other non-current liabilities
216

 
211

Total liabilities
5,972

 
5,926

Commitments and contingencies


 


Equity:
 
 
 
Realogy Holdings preferred stock: $.01 par value; 50,000,000 shares authorized, none issued and outstanding at March 31, 2013 and December 31, 2012.

 

Realogy Holdings common stock: $.01 par value; 400,000,000 shares authorized, 145,370,433 shares outstanding at March 31, 2013 and 145,369,453 shares outstanding at December 31, 2012.
1

 
1

Additional paid-in capital
5,594

 
5,591

Accumulated deficit
(4,120
)
 
(4,045
)
Accumulated other comprehensive loss
(34
)
 
(31
)
Total stockholders' equity
1,441

 
1,516

Noncontrolling interests
2

 
3

Total equity
1,443

 
1,519

Total liabilities and equity
$
7,415

 
$
7,445





Realogy Reports Financial Results for First Quarter 2013                        6


Table 3

REALOGY HOLDINGS CORP.
2013 vs. 2012 KEY DRIVERS
 
Three Months Ended March 31,
 
2013
 
2012
 
% Change
Real Estate Franchise Services (a)
 
 
 
 
 
Closed homesale sides (b)
209,779

 
197,458

 
6
%
Average homesale price
$
210,919

 
$
194,071

 
9
%
Average homesale broker commission rate
2.56
%
 
2.56
%
 

Net effective royalty rate
4.57
%
 
4.75
%
 
(18) bps

Royalty per side
$
258

 
$
248

 
4
%
Company Owned Real Estate Brokerage Services
 
 
 
 
 
Closed homesale sides (b)
58,060

 
55,273

 
5
%
Average homesale price
$
427,812

 
$
403,115

 
6
%
Average homesale broker commission rate
2.52
%
 
2.51
%
 
1 bps

Gross commission income per side
$
11,630

 
$
10,959

 
6
%
Relocation Services
 
 
 
 
 
Initiations
35,951

 
37,470

 
(4
%)
Referrals
15,677

 
14,266

 
10
%
Title and Settlement Services
 
 
 
 
 
Purchase title and closing units
21,506

 
20,565

 
5
%
Refinance title and closing units
24,500

 
22,016

 
11
%
Average price per closing unit
$
1,322

 
$
1,237

 
7
%
_______________
(a)
Includes all franchisees except for our Company Owned Real Estate Brokerage Services segment.
(b)
Assuming all else remains equal, the gain or loss of one business day in the quarter can increase or reduce homesale sides by approximately 2 percentage points at both RFG and NRT. The first quarter of 2013 contained one less business day than the first quarter of 2012.






Realogy Reports Financial Results for First Quarter 2013                        7


Table 4

REALOGY HOLDINGS CORP.
2012 KEY DRIVERS
 
 
Quarter Ended
 
Year Ended
 
 
March 31,
2012
 
June 30,
2012
 
September 30, 2012
 
December 31, 2012
 
December 31, 2012
Real Estate Franchise Services (a)
 
 
 
 
 
 
 
 
 
 
Closed homesale sides
 
197,458

 
273,771

 
265,828

 
251,567

 
988,624

Average homesale price
 
$
194,071

 
$
214,547

 
$
218,866

 
$
222,234

 
$
213,575

Average homesale broker commission rate
 
2.56
%
 
2.55
%
 
2.53
%
 
2.53
%
 
2.54
%
Net effective royalty rate
 
4.75
%
 
4.64
%
 
4.65
%
 
4.53
%
 
4.63
%
Royalty per side
 
$
248

 
$
263

 
$
268

 
$
265

 
$
262

Company Owned Real Estate Brokerage Services
Closed homesale sides
 
55,273

 
82,768

 
79,383

 
71,985

 
289,409

Average homesale price
 
$
403,115

 
$
446,732

 
$
442,212

 
$
476,789

 
$
444,638

Average homesale broker commission rate
 
2.51
%
 
2.49
%
 
2.50
%
 
2.48
%
 
2.49
%
Gross commission income per side
 
$
10,959

 
$
11,856

 
$
11,786

 
$
12,501

 
$
11,826

Relocation Services
 
 
 
 
 
 
 
 
 
 
Initiations
 
37,470

 
48,698

 
38,696

 
33,298

 
158,162

Referrals
 
14,266

 
22,039

 
24,082

 
18,940

 
79,327

Title and Settlement Services
 
 
 
 
 
 
 
 
 
 
Purchase title and closing units
 
20,565

 
29,973

 
28,927

 
25,691

 
105,156

Refinance title and closing units
 
22,016

 
17,766

 
24,168

 
25,270

 
89,220

Average price per closing unit
 
$
1,237

 
$
1,450

 
$
1,378

 
$
1,366

 
$
1,362

_______________
(a)
Includes all franchisees except for our Company Owned Real Estate Brokerage Services segment.





Realogy Reports Financial Results for First Quarter 2013                        8


Table 5a
REALOGY HOLDINGS CORP.
SELECTED 2013 FINANCIAL DATA
(In millions)
 
For the Three Months Ended
 
March 31,
Revenue (a)
2013
Real Estate Franchise Services
$
135

Company Owned Real Estate Brokerage Services
686

Relocation Services
87

Title and Settlement Services
100

Corporate and Other
(51
)
Total Company
$
957

 
 
EBITDA (b) (c)
 
Real Estate Franchise Services
$
72

Company Owned Real Estate Brokerage Services
(8
)
Relocation Services
10

Title and Settlement Services
4

Corporate and Other
(15
)
Total Company
$
63

Less:
 
Depreciation and amortization
42

Interest expense, net
89

Income tax expense
7

Net loss attributable to Realogy Holdings
$
(75
)
_______________
(a)
Transactions between segments are eliminated in consolidation. Revenues for the Real Estate Franchise Services segment include intercompany royalties and marketing fees paid by the Company Owned Real Estate Brokerage Services segment of $51 million for the three months ended March 31, 2013. Such amounts are eliminated through the Corporate and Other line.
Revenues for the Relocation Services segment include $8 million of intercompany referral and relocation fees paid by the Company Owned Real Estate Brokerage Services segment during the three months ended March 31, 2013. Such amounts are recorded as contra-revenues by the Company Owned Real Estate Brokerage Services segment.
(b)
Includes $3 million related to loss on the early extinguishment of debt and $1 million of former parent legacy costs for the three months ended March 31, 2013, all recorded at Corporate.
(c)
The three months ended March 31, 2013 reflects $13 million of employee-related costs due to the 2013 bonus plan. The three months ended March 31, 2012 reflected $11 million of expense being recognized for the two year retention plan that was implemented in November 2010 and $13 million of expense related to the 2012 bonus plan. The retention plan was put in place to retain key employees during a period when there was not an annual bonus plan. As a result, there is $11 million of lower employee related costs in the first quarter of 2013 compared to the first quarter of 2012.



Realogy Reports Financial Results for First Quarter 2013                        9


Table 5b
REALOGY HOLDINGS CORP.
SELECTED 2012 FINANCIAL DATA
(In millions)
 
For the Three Months Ended
 
For the Year Ended
 
March 31,
 
June 30,
 
September 30,
 
December 31,
 
December 31,
Revenue (a)
2012
 
2012
 
2012
 
2012
 
2012
Real Estate Franchise Services
$
129

 
$
170

 
$
161

 
$
144

 
$
604

Company Owned Real Estate Brokerage Services
617

 
994

 
948

 
910

 
3,469

Relocation Services
88

 
109

 
124

 
102

 
423

Title and Settlement Services
88

 
106

 
114

 
113

 
421

Corporate and Other
(47
)
 
(70
)
 
(66
)
 
(62
)
 
(245
)
Total Company
$
875

 
$
1,309

 
$
1,281

 
$
1,207

 
$
4,672

 
 
 
 
 
 
 
 
 
 
EBITDA (b) (c)
 
 
 
 
 
 
 
 
 
Real Estate Franchise Services
$
61

 
$
99

 
$
107

 
$
97

 
$
364

Company Owned Real Estate Brokerage Services
(17
)
 
78

 
67

 
37

 
165

Relocation Services
4

 
30

 
45

 
24

 
103

Title and Settlement Services
2

 
14

 
12

 
10

 
38

Corporate and Other
(20
)
 
(18
)
 
(18
)
 
(417
)
 
(473
)
Total Company
$
30

 
$
203

 
$
213

 
$
(249
)
 
$
197

Less:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
45

 
44

 
42

 
42

 
173

Interest expense, net
170

 
176

 
187

 
(5
)
 
528

Income tax expense
7

 
8

 
18

 
6

 
39

Net loss attributable to Realogy
$
(192
)
 
$
(25
)
 
$
(34
)
 
$
(292
)
 
$
(543
)
_______________
(a)
Transactions between segments are eliminated in consolidation. Revenues for the Real Estate Franchise Services segment include intercompany royalties and marketing fees paid by the Company Owned Real Estate Brokerage Services segment of $47 million, $70 million, $66 million and $62 million for the three months ended March 31, 2012, June 30, 2012, September 30, 2012 and December 31, 2012, respectively. Such amounts are eliminated through the Corporate and Other line.
Revenues for the Relocation Services segment include $7 million, $11 million, $12 million and $9 million of intercompany referral and relocation fees paid by the Company Owned Real Estate Brokerage Services segment during the three months ended March 31, 2012, June 30, 2012, September 30, 2012 and December 31, 2012, respectively. Such amounts are recorded as contra-revenues by the Company Owned Real Estate Brokerage Services segment.
(b)
Includes $3 million of restructuring costs and $6 million related to loss on the early extinguishment of debt, partially offset by $3 million of former parent legacy benefits for the three months ended March 31, 2012. Includes $2 million of restructuring costs for the three months ended June 30, 2012. Includes $2 million of restructuring costs, partially offset by $1 million of former parent legacy benefits for the three months ended September 30, 2012. Includes $361 million of IPO related costs (of which $256 million was non-cash and related to the issuance of additional shares and $105 million was a cash fee payment), $39 million expense for the Apollo management fee termination agreement, $18 million loss on the early extinguishment of debt and $5 million of restructuring costs, partially offset by a net benefit of $4 million of former parent legacy items for the three months ended December 31, 2012. The amounts broken down by business units as follows:
 
For the Three Months Ended
 
For the Year Ended
 
March 31,
 
June 30,
 
September 30,
 
December 31,
 
December 31,
 
2012
 
2012
 
2012
 
2012
 
2012
Company Owned Real Estate Brokerage Services
1

 
2

 
2

 
2

 
7

Relocation Services
1

 

 

 
2

 
3

Title and Settlement Services
1

 

 

 
1

 
2

Corporate and Other
3

 

 
(1
)
 
414

 
416

Total Company
6

 
2

 
1

 
419

 
428

(c)
The three months ended March 31, 2012 reflects the incremental employee-related costs that were primarily due to $10 million of expense for the 2012 bonus plan, which is in addition to $11 million of expense being recognized for the retention plan that was implemented in November 2010, whereas in the first quarter of 2011 only $11 million of expense was recognized for the retention plan. The retention plan was put in place to retain key employees during a period when there was not an annual bonus plan.
The three months ended June 30, 2012 reflects the incremental employee-related costs that were primarily due to $16 million of expense for the 2012 bonus plan, which is in addition to $10 million of expense being recognized for the November 2010 retention plan, whereas in the second



Realogy Reports Financial Results for First Quarter 2013                        10

quarter of 2011 only $10 million of expense was recognized for the retention plan. As a result, there is $16 million of incremental employee related costs in the second quarter of 2012 compared to the second quarter of 2011.
The three months ended September 30, 2012 reflects the incremental employee-related costs that were primarily due to $18 million of expense for the 2012 bonus plan, which is in addition to $6 million of expense being recognized for the November 2010 retention plan, whereas in the third quarter of 2011 only $9 million of expense was recognized for the retention plan. As a result, there is $15 million of incremental employee related costs in the third quarter of 2012 compared to the third quarter of 2011.
The three months ended December 31, 2012 reflects the incremental employee-related costs that were primarily due to $18 million of expense for the 2012 bonus plan, whereas in the fourth quarter of 2011 only $10 million of expense was recognized for the retention plan. As a result, there is $8 million of incremental employee related costs in the fourth quarter of 2012 compared to the fourth quarter of 2011.




Realogy Reports Financial Results for First Quarter 2013                        11


Table 6a
REALOGY HOLDINGS CORP.
2013 EBITDA AND ADJUSTED EBITDA
(In millions)
A reconciliation of net loss attributable to Realogy to EBITDA and Adjusted EBITDA for the twelve months ended March 31, 2013 is set forth in the following table:
 
 
 
Less
 
Equals
 
Plus
 
Equals
 
Year Ended
 
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
Twelve Months Ended
 
December 31, 2012
March 31,
2012
December 31, 2012
March 31,
2013
March 31,
2013
Net loss attributable to Realogy (a)
$
(543
)
 
$
(192
)
 
$
(351
)
 
$
(75
)
 
$
(426
)
Income tax expense
39

 
7

 
32

 
7

 
39

Income before income taxes
(504
)
 
(185
)
 
(319
)
 
(68
)
 
(387
)
Interest expense, net
528

 
170

 
358

 
89

 
447

Depreciation and amortization
173

 
45

 
128

 
42

 
170

EBITDA (b)
197

 
30

 
167

 
63

 
230

Restructuring costs and former parent legacy costs (benefit), net (c)
 
5

IPO related costs for the Convertible Notes
 
361

Loss on the early extinguishment of debt
 
21

Pro forma cost savings for 2012 restructuring initiatives (d)
 
4

Pro forma effect of business optimization initiatives (e)
 
30

Non-cash charges (f)
 
(5
)
Non-recurring fair value adjustments for purchase accounting (g)
 
2

Pro forma effect of acquisitions and new franchisees (h)
 
6

Apollo management fees (i)
 
35

Incremental securitization interest costs (j)
 
6

Adjusted EBITDA
 
$
695

Total senior secured net debt (k)
 
$
2,348

Senior secured leverage ratio
 
3.38
x
_______________
(a)
Net loss attributable to Realogy consists of: (i) a loss of $25 million for the second quarter of 2012, (ii) a loss of $34 million for the third quarter of 2012, (iii) a loss of $292 million for the fourth quarter of 2012 and (iv) a loss of $75 million for the first quarter of 2013.
(b)
EBITDA consists of: (i) $203 million for the second quarter of 2012, (ii) $213 million for the third quarter of 2012, (iii) negative $249 million for the fourth quarter 2012 and (iv) $63 million for the first quarter of 2013.
(c)
Consists of $9 million of restructuring costs partially offset by a net benefit of $4 million for former parent legacy items.
(d)
Represents actual costs incurred that are not expected to recur in subsequent periods due to restructuring activities initiated during the year ended December 31, 2012. From this restructuring, we expect to reduce our operating costs by approximately $10 million on a twelve-month run-rate basis and estimate that $6 million of such savings were realized from the time they were put in place. The adjustment shown represents the impact the savings would have had on the period from April 1, 2012 through the time they were put in place had those actions been effected on April 1, 2012.
(e)
Represents the twelve-month pro forma effect of business optimization initiatives including $3 million related to our Relocation Services integration costs, $4 million related to vendor renegotiations, $8 million related to business cost cutting initiatives and $15 million for employee retention accruals. The employee retention accruals reflect the two year employee retention plan that was implemented in November 2010 in lieu of our customary bonus plan, due to the ongoing and prolonged downturn in the housing market in order to ensure the retention of executive officers and other key personnel, principally within our corporate services unit and the corporate offices of our four business units.
(f)
Represents the elimination of non-cash expenses, including $7 million of stock-based compensation expense less $11 million for the change in the allowance for doubtful accounts and notes reserves and $1 million of other items from April 1, 2012 through March 31, 2013.
(g)
Reflects the adjustment for the negative impact of fair value adjustments for purchase accounting at the operating business segments primarily related to deferred rent.
(h)
Represents the estimated impact of acquisitions and new franchisees as if they had been acquired or signed on April 1, 2012. Franchisee sales activity is comprised of new franchise agreements as well as growth acquired by existing franchisees with our assistance. We have made a number of assumptions in calculating such estimate and there can be no assurance that we would have



Realogy Reports Financial Results for First Quarter 2013                        12

generated the projected levels of EBITDA had we owned the acquired entities or entered into the franchise contracts as of April 1, 2012.
(i)
Represents the elimination of the expense recognized for the termination of the Apollo management fee agreement for the twelve months ended March 31, 2013.
(j)
Incremental borrowing costs incurred as a result of the securitization facilities refinancing for the twelve months ended March 31, 2013.
(k)
Represents total borrowings under the senior secured credit facility which are secured by a first priority lien on our assets of $2,648 million plus $16 million of capital lease obligations less $316 million of readily available cash as of March 31, 2013. Pursuant to the terms of our senior secured credit facility, total senior secured net debt does not include the First and a Half Lien Notes, other indebtedness secured by a lien on our assets that is pari passu or junior in priority to the First and a Half Lien Notes, including our securitization obligations and the Unsecured Notes.





Realogy Reports Financial Results for First Quarter 2013                        13


Table 6b
REALOGY HOLDINGS CORP.
2012 EBITDA AND ADJUSTED EBITDA
(In millions)
A reconciliation of net loss attributable to Realogy to EBITDA and Adjusted EBITDA for the year ended December 31, 2012 is set forth in the following table:
 
For the Year Ended
December 31, 2012
Net loss attributable to Realogy
$
(543
)
Income tax expense
39

Income before income taxes
(504
)
Interest expense, net
528

Depreciation and amortization
173

EBITDA
197

Covenant calculation adjustments:
 
Restructuring costs and former parent legacy costs (benefit), net (a)
4

IPO related costs for the Convertible Notes
361

Loss on the early extinguishment of debt
24

Pro forma cost savings for 2012 restructuring initiatives (b)
7

Pro forma effect of business optimization initiatives (c)
31

Non-cash charges (d)
(3
)
Non-recurring fair value adjustments for purchase accounting (e)
3

Pro forma effect of acquisitions and new franchisees (f)
5

Apollo management fees (g)
39

Incremental securitization interest costs (h)
6

Adjusted EBITDA
$
674

Total senior secured net debt (i)
$
2,224

Senior secured leverage ratio
3.30
x
_______________
 
 
(a)
Consists of $12 million of restructuring costs offset by a benefit of $8 million of former parent legacy items.
(b)
Represents actual costs incurred that are not expected to recur in subsequent periods due to restructuring activities initiated during 2012. From this restructuring, we expect to reduce our operating costs by approximately $14 million on a twelve-month run-rate basis and estimate that $7 million of such savings were realized from the time they were put in place. The adjustment shown represents the impact the savings would have had on the period from January 1, 2012 through the time they were put in place, had those actions been effected on January 1, 2012.
(c)
Represents the twelve-month pro forma effect of business optimization initiatives including $3 million related to our Relocation Services integration costs, $3 million related to vendor renegotiations, $26 million for employee retention accruals and $2 million of other items less a $3 million adjustment for the at risk homesale reserves. The employee retention accruals reflect the two year employee retention plan that was implemented in November 2010 in lieu of our customary bonus plan, due to the ongoing and prolonged downturn in the housing market in order to ensure the retention of executive officers and other key personnel, principally within our corporate services unit and the corporate offices of our four business units.
(d)
Represents the elimination of non-cash expenses, including $5 million of stock-based compensation expense and $2 million of other items less $10 million for the change in the allowance for doubtful accounts and notes reserves from January 1, 2012 through December 31, 2012.
(e)
Reflects the adjustment for the negative impact of fair value adjustments for purchase accounting at the operating business segments primarily related to deferred rent.
(f)
Represents the estimated impact of acquisitions and new franchisees as if they had been acquired or signed on January 1, 2012. Franchisee sales activity is comprised of new franchise agreements as well as growth acquired by existing franchisees with our assistance. We have made a number of assumptions in calculating such estimate and there can be no assurance that we would have generated the projected levels of EBITDA had we owned the acquired entities or entered into the franchise contracts as of January 1, 2012.
(g)
Represents the elimination of the expense recognized for the termination of the Apollo management fee agreement for the twelve months ended December 31, 2012.



Realogy Reports Financial Results for First Quarter 2013                        14

(h)
Reflects the incremental borrowing costs incurred as a result of the 2011 securitization facilities refinancing for the twelve months ended December 31, 2012.
(i)
Represents total borrowings under the senior secured credit facility which are secured by a first priority lien on our assets of $2,525 million plus $12 million of capital lease obligations less $313 million of readily available cash as of December 31, 2012. Pursuant to the terms of the senior secured credit facility, senior secured net debt does not include First and a Half Lien Notes and other indebtedness that is secured by a lien that is pari passu or junior to the First and a Half Lien Notes or securitization obligations.




Realogy Reports Financial Results for First Quarter 2013                        15


Table 6c
REALOGY HOLDINGS CORP.
EBITDA AND ADJUSTED EBITDA
THREE MONTHS ENDED MARCH 31
(In millions)
Set forth in the table below is a reconciliation of net loss attributable to Realogy Holdings Corp. to Adjusted EBITDA for the three-month periods ended March 31, 2013 and 2012:
 
Three Months Ended
 
March 31,
2013
 
March 31,
2012
Net loss attributable to Realogy
$
(75
)
 
$
(192
)
Income tax expense
7

 
7

Income before income taxes
(68
)
 
(185
)
Interest expense, net
89

 
170

Depreciation and amortization
42

 
45

EBITDA
63

 
30

Restructuring costs, merger costs and former parent legacy costs (benefit), net
1

 

Loss on the early extinguishment of debt
3

 
6

Pro forma effect of business optimization initiatives
4

 
9

Non-cash charges
(2
)
 

Non-recurring fair value adjustments for purchase accounting

 
1

Pro forma effect of acquisitions and new franchisees
1

 
1

Apollo management fees

 
4

Incremental securitization interest costs
1

 
2

Adjusted EBITDA
$
71

 
$
53





Realogy Reports Financial Results for First Quarter 2013                        16


Table 7
REALOGY HOLDINGS CORP.
FREE CASH FLOW

A reconciliation of net loss attributable to Realogy to free cash flow for the three months ended March 31, 2013 is set forth in the following table:
 
For the three months ended
 
March 31, 2013
 
($ in millions)
 
($ per share)
Net loss attributable to Realogy / Basic earnings per share
$
(75
)
 
$
(0.52
)
Income tax expense, net of payments
4

 
0.03

Interest expense, net
89

 
0.61

Cash interest payments
(92
)
 
(0.63
)
Depreciation and amortization
42

 
0.29

Capital expenditures
(12
)
 
(0.08
)
Restructuring costs and legacy, net of payments
(2
)
 
(0.02
)
Final cash payment related to Apollo management fee termination
(15
)
 
(0.10
)
Loss on the early extinguishment of debt
3

 
0.02

Working capital adjustments
(2
)
 
(0.01
)
Relocation assets, net of securitization
(16
)
 
(0.11
)
Free Cash Flow / Cash Earnings Per Share
$
(76
)
 
$
(0.52
)
 
 
 
 
Basic weighted average number of common shares outstanding (in millions)
 
 
145.1





Realogy Reports Financial Results for First Quarter 2013                        17


Table 8
                                                                                                                                                                                                            
Non-GAAP Definitions
EBITDA is defined by us as net income (loss) before depreciation and amortization, interest expense, net (other than relocation services interest for relocation receivables and securitization obligations) and income taxes. Adjusted EBITDA calculated for a twelve-month period is presented to demonstrate our compliance with the senior secured leverage ratio covenant in the senior secured credit facility. Adjusted EBITDA calculated for a twelve-month period corresponds to the definition of “EBITDA,” calculated on a “pro forma basis,” used in the senior secured credit facility to calculate the senior secured leverage ratio. Adjusted EBITDA includes adjustments to EBITDA for merger costs, restructuring costs, former parent legacy cost (benefit) items, net, gain (loss) on the early extinguishment of debt, pro forma cost savings, the pro forma effect of business optimization initiatives and the pro forma effect of acquisitions and new franchisees, in each case calculated as of the beginning of the twelve-month period.
We present EBITDA and Adjusted EBITDA because we believe EBITDA and Adjusted EBITDA are useful as supplemental measures in evaluating the performance of our operating businesses and provide greater transparency into our results of operations. Our management, including our chief operating decision maker, uses EBITDA as a factor in evaluating the performance of our business. EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations data prepared in accordance with GAAP.
We believe EBITDA facilitates company-to-company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting net interest expense), taxation, the age and book depreciation of facilities (affecting relative depreciation expense) and the amortization of intangibles, which may vary for different companies for reasons unrelated to operating performance. We further believe that EBITDA is frequently used by securities analysts, investors and other interested parties in their evaluation of companies, many of which present an EBITDA measure when reporting their results.
EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider EBITDA or Adjusted EBITDA either in isolation or as substitutes for analyzing our results as reported under GAAP. Some of these limitations are:
these measures do not reflect changes in, or cash requirement for, our working capital needs;
these measures do not reflect our interest expense (except for interest related to our securitization obligations), or the cash requirements necessary to service interest or principal payments on our debt;
these measures do not reflect our income tax expense or the cash requirements to pay our taxes;
these measures do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often require replacement in the future, and these measures do not reflect any cash requirements for such replacements; and
other companies may calculate these measures differently so they may not be comparable.
In addition to the limitations described above, Adjusted EBITDA includes pro forma cost savings, the pro forma effect of business optimization initiatives and the pro forma full year effect of acquisitions and new franchisees. These adjustments may not reflect the actual cost savings or pro forma effect recognized in future periods.
Free Cash Flow is defined as net loss attributable to Realogy before income tax expense, net of payments, interest expense, net, depreciation and amortization, capital expenditures, restructuring costs and former parent legacy costs (benefit), net of payments, IPO related costs, cash payment related to Convertible Notes, cash payment related to Apollo management fee termination, loss on the early extinguishment of debt, working capital adjustments and relocation receivables and properties, net of change in securitization obligations. Cash Earnings Per Share is defined as Free Cash Flow divided by the weighted average basic shares outstanding. We use Free Cash Flow and Cash Earnings Per Share in our internal evaluation of operating effectiveness and decisions regarding the allocation of resources. Free Cash Flow and Cash Earnings Per Share are not defined by GAAP and should not be considered in isolation or as an alternative to net income (loss), net cash provided by (used in) operating, investing and financing activities or other financial data prepared in accordance with GAAP or as an indicator of the Company’s operating performance. Free Cash Flow and Cash Earnings Per Share may differ from similarly titled measures presented by other companies.