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Segment Information (RMCO)
 9 Months Ended
Sep. 30, 2013
RMCO
  
Segment Information

(11)              Segment information

The Company has two reportable segments, (1) Real Estate Franchise Services and (2) Brokerage and Other. Management evaluates the operating results of the Company’s reportable segments based upon revenue and adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). The Company’s presentation of Adjusted EBITDA may not be comparable to similar measures used by other companies.

Adjusted EBITDA for the reportable segments excludes depreciation, amortization, interest and taxes and is adjusted for items in a manner consistent with the calculation of the Company’s compliance with debt covenants. Adjusted EBITDA for the reportable segments is also a key factor that is used by the Company’s internal decision makers to (i) determine how to allocate resources to segments and (ii) evaluate the effectiveness of management for purposes of annual and other incentive compensation plans. The additional items that are adjusted to determine Adjusted EBITDA for the reportable segments include gains and losses on the sale of assets and sublease activity, gains and losses on the early extinguishment of debt, depreciation expense, interest expense, loss on the sale of assets and loss on the extinguishment of debt from non-controlling interest, stock-based compensation, non-cash deferred rent expense and acquisition transaction and reorganization costs. The Company’s Real Estate Franchise Services segment comprises the operations of the Company’s owned and independent global franchising operations under the RE/MAX brand name. All of the brokerage offices in the Real Estate Franchise Services segment are franchised. The Company’s Brokerage and Other reportable segment includes the Company’s brokerage services business, the elimination of intersegment revenue and other consolidation entries as well as corporate-wide professional services expenses.

The following tables present the results of the Company’s reportable segments for the three and nine months ended September 30, 2013 and 2012, respectively (in thousands):

 

 

Revenue (a)

 

 

Three Months Ended
September 30,

 

  

Nine Months Ended
September 30,

 

 

2013

 

  

2012

 

  

2013

 

  

2012

 

Real Estate Franchise Services             

$

  36,211

  

  

$

  34,490

  

  

$

  106,746

  

  

$

  97,382

  

Brokerage and Other (b)             

 

  4,101

  

  

 

  3,939

  

  

 

  11,882

  

  

 

  11,215

  

Total segment revenue             

$

  40,312

  

  

$

  38,429

  

  

$

  118,628

  

  

$

  108,597

  

(a)              Transactions between the Real Estate Franchise Services and the Brokerage and Other reportable segments are eliminated in consolidation. Revenues for the Real Estate Franchise Services segment include intercompany amounts paid from the Company’s brokerage services business of $435,000 and $427,000 for the three months ended September 30, 2013 and 2012, respectively, and $1,318,000 and $1,295,000 for the nine months ended September 30, 2013 and 2012, respectively. Such amounts are eliminated through the Brokerage and Other reportable segment.

(b)              Includes the elimination of transactions between the Real Estate Franchise Services and the Brokerage and Other reportable segments.

 

 

Adjusted EBITDA

 

 

Three Months Ended
September 30,

 

  

Nine Months Ended
September 30,

 

 

2013

 

  

2012

 

  

2013

 

  

2012

 

Real Estate Franchise Services             

$

  21,495

  

  

$

  18,589

  

  

$

  58,276

  

  

$

  48,713

  

Brokerage and Other (c)             

 

  580

  

  

 

  896

  

  

 

  499

  

  

 

  177

  

Total segment Adjusted EBITDA             

$

  22,075

  

  

$

  19,485

  

  

$

  58,775

  

  

$

  48,890

  

(c)              Includes the elimination of transactions between the Real Estate Franchise Services and the Brokerage and Other reportable segments.

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2013

 

 

2012

 

 

2013

 

 

2012

 

Segment Adjusted EBITDA             

$

  22,075

 

 

$

  19,485

 

 

$

  58,775

 

 

$

  48,890

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization             

 

  3,656

 

 

 

  2,788

 

 

 

  11,088

 

 

 

  9,231

 

Interest expense, net             

 

  5,046

 

 

 

  2,835

 

 

 

  11,829

 

 

 

  8,567

 

Loss on early extinguishment of debt             

 

  1,664

 

 

 

—

 

 

 

  1,798

 

 

 

  136

 

Equity-based compensation             

 

—

 

 

 

—

 

 

 

  701

 

 

 

—

 

Non-cash straight-line rent expense             

 

  261

 

 

 

  270

 

 

 

  970

 

 

 

  1,223

 

Gain on sale of assets and sublease             

 

(164

)

 

 

(144

)

 

 

(411

)

 

 

(442

)

Chairman executive compensation             

 

  750

 

 

 

  750

 

 

 

  2,250

 

 

 

  2,250

 

Acquisition integration costs             

 

  27

 

 

 

—

 

 

 

  249

 

 

 

—

 

IPO expenses             

 

  2,436

 

 

 

—

 

 

 

  5,916

 

 

 

—

 

Income before income taxes             

 

  8,399

 

 

 

  12,986

 

 

 

  24,385

 

 

 

  27,925

 

Provision for income taxes             

 

  702

 

 

 

  636

 

 

 

  1,733

 

 

 

  1,740

 

Net income             

$

  7,697

 

 

$

  12,350

 

 

$

  22,652

 

 

$

  26,185