flagellate nostalgic: Realogy Reports Financial Results for Second ...

Real Estate Leader Sees Continued Gains in Existing Home Sales and Average Sales Price

PARSIPPANY, NJ--(Marketwire - Aug 7, 2012) - Realogy Corporation, a global leader in residential real estate services, today reported results for the second quarter ended June 30, 2012. Realogy's net revenue for the second quarter was $1.3 billion, an increase of 11% compared to 2011. Realogy's EBITDA for the quarter was $203 million, a year-over-year increase of $16 million, or 9%. These improvements were due largely to an increase in sales volume (transaction sides times average sale price) at both the franchised and company-owned real estate services segments. For the quarter, Realogy recorded a net loss attributable to the Company of $25 million, which was after $176 million of interest expense and $44 million of depreciation and amortization.

For the six months ended June 30, 2012, net revenue totaled $2.2 billion, an increase of 9% compared to the first half of 2011. Realogy's EBITDA for the first six months of 2012 was $233 million, an increase of 32% compared to the first six months of 2011. Realogy's Adjusted EBITDA for the first six months of 2012 was $274 million, an increase of 14% compared to 2011, with a net loss attributable to the Company of $217 million.

"We believe that the U.S. residential real estate market is continuing to experience the beginnings of the recovery that we reported in the first quarter of 2012," said Richard A. Smith, Realogy's chairman, chief executive officer and president. "We expected to see the continued improvement in both home sale units and average sales price, with price increases in most major markets being heavily influenced by reduced inventory. Those expectations were realized in our second quarter results, which support our forecasted early-stage recovery."

Looking at Realogy's core business drivers in the second quarter, Realogy Franchise Group (RFG) had a year-over-year 9% increase in homesale transaction sides, while NRT, the company-owned brokerage unit, had a 13% year-over-year increase. In comparison, the National Association of Realtors (NAR) reported that existing home sales increased by 9% compared to second quarter 2011. RFG's average homesale price increased 6% in the second quarter, which was consistent with NAR's 6% reported increase in national average sales price. NRT's average homesale price was flat compared to second quarter 2011, due to its mix of business that shifted to more lower-priced homes. In our relocation business, Cartus experienced a 5% year-over-year increase in initiations and a 9% increase in broker referrals. As for our title and settlement services segment, Title Resource Group experienced a 14% increase in purchase title and closing units and a 64% increase in refinance title and closing units. Those combined unit gains more than offset a 5% decrease in the average fee per closing unit due to the increase in refinance volume.

"Our closed homesale transaction sides continued to increase at an accelerated pace in the second quarter," said Anthony E. Hull, Realogy's CFO and treasurer. "We believe that the combined Realogy average sale price increase was driven by lower levels of home inventory in many markets, greater overall demand, and fewer distressed sales than we saw last year. Looking ahead, we anticipate our third quarter 2012 homesales to increase at a high single-digit pace ahead of last year on a combined Realogy basis, and average homesale price to increase in the mid-single digits as indicated by our preliminary July results."

Balance Sheet Information and Covenant Compliance as of June 30, 2012

The Company ended the quarter with $89 million of readily available cash out of a total cash balance of $138 million and $109 million of outstanding borrowings on its revolving credit facility under its senior secured credit agreement. A consolidated balance sheet is included as Table 2 of this press release.

As of August 6, 2012, the Company had $150 million outstanding under its revolving credit facility. The Company expects its revolver balance to be approximately $50 million by the end of September 2012.

As of June 30, 2012, the Company's senior secured leverage ratio (SSLR) was 4.08 to 1, below the 4.75 to 1 maximum ratio required to be in compliance with its senior secured credit agreement. The SSLR is determined by dividing Realogy's senior secured net debt of $2.4 billion at June 30, 2012 by the Company's Adjusted EBITDA of $599 million for the twelve-month period ended June 30, 2012 (please see Table 7 for the definition of this non-GAAP financial measure, Adjusted EBITDA, and Table 6 for a reconciliation of this non-GAAP measure to the most comparable GAAP financial measure, net loss attributable to Realogy).

Investor Webcast

Realogy will hold a Webcast to review its second quarter 2012 results on August 8th at 10:00 a.m. (EDT). The call will be hosted by Richard A. Smith, chairman, CEO and president, and Anthony E. Hull, executive vice president, CFO and treasurer. The conference call, together with corresponding slides, will be made available live via Webcast on the Investor Information section of the Realogy website. A replay of the Webcast also will be available on the website from August 8 through August 16.

About Realogy Corporation

Realogy Corporation, a global provider of real estate services, has a diversified business model that includes real estate franchising, brokerage, relocation and title services. Realogy's world-renowned 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 LLC, Cartus and Title Resource Group. Collectively, Realogy's franchise system members operate approximately 13,500 offices with 238,500 sales associates doing business in 103 countries and territories around the world. Headquartered in Parsippany, N.J., Realogy is owned by affiliates of Apollo Management, L.P., a subsidiary of Apollo Global Management, LLC, a leading global alternative asset manager.

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 Corporation 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: our substantial amount of outstanding debt; constraints on the Company's liquidity including but not limited to our ability to access the capital, including debt financing, and/or securitization markets; variable rate indebtedness which subjects the Company to interest rate risk; our ability to comply with the affirmative and negative covenants contained in our debt agreements; 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 further declines in 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, continuing high levels of foreclosures, seasonal fluctuations in the residential real estate brokerage business; reduced availability of mortgage financing or financing availability at rates not sufficiently attractive to homebuyers; the final resolution or outcomes with respect to Cendant's remaining contingent liabilities; 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 the Internal Revenue Code; the Company's failure to enter into or renew franchise agreements, maintain its brands or the inability of franchisees to survive the current real estate cycle; the Company's inability to realize benefits from future acquisitions; and the Company's inability to sustain improvements in its operating efficiency.

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 Annual Report on Form 10-K for the year ended December 31, 2011 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012 and in our other periodic reports filed 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.

Table 1

REALOGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions)

Three Months Ended

Six Months Ended

June?30,

2012

2011

2012

2011

Revenues

Gross commission income

983

873

1,589

1,448

Service revenue

208

192

380

356

Franchise fees

130

121

Other

Net revenues

1,309

1,179

2,184

2,010

Expenses

Commission and other agent-related costs

662

577

1,064

951

Operating

325

317

643

635

Marketing

103

General and administrative

156

127

Former parent legacy costs (benefit), net

(12

)

(14

)

Restructuring costs

Depreciation and amortization

Interest expense, net

176

161

346

340

Loss on the early extinguishment of debt

Other (income)/expense, net

Total expenses

1,340

1,203

2,410

2,270

Loss before income taxes, equity in earnings and noncontrolling interests

(31

)

(24

)

(226

)

(260

)

Income tax expense

Equity in earnings of unconsolidated entities

(15

)

(25

)

Net loss

(24

(21

)

(216

)

(258

)

Less: Net income attributable to noncontrolling interests

)

Net loss attributable to Realogy

(25

)

(22

)

(217

)

(259

)

Table 2

?									?
REALOGY CORPORATION									?
CONDENSED CONSOLIDATED BALANCE SHEETS									?
(In millions)									?
?									?
?									?
?			June?30, 2012		?	?	December?31, 2011		?
ASSETS			?	?	?	?	?	?	?
Current assets:			?	?	?	?	?	?	?
?	Cash and cash equivalents		$	138	?	?	$	143	?
?	Trade receivables (net of allowance for doubtful accounts of $58 and $64)		?	147	?	?	?	120	?
?	Relocation receivables		?	419	?	?	?	378	?
?	Relocation properties held for sale		?	10	?	?	?	11	?
?	Deferred income taxes		?	59	?	?	?	66	?
?	Other current assets		?	97	?	?	?	88	?
?	?	Total current assets	?	870	?	?	?	806	?
Property and equipment, net			?	151	?	?	?	165	?
Goodwill			?	2,618	?	?	?	2,614	?
Trademarks			?	732	?	?	?	732	?
Franchise agreements, net			?	2,808	?	?	?	2,842	?
Other intangibles, net			?	418	?	?	?	439	?
Other non-current assets			?	225	?	?	?	212	?
Total assets			$	7,822	?	?	$	7,810	?
?			?	?	?	?	?	?	?
LIABILITIES AND EQUITY (DEFICIT)			?	?	?	?	?	?	?
Current liabilities:			?	?	?	?	?	?	?
?	Accounts payable		$	214	?	?	$	184	?
?	Securitization obligations		?	267	?	?	?	327	?
?	Due to former parent		?	76	?	?	?	80	?
?	Revolving credit facilities and current portion of long-term debt		?	214	?	?	?	325	?
?	Accrued expenses and other current liabilities		?	583	?	?	?	520	?
?	?	Total current liabilities	?	1,354	?	?	?	1,436	?
Long-term debt			?	7,121	?	?	?	6,825	?
Deferred income taxes			?	895	?	?	?	890	?
Other non-current liabilities			?	173	?	?	?	167	?
Total liabilities			?	9,543	?	?	?	9,318	?
Commitments and contingencies			?	?	?	?	?	?	?
Equity (deficit):			?	?	?	?	?	?	?
?	Realogy common stock: $.01 par value, 100 shares authorized, issued and outstanding at June 30, 2012 and December 31, 2011		?	-	?	?	?	-	?
?	Additional paid-in capital		?	2,035	?	?	?	2,033	?
?	Accumulated deficit		?	(3,728	)	?	?	(3,511	)
?	Accumulated other comprehensive loss		?	(30	)	?	?	(32	)?
?	?	Total Realogy stockholder's deficit	?	(1,723	)	?	?	(1,510	)
?	Noncontrolling interests		?	2	?	?	?	2	?
Total equity (deficit)			?	(1,721	)	?	?	(1,508	)
Total liabilities and equity (deficit)			$	7,822	?	?	$	7,810	?
?			?	?	?	?	?	?	?
?			?	?	?	?	?	?	?
?			?	?	?	?	?	?	?

Table 3

REALOGY CORPORATION

2012 vs. 2011 KEY DRIVERS

Three Months Ended June 30,

Six Months Ended June 30,

2012

2011

% Change

2012

2011

% Change

Real Estate Franchise Services (a)

Closed homesale sides

273,771

251,045

471,229

435,688

Average homesale price

214,547

202,045

205,967

198,513

Average homesale broker commission rate

2.55

Net effective royalty rate

4.64

4.83

(19) bps

4.68

4.85

(17) bps

Royalty per side

263

258

256

255

Company Owned Real Estate Brokerage Services

Closed homesale sides

82,768

73,061

13%

138,041

124,261

11%

Average homesale price

446,732

445,550

429,267

432,618

(1%)

Average homesale broker commission rate

2.49

2.50

2.49

1 bps

Gross commission income per side

11,856

11,931

(1%)

11,497

11,625

(1%)

Relocation Services

Initiations

48,698

46,433

86,168

81,541

Referrals

22,039

20,282

36,305

33,095

10%

Title and Settlement Services

Purchase title and closing units

29,973

26,219

14%

50,538

45,190

12%

Refinance title and closing units

17,766

10,840

64%

39,782

27,666

44%

Average price per closing unit

1,450

1,525

(5%)

1,350

1,457

(7%)

(a)

Includes all franchisees except for our Company Owned Real Estate Brokerage Services segment.

Table 4

REALOGY CORPORATION

2011 KEY DRIVERS

Quarter Ended

March 31,
2011

June 30,
2011

September 30,
2011

December 31,
2011

Year Ended
December 31,
2011

Real Estate Franchise Services (a)

Closed homesale sides

184,643

251,045

252,991

220,931

909,610

Average homesale price

193,710

202,045

200,987

194,673

198,268

Average homesale broker commission rate

2.54

2.55

2.56

2.55

Net effective royalty rate

4.87

4.83

4.88

4.78

4.84

Royalty per side

251

258

261

250

256

Company Owned Real Estate Brokerage Services?

Closed homesale sides

51,200

73,061

71,167

59,094

254,522

Average homesale price

414,164

445,550

433,003

405,382

426,402

Average homesale broker commission rate

2.50

2.49

2.51

2.50

Gross commission income per side

11,188

11,931

11,620

10,924

11,461

Relocation Services

Initiations

35,108

46,433

37,540

34,188

153,269

Referrals

12,813

20,282

22,254

16,820

72,169

Title and Settlement Services

Purchase title and closing units

18,971

26,219

26,128

21,927

93,245

Refinance title and closing units

16,826

10,840

14,234

20,950

62,850

Average price per closing unit

1,386

1,525

1,446

1,292

1,409

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

Table 5a

?								?
REALOGY CORPORATION								?
SELECTED 2012 FINANCIAL DATA								?
(In millions)								?
?								?
?		For the Three Months Ended						?
?		March 31,		?	?	June 30,		?
Revenue (a)		2012		?	?	2012		?
Real Estate Franchise Services		$	129	?	?	$	170	?
Company Owned Real Estate Brokerage Services		617		?	?	994		?
Relocation Services		88		?	?	109		?
Title and Settlement Services		88		?	?	106		?
Corporate and Other		(47		)	?	(70		)
?	Total Company	$	875	?	?	$	1,309	?
?		?		?	?	?		?
EBITDA (b) (c)		?		?	?	?		?
Real Estate Franchise Services		$	61	?	?	$	99	?
Company Owned Real Estate Brokerage Services		(17		)	?	78		?
Relocation Services		4		?	?	30		?
Title and Settlement Services		2		?	?	14		?
Corporate and Other		(20		)	?	(18		)
?	Total Company	$	30	?	?	$	203	?
Less:		?		?	?	?		?
Depreciation and amortization		45		?	?	44		?
Interest expense, net		170		?	?	176		?
Income tax expense		7		?	?	8		?
?	Net loss attributable to Realogy	$	(192	)	?	$	(25	)
?		?	?	?	?	?	?	?

(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 and $70 million for the three months ended March 31, 2012 and June?30, 2012, respectively. Such amounts are eliminated through the Corporate and Other line. Revenues for the Relocation Services segment include $7 million and $11 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 and June?30, 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 and $2 million of restructuring costs for the three months ended June?30, 2012, broken down by business units as follows:
?	?	?

?		For the Three Months Ended
?		March 31,	?	June 30,
?		2012	?	2012
Real Estate Franchise Services		-	?	-
Company Owned Real Estate Brokerage Services		1	?	2
Relocation Services		1	?	-
Title and Settlement Services		1	?	-
Corporate and Other		3	?	-
?	Total Company	6	?	2
?		?	?	?

(c)	?	The increase in employee related costs for the three months ended March 31, 2012 was 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 being recognized for the retention plan. The incremental employee related costs for the three months ended June 30, 2012 was primarily due to $15 million of expense for the 2012 bonus plan which is in addition to $10 million of expense being recognized for the 2011-2012 retention plan whereas in the second quarter of 2011 only $10 million of expense was being recognized for the retention plan. As a result, there is $15 million of incremental employee related costs in the second quarter of 2012 compared to the second quarter of 2011. The retention plan was put in place to retain key employees during a period when there was not an annual bonus plan.
?	?	?

Table 5b

REALOGY CORPORATION

SELECTED 2011 FINANCIAL DATA

(In millions)

For the Three Months Ended

Revenue (a)

March 31,
2011

June 30,
2011

September 30,
2011

December 31,
2011

For the Year Ended
December 31,
2011

Real Estate Franchise Services

118

160

151

128

557

Company Owned Real Estate Brokerage Services

587

884

841

658

2,970

Relocation Services

110

126

100

423

Title and Settlement Services

359

Corporate and Other

(44

)

(65

)

(58

)

(49

)

(216

)

Total Company

831

1,179

1,155

928

4,093

EBITDA (b)

Real Estate Franchise Services

320

Company Owned Real Estate Brokerage Services

(37

)

Relocation Services

115

Title and Settlement Services

Corporate and Other

(48

)

(10

)

(17

)

(77

)

Total Company

(11

)

187

443

Less:

Depreciation and amortization

186

Interest expense, net

179

161

159

167

666

Income tax expense

Net loss attributable to Realogy

(237

)

(22

)

(28

)

(154

)

(441

)

(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 $44 million, $65 million, $58 million and $49 million for the three months ended March 31, June 30, September 30, and December 31, 2011, respectively. Such amounts are eliminated through the Corporate and Other line. Revenues for the Relocation Services segment include $7 million, $11 million, $11 million and $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, June 30, September 30, and December 31, 2011, respectively. Such amounts are recorded as contra-revenues by the Company Owned Real Estate Brokerage Services segment. 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 $216 million for the year ended December 31, 2011. Revenues for the Relocation Services segment include intercompany referral and relocation fees paid by the Company Owned Real Estate Brokerage Services segment of $37 million for the year ended December 31, 2011. There are no other material inter-segment transactions.
?	?	?
(b)	?	Includes $2 million of restructuring costs and $36 million related to loss on the early extinguishment of debt, partially offset by $2 million of former parent legacy benefits for the three months ended March 31, 2011, $3 million of restructuring costs offset by a net benefit of $12 million of former parent legacy items for the three months ended June 30, 2011, $3 million of restructuring costs offset by a net benefit of $3 million of former parent legacy items for the three months ended September 30, 2011 and $3 million of restructuring, $1 million of merger costs and $2 million of former parent legacy costs for the three months ended December 31, 2011. EBITDA for the year ended December 31, 2011 includes $36 million related to loss on the early extinguishment of debt, $11 million of restructuring costs and $1 million of merger costs, partially offset by a net benefit of $15 million of former parent legacy items primarily as a result of tax and other liability adjustments broken down by business units as follows:
?	?	?

For the Three Months Ended

March 31,
2011

June 30,
2011

September 30,
2011

December 31,
2011

For the Year Ended
December 31,
2011

Real Estate Franchise Services

Company Owned Real Estate Brokerage Services

Relocation Services

?Source: http://www.franchising.com/news/20120809_realogy_reports_financial_results_for_second_quart.html

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Friday, August 10, 2012

Realogy Reports Financial Results for Second ... - Franchising.com

Balance Sheet Information and Covenant Compliance as of June 30, 2012

Investor Webcast

About Realogy Corporation

Forward-Looking Statements

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