Realogy Reports Financial Results For Second Quarter 2014 Residential Real Estate Leader Reports Quarterly Revenue of $1.5 Billion

Homesale Transaction Volume Increased 3% Year-over-Year

MADISON, N.J., Aug. 4, 2014 /PRNewswire/ -- 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 quarter ended June 30, 2014, including the following highlights:

  • Net revenue for second quarter 2014 was $1.5 billion, a 1% decrease compared to second quarter 2013.
  • Adjusted EBITDA1 for second quarter 2014 was $269 million, down 3% from $278 million in the second quarter of 2013, primarily due to an approximately $11 million reduction in earnings related to the decrease in refinancing activity at our mortgage origination joint venture and within the Company's title and settlement services segment.
  • Net income for second quarter 2014 was $68 million and basic earnings per share for the quarter was $0.47, which includes $73 million of interest expense, $46 million of depreciation and amortization expense and $17 million in pre-tax charges related to the Company's repurchase of $354 million of its 7.875% First and a Half Lien Notes during the quarter.
  • Basic earnings per share was $0.59 excluding the $17 million of debt extinguishment charges and $14 million of mark-to-market interest rate swap losses.
  • Realogy generated $198 million of free cash flow during the quarter, or $1.36 per share.

"With our recently announced agreement to acquire ZipRealty, we seized upon an exceptional opportunity to further drive growth in our brokerage operations and undertake a significant technology upgrade across our franchise systems," said Richard A. Smith, Realogy's chairman, chief executive officer and president. "For the second quarter, we are pleased to report that we outperformed the high end of our previously announced guidance range by achieving homesale transaction volume gains of 3% for the quarter on a combined basis between our company-owned brokerages and franchise business segments. While price was the principal reason for the overall volume increase, better-than-expected sides comparisons also drove the better-than-expected performance."

"Homesale transaction volume increased at the Realogy Franchise Group (RFG) and our company-owned brokerage operations (NRT) in the second quarter, though it was not sufficient to offset approximately $11 million of lower EBITDA that resulted from reduced mortgage refinancing activity relative to the same period in 2013," said Anthony Hull, Realogy's executive vice president and chief financial officer.

For the second quarter of 2014, combined full-year homesale transaction volume (transaction sides times average sale price) increased by 3%, as compared to second quarter of 2013. RFG and NRT reported that average homesale price improved 7% year-over-year while homesale transactions declined 3% and 5%, respectively.

At Cartus, the Company's relocation services segment, initiations for second quarter 2014 remained flat and referrals increased 4% compared to second quarter 2013. At TRG, the Company's title and settlement services segment, purchase unit volume decreased 3% year over year, which was consistent with NRT homesale transaction declines.  Average fee per transaction improved 35% due to a shift in the mix of business to home purchase transactions from refinancing transactions. TRG's refinance title and closing units decreased 72% in second quarter 2014 compared to 2013, which was expected given lower refinancing trends across the industry.

"Looking ahead, third quarter comparisons are difficult given exceptional homesale transaction volume growth of 29% in the third quarter of 2013 for RFG and NRT combined," added Hull.  "For the third quarter of 2014, based on our closed sales activity in July, along with contracts opened in June and July, we expect homesale sides to be down -4% to -6% year-over-year, and average sale price to increase +4% to +6% on a combined basis. As a result, we expect to see homesale transaction volume in the range of -2% to +2% year-over-year this quarter for RFG and NRT combined."

The Company ended the quarter with a cash and cash equivalents balance of $209 million and no outstanding borrowings under its revolving credit facility under its senior secured credit agreement. Total long-term corporate debt, including the short term portion, net of cash and cash equivalents totaled $3.7 billion at June 30, 2014.

Reported interest expense for the quarter included the impact of mark-to-market adjustments for our interest rate swaps which were losses of $14 million in 2014 compared to gains of $8 million in the same period of 2013. For the six months ended June 30, 2014, corporate cash interest was $52 million lower than the same period in the prior year as a result of refinancing activity. The Company expects full-year corporate cash interest to be approximately $230 million.

A condensed consolidated balance sheet is included as Table 2 of this press release.

1   See Table 10 for definitions of these non-GAAP financial measures and Tables 6 and 7 for reconciliations of these non-GAAP financial measures to their most comparable GAAP terms.

Investor Conference Call

Today, August 4, at 8:30 a.m. (EDT), Realogy will hold a conference call via webcast to review its second quarter 2014  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) 895-3527 (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 August 4 through August 18, 2014.

About Realogy Holdings Corp.

Realogy Holdings Corp. (NYSE: RLGY) is a global leader in residential 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 LLC, Cartus and Title Resource Group. Collectively, Realogy's franchise system members operate approximately 13,500 offices with 251,000 independent sales associates doing business in 104 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 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 and changes in state or federal employment laws or regulations that would require classification of independent contractor sales associates to employee status, and wage and hour regulations; the failure to satisfy the conditions to the completion of the ZipRealty, Inc. transaction in a timely manner or at all, or if completed, the Company's inability  to realize the benefits or synergies from this acquisition; the Company's inability to sustain improvements in its operating efficiency; and the final resolution or outcomes with respect to Cendant's (our former parent) 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 Quarterly Reports filed on Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014 and our Annual Report on Form 10-K for the year ended December 31, 2013, and 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



 

Table 1


REALOGY HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)



Three Months Ended
June 30,



Six Months Ended
June 30,



2014



2013



2014



2013


Revenues












Gross commission income

$

1,170



$

1,169



$

1,908



$

1,845


Service revenue

211



233



376



416


Franchise fees

92



91



155



148


Other

39



40



80



81


Net revenues

1,512



1,533



2,519



2,490


Expenses












Commission and other agent-related costs

804



800



1,304



1,254


Operating

340



353



676



680


Marketing

52



49



103



99


General and administrative

65



93



135



160


Former parent legacy costs (benefit), net



(2)



1



(1)


Restructuring costs



4





4


Depreciation and amortization

46



44



92



86


Interest expense, net

73



67



143



156


Loss on the early extinguishment of debt

17



43



27



46


Other (income)/expense, net

(1)





(1)




Total expenses

1,396



1,451



2,480



2,484


Income before income taxes, equity in earnings and noncontrolling interests

116



82



39



6


Income tax expense

51



9



17



16


Equity in earnings of unconsolidated entities

(4)



(13)



(1)



(22)


Net income

69



86



23



12


Less: Net income attributable to noncontrolling interests

(1)



(2)



(1)



(3)


Net income attributable to Realogy Holdings

$

68



$

84



$

22



$

9














Earnings per share attributable to Realogy Holdings:










Basic earnings per share:

$

0.47



$

0.58



$

0.15



$

0.06


Diluted earnings per share:

$

0.46



$

0.57



$

0.15



$

0.06


Weighted average common and common equivalent shares outstanding:







Basic:

145.9



145.4



145.9



145.2


Diluted:

146.8



146.6



147.0



146.4


 


Table 2


REALOGY HOLDINGS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)



June 30,
 2014



December 31,
 2013




ASSETS






Current assets:






Cash and cash equivalents

$

209



$

236


Trade receivables (net of allowance for doubtful accounts of $31 and $37)

165



121


Relocation receivables

349



270


Deferred income taxes

200



186


Other current assets

110



104


Total current assets

1,033



917


Property and equipment, net

203



205


Goodwill

3,360



3,335


Trademarks

736



732


Franchise agreements, net

1,529



1,562


Other intangibles, net

352



365


Other non-current assets

230



210


Total assets

$

7,443



$

7,326








LIABILITIES AND EQUITY






Current liabilities:






Accounts payable

$

157



$

123


Securitization obligations

252



252


Due to former parent

64



63


Revolving credit facilities and current portion of long-term debt

19



19


Accrued expenses and other current liabilities

397



454


Total current liabilities

889



911


Long-term debt

3,932



3,886


Deferred income taxes

361



337


Other non-current liabilities

204



179


Total liabilities

5,386



5,313


Commitments and contingencies






Equity:






Realogy Holdings preferred stock: $.01 par value; 50,000,000 shares authorized, none issued and outstanding at June 30, 2014 and December 31, 2013.




Realogy Holdings common stock: $.01 par value; 400,000,000 shares authorized, 146,160,078 shares outstanding at June 30, 2014 and 146,125,337 shares outstanding at December 31, 2013.

1



1


Additional paid-in capital

5,655



5,635


Accumulated deficit

(3,585)



(3,607)


Accumulated other comprehensive loss

(17)



(19)


Total stockholders' equity

2,054



2,010


Noncontrolling interests

3



3


Total equity

2,057



2,013


Total liabilities and equity

$

7,443



$

7,326


 

Table 3


REALOGY HOLDINGS CORP.

2014 vs. 2013 KEY DRIVERS



For Three Months Ended June 30,


For Six Months Ended June 30,


2014


2013


% Change


2014


2013


% Change

Real Estate Franchise Services (a)


















Closed homesale sides

293,450



302,420



(3%)



497,422



512,200



(3%)


Average homesale price

$

252,606



$

236,590



7%



$

246,088



$

226,076



9%


Average homesale broker commission rate

2.53

%


2.55

%


(2)

bps


2.53

%


2.55

%


(2)

bps

Net effective royalty rate

4.46

%


4.51

%


(5)

bps


4.47

%


4.53

%


(6)

bps

Royalty per side

$

297



$

281



6%



$

291



$

272



7%


Company Owned Real Estate Brokerage Services

















Closed homesale sides

87,803



92,878



(5%)



144,489



150,938



(4%)


Average homesale price

$

511,969



$

478,280



7%



$

502,979



$

458,867



10%


Average homesale broker commission rate

2.47

%


2.49

%


(2)

bps


2.48

%


2.50

%


(2)

bps

Gross commission income per side

$

13,335



$

12,598



6%



$

13,220



$

12,226



8%


Relocation Services


















Initiations

51,306



51,311



%


89,205



87,262



2%


Referrals

27,346



26,258



4%



43,842



41,935



5%


Title and Settlement Services


















Purchase title and closing units

33,104



34,157



(3%)



53,879



55,663



(3%)


Refinance title and closing units

6,410



23,123



(72%)



13,609



47,623



(71%)


Average fee per closing unit

$

2,013



$

1,490



35%



$

1,889



$

1,415



33%
























 

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

 

Table 4


REALOGY HOLDINGS CORP.

2013 KEY DRIVERS




Quarter Ended


Year Ended



March 31,
 2013


June 30,
 2013


September 30,
 2013


December 31,
 2013


December 31,
 2013

Real Estate Franchise Services (a)
















Closed homesale sides


209,779



302,420



315,432



255,793



1,083,424


Average homesale price


$

210,919



$

236,590



$

240,408



$

237,776



$

233,011


Average homesale broker commission rate


2.56

%


2.55

%


2.53

%


2.53

%


2.54

%

Net effective royalty rate


4.57

%


4.51

%


4.46

%


4.44

%


4.49

%

Royalty per side


$

258



$

281



$

281



$

278



$

276


Company Owned Real Estate Brokerage Services

Closed homesale sides


58,060



92,878



93,083



72,619



316,640


Average homesale price


$

427,812



$

478,280



$

475,823



$

490,666



$

471,144


Average homesale broker commission rate


2.52

%


2.49

%


2.49

%


2.49

%


2.50

%

Gross commission income per side


$

11,630



$

12,598



$

12,527



$

12,856



$

12,459


Relocation Services
















Initiations


35,951



51,311



42,788



35,655



165,705


Referrals


15,677



26,258



28,406



21,032



91,373


Title and Settlement Services
















Purchase title and closing units


21,506



34,157



33,540



26,369



115,572


Refinance title and closing units


24,500



23,123



17,625



10,948



76,196


Average price per closing unit


$

1,322



$

1,490



$

1,579



$

1,649



$

1,504























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

 

Table 5a

REALOGY HOLDINGS CORP.

SELECTED 2014 FINANCIAL DATA

(In millions)



For the Three Months Ended


March 31,
 2014


June 30,
 2014

Net revenues (a)




Real Estate Franchise Services

$

144


$

196

Company Owned Real Estate Brokerage Services

750


1,182

Relocation Services

86


107

Title and Settlement Services

81


108

Corporate and Other

(54)


(81)

Total Company

$

1,007


$

1,512





EBITDA (b)




Real Estate Franchise Services

$

79


$

137

Company Owned Real Estate Brokerage Services

(20)


91

Relocation Services

7


26

Title and Settlement Services

(5)


17

Corporate and Other

(25)


(33)

Total Company

$

36


$

238

Less:




Depreciation and amortization

46


46

Interest expense, net

70


73

Income tax expense (benefit)

(34)


51

Net income (loss) attributable to Realogy Holdings

$

(46)


$

68

 

(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 $54 million and $81 million for the three months ended March 31, 2014 and June 30, 2014, respectively.  Such amounts are eliminated through the Corporate and Other line.


Revenues for the Relocation Services segment include $7 million and $12 million of intercompany referral commissions paid by the Company Owned Real Estate Brokerage Services segment during the three months ended March 31, 2014 and June 30, 2014, respectively.  Such amounts are recorded as contra-revenues by the Company Owned Real Estate Brokerage Services segment.

(b)   

The three months ended March 31, 2014 includes $10 million related to the loss on early extinguishment of debt, $1 million related to the Phantom Value Plan and $1 million of former parent legacy costs.  The three months ended June 30, 2014 includes $17 million related to the loss on early extinguishment of debt, $1 million related to the Phantom Value Plan.

 

Table 5b

REALOGY HOLDINGS CORP.

SELECTED 2013 FINANCIAL DATA

(In millions)







For the Three Months Ended



For the Year Ended



March 31,



June 30,



September 30,



December 31,



December 31,



2013



2013



2013



2013



2013


Net revenues (a)















Real Estate Franchise Services

$

135



$

193



$

193



$

169



$

690


Company Owned Real Estate Brokerage Services

686



1,182



1,178



944



3,990


Relocation Services

87



108



127



97



419


Title and Settlement Services

100



130



134



103



467


Corporate and Other

(51)



(80)



(79)



(67)



(277)


Total Company

$

957



$

1,533



$

1,553



$

1,246



$

5,289

















EBITDA (b)















Real Estate Franchise Services

$

72



$

133



$

133



$

110



$

448


Company Owned Real Estate Brokerage Services

(8)



102



91



21



206


Relocation Services

10



27



45



22



104


Title and Settlement Services

4



20



17



9



50


Corporate and Other

(15)



(78)



(50)



(12)



(155)


Total Company

$

63



$

204



$

236



$

150



$

653


Less:















Depreciation and amortization

42



44



44



46



176


Interest expense, net

89



67



74



51



281


Income tax expense (benefit)

7



9



9



(267)



(242)


Net income (loss) attributable to Realogy

$

(75)



$

84



$

109



$

320



$

438


 


(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, $80 million, $79 million and $67 million for the three months ended March 31, 2013, June 30, 2013, September 30, 2013 and December 31, 2013, respectively.  Such amounts are eliminated through the Corporate and Other line.


Revenues for the Relocation Services segment include $8 million, $12 million, $14 million and $9 million of intercompany referral commissions paid by the Company Owned Real Estate Brokerage Services segment during the three months ended March 31, 2013, June 30, 2013, September 30, 2013 and December 31, 2013, respectively. Such amounts are recorded as contra-revenues by the Company Owned Real Estate Brokerage Services segment.

(b) 

The three months ended March 31, 2013 includes $3 million related to the loss on early extinguishment of debt and $1 million of former parent legacy costs.


The three months ended June 30, 2013 includes $43 million related to the loss on early extinguishment of debt, $26 million related to the Phantom Value Plan and $4 million restructuring costs, partially offset by a net benefit of $2 million of former parent legacy items.


The three months ended September 30, 2013 includes $22 million related to the loss on early extinguishment of debt, $19 million related to the Phantom Value Plan and a net cost of $1 million of former parent legacy items.


The three months ended December 31, 2013 includes $2 million related to the Phantom Value Plan and a net benefit of $4 million of former parent legacy items.

 

Table 6

REALOGY HOLDINGS CORP.

2014 EBITDA AND ADJUSTED EBITDA

(In millions)


A reconciliation of net income attributable to Realogy Group to EBITDA and Adjusted EBITDA for the twelve months ended June 30, 2014 is set forth in the following table:






Less



Equals



Plus



Equals



Year Ended



Six Months
Ended



Six Months
Ended



Six Months
Ended



Twelve Months
Ended



December 31,
 2013


June 30,
 2013


December 31,
 2013


June 30,
 2014


June 30,
 2014


Net income attributable to Realogy Group (a)

$

438



$

9



$

429



$

22



$

451


Income tax (benefit) expense

(242)



16



(258)



17



(241)


Income before income taxes

196



25



171



39



210


Interest expense, net

281



156



125



143



268


Depreciation and amortization

176



86



90



92



182


EBITDA (b)

653



267



386



274



660


Covenant calculation adjustments:




Former parent legacy benefit, net


(2)


Loss on the early extinguishment of debt


49


Pro forma effect of business optimization initiatives (c)


9


Non-cash charges (d)


34


Pro forma effect of acquisitions and new franchisees (e)


12


Incremental securitization interest costs (f)


4


Adjusted EBITDA


$

766


Total senior secured net debt (g)


$

2,355


Senior secured leverage ratio


3.07

x





















 


(a)     

Net income (loss) attributable to Realogy consists of:  (i) income of $109 million for the third quarter of 2013, (ii) income of $320 million for the fourth quarter of 2013. (iii) a loss of $46 million for the first quarter of 2014 and (iv) income of $68 million for the second quarter of 2014.

(b)    

EBITDA consists of:  (i) $236 million for the third quarter of 2013, (ii) $150 million for the fourth quarter of 2013, (iii) $36 million for the first quarter of 2014 and (iv) $238 million for the second quarter of 2014.

(c)    

Represents the twelve-month pro forma effect of business optimization initiatives including $5 million related to business cost cutting initiatives, $1 million related to our Relocation Services integration costs, $2 million related to vendor renegotiations and $1 million of other items.

(d)    

Represents the elimination of non-cash expenses, including $50 million of stock-based compensation expense and $3 million of other items less $19 million for the change in the allowance for doubtful accounts and notes reserves from July 1, 2013 through June 30, 2014.

(e)    

Represents the estimated impact of acquisitions and new franchisees as if they had been acquired or signed on July 1, 2013.  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 July 1, 2013.

(f)    

Incremental borrowing costs incurred as a result of the securitization facilities refinancing for the twelve months ended June 30, 2014.

(g)    

Represents total borrowings under the senior secured credit facility and borrowings secured by a first priority lien on our assets of $2,489 million plus $18 million of capital lease obligations less $152 million of readily available cash as of June 30, 2014.  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, our securitization obligations or unsecured indebtedness, including the 3.375% Senior Notes and the 4.50% Senior Notes.

 

Table 7

REALOGY HOLDINGS CORP.

EBITDA AND ADJUSTED EBITDA

THREE MONTHS ENDED JUNE 30

(In millions)


Set forth in the table below is a reconciliation of net income attributable to Realogy Group to Adjusted EBITDA for the three-month periods ended June 30, 2014 and 2013:



Three Months Ended


June 30,
 2014



June 30,
 2013

Net income attributable to Realogy

$

68



$

84

Income tax expense

51



9

Income before income taxes

119



93

Interest expense, net

73



67

Depreciation and amortization

46



44

EBITDA

238



204

Restructuring costs and former parent legacy costs, net



2

Loss on the early extinguishment of debt

17



43

Non-cash charges

10



20

Pro forma cost savings for restructuring initiatives



2

Pro forma effect of business optimization initiatives

1



3

Non-recurring fair value adjustments for purchase accounting



1

Pro forma effect of acquisitions and new franchisees

2



1

Fees for secondary offering



1

Incremental securitization interest costs

1



1

Adjusted EBITDA

$

269



$

278

 

Table 8

REALOGY HOLDINGS CORP.

FREE CASH FLOW


A reconciliation of net income attributable to Realogy Holdings to free cash flow is set forth in the following table:



For the three months ended


June 30, 2014


($ in millions)


($ per share)

Net income attributable to Realogy Holdings / Basic earnings per share

$

68



$

0.47

Income tax expense, net of payments

48



0.33

Interest expense, net

73



0.50

Cash interest payments

(38)



(0.26)

Depreciation and amortization

46



0.31

Capital expenditures

(18)



(0.12)

Loss on the early extinguishment of debt

17



0.12

Working capital adjustments

15



0.10

Relocation assets, net of securitization

(13)



(0.09)

Free Cash Flow / Cash Earnings Per Share

$

198



$

1.36

Basic weighted average number of common shares outstanding (in millions)




145.9

 

Table 9

REALOGY HOLDINGS CORP.

EARNINGS PER SHARE EXCLUDING LOSS ON THE EARLY

EXTINGUISHMENT OF DEBT AND MARK-TO-MARKET INTEREST RATE SWAP LOSSES


A reconciliation of net income attributable to Realogy Holdings to net income before loss on the early extinguishment of debt and mark-to-market interest rate swap losses is set forth in the following table:



For the three months ended


June 30, 2014


($ in millions)



($ per share)

Net income attributable to Realogy Holdings / Basic earnings per share

$

68



$

0.47

Loss on the early extinguishment of debt

17



0.12

Mark-to-market interest rate swap losses

14



0.09

Tax impact

(13)



(0.09)

Net income before loss on the early extinguishment of debt and mark-to-market interest rate swap losses

$

86



$

0.59

Basic weighted average number of common shares outstanding (in millions)




145.9

 

Table 10                                                                                                                                                                                                           

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 securitization assets 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 restructuring costs, former parent legacy cost (benefit) items, net, loss on the early extinguishment of debt, non-cash charges, non-recurring fair value adjustments for purchase accounting, fees for the secondary equity offerings and incremental securitization interest costs, as well as pro forma cost savings for restructuring initiatives, 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.  Adjusted EBITDA calculated for a three-month period adjusts for the same items as for a twelve-month period, except that the pro forma effect of cost savings, business optimizations and acquisitions and new franchisees are calculated as of the beginning of the three-month period instead 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 required 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 period 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 income (loss) attributable to Realogy before income tax (benefit) expense, net of payments, interest expense, net, depreciation and amortization, capital expenditures, restructuring costs and former parent legacy costs (benefits), net of payments, loss on the early extinguishment of debt, working capital adjustments and relocation assets, 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.

SOURCE Realogy Holdings Corp.



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