Realogy Reports Results for Second Quarter 2009

PARSIPPANY, NJ--(Marketwire - August 11, 2009) - Realogy Corporation, a global provider of real estate and relocation services, today reported results for the second quarter of 2009. The Company had second quarter 2009 net revenue of $1.0 billion, a net loss of $15 million and earnings before interest, taxes, depreciation and amortization (EBITDA) of $185 million. Realogy generated $172 million of cash flow from operations in the first half of 2009 -- a year-over-year improvement of $246 million -- and, as of June 30, 2009, had $356 million of readily available cash.

Realogy's EBITDA for the period was positively affected by $36 million of legacy items net of restructuring charges, including $49 million from the prepayment of a receivable from Wright Express.

"While the rate of decline in home sales is slowing and there are emerging positive signals, given the macroeconomic headwinds it is premature to conclude that the housing market has started its rebound," said Realogy Chief Executive Officer Richard A. Smith. "That said, long term we remain bullish on housing and are very well positioned to capitalize on its eventual recovery."

In the second quarter, Realogy's core business drivers continued to reflect a weak overall housing market. On a year-over-year basis, the Realogy Franchise Group (RFG) and NRT, the Company's owned brokerage unit, saw transaction sides decline by 8 percent and 9 percent, respectively. RFG's average home sales price decreased 15 percent for the quarter while NRT's average sales price declined 24 percent. Particularly for NRT, the decrease in average sales price was driven largely by a shift in the mix of business away from higher price-points.

"Our variable and fixed cost savings in the second quarter helped to largely offset year-over-year revenue declines of approximately $370 million," said Chief Financial Officer Anthony E. Hull. "We have worked diligently to create efficiencies and act upon cost-saving opportunities within our businesses, and we will continue to do so."

Covenant Compliance



As of June 30, 2009, the Company's senior secured leverage ratio was 5.1 to 1. The senior secured leverage ratio is determined by taking Realogy's senior secured net debt of $3.4 billion at June 30, 2009 and dividing it by the Company's Adjusted EBITDA of $655 million for the 12 months ended June 30, 2009. (Please see Table 4a for a reconciliation of net loss to EBITDA, Table 5 for a reconciliation of net loss to Adjusted EBITDA and Table 6 for the definition of non-GAAP financial measures.)

Balance Sheet Information as of June 30, 2009:



As of June 30, 2009, Realogy had a net revolver debt balance of $254 million, which consists of the $610 million revolver drawn less $356 million of readily available cash, the latter of which is included in cash and cash equivalents of $388 million. A complete balance sheet is included as Table 2 of this press release.

Investor Webcast



Realogy will hold a Webcast to review its second quarter 2009 results at 5:00 p.m. (ET) today. The call will be hosted by Richard A. Smith, president and CEO, and Anthony E. Hull, executive vice president, CFO and treasurer. The conference call will be made available live via Webcast on the Investor Information section of the Realogy.com Web site. A replay of the Webcast will be available at www.realogy.com from August 11 through August 25.

About Realogy Corporation



Realogy Corporation, a global provider of real estate and relocation 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 systems have approximately 14,400 offices and 270,000 sales associates doing business in 93 countries around the world. Headquartered in Parsippany, N.J., Realogy (www.realogy.com) is owned by affiliates of Apollo Management, L.P., a leading private equity and capital markets investor. To receive future Realogy news releases, you can sign up for an e-mail subscription or secure a link for your RSS reader at www.realogy.com/media.

Forward-Looking Statements



Certain statements in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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 ("Realogy") 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", "plans", "may increase", "may fluctuate" 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 sources of liquidity; our ability to comply with the affirmative and negative covenants contained in our debt agreements; continuing adverse developments in the residential real estate markets; the final resolution or outcomes with respect to Cendant's contingent liabilities, including contingent tax liabilities; continuing adverse developments in general business, economic and political conditions, including reduced availability of credit and the instability of financial markets in the U.S. and abroad, substantial volatility in the equity or bond markets, and changes in short-term or long-term interest rates, or any outbreak or escalation of hostilities on a national, regional or international basis; a continuing drop in consumer confidence and/or the impact of the recession and the related high levels of unemployment in the U.S. and abroad; our failure to complete future acquisitions or to realize anticipated benefits from completed acquisitions; our failure to maintain or acquire franchisees and brands or the inability of franchisees to survive the current real estate downturn; and our inability to access capital and/or securitization markets.

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, 2008 and "Forward-Looking Statements" in our Form 10-Q for the quarter ended June 30, 2009 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, June 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Revenues
Gross commission income $ 746 $ 1,040 $ 1,218 $ 1,788
Service revenue 161 208 295 392
Franchise fees 72 91 122 164
Other 39 50 80 96
---------- ---------- ---------- ----------
Net revenues 1,018 1,389 1,715 2,440
---------- ---------- ---------- ----------

Expenses
Commission and other
agent-related costs 477 685 769 1,171
Operating 313 422 641 851
Marketing 45 60 86 115
General and administrative 53 55 116 118
Former parent legacy costs
(benefit), net (46) (7) (42) (1)
Restructuring costs 10 14 44 23
Merger costs - - - 2
Depreciation and
amortization 48 55 99 111
Interest expense/
(income), net 147 152 291 316
Other (income)/expense,
net (11) - (10) -
---------- ---------- ---------- ----------
Total expenses 1,036 1,436 1,994 2,706
---------- ---------- ---------- ----------

Loss before income taxes,
equity in earnings and
noncontrolling interest (18) (47) (279) (266)
Income tax expense (benefit) 5 (19) 7 (102)
Equity in earnings of
unconsolidated entities (8) (1) (12) (4)
---------- ---------- ---------- ----------
Net loss $ (15) $ (27) $ (274) $ (160)
========== ========== ========== ==========



Table 2

REALOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)

June 30, December 31,
2009 2008
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 388 $ 437
Trade receivables (net of allowance
for doubtful accounts of $72 and $46) 151 140
Relocation receivables 499 765
Relocation properties held for sale 3 22
Deferred income taxes 27 92
Due from former parent 3 3
Other current assets 106 112
--------------- ---------------
Total current assets 1,177 1,571

Property and equipment, net 232 276
Goodwill 2,575 2,572
Trademarks 732 732
Franchise agreements, net 3,009 3,043
Other intangibles, net 467 480
Other non-current assets 233 238
--------------- ---------------
Total assets $ 8,425 $ 8,912
=============== ===============

LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable $ 142 $ 133
Securitization obligations 442 703
Due to former parent 560 554
Revolving credit facility and
current portion of long-term debt 642 547
Accrued expenses and other current
liabilities 492 513
--------------- ---------------
Total current liabilities 2,278 2,450

Long-term debt 6,233 6,213
Deferred income taxes 767 826
Other non-current liabilities 152 163
--------------- ---------------
Total liabilities 9,430 9,652
--------------- ---------------

Commitments and contingencies

Stockholder's deficit:
Common stock - -
Additional paid-in capital 2,016 2,013
Accumulated deficit (2,983) (2,709)
Accumulated other comprehensive loss (39) (46)
--------------- ---------------
Total Realogy stockholder's
deficit (1,006) (742)
--------------- ---------------
Noncontrolling interest 1 2
--------------- ---------------
Total stockholder's deficit (1,005) (740)
--------------- ---------------
Total liabilities and stockholder's
deficit $ 8,425 $ 8,912
=============== ===============




Table 3
REALOGY CORPORATION
KEY DRIVERS

Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ----------------------------
2009 2008 % Change 2009 2008 % Change
-------- -------- ------- -------- --------- -------
Real Estate
Franchise
Services (a)
Closed homesale
sides 259,476 282,333 (8%) 437,708 491,646 (11%)
Average homesale
price $188,489 $221,351 (15%) $186,199 $ 218,351 (15%)
Average homesale
broker commission
rate 2.57% 2.52% 5 bps 2.57% 2.51% 6 bps
Net effective
royalty rate 5.10% 5.10% - bps 5.12% 5.08% 4 bps
Royalty per
side $ 256 $ 294 (13%) $ 255 $ 289 (12%)

Company Owned
Real Estate
Brokerage
Services
Closed homesale
sides 72,362 79,823 (9%) 119,861 133,871 (10%)
Average homesale
price $378,870 $497,203 (24%) $369,743 $ 509,059 (27%)
Average homesale
broker
commission
rate 2.52% 2.48% 4 bps 2.53% 2.47% 6 bps
Gross commission
income per
side $ 10,292 $ 12,981 (21%) $ 10,140 $ 13,322 (24%)

Relocation
Services
Initiations 33,074 42,439 (22%) 60,751 75,194 (19%)
Referrals 17,349 20,943 (17%) 28,068 34,875 (20%)

Title and
Settlement
Services
Purchase title
and closing
units 28,148 32,938 (15%) 46,959 56,947 (18%)
Refinance title
and closing
units 22,693 10,504 116% 42,625 21,775 96%
Average price
per closing
unit $ 1,255 $ 1,535 (18%) $ 1,236 $ 1,485 (17%)

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



Table 4a


REALOGY CORPORATION
SELECTED 2009 QUARTERLY FINANCIAL DATA
(In millions)

For The Three For The Three
Months Ended Months Ended
March 31, 2009 June 30, 2009
--------------- ---------------
Revenue
Real Estate Franchise Services $ 105 $ 143
Company Owned Real Estate
Brokerage Services 491 764
Relocation Services 71 80
Title and Settlement Services 68 88
Corporate and Other (a) (38) (57)
--------------- ---------------
$ 697 $ 1,018
=============== ===============
EBITDA (b)
Real Estate Franchise Services $ 44 $ 85
Company Owned Real Estate
Brokerage Services (84) 24
Relocation Services - 72
Title and Settlement Services (5) 12
Corporate and Other (17) (8)
--------------- ---------------
Total $ (62) $ 185
--------------- ---------------
Depreciation and Amortization 51 48
Interest, Net 144 147
Income Tax Expense/(Benefit) 2 5
--------------- ---------------
Net Loss $ (259) $ (15)
=============== ===============

(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 $38 million and $57 million
for the three months ended March 31, 2009 and June 30, 2009,
respectively. Such amounts are eliminated through the Corporate and
Other line. Revenues for the Relocation Services segment include $6
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, 2009 and June 30, 2009,
respectively. Such amounts are recorded as contra-revenues by the
Company Owned Real Estate Brokerage Services segment. There are no
other material inter-segment transactions.

(b) Includes $34 million and $4 million of restructuring costs and former
parent legacy items, respectively, for the three months ended March
31, 2009, compared to $10 million of restructuring costs offset by a
benefit of $46 million of former parent legacy items (comprised of a
benefit of $55 million recorded at Cartus related to Wright Express
Corporation partially offset by $9 million of expenses recorded at
Corporate) for the three months ended June 30, 2009.

For the three For the three
months ended months ended
March 31, 2009 June 30, 2009
---------------- ---------------
Real Estate Franchise Services $ 1 $ 1
Company Owned Real Estate Brokerage
Services 25 5
Relocation Services 5 (52)
Title and Settlement Services 1 1
Corporate and Other 6 9
---------------- ---------------
Total $ 38 $ (36)
================ ===============

EBITDA by segment before restructuring and other items detailed above for
the three months ended March 31, 2009 was: RFG $45 million, NRT ($59)
million, Cartus $5 million, TRG ($4) million and Corporate ($11) million.
EBITDA by segment before restructuring and other items detailed above for
the corresponding three months ended June 30, 2009 was as follows: RFG $86
million, NRT $29 million, Cartus $20 million, TRG $13 million, and
Corporate $1 million.



Table 4b


REALOGY CORPORATION
SELECTED 2008 QUARTERLY FINANCIAL DATA
(In millions)

For The For The For The For The
Three Three Three Three
Months Months Months Months
Ended Ended Ended Ended
March 31, June 30, September December
2008 2008 30, 2008 31, 2008
--------- --------- --------- ---------
Revenue (a)
Real Estate Franchise
Services $ 152 $ 185 $ 172 $ 133
Company Owned Real Estate
Brokerage Services 767 1,061 1,026 707
Relocation Services 108 124 129 90
Title and Settlement Services 81 94 84 63
Corporate and Other (d) (57) (75) (70) (49)
--------- --------- --------- ---------
$ 1,051 $ 1,389 $ 1,341 $ 944
========= ========= ========= =========
EBITDA (b) (c)
Real Estate Franchise
Services $ 80 $ 109 $ 98 $ (884)
Company Owned Real Estate
Brokerage Services (e) (60) 26 (9) (226)
Relocation Services - 23 39 (319)
Title and Settlement Services (2) 5 9 (315)
Corporate and Other (d) (14) (2) (8) 1
--------- --------- --------- ---------
Total $ 4 $ 161 $ 129 $ (1,743)
--------- --------- --------- ---------
Depreciation and
Amortization 56 55 54 54
Interest, Net 164 152 152 156
Income Tax Benefit (84) (19) (27) (250)
--------- --------- --------- ---------
Net Loss $ (132) $ (27) $ (50) $ (1,703)
========= ========= ========= =========

(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 $57 million, $75 million,
$70 million and $49 million for the three months ended March 31, 2008,
June 30, 2008, September 30, 2008 and December 31, 2008, respectively.
Such amounts are eliminated through the Corporate and Other line.
Revenues for the Relocation Services segment include $7 million, $12
million, $14 million and $9 million of intercompany referral and
relocation fees paid by the Company Owned Real Estate Brokerage
Services segment during the three months ended March 31, 2008, June
30, 2008, September 30, 2008 and December 31, 2008 respectively. Such
amounts are recorded as contra-revenues by the Company Owned Real
Estate Brokerage Services segment. There are no other material
inter-segment transactions.
(b) EBITDA includes Former Parent Legacy Costs (Benefits), Restructuring
Costs, Merger Costs and Impairment Charges as follows ($ In Millions):

For The For The For The For The
Three Three Three Three
Months Months Months Months
Ended Ended Ended Ended
March 31, June 30, September December
2008 2008 30, 2008 31, 2008
---------- --------- ---------- ---------
Real Estate Franchise Services $ - $ - $ 1 $ 954
Company Owned Real Estate
Brokerage Services 9 13 56 193
Relocation Services - - 2 337
Title and Settlement Services - 1 1 309
Corporate and Other 7 (7) 1 (17)
---------- --------- ---------- ---------
Total $ 16 $ 7 $ 61 $ 1,776
========== ========= ========== =========


EBITDA by segment before restructuring and other items detailed above for
the three months ended March 31, 2008 was: RFG $80 million, NRT ($51)
million, Cartus $0, TRG ($2) million and Corporate ($7) million. For the
three months ended June 30, 2008 was: RFG $109 million, NRT $39 million,
Cartus $23 million, TRG $6 million, and Corporate ($9) million. For the
three months ended September 30, 2008 was: RFG $99 million, NRT $47
million, Cartus $41 million, TRG $10 million, and Corporate ($7) million.
For the three months ended December 31, 2008 was: RFG $70 million, NRT
($33) million, Cartus $18 million, TRG ($6) million, and Corporate ($16)
million.

(c) For the year ended December 31, 2008, Realogy's joint venture partner
PHH Home Loans, of which Realogy owns 49.9%, recorded an impairment
charge for which Realogy recorded its portion of the charge in equity
(earnings) losses of unconsolidated entities of $31 million. As a
result of the impairment analysis completed by PHH Home Loans, Realogy
performed an impairment analysis of its investment in the entity and
recognized an incremental impairment loss of $33 million.



Table 5

REALOGY CORPORATION
EBITDA AND ADJUSTED EBITDA

A reconciliation of net loss to EBITDA and Adjusted EBITDA for the twelve
months ended June 30, 2009 is set forth in the following table:


Less Equals Plus Equals
-------- -------- -------- --------
Six Six Six Twelve
Year Months Months Months Months
Ended Ended Ended Ended Ended
December June December June June
31, 30, 31, 30, 30,
2008 2008 2008 2009 2009
-------- -------- -------- -------- --------
Net loss $ (1,912) $ (160) $ (1,752) $ (274) $ (2,026) (a)
Income tax expense
(benefit) (380) (102) (278) 7 (271)
-------- -------- -------- -------- --------
Loss before income
taxes (2,292) (262) (2,030) (267) (2,297)
Interest expense/
(income), net 624 316 308 291 599
Depreciation and
amortization 219 111 108 99 207
-------- -------- -------- -------- --------
EBITDA (1,449) 165 (1,614) 123 (1,491) (b)
Covenant calculation adjustments:
Restructuring costs and former parent legacy cost (benefit)
items, net (c) 18
Impairment of intangible assets, goodwill and investments in
unconsolidated entities (d) 1,789
Non-cash charges for PHH Home Loans impairment 31
Pro forma cost savings for 2009 restructuring initiatives (e) 60
Pro forma cost savings for 2008 restructuring initiatives (f) 24
Pro forma effect of business optimization initiatives (g) 67
Non-cash charges (h) 58
Non-recurring fair value adjustments for purchase
accounting (i) 6
Pro forma effect of NRT acquisitions and RFG acquisitions and
new franchisees (j) 8
Apollo management fees (k) 15
Proceeds from WEX contingent asset (l) 61
Incremental securitization interest costs (m) 4
Expenses incurred in debt modification activities (n) 5
--------
Adjusted EBITDA $ 655
--------
Total senior secured net debt (o) $ 3,373
Senior secured leverage ratio 5.1x


(a) Net loss consists of a loss of: (i) $50 million for the third quarter
of 2008; (ii) $1,703 million for the fourth quarter of 2008; (iii)
$259 million for the first quarter of 2009 and (iv) $15 million for
the second quarter of 2009.
(b) EBITDA consists of: (i) a positive $129 million for the third quarter
of 2008; (ii) a negative $1,743 million for the fourth quarter of
2008; (iii) a negative $62 million for the first quarter of 2009 and
(iv) a positive $185 million for the second quarter of 2009.
(c) Consists of $79 million of restructuring costs offset by a net benefit
of $61 million for former parent legacy items.
(d) Represents the non-cash adjustment for the 2008 impairment of
goodwill, intangible assets and investments in unconsolidated
entities.
(e) Represents actual costs incurred that are not expected to recur in
subsequent periods due to restructuring activities initiated during
the first half of 2009. From this restructuring, we expect to reduce
our operating costs by approximately $84 million on a twelve month
run-rate basis and estimate that $24 million of such savings were
realized in the first half of 2009. The adjustment shown represents
the impact the savings would have had on the period from July 1, 2008
through the time they were put in place had those actions been
effected on July 1, 2008.
(f) Represents actual costs incurred that are not expected to recur in
subsequent periods due to restructuring activities initiated during
the second half of 2008. From this restructuring, we expect to reduce
our operating costs by approximately $69 million on a twelve month
run-rate basis and estimate that $45 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
July 1, 2008 through the time they were put in place had those actions
been effected on July 1, 2008.
(g) Represents the twelve month pro forma effect of business optimization
initiatives that have been completed to reduce costs including $20
million for initiatives to improve the Company Owned Real Estate
Brokerage profit margin, $12 million for initiatives to improve
Relocation Services and Title and Settlement Services fees, $10
million due to the add back of the retention accrual and $25 million
related to other initiatives.
(h) Represents the elimination of non-cash expenses, including $36 million
for the change in the allowance for doubtful accounts and the reserves
for development advance notes and promissory notes from July 1, 2008
through June 30, 2009, $7 million of stock based compensation expense
and $15 million related to the unrealized net losses on foreign
currency transactions and foreign currency forward contracts.
(i) Reflects the adjustment for the negative impact of fair value
adjustments for purchase accounting at the operating business segments
primarily related to deferred rent for the twelve months ended June
30, 2009.
(j) Represents the estimated impact of acquisitions made by NRT and RFG
acquisitions and new franchisees as if they had been acquired or
signed on July 1, 2008. 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, 2008.
(k) Represents the elimination of annual management fees payable to Apollo
for the twelve months ended June 30, 2009.
(l) Wright Express Corporation ("WEX") was divested by Cendant in February
2005 through an initial public offering ("IPO"). As a result of such
IPO, the tax basis of WEX's tangible and intangible assets increased
to their fair market value which may reduce federal income tax that
WEX might otherwise be obligated to pay in future periods. Under
Article III of the Tax Receivable Agreement dated February 22, 2005
among WEX, Cendant and Cartus (the "TRA"),WEX was required to pay
Cendant 85% of any tax savings related to the increase in fair value
utilized for a period of time that we expect will be beyond the
maturity of the notes. Cendant is required to pay 62.5% of these tax
savings payments received from WEX to us. The Company received $12
million of recurring tax receivable payments from Wright Express
Corporation ("WEX") during the last twelve months. On June 26, 2009,
we entered into a Tax Receivable Prepayment Agreement with WEX,
pursuant to which WEX simultaneously paid us the sum of $51 million,
less expenses of approximately $2 million, as prepayment in full of
its remaining contingent obligations to Realogy under Article III of
the TRA.
(m) Incremental borrowing costs incurred as a result of the securitization
facilities refinancing for the twelve months ended June 30, 2009.
(n) Represents the expenses incurred in connection with the Company's
unsuccessful debt modification activities in the second half of 2008.
(o) Represents total borrowings under the senior secured credit facility,
including the revolving credit facility, of $3,717 million plus $12
million of capital lease obligations less $356 million of readily
available cash as of June 30, 2009.

Table 6

Definitions

EBITDA is defined by the Company as net income (loss) before depreciation
and amortization, interest (income) expense, net (other than relocation
services interest for securitization assets and securitization obligations)
and income taxes. EBITDA before restructuring and other items is calculated
by adjusting EBITDA by restructuring, legacy, and other items as described
in Table 4 above. Adjusted EBITDA is calculated by adjusting EBITDA by the
items described in Table 5 above. Adjusted EBITDA 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 and substantially corresponds to the definition of "EBITDA" used in
the indentures governing the Unsecured Notes to test the permissibility of
certain types of transactions, including debt incurrence. We present EBITDA
and EBITDA before restructuring and other items because we believe EBITDA
and EBITDA adjusted for restructuring and other items are useful
supplemental measures in evaluating the performance of our operating
businesses and provide greater transparency into our results of operations.
The EBITDA and EBITDA before restructuring and other items measures are
used by our management, including our chief operating decision maker, to
perform such evaluation, and Adjusted EBITDA is used in measuring
compliance with debt covenants relating to certain of our borrowing
arrangements. EBITDA, EBITDA before restructuring and other items 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 EBITDA before restructuring and other items have limitations as
an analytical tool, and you should not consider EBITDA either in isolation
or as a substitute for analyzing our results as reported under GAAP. Some
of these limitations are:

-- EBITDA does not reflect changes in, or cash requirement for, our
working capital needs;
-- EBITDA does 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;
-- EBITDA does not reflect our income tax expense or the cash requirements
to pay our taxes;
-- EBITDA does 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 have to be replaced in the
future, and these EBITDA measures do not reflect any cash requirements
for such replacements; and other companies in our industry may
calculate these EBITDA measures differently so they may not be
comparable.

In addition to the limitations described above with respect to EBITDA and
EBITDA before restructuring and other items, Adjusted EBITDA includes pro
forma cost savings and the pro forma full year effect of NRT acquisitions
and RFG acquisitions/new franchisees. These adjustments may not reflect the
actual cost savings or pro forma effect recognized in future periods.

###

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