Realogy Reports Results for Second Quarter 2010

Real Estate Leader Posts 23% Higher Net Revenue of $1.3 Billion

August 11, 2010 // Franchising.com // PARSIPPANY, NJ, -- Realogy Corporation, a global leader in real estate and relocation services, today reported results for the second quarter ended June 30, 2010. Realogy's net revenue for the second quarter of $1.3 billion increased 23% compared to the same period in 2009. For the latest quarter, Realogy recorded net income attributable to the Company of $222 million. EBITDA before restructuring and other items for the quarter was $234 million, an improvement of $85 million year-over-year due to revenue gains, cost reductions and productivity increases. EBITDA for the quarter was $544 million, which included the benefit of $314 million related to the reduction in former parent legacy liabilities.

Realogy's core business drivers showed improvement during the second quarter. The number of home sale transactions increased 11% year-over-year at the Realogy Franchise Group (RFG) and 16% at NRT, the company-owned brokerage unit. The average home sale price increased in the second quarter by 5% at RFG and 12% at NRT compared to the second quarter of 2009. Cartus experienced a 40% increase in relocation initiations primarily due to increased volume from corporate clients including incremental business from the Primacy Relocation operations it acquired earlier this year. Title Resource Group had a decrease in its refinance title and closing units, which was partially offset by increases in purchase title and closing units and average price per closing unit.

"Clearly, Realogy had a strong second quarter, and we are pleased with our operating and financial results for the period," said Richard A. Smith, Realogy's chief executive officer. "Looking forward, however, it is shaping up to be a difficult third quarter because of the expiration of the Homebuyer Tax Credit and an uncertain near-term outlook for the economy. The sales volume of open contracts for both our company-owned and franchise segments -- which are the leading indicator for closed and reported sales in the third quarter -- dropped sharply, down an average of 17% in June and July on a year-over-year basis. High affordability and near-record low mortgage rates alone cannot offset the impact of high unemployment and declining consumer confidence."

As a result of lower than forecasted industry sales levels in the second quarter and weakening third quarter prospects, the full-year industry outlook for 2010 is now relatively flat to 2009. In July and August, respectively, both Fannie Mae and the National Association of Realtors downwardly revised their forecasts for the full year. Currently, Fannie Mae and NAR are forecasting 2010 home sales to be flat to 2009 at 5.1 million units.

"While we are faced with a challenging housing market in the second half of 2010, Realogy will continue focusing on what we can control," added Smith. "This strategy includes executing on strategic growth opportunities while maintaining our focus on costs."

Balance Sheet Information and Covenant Compliance as of June 30, 2010:

The Company ended the second quarter with strong liquidity. Realogy had $239 million of readily available cash and no outstanding balance on its revolving credit facility as of June 30, 2010.

"The strong earnings and cash balances we achieved in the first half of 2010 should provide cushion to counter the weakening industry outlook for the second half of the year," said Anthony Hull, Realogy's chief financial officer.

As of June 30, 2010, the Company's senior secured leverage ratio was 4.34 to 1, which is below the 5.0 to 1 maximum ratio required to be in compliance with its Credit Agreement. The senior secured leverage ratio is determined by taking Realogy's senior secured net debt of $2.85 billion at June 30, 2010 and dividing it by the Company's Adjusted EBITDA of $656 million for the 12 months ended June 30, 2010. The Adjusted EBITDA figure is unaffected by the legacy tax settlement discussed below. (Please see Tables 6 and 7 for a reconciliation of EBITDA before restructuring and other items, Adjusted EBITDA and net loss attributable to Realogy to EBITDA, and Table 8 for the definition of non-GAAP financial measures.)

Also, in early July we resolved a tax audit for the period 2003 to 2006 that we inherited from our former parent, Cendant Corporation. As a result of this settlement as well as other adjustments, we reduced our contingent liability balance from $505 million at year-end 2009 to $197 million at June 30, 2010. This amount includes the actual payments related to the settlement totaling $58 million. The tax audit settlement also resulted in approximately $110 million of non-cash tax expense in the second quarter.

As a result of the resolution of this matter, our related outstanding letter of credit of $446 million is expected to be reduced to approximately $150 million by the end of the current quarter.

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 2010 results at 4:00 p.m. (EDT) today. The call will be hosted by CEO Richard A. Smith and CFO Anthony Hull. The conference call will be made available live via Webcast on the Investor Information section of the Realogy website. A replay of the Webcast will be available at www.realogy.com from August 10 through August 24.

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(R) Real Estate, CENTURY 21(R), Coldwell Banker(R), Coldwell Banker Commercial(R), The Corcoran Group(R), ERA(R), Sotheby's International Realty(R), NRT LLC, Cartus and Title Resource Group. Collectively, Realogy's franchise systems have approximately 14,400 offices and 264,000 sales associates doing business in 99 countries and territories 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 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; 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 the ongoing or future recessions and related high levels of unemployment in the U.S. and abroad, the termination of the federal homebuyer tax credit program, continuing high levels of foreclosures, our geographic and high-end market concentration in particular to our company-owned brokerage operations and 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 or adverse effects of natural disasters or environmental catastrophes; our failure to enter into or renew franchise agreements, maintain our brands or the inability of franchisees to survive the current real estate cycle; our inability to realize benefits from future acquisitions; our inability to sustain improvements in our operating efficiency; 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, 2009, under the heading "Forward-Looking Statements" in our Form 10-Q for the quarter ended June 30, 2010, 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,
                                    ------------------  ------------------
                                       2010     2009     2010     2009
                                    --------  --------  --------  --------
Revenues
  Gross commission income           $    941  $    746  $  1,529  $  1,218
  Service revenue                        185       161       321       295
  Franchise fees                          81        72       136       122
  Other                                   46        39        86        80
                                    --------  --------  --------  --------
Net revenues                           1,253     1,018     2,072     1,715
                                    --------  --------  --------  --------
Expenses
  Commission and other agent-related
   costs                                 612       477       989       769
  Operating                              310       313       610       641
  Marketing                               50        45        96        86
  General and administrative              57        53       135       116
  Former parent legacy costs (benefit),
   net                                  (314)      (46)     (309)      (42)
  Restructuring costs                      4        10        10        44
  Depreciation and amortization           49        48        99        99
  Interest expense/(income), net         155       147       307       291
  Other (income)/expense, net             (3)      (11)      (6)       (10)
                                    --------  --------  --------  --------
Total expenses                           920     1,036     1,931     1,994
                                    --------  --------  --------  --------
Income (loss) before income taxes,
 equity in earnings and
 noncontrolling interests                333       (18)      141      (279)
Income tax expense                       118         5       124         7
Equity in earnings of
unconsolidated entities                   (8)       (8)       (9)      (12)
                                    --------  --------  --------  --------
Net income (loss)                        223       (15)       26      (274)
  Less: Net income attributable
   to noncontrolling
   interests                              (1)        -        (1)        -
                                    --------  --------  --------  --------
Net income (loss) attributable to
 Realogy                            $    222  $    (15) $     25  $   (274)
                                    ========  ========  ========  ========




Table 2


                       REALOGY CORPORATION
              CONDENSED CONSOLIDATED BALANCE SHEETS
                         (In millions)
                                                    June 30,   December 31,
                                                     2010         2009
                                                  -----------  -----------
ASSETS
Current assets:
  Cash and cash equivalents                       $       265  $       255
  Trade receivables (net of allowance for
   doubtful accounts of $70 and $66)                      133          102
  Relocation receivables                                  387          334
  Relocation properties held for sale                      39            -
  Deferred income taxes                                    79           85
  Other current assets                                    107           98
                                                  -----------  -----------
     Total current assets                               1,010          874
Property and equipment, net                               193          211
Goodwill                                                2,591        2,577
Trademarks                                                732          732
Franchise agreements, net                               2,942        2,976
Other intangibles, net                                    499          453
Other non-current assets                                  221          218
                                                  -----------  -----------
Total assets                                      $     8,188  $     8,041
                                                  ===========  ===========
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
  Accounts payable                                $       179  $        96
  Securitization obligations                              290          305
  Due to former parent                                    197          505
  Revolving credit facilities and current portion
   of long-term debt                                      162           32
  Accrued expenses and other current liabilities          583          502
                                                  -----------  -----------
     Total current liabilities                          1,411        1,440
Long-term debt                                          6,685        6,674
Deferred income taxes                                     876          760
Other non-current liabilities                             167          148
                                                  -----------  -----------
Total liabilities                                       9,139        9,022
                                                  -----------  -----------
Commitments and contingencies
Equity (deficit):
  Common stock                                             -             -
  Additional paid-in capital                           2,023         2,020
  Accumulated deficit                                 (2,946)       (2,971)
  Accumulated other comprehensive loss                   (30)          (32)
                                                  -----------  -----------
     Total Realogy stockholder's deficit                (953)         (983)
                                                  -----------  -----------
  Noncontrolling interests                                 2             2
                                                  -----------  -----------
Total equity (deficit)                                  (951)         (981)
                                                  -----------  -----------
Total liabilities and equity (deficit)            $    8,188   $     8,041
                                                  ==========   ===========




Table 3


                            REALOGY CORPORATION
                             2010 KEY DRIVERS
                Three Months Ended June 30,     Six Months Ended June 30,
              -----------------------------  -----------------------------
                2010       2009    % Change     2010       2009   % Change
              ---------  ---------  -------  ---------  ---------  -------
Real Estate
 Franchise
 Services (a)
Closed
 homesale
 sides          288,479    259,476       11%   481,820    437,709       10%
Average
 homesale
 price        $ 197,637  $ 188,489        5% $ 193,962  $ 186,199        4%
Average
 homesale
 broker
 commission
 rate              2.54%      2.57% (3) bps       2.54%      2.57% (3) bps
Net effective
 royalty rate      5.04%      5.10% (6) bps       5.04%      5.12% (8) bps
Royalty per
 side         $     261  $     256        2% $     258  $     255        1%
Company Owned
 Real Estate
 Brokerage
 Services
Closed
 homesale
 sides           83,583     72,362       16%   136,115    119,861       14%
Average
 homesale
 price        $ 424,442  $ 378,870       12% $ 421,872  $ 369,743       14%
Average
 homesale
 broker
 commission
 rate              2.49%      2.52% (3) bps       2.49%      2.53% (4) bps
Gross
 commission
 income per
 side         $  11,247  $  10,292        9% $  11,214  $  10,140       11%
Relocation
 Services
Initiations (b)  46,189     33,074       40%    78,618     60,751       29%
Referrals (c)    21,770     17,349       25%    33,879     28,068       21%
Title and
 Settlement
 Services
Purchase title
 and closing
 units           30,133     28,148       7%     50,080     46,959        7%
Refinance
 title and
 closing units   10,378     22,693     (54%)    22,313     42,626     (48%)
Average price
 per closing
 unit         $   1,472  $   1,258      17% $    1,419  $   1,236       15%
(a)  Includes all franchisees except for our Company Owned Real Estate
     Brokerage Services segment.
(b)  Includes initiations of 7,612 and 12,789 for the three and six months
     ended June 30, 2010, respectively, related to the Primacy acquisition
     in 2010.
(c)  Includes referrals of 1,527 and 2,243 for the three and six months
     ended June 30, 2010, respectively, related to the Primacy acquisition
in 2010.




Table 4


                          REALOGY CORPORATION
                           2009 KEY DRIVERS
                                                                  Year
                             Quarter Ended                        Ended
                     -----------------------------------------  --------
                       March      June      September December   December
                        31,        30,         30,       31,        31,
                       2009       2009        2009      2009       2009
                     ---------  ---------  ---------  ---------  ---------
Real Estate Franchise
 Services (a)
Closed homesale
 sides                 178,233    259,476    281,973    263,834    983,516
Average homesale
 price               $ 182,865  $ 188,489  $ 194,881  $ 192,604  $ 190,406
Average homesale
 broker commission
 rate                     2.57%      2.57%      2.53%      2.54%      2.55%
Net effective
 royalty rate             5.15%      5.10%      5.11%      5.04%      5.10%
Royalty per side     $     253  $     256  $     260  $     255  $     257
Company Owned Real
 Estate Brokerage
 Services
Closed homesale sides   47,499     72,362     81,025     72,931    273,817
Average homesale
 price               $ 355,838  $ 378,870  $ 407,398  $ 406,549  $ 390,688
Average homesale
 broker commission
 rate                     2.55%      2.52%      2.49%      2.51%      2.51%
Gross commission
 income per side     $   9,909  $  10,292  $  10,816  $  10,814  $  10,519
Relocation Services
Initiations             27,677     33,074     28,326     25,607    114,684
Referrals               10,719     17,349     20,320     16,607     64,995
Title and Settlement
 Services
Purchase title and
 closing units          18,811     28,148     30,653     27,077    104,689
Refinance title and
 closing units          19,933     22,693     14,493     12,808     69,927
Average price per
 closing unit        $   1,211  $   1,258  $   1,405  $   1,396  $   1,317
(a)  Includes all franchisees except for our Company Owned Real Estate
     Brokerage Services segment.




Table 5a


                                REALOGY CORPORATION
                           SELECTED 2010 FINANCIAL DATA
                                    (In millions)
                                                    For the      For the
                                                     Three        Three
                                                 Months ended  Months ended
                                                    March 31,    June 30,
                                                      2010        2010
                                                  -----------  -----------
Revenue (a)
  Real Estate Franchise Services                  $       122  $       173
  Company Owned Real Estate
   Brokerage Services                                     601          956
  Relocation Services                                      76          106
  Title and Settlement Services                            65           86
  Corporate and Other                                     (45)         (68)
                                                  -----------  -----------
  Total Company                                   $       819  $     1,253
                                                  ===========  ===========
EBITDA (b)
  Real Estate Franchise Services                  $        65  $       123
  Company Owned Real Estate
   Brokerage Services                                     (34)          84
  Relocation Services                                       4           27
  Title and Settlement Services                            (5)          11
  Corporate and Other                                     (19)         299
                                                  -----------  -----------
  Total Company                                   $        11          544
                                                  -----------  -----------
  Depreciation and amortization                            50           49
  Interest expense, net                                   152          155
  Income tax expense (benefit)                              6          118
                                                  -----------  -----------
  Net income (loss) attributable to Realogy       $      (197)         222
                                                  ===========  ===========
(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 $45 million and $68 million for the three
    months ended March 31 and June 30, 2010, respectively. Such amounts are
    eliminated through the Corporate and Other line. Revenues for the
    Relocation Services segment include $7 million and $10 million of
    intercompany referral and relocation fees paid by the Company Owned
    Real Estate Brokerage Services segment during the three ended March 31
    and June 30, 2010, 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 $6 million and $5 million of restructuring costs and former
    parent legacy items, respectively, for the three months ended
    March 31, 2010 and $4 million of restructuring costs offset by a net
    benefit of $314 million of former parent legacy items primarily as a
    result of tax and other liability adjustments for the three months
    ended June 30, 2010 broken down by business units as follows:
                                                    For the       For the
                                                     Three         Three
                                                 Months ended  Months ended
                                                    March 31,    June 30,
                                                      2010        2010
                                                  -----------  -----------
  Real Estate Franchise Services                  $         -  $         -
  Company Owned Real Estate
   Brokerage Services                                       3            2
  Relocation Services                                       2            1
  Title and Settlement Services                             1            -
  Corporate and Other                                       5         (313)
                                                  -----------  -----------
  Total Company                                   $        11  $      (310)
                                                  ===========  ===========
EBITDA by segment before restructuring and other items detailed above for
the three months ended March 31, 2010  was:  RFG $65 million, NRT ($31)
million, Cartus $6 million, TRG ($4) million and Corporate ($14) million.
EBITDA by segment before restructuring and other items detailed above for
the three months ended June 30, 2010  was:  RFG $123 million, NRT
$86 million, Cartus $28 million, TRG $11 million and Corporate ($14)
million.
Table 5b
                           REALOGY CORPORATION
                       SELECTED 2009 FINANCIAL DATA
                               (In millions)
                             For the For the  For the    For the
                              Three   Three    Three      Three    For the
                              Months  Months   Months     Months    Year
                              ended   ended    ended       end      Ended
                              March    June   September  December  December
                                31,     30,      30,        31,       31,
                               2009    2009     2009       2009      2009
                              ------  ------  --------   -------   -------
Revenue (a)
  Real Estate Franchise
   Services                   $  105  $  143  $    151   $   139   $   538
  Company Owned Real Estate
   Brokerage Services            491     764       896       808     2,959
  Relocation Services             71      80        92        77       320
  Title and Settlement Services   68      88        91        81       328
  Corporate and Other            (38)    (57)      (61)      (57)     (213)
                              ------  ------  --------   -------   -------
  Total Company               $  697  $1,018  $  1,169   $ 1,048   $ 3,932
                              ======  ======  ========   =======   =======
EBITDA (b)
  Real Estate Franchise
   Services                   $   44  $   85  $    107   $    87   $   323
  Company Owned Real Estate
   Brokerage Services            (84)     24        48        18         6
  Relocation Services              -      72        34        16       122
  Title and Settlement Services   (5)     12        10         3        20
  Corporate and Other            (17)     (8)       54       (35)       (6)
                              ------  ------  --------   -------   -------
  Total Company               $  (62) $  185  $    253   $    89   $   465
                              ------  ------  --------   -------   -------
  Depreciation and amortization   51      48        48        47       194
  Interest expense, net          144     147       139       153       583
  Income tax expense (benefit)     2       5         8       (65)      (50)
                              ------  ------  --------   -------   -------
  Net income (loss)
   attributable to Realogy    $ (259) $  (15) $     58  $   (46)  $  (262)
                              ======  ======  ========  =======   =======
(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, $57 million,
    $61 million and $57 million for the three months ended March 31,
    2009, June 30, 2009, September 30, 2009 and December 31, 2009,
    respectively. Such amounts are eliminated through the Corporate and
    Other line. Revenues for the Relocation Services segment include $6
    million, $9 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,
    2009, June 30, 2009, September 30, 2009 and December 31, 2009,
    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 $213 million for the year ended
    December 31, 2009.  Revenues for the Relocation Services segment
    include intercompany referral and relocation fees paid by the Company
    Owned Real Estate Brokerage Services segment of $34 million for the
    year ended December 31, 2009.  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, $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, $15 million and $5 million of
    restructuring costs and former legacy items along with a $75 million
    gain on extinguishment of debt for the three months ended September
    30, 2009 and $11 million, $3 million and $1 million of restructuring
    costs, former legacy items and merger cost, respectively for the
    three months ended December 31, 2009. EBITDA for the year ended
    December 31, 2009 includes $70 million of restructuring costs and
    $1 million of merger costs offset by a benefit of $34 million of
    former parent legacy items (comprised of a benefit of $55 million
    recorded at Cartus related to Wright Express Corporation partially
    offset by $21 million of expenses recorded at Corporate) and a gain
    on the extinguishment of debt of $75 million.
                             For the For the  For the    For the
                              Three   Three    Three      Three    For the
                              Months  Months   Months     Months    Year
                              ended   ended    ended      ended     Ended
                              March    June   September  December  December
                                31,     30,      30,        31,       31,
                               2009    2009     2009       2009      2009
                              ------  ------  --------   -------   -------
Real Estate Franchise
 Services                     $    1  $    1  $      1   $     -         3
Company Owned Real Estate
 Brokerage Services               25       5        13         4        47
Relocation Services                5     (52)        -         2       (45)
Title and Settlement Services      1       1         -         1         3
Corporate and Other                6       9       (69)        8       (46)
                              ------  ------  --------   -------   -------
Total Company                 $   38  $  (36) $    (55)  $    15   $   (38)
                              ======  ======  ========   =======   =======
    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.  EBITDA by segment before
    restructuring and other items detailed above for the corresponding
    three months ended September 30, 2009 was as follows:  RFG $108
    million, NRT $61 million, Cartus $34 million, TRG $10 million, and
    Corporate ($15) million. EBITDA by segment before restructuring and
    other items detailed above for the corresponding three months ended
    December 31, 2009 was as follows:  RFG $87 million, NRT $22 million,
    Cartus $18 million, TRG $4 million, and Corporate ($27) million.
    EBITDA by segment before restructuring and other items detailed
    above for the corresponding year ended December 31, 2009 was as
    follows:  RFG $326 million, NRT $53 million, Cartus $77 million,
    TRG $23 million, and Corporate ($52) million.
Table 6
                           REALOGY CORPORATION
                        EBITDA AND ADJUSTED EBITDA
                               (In millions)
A reconciliation of net income (loss) attributable to Realogy to EBITDA and
Adjusted EBITDA for the twelve months ended June 30, 2010 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,
                                 2009     2009     2009     2010    2010
                               -------  -------  -------- ------  ------
Net income (loss) attributable
 to Realogy                    $  (262) $  (274) $     12 $   25  $   37(a)
Income tax expense (benefit)       (50)       7       (57)   124      67
                               -------  -------  -------- ------  ------
Income (loss) before income taxes (312)    (267)      (45)   149     104
Interest expense, net              583      291       292    307     599
Depreciation and amortization      194       99        95     99     194
                               -------  -------  -------- ------  ------
EBITDA                             465      123       342    555     897(b)
Covenant calculation adjustments:
    Restructuring costs, merger
     costs and former parent legacy
     cost (benefit) items, net (c)                                  (264)
    Pro forma cost-savings for 2010
     restructuring initiatives (d)                                    10
    Pro forma cost-savings for 2009
     restructuring initiatives (e)                                     6
    Pro forma effect of business
     optimization initiatives (f)                                     46
    Non-cash charges (g)                                               3
    Non-recurring fair value
     adjustments for purchase
     accounting (h)                                                    4
    Pro forma effect of acquisitions
     and new franchisees (i)                                           8
    Apollo management fees (j)                                        15
    Incremental securitization
     interest costs (k)                                                2
    Expenses incurred in debt
     refinancing activities (l)                                        4
    Gain on extinguishment of debt                                   (75)
                                                                  ------
Adjusted EBITDA                                                   $  656
                                                                  ------
Total senior secured net debt (m)                                 $2,849
Senior secured leverage ratio                                       4.34x
(a) Net income (loss) attributable to Realogy consists of: (i) income of
    $58 million for the third quarter of 2009; (ii) a loss of $46 million
    for the fourth quarter of 2009;  (iii) a loss of $197 million for the
    first quarter of 2010; and (iv) income of $222 million for the second
    quarter of 2010.
(b) EBITDA consists of: (i) $253 million for the third quarter of 2009;
    (ii) $89 million for the fourth quarter of 2009; (iii) $11 million for
    the first quarter of 2010 and (iv) $544 million for the second quarter
    of 2010.
(c) Consists of $36 million of restructuring costs and $1 million of
    merger costs offset by a net benefit of $301 million for former parent
    legacy items.
(d) Represents actual costs incurred that are not expected to recur in
    subsequent periods due to restructuring activities initiated during
    the first six months of 2010. From this restructuring, we expect to
    reduce our operating costs by approximately $14 million on a
    twelve-month run-rate basis and estimate that $4 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, 2009 through the time they were put in place
    had those actions been effected on July 1, 2009.
(e) Represents actual costs incurred that are not expected to recur in
    subsequent periods due to restructuring activities initiated during
    the year ended December 31, 2009. From this restructuring, we expect
    to reduce our operating costs by approximately $103 million on a
    twelve-month run-rate basis and estimate that $97 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, 2009 through the time they were put in place
    had those actions been effected on July 1, 2009.
(f) Represents the twelve-month pro forma effect of business optimization
    initiatives that have been completed to reduce costs of $18 million
    as well as $28 million for employee retention accruals.
(g) Represents the elimination of non-cash expenses, including a $14
    million write-down of a cost method investment acquired in 2006, $7
    million of stock-based compensation expense, less $15 million for the
    change in the allowance for doubtful accounts and notes reserves from
    July 1, 2009 through June 30, 2010 and $1 million related to the
    unrealized net gains on foreign currency transactions and foreign
    currency forward contracts.
(h) Reflects the adjustment for the negative impact of fair value
    adjustments for purchase accounting at the operating business segments
    primarily related to deferred rent.
(i) Represents the estimated impact of acquisitions and new franchisees
    as if they had been acquired or signed on July 1, 2009. 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, 2009.
(j) Represents the elimination of annual management fees payable to Apollo
    for the twelve months ended June 30, 2010.
(k) Incremental borrowing costs incurred as a result of the securitization
    facilities refinancing for the twelve months ended June 30, 2010.
(l) Represents the expenses incurred in connection with the Company's
    unsuccessful debt refinancing activities principally in the third
    quarter of 2009.
(m) Represents total borrowings under the senior secured credit facility
    which are secured by a first priority lien on our assets of $3,075
    million plus $13 million of capital lease obligations less $239
    million of readily available cash as of June 30, 2010.  Pursuant to
    the terms of the senior secured credit agreement, senior secured net
    debt does not include Second Lien Loans, other bank indebtedness not
    secured by a first lien on our assets, securitization obligations or
    Unsecured Notes.
Table 7
Reconciliation of net income (loss) attributable to Realogy to EBITDA
before restructuring and other items (In millions)
A reconciliation of net income (loss) attributable to Realogy to EBITDA and
EBITDA before restructuring and other items for the three and six months
ended June 30, 2010 and 2009 are set forth in the following tables:
                                                      Three Months Ended
                                                           June 30,
                                                    ---------------------
                                                      2010          2009
                                                    -------       -------
Net income (loss) attributable to Realogy           $   222       $   (15)
Income tax expense                                      118             5
                                                    -------       -------
Income (loss) before income taxes                       340           (10)
Interest expense, net                                   155           147
Depreciation and amortization                            49            48
                                                    -------       -------
EBITDA                                              $   544       $   185
                                                    -------       -------
Legacy costs (benefits), net                           (314)          (46)
Restructuring costs                                       4            10
                                                    -------       -------
Total restructuring and other items                    (310)          (36)
                                                    -------       -------
EBITDA before restructuring and other items         $   234       $   149
                                                    =======       =======
                                                       Six Months Ended
                                                           June 30,
                                                    ---------------------
                                                      2010          2009
                                                    -------       -------
Net income (loss) attributable to Realogy           $    25       $  (274)
Income tax expense                                      124             7
                                                    -------       -------
Income (loss) before income taxes                       149          (267)
Interest expense, net                                   307           291
Depreciation and amortization                            99            99
                                                    -------       -------
EBITDA                                              $   555       $   123
                                                    -------       -------
Legacy costs (benefits), net                           (309)          (42)
Restructuring costs                                      10            44
                                                    -------       -------
Total restructuring and other items                    (299)            2
                                                    -------       -------
EBITDA before restructuring and other items         $   256       $   125
                                                    =======       =======

Table 8

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 7 above. Adjusted EBITDA is calculated by adjusting EBITDA by the items described in Table 6 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 before 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 require replacement 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.

SOURCE: Realogy Corporation

###

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