Realogy Reports Results for Full Year 2011

Real Estate Leader Posts Net Revenue of $4.1 Billion; Refinances Near-Term Debt Maturities; CEO and President Richard A. Smith Elected as Chairman of the Board, Effective March 15, 2012

PARSIPPANY, NJ--(Marketwire - Feb 27, 2012) - Realogy Corporation, a global leader in real estate and relocation services, today reported results for the year ended December 31, 2011. Realogy's net revenue for the year was $4.1 billion, which was flat as compared to 2010. Realogy's EBITDA before restructuring and other items for the year was $476 million, a decrease of 11% year-over-year. This was attributable to a decrease in sales volume at both the franchised and company-owned real estate services segments as well as certain beneficial items in 2010 that did not recur in 2011. Realogy's reported EBITDA for the year was $443 million. For the full year, Realogy recorded a net loss attributable to the Company of $441 million, which includes $666 million of interest expense, $186 million of depreciation and amortization and $36 million from the loss on early extinguishment of debt in early 2011.

"The U.S. economy remained weak in 2011, and our business results reflected that weakness," said Richard A. Smith, Realogy's president and chief executive officer. "Despite the difficult macroeconomic headwinds and another challenging housing market in 2011, our revenues were flat year-over-year. While we experienced modest softness in our real estate franchising and brokerage segments, as did the rest of the industry, this was offset by continued growth in our relocation and title services segments."

Earlier today, the Realogy Board of Directors elected Mr. Smith as Chairman of the Board in addition to his ongoing role as Chief Executive Officer and President. Smith's appointment as Chairman will begin March 15, 2012, which is the effective date of Henry Silverman's resignation from his positions as a director and the non-executive chairman of Realogy's Board of Directors. Apollo Global Management, LLC, previously announced Silverman's resignation from all positions he holds at Apollo and its subsidiaries, affiliates and portfolio companies, effective on March 15, 2012. "We wish Henry well, and we thank him for his many contributions through the years," said Smith.

In early February 2012, the Company completed a refinancing transaction that resulted in the issuance of $593 million of 7.625% Senior Secured First Lien Notes due 2020 and $325 million of 9.00% New First and a Half Lien Notes due 2020, the proceeds of which were used to retire outstanding indebtedness.

"We had $918 million of debt maturing in 2013 that we were able to refinance, extending those maturities to 2020," said Anthony E. Hull, Realogy's chief financial officer. "As a result of this proactive transaction, which was well received in the financial markets, we have no substantial corporate debt maturities until 2016."

Looking at Realogy's core business drivers, Realogy Franchise Group (RFG) had a year-over-year 1% decrease in homesale transaction sides and NRT, the company-owned brokerage unit, was flat year-over-year. Average homesale price was flat at RFG and decreased 2% at NRT for the year ended 2011 as compared to 2010, largely from a shift in our business to more sales of comparatively lower-priced homes. Cartus experienced a 3% increase in relocation initiations and a 4% increase in broker referrals, while Title Resource Group experienced a 1% decrease in purchase title and closing units and a 2% increase in the average price per closing unit along with a 1% increase in refinance title and closing units.

"We anticipate first quarter 2012 homesales to increase at a high single-digit pace, and average sales price to be modestly down year-over-year as indicated by our preliminary January and February results," said Hull. "The trend we are seeing currently is that in many of our markets, home affordability, particularly for first-time buyers, is driving activity at the lower end of the housing market. Assuming continuation of favorable employment trends and rising consumer confidence, we are encouraged about the prospects for 2012."

Balance Sheet Information and Covenant Compliance as of December 31, 2011

The Company ended the year with $101 million of readily available cash and $175 million outstanding on its revolving credit facility under its senior secured credit agreement.

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

As noted above, Realogy refinanced $918 million of debt maturing in 2013 by issuing two series of senior secured notes maturing in 2020. With the proceeds from this transaction, Realogy retired $629 million of first lien term debt and terminated its commitments under its $289 million non-extended revolver. As of February 27, 2012, the Company had $55 million outstanding under its $363 million extended revolving credit facility due 2016 and had available capacity of $227 million (net of outstanding letters of credit). The Company expects substantially all of the current borrowings to be repaid by the end of the March, but consistent with past experience expects to borrow additional funds in April principally to fund interest payments.

As of December 31, 2011, the Company's senior secured leverage ratio (SSLR) was 4.44 to 1, or 3.87 to 1 after giving pro forma effect to the February 2012 bond offering and the application of the proceeds, below the 4.75 to 1 maximum ratio required to be in compliance with its senior secured credit agreement. The SSLR is determined by dividing Realogy's senior secured net debt of $2.5 billion at December 31, 2011 (or $2.2 billion on a pro forma basis) by the Company's Adjusted EBITDA of $571 million for the four quarters ended December 31, 2011. (Please see Table 8 for the definition of non-GAAP financial measures, Adjusted EBITDA and EBITDA before restructuring and other items and Tables 6 and 7 for a reconciliation of these non-GAAP measures to their most comparable GAAP financial measure, net loss attributable to Realogy.

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Investor Webcast

Realogy will hold a Webcast to review its 2011 results on February 27 at 4:00 p.m. (EST). 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, together with corresponding slides, will be made available live via Webcast on the Investor Information section of the Realogy website. A replay of the Webcast also will be available on the website from February 28 through March 6. Realogy plans to file its Annual Report on Form 10-K for the year ended December 31, 2011 later this week.

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 system members operate approximately 14,000 offices with 245,800 sales associates doing business in 101 countries and territories around the world. Headquartered in Parsippany, N.J., Realogy is owned by affiliates of Apollo Management, L.P., a subsidiary of Apollo Global Management, LLC, a leading global alternative asset manager.

Forward-Looking Statements

Certain statements in this press release constitute "forward-looking statements." Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Realogy Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "projects", "estimates" and "plans" and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements.

Various factors that could cause actual future results and other future events to differ materially from those estimated by management include, but are not limited to: our substantial amount of outstanding debt; constraints on the Company's liquidity including but not limited to our ability to access the capital, including debt financing, and/or securitization markets; variable rate indebtedness which subjects the Company to interest rate risk; our ability to comply with the affirmative and negative covenants contained in our debt agreements; adverse developments or the absence of sustained improvement in general business, economic and political conditions; adverse developments or the absence of improvement in the residential real estate markets including but not limited to the lack of sustained improvement in the number of home sales and/or further declines in home prices, low levels of consumer confidence, the impact of slow economic growth or future recessions and related high levels of unemployment in the U.S. and abroad, continuing high levels of foreclosures, seasonal fluctuations in the residential real estate brokerage business; reduced availability of mortgage financing or financing availability at rates not sufficiently attractive to homebuyers; the final resolution or outcomes with respect to Cendant's remaining contingent liabilities; any outbreak or escalation of hostilities on a national, regional or international basis; government regulation as well as legislative, tax or regulatory changes that would adversely impact the residential real estate market, including but not limited to potential reform of the financing of the U.S. housing and mortgage markets and the Internal Revenue Code; the Company's failure to enter into or renew franchise agreements, maintain its brands or the inability of franchisees to survive the current real estate cycle; the Company's inability to realize benefits from future acquisitions; and the Company's inability to sustain improvements in its operating efficiency.

Consideration should be given to the areas of risk described above, as well as those risks set forth under the headings "Forward-Looking Statements" and "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2010 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2011, June 30, 2011 and September 30, 2011, 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  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(In millions)  
   
    Year Ended December 31,  
    2011     2010     2009  
Revenues                        
  Gross commission income   $ 2,926     $ 2,965     $ 2,886  
  Service revenue     752       700       621  
  Franchise fees     256       263       273  
  Other     159       162       152  
Net revenues     4,093       4,090       3,932  
Expenses                        
  Commission and other agent-related costs     1,932       1,932       1,850  
  Operating     1,270       1,241       1,263  
  Marketing     185       179       161  
  General and administrative     254       238       250  
  Former parent legacy costs (benefit), net     (15 )     (323 )     (34 )
  Restructuring costs     11       21       70  
  Merger costs     1       1       1  
  Depreciation and amortization     186       197       194  
  Interest expense/(income), net     666       604       583  
  Loss (gain) on the early extinguishment of debt     36       --       (75 )
  Other (income)/expense, net     --       (6 )     3  
Total expenses     4,526       4,084       4,266  
Income (loss) before income taxes, equity in earnings and noncontrolling interests     (433 )     6       (334 )
Income tax expense (benefit)     32       133       (50 )
Equity in (earnings) losses of unconsolidated entities     (26 )     (30 )     (24 )
Net loss     (439 )     (97 )     (260 )
Less: Net income attributable to noncontrolling interests     (2 )     (2 )     (2 )
Net loss attributable to Realogy   $ (441 )   $ (99 )   $ (262 )
                         
                         
                         
   
Table 2  
   
REALOGY CORPORATION  
CONSOLIDATED BALANCE SHEETS  
(In millions)  
   
    December 31,  
    2011     2010  
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 143     $ 192  
  Trade receivables (net of allowance for doubtful accounts of $64 and $67)     120       114  
  Relocation receivables     378       386  
  Relocation properties held for sale     11       21  
  Deferred income taxes     66       76  
  Other current assets     88       109  
    Total current assets     806       898  
Property and equipment, net     165       186  
Goodwill     2,614       2,611  
Trademarks     732       732  
Franchise agreements, net     2,842       2,909  
Other intangibles, net     439       478  
Other non-current assets     212       215  
Total assets     7,810       8,029  
LIABILITIES AND EQUITY (DEFICIT)                
Current liabilities:                
  Accounts payable     184       203  
  Securitization obligations     327       331  
  Due to former parent     80       104  
  Revolving credit facility and current portion of long-term debt     325       194  
  Accrued expenses and other current liabilities     520       525  
    Total current liabilities     1,436       1,357  
Long-term debt     6,825       6,698  
Deferred income taxes     890       883  
Other non-current liabilities     167       163  
Total liabilities     9,318       9,101  
Commitments and contingencies                
Equity (deficit):                
Realogy common stock: $.01 par value, 100 shares authorized, issued and outstanding at December 31, 2011 and 2010     --       --  
  Additional paid-in capital     2,033       2,026  
  Accumulated deficit     (3,511 )     (3,070 )
  Accumulated other comprehensive loss     (32 )     (30 )
    Total Realogy stockholder's deficit     (1,510 )     (1,074 )
  Noncontrolling interests     2       2  
Total equity (deficit)     (1,508 )     (1,072 )
Total liabilities and equity (deficit)   $ 7,810     $ 8,029  
                 
                 
                 
   
Table 3  
   
REALOGY CORPORATION  
2011 KEY DRIVERS  
   
    Quarter Ended     Year Ended  
    March 31, 2011     June 30, 2011     September 30, 2011     December 31, 2011     December 31, 2011  
Real Estate Franchise Services (a)                                        
  Closed homesale sides     184,643       251,045       252,991       220,931       909,610  
  Average homesale price   $ 193,710     $ 202,045     $ 200,987     $ 194,673     $ 198,268  
  Average homesale broker commission rate     2.54 %     2.55 %     2.56 %     2.56 %     2.55 %
  Net effective royalty rate     4.87 %     4.83 %     4.88 %     4.78 %     4.84 %
  Royalty per side   $ 251     $ 258     $ 261     $ 250     $ 256  
Company Owned Real Estate Brokerage Services                                        
  Closed homesale sides     51,200       73,061       71,167       59,094       254,522  
  Average homesale price   $ 414,164     $ 445,550     $ 433,003     $ 405,382     $ 426,402  
  Average homesale broker commission rate     2.50 %     2.49 %     2.49 %     2.51 %     2.50 %
  Gross commission income per side   $ 11,188     $ 11,931     $ 11,620     $ 10,924     $ 11,461  
Relocation Services                                        
  Initiations     35,108       46,433       37,540       34,188       153,269  
  Referrals     12,813       20,282       22,254       16,820       72,169  
Title and Settlement Services                                        
  Purchase title and closing units     18,971       26,219       26,128       21,927       93,245  
  Refinance title and closing units     16,826       10,840       14,234       20,950       62,850  
  Average price per closing unit   $ 1,386     $ 1,525     $ 1,446     $ 1,292     $ 1,409  
                                           
(a) Includes all franchisees except for our Company Owned Real Estate Brokerage Services segment.
 
 
 
   
Table 4  
   
REALOGY CORPORATION  
2010 KEY DRIVERS  
   
    Quarter Ended     Year Ended  
    March 31, 2010     June 30, 2010     September 30, 2010     December 31, 2010     December 31, 2010  
Real Estate Franchise Services (a)                                        
  Closed homesale sides     193,340       288,479       229,241       211,281       922,341  
  Average homesale price   $ 188,478     $ 197,637     $ 202,272     $ 202,906     $ 198,076  
  Average homesale broker commission rate     2.55 %     2.54 %     2.53 %     2.53 %     2.54 %
  Net effective royalty rate     5.04 %     5.04 %     4.95 %     4.97 %     5.00 %
  Royalty per side   $ 252     $ 261     $ 267     $ 267     $ 262  
Company Owned Real Estate Brokerage Services                                        
  Closed homesale sides     52,532       83,583       61,092       58,080       255,287  
  Average homesale price   $ 417,782     $ 424,442     $ 457,782     $ 444,000     $ 435,500  
  Average homesale broker commission rate     2.48 %     2.49 %     2.47 %     2.48 %     2.48 %
  Gross commission income per side   $ 11,161     $ 11,247     $ 12,209     $ 11,736     $ 11,571  
Relocation Services                                        
  Initiations     32,429       46,189       36,743       32,943       148,304  
  Referrals     12,109       21,770       19,625       16,101       69,605  
Title and Settlement Services                                        
  Purchase title and closing units     19,947       30,133       22,963       21,247       94,290  
  Refinance title and closing units     11,935       10,378       17,546       22,366       62,225  
  Average price per closing unit   $ 1,353     $ 1,472     $ 1,381     $ 1,336     $ 1,386  
                                         
(a) Includes all franchisees except for our Company Owned Real Estate Brokerage Services segment.
 
 
 
   
Table 5a  
REALOGY CORPORATION  
SELECTED 2011 FINANCIAL DATA  
(In millions)  
   
    For the Three Months Ended     For the Year Ended  
    March 31,     June 30,     September 30,     December 31,     December 31,  
Revenue (a)   2011     2011     2011     2011     2011  
Real Estate Franchise Services   $ 118     $ 160     $ 151     $ 128     $ 557  
Company Owned Real Estate Brokerage Services     587       884       841       658       2,970  
Relocation Services     87       110       126       100       423  
Title and Settlement Services     83       90       95       91       359  
Corporate and Other     (44 )     (65 )     (58 )     (49 )     (216 )
Total Company   $ 831     $ 1,179     $ 1,155     $ 928     $ 4,093  
EBITDA (b)                                        
Real Estate Franchise Services   $ 62     $ 97     $ 92     $ 69     $ 320  
Company Owned Real Estate Brokerage Services     (37 )     48       47       (2 )     56  
Relocation Services     10       32       50       23       115  
Title and Settlement Services     2       12       8       7       29  
Corporate and Other     (48 )     (2 )     (10 )     (17 )     (77 )
Total Company   $ (11 )   $ 187     $ 187     $ 80     $ 443  
Depreciation and amortization     46       47       46       47       186  
Interest expense, net     179       161       159       167       666  
Income tax expense (benefit)     1       1       10       20       32  
Net loss attributable to Realogy   $ (237 )   $ (22 )   $ (28 )   $ (154 )   $ (441 )
                                         
(a)   Transactions between segments are eliminated in consolidation. Revenues for the Real Estate Franchise Services segment include intercompany royalties and marketing fees paid by the Company Owned Real Estate Brokerage Services segment of $44 million, $65 million, $58 million and $49 million for the three months ended March 31, June 30, September 30, and December 31 2011, respectively. Such amounts are eliminated through the Corporate and Other line. Revenues for the Relocation Services segment include $7 million, $11 million, $11 million and $8 million of intercompany referral and relocation fees paid by the Company Owned Real Estate Brokerage Services segment during the three months ended March 31, June 30, September 30, and December 31 2011, respectively. Such amounts are recorded as contra-revenues by the Company Owned Real Estate Brokerage Services segment. Revenues for the Real Estate Franchise Services segment include intercompany royalties and marketing fees paid by the Company Owned Real Estate Brokerage Services segment of $216 million for the year ended December 31, 2011. Revenues for the Relocation Services segment include intercompany referral and relocation fees paid by the Company Owned Real Estate Brokerage Services segment of $37 million for the year ended December 31, 2011. There are no other material inter-segment transactions.
     
(b)   Includes $2 million of restructuring costs and $36 million related to loss on the early extinguishment of debt, partially offset by $2 million of former parent legacy benefits for the three months ended March 31, 2011, $3 million of restructuring costs offset by a net benefit of $12 million of former parent legacy items for the three months ended June 30, 2011, $3 million of restructuring costs offset by a net benefit of $3 million of former parent legacy items for the three months ended September 30, 2011 and $3 million of restructuring, $1 million of merger costs and $2 million of former parent legacy costs for the three months ended December 31, 2011. EBITDA for the year ended December 31, 2011 includes $36 million related to loss on the early extinguishment of debt, $11 million of restructuring costs and $1 million of merger costs, partially offset by a net benefit of $15 million of former parent legacy items primarily as a result of tax and other liability adjustments broken down by business units as follows:
     
    For the Three Months Ended   For the Year Ended
    March 31,   June 30,     September 30,     December 31,   December 31,
    2011   2011     2011     2011   2011
Real Estate Franchise Services   --   --     --     --   --
Company Owned Real Estate Brokerage Services   2   2     3     2   9
Relocation Services   --   --     --     1   1
Title and Settlement Services   --   1     --     --   1
Corporate and Other   34   (12 )   (3 )   3   22
Total Company   36   (9 )   --     6   33
                         

EBITDA by segment before restructuring and other items detailed above for the three months ended March 31, 2011 was: RFG $62 million, NRT $(35) million, Cartus $10 million, TRG $2 million and Corporate $(14) million. EBITDA by segment before restructuring and other items detailed above for the three months ended June 30, 2011 was: RFG $97 million, NRT $50 million, Cartus $32 million, TRG $13 million and Corporate $(14) million. EBITDA by segment before restructuring and other items detailed above for the three months ended September 30, 2011 was: RFG $92 million, NRT $50 million, Cartus $50 million, TRG $8 million and Corporate $(13) million. EBITDA by segment before restructuring and other items detailed above for the three months ended December 31, 2011 was: RFG $69 million, NRT $0 million, Cartus $24 million, TRG $7 million and Corporate $(14) million. EBITDA by segment before restructuring and other items detailed above for the corresponding year ended December 31, 2011 was as follows: RFG $320 million, NRT $65 million, Cartus $116 million, TRG $30 million, and Corporate $(55) million.

   
Table 5b  
REALOGY CORPORATION  
SELECTED 2010 FINANCIAL DATA  
(In millions)  
   
    For the Three Months Ended     For the Year Ended  
    March 31,     June 30,     September 30,     December 31,     December 31,  
Revenue (a)   2010     2010     2010     2010     2010  
Real Estate Franchise Services   $ 122     $ 173     $ 138     $ 127     $ 560  
Company Owned Real Estate Brokerage Services     601       956       762       697       3,016  
Relocation Services     76       106       122       101       405  
Title and Settlement Services     65       86       84       90       325  
Corporate and Other     (45 )     (68 )     (54 )     (49 )     (216 )
Total Company   $ 819     $ 1,253     $ 1,052     $ 966     $ 4,090  
EBITDA (b)                                        
Real Estate Franchise Services   $ 65     $ 123     $ 90     $ 74     $ 352  
Company Owned Real Estate Brokerage Services     (34 )     84       31       (1 )     80  
Relocation Services     4       27       51       27       109  
Title and Settlement Services     (5 )     11       8       11       25  
Corporate and Other     (19 )     299       (3 )     (8 )     269  
Total Company   $ 11     $ 544     $ 177     $ 103     $ 835  
Depreciation and amortization     50       49       49       49       197  
Interest expense, net     152       155       151       146       604  
Income tax expense (benefit)     6       118       10       (1 )     133  
Net loss attributable to Realogy   $ (197 )   $ 222     $ (33 )   $ (91 )   $ (99 )
                                         
(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, $68 million, $54 million and $49 million for the three months ended March 31, June 30, September 30, and December 31 2010, respectively. Such amounts are eliminated through the Corporate and Other line. Revenues for the Relocation Services segment include $7 million, $10 million, $12 million and $8 million of intercompany referral and relocation fees paid by the Company Owned Real Estate Brokerage Services segment during the three months ended March 31, June 30, September 30, and December 31 2010, respectively. Such amounts are recorded as contra-revenues by the Company Owned Real Estate Brokerage Services segment. Revenues for the Real Estate Franchise Services segment include intercompany royalties and marketing fees paid by the Company Owned Real Estate Brokerage Services segment of $216 million for the year ended December 31, 2010. Revenues for the Relocation Services segment include intercompany referral and relocation fees paid by the Company Owned Real Estate Brokerage Services segment of $37 million for the year ended December 31, 2010. 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, $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, $2 million of restructuring costs offset by a net benefit of $6 million of former parent legacy items for the three months ended September 30, 2010 and $9 million of restructuring and $1 million of merger costs, offset by a net benefit of $8 million of former parent legacy items for the three months ended December 31, 2010. EBITDA for the year ended December 31, 2010 includes $21 million of restructuring costs and $1 million of merger costs, offset by a net benefit of $323 million of former parent legacy items primarily as a result of tax and other liability adjustments broken down by business units as follows:
     
    For the Three Months Ended     For the Year Ended  
    March 31,   June 30,     September 30,     December 31,     December 31,  
    2010   2010     2010     2010     2010  
Real Estate Franchise Services   --   --     --     --     --  
Company Owned Real Estate Brokerage Services   3   2     2     5     12  
Relocation Services   2   1     --     --     3  
Title and Settlement Services   1   --     --     2     3  
Corporate and Other   5   (313 )   (6 )   (5 )   (319 )
Total Company   11   (310 )   (4 )   2     (301 )
                             

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. EBITDA by segment before restructuring and other items detailed above for the three months ended September 30, 2010 was: RFG $90 million, NRT $33 million, Cartus $51 million, TRG $8 million and Corporate ($9) million. EBITDA by segment before restructuring and other items detailed above for the three months ended December 31, 2010 was: RFG $74 million, NRT $4 million, Cartus $27 million, TRG $13 million and Corporate ($13) million. EBITDA by segment before restructuring and other items detailed above for the corresponding year ended December 31, 2010 was as follows: RFG $352 million, NRT $92 million, Cartus $112 million, TRG $28 million, and Corporate ($50) million.

   
Table 6  
REALOGY CORPORATION  
EBITDA, EBITDA BEFORE RESTRUCTURING AND OTHER ITEMS, AND ADJUSTED EBITDA  
(In millions)  
   
A reconciliation of net loss attributable to Realogy to EBITDA, EBITDA before restructuring and other items, and Adjusted EBITDA for the twelve months ended December 31, 2011 is set forth in the following table:  
   
    For the Year Ended
December 31, 2011
 
Net loss attributable to Realogy   $ (441 )
Income tax expense (benefit)     32  
Income before income taxes     (409 )
Interest expense (income), net     666  
Depreciation and amortization     186  
EBITDA     443  
Covenant calculation adjustments:        
  Restructuring costs, merger costs and former parent legacy costs (benefit), net (a)     (3 )
  Loss on the early extinguishment of debt     36  
EBITDA before restructuring and other items     476  
  Pro forma cost savings for 2011 restructuring initiatives (b)     11  
  Pro forma effect of business optimization initiatives (c)     52  
  Non-cash charges (d)     4  
  Non-recurring fair value adjustments for purchase accounting (e)     4  
  Pro forma effect of acquisitions and new franchisees (f)     7  
  Apollo management fees (g)     15  
  Incremental securitization interest costs (h)     2  
Adjusted EBITDA   $ 571  
Total senior secured net debt (i)   $ 2,536  
Senior secured leverage ratio     4.44x  
Pro forma total senior secured net debt (j)   $ 2,211  
Pro forma senior secured leverage ratio     3.87x  
         

_______________

(a)   Consists of $11 million of restructuring costs and $1 million of merger costs offset by a benefit of $15 million of former parent legacy items.
     
(b)   Represents actual costs incurred that are not expected to recur in subsequent periods due to restructuring activities initiated during 2011. From this restructuring, we expect to reduce our operating costs by approximately $21 million on a twelve-month run-rate basis and estimate that $10 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 January 1, 2011 through the time they were put in place, had those actions been effected on January 1, 2011.
     
(c)   Represents the twelve-month pro forma effect of business optimization initiatives that have been completed to reduce costs, including $1 million related to our Relocation Services integration costs and acquisition related non-cash adjustments, $6 million related to vendor renegotiations, $41 million for employee retention accruals and $4 million of other initiatives. The employee retention accruals reflect the employee retention plans that have been implemented in lieu of our customary bonus plan, due to the ongoing and prolonged downturn in the housing market in order to ensure the retention of executive officers and other key personnel, principally within our corporate services unit and the corporate offices of our four business units.
     
(d)   Represents the elimination of non-cash expenses, including $7 million of stock-based compensation expense and $4 million of other items less $7 million for the change in the allowance for doubtful accounts and notes reserves from January 1, 2011 through December 31, 2011.
     
(e)   Reflects the adjustment for the negative impact of fair value adjustments for purchase accounting at the operating business segments primarily related to deferred rent.
     
(f)   Represents the estimated impact of acquisitions and new franchisees as if they had been acquired or signed on January 1, 2011. 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 January 1, 2011.
     
(g)   Represents the elimination of annual management fees payable to Apollo for the twelve months ended December 31, 2011.
     
(h)   Reflects the incremental borrowing costs incurred as a result of the securitization facilities refinancing for the twelve months ended December 31, 2011.
     
(i)   Represents total borrowings under the senior secured credit facility which are secured by a first priority lien on our assets of $2,626 million plus $11 million of capital lease obligations less $101 million of readily available cash as of December 31, 2011. Pursuant to the terms of the senior secured credit facility, senior secured net debt does not include First and a Half Lien Notes, Second Lien Loans, other indebtedness that is secured by a lien that is pari passu or junior to the First and a Half Lien Notes or securitization obligations.
     
(j)   Reflects the proceeds of $918 million from the issuance of $593 million of First Lien Notes and $325 million of New First and a Half Lien Notes offset by the payment of $629 million of non-extended term loan borrowings, $78 million of borrowings under the non-extended revolving credit facility and $211 million of additional readily available cash.
     
   
Table 7  
   
Reconciliation of net loss attributable to Realogy to EBITDA and EBITDA before restructuring and other items (in millions)  
   
A reconciliation of net loss attributable to Realogy to EBITDA and EBITDA before restructuring and other items for the year ended December 31, 2011 and 2010 is set forth in the following tables:  
    Twelve Months Ended  
    December 31,  
    2011     2010  
Net loss attributable to Realogy   $ (441 )   $ (99 )
Income tax expense     32       133  
Loss before income tax     (409 )     34  
Interest expense, net     666       604  
Depreciation and amortization     186       197  
EBITDA   $ 443     $ 835  
Legacy costs (benefit), net     (15 )     (323 )
Restructuring and merger costs     12       22  
Loss on the early extinguishment of debt     36       --  
Total restructuring and other items     33       (301 )
EBITDA before restructuring and other items   $ 476     $ 534  
                 

Table 8

Definitions
EBITDA is defined by us 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 defined by us as EBITDA adjusted for merger costs, restructuring costs, former parent legacy cost (benefit) items, net, and (gain) loss on the early extinguishment of debt. Adjusted EBITDA is presented to demonstrate our compliance with the senior secured leverage ratio covenant in the senior secured credit facility. We present EBITDA, EBITDA before restructuring and other items and Adjusted EBITDA because we believe EBITDA, EBITDA before restructuring and other items and Adjusted EBITDA are useful as supplemental measures in evaluating the performance of our operating businesses and provides greater transparency into our results of operations. Our management, including our chief operating decision maker, use EBITDA and EBITDA before restructuring and other items as a factor in evaluating the performance of our business. 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 believe EBITDA before restructuring and other items also facilitates company-to-company operating performance comparisons by backing out those items in EBITDA as well as certain historical cost (benefit) items 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 analytical tools, and you should not consider EBITDA or EBITDA before restructuring and other items 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 requirement 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.

Adjusted EBITDA as used herein 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.

Like EBITDA and EBITDA before restructuring and other items, Adjusted EBITDA has limitations as an analytical tool, and you should not consider Adjusted EBITDA either in isolation or as a substitute for analyzing our results as reported under GAAP. 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, the pro forma effect of business optimization initiatives and the pro forma full year effect of acquisitions and new franchisees. These adjustments may not reflect the actual cost savings or pro forma effect recognized in future periods.

###

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