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Realogy Reports Financial Results For Third Quarter 2016

MADISON, N.J., Nov. 4, 2016 /PRNewswire/ -- Realogy Holdings Corp. (NYSE: RLGY), the largest full-service residential real estate services company in the United States, today reported financial results for the third quarter ended September 30, 2016, including the following highlights:

  • Revenue of $1.64 billion, a 1% decrease as compared to the third quarter of 2015, was primarily driven by lower homesale transaction volume at NRT along with lower referral revenue at Cartus, and partially offset by higher purchase and refinance closing unit volume at Title Resource Group (TRG).
  • The Company's combined homesale transaction volume increased 2% in the quarter, consisting of a 4% volume gain at the Realogy Franchise Group (RFG) and a 3% decline in volume at NRT.
  • Net income for the period was $106 million, compared to $110 million in the third quarter of 2015. Basic earnings per share (EPS) was $0.74, compared to $0.75 in third quarter of 2015 (See Table 1).
  • Adjusted net income was $108 million and adjusted basic EPS was $0.75, decreases of 3% and 1%, respectively, compared to the third quarter of 2015 (See Table 1a).1
  • Operating EBITDA was $279 million, compared to $295 million in the third quarter of 2015, a year-over-year decrease of 5% (See Table 6).2
  • During the third quarter, Realogy repurchased approximately 2.5 million shares of Realogy's common stock in the open market at a weighted average market price of $27 per share for a total of $67 million. Year-to-date, the Company has repurchased $134 million, or approximately 4.5 million shares, of common stock in the open market.
  • As previously announced, the Company declared a quarterly cash dividend of $0.09 per share of the Company's common stock. The dividend payment was made on Aug. 31, 2016 to shareholders of record as of the close of business on Aug. 17, 2016. The next dividend payment will be made on Dec. 1, 2016 to shareholders of record as of the close of business on Nov. 17, 2016.
  • The Company continued to execute on its business optimization program, improving the efficiency and effectiveness of the cost structure of each of the Company's business units. The Company expects to realize over $30 million in actual savings in 2016 and is on track to reach its annualized run-rate savings target of $60 million in 2017. The total cost to implement the program is $69 million, of which $40 million has been incurred to date.

 

Realogy logo. (PRNewsFoto/Realogy Holdings Corp.)

 

"While our third quarter results reflect continued pressure on NRT as expected, we have moved aggressively to improve the business and enhance NRT's competitiveness with an infusion of talent and new growth initiatives," said Richard A. Smith, Realogy's chairman, chief executive officer and president. "We expect these initiatives to put near-term pressure on margins, but anticipate that the resulting increase in revenue will deliver improved financial results over time and position us well to achieve our long-term goals and drive shareholder value."

1  Adjusted net income is adjusted for non-cash mark-to-market expense on interest rate swaps and restructuring charges.
2 Operating EBITDA is defined as EBITDA before restructuring costs, early extinguishment of debt and former parent legacy items.

Operational Results

In the third quarter of 2016, Realogy's franchise (RFG) and Company-owned (NRT) business segments achieved a combined homesale transaction volume (transaction sides multiplied by average sale price) increase of 2% as compared to the third quarter of 2015, which was within the Company's previous guidance range. RFG reported a homesale transaction sides increase of 1% and an average homesale price increase of 3%. NRT reported a homesale transaction sides decrease of 4% and an average homesale price increase of 1%.

In the title and settlement services sector, TRG was involved in the closing of approximately 58,000 transactions during the quarter, reflecting a 4% increase in purchase units and a 52% increase in refinance units as compared to the third quarter of 2015. These results include the benefits of the acquisition of TitleOne in the third quarter.

Looking Ahead

For the fourth quarter of 2016, Realogy expects to achieve overall homesale transaction volume gains in the range of 3% to 5% year-over-year. RFG's fourth quarter transaction volume is expected to increase 4% to 6% and NRT transaction volume is expected to increase 1% to 3%.

For the full year 2016, the Company expects homesale transaction volume gains in the range of 3% to 4% year-over-year. Realogy also expects to deliver Operating EBITDA of between $750 million and $770 million, yielding approximately $425 million to $450 million of free cash flow.

"Our business model continues to generate significant free cash flow, which enabled us to accelerate share repurchases during the third quarter," said Anthony E. Hull, Realogy's executive vice president, CFO and treasurer.  "We will continue to be thoughtful about deploying our free cash flow, with a balanced approach to delevering, acquisitions and returning capital to shareholders."

Balance Sheet

The Company ended the quarter with cash and cash equivalents of $224 million.  Total long-term corporate debt, including the short-term portion, net of cash and cash equivalents (net corporate debt), totaled $3.3 billion at September 30, 2016.  Our net debt leverage3 was 3.8 times at September 30, 2016.

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

3   Net corporate debt divided by EBITDA calculated on a pro forma basis, as defined under our credit facilities, for the twelve-month period ended September 30, 2016.

Investor Conference Call      

Today, November 4, at 8:30 a.m. (EDT), Realogy will hold a conference call via webcast to review its third quarter 2016 results.  The call will be hosted by Richard A. Smith, chairman, chief executive officer and president, and Anthony E. Hull, executive vice president, chief financial officer and treasurer, and will conclude with an investor Q&A period with management.

Investors may access the conference call live via webcast at www.realogy.com under "Investors" or by dialing (888) 895-3527 (toll free); international participants should dial (706) 679-2250.  Please dial in at least 5 to 10 minutes prior to start time.  A webcast replay also will be available from November 4 through November 18, 2016.

About Realogy Holdings Corp.

Realogy Holdings Corp. (NYSE: RLGY) is a global leader in residential real estate franchising and brokerage with many of the best-known industry brands including Better Homes and Gardens® Real Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, Corcoran®, ERA®, Sotheby's International Realty® and ZipRealty®.  Collectively, Realogy's franchise system members operate approximately 13,650 offices with more than 268,000 independent sales associates conducting business in 111 countries and territories around the world.  NRT LLC, Realogy's company-owned real estate brokerage, is the largest residential brokerage company in the United States, operates under several of Realogy's brands and also provides related residential real estate services. Realogy also owns Cartus, a prominent worldwide provider of relocation services to corporate and affinity clients, Title Resource Group (TRG), a leading provider of title, settlement and underwriting services, and ZapLabs LLC, its innovation and technology development subsidiary.  Realogy is headquartered in Madison, New Jersey.

Forward-Looking Statements

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

Various factors that could cause actual future results and other future events to differ materially from those estimated by management include, but are not limited to: adverse developments or the absence of sustained improvement in general business, economic and political conditions; adverse developments or the absence of improvement in the residential real estate markets including but not limited to the lack of sustained improvement in the number of home sales and/or stagnant or declining home prices, low levels of consumer confidence, the impact of slow economic growth or future recessions and related high levels of unemployment in the U.S. and abroad, continued low inventory levels, renewed high levels of foreclosures, seasonal fluctuations in the residential real estate brokerage business, and increasing mortgage rates and down payment requirements and/or constraints on the availability of mortgage financing; the Company's geographic and high-end market concentration, particularly with respect to its Company-owned brokerage operations; the Company's failure to enter into or renew franchise agreements or maintain its brands; risks relating to our outstanding debt and interest obligations; variable rate indebtedness which subjects the Company to interest rate risk; the Company's inability to access capital or refinance or repay existing indebtedness, or return capital to stockholders; the Company's inability to realize the benefits from acquisitions; any outbreak or escalation of hostilities on a national, regional or international basis; government regulation as well as legislative, tax or regulatory changes that would adversely impact the residential real estate market, including but not limited to potential reform of the financing of the U.S. housing and mortgage markets and/or the Internal Revenue Code and changes in state or federal employment laws or regulations that would require reclassification of independent contractor sales associates to employee status, and wage and hour regulations; the Company's inability to sustain improvements in its operating efficiency and to achieve anticipated cost savings from its business optimization initiatives; any adverse resolution of litigation, governmental or regulatory proceedings or arbitration awards; and the final resolution or outcomes with respect to Cendant's (our former parent) remaining contingent liabilities.

Consideration should be given to the areas of risk described above, as well as those risks set forth under the headings "Forward-Looking Statements" and "Risk Factors" in our filings with the Securities and Exchange Commission, including our Quarterly Reports filed on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016, and our Annual Report on Form 10-K for the year ended December 31, 2015, and our other filings made from time to time, in connection with considering any forward-looking statements that may be made by us and our businesses generally.  Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law.

Non-GAAP Financial Measures

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. See Tables 1a and 8 for definitions of these non-GAAP financial measures and Tables 1a, 5, 6, and 7 for reconciliations of the historical non-GAAP financial measures to their most comparable GAAP terms.

Because of the forward-looking nature of the Company's forecasted non-GAAP financial measures, specific quantifications of the amounts that would be required to reconcile forecasted forecasted Operating EBITDA to forecasted EBITDA and forecasted net income are not readily determinable. The Company believes that there is a degree of volatility with respect to certain of the Company's GAAP measures which preclude the Company from providing accurate forecasted GAAP to non-GAAP reconciliations. Based on the above, the Company believes that providing estimates of the amounts that would be required to reconcile the range of the non-GAAP measures to forecasted GAAP measures would imply a degree of precision that would be confusing or misleading to investors for the reasons identified above.


Investor Contacts:


Media Contact:

Alicia Swift


Mark Panus

(973) 407-4669


(973) 407-7215

alicia.swift@realogy.com


mark.panus@realogy.com




Jennifer Halchak



(973) 407-7487



jennifer.halchak@realogy.com



 

 

Table 1


REALOGY HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2016


2015


2016


2015

Revenues








Gross commission income

$

1,211



$

1,251



$

3,288



$

3,310


Service revenue

273



265



715



664


Franchise fees

107



103



280



269


Other

53



49



157



138


Net revenues

1,644



1,668



4,440



4,381


Expenses








Commission and other agent-related costs

834



855



2,256



2,262


Operating

400



381



1,158



1,089


Marketing

58



56



181



171


General and administrative

78



85



234



255


Former parent legacy costs (benefit), net



(14)



1



(15)


Restructuring costs

9





30




Depreciation and amortization

53



55



149



153


Interest expense, net

37



70



169



188


Other income, net

(1)



(2)



(1)



(3)


Total expenses

1,468



1,486



4,177



4,100


Income before income taxes, equity in earnings and noncontrolling interests

176



182



263



281


Income tax expense

74



74



114



116


Equity in earnings of unconsolidated entities

(5)



(4)



(10)



(13)


Net income

107



112



159



178


Less: Net income attributable to noncontrolling interests

(1)



(2)



(3)



(3)


Net income attributable to Realogy Holdings

$

106



$

110



$

156



$

175










Earnings per share attributable to Realogy Holdings:








Basic earnings per share

$

0.74



$

0.75



$

1.07



$

1.19


Diluted earnings per share

$

0.73



$

0.74



$

1.06



$

1.18


Weighted average common and common equivalent shares of Realogy Holdings outstanding:

Basic

144.0



146.6



145.4



146.5


Diluted

145.1



148.1



146.6



148.0










Cash dividends declared per share (beginning in August 2016)

$

0.09



$



$

0.09



$


 



Table 1a


REALOGY HOLDINGS CORP.
Adjusted Net Income and Adjusted Earnings Per Share
(In millions, except per share data)


We present Adjusted net income and Adjusted earnings per share because we believe these measures are useful as supplemental measures in evaluating the performance of our operating businesses and provides greater transparency into our operating results.


Adjusted net income is defined by us as net income before: (a) mark to market interest rate swap adjustments, whose fair value is subject to movements in LIBOR and the forward yield curve and therefore are subject to significant fluctuations; (b) former parent legacy items, which pertain to liabilities of the former parent for matters prior to mid-2006 and are non-operational in nature; (c) restructuring charges, which the Company believes will be significant as a result of the business optimization initiatives currently in progress; and (d) the loss on the early extinguishment of debt that results from refinancing and deleveraging debt initiatives.  The gross amounts for these items as well as the adjustment for income taxes are shown in the table below. 


Adjusted income per share is Adjusted net income divided by the weighted average common and common equivalent shares outstanding.


Set forth in the table below is a reconciliation of Net income to Adjusted net income for the three and nine months ended September 30, 2016 and 2015:



Three Months Ended
September 30,


Nine Months Ended
September 30,


2016


2015


2016


2015

Net income attributable to Realogy Holdings

$

106



$

110



$

156



$

175


Addback:








Mark-to-market interest rate swap adjustments

(5)



16



40



27


Former parent legacy cost / (benefit)



(14)



1



(15)


Restructuring charges

9





30




Adjustments for tax effect (a)

(2)



(1)



(28)



(5)


Adjusted net income attributable to Realogy Holdings

$

108



$

111



$

199



$

182










Earnings per share








Basic earnings per share:

$

0.74



$

0.75



$

1.07



$

1.19


Diluted earnings per share:

$

0.73



$

0.74



$

1.06



$

1.18










Adjusted earnings per share








Adjusted basic earnings per share:

$

0.75



$

0.76



$

1.37



$

1.24


Adjusted diluted earnings per share:

$

0.74



$

0.75



$

1.36



$

1.23










Weighted average common and common equivalent shares outstanding:

Basic:

144.0



146.6



145.4



146.5


Diluted:

145.1



148.1



146.6



148.0



 (a)         Reflects tax effect of adjustments at an assumed tax rate of 40%.

 

 


Table 2


REALOGY HOLDINGS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)



September 30,
 2016


December 31,
 2015



ASSETS




Current assets:




Cash and cash equivalents

$

224



$

415


Trade receivables (net of allowance for doubtful accounts of $14 and $20)

172



141


Relocation receivables

290



279


Other current assets

140



126


Total current assets

826



961


Property and equipment, net

254



254


Goodwill

3,690



3,618


Trademarks

748



745


Franchise agreements, net

1,378



1,428


Other intangibles, net

326



316


Other non-current assets

233



209


Total assets

$

7,455



$

7,531






LIABILITIES AND EQUITY




Current liabilities:




Accounts payable

$

142



$

139


Securitization obligations

255



247


Due to former parent

31



31


Current portion of long-term debt

197



740


Accrued expenses and other current liabilities

431



448


Total current liabilities

1,056



1,605


Long-term debt

3,273



2,962


Deferred income taxes

365



267


Other non-current liabilities

293



275


Total liabilities

4,987



5,109


Commitments and contingencies




Equity:




Realogy Holdings preferred stock: $.01 par value; 50,000,000 shares authorized, none issued and outstanding at September 30, 2016 and December 31, 2015




Realogy Holdings common stock: $.01 par value; 400,000,000 shares authorized, 142,623,095 shares outstanding at September 30, 2016 and 146,746,537 shares outstanding at December 31, 2015

1



1


Additional paid-in capital

5,621



5,733


Accumulated deficit

(3,119)



(3,280)


Accumulated other comprehensive loss

(39)



(36)


Total stockholders' equity

2,464



2,418


Noncontrolling interests

4



4


Total equity

2,468



2,422


Total liabilities and equity

$

7,455



$

7,531


 

 


Table 3a


REALOGY HOLDINGS CORP.

2016 vs. 2015 KEY DRIVERS





Three Months Ended September 30,



Nine Months Ended September 30,



2016


 

2015


%
Change


 

2016


2015


%
Change

RFG (a)














Closed homesale sides



323,176


318,873


1%



861,254


838,305



3%


Average homesale price


$

275,325


$

267,296


3%



$

270,669


$

262,959



3%


Average homesale broker commission rate



2.50%



2.52%


(2)

bps



2.51%



2.52%



(1)

bps

Net effective royalty rate



4.50%


4.47%


3

bps


4.50%


4.49%



1

bps

Royalty per side


$

322


$

312


3%



$

318


$

309



3%


NRT














Closed homesale sides


95,605


99,789


(4%)



258,163


259,411



—%


Average homesale price


$

486,343


$

479,874


1%



$

487,781


$

490,463



(1)%


Average homesale broker commission rate


2.46%


2.48%


(2)

bps


2.47%


2.46%



1

bps

Gross commission income per side


$

12,681


$

12,524


1%



$

12,750


$

12,756



—%


Cartus














Initiations


40,556


42,303


(4%)



129,290


131,999



(2%)


Referrals


25,495


30,010


(15%)



68,526


77,065



(11%)


TRG













Purchase title and closing units (b)


42,932


41,245


4%



116,082


98,484



18%


Refinance title and closing units (c)


15,170


9,989


52%



36,100


29,300



23%


Average fee per closing unit


$

1,824


$

1,932


(6%)



$

1,865


$

1,839



1%














(a)   

Includes all franchisees except for NRT.



(b)     

The amounts presented for the nine months ended September 30, 2016 include 16,445 purchase units as a result of the acquisitions
completed prior to and during the third quarter of 2016.  The impact on the three months ended September 30, 2016 is immaterial.



(c)     

The amounts presented for the nine months ended September 30, 2016 include 3,372 refinance units as a result of the acquisitions completed prior to and during the third quarter of 2016.  The impact on the three months ended September 30, 2016 is immaterial.

 

 


Table 3b


REALOGY HOLDINGS CORP.

2015 KEY DRIVERS




Quarter Ended


Year Ended



March 31,
 2015


June 30,
 2015


September 30,
 2015


December 31,
 2015


December 31,
 2015

RFG (a) (b)











Closed homesale sides


212,139



307,293



318,873



263,028



1,101,333


Average homesale price


$

251,373



$

266,456



$

267,296



$

266,874



$

263,894


Average homesale broker commission rate


2.52

%


2.52

%


2.52

%


2.49

%


2.51

%

Net effective royalty rate


4.52

%


4.48

%


4.47

%


4.46

%


4.48

%

Royalty per side


$

302



$

312



$

312



$

309



$

309


NRT

Closed homesale sides (c)


60,187



99,435



99,789



77,333



336,744


Average homesale price (d)


$

502,597



$

493,746



$

479,874



$

487,024



$

489,673


Average homesale broker commission rate


2.43

%


2.46

%


2.48

%


2.47

%


2.46

%

Gross commission income per side


$

13,019



$

12,830



$

12,524



$

12,645



$

12,730


Cartus











Initiations


38,168



51,528



42,303



35,750



167,749


Referrals


18,022



29,033



30,010



22,466



99,531


TRG











Purchase title and closing units (e)


21,643



35,596



41,245



32,057



130,541


Refinance title and closing units (f)


9,496



9,815



9,989



9,244



38,544


Average fee per closing unit


$

1,751



$

1,795



$

1,932



$

1,928



$

1,861










(a)   

Includes all franchisees except for NRT.



(b)   

In April 2015, NRT acquired a large franchisee of RFG.  As a result of the acquisition, the drivers of the acquired entity shifted from RFG to NRT.  Closed homesale sides for RFG, excluding the impact of the acquisition, would have increased 5% for the year ended December 31, 2015 compared to 2014.  The acquisition did not have a significant impact on the change in average homesale price for RFG.



(c)    

Closed homesale sides for NRT, excluding the impact of larger acquisitions with an individual purchase price greater than $20 million,
would have increased 2% for the year ended December 31, 2015 compared to 2014.



(d)    

Average homesale price for NRT, excluding the impact of larger  acquisitions with an individual purchase price greater than $20 million, would have increased 1% for the year ended December 31, 2015 compared to 2014.



(e)    

The amounts presented for the year ended December 31, 2015 include 13,304 purchase units as a result of the acquisition of Independence Title on July 1, 2015.



(f)     

The amounts presented for the year ended December 31, 2015 include 3,403 refinance units as a result of the acquisition of Independence Title on July 1, 2015.

 

 

 

Table 4a


REALOGY HOLDINGS CORP.

SELECTED 2016 FINANCIAL DATA

(In millions)



Three Months Ended


March 31,
 2016


June 30,
 2016


September 30,
 2016

Net revenues (a)






Real Estate Franchise Services

$

157



$

221



$

215


Company Owned Real Estate Brokerage Services

841



1,268



1,231


Relocation Services

83



109



116


Title and Settlement Services

111



149



164


Corporate and Other

(58)



(85)



(82)


Total Company

$

1,134



$

1,662



$

1,644








EBITDA (b)






Real Estate Franchise Services

$

92



$

149



$

153


Company Owned Real Estate Brokerage Services

(21)



78



74


Relocation Services

5



29



40


Title and Settlement Services



26



23


Corporate and Other

(21)



(19)



(20)


Total Company

$

55



$

263



$

270


Less:






Depreciation and amortization

48



48



53


Interest expense, net

73



59



37


Income tax expense (benefit)

(24)



64



74


Net income (loss) attributable to Realogy Holdings

$

(42)



$

92



$

106









(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 $58 million, $85 million and $82 million for the three months ended March 31, 2016, June 30, 2016 and September 30, 2016, respectively.  Such amounts are eliminated through the Corporate and Other line.




Revenues for the Relocation Services segment include $8 million, $13 million and $12 million of intercompany referral commissions paid by the Company Owned Real Estate Brokerage Services segment during the three months ended March 31, 2016, June 30, 2016 and September 30, 2016, respectively.  Such amounts are recorded as contra-revenues by the Company Owned Real Estate Brokerage Services segment.



(b)   

Includes a net cost of $1 million of former parent legacy items for the three months ended March 31, 2016.  Includes $9 million, $12 million and $9 million of restructuring charges for the three months ended March 31, 2016, June 30, 2016 and September 30, 2016, respectively.




The amounts broken down by business unit are as follows:

 



Three Months Ended


March 31,
 2016


June 30,
 2016


September 30,
 2016

Real Estate Franchise Services

$



$

3



$

1


Company Owned Real Estate Brokerage Services

2



7



6


Relocation Services

2



1



1


Title and Settlement Services





1


Corporate and Other

6



1




Total Company

$

10



$

12



$

9


 

 

Table 4b


REALOGY HOLDINGS CORP.

SELECTED 2015 FINANCIAL DATA

(In millions)



Three Months Ended


Year Ended


March 31,


June 30,


September 30,


December 31,


December 31,


2015


2015


2015


2015


2015

Net revenues (a)










Real Estate Franchise Services

$

151



$

213



$

214



$

177



$

755


Company Owned Real Estate Brokerage Services

796



1,289



1,267



992



4,344


Relocation Services

85



108



124



98



415


Title and Settlement Services

87



128



147



125



487


Corporate and Other

(57)



(87)



(84)



(67)



(295)


Total Company

$

1,062



$

1,651



$

1,668



$

1,325



$

5,706












EBITDA (b)










Real Estate Franchise Services

$

86



$

146



$

152



$

111



$

495


Company Owned Real Estate Brokerage Services

(16)



97



96



22



199


Relocation Services

7



29



47



22



105


Title and Settlement Services

(3)



20



20



11



48


Corporate and Other (c)

(16)



(27)



(6)



(72)



(121)


Total Company

$

58



$

265



$

309



$

94



$

726


Less:










Depreciation and amortization

46



52



55



48



201


Interest expense, net

68



50



70



43



231


Income tax expense (benefit)

(24)



66



74



(6)



110


Net income (loss) attributable to Realogy Holdings

$

(32)



$

97



$

110



$

9



$

184










(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, $87 million, $84 million and $67 million for the three months ended March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015, respectively.  Such amounts are eliminated through the Corporate and Other line.




Revenues for the Relocation Services segment include $8 million, $15 million, $16 million and $10 million of intercompany referral commissions paid by the Company Owned Real Estate Brokerage Services segment during the three months ended March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015, respectively.  Such amounts are recorded as contra-revenues by the Company Owned Real Estate Brokerage Services segment.



(b)   

The three months ended June 30, 2015 includes a net benefit of $1 million for former parent legacy items.




The three months ended September 30, 2015 includes a net benefit of $14 million for former parent legacy items.




The three months ended December 31, 2015 includes $48 million related to the loss on early extinguishment of debt and restructuring charges of $10 million.




The year ended December 31, 2015 includes $48 million related to the loss on early extinguishment of debt and restructuring charges of $10 million, partially offset by a net benefit of $15 million for former parent legacy items.




The amounts broken down by business unit are as follows:

 



Three Months Ended


Year Ended


March 31,


June 30,


September 30,


December 31,


December 31,


2015


2015


2015


2015


2015

Real Estate Franchise Services

$



$



$



$



$


Company Owned Real Estate Brokerage Services







5



5


Relocation Services







1



1


Title and Settlement Services










Corporate and Other



(1)



(14)



52



37


Total Company

$



$

(1)



$

(14)



$

58



$

43




(c)  

The three months ended June 30, 2015 includes $6 million of costs related to the settlement of a legal matter, subject to court approval, and
certain transaction costs related to acquisitions in April 2015.

 


 

Table 5


REALOGY HOLDINGS CORP.

2015 EBITDA AND OPERATING EBITDA

(In millions)


A reconciliation of net income attributable to Realogy Group to EBITDA and Operating EBITDA for the year ended December 31, 2015 is set forth in the following table:



Year Ended
December 31, 2015

Net income attributable to Realogy Group

$

184


Income tax expense

110


Income before income taxes

294


Interest expense, net

231


Depreciation and amortization

201


EBITDA

726


EBITDA adjustments:


Restructuring costs

10


Former parent legacy costs (benefit), net

(15)


Loss on the early extinguishment of debt

48


Operating EBITDA

769


 

 

 

Table 6


REALOGY HOLDINGS CORP.

EBITDA AND OPERATING EBITDA

THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(In millions)


Set forth in the table below is a reconciliation of net income to EBITDA and Operating EBITDA for the three-month periods ended September 30, 2016 and 2015:



Three Months Ended


September 30, 2016


September 30, 2015

Net income attributable to Realogy Holdings

$

106



$

110


Income tax expense

74



74


Income before income taxes

180



184


Interest expense, net

37



70


Depreciation and amortization

53



55


EBITDA

270



309


EBITDA adjustments:




Restructuring costs

9




Former parent legacy benefit, net



(14)


Operating EBITDA

$

279



$

295


 

Set forth in the table below is a reconciliation of Operating EBITDA by reportable segments to the net income for the three months ended ended September 30, 2016 and 2015:


Revenues






Operating

 EBITDA





Operating EBITDA

 Margin




2016


2015


Change


%
Change


2016


2015


Change


% Change


2016


2015


Change

RFG

$

215



$

214



$

1



%


$

154



$

152



$

2



1

%


72

%


71

%


1

%

NRT

1,231



1,267



(36)



(3)



80



96



(16)



(17)



6



8



(2)


Cartus

116



124



(8)



(6)



41



47



(6)



(13)



35



38



(3)


TRG

164



147



17



12



24



20



4



20



15



14



1


Corporate and Other

(82)



(84)



2



*           


(20)



(20)





*              







Total Company

$

1,644



$

1,668



$

(24)



(1)

%


$

279



$

295



$

(16)



(5)

%


17

%


18

%


(1)

%

Less: Restructuring costs


9














  Former parent legacy benefit, net




(14)












         Depreciation and amortization


53



55












Interest expense, net


37



70












Income tax expense


74



74












Net income attributable to Realogy Holdings


$

106



$

110












Table 7


REALOGY HOLDINGS CORP.

 FREE CASH FLOW

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(In millions)


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



Three Months Ended September 30,


Nine Months Ended September 30,


2016


2015


2016


2015

Net income attributable to Realogy Holdings

$

106



$

110



$

156



$

175


Income tax expense, net of payments

68



69



101



106


Interest expense, net

37



70



169



188


Cash interest payments

(31)



(57)



(117)



(165)


Depreciation and amortization

53



55



149



153


Capital expenditures

(21)



(19)



(61)



(60)


Restructuring costs and former parent legacy items, net of payments

(1)



(15)



4



(21)


Working capital adjustments

11



8



(38)



16


Relocation receivables (assets), net of securitization obligations

40



30



(5)



13


Free Cash Flow

$

262



$

251



$

358



$

405



A reconciliation of net cash provided by operating activities to free cash flow is set forth in the following table:



Three Months Ended September 30,


Nine Months Ended September 30,


2016


2015


2016


2015

Net cash provided by operating activities

$

308



$

324



$

411



$

400


Property and equipment additions

(21)



(19)



(61)



(60)


Net change in securitization

(25)



(53)



9



67


Effect of exchange rates on cash and cash equivalents



(1)



(1)



(2)


Free Cash Flow

$

262



$

251



$

358



$

405










Net cash used in investing activities

$

(105)



$

(50)



$

(163)



$

(171)


Net cash (used in) provided by financing activities

$

(402)



$

(65)



$

(438)



$

27


 

 

Table 8

Non-GAAP Definitions

Adjusted net income (loss) is defined by us as net income (loss) before mark to market interest rate adjustments, former parent legacy items, restructuring charges and loss on the early extinguishment of debt.  The gross amounts for these items as well as the adjustment for income taxes are presented.  Adjusted income (loss) per share is Adjusted net income (loss) divided by the weighted average common and common equivalent shares outstanding.  We present Adjusted net income (loss) and Adjusted earnings (loss) per share because we believe these measures are useful as supplemental measures in evaluating the performance of our operating businesses and provides greater transparency into our operating results.

EBITDA is defined by us as net income (loss) before depreciation and amortization, interest expense, net (other than relocation services interest for securitization assets and securitization obligations) and income taxes and is our primary non-GAAP measure.

Operating EBITDA is defined by us as EBITDA before restructuring, early extinguishment of debt and legacy items and is used as a supplementary financial measure.  Operating EBITDA calculated for a twelve-month period is presented because the Company believes these items do not directly affect the operating results of the Company and accordingly should be excluded in comparing operating results.

We present EBITDA and Operating EBITDA because we believe they are useful as supplemental measures in evaluating the performance of our operating businesses and provide greater transparency into our results of operations.  Our management, including our chief operating decision maker, uses EBITDA as a factor in evaluating the performance of our business.  EBITDA and Operating 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 Operating EBITDA have limitations as analytical tools, and you should not consider EBITDA and Operating EBITDA either in isolation or as substitutes for analyzing our results as reported under GAAP.  Some of these limitations are:

  • these measures do not reflect changes in, or cash required for, our working capital needs;
  • these measures do not reflect our interest expense (except for interest related to our securitization obligations), or the cash requirements necessary to service interest or principal payments on our debt;
  • these measures do not reflect our income tax expense or the cash requirements to pay our taxes;
  • these measures do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often require replacement in the future, and these measures do not reflect any cash requirements for such replacements; and
  • other companies may calculate these measures differently so they may not be comparable.

Free Cash Flow is defined as net income (loss) attributable to Realogy before income tax expense (benefit), net of payments, interest expense, net, depreciation and amortization, capital expenditures, restructuring costs and former parent legacy costs (benefits), net of payments, loss on the early extinguishment of debt, working capital adjustments and relocation assets, net of change in securitization obligations.  We use Free Cash Flow in our internal evaluation of operating effectiveness and decisions regarding the allocation of resources, as well as measuring the Company's ability to generate cash.  Since Free Cash Flow can be viewed as both a performance measure and a cash flow measure, the Company has provided a reconciliation to both net income attributable to Realogy Holdings and net cash provided by operating activities. Free Cash Flow is not defined by GAAP and should not be considered in isolation or as an alternative to net income (loss), net cash provided by (used in) operating, investing and financing activities or other financial data prepared in accordance with GAAP or as an indicator of the Company's operating performance or liquidity.  Free Cash Flow may differ from similarly titled measures presented by other companies.

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SOURCE Realogy Holdings Corp.

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