Delaware | 001-35674 | 20-8050955 | ||||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Delaware | 333-148153 | 20-4381990 | ||||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits |
Exhibit No. | Description | |
99.1 | Press Release dated November 3, 2017. |
REALOGY HOLDINGS CORP. | ||
By: | /s/ Anthony E. Hull | |
Anthony E. Hull, Executive Vice President, Chief Financial Officer and Treasurer |
REALOGY GROUP LLC | ||
By: | /s/ Anthony E. Hull | |
Anthony E. Hull, Executive Vice President, Chief Financial Officer and Treasurer |
Exhibit No. | Exhibit | |
99.1 |
• | Revenue was $1.7 billion, an increase of 2% compared with the third quarter of 2016, driven by increases in homesale transaction volume (transaction sides multiplied by average sale price) at the Company-owned brokerage segment (NRT) and Realogy Franchise Group (RFG). |
• | The Company's combined homesale transaction volume increased 4% year-over-year, consisting of a 5% volume gain at RFG and a 4% volume gain at NRT, both driven by increases in average sales price. Realogy outperformed national averages on sales volume and transaction sides. |
• | Net income was $95 million for the period, compared to $106 million in the same period in the prior year. Basic earnings per share was $0.70 compared with basic earnings per share of $0.74 in the third quarter of 2016. |
• | Adjusted net income per share was $0.71 compared with adjusted net income per share of $0.75 in the third quarter of 2016. (See Table 1a).1 |
• | Operating EBITDA was $258 million, compared with $279 million in the third quarter of 2016. (See Table 5).2 The decline was primarily attributable to higher commission splits due to the relative strength in NRT's West Coast operations and initiatives designed to attract and retain agents, as well as the impact of lower global relocation volume on Cartus results. The combined effects from hurricanes in Texas and Florida represented approximately $7 million of the decline, mostly at NRT and TRG. |
• | Free Cash Flow for the third quarter was $249 million compared with $262 million in Q3 2016, a decrease of $13 million primarily due to lower net income. Year to date Free Cash Flow was $406 million, up from $358 million in the first nine months of 2016. (See Table 6).3 |
• | In the first nine months of 2017, Realogy returned $215 million of capital to stockholders through share repurchases and dividends. |
• | NRT grew its agent count by 4.5% in the last 12 months to more than 50,000. |
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 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues | |||||||||||||||
Gross commission income | $ | 1,250 | $ | 1,211 | $ | 3,505 | $ | 3,288 | |||||||
Service revenue | 261 | 273 | 710 | 715 | |||||||||||
Franchise fees | 111 | 107 | 296 | 280 | |||||||||||
Other | 52 | 53 | 159 | 157 | |||||||||||
Net revenues | 1,674 | 1,644 | 4,670 | 4,440 | |||||||||||
Expenses | |||||||||||||||
Commission and other agent-related costs | 887 | 834 | 2,462 | 2,256 | |||||||||||
Operating | 394 | 400 | 1,162 | 1,158 | |||||||||||
Marketing | 63 | 58 | 195 | 181 | |||||||||||
General and administrative | 82 | 78 | 269 | 234 | |||||||||||
Former parent legacy cost (benefit), net | 1 | — | (10 | ) | 1 | ||||||||||
Restructuring costs | 2 | 9 | 9 | 30 | |||||||||||
Depreciation and amortization | 50 | 53 | 149 | 149 | |||||||||||
Interest expense, net | 41 | 37 | 127 | 169 | |||||||||||
Loss on the early extinguishment of debt | 1 | — | 5 | — | |||||||||||
Other income, net | — | (1 | ) | — | (1 | ) | |||||||||
Total expenses | 1,521 | 1,468 | 4,368 | 4,177 | |||||||||||
Income before income taxes, equity in earnings and noncontrolling interests | 153 | 176 | 302 | 263 | |||||||||||
Income tax expense | 67 | 74 | 131 | 114 | |||||||||||
Equity in earnings of unconsolidated entities | (10 | ) | (5 | ) | (7 | ) | (10 | ) | |||||||
Net income | 96 | 107 | 178 | 159 | |||||||||||
Less: Net income attributable to noncontrolling interests | (1 | ) | (1 | ) | (2 | ) | (3 | ) | |||||||
Net income attributable to Realogy Holdings | $ | 95 | $ | 106 | $ | 176 | $ | 156 | |||||||
Earnings per share attributable to Realogy Holdings: | |||||||||||||||
Basic earnings per share | $ | 0.70 | $ | 0.74 | $ | 1.28 | $ | 1.07 | |||||||
Diluted earnings per share | $ | 0.69 | $ | 0.73 | $ | 1.26 | $ | 1.06 | |||||||
Weighted average common and common equivalent shares of Realogy Holdings outstanding: | |||||||||||||||
Basic | 136.1 | 144.0 | 137.8 | 145.4 | |||||||||||
Diluted | 138.1 | 145.1 | 139.4 | 146.6 | |||||||||||
Cash dividends declared per share (beginning in August 2016) | $ | 0.09 | $ | 0.09 | $ | 0.27 | $ | 0.09 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income attributable to Realogy Holdings | $ | 95 | $ | 106 | $ | 176 | $ | 156 | |||||||
Addback: | |||||||||||||||
Mark-to-market interest rate swap (gains) losses | — | (5 | ) | 4 | 40 | ||||||||||
Former parent legacy cost (benefit), net | 1 | — | (10 | ) | 1 | ||||||||||
Restructuring costs | 2 | 9 | 9 | 30 | |||||||||||
Loss on the early extinguishment of debt | 1 | — | 5 | — | |||||||||||
Adjustments for tax effect (a) | (2 | ) | (2 | ) | (3 | ) | (28 | ) | |||||||
Adjusted net income attributable to Realogy Holdings | $ | 97 | $ | 108 | $ | 181 | $ | 199 | |||||||
Earnings per share | |||||||||||||||
Basic earnings per share: | $ | 0.70 | $ | 0.74 | $ | 1.28 | $ | 1.07 | |||||||
Diluted earnings per share: | $ | 0.69 | $ | 0.73 | $ | 1.26 | $ | 1.06 | |||||||
Adjusted earnings per share | |||||||||||||||
Adjusted basic earnings per share: | $ | 0.71 | $ | 0.75 | $ | 1.31 | $ | 1.37 | |||||||
Adjusted diluted earnings per share: | $ | 0.70 | $ | 0.74 | $ | 1.30 | $ | 1.36 | |||||||
Weighted average common and common equivalent shares outstanding: | |||||||||||||||
Basic: | 136.1 | 144.0 | 137.8 | 145.4 | |||||||||||
Diluted: | 138.1 | 145.1 | 139.4 | 146.6 |
(a) | Reflects tax effect of adjustments at an assumed tax rate of 40%. |
September 30, 2017 | December 31, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 348 | $ | 274 | |||
Trade receivables (net of allowance for doubtful accounts of $10 and $13) | 166 | 152 | |||||
Relocation receivables | 275 | 244 | |||||
Other current assets | 153 | 148 | |||||
Total current assets | 942 | 818 | |||||
Property and equipment, net | 272 | 267 | |||||
Goodwill | 3,704 | 3,690 | |||||
Trademarks | 748 | 748 | |||||
Franchise agreements, net | 1,311 | 1,361 | |||||
Other intangibles, net | 291 | 313 | |||||
Other non-current assets | 253 | 224 | |||||
Total assets | $ | 7,521 | $ | 7,421 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 152 | $ | 140 | |||
Securitization obligations | 234 | 205 | |||||
Due to former parent | 18 | 28 | |||||
Current portion of long-term debt | 242 | 242 | |||||
Accrued expenses and other current liabilities | 442 | 435 | |||||
Total current liabilities | 1,088 | 1,050 | |||||
Long-term debt | 3,234 | 3,265 | |||||
Deferred income taxes | 518 | 389 | |||||
Other non-current liabilities | 216 | 248 | |||||
Total liabilities | 5,056 | 4,952 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
Realogy Holdings preferred stock: $.01 par value; 50,000,000 shares authorized, none issued and outstanding at September 30, 2017 and December 31, 2016 | — | — | |||||
Realogy Holdings common stock: $.01 par value; 400,000,000 shares authorized, 135,180,292 shares issued and outstanding at September 30, 2017 and 140,227,692 shares issued and outstanding at December 31, 2016 | 1 | 1 | |||||
Additional paid-in capital | 5,383 | 5,565 | |||||
Accumulated deficit | (2,886 | ) | (3,062 | ) | |||
Accumulated other comprehensive loss | (37 | ) | (40 | ) | |||
Total stockholders' equity | 2,461 | 2,464 | |||||
Noncontrolling interests | 4 | 5 | |||||
Total equity | 2,465 | 2,469 | |||||
Total liabilities and equity | $ | 7,521 | $ | 7,421 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||||
RFG (a) | ||||||||||||||||||||||
Closed homesale sides | 318,961 | 323,176 | (1 | %) | 866,956 | 861,254 | 1 | % | ||||||||||||||
Average homesale price | $ | 292,000 | $ | 275,325 | 6 | % | $ | 287,558 | $ | 270,669 | 6 | % | ||||||||||
Average homesale broker commission rate | 2.49 | % | 2.50 | % | (1 | ) bps | 2.50 | % | 2.51 | % | (1 | ) bps | ||||||||||
Net effective royalty rate | 4.42 | % | 4.50 | % | (8 | ) bps | 4.42 | % | 4.50 | % | (8 | ) bps | ||||||||||
Royalty per side | $ | 334 | $ | 322 | 4 | % | $ | 331 | $ | 318 | 4 | % | ||||||||||
NRT | ||||||||||||||||||||||
Closed homesale sides | 95,236 | 95,605 | — | % | 262,849 | 258,163 | 2 | % | ||||||||||||||
Average homesale price | $ | 506,418 | $ | 486,343 | 4 | % | $ | 515,617 | $ | 487,781 | 6 | % | ||||||||||
Average homesale broker commission rate | 2.45 | % | 2.46 | % | (1 | ) bps | 2.45 | % | 2.47 | % | (2 | ) bps | ||||||||||
Gross commission income per side | $ | 13,142 | $ | 12,681 | 4 | % | $ | 13,358 | $ | 12,750 | 5 | % | ||||||||||
Cartus | ||||||||||||||||||||||
Initiations | 39,608 | 40,556 | (2 | %) | 126,921 | 129,290 | (2 | %) | ||||||||||||||
Referrals | 23,905 | 25,495 | (6 | %) | 64,392 | 68,526 | (6 | %) | ||||||||||||||
TRG | ||||||||||||||||||||||
Purchase title and closing units (b) | 43,764 | 42,932 | 2 | % | 122,069 | 116,082 | 5 | % | ||||||||||||||
Refinance title and closing units (c) | 6,513 | 15,170 | (57 | %) | 21,370 | 36,100 | (41 | %) | ||||||||||||||
Average fee per closing unit | $ | 2,115 | $ | 1,824 | 16 | % | $ | 2,092 | $ | 1,865 | 12 | % |
(a) | Includes all franchisees except for NRT. |
(b) | The amounts presented for the three and nine months ended September 30, 2017 include 3,325 and 8,351 purchase units, respectively, as a result of the acquisitions completed prior to the third quarter of 2017. |
(c) | The amounts presented for the three and nine months ended September 30, 2017 include 725 and 1,858 refinance units, respectively, as a result of the acquisitions completed prior to the third quarter of 2017. |
Quarter Ended | Year Ended | |||||||||||||||||||
March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | December 31, 2016 | ||||||||||||||||
RFG (a) | ||||||||||||||||||||
Closed homesale sides | 218,330 | 319,748 | 323,176 | 274,090 | 1,135,344 | |||||||||||||||
Average homesale price | $ | 259,044 | $ | 273,900 | $ | 275,325 | $ | 277,037 | $ | 272,206 | ||||||||||
Average homesale broker commission rate | 2.51 | % | 2.51 | % | 2.50 | % | 2.49 | % | 2.50 | % | ||||||||||
Net effective royalty rate | 4.51 | % | 4.49 | % | 4.50 | % | 4.34 | % | 4.46 | % | ||||||||||
Royalty per side | $ | 309 | $ | 319 | $ | 322 | $ | 313 | $ | 317 | ||||||||||
NRT | ||||||||||||||||||||
Closed homesale sides | 64,244 | 98,314 | 95,605 | 77,536 | 335,699 | |||||||||||||||
Average homesale price | $ | 493,125 | $ | 485,688 | $ | 486,343 | $ | 495,242 | $ | 489,504 | ||||||||||
Average homesale broker commission rate | 2.46 | % | 2.49 | % | 2.46 | % | 2.44 | % | 2.46 | % | ||||||||||
Gross commission income per side | $ | 12,878 | $ | 12,732 | $ | 12,681 | $ | 12,760 | $ | 12,752 | ||||||||||
Cartus | ||||||||||||||||||||
Initiations | 37,174 | 51,560 | 40,556 | 33,773 | 163,063 | |||||||||||||||
Referrals | 16,893 | 26,138 | 25,495 | 18,751 | 87,277 | |||||||||||||||
TRG | ||||||||||||||||||||
Purchase title and closing units (b) | 29,236 | 43,914 | 42,932 | 36,915 | 152,997 | |||||||||||||||
Refinance title and closing units (c) | 9,703 | 11,227 | 15,170 | 14,819 | 50,919 | |||||||||||||||
Average fee per closing unit | $ | 1,848 | $ | 1,919 | $ | 1,824 | $ | 1,907 | $ | 1,875 |
(a) | Includes all franchisees except for NRT. |
(b) | The amounts presented for the year ended December 31, 2016 include 18,930 purchase units as a result of acquisitions. |
(c) | The amounts presented for the year ended December 31, 2016 include 4,469 refinance units as a result of acquisitions. |
Three Months Ended | |||||||||||
March 31, 2017 | June 30, 2017 | September 30, 2017 | |||||||||
Net revenues (a) | |||||||||||
Real Estate Franchise Services | $ | 170 | $ | 237 | $ | 224 | |||||
Company Owned Real Estate Brokerage Services | 897 | 1,392 | 1,267 | ||||||||
Relocation Services | 77 | 102 | 111 | ||||||||
Title and Settlement Services | 120 | 157 | 154 | ||||||||
Corporate and Other | (61 | ) | (95 | ) | (82 | ) | |||||
Total Company | $ | 1,203 | $ | 1,793 | $ | 1,674 | |||||
EBITDA (b) | |||||||||||
Real Estate Franchise Services | $ | 102 | $ | 166 | $ | 159 | |||||
Company Owned Real Estate Brokerage Services | (26 | ) | 77 | 62 | |||||||
Relocation Services | 1 | 27 | 37 | ||||||||
Title and Settlement Services | 2 | 26 | 21 | ||||||||
Corporate and Other | (27 | ) | (18 | ) | (25 | ) | |||||
Total Company | $ | 52 | $ | 278 | $ | 254 | |||||
Non-GAAP Reconciliation - EBITDA | |||||||||||
Total Company EBITDA | $ | 52 | $ | 278 | $ | 254 | |||||
Less: Depreciation and amortization (c) | 50 | 49 | 51 | ||||||||
Interest expense, net | 39 | 47 | 41 | ||||||||
Income tax expense (benefit) | (9 | ) | 73 | 67 | |||||||
Net income (loss) attributable to Realogy Holdings | $ | (28 | ) | $ | 109 | $ | 95 |
(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 $61 million, $95 million and $82 million for the three months ended March 31, 2017, June 30, 2017, and September 30, 2017, respectively. Such amounts are eliminated through the Corporate and Other line. |
(b) | Includes restructuring charges of $5 million in the Company Owned Real Estate Brokerage Services segment and $4 million related to the loss on the early extinguishment of debt in Corporate and Other for the three months ended March 31, 2017. |
(c) | Depreciation and amortization for the three months ended September 30, 2017 includes $1 million of amortization expense related to Guaranteed Rate Affinity's purchase accounting included in the "Equity in earnings of unconsolidated entities" line on the Condensed Consolidated Statement of Operations. |
Three Months Ended | Year Ended | ||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | December 31, | |||||||||||||||
2016 | 2016 | 2016 | 2016 | 2016 | |||||||||||||||
Net revenues (a) | |||||||||||||||||||
Real Estate Franchise Services | $ | 157 | $ | 221 | $ | 215 | $ | 188 | $ | 781 | |||||||||
Company Owned Real Estate Brokerage Services | 841 | 1,268 | 1,231 | 1,004 | 4,344 | ||||||||||||||
Relocation Services | 83 | 109 | 116 | 97 | 405 | ||||||||||||||
Title and Settlement Services | 111 | 149 | 164 | 149 | 573 | ||||||||||||||
Corporate and Other | (58 | ) | (85 | ) | (82 | ) | (68 | ) | (293 | ) | |||||||||
Total Company | $ | 1,134 | $ | 1,662 | $ | 1,644 | $ | 1,370 | $ | 5,810 | |||||||||
EBITDA (b) | |||||||||||||||||||
Real Estate Franchise Services | $ | 92 | $ | 149 | $ | 153 | $ | 122 | $ | 516 | |||||||||
Company Owned Real Estate Brokerage Services | (21 | ) | 78 | 74 | 6 | 137 | |||||||||||||
Relocation Services | 5 | 29 | 40 | 22 | 96 | ||||||||||||||
Title and Settlement Services | — | 26 | 23 | 13 | 62 | ||||||||||||||
Corporate and Other | (21 | ) | (19 | ) | (20 | ) | (18 | ) | (78 | ) | |||||||||
Total Company | $ | 55 | $ | 263 | $ | 270 | $ | 145 | $ | 733 | |||||||||
Non-GAAP Reconciliation - EBITDA | |||||||||||||||||||
Total Company EBITDA | 55 | 263 | 270 | 145 | 733 | ||||||||||||||
Less: Depreciation and amortization (c) | 48 | 48 | 53 | 53 | 202 | ||||||||||||||
Interest expense, net | 73 | 59 | 37 | 5 | 174 | ||||||||||||||
Income tax expense (benefit) | (24 | ) | 64 | 74 | 30 | 144 | |||||||||||||
Net income (loss) attributable to Realogy Holdings | $ | (42 | ) | $ | 92 | $ | 106 | $ | 57 | $ | 213 |
(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, $82 million and $68 million for the three months ended March 31, 2016, June 30, 2016, September 30, 2016 and December 31, 2016, respectively. Such amounts are eliminated through the Corporate and Other line. |
(b) | Includes a net cost of $1 million and a net benefit of $3 million of former parent legacy items for the three months ended March 31, 2016 and December 31, 2016, respectively. |
Three Months Ended | Year Ended | ||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | December 31, | |||||||||||||||
2016 | 2016 | 2016 | 2016 | 2016 | |||||||||||||||
Real Estate Franchise Services | $ | — | $ | 3 | $ | 1 | $ | — | $ | 4 | |||||||||
Company Owned Real Estate Brokerage Services | 2 | 7 | 6 | 7 | 22 | ||||||||||||||
Relocation Services | 2 | 1 | 1 | — | 4 | ||||||||||||||
Title and Settlement Services | — | — | 1 | — | 1 | ||||||||||||||
Corporate and Other | 6 | 1 | — | (1 | ) | 6 | |||||||||||||
Total Company | $ | 10 | $ | 12 | $ | 9 | $ | 6 | $ | 37 |
Three Months Ended | |||||||
September 30, 2017 | September 30, 2016 | ||||||
Net income attributable to Realogy | $ | 95 | $ | 106 | |||
Income tax expense | 67 | 74 | |||||
Income before income taxes | 162 | 180 | |||||
Interest expense, net | 41 | 37 | |||||
Depreciation and amortization (a) | 51 | 53 | |||||
EBITDA | 254 | 270 | |||||
EBITDA adjustments: | |||||||
Restructuring costs | 2 | 9 | |||||
Former parent legacy cost, net | 1 | — | |||||
Loss on the early extinguishment of debt | 1 | — | |||||
Operating EBITDA | $ | 258 | $ | 279 |
(a) | Depreciation and amortization for the three months ended September 30, 2017 includes $1 million of amortization expense related to Guaranteed Rate Affinity's purchase accounting included in the "Equity in earnings of unconsolidated entities" line on the Condensed Consolidated Statement of Operations. |
Revenues | Operating EBITDA | Operating EBITDA Margin | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | Change | % Change | 2017 | 2016 | Change | % Change | 2017 | 2016 | Change | ||||||||||||||||||||||||||||
RFG | $ | 224 | $ | 215 | $ | 9 | 4 | % | $ | 159 | $ | 154 | $ | 5 | 3 | % | 71 | % | 72 | % | (1 | ) | ||||||||||||||||
NRT | 1,267 | 1,231 | 36 | 3 | 64 | 80 | (16 | ) | (20 | ) | 5 | 6 | (1 | ) | ||||||||||||||||||||||||
Cartus | 111 | 116 | (5 | ) | (4 | ) | 37 | 41 | (4 | ) | (10 | ) | 33 | 35 | (2 | ) | ||||||||||||||||||||||
TRG | 154 | 164 | (10 | ) | (6 | ) | 21 | 24 | (3 | ) | (13 | ) | 14 | 15 | (1 | ) | ||||||||||||||||||||||
Corporate and Other | (82 | ) | (82 | ) | — | * | (23 | ) | (20 | ) | (3 | ) | * | |||||||||||||||||||||||||
Total Company | $ | 1,674 | $ | 1,644 | $ | 30 | 2 | % | $ | 258 | $ | 279 | $ | (21 | ) | (8 | %) | 15 | % | 17 | % | (2 | ) | |||||||||||||||
Less: Restructuring costs | 2 | 9 | ||||||||||||||||||||||||||||||||||||
Former parent legacy cost, net | 1 | — | ||||||||||||||||||||||||||||||||||||
Loss on the early extinguishment of debt | 1 | — | ||||||||||||||||||||||||||||||||||||
Depreciation and amortization (a) | 51 | 53 | ||||||||||||||||||||||||||||||||||||
Interest expense, net | 41 | 37 | ||||||||||||||||||||||||||||||||||||
Income tax expense | 67 | 74 | ||||||||||||||||||||||||||||||||||||
Net income attributable to Realogy Holdings | $ | 95 | $ | 106 |
* | not meaningful. |
(a) | Depreciation and amortization for the three months ended September 30, 2017 includes $1 million of amortization expense related to Guaranteed Rate Affinity's purchase accounting included in the "Equity in earnings of unconsolidated entities" line on the Condensed Consolidated Statement of Operations. |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
Net income attributable to Realogy Holdings | $ | 95 | $ | 106 | $ | 176 | $ | 156 | |||||||
Income tax expense, net of payments | 65 | 68 | 121 | 101 | |||||||||||
Interest expense, net | 41 | 37 | 127 | 169 | |||||||||||
Cash interest payments | (25 | ) | (31 | ) | (111 | ) | (117 | ) | |||||||
Depreciation and amortization | 50 | 53 | 149 | 149 | |||||||||||
Capital expenditures | (21 | ) | (21 | ) | (69 | ) | (61 | ) | |||||||
Restructuring costs and former parent legacy items, net of payments | (1 | ) | (1 | ) | (19 | ) | 4 | ||||||||
Loss on the early extinguishment of debt | 1 | — | 5 | — | |||||||||||
Working capital adjustments | 16 | 11 | 28 | (38 | ) | ||||||||||
Relocation receivables (assets), net of securitization obligations | 28 | 40 | (1 | ) | (5 | ) | |||||||||
Free Cash Flow | $ | 249 | $ | 262 | $ | 406 | $ | 358 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
Net cash provided by operating activities | $ | 258 | $ | 308 | $ | 444 | $ | 411 | |||||||
Property and equipment additions | (21 | ) | (21 | ) | (69 | ) | (61 | ) | |||||||
Net change in securitization | 11 | (25 | ) | 29 | 9 | ||||||||||
Effect of exchange rates on cash and cash equivalents | 1 | — | 2 | (1 | ) | ||||||||||
Free Cash Flow | $ | 249 | $ | 262 | $ | 406 | $ | 358 | |||||||
Net cash used in investing activities | $ | (40 | ) | $ | (105 | ) | $ | (96 | ) | $ | (163 | ) | |||
Net cash used in financing activities | $ | (90 | ) | $ | (402 | ) | $ | (276 | ) | $ | (438 | ) |
Less | Equals | Plus | Equals | ||||||||||||||||
Year Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | Twelve Months Ended | |||||||||||||||
December 31, 2016 | September 30, 2016 | December 31, 2016 | September 30, 2017 | September 30, 2017 | |||||||||||||||
Net income attributable to Realogy Group (a) | $ | 213 | $ | 156 | $ | 57 | $ | 176 | $ | 233 | |||||||||
Income tax expense | 144 | 114 | 30 | 131 | 161 | ||||||||||||||
Income before income taxes | 357 | 270 | 87 | 307 | 394 | ||||||||||||||
Interest expense, net | 174 | 169 | 5 | 127 | 132 | ||||||||||||||
Depreciation and amortization (b) | 202 | 149 | 53 | 150 | 203 | ||||||||||||||
EBITDA (c) | 733 | 588 | 145 | 584 | 729 | ||||||||||||||
EBITDA adjustments: | |||||||||||||||||||
Restructuring costs | 18 | ||||||||||||||||||
Former parent legacy benefit, net | (13 | ) | |||||||||||||||||
Loss on the early extinguishment of debt | 5 | ||||||||||||||||||
Operating EBITDA | 739 | ||||||||||||||||||
Bank covenant adjustments: | |||||||||||||||||||
Pro forma effect of business optimization initiatives (d) | 25 | ||||||||||||||||||
Non-cash charges (e) | 43 | ||||||||||||||||||
Pro forma effect of acquisitions and new franchisees (f) | 7 | ||||||||||||||||||
Incremental securitization interest costs (g) | 3 | ||||||||||||||||||
EBITDA as defined by the Senior Secured Credit Facility | $ | 817 | |||||||||||||||||
Total senior secured net debt (h) | $ | 1,773 | |||||||||||||||||
Senior secured leverage ratio | 2.17 | x |
(a) | Net income attributable to Realogy consists of: (i) income of $57 million for the fourth quarter of 2016, (ii) a loss of $28 million for the first quarter of 2017, (iii) income of $109 million for the second quarter of 2017, and (iv) income of $95 million for the third quarter of 2017. |
(b) | Depreciation and amortization for the nine months ended September 30, 2017 includes $1 million of amortization expense related to Guaranteed Rate Affinity's purchase accounting included in the "Equity in earnings of unconsolidated entities" line on the Condensed Consolidated Statement of Operations. |
(c) | EBITDA consists of: (i) $145 million for the fourth quarter of 2016, (ii) $52 million for the first quarter of 2017, (iii) $278 million for the second quarter of 2017 and (iv) $254 million for the third quarter of 2017. |
(d) | Represents the twelve-month pro forma effect of business optimization initiatives. |
(e) | Represents the elimination of non-cash expenses, including $56 million of stock-based compensation expense less $12 million for the change in the allowance for doubtful accounts and notes reserves and $1 million of other items from October 1, 2016 through September 30, 2017. |
(f) | Represents the estimated impact of acquisitions and franchise sales activity, net of brokerages that exited our franchise system as if these changes had occurred on October 1, 2016. Franchisee sales activity is comprised of new franchise agreements as well as growth through acquisitions and independent sales associate recruitment by existing franchisees with our assistance. We have made a number of assumptions in calculating such estimates 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 October 1, 2016. |
(g) | Incremental borrowing costs incurred as a result of the securitization facilities refinancing for the twelve months ended September 30, 2017. |
(h) | Represents total borrowings under the Senior Secured Credit Facility and borrowings secured by a first priority lien on our assets of $2,017 million plus $28 million of capital lease obligations less $272 million of readily available cash as of September 30, 2017. Pursuant to the terms of our Senior Secured Credit Facility and Term Loan A Facility, total senior secured net debt does not include our securitization obligations or unsecured indebtedness, including the Unsecured Notes. |
As of September 30, 2017 | ||||
Revolver | 190 | |||
Term Loan A | 397 | |||
Term Loan A-1 | 344 | |||
Term Loan B | 1,086 | |||
Senior Notes | 450 | |||
Senior Notes | 550 | |||
Senior Notes | 500 | |||
Total Debt (excluding securitizations) | $3,517 | |||
Less: Cash and Cash Equivalents | $348 | |||
Net Corporate Debt | $3,169 | |||
EBITDA as defined by the Senior Secured Credit Facility | $ | 817 | ||
Net Debt Leverage Ratio | 3.9 | x |
• | 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. |
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