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 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Item 5.07. | Submission of Matters to a Vote of Security Holders. |
Director Nominee | Votes For | Votes Against | Abstain | Broker Non-Votes | ||||||||
Fiona P. Dias | 115,310,339 | 341,102 | 609,348 | 5,416,828 | ||||||||
Matthew J. Espe | 115,544,592 | 91,271 | 624,926 | 5,416,828 | ||||||||
V. Ann Hailey | 108,095,034 | 7,556,562 | 609,193 | 5,416,828 | ||||||||
Duncan L. Niederauer | 115,504,539 | 104,367 | 651,883 | 5,416,828 | ||||||||
Ryan M. Schneider | 115,591,351 | 61,776 | 607,662 | 5,416,828 | ||||||||
Sherry M. Smith | 114,579,713 | 1,072,109 | 608,967 | 5,416,828 | ||||||||
Christopher S. Terrill | 115,590,494 | 60,944 | 609,351 | 5,416,828 | ||||||||
Michael J. Williams | 115,473,476 | 177,912 | 609,401 | 5,416,828 |
Votes For | Votes Against | Abstain | Broker Non-Votes | ||||||||
73,668,238 | 41,960,135 | 632,416 | 5,416,828 |
Votes For | Votes Against | Abstain | ||||||
120,647,998 | 405,972 | 623,647 |
Votes For | Votes Against | Abstain | Broker Non-Votes | ||||||||
80,557,063 | 35,613,241 | 90,485 | 5,416,828 |
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits |
Exhibit No. | Description | |
10.1 | Realogy Holdings Corp. 2018 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-8 filed on May 2, 2018). | |
99.1 | Press Release dated May 3, 2018. |
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 |
• | Revenue was $1.2 billion, an increase of 2% compared with the first quarter in 2017, driven by increases in homesale transaction volume (transaction sides multiplied by average sale price). |
• | The Company's combined homesale transaction volume increased 4% compared with the first quarter of 2017, consisting of a 5% volume gain at RFG and a 2% volume gain at NRT. For reference, the National Association of Realtors reported an annual industry volume increase of 2% in the first quarter of 2018. |
• | Operating EBITDA was $34 million, consistent with our guidance for the first quarter of 2018. |
• | Net loss was $67 million compared with net loss of $28 million in the first quarter of 2017. Basic loss per share was $0.51 compared with basic loss per share of $0.20 in the first quarter of 2017. The Net Loss was driven by lower Operating EBITDA and includes a $30 million restructuring charge. |
• | Adjusted net loss per share was $0.38 compared with adjusted net loss per share of $0.16 in the first quarter of 2017. (See Table 1a)1 |
• | Free Cash Flow for the first quarter of 2018 was negative $166 million compared with negative $72 million for the first quarter of 2017. In addition to the change in Operating EBITDA, the results reflected greater seasonal working capital adjustments than last year. (See Table 6)3 |
• | In the first quarter of 2018, Realogy returned $111 million of capital to stockholders through share repurchases and dividends. |
Investor Contacts: | Media Contact: | |
Alicia Swift | Nick Renda | |
(973) 407-4669 | (973) 407-7470 | |
alicia.swift@realogy.com | nick.renda@realogy.com | |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Revenues | |||||||
Gross commission income | $ | 902 | $ | 881 | |||
Service revenue | 197 | 194 | |||||
Franchise fees | 79 | 75 | |||||
Other | 51 | 53 | |||||
Net revenues | 1,229 | 1,203 | |||||
Expenses | |||||||
Commission and other agent-related costs | 645 | 605 | |||||
Operating | 392 | 383 | |||||
Marketing | 67 | 62 | |||||
General and administrative | 89 | 89 | |||||
Restructuring costs, net | 30 | 5 | |||||
Depreciation and amortization | 48 | 50 | |||||
Interest expense, net | 33 | 39 | |||||
Loss on the early extinguishment of debt | 7 | 4 | |||||
Total expenses | 1,311 | 1,237 | |||||
Loss before income taxes, equity in losses and noncontrolling interests | (82 | ) | (34 | ) | |||
Income tax benefit | (19 | ) | (9 | ) | |||
Equity in losses of unconsolidated entities | 4 | 3 | |||||
Net loss | (67 | ) | (28 | ) | |||
Less: Net income attributable to noncontrolling interests | — | — | |||||
Net loss attributable to Realogy Holdings | $ | (67 | ) | $ | (28 | ) | |
Loss per share attributable to Realogy Holdings: | |||||||
Basic loss per share | $ | (0.51 | ) | $ | (0.20 | ) | |
Diluted loss per share | $ | (0.51 | ) | $ | (0.20 | ) | |
Weighted average common and common equivalent shares of Realogy Holdings outstanding: | |||||||
Basic | 130.3 | 139.7 | |||||
Diluted | 130.3 | 139.7 | |||||
Cash dividends declared per share | $ | 0.09 | $ | 0.09 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Net loss attributable to Realogy Holdings | $ | (67 | ) | $ | (28 | ) | |
Addback: | |||||||
Mark-to-market interest rate swap gains | (12 | ) | (1 | ) | |||
Restructuring costs, net | 30 | 5 | |||||
Loss on the early extinguishment of debt | 7 | 4 | |||||
Adjustments for tax effect (a) | (7 | ) | (3 | ) | |||
Adjusted net loss attributable to Realogy Holdings | $ | (49 | ) | $ | (23 | ) | |
Loss per share | |||||||
Basic loss per share: | $ | (0.51 | ) | $ | (0.20 | ) | |
Diluted loss per share: | $ | (0.51 | ) | $ | (0.20 | ) | |
Adjusted loss per share | |||||||
Adjusted basic loss per share: | $ | (0.38 | ) | $ | (0.16 | ) | |
Adjusted diluted loss per share: | $ | (0.38 | ) | $ | (0.16 | ) | |
Weighted average common and common equivalent shares outstanding: | |||||||
Basic: | 130.3 | 139.7 | |||||
Diluted: | 130.3 | 139.7 |
(a) | Reflects tax effect of adjustments at the Company's blended state and federal statutory rate. |
March 31, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 182 | $ | 227 | |||
Restricted cash | 6 | 7 | |||||
Trade receivables (net of allowance for doubtful accounts of $10 and $11) | 163 | 153 | |||||
Relocation receivables | 250 | 223 | |||||
Other current assets | 159 | 179 | |||||
Total current assets | 760 | 789 | |||||
Property and equipment, net | 281 | 289 | |||||
Goodwill | 3,711 | 3,710 | |||||
Trademarks | 749 | 749 | |||||
Franchise agreements, net | 1,277 | 1,294 | |||||
Other intangibles, net | 276 | 284 | |||||
Other non-current assets | 271 | 222 | |||||
Total assets | $ | 7,325 | $ | 7,337 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 139 | $ | 156 | |||
Securitization obligations | 184 | 194 | |||||
Current portion of long-term debt | 332 | 127 | |||||
Accrued expenses and other current liabilities | 426 | 478 | |||||
Total current liabilities | 1,081 | 955 | |||||
Long-term debt | 3,263 | 3,221 | |||||
Deferred income taxes | 291 | 327 | |||||
Other non-current liabilities | 262 | 212 | |||||
Total liabilities | 4,897 | 4,715 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
Realogy Holdings preferred stock: $.01 par value; 50,000,000 shares authorized, none issued and outstanding at March 31, 2018 and December 31, 2017 | — | — | |||||
Realogy Holdings common stock: $.01 par value; 400,000,000 shares authorized, 128,755,023 shares issued and outstanding at March 31, 2018 and 131,636,870 shares issued and outstanding at December 31, 2017 | 1 | 1 | |||||
Additional paid-in capital | 5,179 | 5,285 | |||||
Accumulated deficit | (2,711 | ) | (2,631 | ) | |||
Accumulated other comprehensive loss | (44 | ) | (37 | ) | |||
Total stockholders' equity | 2,425 | 2,618 | |||||
Noncontrolling interests | 3 | 4 | |||||
Total equity | 2,428 | 2,622 | |||||
Total liabilities and equity | $ | 7,325 | $ | 7,337 |
Three Months Ended March 31, | ||||||||||||
2018 | 2017 | % Change | ||||||||||
RFG (a) | ||||||||||||
Closed homesale sides | 223,990 | 225,250 | (1 | %) | ||||||||
Average homesale price | $ | 292,580 | $ | 275,828 | 6 | % | ||||||
Average homesale broker commission rate | 2.50 | % | 2.50 | % | — | |||||||
Net royalty per side (b) | $ | 310 | $ | 298 | 4 | % | ||||||
NRT | ||||||||||||
Closed homesale sides | 66,097 | 66,570 | (1 | %) | ||||||||
Average homesale price | $ | 525,020 | $ | 509,197 | 3 | % | ||||||
Average homesale broker commission rate | 2.45 | % | 2.45 | % | — | |||||||
Gross commission income per side | $ | 13,666 | $ | 13,261 | 3 | % | ||||||
Cartus | ||||||||||||
Initiations | 37,953 | — | 36,515 | 4 | % | |||||||
Referrals | 16,031 | 15,203 | 5 | % | ||||||||
TRG | ||||||||||||
Purchase title and closing units | 31,741 | 31,297 | 1 | % | ||||||||
Refinance title and closing units | 5,410 | 8,533 | (37 | %) | ||||||||
Average fee per closing unit | $ | 2,161 | $ | 2,001 | 8 | % |
(a) | Includes all franchisees except for NRT. |
(b) | Net royalty per side amounts include the effect of volume incentives and non-standard incentives granted to franchisees. The net royalty per side increase of 4% was below the average homesale price increase of 6% as a result of an increase in sales incentives primarily due to a shift in mix to our top 250 franchisees. |
Quarter Ended | Year Ended | ||||||||||||||||||||
March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | December 31, 2017 | |||||||||||||||||
RFG (a) | |||||||||||||||||||||
Closed homesale sides | 225,250 | 322,745 | 318,961 | 277,261 | 1,144,217 | ||||||||||||||||
Average homesale price | $ | 275,828 | $ | 291,355 | $ | 292,000 | $ | 293,216 | $ | 288,929 | |||||||||||
Average homesale broker commission rate | 2.50 | % | 2.50 | % | 2.49 | % | 2.49 | % | 2.50 | % | |||||||||||
Net royalty per side (b) | $ | 298 | $ | 316 | $ | 316 | $ | 316 | $ | 313 | |||||||||||
NRT | |||||||||||||||||||||
Closed homesale sides | 66,570 | 101,043 | 95,236 | 81,597 | 344,446 | ||||||||||||||||
Average homesale price | $ | 509,197 | $ | 528,518 | $ | 506,418 | $ | 511,683 | $ | 514,685 | |||||||||||
Average homesale broker commission rate | 2.45 | % | 2.44 | % | 2.45 | % | 2.44 | % | 2.44 | % | |||||||||||
Gross commission income per side | $ | 13,261 | $ | 13,625 | $ | 13,142 | $ | 13,152 | $ | 13,309 | |||||||||||
Cartus | |||||||||||||||||||||
Initiations | 36,515 | — | 50,798 | 39,608 | 34,834 | 161,755 | |||||||||||||||
Referrals | 15,203 | 25,284 | 23,905 | 19,286 | 83,678 | ||||||||||||||||
TRG | |||||||||||||||||||||
Purchase title and closing units (c) | 31,297 | 47,008 | 43,764 | 37,044 | 159,113 | ||||||||||||||||
Refinance title and closing units (d) | 8,533 | 6,324 | 6,513 | 7,194 | 28,564 | ||||||||||||||||
Average fee per closing unit | $ | 2,001 | $ | 2,139 | $ | 2,115 | $ | 2,092 | $ | 2,092 |
(a) | Includes all franchisees except for NRT. |
(b) | Net royalty per side amounts include the effect of volume incentives and non-standard incentives granted to franchisees. |
(c) | The amounts presented for the year ended December 31, 2017 include 8,351 purchase units as a result of acquisitions. |
(d) | The amounts presented for the year ended December 31, 2017 include 1,858 refinance units as a result of acquisitions. |
Three Months Ended | |||||||
March 31, 2018 | March 31, 2017 | ||||||
Net loss attributable to Realogy Holdings | $ | (67 | ) | $ | (28 | ) | |
Income tax benefit | (19 | ) | (9 | ) | |||
Loss before income taxes | (86 | ) | (37 | ) | |||
Depreciation and amortization (a) | 50 | 50 | |||||
Interest expense, net | 33 | 39 | |||||
Restructuring costs | 30 | 5 | |||||
Loss on the early extinguishment of debt | 7 | 4 | |||||
Operating EBITDA | $ | 34 | $ | 61 |
(a) | Depreciation and amortization for the three months ended March 31, 2018 includes $2 million of amortization expense related to Guaranteed Rate Affinity's purchase accounting included in the "Equity in losses of unconsolidated entities" line on the Condensed Consolidated Statement of Operations. |
Revenues (a) | $ Change | % Change | Operating EBITDA | $ Change | % Change | Margin | Change | |||||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||||||||||
RFG | $ | 176 | $ | 170 | $ | 6 | 4 | % | $ | 105 | $ | 102 | $ | 3 | 3 | % | 60 | % | 60 | % | — | |||||||||||||||||
NRT | 917 | 897 | 20 | 2 | (45 | ) | (21 | ) | (24 | ) | (114 | ) | (5 | ) | (2 | ) | (3 | ) | ||||||||||||||||||||
Cartus | 79 | 77 | 2 | 3 | (1 | ) | 1 | (2 | ) | * | (1 | ) | 1 | (2 | ) | |||||||||||||||||||||||
TRG | 120 | 120 | — | — | (6 | ) | 2 | (8 | ) | * | (5 | ) | 2 | (7 | ) | |||||||||||||||||||||||
Corporate and Other | (63 | ) | (61 | ) | (2 | ) | * | (19 | ) | (23 | ) | 4 | * | |||||||||||||||||||||||||
Total Company | $ | 1,229 | $ | 1,203 | $ | 26 | 2 | % | $ | 34 | $ | 61 | $ | (27 | ) | (44 | %) | 3 | % | 5 | % | (2 | ) | |||||||||||||||
Less: Depreciation and amortization (b) | 50 | 50 | ||||||||||||||||||||||||||||||||||||
Interest expense, net | 33 | 39 | ||||||||||||||||||||||||||||||||||||
Income tax benefit | (19 | ) | (9 | ) | ||||||||||||||||||||||||||||||||||
Restructuring costs (c) | 30 | 5 | ||||||||||||||||||||||||||||||||||||
Loss on the early extinguishment of debt (d) | 7 | 4 | ||||||||||||||||||||||||||||||||||||
Net loss attributable to Realogy Holdings | $ | (67 | ) | $ | (28 | ) |
* | not meaningful. |
(a) | Includes the elimination of transactions between segments, which consists of intercompany royalties and marketing fees paid by NRT of $63 million and $61 million during the three months ended March 31, 2018 and 2017, respectively. |
(b) | Depreciation and amortization for the three months ended March 31, 2018 includes $2 million of amortization expense related to Guaranteed Rate Affinity's purchase accounting included in the "Equity in losses of unconsolidated entities" line on the Condensed Consolidated Statement of Operations. |
(c) | Restructuring charges incurred for the three months ended March 31, 2018 include $2 million at RFG, $17 million at NRT, $8 million at Cartus, $1 million at TRG and $2 million at Corporate and Other. Restructuring charges incurred for the three months ended March 31, 2017 include $5 million at NRT. |
(d) | Loss on the early extinguishment of debt is recorded in the Corporate and Other segment. |
Three Months Ended | |||
March 31, | |||
2018 | |||
Net revenues (a) | |||
Real Estate Franchise Services | $ | 176 | |
Company Owned Real Estate Brokerage Services | 917 | ||
Relocation Services | 79 | ||
Title and Settlement Services | 120 | ||
Corporate and Other | (63 | ) | |
Total Company | $ | 1,229 | |
Operating EBITDA | |||
Real Estate Franchise Services | $ | 105 | |
Company Owned Real Estate Brokerage Services | (45 | ) | |
Relocation Services | (1 | ) | |
Title and Settlement Services | (6 | ) | |
Corporate and Other | (19 | ) | |
Total Company | $ | 34 | |
Non-GAAP Reconciliation - Operating EBITDA | |||
Total Company Operating EBITDA | $ | 34 | |
Less: Depreciation and amortization (b) | 50 | ||
Interest expense, net | 33 | ||
Income tax benefit | (19 | ) | |
Restructuring costs (c) | 30 | ||
Loss on the early extinguishment of debt (d) | 7 | ||
Net loss attributable to Realogy Holdings | $ | (67 | ) |
(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 $63 million for the three months ended March 31, 2018. Such amounts are eliminated through the Corporate and Other line. |
(b) | Depreciation and amortization for the three months ended March 31, 2018 includes $2 million of amortization expense related to our mortgage origination joint venture Guaranteed Rate Affinity's purchase accounting included in the "Equity in losses of unconsolidated entities" line on the Condensed Consolidated Statement of Operations. |
(c) | Includes restructuring charges broken down by business unit as follows: |
Three Months Ended | |||
March 31, | |||
2018 | |||
Real Estate Franchise Services | $ | 2 | |
Company Owned Real Estate Brokerage Services | 17 | ||
Relocation Services | 8 | ||
Title and Settlement Services | 1 | ||
Corporate and Other | 2 | ||
Total Company | $ | 30 |
(d) | Loss on the early extinguishment of debt is recorded in the Corporate and Other segment. |
Three Months Ended | Year Ended | ||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | December 31, | |||||||||||||||
2017 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
Net revenues (a) | |||||||||||||||||||
Real Estate Franchise Services | $ | 170 | $ | 237 | $ | 224 | $ | 199 | $ | 830 | |||||||||
Company Owned Real Estate Brokerage Services | 897 | 1,392 | 1,267 | 1,087 | 4,643 | ||||||||||||||
Relocation Services | 77 | 102 | 111 | 92 | 382 | ||||||||||||||
Title and Settlement Services | 120 | 157 | 154 | 139 | 570 | ||||||||||||||
Corporate and Other | (61 | ) | (95 | ) | (82 | ) | (73 | ) | (311 | ) | |||||||||
Total Company | $ | 1,203 | $ | 1,793 | $ | 1,674 | $ | 1,444 | $ | 6,114 | |||||||||
Operating EBITDA (b) | |||||||||||||||||||
Real Estate Franchise Services | $ | 102 | $ | 167 | $ | 159 | $ | 132 | $ | 560 | |||||||||
Company Owned Real Estate Brokerage Services | (21 | ) | 78 | 64 | 14 | 135 | |||||||||||||
Relocation Services | 1 | 27 | 37 | 20 | 85 | ||||||||||||||
Title and Settlement Services | 2 | 26 | 21 | 10 | 59 | ||||||||||||||
Corporate and Other | (23 | ) | (29 | ) | (23 | ) | (32 | ) | (107 | ) | |||||||||
Total Company | $ | 61 | $ | 269 | $ | 258 | $ | 144 | $ | 732 | |||||||||
Non-GAAP Reconciliation - Operating EBITDA | |||||||||||||||||||
Total Company Operating EBITDA | 61 | 269 | 258 | 144 | 732 | ||||||||||||||
Less: Depreciation and amortization (c) | 50 | 49 | 51 | 51 | 201 | ||||||||||||||
Interest expense, net | 39 | 47 | 41 | 31 | 158 | ||||||||||||||
Income tax (benefit) expense | (9 | ) | 73 | 67 | (196 | ) | (65 | ) | |||||||||||
Restructuring costs (d) | 5 | 2 | 2 | 3 | 12 | ||||||||||||||
Former parent legacy (benefit) cost, net (e) | — | (11 | ) | 1 | — | (10 | ) | ||||||||||||
Loss on the early extinguishment of debt (e) | 4 | — | 1 | — | 5 | ||||||||||||||
Net income (loss) attributable to Realogy Holdings | $ | (28 | ) | $ | 109 | $ | 95 | $ | 255 | $ | 431 |
(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, $82 million and $73 million for the three months ended March 31, 2017, June 30, 2017, September 30, 2017 and December 31, 2017, respectively. Such amounts are eliminated through the Corporate and Other line. |
(b) | Operating EBITDA includes an $8 million expense related to the settlement of the Strader legal matter for the three months ended June 30, 2017 and an $8 million expense related to the transition of the Company's CEO for the three months ended December 31, 2017. In addition, the Company believes that 2017 Operating EBITDA was also negatively impacted by an estimated $8 million due to natural disasters in the third and fourth quarters. |
(c) | Depreciation and amortization includes $1 million and $2 million for the three months ended September 30, 2017 and December 31, 2017, respectively, of amortization expense related to our mortgage origination joint venture Guaranteed Rate Affinity's purchase accounting included in the "Equity in earnings of unconsolidated entities" line on the Consolidated Statement of Operations in our Annual Report on Form 10-K for the year ended December 31, 2017. |
(d) | Includes restructuring charges broken down by business unit as follows: |
Three Months Ended | Year Ended | ||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | December 31, | |||||||||||||||
2017 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
Real Estate Franchise Services | $ | — | $ | 1 | $ | — | $ | — | $ | 1 | |||||||||
Company Owned Real Estate Brokerage Services | 5 | 1 | 2 | 1 | 9 | ||||||||||||||
Relocation Services | — | — | — | — | — | ||||||||||||||
Title and Settlement Services | — | — | — | 1 | 1 | ||||||||||||||
Corporate and Other | — | — | — | 1 | 1 | ||||||||||||||
Total Company | $ | 5 | $ | 2 | $ | 2 | $ | 3 | $ | 12 |
(e) | Former parent legacy items and losses on the early extinguishment of debt are recorded in the Corporate and Other segment. |
Three Months Ended | |||||||
2018 | 2017 | ||||||
Net loss attributable to Realogy Holdings | $ | (67 | ) | $ | (28 | ) | |
Income tax benefit, net of payments | (23 | ) | (11 | ) | |||
Interest expense, net | 33 | 39 | |||||
Cash interest payments | (21 | ) | (24 | ) | |||
Depreciation and amortization | 48 | 50 | |||||
Capital expenditures | (25 | ) | (28 | ) | |||
Restructuring costs and former parent legacy items, net of payments | 19 | (3 | ) | ||||
Loss on the early extinguishment of debt | 7 | 4 | |||||
Working capital adjustments | (99 | ) | (60 | ) | |||
Relocation receivables (assets), net of securitization obligations | (38 | ) | (11 | ) | |||
Free Cash Flow | $ | (166 | ) | $ | (72 | ) |
Three Months Ended | |||||||
2018 | 2017 | ||||||
Net cash used in operating activities | $ | (130 | ) | $ | (12 | ) | |
Property and equipment additions | (25 | ) | (28 | ) | |||
Net change in securitization | (11 | ) | (33 | ) | |||
Effect of exchange rates on cash and cash equivalents | — | 1 | |||||
Free Cash Flow | $ | (166 | ) | $ | (72 | ) | |
Net cash used in investing activities | $ | (9 | ) | $ | (33 | ) | |
Net cash provided by (used in) financing activities | $ | 93 | $ | (27 | ) |
Less | Equals | Plus | Equals | ||||||||||||||||
Year Ended | Three Months Ended | Nine Months Ended | Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, 2017 | March 31, 2017 | December 31, 2017 | March 31, 2018 | March 31, 2018 | |||||||||||||||
Net income (loss) attributable to Realogy Group (a) | $ | 431 | $ | (28 | ) | $ | 459 | $ | (67 | ) | $ | 392 | |||||||
Income tax benefit | (65 | ) | (9 | ) | (56 | ) | (19 | ) | (75 | ) | |||||||||
Income before income taxes | 366 | (37 | ) | 403 | (86 | ) | 317 | ||||||||||||
Depreciation and amortization (b) | 201 | 50 | 151 | 50 | 201 | ||||||||||||||
Interest expense, net | 158 | 39 | 119 | 33 | 152 | ||||||||||||||
Restructuring costs | 12 | 5 | 7 | 30 | 37 | ||||||||||||||
Former parent legacy benefit, net | (10 | ) | — | (10 | ) | — | (10 | ) | |||||||||||
Loss on the early extinguishment of debt | 5 | 4 | 1 | 7 | 8 | ||||||||||||||
Operating EBITDA (c) | $ | 732 | $ | 61 | $ | 671 | $ | 34 | 705 | ||||||||||
Bank covenant adjustments: | |||||||||||||||||||
Pro forma effect of business optimization initiatives (d) | 40 | ||||||||||||||||||
Non-cash charges (e) | 39 | ||||||||||||||||||
Pro forma effect of acquisitions and new franchisees (f) | 7 | ||||||||||||||||||
Incremental securitization interest costs (g) | 3 | ||||||||||||||||||
EBITDA as defined by the Senior Secured Credit Facilities | $ | 794 | |||||||||||||||||
Total senior secured net debt (h) | $ | 2,040 | |||||||||||||||||
Senior secured leverage ratio | 2.57 | x |
(a) | Net income (loss) attributable to Realogy consists of: (i) income of $109 million for the second quarter of 2017, (ii) income of $95 million for the third quarter of 2017, (iii) income of $255 million for the fourth quarter of 2017 and (iv) a loss of $67 million for the first quarter of 2018. |
(b) | Depreciation and amortization consists of: (i) $1 million for the third quarter of 2017, (ii) $2 million for the fourth quarter of 2017 and (iii) $2 million for the first quarter of 2018 of amortization expense related to Guaranteed Rate Affinity's purchase accounting included in the "Equity in losses of unconsolidated entities" line on the Condensed Consolidated Statement of Operations. |
(c) | Operating EBITDA consists of: (i) $269 million for the second quarter of 2017, (ii) $258 million for the third quarter of 2017, (iii) $144 million for the fourth quarter of 2017 and (iv) $34 million for the first quarter of 2018. |
(d) | Represents the twelve-month pro forma effect of business optimization initiatives. |
(e) | Represents the elimination of non-cash expenses, including $49 million of stock-based compensation expense less $10 million for the change in the allowance for doubtful accounts and notes reserves for the twelve months ended March 31, 2018. |
(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 April 1, 2017. Franchisee sales activity is comprised of new franchise agreements as well as growth through acquisitions and independent sales agent recruitment by existing franchisees with our assistance. We have made a number of |
(g) | Incremental borrowing costs incurred as a result of the securitization facilities refinancing for the twelve months ended March 31, 2018. |
(h) | Represents total borrowings under the senior secured credit facilities and borrowings secured by a first priority lien on our assets of $2,129 million plus $29 million of capital lease obligations less $118 million of readily available cash as of March 31, 2018. Pursuant to the terms of our senior secured credit facilities, total senior secured net debt does not include our securitization obligations or unsecured indebtedness, including the Unsecured Notes. |
* | Our senior secured credit facilities include the Amended and Restated Credit Agreement dated as of March 5, 2013, as amended, and the Term Loan A Agreement dated as of October 23, 2015, as amended, which was amended and restated in its entirety as of February 8, 2018. Our Unsecured Notes include our 4.50% Senior Notes due 2019, our 5.25% Senior Notes due 2021 and our 4.875% Senior Notes due 2023. |
As of March 31, 2018 | ||||
Revolver | $ | 302 | ||
Term Loan A | 750 | |||
Term Loan B | 1,077 | |||
Senior Notes | 450 | |||
Senior Notes | 550 | |||
Senior Notes | 500 | |||
Total Debt (excluding securitizations) | $ | 3,629 | ||
Less: Cash and Cash Equivalents | 182 | |||
Net Corporate Debt | $ | 3,447 | ||
EBITDA as defined by the Senior Secured Credit Facility | $ | 794 | ||
Net Debt Leverage Ratio | 4.3 | x |
• | this measure does not reflect changes in, or cash required for, our working capital needs; |
• | this measure does not reflect our interest expense (except for interest related to our securitization obligations), or the cash requirements necessary to service interest or principal payments on our debt; |
• | this measure does not reflect our income tax expense or the cash requirements to pay our taxes; |
• | this measure does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; |
• | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often require replacement in the future, and this measure does not reflect any cash requirements for such replacements; and |
• | other companies may calculate this measure differently so they may not be comparable. |
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