Price Graph
Price
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Realogy Holdings Corp.
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þ
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Realogy Group LLC
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Page
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PART I
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FINANCIAL INFORMATION
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 1.
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Item 2.
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Item 5.
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Item 6.
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•
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risks related to general business, economic, employment and political conditions and the U.S. residential real estate markets, either regionally or nationally, including but not limited to:
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◦
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a lack of improvement or a decline in the number of homesales, stagnant or declining home prices and/or a deterioration in other economic factors that particularly impact the residential real estate market and the business segments in which we operate;
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◦
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a decrease in consumer confidence;
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◦
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the impact of recessions, slow economic growth, disruptions in the U.S. government or banking system, disruptions in a major geoeconomic region, or equity or commodity markets and high levels of unemployment in the U.S. and abroad, which may impact all or a portion of the housing markets in which we and our franchisees operate;
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◦
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increasing mortgage rates and/or constraints on the availability of mortgage financing;
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◦
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legislative, tax or regulatory changes (including changes in regulatory interpretations or enforcement practices)that would adversely impact the residential real estate market, including changes relating to the Real Estate Settlement Procedures Act ("RESPA") and potential reforms of Fannie Mae and Freddie Mac, and potential tax code reform;
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◦
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continued or lengthier delays in homesale transaction closings that impact us or other industry participants resulting from the Consumer Financial Protection Bureau's rule relating to integrated mortgage disclosure forms, which became effective for new loan applications beginning October 3, 2015;
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◦
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a decrease in housing affordability;
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◦
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high levels of foreclosure activity;
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◦
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insufficient or excessive home inventory levels by market;
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◦
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changing attitudes towards home ownership, particularly among potential first-time homebuyers who may delay, or decide not to, purchase a home; and
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◦
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the inability or unwillingness of current homeowners to purchase their next home due to various factors, including limited or negative equity in their current home, difficult mortgage underwriting standards, attractive rates on existing mortgages and the lack of available inventory in their market;
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•
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our geographic and high-end market concentration, particularly with respect to our company owned brokerage operations;
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•
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our inability to enter into franchise agreements with new franchisees at current net effective royalty rates, or to realize royalty revenue growth from them;
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•
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our inability to renew existing franchise agreements at current net effective royalty rates, or to maintain or enhance our value proposition to franchisees, including but not limited to our ability to successfully develop, license and scale our ZAP
SM
technology to our franchisees;
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•
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the lack of revenue growth or declining profitability of our franchisees and company owned brokerage operations, including the impact of lower average broker commission rates;
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disputes or issues with entities that license us their tradenames for use in our business that could impede our franchising of those brands;
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actions by our franchisees that could harm our business or reputation, non-performance of our franchisees, controversies with our franchisees or actions against us by their independent sales associates or employees or third parties with which our franchisees have business relationships;
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increased competition whether through traditional competitors or competitors with alternative business models;
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competition for productive agents and manager talent—both at our franchisees and our company owned brokerage business—impacting the ability to attract and retain independent sales associates, either individually or as members of a team;
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loss or attrition among our senior executives or other key employees;
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we may be unable to achieve or maintain cost savings and other benefits from our restructuring activities;
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•
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our restructuring activities could have an adverse impact on our operations;
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our inability to realize the benefits from acquisitions due to the loss of key personnel of the acquired companies, as well as the possibility that expected benefits and synergies of the transactions may not be achieved in a timely manner or at all;
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our failure or alleged failure to comply with laws, regulations and regulatory interpretations and any changes in laws and regulations or stricter interpretations of regulatory requirements, including but not limited to (1) state or federal employment laws or regulations that would require reclassification of independent contractor sales associates to employee status; and (2) RESPA or state consumer protection or similar laws;
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any adverse resolution of litigation, governmental or regulatory proceedings or arbitration awards as well as any adverse impact of decisions to voluntarily modify business arrangements or enter into settlement agreements to avoid the risk of protracted and costly litigation or other proceedings;
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the general impact of emerging technologies on our business;
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our inability to obtain new technologies and systems, to replace or introduce new technologies and systems as quickly as our competitors and in a cost-effective manner or to achieve the benefits anticipated from new technologies or systems;
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the failure or significant disruption of our operations from various causes related to our critical information technologies and systems including cybersecurity threats to our data and customer, franchisee and independent sales associate data as well as reputational or financial risks associated with a loss of any such data;
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risks related to our international operations, including compliance with the Foreign Corrupt Practices Act and similar anti-corruption laws as well as risks relating to the master franchisor model that we deploy internationally;
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risks associated with our substantial indebtedness and interest obligations and restrictions contained in our debt agreements, including risks relating to having to dedicate a significant portion of our cash flows from operations to service our debt;
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•
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risks relating to our ability to refinance or repay our indebtedness, incur additional indebtedness or return capital to stockholders;
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changes in corporate relocation practices resulting in fewer employee relocations, reduced relocation benefits or the loss of one or more significant Affinity clients;
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an increase in the claims rate of our title underwriter and an increase in mortgage rates could adversely impact the revenue of our title and settlement services segment;
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our inability to securitize certain assets of our relocation business, which would require us to find an alternative source of liquidity that may not be available, or if available, may not be on favorable terms;
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risks that could materially adversely impact our equity investment in PHH Home Loans LLC, our joint venture with PHH Corporation ("PHH");
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any remaining resolutions or outcomes with respect to contingent liabilities of our former parent, Cendant Corporation ("Cendant"), under the Separation and Distribution Agreement and the Tax Sharing Agreement (each as described in our Annual Report on Form 10-K for the year ended December 31, 2015), including any adverse impact on our future cash flows; and
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new types of taxes or increases in state, local or federal taxes that could diminish profitability or liquidity.
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Three Months Ended
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Six Months Ended
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June 30,
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June 30,
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2016
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2015
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2016
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2015
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Revenues
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Gross commission income
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$
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1,251
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$
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1,278
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$
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2,077
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$
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2,059
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Service revenue
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252
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228
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442
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399
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Franchise fees
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104
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99
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173
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166
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Other
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55
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46
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104
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89
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Net revenues
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1,662
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1,651
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2,796
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2,713
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Expenses
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Commission and other agent-related costs
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864
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877
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1,422
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1,407
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Operating
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391
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366
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758
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708
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Marketing
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65
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59
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123
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115
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General and administrative
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70
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92
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156
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170
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Former parent legacy costs (benefit), net
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—
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(1
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1
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(1
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Restructuring costs
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12
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—
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21
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—
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Depreciation and amortization
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48
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52
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96
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98
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Interest expense, net
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59
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50
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132
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118
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Other income, net
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—
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(1
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—
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(1
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)
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Total expenses
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1,509
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1,494
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2,709
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2,614
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Income before income taxes, equity in earnings and noncontrolling interests
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153
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157
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87
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99
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Income tax expense
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64
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66
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40
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42
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Equity in earnings of unconsolidated entities
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(5
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)
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(7
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(5
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(9
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)
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Net income
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94
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98
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52
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66
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Less: Net income attributable to noncontrolling interests
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(2
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)
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(1
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)
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(2
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)
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(1
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)
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Net income attributable to Realogy Holdings and Realogy Group
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$
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92
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$
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97
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$
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50
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$
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65
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Earnings per share attributable to Realogy Holdings:
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Basic earnings per share
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$
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0.63
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$
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0.66
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$
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0.34
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$
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0.44
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Diluted earnings per share
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$
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0.63
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$
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0.66
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$
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0.34
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$
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0.44
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Weighted average common and common equivalent shares of Realogy Holdings outstanding:
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Basic
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145.5
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146.5
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146.0
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146.4
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||||
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Diluted
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146.7
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148.0
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147.2
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147.9
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||||
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Three Months Ended
|
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Six Months Ended
|
||||||||||||
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June 30,
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|
June 30,
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||||||||||||
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|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
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Net income
|
$
|
94
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$
|
98
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|
|
$
|
52
|
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$
|
66
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|
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Currency translation adjustment
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(3
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)
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|
2
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(3
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)
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—
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||||
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Defined benefit pension plan - amortization of actuarial loss to periodic pension cost
|
1
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—
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1
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—
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||||
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Other comprehensive income (loss), before tax
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(2
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)
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2
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(2
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)
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—
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||||
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Income tax expense related to items of other comprehensive income
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—
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—
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—
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—
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||||
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Other comprehensive income (loss), net of tax
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(2
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)
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|
2
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(2
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)
|
|
—
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||||
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Comprehensive income
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92
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|
|
100
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|
|
50
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|
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66
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||||
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Less: comprehensive income attributable to noncontrolling interests
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(2
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)
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(1
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)
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(2
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)
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(1
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)
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Comprehensive income attributable to Realogy Holdings and Realogy Group
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$
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90
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$
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99
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$
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48
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$
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65
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June 30,
2016 |
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December 31,
2015 |
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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423
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$
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415
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Trade receivables (net of allowance for doubtful accounts of $16 and $20)
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175
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141
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Relocation receivables
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356
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279
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Other current assets
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129
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126
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Total current assets
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1,083
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961
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Property and equipment, net
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250
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254
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Goodwill
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3,631
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3,618
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Trademarks
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745
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745
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Franchise agreements, net
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1,394
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1,428
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Other intangibles, net
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298
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316
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Other non-current assets
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229
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209
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||
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Total assets
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$
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7,630
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$
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7,531
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LIABILITIES AND EQUITY
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Current liabilities:
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Accounts payable
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$
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152
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$
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139
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Securitization obligations
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280
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|
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247
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Due to former parent
|
31
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31
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Current portion of long-term debt
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41
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740
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Accrued expenses and other current liabilities
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403
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448
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Total current liabilities
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907
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1,605
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Long-term debt
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3,691
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2,962
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Deferred income taxes
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299
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|
|
267
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|
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Other non-current liabilities
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309
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|
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275
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Total liabilities
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5,206
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|
|
5,109
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||
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Commitments and contingencies (Notes 8 and 10)
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Equity:
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||||
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Realogy Holdings preferred stock: $.01 par value; 50,000,000 shares authorized, none issued and outstanding at June 30, 2016 and December 31, 2015
|
—
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—
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Realogy Holdings common stock: $.01 par value; 400,000,000 shares authorized,
144,990,520
shares outstanding at June 30, 2016 and 146,746,537 shares outstanding at December 31, 2015
|
1
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|
|
1
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|
||
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Additional paid-in capital
|
5,687
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|
|
5,733
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|
||
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Accumulated deficit
|
(3,230
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)
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|
(3,280
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)
|
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Accumulated other comprehensive loss
|
(38
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)
|
|
(36
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)
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||
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Total stockholders' equity
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2,420
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|
|
2,418
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|
||
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Noncontrolling interests
|
4
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|
|
4
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|
||
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Total equity
|
2,424
|
|
|
2,422
|
|
||
|
Total liabilities and equity
|
$
|
7,630
|
|
|
$
|
7,531
|
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2016
|
|
2015
|
||||
|
Operating Activities
|
|
|
|
||||
|
Net income
|
$
|
52
|
|
|
$
|
66
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
|
Depreciation and amortization
|
96
|
|
|
98
|
|
||
|
Deferred income taxes
|
33
|
|
|
32
|
|
||
|
Amortization of deferred financing costs and discount
|
8
|
|
|
9
|
|
||
|
Equity in earnings of unconsolidated entities
|
(5
|
)
|
|
(9
|
)
|
||
|
Stock-based compensation
|
25
|
|
|
26
|
|
||
|
Mark-to-market adjustments on derivatives
|
45
|
|
|
10
|
|
||
|
Other adjustments to net income
|
(3
|
)
|
|
(1
|
)
|
||
|
Net change in assets and liabilities, excluding the impact of acquisitions and dispositions:
|
|
|
|
||||
|
Trade receivables
|
(33
|
)
|
|
(47
|
)
|
||
|
Relocation receivables
|
(79
|
)
|
|
(137
|
)
|
||
|
Other assets
|
(14
|
)
|
|
(9
|
)
|
||
|
Accounts payable, accrued expenses and other liabilities
|
(18
|
)
|
|
36
|
|
||
|
Due to former parent
|
1
|
|
|
(5
|
)
|
||
|
Dividends received from unconsolidated entities
|
1
|
|
|
6
|
|
||
|
Taxes paid related to net share settlement for stock-based compensation
|
(5
|
)
|
|
(3
|
)
|
||
|
Other, net
|
(6
|
)
|
|
1
|
|
||
|
Net cash provided by operating activities
|
98
|
|
|
73
|
|
||
|
Investing Activities
|
|
|
|
||||
|
Property and equipment additions
|
(40
|
)
|
|
(41
|
)
|
||
|
Payments for acquisitions, net of cash acquired
|
(15
|
)
|
|
(75
|
)
|
||
|
Change in restricted cash
|
1
|
|
|
(8
|
)
|
||
|
Other, net
|
(4
|
)
|
|
3
|
|
||
|
Net cash used in investing activities
|
(58
|
)
|
|
(121
|
)
|
||
|
Financing Activities
|
|
|
|
||||
|
Net change in revolving credit facilities
|
(200
|
)
|
|
—
|
|
||
|
Repayments of term loan facilities
|
(20
|
)
|
|
(10
|
)
|
||
|
Proceeds from issuance of Senior Notes
|
750
|
|
|
—
|
|
||
|
Redemption of Senior Notes
|
(500
|
)
|
|
—
|
|
||
|
Net change in securitization obligations
|
34
|
|
|
120
|
|
||
|
Debt issuance costs
|
(7
|
)
|
|
(1
|
)
|
||
|
Repurchase of common stock
|
(67
|
)
|
|
—
|
|
||
|
Proceeds from exercise of stock options
|
1
|
|
|
2
|
|
||
|
Payments of contingent consideration
|
(10
|
)
|
|
(5
|
)
|
||
|
Other, net
|
(12
|
)
|
|
(11
|
)
|
||
|
Net cash (used in) provided by financing activities
|
(31
|
)
|
|
95
|
|
||
|
Effect of changes in exchange rates on cash and cash equivalents
|
(1
|
)
|
|
(1
|
)
|
||
|
Net increase in cash and cash equivalents
|
8
|
|
|
46
|
|
||
|
Cash and cash equivalents, beginning of period
|
415
|
|
|
313
|
|
||
|
Cash and cash equivalents, end of period
|
$
|
423
|
|
|
$
|
359
|
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
|
||||
|
Interest payments (including securitization interest of $3 for both periods presented)
|
$
|
86
|
|
|
$
|
108
|
|
|
Income tax payments, net
|
7
|
|
|
5
|
|
||
|
1.
|
BASIS OF PRESENTATION
|
|
Level Input:
|
|
Input Definitions:
|
|
|
|
|
|
Level I
|
|
Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the
measurement date.
|
|
|
|
|
|
Level II
|
|
Inputs other than quoted prices included in Level I that are observable for the asset or liability through
corroboration with market data at the measurement date.
|
|
|
|
|
|
Level III
|
|
Unobservable inputs that reflect management’s best estimate of what market participants would use in
pricing the asset or liability at the measurement date.
|
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
|
Interest rate swaps (included in other non-current liabilities)
|
$
|
—
|
|
|
$
|
82
|
|
|
$
|
—
|
|
|
$
|
82
|
|
|
Deferred compensation plan assets
(included in other non-current assets)
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
|
Contingent consideration for acquisitions (included in accrued expenses and other current liabilities and non-current liabilities)
|
—
|
|
|
—
|
|
|
49
|
|
|
49
|
|
||||
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
|
Interest rate swaps (included in other non-current liabilities)
|
$
|
—
|
|
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
47
|
|
|
Deferred compensation plan assets
(included in other non-current assets)
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
|
Contingent consideration for acquisitions (included in accrued expenses and other current liabilities and non-current liabilities)
|
—
|
|
|
—
|
|
|
59
|
|
|
59
|
|
||||
|
|
|
Level III
|
||
|
Fair value of contingent consideration at December 31, 2015
|
|
$
|
59
|
|
|
Additions: contingent consideration related to acquisitions during the period
|
|
1
|
|
|
|
Reductions: payments of contingent consideration (reflected in the financing section of the Statement of Cash Flows)
|
|
(10
|
)
|
|
|
Changes in fair value (reflected in the Statement of Operations)
|
|
(1
|
)
|
|
|
Fair value of contingent consideration at June 30, 2016
|
|
$
|
49
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||||
|
Debt
|
Principal Amount
|
|
Estimated
Fair Value (a) |
|
Principal Amount
|
|
Estimated
Fair Value (a) |
||||||||
|
Senior Secured Credit Facility:
|
|
|
|
|
|
|
|
||||||||
|
Revolving Credit Facility
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
200
|
|
|
$
|
200
|
|
|
Term Loan B
|
1,858
|
|
|
1,853
|
|
|
1,867
|
|
|
1,849
|
|
||||
|
Term Loan A
|
424
|
|
|
415
|
|
|
435
|
|
|
426
|
|
||||
|
3.375% Senior Notes
|
—
|
|
|
—
|
|
|
500
|
|
|
500
|
|
||||
|
4.50% Senior Notes
|
450
|
|
|
462
|
|
|
450
|
|
|
464
|
|
||||
|
5.25% Senior Notes
|
550
|
|
|
564
|
|
|
300
|
|
|
308
|
|
||||
|
4.875% Senior Notes
|
500
|
|
|
494
|
|
|
—
|
|
|
—
|
|
||||
|
Securitization obligations
|
280
|
|
|
280
|
|
|
247
|
|
|
247
|
|
||||
|
(a)
|
The fair value of the Company's indebtedness is categorized as Level I.
|
|
Notional Value (in millions)
|
Commencement Date
|
Expiration Date
|
|
$225
|
July 2012
|
February 2018
|
|
$200
|
January 2013
|
February 2018
|
|
$600
|
August 2015
|
August 2020
|
|
$450
|
November 2017
|
November 2022
|
|
Liability Derivatives
|
|
Fair Value
|
||||||||
|
Not Designated as Hedging Instruments
|
|
Balance Sheet Location
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
|
Interest rate swap contracts
|
|
Other non-current liabilities
|
|
$
|
82
|
|
|
$
|
47
|
|
|
Derivative Instruments Not Designated as Hedging Instruments
|
|
Location of (Gain) or Loss Recognized for Derivative Instruments
|
|
(Gain) or Loss Recognized on Derivatives
|
||||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||||
|
Interest rate swap contracts
|
|
Interest expense
|
|
$
|
14
|
|
|
$
|
(3
|
)
|
|
$
|
45
|
|
|
$
|
11
|
|
|
Foreign exchange contracts
|
|
Operating expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||
|
2.
|
ACQUISITIONS
|
|
3.
|
INTANGIBLE ASSETS
|
|
|
Real Estate
Franchise
Services
|
|
Company
Owned
Brokerage
Services
|
|
Relocation
Services
|
|
Title and
Settlement
Services
|
|
Total
Company
|
||||||||||
|
Gross goodwill as of December 31, 2015
|
$
|
3,315
|
|
|
$
|
999
|
|
|
$
|
641
|
|
|
$
|
449
|
|
|
$
|
5,404
|
|
|
Accumulated impairment losses
|
(1,023
|
)
|
|
(158
|
)
|
|
(281
|
)
|
|
(324
|
)
|
|
(1,786
|
)
|
|||||
|
Balance at December 31, 2015
|
2,292
|
|
|
841
|
|
|
360
|
|
|
125
|
|
|
3,618
|
|
|||||
|
Goodwill acquired
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|||||
|
Balance at June 30, 2016
|
$
|
2,292
|
|
|
$
|
854
|
|
|
$
|
360
|
|
|
$
|
125
|
|
|
$
|
3,631
|
|
|
|
As of June 30, 2016
|
|
As of December 31, 2015
|
||||||||||||||||||||
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
||||||||||||
|
Amortizable—Franchise agreements (a)
|
$
|
2,019
|
|
|
$
|
625
|
|
|
$
|
1,394
|
|
|
$
|
2,019
|
|
|
$
|
591
|
|
|
$
|
1,428
|
|
|
Indefinite life—Trademarks (b)
|
$
|
745
|
|
|
|
|
$
|
745
|
|
|
$
|
745
|
|
|
|
|
$
|
745
|
|
||||
|
Other Intangibles
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Amortizable—License agreements (c)
|
$
|
45
|
|
|
$
|
9
|
|
|
$
|
36
|
|
|
$
|
45
|
|
|
$
|
8
|
|
|
$
|
37
|
|
|
Amortizable—Customer relationships (d)
|
530
|
|
|
297
|
|
|
233
|
|
|
530
|
|
|
284
|
|
|
246
|
|
||||||
|
Indefinite life—Title plant shares (e)
|
11
|
|
|
|
|
11
|
|
|
11
|
|
|
|
|
11
|
|
||||||||
|
Amortizable—Pendings and listings (f)
|
2
|
|
|
1
|
|
|
1
|
|
|
3
|
|
|
1
|
|
|
2
|
|
||||||
|
Amortizable—Other (g)
|
31
|
|
|
14
|
|
|
17
|
|
|
31
|
|
|
11
|
|
|
20
|
|
||||||
|
Total Other Intangibles
|
$
|
619
|
|
|
$
|
321
|
|
|
$
|
298
|
|
|
$
|
620
|
|
|
$
|
304
|
|
|
$
|
316
|
|
|
(b)
|
Primarily relates to the Century 21
®
, Coldwell Banker
®
, ERA
®
, Corcoran
®
, Coldwell Banker Commercial
®
and Cartus tradenames, which are expected to generate future cash flows for an indefinite period of time.
|
|
(c)
|
Relates to the Sotheby’s International Realty
®
and Better Homes and Gardens
®
Real Estate agreements which are being amortized over
50
years (the contractual term of the license agreements).
|
|
(d)
|
Relates to the customer relationships at the Relocation Services segment, the Title and Settlement Services segment and the Real Estate Franchise Services segment. These relationships are being amortized over a period of
2
to
20
years.
|
|
(e)
|
Primarily relates to the Texas American Title Company title plant shares. Ownership in a title plant is required to transact title insurance in certain states. The Company expects to generate future cash flows for an indefinite period of time.
|
|
(f)
|
Generally amortized over a period of
5 months
.
|
|
(g)
|
Consists of covenants not to compete which are amortized over their contract lives and other intangibles which are generally amortized over periods ranging from
5
to
10
years.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
Franchise agreements
|
$
|
17
|
|
|
$
|
16
|
|
|
$
|
34
|
|
|
$
|
33
|
|
|
License agreements
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
|
Customer relationships
|
6
|
|
|
7
|
|
|
13
|
|
|
14
|
|
||||
|
Pendings and listings
|
2
|
|
|
6
|
|
|
2
|
|
|
6
|
|
||||
|
Other
|
1
|
|
|
2
|
|
|
3
|
|
|
3
|
|
||||
|
Total
|
$
|
27
|
|
|
$
|
31
|
|
|
$
|
53
|
|
|
$
|
57
|
|
|
4.
|
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
|
Accrued payroll and related employee costs
|
$
|
100
|
|
|
$
|
140
|
|
|
Accrued volume incentives
|
24
|
|
|
34
|
|
||
|
Accrued commissions
|
44
|
|
|
29
|
|
||
|
Restructuring accruals
|
11
|
|
|
9
|
|
||
|
Deferred income
|
70
|
|
|
73
|
|
||
|
Accrued interest
|
18
|
|
|
13
|
|
||
|
Contingent consideration for acquisitions
|
20
|
|
|
27
|
|
||
|
Other
|
116
|
|
|
123
|
|
||
|
Total accrued expenses and other current liabilities
|
$
|
403
|
|
|
$
|
448
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
|
Senior Secured Credit Facility:
|
|
|
|
||||
|
Revolving Credit Facility
|
$
|
—
|
|
|
$
|
200
|
|
|
Term Loan B
|
1,833
|
|
|
1,839
|
|
||
|
Term Loan A
|
422
|
|
|
433
|
|
||
|
3.375% Senior Notes
|
—
|
|
|
499
|
|
||
|
4.50% Senior Notes
|
437
|
|
|
434
|
|
||
|
5.25% Senior Notes
|
544
|
|
|
297
|
|
||
|
4.875% Senior Notes
|
496
|
|
|
—
|
|
||
|
Total Short-Term & Long-Term Debt
|
$
|
3,732
|
|
|
$
|
3,702
|
|
|
Securitization obligations:
|
|
|
|
||||
|
Apple Ridge Funding LLC
|
$
|
269
|
|
|
$
|
238
|
|
|
Cartus Financing Limited
|
11
|
|
|
9
|
|
||
|
Total securitization obligations
|
$
|
280
|
|
|
$
|
247
|
|
|
|
Interest
Rate |
|
Expiration
Date |
|
Principal Amount
|
|
Unamortized Discount and Debt Issuance Costs
|
|
Net Amount
|
||||||
|
Senior Secured Credit Facility:
|
|
|
|
|
|
|
|
|
|
||||||
|
Revolving Credit Facility (1)
|
(2)
|
|
October 2020
|
|
$
|
—
|
|
|
$ *
|
|
|
$
|
—
|
|
|
|
Term Loan B
|
(3)
|
|
March 2020
|
|
1,858
|
|
|
25
|
|
|
1,833
|
|
|||
|
Term Loan A
|
(4)
|
|
October 2020
|
|
424
|
|
|
2
|
|
|
422
|
|
|||
|
Senior Notes
|
4.50%
|
|
April 2019
|
|
450
|
|
|
13
|
|
|
437
|
|
|||
|
Senior Notes
|
5.25%
|
|
December 2021
|
|
550
|
|
|
6
|
|
|
544
|
|
|||
|
Senior Notes
|
4.875%
|
|
June 2023
|
|
500
|
|
|
4
|
|
|
496
|
|
|||
|
Securitization obligations: (5)
|
|
|
|
|
|
|
|
|
|
||||||
|
Apple Ridge Funding LLC (6)
|
|
|
June 2017
|
|
269
|
|
|
*
|
|
|
269
|
|
|||
|
Cartus Financing Limited (7)
|
|
|
August 2016
|
|
11
|
|
|
*
|
|
|
11
|
|
|||
|
Total (8)
|
$
|
4,062
|
|
|
$
|
50
|
|
|
$
|
4,012
|
|
||||
|
*
|
The debt issuance costs related to our Revolving Credit Facility and securitization obligations are classified as a deferred asset within other assets.
|
|
(1)
|
As of
June 30, 2016
, the Company had
$815 million
of borrowing capacity under its Revolving Credit Facility. On
August 2, 2016
, the Company had
$225 million
outstanding borrowings on the Revolving Credit Facility, leaving
$590 million
of available capacity. The increase in outstanding borrowings compared to June 30, 2016 was a result of amending and reducing the borrowings under the Term Loan B in July 2016. See Note 12, "Subsequent Events" for a description of the transaction.
|
|
(2)
|
Interest rates with respect to revolving loans under the Senior Secured Credit Facility at
June 30, 2016
are based on, at the Company's option, (a) adjusted
LIBOR
plus an additional margin or (b)
ABR
plus an additional margin, in each case subject to adjustment based on the then current senior secured leverage ratio. Based on the previous quarter senior secured leverage ratio, the
LIBOR
margin was
2.00%
and the
ABR
margin was
1.00%
for the three months ended
June 30, 2016
.
|
|
(3)
|
The Term Loan B provides for quarterly amortization payments totaling
1%
per annum of the original principal amount. The interest rate with respect to term loans under the Term Loan B is based on, at the Company’s option, (a) adjusted
LIBOR
plus
3.00%
(with a
LIBOR
floor of
0.75%
) or (b) JPMorgan Chase Bank, N.A.’s prime rate ("
ABR
") plus
2.00%
(with an
ABR
floor of
1.75%
).
|
|
(4)
|
The Term Loan A provides for quarterly amortization payments, which commenced March 31, 2016, totaling per annum
5%
,
5%
,
7.5%
,
10.0%
and
12.5%
of the original principal amount of the Term Loan A in 2016, 2017, 2018, 2019 and 2020, respectively. The interest rates with respect to term loans under the Term Loan A Facility are based on, at the Company's option, (a) adjusted
LIBOR
plus an additional margin or (b)
ABR
plus an additional margin, in each case subject to adjustment based on the then current senior secured leverage ratio. Based on the previous quarter senior secured leverage ratio, the
LIBOR
margin was
2.00%
and the
ABR
margin was
1.00%
for the three months ended
June 30, 2016
.
|
|
(5)
|
Available capacity is subject to maintaining sufficient relocation related assets to collateralize these securitization obligations.
|
|
(6)
|
In June 2016, Realogy Group extended the existing Apple Ridge Funding LLC securitization program utilized by Cartus until June 2017. As of
June 30, 2016
, the Company had
$325 million
of borrowing capacity under the Apple Ridge Funding LLC securitization program leaving
$56 million
of available capacity.
|
|
(7)
|
Consists of a
£20 million
revolving loan facility and a
£5 million
working capital facility. As of
June 30, 2016
, the Company had
$33 million
of borrowing capacity under the Cartus Financing Limited securitization program leaving
$22 million
of available capacity.
|
|
(8)
|
Not included in this table, the Company had
$130 million
of outstanding letters of credit at
June 30, 2016
under the Unsecured Letter of Credit Facility with a weighted average rate of
3.10%
. In the second quarter of 2016, the Company moved outstanding letters of credit to the Unsecured Letter of Credit Facility and terminated the synthetic letter of credit facility. As a result, the Company increased the capacity under the Unsecured Letter of Credit Facility by
$47 million
to
$135 million
.
|
|
Year
|
|
Amount
|
||
|
Remaining 2016
|
|
$
|
21
|
|
|
2017
|
|
41
|
|
|
|
2018
|
|
52
|
|
|
|
2019
|
|
513
|
|
|
|
2020
|
|
2,105
|
|
|
|
(a)
|
a Term Loan B initially issued in the aggregate principal amount of
$1,905 million
with a maturity date of March 5, 2020. The Term Loan B has quarterly amortization payments totaling
1%
per annum of the initial aggregate principal amount. The interest rate with respect to term loans under the Term Loan B is based on, at Realogy Group's option, adjusted
LIBOR
plus
3.00%
(with a
LIBOR
floor of
0.75%
) or
ABR
plus
2.00%
(with an
ABR
floor of
1.75%
); and
|
|
(b)
|
an
$815 million
Revolving Credit Facility with a maturity date of October 23, 2020, which includes (i) a
$125 million
letter of credit subfacility and (ii) a swingline loan subfacility. The interest rate with respect to revolving loans under the Revolving Credit Facility is based on, at Realogy Group's option, adjusted
LIBOR
or
ABR
plus an additional margin subject to the following adjustments based on the Company’s then current senior secured leverage ratio:
|
|
Senior Secured Leverage Ratio
|
Applicable LIBOR Margin
|
Applicable ABR Margin
|
|
Greater than 3.50 to 1.00
|
2.50%
|
1.50%
|
|
Less than or equal to 3.50 to 1.00 but greater than or equal to 2.50 to 1.00
|
2.25%
|
1.25%
|
|
Less than 2.50 to 1.00
|
2.00%
|
1.00%
|
|
Senior Secured Leverage Ratio
|
Applicable LIBOR Margin
|
Applicable ABR Margin
|
|
Greater than 3.50 to 1.00
|
2.50%
|
1.50%
|
|
Less than or equal to 3.50 to 1.00 but greater than or equal to 2.50 to 1.00
|
2.25%
|
1.25%
|
|
Less than 2.50 to 1.00
|
2.00%
|
1.00%
|
|
Capacity (in millions)
|
Expiration Date
|
|
$53
|
June 2017
|
|
$16
|
September 2018
|
|
$66
|
December 2019
|
|
6.
|
RESTRUCTURING COSTS
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
Personnel-related costs (1)
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
Facility-related costs (2)
|
3
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||
|
Other restructuring costs (3)
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||
|
Total restructuring charges
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
(1)
|
Personnel-related costs consist of severance costs provided to employees who have been terminated and duplicate payroll costs during transition.
|
|
(2)
|
Facility-related costs consist of costs associated with planned facility closures such as contract termination costs, lease payments that will continue to be incurred under the contract for its remaining term without economic benefit to the Company and other facility and employee relocation related costs.
|
|
(3)
|
Other restructuring costs consist of costs related to professional fees, consulting fees and other costs associated with restructuring activities which are primarily included in the Corporate and Other business segment.
|
|
|
Personnel-related costs
|
|
Facility-related costs
|
|
Other restructuring costs
|
|
Total
|
||||||||
|
Balance at December 31, 2015
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
9
|
|
|
Restructuring charges
|
11
|
|
|
5
|
|
|
5
|
|
|
21
|
|
||||
|
Costs paid or otherwise settled
|
(9
|
)
|
|
(2
|
)
|
|
(7
|
)
|
|
(18
|
)
|
||||
|
Balance at June 30, 2016
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
1
|
|
|
$
|
12
|
|
|
|
Total amount expected to be incurred
|
|
Amount incurred to date
|
|
Total amount remaining to be incurred
|
||||||
|
Personnel-related costs
|
$
|
41
|
|
|
$
|
14
|
|
|
$
|
27
|
|
|
Facility-related costs
|
13
|
|
|
8
|
|
|
5
|
|
|||
|
Accelerated depreciation related to asset disposals
|
1
|
|
|
—
|
|
|
1
|
|
|||
|
Other restructuring costs
|
11
|
|
|
9
|
|
|
2
|
|
|||
|
Total
|
$
|
66
|
|
|
$
|
31
|
|
|
$
|
35
|
|
|
|
Total amount expected to be incurred
|
|
Amount incurred to date
|
|
Total amount remaining to be incurred
|
||||||
|
Real Estate Franchise Services
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
Company Owned Real Estate Brokerage Services
|
43
|
|
|
14
|
|
|
29
|
|
|||
|
Relocation Services
|
6
|
|
|
4
|
|
|
2
|
|
|||
|
Title and Settlement Services
|
1
|
|
|
—
|
|
|
1
|
|
|||
|
Corporate and Other
|
12
|
|
|
10
|
|
|
2
|
|
|||
|
Total
|
$
|
66
|
|
|
$
|
31
|
|
|
$
|
35
|
|
|
7.
|
STOCK-BASED COMPENSATION
|
|
|
2016 RTSR PSU
|
||
|
Grant date fair value
|
$
|
28.15
|
|
|
Expected volatility
|
28.1
|
%
|
|
|
Volatility of XHB
|
19.4
|
%
|
|
|
Correlation coefficient
|
0.58
|
|
|
|
Risk-free interest rate
|
0.9
|
%
|
|
|
Dividend yield
|
—
|
|
|
|
|
Restricted
Stock Units |
|
Weighted Average Grant Date Fair Value
|
|||
|
Unvested at January 1, 2016
|
1.02
|
|
|
$
|
46.36
|
|
|
Granted
|
0.92
|
|
|
32.40
|
|
|
|
Vested (a)
|
(0.36
|
)
|
|
46.79
|
|
|
|
Forfeited
|
(0.02
|
)
|
|
39.70
|
|
|
|
Unvested at June 30, 2016
|
1.56
|
|
|
$
|
38.16
|
|
|
(a)
|
The total fair value of RSUs which vested during the
six months ended
June 30, 2016
was
$17 million
.
|
|
|
Performance Share Units (a)
|
|
Weighted Average Grant Date Fair Value
|
|||
|
Unvested at January 1, 2016
|
0.86
|
|
|
$
|
44.97
|
|
|
Granted
|
0.64
|
|
|
32.05
|
|
|
|
Vested (b)
|
(0.03
|
)
|
|
46.45
|
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
|
Unvested at June 30, 2016
|
1.47
|
|
|
$
|
39.33
|
|
|
(a)
|
The PSU amounts in the table are shown at the target amount of the award.
|
|
(b)
|
The total fair value of PSUs which vested during the
six months ended
June 30, 2016
was
$1 million
.
|
|
|
2016 Options
|
||
|
Grant date fair value
|
$
|
10.97
|
|
|
Expected volatility
|
31.7
|
%
|
|
|
Expected term (years)
|
6.25
|
|
|
|
Risk-free interest rate
|
1.3
|
%
|
|
|
Dividend yield
|
—
|
|
|
|
|
Options
|
|
Weighted Average
Exercise Price
|
|||
|
Outstanding at January 1, 2016
|
3.15
|
|
|
$
|
31.42
|
|
|
Granted
|
0.30
|
|
|
32.63
|
|
|
|
Exercised (a) (b)
|
(0.05
|
)
|
|
20.82
|
|
|
|
Forfeited/Expired
|
(0.02
|
)
|
|
33.42
|
|
|
|
Outstanding at June 30, 2016 (c)
|
3.38
|
|
|
$
|
31.68
|
|
|
(a)
|
The intrinsic value of options exercised during the
six months ended
June 30, 2016
was
$1 million
.
|
|
(b)
|
Cash received from options exercised during the
six months ended
June 30, 2016
was
$1 million
.
|
|
(c)
|
Options outstanding at
June 30, 2016
have an intrinsic value of
$13 million
and have a weighted average remaining contractual life of
6.4
years.
|
|
8.
|
TRANSACTIONS WITH FORMER PARENT AND SUBSIDIARIES
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
(in millions, except per share data)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
Net income attributable to Realogy Holdings shareholders
|
$
|
92
|
|
|
$
|
97
|
|
|
$
|
50
|
|
|
$
|
65
|
|
|
Basic weighted average shares
|
145.5
|
|
|
146.5
|
|
|
146.0
|
|
|
146.4
|
|
||||
|
Stock options, restricted stock, restricted stock units and performance share units (a)
|
1.2
|
|
|
1.5
|
|
|
1.2
|
|
|
1.5
|
|
||||
|
Weighted average diluted shares
|
146.7
|
|
|
148.0
|
|
|
147.2
|
|
|
147.9
|
|
||||
|
Earnings Per Share:
|
|
|
|
|
|
|
|
||||||||
|
Basic
|
$
|
0.63
|
|
|
$
|
0.66
|
|
|
$
|
0.34
|
|
|
$
|
0.44
|
|
|
Diluted
|
$
|
0.63
|
|
|
$
|
0.66
|
|
|
$
|
0.34
|
|
|
$
|
0.44
|
|
|
(a)
|
The
three and six months ended
June 30, 2016
, both exclude
5.3 million
shares of common stock issuable for incentive equity awards, which includes performance share units based on the achievement of target amounts, that are anti-dilutive to the diluted earnings per share computation. The
three and six months ended
June 30, 2015
, both exclude
3.9 million
shares of common stock issuable for incentive equity awards, which includes performance share units based on the achievement of target amounts, that are anti-dilutive to the diluted earnings per share computation.
|
|
10.
|
COMMITMENTS AND CONTINGENCIES
|
|
•
|
that the Company is vicariously liable for the acts of franchisees under theories of actual or apparent agency;
|
|
•
|
by former franchisees that franchise agreements were breached including improper terminations;
|
|
•
|
that residential real estate sales associates engaged by NRT—under certain state or federal laws—are potentially employees instead of independent contractors, and they or regulators therefore may bring claims against NRT for breach of contract, wage and hour classification claims, wrongful discharge and unemployment and workers' compensation and obtain benefits, back wages, overtime, indemnification, penalties related to classification practices and expense reimbursement available to employees;
|
|
•
|
concerning claims for alleged RESPA or state real estate law violations including but not limited to claims challenging the validity of sales associates indemnification, and administrative fees;
|
|
•
|
concerning claims generally against the company owned brokerage operations for negligence, misrepresentation or breach of fiduciary duty in connection with the performance of real estate brokerage or other professional services as well as other brokerage claims associated with listing information and property history; and
|
|
•
|
concerning claims generally against the title company contending that, as the escrow company, the company knew or should have known that a transaction was fraudulent or concerning other title defects or settlement errors.
|
|
11.
|
SEGMENT INFORMATION
|
|
|
Revenues (a) (b)
|
||||||||||||||
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
Real Estate Franchise Services
|
$
|
221
|
|
|
$
|
213
|
|
|
$
|
378
|
|
|
$
|
364
|
|
|
Company Owned Real Estate Brokerage Services
|
1,268
|
|
|
1,289
|
|
|
2,109
|
|
|
2,085
|
|
||||
|
Relocation Services
|
109
|
|
|
108
|
|
|
192
|
|
|
193
|
|
||||
|
Title and Settlement Services
|
149
|
|
|
128
|
|
|
260
|
|
|
215
|
|
||||
|
Corporate and Other (c)
|
(85
|
)
|
|
(87
|
)
|
|
(143
|
)
|
|
(144
|
)
|
||||
|
Total Company
|
$
|
1,662
|
|
|
$
|
1,651
|
|
|
$
|
2,796
|
|
|
$
|
2,713
|
|
|
(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
$85 million
and
$143 million
for the
three and six months ended
June 30, 2016
, respectively, and
$87 million
and
$144 million
for the
three and six months ended
June 30, 2015
, respectively. Such amounts are eliminated through the Corporate and Other line.
|
|
(b)
|
Revenues for the Relocation Services segment include intercompany referral commissions paid by the Company Owned Real Estate Brokerage Services segment of
$13 million
and
$21 million
for the
three and six months ended
June 30, 2016
, respectively, and
$15 million
and
$23 million
for the
three and six months ended
June 30, 2015
, respectively. Such amounts are recorded as contra-revenues by the Company Owned Real Estate Brokerage Services segment. There are no other material intersegment transactions.
|
|
(c)
|
Includes the elimination of transactions between segments.
|
|
|
EBITDA
|
||||||||||||||
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016 (a)
|
|
2015 (b)
|
|
2016 (c)
|
|
2015 (d)
|
||||||||
|
Real Estate Franchise Services
|
$
|
149
|
|
|
$
|
146
|
|
|
$
|
241
|
|
|
$
|
232
|
|
|
Company Owned Real Estate Brokerage Services
|
78
|
|
|
97
|
|
|
57
|
|
|
81
|
|
||||
|
Relocation Services
|
29
|
|
|
29
|
|
|
34
|
|
|
36
|
|
||||
|
Title and Settlement Services
|
26
|
|
|
20
|
|
|
26
|
|
|
17
|
|
||||
|
Corporate and Other (e)
|
(19
|
)
|
|
(27
|
)
|
|
(40
|
)
|
|
(43
|
)
|
||||
|
Total Company
|
$
|
263
|
|
|
$
|
265
|
|
|
$
|
318
|
|
|
$
|
323
|
|
|
Less:
|
|
|
|
|
|
|
|
||||||||
|
Depreciation and amortization
|
$
|
48
|
|
|
$
|
52
|
|
|
$
|
96
|
|
|
$
|
98
|
|
|
Interest expense, net
|
59
|
|
|
50
|
|
|
132
|
|
|
118
|
|
||||
|
Income tax expense
|
64
|
|
|
66
|
|
|
40
|
|
|
42
|
|
||||
|
Net income attributable to Realogy Holdings and Realogy Group
|
$
|
92
|
|
|
$
|
97
|
|
|
$
|
50
|
|
|
$
|
65
|
|
|
(a)
|
Includes
$12 million
of restructuring charges as follows:
$3 million
in the Real Estate Franchise Services segment,
$7 million
in the Company Owned Real Estate Brokerage Services segment,
$1 million
in the Relocation Services segment and
$1 million
in Corporate and Other
for the three months ended
June 30, 2016
.
|
|
(b)
|
Includes a net benefit of
$1 million
of former parent legacy items
for the three months ended
June 30, 2015
.
|
|
(c)
|
Includes
$21 million
of restructuring charges as follows:
$3 million
in the Real Estate Franchise Services segment,
$9 million
in the Company Owned Real Estate Brokerage Services segment,
$3 million
in the Relocation Services segment and
$6 million
in Corporate and Other, and a net cost of
$1 million
of former parent legacy items included in Corporate and Other for the six months ended
June 30, 2016
.
|
|
(d)
|
Includes a net benefit of
$1 million
of former parent legacy items for the six months ended
June 30, 2015
.
|
|
(e)
|
Includes the elimination of transactions between segments.
|
|
12.
|
SUBSEQUENT EVENTS
|
|
Senior Secured Leverage Ratio
|
Applicable LIBOR Margin
|
Applicable ABR Margin
|
|
Greater than 3.50 to 1.00
|
2.50%
|
1.50%
|
|
Less than or equal to 3.50 to 1.00 but greater than or equal to 2.50 to 1.00
|
2.25%
|
1.25%
|
|
Less than 2.50 to 1.00 but greater than or equal to 2.00 to 1.00
|
2.00%
|
1.00%
|
|
Less than 2.00 to 1.00
|
1.75%
|
0.75%
|
|
•
|
Real Estate Franchise Services
(known as Realogy Franchise Group or RFG)—franchises the Century 21
®
, Coldwell Banker
®
, Coldwell Banker Commercial
®
, ERA
®
, Sotheby's International Realty
®
and Better Homes and Gardens
®
Real Estate brand names. As of
June 30, 2016
, our franchise systems had approximately
13,600
franchised and company owned offices and approximately
261,000
independent sales associates operating under our franchise and proprietary brands in the U.S. and
108
other countries and territories around the world, which included approximately
780
of our company owned and operated brokerage offices with approximately
46,800
independent sales associates. Our wholly-owned subsidiary, Zaplabs is a developer of proprietary technology platform for real estate brokerages, independent sales associates and customers. Through the first half of 2016, we have rolled out Zaplabs' comprehensive, integrated ZAP
SM
technology platform to approximately
1,000
of our approximately
2,600
franchisees and, consistent with our previously disclosed plan, anticipate rolling this product out to a broader franchisee base over the next two years. We believe the ZAP technology platform will increase the value proposition to our franchisees, their independent sales associates and their customers.
|
|
•
|
Company Owned Real Estate Brokerage Services
(known as NRT)—operates a full-service real estate brokerage business principally under the Coldwell Banker
®
, Corcoran
®
, Sotheby’s International Realty
®
, Citi Habitats
SM
and ZipRealty
®
brand names in more than
50
of the
100
largest metropolitan areas in the U.S. This segment also includes the Company's share of earnings for our PHH Home Loans venture.
|
|
•
|
Relocation Services
(known as Cartus
®
)—primarily offers clients employee relocation services such as homesale assistance, providing home equity advances to transferees (generally guaranteed by the client), home finding and other destination services, expense processing, relocation policy counseling and consulting services, arranging household goods moving services, coordinating visa and immigration support, intercultural and language training and group move management services. In addition, we provide home buying and selling assistance to members of affinity clients.
|
|
•
|
Title and Settlement Services
(known as Title Resource Group or TRG)—provides full-service title and settlement services to real estate companies, affinity groups, corporations and financial institutions with many of these services provided in connection with the Company's real estate brokerage and relocation services business.
|
|
|
Total amount expected to be incurred
|
|
Amount incurred to date
|
|
Total amount remaining to be incurred
|
||||||
|
RFG
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
NRT
|
43
|
|
|
14
|
|
|
29
|
|
|||
|
Cartus
|
6
|
|
|
4
|
|
|
2
|
|
|||
|
TRG
|
1
|
|
|
—
|
|
|
1
|
|
|||
|
Corporate and Other
|
12
|
|
|
10
|
|
|
2
|
|
|||
|
Total
|
$
|
66
|
|
|
$
|
31
|
|
|
$
|
35
|
|
|
|
|
|
2016 vs. 2015
|
|
||||||||||||||
|
|
Full Year
2015 vs. 2014 |
|
First
Quarter |
|
Second
Quarter |
|
Third
Quarter Forecast |
|
Fourth
Quarter Forecast |
|
Full Year
Forecast 2016 vs. 2015 |
|
||||||
|
Number of Existing Homesales
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Industry
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
NAR
|
6
|
%
|
(a)
|
6
|
%
|
(a)
|
4
|
%
|
(a)
|
3
|
%
|
(b)
|
4
|
%
|
(b)
|
4
|
%
|
(b)
|
|
Fannie Mae (c)
|
6
|
%
|
|
5
|
%
|
|
4
|
%
|
|
3
|
%
|
|
3
|
%
|
|
3
|
%
|
|
|
Realogy
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
RFG and NRT Combined
|
5
|
%
|
|
4
|
%
|
|
3
|
%
|
|
|
|
|
|
|
|
|||
|
RFG
|
3
|
%
|
(d)
|
3
|
%
|
(d)
|
4
|
%
|
|
|
|
|
|
|
|
|||
|
NRT
|
9
|
%
|
(d)
|
7
|
%
|
(d)
|
(1
|
%)
|
|
|
|
|
|
|
|
|||
|
(a)
|
Historical existing homesale data is as of the most recent NAR press release, which is subject to sampling error.
|
|
(b)
|
Forecasted existing homesale data, on a seasonally adjusted basis, is as of the most recent NAR forecast.
|
|
(c)
|
Forecasted existing homesale data, on a seasonally adjusted basis, is as of the most recent Fannie Mae press release.
|
|
(d)
|
In April 2015, NRT acquired Coldwell Banker United, a large franchisee of RFG, and as a result the drivers of Coldwell Banker United shifted from RFG to NRT. In addition, NRT homesale sides include transactions from the acquisition of ZipRealty in August 2014. The year-over-year change in homesale sides, excluding the impact of these acquisitions, would have been as follows:
|
|
|
Full Year
2015 vs. 2014 |
|
First Quarter
2016 vs. 2015 |
||
|
RFG
|
5
|
%
|
|
4
|
%
|
|
NRT
|
2
|
%
|
|
1
|
%
|
|
|
|
|
2016 vs. 2015
|
|
||||||||||||||
|
|
Full Year
2015 vs. 2014 |
|
First
Quarter |
|
Second
Quarter |
|
Third
Quarter Forecast |
|
Fourth
Quarter Forecast |
|
Full Year
Forecast 2016 vs. 2015 |
|
||||||
|
Price of Existing Homes
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Industry
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
NAR (a)
|
4
|
%
|
(a)
|
4
|
%
|
(a)
|
4
|
%
|
(a)
|
5
|
%
|
(b)
|
4
|
%
|
(b)
|
4
|
%
|
(b)
|
|
Fannie Mae (c)
|
6
|
%
|
|
6
|
%
|
|
5
|
%
|
|
5
|
%
|
|
5
|
%
|
|
5
|
%
|
|
|
Realogy
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
RFG and NRT Combined
|
3
|
%
|
|
2
|
%
|
|
1
|
%
|
|
|
|
|
|
|
|
|||
|
RFG
|
5
|
%
|
(d)
|
3
|
%
|
(d)
|
3
|
%
|
|
|
|
|
|
|
|
|||
|
NRT
|
(2
|
)%
|
(d)
|
(2
|
%)
|
(d)
|
(2
|
%)
|
|
|
|
|
|
|
|
|||
|
(a)
|
Historical homesale price data is for existing homesale average price and is as of the most recent NAR press release.
|
|
(b)
|
Forecasted homesale price data is for median price and is as of the most recent NAR forecast.
|
|
(c)
|
Existing homesale price data is for median price and is as of the most recent Fannie Mae press release.
|
|
(d)
|
In April 2015, NRT acquired Coldwell Banker United, a large franchisee of RFG, and as a result the drivers of Coldwell Banker United shifted from RFG to NRT. In addition, NRT homesale price includes transactions from the acquisition of ZipRealty in August 2014. The acquisition of Coldwell Banker United did not have a significant impact on the average homesale price for RFG. The year-over-year change in average homesale price for NRT, excluding the impact of these acquisitions, would have been as follows:
|
|
|
Full Year
2015 vs. 2014 |
|
First Quarter
2016 vs. 2015 |
||
|
NRT
|
1
|
%
|
|
1
|
%
|
|
•
|
higher mortgage rates due to increases in long-term interest rates as well as reduced availability of mortgage financing;
|
|
•
|
insufficient inventory levels leading to lower unit sales;
|
|
•
|
changing attitudes towards home ownership, particularly among potential first-time homebuyers who may delay, or decide not to, purchase homes;
|
|
•
|
the impact of limited or negative equity of current homeowners, as well as the lack of available inventory may limit their proclivity to purchase an alternative home;
|
|
•
|
reduced affordability of homes;
|
|
•
|
high levels of unemployment and associated lack of consumer confidence;
|
|
•
|
unsustainable economic recovery in the U.S. or a weak recovery resulting in only modest economic growth;
|
|
•
|
a decline in home ownership levels in the U.S.;
|
|
•
|
geopolitical and economic instability; and
|
|
•
|
legislative or regulatory reform, including but not limited to reform that adversely impacts the financing of the U.S. housing market or amends the Internal Revenue Code in a manner that negatively impacts home ownership such as reform that reduces the amount that certain taxpayers would be allowed to deduct for home mortgage interest.
|
|
•
|
they use survey data and estimates in their historical reports and forecasting models, which are subject to sampling error, whereas we use data based on actual reported results;
|
|
•
|
there are geographical differences and concentrations in the markets in which we operate versus the national market. For example, many of our company owned brokerage offices are geographically located where average homesale prices are generally higher than the national average and therefore NAR survey data will not correlate with NRT's results;
|
|
•
|
comparability is also impaired due to NAR’s utilization of seasonally adjusted annualized rates whereas we report actual period-over-period changes and their use of median price for their forecasts compared to our average price;
|
|
•
|
NAR historical data is subject to periodic review and revision and these revisions have been, and could be material in the future; and
|
|
•
|
NAR and Fannie Mae generally update their forecasts on a monthly basis and a subsequent forecast may change materially from a forecast that was previously issued.
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
|
|
2016
|
|
2015
|
|
% Change
|
|
2016
|
|
2015
|
|
% Change
|
||||||||||
|
RFG (a)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Closed homesale sides
|
319,748
|
|
|
307,293
|
|
|
4
|
%
|
|
538,078
|
|
|
519,432
|
|
|
4
|
%
|
||||
|
Average homesale price
|
$
|
273,900
|
|
|
$
|
266,456
|
|
|
3
|
%
|
|
$
|
267,872
|
|
|
$
|
260,296
|
|
|
3
|
%
|
|
Average homesale broker commission rate
|
2.51
|
%
|
|
2.52
|
%
|
|
(1) bps
|
|
|
2.51
|
%
|
|
2.52
|
%
|
|
(1) bps
|
|
||||
|
Net effective royalty rate
|
4.49
|
%
|
|
4.48
|
%
|
|
1 bps
|
|
|
4.50
|
%
|
|
4.50
|
%
|
|
—
|
|
||||
|
Royalty per side
|
$
|
319
|
|
|
$
|
312
|
|
|
2
|
%
|
|
$
|
315
|
|
|
$
|
308
|
|
|
2
|
%
|
|
NRT
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Closed homesale sides
|
98,314
|
|
|
99,435
|
|
|
(1
|
%)
|
|
162,558
|
|
|
159,622
|
|
|
2
|
%
|
||||
|
Average homesale price
|
$
|
485,688
|
|
|
$
|
493,746
|
|
|
(2
|
%)
|
|
$
|
488,627
|
|
|
$
|
497,083
|
|
|
(2
|
%)
|
|
Average homesale broker commission rate
|
2.49
|
%
|
|
2.46
|
%
|
|
3 bps
|
|
|
2.47
|
%
|
|
2.45
|
%
|
|
2 bps
|
|
||||
|
Gross commission income per side
|
$
|
12,732
|
|
|
$
|
12,830
|
|
|
(1
|
%)
|
|
$
|
12,790
|
|
|
$
|
12,901
|
|
|
(1
|
%)
|
|
Cartus
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Initiations
|
51,560
|
|
|
51,528
|
|
|
—
|
%
|
|
88,734
|
|
|
89,696
|
|
|
(1
|
%)
|
||||
|
Referrals
|
26,138
|
|
|
29,033
|
|
|
(10
|
%)
|
|
43,031
|
|
|
47,055
|
|
|
(9
|
%)
|
||||
|
TRG
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Purchase title and closing units (b)
|
43,914
|
|
|
35,596
|
|
|
23
|
%
|
|
73,150
|
|
|
57,239
|
|
|
28
|
%
|
||||
|
Refinance title and closing units (c)
|
11,227
|
|
|
9,815
|
|
|
14
|
%
|
|
20,930
|
|
|
19,311
|
|
|
8
|
%
|
||||
|
Average fee per closing unit
|
$
|
1,919
|
|
|
$
|
1,795
|
|
|
7
|
%
|
|
$
|
1,890
|
|
|
$
|
1,777
|
|
|
6
|
%
|
|
(a)
|
Includes all franchisees except for NRT.
|
|
(b)
|
The amounts presented for the
three and six months ended
June 30, 2016
include
8,971
and
15,556
purchase units, respectively, as a result of the acquisition of Independence Title on July 1, 2015.
|
|
(c)
|
The amounts presented for the
three and six months ended
June 30, 2016
include
1,560
and
3,101
refinance units, respectively, as a result of the acquisition of Independence Title on July 1, 2015.
|
|
|
Three Months Ended June 30,
|
||||||||||
|
|
2016
|
|
2015
|
|
Change
|
||||||
|
Net revenues
|
$
|
1,662
|
|
|
$
|
1,651
|
|
|
$
|
11
|
|
|
Total expenses (1)
|
1,509
|
|
|
1,494
|
|
|
15
|
|
|||
|
Income before income taxes, equity in earnings and noncontrolling interests
|
153
|
|
|
157
|
|
|
(4
|
)
|
|||
|
Income tax expense
|
64
|
|
|
66
|
|
|
(2
|
)
|
|||
|
Equity in earnings of unconsolidated entities
|
(5
|
)
|
|
(7
|
)
|
|
2
|
|
|||
|
Net income
|
94
|
|
|
98
|
|
|
(4
|
)
|
|||
|
Less: Net income attributable to noncontrolling interests
|
(2
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|||
|
Net income attributable to Realogy Holdings and Realogy Group
|
$
|
92
|
|
|
$
|
97
|
|
|
$
|
(5
|
)
|
|
(1)
|
Total expenses
for the three months ended
June 30, 2016
includes
$12 million
of restructuring charges. Total expenses
for the three months ended
June 30, 2015
includes a net benefit of
$1 million
of former parent legacy items. There were no restructuring charges in the second quarter of 2015.
|
|
•
|
$12 million
in restructuring charges related to the Company's business optimization initiative;
|
|
•
|
a
$9 million
net
increase
in interest expense to
$59 million
in the second quarter of 2016 from
$50 million
in the second quarter of 2015 due to the impact of mark-to-market adjustments for our interest rate swaps which resulted in losses of
$14 million
in the second quarter of 2016 compared to gains of
$3 million
in the same period of 2015, partially offset by the impact of lower interest expense as a result of a reduction in total outstanding indebtedness and weighted average interest rate. Before the mark-to-market adjustments for our interest rate swaps, interest expense was
$45 million
and
$53 million
during the second quarter of 2016 and 2015, respectively;
|
|
•
|
a
$6 million
increase in marketing expenses primarily driven by higher advertising spending at NRT and RFG; and
|
|
•
|
a
$3 million
increase
in operating and general and administrative expenses primarily driven by:
|
|
◦
|
$10 million
of additional employee-related costs associated with acquisitions completed after the second quarter of 2015; and
|
|
◦
|
a
$7 million
increase in variable operating costs at TRG primarily related to volume increases as a result of acquisitions completed after the second quarter of 2015,
|
|
◦
|
a
$7 million
decrease in employee-related costs primarily related to lower incentive accruals; and
|
|
◦
|
the absence of
$6 million
of expenses related to certain transaction costs associated with the acquisition of Coldwell Banker United and the settlement of a legal matter in 2015.
|
|
|
Revenues (a)
|
|
%
Change
|
|
EBITDA (b)
|
|
%
Change
|
|
EBITDA Margin
|
|
Change
|
|||||||||||||||||||
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
||||||||||||||||
|
RFG
|
$
|
221
|
|
|
$
|
213
|
|
|
4
|
%
|
|
$
|
149
|
|
|
$
|
146
|
|
|
2
|
%
|
|
67
|
%
|
|
69
|
%
|
|
(2
|
)
|
|
NRT
|
1,268
|
|
|
1,289
|
|
|
(2
|
)
|
|
78
|
|
|
97
|
|
|
(20
|
)
|
|
6
|
|
|
8
|
|
|
(2
|
)
|
||||
|
Cartus
|
109
|
|
|
108
|
|
|
1
|
|
|
29
|
|
|
29
|
|
|
—
|
|
|
27
|
|
|
27
|
|
|
—
|
|
||||
|
TRG
|
149
|
|
|
128
|
|
|
16
|
|
|
26
|
|
|
20
|
|
|
30
|
|
|
17
|
|
|
16
|
|
|
1
|
|
||||
|
Corporate and Other
|
(85
|
)
|
|
(87
|
)
|
|
*
|
|
|
(19
|
)
|
|
(27
|
)
|
|
*
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total Company
|
$
|
1,662
|
|
|
$
|
1,651
|
|
|
1
|
%
|
|
$
|
263
|
|
|
$
|
265
|
|
|
(1
|
)%
|
|
16
|
%
|
|
16
|
%
|
|
—
|
|
|
Less: Depreciation and amortization
|
|
48
|
|
|
52
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Interest expense, net
|
|
59
|
|
|
50
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Income tax expense
|
|
64
|
|
|
66
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Net income attributable to Realogy Holdings and Realogy Group
|
|
$
|
92
|
|
|
$
|
97
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
*
|
not meaningful
|
|
(a)
|
Includes the elimination of transactions between segments, which consists of intercompany royalties and marketing fees paid by NRT of
$85 million
and
$87 million
during the
three months ended
June 30, 2016
and
2015
, respectively.
|
|
(b)
|
EBITDA
for the three months ended
June 30, 2016
includes
$12 million
of restructuring charges discussed further below. EBITDA
for the three months ended
June 30, 2015
includes a net benefit of
$1 million
of former parent legacy items.
|
|
|
Three Months Ended June 30,
|
|
|
|||||||||||||||
|
|
2016
|
|
2015
|
|
|
|||||||||||||
|
|
EBITDA
|
|
Restructuring Charges
|
|
EBITDA Before Restructuring
|
|
EBITDA
|
|
%
Change |
|||||||||
|
Real Estate Franchise Services
|
$
|
149
|
|
|
$
|
3
|
|
|
$
|
152
|
|
|
$
|
146
|
|
|
4
|
%
|
|
Company Owned Real Estate Brokerage Services
|
78
|
|
|
7
|
|
|
85
|
|
|
97
|
|
|
(12
|
)%
|
||||
|
Relocation Services
|
29
|
|
|
1
|
|
|
30
|
|
|
29
|
|
|
3
|
%
|
||||
|
Title and Settlement Services
|
26
|
|
|
—
|
|
|
26
|
|
|
20
|
|
|
30
|
%
|
||||
|
Corporate and Other
|
(19
|
)
|
|
1
|
|
|
(18
|
)
|
|
(27
|
)
|
|
*
|
|
||||
|
Total Company
|
$
|
263
|
|
|
$
|
12
|
|
|
$
|
275
|
|
|
$
|
265
|
|
|
4
|
%
|
|
*
|
not meaningful
|
|
•
|
the
$21 million
decrease
in revenues discussed above;
|
|
•
|
$7 million
in restructuring costs related to the Company's business optimization plan;
|
|
•
|
a
$3 million
decrease
in equity earnings related to our investment in PHH Home Loans; and
|
|
•
|
a
$2 million
increase
in marketing expenses driven by higher advertising spending.
|
|
•
|
a
$13 million
decrease
in commission expenses paid to independent real estate sales associates from
$877 million
in the
second quarter
of 2015 to
$864 million
in the
second quarter
of 2016, as a result of the
decrease
in revenues discussed above. The decrease is net of a
$10 million
increase attributable to acquisitions;
|
|
•
|
a
$2 million
decrease
in employee-related costs comprised of a
$5 million
decrease in incentive accruals partially offset by a
$2 million
increase
attributable to acquisitions and $1 million increase in other employee costs; and
|
|
•
|
a
$1 million
decrease
in royalties paid to RFG from
$83 million
in the
second quarter
of 2015 to
$82 million
in the
second quarter
of 2016.
|
|
|
Six Months Ended June 30,
|
||||||||||
|
|
2016
|
|
2015
|
|
Change
|
||||||
|
Net revenues
|
$
|
2,796
|
|
|
$
|
2,713
|
|
|
$
|
83
|
|
|
Total expenses (1)
|
2,709
|
|
|
2,614
|
|
|
95
|
|
|||
|
Income before income taxes, equity in earnings and noncontrolling interests
|
87
|
|
|
99
|
|
|
(12
|
)
|
|||
|
Income tax expense
|
40
|
|
|
42
|
|
|
(2
|
)
|
|||
|
Equity in earnings of unconsolidated entities
|
(5
|
)
|
|
(9
|
)
|
|
4
|
|
|||
|
Net income
|
52
|
|
|
66
|
|
|
(14
|
)
|
|||
|
Less: Net income attributable to noncontrolling interests
|
(2
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|||
|
Net income attributable to Realogy Holdings and Realogy Group
|
$
|
50
|
|
|
$
|
65
|
|
|
$
|
(15
|
)
|
|
(1)
|
Total expenses
for the six months ended
June 30, 2016
includes
$21 million
restructuring charges and a net cost of
$1 million
of former parent legacy items. Total expenses
for the six months ended
June 30, 2015
includes a net benefit of
$1 million
of former parent legacy items. There were no restructuring charges during the six months ended June 30, 2015.
|
|
•
|
a
$36 million
increase
in operating and general and administrative expenses primarily driven by:
|
|
◦
|
$24 million
of additional employee-related costs associated with acquisitions completed after the second quarter of 2015;
|
|
◦
|
an
$18 million
increase
in variable operating costs at TRG primarily related to volume increases as a result of acquisitions completed after the second quarter of 2015; and
|
|
◦
|
a
$2 million
increase in employee-related costs primarily due to salary and merit increases, partially offset by a
$9 million
decrease in employee-related costs due to lower incentive accruals,
|
|
◦
|
the absence of
$6 million
of expenses related to certain transaction costs associated with the acquisition of Coldwell Banker United and the settlement of a legal matter in 2015.
|
|
•
|
$21 million
in restructuring charges related to the Company's business optimization initiative;
|
|
•
|
a
$15 million
increase
in commission and other sales associate-related costs due to the increase in homesale transaction volume at NRT;
|
|
•
|
a
$14 million
increase
in interest expense
for the six months ended
June 30, 2016
compared to the
six months ended
June 30, 2015
primarily due to the impact of mark-to-market adjustments for our interest rate swaps which resulted in losses of
$45 million
in the first half of 2016 compared to losses of
$11 million
in the same period of 2015, partially offset by the impact of lower interest expense as a result of a reduction in total outstanding indebtedness and weighted average interest rate. Before the mark-to-market adjustments for our interest rate swaps, interest expense was
$87 million
and
$107 million
during the first half of 2016 and 2015, respectively; and
|
|
•
|
an
$8 million
increase
in marketing expenses due to higher advertising spending at NRT and TRG;
|
|
|
Revenues (a)
|
|
%
Change
|
|
EBITDA (b)
|
|
%
Change
|
|
Margin
|
|
Change
|
|||||||||||||||||||
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
||||||||||||||||
|
RFG
|
$
|
378
|
|
|
$
|
364
|
|
|
4
|
%
|
|
$
|
241
|
|
|
$
|
232
|
|
|
4
|
%
|
|
64
|
%
|
|
64
|
%
|
|
—
|
|
|
NRT
|
2,109
|
|
|
2,085
|
|
|
1
|
|
|
57
|
|
|
81
|
|
|
(30
|
)
|
|
3
|
|
|
4
|
|
|
(1
|
)
|
||||
|
Cartus
|
192
|
|
|
193
|
|
|
(1
|
)
|
|
34
|
|
|
36
|
|
|
(6
|
)
|
|
18
|
|
|
19
|
|
|
(1
|
)
|
||||
|
TRG
|
260
|
|
|
215
|
|
|
21
|
|
|
26
|
|
|
17
|
|
|
53
|
|
|
10
|
|
|
8
|
|
|
2
|
|
||||
|
Corporate and Other
|
(143
|
)
|
|
(144
|
)
|
|
*
|
|
|
(40
|
)
|
|
(43
|
)
|
|
*
|
|
|
|
|
|
|
|
|||||||
|
Total Company
|
$
|
2,796
|
|
|
$
|
2,713
|
|
|
3
|
%
|
|
$
|
318
|
|
|
$
|
323
|
|
|
(2
|
)%
|
|
11
|
%
|
|
12
|
%
|
|
(1
|
)
|
|
Less: Depreciation and amortization
|
|
96
|
|
|
98
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Interest expense, net
|
|
132
|
|
|
118
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Income tax expense
|
|
40
|
|
|
42
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Net income attributable to Realogy Holdings and Realogy Group
|
|
$
|
50
|
|
|
$
|
65
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
*
|
not meaningful
|
|
(a)
|
Includes the elimination of transactions between segments, which consists of intercompany royalties and marketing fees paid by NRT of
$143 million
and
$144 million
for the six months ended
June 30, 2016
and
2015
, respectively.
|
|
(b)
|
EBITDA
for the six months ended
June 30, 2016
includes
$21 million
restructuring charges discussed further below and a net cost of
$1 million
of former parent legacy items. EBITDA
for the six months ended
June 30, 2015
includes a net benefit of
$1 million
of former parent legacy items.
|
|
|
Six Months Ended June 30,
|
|
|
|||||||||||||||
|
|
2016
|
|
2015
|
|
|
|||||||||||||
|
|
EBITDA
|
|
Restructuring Charges
|
|
EBITDA Before Restructuring
|
|
EBITDA
|
|
%
Change |
|||||||||
|
Real Estate Franchise Services
|
$
|
241
|
|
|
$
|
3
|
|
|
$
|
244
|
|
|
$
|
232
|
|
|
5
|
%
|
|
Company Owned Real Estate Brokerage Services
|
57
|
|
|
9
|
|
|
66
|
|
|
81
|
|
|
(19
|
)%
|
||||
|
Relocation Services
|
34
|
|
|
3
|
|
|
37
|
|
|
36
|
|
|
3
|
%
|
||||
|
Title and Settlement Services
|
26
|
|
|
—
|
|
|
26
|
|
|
17
|
|
|
53
|
%
|
||||
|
Corporate and Other
|
(40
|
)
|
|
6
|
|
|
(34
|
)
|
|
(43
|
)
|
|
*
|
|
||||
|
Total Company
|
$
|
318
|
|
|
$
|
21
|
|
|
$
|
339
|
|
|
$
|
323
|
|
|
5
|
%
|
|
*
|
not meaningful
|
|
•
|
a
$15 million
increase
in commission expenses paid to independent real estate sales associates from
$1,407 million
in first half of 2015 to
$1,422 million
in the first half of 2016, as a result of the
increase
in revenues discussed above. The increase includes
$30 million
attributable to acquisitions;
|
|
•
|
$9 million
in restructuring costs related to the Company's business optimization plan;
|
|
•
|
an
$8 million
increase
in employee-related costs related to acquisitions;
|
|
•
|
a
$5 million
decrease
in equity earnings related to our investment in PHH Home Loans;
|
|
•
|
a
$4 million
increase
in occupancy costs related to acquisitions;
|
|
•
|
a
$3 million
increase
in marketing expenses primarily related to acquisitions; and
|
|
•
|
a
$1 million
increase
in royalties paid to RFG from
$137 million
in the first half of 2015 to
$138 million
in the first half of 2016 primarily related to acquisitions.
|
|
|
June 30, 2016
|
|
December 31, 2015
|
|
Change
|
||||||
|
Total assets
|
$
|
7,630
|
|
|
$
|
7,531
|
|
|
$
|
99
|
|
|
Total liabilities
|
5,206
|
|
|
5,109
|
|
|
97
|
|
|||
|
Total equity
|
2,424
|
|
|
2,422
|
|
|
2
|
|
|||
|
|
Six Months Ended June 30,
|
||||||||||
|
|
2016
|
|
2015
|
|
Change
|
||||||
|
Cash provided by (used in):
|
|
|
|
|
|
||||||
|
Operating activities
|
$
|
98
|
|
|
$
|
73
|
|
|
$
|
25
|
|
|
Investing activities
|
(58
|
)
|
|
(121
|
)
|
|
63
|
|
|||
|
Financing activities
|
(31
|
)
|
|
95
|
|
|
(126
|
)
|
|||
|
Effects of change in exchange rates on cash and cash equivalents
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|||
|
Net change in cash and cash equivalents
|
$
|
8
|
|
|
$
|
46
|
|
|
$
|
(38
|
)
|
|
•
|
repayment of
$500 million
to retire the 3.375% Senior Notes at maturity;
|
|
•
|
net repayment of
$200 million
of borrowings under the Revolving Credit Facility;
|
|
•
|
$67 million
for the repurchase of our common stock;
|
|
•
|
$20 million
of amortization payments on the term loan facilities;
|
|
•
|
$10 million
for payments of contingent consideration; and
|
|
•
|
$12 million
of other financing payments primarily related to interest rate swaps and capital leases;
|
|
•
|
$750 million
of proceeds from the issuance of
5.25%
Senior Notes of
$250 million
and
4.875%
Senior Notes of
$500 million
; and
|
|
•
|
a
$34 million
net increase in securitization obligation borrowings.
|
|
|
Interest
Rate |
|
Expiration
Date |
|
Principal Amount
|
|
Unamortized Discount and Debt Issuance Costs
|
|
Net Amount
|
||||||
|
Senior Secured Credit Facility:
|
|
|
|
|
|
|
|
|
|
||||||
|
Revolving Credit Facility (1)
|
(2)
|
|
October 2020
|
|
$
|
—
|
|
|
$ *
|
|
|
$
|
—
|
|
|
|
Term Loan B
|
(3)
|
|
March 2020
|
|
1,858
|
|
|
25
|
|
|
1,833
|
|
|||
|
Term Loan A
|
(4)
|
|
October 2020
|
|
424
|
|
|
2
|
|
|
422
|
|
|||
|
Senior Notes
|
4.50%
|
|
April 2019
|
|
450
|
|
|
13
|
|
|
437
|
|
|||
|
Senior Notes
|
5.25%
|
|
December 2021
|
|
550
|
|
|
6
|
|
|
544
|
|
|||
|
Senior Notes
|
4.875%
|
|
June 2023
|
|
500
|
|
|
4
|
|
|
496
|
|
|||
|
Securitization obligations: (5)
|
|
|
|
|
|
|
|
|
|
||||||
|
Apple Ridge Funding LLC (6)
|
|
|
June 2017
|
|
269
|
|
|
*
|
|
|
269
|
|
|||
|
Cartus Financing Limited (7)
|
|
|
August 2016
|
|
11
|
|
|
*
|
|
|
11
|
|
|||
|
Total (8)
|
$
|
4,062
|
|
|
$
|
50
|
|
|
$
|
4,012
|
|
||||
|
*
|
The debt issuance costs related to our Revolving Credit Facility and securitization obligations are classified as a deferred asset within other assets.
|
|
(1)
|
As of
June 30, 2016
, the Company had
$815 million
of borrowing capacity under its Revolving Credit Facility. On
August 2, 2016
, the Company had
$225 million
outstanding borrowings on the Revolving Credit Facility, leaving
$590 million
of available capacity. The increase in outstanding borrowings compared to June 30, 2016 was a result of amending and reducing the borrowings under the Term Loan B in July 2016. See Note 12, "Subsequent Events" for a description of the transaction.
|
|
(2)
|
Interest rates with respect to revolving loans under the Senior Secured Credit Facility at
June 30, 2016
are based on, at the Company's option, (a) adjusted
LIBOR
plus an additional margin or (b)
ABR
plus an additional margin, in each case subject to adjustment based on the then current senior secured leverage ratio. Based on the previous quarter senior secured leverage ratio, the
LIBOR
margin was
2.00%
and the
ABR
margin was
1.00%
for the three months ended
June 30, 2016
.
|
|
(3)
|
The Term Loan B provides for quarterly amortization payments totaling
1%
per annum of the original principal amount. The interest rate with respect to term loans under the Term Loan B is based on, at the Company’s option, (a) adjusted
LIBOR
plus
3.00%
(with a
LIBOR
floor of
0.75%
) or (b) JPMorgan Chase Bank, N.A.’s prime rate ("
ABR
") plus
2.00%
(with an
ABR
floor of
1.75%
).
|
|
(4)
|
The Term Loan A provides for quarterly amortization payments, which commenced March 31, 2016, totaling per annum
5%
,
5%
,
7.5%
,
10.0%
and
12.5%
of the original principal amount of the Term Loan A in 2016, 2017, 2018, 2019 and 2020, respectively. The interest rates with respect to term loans under the Term Loan A Facility are based on, at the Company's option, (a) adjusted
LIBOR
plus an additional margin or (b)
ABR
plus an additional margin, in each case subject to adjustment based on the then current senior secured leverage ratio. Based on the previous quarter senior secured leverage ratio, the
LIBOR
margin was
2.00%
and the
ABR
margin was
1.00%
for the three months ended
June 30, 2016
.
|
|
(5)
|
Available capacity is subject to maintaining sufficient relocation related assets to collateralize these securitization obligations.
|
|
(6)
|
In June 2016, Realogy Group extended the existing Apple Ridge Funding LLC securitization program utilized by Cartus until June 2017. As of
June 30, 2016
, the Company had
$325 million
of borrowing capacity under the Apple Ridge Funding LLC securitization program leaving
$56 million
of available capacity.
|
|
(7)
|
Consists of a
£20 million
revolving loan facility and a
£5 million
working capital facility. As of
June 30, 2016
, the Company had
$33 million
of borrowing capacity under the Cartus Financing Limited securitization program leaving
$22 million
of available capacity.
|
|
(8)
|
Not included in this table, the Company had
$130 million
of outstanding letters of credit at
June 30, 2016
under the Unsecured Letter of Credit Facility with a weighted average rate of
3.10%
. In the second quarter of 2016, the Company moved outstanding letters of credit to the Unsecured Letter of Credit Facility and terminated the synthetic letter of credit facility. As a result, the Company increased the capacity under the Unsecured Letter of Credit Facility by
$47 million
to
$135 million
.
|
|
|
|
As of June 30, 2016
|
||||||
|
|
|
Actual
|
|
As Adjusted
|
||||
|
Cash and cash equivalents (1)
|
|
$
|
423
|
|
|
$
|
234
|
|
|
Senior Secured Credit Facility:
|
|
|
|
|
||||
|
Revolving Credit Facility (2)
|
|
$
|
—
|
|
|
$
|
225
|
|
|
Existing Term Loan B
|
|
1,858
|
|
|
—
|
|
||
|
New Term Loan B
|
|
—
|
|
|
1,100
|
|
||
|
Term Loan A Facility:
|
|
|
|
|
||||
|
Existing Term Loan A
|
|
424
|
|
|
424
|
|
||
|
New Term Loan A
|
|
—
|
|
|
355
|
|
||
|
4.50% Senior Notes
|
|
450
|
|
|
450
|
|
||
|
5.25% Senior Notes
|
|
550
|
|
|
550
|
|
||
|
4.875% Senior Notes
|
|
500
|
|
|
500
|
|
||
|
Securitization obligations:
|
|
|
|
|
||||
|
Apple Ridge Funding LLC
|
|
269
|
|
|
269
|
|
||
|
Cartus Financing Limited
|
|
11
|
|
|
11
|
|
||
|
Total Debt
|
|
$
|
4,062
|
|
|
$
|
3,884
|
|
|
(1)
|
As adjusted cash and cash equivalents reflects proceeds of
$1,100 million
from the issuance of the New Term Loan B, proceeds of
$355 million
from the issuance of the New Term Loan A,
$225 million
of borrowings on the Revolving Credit Facility and
$189 million
of cash on hand to redeem all of the outstanding
$1,858 million
of the Existing Term Loan B and pay related debt issuance costs and accrued interest of
$11 million
.
|
|
(2)
|
As adjusted revolver borrowings reflect
$225 million
of outstanding borrowings on the Revolving Credit Facility, leaving
$590 million
of available capacity.
|
|
•
|
incur or guarantee additional debt or issue disqualified stock or preferred stock;
|
|
•
|
pay dividends or make distributions to Realogy Group’s stockholders, including Realogy Holdings;
|
|
•
|
repurchase or redeem capital stock;
|
|
•
|
make loans, investments or acquisitions;
|
|
•
|
incur restrictions on the ability of certain of Realogy Group's subsidiaries to pay dividends or to make other payments to Realogy Group;
|
|
•
|
enter into transactions with affiliates;
|
|
•
|
create liens;
|
|
•
|
merge or consolidate with other companies or transfer all or substantially all of Realogy Group's and its material subsidiaries' assets;
|
|
•
|
transfer or sell assets, including capital stock of subsidiaries; and
|
|
•
|
prepay, redeem or repurchase subordinated indebtedness.
|
|
•
|
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.
|
|
|
|
|
Less
|
|
Equals
|
|
Plus
|
|
Equals
|
||||||||||
|
|
Year Ended
|
|
Six Months Ended
|
|
Six Months
Ended |
|
Six Months Ended
|
|
Twelve Months
Ended |
||||||||||
|
|
December 31,
2015 |
June 30,
2015 |
December 31,
2015 |
June 30,
2016 |
June 30,
2016 |
||||||||||||||
|
Net income attributable to Realogy Group (a)
|
$
|
184
|
|
|
$
|
65
|
|
|
$
|
119
|
|
|
$
|
50
|
|
|
$
|
169
|
|
|
Income tax expense
|
110
|
|
|
42
|
|
|
68
|
|
|
40
|
|
|
108
|
|
|||||
|
Income before income taxes
|
294
|
|
|
107
|
|
|
187
|
|
|
90
|
|
|
277
|
|
|||||
|
Interest expense, net
|
231
|
|
|
118
|
|
|
113
|
|
|
132
|
|
|
245
|
|
|||||
|
Depreciation and amortization
|
201
|
|
|
98
|
|
|
103
|
|
|
96
|
|
|
199
|
|
|||||
|
EBITDA (b)
|
726
|
|
|
323
|
|
|
403
|
|
|
318
|
|
|
721
|
|
|||||
|
EBITDA adjustments:
|
|
|
|||||||||||||||||
|
Restructuring costs
|
|
31
|
|
||||||||||||||||
|
Former parent legacy benefit, net
|
|
(13
|
)
|
||||||||||||||||
|
Loss on the early extinguishment of debt
|
|
48
|
|
||||||||||||||||
|
Operating EBITDA
|
|
787
|
|
||||||||||||||||
|
Bank covenant adjustments:
|
|
|
|||||||||||||||||
|
Pro forma effect of business optimization initiatives (c)
|
|
36
|
|
||||||||||||||||
|
Non-cash charges (d)
|
|
41
|
|
||||||||||||||||
|
Pro forma effect of acquisitions and new franchisees (e)
|
|
9
|
|
||||||||||||||||
|
Incremental securitization interest costs (f)
|
|
4
|
|
||||||||||||||||
|
Adjusted (Covenant) EBITDA
|
|
$
|
877
|
|
|||||||||||||||
|
Total senior secured net debt (g)
|
|
$
|
1,947
|
|
|||||||||||||||
|
Senior secured leverage ratio
|
|
2.22
|
x
|
||||||||||||||||
|
(a)
|
Net income (loss) attributable to Realogy consists of: (i) income of
$110 million
for the third quarter of 2015, (ii) income of
$9 million
for the fourth quarter of 2015, (iii) a loss of
$42 million
for the first quarter of 2016 and (iv) income of
$92 million
for the second quarter of 2016.
|
|
(b)
|
EBITDA consists of: (i)
$309 million
for the third quarter of 2015, (ii)
$94 million
for the fourth quarter of 2015, (iii)
$55 million
for the first quarter of 2016 and (iv)
$263 million
for the second quarter of 2016.
|
|
(c)
|
Represents the twelve-month pro forma effect of business optimization initiatives.
|
|
(d)
|
Represents the elimination of non-cash expenses, including
$56 million
of stock-based compensation expense less
$10 million
for the change in the allowance for doubtful accounts and notes reserves and
$5 million
of foreign exchange benefit from
July 1, 2015
through
June 30, 2016
.
|
|
(e)
|
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
July 1, 2015
. 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
July 1, 2015
.
|
|
(f)
|
Incremental borrowing costs incurred as a result of the securitization facilities refinancing for the twelve months ended
June 30, 2016
.
|
|
(g)
|
Represents total borrowings under the Senior Secured Credit Facility and borrowings secured by a first priority lien on our assets of
$2,282 million
plus
$27 million
of capital lease obligations less
$362 million
of readily available cash as of
June 30, 2016
. 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.
|
|
|
Three Months Ended
|
||||||
|
|
June 30, 2016
|
|
June 30, 2015
|
||||
|
Net income attributable to Realogy
|
$
|
92
|
|
|
$
|
97
|
|
|
Income tax expense
|
64
|
|
|
66
|
|
||
|
Income before income taxes
|
156
|
|
|
163
|
|
||
|
Interest expense, net
|
59
|
|
|
50
|
|
||
|
Depreciation and amortization
|
48
|
|
|
52
|
|
||
|
EBITDA
|
263
|
|
|
265
|
|
||
|
EBITDA adjustments:
|
|
|
|
||||
|
Restructuring costs
|
12
|
|
|
—
|
|
||
|
Former parent legacy benefit, net
|
—
|
|
|
(1
|
)
|
||
|
Operating EBITDA
|
$
|
275
|
|
|
$
|
264
|
|
|
Notional Value (in millions)
|
Commencement Date
|
Expiration Date
|
|
$225
|
July 2012
|
February 2018
|
|
$200
|
January 2013
|
February 2018
|
|
$600
|
August 2015
|
August 2020
|
|
$450
|
November 2017
|
November 2022
|
|
(a)
|
Realogy Holdings Corp. ("Realogy Holdings") maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its filings under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Realogy Holdings' management, including the Chief Executive Officer and the Chief Financial Officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
|
|
(b)
|
As of the end of the period covered by this quarterly report on Form 10-Q, Realogy Holdings has carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Realogy Holdings' disclosure controls and procedures are effective at the "reasonable assurance" level.
|
|
(c)
|
There has not been any change in Realogy Holdings' internal control over financial reporting during the period covered by this quarterly report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
|
|
(a)
|
Realogy Group LLC ("Realogy Group") maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its filings under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Realogy Group's management, including the Chief Executive Officer and the Chief Financial Officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
|
|
(b)
|
As of the end of the period covered by this quarterly report on Form 10-Q, Realogy Group has carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Realogy Group's disclosure controls and procedures are effective at the "reasonable assurance" level.
|
|
(c)
|
There has not been any change in Realogy Group's internal control over financial reporting during the period covered by this quarterly report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
|
|
(c)
|
In February 2016, the Company's Board of Directors authorized a share repurchase program of up to
$275 million
of the Company’s common stock. Repurchases may be made at management's discretion from time to time on the open market transactions, Rule 10b5-1 trading plans or through privately negotiated transactions. The size and timing of these repurchases will depend on price, market and economic conditions, legal and contractual requirements and other factors. The repurchase program has no time limit and may be suspended or discontinued at any time. All of the repurchased common stock has been retired.
|
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of a Publicly Announced Program
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
|
||||
|
May 1-31, 2016
|
|
975,000
|
|
|
$31.41
|
|
975,000
|
|
|
$
|
210,925,250
|
|
|
June 1-30, 2016
|
|
75,000
|
|
|
$32.72
|
|
75,000
|
|
|
$
|
208,471,250
|
|
|
4.1
|
Indenture, dated as of June 1, 2016, among Realogy Group LLC, as Issuer, Realogy Co-Issuer Corp., as Co-Issuer, Realogy Holdings Corp., the Note Guarantors (as defined therein), and The Bank of New York Mellon Trust Company, N.A., as Trustee, governing the 4.875% Senior Notes due 2023 (Incorporated by reference to Exhibit 4.1 to Registrants' Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2016).
|
|
10.1
|
Amendment to Note Purchase Agreement, dated as of June 1, 2016, among Apple Ridge Funding LLC, Cartus Corporation, Realogy Group LLC, the Managing Agents, Committed Purchasers and Conduit Purchasers, and Crédit Agricole Corporate and Investment Bank, as Administrative Agent (Incorporated by reference to Exhibit 10.1 to Registrants' Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2016).
|
|
15.1*
|
Letter Regarding Unaudited Interim Financial Statements.
|
|
31.1*
|
Certification of the Chief Executive Officer of Realogy Holdings Corp. pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
|
|
31.2*
|
Certification of the Chief Financial Officer of Realogy Holdings Corp. pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
|
|
31.3*
|
Certification of the Chief Executive Officer of Realogy Group LLC pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
|
|
31.4*
|
Certification of the Chief Financial Officer of Realogy Group LLC pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
|
|
32.1*
|
Certification for Realogy Holdings Corp. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2*
|
Certification for Realogy Group LLC pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS ^
|
XBRL Instance Document.
|
|
101.SCH ^
|
XBRL Taxonomy Extension Schema Document.
|
|
101.CAL^
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.DEF ^
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
101.LAB ^
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
101.PRE ^
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
*
|
Filed herewith.
|
|
^
|
Furnished electronically with this report.
|
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|