Realogy Reports Results for First Quarter 2012
Company's Q1 Results and Q2 Pending Home Sales Consistent With Industry Forecasts for Modest Housing Recovery in 2012
(firmenpresse) - PARSIPPANY, NJ -- (Marketwire) -- 05/02/12 -- Realogy Corporation, a global leader in real estate and relocation services, today reported results for the first quarter ended March 31, 2012. Realogy's net revenue for the first quarter was $875 million, an increase of 5% compared to 2011. Realogy's EBITDA before restructuring and other items for the year was $36 million, a year-over-year increase of $11 million, or 44%. This was attributable to an increase in sales volume at both the franchised and company-owned real estate services segments offset by incremental compensation expense. Realogy's reported EBITDA for the first quarter of 2012 was $30 million. For the quarter, Realogy recorded a net loss attributable to the Company of $192 million, which includes $170 million of interest expense and $45 million of depreciation and amortization.
"Despite the seasonality that typically makes the first quarter the weakest quarter of the year in our industry, on a relative basis, we are pleased with what we saw both in the market and in our operating results during the first quarter of 2012," said Richard A. Smith, Realogy's chairman, chief executive officer and president. "During the fourth quarter of 2011, we spoke about seeing signs of a stabilizing market. In the first quarter of 2012, we believe we saw the beginnings of a housing recovery. Looking ahead, assuming current economic trends remain unchanged, we believe that the housing recovery should continue to gain traction. We believe demand is increasing, and home values are starting to stabilize."
Compensation expense recorded in the first quarter of 2012 increased by $10 million. The incremental expense in the first quarter of 2012 was due to the impact of recording both the previously instituted retention plan as well as the 2012 bonus plan. Realogy did not have an annual bonus plan in 2011 but implemented the retention plan in November 2010, which will be expensed through September 2012. Excluding the expense of $11 million for the retention plan, Realogy's EBITDA before restructuring and other items for the first quarter of 2012 would have been $47 million.
Looking at Realogy's core business drivers, Realogy Franchise Group (RFG) had a year-over-year 7% increase in homesale transaction sides across all price ranges, while NRT, the company-owned brokerage unit, had an 8% year-over-year increase. Average homesale price was flat at RFG and declined 3% at NRT for the first quarter of 2012 as compared to 2011. RFG and NRT homesale unit increases were in line with the national trends reported in the first quarter by the National Association of Realtors (NAR), which had existing homesale transactions up 7%. NAR also reported average sale price for first quarter 2012 as flat year-over-year. Cartus experienced a 7% increase in initiations and a 11% increase in broker referrals, while Title Resource Group experienced an 8% increase in purchase title and closing units and a 31% increase in refinance title and closing units offset by an 11% decrease in the average price per closing unit due to the increase in refinance volume along with geographic mix of business in resale units.
"Our first quarter closed homesale sides were the highest we have seen in the past four years," said Anthony E. Hull, Realogy's CFO and treasurer. "The current market conditions -- increased demand for housing and upward pressure on prices -- reflect the tight inventory that is prevalent in many markets as well as increased sales activity at the high end. On a combined Realogy basis, we anticipate our second quarter 2012 homesales to increase at a high single-digit pace ahead of last year, and average homesale price will be flat to modestly up year-over-year as indicated by our preliminary April results."
The Company ended the quarter with $109 million of readily available cash and no outstanding borrowings on its revolving credit facility under its senior secured credit agreement.
A consolidated balance sheet is included as Table 2 of this press release.
As of May 1, 2012, the Company had $197 million outstanding under its $363 million extended revolving credit facility as anticipated due to the semiannual April interest payments. The Company expects its revolver balance to be approximately $100 million by the end of the June and expects that the borrowings will be further reduced in the third quarter as the third quarter typically generates the highest EBITDA and cash flow of each year.
As of March 31, 2012, the Company's senior secured leverage ratio (SSLR) was 4.02 to 1, below the 4.75 to 1 maximum ratio required to be in compliance with its senior secured credit agreement. The SSLR is determined by dividing Realogy's senior secured net debt of $2.3 billion at March 31, 2012 by the Company's Adjusted EBITDA of $577 million for the four quarters ended March 31, 2012 (please see Table 8 for the definition of non-GAAP financial measures, Adjusted EBITDA and EBITDA before restructuring and other items and Tables 6 and 7 for a reconciliation of these non-GAAP measures to their most comparable GAAP financial measure, net loss attributable to Realogy).
During the first quarter of 2012, Realogy completed a $918 million refinancing, and as a result, the Company does not have any significant corporate debt maturities until 2016. Realogy's capital structure puts it in the unique position of having $2.1 billion in convertible debt, all or a portion of which can be converted to equity at the option of the holders thereof.
Realogy will hold a Webcast to review its first quarter 2012 results on May 2 at 4:00 p.m. (EDT). The call will be hosted by Richard A. Smith, chairman, CEO and president, and Anthony E. Hull, executive vice president, CFO and treasurer. The conference call, together with corresponding slides, will be made available live via Webcast on the Investor Information section of the Realogy website. A replay of the Webcast also will be available on the website from May 3 through May 10.
Realogy Corporation, a global provider of real estate and relocation services, has a diversified business model that includes real estate franchising, brokerage, relocation and title services. Realogy's world-renowned brands and business units include Better Homes and Gardens® Real Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, The Corcoran Group®, ERA®, Sotheby's International Realty®, NRT LLC, Cartus and Title Resource Group. Collectively, Realogy's franchise system members operate approximately 13,800 offices with 241,000 sales associates doing business in 103 countries and territories around the world. Headquartered in Parsippany, N.J., Realogy is owned by affiliates of Apollo Management, L.P., a subsidiary of Apollo Global Management, LLC, a leading global alternative asset manager.
Certain statements in this press release constitute "forward-looking statements." Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Realogy Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "projects", "estimates" and "plans" and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements.
Various factors that could cause actual future results and other future events to differ materially from those estimated by management include, but are not limited to: our substantial amount of outstanding debt; constraints on the Company's liquidity including but not limited to our ability to access the capital, including debt financing, and/or securitization markets; variable rate indebtedness which subjects the Company to interest rate risk; our ability to comply with the affirmative and negative covenants contained in our debt agreements; adverse developments or the absence of sustained improvement in general business, economic and political conditions; adverse developments or the absence of improvement in the residential real estate markets including but not limited to the lack of sustained improvement in the number of home sales and/or further declines in home prices, low levels of consumer confidence, the impact of slow economic growth or future recessions and related high levels of unemployment in the U.S. and abroad, continuing high levels of foreclosures, seasonal fluctuations in the residential real estate brokerage business; reduced availability of mortgage financing or financing availability at rates not sufficiently attractive to homebuyers; the final resolution or outcomes with respect to Cendant's remaining contingent liabilities; any outbreak or escalation of hostilities on a national, regional or international basis; government regulation as well as legislative, tax or regulatory changes that would adversely impact the residential real estate market, including but not limited to potential reform of the financing of the U.S. housing and mortgage markets and the Internal Revenue Code; the Company's failure to enter into or renew franchise agreements, maintain its brands or the inability of franchisees to survive the current real estate cycle; the Company's inability to realize benefits from future acquisitions; and the Company's inability to sustain improvements in its operating efficiency.
Consideration should be given to the areas of risk described above, as well as those risks set forth under the headings "Forward-Looking Statements" and "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2011 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 and in our other periodic reports filed from time to time, in connection with considering any forward-looking statements that may be made by us and our businesses generally. Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law.
This release includes certain non-GAAP financial measures as defined under SEC rules. As required by SEC rules, important information regarding such measures is contained in the Tables attached to this release.
EBITDA is defined by us as net income (loss) before depreciation and amortization, interest (income) expense, net (other than relocation services interest for securitization assets and securitization obligations) and income taxes. EBITDA before restructuring and other items is defined by us as EBITDA adjusted for merger costs, restructuring costs, former parent legacy cost (benefit) items, net, and (gain) loss on the early extinguishment of debt. Adjusted EBITDA is presented to demonstrate our compliance with the senior secured leverage ratio covenant in the senior secured credit facility. We present EBITDA, EBITDA before restructuring and other items and Adjusted EBITDA because we believe EBITDA, EBITDA before restructuring and other items and Adjusted EBITDA are useful as supplemental measures in evaluating the performance of our operating businesses and provides greater transparency into our results of operations. Our management, including our chief operating decision maker, use EBITDA and EBITDA before restructuring and other items as a factor in evaluating the performance of our business. EBITDA, EBITDA before restructuring and other items and Adjusted EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations data prepared in accordance with GAAP.
We believe EBITDA facilitates company-to-company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting net interest expense), taxation, the age and book depreciation of facilities (affecting relative depreciation expense) and the amortization of intangibles, which may vary for different companies for reasons unrelated to operating performance. We believe EBITDA before restructuring and other items also facilitates company-to-company operating performance comparisons by backing out those items in EBITDA as well as certain historical cost (benefit) items which may vary for different companies for reasons unrelated to operating performance. We further believe that EBITDA is frequently used by securities analysts, investors and other interested parties in their evaluation of companies, many of which present an EBITDA measure when reporting their results.
EBITDA and EBITDA before restructuring and other items have limitations as analytical tools, and you should not consider EBITDA or EBITDA before restructuring and other items either in isolation or as substitutes for analyzing our results as reported under GAAP. Some of these limitations are:
these measures do not reflect changes in, or cash requirement for, our working capital needs;
these measures do not reflect our interest expense (except for interest related to our securitization obligations), or the cash requirements necessary to service interest or principal payments on our debt;
these measures do not reflect our income tax expense or the cash requirements to pay our taxes;
these measures do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often require replacement in the future, and these measures do not reflect any cash requirements for such replacements; and
other companies may calculate these measures differently so they may not be comparable.
Adjusted EBITDA as used herein corresponds to the definition of "EBITDA," calculated on a "pro forma basis," used in the senior secured credit facility to calculate the senior secured leverage ratio.
Like EBITDA and EBITDA before restructuring and other items, Adjusted EBITDA has limitations as an analytical tool, and you should not consider Adjusted EBITDA either in isolation or as a substitute for analyzing our results as reported under GAAP. In addition to the limitations described above with respect to EBITDA and EBITDA before restructuring and other items, Adjusted EBITDA includes pro forma cost savings, the pro forma effect of business optimization initiatives and the pro forma full year effect of acquisitions and new franchisees. These adjustments may not reflect the actual cost savings or pro forma effect recognized in future periods.
Alicia Swift
(973) 407-4669
Mark Panus
(973) 407-7215
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Datum: 02.05.2012 - 18:18 Uhr
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