SOURCE: Realogy Corporation

Realogy Corporation

November 10, 2009 14:37 ET

Realogy Reports Results for Third Quarter 2009

Real Estate Leader Posts Net Revenue of $1.2 Billion, Net Income of $58 Million and EBITDA of $253 Million

PARSIPPANY, NJ--(Marketwire - November 10, 2009) - Realogy Corporation, a global provider of real estate and relocation services, today reported results for the third quarter of 2009. The Company had third quarter 2009 net revenue of $1.2 billion, a net income attributable to Realogy of $58 million and earnings before interest, taxes, depreciation and amortization (EBITDA) of $253 million. As of September 30, 2009, Realogy had $161 million of readily available cash and no outstanding balance on its $750 million revolving credit facility.

Realogy's EBITDA for the quarter was positively affected by a $75 million gain on debt extinguishment, which was partially offset by $20 million of restructuring and legacy charges. Despite revenue declines of $172 million in the third quarter of 2009 compared to 2008, EBITDA for the period, before restructuring and other items of $198 million, increased by $9 million year over year. (Please see Table 6 for a reconciliation of net income (loss) attributable to Realogy to EBITDA before restructuring and other items and Table 7 for the definition of non-GAAP financial measures.)

"The momentum that both Realogy and the real estate industry experienced during the third quarter was favorably impacted by the first-time homebuyer tax credit along with the seasonal strength of the third quarter," said Realogy President & CEO Richard A. Smith. "The tax credit has made a demonstrable impact on the housing market and the overall economy, which is why we commend Congress and the Administration for acting swiftly to extend and expand the tax credit through the first half of 2010. Stimulating the move-up or repeat-buyer market should maintain momentum in the fragile housing market and accelerate a broader economic recovery."

In the third quarter, Realogy's core business drivers showed slight year-over-year improvement in home sales transactions but this was more than offset by continuing moderation in average sales price. On a year-over-year basis, the Realogy Franchise Group (RFG) and NRT, the Company's owned brokerage unit, saw transaction sides flat and increase 1 percent, respectively. RFG's average home sales price decreased 10 percent for the quarter while NRT's average sales price declined 14 percent. Particularly for NRT, the decrease in average sales price was driven by a continued shift in the mix of business away from higher priced homes.

"We achieved a $9 million year-over-year increase in EBITDA before restructuring and other items as lower commissions and the realization of cost reduction initiatives more than offset quarterly revenue declines," said Chief Financial Officer Anthony E. Hull. "We expect that the strength of our business model and management's focus on maintaining the efficiencies executed within our businesses will continue to positively impact results for the foreseeable future."

Covenant Compliance

As of September 30, 2009, the Company's senior secured leverage ratio was 4.94 to 1, which was in compliance with our Credit Agreement. The senior secured leverage ratio is determined by taking Realogy's senior secured net debt of $2.9 billion at September 30, 2009 and dividing it by the Company's Adjusted EBITDA of $597 million for the 12 months ended September 30, 2009. (Please see Table 5 for a reconciliation of net loss attributable to Realogy to Adjusted EBITDA and Table 7 for the definition of non-GAAP financial measures.)

Balance Sheet Information as of September 30, 2009

As of September 30, 2009, Realogy had access to $736 million of its $750 million revolving credit facility. The Company also had $161 million of readily available cash, which is included in cash and cash equivalents of $192 million.

The Company completed a $650 million second lien debt offering. We received $515 million of proceeds on September 29th and the remaining $135 million on October 9th. These proceeds were used to reduce total senior secured net debt as defined under our covenant calculation by approximately $490 million, and we utilized $150 million to facilitate a debt exchange, which reduced our unsecured debt level by approximately $221 million or 7 percent. The exchange resulted in a gain on debt extinguishment of $75 million and reduced our 2012 Applicable High Yield Discount Obligation (AHYDO) by approximately $70 million, or 34 percent. The second lien financing also allowed the Company to push the maturity on approximately 10 percent of its total debt from 2013 to 2017. A complete balance sheet is included as Table 2 of this press release.

Investor Webcast

Realogy will hold a Webcast to review its third quarter 2009 results at 5:00 p.m. (EST) today. The call will be hosted by Richard A. Smith, president and CEO, and Anthony E. Hull, executive vice president, CFO and treasurer. The conference call will be made available live via Webcast on the Investor Information section of the Realogy.com Web site. A replay of the Webcast will be available at www.realogy.com from November 11 through November 25.

About Realogy Corporation

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 systems have approximately 14,500 offices and 268,000 sales associates doing business in 93 countries and territories around the world. Headquartered in Parsippany, N.J., Realogy (www.realogy.com) is owned by affiliates of Apollo Management, L.P., a leading private equity and capital markets investor. To receive future Realogy news releases, you can sign up for an e-mail subscription or secure a link for your RSS reader at www.realogy.com/media.

Forward-Looking Statements

Certain statements in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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 sources of liquidity; our ability to comply with the affirmative and negative covenants contained in our debt agreements; continuing adverse developments in the residential real estate markets; the final resolution or outcomes with respect to Cendant's contingent liabilities, including contingent tax liabilities; continuing adverse developments in general business, economic and political conditions, including reduced availability of credit and the instability of financial markets in the U.S. and abroad, substantial volatility in the equity or bond markets, and changes in short-term or long-term interest rates, or any outbreak or escalation of hostilities on a national, regional or international basis; a continuing drop in consumer confidence and/or the impact of the recession and the related high levels of unemployment in the U.S. and abroad; our failure to maintain or acquire franchisees and brands or the inability of franchisees to survive the current real estate downturn; and our inability to access capital and/or securitization markets.

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, 2008 and "Forward-Looking Statements" in our Form 10-Q for the quarter ended September 30, 2009 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.


Table 1
                          REALOGY CORPORATION
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                             (In millions)


                                    Three Months Ended   Nine Months Ended
                                       September 30,       September 30,
                                    ------------------  ------------------
                                     2009       2008      2009      2008
                                    --------  --------  --------  --------
Revenues
  Gross commission income           $    878  $  1,007  $  2,096  $  2,795
  Service revenue                        174       202       469       594
  Franchise fees                          79        88       201       252
  Other                                   38        44       118       139
                                    --------  --------  --------  --------
Net revenues                           1,169     1,341     2,884     3,780
                                    --------  --------  --------  --------

Expenses
  Commission and other
   agent-related costs                   567       656     1,336     1,827
  Operating                              309       398       950     1,249
  Marketing                               38        50       124       165
  General and administrative              63        59       179       177
  Former parent legacy costs (benefit),
   net                                     5         -       (37)       (1)
  Restructuring costs                     15        15        59        38
  Merger costs                             -         -         -         2
  Impairment of investment in
   unconsolidated entity                   -        14         -        14
  Depreciation and amortization           48        54       147       165
  Interest expense/(income), net         139       152       430       468
  Gain on extinguishment of debt         (75)        -       (75)        -
  Other (income)/expense, net             (1)      (11)      (11)      (11)
                                    --------  --------  --------  --------
Total expenses                         1,108     1,387     3,102     4,093
                                    --------  --------  --------  --------

Income (loss) before income taxes,
 equity in earnings  and
 noncontrolling interests                 61       (46)     (218)     (313)
Income tax expense (benefit)               8       (27)       15      (129)
Equity in (earnings) losses of
 unconsolidated entities                  (6)       30       (18)       25
                                    --------  --------  --------  --------
Net income (loss)                         59       (49)     (215)     (209)
  Less: Net income attributable to
   noncontrolling interests               (1)       (1)       (1)       (1)
                                    --------  --------  --------  --------
Net income (loss) attributable to
 Realogy                            $     58  $    (50) $   (216) $   (210)
                                    ========  ========  ========  ========


Table 2

                       REALOGY CORPORATION
              CONDENSED CONSOLIDATED BALANCE SHEETS
                          (In millions)

                                                 September 30, December 31,
                                                     2009         2008
                                                  -----------  -----------
ASSETS
Current assets:
  Cash and cash equivalents                       $       192  $       437
  Trade receivables (net of allowance for
   doubtful accounts of $67 and $46)                      136          140
  Relocation receivables                                  400          765
  Relocation properties held for sale                       -           22
  Deferred income taxes                                    39           92
  Due from former parent                                    3            3
  Other current assets                                     93          112
                                                  -----------  -----------
     Total current assets                                 863        1,571

Property and equipment, net                               213          276
Goodwill                                                2,576        2,572
Trademarks                                                732          732
Franchise agreements, net                               2,992        3,043
Other intangibles, net                                    460          480
Other non-current assets                                  231          238
                                                  -----------  -----------
Total assets                                      $     8,067  $     8,912
                                                  ===========  ===========

LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
  Accounts payable                                $       120  $       133
  Securitization obligations                              379          703
  Due to former parent                                    502          554
  Revolving credit facility and current portion
   of long-term debt                                       32          547
  Accrued expenses and other current liabilities          529          513
                                                  -----------  -----------
     Total current liabilities                          1,562        2,450

Long-term debt                                          6,522        6,213
Deferred income taxes                                     785          826
Other non-current liabilities                             142          163
                                                  -----------  -----------
Total liabilities                                       9,011        9,652
                                                  -----------  -----------

Commitments and contingencies

Stockholder's deficit:
  Common stock                                              -            -
  Additional paid-in capital                            2,018        2,013
  Accumulated deficit                                  (2,925)      (2,709)
  Accumulated other comprehensive loss                    (39)         (46)
                                                  -----------  -----------
     Total Realogy stockholder's deficit                 (946)        (742)
                                                  -----------  -----------
  Noncontrolling interests                                  2            2
                                                  -----------  -----------
Total stockholder's deficit                              (944)        (740)
                                                  -----------  -----------

Total liabilities and stockholder's deficit       $     8,067  $     8,912
                                                  ===========  ===========




Table 3
                             REALOGY CORPORATION
                                 KEY DRIVERS

                   Three Months Ended                Nine Months Ended
                      September 30,                    September 30,
            ------------------------------  ------------------------------
                2009       2008    % Change     2009       2008    % Change
            ----------  ----------  ------  ----------  ----------  ------
Real Estate
 Franchise
 Services
 (a)
Closed
 homesale
 sides         281,973     281,158      --     719,682     772,803     (7%)
Average
 homesale
 price      $  194,881  $  216,164    (10%) $  189,600  $  217,555    (13%)
Average
 homesale
 broker
 commission
 rate             2.53%       2.52%  1 bps        2.55%      2.51%   4 bps
Net effective
 royalty rate     5.11%       5.06%  5 bps        5.12%      5.07%   5 bps
Royalty per
 side       $      260  $      285     (9%) $      257  $     288     (11%)


Company Owned
 Real Estate
 Brokerage
 Services
Closed
 homesale
 sides          81,025      80,296      1%     200,886     214,167     (6%)
Average
 homesale
 price      $  407,398  $  474,172    (14%) $  384,930  $  495,979    (22%)
Average
 homesale
 broker
 commission
 rate             2.49%       2.48%  1 bps        2.51%       2.48%  3 bps
Gross
 commission
 income per
 side       $   10,816  $   12,468    (13%) $   10,413  $   13,002    (20%)

Relocation Services
Initiations     28,871      34,194    (16%)     89,622     109,388    (18%)
Referrals       20,320      21,767     (7%)     48,388      56,642    (15%)

Title and
 Settlement
 Services
Purchase
 title and
 closing units  30,653      30,718      --      77,611      87,666    (11%)
Refinance
 title and
 closing
 units          14,493       7,622      90%     57,119      29,396     94%
Average
 price per
 closing
 unit       $    1,405  $    1,552     (9%) $    1,293  $    1,507    (14%)


(a) Includes all franchisees except for our Company Owned Real Estate
    Brokerage Services segment.




Table 4a
                          REALOGY CORPORATION
                  SELECTED 2009 QUARTERLY FINANCIAL DATA
                             (In millions)

                                   For The       For The     For The Three
                                 Three Months  Three Months  Months Ended
                                 Ended March    Ended June   September 30,
                                   31, 2009      30, 2009        2009
                                 ------------  ------------  -------------
Revenue (a)
 Real Estate Franchise Services  $        105  $        143  $         151
 Company Owned Real Estate
  Brokerage Services                      491           764            896
 Relocation Services                       71            80             92
 Title and Settlement Services             68            88             91
 Corporate and Other                      (38)          (57)           (61)
                                 ------------  ------------  -------------
                                 $        697  $      1,018  $       1,169
                                 ============  ============  =============
EBITDA (b)
 Real Estate Franchise Services  $         44  $         85  $         107
 Company Owned Real Estate
  Brokerage Services                      (84)           24             48
 Relocation Services                        -            72             34
 Title and Settlement Services             (5)           12             10
 Corporate and Other                      (17)           (8)            54
                                 ------------  ------------  -------------
Total                            $        (62) $        185  $         253
                                 ------------  ------------  -------------
  Depreciation and Amortization            51            48             48
  Interest, Net                           144           147            139
  Income Tax Expense/(Benefit)              2             5              8
                                 ------------  ------------  -------------
  Net income / (Loss)
   attributable to Realogy       $       (259) $        (15) $          58
                                 ============  ============  =============


(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 $38 million and $57 million
     and  $61 million for the three months ended March 31, 2009, June 30,
     2009 and September 30, 2009, respectively. Such amounts are eliminated
     through the Corporate and Other line. Revenues for the Relocation
     Services segment include $6 million, $9 million and $11 million of
     intercompany referral and relocation fees paid by the Company Owned
     Real Estate Brokerage Services segment during the three months ended
     March 31, 2009, June 30, 2009 and September 30, 2009, respectively.
     Such amounts are recorded as contra-revenues by the Company Owned Real
     Estate Brokerage Services segment. There are no other material inter-
     segment transactions.
(b)  Includes $34 million and $4 million of restructuring costs and former
     parent legacy items, respectively, for the three months ended March
     31, 2009, $10 million of restructuring costs offset by a benefit of
     $46 million of former parent legacy items (comprised of a benefit of
     $55 million recorded at Cartus related to Wright Express Corporation
     partially offset by $9 million of expenses recorded at Corporate) for
     the three months ended June 30, 2009 and $15 million and $5 million of
     restructuring costs and former legacy items along with a $75 million
     gain on extinguishment of debt for the three months ended September
     30, 2009.


                                  For the three   For the       For the
                                  months ended  three months  three months
                                    March 31,    ended June    ended Sept
                                      2009        30, 2009      30, 2009
                                  ------------- ------------  ------------
         Real Estate Franchise
          Services                $           1 $          1  $          1
         Company Owned Real
          Estate Brokerage
          Services                           25            5            13
         Relocation Services                  5          (52)            -
         Title and Settlement
          Services                            1            1             -
         Corporate and Other                  6            9           (69)
                                  ------------- ------------  ------------
         Total                    $          38 $        (36) $        (55)
                                  ============= ============  ============

EBITDA by segment before restructuring and other items detailed above for the three months ended March 31, 2009 was: RFG $45 million, NRT ($59) million, Cartus $5 million, TRG ($4) million and Corporate ($11) million. EBITDA by segment before restructuring and other items detailed above for the corresponding three months ended June 30, 2009 was as follows: RFG $86 million, NRT $29 million, Cartus $20 million, TRG $13 million, and Corporate $1 million. EBITDA by segment before restructuring and other items detailed above for the corresponding three months ended September 30, 2009 was as follows: RFG $108 million, NRT $61 million, Cartus $34 million, TRG $10 million, and Corporate ($15) million.

Table 4b

                            REALOGY CORPORATION
                  SELECTED 2008 QUARTERLY FINANCIAL DATA
                              (In millions)


                    For The       For The     For The Three  For The Three
                  Three Months  Three Months  Months Ended   Months Ended
                  Ended March    Ended June   September 30,  December 31,
                    31, 2008      30, 2008        2008           2008
                  ------------  ------------  -------------  -------------
Revenue (a)
 Real Estate
  Franchise
  Services        $        152  $        185  $         172  $         133
 Company Owned
  Real Estate
  Brokerage
  Services                 767         1,061          1,026            707
 Relocation
  Services                 108           124            129             90
 Title and
  Settlement
  Services                  81            94             84             63
 Corporate and
  Other                    (57)          (75)           (70)           (49)
                  ------------  ------------  -------------  -------------
                  $      1,051  $      1,389  $       1,341  $         944
                  ============  ============  =============  =============
EBITDA (b)
 Real Estate
  Franchise
  Services        $         80  $        109  $          98  $        (884)
 Company Owned
  Real Estate
  Brokerage
  Services (c)             (60)           26             (9)          (226)
 Relocation
  Services                   -            23             39           (319)
 Title and
  Settlement
  Services                  (2)            5              9           (315)
 Corporate and
  Other                    (14)           (2)            (8)             1
                  ------------  ------------  -------------  -------------
Total             $          4  $        161  $         129  $      (1,743)
                  ------------  ------------  -------------  -------------
  Depreciation
   and
   Amortization             56            55             54             54
  Interest, Net            164           152            152            156
  Income Tax
   Benefit                 (84)          (19)           (27)          (250)
                  ------------  ------------  -------------  -------------
  Net Loss
   attributable
   to Realogy     $       (132) $        (27) $         (50) $      (1,703)
                  ============  ============  =============  =============


(a)  Transactions between segments are eliminated in consolidation.
     Revenues for the Real Estate Franchise Services segment include
     intercompany royalties and marketing fees paid by the Company Owned
     Real Estate Brokerage Services segment of $57 million, $75 million,
     $70 million and $49 million for the three months ended March 31, 2008,
     June 30, 2008, September 30, 2008 and December 31, 2008, respectively.
     Such amounts are eliminated through the Corporate and Other line.
     Revenues for the Relocation Services segment include $7 million, $12
     million, $14 million and $9 million of intercompany referral and
     relocation fees paid by the Company Owned Real Estate Brokerage
     Services segment during the three months ended March 31, 2008, June
     30, 2008, September 30, 2008 and December 31, 2008 respectively. Such
     amounts are recorded as contra-revenues by the Company Owned Real
     Estate Brokerage Services segment. There are no other material inter-
     segment transactions.
(b)  EBITDA includes Former Parent Legacy Costs (Benefits),  Restructuring
     Costs,  Merger Costs and Impairment Charges as follows
     ($ In  Millions):


                  For The Three   For The     For The Three  For The Three
                  Months Ended  Three Months  Months Ended   Months Ended
                    March 31,    Ended June   September 30,  December 31,
                      2008        30, 2008        2008           2008
                  ------------- ------------  -------------- -------------
Real Estate
 Franchise
 Services         $           - $          -  $            1 $         954
Company Owned
 Real Estate
 Brokerage
 Services                     9           13              56           193
Relocation
 Services                     -            -               2           337
Title and
 Settlement
 Services                     -            1               1           309
Corporate and
 Other                        7           (7)              -           (16)
                  ------------- ------------  -------------- -------------
Total             $          16 $          7  $           60 $       1,777
                  ============= ============  ============== =============

EBITDA by segment before restructuring and other items detailed above for the three months ended March 31, 2008 was: RFG $80 million, NRT ($51) million, Cartus $0, TRG ($2) million and Corporate ($7) million. For the three months ended June 30, 2008 was: RFG $109 million, NRT $39 million, Cartus $23 million, TRG $6 million, and Corporate ($9) million. For the three months ended September 30, 2008 was: RFG $99 million, NRT $47 million, Cartus $41 million, TRG $10 million, and Corporate ($8) million. For the three months ended December 31, 2008 was: RFG $70 million, NRT ($33) million, Cartus $18 million, TRG ($6) million, and Corporate ($15) million.


(c)  For the year ended December 31, 2008, Realogy's joint venture partner
     PHH Home Loans, of which Realogy owns 49.9%, recorded an impairment
     charge for which Realogy recorded its portion of the charge in equity
     (earnings) losses of unconsolidated entities of $31 million. As a
     result of the impairment analysis completed by PHH Home Loans, Realogy
     performed an impairment analysis of its investment in the entity and
     recognized an incremental impairment loss of $33 million.



Table 5
                        REALOGY CORPORATION
                    EBITDA AND ADJUSTED EBITDA

        A reconciliation of net loss to EBITDA and Adjusted EBITDA for
the twelve months ended September 30, 2009 is set forth in the following
table:

                                 Less      Equals     Plus     Equals
                                -------   --------   -------  ---------
                                 Nine      Three      Nine     Twelve
                      Year       Months    Months     Months   Months
                      Ended      Ended     Ended      Ended    Ended
                     December  September  December  September  September
                     31, 2008   30, 2008  31, 2008   30, 2009  30, 2009
                     --------   -------   --------   -------  --------
Net loss attributable
 to Realogy          $ (1,912)  $  (210)  $ (1,702)  $  (216) $ (1,918) (a)
Income tax
 expense (benefit)       (380)     (129)      (251)       15      (236)
                     --------   -------   --------   -------  --------
Loss before income
 taxes                 (2,292)     (339)    (1,953)     (201)   (2,154)
Interest expense/
 (income), net            624       468        156       430       586
Depreciation and
 amortization             219       165         54       147       201
                     --------   -------   --------   -------  --------
EBITDA                 (1,449)      294     (1,743)      376    (1,367) (b)
Covenant calculation
 adjustments:
  Restructuring costs and former parent legacy cost (benefit)
   items, net (c)                                                  23
  Impairment of intangible assets, goodwill and investments
   in unconsolidated entities (d)                               1,775
  Pro forma cost savings for 2009 restructuring
   initiatives (e)                                                 49
  Pro forma cost savings for 2008 restructuring initiatives (f)     8
  Pro forma effect of business optimization initiatives (g)        50
  Non-cash charges (h)                                             38
  Non-recurring fair value adjustments for purchase
   accounting (i)                                                   5
  Pro forma effect of NRT acquisitions and RFG acquisitions and
   new franchisees (j)                                              5
  Apollo management fees (k)                                       15
  Proceeds from WEX contingent asset (l)                           58
  Incremental securitization interest costs (m)                     4
  Expenses incurred in debt modification activities (n)             9
Gain on extinguishment of debt                                    (75)
                                                             --------
Adjusted EBITDA                                              $    597
                                                             --------
Total senior secured net debt (o)                            $  2,949
Senior secured leverage ratio                                    4.94x

(a) Net loss consists of a loss attributable to Realogy of: (i) $1,702 million for the fourth quarter of 2008; (ii) $259 million for the first quarter of 2009; (iii) $15 million for the second quarter of 2009 and (iv) $58 million of income for the third quarter of 2009.

(b) EBITDA consists of: (i) a negative $1,743 million for the fourth quarter of 2008; (ii) a negative $62 million for the first quarter of 2009; (iii) a positive $185 million for the second quarter of 2009 and (iv) a positive $253 million for the third quarter of 2009.

(c) Consists of $79 million of restructuring costs offset by a net benefit of $56 million for former parent legacy items.

(d) Represents the non-cash adjustment for the 2008 impairment of goodwill, intangible assets and investments in unconsolidated entities.

(e) Represents actual costs incurred that are not expected to recur in subsequent periods due to restructuring activities initiated during the first nine months of 2009. From this restructuring, we expect to reduce our operating costs by approximately $94 million on a twelve month run-rate basis and estimate that $45 million of such savings were realized in the first nine months of 2009. The adjustment shown represents the impact the savings would have had on the period from October 1, 2008 through the time they were put in place had those actions been effected on October 1, 2008.

(f) Represents actual costs incurred that are not expected to recur in subsequent periods due to restructuring activities initiated during the year ended December 31, 2008. From this restructuring, we expect to reduce our operating costs by approximately $96 million on a twelve month run-rate basis and estimate that $88 million of such savings were realized from the time they were put in place. The adjustment shown represents the impact the savings would have had on the period from October 1, 2008 through the time they were put in place had those actions been effected on October 1, 2008.

(g) Represents the twelve month pro forma effect of business optimization initiatives that have been completed to reduce costs including $9 million for initiatives to improve the Company Owned Real Estate Brokerage profit margin, $8 million for initiatives to improve Relocation Services and Title and Settlement Services fees, $10 million due to the add back of the retention accrual and $23 million related to other initiatives.

(h) Represents the elimination of non-cash expenses, including $22 million for the change in the allowance for doubtful accounts and the reserves for development advance notes and promissory notes from October 1, 2008 through September 30, 2009, $7 million of stock based compensation expense and $9 million related to the unrealized net losses on foreign currency transactions and foreign currency forward contracts.

(i) Reflects the adjustment for the negative impact of fair value adjustments for purchase accounting at the operating business segments primarily related to deferred rent for the twelve months ended September 30, 2009.

(j) Represents the estimated impact of acquisitions made by NRT and RFG acquisitions and new franchisees as if they had been acquired or signed on October 1, 2008. We have made a number of assumptions in calculating such estimate and there can be no assurance that we would have generated the projected levels of EBITDA had we owned the acquired entities or entered into the franchise contracts as of October 1, 2008.

(k) Represents the elimination of annual management fees payable to Apollo for the twelve months ended September 30, 2009.

(l) Wright Express Corporation ("WEX") was divested by Cendant in February 2005 through an initial public offering ("IPO"). As a result of such IPO, the tax basis of WEX's tangible and intangible assets increased to their fair market value which may reduce federal income tax that WEX might otherwise be obligated to pay in future periods. Under Article III of the Tax Receivable Agreement dated February 22, 2005 among WEX, Cendant and Cartus (the "TRA"),WEX was required to pay Cendant 85% of any tax savings related to the increase in fair value utilized for a period of time that we expect will be beyond the maturity of the notes. Cendant is required to pay 62.5% of these tax savings payments received from WEX to us. The Company received $9 million of recurring tax receivable payments from Wright Express Corporation ("WEX") during the last twelve months. On June 26, 2009, we entered into a Tax Receivable Prepayment Agreement with WEX, pursuant to which WEX simultaneously paid us the sum of $51 million, less expenses of approximately $2 million, as prepayment in full of its remaining contingent obligations to Realogy under Article III of the TRA.

(m) Incremental borrowing costs incurred as a result of the securitization facilities refinancing for the twelve months ended September 30, 2009.

(n) Represents the expenses incurred in connection with the Company's unsuccessful debt modification activities in 2008 and the third quarter of 2009.

(o) Represents total borrowings under the senior secured credit facility of $3,099 million plus $11 million of capital lease obligations less $161 million of readily available cash as of September 30, 2009.

Table 6

  A reconciliation of net income (loss) to EBITDA and EBITDA
adjusted for restructuring and other items for the quarters ended
September 30, 2008 and September 30, 2009 is set forth in the following
table:
                                            Quarter Ended   Quarter Ended
                                            September 30,   September 30,
                                                 2009            2008
                                            --------------  --------------
Net income (loss) attributable to Realogy   $           58  $          (50)
Income tax expense (benefit)                             8             (27)
                                            --------------  --------------
Loss before income taxes                                66             (77)
Interest expense (income), net                         139             152
Depreciation and amortization                           48              54
                                            --------------  --------------

EBITDA                                                 253             129

Legacy costs (benefit)                                   5               -
Restructuring costs                                     15              15
Impairment of investment in unconsolidated
 entity                                                  -              14
Impairment charge in equity (earnings)
 losses of unconsolidated entities                       -              31
Gain on extinguishment of debt                         (75)              -
                                            --------------  --------------
Total restructuring and other items                    (55)             60

                                            --------------  --------------
EBITDA adjusted for restructuring and other
 items                                      $          198  $          189
                                            ==============  ==============

Table 7

Definitions

EBITDA is defined by the Company 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 calculated by adjusting EBITDA by restructuring, legacy, and other items as described in Table 4 above. Adjusted EBITDA is calculated by adjusting EBITDA by the items described in Table 5 above. Adjusted EBITDA 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 and substantially corresponds to the definition of "EBITDA" used in the indentures governing the Unsecured Notes to test the permissibility of certain types of transactions, including debt incurrence. We present EBITDA and EBITDA before restructuring and other items because we believe EBITDA and EBITDA adjusted for restructuring and other items are useful supplemental measures in evaluating the performance of our operating businesses and provide greater transparency into our results of operations. The EBITDA and EBITDA before restructuring and other items measures are used by our management, including our chief operating decision maker, to perform such evaluation, and Adjusted EBITDA is used in measuring compliance with debt covenants relating to certain of our borrowing arrangements. 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 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 an analytical tool, and you should not consider EBITDA either in isolation or as a substitute for analyzing our results as reported under GAAP. Some of these limitations are:

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

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 and the pro forma full year effect of NRT acquisitions and RFG acquisitions/new franchisees. These adjustments may not reflect the actual cost savings or pro forma effect recognized in future periods.

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