RISMEDIA, March 8, 2011—Realogy Corporation, a global leader in real estate and relocation services, reported results for the full year ended December 31, 2010. Realogy’s net revenue for the year was $4.1 billion, an increase of 4% compared to 2009. The growth is attributed to an increase in the average sales price of homes sold by our franchisees and owned real estate offices as well as the impact of the January 2010 acquisition of Primacy Relocation. Reported EBITDA for the year was $835 million. EBITDA before restructuring and other items for the year was $534 million, an increase of $107 million, or 25%, year-over-year. For the year, Realogy recorded a net loss attributable to the Company of $99 million.
“In spite of another difficult year in housing and the economy, management remained highly focused on our strategic growth initiatives,” said Richard A. Smith, Realogy’s chief executive officer. “The Realogy Franchise Group increased its domestic franchise sales by 56% in 2010 compared to 2009, adding new franchisees and sales associates with $332 million in franchisee gross commission income (GCI). NRT, our owned brokerage company, added $60 million of annualized GCI through the acquisition of nine companies encompassing 23 offices and more than 1,000 sales associates. Cartus strengthened its position as a global provider of relocation services through the acquisition of Primacy, as well as adding more than 140 new clients and expanding relationships with approximately 300 of its existing clients. Title Resource Group continued to develop both its lender channel and title underwriting business, further diversifying its revenue base.”
Looking at Realogy’s core business drivers, both RFG and NRT outperformed the national market in terms of average sales price. Due to our mix of business, the average home sale price increased at both RFG and NRT in 2010 by 4% and 11% year-over-year, respectively, compared to the 1% increase in average home price reported by the National Association of REALTORS® (NAR). The number of home sale sides decreased 6% year-over-year at the Realogy Franchise Group (RFG) and decreased 7% at NRT, the company-owned brokerage unit. These results were consistent with the 5% decrease in existing domestic home sale units reported by NAR. Cartus experienced a 29% increase in relocation initiations primarily due to increased volume from corporate clients principally from the Primacy Relocation acquisition. Title Resource Group had a 5% increase in the average price per closing unit, which was offset by an 11% decrease in refinance title and closing units and a 10% decrease in its purchase title and closing units.
Industry forecasts from NAR and Fannie Mae continue to anticipate a weak first half of 2011 compared to 2010 for existing home sales. This is mainly because the first half of 2010 had an atypical sales pattern due to the existence of the federal home buyer tax credit that pulled forward sales from the third quarter of 2010. For the same reasons, industry forecasts project double-digit gains in the second half of 2011 in terms of year-over-year comparisons in home sales, which could offset the anticipated weak first half.
Balance Sheet Information and Covenant Compliance as of December 31, 2010
In February 2011, the Company successfully completed a series of refinancing transactions designed to improve Realogy’s capital structure and debt maturity profile.
The highlights of the transactions include:
-We extended the maturities by at least three years on the majority of our secured and unsecured debt. Consequently, the due dates for most of our debt have been extended to 2016 or later.
-After completing an amendment to our senior secured credit agreement, we raised $700 million in a senior secured bond offering. The senior secured bonds mature in 2019, and we used the proceeds from the offering to prepay a like amount of our term loans under the credit agreement.
-The new senior secured bonds are not included in the calculation of senior secured net debt for compliance with our senior secured leverage ratio maintenance covenant under our senior secured credit facility. Accordingly, the prepayment of $700 million of term loans enabled us to increase our operating cushion under the leverage ratio.
-We completed a debt exchange of $2.1 billion principal amount of unsecured notes for an equivalent amount of convertible notes that are convertible into equity of our parent company. As a result, these convertible notes represent a potential future reduction of a substantial portion of our outstanding debt if and when such convertible notes are converted.
“These transactions have resulted in improved financial flexibility for our Company in the future,” said Anthony Hull, Realogy’s chief financial officer. “We believe our success in completing these transactions at a modest increase in our interest expense reflects both investor confidence in Realogy’s future and the strength of our business model.”
The Company ended 2010 with $166 million of readily available cash and no outstanding balance on its revolving credit facility under its senior secured credit agreement. There was $60 million outstanding as of March 1, 2011 due to normal seasonal activity. The Company expects these borrowings to be substantially repaid prior to the end of the first quarter.
As of December 31, 2010, the Company’s senior secured leverage ratio (SSLR) was 4.59 to 1, which is below the 5.0 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 $2.9 billion at December 31, 2010 by the Company’s Adjusted EBITDA of $633 million for the 12 months ended December 31, 2010. After giving effect to the refinancing transactions completed in February 2011, the SSLR would have been 3.51 to 1 as of December 31, 2010.
For more information, visit www.realogy.com.
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