Edgar Filing: REALOGY GROUP LLC

Realogy Q1 3.31.2013

^{_________________________________________________________________________________________________________________________________________________________}

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

^{___________________________}

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File No. 001-35674

REALOGY HOLDINGS CORP

(Exact name of registrant as specified in its charter)

20-8050955

(I.R.S. Employer Identification Number)

Commission File No. 333-179896

REALOGY GROUP LLC

(Exact name of registrant as specified in its charter)

20-4381990

(I.R.S. Employer Identification Number)

Delaware

(State or other jurisdiction of incorporation or organization)

175 Park Avenue

Madison, NJ 07940

(Address of principal executive offices) (Zip Code)

(973) 407-2000

(Registrants' telephone number, including area code)

^{___________________________}

1 Campus Drive

Parsippany, NJ 07054

(Former name, former address and former fiscal year, if changed since last report)

^{___________________________}

Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Realogy Holdings Corp. Yes þ No ¨ Realogy Group LLC Yes ¨ No þ

Indicate by check mark whether the Registrants have submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrants were required to submit and post such files).

Realogy Holdings Corp. Yes þ No ¨ Realogy Group LLC Yes þ No ¨

Indicate by check mark whether the Registrants are large accelerated filers, accelerated filers, non-accelerated filers, or smaller reporting companies. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



	Large accelerated filer	Accelerated filer		Non-accelerated filer	Smaller reporting company
			(Do not check if a smaller reporting company)
Realogy Holdings Corp.	¨	¨		þ	¨
Realogy Group LLC	¨	¨		þ	¨

Indicate by check mark whether the Registrants are a shell company (as defined in Rule 12b-2 of the Exchange Act).

Realogy Holdings Corp. Yes ¨ No þ Realogy Group LLC Yes ¨ No þ

There were 145,738,746 shares of Common Stock, $0.01 par value, of Realogy Holdings Corp. outstanding as of April 29, 2013.

______________________________________________________________________________________________________________________________________________________________________

Table of Contents

TABLE OF CONTENTS



		Page
Introductory Note		1
Forward-Looking Statements		1

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Report of Independent Registered Public Accounting Firm for Realogy Holdings Corp.	3
	Report of Independent Registered Public Accounting Firm for Realogy Group LLC	4
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2013 and 2012	5
	Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2013 and 2012	6
	Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012	7
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2012	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risks	56
Item 4.	Controls and Procedures	57
PART II	OTHER INFORMATION	58
Item 1.	Legal Proceedings	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 5.	Other Information	59
Item 6.	Exhibits	59
Signatures		60
Exhibit Index		61

Table of Contents

INTRODUCTORY NOTE

Except as otherwise indicated or unless the context otherwise requires, the terms “we,” “us,” “our,” “our company,” "Realogy," "Realogy Holdings" and the “Company” refer to Realogy Holdings Corp., a Delaware corporation, and its consolidated subsidiaries, including Realogy Intermediate Holdings LLC, a Delaware limited liability company (“Realogy Intermediate”), and Realogy Group LLC, a Delaware limited liability company (“Realogy Group”). Neither Realogy Holdings, the indirect parent of Realogy Group, nor Realogy Intermediate, the direct parent company of Realogy Group, conducts any operations other than with respect to its respective direct or indirect ownership of Realogy Group. As a result, the consolidated financial positions, results of operations and cash flows of Realogy Holdings, Realogy Intermediate and Realogy Group are the same.

Realogy Holdings is not a party to the senior secured credit facility and certain references in this report to our consolidated indebtedness exclude Realogy Holdings with respect to indebtedness under the senior secured credit facility. In addition, while Realogy Holdings is a guarantor of Realogy Group's obligations under its secured and unsecured notes, Realogy Holdings is not subject to the restrictive covenants in the indentures governing such indebtedness.

FORWARD-LOOKING STATEMENTS

Forward-looking statements included in this report and our other public filings or other public statements that we make from time to time are based on various facts and derived utilizing numerous important assumptions and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include the information concerning our future financial performance, business strategy, projected plans and objectives, as well as projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "projects," "estimates," "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. You should understand that the following important factors could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements:


•	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:


◦	a lack of improvement 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;


◦	a lack of improvement in consumer confidence;


◦	the impact of recessions, slow economic growth, disruptions in the banking system and high levels of unemployment in the U.S. and abroad;

◦

increasing mortgage rates and down payment requirements and/or constraints on the availability of mortgage financing, including but not limited to the potential impact of various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and regulations that may be promulgated thereunder relating to mortgage financing as well as other factors that tighten underwriting standards;

◦

legislative, tax or regulatory changes that would adversely impact the residential real estate market, including potential reforms of the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation (“Freddie Mac") and the Federal Housing Administration, and potential tax code reform, which could reduce the amount that taxpayers would be allowed to deduct for home mortgage interest;


◦	negative trends and/or a negative perception of the market trends in value for residential real estate;


◦	renewed high levels of foreclosure activity including but not limited to the release of homes already held for sale by financial institutions;


◦	insufficient or excessive regional home inventory levels;


◦	the inability or unwillingness of homeowners to enter into homesale transactions due to negative equity in their existing homes; and

Table of Contents


◦	lower homeownership rates or failure of homeownership rates to return to more typical levels;


•	our geographic and high-end market concentration, particularly with respect to our company owned brokerage operations;


•	our inability to enter into franchise agreements with new franchisees or to realize royalty revenue growth from them;


•	our inability to renew existing franchise agreements or maintain franchisee satisfaction with our brands;


•	existing franchisees may incur operating losses if sales volume decreases which may impede their ability to grow or continue operations. Additionally, debt incurred by our franchisees during the downturn may hinder long-term growth and their ability to pay back indebtedness;


•	disputes or issues with entities that license us their trade names for use in our business that could impede our franchising of those brands;


•	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 third parties with which our franchisees have business relationships;


•	competition in our existing and future lines of business;


•	our failure to comply with laws, regulations and regulatory interpretations and any changes in laws, regulations and regulatory interpretations;


•	seasonal fluctuations in the residential real estate brokerage business which could adversely affect our business, financial condition and liquidity;


•	the loss of any of our senior management or key managers or employees or other significant labor or employment issues;


•	the failure or significant disruption from various causes of our critical information technologies;


•	adverse effects of natural disasters or environmental catastrophes;


•	risks related to our international operations;

•

risks associated with our substantial indebtedness and interest obligations, including risks related to having to dedicate a substantial portion of our cash flows from operations to service our debt, risks related to our ability to refinance our indebtedness and to incur additional indebtedness, risks associated with our ability to comply with our senior secured leverage ratio covenant under our senior secured credit facility, interest rate risk, and risks related to an event of default under our outstanding indebtedness;


•	changes in corporate relocation practices resulting in fewer employee relocations;


•	an increase in the claims rate of our title underwriter;


•	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;


•	limitations on flexibility in operating our business due to restrictions contained in our debt agreements;


•	any remaining resolutions or outcomes with respect to Cendant's contingent liabilities under the Separation and Distribution Agreement and the Tax Sharing Agreement, including any adverse impact on our future cash flows;


•	any adverse resolution of litigation, governmental proceedings or arbitration awards; and


•	new types of taxes or increases in state, local or federal taxes that could diminish profitability or liquidity.

Other factors not identified above, including those described under the headings “Forward-Looking Statements,” “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”), may also cause actual results to differ materially from those described in our forward-looking statements. Most of these factors are difficult to anticipate and are generally beyond our control. You should consider these factors 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. For any forward-looking statement contained in our public filings or other public statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Realogy Holdings Corp.:

We have reviewed the accompanying condensed consolidated balance sheet of Realogy Holdings Corp. and its subsidiaries as of March 31, 2013, and the related condensed consolidated statements of operations and comprehensive loss for the three-month periods ended March 31, 2013 and March 31, 2012 and the condensed consolidated statements of cash flows for the three-month periods ended March 31, 2013 and March 31, 2012. These interim financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2012, and the related consolidated statements of operations, comprehensive loss, equity, and cash flows for the year then ended (not presented herein), and in our report dated February 25, 2013, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2012, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

Florham Park, New Jersey

May 1, 2013

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholder of Realogy Group LLC:

We have reviewed the accompanying condensed consolidated balance sheet of Realogy Group LLC and its subsidiaries as of March 31, 2013, and the related condensed consolidated statements of operations and comprehensive loss for the three-month periods ended March 31, 2013 and March 31, 2012 and the condensed consolidated statements of cash flows for the three-month periods ended March 31, 2013 and March 31, 2012. These interim financial statements are the responsibility of the Company's management.

/s/ PricewaterhouseCoopers LLP

Florham Park, New Jersey

May 1, 2013

Table of Contents

REALOGY HOLDINGS CORP. AND REALOGY GROUP LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)



	Three Months Ended
	March 31,
	2013			2012
Revenues
Gross commission income	$	676		$	606
Service revenue	183			172
Franchise fees	57			54
Other	41			43
Net revenues	957			875
Expenses
Commission and other agent-related costs	454			402
Operating	327			318
Marketing	50			51
General and administrative	67			77
Former parent legacy costs (benefit), net	1			(3		)
Restructuring costs	—			3
Depreciation and amortization	42			45
Interest expense, net	89			170
Loss on the early extinguishment of debt	3			6
Other (income)/expense, net	—			1
Total expenses	1,033			1,070
Loss before income taxes, equity in earnings and noncontrolling interests	(76		)	(195		)
Income tax expense	7			7
Equity in earnings of unconsolidated entities	(9		)	(10		)
Net loss	(74		)	(192		)
Less: Net income attributable to noncontrolling interests	(1		)	—
Net loss attributable to Realogy Holdings and Realogy Group	$	(75	)	$	(192	)

Earnings (loss) per share attributable to Realogy Holdings:
Basic loss per share:	$	(0.52	)	$	(23.95	)
Diluted loss per share:	$	(0.52	)	$	(23.95	)
Weighted average common and common equivalent shares of Realogy Holdings outstanding:
Basic:	145.1			8.0
Diluted:	145.1			8.0

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

REALOGY HOLDINGS CORP. AND REALOGY GROUP LLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In millions)

(Unaudited)



	Three Months Ended
	March 31,
	2013			2012
Net loss	$	(74	)	$	(192	)
Currency translation adjustment	(3		)	2
Defined benefit pension plan - amortization of actuarial loss to periodic pension cost	—			1
Other comprehensive (loss) income, before tax	(3		)	3
Income tax expense related to other comprehensive (loss) income amounts	—			1
Other comprehensive (loss) income, net of tax	(3		)	2
Comprehensive loss	(77		)	(190		)
Less: comprehensive income attributable to noncontrolling interests	(1		)	—
Comprehensive loss attributable to Realogy Holdings and Realogy Group	$	(78	)	$	(190	)

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

REALOGY HOLDINGS CORP. AND REALOGY GROUP LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

(Unaudited)



	March 31, 2013			December 31, 2012
	March 31, 2013			December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	366		$	376
Trade receivables (net of allowance for doubtful accounts of $50 and $51)	118			122
Relocation receivables	321			324
Relocation properties held for sale	5			9
Deferred income taxes	53			54
Other current assets	99			93
Total current assets	962			978
Property and equipment, net	190			188
Goodwill	3,306			3,304
Trademarks	732			732
Franchise agreements, net	1,613			1,629
Other intangibles, net	390			399
Other non-current assets	222			215
Total assets	$	7,415		$	7,445

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	147		$	148
Securitization obligations	239			261
Due to former parent	70			69
Revolving credit facilities and current portion of long-term debt	154			110
Accrued expenses and other current liabilities	381			427
Total current liabilities	991			1,015
Long-term debt	4,317			4,256
Deferred income taxes	448			444
Other non-current liabilities	216			211
Total liabilities	5,972			5,926
Commitments and contingencies (Notes 8 and 10)
Equity:
Realogy Holdings preferred stock: $.01 par value; 50,000,000 shares authorized, none issued and outstanding at March 31, 2013 and December 31, 2012.	—			—
Realogy Holdings common stock: $.01 par value; 400,000,000 shares authorized, 145,370,433 shares outstanding at March 31, 2013 and 145,369,453 shares outstanding at December 31, 2012.	1			1
Additional paid-in capital	5,594			5,591
Accumulated deficit	(4,120		)	(4,045		)
Accumulated other comprehensive loss	(34		)	(31		)
Total stockholders' equity	1,441			1,516
Noncontrolling interests	2			3
Total equity	1,443			1,519
Total liabilities and equity	$	7,415		$	7,445

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

REALOGY HOLDINGS CORP. AND REALOGY GROUP LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)



	Three Months Ended March 31,
	2013			2012
Operating Activities
Net loss	$	(74	)	$	(192	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	42			45
Deferred income taxes	5			6
Amortization of deferred financing costs and discount on unsecured notes	3			4
Loss on the early extinguishment of debt	3			6
Equity in earnings of unconsolidated entities	(9		)	(10		)
Other adjustments to net loss	5			3
Net change in assets and liabilities, excluding the impact of acquisitions and dispositions:
Trade receivables	3			(2		)
Relocation receivables and advances	1			(6		)
Relocation properties held for sale	4			5
Other assets	(3		)	(4		)
Accounts payable, accrued expenses and other liabilities	(39		)	103
Due (to) from former parent	1			(4		)
Dividends received from unconsolidated entities	15			14
Net cash used in operating activities	(43		)	(32		)
Investing Activities
Property and equipment additions	(12		)	(9		)
Net assets acquired (net of cash acquired) and acquisition-related payments	(2		)	(4		)
Purchases of certificates of deposit, net	—			(3		)
Change in restricted cash	(2		)	(4		)
Net cash used in investing activities	(16		)	(20		)
Financing Activities
Net change in revolving credit facilities	25			(208		)
Proceeds from term loan extension	79			—
Repayments of term loan credit facility	—			(629		)
Proceeds from issuance of First Lien Notes	—			593
Proceeds from issuance of First and a Half Lien Notes	—			325
Net change in securitization obligations	(21		)	(27		)
Debt issuance costs	(22		)	(2		)
Other, net	(11		)	4
Net cash provided by financing activities	50			56
Effect of changes in exchange rates on cash and cash equivalents	(1		)	1
Net (decrease)/increase in cash and cash equivalents	(10		)	5
Cash and cash equivalents, beginning of period	376			143
Cash and cash equivalents, end of period	$	366		$	148

Supplemental Disclosure of Cash Flow Information
Interest payments (including securitization interest expense)	$	92		$	66
Income tax payments, net	3			—

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

REALOGY HOLDINGS CORP. AND REALOGY GROUP LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise noted, all amounts are in millions)

(Unaudited)


1.	BASIS OF PRESENTATION

Realogy Holdings Corp. (previously known as Domus Holdings Corp.) (“Realogy Holdings”, "Realogy" or the "Company") is a holding company for its consolidated subsidiaries including Realogy Intermediate Holdings LLC (“Realogy Intermediate”) and Realogy Group LLC (“Realogy Group”). Neither Realogy Holdings, the indirect parent of Realogy Group, nor Intermediate, the direct parent company of Realogy Group, conducts any operations other than with respect to its respective direct or indirect ownership of Realogy Group. As a result, the consolidated financial positions, results of operations and cash flows of Realogy Holdings, Realogy Intermediate and Realogy Group are the same.

Realogy Holdings was incorporated on December 14, 2006. On April 10, 2007, Realogy Holdings, then wholly owned by investment funds affiliated with, or co-investment vehicles managed by, Apollo Management VI, L.P., an entity affiliated with Apollo Management, L.P. (collectively referred to as “Apollo”), acquired the outstanding shares of Realogy Group (then known as Realogy Corporation, a Delaware corporation) pursuant to a merger of its wholly owned subsidiary Domus Acquisition Corp., with and into Realogy Group (the “Merger”) with Realogy Holdings becoming the indirect parent company of Realogy Group. Prior to the consummation of the Realogy Holdings' initial public offering and related transactions in October 2012, Realogy Holdings was owned by Apollo and members of the Company’s management. As of March 31, 2013, Apollo owned approximately 45% of the outstanding shares of Realogy Holdings (which was reduced to approximately 17% upon the consummation of the secondary public offering of shares of common stock by Apollo on April 16, 2013, see Note 13, "Subsequent Events"). As of March 31, 2013, Realogy Group is wholly-owned by Realogy Intermediate, a direct wholly-owned subsidiary of Realogy Holdings.

Realogy is a global provider of residential real estate services. Realogy Group (then Realogy Corporation) was incorporated in January 2006 to facilitate a plan by Cendant Corporation (now known as Avis Budget Group, Inc.) to separate into four independent companies—one for each of Cendant's business units—real estate services or Realogy, travel distribution services (“Travelport”), hospitality services, including timeshare resorts (“Wyndham Worldwide”), and vehicle rental (“Avis Budget Group”). On July 31, 2006, the separation (“Separation”) from Cendant became effective.

The accompanying Condensed Consolidated Financial Statements include the financial statements of Realogy Holdings and Realogy Group. Realogy Holdings' only asset is its investment in the common stock of Intermediate, and Intermediate's only asset is its investment in Realogy Group. Realogy Holdings' only obligations are its guarantees of certain borrowings and certain franchise obligations of Realogy Group. All expenses incurred by Realogy Holdings and Intermediate are for the benefit of Realogy Group and have been reflected in Realogy Group's consolidated financial statements. The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and with Article 10 of Regulation S-X. Interim results may not be indicative of full year performance because of seasonal and short-term variations. The Company has eliminated all material intercompany transactions and balances between entities consolidated in these financial statements. In presenting the Condensed Consolidated Financial Statements, management makes estimates and assumptions that affect the amounts reported and the related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ materially from those estimates.

In management's opinion, the accompanying Condensed Consolidated Financial Statements reflect all normal and recurring adjustments necessary to present fairly the Realogy Holdings and Realogy Group' financial position as of March 31, 2013 and the results of operations, and comprehensive loss for the three months ended March 31, 2013 and 2012 and cash flows for the three months ended March 31, 2013 and 2012.

As the interim Condensed Consolidated Financial Statements are prepared using the same accounting principles and policies used to prepare the annual financial statements, they should be read in conjunction with the Consolidated Financial Statements for the year ended December 31, 2012 included in the Annual Report on Form 10-K for the year ended December 31, 2012.

Table of Contents

Financial Instruments

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.



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.

The availability of observable inputs can vary from asset to asset and is affected by a wide variety of factors, including, for example, the type of asset, whether the asset is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level III. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The fair value of financial instruments is generally determined by reference to quoted market values. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques, as appropriate. The fair value of interest rate swaps is determined based upon a discounted cash flow approach.

The following table summarizes fair value measurements by level at March 31, 2013 for assets/liabilities measured at fair value on a recurring basis:



	Level I		Level II		Level III		Total
Interest rate swaps (included in other non-current liabilities)	$	—	$	30	$	—	$	30
Deferred compensation plan assets (included in other non-current assets)	1		—		—		1

The following table summarizes fair value measurements by level at December 31, 2012 for assets/liabilities measured at fair value on a recurring basis:



	Level I		Level II		Level III		Total
Interest rate swaps (included in other non-current liabilities)	$	—	$	29	$	—	$	29
Deferred compensation plan assets (included in other non-current assets)	1		—		—		1

Table of Contents

The following table summarizes the carrying amount of the Company’s indebtedness compared to the estimated fair value, primarily determined by quoted market values, at:



	March 31, 2013				December 31, 2012
	Carrying Amount		Estimated Fair Value (a)		Carrying Amount		Estimated Fair Value (a)
Debt
Senior Secured Credit Facility:
Revolving credit facility	$	135	$	135	$	110	$	110
Term loan facility	1,901		1,925		1,822		1,831
7.625% First Lien Notes	593		669		593		673
7.875% First and a Half Lien Notes	700		766		700		763
9.00% First and a Half Lien Notes	325		377		325		366
11.50% Senior Notes	490		521		489		527
12.00% Senior Notes	129		137		129		140
12.375% Senior Subordinated Notes	188		189		188		192
13.375% Senior Subordinated Notes	10		11		10		11
Securitization obligations	239		239		261		261

_______________


(a)	The fair value of the Company's indebtedness is categorized as Level I.

Income Taxes

Income tax expense for the three months ended March 31, 2013 was $7 million. This expense included $6 million for an increase in deferred tax liabilities associated with indefinite-lived intangible assets and $1 million was recognized for foreign and state income taxes for certain jurisdictions. The Company's provision for income taxes in interim periods is computed by applying its estimated annual effective tax rate against the income (loss) before income taxes for the period. In addition, non-recurring or discrete items, including the increase in deferred tax liabilities associated with indefinite-lived intangibles, are recorded during the period in which they occur. No federal income tax benefit was recognized for the current period loss due to the recognition of a full valuation allowance for domestic operations. Management will continue to evaluate all evidence, including the impact of the reduction in indebtedness and related interest expense as a result of the Company's initial public offering, as well as the impact of note redemptions discussed in Note 13, "Subsequent Events", to determine if the valuation allowance is appropriate for future periods.

Derivative Instruments

The Company uses foreign currency forward contracts largely to manage its exposure to changes in foreign currency exchange rates associated with its foreign currency denominated receivables and payables. The Company primarily manages its foreign currency exposure to the Canadian Dollar, Swiss Franc, Euro and British Pound. The Company has elected not to utilize hedge accounting for these forward contracts; therefore, any change in fair value is recorded in the Consolidated Statements of Operations. However, the fluctuations in the value of these forward contracts generally offset the impact of changes in the value of the underlying risk that they are intended to economically hedge. As of March 31, 2013, the Company had outstanding foreign currency forward contracts with a fair value of less than $1 million and a notional value of $18 million. As of December 31, 2012, the Company had outstanding foreign currency forward contracts with a fair value of less than $1 million and a notional value of $28 million.

The Company also enters into interest rate swaps to manage its exposure to changes in interest rates associated with its variable rate borrowings. The Company has two interest rate swaps with an aggregate notional value of $425 million to hedge the variability in cash flows resulting from the term loan facility. The first swap, with a notional value of $225 million, commenced in July 2012 and expires in February 2018 and the second swap, with a notional value of $200 million, commenced in January 2013 and expires in February 2018. The Company is utilizing pay fixed interest swaps (in exchange for floating LIBOR rate based payments) to perform this hedging strategy.

The fair value of derivative instruments was as follows:



Liability Derivatives		Fair Value
Not Designated as Hedging Instruments	Balance Sheet Location	March 31, 2013		December 31, 2012
Interest rate swap contracts	Other non-current liabilities	$	30	$	29

Table of Contents

The effect of derivative instruments on earnings is as follows:



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 March 31,
		2013			2012
Interest rate swap contracts	Interest expense	$	2		$	3
Foreign exchange contracts	Operating expense	(1		)	1

Restricted Cash

Restricted cash primarily relates to amounts specifically designated as collateral for the repayment of outstanding borrowings under the Company’s securitization facilities. Such amounts approximated $11 million and $9 million at March 31, 2013 and December 31, 2012, respectively and are primarily included within Other current assets on the Company’s Condensed Consolidated Balance Sheets.

Supplemental Cash Flow Information

The Company had a non-cash transaction for the three months ended March 31, 2013 related to tenant improvements on the new corporate headquarters which resulted in $5 million of non-cash accruals to fixed assets and deferred rent.

Defined Benefit Pension Plan

The net periodic pension cost for the three months ended March 31, 2013 was less than $1 million and was comprised of interest cost and amortization of actuarial loss of $2 million offset by a benefit of $2 million for the expected return on assets. The net periodic pension cost for the three months ended March 31, 2012 was $1 million and was comprised of interest cost and amortization of actuarial loss of $3 million offset by a benefit of $2 million for the expected return on assets.

Reclassifications from Accumulated Other Comprehensive Income

The Company adopted FASB's amended guidance for comprehensive income, which requires new footnote disclosures related to reclassifications out of accumulated other comprehensive income to net income. These reclassifications include the amortization of actuarial loss to periodic pension cost of less than $1 million and $1 million for the three months ended March 31, 2013 and March 31, 2012, respectively. These amounts were reclassified from accumulated other comprehensive income to the general and administrative expenses line on the statement of operations.

Recently Adopted Accounting Pronouncements

In July 2012, the FASB amended the guidance on impairment testing for indefinite-lived intangible assets that allows an entity to elect to qualitatively assess whether it is necessary to perform the current two step impairment test. If the qualitative assessment determines that it is not more-likely-than-not that the fair value of the indefinite-lived intangible asset is less than its carrying amount, then performing the two step test is unnecessary. If the entity elects to bypass the qualitative assessment for any indefinite-lived intangible asset and proceed directly to Step One of the test and validate the conclusion by measuring fair value, it can resume performing the qualitative assessment in any subsequent period. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, however early adoption is permitted. The Company will consider utilizing the new qualitative analysis for its annual impairment test to be performed in the fourth quarter of 2013.

In February 2013, the FASB amended guidance requiring new footnote disclosures related to reclassifications out of accumulated other comprehensive income to net income. Companies are required to present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by reclassification. A company would not need to show the income statement line item affected for certain components that are not required to be reclassified in their entirety to net income. If the component is not required to be reclassified to net income it its entirety, companies would instead cross reference that amount to the related footnote where additional details about the effect of the reclassification are disclosed. The Company disclosed the reclassifications for the three months ended March 31, 2013 and 2012.

Table of Contents


2.	ACQUISITIONS

2013 ACQUISITIONS

During the three months ended March 31, 2013, the Company acquired two real estate brokerage operations through its wholly owned subsidiary, NRT, for total consideration of $2 million. These acquisitions resulted in goodwill of $2 million that was assigned to the Company Owned Brokerage Services segment.

None of the 2013 acquisitions were significant to the Company’s results of operations, financial position or cash flows individually or in the aggregate.

2012 ACQUISITIONS

During the year ended December 31, 2012, the Company acquired seven real estate brokerage operations through its wholly owned subsidiary, NRT, for total consideration of $5 million. These acquisitions resulted in goodwill of $5 million that was assigned to the Company Owned Brokerage Services segment.

None of the 2012 acquisitions were significant to the Company’s results of operations, financial position or cash flows individually or in the aggregate.


3.	INTANGIBLE ASSETS

Goodwill by segment and changes in the carrying amount are as follows:



	Real Estate Franchise Services			Company Owned Brokerage Services			Relocation Services			Title and Settlement Services			Total Company
Gross Goodwill as of December 31, 2012	$	3,264		$	788		$	641		$	397		$	5,090
Accumulated impairment losses	(1,023		)	(158		)	(281		)	(324		)	(1,786		)
Balance at December 31, 2012	2,241			630			360			73			3,304
Goodwill acquired	—			2			—			—			2
Balance at March 31, 2013	$	2,241		$	632		$	360		$	73		$	3,306

Intangible assets are as follows:



	As of March 31, 2013						As of December 31, 2012
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizable—Franchise agreements^(a)	$	2,019	$	406	$	1,613	$	2,019	$	390	$	1,629
Unamortizable—Trademarks ^(b)	$	732	$	—	$	732	$	732	$	—	$	732
Other Intangibles
Amortizable—License agreements ^(c)	$	45	$	5	$	40	$	45	$	5	$	40
Amortizable—Customer relationships ^(d)	529		191		338		529		182		347
Unamortizable—Title plant shares ^(e)	10		—		10		10		—		10
Amortizable—Other ^(f)	6		4		2		6		4		2
Total Other Intangibles	$	590	$	200	$	390	$	590	$	191	$	399

_______________

(a) Generally amortized over a period of 30 years.


(b)	Relates to the Century 21, Coldwell Banker, ERA, The Corcoran Group, 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 Title and Settlement Services segment and the Relocation Services segment. These relationships are being amortized over a period of 5 to 20 years.

Table of Contents


(e)	Primarily related 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 periods ranging from 2 to 10 years.

Intangible asset amortization expense is as follows:



	Three Months Ended March 31,
	2013		2012
Franchise agreements	$	16	$	17
License agreement	—		1
Customer relationships	9		10
Other	—		2
Total	$	25	$	30

Based on the Company’s amortizable intangible assets as of March 31, 2013, the Company expects related amortization expense for the remainder of 2013, the four succeeding years and thereafter to approximate $80 million, $105 million, $95 million, $95 million, $91 million and $1,527 million, respectively.


4.	ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of:



	March 31, 2013		December 31, 2012
Accrued payroll and related employee costs	$	78	$	80
Accrued volume incentives	19		22
Accrued commissions	18		22
Restructuring accruals	8		11
Deferred income	63		69
Accrued interest	79		87
Other	116		136
	$	381	$	427

5. SHORT AND LONG-TERM DEBT

Total indebtedness is as follows:



	March 31, 2013		December 31, 2012
Senior Secured Credit Facility:
Revolving credit facility	$	135	$	110
Term loan facility	1,901		1,822
7.625% First Lien Notes	593		593
7.875% First and a Half Lien Notes	700		700
9.00% First and a Half Lien Notes	325		325
11.50% Senior Notes	490		489
12.00% Senior Notes	129		129
12.375% Senior Subordinated Notes	188		188
13.375% Senior Subordinated Notes	10		10
Securitization Obligations:
Apple Ridge Funding LLC	214		235
Cartus Financing Limited	25		26
	$	4,710	$	4,627

Table of Contents

Indebtedness Table

As of March 31, 2013, the total capacity, outstanding borrowings and available capacity under the Company’s borrowing arrangements were as follows and gives effect to the refinancing of the revolving credit facility and the term loan facility under the amended and restated senior secured credit agreement dated as of March 5, 2013:



	Interest Rate	Expiration Date	Total Capacity		Outstanding Borrowings		Available Capacity
Senior Secured Credit Facility:
Revolving credit facility⁽¹⁾	(2)	March 2018	$	475	$	135	$	340
Term loan facility	(3)	March 2020	1,920		1,901		—
First Lien Notes	7.625%	January 2020	593		593		—
First and a Half Lien Notes	7.875%	February 2019	700		700		—
First and a Half Lien Notes	9.00%	January 2020	325		325		—
Other bank indebtedness	(4)	August 2013	8		—		8
Senior Notes⁽⁵⁾	11.50%	April 2017	492		490		—
Senior Notes⁽⁶⁾	12.00%	April 2017	130		129		—
Senior Subordinated Notes⁽⁷⁾	12.375%	April 2015	190		188		—
Senior Subordinated Notes ⁽⁸⁾	13.375%	April 2018	10		10		—
Securitization obligations:⁽⁹⁾
Apple Ridge Funding LLC⁽¹⁰⁾		December 2013	375		214		161
Cartus Financing Limited⁽¹¹⁾		Various	61		25		36
			$	5,279	$	4,710	$	545

_______________


(1)	On April 29, 2013, the Company had $310 million outstanding on the revolving credit facility and no outstanding letters of credit on such facility, leaving $165 million of available capacity.


(2)	Interest rates with respect to revolving loans under the senior secured credit facility are based on, at Realogy Group’s option, (a) adjusted LIBOR plus 2.75% or (b) JPMorgan Chase Bank, N.A., prime rate ("ABR") plus 1.75% in each case subject to reductions based on the attainment of certain leverage ratios.


(3)	Consists of a $1,920 million term loan, less a discount of $19 million. The interest rate with respect to the term loan under the senior secured credit facility is based on, at Realogy Group’s option, (a) adjusted LIBOR plus 3.50% (with a LIBOR floor of 1.00%) or (b) JPMorgan Chase Bank, N.A.’s prime rate (“ABR”) plus 2.50% (with an ABR floor of 2.0%).


(4)	A revolving credit facility in the U.K. with a capacity of £5 million ($8 million) which expires in August 2013. The facility has a one-year term with certain options for renewal. The interest rate with respect to the revolving credit facility is based on the bank's base rate plus 2.0%. This facility is supported by a letter of credit issued under the senior secured credit facility.


(5)	Consists of $492 million of 11.50% Senior Notes, less a discount of $2 million. See Note 13, "Subsequent Events" for additional information on the 11.50% Senior Notes redemption.


(6)	Consists of $130 million of 12.00% Senior Notes, less a discount of $1 million. The 12.00% Senior Notes were redeemed on April 23, 2013.


(7)	Consists of $190 million of 12.375% Senior Subordinated Notes, less a discount of $2 million. The 12.375% Senior Subordinated Notes were redeemed on April 16, 2013.


(8)	The 13.375% Senior Subordinated Notes were redeemed on April 16, 2013.


(9)	Available capacity is subject to maintaining sufficient relocation related assets to collateralize these securitization obligations.


(10)	On April 19, 2013, the Company elected to reduce the available capacity of the Apple Ridge securitization facility by $50 million to $325 million.


(11)	Consists of a £35 million facility which expires in August 2015 and a £5 million working capital facility which expires in August 2013.

Senior Secured Credit Facility

On March 5, 2013, Realogy Group entered into an amended and restated senior secured credit agreement (the “Amended and Restated Credit Agreement”). The Amended and Restated Credit Agreement replaces the agreement that had been entered into on April 10, 2007 and refinances the prior term loan facility and prior revolving credit facility.

The Amended and Restated Credit Agreement provides for (a) a seven-year, $1,920 million term loan facility issued at 99% of par with a maturity date of March 5, 2020, the proceeds of which were utilized to pay off the $1,822 million

Table of Contents

principal amount of the existing term loan borrowings under the prior facility, plus accrued and unpaid interest, and to pay the fees and expenses incurred in connection with the refinancing and for general corporate purposes; and (b) a five-year, $475 million revolving credit facility with a maturity date of March 5, 2018, which includes (i) a $250 million letter of credit subfacility and (ii) a swingline loan subfacility. Initial borrowings under the new revolving credit facility were used to repay the outstanding indebtedness under the prior revolving credit facility. The interest rate with respect to the term loan is based on, at our option, adjusted LIBOR plus 3.50% (with a LIBOR floor of 1.00%) or ABR plus 2.50% (with an ABR floor of 2.0%). The interest rate with respect to revolving loans under the revolving credit facility is based on, at our option, adjusted LIBOR plus 2.75% or ABR plus 1.75%.

The Amended and Restated Credit Agreement also retains a $155 million synthetic letter of credit facility, approximately $36 million of which matures on October 10, 2013 and the balance of which matures on October 10, 2016.

The Amended and Restated Credit Agreement permits the Company to obtain up to $500 million of additional credit facilities from lenders reasonably satisfactory to the administrative agent and us, without the consent of the existing lenders under the new senior secured credit facility, plus an unlimited amount if our senior secured leverage ratio is less than 3.50 to 1.0 on a pro forma basis. Subject to certain restrictions, the Amended and Restated Credit Agreement also permits us to issue senior secured or unsecured notes in lieu of any incremental facility.

The Senior Secured Credit Facility consisting of the term loan facility, revolving credit facility, and synthetic letter of credit facility are collectively referred to as the “First Lien Facilities”. Realogy Group uses the revolving credit facility for, among other things, working capital and other general corporate purposes.

The synthetic letter of credit facility may be utilized for general corporate purposes, including the support of Realogy Group’s obligations with respect to Cendant contingent and other liabilities assumed under the Separation and Distribution Agreement. As of March 31, 2013, the capacity was being utilized by a $53 million letter of credit with Cendant for potential contingent obligations and $91 million of letters of credit for other general corporate purposes.

The term loan facility provides for quarterly amortization payments totaling 1% per annum of the original principal amount of the term loan facility, commencing June 30, 2013, with the balance payable upon the final maturity date. The synthetic letter of credit facility provides for quarterly amortization payments totaling 1% per annum of the principal amount of the synthetic letter of credit facility outstanding with the balance payable upon the final maturity date.

The obligations under the Amended and Restated Agreement are secured to the extent legally permissible by substantially all of the assets of Realogy Group, Realogy Intermediate and all of their domestic subsidiaries, other than certain excluded subsidiaries, including but not limited to (a) a first-priority pledge of substantially all capital stock held by Realogy Group or any subsidiary guarantor (which pledge, with respect to obligations in respect of the borrowings secured by a pledge of the stock of any first-tier foreign subsidiary, is limited to 100% of the non-voting stock (if any) and 65% of the voting stock of such foreign subsidiary), and (b) perfected first-priority security interests in substantially all tangible and intangible assets of Realogy Group and each subsidiary guarantor, subject to certain exceptions.

Realogy Group’s senior secured credit facility contains financial, affirmative and negative covenants and requires Realogy Group to maintain a senior secured leverage ratio of 4.75 to 1.0 tested on a quarterly basis but only if the aggregate amount of borrowings outstanding under the revolving credit facility together with the aggregate amount of letters of credit issued under the letter of credit subfacility at the end of the applicable quarter, exceed 25% of the aggregate revolving credit facility commitments. In this report, the Company refers to the term “Adjusted EBITDA” to mean EBITDA as so defined for purposes of determining compliance with the senior secured leverage covenant. At March 31, 2013, Realogy Group’s aggregate borrowings and outstanding letters of credit issued under the revolving credit facility exceeded 25% of the aggregate revolving credit facility commitments and therefore the senior secured leverage ratio computation was required. At March 31, 2013, Realogy Group’s senior secured leverage ratio was 3.38 to 1.0 and was in compliance with the senior secured leverage ratio covenant.

Realogy Group has the right to cure an event of default of the senior secured leverage ratio in three of any of the four consecutive quarters through the issuance of additional Realogy Intermediate equity for cash, which would be infused as capital into Realogy Group. If Realogy Group is unable to maintain compliance with the senior secured leverage ratio and fails to remedy a default through an equity cure as described above, there would be an “event of default” under the senior secured credit facility. Other events of default under the senior secured credit facility include, without limitation, nonpayment, material misrepresentations, insolvency, bankruptcy, certain material judgments, change of control and cross-events of default on material indebtedness.

Table of Contents

If an event of default occurs under the senior secured credit facility, and Realogy Group fails to obtain a waiver from the lenders, Realogy Group’s financial condition, results of operations and business would be materially adversely affected. Upon the occurrence of an event of default under the senior secured credit facility, the lenders:


•	would not be required to lend any additional amounts to Realogy Group;


•	could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and payable;


•	could require Realogy Group to apply all of its available cash to repay these borrowings; or


•	could prevent Realogy Group from making payments on the First Lien Notes, the First and a Half Lien Notes or the unsecured notes;

any of which could result in an event of default under the First Lien Notes, the First and a Half Lien Notes, the unsecured notes and the Company’s Apple Ridge Funding LLC securitization program.

If Realogy Group were unable to repay those amounts, the lenders under the senior secured credit facility could proceed against the collateral granted to secure the senior secured credit facility, which assets also secure its other secured indebtedness. Realogy Group has pledged the majority of its assets as collateral to secure such indebtedness. If the lenders under the senior secured credit facility were to accelerate the repayment of borrowings, then Realogy Group may not have sufficient assets to repay the senior secured credit facility and its other indebtedness, including the First Lien Notes, the First and a Half Lien Notes and the unsecured notes, or be able to borrow sufficient funds to refinance such indebtedness. Even if Realogy Group is able to obtain new financing, it may not be on commercially reasonable terms, or terms that are acceptable to Realogy Group.

First Lien Notes

The $593 million of First Lien Notes are senior secured obligations of Realogy Group and mature on January 15, 2020. The First Lien Notes bear interest at a rate of 7.625% per annum and interest is payable semiannually on January 15 and July 15 of each year (the first interest payment was July 15, 2012). The First Lien Notes are guaranteed on a senior secured basis by Realogy Intermediate and each domestic subsidiary of Realogy Group that is a guarantor under the Senior Secured Credit Facility or certain of Realogy Group's outstanding debt securities. The First Lien Notes are also guaranteed by Realogy Holdings, on an unsecured senior subordinated basis. The First Lien Notes are secured by the same collateral as the Company’s existing secured obligations under its Senior Secured Credit Facility. The priority of the collateral liens securing the First Lien Notes is (i) equal to the collateral liens securing the Company's first lien obligations under the Senior Secured Credit Facility and (ii) senior to the collateral liens securing the Company’s other secured obligations not secured by a first priority lien, including the First and a Half Lien Notes.

First and a Half Lien Notes

The First and a Half Lien Notes are senior secured obligations of the Company. The $700 million of 7.875% First and a Half Lien Notes mature in February 2019 and interest is payable semiannually on February 15 and August 15 of each year. The $325 million of 9.0% First and a Half Lien Notes mature in January 2020 and interest is payable semiannually on January 15 and July 15 of each year (the first interest payment date was July 15, 2012). The First and a Half Lien Notes are guaranteed on a senior secured basis by Realogy Intermediate and each domestic subsidiary of Realogy Group that is a guarantor under the Senior Secured Credit Facility or certain of Realogy Group's outstanding debt securities. The First and a Half Lien Notes are also guaranteed by Realogy Holdings, on an unsecured senior subordinated basis. The First and a Half Lien Notes are secured by the same collateral as the Company’s existing secured obligations under its Senior Secured Credit Facility, but the priority of the collateral liens securing the First and a Half Lien Notes is (i) junior to the collateral liens securing the Company’s first lien obligations under its Senior Secured Credit Facility and the First Lien Notes. The priority of the collateral liens securing each series of the First and a Half Lien Notes is equal to one another.

Unsecured Notes

On April 16, 2013, Realogy Group utilized approximately $201 million of the remaining $218 million of net proceeds from the Company's initial public offering to redeem all of the outstanding Senior Subordinated Notes. On April 23, 2013, the Company utilized the remaining net proceeds, cash on hand and borrowings under its revolving credit facility to redeem all of the outstanding 12.00% Senior Notes at a premium of 106%. After giving effect to the foregoing, the only Unsecured Notes outstanding are the 11.50% Senior Notes.

Table of Contents

The $490 million of 11.50% Senior Notes mature on April 15, 2017 and bear interest payable semiannually on April 15 and October 15 of each year. The 11.50% Senior Notes are guaranteed on an unsecured senior basis by each domestic subsidiary of Realogy Group that is a guarantor under the senior secured credit facility or certain of Realogy Group's outstanding debt securities. The Senior Notes are guaranteed by Realogy Holdings on an unsecured senior subordinated basis. See Note 13, "Subsequent Events" for additional information on the redemption of the 11.50% Senior Notes which will occur on May 28, 2013.

Securitization Obligations

Realogy Group has secured obligations through Apple Ridge Funding LLC, a securitization program with a borrowing capacity of $375 million and an expiration date of December 2013. On April 19, 2013, the Company elected to reduce the available capacity of the Apple Ridge securitization facility by $50 million to $325 million.

Realogy Group, through a special purpose entity, known as Cartus Financing Limited has agreements providing for a £35 million revolving loan facility which expires in August 2015 and a £5 million working capital facility which expires in August 2013. These Cartus Financing Limited facilities are secured by the relocation assets of a U.K. government contract in this special purpose entity and are therefore classified as permitted securitization financings as defined in Realogy Group’s senior secured credit facility and the indentures governing the Unsecured Notes.

The Apple Ridge entities and the Cartus Financing Limited entity are consolidated special purpose entities that are utilized to securitize relocation receivables and related assets. These assets are generated from advancing funds on behalf of clients of Realogy Group’s relocation business in order to facilitate the relocation of their employees. Assets of these special purpose entities are not available to pay Realogy Group’s general obligations. Under the Apple Ridge program, provided no termination or amortization event has occurred, any new receivables generated under the designated relocation management agreements are sold into the securitization program and as new eligible relocation management agreements are entered into, the new agreements are designated to the program. The Apple Ridge program has restrictive covenants and trigger events, including performance triggers linked to the age and quality of the underlying assets, foreign obligor limits, multicurrency limits, financial reporting requirements, restrictions on mergers and change of control, any uncured breach of Realogy Group’s senior secured leverage ratio under Realogy Group’s senior secured credit facility, and cross-defaults to Realogy Group’s material indebtedness. The occurrence of a trigger event under the Apple Ridge securitization facility could restrict our ability to access new or existing funding under this facility or result in termination of the facility, either of which would adversely affect the operation of our relocation business.

Certain of the funds that the Company receives from relocation receivables and related assets must be utilized to repay securitization obligations. These obligations were collateralized by $305 million and $309 million of underlying relocation receivables and other related relocation assets at March 31, 2013 and December 31, 2012, respectively. Substantially all relocation related assets are realized in less than twelve months from the transaction date. Accordingly, all of the Company’s securitization obligations are classified as current in the accompanying Condensed Consolidated Balance Sheets.

Interest incurred in connection with borrowings under these facilities amounted to $2 million and $2 million for the three months ended March 31, 2013 and March 31, 2012, respectively. This interest is recorded within net revenues in the accompanying Condensed Consolidated Statements of Operations as related borrowings are utilized to fund the Company’s relocation business where interest is generally earned on such assets. These securitization obligations represent floating rate debt for which the average weighted interest rate was 3.1% and 3.5% for the three months ended March 31, 2013 and 2012, respectively.

Loss on the Early Extinguishment of Debt and Write-Off of Deferred Financing Costs

For the three months ended March 31, 2013, the Company recorded a loss on the early extinguishment of debt of $3 million for the portion of the Amended and Restated Credit Agreement that qualified for debt extinguishment. In addition, the Company wrote off deferred financing costs of $2 million to interest expense for the portion of the Amended and Restated Credit Agreement that qualified as a debt modification.

As a result of the 2012 Senior Secured Notes Offering and the use of proceeds to repay indebtedness, the Company recorded a loss on the early extinguishment of debt of $6 million during the three months ended March 31, 2012.

Table of Contents


6.	RESTRUCTURING COSTS

2012 Restructuring Program

During 2012, the Company committed to various initiatives targeted principally at reducing costs, enhancing organizational efficiencies and consolidating existing facilities. The Company incurred restructuring charges of $12 million for the year ended December 31, 2012. The Company Owned Real Estate Brokerage Services segment recognized $3 million of facility related expenses, $3 million of personnel related expenses and $1 million of expenses related to asset impairments. The Relocation Services segment recognized $3 million of facility related expenses. The Title and Settlement Services segment recognized $2 million of facility related expenses. At March 31, 2013, the remaining liability is $3 million.

Prior Restructuring Programs

The Company committed to restructuring activities targeted principally at reducing personnel related costs and consolidating facilities during 2006 through 2011. At December 31, 2012, the remaining liability was $11 million. During the three months ended March 31, 2013, the Company utilized $2 million of the remaining accrual resulting in a remaining liability of $9 million related to future lease payments.


7.	STOCK-BASED COMPENSATION

The Company has stock-based compensation plans available under which non-qualified stock options, rights to purchase shares of common stock, restricted stock and other awards settleable in, or based upon, Realogy Holdings common stock may be issued to employees, consultants or directors of Realogy.

The number of shares authorized for issuance under the Realogy 2007 Stock Incentive Plan and the 2012 Long Term Incentive Plan are 2.8 million shares and 6.8 million shares, respectively. As of March 31, 2013, the total number of shares available for future grant under the 2007 Stock Incentive Plan and the 2012 LTIP was approximately 0.6 million shares and 4.8 million shares, respectively.

Incentive Equity Awards Granted by Realogy Holdings

A summary of option and restricted share activity is presented below (number of shares in millions):



	Time-vesting Options		Weighted Average Exercise Price		Phantom and Other Performance Options	Weighted Average Exercise Price		Restricted Stock	Weighted Average Grant Date Fair Value
Outstanding at January 1, 2013	3.10		$	26.61	0.16	$	20.61	0.29	$	27.09
Granted	0.01		44.30		—	—		—	—
Exercised	—		—		—	—
Vested								—	—
Forfeited/Expired	(0.01	)	20.60		—	—		—	—
Outstanding at March 31, 2013 (a)	3.10		$	26.67	0.16	$	20.61	0.29	$	27.09

_______________


(a)	Options outstanding at March 31, 2013 had an intrinsic value of $81 million and have a weighted average remaining contractual life of 8.9 years.

The fair value of the options was estimated on the date of grant using the Black-Scholes option-pricing model utilizing the following assumptions. Expected volatility was based on historical volatilities of comparable companies. The expected term of the options granted represents the period of time that options were expected to be outstanding. The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of the grant, which corresponds to the expected term of the options.



	2013 Options
Grant date fair value	$	19.27
Expected volatility	43.9		%
Expected term (years)	6.25
Risk-free interest rate	1.0		%
Dividend yield	—

Table of Contents

Stock-Based Compensation Expense

As of March 31, 2013, there was approximately $33 million of unrecognized compensation cost related to options and restricted stock under the plans. Unrecognized compensation cost for the options and restricted stock will be recorded in future periods as compensation expense and have a remaining weighted average period of approximately 3 years. The Company recorded stock-based compensation expense related to the incentive equity awards of $3 million and $1 million for the three months ended March 31, 2013 and 2012, respectively.

Phantom Value Plan

On January 5, 2011, the Board of Directors of Realogy Holdings approved the Realogy Group LLC Phantom Value Plan (the “Phantom Value Plan”), which is intended to provide certain of Realogy’s executive officers, with an incentive (the “Incentive Award”) to remain in the service of Realogy, increase interest in the success of Realogy and create the opportunity to receive compensation based upon Realogy’s success. On January 5, 2011, the Board of Directors of the Company made initial grants of Incentive Awards in an aggregate amount of $22 million to certain executive officers of Realogy. The amount of the Incentive Awards granted to certain of Realogy's executive officers was determined by the sum of (1) the shares of common stock purchased by the executives at $250.00 per share in April 2007 (representing an aggregate purchase price of $19 million) and (2) the implied $250.00 per share grant date value in April 2007 of the executive's restricted stock grant (representing an aggregate of $3 million). Incentive Awards are immediately cancelable and forfeitable in the event of the termination of a participant’s employment for any reason. The Incentive Awards terminate 10 years from the date of grant.

Incentive Awards under the Phantom Value Plan

Under the Phantom Value Plan, each participant is eligible to receive a cash payment based upon the Company’s success and the cash received by RCIV Holdings ("RCIV"), an affiliate of Apollo, upon the transfer or sale of the 57.5 million shares of Common Stock (the "RCIV Shares") that RCIV received in connection with our initial public offering upon conversion of the $1.3 billion of Convertible Notes that had been purchased by RCIV in January 2011 (the "RCIV Notes"). Each participant is eligible to receive a payment with respect to his or her Incentive Award at such time and from time to time that RCIV receives cash upon the transfer or exchange of RCIV Shares, including any third party sale. A payment would be an amount which bears the same ratio to the dollar amount of the Incentive Award as (i) the aggregate amount of cash received by RCIV at such time for the transfer or exchange of all or a portion of the RCIV Shares bears to (ii) $1.3 billion, representing the amount of the RCIV Notes on the date of issuance. Any payments made under the Phantom Value Plan will be recorded as compensation expense when RCIV receives cash upon the discharge or third-party sale of the RCIV Shares.

In the event that a payment is to be made with respect to an Incentive Award, a participant may elect to receive, in lieu of the cash payment, unrestricted shares of common stock with a fair market value, as determined in good faith by the Compensation Committee, equal to the dollar amount then due on such Incentive Award, plus restricted shares of such common stock with a fair market value, as determined in good faith by the Compensation Committee, equal to the amount then due multiplied by 0.15. The restricted shares of common stock will vest based on continued employment, on the first anniversary of issuance. In addition, Incentive Awards are subject to acceleration and payment upon a change of control as specified in the Phantom Value Plan.

On April 16, 2013, the Company completed a public stock offering of certain shares held by RCIV. See Note 13, "Subsequent Events" for additional information.


8.	SEPARATION ADJUSTMENTS, TRANSACTIONS WITH FORMER PARENT AND SUBSIDIARIES AND RELATED PARTIES

Transfer of Cendant Corporate Liabilities and Issuance of Guarantees to Cendant and Affiliates

The Company has certain guarantee commitments with Cendant (pursuant to the assumption of certain liabilities and the obligation to indemnify Cendant, Wyndham Worldwide and Travelport for such liabilities). These guarantee arrangements primarily relate to certain contingent litigation liabilities, contingent tax liabilities, and other corporate liabilities, of which the Company assumed and is generally responsible for 62.5%. Upon separation from Cendant, the liabilities assumed by the Company were comprised of certain Cendant corporate liabilities which were recorded on the historical books of Cendant as well as additional liabilities which were established for guarantees issued at the date of Separation related to certain unresolved contingent matters that could arise during the guarantee period. Regarding the

Table of Contents

guarantees, if any of the companies responsible for all or a portion of such liabilities were to default in its payment of costs or expenses related to any such liability, the Company would be responsible for a portion of the defaulting party or parties’ obligation. To the extent such recorded liabilities are in excess or are not adequate to cover the ultimate payment amounts, such excess or deficiency will be reflected in the results of operations in future periods.

The due to former parent balance was $70 million and $69 million at March 31, 2013 and December 31, 2012, respectively. At March 31, 2013, the due to former parent balance was comprised of the Company’s portion of the following: (i) Cendant’s remaining state and foreign contingent tax liabilities, (ii) accrued interest on contingent tax liabilities, (iii) potential liabilities related to Cendant’s terminated or divested businesses, and (iv) potential liabilities related to the residual portion of accruals for Cendant operations.

Transactions with PHH Corporation

In January 2005, Cendant completed the spin-off of its former mortgage, fleet leasing and appraisal businesses in a tax free distribution of 100% of the common stock of PHH Corporation (PHH") to its stockholders. In connection with the spin-off, the Company entered into a venture, PHH Home Loans, with PHH for the purpose of originating and selling mortgage loans primarily sourced through the Company’s real estate brokerage and relocation businesses. The Company owns 49.9% of the venture. In connection with the venture, the Company entered into an agreement with PHH and PHH Home Loans regarding the operation of the venture and a marketing agreement with PHH whereby PHH is the recommended provider of mortgage products and services promoted by the Company to its independently owned and operated franchisees. The Company also entered into a license agreement with PHH whereby PHH Home Loans was granted a license to use certain of the Company’s real estate brand names. The Company also maintains a relocation agreement with PHH whereby PHH outsources its employee relocation function to the Company and the Company subleases office space to PHH Home Loans. In connection with these agreements, the Company recorded net revenues of $1 million and $2 million for the three months ended March 31, 2013 and 2012, respectively. In addition, the Company recorded equity earnings of $9 million and $10 million for the three months ended March 31, 2013 and 2012, respectively. The Company received cash dividends from PHH Home Loans of $15 million and $14 million during the three months ended March 31, 2013 and 2012, respectively.

Transactions with Related Parties

The Company has entered into certain transactions in the normal course of business with entities that are owned by affiliates of Apollo. For the three months ended March 31, 2013 and 2012, the Company has recognized revenue related to these transactions of less than $1 million in each of the periods.

9. EARNINGS (LOSS) PER SHARE

Earnings (loss) per share attributable to Holdings

Basic earnings per share is computed based upon weighted-average shares outstanding during the period. Dilutive earnings per share is computed consistently with the basic computation while giving effect to all dilutive potential common shares and common share equivalents that were outstanding during the period. Realogy Holdings uses the treasury stock method to reflect the potential dilutive effect of unvested stock awards and unexercised options.

The Company was in a net loss position for the three months ended March 31, 2013 and therefore the impact of stock options and restricted stock were excluded from the computation of dilutive earnings (loss) per share as the inclusion of such amounts would be anti-dilutive. At March 31, 2013, the number of shares of common stock issuable for stock options and restricted stock that were excluded from the computation was 3.3 million and 0.3 million, respectively.


10.	COMMITMENTS AND CONTINGENCIES

Litigation

The Company is involved in claims, legal proceedings and governmental inquiries related to alleged contract disputes, business practices, intellectual property and other commercial, employment, regulatory and tax matters. Examples of such matters include but are not limited to allegations:


•	that the Company is vicariously liable for the acts of franchisees under theories of actual or apparent agency;

Table of Contents


•	by former franchisees that franchise agreements were breached including improper terminations;


•	that residential real estate agents engaged by NRT—in certain states—are potentially employees instead of independent contractors, and therefore may bring claims against NRT for breach of contract, wrongful discharge and negligent supervision and obtain benefits, indemnification 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 or breach of fiduciary duty in connection with the performance of real estate brokerage or other professional services; 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.

Real Estate Business Litigation

Larsen, et al. v. Coldwell Banker Real Estate Corporation, et al. (case formerly known as Joint Equity Committee of Investors of Real Estate Partners, Inc. v. Coldwell Banker Real Estate Corp., et al). As previously disclosed in the Company's June 2012 Form 10-Q, as a matter of litigation avoidance, we entered into a memorandum of understanding memorializing the principal terms of a settlement of this action. In July 2012, we entered into a definitive settlement agreement and in March 2013 the settlement received final court approval. Substantially all of the settlement will be funded directly by the Company with only a modest contribution by its insurance carrier.

Barasani v. Coldwell Banker Residential Brokerage Company. On November 15, 2012, plaintiff Ali Barasani filed a putative class action complaint in Los Angeles Superior Court, California, against Coldwell Banker Residential Brokerage Company alleging that the company had misclassified all of its sales associates as independent contractors when they were actually employees. The complaint further alleges that, because of the misclassification, the company has violated several sections of the Labor Code including Section 2802 for failing to reimburse plaintiff and the class for business related expenses and Section 226 for failing to keep proper records. The complaint also asserts a Section 17200 Unfair Business Practices claim for misclassifying the sales agents. The court issued an order staying most of the proceedings until the next status conference in May 2013. Accordingly, the Company has yet to file an answer or other responsive pleading to the complaint.

Cendant Corporate Litigation

Pursuant to the Separation and Distribution Agreement dated as of July 27, 2006 among Cendant, Realogy, Wyndham Worldwide and Travelport, each of Realogy, Wyndham Worldwide and Travelport have assumed certain contingent and other corporate liabilities (and related costs and expenses), which are primarily related to each of their respective businesses. In addition, Realogy has assumed 62.5% and Wyndham Worldwide has assumed 37.5% of certain contingent and other corporate liabilities (and related costs and expenses) of Cendant or its subsidiaries, which are not primarily related to any of the respective businesses of Realogy, Wyndham Worldwide, Travelport and/or Cendant’s vehicle rental operations, in each case incurred or allegedly incurred on or prior to the date of the separation of Travelport from Cendant.

* * *

The Company believes that it has adequately accrued for legal matters as appropriate. The Company records litigation accruals for legal matters which are both probable and estimable. For legal proceedings for which (1) there is a reasonable possibility of loss (meaning those losses for which the likelihood is more than remote but less than probable) and (2) the Company is able to estimate a range of reasonably possible loss, the Company estimates the range of reasonably possible losses to be between zero and $10 million at March 31, 2013.

Litigation and other disputes are inherently unpredictable and subject to substantial uncertainties and unfavorable resolutions could occur. In addition, class action lawsuits can be costly to defend and, depending on the class size and claims, could be costly to settle. As such, the Company could incur judgments or enter into settlements of claims with liability that are materially in excess of amounts accrued and these settlements could have a material adverse effect on the Company’s financial condition, results of operations or cash flows in any particular period.

Tax Matters

The Company is subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes and recording related assets and liabilities. In the

Table of Contents

ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is regularly under audit by tax authorities whereby the outcome of the audits is uncertain. The Company believes there is appropriate support for positions taken on its tax returns. The liabilities that have been recorded represent the best estimates of the probable loss on certain positions and are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. However, the outcomes of tax audits are inherently uncertain.

Under the Tax Sharing Agreement with Cendant, Wyndham Worldwide and Travelport, the Company is generally responsible for 62.5% of payments made to settle claims with respect to tax periods ending on or prior to December 31, 2006 that relate to income taxes imposed on Cendant and certain of its subsidiaries, the operations (or former operations) of which were determined by Cendant not to relate specifically to the respective businesses of Realogy, Wyndham Worldwide, Avis Budget or Travelport.

With respect to any remaining legacy Cendant tax liabilities, the Company and its former parent believe there is appropriate support for the positions taken on Cendant’s tax returns. However, tax audits and any related litigation, including disputes or litigation on the allocation of tax liabilities between parties under the Tax Sharing Agreement, could result in outcomes for the Company that are different from those reflected in the Company’s historical financial statements.

Contingent Liability Letter of Credit

In April 2007, the Company established a standby irrevocable letter of credit for the benefit of Avis Budget Group in accordance with the Separation and Distribution Agreement. The synthetic letter of credit was utilized to support the Company’s payment obligations with respect to its share of Cendant contingent and other corporate liabilities. The stated amount of the standby irrevocable letter of credit is subject to periodic adjustment to reflect the then current estimate of Cendant contingent and other liabilities. The letter of credit was $53 million at March 31, 2013 and $70 million at December 31, 2012. The standby irrevocable letter of credit will be terminated if (i) the Company’s senior unsecured credit rating is raised to BB by Standard and Poor’s or Ba2 by Moody’s or (ii) the aggregate value of the former parent contingent liabilities falls below $30 million.

Escrow and Trust Deposits

As a service to the Company’s customers, it administers escrow and trust deposits which represent undisbursed amounts received for the settlement of real estate transactions. With the passage of the Dodd-Frank Act in July 2010, deposits at FDIC-insured institutions are permanently insured up to $250 thousand. These escrow and trust deposits totaled approximately $408 million and $330 million at March 31, 2013 and December 31, 2012, respectively. These escrow and trust deposits are not assets of the Company and, therefore, are excluded from the accompanying Condensed Consolidated Balance Sheets. However, the Company remains contingently liable for the disposition of these deposits.


11.	SEGMENT INFORMATION

The reportable segments presented below represent the Company’s operating segments for which separate financial information is available and which is utilized on a regular basis by its chief operating decision maker to assess performance and to allocate resources. In identifying its reportable segments, the Company also considers the nature of services provided by its operating segments. Management evaluates the operating results of each of its reportable segments based upon revenue and EBITDA, which is defined as net income (loss) before depreciation and amortization, interest (income) expense, net (other than Relocation Services interest for secured assets and obligations) and income taxes, each of which is presented in the Company’s Condensed Consolidated Statements of Operations. The Company’s presentation of EBITDA may not be comparable to similar measures used by other companies.



	Revenues (a) (b)
	Three Months Ended March 31,
	2013			2012
Real Estate Franchise Services	$	135		$	129
Company Owned Real Estate Brokerage Services	686			617
Relocation Services	87			88
Title and Settlement Services	100			88
Corporate and Other^(c)	(51		)	(47		)
Total Company	$	957		$	875

Table of Contents

_______________

(a)

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 $51 million and $47 million for the three months ended March 31, 2013 and March 31, 2012, respectively. Transactions between segments are eliminated in consolidation. Such amounts are eliminated through the Corporate and Other line.

(b)

Revenues for the Relocation Services segment include intercompany referral and relocation fees paid by the Company Owned Real Estate Brokerage Services segment of $8 million and $7 million for the three months ended March 31, 2013 and March 31, 2012, 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.


(c)	Includes the elimination of transactions between segments.



	EBITDA (a)
	Three Months Ended March 31,
	2013			2012
Real Estate Franchise Services	$	72		$	61
Company Owned Real Estate Brokerage Services	(8		)	(17		)
Relocation Services	10			4
Title and Settlement Services	4			2
Corporate and Other	(15		)	(20		)
Total Company	$	63		$	30
Less:
Depreciation and amortization	42			45
Interest expense, net	89			170
Income tax expense	7			7
Net loss attributable to Holdings and Realogy	$	(75	)	$	(192	)

_______________


(a)	Includes $3 million related to the loss on early extinguishment of debt and $1 million of former parent legacy costs for the three months ended March 31, 2013 compared to $3 million of restructuring costs and $6 million related to the loss on the early extinguishment of debt, partially offset by a net benefit of $3 million of former parent legacy items for the three months ended March 31, 2012.

12. GUARANTOR/NON-GUARANTOR SUPPLEMENTAL FINANCIAL INFORMATION

The following consolidating financial information presents the Condensed Consolidating Balance Sheets and Condensed Consolidating Statements of Operations and Cash Flows for: (i) Realogy Holdings Corp. (“Realogy Holdings”); (ii) its direct wholly owned subsidiary Realogy Intermediate Holdings Corp. (“Realogy Intermediate”); (iii) its indirect wholly owned subsidiary, Realogy Group LLC (“Realogy Group”); (iv) the guarantor subsidiaries of Realogy Group; (v) the non-guarantor subsidiaries of Realogy Group; (vi) elimination entries necessary to consolidate Realogy Holdings, Intermediate, Realogy Group and the guarantor and non-guarantor subsidiaries; and (vii) the Company on a consolidated basis.

The guarantor subsidiaries of Realogy Group are comprised of 100% owned entities. Guarantor and non-guarantor subsidiaries are 100% owned by Realogy Group, either directly or indirectly. All guarantees are full and unconditional and joint and several, subject to release under certain customary circumstances, including but not limited to: (i) the sale, disposition or other transfer of the capital stock of a Guarantor made in compliance with the provisions of the applicable indenture; (ii) the designation of a Guarantor as "Unrestricted Subsidiary" (as that term is defined in the applicable indenture); (iii) subject to certain exceptions, the release or discharge of a Guarantor's guarantee of indebtedness under the Senior Secured Credit Facility; and (iv) Realogy's exercise of legal defeasance or covenant defeasance in accordance with the applicable indenture. Non-guarantor entities are comprised of securitization entities, foreign subsidiaries, unconsolidated entities, insurance underwriter subsidiaries and qualified foreign holding corporations.

The guarantor and non-guarantor financial information is prepared using the same basis of accounting as the consolidated financial statements except for the investments in consolidated subsidiaries which are accounted for using the equity method.

Table of Contents

Condensed Consolidating Statement of Operations and Comprehensive Loss

Three Months Ended March 31, 2013

(in millions)



	Realogy Holdings			Realogy Intermediate			Realogy Group			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues
Gross commission income	$	—		$	—		$	—		$	676		$	—		$	—		$	676
Service revenue	—			—			—			109			74			—			183
Franchise fees	—			—			—			57			—			—			57
Other	—			—			—			40			1			—			41
Net revenues	—			—			—			882			75			—			957
Expenses
Commission and other agent-related costs	—			—			—			454			—			—			454
Operating	—			—			—			268			59			—			327
Marketing	—			—			—			50			—			—			50
General and administrative	—			—			11			51			5			—			67
Former parent legacy costs (benefit), net	—			—			1			—			—			—			1
Depreciation and amortization	—			—			2			40			—			—			42
Interest expense, net	—			—			88			1			—			—			89
Loss on the early extinguishment of debt	—			—			3			—			—			—			3
Intercompany transactions	—			—			1			(1		)	—			—			—
Total expenses	—			—			106			863			64			—			1,033
Income (loss) before income taxes, equity in earnings and noncontrolling interests	—			—			(106		)	19			11			—			(76		)
Income tax expense (benefit)	—			—			(9		)	12			4			—			7
Equity in earnings of unconsolidated entities	—			—			—			—			(9		)	—			(9		)
Equity in (earnings) losses of subsidiaries	75			75			(22		)	(15		)	—			(113		)	—
Net income (loss)	(75		)	(75		)	(75		)	22			16			113			(74		)
Less: Net income attributable to noncontrolling interests	—			—			—			—			(1		)	—			(1		)
Net income (loss) attributable to Realogy Holdings and Realogy Group	$	(75	)	$	(75	)	$	(75	)	$	22		$	15		$	113		$	(75	)
Comprehensive income (loss) attributable to Realogy Holdings and Realogy Group	$	(78	)	$	(78	)	$	(78	)	$	22		$	12		$	122		$	(78	)

Table of Contents

Condensed Consolidating Statement of Operations and Comprehensive Loss

Three Months Ended March 31, 2012

(in millions)



	Realogy Holdings			Realogy Intermediate			Realogy Group			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues
Gross commission income	$	—		$	—		$	—		$	606		$	—		$	—		$	606
Service revenue	—			—			—			110			62			—			172
Franchise fees	—			—			—			54			—			—			54
Other	—			—			—			42			1			—			43
Net revenues	—			—			—			812			63			—			875
Expenses
Commission and other agent-related costs	—			—			—			402			—			—			402
Operating	—			—			—			269			49			—			318
Marketing	—			—			—			51			—			—			51
General and administrative	—			—			17			57			3			—			77
Former parent legacy costs (benefit), net	—			—			(3		)	—			—			—			(3		)
Restructuring costs	—			—			—			3			—			—			3
Depreciation and amortization	—			—			2			43			—			—			45
Interest expense, net	—			—			168			2			—			—			170
Loss on the early extinguishment of debt	—			—			6			—			—			—			6
Other (income)/expense, net	—			—			—			1			—			—			1
Intercompany transactions	—			—			1			(1		)	—			—			—
Total expenses	—			—			191			827			52			—			1,070
Income (loss) before income taxes, equity in earnings and noncontrolling interests	—			—			(191		)	(15		)	11			—			(195		)
Income tax expense (benefit)	—			—			5			(6		)	8			—			7
Equity in earnings of unconsolidated entities	—			—			—			—			(10		)	—			(10		)
Equity in (earnings) losses of subsidiaries	192			192			(4		)	(13		)	—			(367		)	—
Net income (loss)	(192		)	(192		)	(192		)	4			13			367			(192		)
Less: Net income attributable to noncontrolling interests	—			—			—			—			—			—			—
Net income (loss) attributable to Realogy Holdings and Realogy Group	$	(192	)	$	(192	)	$	(192	)	$	4		$	13		$	367		$	(192	)
Comprehensive income (loss) attributable to Realogy Holdings and Realogy Group	$	(190	)	$	(190	)	$	(190	)	$	4		$	14		$	362		$	(190	)

Table of Contents

Condensed Consolidating Balance Sheet

March 31, 2013

(in millions)



	Realogy Holdings		Realogy Intermediate		Realogy Group		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	—	$	228	$	68	$	71	$	(1	)	$	366
Trade receivables, net	—		—		—		77		41		—			118
Relocation receivables	—		—		—		26		295		—			321
Relocation properties held for sale	—		—		—		5		—		—			5
Deferred income taxes	—		—		7		45		1		—			53
Other current assets	—		—		10		61		28		—			99
Intercompany notes receivable	—		—		—		34		20		(54		)	—
Intercompany receivables	—		—		—		2,351		157		(2,508		)	—
Total current assets	—		—		245		2,667		613		(2,563		)	962
Property and equipment, net	—		—		49		137		4		—			190
Deferred income taxes	—		—		621		—		1		(622		)	—
Goodwill	—		—		—		3,306		—		—			3,306
Trademarks	—