Table of Contents

_________________________________________________________________________________________________________________________________________________________ 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549  
___________________________ 
FORM 10-Q10-Q/A
Amendment No. 1
T
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 2012
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File No. 333-179896  
DOMUSREALOGY HOLDINGS CORP.
(Exact name of registrants as specified in its charter)

Commission File No. 333-179896  
REALOGY CORPORATION
(Exact name of registrants as specified in its charter)
 
 Delaware20-8050955 and 20-4381990 
 
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification Numbers)
 
    
 
One Campus Drive
Parsippany, NJ
07054 
 (Address of principal executive offices)(Zip Code) 
(973) 407-2000
(Registrants' telephone number, including area code)  
___________________________ 
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 Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.   Yes  ox    No   xo
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 registrant was required to submit and post such files). Yes  x    No   o
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 o
Accelerated filer  o
Non-accelerated filer  x
(Do not check if a smaller reporting company)
Smaller reporting company  o
Indicate by check mark whether the Registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
There were 105,0004,200 shares of Class A Common Stock, $0.01 par value, and 200,496,9068,017,080 shares of Class B Common Stock, $0.01 par value, of DomusRealogy Holdings Corp. outstanding as of May 2, 2012.August 7, 2012. There were 100 shares of Common Stock, $0.01 par value, of Realogy Corporation outstanding as of May 2, 2012.August 7, 2012.
_________________________________________________________________________________________________________________________________________________________ 


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EXPLANATORY NOTE
This Amendment No. 1 on Form 10-Q/A amends the Quarterly Report on Form 10-Q of Realogy Holdings Corp.("Holdings")(formerly known as Domus Holdings Corp.) and its indirect, wholly owned subsidiary, Realogy Corporation ("Realogy") for the quarter ended June 30, 2012, as filed with the Securities and Exchange Commission on August 7, 2012 (the “Original Form 10-Q”). Except as otherwise indicated or unless the context otherwise requires, the terms “we,” “us,” “our,” “our company” and the “Company” refer to Holdings and its consolidated subsidiaries. Except as otherwise defined herein, capitalized terms shall have the meanings ascribed to them in the Original Form 10-K.
In connection with the preparation of Holdings' initial public offering of shares filed on a Registration Statement on Form S-1, we identified and corrected an error in the manner in which we had allocated the purchase price paid by Apollo subsequent to their 2007 acquisition. Specifically, we inappropriately identified the discounted cash flows generated from the Real Estate Franchise Services franchise agreement with NRT as a separately identifiable indefinite lived intangible asset. We concluded that the value ascribed to this agreement should have been attributed to the Real Estate Franchise Services business unit as goodwill. Accordingly, we corrected our error through the elimination of the Real Estate Franchise Services franchise agreement with NRT intangible asset and increased the value associated with our goodwill, which resulted in a concurrent decrease in our deferred income tax liability. In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), we assessed the materiality of the error and concluded that the error was not material to any of our previously issued financial statements. This non-cash error had no impact to our condensed consolidated statement of operations or cash flows for any of the periods presented in these financial statements.
On September 11, 2012, the Board of Directors of Holdings approved an amendment to its Certificate of Incorporation to effect a change in its name of Domus Holdings Corp. to "Realogy Holdings Corp.", to amend and restate its authorized capital stock and to approve a reverse stock split of the Company's Class A Common Stock and Class B Common Stock at a ratio of 1 to 25 (the “Reverse Stock Split”). On the same day, the stockholders of Holdings approved the foregoing amendments to Holdings' Certificate of Incorporation.
On September 27, 2012, Holdings filed a Certificate of Amendment to its Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to effect the change in authorized capital stock, the Reverse Stock Split and the name change. The Certificate of Amendment provides that the Reverse Stock Split became effective upon filing, at which time every twenty five (25) issued and outstanding shares of the Company's Class A Common Stock and Class B Common Stock were automatically combined into one (1) issued and outstanding share of the respective class of Holdings' Common Stock, without any change in par value. Immediately following the Reverse Stock Split, there were 4,200 shares of Class A Common Stock issued and outstanding and 8,017,080 shares of Class B Common stock issued and outstanding. Holdings did not issue any fractional shares in connection with the Reverse Stock Split, but rounded those shares up to the next whole share. Pursuant to the terms of the Convertible Notes, the stated conversion rates applicable to each series of Convertible Notes were adjusted to reflect the Reverse Stock Split. In addition, pursuant to the terms of the 2007 Stock Incentive Plan, the number of shares reserved there under, as well as the number of options outstanding and their stated exercise prices, was adjusted to reflect the Reverse Stock Split. All amounts and per share data presented in the accompanying consolidated financial statements and related notes give retroactive effect to the Reverse Stock Split for all periods presented.
No other information in the Original Form 10-Q is amended hereby. Except for the amended disclosure described above, the information in this Form 10-Q/A has not been updated to reflect events that occurred after August 7, 2012, the filing date of the Original Form 10-Q. Accordingly, the Amendment should be read in conjunction with our other filings made with the SEC subsequent to the filing of the Original Form 10-Q.


Table of Contents

Table of Contents
  Page
   
PART IFINANCIAL INFORMATION 
Item 1.
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 5.
Item 6.




Table of Contents

INTRODUCTORY NOTESIGNATURES
Except as otherwise indicated or unless the context otherwise requires, the terms “we,” “us,” “our,” “our company” and the “Company” refer to Domus Holdings Corp. (“Holdings”) and its consolidated subsidiaries, including Domus Intermediate Holdings Corp., a Delaware corporation (“Intermediate”), and Realogy Corporation, a Delaware corporation (“Realogy”).
Holdings is not a partyPursuant to the senior secured credit facility and certain references inrequirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to our consolidated indebtedness exclude Holdings with respect to indebtedness underbe signed on its behalf by the senior secured credit facility. In addition, while Holdings is a guarantor of Realogy's obligations under the Unsecured Notes, the First Lien Notes and the First and a Half Lien Notes, Holdings is not subject to the restrictive covenants in the agreements governing such indebtedness. Holdings, the indirect parent of Realogy, does not conduct any operations other than with respect to its indirect ownership of Realogy. Intermediate, the parent of Realogy, does not conduct any operations other than with respect to its ownership of Realogy. As a result, the condensed consolidated financial positions, results of operations and cash flows of Holdings, Intermediate and Realogy are the same.
The term "Existing Notes" refers, collectively, to the 10.50% Senior Notes due 2014 (the "10.50% Senior Notes"), the 11.00%/11.75% Senior Toggle Notes due 2014 (the "Senior Toggle Notes") and the 12.375% Senior Subordinated Notes due 2015 (the "12.375% Senior Subordinated Notes").
The term "Extended Maturity Notes" refers collectively to the 11.50% Senior Notes due 2017 (the "11.50% Senior Notes"), the 12.00% Senior Notes due 2017 (the "12.00% Senior Notes") and the 13.375% Senior Subordinated Notes due 2018 (the "13.375% Senior Subordinated Notes") issued on January 5, 2011.
The term "Convertible Notes" refers, collectively, to the 11.00% Series A Convertible Notes due 2018, the 11.00% Series B Convertible Notes due 2018 and the 11.00% Series C Convertible Notes due 2018 issued on January 5, 2011.
The term "Unsecured Notes" refers, collectively, to the Existing Notes, the Extended Maturity Notes and the Convertible Notes.
The term "Senior Subordinated Notes" refers, collectively, to the 12.375% Senior Subordinated Notes and the 13.375% Senior Subordinated Notes.
The term "Existing First and a Half Lien Notes" refers to the 7.875% Senior Secured Notes due 2019, issued on February 3, 2011. The term "New First and a Half Lien Notes" refers to the 9.00% Senior Secured Notes due 2020, issued on February 2, 2012 and the term "First and a Half Lien Notes" refers, collectively, to the Existing First and a Half Lien Notes and the New First and a Half Lien Notes.
The term "First Lien Notes" refers to the 7.625% Senior Secured First Lien Notes due 2020 issued on February 2, 2012.
The term "2012 Senior Secured Notes Offering" refers to the issuance and sale of the First Lien Notes and the New First and a Half Lien Notes on February 2, 2012 in a private offering and the application of the proceeds therefrom.

1


FORWARD-LOOKING STATEMENTS
Forward-looking statements in this report and our other public filings or other public statements 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 or other public statements. These forward-looking statements were based on various facts and were derived utilizing numerous important assumptions and other important factors, and changes in such facts, assumptions or factors could cause actual results to differ materially from those in the 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 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:
we have substantial leverage as a result of our April 2007 acquisition by affiliates of Apollo Management VI, L.P. and the related financings (the “Merger Transactions”). Since the Merger Transactions, we have needed to incur additional debt in order to fund negative cash flows, principally due to the significant level of interest expense arising from our substantial leverage. As of March 31, 2012, our total debt (excluding the securitization obligations) was $7,232 million. The housing industry and economy have experienced significant declines since the time of the Merger Transactions, which have negatively impacted our operating results. We have been, and continue to be, challenged by our heavily leveraged capital structure, negative cash flows and significant level of interest expense;
under our senior secured credit facility, our senior secured leverage ratio of total senior secured net debt to trailing four quarter EBITDA, as those terms are defined in the senior secured credit facility, calculated on a “pro forma” basis pursuant to the senior secured credit facility, may not exceed 4.75 to 1.0undersigned, thereunto duly authorized, on the last day of each fiscal quarter. For the twelve months ended 8March 31, 2012, we were in compliance with the senior secured leverage ratio covenant with a ratio of 4.02 to 1.0. While the housing market has shown signs of modest recovery in the most recent quarter, there remains substantial uncertainty with respect to the timing and scope of a full housing recovery and if a housing recovery is delayed or is weak or if general macroeconomic or other factors do not significantly improve, we may be subject to additional pressure in maintaining compliance with our senior secured leverage ratio covenant;
if we experience an event of default under our senior secured credit facility, including but not limited to a failure to pay our cash interest obligations under such facility, or under our indentures or relocation securitization facilities, or a failure to maintain, or a failure to cure a default of, the applicable senior secured leverage ratio under such instruments, or other lack of liquidity caused by substantial leverage and the adverse conditions in the housing market or other factors, such an event would materially and adversely affect our financial condition, results of operations and business;
we will continue to evaluate potential financing transactions, including refinancing certain tranches of our indebtedness, issuing incremental debt, obtaining incremental letters of credit facilities and extending maturities as well as potential transactions pursuant to which third parties, Apollo or its affiliates may provide financing to us or otherwise engage in transactions to provide liquidity to us. There can be no assurance as to which, if any, of these alternatives we may pursue as the choice of any alternative will depend upon numerous factors such as market conditions, our financial performance and the limitations applicable to such transactions under our existing financing agreements and the consents we may need to obtain under the relevant documents. There also can be no assurance that financing or refinancing will be available to us on acceptable terms or at all. In addition, the conversion of all or a portion of our existing $2.1 billionth of outstanding Convertible Notes at the option of the holders thereof would improve our liquidity position;October 2012.

If a housing recovery is delayed or weak, we may need to continue to defer or further reduce spending, including capital expenditures. There can be no assurance that we would be able to delay or further reduce expenses or that any such actions would not materially and adversely impact our business and results of operations;REALOGY HOLDINGS CORP.
adverse developments or the absence of sustained improvement in general business, economic, employment and political conditions;
REALOGY CORPORATION
(Registrants)

2


adverse developments or the absence of sustained improvement in the U.S. residential real estate markets, either regionally or nationally, including but not limited to:
By:a lack of improvement in the number of homesales, further declines in home prices caused by either absolute price decreases or a change in the mix of business that we conduct and/or a deterioration in other economic factors that particularly impact the residential real estate market and the business segments in which we operate;/S/ ANTHONY E. HULL    
Name:a lack of improvement in consumer confidence;Anthony E. Hull
Title:the impact of future recessions, slow economic growth and high levels of unemployment in the U.S. and abroad;
increasing mortgage rates and down payment requirements and/or reduced availability of mortgage financing, including but not limited to the potential impact of various provisions of the Dodd-Frank Act and regulations that may be promulgated thereunder relating to mortgage financing, including restrictions imposed on mortgage originators as well as potential retention levels required to be maintained by sponsors to securitize certain mortgages;
legislative, tax or regulatory changes that would adversely impact the residential real estate market, including but not limited to potential reform relating to Fannie Mae, Freddie Mac and other government sponsored entities that provide liquidity to the U.S. housing and mortgage markets and potential reform of the Internal Revenue Code, which could involve reform that reduces 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;
continuing high levels of foreclosure activity including but not limited to the release of homes for sale by financial institutions;
excessive or insufficient regional home inventory levels;
the inability or unwillingness of homeowners to enter into homesale transactions due to negative equity in their existing homes;
lower homeownership rates due to various factors, including, but not limited to, high unemployment levels, reduced demand or preferred use by households of rental housing due in part to uncertainty regarding future home values;
our geographic and high-end market concentration, particularly with respect to our company-owned brokerage operations; and
local and regional conditions in the areas where our franchisees and brokerage operations are located;Executive Vice President,
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;Chief Financial Officer and Treasurer
limitations on flexibility in operating our business due to restrictions contained in our debt agreements;
our inability to sustain the improvements we have realized during the past several years in our operating efficiency through cost savings and business optimization efforts;
we may not be successful in our efforts to enter into franchise agreements with new franchisees or to realize material royalty revenue from them and/or we may not be able to renew franchise agreements or maintain franchisee satisfaction with our brands;
existing franchisees may not survive the ongoing challenges of the real estate market or may not be able to grow their businesses;
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 or 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, including, but not limited to, higher costs to retain or attract sales agents for residential real estate brokerages, and the financial resources of competitors. In addition, listing aggregators and other web-based real estate service providers may also begin to compete for part of the service revenue through referral or other fees;

3


our failure to comply with laws and regulations and any changes in laws and regulations;
seasonal fluctuations in the residential real estate brokerage business could adversely affect our business, financial condition and liquidity, particularly during periods in which we have significant fixed cash obligations due to our fixed expenses, such as interest payments, facilities costs and personnel-related costs;
the loss of any of our senior management or key managers or employees;
adverse effects of natural disasters or environmental catastrophes;
any remaining resolutions or outcomes with respect to Cendant's (as defined herein) contingent liabilities under the Separation and Distribution Agreement (as defined herein) and the Tax Sharing Agreement (as defined herein), including any adverse impact on our future cash flows;
the cumulative effect of adverse litigation, governmental proceedings or arbitration awards against us and the adverse effect of new regulatory interpretations, rules and laws, including any changes that would (1) require classification of independent contractors to employee status, (2) place additional limitations or restrictions on affiliated transactions, which could have the effect of limiting or restricting collaboration among our business units, or (3) interpret the Real Estate Settlement Procedures Act or RESPA in a manner that would adversely affect our business operations and business arrangements; 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” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011 (the “2011 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.

41


PART I - FINANCIAL INFORMATION
Item 1.    Financial Statements.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of DomusRealogy Holdings Corp.:
We have reviewed the accompanying condensed consolidated balance sheet of Realogy Holdings Corp. (formerly known as Domus Holdings Corp.) and its subsidiaries as of March 31,June 30, 2012, and the related condensed consolidated statements of operations and comprehensive loss for the three-monththree and six-month periods ended March 31,June 30, 2012 and March 31,June 30, 2011 and the condensed consolidated statements of cash flows for the three-monthsix-month periods ended March 31,June 30, 2012 and March 31,June 30, 2011. These interim financial statements are the responsibility of the Company's management.

We conducted our reviewsreview 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,review, 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, 2011, and the related consolidated statements of operations, comprehensive loss, equity (deficit), and cash flows for the year then ended (not presented herein), and in our report dated March 2, 2012, except with respect to our opinion on the consolidated financial statements insofar as it relates to the effects of the reverse stock split and the NRT franchise agreement matter as described in Note 1 as to which the date is September 27, 2012, 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, 2011, 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 2,August 7, 2012, except for the effects of the reverse stock split and the NRT franchise agreement matter as described in Note 1 to the condensed consolidated financial statements, as to which the date is September 27, 2012.




52


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholder of Realogy Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of Realogy Corporation and its subsidiaries as of March 31,June 30, 2012, and the related condensed consolidated statements of operations and comprehensive loss for the three-monththree and six-month periods ended March 31,June 30, 2012 and March 31,June 30, 2011 and the condensed consolidated statements of cash flows for the three-monthsix-month periods ended March 31,June 30, 2012 and March 31,June 30, 2011. These interim financial statements are the responsibility of the Company's management.

We conducted our reviewsreview 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,review, 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, 2011, and the related consolidated statements of operations, comprehensive loss, equity (deficit), and cash flows for the year then ended (not presented herein), and in our report dated March 2, 2012, except with respect to our opinion on the consolidated financial statements insofar as it relates to the effects of the reverse stock split and the NRT franchise agreement matter as described in Note 1 as to which the date is September 27, 2012, 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, 2011, 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 2,August 7, 2012 except for the effects of the reverse stock split and the NRT franchise agreement matter as described in Note 1 to the condensed consolidated financial statements, as to which the date is September 27, 2012.


63


DOMUSREALOGY HOLDINGS CORP. AND REALOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions)millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
Three Months Ended March 31,June 30, June 30,
2012 20112012 2011 2012 2011
Revenues          
Gross commission income$606
 $575
$983
 $873
 $1,589
 $1,448
Service revenue172
 164
208
 192
 380
 356
Franchise fees54
 51
76
 70
 130
 121
Other43
 41
42
 44
 85
 85
Net revenues875
 831
1,309
 1,179
 2,184
 2,010
Expenses          
Commission and other agent-related costs402
 374
662
 577
 1,064
 951
Operating318
 318
325
 317
 643
 635
Marketing51
 43
52
 54
 103
 97
General and administrative77
 71
79
 56
 156
 127
Former parent legacy costs (benefit), net(3) (2)
 (12) (3) (14)
Restructuring costs3
 2
2
 3
 5
 5
Depreciation and amortization45
 46
44
 47
 89
 93
Interest expense, net170
 179
176
 161
 346
 340
Loss on the early extinguishment of debt6
 36

 
 6
 36
Other (income)/expense, net1
 

 
 1
 
Total expenses1,070
 1,067
1,340
 1,203
 2,410
 2,270
Loss before income taxes, equity in earnings and noncontrolling interests(195) (236)(31) (24) (226) (260)
Income tax expense7
 1
8
 1
 15
 2
Equity in earnings of unconsolidated entities(10) 
(15) (4) (25) (4)
Net loss(192) (237)(24) (21) (216) (258)
Less: Net income attributable to noncontrolling interests
 
(1) (1) (1) (1)
Net loss attributable to Domus Holdings and Realogy$(192) $(237)
Net loss attributable to Realogy Holdings and Realogy$(25) $(22) $(217) $(259)
          
Earnings (loss) per share attributable to Domus Holdings:   
Earnings (loss) per share attributable to Realogy Holdings:       
Basic loss per share:(0.96) (1.18)(3.12) (2.74) (27.07) (32.31)
Diluted loss per share:(0.96) (1.18)(3.12) (2.74) (27.07) (32.31)
Weighted average common and common equivalent shares of Domus Holdings outstanding:   
Weighted average common and common equivalent shares of Realogy Holdings outstanding:       
Basic:200.4
 200.4
8.0
 8.0
 8.0
 8.0
Diluted:200.4
 200.4
8.0
 8.0
 8.0
 8.0








See Notes to Condensed Consolidated Financial Statements.

74


DOMUSREALOGY HOLDINGS CORP. AND REALOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In millions)
(Unaudited)
 Three Months Ended March 31,
 2012 2011
Net loss$(192) $(237)
Currency Translation Adjustment2
 1
  Defined Benefit Pension Plan - amortization of actuarial loss to periodic pension cost1
 
Cash Flow Hedges:   
Less: interest rate hedge losses to interest expense
 (1)
Less: de-designation of interest rate hedges to interest expense
 (17)
Cash flow hedges
 18
Other comprehensive income, before tax3
 19
Income tax expense related to other comprehensive income amounts1
 8
Other comprehensive income, net of tax2
 11
Comprehensive loss(190) (226)
Less: comprehensive income attributable to noncontrolling interests
 
Comprehensive loss attributable to Domus Holdings and Realogy$(190) $(226)





 Three Months Ended Six Months Ended
 June 30, June 30,
 2012 2011 2012 2011
Net loss$(24) $(21) $(216) $(258)
Currency Translation Adjustment(1) 
 1
 1
Defined Benefit Pension Plan - amortization of actuarial loss to periodic pension cost2
 
 3
 
Cash Flow Hedges:       
Less: interest rate hedge losses to interest expense
 
 
 (1)
Less: de-designation of interest rate hedges to interest expense
 
 
 (17)
Cash flow hedges
 
 
 18
Other comprehensive income, before tax1
 
 4
 19
Income tax expense related to other comprehensive income amounts
 
 1
 8
Other comprehensive income, net of tax1
 
 3
 11
Comprehensive loss(23) (21) (213) (247)
Less: comprehensive income attributable to noncontrolling interests(1) (1) (1) (1)
Comprehensive loss attributable to Realogy Holdings and Realogy$(24) $(22) $(214) $(248)



























See Notes to Condensed Consolidated Financial Statements.

85


DOMUSREALOGY HOLDINGS CORP. AND REALOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
March 31,
2012
 December 31, 2011
Revised
June 30, 2012
 
Revised
December 31, 2011
  
ASSETS      
Current assets:      
Cash and cash equivalents$148
 $143
$138
 $143
Trade receivables (net of allowance for doubtful accounts of $65 and $64)122
 120
Trade receivables (net of allowance for doubtful accounts of $58 and $64)147
 120
Relocation receivables385
 378
419
 378
Relocation properties held for sale7
 11
10
 11
Deferred income taxes62
 66
59
 66
Other current assets101
 88
97
 88
Total current assets825
 806
870
 806
Property and equipment, net155
 165
151
 165
Goodwill2,617
 2,614
3,303
 3,299
Trademarks732
 732
732
 732
Franchise agreements, net2,825
 2,842
1,663
 1,697
Other intangibles, net428
 439
418
 439
Other non-current assets215
 212
225
 212
Total assets$7,797
 $7,810
$7,362
 $7,350
      
LIABILITIES AND EQUITY (DEFICIT)      
Current liabilities:      
Accounts payable$180
 $184
$214
 $184
Securitization obligations302
 327
267
 327
Due to former parent76
 80
76
 80
Revolving credit facilities and current portion of long-term debt111
 325
214
 325
Accrued expenses and other current liabilities641
 520
583
 520
Total current liabilities1,310
 1,436
1,354
 1,436
Long-term debt7,121
 6,825
7,121
 6,825
Deferred income taxes892
 890
426
 421
Other non-current liabilities172
 167
173
 167
Total liabilities9,495
 9,318
9,074
 8,849
Commitments and contingencies (Notes 8 and 9)   

 

Equity (deficit):      
Domus Holdings common stock: $.01 par value; 4,450,000,000 shares authorized, 105,000 Class A shares outstanding, 200,426,906 Class B shares outstanding at March 31, 2012 and December 31, 2011 (Realogy common stock: $.01 par value, 100 shares authorized, issued and outstanding at March 31, 2012 and December 31, 2011)2
 2
Realogy Holdings common stock: $.01 par value; 178,000,000 shares authorized, 4,200 Class A shares outstanding, 8,017,080 Class B shares outstanding at June 30, 2012 and December 31, 2011 (Realogy common stock: $.01 par value, 100 shares authorized, issued and outstanding at June 30, 2012 and December 31, 2011)
 
Additional paid-in capital2,032
 2,031
2,035
 2,033
Accumulated deficit(3,703) (3,511)(3,719) (3,502)
Accumulated other comprehensive loss(30) (32)(30) (32)
Total Domus Holdings stockholders' deficit(1,699) (1,510)
Total Realogy Holdings stockholders' deficit(1,714) (1,501)
Noncontrolling interests1
 2
2
 2
Total equity (deficit)(1,698) (1,508)(1,712) (1,499)
Total liabilities and equity (deficit)$7,797
 $7,810
$7,362
 $7,350
See Notes to Condensed Consolidated Financial Statements.

96


DOMUSREALOGY HOLDINGS CORP. AND REALOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended March 31,Six Months Ended June 30,
2012 20112012 2011
Operating Activities      
Net loss$(192) $(237)$(216) $(258)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization45
 46
89
 93
Deferred income taxes6
 (1)12
 (1)
Amortization of deferred financing costs and discount on unsecured notes4
 5
8
 9
Loss on the early extinguishment of debt6
 36
6
 36
De-designation of interest rate hedge
 17
De-designation of interest rate hedges
 17
Equity in earnings of unconsolidated entities(10) 
(25) (4)
Other adjustments to net loss3
 9
6
 10
Net change in assets and liabilities, excluding the impact of acquisitions and dispositions:      
Trade receivables(2) (9)(27) (32)
Relocation receivables and advances(6) (7)(41) (41)
Relocation properties held for sale5
 3
2
 2
Other assets(4) (6)1
 (8)
Accounts payable, accrued expenses and other liabilities103
 62
82
 (1)
Due (to) from former parent(4) (6)(5) (23)
Other, net14
 1
15
 7
Net cash used in operating activities(32) (87)(93) (194)
Investing Activities      
Property and equipment additions(9) (11)(19) (25)
Net assets acquired (net of cash acquired) and acquisition-related payments(4) (2)(4) (4)
Purchases of certificates of deposit, net(3) (5)
(Purchases of) proceeds from certificates of deposit, net(4) 9
Change in restricted cash(4) 
(3) 1
Other, net
 (1)
 (5)
Net cash used in investing activities(20) (19)(30) (24)
Financing Activities      
Net change in revolving credit facilities(208) (33)(94) 125
Proceeds from term loan extension
 98

 98
Repayments of term loan credit facility(629) (702)(640) (703)
Proceeds from issuance of First Lien Notes593
 
593
 
Proceeds from issuance of First and a Half Lien Notes325
 700
325
 700
Net change in securitization obligations(27) (21)(61) (4)
Debt issuance costs(2) (33)(3) (34)
Other, net4
 (3)(2) (3)
Net cash provided by financing activities56
 6
118
 179
Effect of changes in exchange rates on cash and cash equivalents1
 1

 1
Net increase (decrease) in cash and cash equivalents5
 (99)
Net decrease in cash and cash equivalents(5) (38)
Cash and cash equivalents, beginning of period143
 192
143
 192
Cash and cash equivalents, end of period$148
 $93
$138
 $154
      
Supplemental Disclosure of Cash Flow Information      
Interest payments (including securitization interest expense)$66
 $36
$320
 $287
Income tax payments, net
 
4
 2


See Notes to Condensed Consolidated Financial Statements.

107


DOMUSREALOGY HOLDINGS CORP. AND REALOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise noted, all amounts are in millions)
(Unaudited)
1.BASIS OF PRESENTATION
DomusRealogy Holdings Corp., a Delaware corporation (“Holdings”), formerly known as Domus Holdings Corp., is a holding company for its wholly owned subsidiary, Domus Intermediate Holdings Corp., a Delaware corporation (“Intermediate”). Intermediate is a holding company for its wholly owned subsidiary, Realogy Corporation, a Delaware corporation (“Realogy”), and its subsidiaries (Holdings, Intermediate and Realogy and its subsidiaries being referred to herein collectively as the “Company”). Holdings derives all of its operating income and cash flows from Realogy and its subsidiaries.
Holdings was incorporated on December 14, 2006. On December 15, 2006, Holdings and its wholly owned subsidiary Domus Acquisition Corp., entered into an agreement and plan of merger (the “Merger”) with Realogy which was consummated on April 10, 2007 with Holdings becoming the indirect parent company of Realogy. Holdings is 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”) and members of the Company's management. As of March 31,June 30, 2012, all of Realogy's issued and outstanding common stock was currently owned by Intermediate, a direct wholly owned subsidiary of Holdings.
Realogy is a global provider of real estate and relocation services. Realogy 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.
Realogy incurred indebtedness in connection with the Merger which included borrowings under Realogy's senior secured credit facility (the “Senior Secured Credit Facility”) and the issuance of unsecured notes. See Note 5, “Short and Long-Term Debt” for additional information on the indebtedness incurred related to the Merger, indebtedness incurred following the Merger as well as additional information related to the senior secured leverage ratio that Realogy is required to maintain.
The accompanying Condensed Consolidated Financial Statements include the financial statements of both Holdings and Realogy and these statements 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.
Holdings' only asset is its investment in the common stock of Intermediate, and Intermediate's only asset is its investment in the common stock of Realogy. Holdings' only obligations are its guarantees of certain borrowings and certain franchise obligations of Realogy. All expenses incurred by Holdings and Intermediate are for the benefit of Realogy and have been reflected in Realogy's consolidated financial statements. All issuances of Holdings' equity securities, including grants of stock options and restricted stock by Holdings to employees and directors of Realogy and its subsidiaries have been reflected in Realogy's condensed consolidated financial statements. As a result, the condensed consolidated financial positions, results of operations, comprehensive loss and cash flows of Holdings, Intermediate and Realogy are the same. In management's opinion, the accompanying Condensed Consolidated Financial Statements reflect all normal and recurring adjustments necessary to present fairly the Realogy and Holdings' financial position as of March 31,June 30, 2012 and the results of operations, and comprehensive loss for the three and six months endedJune 30, 2012 and 2011 and cash flows for the threesix months ended March 31,June 30, 2012 and 2011.
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

8


Statements for the year ended December 31, 2011 included in the Annual Report on Form 10-K for the year ended December 31, 2011.
NRT Franchise Agreement - Revision of Prior Period Financial Statements
In connection with the preparation of the Registration Statement, the Company identified and corrected an error in the manner in which it had allocated the purchase price paid by Apollo subsequent to their 2007 acquisition. Specifically, the Company inappropriately identified the discounted cash flows generated from the Real Estate Franchise Services franchise agreement with NRT as a separately identifiable indefinite lived intangible asset. The Company concluded that the value ascribed to this agreement should have been attributed to the Real Estate Franchise Services business unit as goodwill. Accordingly, the Company corrected its error through the elimination of the Real Estate Franchise Services franchise agreement with NRT intangible asset and increased the value associated with its goodwill, which resulted in a concurrent decrease in its deferred income tax liability. In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), the Company assessed the materiality of the error and concluded that the error was not material to any of its previously issued financial statements. This non-cash error had no impact to the Company's consolidated statement of operations or cash flows for any of the periods presented in these financial statements.
The following table presents the effect the revision had on the Condensed Consolidated Balance Sheets at June 30, 2012 and December 31, 2011:
  June 30, 2012
  (in millions)
  As Previously Reported Adjustment As Revised
Goodwill 2,618
 685
 3,303
Franchise agreements, net 2,808
 (1,145) 1,663
Total Assets 7,822
 (460) 7,362
Deferred income taxes 895
 (469) 426
Total Liabilities 9,543
 (469) 9,074
Accumulated deficit (3,728) 9
 (3,719)
  December 31, 2011
  (in millions)
  As Previously Reported Adjustment As Revised
Goodwill 2,614
 685
 3,299
Franchise agreements, net 2,842
 (1,145) 1,697
Total Assets 7,810
 (460) 7,350
Deferred income taxes 890
 (469) 421
Total Liabilities 9,318
 (469) 8,849
Accumulated deficit (3,511) 9
 (3,502)
Amendment to Certificate of Incorporation; Reverse Stock Split:
On September 11, 2012, the Board of Directors approved an amendment to its Certificate of Incorporation to effect a change in the name of the Company to Realogy Holdings Corp., to amend and restate its authorized capital stock and to approve a reverse stock split of the Company's Class A and Class B Common Stock at a ratio of 1 to 25 (the “Reverse Stock Split”). On the same day, the stockholders of the Company approved the foregoing amendments to the Company's Certificate of Incorporation.
On September 27, 2012, the Company filed a Certificate of Amendment to its Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to effect the change in authorized capital stock, the Reverse Stock Split and the name change. The Certificate of Amendment provides that the Reverse Stock Split became effective upon filing, at which time every twenty five (25) issued and outstanding shares of the Company's Class A Common Stock and Class B Common Stock were automatically combined into one (1) issued and outstanding share of the respective class of the Company's Common Stock, without any change in par value. Immediately following the Reverse Stock Split, there were 4,200 shares of Class A Common Stock issued and outstanding and 8,017,080 shares of Class B

119


Common stock issued and outstanding. The Company did not issue any fractional shares in connection with the Reverse Stock Split, but rounded those shares up to the next whole share. Pursuant to the terms of the Convertible Notes, the stated conversion rates applicable to each series of Convertible Notes were adjusted to reflect the Reverse Stock Split. In addition, pursuant to the terms of the 2007 Stock Incentive Plan, the number of shares reserved there under, as well as the number of options outstanding and their stated exercise prices, was adjusted to reflect the Reverse Stock Split. All amounts and per share data presented in the accompanying consolidated financial statements and related notes give retroactive effect to the Reverse Stock Split for all periods presented.
2012 Senior Secured Notes Offering
On February 2, 2012, Realogy issued $593 million of First Lien Notes and $325 million of New First and a Half Lien Notes to repay amounts outstanding under its senior secured credit facility. The First Lien Notes and the New First and a Half Lien Notes are senior secured obligations of the Company and will mature on January 15, 2020. Interest is payable semiannually on January 15 and July 15 of each year, commencing July 15, 2012. The First Lien Notes and the New First and a Half Lien Notes were issued in a private offering that is exempt from the registration requirements of the Securities Act.
The Company used the proceeds from the offering, of approximately $918$918 million, to: (i) prepay $629 million of its non-extended term loan borrowings under its senior secured credit facility which were due to mature in October 2013, (ii) repay all of the $133$133 million in outstanding borrowings under its non-extended revolving credit facility which was due to mature in April 2013, and (iii) repay $156$156 million of the outstanding borrowings under its extended revolving credit facility. In conjunction with the repayments of $289$289 million described in clauses (ii) and (iii), the Company reduced the commitments under its non-extended revolving credit facility by a like amount, thereby terminating the non-extended revolving credit facility.
Under the terms of the Senior Secured Credit Facility, the New First and a Half Lien Notes (as well as the Existing First and a Half Lien Notes) do not constitute senior secured debt for purposes of calculating the senior secured leverage ratio maintenance covenant under our senior secured credit facility. This facility requires Realogy to maintain a senior secured leverage ratio of total senior secured net debt to trailing 12-month Adjusted EBITDA (as defined in Note 8,5, “Short and Long-Term Debt”), that may not exceed 4.75 to 1.0.1.0. Realogy was in compliance with the senior secured leverage covenant with a senior secured leverage ratio of 4.024.08 to 1.0 at March 31,June 30, 2012.
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. 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 and six months ended March 31,June 30, 2012 and therefore the impact of stock options, restricted stock and the convertible notes were excluded from the computation of dilutive earnings (loss) per share as the inclusion of such amounts would be anti-dilutive. At March 31,June 30, 2012, the number of shares of common stock issuable under the stock options, restricted stock and the convertible notes that were excluded from the computation was 132 million, 0.1 million4 thousand and 2,02681 million, respectively.
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 Swiss Franc, Canadian Dollar, British Pound and Euro. 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,June 30, 2012, the Company had outstanding foreign currency forward contracts with a fair value of less than $1 million and a notional value of $19 million. As of December 31, 2011, the Company had outstanding foreign currency forward contracts with a fair value of less than $1 million and a notional value of $15 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 four interest rate swaps with an aggregate notional value of $850 million to hedge the variability in cash flows resulting from the term loan facility. One swap, with a notional value of $225 million, expires

10


expired in July 2012, the second swap, with a notional value of $200 million, expires in December 2012, the third swap, with a notional value of $225 million, commences in July 2012 and expires in October 2016, and the fourth swap with a notional value of $200 million, commences in January 2013 and expires in October 2016. The Company is utilizing pay fixed interest swaps (in exchange for floating LIBOR rate based payments) to perform this hedging strategy.
At December 31, 2010, $425 million of the interest rate swap derivatives were being accounted for as cash flow hedges in accordance with the FASB’s derivative and hedging guidance and the unfavorable fair market value of the swaps was recorded within

12


Accumulated Other Comprehensive Income/(Loss) (“AOCI”). Following the completion of the 2011 Refinancing Transactions, the Company was not able to maintain hedge effectiveness in accordance with the accounting guidance. As a result, the interest rate swaps were de-designated as cash flow hedging instruments and the fair value of $17$17 million was reclassified from AOCI and recognized in interest expense in the Consolidated Statements of Operations during the first quarter of 2011.
The fair value of derivative instruments was as follows:
Liability DerivativesLiability Derivatives March 31, 2012 December 31, 2011Liability Derivatives June 30, 2012 December 31, 2011
Designated as Hedging Instruments Balance Sheet Location Fair Value Fair Value
Interest rate swap contracts Other non-current liabilities $
 $
Not Designated as Hedging Instruments     Balance Sheet Location Fair Value Fair Value
Interest rate swap contracts Other current liabilities $4
 $7
 Other current liabilities $1
 $7
 Other non-current liabilities 19
 10
 Other non-current liabilities 26
 10
 $23
 $17
 $27
 $17
The effect of derivative instruments on earnings is as follows:
 
Gain or (Loss) Recognized in
Other Comprehensive Income
 Location of Gain or (Loss) Reclassified from AOCI into Income 
Gain or (Loss) Reclassified
from AOCI into Income
 
Gain or (Loss) Recognized in
Other Comprehensive Income
 Location of Gain or (Loss) Reclassified from AOCI into Income 
Gain or (Loss) Reclassified
from AOCI into Income
Derivatives in Cash Flow
Hedge Relationships
 Three Months Ended Three Months Ended Three Months Ended Three Months Ended Six Months Ended Six Months Ended Six Months Ended Six Months Ended
March 31, 2012March 31, 2011March 31, 2012March 31, 2011Location of Gain or (Loss) Reclassified from AOCI into IncomeMarch 31, 2011June 30, 2012June 30, 2011June 30, 2012June 30, 2011Location of Gain or (Loss) Reclassified from AOCI into IncomeJune 30, 2011
Interest rate swap contracts $
 $
 Interest expense $
 (17) $
 $
 Interest expense $
 (17)
Derivative Instruments Not
Designated as Hedging Instruments
 
Location of Gain or (Loss) Recognized
in Income for Derivative Instruments
 
Gain or (Loss) Recognized in
Income on Derivative
 
Location of Gain or (Loss) Recognized
in Income for Derivative Instruments
 
Gain or (Loss) Recognized in
Income on Derivative
Three Months Ended Three Months EndedThree Months Ended Three Months Ended
March 31, 2012 March 31, 2011 June 30, 2012 June 30, 2011
Interest rate swap contracts Interest expense $4
 $2
 Interest expense $4
 $2
Foreign exchange contracts Operating expense 1
 $(1) Operating expense 1
 $
Derivative Instruments Not
Designated as Hedging Instruments
 
Location of Gain or (Loss) Recognized
in Income for Derivative Instruments
 
Gain or (Loss) Recognized in
Income on Derivative
Six Months Ended Six Months Ended
 June 30, 2012 June 30, 2011
Interest rate swap contracts Interest expense $
 $4
Foreign exchange contracts Operating expense 
 $(1)
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.

11


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.

13


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 that incorporates counterparty and performance risk and therefore is categorized in Level III.
The following table summarizes fair value measurements by level at March 31,June 30, 2012 for assets/liabilities measured at fair value on a recurring basis:
Level I Level II Level III TotalLevel I Level II Level III Total
Derivatives              
Interest rate swaps (included in other current
and non-current liabilities)
$
 $
 $23
 $23
$
 $
 $27
 $27
The following table summarizes fair value measurements by level at December 31, 2011 for assets/liabilities measured at fair value on a recurring basis:
 Level I Level II Level III Total
Derivatives       
Interest rate swaps (included in other current
and non-current liabilities)
$
 $
 $17
 $17
Deferred compensation plan assets
(included in other non-current assets)
$1
 $
 $
 $1
The following table presents changes in Level III financial liabilities measured at fair value on a recurring basis:
Fair value at December 31, 2011$17
Changes reflected in the statement of operations6
Fair value at March 31, 2012$23
Fair value at December 31, 2011$17
Loss reflected in the statement of operations10
Fair value at June 30, 2012$27

12


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, 2012 December 31, 2011June 30, 2012 December 31, 2011
Carrying
Amount
 Estimated
Fair Value
 Carrying
Amount
 Estimated
Fair Value
Carrying
Amount
 Estimated
Fair Value (a)
 Carrying
Amount
 
Estimated
Fair Value
(1)
Debt              
Senior Secured Credit Facility:              
Non-extended revolving credit facility$
 $
 $78
 $78
$
 $
 $78
 $78
Extended revolving credit facility
 
 97
 97
109
 109
 97
 97
Non-extended term loan facility
 
 629
 590

 
 629
 590
Extended term loan facility1,822
 1,703
 1,822
 1,630
1,822
 1,721
 1,822
 1,630
First Lien Notes593
 623
 
 
593
 620
 
 
Existing First and a Half Lien Notes700
 702
 700
 606
700
 686
 700
 606
New First and a Half Lien Notes325
 334
 
 
325
 335
 
 
Second Lien Loans650
 674
 650
 655
650
 663
 650
 655
Other bank indebtedness100
 100
 133
 133
105
 105
 133
 133
Existing Notes:              
10.50% Senior Notes64
 64
 64
 56
64
 63
 64
 56
11.00%/11.75% Senior Toggle Notes52
 51
 52
 43
41
 40
 52
 43
12.375% Senior Subordinated Notes188
 175
 187
 144
188
 175
 187
 144
Extended Maturity Notes:              
11.50% Senior Notes489
 462
 489
 367
489
 463
 489
 367
12.00% Senior Notes129
 121
 129
 95
129
 120
 129
 95
13.375% Senior Subordinated Notes10
 7
 10
 7
10
 9
 10
 7
11.00% Convertible Notes2,110
 1,633
 2,110
 1,189
2,110
 1,643
 2,110
 1,189
Securitization obligations302
 302
 327
 327
267
 267
 327
 327

14_______________


(a)The fair value of the Company's indebtedness is categorized as Level I.
Income Taxes
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.  Income tax expense for the threesix months ended March 31,June 30, 2012 was $715 million.  This expense included $612 million for an increase in deferred tax liabilities associated with indefinite-lived intangible assets and $13 million was recognized for foreign and state income taxes for certain jurisdictions.
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 $1110 million and $7 million at March 31,June 30, 2012 and December 31, 2011, respectively and are primarily included within Other current assets on the Company’s Condensed Consolidated Balance Sheets.
Defined Benefit Pension Plan
The net periodic pension cost for the three months ended March 31,June 30, 2012 and for the three months endedJune 30, 2011 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.
The net periodic pension cost for the threesix months ended March 31, 2011June 30, 2012 was $13 million and was comprised of interest cost and amortization of actuarial loss of $26 million offset by a benefit of $13 million for the expected return on assets. The net periodic pension cost for the six months endedJune 30, 2011 was $2 million and was comprised of interest cost and amortization of actuarial loss of $5 million offset by a benefit of $3 million for the expected return on assets.

13


Recently Adopted Accounting Pronouncements
In September 2011, the FASB amended the guidance on testing for goodwill impairment that allows an entity to elect to qualitatively assess whether it is necessary to perform the current two-step goodwill impairment test. If the qualitative assessment determines that it is not more-likely-than-not that the fair value of a reporting unit 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 reporting unit 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 goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company will consider utilizing the new qualitative analysis for its goodwill impairment test to be performed in the fourth quarter of 2012.
In May 2011, the FASB amended the guidance on Fair Value Measurement that result in common measurement of fair value and disclosure requirements between U.S. GAAP and the International Financial Reporting Standards (“IFRS”). The amendments mainly change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments are effective prospectively for interim and annual periods beginning after December 15, 2011. The Company adopted the amendments on January 1, 2012 and the adoption did not have a significant impact on the consolidated financial statements.
2.ACQUISITIONS
2012 ACQUISITIONS
During the threesix months ended March 31,June 30, 2012, the Company acquired threefour real estate brokerage operations through its wholly owned subsidiary, NRT, for total consideration of $4 million. These acquisitions resulted in goodwill of $34 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.
2011 ACQUISITIONS
During the year ended December 31, 2011, the Company acquired thirteen real estate brokerage operations through its wholly owned subsidiary, NRT, for total consideration of $4 million. These acquisitions resulted in goodwill of $3 million that was assigned to the Company Owned Brokerage Services segment.

15


None of the 2011 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
Real Estate
Franchise
Services
 
Company
Owned
Brokerage
Services
 
Relocation
Services
 
Title and
Settlement
Services
 
Total
Company
Gross Goodwill as of December 31, 2011$2,265
 $783
 $641
 $397
 $4,086
$3,264
 $783
 $641
 $397
 $5,085
Accumulated impairment losses(709) (158) (281) (324) (1,472)(1,023) (158) (281) (324) (1,786)
Balance at December 31, 20111,556
 625
 360
 73
 2,614
2,241
 625
 360
 73
 3,299
Goodwill acquired
 3
 
 
 3

 4
 
 
 4
Balance at March 31, 2012$1,556
 $628
 $360
 $73
 $2,617
Balance at June 30, 2012$2,241
 $629
 $360
 $73
 $3,303

14


Intangible assets are as follows:
 As of March 31, 2012 As of December 31, 2011
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Franchise Agreements           
Amortizable—Franchise agreements (a)$2,019
 $339
 $1,680
 $2,019
 $322
 $1,697
Unamortizable—Franchise agreement (b)1,145
 
 1,145
 1,145
 
 1,145
Total Franchise Agreements$3,164
 $339
 $2,825
 $3,164
 $322
 $2,842
Unamortizable—Trademarks (c)$732
 $
 $732
 $732
 $
 $732
Other Intangibles           
Amortizable—License agreements (d)$45
 $5
 $40
 $45
 $4
 $41
Amortizable—Customer relationships (e)529
 154
 375
 529
 144
 385
Unamortizable—Title plant shares (f)10
 
 10
 10
 
 10
Amortizable—Other (g) 13
 10
 3
 17
 14
 3
Total Other Intangibles$597
 $169
 $428
 $601
 $162
 $439
 As of June 30, 2012 As of December 31, 2011
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Amortizable—Franchise agreements (a)
$2,019
 $356
 $1,663
 $2,019
 $322
 $1,697
Unamortizable—Trademarks (b)
$732
 $
 $732
 $732
 $
 $732
Other Intangibles           
Amortizable—License agreements (c)
$45
 $5
 $40
 $45
 $4
 $41
Amortizable—Customer relationships (d)
529
 163
 366
 529
 144
 385
Unamortizable—Title plant shares (e)
10
 
 10
 10
 
 10
Amortizable—Other (f) 
12
 10
 2
 17
 14
 3
Total Other Intangibles$596
 $178
 $418
 $601
 $162
 $439
_______________
(a)    Generally amortized over a period of 30 years.
(b)Relates to the Real Estate Franchise Services franchise agreement with NRT, which is expected to generate future cash flows for an indefinite period of time.
(c)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.
(d)(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).
(e)(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.
(f)(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.
(g)(f)
Generally amortized over periods ranging from 2 to 10 years.
Intangible asset amortization expense is as follows:
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2012 20112012 2011 2012 2011
Franchise agreements$17
 $17
$17
 $17
 $34
 $34
License agreement1
 

 
 1
 
Customer relationships10
 9
9
 10
 19
 19
Other2
 2

 1
 2
 3
Total$30
 $28
$26
 $28
 $56
 $56

16


Based on the Company’s amortizable intangible assets as of March 31,June 30, 2012, the Company expects related amortization expense for the remainder of 2012, the four succeeding years and thereafter to approximate $7953 million, $105 million, $105 million, $95 million, $9594 million and $1,619 million, respectively.
4.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of:
March 31,
2012
 December 31,
2011
June 30,
2012
 December 31,
2011
  
Accrued payroll and related employee costs$94
 $69
$114
 $69
Accrued volume incentives15
 17
14
 17
Accrued commissions25
 14
29
 14
Restructuring accruals19
 20
17
 20
Deferred income70
 76
66
 76
Accrued interest241
 139
157
 139
Relocation services home mortgage obligations5
 9
6
 9
Other172
 176
180
 176
$641
 $520
$583
 $520


15


5.SHORT AND LONG-TERM DEBT
Total indebtedness is as follows:
March 31,
2012
 December 31,
2011
June 30,
2012
 December 31,
2011
Senior Secured Credit Facility:      
Non-extended revolving credit facility$
 $78
$
 $78
Extended revolving credit facility
 97
109
 97
Non-extended term loan facility
 629

 629
Extended term loan facility1,822
 1,822
1,822
 1,822
First Lien Notes593
 
593
 
Existing First and a Half Lien Notes700
 700
700
 700
New First and a Half Lien Notes325
 
325
 
Second Lien Loans650
 650
650
 650
Other bank indebtedness100
 133
105
 133
Existing Notes:
      
10.50% Senior Notes64
 64
64
 64
11.00%/11.75% Senior Toggle Notes52
 52
41
 52
12.375% Senior Subordinated Notes188
 187
188
 187
Extended Maturity Notes:      
11.50% Senior Notes489
 489
489
 489
12.00% Senior Notes129
 129
129
 129
13.375% Senior Subordinated Notes10
 10
10
 10
11.00% Convertible Notes2,110
 2,110
2,110
 2,110
Securitization Obligations:      
Apple Ridge Funding LLC270
 296
245
 296
Cartus Financing Limited32
 31
22
 31
$7,534
 $7,477
$7,602
 $7,477

1716


Indebtedness Table
As of March 31,June 30, 2012, the total capacity, outstanding borrowings and available capacity under the Company’s borrowing arrangements were as follows:
Interest
Rate
 Expiration
Date
 Total
Capacity
 Outstanding
Borrowings
 Available
Capacity
Interest
Rate
 Expiration
Date
 Total
Capacity
 Outstanding
Borrowings
 Available
Capacity
Senior Secured Credit Facility:                  
Extended revolving credit facility (1)
(2) April 2016 $363
 $
 $283
(2) April 2016 $363
 $109
 $165
Extended term loan facility(3) October 2016 1,822
 1,822
 
(3) October 2016 1,822
 1,822
 
First Lien Notes7.625% January 2020 593
 593
 
7.625% January 2020 593
 593
 
Existing First and a Half Lien Notes7.875% February 2019 700
 700
 
7.875% February 2019 700
 700
 
New First and a Half Lien Notes9.00% January 2020 325
 325
 
9.00% January 2020 325
 325
 
Second Lien Loans13.50% October 2017 650
 650
 
13.50% October 2017 650
 650
 
Other bank indebtedness (4)
 Various 108
 100
 8
 Various 108
 105
 3
Existing Notes:            
Senior Notes10.50% April 2014 64
 64
 
10.50% April 2014 64
 64
 
Senior Toggle Notes(5)11.00% April 2014 52
 52
 
11.00% April 2014 41
 41
 
Senior Subordinated Notes (5)(6)
12.375% April 2015 190
 188
 
12.375% April 2015 190
 188
 
Extended Maturity Notes:            
Senior Notes (6)(7)
11.50% April 2017 492
 489
 
11.50% April 2017 492
 489
 
Senior Notes (7)(8)
12.00% April 2017 130
 129
 
12.00% April 2017 130
 129
 
Senior Subordinated Notes13.375% April 2018 10
 10
 
13.375% April 2018 10
 10
 
Convertible Notes11.00% April 2018 2,110
 2,110
 
11.00% April 2018 2,110
 2,110
 
Securitization obligations: (8)(9)
            
Apple Ridge Funding LLC December 2013 400
 270
 130
 December 2013 400
 245
 155
Cartus Financing Limited (9)
 Various 64
 32
 32
Cartus Financing Limited (10)
 Various 63
 22
 41
 $8,073
 $7,534
 $453
 $8,061
 $7,602
 $364
_______________
 
 
(1)
The available capacity under this facility was reduced by $8089 million of outstanding letters of credit. On May 1,August 6, 2012, the Company had $197$150 million outstanding on the extended revolving credit facility and $79$89 million of outstanding letters of credit, leaving $81$124 million of available capacity.
(2)
Interest rates with respect to revolving loans under the senior secured credit facility are based on, at Realogy’s option, (a) adjusted LIBOR plus 3.25% or (b) JPMorgan Chase Bank, N.A., prime rate ("ABR") plus 2.25% in each case subject to reductions based on the attainment of certain leverage ratios.
(3)
Interest rates with respect to term loans under the senior secured credit facility are based on, at Realogy’s option, (a) adjusted LIBOR plus 4.25% or (b) the higher of the Federal Funds Effective Rate plus 1.75% and JPMorgan Chase Bank, N.A.’s prime rate (“ABR”) plus 3.25%.
(4)
Consists of revolving credit facilities that are supported by letters of credit issued under the senior secured credit facility;facility, a portion of which are issued under the synthetic letter of credit facility: $85 million of capacity which expiresdue in August 2012, $50 million due in January 2013 and $50 million due in July 2013.
(5)
On April 16, 2012, the Company redeemed $11 million principal amount of the outstanding Senior Toggle Notes.
(6)
Consists of $190 million of 12.375% Senior Subordinated Notes due 2015, less a discount of $2 million.
(6)(7)
Consists of $492 million of 11.50% Senior Notes due 2017, less a discount of $3 million.
(7)(8)
Consists of $130 million of 12.00% Senior Notes due 2017, less a discount of $1 million.
(8)(9)Available capacity is subject to maintaining sufficient relocation related assets to collateralize these securitization obligations.
(9)(10)
Consists of a £35£35 million facility which expires in August 2015 and a £5£5 million working capital facility which expires in August 2012.
Indebtedness Incurred in Connection with the Merger and Subsequent Debt Transactions
Realogy incurred indebtedness in 2007 in connection with the Merger, which included borrowings under Realogy's senior secured credit facility (the “Senior Secured Credit Facility”) and the issuance of unsecured notes. Realogy borrowed an initial amount of $3,170$3,170 million term loan facility under the Senior Secured Credit Facility (consisting of $1,950$1,950 million initial term loan facility and a $1,220$1,220 million delayed draw term loan facility) with original maturity dates of October 2013. The $1,950$1,950 million initial term loan facility was used by Realogy to finance a part of the Merger, including, without

17


limitation, payment of fees and expenses contemplated thereby. In addition, Realogy used the $1,220$1,220 million delayed draw

18


term loan facility to finance the refinancing or discharge of Realogy's previously existing senior notes, including, without limitation, the payment of fees and expenses. Realogy issued an original aggregate principal amount of $3,125$3,125 million of unsecured notes with maturity dates in 2014 and 2015 (the "Existing Notes") to finance a part of the Merger, including, without limitation, payment of fees and expenses.
In 2009, 2011 and 2012, Realogy completed various debt transactions, which are detailed below, that accomplished one or more ofresulted in the following: (1) provided additional cushionflexibility with respect to compliance with Realogy's senior secured leverage ratio under the senior secured leverage ratio;credit facility; (2) extended the maturityextension of the maturities of certain portions of our indebtedness; (3) provided additional liquidity to fund operations; and (4) issuedthe issuance of $2,110 million of Convertible Notes that if converted to equity would improve Realogy's liquidity position.Notes.
In September and October 2009, Realogy incurred $650 million of Second Lien Loans (the "Second Lien Loans") under the Senior Secured Credit Facility, the net proceeds of which were used to pay down outstanding balances on the revolving credit facility under the Senior Secured Credit Facility and for working capital as well as to exchange $150$150 million of Second Lien Loans for $221$221 million aggregate principal amount of outstanding Senior Toggle Notes.
In January and February of 2011, Realogy completed a series of transactions, referred to herein as the “2011 Refinancing Transactions,” to refinance portions of its Senior Secured Credit Facility and the Existing Notes.
On January 5, 2011, Realogy completed private exchange offers, relating to its then outstanding Existing Notes (the “Debt Exchange Offering”). As a result of the Debt Exchange Offering, $2,110 million of Existing Notes were tendered for Convertible Notes due 2018, $632$632 million of Existing Notes due 2014 and 2015 were tendered for Extended Maturity Notes due 2017 and 2018 and $303$303 million of Existing Notes remained outstanding.
Effective February 3, 2011, we entered into a first amendment to our senior secured credit facility (the “Senior Secured Credit Facility Amendment”) and an incremental assumption agreement, which resulted in the following: (i) extended the maturity of a significant portion of our first lien term loans to October 10, 2016; (ii) extended the maturity of a significant portion of the loans and commitments under our revolving credit facility to April 10, 2016, and converted a portion of the extended revolving loans to extended term loans ($($98 million in the aggregate); (iii) extended the maturity of a significant portion of the commitments under our synthetic letter of credit facility to October 10, 2016; and (iv) allowed for the issuance of First and a Half Lien Notes, which would not be counted as senior secured debt for purposes of determining the Company's compliance with the senior secured leverage ratio covenant under the Senior Secured Credit Facility.
On February 3, 2011, the Company issued $700 million aggregate principal amount of Existing First and a Half Lien Notes due 2019 in a private offering exempt from the registration requirements of the Securities Act, the net proceeds of which, along with cash on hand, were used to prepay $700$700 million of certain of the first lien term loans that were extended in connection with the Senior Secured Credit Facility Amendment.
On February 2, 2012, Realogy issued $593 million of First Lien Notes due 2020 and $325 million of New First and a Half Lien Notes due 2020 in a private offering exempt from the registration requirements of the Securities Act, referred to herein as the “2012 Senior Secured Notes Offering.” The Company used the proceeds from the offering, of approximately $918$918 million, to: (i) prepay $629$629 million of its non-extended term loan borrowings under its senior secured credit facility which were due to mature in October 2013, (ii) repay all of the $133$133 million in outstanding borrowings under its non-extended revolving credit facility which was due to mature in April 2013, and (iii) repay $156$156 million of the outstanding borrowings under its extended revolving credit facility. In conjunction with the repayments of $289$289 million described in clauses (ii) and (iii), the Company reduced the commitments under its non-extended revolving credit facility by a like amount, thereby terminating the non-extended revolving credit facility.
***
Senior Secured Credit Facility
The Senior Secured Credit Facility consists of (i) term loan facilities, (ii) revolving credit facilities, (iii) a synthetic letter of credit facility (the facilities described in clauses (i), (ii) and (iii), as amended by the Senior Secured Credit Facility Amendment, collectively referred to as the “First Lien Facilities”), and (iv) an incremental (or accordion) loan facility, a portion of which as summarized above was utilized in connection with the incurrence of Second Lien Loans. Realogy uses the revolving credit facility for, among other things, working capital and other general corporate purposes.

18


The loans under the First Lien Facilities (the “First Lien Loans”) are secured to the extent legally permissible by substantially all of the assets of Realogy, Intermediate and the subsidiary guarantors,all of their domestic subsidiaries, other than certain excluded subsidiaries, including but not limited to (i) a first-priority pledge of substantially all capital stock held by Realogy or any subsidiary guarantor (which pledge, with respect to

19


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 (ii) perfected first-priority security interests in substantially all tangible and intangible assets of Realogy and each subsidiary guarantor, subject to certain exceptions.
The Second Lien Loans are secured by liens on the assets of Realogy, Intermediate and by the subsidiary guarantors that secure the First Lien Loans. However, such liens are junior in priority to the First Lien Loans, the First Lien Notes and the First and a Half Lien Notes. The Second Lien Loans bear interest at a rate of 13.50% per year and interest payments are payable semi-annually with the first interest payment made on April 15, and October 15of each year.2010. The Second Lien Loans mature on October 15, 2017 and there are no required amortization payments.
The senior secured credit facility also provides for a synthetic letter of credit facility which is for: (i) the support of Realogy’s obligations with respect to Cendant contingent and other liabilities assumed under the Separation and Distribution Agreement and (ii) general corporate purposes in an amount not to exceed $100 million.$100 million. The synthetic letter of credit facility capacity is $186 million at March 31,June 30, 2012, of which $43 million will expire in October 2013 and $143 million will expire in October 2016. As of March 31,June 30, 2012, the capacity was being utilized by a $70 million letter of credit with Cendant for any remaining potential contingent obligations and $100 million of letters of credit for general corporate purposes.
Realogy’s senior secured credit facility contains financial, affirmative and negative covenants and requires Realogy to maintain a senior secured leverage ratio not to exceed a maximum amount on the last day of each fiscal quarter. Specifically, Realogy’s total senior secured net debt to trailing twelve month EBITDA may not exceed 4.75 to 1.0.1.0. EBITDA, as defined in the senior secured credit facility, includes certain adjustments and is calculated on a “pro forma” basis for purposes of calculating the senior secured leverage ratio. 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. Total senior secured net debt does not include the First and a Half Lien Notes, other indebtedness secured by a lien on our assets pari passu or junior in priority to the liens securing the First and a Half Lien Notes, including the Second Lien Loans, other bank indebtedness not secured by a first lien on Realogy or its subsidiaries assets,our securitization obligations or the unsecured notes. At March 31,June 30, 2012, Realogy’s senior secured leverage ratio was 4.024.08 to 1.0.1.0.
Realogy 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 Intermediate equity for cash, which would be infused as capital into Realogy. The effect of such infusion would be to increase Adjusted EBITDA for purposes of calculating the senior secured leverage ratio for the applicable twelve-month period and reduce net senior secured indebtedness upon actual receipt of such capital. If Realogy 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.
If an event of default occurs under the senior secured credit facility, and Realogy fails to obtain a waiver from the lenders, Realogy’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;
could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and payable;
could require Realogy to apply all of its available cash to repay these borrowings; or
could prevent Realogy from making payments on the First and a Half Lien Notes or the unsecured notes;
any of which could result in an event of default under the First and a Half Lien Notes, the unsecured notes and the Company’s Apple Ridge Funding LLC securitization program.
If the CompanyRealogy 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, andwhich assets also secure its other secured indebtedness. The CompanyRealogy has pledged the majority of its assets as collateral to secure such indebtedness. If the lenders under

19


the senior secured credit facility were to accelerate the repayment of borrowings, then the CompanyRealogy 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, the Second Lien Loans and the Unsecured Notes, or be able to borrow sufficient funds to refinance such indebtedness. Even if the CompanyRealogy is able to obtain new financing, it may not be on commercially reasonable terms, or terms that are acceptable to the Company.Realogy.

20


First Lien Notes
The $593 million of First Lien Notes are senior secured obligations of the CompanyRealogy 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 commencing(the first interest payment was July 15, 2012.2012). The First Lien Notes are guaranteed on a senior secured basis by Intermediate and each domestic subsidiary of the CompanyRealogy that is a guarantor under the Senior Secured Credit Facility and certain of the Company'sRealogy's outstanding securities. The First Lien Notes are also guaranteed by 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, (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 and the Second Lien Loans.
First and a Half Lien Notes
The First and a Half Lien Notes are senior secured obligations of the Company. The $700$700 million of Existing First and a Half Lien Notes mature on February 15, 2019 and bear interest at a rate of 7.875% per annum, payable semiannually on February 15 and August 15 of each year. The New First and a Half Lien Notes mature on January 15, 2020. The $325$325 million of New First and a Half Lien Notes bear interest at a rate of 9.0% per annum and interest is payable semiannually on January 15 and July 15 of each year commencing(the first interest payment date was July 15, 2012.2012). The First and a Half Lien Notes are guaranteed on a senior secured basis by Intermediate and each domestic subsidiary of the CompanyRealogy that is a guarantor under the Senior Secured Credit Facility and certain of the Company'sRealogy's outstanding securities. The First and a Half Lien Notes are also guaranteed by 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, and (ii) senior to the collateral liens securing the Company’s second lien obligations under its Senior Secured Credit Facility.Second Lien Loans. The priority of the collateral liens securing each series of the First and a Half Lien Notes is equal to one another.
Other Bank Indebtedness
Realogy has separate revolving U.S. credit facilities under which it could borrow up to $100 million at March 31,June 30, 2012 and $125$125 million at December 31, 2011 and a separate U.K. credit facility under which it could borrow up to £5£5 million ($ ($8 million)million) at March 31,June 30, 2012 and December 31, 2011. These facilities are not secured by assets of Realogy or any of its subsidiaries but are supported by letters of credit issued under the senior secured credit facility, including the synthetic letter of credit facility. The facilities generally have a one-year term with certain options for renewal. As of March 31,June 30, 2012, Realogy had outstanding borrowings of $100105 million under these credit facilities. In April 2012, Realogy extended the $50 million facility that was due in July 2012 to July 2013. As a result, Realogy has$5 million outstanding on an $8 million of capacity facility which expires in August 2012, $$50 million due in January 2013 and $50 million due in July 2013. For the threesix months ended March 31,June 30, 2012 and March 31,June 30, 2011, the weighted average interest rate under the U.S. credit facilities was 2.9% with interest payable either monthly or quarterly.  
Unsecured Notes
On April 10, 2007, Realogy issued in a private placement $1,700$1,700 million of Senior Notes due 2014, $550$550 million of Senior Toggle Notes due 2014 and $875$875 million of Senior Subordinated Notes due 2015. On February 15, 2008, Realogy completed an exchange offer to register the privately placed notes under the Securities Act. The registration statement was filed on Form S-4 (File No. 333-148153 declared effective by the SEC on January 9, 2008). The term "Existing Notes" refers to the privately placed notes and the exchange notes. On January 5, 2011, Realogy settled the Debt Exchange Offering to exchange its Existing Senior Notes and the 12.375% Senior Subordinated Notes for the Extended Maturity Notes and the Convertible Notes. On the settlement date of the Debt Exchange Offering, Realogy issued (i) $492 million aggregate principal amount of 11.50% Senior Notes, (ii) $130 million aggregate principal amount of 12.00% Senior Notes and (iii) $10 million aggregate principal amount of 13.375% Senior Subordinated Notes.

20


The 10.50% Senior Notes mature on April 15, 2014 and bear interest payable semiannually on April 15 and October 15 of each year. The 11.50% Senior Notes mature on April 15, 2017 and bear interest payable semiannually on April 15 and October 15 of each year.
The Senior Toggle Notes mature on April 15, 2014. Interest is payable semiannually on April 15 and October 15 of each year. For any interest payment period after the initial interest payment period and through October 15, 2011, Realogy had the option to pay interest on the Senior Toggle Notes (i) entirely in cash (“Cash Interest”), (ii) entirely by increasing the principal amount of the outstanding Senior Toggle Notes or by issuing Senior Toggle Notes (“PIK Interest”), or (iii) 50% as Cash Interest and 50% as PIK Interest. Cash Interest on the Senior Toggle Notes accrues at a rate of 11.00% per annum. PIK Interest on the Senior Toggle Notes accrues at the Cash Interest rate per annum plus 0.75%. Beginning with the interest

21


period which ended October 2008 through the interest period which ended April 2011, Realogy elected to satisfy its interest payment obligations by issuing additional Senior Toggle Notes. Realogy elected to pay Cash Interest for the interest period commencing April 15, 2011 and is required to make all future interest payments on the Senior Toggle Notes entirely in cash until they mature.
Realogy would be subject to certain interest deduction limitations if the Senior Toggle Notes were treated as “applicable high yield discount obligations” (“AHYDO”) within the meaning of Section 163(i)(1) of the Internal Revenue Code, as amended. In order to avoid such treatment, Realogy is required to redeem for cash a portion of each Senior Toggle Note outstanding on April 15, 2012 for the periods that Realogy elected to pay PIK Interest. As a result, on April 16, 2012, Realogy redeemed $11$11 million principal amount of the outstanding Senior Toggle Notes.
The 12.00% Senior Notes mature on April 15, 2017 and bear interest payable semiannually on April 15 and October 15 of each year. The 12.375% Senior Subordinated Notes mature on April 15, 2015 and bear interest payable semiannually on April 15 and October 15 of each year. The 13.375% Senior Subordinated Notes mature on April 15, 2018 and bear interest payable on April 15 and October 15 of each year.
The Senior Notes are guaranteed on an unsecured senior basis, and the Senior Subordinated Notes are guaranteed on an unsecured senior subordinated basis, in each case, by each domestic subsidiary of Realogy’s existing and future U.S. subsidiariesRealogy that is a guarantor under the senior secured credit facility or that guarantees certain other indebtedness in the future, subject to certain exceptions.of Realogy's outstanding securities. The Senior Notes are guaranteed by Holdings on an unsecured senior subordinated basis and the Senior Subordinated Notes are guaranteed by Holdings on an unsecured junior subordinated basis.
On June 24, 2011, Realogy completed offers of exchange notes for Extended Maturity Notes issued in the Debt Exchange Offering. The term “exchange notes” refers to the 11.50% Senior Notes due 2017, the 12.00% Senior Notes due 2017 and the 13.375% Senior Subordinated Notes due 2018, all as registered under the Securities Act, pursuant to a Registration Statement on Form S-4 (File No. 333-173254 declared effective by the SEC on May 20, 2011). Each series of the exchange notes are substantially identical in all material respects to the Extended Maturity Notes of the applicable series issued in the Debt Exchange Offering (except that the new registered exchange notes do not contain terms with respect to additional interest or transfer restrictions). Unless the context otherwise requires, the term “Extended Maturity Notes” refers to the exchange notes.
Convertible Notes
The Series A Convertible Notes, Series B Convertible Notes and Series C Convertible Notes mature on April 15, 2018 and bear interest at a rate per annum of 11.00% payable semiannually on April 15 and October 15 of each year. The Convertible Notes are convertible into Class A Common Stock at any time prior to April 15, 2018. The Series A Convertible Notes and Series B Convertible Notes are initially convertible into 975.609839.0244 shares of Class A Common Stock per $1,000$1,000 aggregate principal amount of Series A Convertible Notes and Series B Convertible Notes, which is equivalent to an initial conversion price of approximately $1.025$25.625 per share, and the Series C Convertible Notes are initially convertible into 926.784137.0714 shares of Class A Common Stock per $1,000$1,000 aggregate principal amount of Series C Convertible Notes, which is equivalent to an initial conversion price of approximately $1.079$26.975 per share, subject to adjustment if specified distributions to holders of the Class A Common Stock are made or specified corporate transactions occur, in each case as set forth in the indenture governing the Convertible Notes. The Convertible Notes are guaranteed on an unsecured senior subordinated basis by each of Realogy’s existing and future U.S. subsidiaries that is a guarantor under the senior secured credit facility or that guarantees certain other indebtedness in the future, subject to certain exceptions. The Convertible Notes are guaranteed on an unsecured junior subordinated basis by Holdings.

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Following a Qualified Public Offering, Realogy may, at its option, redeem the Convertible Notes, in whole or in part, at a redemption price, payable in cash, equal to 90% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest thereon to, but excluding, the redemption date.interest.
On March 21, 2012, the SEC declared effective a Registration Statement on Form S-1 (File No. 333-179896) of Holdings and Realogy, which included the effectiveness of a Post-Effective Amendment to the registration statement initially declared effective on June 16, 2011. The Registration Statement registers for resale the outstanding Convertible Notes and the Class A Common Stock of Holdings issuable upon conversion of the Convertible Notes. Offers and sales of the Convertible Notes and Class A Common Stock may be made by selling securityholders named in the registration statement pursuant to the related prospectus, as amended or supplemented from time to time.

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Loss on the Early Extinguishment of Debt and Write-Off of Deferred Financing Costs
As a result of the 2012 Senior Secured Notes Offering, the Company recorded a loss on the early extinguishment of debt of $6 million during the threesix months ended March 31,June 30, 2012.
As a result of the 2011 Refinancing Transactions, the Company recorded a loss on the early extinguishment of debt of $36 million and wrote off deferred financing costs of $7 million to interest expense as a result of debt modifications during the threesix months ended March 31,June 30, 2011.
Securitization Obligations
Realogy has secured obligations through Apple Ridge Funding LLC, a securitization program with a borrowing capacity of $400$400 million and expiration date of December 2013.
In 2010, Realogy, through a special purpose entity, Cartus Financing Limited, entered into agreements providing for a £35£35 million revolving loan facility which expires in August 2015 and a £5£5 million working capital facility which expires in August 2012. These Cartus Financing Limited facilities are secured by relocation assets of a U.K. government contract in a special purpose entity and are therefore classified as permitted securitization financings as defined in Realogy’s senior secured credit facility and the indentures governing the Unsecured Notes.
The Apple Ridge entities and 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’s relocation business in order to facilitate the relocation of their employees. Assets of these special purpose entities are not available to pay Realogy’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, breach of Realogy’s senior secured leverage ratio under Realogy’s senior secured credit facility if uncured, and cross-defaults to Realogy’s credit agreement, unsecured and secured notes or other 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 $362393 million and $366 million of underlying relocation receivables and other related relocation assets at March 31,June 30, 2012 and December 31, 2011, 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 $14 millionfor the three and six months endedMarch 31,June 30, 2012, respectively and $2 million and $3 million for the three and six months ended June 30, 2011, respectively. This interest is recorded within net revenues in the accompanying 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 3.5% and 1.9% for the threesix months ended March 31,June 30, 2012 and 2011, respectively.

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6.RESTRUCTURING COSTS
2012 Restructuring Program
During the first threesix months of 2012, the Company committed to various initiatives targeted principally at reducing costs, enhancing organizational efficiencies and consolidating existing facilities. The Company currently expects to incur restructuring charges of $810 million in 2012. As of March 31,June 30, 2012, the Company Owned Real Estate Brokerage Services therecognized $2 million of personnel related expense and $1 million of facility related expenses. The Relocation Services and the Title and Settlement Services segments each recognized $1 million of facility related expenses. At March 31,June 30, 2012, the remaining liability is $12 million.

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2011 Restructuring Program
During 2011, the Company committed to various initiatives targeted principally at reducing costs, enhancing organizational efficiencies and consolidating existing facilities.  The Company incurred restructuring charges of $11 million in 2011. The Company Owned Real Estate Brokerage Services segment recognized $5 million of facility related expenses and $4 million of personnel related expenses. The Relocation Services segment recognized $1 million of personnel related expense and the Title and Settlement Services segmentssegment recognized $1 million of facility related expenses. At March 31,June 30, 2012, the remaining liability is $2 million.
Prior Restructuring Programs
The Company committed to restructuring activities targeted principally at reducing personnel related costs and consolidating facilities during 2006 through 2010. At December 31, 2011, the remaining liability for these various restructuring activities was $17 million. During the threesix months endedMarch 31,June 30, 2012, the Company utilized $14 million of the remaining accrual resulting in a remaining liability of $1613 million related to future lease payments.
7.STOCK-BASED COMPENSATION
Incentive Equity Awards Granted by Holdings
In April 2007, Holdings adopted the DomusRealogy Holdings Corp. 2007 Stock Incentive Plan (the “Plan”) under which non-qualified stock options, rights to purchase shares of common stock, restricted stock and other awards settleable in, or based upon, Holdings common stock may be issued to employees, consultants or directors of Realogy. The original stock options granted were either time vesting or performance based awards with an exercise price equal to the grant date fair price of the underlying shares and a contractual term of 10 years. The time vesting options are subject to ratable vesting over the requisite service period. The restricted stock was granted at the grant date fair value and has a three-year requisite service period with one-half “cliff” vesting after 18 months of service and one-half “cliff” vesting at the end
In November 2010, Holdings exchanged almost all of the three-year service period.
During original stock options granted to employees (0.41 million) for new stock options as described below. Each original option held by eligible employees was exchanged on a one-for-one basis for a new option with different terms. The original options had an exercise price of $250.00 per share and were 50% time vested and 50% performance based awards. These awards were exchanged for all time vested new awards. The new options were unvested on the first three monthsdate of2012 grant and vest at a rate of ,25% a year over a four-year period, which began on July 1, 2010 with a 10-year contractual term beginning on the Holdings Board granteddate of grant. The exercise price for 0.1 million30% of timethe new options issued to certain senior executives was $137.50 per share and the exercise price of all other new options issued was $20.75 per share, which represented the fair market value of Common Stock of Holdings as determined by its Compensation Committee as of the date of grant of the new options. The exchange resulted in an incremental stock compensation expense of $4 million that will be recognized over a four-year vesting stock options to an independent director of Realogy.period, which began on July 1, 2010.
The fair value of the time vesting options and Phantom Value Plan (see discussion below) 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.
In November 2010,February 2012, the Holdings exchanged 10.16 million originalBoard granted 4 thousand of time vesting stock options to an independent director of Realogy. In April and May 2012, the Holdings Board granted to employees for new0.97 million of time vesting stock options as described below. Each original option held by eligible employees was exchanged onto senior management employees. The options have a one-for-one basis for a new option with different terms. The original options hadterm of 10 years, an exercise price of $10$17.50 per share and were 50% time vested and 50% performance based awards. These awards were exchanged for all time vested new awards. The new options were unvested on the datea fair market value

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of 25% a year over a four-year period, which began on July 1, 2010 with a 10-year contractual term beginning$20.50 per share on the date of grant. The options become exercisable over a four-year period at the rate of 25% per year, commencing one year from the date of grant. In addition, in April 2012, 0.08 million of performance based stock options were granted under the Phantom Value Plan. The performance based stock options have a term of 7 years, an exercise price for 30% of the new options issued to certain senior executives was $5.50$17.50 per share and the exercise price of all other new options issued was $0.83 per share, which represented thea fair market value of Common Stock of Holdings as determined by its Compensation Committee as of$20.50 per share on the date of grant of the new options. The exchange resulted in an incremental stock compensation expense of $4 million that will be recognized over a four-year vesting period, which began on July 1, 2010.grant.
In February 2012, the Holdings Compensation Committee approved an amendment of the Plan to increase the number of shares reserved under the Amended and Restated Holdings 2007 Stock Incentive Plan by 20 million shares. As of March 31, 2012, there were approximately 42.2 million shares of Class A Common Stock reserved for issuance, including approximately 13.0 million shares reserved for issuance upon exercise of outstanding options and approximately 29.2 million shares available for future grant.
On April 30, 2012, the Holdings Compensation Committee approved a further amendment to the plan to increase the number of shares reserved thereunder by 251 million to 67.22.69 million reserved shares. As of June 30, 2012, the total number of shares and approved theavailable for future grant of 24.1was approximately 1.12 million non-qualified options to key employees of the Company. shares.

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20122012
Time Vesting OptionsTime Vesting Options Phantom Plan Options
Weighted average grant date fair value$0.36
$10.25
 $9.75
Expected volatility52.7%46.84% 50.28%
Expected term (years)6.25
6.25
 4.75
Risk-free interest rate1.1%1.1% 0.79%
Dividend yield

 
Equity Award Activity
A summary of2012 option and restricted share activity is presented below (number of shares in millions):
 
Time Vesting
Options
 Performance Based Options 
Restricted
Stock
Outstanding at January 1, 201213.34
 4.55
 0.11
Granted0.13
 
 
Exercised
 
 
Vested
 
 
Forfeited(2.55) (2.50) 
Outstanding at March 31, 201210.92
 2.05
 0.11
 Options Vested Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value
Exercisable at March 31, 20122.74 1.04 7.95 years 
 
Time Vesting
Options
 Performance Based Options 
Restricted
Stock
Outstanding at January 1, 20120.53
 0.18
 *
Granted0.98
 0.08
 
Exercised
 
 
Vested
 
 
Forfeited(0.10) (0.10) 
Outstanding as of June 30, 20121.41
 0.16
 *

* The outstanding amount is 4 thousand shares of restricted stock.    
 Options Vested Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value
Exercisable at June 30, 20120.11 48.25 8.32 years 
As of March 31,June 30, 2012, there was approximately $311 million of unrecognized compensation cost related to the time vesting options and restricted stock under the Plan and $12 million of unrecognized compensation cost related to performance based options issued under the Phantom Value Plan described below. Unrecognized cost for the time vesting options and restricted stock will be recorded in future periods as compensation expense as the awards vest over the next 4 yearsyear period from the date of grant with a remaining weighted average period of approximately 1.42.9 years. The Company recorded stock-based compensation expense related to the incentive equity awards granted by Holdings of $1 million and $2 million for the three and six months ended March 31,June 30, 2012, respectively, and $1 million and $3 million related to the incentive equity awards for the three and six months endedJune 30, 2011, respectively..
Phantom Value Plan
On January 5, 2011, the Board of Directors of Holdings approved the Realogy Corporation Phantom Value Plan (the “Phantom Value Plan”), which is intended to provide certain of Realogy’s executive officers with an incentive (the “Incentive Awards”) 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$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 $18.5 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 $3.3 million). Incentive Awards are immediately cancelable

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and forfeitable in the event of the termination of a participant’s employment for any reason. The Incentive Awards also terminate 10 years followingfrom 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 with respect to an Incentive Award relating to the Convertible Notes that RCIV Holdings (“RCIV”), an affiliate of Apollo, purchased ($($1.3 billion aggregate principal amount) for which RCIV receives cash upon the discharge or third-party sale of not less than $267$267 million of the aggregate principal amount of the Convertible Notes (the “Plan Notes”). Any cash 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 Convertible Notes.Plan Notes (or the shares underlying the Plan Notes).

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Stock Option Awards under the Phantom Value Plan
On each date RCIV receives cash interest on the Plan Notes, certain executive officers of Realogy may be granted stock options under the Holdings 2007 Stock Incentive Plan. The aggregate value of stock options granted (determined by the Holdings Board or its Compensation Committee in its sole discretion) is equal to an amount which bears the same ratio to the aggregate dollar amount of the participant’s Incentive Award as the aggregate amount of cash interest received by RCIV on such date bears to the aggregate principal amount of the Plan Notes held by RCIV on the date of grant of the Incentive Award. Generally, each grant of stock options will havevests over a three year vesting schedule,period subject to the participant’s continued employment, andhowever, the vested stock options willdoes not become exercisable until one year following a qualified public offering. As such, compensation expense will begin to be recorded after a public offering becomes probable of occurring. The stock options have a term of 7.5 years. In April 2012, Holdings issued 20.08 million stock options under the Phantom Value Plan in conjunction with RCIV receiving cash interest on the Plan Notes.
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 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 deficiency or excess will be reflected in the results of operations in future periods.
The due to former parent balance was $76 million and $80 million at March 31,June 30, 2012 and December 31, 2011, respectively. At March 31,June 30, 2012, 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 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

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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 $21 million and $13 million, for the three and six months ended March 31,June 30, 2012, respectively and $2 million and $3 millionfor the three and six months endedJune 30, 2011, respectively. In addition, the Company recorded equity earnings of $1015 million and less than $1$25 million for the three and six months ended March 31,June 30, 2012, respectively and $3 million and $3 millionfor the three and six months endedJune 30, 2011, respectively. The Company received cash dividends from PHH Home Loans of $14 million and $512 million during the threesix months ended March 31,June 30, 2012 and 2011, respectively.

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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 and six months endedMarch 31,June 30, 2012 and 2011, the Company has recognized revenue related to these transactions of less than $1 million in each period.of the periods.
9.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;
by former franchisees that franchise agreements were improperly terminated;breached including improper terminations;
that residential real estate agents engaged by NRT – NRT—in certain states – states—are potentially common law employees instead of independent contractors, and therefore may bring claims against NRT for breach of contract, wrongful discharge and negligent supervision and obtain benefits available to employees under various state statutes;
concerning claims for alleged RESPA or state law violations including but not limited to claims relating to administrative fees or commissions that include both a fixed fee and percentage payment as well aschallenging 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; andfraudulent.
concerning adverse impacts to franchisees related to purported changes made to the Century 21® system and its marketing fund, which is referred to elsewhere in this report as the “Cooper Litigation”.
Real Estate Business Litigation
Frank K. Cooper Real Estate #1, Inc. v. Cendant Corp. and Century 21 Real Estate Corporation (N.J. Super. Ct. L. Div., Morris County, New Jersey). In 2002, Frank K. Cooper Real Estate #1, Inc. filed a putative class action against Cendant and Cendant’s subsidiary, Century 21 Real Estate Corporation (“Century 21”).21. The complaint alleged breach of certain provisions of the Real Estate Franchise Agreement entered into between Century 21 and the plaintiffs, breach of the implied duty of good faith and fair dealing, violation of the New Jersey Consumer Fraud Act and breach of certain express and implied fiduciary duties. The complaint alleged, among other things, that Cendant diverted money and resources from Century 21 franchisees and allotted them to NRT owned brokerages and otherwise improperly charged expenses to marketing funds. The complaint sought unspecified compensatory and punitive damages, injunctive relief, interest, attorney’s fees and costs. On August 17, 2010, the court certified a class consisting of Century 21 franchisees at any time between August 1, 1995 and April 17, 2002 whose franchise agreements contain New Jersey choice of law and venue provisions and who have not executed releases releasing the claim (unless the release was a provision of a franchise renewal agreement).
AsOn February 16, 2012, as a matter of January 24,litigation avoidance, we executed a Stipulation of Settlement and on June 4, 2012, Realogy entered into a memorandum of understanding memorializing the principal terms of a proposed settlement of this action.  The structureCourt granted final approval of the proposedsettlement. The settlement involves both monetary and non-monetary consideration as well as contributions from insurance carriers. During the second quarter of 2012, the monetary consideration of the settlement was funded by the Company and the insurance carriers into an escrow account established to fund claims made by class participants. The non-monetary consideration includes, but is not limited to, waivers and modifications of certain fees and payments of incentive fees. On February 16, 2012, the parties executed a Stipulation of Settlement finalizing the terms of the settlement reflected in the memorandum of understanding.  The Stipulation of Settlement and related settlement documents were submitted to the Court on February 17th by the plaintiffs to obtain preliminary approval.  The court granted preliminary approval on February 22nd.  Notice of the settlement was made to the class.  A fairness hearing will be held on June 4, 2012 when the court will determine whether to grant final approval of the settlement.  RealogyCompany accrued the amount that would be payable beyond carrier contributions in ourits financial results for the year ended December 31, 2011. The full amount of this settlement was subsequently accrued

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during the quarter ended June 30, 2012 as the amounts were funded by the insurance carriers and final court approval during that quarter.
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.al).  The case, pending in the United States District Court for the Central District of California, arises from the relationship of two of ourthe Company's subsidiaries with a former Coldwell Banker Commercial franchisee, whose 40.5% shareholder allegedly utilized the Coldwell Banker Commercial name in the offer and sale of securities.  In an SEC civil proceeding asserting violations of various securities laws, by stipulated judgment dated September 2, 2009, the shareholder of the franchisee, Real Estate Partners, Inc. ("REP"), and REP's affiliated entitiesthat were ordered to disgorge approximately $53 million in funds raised from investors.  REP filed for Chapter 11 bankruptcy protection in 2007.  The complaint, initially filed in April 2010 and subsequently amended twice, most recently in March 2011, alleges, among other things, that our subsidiaries Coldwell Banker Real Estate Corporation and Coldwell Banker Real Estate LLC, engaged in negligence, aiding and abetting fraud, negligent misrepresentation, and false advertising, and are vicariously liable for fraud and negligent misrepresentation, as they knew or should have known that REP was using the marks in connection with the promotion of securities but that the Coldwell Banker subsidiaries failed to take sufficient steps to stop that use. The Company disputes the allegations and has asserted numerous defenses - including lack of knowledge and participation in the fraud. The second amended complaint is a class action brought on behalf of REP investors. On September 8, 2011, the court granted and denied in part the Coldwell Banker subsidiaries' motion to dismiss on the second amended complaint. On August 22, 2011, plaintiffs filed their motion to certify a class.improperly sold. On March 26, 2012, the Court granted plaintiffs motion to certify a class as to all claims except for false advertising. On April 11, 2012, the Coldwell Banker subsidiaries filed a motion seeking permission to file an interlocutory appeal of the class certification order. Motions for summary judgment also were filed. On April 13, 2012, the court entered into an order stipulated by the parties to stay the case for 60 days while the parties pursue mediation. Trial is currently scheduled for November 2012. Our primary insurance carrier has disclaimed coverage of either liability or defense costs, whichcosts. Two mediation sessions were held and at the end of the mediation session held on June 5, 2012, as a matter of litigation avoidance, we are vigorously challenging.
This case involvesentered into a complex seriesmemorandum of securities offerings and raises certain unusual claims that makeunderstanding memorializing the principal terms of a settlement of this action. On July 19, 2012, we entered into a definitive settlement agreement. Substantially all of the settlement will be funded directly by the Company with only a modest contribution by its resolutioninsurance carrier. The settlement is subject to significant uncertainties. Although the parties will attempt a mediationcourt approval and other conditions and there can be no assurance that the mediationcourt will be successful particularly givengrant such approval. The Company accrued for the substantial size of the claims and the absence of carrier participation.settlement in June 2012.
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 and believes that it has adequately accrued for legal matters as appropriate.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 $20$10 million at March 31,June 30, 2012.
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. Lastly, there may be greater risk of unfavorable resolutions in the current economic environment due to various factors including the absence of other defendants (due to business failures) that may be the real cause of the liability and greater negative sentiment toward corporate defendants.  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 ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain.

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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 outcome 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

27


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 $70 million at March 31,June 30, 2012 and December 31, 2011. 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.$30 million.
Apollo Management Fee Agreement
In connection with the Merger, Apollo entered into a management fee agreement with the Company which allows Apollo Management VI, L.P. and its affiliates to provide certain management consulting services to the Company through the end of 2016 (subject to possible extension). The Company pays Apollo Management VI, L.P. an annual management fee for this service up to the sum of the greater of $15$15 million or 2.0% of the Company’s annual Adjusted EBITDA for the immediately preceding year, plus out-of-pocket costs and expenses in connection therewith. At March 31,June 30, 2012, the Company had $3438 million accrued for the payment of Apollo Management VI, L.P. management fees.fees, $15 million of which were paid in July 2012.
In addition, in the absence of an express agreement to the contrary, at the closing of any merger, acquisition, financing and similar transaction with a related transaction or enterprise value equal to or greater than $200$200 million, Apollo Management VI, L.P. will receive a fee equal to 1% of the aggregate transaction or enterprise value paid to or provided by such entity or its stockholders (including the aggregate value of (x) equity securities, warrants, rights and options acquired or retained, (y) indebtedness acquired, assumed or refinanced and (z) any other consideration or compensation paid in connection with such transaction). Apollo waived any fees payable to it pursuant to the management fee agreement in connection with the 2011 Refinancing Transactions and 2012 Senior Secured Notes Offering. The Company has agreed to indemnify Apollo Management VI, L.P. and its affiliates and their directors, officers and representatives for potential losses relating to the services to be provided under the management fee agreement.
Escrow and Trust Deposits
As a service to the Company’s customers, it administers escrow and trust deposits which represent undisbursed amounts received for settlements 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.$250 thousand. In addition, the Dodd-Frank Act temporarily provides unlimited coverage for non-interest-bearing transaction accounts from December 31, 2010 through December 31, 2012. These escrow and trust deposits totaled approximately $380481 million and $272 million at March 31,June 30, 2012 and December 31, 2011, 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.

2928


10.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)Revenues (a) (b)
Three Months Ended March 31,Three Months Ended
June 30,
 
Six Months Ended
June 30,
2012 20112012 2011 2012 2011
Real Estate Franchise Services$129
 $118
$170
 $160
 $299
 $278
Company Owned Real Estate Brokerage Services617
 587
994
 884
 1,611
 1,471
Relocation Services88
 87
109
 110
 197
 197
Title and Settlement Services88
 83
106
 90
 194
 173
Corporate and Other (c)
(47) (44)(70) (65) (117) (109)
Total Company$875
 $831
$1,309
 $1,179
 $2,184
 $2,010
_______________
 
 
(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 $4770 million and $44117 million for the three and six months ended March 31,June 30, 2012, respectively, and $65 million and March 31,$109 millionfor the three and six months endedJune 30, 2011, 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 $711 million and $718 million for the three and six months ended March 31,June 30, 2012, respectively, and $11 million and March 31,$18 millionfor the three and six months endedJune 30, 2011, 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) (b)
 Three Months Ended
June 30,
 
Six Months Ended
 June 30,
 2012 2011 2012 2011
Real Estate Franchise Services$99
 $97
 $160
 $159
Company Owned Real Estate Brokerage Services78
 48
 61
 11
Relocation Services30
 32
 34
 42
Title and Settlement Services14
 12
 16
 14
Corporate and Other(18) (2) (38) (50)
Total Company$203
 $187
 $233

$176
Less:       
Depreciation and amortization44
 47
 89
 93
Interest expense, net176
 161
 346
 340
Income tax expense8
 1
 15
 2
Net loss attributable to Holdings and Realogy$(25) $(22) $(217) $(259)
 EBITDA (a)
 Three Months Ended March 31,
 2012 2011
Real Estate Franchise Services$61
 $62
Company Owned Real Estate Brokerage Services(17) (37)
Relocation Services4
 10
Title and Settlement Services2
 2
Corporate and Other(20) (48)
Total Company$30
 $(11)
Less:   
Depreciation and amortization45
 46
Interest expense, net170
 179
Income tax expense7
 1
Net loss attributable to Holdings and Realogy$(192) $(237)
_______________
(a)
Includes $2 million of restructuring costs for the three months endedJune 30, 2012, compared to $3 million of restructuring costs, offset by a net benefit of $12 million of former parent legacy items for the three months endedJune 30, 2011.
(b)
Includes $5 million of restructuring costs and a $6 million loss on the early extinguishment of debt, partially offset by a net benefit of $3 million of former parent legacy benefitsitems for the threesix months ended March 31,June 30, 2012, compared to $25 million of restructuring costs and a $36 million loss on the early extinguishment of debt, partially offset by a net benefit of $214 million of former parent legacy benefitsitems for the threesix months ended March 31,June 30, 2011.

3029


11.

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) DomusRealogy Holdings Corp. (“Holdings”); (ii) its direct wholly owned subsidiary Domus Intermediate Holdings Corp. (“Intermediate”); (iii) its indirect wholly owned subsidiary, Realogy Corporation (“Realogy”); (iv) the guarantor subsidiaries of Realogy; (v) the non-guarantor subsidiaries of Realogy; (vi) elimination entries necessary to consolidate Holdings, Intermediate, Realogy and the guarantor and non-guarantor subsidiaries; and (vii) the Company on a consolidated basis. The guarantor subsidiaries of Realogy are comprised of 100% owned entities. Guarantor and non-guarantor subsidiaries are 100% owned by Realogy, either directly or indirectly. All guarantees are full and unconditional and joint and several.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.
Condensed Consolidating Statement of Operations and Comprehensive Loss
Three Months Ended March 31,June 30, 2012
(in millions)
Holdings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations ConsolidatedHoldings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations Consolidated
Revenues                          
Gross commission income$
 $
 $
 $606
 $
 $
 $606
$
 $
 $
 $983
 $
 $
 $983
Service revenue
 
 
 110
 62
 
 172

 
 
 143
 65
 
 208
Franchise fees
 
 
 54
 
 
 54

 
 
 76
 
 
 76
Other
 
 
 42
 1
 
 43

 
 
 40
 2
 
 42
Net revenues
 
 
 812
 63
 
 875

 
 
 1,242
 67
 
 1,309
Expenses                          
Commission and other agent-related costs
 
 
 402
 
 
 402

 
 
 662
 
 
 662
Operating
 
 
 269
 49
 
 318

 
 
 280
 45
 
 325
Marketing
 
 
 51
 
 
 51

 
 
 51
 1
 
 52
General and administrative
 
 17
 57
 3
   77

 
 18
 57
 4
 

 79
Former parent legacy costs (benefit), net
 
 (3) 
 
 
 (3)
Restructuring costs
 
 
 3
 
 
 3

 
 
 2
 
 
 2
Depreciation and amortization
 
 2
 43
 
 
 45

 
 3
 41
 
 
 44
Interest expense, net
 
 168
 2
 
 
 170

 
 175
 1
 
 
 176
Loss on the early extinguishment of debt
 
 6
 
 
 
 6
Other income/expense, net
 
 
 1
 
 
 1
Intercompany transactions
 
 1
 (1) 
 
 

 
 1
 (1) 
 
 
Total expenses
 
 191
 827
 52
 
 1,070

 
 197
 1,093
 50
 
 1,340
Income (loss) before income taxes, equity in earnings and noncontrolling interests
 
 (191) (15) 11
 
 (195)
 
 (197) 149
 17
 
 (31)
Income tax expense (benefit)
 
 5
 (6) 8
 
 7

 
 (66) 64
 10
 
 8
Equity in (earnings) losses of unconsolidated entities
 
 
 
 (10) 
 (10)
Equity in earnings of unconsolidated entities
 
 
 
 (15) 
 (15)
Equity in (earnings) losses of subsidiaries192
 192
 (4) (13) 
 (367) 
25
 25
 (106) (21) 
 77
 
Net income (loss)(192) (192) (192) 4
 13
 367
 (192)(25) (25) (25) 106
 22
 (77) (24)
Less: Net income attributable to noncontrolling interests
 
 
 
 
 
 

 
 
 
 (1) 
 (1)
Net income (loss) attributable to Holdings and Realogy$(192) $(192) $(192) $4
 $13
 $367
 $(192)$(25) $(25) $(25) $106
 $21
 $(77) $(25)
Comprehensive income (loss) attributable to Holdings and Realogy$(190) $(190) $(190) $4
 $14
 $362
 $(190)$(24) $(24) $(24) $106
 $20
 $(78) $(24)

3130


Condensed Consolidating Statement of Operations and Comprehensive Loss
Three Months Ended March 31,June 30, 2011
(in millions)
Holdings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations ConsolidatedHoldings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations Consolidated
Revenues                          
Gross commission income$
 $
 $
 $575
 $
 $
 $575
$
 $
 $
 $873
 $
 $
 $873
Service revenue
 
 
 105
 59
 
 164

 
 
 130
 62
 
 192
Franchise fees
 
 
 51
 
 
 51

 
 
 70
 
 
 70
Other
 
 
 39
 2
 
 41

 
 
 42
 2
 
 44
Net revenues
 
 
 770
 61
 
 831

 
 
 1,115
 64
 
 1,179
Expenses                          
Commission and other agent-related costs
 
 
 374
 
 
 374

 
 
 577
 
 
 577
Operating
 
 
 274
 44
 
 318

 
 
 273
 44
 
 317
Marketing
 
 
 43
 ���
 
 43

 
 
 53
 1
 
 54
General and administrative
 
 14
 53
 4
   71

 
 13
 39
 4
 
 56
Former parent legacy costs (benefit), net
 
 (2) 
 
 
 (2)
 
 (12) 
 
 
 (12)
Restructuring costs
 
 
 2
 
 
 2

 
 
 3
 
 
 3
Depreciation and amortization
 
 2
 44
 
 
 46

 
 3
 44
 
 
 47
Interest expense, net
 
 177
 2
 
 
 179

 
 160
 1
 
 
 161
Loss on the early extinguishment of debt
 
 36
 
 
 
 36
Intercompany transactions
 
 1
 (1) 
 
 

 
 1
 (1) 
 
 
Total expenses
 
 228
 791
 48
 
 1,067

 
 165
 989
 49
 
 1,203
Income (loss) before income taxes, equity in earnings and noncontrolling interests
 
 (228) (21) 13
 
 (236)
 
 (165) 126
 15
 
 (24)
Income tax expense (benefit)
 
 4
 (7) 4
 
 1

 
 (50) 46
 5
 
 1
Equity in earnings of unconsolidated entities
 
 
 
 (4) 
 (4)
Equity in (earnings) losses of subsidiaries237
 237
 5
 (9) 
 (470) 
22
 22
 (93) (13) 
 62
 
Net income (loss)(237) (237) (237) (5) 9
 470
 (237)(22) (22) (22) 93
 14
 (62) (21)
Less: Net income attributable to noncontrolling interests
 
 
 
 
 
 

 
 
 
 (1) 
 (1)
Net income (loss) attributable to Holdings and Realogy$(237) $(237) $(237) $(5) $9
 $470
 $(237)$(22) $(22) $(22) $93
 $13
 $(62) $(22)
Comprehensive income (loss) attributable to Holdings and Realogy$(226) $(226) $(226) $(5) $10
 $447
 $(226)$(22) $(22) $(22) $93
 $13
 $(62) $(22)


31


Condensed Consolidating Statement of Operations and Comprehensive Loss
Six Months Ended June 30,2012
(in millions)
 Holdings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations Consolidated
Revenues             
Gross commission income$
 $
 $
 $1,589
 $
 $
 $1,589
Service revenue
 
 
 252
 128
 
 380
Franchise fees
 
 
 130
 
 
 130
Other
 
 
 83
 2
 
 85
Net revenues
 
 
 2,054
 130
 
 2,184
Expenses             
Commission and other agent-related costs
 
 
 1,064
 
 
 1,064
Operating
 
 
 549
 94
 
 643
Marketing
 
 
 102
 1
 
 103
General and administrative
 
 35
 114
 7
 

 156
Former parent legacy costs (benefit), net
 
 (3) 
 
 
 (3)
Restructuring costs
 
 
 5
 
 
 5
Depreciation and amortization
 
 5
 83
 1
 
 89
Interest expense, net
 
 343
 3
 
 
 346
Loss on the early extinguishment of debt
 
 6
 
 
 
 6
Other (income)/expense, net
 
 
 1
 
 
 1
Intercompany transactions
 
 2
 (2) 
 
 
Total expenses
 
 388
 1,919
 103
 
 2,410
Income (loss) before income taxes, equity in earnings and noncontrolling interests
 
 (388) 135
 27
 
 (226)
Income tax expense (benefit)
 
 (60) 58
 17
 
 15
Equity in earnings of unconsolidated entities
 
 
 
 (25) 
 (25)
Equity in (earnings) losses of subsidiaries217
 217
 (111) (34) 
 (289) 
Net income (loss)(217) (217) (217)
111
 35
 289
 (216)
Less: Net income attributable to noncontrolling interests
 
 
 
 (1) 
 (1)
Net income (loss) attributable to Holdings and Realogy$(217) $(217) $(217) $111
 $34
 $289
 $(217)
Comprehensive income (loss) attributable to Holdings and Realogy$(214) $(214) $(214) $111
 $35
 $282
 $(214)


32


Condensed Consolidating Statement of Operations and Comprehensive Loss
Six Months Ended June 30,2011
(in millions)
 Holdings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations Consolidated
Revenues             
Gross commission income$
 $
 $
 $1,448
 $
 $
 $1,448
Service revenue
 
 
 235
 121
 
 356
Franchise fees
 
 
 121
 
 
 121
Other
 
 
 82
 3
 
 85
Net revenues
 
 
 1,886
 124
 
 2,010
Expenses             
Commission and other agent-related costs
 
 
 951
 
 
 951
Operating
 
 
 547
 88
 
 635
Marketing
 
 
 96
 1
 
 97
General and administrative
 
 28
 92
 7
 
 127
Former parent legacy costs (benefit), net
 
 (14) 
 
 
 (14)
Restructuring costs
 
 
 5
 
 
 5
Depreciation and amortization
 
 4
 88
 1
 
 93
Interest expense, net
 
 337
 3
 
 
 340
Loss on the early extinguishment of debt
 
 36
 
 
 
 36
Intercompany transactions
 
 2
 (2) 
 
 
Total expenses
 
 393
 1,780
 97
 
 2,270
Income (loss) before income taxes, equity in earnings and noncontrolling interests
 
 (393) 106
 27
 
 (260)
Income tax expense (benefit)
 
 (45) 39
 8
 
 2
Equity in earnings of unconsolidated entities
 
 
 
 (4) 
 (4)
Equity in (earnings) losses of subsidiaries259
 259
 (89) (22) 
 (407) 
Net income (loss)(259) (259) (259) 89
 23
 407
 (258)
Less: Net income attributable to noncontrolling interests
 
 
 
 (1) 
 (1)
Net income (loss) attributable to Holdings and Realogy$(259) $(259) $(259) $89
 $22
 $407
 $(259)
Comprehensive income (loss) attributable to Holdings and Realogy$(248) $(248) $(248) $89
 $23
 $384
 $(248)


33


Condensed Consolidating Balance Sheet
March 31,June 30, 2012
(in millions)
Holdings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations ConsolidatedHoldings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations Consolidated
ASSETS                          
Current assets:                          
Cash and cash equivalents$
 $
 $38
 $63
 $48
 $(1) $148
$
 $
 $2
 $86
 $56
 $(6) $138
Trade receivables, net
 
 
 80
 42
 
 122

 
 
 103
 44
 
 147
Relocation receivables
 
 
 31
 354
 
 385

 
 
 34
 385
 
 419
Relocation properties held for sale
 
 
 7
 
 
 7

 
 
 10
 
 
 10
Deferred income taxes
 
 11
 53
 (2) 
 62

 
 8
 53
 (2) 
 59
Intercompany note receivable
 
 
 31
 20
 (51) 

 
 
 91
 20
 (111) 
Other current assets
 
 9
 70
 22
 
 101
1
 
 9
 67
 20
 
 97
Total current assets
 
 58
 335
 484
 (52) 825
1
 
 19
 444
 523
 (117) 870
Property and equipment, net
 
 16
 137
 2
 
 155

 
 16
 133
 2
 
 151
Goodwill
 
 
 2,617
 
 
 2,617

 
 
 3,303
 
 
 3,303
Trademarks
 
 
 732
 
 
 732

 
 
 732
 
 
 732
Franchise agreements, net
 
 
 2,825
 
 
 2,825

 
 
 1,663
 
 
 1,663
Other intangibles, net
 
 
 428
 
 
 428

 
 
 418
 
 
 418
Other non-current assets
 
 74
 86
 55
 
 215

 
 71
 84
 70
 
 225
Investment in subsidiaries(1,698) (1,698) 8,213
 187
 
 (5,004) 
(1,712) (1,712) 8,328
 206
 
 (5,110) 
Total assets$(1,698) $(1,698) $8,361
 $7,347
 $541
 $(5,056) $7,797
$(1,711) $(1,712) $8,434
 $6,983
 $595
 $(5,227) $7,362
LIABILITIES AND EQUITY (DEFICIT)LIABILITIES AND EQUITY (DEFICIT)            LIABILITIES AND EQUITY (DEFICIT)            
Current liabilities:                          
Accounts payable$
 $
 $24
 $145
 $12
 $(1) $180
$
 $
 $27
 $182
 $11
 $(6) $214
Securitization obligations
 
 
 
 302
 
 302

 
 
 
 267
 
 267
Intercompany note payable
 
 
 20
 31
 (51) 

 
 
 20
 91
 (111) 
Due to former parent
 
 76
 
 
 
 76

 
 76
 
 
 
 76
Revolving credit facilities and current portion of long-term debt
 
 61
 50
 
 
 111

 
 159
 50
 5
 
 214
Accrued expenses and other current liabilities
 
 310
 291
 40
 
 641

 
 234
 314
 35
 
 583
Intercompany payables
 
 2,249
 (2,193) (56) 
 
1
 
 2,304
 (2,261) (44) 
 
Total current liabilities
 
 2,720
 (1,687) 329
 (52) 1,310
1
 
 2,800
 (1,695) 365
 (117) 1,354
Long-term debt
 
 7,121
 
 
 
 7,121

 
 7,121
 
 
 
 7,121
Deferred income taxes
 
 (601) 1,493
 
 
 892

 
 (600) 1,027
 (1) 
 426
Other non-current liabilities
 
 91
 56
 25
 
 172

 
 96
 52
 25
 
 173
Intercompany liabilities
 
 728
 (728) 
 
 

 
 729
 (729) 
 
 
Total liabilities
 
 10,059
 (866) 354
 (52) 9,495
1
 
 10,146
 (1,345) 389
 (117) 9,074
Total equity (deficit)(1,698) (1,698) (1,698) 8,213
 187
 (5,004) (1,698)(1,712) (1,712) (1,712) 8,328
 206
 (5,110) (1,712)
Total liabilities and equity (deficit)$(1,698) $(1,698) $8,361
 $7,347
 $541
 $(5,056) $7,797
$(1,711) $(1,712) $8,434
 $6,983
 $595
 $(5,227) $7,362


3334


Condensed Consolidating Balance Sheet
December 31, 2011
(in millions)
 Holdings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations Consolidated
ASSETS             
Current assets:             
Cash and cash equivalents$
 $
 $2
 $80
 $67
 $(6) $143
Trade receivables, net
 
 
 75
 45
 
 120
Relocation receivables
 
 
 14
 364
 
 378
Relocation properties held for sale
 
 
 11
 
 
 11
Deferred income taxes
 
 14
 53
 (1) 
 66
Intercompany note receivable
 
 
 6
 19
 (25) 
Other current assets
 
 8
 64
 16
 
 88
Total current assets
 
 24
 303
 510
 (31) 806
Property and equipment, net
 
 17
 145
 3
 
 165
Goodwill
 
 
 2,614
 
 
 2,614
Trademarks
 
 
 732
 
 
 732
Franchise agreements, net
 
 
 2,842
 
 
 2,842
Other intangibles, net
 
 
 439
 
 
 439
Other non-current assets
 
 68
 85
 59
 
 212
Investment in subsidiaries(1,508) (1,508) 8,207
 181
 
 (5,372) 
Total assets$(1,508) $(1,508) $8,316
 $7,341
 $572
 $(5,403) $7,810
LIABILITIES AND EQUITY (DEFICIT)            
Current liabilities:             
Accounts payable$
 $
 $22
 $158
 $10
 $(6) $184
Securitization obligations
 
 
 
 327
 
 327
Intercompany note payable
 
 
 19
 6
 (25) 
Due to former parent
 
 80
 
 
 
 80
Revolving credit facilities and current portion of long-term debt
 
 267
 50
 8
 
 325
Accrued expenses and other current liabilities
 
 202
 282
 36
 
 520
Intercompany payables
 
 2,222
 (2,203) (19) 
 
Total current liabilities
 
 2,793
 (1,694) 368
 (31) 1,436
Long-term debt
 
 6,825
 
 
 
 6,825
Deferred income taxes
 
 (604) 1,494
 
 
 890
Other non-current liabilities
 
 83
 61
 23
 
 167
Intercompany liabilities
 
 727
 (727) 
 
 
Total liabilities
 
 9,824
 (866) 391
 (31) 9,318
Total equity (deficit)(1,508) (1,508) (1,508) 8,207
 181
 (5,372) (1,508)
Total liabilities and equity (deficit)$(1,508) $(1,508) $8,316
 $7,341
 $572
 $(5,403) $7,810


34


Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31,2012
(in millions)

 Holdings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations Consolidated
Net cash provided by (used in) operating activities$
 $
 $(85) $11
 $43
 $(1) $(32)
Investing Activities             
Property and equipment additions
 
 (1) (8) 
 
 (9)
Net assets acquired (net of cash acquired) and acquisition-related payments
 
 
 (4) 
 
 (4)
Purchases of certificates of deposit, net
 
 
 (3) 
 
 (3)
Change in restricted cash
 
 
 
 (4) 
 (4)
Intercompany note receivable
 
 
 (25) 
 25
 
Other, net
 
 
 
 
 
 
Net cash provided by (used in) investing activities
 
 (1) (40) (4) 25
 (20)
Financing Activities             
Net change in revolving credit facilities
 
 (200) 
 (8) 
 (208)
Repayments of term loan credit facility
 
 (629) 
 
 
 (629)
Proceeds from issuance of First Lien Notes
 
 593
 
 
 
 593
Proceeds from the issuance of First and a Half Lien Notes
 
 325
 
 
 
 325
Net change in securitization obligations
 
 
 
 (27) 
 (27)
Debt issuance costs
 
 (1) 
 (1) 
 (2)
Intercompany dividend
 
 
 
 (6) 6
 
Intercompany note payable
 
 
 
 25
 (25) 
Intercompany transactions
 
 28
 14
 (42) 
 
Other, net
 
 6
 (2) 
 
 4
Net cash provided by (used in) financing activities
 
 122
 12
 (59) (19) 56
Effect of changes in exchange rates on cash and cash equivalents
 
 
 
 1
 
 1
Net increase (decrease) in cash and cash equivalents
 
 36
 (17) (19) 5
 5
Cash and cash equivalents, beginning of period
 
 2
 80
 67
 (6) 143
Cash and cash equivalents, end of period$
 $
 $38
 $63
 $48
 $(1) $148
 Holdings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations Consolidated
ASSETS             
Current assets:             
Cash and cash equivalents$
 $
 $2
 $80
 $67
 $(6) $143
Trade receivables, net
 
 
 75
 45
 
 120
Relocation receivables
 
 
 14
 364
 
 378
Relocation properties held for sale
 
 
 11
 
 
 11
Deferred income taxes
 
 14
 53
 (1) 
 66
Intercompany note receivable
 
 
 6
 19
 (25) 
Other current assets
 
 8
 64
 16
 
 88
Total current assets
 
 24
 303
 510
 (31) 806
Property and equipment, net
 
 17
 145
 3
 
 165
Goodwill
 
 
 3,299
 
 
 3,299
Trademarks
 
 
 732
 
 
 732
Franchise agreements, net
 
 
 1,697
 
 
 1,697
Other intangibles, net
 
 
 439
 
 
 439
Other non-current assets
 
 68
 85
 59
 
 212
Investment in subsidiaries(1,499) (1,499) 8,216
 181
 
 (5,399) 
Total assets$(1,499) $(1,499) $8,325
 $6,881
 $572
 $(5,430) $7,350
LIABILITIES AND EQUITY (DEFICIT)            
Current liabilities:             
Accounts payable$
 $
 $22
 $158
 $10
 $(6) $184
Securitization obligations
 
 
 
 327
 
 327
Intercompany note payable
 
 
 19
 6
 (25) 
Due to former parent
 
 80
 
 
 
 80
Revolving credit facilities and current portion of long-term debt
 
 267
 50
 8
 
 325
Accrued expenses and other current liabilities
 
 202
 282
 36
 
 520
Intercompany payables
 
 2,222
 (2,203) (19) 
 
Total current liabilities
 
 2,793
 (1,694) 368
 (31) 1,436
Long-term debt
 
 6,825
 
 
 
 6,825
Deferred income taxes
 
 (604) 1,025
 
 
 421
Other non-current liabilities
 
 83
 61
 23
 
 167
Intercompany liabilities
 
 727
 (727) 
 
 
Total liabilities
 
 9,824
 (1,335) 391
 (31) 8,849
Total equity (deficit)(1,499) (1,499) (1,499) 8,216
 181
 (5,399) (1,499)
Total liabilities and equity (deficit)$(1,499) $(1,499) $8,325
 $6,881
 $572
 $(5,430) $7,350


35


Condensed Consolidating Statement of Cash Flows
ThreeSix Months Ended March 31,June 30, 2011
2012
(in millions)

Holdings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations ConsolidatedHoldings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations Consolidated
Net cash provided by (used in) operating activities$
 $
 $(79) $(25) $19
 $(2) $(87)$
 $
 $(342) $236
 $22
 $(9) $(93)
Investing Activities                          
Property and equipment additions
 
 (1) (10) 
 
 (11)
 
 (2) (17) 
 
 (19)
Net assets acquired (net of cash acquired) and acquisition-related payments
 
 
 (2) 
 
 (2)
 
 
 (4) 
 
 (4)
Purchases of certificates of deposit, net
 
 
 
 (5) 
 (5)
 
 
 (4) 
 
 (4)
Change in restricted cash
 
 
 
 (3) 
 (3)
Intercompany note receivable
 
 
 (16) 
 16
 

 
 
 (85) 
 85
 
Other, net
 
 
 (1) 
 
 (1)
 
 
 
 
 
 
Net cash provided by (used in) investing activities
 
 (1) (29) (5) 16
 (19)
 
 (2) (110) (3) 85
 (30)
Financing Activities                          
Net change in revolving credit facilities
 
 (20) (5) (8) 
 (33)
 
 (91) 
 (3) 
 (94)
Proceeds from term loan extensions
 
 98
 
 
 
 98
Repayments of term loan credit facility
 
 (702) 
 
 
 (702)
 
 (640) 
 
 
 (640)
Proceeds from the issuance of First and a Half Lien Notes
 
 700
 
 
 
 700
Proceeds from issuance of First Lien Notes
 
 593
 
 
 
 593
Proceeds from issuance of First and a Half Lien Notes
 
 325
 
 
 
 325
Net change in securitization obligations
 
 
 
 (21) 
 (21)
 
 
 
 (61) 
 (61)
Debt issuance costs
 
 (33) 
 
 
 (33)
 
 (2) 
 (1) 
 (3)
Intercompany dividend
 
 
 
 (2) 2
 

 
 
 
 (9) 9
 
Intercompany note payable
 
 
 
 16
 (16) 

 
 
 
 85
 (85) 
Intercompany transactions
 
 (29) 41
 (12) 
 

 
 155
 (116) (39) 
 
Other, net
 
 
 (2) (1) 
 (3)
 
 4
 (4) (2) 
 (2)
Net cash provided by (used in) financing activities
 
 14
 34
 (28) (14) 6

 
 344
 (120) (30) (76) 118
Effect of changes in exchange rates on cash and cash equivalents
 
 
 
 1
 
 1

 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
 (66) (20) (13) 
 (99)
 
 
 6
 (11) 
 (5)
Cash and cash equivalents, beginning of period
 
 69
 74
 51
 (2) 192

 
 2
 80
 67
 (6) 143
Cash and cash equivalents, end of period$
 $
 $3
 $54
 $38
 $(2) $93
$
 $
 $2
 $86
 $56
 $(6) $138


36


Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30,2011
(in millions)
 Holdings Intermediate Realogy 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Eliminations Consolidated
Net cash provided by (used in) operating activities$
 $
 $(347) $142
 $14
 $(3) $(194)
Investing Activities             
Property and equipment additions
 
 (2) (22) (1) 
 (25)
Net assets acquired (net of cash acquired) and acquisition-related payments
 
 
 (4) 
 
 (4)
Proceeds from certificates of deposit, net
 
 
 
 9
 
 9
Change in restricted cash
 
 
 
 1
 
 1
Intercompany note receivable
 
 
 (18) 
 18
 
Other, net
 
 
 (5) 
 
 (5)
Net cash provided by (used in) investing activities
 
 (2) (49) 9
 18
 (24)
Financing Activities             
Net change in revolving credit facilities
 
 130
 (5) 
 
 125
Proceeds from term loan extension
 
 98
 
 
 
 98
Repayments of term loan credit facility
 
 (703) 
 
 
 (703)
Proceeds from issuance of First and a Half Lien Notes
 
 700
 
 
 
 700
Net change in securitization obligations
 
 
 
 (4) 
 (4)
Debt issuance costs
 
 (34) 
 
 
 (34)
Intercompany dividend
 
 
 
 (4) 4
 
Intercompany note payable
 
 
 
 18
 (18) 
Intercompany transactions
 
 94
 (77) (17) 
 
Other, net
 
 (1) (5) 3
 
 (3)
Net cash provided by (used in) financing activities
 
 284
 (87) (4) (14) 179
Effect of changes in exchange rates on cash and cash equivalents
 
 
 
 1
 
 1
Net increase (decrease) in cash and cash equivalents
 
 (65) 6
 20
 1
 (38)
Cash and cash equivalents, beginning of period
 
 69
 74
 51
 (2) 192
Cash and cash equivalents, end of period$
 $
 $4
 $80
 $71
 $(1) $154


37


Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein and with our Consolidated Financial Statements and accompanying Notes included in the 2011 Form 10-K. Unless otherwise noted, all dollar amounts in tables are in millions. Neither Holdings, the indirect parent of Realogy, does not conductnor Intermediate, the direct parent company of Realogy, conducts any operations other than with respect to its respective direct or indirect ownership of Realogy. All expenses incurred by Holdings and Intermediate are for the benefit of Realogy and have been reflected in Realogy's consolidated financial statements. All issuances of Holdings' equity securities, including grants of stock options and restricted stock by Holdings to employees and directors of Realogy and its subsidiaries have been reflected in Realogy's condensed consolidated financial statements. As a result, the condensed consolidated financial positions, results of operations and cash flows of Holdings, Intermediate and Realogy are the same. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See “Forward-Looking Statements” and “Risk Factors” in this report and “Forward-Looking Statements” and “Risk Factors” in our 2011 Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results may differ materially from those contained in any forward-looking statements.
OVERVIEW
We are a global provider of real estate and relocation services and report our operations in the following four segments:
Real Estate Franchise Services (known as Realogy Franchise Group or RFG)—franchises the Century 21®, Coldwell Banker®, ERA®, Sotheby's International Realty®, Coldwell Banker Commercial® and Better Homes and Gardens® Real Estate brand names. As of March 31,June 30, 2012, weour franchise system had approximately 13,80013,500 franchised and company owned offices and 241,000238,500 independent sales associates operating under our brands in the U.S. and 102 other countries and territories around the world, which included approximately 725720 of our company owned and operated brokerage offices with approximately 41,500 independent sales associates.
Company Owned Real Estate Brokerage Services (known as NRT)—operates a full-service real estate brokerage business principally under the Coldwell Banker®, ERA®, Corcoran Group®, and Sotheby's International Realty® and CitiHabitats brand names. In addition, we operate a large independent real estate owned (“REO”) residential asset manager, which focuses on bank-owned properties.
Relocation Services (known as Cartus)—primarily offers clients employee relocation services such as homesale assistance, providing home equity advances to transferees (generally guaranteed by the client), home finding and other destination services, expense processing, relocation policy counseling and other consulting services, arranging household goods moving services, visa and immigration support, intercultural and language training and group move management services.
Title and Settlement Services (known as Title Resource Group or TRG)—provides full-service title, settlement and vendor management services to real estate companies, affinity groups, corporations and financial institutions with many of these services provided in connection with the Company's real estate brokerage and relocation services business.
As discussed under the heading “Current Industry Trends,” the domestic residential real estate market has been inrecently shown signs of recovery after a significant and lengthy downturn. As a result, our results of operationsThe residential real estate market is cyclical and we have been, and may continue to be, materially adversely affected.affected by downturns in this market.
July 2006 Separation from Cendant
Realogy was incorporated on January 27, 2006 to facilitate a plan by Cendant to separate into four independent companies—one for each of Cendant’s real estate services, travel distribution services (“Travelport”), hospitality services (including timeshare resorts) (“Wyndham Worldwide”) and vehicle rental businesses (“Avis Budget Group”). Prior to July 31, 2006, the assets of the real estate services businesses of Cendant were transferred to Realogy and, on July 31, 2006, Cendant distributed all of the shares of Realogy’s common stock held by it to the holders of Cendant common stock issued and outstanding on the record date for the distribution, which was July 21, 2006 (the “Separation”). The Separation was effective on July 31, 2006.

38


Before the Separation, Realogy entered into a Separation and Distribution Agreement, a Tax Sharing Agreement and several other agreements with Cendant and Cendant’s other businesses to effect the separation and distribution and provide a framework for Realogy’s relationships with Cendant and Cendant’s other businesses after the Separation. These agreements govern the relationships among Realogy, Cendant, Wyndham Worldwide and Travelport subsequent to the completion of the

37


separation plan and provide for the allocation among Realogy, Cendant, Wyndham Worldwide and Travelport of Cendant’s assets, liabilities and obligations attributable to periods prior to the Separation. Matters governed by these agreements have been substantially concluded other than the resolution of certain Cendant tax and other liabilities attributable to periods prior to the Separation.
April 2007 Merger Agreement with Affiliates of Apollo
On December 15, 2006, Realogy entered into an agreement and plan of merger with Holdings and Domus Acquisition Corp., which are affiliates of Apollo Management VI, L.P., an entity affiliated with Apollo Global Management, LLC. Under the merger agreement, Holdings acquired the outstanding shares of Realogy pursuant to the merger of Domus Acquisition Corp. with and into Realogy, with Realogy being the surviving entity (the “Merger”). The Merger was consummated on April 10, 2007. All of Realogy’s issued and outstanding common stock is currently owned by Intermediate, which is a direct, wholly owned subsidiary of Holdings.
Realogy incurred substantial indebtedness in connection with the Merger, the aggregate proceeds of which were sufficient to pay the aggregate merger consideration, repay a portion of Realogy’s then outstanding indebtedness and pay fees and expenses related to the Merger. Specifically, Realogy entered into the senior secured credit facility, issued unsecured notes and refinanced the credit facilities governing Realogy’s relocation securitization programs. In addition, investment funds affiliated with, or co-investment vehicles managed by, Apollo Management VI, L.P. or one of its affiliates (together with Apollo Global Management, LLC and its subsidiaries, “Apollo”), as well as members of management who purchased Holdings common stock with cash or through rollover equity, contributed $2,001$2,001 million to Realogy to complete the Merger Transactions, which was treated as a contribution to Realogy’s equity. Holdings common stock is currently owned or controlled solely by Apollo, although other parties own Convertible Notes that may be converted, at the option of such parties, into Holdings common stock.
Current Industry Trends
Our businesses compete primarily in the domestic residential real estate market. This market is cyclical in nature and although itwe believe that we are experiencing the beginning of a recovery. The market has most recently shown strong growth over several decades, it hassigns of recovery after having been in a significant and prolonged downturn, which initially began in the second half of 2005. Based upon data published by NAR from 2005 to 2011, the number of annual U.S. existing homesale units has declined by 40% and the median existing homesale price has declined by 24%. DueAccording to NAR, homesale transactions for 2011 represented the 4th consecutive year that existing homesale transactions have been in the 4.1 to 4.3 million range on an annual basis, despite adverse economic and housing conditions during that period. The signs of growth in the first six months of 2012 were particularly evident with respect to year-over-year unit growth, due to favorable affordability trends due toreflective of low mortgage rates and lower home prices,prices.
NAR reported a year-over-year increase of 8% in existing homesale transactions in the first quarter of 2012 the existing home residential real estate market showed signs of modest growth, particularly with respect to year-over-year unit growth. NAR reported year-over-year increases of 7% in homesales in the first quartersix months of 2012 compared to the first quarter of 2011.
In response to the housing downturn, the U.S. government implemented certain actions to help stabilize and assist in a recovery of the residential real estate market. These measures have included: (1) the placement of Fannie Mae and Freddie Mac in conservatorship in September 2008 and the funding by the government of billions of dollars to these entities to backstop shortfalls in their capital requirements; (2) the establishment, and subsequent expansion and extension, of a federal homebuyer tax credit for qualified buyers (that, as extended, required signed contracts on or before April 30, 2010); (3) as part of a broader plan to bring stability to credit markets and stimulate the housing market, the purchase of mortgage-backed securities by the Federal Reserve in an attempt to maintain low mortgage rates which concluded in mid-2011; (4) the continuation of the 2008 higher loan limits for the FHA, Freddie Mac and Fannie Mae loans most recently extended to the end of 2013; and (5) the availability of low-cost refinancing through Fannie Mae and Freddie Mac to certain homeowners negatively impacted by falling home prices and encouraging lenders to modify loan terms, including reductions in principal amount, with borrowers at risk of foreclosure or already in foreclosure. Based in part on these measures, since 2010, the residential real estate market has shown signs of stabilization through the endsix months of 2011 particularly with respectand is forecasting a 9% increase in existing homesale transactions for 2012 compared to 2011. For 2013, NAR is forecasting a 7% increase in homesales to 5.0 million units compared to 2012, although it noted in its May 2012 release that the number of homesales could rise to as many as 5.3 million units, or a 14% increase compared to 2012, with a return to more normal mortgage lending standards. Fannie Mae is forecasting 2012 to increase 8% for existing homesale transactions though pressure continuescompared to exist on2011.
With respect to homesale prices, NAR reported a year-over-year increase of 3% in average homesale price in part duethe first six months of 2012 compared to the high levelsfirst six months of distressed sales.2011 and is forecasting median homesale prices for 2012 to increase 4% compared to 2011. NAR is also forecasting a 5% increase in median existing homesale prices in 2013 compared to 2012. Fannie Mae's most recent forecast shows a 1% decrease in median homesale price for 2012 compared to 2011.
The most recent NAR forecast estimates that the volume of existing homesales (i.e., median homesale price times existing homesale transactions) will increase 13% for the full year 2012 compared to 2011 and increase a further 13% in 2013 compared to 2012.

39


According to NAR, the housing affordability index has continued to improve as a result of the cumulative homesale price declines that began in 2007. An index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. The housing affordability index was 184 as of May 2012 and 185 for 2011 compared to 174 for 2010 and 169 for 2009. The overall improvement in this index could favorably impact a housing recovery. In addition, as rental prices have recently continued to rise, the cost of owning a home is now lower than the rental of a comparable property in the vast majority of U.S. metropolitan areas.
Interest rates continue to be at low levels by historical standards, which we believe has helped stimulate demand in the residential real estate market, thereby reducing the rate of sales volume decline.market. According to Freddie Mac, interest rates on commitments for 30-year, fixed-rate first mortgages have decreased from 5.3% in December 2008 to 4.0%5.3% in MarchDecember 2008 to 3.7% in June 2012.
Continuing constraints on the housing market include conservative mortgage underwriting standards, increased down payment requirements and homeowners having limited or negative equity in homes in certain markets. Mortgage credit conditions have tightened significantly during this housing downturn, with banks limiting credit availability to more creditworthy borrowers and requiring larger down payments, stricter appraisal standards, and more extensive mortgage documentation. As a result, mortgages are less available to borrowers and it frequently takes longer to close a homesale transaction due to the enhanced mortgage and underwriting requirements.

38


Corelogic,CoreLogic, one of several third parties that track residential housing statistics, in their MarchJune 2012 press release, disclosed that there were 1.61.5 million units of so called shadow inventory"shadow inventory" (i.e., properties where the homeowner is seriously delinquent in meeting its mortgage obligations or where the property is in some stage of foreclosure or already a REO) as of JanuaryApril 2012 which is slightly down from 1.8 million units as of JanuaryApril 2011. Of the 1.6 million properties currently in the shadowThis inventory 800,000consists of 720,000 units which are seriously delinquent (90 days or more), 410,000 units which are in some stage of foreclosure and 400,000390,000 units which are already in REO. Florida, California and Illinois account for more thanAlthough there have been concerns about significant shadow inventory, we do not believe that this will have a thirdsignificant impact on our business, as the concentration of the shadow inventory is limited to a few regions of the country and the top six states, which would also include New York, Texas and New Jersey, account for half ofpotential increase in unit sales activity should offset in whole or in part the shadow inventory. This shadow inventory could, were it to be released into the market, adverselyadverse impact on home prices in localthese regions. Furthermore, according to NAR, the percentage of distressed properties has declined from 30% of sales in June 2011 to 25% of sales in June 2012, and institutions holding distressed mortgages have increasingly shifted activity away from REOs and focused on short sales, which are less disruptive to the market. In addition, an increase in saleable housing inventory would be welcome in many housing markets while potentially increasing unit sales activity.given the significant decrease in overall housing inventory.
According to NAR, the inventory of existing homes for sale is 2.4 million homes at MarchJune 2012 and the inventory level has trended down from a record 4.0 million homes in July 2007, and is 2224 percent below a year ago.June 2011. The MarchJune 2012 inventory represents a supply of 6.36.6 months at the current sales pace. The inventory supply is returning to a more normaltypical level and is acting as a stabilizing force on home prices; however, the supply could increase due to the release of homes for sale by financial institutions and this factor could add downward pressure on the price of existing homesales. In addition,prices. Lastly, in many markets at certain price points there are low levels of inventory at certain price points, which could mutelimit sales activity over the near term.
Recent Legislative and Regulatory Matters
Dodd-Frank Act. On July 21, 2010, the Dodd-Frank Act was signed into law for the express purpose of regulating the financial services industry. The Dodd-Frank Act establishes an independent federal bureau of consumer financial protection to enforce laws involving consumer financial products and services, including mortgage finance. The bureau is empowered with examination and enforcement authority. The Dodd-Frank Act also establishes new standards and practices for mortgage originators, including determining a prospective borrower’s ability to repay their mortgage, removing incentives for higher cost mortgages, prohibiting prepayment penalties for non-qualified mortgages, prohibiting mandatory arbitration clauses, requiring additional disclosures to potential borrowers and restricting the fees that mortgage originators may collect. These standards and practices include limitations, which are scheduled to become effective in 2013, on the amount that a mortgage originator may receive with respect to a "qualified mortgage," including fees received by affiliates of the mortgage originator. Based upon the current legislation and the definition of a qualified mortgage, such limitation could adversely affect the fees thatreceived by TRG, as a provider of title and settlement services, charges in transactions originated by our joint venture, PHH Home Loans could be adversely affected.Loans. While we are continuing to evaluate all aspects of the Dodd-Frank Act, such legislation and regulations promulgated pursuant to such legislation, as well as other legislation that may be enacted to reform the U.S. housing finance market, could materially and adversely affect the mortgage and housing industries, result in heightened federal regulation and oversight of the mortgage and housing industries, disrupt mortgage availability, increase down payment requirements, increase mortgage costs, curtail affiliated business transactions and result in increased costs and potential litigation for housing market participants.

40


Certain provisions of the Dodd-Frank Act may impact the operation and practices of Fannie Mae, Freddie Mac and other government sponsored entities, or GSEs, and require sponsors of securitizations to retain a portion of the economic interest in the credit risk associated with the assets securitized by them. Substantial reduction in, or the elimination of, GSE demand for mortgage loans by reducing qualifying mortgages could have a material adverse effect on the mortgage industry and the housing industry in general and these provisions may reduce the availability or increase the cost of mortgages to certain individuals.
Potential Reform of the U.S. Housing Finance Market and Potential Wind-downWind-Down of Freddie Mac and Fannie Mae. In September 2008, the U.S. government placed Fannie Mae and Freddie Mac in conservatorship and has provided funding of billions of dollars to these entities to backstop shortfalls in their capital requirements. Congress also has held hearings on the future of Freddie Mac and Fannie Mae and other GSEs with a view towards further legislative reform. On February 11, 2011, the Obama Administration issued a report to the U.S. Congress outlining proposals to reform the U.S. housing finance market, including, among other things, reform designed to reduce government support for housing finance and the winding down of Freddie Mac and Fannie Mae over a period of years. Numerous pieces of legislation seeking various types of reform for the GSEs have been introduced in Congress. Legislation, if enacted, which curtails Freddie Mac and/or Fannie Mae’s activities and/or results in the wind down of these entities could increase mortgage costs and could result in more stringent underwriting guidelines imposed by lenders eitheror cause other disruptions in the mortgage industry, any of which could have a materially adverse affect on the housing market in general and our operations in particular. Given the current uncertainty with respect to the extent, if any, of such reform, it is difficult to predict either the long-term or short-term impact of government action that may be taken. At present, the U.S. government also is attempting, through various avenues, to increase loan modifications for home owners with negative equity.
***
We believe that long-term demand for housing and the growth of our industry is primarily driven by affordability of housing, the economic health of the domestic economy, positive demographic trends such as population growth, increases in the number of U.S. households, low interest rates, increases in renters that qualify as homebuyers and locally based dynamics such as housing demand relative to housing supply. While the housing market has recently shown signs of stabilization,recovery, there remains

39


substantial uncertainty with respect to the timing and scope of a sustained housing recovery. Factors that may negatively affect a sustained housing recovery include:
higher mortgage rates as well as reduced availability of mortgage financing;
lower unit sales, due to reduced inventory levels in certain markets at lower price points, the reluctance of first time homebuyers to purchase due to concerns about investing in a home and move-up buyers having limited or negative equity in homes;
lower average homesale price, particularly if banks and other mortgage servicers liquidate foreclosed properties that they are currently holding in certain concentrated affected markets;
continuing high levels of unemployment and associated lack of consumer confidence;
unsustainable economic recovery in the U.S. or a weak recovery resulting in only modest economic growth;
a lack of stability or improvement in home ownership levels in the U.S.; and
legislative or regulatory reform, including but not limited to reform that adversely impacts the financing of the U.S. housing market or amends the Internal Revenue Code in a manner that negatively impacts home ownership such as reform that reduces the amount that certain taxpayers would be allowed to deduct for home mortgage interest.
Consequently, we cannot predict when the residential real estate industry will return to a period of sustainable growth. Moreover, if the residential real estate market or the economy as a whole does not improve, we may experience further adverse effects on our business, financial condition and liquidity, including our ability to access capital.
Many of the trends impacting our businesses that derive revenue from homesales also impact our Relocation Services business, which is a global provider of outsourced employee relocation services. In addition to general residential housing trends, key drivers of our Relocation Services business are corporate spending and employment trends which have shown modest signs of stabilization;a recovery; however, there can be no assurance that corporate spending on relocation services will return to previous levels following any economic recovery.

41


Homesales
According to NAR, homesale transactions for 2011 increased 2% over 2010 and represent the 4th consecutive year that existing homesale transactions have been in the 4.1 to 4.3 million range on an annual basis, despite adverse economic and housing conditions during that period. For the three months ended March 31,June 30, 2012, RFG and NRT homesale transactions increased 7%9% and 8%13%, respectively, due to an overall pick-up in homebuyer activity compared to the firstsecond quarter of 2011. AlsoThe increase in homesale transactions in the second quarter of note is that RFG experienced similar2012 follows an increase in homesale transaction gains across all homesale price rangestransactions in the first quarter of 2011 compared to the prior year.2012 of 7% for RFG and 8% for NRT. The quarterly and annual year over year trend in homesale transactions is as follows:
  2012 vs. 2011 2012 vs. 2011
    Second Quarter Forecast Third Quarter Forecast Fourth Quarter Forecast Full Year 2012 vs. 2011 Forecast Second Quarter Third Quarter Forecast Fourth Quarter Forecast Full Year 2012 vs. 2011 Forecast
Full Year 2011 vs. 2010 First Quarter Full Year 2011 vs. 2010 First Quarter 
 Third Quarter ForecastFourth Quarter Forecast Fourth Quarter Forecast
Number of Homesales        
Industry        
NAR (a)
2 % 7% *
 *
 *
 10%2% 5% 9% 9% 9% 9%
Fannie Mae (a)
2 % 4% 10% 10% 4% 8%2% 5% 10% 9% 6% 8%
Realogy            
Real Estate Franchise Services(1)% 7%        (1)% 7% 9% 
Company Owned Real Estate Brokerage Services % 8%        —% 8% 13% 
_______________
 
 
(a)  
Existing homesale data, on a seasonally adjusted basis, is as of the most recent NAR and Fannie Mae press release.
*NAR has amended its disclosure process to only provide historical quarterly data and full year forecasts.
As of their most recent releases, NAR is forecasting a 10%9% increase in existing homesale transactions in 2012, while Fannie Mae is forecasting an increase of 8%. For 2013, NAR and Fannie Mae are forecasting an increase of 1%7% and 2%, respectively, in existing homesale transactions for 2013 compared to 2012.

40


Homesale Price
NAR reported homesale price declines of 4% for the year ended December 31, 2011 compared to 2010 while our price was flat for RFG and down 2% for NRT. We believe that one significant reason, other than our geographic footprint, that accounts for the difference between our average homesale price and the median homesale price of NAR in 2011 iscompared to 2010 was due to the high level of distressed sales included in NAR’s data. For the three months ended March 31,June 30, 2012, average homesale price was flatup 6% for RFG which was consistent with NAR's firstsecond quarter forecast and down 3%was flat for NRT due to a shift in the mix of business towith more lower priced homes. We believe the improvement in price in the second quarter of 2012 was due to the low level of home inventory in many markets. The quarterly and annual year over year trend in the price of homes is as follows:
  2012 vs. 2011 2012 vs. 2011
    Second Quarter Forecast Third Quarter Forecast Fourth Quarter Forecast Full Year 2012 vs. 2011 Forecast Second Quarter Third Quarter Forecast Fourth Quarter Forecast Full Year 2012 vs. 2011 Forecast
Full Year 2011 vs. 2010 First Quarter Full Year 2011 vs. 2010 First Quarter 
 Third Quarter ForecastFourth Quarter Forecast Fourth Quarter Forecast
Price of Homes        
Industry        
NAR (a)
(4)%  % *
 *
 *
 2%(4)% —% 7% 6% 5% 4%
Fannie Mae (a)
(4)% (2)% (3)% (2)% (2)% (3)%(4)% —% (1)% 1% 2% (1)%
Realogy            
Real Estate Franchise Services %  %        —% —% 6% 
Company Owned Real Estate Brokerage Services(2)% (3)%        (2)% (3)% —% 
_______________
 
 
(a)Existing homesale price data is for median price and is as of the most recent NAR and Fannie Mae press release.
*NAR has amended its disclosure process to only provide historical quarterly data and full year forecasts.
As of their most recent releases, for 2012 NAR is forecasting a 2%4% increase in the median existing homesale price compared to 2011 and Fannie Mae is forecasting a 3%1% decline. For 2013, NAR is forecasting an increase of 2%5% in median homesale prices for 2013 compared to 2012 whileand Fannie Mae is forecasting a decreasean increase of 1% in median homesale prices for 2013 compared to 2012.
***

42


While data provided by NAR and Fannie Mae are two indicators of the direction of the residential housing market, we believe that homesale statistics will continue to vary between us and NAR and Fannie Mae because they use survey data in their historical reports and forecasting models whereas we use data based on actual reported results.  In addition to the differences in calculation methodologies, there are geographical differences and concentrations in the markets in which we operate versus the national market. For instance, comparability is impaired due to NAR’s utilization of seasonally adjusted annualized rates whereas we report actual period over period changes and their use of median price for their forecasts compared to our average price. Additionally, NAR data is subject to periodic review and revision.  While we believe that the industry data presented herein areis derived from the most widely recognized sources for reporting U.S. residential housing market statistical data, we do not endorse or suggest reliance on this data alone.  We also note that forecasts are inherently uncertain or speculative in nature and actual results for any period may materially differ. 
Housing Affordability Index
According to NAR, the housing affordability index has continued to improve as a result of the homesale price declines that began in 2007. An index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. The housing affordability index improved to 207 as of February, 2012 compared to 185 for 2011, 174 for 2010 and 169 for 2009 and the overall improvement in this index could favorably impact a housing recovery.
Other Factors
Due to the prolonged downturn in the residential real estate market, a significant number of third party franchisees have experienced operating difficulties. As a result, many of our franchisees with multiple offices have reduced overhead and consolidated offices in an attempt to remain competitive in the marketplace. In addition, we have had to terminate franchisees due to non-reporting and non-payment which could adversely impact transaction volumes in the future. Due to the factors noted above, we continue to actively monitor the collectability of receivables and notes from our franchisees.

41


Key Drivers of Our Businesses
Within our Real Estate Franchise Services segment and our Company Owned Real Estate Brokerage Services segment, we measure operating performance using the following key operating statistics: (i) closed homesale sides, which represents either the “buy” side or the “sell” side of a homesale transaction, (ii) average homesale price, which represents the average selling price of closed homesale transactions and (iii) average homesale broker commission rate, which represents the average commission rate earned on either the “buy” side or “sell” side of a homesale transaction. Our Real Estate Franchise Services segment is also impacted by the net effective royalty rate which represents the average percentage of our franchisees’ commission revenues payable to our Real Estate Franchise Services segment, net of volume incentives achieved. The net effective royalty rate does not include the effect of non-standard incentives granted to some franchisees.
Prior to 2006, the average homesale broker commission rate was declining several basis points per year, the effect of which was more than offset by increases in homesale prices. From 2007 through the firstsecond quarter of 2012, the average broker commission rate remained fairly stable; however, we expect that, over the long term, the average brokerage commission rates will modestly decline.
The net effective royalty rate has been declining over the past three years. We would expect that, over the near term, the net effective royalty rate will continue to modestly decline due to an increased concentration of business inwith larger franchisees which earn higher volume rebatesincentives as well as the Company’s focus on strategic growth through relationships with larger established real estate companies which may pay a lower royalty rate. In addition, mergers and consolidations of distressed franchisees into larger franchisees can drive down the net effective royalty rate. The net effective rate can also be affected by a shift in volume amongst our brands which operate under different royalty rate arrangements.
Our Company Owned Real Estate Brokerage Services segment has a significant concentration of real estate brokerage offices and transactions in geographic regions where home prices are at the higher end of the U.S. real estate market, particularly the east and west coasts, while our Real Estate Franchise Services segment has franchised offices that are more widely dispersed across the United States. Accordingly, operating results and homesale statistics may differ between our Company Owned Real Estate Brokerage Services segment and our Real Estate Franchise Services segment based upon geographic presence and the corresponding homesale activity in each geographic region.
Within our Relocation Services segment, we measure operating performance using the following key operating statistics: (i) initiations, which represent the total number of transferees we serve and (ii) referrals, which represent the number of referrals from which we earn revenue from real estate brokers. In our Title and Settlement Services segment, operating performance is evaluated using the following key metrics: (i) purchase title and closing units, which represent the number of title and closing units we process as a result of home purchases, (ii) refinance title and closing units, which represent the number of title and closing units we process as a result of homeowners refinancing their home loans, and (iii) average price per closing unit, which represents the average fee we earn on purchase title and refinancing title sides.

43


A decline in the number of homesale transactions and the decline in homesale prices has and could continue to adversely affect our results of operations by: (i) reducing the royalties we receive from our franchisees and company owned brokerages, (ii) reducing the commissions our company owned brokerage operations earn, (iii) reducing the demand for our title and settlement services, (iv) reducing the referral fees we earn in our relocation services business, and (v) increasing the risk of franchisee default due to lower homesale volume. Our results could also be negatively affected by a decline in commission rates charged by brokers.

42


The following table presents our drivers for the three and six months ended March 31,June 30, 2012 and 2011. See “Results of Operations” for a discussion as to how the key drivers affected our business for the periods presented.
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2012 2011 % Change2012 2011 % Change 2012 2011 % Change
Real Estate Franchise Services (a)                
Closed homesale sides197,458
 184,643
 7%273,771
 251,045
 9% 471,229
 435,688
 8%
Average homesale price$194,071
 $193,710
 %$214,547
 $202,045
 6% $205,967
 $198,513
 4%
Average homesale broker commission rate2.56% 2.54% 2 bps
2.55% 2.55% 
 2.55% 2.55% 
Net effective royalty rate4.75% 4.87% (12) bps
4.64% 4.83% (19) bps
 4.68% 4.85% (17) bps
Royalty per side$248
 $251
 (1%)$263
 $258
 2% $256
 $255
 %
Company Owned Real Estate Brokerage Services     Company Owned Real Estate Brokerage Services          
Closed homesale sides55,273
 51,200
 8%82,768
 73,061
 13% 138,041
 124,261
 11%
Average homesale price$403,115
 $414,164
 (3%)446,732
 445,550
 % 429,267
 432,618
 (1%)
Average homesale broker commission rate2.51% 2.50% 1 bps
2.49% 2.49% 
 2.50% 2.49% 1 bps
Gross commission income per side$10,959
 $11,188
 (2%)$11,856
 $11,931
 (1%) $11,497
 $11,625
 (1%)
Relocation Services                
Initiations37,470
 35,108
 7%48,698
 46,433
 5% 86,168
 81,541
 6%
Referrals14,266
 12,813
 11%22,039
 20,282
 9% 36,305
 33,095
 10%
Title and Settlement Services                
Purchase title and closing units20,565
 18,971
 8%29,973
 26,219
 14% 50,538
 45,190
 12%
Refinance title and closing units22,016
 16,826
 31%17,766
 10,840
 64% 39,782
 27,666
 44%
Average price per closing unit$1,237
 $1,386
 (11%)$1,450
 $1,525
 (5%) $1,350
 $1,457
 (7%)
_______________
(a)Includes all franchisees except for our Company Owned Real Estate Brokerage Services segment.

44


RESULTS OF OPERATIONS
Discussed below are our condensed consolidated results of operations and the results of operations for each of our reportable segments. The reportable segments presented below represent our operating segments for which separate financial information is available and which is utilized on a regular basis by our chief operating decision maker to assess performance and to allocate resources. In identifying our reportable segments, we also consider the nature of services provided by our operating segments. Management evaluates the operating results of each of our reportable segments based upon revenue and EBITDA. EBITDA is defined as net income (loss) before depreciation and amortization, interest (income) expense, net (other than Relocation Services interest for securitization assets and securitization obligations) and income taxes, each of which is presented on our Consolidated Statements of Operations. Our presentation of EBITDA may not be comparable to similarly-titled measures used by other companies. As discussed above under “Industry Trends,” our results of operations are significantly impacted by industry and economic factors that are beyond our control.
Three Months Ended March 31,June 30, 2012 vs. Three Months Ended March 31,June 30, 2011
Our consolidated results comprised the following:
Three Months Ended March 31,Three Months Ended June 30,
2012 2011 Change2012 2011 Change
Net revenues$875
 $831
 $44
$1,309
 $1,179
 $130
Total expenses (1)
1,070
 1,067
 3
1,340
 1,203
 137
Loss before income taxes, equity in earnings and noncontrolling interests(195) (236) 41
(31) (24) (7)
Income tax expense7
 1
 6
8
 1
 7
Equity in earnings of unconsolidated entities(10) 
 (10)(15) (4) (11)
Net loss(192) (237) 45
(24) (21) (3)
Less: Net income attributable to noncontrolling interests
 
 
(1) (1) 
Net loss attributable to Holdings and Realogy$(192) $(237) $45
$(25) $(22) $(3)

43


_______________
 
 
(1)
Total expenses for the three months ended March 31,June 30, 2012 include $2 million of restructuring costs. Total expenses for the three months endedJune 30, 2011 include $3 million of restructuring costs, andoffset by a net benefit of $6 million related to the loss on the early extinguishment of debt, partially offset by $312 million of former parent legacy benefits. Total expenses for the three months endedMarch 31, 2011 include $2 million of restructuring costs and $60 million related to the 2011 Refinancing Transactions, partially offset by $2 million of former parent legacy benefits.items.
Net revenues increased $44130 million (5%11%for the three months ended March 31,June 30, 2012 compared with the three months endedMarch 31,June 30, 2011, principally due to an increase in revenues for the Real Estate Franchise Services segment and Company Owned Real Estate Brokerage Services segment primarily due to higher homesale transaction volume as well as an increase in revenues for the Title and Settlement Services segment due to higher resale volume, refinancing volume and underwriter volume.
Total expenses increased $3137 million (11%) primarily due to:
1.
a $42$114 million increase in commission and other agent-related costs, operating, marketing and general and administrative expenses primarily related to:
aan $2885 million increase in commission expense for the Company Owned Real Estate Brokerage Services segment due to increased volume, $9 million in incremental employee related costs, and a $6 million increase in franchise fees paid to RFG partially offset by $11$10 million of lower operating expenses primarily as a result of restructuring and cost-saving activities;
an increase in expenses for the Real Estate Franchise Service segment, primarily due to an $8$10 million increase in marketing expenses, $3 millionfor a settlement of incrementala legal expenses,matter and $3 million of incremental employee related costs;
costs partially offset by a $4 million increase in variable operating expense for the Relocation Services segment primarily as a result of increases in volume and $3 million of incremental employee related costs;decrease in marketing expenses; and
an increase in variable operating expenses for the Title and Settlement segment of $3$11 million as a result of increases in resale, refinancing and underwriter volume and resale volume.
Thea $2 million increase in incremental employee related costs.
The incremental employee related costs noted above was primarily due to $10$15 million of expense for the 2012 bonus plan which is in addition to $11$10 million of expense being recognized for the 2011-2012 retention plan

45


whereas in the firstsecond quarter of 2011 only $11$10 million of expense was being recognized for the retention plan. As a result, duringthere is $15 million of incremental employee related costs in the firstsecond quarter of 2012 there is double the amount of expense for these employee related costs compared to the firstsecond quarter of 2011.
2.
offset by a decreasean increase of $3015 million related to the loss on the early extinguishment of debt which wasin interest expense $6 millionfor the three months ended March 31,June 30, 2012 compared to the $36 million for the three months ended March 31, 2011;June 30, 2011 as a result of incremental interest related to the 2012 Senior Secured Notes Offering; and
3.a decreasereduction in the net benefit of $9 million in interest expense compared to the three months ended March 31, 2011 primarily because the first quarterformer parent legacy items of 2011 included incremental interest expense of $17 million as a result of the de-designation of interest rate swaps and $7$12 million due to the write-off of financing costs as a result of thebenefits received in 2011 Refinancing Transactions.that did not recur in 2012.
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.  Income tax expense for the three months endedMarch 31,June 30, 2012 was $78 million.  This expense included $6 million for an increase in deferred tax liabilities associated with indefinite-lived intangible assets and $12 million was recognized for foreign and state income taxes for certain jurisdictions.

44


Following is a more detailed discussion of the results of each of our reportable segments during the three months endedMarch 31,June 30, 2012 and 2011:
Revenues (a)
   
EBITDA (b)
   Margin  
Revenues (a)
   
EBITDA (b)
   Margin  
2012 2011 % Change 2012 2011 % Change 2012 2011 Change2012 2011 % Change 2012 2011 % Change 2012 2011 Change
Real Estate Franchise Services$129
 $118
 9% $61
 $62
 (2)% 47 % 53 % (6)$170
 $160
 6 % $99
 $97
 2 % 58% 61% (3)
Company Owned Real Estate Brokerage Services617
 587
 5
 (17) (37) 54
 (3) (6) 3
994
 884
 12
 78
 48
 63
 8
 5
 3
Relocation Services88
 87
 1
 4
 10
 (60) 5
 11
 (6)109
 110
 (1) 30
 32
 (6) 28
 29
 (1)
Title and Settlement Services88
 83
 6
 2
 2
 
 2
 2
 
106
 90
 18
 14
 12
 17
 13
 13
 
Corporate and Other(47) (44) * (20) (48) * 

 

 

(70) (65) *
 (18) (2) *
 

 

 

Total Company$875
 $831
 5% $30
 $(11) 373 % 3 % (1)% 4
$1,309
 $1,179
 11 % $203
 $187
 9 % 16% 16% 
Less: Depreciation and amortization      45
 46
              44
 47
        
Interest expense, net (c)
      170
 179
              176
 161
        
Income tax expense      7
 1
              8
 1
        
Net loss attributable to Holdings and Realogy      $(192) $(237)              $(25) $(22)        
_______________
 
 
*not meaningful
(a)
Includes the elimination of transactions between segments, which consists of intercompany royalties and marketing fees paid by our Company Owned Real Estate Brokerage Services segment of $4770 million and $4465 million during the three months endedMarch 31,June 30, 2012 and 2011, respectively.
(b)
EBITDA for the three months ended March 31,June 30, 2012 includes $10$2 million of expense restructuring costs. EBITDA for the 2012 bonus plan in addition to $11three months endedJune 30, 2011 includes $3 million of restructuring costs offset by the net benefit of $12 million of former parent legacy items.
As described in the aforementioned table, EBITDA margin for “Total Company” expressed as a percentage of revenues remained constant at 16%for the three months endedJune 30, 2012 compared to the same period in 2011 primarily due to a $12 million increase in equity earnings related to our investment in PHH Home Loans and a $10 million decrease in other operating expenses for the Company Owned Real Estate Brokerage Services Segment offset by $15 million of incremental employee related costs and $10 million of incremental legal expenses.
On a segment basis, the Real Estate Franchise Services segment margin decreased 3 percentage points to 58% from 61%. The three months endedJune 30, 2012 reflected increases in legal and employee related expenses partially offset by increases in franchisee royalty revenue due to an increase in homesale transactions. The Company Owned Real Estate Brokerage Services segment margin increased 3 percentage points to 8% from 5% in the prior period. The three months endedJune 30, 2012 reflected an increase in the number of homesale transactions. The Relocation Services segment margin decreased 1 percentage point to 28% from 29% in the comparable prior period primarily due to flat revenues and higher employee related costs. The Title and Settlement Services segment margin remained constant at 13%.

46


Corporate and Other EBITDA for the three months endedJune 30, 2012 decreased $16 million to negative $18 million primarily due to the absence of a net benefit of $12 million of former parent legacy items that occurred in the three months endedJune 30, 2011 and $3 million of incremental employee related costs.
Real Estate Franchise Services
Revenues increased $10 million to $170 million and EBITDA increased $2 million to $99 millionfor the three months endedJune 30, 2012 compared with the same period in 2011.
The increase in revenue was driven by a $7 million increase in third-party domestic franchisee royalty revenue due to a 9% increase in the number of homesale transactions along with a 6% increase in the average homesale price, partially offset by a lower net effective royalty rate as a result of our larger affiliates achieving higher volume levels. Marketing revenue and related expense decreased $3 million primarily due to lower television and online advertising spend during the second quarter of 2012 compared to the same period in 2011.
The increase in revenue was also attributable to a $6 million increase in royalties received from our Company Owned Real Estate Brokerage Services segment which pays royalties to our Real Estate Franchise Services segment. These intercompany royalties of $65 million and $59 million during the second quarter of 2012 and 2011, respectively, are eliminated in consolidation. See “Company Owned Real Estate Brokerage Services” for a discussion of the drivers related to this period over period revenue increase for the Real Estate Franchise Services segment.
The $2 million increase in EBITDA was principally due to the $13 million increase in royalty revenue discussed above and a $2 million reduction in bad debt expense, partially offset by a $10 million increase in legal expenses primarily due to a settlement of a legal matter and a $3 million increase in employee related expenses.
Company Owned Real Estate Brokerage Services
Revenues increased $110 million to $994 million and EBITDA increased $30 million to $78 millionfor the three months endedJune 30, 2012 compared with the same period in 2011.
The increase in revenues, excluding REO revenues, of $114 million was due to increased commission income earned on homesale transactions which was primarily driven by a 13% increase in the number of homesale transactions while the average price of homes remained flat. We believe the 13% increase in homesale transactions was due to higher activity in the Midwest, New England and California markets and the flat average homesale price is reflective of industry trends in the markets we serve. Separately, revenues from our REO asset management company decreased by $4 million to $3 million in the three months endedJune 30, 2012 compared to the same period in 2011 due to reduced inventory levels of foreclosed properties being made available for sale. Our REO operations facilitate the maintenance and sale of foreclosed homes on behalf of lenders.
EBITDA increased $30 million due to:
$110 million increase in revenues discussed above;
a $12 million increase in equity earnings related to our investment in PHH Home Loans; and
a $10 million decrease in other operating expenses, net of inflation, primarily due to restructuring and cost-saving activities and employee costs.
These increases were partially offset by an $85 million increase in commission expenses paid to real estate agents as a result of the increase in revenues, a $6 million increase in royalties paid to the Real Estate Franchise Services segment and a $9 million increase in employee related costs. Commission expense as a percentage of gross commission income increased slightly compared to the same period in 2011, caused by the mix of business. Commission schedules are generally progressive to incentivize agents with higher levels of production.
Relocation Services
Revenues decreased $1 million to $109 million and EBITDA decreased $2 million to $30 million for the quarter ended June 30, 2012 compared with the same quarter in 2011.
The decrease in revenues was primarily driven by a $4 million decrease in at-risk revenue due to lower at-risk transaction volume and a $1 million decrease in financial income due to higher securitization interest expense as a result of the new Apple Ridge agreement during the second quarter of 2012 compared to 2011. The decrease was partially offset by a

47


$4 million increase in referral fees due to increased transaction volume and higher home values compared to the same quarter in 2011.
EBITDA decreased $2 million as a result of a $3 million increase in employee related costs, a $2 million increase in operating costs, primarily due to higher volume related staffing costs and the $1 million decrease in revenue discussed above. The increase in operating costs is higher than the change in revenues in the three months ended June 30, 2012 compared with the same quarter in 2011, primarily due to incremental staffing associated with the increase in initiations, where related revenues will be recognized in later periods as services are provided. These factors were partially offset by a $3 million reduction in costs for at-risk transactions due to lower volume and a $2 million net reduction in insurance loss reserves due to an improvement in claim activity.
Title and Settlement Services
Revenues increased $16 million to $106 million and EBITDA increased $2 million to $14 million for the quarter ended June 30, 2012 compared with the same quarter in 2011.
The increase in revenues was primarily driven by a $7 million increase in resale volume, a $5 million increase in underwriter revenue and a $4 million increase in refinancing transactions. Resale title and closing units increased 14% and refinance title and closing units increased 64% while average price per closing decreased 5% for the quarter ended June 30, 2012 compared with the same quarter in 2011. The decrease in the average price per closing unit was primarily due to a greater percentage of total closing units being derived from refinancing closings, which have a lower average price than resale closings.
EBITDA increased $2 million as a result of the increase in revenues partially offset by a $9 million increase in variable operating costs as a result of the increase in transaction volume, as well as $2 million of increased costs related to the expansion of the lender channel and a $2 million increase in employee related expenses.
Six Months EndedJune 30, 2012 vs. Six Months EndedJune 30, 2011
Our consolidated results comprised the following:
 Six Months Ended June 30,
 2012 2011 Change
Net revenues$2,184
 $2,010
 $174
Total expenses (1)
2,410
 2,270
 140
Loss before income taxes, equity in earnings and noncontrolling interests(226) (260) 34
Income tax expense15
 2
 13
Equity in earnings of unconsolidated entities(25) (4) (21)
Net loss(216) (258) 42
Less: Net income attributable to noncontrolling interests(1) (1) 
Net loss attributable to Holdings and Realogy$(217) $(259) $42
_______________
(1)
Total expenses for the 2011-2012 retention plan,six months endedJune 30, 2012 include $35 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 benefits. items. Total expenses for the six months endedJune 30, 2011 include $5 million of restructuring costs and $60 million related to the 2011 Refinancing Transactions, partially offset by a net benefit of $14 million of former parent legacy items.
Net revenues increased $174 million (9%for the six months endedJune 30, 2012 compared with the six months endedJune 30, 2011, principally due to an increase in revenues for the Real Estate Franchise Services segment and Company Owned Real Estate Brokerage Services segment due to higher homesale transaction volume.
Total expenses increased $140 million (6%) primarily due to:
1.
a $156 million increase in commission and other agent-related costs, operating, marketing and general and administrative expenses primarily related to:
a $113 million increase in commission expense for the Company Owned Real Estate Brokerage Services segment due to increased volume, $10 million in incremental employee related costs, and an $8 million

48


increase in franchise fees paid to RFG partially offset by $21 million lower operating expenses primarily as a result of restructuring and cost-saving activities;
an increase in expenses for the Real Estate Franchise Service segment, primarily due to $13 million of incremental legal expenses, a $5 million increase in marketing expenses and $5 million of incremental employee related costs;
$6 million of incremental employee related costs for the Relocation Services segment and an increase in operating costs related to incremental staffing needs; and
an increase in variable operating expenses for the Title and Settlement segment of $15 million as a result of increases in resale, refinancing and underwriter volume and $3 million of incremental employee related costs.
The incremental employee related costs noted above was primarily due to $30 million of expense for the 2012 bonus plan which is in addition to $20 million of expense being recognized for the 2011-2012 retention plan whereas in the first half of 2011 only $21 million of expense was being recognized for the retention plan. As a result, during the first half of 2012, there is approximately $30 million of incremental employee related costs compared to the first half of 2011.
2.
a net increase in interest expense of $6 million as a result incremental interest related to the 2012 Senior Secured Notes Offering offset by the absence of $17 million of interest expense due to the de-designation of interest rate swaps and $7 million due to the write-off of financing costs as a result of the 2011 Refinancing Transactions which occurred in the first six months of2011;
3.a reduction in the net benefit of former parent legacy items of $11 million due to benefits received in 2011 that did not recur in 2012;
4.
offset by a decrease of $30 million related to the loss on the early extinguishment of debt which was $6 millionfor the six months endedJune 30, 2012 compared to $36 millionfor the six months endedJune 30, 2011.
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.  Income tax expense for the six months endedJune 30, 2012 was $15 million.  This expense included $12 million for an increase in deferred tax liabilities associated with indefinite-lived intangible assets and $3 million was recognized for foreign and state income taxes for certain jurisdictions.
Following is a more detailed discussion of the results of each of our reportable segments during the six months endedJune 30, 2012 and 2011:
 
Revenues (a)
   
EBITDA (b)
   Margin  
 2012 2011 % Change 2012 2011 % Change 2012 2011 Change
Real Estate Franchise Services$299
 $278
 8% $160
 $159
 1 % 54% 57% (3)
Company Owned Real Estate Brokerage Services1,611
 1,471
 10
 61
 11
 455
 4
 1
 3
Relocation Services197
 197
 
 34
 42
 (19) 17
 21
 (4)
Title and Settlement Services194
 173
 12
 16
 14
 14
 8
 8
 
Corporate and Other(117) (109) *
 (38) (50) *
 32
 46
 (14)
Total Company$2,184
 $2,010
 9% $233
 $176
 32 % 11% 9% 2
Less: Depreciation and amortization      89
 93
        
Interest expense, net (c)
      346
 340
        
Income tax expense      15
 2
        
Net loss attributable to Holdings and Realogy      $(217) $(259)        
_______________
*not meaningful
(a)
Includes the elimination of transactions between segments, which consists of intercompany royalties and marketing fees paid by our Company Owned Real Estate Brokerage Services segment of $117 million and $109 million during the six months endedJune 30, 2012 and 2011, respectively.

49


(b)
EBITDA for the threesix months ended March 31,June 30, 2012 includes $5 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. EBITDA for the six months endedJune 30, 2011 includes $11 million of expense for the 2011-2012 retention plan, $25 million of restructuring costs and $36 million related to the loss on the early extinguishment of debt, partially offset by a net benefit of $214 million of former parent legacy benefits.items.
(c)
IncludesInterest expense for the six months endedJune 30, 2011 includes $24 million of interest expense in the three months ended March 31, 2011 due to the de-designation of interest rate swaps and write-off of deferred financing costs as a result of the 2011 Refinancing Transactions.
As described in the aforementioned table, EBITDA margin for “Total Company” expressed as a percentage of revenues increased 42 percentage points for the threesix months endedMarch 31,June 30, 2012 compared to the same period in 2011 primarily due to an increase in revenues forimproved margins at the Real Estate Franchise Services and Company Owned Real Estate Brokerage Services segments due to higher homesale transaction volume. In addition, the increase in EBITDA was also due tosegment partially offset by $30 million of incremental employee related costs, $13 million of incremental legal expenses and a$30 million reduction in the loss on the early extinguishmentnet benefit of debt for the three months ended March 31, 2012 compared to the same period in 2011.former parent legacy items of $11 million.
On a segment basis, the Real Estate Franchise Services segment margin decreased 63 percentage points to 47%54% from 53%57%. The threesix months endedMarch 31,June 30, 2012 reflected increases in franchisee royalty revenue due to an increase in homesale transactions offset by the timing of marketing spend into the first quarterhalf of 2012 for Century 21 advertising that took place during Super Bowl XLVI and increases in legal expenses and employee related expenses. The Company Owned Real Estate Brokerage Services segment margin increased 3 percentage points to negative 3%4% from negative 6%1% in the prior period. The threesix months endedMarch 31,June 30, 2012 reflected an increase in the number of homesale transactions and increase in the average homesale broker commission rate offset by ana 1% decrease in average homesale price. The Relocation Services segment margin decreased 64 percentage points to 5%17% from 11%21% in the comparable prior period primarily due to an increase inflat revenues and incremental employee related costs, higher foreign currency exchange rate losses, and higher restructuring costs. The Title and Settlement Services segment margin remained constantflat at 2%8%. percentage points due to increases in revenue and related variable operating costs as well as incremental employee related costs.
The Corporate and Other EBITDA for the threesix months endedMarch 31,June 30, 2012 increasedimproved $2812 million to negative $2038 million from negative $50 million primarily due to a $30$30 million reduction in the loss on the early extinguishment of debt which was $6 million as a result of the 2012 Senior Secured Notes Offering compared to $36 million as a result of the 2011 Refinancing Transactions.Transactions partially offset by a reduction in the net benefit of former parent legacy items of $11 million and incremental employee related costs of $4 million during the first half of 2012.
Real Estate Franchise Services
Revenues increased $1121 million to $129299 million and EBITDA decreasedincreased $1 million to $61160 millionfor the threesix months endedMarch 31,June 30, 2012 compared with the same period in 2011.

45


The increase in revenue was driven by a $3$9 million increase in third-party domestic franchisee royalty revenue due to aan 7%8% increase in the number of homesale transactions along with ana 4% increase in the average broker commission rate,homesale price, partially offset by a lower net effective royalty rate as a result of our larger affiliates achieving higher volume levels. In addition, marketing revenue and related marketing expenses increased $7$4 million and $8$5 million, respectively, primarily due to the timing of advertising spend for Century 21 compared to the same period in 2011.
The increase in revenue was also attributable to a $2an $8 million increase in royalties received from our Company Owned Real Estate Brokerage Services segment which pays royalties to our Real Estate Franchise Services segment. These intercompany royalties of $44$109 million and $42$101 million during the first quarterhalf of 2012 and 2011, respectively, are eliminated in consolidation. See “Company Owned Real Estate Brokerage Services” for a discussion of the drivers related to this period over period revenue increase for the Real Estate Franchise Services segment.
The $1 million decreaseincrease in EBITDA was principally due to the $17 million increase in royalty revenues noted above and a $3 million increasedecrease in operating expenses partially offset by $13 million of legal expense,expenses due to the settlement of a $3legal matter and other incremental legal expenses, a $5 million increase in employee related expenses due to the 2012 bonus plan on top of the retention plancosts and a net $1 million decrease in EBITDA due to marketing activities, partially offset by the increase in royalty revenues discussed above.activities.
Company Owned Real Estate Brokerage Services
Revenues increased $30140 million to $6171,611 million and EBITDA increased $2050 million to a negative $1761 millionfor the threesix months endedMarch 31,June 30, 2012 compared with the same period in 2011.
The increase in revenues, excluding REO revenues, of $33$147 million was due to increased commission income earned on homesale transactions which was primarily driven by an 8%11% increase in the number of homesale transactions, and an increase in the average broker commission rate, partially offset by a 3%1% decrease in average price of homes sold. We believe the 8%11% increase in homesale transactions and 3%1%

50


decrease in the average price of homes sold is reflective of industry trends in the markets we serve. Separately, revenues from our REO asset management company decreased by $3$7 million to $3$7 million in the threesix months endedMarch 31,June 30, 2012 compared to the same period in 2011 due to reduced inventory levels of foreclosed properties being made available for sale. Our REO operations facilitate the maintenance and sale of foreclosed homes on behalf of lenders.
EBITDA increased $2050 million due to:
$30140 million increase in revenues discussed above;
a $10$22 million increase in equity earnings related to our investment in PHH Home Loans; and
a $11$21 million decrease in other operating expenses, net of inflation, primarily due to restructuring and cost-saving activities and employee costs.
These increases were partially offset by aan $28113 million increase in commission expenses paid to real estate agents as a result of the increase in revenues, a $2$10 million increase in employee related costs, a $8 million increase in royalties paid to the Real Estate Franchise Services segment and a $2 million increase in employee related costsmarketing expenses due to increased transaction volume. Commission expense as a percentage of gross commission income increased slightly compared to the 2012 bonus plan on topsame period in 2011, caused by the mix of the retention plan.business. Commission schedules are generally progressive to incentivize agents with higher levels of production.
Relocation Services
Revenues increasedremained flat at $1 million to $88197 million and EBITDA decreased $68 million to $434 millionfor the quartersix months endedMarch 31,June 30, 2012 compared with the same quarter in 2011.
Revenue remained flat primarily due to a $5 million increase in referral fees due to increased transaction volume and higher home values, $2 million of higher international revenue due to increased transaction volume offset by a $5 million decrease in at-risk revenue driven by lower at-risk transaction volume and a $2 million decrease in financial income due to higher securitization interest expense as a result of the new Apple Ridge agreement. The increase in referral revenue year over year was slightly lower than the increase in referral volume due to a shift in mix of business.
EBITDA decreased $8 million as a result of a $6 million increase in operating costs driven by higher volume. The increase in operating costs is higher than the change in revenues in the six months ended June 30, 2012 compared with the same period in 2011, primarily due to incremental staffing associated with the increase in initiations, where related revenues will be recognized in later periods as services are provided. EBITDA was further impacted by a $6 million increase in employee related costs, partially offset by a reduction in costs of $4 million for at-risk transactions due to lower at-risk transaction volume and a $2 million net reduction in insurance loss reserves due to an improvement in claim activity.
Title and Settlement Services
Revenues increased $21 million to $194 million and EBITDA increased $2 million to $16 millionfor the six months endedJune 30, 2012 compared with the same period in 2011.
The increase in revenues was primarily driven by $3 million of incremental international revenue due to increased transaction volume partially offset by a $2 million decrease in at-risk revenue driven primarily by a lower at-risk transaction volume compared to the same quarter in 2011.
EBITDA decreased $6 million as a result of a $4 million increase in operating costs driven by higher volume, $3 million increase in employee related costs due to the 2012 bonus plan on top of the retention plan, $1 million of higher foreign currency exchange rate losses and $1 million of restructuring costs partially offset by the increase in revenues discussed above.
Title and Settlement Services
Revenues increased $5 million to $88 million and EBITDA remained flat at $2 million for the quarter ended March 31, 2012 compared with the same quarter in 2011.

46


The increase in revenues was primarily driven by a $3$10 million increase in resale volume, a $1$6 million increase in underwriter revenue and a $1$4 million increase in refinancing transactions. Resale title and closing units increased 12% and refinance title and closing units increased 44% while average price per closing decreased 7% for the six months ended June 30, 2012 compared with the same period in 2011. The decrease in the average price per closing unit was primarily due to a greater percentage of total closing units being derived from refinance closings, which have a lower average price than resale closings.
EBITDA remained flatincreased as a result of the increase in revenues partially offset by an increase of $3$13 million in variable operating costs as a result of thedue to an increase in volume, $1as well as, $2 million of increased costs related to the expansion of the lender channel and $3 million of incremental claims reserves due to the timing of claims and the increase in underwriter transactions and $1 million of restructuringemployee related costs.
2012 Restructuring Program
During the first threesix months of 2012, the Company committed to various initiatives targeted principally at reducing costs, enhancing organizational efficiencies and consolidating existing facilities. The Company currently expects to incur restructuring charges of $810 million in 2012. As of March 31,June 30, 2012, the Company Owned Real Estate Brokerage Services therecognized $2 million of personnel related expense and $1 million of facility related expenses. The Relocation Services and

51


the Title and Settlement Services segments each recognized $1 million of facility related expenses. At March 31,June 30, 2012, the remaining liability is $12 million.
2011 Restructuring Program
During 2011, the Company committed to various initiatives targeted principally at reducing costs, enhancing organizational efficiencies and consolidating existing facilities.  The Company incurred restructuring charges of $11 million in 2011. The Company Owned Real Estate Brokerage Services segment recognized $5 million of facility related expenses and $4 million of personnel related expenses. The Relocation Services segment recognized $1 million of personnel related expense and the Title and Settlement Services segmentssegment recognized $1 million of facility related expenses. At March 31,June 30, 2012, the remaining liability is $2 million.
Prior Restructuring Programs
The Company committed to restructuring activities targeted principally at reducing personnel related costs and consolidating facilities during 2006 through 2010. At December 31, 2011, the remaining liability for these various restructuring activities was $17 million. During the three months endedMarch 31,June 30, 2012, the Company utilized $14 million of the remaining accrual resulting in a remaining liability of $1613 million related to future lease payments.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL CONDITION
March 31,
2012
 December 31, 2011 ChangeJune 30,
2012
 December 31, 2011 Change
Total assets$7,797
 $7,810
 $(13)$7,362
 $7,350
 $12
Total liabilities$9,495
 $9,318
 $177
$9,074
 $8,849
 $225
Total equity (deficit)$(1,698) $(1,508) $(190)$(1,712) $(1,499) $(213)
For the threesix months ended March 31,June 30, 2012, total assets decreasedincreased $1312 million primarily as a result of a $41 million increase in relocation receivables, a $27 million increase in trade receivables and a $13 million increase in other non-current assets, partially offset by a decrease in franchise agreements intangible assets, other intangibles and property and equipment of $1734 million, $1121 million and $1014 million, respectively, due to amortization and depreciation, partially offset by a $5 million increase in cash and cash equivalents, $13 million increase in other current assets and a $7 million increase in relocation receivables.depreciation.
Total liabilities increased $177225 million principally due to a $82185 million increase in indebtedness. Accrued expenses and other current liabilities increased$63 million, primarily due to an increase in accrued interest of $102$18 million as well as $15 million of, an increase in accrued debt financing costs of $14 million related to the 2012 Senior Secured Note Offering.Offering as well as an increase in accounts payable of $30 million. These increases were partially offset by a $2560 million decrease in securitization obligations.
Total equity (deficit) decreased $190213 million primarily due to the net loss attributable to Holdings and Realogy of $192217 million for the threesix months ended March 31,June 30, 2012.
LIQUIDITY AND CAPITAL RESOURCES
On June 8, 2012, Holdings filed a registration statement on Form S-1 with the SEC relating to a proposed initial public offering of shares of Common Stock. If the initial public offering is consummated, all of the outstanding Convertible Notes would be either converted into shares of Common Stock or redeemed at 90% of the principal thereof. Holders of approximately $2.0 billion principal amount of the Convertible Notes have indicated that they intend to convert all of their Convertible Notes substantially concurrently with the closing of the offering. In addition, we expect to use substantially all of the net proceeds from the offering to repay other outstanding indebtedness. The following discussion assumes that the initial public offering of Common Stock is not consummated.
Our liquidity position has been negatively affected by the substantial interest expense on our debt obligations as well as the impact of the significant and prolonged downturn in the real estate market, which have resulted in negative operating cash flows to the Company. While we believe that we are experiencing the beginning of a recovery in the residential real estate market, our liquidity position is expected to continue to be negatively affected by the ongoing unfavorable conditions in the real estate market resulting in negative operating cash flows, the substantial interest expense on our debt obligationsobligations. Moreover, we are not certain whether the improvement we have seen in the residential real estate market will lead to a sustained recovery and potentialcannot predict when this market will return to a period of sustainable growth. If a recovery

52


in the residential real estate market is not sustained or is delayed or the economy as a whole does not improve or deteriorates, we may experience further adverse changes in interest rates.effects on our business, financial condition and liquidity, including our ability to access capital and grow our business. Our liquidity position would also be adversely impacted by our inability to access our relocation securitization programs and could be adversely impacted by our inability to access the

47


capital markets. In addition, our short-term liquidity position from time to time has been and may continue to be negatively affected by seasonal fluctuations in the residential real estate brokerage business.
Although we have seen improvement in affordability and stabilization in homesale sides at our Company Owned Real Estate Brokerage Services segment and our Real Estate Franchise Services segment, we are not certain whether these signs of stabilization will lead to a recovery. We cannot predict when the residential real estate industry will return to a period of sustainable growth. Moreover, if the residential real estate market or the economy as a whole does not improve, we may experience further adverse effects on our business, financial condition and liquidity, including our ability to access capital.
Our primary liquidity needs will beare to service our debt and finance our working capital and capital expenditures, which we have historically satisfied with cash flows from operations and funds available under our revolving credit facilities and securitization facilities. Primarily as a consequence of our cash interest obligations, we expect to experience negative cash flows in 2012during the next twelve months given our operating environment. However, if conditions in the real estate market do not deteriorate, further, given our availability under our extended revolving credit facility and other sources of liquidity which we believe are available to us, we believe we will be able to meet our cash flow needs through March 31,June 30, 2013.
Historically, operating results and revenues for all of our businesses have been strongest in the second and third quarters of the calendar year. A significant portion of the expenses we incur in our real estate brokerage operations are related to marketing activities and commissions and are, therefore, variable. However, many of our other expenses, such as interest payments, facilities costs and certain personnel-related costs, are fixed and cannot be reduced during a seasonal slowdown. For example, interest payments of approximately $215$215 million are due on our Unsecured Notes and Second Lien Loans in October and April of each year. Because of this asymmetry and the size of our cash interest obligations, if unfavorable conditions in the real estate market and general macroeconomic conditions do not significantly improve or our total indebtedness is not materially reduced, we would be required to seek additional sources of working capital for our future liquidity needs, including obtaining additional financing and deferring or reducing spending. There can be no assurance that we would be able to defer or reduce expenses or that any such actions would not materially and adversely impact our business and results of operations or that we would be able to obtain financing on acceptable terms or at all.
We will continue to evaluate potential financing transactions, including issuing equity securities, refinancing certain tranches of our indebtedness, issuing incremental debt, obtaining incremental letters of credit and extending maturities as well as potential transactions pursuant to which third parties, Apollo or its affiliates may provide financing to us or otherwise engage in transactions to provide liquidity to us. There can be no assurance as to which, if any, of these alternatives we may pursue as the choice of any alternative will depend upon numerous factors such as market conditions, our financial performance and the limitations applicable to such transactions under our existing financing agreements and the consents we may need to obtain under the relevant documents. There also can be no assurance that financing or refinancing will be available to us on acceptable terms or at all. In addition, the conversion of all or a portion of our approximately $2.1 billion in outstanding Convertible Notes into equity at the option of the holders thereof would increase our liquidity, although the holders of the Convertible Notes are not obligated to do so.
Future indebtedness may impose various additional restrictions and covenants on us which could limit our ability to respond to market conditions, to make capital investments or to take advantage of business opportunities. Our ability to make payments to fund working capital, capital expenditures, debt service, and strategic acquisitions will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control.
Cash Flows
At March 31,June 30, 2012, we had $148138 million of cash and cash equivalents, an increasea decrease of $5 million compared to the balance of $143 million at December 31, 2011. The following table summarizes our cash flows for the threesix months endedMarch 31,June 30, 2012 and 2011:
Three Months Ended March 31,Six Months Ended June 30,  
March 31, 2012 March 31, 2011 Change2012 2011 Change
Cash provided by (used in):          
Operating activities$(32) $(87) $55
$(93) $(194) $101
Investing activities(20) (19) (1)(30) (24) (6)
Financing activities56
 6
 50
118
 179
 (61)
Effects of change in exchange rates on cash and cash equivalents1
 1
 

 1
 (1)
Net change in cash and cash equivalents$5
 $(99) $104
$(5) $(38) $33

4853


For the threesix months endedMarch 31,June 30, 2012, we utilized $55101 million less cash in operations compared to the same period in 2011. For the threesix months endedMarch 31,June 30, 2012, $3293 million of cash was used in operating activities primarily due to negative cash flows from operating results of $125 million after $320 million of cash interest payments as well as an increase in trade receivables and relocation receivables of $27 million and $41 million, respectively, partially offset by an increase in accounts payable, accrued expenses and other liabilities of $82 million. For the six months endedJune 30, 2011, $194 million of cash was used in operating activities due to negative cash flows from operating results of $142121 million includingafter $66 million of cash interest payments, partially offset by an increase in accounts payable, accrued expenses and other liabilities of $103 million. For the three months ended March 31, 2011, $87 million of cash was used in operating activities due to negative cash flows from operating results of $131 million including $36287 million of cash interest payments as well as an increase in trade receivables and relocation receivables of $932 million and $741 million, respectively. These uses of cash were partially offset by an increase in accounts payable, accrued expenses and other liabilities of $62 million.
For the threesix months endedMarch 31,June 30, 2012, we used $16 million more cash for investing activities compared to the same period in 2011. For the threesix months endedMarch 31,June 30, 2012, $2030 million of cash was used primarily for $919 million of property and equipment additions, $4 million of acquisition related payments, a $43 million increase in restricted cash and the purchase of certificates of deposit for $34 million. For the threesix months endedMarch 31,June 30, 2011, $1924 million of cash was used in investing activities primarily fordue to $1125 million of property and equipment additions, and the purchase$4 million of acquisition related payments partially offset by net proceeds from certificates of deposit forof $59 million.
For the threesix months endedMarch 31,June 30, 2012, $5061 million moreless cash was provided from financing activities compared to the same period in 2011. For the threesix months endedMarch 31,June 30, 2012, $56118 million of cash was provided as a result of the issuance of $593 million of First Lien Notes and $325 million of First and a Half Lien Notes partially offset by $629640 million of term loan facility repayments, the repayment of revolver borrowings of $20894 million and $2761 million of securitization obligation repayments. For the threesix months endedMarch 31,June 30, 2011, $6$179 million of cash was provided by financing activities and was comprised of $700 million of proceeds from the issuance of the First and a Half Lien Notes, and $98 million related to the proceeds from the extension of the term loan facility and an increase in incremental revolver borrowings of $125 million, partially offset by $702703 million of term loan facility repayments a decrease in incremental revolver borrowings of $33 million of revolving credit,and the payment of $3334 million of debt issuance costscosts.
Adjusted Free Cash Flow
We define “Adjusted Free Cash Flow” as cash flows from operating activities less property and $21 millionequipment additions and changes in relocation receivables and advances. The changes in relocation receivables and advances are removed from the Adjusted Free Cash Flow calculation as the change in these assets corresponds with the change in our securitization obligations included in cash flows from financing activities. We use Adjusted Free Cash Flow as a measure of securitization obligation repayments.liquidity because it assists us in assessing our ability to reduce our indebtedness through our generation of cash. We believe Adjusted Free Cash Flow is useful to an investor in evaluating our liquidity because Adjusted Free Cash Flow and similar measures are widely used by investors, securities analysts and other interested parties in our industry to measure a company's liquidity without regard to revenue and expense recognition, which can vary depending upon accounting methods. Although we use Adjusted Free Cash Flow as a liquidity measure to assess our ability to reduce our indebtedness through our generation of cash, the use of Adjusted Free Cash Flow has important limitations, including that: (1) Adjusted Free Cash Flow does not reflect the cash requirements necessary to service principal payments on our indebtedness; and (2) Adjusted Free Cash Flow removes the impact of accrual basis accounting on asset accounts and non-debt liability accounts. Adjusted Free Cash Flow may be calculated differently by other companies, including other companies in our industry, limiting its usefulness as a comparative measure. Adjusted Free Cash Flow should not be considered in isolation or as a substitute to cash flows from operating activities determined in accordance with GAAP and should be assessed alongside other liquidity measures, including various cash flow metrics and our other GAAP results.
A reconciliation of net cash used in operating activities to Adjusted Free Cash Flow is set forth in the following table:
 Six Months Ended June 30,
 2012 2011
Net cash used in operating activities$(93) $(194)
Less property and equipment additions(19) (25)
Less relocation receivables and advances(41) (41)
Adjusted Free Cash Flow$(33) $(128)

54

Table of Contents

Financial Obligations
Indebtedness Table
As of March 31,June 30, 2012, the total capacity, outstanding borrowings and available capacity under the Company’s borrowing arrangements were as follows:
Interest
Rate
 
Expiration
Date
 
Total
Capacity
 
Outstanding
Borrowings
 
Available
Capacity
Interest
Rate
 
Expiration
Date
 
Total
Capacity
 
Outstanding
Borrowings
 
Available
Capacity
Senior Secured Credit Facility:                  
Extended revolving credit facility (1)(2) April 2016 $363
 $
 $283
(2) April 2016 $363
 $109
 $165
Extended term loan facility(3) October 2016 1,822
 1,822
 
(3) October 2016 1,822
 1,822
 
First Lien Notes7.625% January 2020 593
 593
 
7.625% January 2020 593
 593
 
Existing First and a Half Lien Notes7.875% February 2019 700
 700
 
7.875% February 2019 700
 700
 
New First and a Half Lien Notes9.00% January 2020 325
 325
 
9.00% January 2020 325
 325
 
Second Lien Loans13.50% October 2017 650
 650
 
13.50% October 2017 650
 650
 
Other bank indebtedness (4) Various 108
 100
 8
 Various 108
 105
 3
Existing Notes:            
Senior Notes10.50% April 2014 64
 64
 
10.50% April 2014 64
 64
 
Senior Toggle Notes(5)11.00% April 2014 52
 52
 
11.00% April 2014 41
 41
 
Senior Subordinated Notes (5)(6)12.375% April 2015 190
 188
 
12.375% April 2015 190
 188
 
Extended Maturity Notes:            
Senior Notes (6)(7)11.50% April 2017 492
 489
 
11.50% April 2017 492
 489
 
Senior Notes (7)(8)12.00% April 2017 130
 129
 
12.00% April 2017 130
 129
 
Senior Subordinated Notes13.375% April 2018 10
 10
 
13.375% April 2018 10
 10
 
Convertible Notes11.00% April 2018 2,110
 2,110
 
11.00% April 2018 2,110
 2,110
 
Securitization obligations: (8)(9)            
Apple Ridge Funding LLC December 2013 400
 270
 130
 December 2013 400
 245
 155
Cartus Financing Limited (9) Various 64
 32
 32
Cartus Financing Limited (10)
 Various 63
 22
 41
 $8,073
 $7,534
 $453
 $8,061
 $7,602
 $364

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_______________
 
 
(1)
The available capacity under this facility was reduced by $8089 million of outstanding letters of credit. On May 1,August 6, 2012, the Company had $197$150 million outstanding on the extended revolving credit facility and $79$89 million of outstanding letters of credit, leaving $81$124 million of available capacity.
(2)
Interest rates with respect to revolving loans under the senior secured credit facility are based on, at Realogy’s option, (a) adjusted LIBOR plus 3.25% or ABR(b) JPMorgan Chase Bank, N.A., prime rate ("ABR") plus 2.25% in each case subject to reductions based on the attainment of certain leverage ratios.
(3)
Interest rates with respect to term loans under the senior secured credit facility are based on, at Realogy���sRealogy’s option, (a) adjusted LIBOR plus 4.25% or (b) the higher of the Federal Funds Effective Rate plus 1.75% and JPMorgan Chase Bank, N.A.’s prime rate (“ABR”) plus 3.25%.
(4)
Consists of revolving credit facilities that are supported by letters of credit issued under the senior secured credit facility;facility, a portion of which are issued under the synthetic letter of credit facility: $85 million of capacity which expiresdue in August 2012, $50 million due in January 2013 and $50 million due in July 2013.
(5)On April 16, 2012, the Company redeemed $11 million principal amount of the outstanding Senior Toggle Notes.
(6)
Consists of $190 million of 12.375% Senior Subordinated Notes due 2015, less a discount of $2 million.
(6)(7)
Consists of $492 million of 11.50% Senior Notes due 2017, less a discount of $3 million.
(7)(8)
Consists of $130 million of 12.00% Senior Notes due 2017, less a discount of $1 million.
(8)(9)Available capacity is subject to maintaining sufficient relocation related assets to collateralize these securitization obligations.
(9)(10)
Consists of a £35£35 million facility which expires in August 2015 and a £5£5 million working capital facility which expires in August 2012.

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Indebtedness Incurred in Connection with the Merger and Subsequent Debt Transactions
Realogy incurred indebtedness in 2007 in connection with the Merger, which included borrowings under Realogy's senior secured credit facility (the “Senior Secured Credit Facility”) and the issuance of unsecured notes. Realogy borrowed an initial amount of $3,170$3,170 million term loan facility under the Senior Secured Credit Facility (consisting of $1,950$1,950 million initial term loan facility and a $1,220$1,220 million delayed draw term loan facility) with original maturity dates of October 2013. The $1,950$1,950 million initial term loan facility was used by Realogy to finance a part of the Merger, including, without limitation, payment of fees and expenses contemplated thereby. In addition, Realogy used the $1,220$1,220 million delayed draw term loan facility to finance the refinancing or discharge of Realogy's previously existing senior notes, including, without limitation, the payment of fees and expenses. Realogy issued an original aggregate principal amount of $3,125$3,125 million of unsecured notes with maturity dates in 2014 and 2015 (the "Existing Notes") to finance a part of the Merger, including, without limitation, payment of fees and expenses.
In 2009, 2011 and 2012, Realogy completed various debt transactions, which are detailed below, that accomplished one or more ofresulted in the following: (1) provided additional cushion under theflexibility with respect to compliance with Realogy's senior secured leverage ratio;ratio under our senior secured credit facility; (2) extended the maturityextension of the maturities of certain portions of our indebtedness; (3) provided additional liquidity to fund operations; and (4) issuedthe issuance of $2,110 million of Convertible Notes that if converted to equity would improve Realogy's liquidity position.Notes.
In September and October 2009, Realogy incurred $650 million of Second Lien Loans (the "Second Lien Loans") under the Senior Secured Credit Facility, the net proceeds of which were used to pay down outstanding balances on the revolving credit facility under the Senior Secured Credit Facility and for working capital as well as to exchange $150$150 million of Second Lien Loans for $221$221 million aggregate principal amount of outstanding Senior Toggle Notes.
In January and February of 2011, Realogy completed a series of transactions, referred to herein as the “2011 Refinancing Transactions,” to refinance portions of its Senior Secured Credit Facility and the Existing Notes.
On January 5, 2011, Realogy completed private exchange offers, relating to its then outstanding Existing Notes (the “Debt Exchange Offering”). As a result of the Debt Exchange Offering, $2,110 million of Existing Notes were tendered for Convertible Notes due 2018, $632$632 million of Existing Notes due 2014 and 2015 were tendered for Extended Maturity Notes due 2017 and 2018 and $303$303 million of Existing Notes remained outstanding.
Effective February 3, 2011, we entered into a first amendment to our senior secured credit facility (the “Senior Secured Credit Facility Amendment”) and an incremental assumption agreement, which resulted in the following: (i) extended the maturity of a significant portion of our first lien term loans to October 10, 2016; (ii) extended the maturity of a significant portion of the loans and commitments under our revolving credit facility to April 10, 2016, and converted a portion of the extended revolving loans to extended term loans ($($98 million in the aggregate); (iii) extended the maturity of a significant portion of the commitments under our synthetic letter of credit facility to October 10, 2016; and (iv) allowed for the issuance of First and a Half Lien Notes, which would not be counted as senior secured debt for purposes of determining the Company's compliance with the senior secured leverage ratio covenant under the Senior Secured Credit Facility.
On February 3, 2011, the Company issued $700 million aggregate principal amount of Existing First and a Half Lien Notes due 2019 in a

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private offering exempt from the registration requirements of the Securities Act, the net proceeds of which, along with cash on hand, were used to prepay $700$700 million of certain of the first lien term loans that were extended in connection with the Senior Secured Credit Facility Amendment.
On February 2, 2012, Realogy issued $593 million of First Lien Notes due 2020 and $325 million of New First and a Half Lien Notes due 2020 in a private offering exempt from the registration requirements of the Securities Act, referred to herein as the “2012 Senior Secured Notes Offering.” The Company used the proceeds from the offering, of approximately $918$918 million, to: (i) prepay $629$629 million of its non-extended term loan borrowings under its senior secured credit facility which were due to mature in October 2013, (ii) repay all of the $133$133 million in outstanding borrowings under its non-extended revolving credit facility which was due to mature in April 2013, and (iii) repay $156$156 million of the outstanding borrowings under its extended revolving credit facility. In conjunction with the repayments of $289$289 million described in clauses (ii) and (iii), the Company reduced the commitments under its non-extended revolving credit facility by a like amount, thereby terminating the non-extended revolving credit facility.
***

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Senior Secured Credit Facility
The Senior Secured Credit Facility consists of (i) term loan facilities, (ii) revolving credit facilities, (iii) a synthetic letter of credit facility (the facilities described in clauses (i), (ii) and (iii), as amended by the Senior Secured Credit Facility Amendment, collectively referred to as the “First Lien Facilities”), and (iv) an incremental (or accordion) loan facility, a portion of which as summarized above was utilized in connection with the incurrence of Second Lien Loans. Realogy uses the revolving credit facility for, among other things, working capital and other general corporate purposes.
The loans under the First Lien Facilities (the “First Lien Loans”) are secured to the extent legally permissible by substantially all of the assets of Realogy, Intermediate and the subsidiary guarantors,all of their domestic subsidiaries other than certain excluded subsidiaries, including but not limited to (i) a first-priority pledge of substantially all capital stock held by Realogy 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 (ii) perfected first-priority security interests in substantially all tangible and intangible assets of Realogy and each subsidiary guarantor, subject to certain exceptions.
The Second Lien Loans are secured by liens on the assets of Realogy, Intermediate and by the subsidiary guarantors that secure the First Lien Loans. However, such liens are junior in priority to the First Lien Loans, the First Lien Notes and the First and a Half Lien Notes. The Second Lien Loans bear interest at a rate of 13.50% per year and interest payments are payable semi-annually with the first interest payment made on April 15, and October 15of each year.2010. The Second Lien Loans mature on October 15, 2017 and there are no required amortization payments. Subject to certain limitations set forth in our senior secured credit facility, we may prepay the Second Lien Loans on or prior to October 15, 2012 at par plus a make-whole payment with respect to all interest that would accrue through October 15, 2012 in respect of the principal amount of Second Lien Loans to be prepaid, and thereafter, until October 15, 2013, we may prepay the Second Lien Loans at par plus a prepayment fee in an amount equal to 10.125% of the principal amount of Second Lien Loans to be prepaid. There are no prepayment fees payable in connection with prepayments of the Second Lien Loans following October 15, 2013.
The senior secured credit facility also provides for a synthetic letter of credit facility which is for: (i) the support of Realogy’s obligations with respect to Cendant contingent and other liabilities assumed under the Separation and Distribution Agreement and (ii) general corporate purposes in an amount not to exceed $100 million.$100 million. The synthetic letter of credit facility capacity is $186 million at March 31,June 30, 2012, of which $43 million will expire in October 2013 and $143 million will expire in October 2016. As of March 31,June 30, 2012, the capacity was being utilized by a $70 million letter of credit with Cendant for any remaining potential contingent obligations and $100 million of letters of credit for general corporate purposes.
Realogy’s senior secured credit facility contains financial, affirmative and negative covenants and requires Realogy to maintain a senior secured leverage ratio not to exceed a maximum amount on the last day of each fiscal quarter. Specifically, Realogy’s total senior secured net debt to trailing twelve month EBITDA may not exceed 4.75 to 1.0.1.0. EBITDA, as defined in the senior secured credit facility, includes certain adjustments and is calculated on a “pro forma” basis for purposes of calculating the senior secured leverage ratio. 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. Total senior secured net debt does not include the First and a Half Lien Notes, other indebtedness secured by a lien on our assets pari passu or junior in priority to the liens securing the First and a Half Lien Notes, including the Second Lien Loans, other bank indebtedness not secured by a first lien on Realogy or its subsidiaries assets,our securitization obligations or the unsecured notes. At March 31,June 30, 2012, Realogy’s senior secured leverage ratio was 4.024.08 to 1.0.1.0.
Realogy 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 Intermediate equity for cash, which would be infused as capital into Realogy. The effect of such infusion would be to increase Adjusted EBITDA for purposes of calculating the senior secured leverage ratio for the applicable twelve-month period and reduce net senior secured indebtedness upon actual receipt of such capital. If Realogy is unable to maintain compliance with the senior secured leverage ratio and fails to remedy a default

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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.
If an event of default occurs under the senior secured credit facility, and Realogy fails to obtain a waiver from the lenders, Realogy’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:

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would not be required to lend any additional amounts to Realogy;
could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and payable;
could require Realogy to apply all of its available cash to repay these borrowings; or
could prevent Realogy from making payments on the First and a Half Lien Notes or the unsecured notes;
any of which could result in an event of default under the First and a Half Lien Notes, the unsecured notes and the Company’s Apple Ridge Funding LLC securitization program.
If the CompanyRealogy 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, and itswhich assets also secure our other secured indebtedness. The CompanyRealogy 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 the CompanyRealogy 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, the Second Lien Loans and the Unsecured Notes, or be able to borrow sufficient funds to refinance such indebtedness. Even if the CompanyRealogy is able to obtain new financing, it may not be on commercially reasonable terms, or terms that are acceptable to the Company.Realogy.
First Lien Notes
The $593 million of First Lien Notes are senior secured obligations of the CompanyRealogy 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 commencing(the first interest payment was July 15, 2012.2012). The First Lien Notes are guaranteed on a senior secured basis by Intermediate and each domestic subsidiary of the CompanyRealogy that is a guarantor under the Senior Secured Credit Facility and certain of the Company'sRealogy's outstanding securities. The First Lien Notes are also guaranteed by 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, (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 and the Second Lien Loans.
First and a Half Lien Notes
The First and a Half Lien Notes are senior secured obligations of the Company. The $700$700 million of Existing First and a Half Lien Notes mature on February 15, 2019 and bear interest at a rate of 7.875% per annum, payable semiannually on February 15 and August 15 of each year. The New First and a Half Lien Notes mature on January 15, 2020. The $325$325 million of New First and a Half Lien Notes bear interest at a rate of 9.0% per annum and interest is payable semiannually on January 15 and July 15 of each year commencing(the first interest payment date was July 15, 2012.2012). The First and a Half Lien Notes are guaranteed on a senior secured basis by Intermediate and each domestic subsidiary of the CompanyRealogy that is a guarantor under the Senior Secured Credit Facility and certain of the Company'sRealogy's outstanding securities. The First and a Half Lien Notes are also guaranteed by 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, and (ii) senior to the collateral liens securing the Company’s second lien obligations under its Senior Secured Credit Facility.Second Lien Loans. The priority of the collateral liens securing each series of the First and a Half Lien Notes is equal to one another.

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Other Bank Indebtedness
Realogy has separate revolving U.S. credit facilities under which it could borrow up to $100 million at March 31,June 30, 2012 and $125$125 million at December 31, 2011 and a separate U.K. credit facility under which it could borrow up to £5£5 million ($ ($8 million)million) at March 31,June 30, 2012 and December 31, 2011. These facilities are not secured by assets of Realogy or any of its subsidiaries but are supported by letters of credit issued under the senior secured credit facility, including the synthetic letter of credit facility. The facilities generally have a one-year term with certain options for renewal. As of March 31,June 30, 2012, Realogy had outstanding borrowings of $100105 million under these credit facilities. In April 2012, Realogy extended the $50 million facility that was due in July 2012 to July 2013. As a result, Realogy has$5 million outstanding on an $8 million of capacity facility which expires in August 2012, $$50 million due in January 2013 and $50 million due in July 2013. For the threesix months endedMarch 31,June 30, 2012 and March 31,June 30, 2011, the weighted average interest rate under the U.S. credit facilities was 2.9% with interest payable either monthly or quarterly.  

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Unsecured Notes
On April 10, 2007, Realogy issued in a private placement $1,700$1,700 million of Senior Notes due 2014, $550$550 million of Senior Toggle Notes due 2014 and $875$875 million of Senior Subordinated Notes due 2015. On February 15, 2008, Realogy completed an exchange offer to register the privately placed notes under the Securities Act. The registration statement was filed on Form S-4 (File No. 333-148153 declared effective by the SEC on January 9, 2008). The term "Existing Notes" refers to the privately placed notes and the exchange notes. On January 5, 2011, Realogy settled the Debt Exchange Offering to exchange its Existing Senior Notes and the 12.375% Senior Subordinated Notes for the Extended Maturity Notes and the Convertible Notes. On the settlement date of the Debt Exchange Offering, Realogy issued (i) $492 million aggregate principal amount of 11.50% Senior Notes, (ii) $130 million aggregate principal amount of 12.00% Senior Notes and (iii) $10 million aggregate principal amount of 13.375% Senior Subordinated Notes.
The 10.50%10.5% Senior Notes mature on April 15, 2014 and bear interest payable semiannually on April 15 and October 15 of each year. The 11.50% Senior Notes mature on April 15, 2017 and bear interest payable semiannually on April 15 and October 15 of each year.
The Senior Toggle Notes mature on April 15, 2014. Interest is payable semiannually on April 15 and October 15 of each year. For any interest payment period after the initial interest payment period and through October 15, 2011, Realogy had the option to pay interest on the Senior Toggle Notes (i) entirely in cash (“Cash Interest”), (ii) entirely by increasing the principal amount of the outstanding Senior Toggle Notes or by issuing Senior Toggle Notes (“PIK Interest”), or (iii) 50% as Cash Interest and 50% as PIK Interest. Cash Interest on the Senior Toggle Notes accrues at a rate of 11.00% per annum. PIK Interest on the Senior Toggle Notes accrues at the Cash Interest rate per annum plus 0.75%. Beginning with the interest period which ended October 2008 through the interest period which ended April 2011, Realogy elected to satisfy its interest payment obligations by issuing additional Senior Toggle Notes. Realogy elected to pay Cash Interest for the interest period commencing April 15, 2011 and is required to make all future interest payments on the Senior Toggle Notes entirely in cash until they mature.
Realogy would be subject to certain interest deduction limitations if the Senior Toggle Notes were treated as “applicable high yield discount obligations” (“AHYDO”) within the meaning of Section 163(i)(1) of the Internal Revenue Code, as amended. In order to avoid such treatment, Realogy is required to redeem for cash a portion of each Senior Toggle Note outstanding on April 15, 2012 for the periods that Realogy elected to pay PIK Interest. As a result, on April 16, 2012, Realogy redeemed $11$11 million principal amount of the outstanding Senior Toggle Notes.
The 12.00% Senior Notes mature on April 15, 2017 and bear interest payable semiannually on April 15 and October 15 of each year. The 12.375% Senior Subordinated Notes mature on April 15, 2015 and bear interest payable semiannually on April 15 and October 15 of each year. The 13.375% Senior Subordinated Notes mature on April 15, 2018 and bear interest payable on April 15 and October 15 of each year.
The Senior Notes are guaranteed on an unsecured senior basis, and the Senior Subordinated Notes are guaranteed on an unsecured senior subordinated basis, in each case, by each domestic subsidiary of Realogy’s existing and future U.S. subsidiariesRealogy that is a guarantor under the senior secured credit facility or that guarantees certain other indebtedness in the future, subject to certain exceptions.of Realogy's outstanding securities. The Senior Notes are guaranteed by Holdings on an unsecured senior subordinated basis and the Senior Subordinated Notes are guaranteed by Holdings on an unsecured junior subordinated basis.
On June 24, 2011, Realogy completed offers of exchange notes for Extended Maturity Notes issued in the Debt Exchange Offering. The term “exchange notes” refers to the 11.50% Senior Notes due 2017, the 12.00% Senior Notes due 2017 and the 13.375% Senior Subordinated Notes due 2018, all as registered under the Securities Act, pursuant to a Registration Statement on Form S-4 (File No. 333-173254 declared effective by the SEC on May 20, 2011). Each series of the exchange notes are substantially identical in all material respects to the Extended Maturity Notes of the applicable series issued in the Debt Exchange Offering (except that the new registered exchange notes do not contain terms with respect to additional interest or transfer restrictions). Unless the context otherwise requires, the term “Extended Maturity Notes” refers

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to the exchange notes.
Convertible Notes
The Series A Convertible Notes, Series B Convertible Notes and Series C Convertible Notes mature on April 15, 2018 and bear interest at a rate per annum of 11.00% payable semiannually on April 15 and October 15 of each year. The Convertible Notes are convertible into Class A Common Stock at any time prior to April 15, 2018. The Series A Convertible Notes and Series B Convertible Notes are initially convertible into 975.609839.0244 shares of Class A Common Stock per $1,000$1,000 aggregate

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principal amount of Series A Convertible Notes and Series B Convertible Notes, which is equivalent to an initial conversion price of approximately $1.025$25.625 per share, and the Series C Convertible Notes are initially convertible into 926.784137.0714 shares of Class A Common Stock per $1,000$1,000 aggregate principal amount of Series C Convertible Notes, which is equivalent to an initial conversion price of approximately $1.079$26.975 per share, subject to adjustment if specified distributions to holders of the Class A Common Stock are made or specified corporate transactions occur, in each case as set forth in the indenture governing the Convertible Notes. The Convertible Notes are guaranteed on an unsecured senior subordinated basis by each of Realogy’s existing and future U.S. subsidiaries that is a guarantor under the senior secured credit facility or that guarantees certain other indebtedness in the future, subject to certain exceptions. The Convertible Notes are guaranteed on an unsecured junior subordinated basis by Holdings.
Following a Qualified Public Offering, Realogy may, at its option, redeem the Convertible Notes, in whole or in part, at a redemption price, payable in cash, equal to 90% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest thereon to, but excluding, the redemption date.interest.
On March 21, 2012, the SEC declared effective a Registration Statement on Form S-1 (File No. 333-179896) of Holdings and Realogy, which included the effectiveness of a Post-Effective Amendment to the registration statement initially declared effective on June 16, 2011. The Registration Statement registers for resale the outstanding Convertible Notes and the Class A Common Stock of Holdings issuable upon conversion of the Convertible Notes. Offers and sales of the Convertible Notes and Class A Common Stock may be made by selling securityholders named in the registration statement pursuant to the related prospectus, as amended or supplemented from time to time.
Loss on the Early Extinguishment of Debt and Write-Off of Deferred Financing Costs
As a result of the 2012 Senior Secured Notes Offering, the Company recorded a loss on the early extinguishment of debt of $6 million during the threesix months ended March 31,June 30, 2012.
As a result of the 2011 Refinancing Transactions, the Company recorded a loss on the early extinguishment of debt of $36 million and wrote off deferred financing costs of $7 million to interest expense as a result of debt modifications during the threesix months ended March 31,June 30, 2011.
Securitization Obligations
Realogy has secured obligations through Apple Ridge Funding LLC, a securitization program with a borrowing capacity of $400$400 million and expiration date of December 2013.
In 2010, Realogy, through a special purpose entity, Cartus Financing Limited, entered into agreements providing for a £35£35 million revolving loan facility which expires in August 2015 and a £5£5 million working capital facility which expires in August 2012. These Cartus Financing Limited facilities are secured by relocation assets of a U.K. government contract in a special purpose entity and are therefore classified as permitted securitization financings as defined in Realogy’s senior secured credit facility and the indentures governing the Unsecured Notes.
The Apple Ridge entities and 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’s relocation business in order to facilitate the relocation of their employees. Assets of these special purpose entities are not available to pay Realogy’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, breach of Realogy’s senior secured leverage ratio under Realogy’s senior secured credit facility if uncured, and cross-defaults to Realogy’s credit agreement, unsecured and secured notes or other material indebtedness. The occurrence of a trigger event under the Apple Ridge securitization

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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 $362393 million and $366 million of underlying relocation receivables and other related relocation assets at March 31,June 30, 2012 and December 31, 2011, respectively. Substantially all

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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 $14 million for the three and six months ended March 31,June 30, 2012, respectively and $2 million and $3 millionfor the three and six months endedJune 30, 2011, respectively. This interest is recorded within net revenues in the accompanying 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 3.5% and 1.9% for the threesix months ended March 31,June 30, 2012 and 2011, respectively.
Covenants under the Senior Secured Credit Facility and Certain Indentures
The senior secured credit facility and the indentures governing the First Lien Notes, First and a Half Lien Notes, the Extended Maturity Notes and the 12.375% Senior Subordinated Notes contain various covenants that limit Realogy’s ability to, among other things:
incur or guarantee additional debt;
incur debt that is junior to senior indebtedness and, with respect to the Senior Subordinated Notes, senior to the Senior Subordinated Notes;
pay dividends or make distributions to Realogy’s stockholders;
repurchase or redeem capital stock or subordinated indebtedness;
make loans, investments or acquisitions;
incur restrictions on the ability of certain of ourRealogy's subsidiaries to pay dividends or to make other payments to Realogy;
enter into transactions with affiliates;
create liens;
merge or consolidate with other companies or transfer all or substantially all of ourRealogy's and its material subsidiaries' assets;
transfer or sell assets, including capital stock of subsidiaries; and
prepay, redeem or repurchase the Unsecured Notes, the First Lien Notes and the First and a Half Lien Notes and debt that is junior in right of payment to the Unsecured Notes, the First Lien Notes and the First and a Half Lien Notes.
In connection with the Debt Exchange Offering, Realogy received consents from the holders of the 10.50% Senior Notes and Senior Toggle Notes to amend the respective indentures governing the terms of such Existing Notes to remove substantially all of the restrictive covenants and certain other provisions previously contained in such indentures.
As a result of the covenants to which we remain subject, we are limited in the manner in which we conduct our business and we may be unable to engage in favorable business activities or finance future operations or capital needs. In addition, on the last day of each fiscal quarter, the financial covenant in the senior secured credit facility requires us to maintain on a quarterly basis a senior secured leverage ratio not to exceed a maximum amount. Specifically, Realogy’s total senior secured net debt to trailing twelve month EBITDA may not exceed 4.75 to 1.0. EBITDA, as defined in the senior secured credit facility, includes certain adjustments and also is calculated on a pro forma basis for purposes of calculating the senior secured leverage ratio. 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 ratio covenant. Total senior secured net debt does not include the Second Lien Loans, securitization obligations, the First and a Half Lien Notes or the Unsecured Notes or other indebtedness secured by a lien that is pari passu or junior in priority to the First and a Half Lien Notes. At March 31,June 30, 2012, the Company’s senior secured leverage ratio was 4.024.08 to 1.0.
To maintain compliance with the senior secured leverage ratio for the twelve-month periods ending June 30, 2012, September 30, 2012, December 31, 2012 and March 31, 2013 (or to avoid an event of default thereof), the Company will

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need to achieve a certain amount of Adjusted EBITDA and/or reduced levels of total senior secured net debt. The factors that will impact the foregoing include: (a) changes in homesale transactions and/or the price of existing homesales, (b) the ability to continue to implement cost-savings and business productivity enhancement initiatives, (c) increasing new franchise sales, sales associate recruitment and/or brokerage and other acquisitions, (d) obtaining additional equity financing

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from our parent company, (e) obtaining additional debt financing from affiliated or non-affiliated debt holders, or (f) a combination thereof. Factors (b) through (e) may be insufficient to overcome macroeconomic conditions affecting the Company.
Based upon the Company’s financial forecast, the Company believes that it will continue to be in compliance with the senior secured leverage ratio covenant during the next twelve months. While the housing market has recently shown signs of stabilization,recovery, there remains substantial uncertainty with respect to the timing and scope of a housing recovery and if a housing recovery is delayednot sustained or is weak, we may be subject to additional pressure in maintaining compliance with our senior secured leverage ratio.
The Company’s financial forecast of Adjusted EBITDA considers numerous factors including open homesale contract trends, industry forecasts and macroeconomic factors, local market dynamics and concentrations in the markets in which we operate. Our twelve month forecast is updated monthly to consider the actual results of the Company and incorporates current homesale contract activity, updated industry forecasts and macroeconomic factors and changes in local market dynamics as well as additional cost savings and business optimization initiatives underway or to be implemented by management. As such initiatives are implemented, management, as permitted by the existing agreement, will pro forma the effect of such measures and add back the savings or enhanced revenue from those initiatives as if they had been implemented at the beginning of the trailing twelve-month period.
The Company 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 Intermediate equity for cash, which would be infused as capital into the Company. The effect of such infusion would be to increase Adjusted EBITDA for purposes of calculating the senior secured leverage ratio for the applicable twelve-month period and reduce net senior secured indebtedness upon actual receipt of such capital. If we are unable to maintain compliance with the senior secured leverage ratio and we fail to remedy a default through an equity cure as described above, there would be an “event of default” under the senior secured credit agreement. 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.
If an event of default occurs under the senior secured credit facility and we fail to obtain a waiver from our lenders, our 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 us;
could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable;
could require us to apply all of our available cash to repay these borrowings; or
could prevent us 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 or the Unsecured Notes or our Apple Ridge Funding LLC securitization program.
If we were unable to repay those amounts, the lenders under the senior secured credit facility could proceed against the collateral granted to them to secure that indebtedness. We have pledged the majority of our assets as collateral under the senior secured credit facility and the indentures governing the First Lien Notes and the First and a Half Lien Notes. If the lenders under the senior secured credit facility were to accelerate the repayment of borrowings thereunder, then we may not have sufficient assets to repay the First Lien Loans under the senior secured credit facility and our other indebtedness, including the First Lien Notes, the First and a Half Lien Notes, the Second Lien Loans and the Unsecured Notes, or be able to borrow sufficient funds to refinance such indebtedness. Even if we are able to obtain new financing, it may not be on commercially reasonable terms, or terms that are acceptable to us.

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Non-GAAP Financial Measures
The SEC has adopted rules to regulate the use in filings with the SEC and in public disclosures of “non-GAAP financial measures,” such as EBITDA EBITDA before restructuring and other items and Adjusted EBITDA and the ratios related thereto. These measures are derived on the basis of methodologies other than in accordance with GAAP.

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EBITDA is defined by us as net income (loss) before depreciation and amortization, interest (income) expense, net (other than relocation services interest for securitization assets and securitization obligations) and income taxes. EBITDA before restructuring and other items is defined by us as EBITDA adjusted for merger costs, restructuring costs, former parent legacy cost (benefit) items, net, and (gain) loss on the early extinguishment of debt. Adjusted EBITDA calculated for a twelve-month period is presented to demonstrate our compliance with the senior secured leverage ratio covenant in the senior secured credit facility. Adjusted EBITDA calculated for a six-month period adjusts for the same items as for a twelve-month period, except that the pro forma effect of cost savings, business optimizations and acquisitions and new franchisees are calculated as of the beginning of the six-month period instead of the twelve-month period.
We present EBITDA EBITDA before restructuring and other items and Adjusted EBITDA because we believe EBITDA EBITDA before restructuring and other items and Adjusted EBITDA are useful as supplemental measures in evaluating the performance of our operating businesses and provides greater transparency into our results of operations. Our management, including our chief operating decision maker, useuses EBITDA and EBITDA before restructuring and other items as a factor in evaluating the performance of our business. EBITDA EBITDA before restructuring and other items and Adjusted EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations data prepared in accordance with GAAP.
We believe EBITDA facilitates company-to-company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting net interest expense), taxation, the age and book depreciation of facilities (affecting relative depreciation expense) and the amortization of intangibles, which may vary for different companies for reasons unrelated to operating performance. We believe EBITDA before restructuring and other items also facilitates company-to-company operating performance comparisons by backing out those items in EBITDA as well as certain historical cost (benefit) items which may vary for different companies for reasons unrelated to operating performance. We further believe that EBITDA is frequently used by securities analysts, investors and other interested parties in their evaluation of companies, many of which present an EBITDA measure when reporting their results.
EBITDA and Adjusted EBITDA before restructuring and other items have limitations as analytical tools, and you should not consider EBITDA or Adjusted EBITDA before restructuring and other items either in isolation or as substitutes for analyzing our results as reported under GAAP. Some of these limitations are:
these measures do not reflect changes in, or cash requirement for, our working capital needs;
these measures do not reflect our interest expense (except for interest related to our securitization obligations), or the cash requirements necessary to service interest or principal payments on our debt;
these measures do not reflect our income tax expense or the cash requirements to pay our taxes;
these measures do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often require replacement in the future, and these measures do not reflect any cash requirements for such replacements; and
other companies may calculate these measures differently so they may not be comparable.
Adjusted EBITDA as used herein for a twelve-month period corresponds to the definition of “EBITDA,” calculated on a “pro forma basis,” used in the senior secured credit facility to calculate the senior secured leverage ratio.
Like EBITDA and EBITDA before restructuring and other items, Adjusted EBITDA has limitations as an analytical tool, and you should not consider Adjusted EBITDA either in isolation or as a substitute for analyzing our results as reported under GAAP. In addition to the limitations described above with respect to EBITDA and EBITDA before restructuring and other items, Adjusted EBITDA includes pro forma cost savings, the pro forma effect of business optimization initiatives and the pro forma full yearperiod effect of acquisitions and new franchisees. These adjustments may not reflect the actual cost savings or pro forma effect recognized in future periods.  

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A reconciliation of net loss attributable to Realogy to EBITDA and Adjusted EBITDA for the twelve months ended March 31,June 30, 2012 is set forth in the following table:
  Less Equals Plus Equals  Less Equals Plus Equals
Year Ended Three Months Ended Nine Months Ended Three Months Ended Twelve Months EndedYear Ended Six Months Ended Six Months Ended Six Months Ended Twelve Months Ended
December 31, 2011March 31,
2011
December 31, 2011March 31,
2012
December 31, 2011June 30,
2011
December 31, 2011June 30,
2012
Net loss attributable to Realogy (a)
$(441) $(237) $(204) $(192) $(396)$(441) $(259) $(182) $(217) $(399)
Income tax expense32
 1
 31
 7
 38
32
 2
 30
 15
 45
Income before income taxes(409) (236) (173) (185) (358)(409) (257) (152) (202) (354)
Interest expense, net666
 179
 487
 170
 657
666
 340
 326
 346
 672
Depreciation and amortization186
 46
 140
 45
 185
186
 93
 93
 89
 182
EBITDA (b)
443
 (11) 454
 30
 484
443
 176
 267
 233
 500
Covenant calculation adjustments:         
Restructuring costs, merger costs and former parent legacy costs (benefit), net (c)
Restructuring costs, merger costs and former parent legacy costs (benefit), net (c)
 (3)
Restructuring costs, merger costs and former parent legacy costs (benefit), net (c)
 8
Loss on the early extinguishment of debtLoss on the early extinguishment of debt 6
Loss on the early extinguishment of debt 6
EBITDA before restructuring and other items 487
Pro forma cost savings for 2012 restructuring initiatives (d)
Pro forma cost savings for 2012 restructuring initiatives (d)
 3
Pro forma cost savings for 2012 restructuring initiatives (d)
 5
Pro forma cost savings for 2011 restructuring initiatives (e)
Pro forma cost savings for 2011 restructuring initiatives (e)
 7
Pro forma cost savings for 2011 restructuring initiatives (e)
 3
Pro forma effect of business optimization initiatives (f)
Pro forma effect of business optimization initiatives (f)
 47
Pro forma effect of business optimization initiatives (f)
 48
Non-cash charges (g)
Non-cash charges (g)
 5
Non-cash charges (g)
 
Non-recurring fair value adjustments for purchase accounting (h)
Non-recurring fair value adjustments for purchase accounting (h)
 4
Non-recurring fair value adjustments for purchase accounting (h)
 4
Pro forma effect of acquisitions and new franchisees (i)
Pro forma effect of acquisitions and new franchisees (i)
 6
Pro forma effect of acquisitions and new franchisees (i)
 7
Apollo management fees (j)
Apollo management fees (j)
 15
Apollo management fees (j)
 15
Incremental securitization interest costs (k)
Incremental securitization interest costs (k)
 3
Incremental securitization interest costs (k)
 3
Adjusted EBITDAAdjusted EBITDA $577
Adjusted EBITDA $599
Total senior secured net debt (l)
Total senior secured net debt (l)
 $2,317
Total senior secured net debt (l)
 $2,445
Senior secured leverage ratioSenior secured leverage ratio 4.02xSenior secured leverage ratio 4.08x
_______________
(a)
Net loss attributable to Realogy consists of: (i) a loss of $22 million for the second quarter of 2011; (ii) a loss of $28 million for the third quarter of 2011; (iii)(ii) a loss of $154 million for the fourth quarter of 2011 and (iv)2011; (iii) a loss of $192 million for the first quarter of 2012 and (iv) a loss of $25 million for the second quarter of 2012.
(b)
EBITDA consists of: (i) $187 million for the secondthird quarter of 2011; (ii)$187 million for the third quarter of 2011; (iii) $80 million for the fourth quarter of 2011 and (iv)2011; (iii) $30 million for the first quarter of 2012 and (iv) $203 million for the second quarter of 2012.
(c)
Consists of $1211 million of restructuring costs and $1 million of merger costs offset by a net benefit of $164 million for former parent legacy items.
(d)
Represents actual costs incurred that are not expected to recur in subsequent periods due to restructuring activities initiated during the first threesix months of 2012. From this restructuring, we expect to reduce our operating costs by approximately $3$7 million on a twelve-month run-rate basis and estimate that less than $1$2 million of such savings were realized from the time they were put in place. The adjustment shown represents the impact the savings would have had on the period from AprilJuly 1, 2011 through the time they were put in place had those actions been effected on AprilJuly 1, 2011.
(e)
Represents actual costs incurred that are not expected to recur in subsequent periods due to restructuring activities initiated during the year ended December 31, 2011. From this restructuring, we expect to reduce our operating costs by approximately $21 million on a twelve-month run-rate basis and estimate that $14$18 million of such savings were realized from the time they were put in place. The adjustment shown represents the impact the savings would have had on the period from AprilJuly 1, 2011 through the time they were put in place had those actions been effected on AprilJuly 1, 2011.
(f)Represents the twelve-month pro forma effect of business optimization initiatives that have been completed to reduce costs, including $2$3 million related to our Relocation Services integration costs, and acquisition related non-cash adjustments, $5 million related to vendor renegotiations and $40 million for employee retention accruals. The employee retention accruals reflect the employee retention plans that have been implemented in lieu of our customary bonus plan, due to the ongoing and prolonged downturn in the housing market in order to ensure the retention of executive officers and other key personnel, principally within our corporate services unit and the corporate offices of our four business units.
(g)
Represents the elimination of non-cash expenses, including $6$5 million of stock-based compensation expense and $6 million of other items less $7$11 million for the change in the allowance for doubtful accounts and notes reserves from AprilJuly 1, 2011 through March 31,June 30, 2012.

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(h)Reflects the adjustment for the negative impact of fair value adjustments for purchase accounting at the operating business segments primarily related to deferred rent.

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(i)
Represents the estimated impact of acquisitions and new franchisees as if they had been acquired or signed on AprilJuly 1, 2011. Franchisee sales activity is comprised of new franchise agreements as well as growth acquired by existing franchisees with our assistance. We have made a number of assumptions in calculating such estimate and there can be no assurance that we would have generated the projected levels of EBITDA had we owned the acquired entities or entered into the franchise contracts as of AprilJuly 1, 2011.
(j)
Represents the elimination of annual management fees payable to Apollo for the twelve months ended March 31,June 30, 2012.
(k)
Incremental borrowing costs incurred as a result of the securitization facilities refinancing for the twelve months ended March 31,June 30, 2012.
(l)
Represents total borrowings under the senior secured credit facility which are secured by a first priority lien on our assets of $2,4152,524 million plus $1110 million of capital lease obligations less $10989 million of readily available cash as of March 31,June 30, 2012. Pursuant to the terms of theour senior secured credit facility, total senior secured net debt does not include the First and a Half Lien Notes, Second Lien Loans, and other indebtedness that is secured by a lien on our assets that is pari passu or junior in priority to the First and a Half Lien Notes, orincluding the Second Lien Loans, our securitization obligations.obligations and the Unsecured Notes.
Set forth in the table below is a reconciliation of net loss attributable to Realogy to Adjusted EBITDA for the six-month periods ended June 30, 2012 and 2011:
  Six Months Ended Six Months Ended
  June 30,
2012
June 30,
2011
Net loss attributable to Realogy $(217) $(259)
Income tax expense 15
 2
Income before income taxes (202) (257)
Interest expense, net 346
 340
Depreciation and amortization 89
 93
EBITDA 233
 176
Restructuring costs, merger costs and former parent legacy costs (benefit), net 2
 (9)
Loss on the early extinguishment of debt 6
 36
Pro forma cost savings for 2012 restructuring initiatives 2
 
Pro forma cost savings for 2011 restructuring initiatives 
 3
Pro forma effect of business optimization initiatives 21
 22
Non-cash charges (4) (1)
Non-recurring fair value adjustments for purchase accounting 2
 2
Pro forma effect of acquisitions and new franchisees 2
 2
Apollo management fees 8
 8
Incremental securitization interest costs 2
 1
Adjusted EBITDA 274
 240
Liquidity Risks
Our liquidity position may be negatively affected as a result of the following specific liquidity risks.
Negative Cash Flows; Seasonality and Cash Requirements
Our liquidity position has been negatively affected by the substantial interest expense on our debt obligations as well as the impact of the significant and prolonged downturn in the real estate market, which have resulted in negative operating cash flows to the Company. While we believe that we are experiencing the beginning of a recovery in the residential real estate market, our liquidity position is expected to continue to be negatively impactedaffected by the ongoing unfavorable conditions in the real estate market resulting in negative cash flows and the substantial interest expense on our debt obligations. Primarily as a consequence of our cash interest obligations, we expect to experience negative cash flows during the next twelve months given our operating environment. Moreover, we are not certain whether the improvement we have seen in the residential real estate market will lead to a sustained recovery and cannot predict when this market will return to a period of sustainable growth. If a recovery in the residential real estate market is not sustained or is delayed or the economy as a whole does not improve or deteriorates, we may experience further adverse effects on our business, financial condition and liquidity, including our ability to access capital and grow our business. Our business segments are also subject to seasonal fluctuations. Historically, operating results and revenues for all of our businesses have been strongest in the second and third quarters of the calendar year. A significant portion of the expenses we incur in our real estate brokerage

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operations are related to marketing activities and commissions and are, therefore, variable. However, many of our other expenses, such as interest payments, facilities costs and certain personnel-related costs, are fixed and cannot be reduced during a seasonal slowdown. For example, interest payments of approximately $215$215 million are due on our Unsecured Notes and Second Lien Loans in OctoberApril and AprilOctober of each year. Accordingly, the two most significant interest payments fall in, or immediately following, periods of our lowest cash flow generation. Because of this asymmetry and the size of our cash interest obligations, if unfavorable conditionsthere is not a sustained recovery in the real estatehousing market and general macroeconomic conditions door our total indebtedness is not significantly improve,materially reduced, we would be required to seek additional sources of working capital for our future liquidity needs, including obtaining additional financing from affiliated or non-affiliated debt holders, issuing equity securities and deferring or reducing spending. There can be no assurance that we would be able to defer or reduce expenses or that any such actions would not materially and adversely impact our business and results of operations or that we would be able to obtain financing on acceptable terms or at all.
Senior Secured Credit Facility Covenant Compliance
On the last day of each fiscal quarter, the financial covenant in the senior secured credit facility requires us to maintain on a quarterly basis a senior secured leverage ratio not to exceed a maximum amount. Specifically, our total senior secured net debt to trailing twelve month Adjusted EBITDA may not exceed 4.75 to 1.0.
As of March 31, 2012, we were in compliance with the senior secured leverage ratio covenant with a ratio of 4.02 to 1.0. While the housing market has shown signs of stabilization, there remains substantial uncertainty with respect to the timing and scope of a housing recovery and if a housing recovery is delayed or is weak, we may be subject to additional pressure in maintaining compliance with our senior secured leverage ratio as a result of negative cash flows due to our significant annual interest payments.
To maintain compliance with the senior secured leverage ratio for the twelve-month periods ending June 30, 2012, September 30, 2012, December 31, 2012 and March 31, 2013 (or to avoid an event of default thereof), the Company will need to achieve a certain amount of Adjusted EBITDA and/or reduced levels of total senior secured net debt. The factors that will impact the foregoing include: (a) changes in homesale transactions and/or the price of existing homesales, (b) the ability to continue to implement cost-savings and business productivity enhancement initiatives, (c) increasing new franchise sales, sales associate recruitment and/or brokerage and other acquisitions, (d) obtaining additional equity financing from our parent company, (e) obtaining additional debt financing from affiliated or non-affiliated debt holders, or (f) a combination thereof. Factors (b) through (e) may be insufficient to overcome macroeconomic conditions affecting the Company.

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If we fail to maintain the senior secured leverage ratio or otherwise default under our senior secured credit facility and if we fail to obtain a waiver from our lenders, then our financial condition, results of operations and business would be materially adversely affected.
We will continue to evaluate potential financing transactions, including issuing equity securities, refinancing certain tranches of our indebtedness, issuing incremental debt, obtaining incremental letters of credit and extending maturities as well as potential transactions pursuant to which third parties, Apollo or its affiliates may provide financing to us or otherwise engage in transactions to provide liquidity to us. There can be no assurance as to which, if any, of these alternatives we may pursue as the choice of any alternative will depend upon numerous factors such as market conditions, our financial performance and the limitations applicable to such transactions under our existing financing agreements and the consents we may need to obtain under the relevant documents. There also can be no assurance that financing or refinancing will be available to us on acceptable terms or at all. The conversion of all or a portion of our approximately $2.1$2.1 billion in outstanding Convertible Notes into equity at the option of the holders thereof would increase our liquidity, although the holders of the Convertible Notes are not obligated to do so.
Senior Secured Credit Facility Covenant Compliance
On the last day of each fiscal quarter, the financial covenant in the senior secured credit facility requires us to maintain on a quarterly basis a senior secured leverage ratio not to exceed a maximum amount. Specifically, our total senior secured net debt to trailing twelve month Adjusted EBITDA may not exceed 4.75 to 1.0.
As of June 30, 2012, we were in compliance with the senior secured leverage ratio covenant with a ratio of 4.08 to 1.0. While the housing market has recently shown signs of recovery, there remains substantial uncertainty with respect to the timing and scope of a sustained housing recovery and if a housing recovery is not sustained or is weak, we may be subject to additional pressure in maintaining compliance with our senior secured leverage ratio.
To maintain compliance with the senior secured leverage ratio (or to avoid an event of default thereof), the Company will need to achieve a certain amount of Adjusted EBITDA and/or reduced levels of total senior secured net debt. The factors that will impact the foregoing include: (a) changes in homesale transactions and/or the price of existing homesales, (b) the ability to continue to implement cost-savings and business productivity enhancement initiatives, (c) increasing new franchise sales, sales associate recruitment and/or brokerage and other acquisitions, (d) obtaining additional equity financing from our parent company, (e) obtaining additional debt financing from affiliated or non-affiliated debt holders, or (f) a combination thereof. Factors (b) through (e) may be insufficient to overcome macroeconomic conditions affecting the Company.
If we fail to maintain the senior secured leverage ratio or otherwise default under our senior secured credit facility and if we fail to obtain a waiver from our lenders, then our financial condition, results of operations and business would be materially adversely affected.
Interest Rate Risk
Certain of our borrowings, primarily borrowings under our senior secured credit facility, our other bank indebtedness and our securitization arrangements, are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net loss would increase further. We have entered into interest rate swaps, involving the exchange of floating for fixed rate interest payments, to reduce interest rate volatility for a portion of our floating interest rate debt facilities.

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Securitization Programs
Funding requirements of our relocation business are primarily satisfied through the issuance of securitization obligations to finance relocation receivables and advances. 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, breach of Realogy’s senior secured leverage ratio under Realogy’s senior secured credit facility if uncured, and cross-defaults to Realogy’s credit agreement, unsecured and secured notes or other material indebtedness.
Contractual Obligations
The following table summarizes our future contractual obligations as of March 31,June 30, 2012:
 Remaining            
 2012 2013 2014 2015 2016 Thereafter Total
Extended revolving credit facility (a)
$
 $
 $
 $
 $109
 $
 $109
Extended term loan facility (b)

 
 
 
 1,822
 
 1,822
First Lien Notes (c)

 
 
 
 
 593
 593
Existing First and a Half Lien Notes (d)

 
 
 
 
 700
 700
New First and a Half Lien Notes (d)

 
 
 
 
 325
 325
Second Lien Loans (d)

 
 
 
 
 650
 650
Other bank indebtedness (e)
5
 100
 
 
 
 
 105
10.50% Senior Notes (f)

 
 64
 
 
 
 64
11.50% Senior Notes (g)

 
 
 
 
 492
 492
11.00%/11.75% Senior Toggle Notes (f)

 
 41
 
 
 
 41
12.00% Senior Notes (g)

 
 
 
 
 130
 130
12.375% Senior Subordinated Notes (f)

 
 
 190
 
 
 190
13.375% Senior Subordinated Notes (g)

 
 
 
 
 10
 10
11.00% Convertible Notes (g)

 
 
 
 
 2,110
 2,110
Securitized obligations (h)
267
 
 
 
 
 
 267
Operating leases (i)
74
 117
 80
 54
 28
 123
 476
Capital leases (including imputed interest)3
 4
 3
 1
 
 
 11
Purchase commitments (j)
35
 26
 13
 10
 9
 248
 341
Total (k) (l)
$384
 $247
 $201
 $255
 $1,968
 $5,381
 $8,436
 Remaining            
 2012 2013 2014 2015 2016 Thereafter Total
Extended term loan facility (a)
$
 $
 $
 $
 $1,822
 $
 $1,822
First Lien Notes (b)

 
 
 
 
 593
 593
Existing First and a Half Lien Notes (c)

 
 
 
 
 700
 700
New First and a Half Lien Notes (c)

 
 
 
 
 325
 325
Second Lien Loans (e)

 
 
 
 
 650
 650
Other bank indebtedness (d)

 100
 
 
 
 
 100
10.50% Senior Notes (f)

 
 64
 
 
 
 64
11.50% Senior Notes (g)

 
 
 
 
 492
 492
11.00%/11.75% Senior Toggle Notes (e) (f)
11
 
 41
 
 
 
 52
12.00% Senior Notes (g)

 
 
 
 
 130
 130
12.375% Senior Subordinated Notes (f)

 
 
 190
 
 
 190
13.375% Senior Subordinated Notes (g)

 
 
 
 
 10
 10
11.00% Convertible Notes (g)

 
 
 
 
 2,110
 2,110
Securitized obligations (h)
302
 
 
 
 
 
 302
Operating leases (i)
105
 108
 73
 49
 26
 120
 481
Capital leases (including imputed interest)5
 4
 3
 1
 
 
 13
Purchase commitments (j)
43
 25
 12
 10
 9
 257
 356
Total (k) (l)
$466
 $237
 $193
 $250
 $1,857
 $5,387
 $8,390

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_______________
(a)
The Company’s senior secured credit facility included a $363 million extended revolving facility expiring in April 2016. Outstanding borrowings under this facility are classified on the balance sheet as current due to the revolving nature of the facility. The interest rate for the variable rate debt of $109 million will be determined by the interest rates in effect during each period.
(b)
The Company’s extended term loan facility matures in October 2016. The interest rate for the variable rate debt of $1,822 million will be determined by the interest rates in effect during each period. There is no scheduled amortization of principal. The Company has entered into derivative instruments to fix the interest rate over the next twelve months for $408$408 million of its $1,822 million variable rate term loan debt, which will result in interest payments of $27$26 million annually. The interest rate for the remaining portion of the variable rate term loan debt of $1,414 million will be determined by the interest rates in effect during each period.
(b)(c)
The Company’s First Lien Notes bear an annual interest rate of 7.625%. Interest payments are due semi-annually and the annual interest expense for the First Lien Notes is approximately $45 million.$45 million.
(c)(d)
The Company’s Existing First and a Half Lien Notes bear an annual interest rate of 7.875%, the New First and a Half Lien Notes bear and annual interest rate of 9.00% and the Second Lien Loans bear an annual interest rate of 13.50%. Interest payments are due semi-annually and the annual interest expense for the First and a Half Lien Notes and the Second Lien Loans is approximately $172 million.$172 million.
(d)(e)
Consists of revolving credit facilities that are supported by letters of credit issued under the senior secured credit facility;facility, a portion of which are issued under the synthetic letter of credit facility: $5 milliondue in August 2012, $50 million due in January 2013 and $50 million due in July 2013. The interest rate for the revolving credit facilities is variable and will be determined by the interest rates in effect during each period.
(e)The Company utilized the PIK Interest option to satisfy interest payment obligations for the Senior Toggle Notes which increased the principal amount of the Senior Toggle Notes from October 2008 through April 2011. As a result, the Company would be subject to certain interest deduction limitations if the Senior Toggle Notes were treated as AHYDO within the meaning of Section 163(i)(1) of the Internal Revenue Code. In order to avoid such treatment, the Company redeemed $11 million principal amount of the Senior Toggle Notes on April 16, 2012.
(f)
Annual interest expense for the 10.50% Senior Notes, 12.375% Senior Subordinated Notes and Senior Toggle Notes is approximately $36 million.$36 million.

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(g)
Annual interest expense for the 11.50% Senior Notes, 12.00% Senior Notes, 13.375% Senior Subordinated Notes and the Convertible Notes is approximately $306 million.$306 million.
(h)The Company’s securitization obligations are variable rate debt and the interest payments will be determined by the interest rates in effect during each period. The Apple Ridge agreement expires in December 2013 and the Cartus Financing Limited agreements expire in August 2012 and August 2015. These obligations are classified as current on the balance sheet due to the current classification of the underlying assets that collateralize the obligations.
(i)The operating lease amounts included in the above table do not include variable costs such as maintenance, insurance and real estate taxes.
(j)
Purchase commitments include a minimum licensing fee that the Company is required to pay to Sotheby’s from 2009 through 2054. The annual minimum licensing fee is approximately $2 million.$2 million. The purchase commitments also include a minimum licensing fee to be paid to Meredith from 2009 through 2057. The annual minimum fee began at $0.5$0.5 million in 2009 and will increase to $4$4 million by 2014 and generally remains the same thereafter.
(k)
In April 2007, the Company established a standby irrevocable letter of credit for the benefit of Avis Budget Group Inc. in accordance with the Separation and Distribution Agreement. At March 31,June 30, 2012, the letter of credit was at $70 million.$70 million. This letter of credit is not included in the contractual obligations table above.
(l)
The contractual obligations table does not include the annual Apollo Management VI, L.P. management fee and does not include other non-current liabilities such as pension liabilities of $63$57 million and unrecognized tax benefits of $46$45 million as the Company is not able to estimate the year in which these liabilities could be paid.  
Potential Debt Purchases or Sales
Our affiliates have purchased a portion of our indebtedness and we or our affiliates from time to time may sell such indebtedness or purchase additional portions of our indebtedness. Any such future purchases or sales may be made through open market or privately negotiated transactions with third parties or pursuant to one or more tender or exchange offers or otherwise, upon such terms and at such prices as well as with such consideration as we or any such affiliates may determine. Affiliates who own portions of our indebtedness earn interest on a consistent basis with third party owners of such indebtedness.
Critical Accounting Policies
In presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material adverse impact to our combined results of operations, financial position and liquidity. We believe that the estimates and assumptions we used

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when preparing our financial statements were the most appropriate at that time.
These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2011, which includes a description of our critical accounting policies that involve subjective and complex judgments that could potentially affect reported results.
Recently Adopted Accounting Pronouncements
See Note 1 of the Notes to the Condensed Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements.
Item 3.Quantitative and Qualitative Disclosures about Market Risks.
Our principal market exposure is interest rate risk. At March 31, 2012, our primary interest rate exposure was to interest rate fluctuations in the United States, specifically LIBOR, due to its impact on our variable rate borrowings. Due to our senior secured credit facility which is benchmarked to U.S. LIBOR, this rate will be the primary market risk exposure for the foreseeable future. We do not have significant exposure to foreign currency risk nor do we expect to have significant exposure to foreign currency risk in the foreseeable future.
We assess our market risk based on changes in interest rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential impact on earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in interest rates. In performing the sensitivity analysis, we are required to make assumptions regarding the fair values of relocation receivables and advances and securitization borrowings, which approximate their carrying values due to the short-term nature of these items. We believe our interest rate risk is further mitigated as the rate we incur on our securitization borrowings and the rate we earn on relocation receivables and advances are based on similar variable indices.
Our total market risk is influenced by various factors, including the volatility present within the markets and the liquidity of the markets. There are certain limitations inherent in the sensitivity analyses presented. While probably the most meaningful analysis, these analyses are constrained by several factors, including the necessity to conduct the analysis based on a single point in time and the inability to include the complex market reactions that normally would arise from the market shifts modeled.
At March 31, 2012, we had total long-term debt of $7,232 million, excluding $302 million of securitization obligations. Of the $7,232 million of long-term debt, the Company has $1,922 million of variable interest rate debt primarily based on LIBOR. We have entered into four floating to fixed interest rate swap agreements and effectively fixed our interest rate on that portion of variable interest rate debt. One swap, with a notional value of $225 million, expires in July 2012, the second swap, with a notional value of $200 million, expires in December 2012, the third swap, with a notional value of $225 million, commences in July 2012 and expires in October 2016, and the fourth swap with a notional value of $200 million, commences in January 2013 and expires in October 2016. After considering these interest rate swaps a portion of our variable interest rate debt is still subject to market rate risk as our interest payments will fluctuate as a result of market changes. We have determined that the impact of a 100 bps change in LIBOR (1% change in the interest rate) on our term loan facility variable rate borrowings would affect our annual interest expense by approximately $15 million. While these results may be used as benchmarks, they should not be viewed as forecasts.
At March 31, 2012, the fair value of our long-term debt approximated $6,649 million, which was determined based on quoted market prices. Since considerable judgment is required in interpreting market information, the fair value of the long-term debt is not necessarily indicative of the amount that could be realized in a current market exchange. A 10% decrease in market rates would have a $211 million impact on the fair value of our long-term debt.
Item 4.Controls and Procedures.
Controls and Procedures for Domus Holdings Corp.
(a)Domus Holdings Corp. (“Holdings”) maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to its

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management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Holdings' management, including the Chief Executive Officer and the Chief Financial Officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
(b)As of the end of the period covered by this quarterly report on Form 10-Q, Holdings has carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Holdings' disclosure controls and procedures are effective at the “reasonable assurance” level.
(c)There has not been any change in Holdings' internal control over financial reporting during the period covered by this quarterly report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
Controls and Procedures for Realogy Corporation
(a)Realogy Corporation (“Realogy”) maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Realogy's management, including the Chief Executive Officer and the Chief Financial Officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
(b)As of the end of the period covered by this quarterly report on Form 10-Q, Realogy has carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Realogy's disclosure controls and procedures are effective at the “reasonable assurance” level.
(c)There has not been any change in Realogy's internal control over financial reporting during the period covered by this quarterly report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

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PART II - OTHER INFORMATION
Item 1.    Legal Proceedings.
Legal—Real Estate Business
Frank K. Cooper Real Estate #1, Inc. v. Cendant Corp. and Century 21 Real Estate Corporation (N.J. Super. Ct. L. Div., Morris County, New Jersey). In 2002, Frank K. Cooper Real Estate #1, Inc. filed a putative class action against Cendant and Cendant’s subsidiary, Century 21 Real Estate Corporation (“Century 21”). The complaint alleged breach of certain provisions of the Real Estate Franchise Agreement entered into between Century 21 and the plaintiffs, breach of the implied duty of good faith and fair dealing, violation of the New Jersey Consumer Fraud Act and breach of certain express and implied fiduciary duties. The complaint alleged, among other things, that Cendant diverted money and resources from Century 21 franchisees and allotted them to NRT owned brokerages and otherwise improperly charged expenses to marketing funds. The complaint sought unspecified compensatory and punitive damages, injunctive relief, interest, attorney’s fees and costs. On August 17, 2010, the court certified a class consisting of Century 21 franchisees at any time between August 1, 1995 and April 17, 2002 whose franchise agreements contain New Jersey choice of law and venue provisions and who have not executed releases releasing the claim (unless the release was a provision of a franchise renewal agreement).
As of January 24, 2012, Realogy entered into a memorandum of understanding memorializing the principal terms of a proposed settlement of this action.  The structure of the proposed settlement involves both monetary and non-monetary consideration as well as contributions from insurance carriers.  The non-monetary consideration includes but is not limited to waivers and modifications of certain fees and payments of incentive fees.  On February 16, 2012, the parties executed a Stipulation of Settlement finalizing the terms of the settlement reflected in the memorandum of understanding.  The Stipulation of Settlement and related settlement documents were submitted to the Court on February 17th by the plaintiffs to obtain preliminary approval.  The court granted preliminary approval on February 22nd.  Notice of the settlement was made to the class.  A fairness hearing will be held on June 4, 2012 when the court will determine whether to grant final approval of the settlement.  Realogy accrued the amount that would be payable beyond carrier contributions in our financial results for the year ended December 31, 2011.
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.).  The case, pending in the United States District Court for the Central District of California, arises from the relationship of two of our subsidiaries with a former Coldwell Banker Commercial franchisee, whose 40.5% shareholder allegedly utilized the Coldwell Banker Commercial name in the offer and sale of securities.  In an SEC civil proceeding asserting violations of various securities laws, by stipulated judgment dated September 2, 2009, the shareholder of the franchisee, Real Estate Partners, Inc. ("REP"), and REP's affiliated entities were ordered to disgorge approximately $53 million in funds raised from investors.  REP filed for Chapter 11 bankruptcy protection in 2007.  The complaint, initially filed in April 2010 and subsequently amended twice, most recently in March 2011, alleges, among other things, that our subsidiaries Coldwell Banker Real Estate Corporation and Coldwell Banker Real Estate LLC, engaged in negligence, aiding and abetting fraud, negligent misrepresentation, and false advertising, and are vicariously liable for fraud and negligent misrepresentation, as they knew or should have known that REP was using the marks in connection with the promotion of securities but that the Coldwell Banker subsidiaries failed to take sufficient steps to stop that use. The Company disputes the allegations and has asserted numerous defenses - including lack of knowledge and participation in the fraud. The second amended complaint is a class action brought on behalf of REP investors. On September 8, 2011, the court granted and denied in part the Coldwell Banker subsidiaries' motion to dismiss on the second amended complaint. On August 22, 2011, plaintiffs filed their motion to certify a class.  On March 26, 2012, the Court granted plaintiffs motion to certify a class as to all claims except for false advertising. On April 11, 2012, the Coldwell Banker subsidiaries filed a motion seeking permission to file an interlocutory appeal of the class certification order. Motions for summary judgment also were filed. On April 13, 2012, the court entered into an order stipulated by the parties to stay the case for 60 days while the parties pursue mediation. Trial is currently scheduled for November 2012. Our primary insurance carrier has disclaimed coverage of either liability or defense costs, which we are vigorously challenging.
This case involves a complex series of securities offerings and raises certain unusual claims that make its resolution subject to significant uncertainties. Although the parties will attempt a mediation there can be no assurance the mediation will be successful particularly given the substantial size of the claims and the absence of carrier participation.

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We are involved in certain other claims and legal actions arising in the ordinary course of our business. Such litigation and other proceedings may include, but are not limited to, actions relating to intellectual property, commercial arrangements, franchising arrangements, actions against our title company alleging it knew or should have known that others were committing mortgage fraud, standard brokerage disputes like the failure to disclose hidden defects in the property such as mold, vicarious liability based upon conduct of individuals or entities outside of our control, including franchisees and independent sales associates, antitrust claims, general fraud claims, employment law, including claims challenging the classification of our sales associates as independent contractors, and claims alleging violations of RESPA or state consumer fraud statutes. While the results of such claims and legal actions cannot be predicted with certainty, we do not believe based on information currently available to us that the final outcome of these proceedings will have a material adverse effect on our consolidated financial position, results of operations or cash flows.
Legal—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 records litigation accruals for legal matters which are both probable and estimable and believes that it has adequately accrued for legal matters as appropriate. 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 $20 million at March 31, 2012.
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. Lastly, there may be greater risk of unfavorable resolutions in the current economic environment due to various factors including the absence of other defendants (due to business failures) that may be the real cause of the liability and greater negative sentiment toward corporate defendants.  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.
The Company also monitors litigation and claims asserted against other industry participants together with new statutory and regulatory enactments for potential impacts to its business. Although the Company responds, as appropriate, to these developments, such developments may impose costs or obligations that adversely affect the Company’s business operations or financial results. Two key RESPA issues currently being litigated in various courts by other industry participants and us are (1) whether RESPA's prohibition of unearned fees applies to all fees or only split fees and (2) whether RESPA impinges on the ability of a real estate broker to charge a two-part fee with fixed and variable components. These issues directly impact the fee structures of franchisees and our Company owned brokerage business in those states where fees frequently include both fixed and variable commission charges. In 2011, the U.S. Supreme Court agreed to hear Freeman vs. Quicken Loans, Inc., where the issue presented is whether RESPA applies to a fee that is not split or shared with a third party. Oral argument in that case was heard on February 21, 2012. A decision in the Quicken Loans case or in other pending cases that interpret RESPA broadly could significantly increase the volume of RESPA litigation and could adversely impact us and our franchisees.
Item 5.    Other Information.
As of April 30, 2012, there were 42.2 million shares of Class A Common Stock reserved for issuance under the Amended and Restated Holdings 2007 Stock Incentive Plan. On April 30, 2012, the Compensation Committee of the Holdings Board of Directors (the “Compensation Committee”) approved a further amendment to the plan to increase the number of shares reserved thereunder by 25 million to 67.2 million reserved shares and approved the grant of non-qualified options to purchase an aggregate of approximately 24.1 million shares to key employees of the Company, including the

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named executive officers. The options have a term of ten years and the exercise price of the options is $0.70 per share, representing the fair market value per share of the Class A Common Stock of Holdings on the date of grant, as determined by the Compensation Committee. The options become exercisable over a four-year period at the rate of 25% per year, commencing one year from the date of grant. Pursuant to this action, the named executive officers received options to purchase the following number of shares:
NameTitleNumber of Shares Underlying April 30, 2012 Option Grant
Richard A. SmithChairman, Chief Executive Officer and President3,000,000
Anthony E. HullExecutive Vice President, Chief Financial Officer and Treasurer825,000
Kevin J. KelleherPresident and Chief Executive Officer of Cartus Corporation650,000
Alexander E. Perriello, IIIPresident and Chief Executive Officer, Realogy Franchise Group750,000
Bruce ZipfPresident and Chief Executive Officer, NRT LLC775,000
A copy of the Amended and Restated Holdings 2007 Stock Incentive Plan, as further amended on April 30, 2012, is attached as Exhibit 10.1 hereto and incorporated herein by reference.
Item 6.Exhibits.
See Exhibit Index.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DOMUS HOLDINGS CORP.
and
REALOGY CORPORATION
(Registrants)


Date: May 2, 2012/s/ Anthony E. Hull    
Anthony E. Hull
Executive Vice President and
Chief Financial Officer


Date: May 2, 2012/s/ Dea Benson    
Dea Benson
Senior Vice President,
Chief Accounting Officer and
Controller


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EXHIBIT INDEX
Exhibit        Description    

10.1Domus Holdings Corp. 2007 Stock Incentive Plan, as amended and restated on November 13, 2007 and as further amended and restated on November 9, 2010, August 2, 2011, February 27, 2012 and April 30, 2012

12.1Ratio of Earnings to Fixed Charges.

31.1Certification of the Chief Executive Officer of DomusRealogy Holdings Corp. pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

31.2Certification of the Chief Financial Officer of DomusRealogy Holdings Corp. pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

31.3Certification of the Chief Executive Officer of Realogy Corporation pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

31.4Certification of the Chief Financial Officer of Realogy Corporation pursuant to Rules 13(a)-14(a) and 15(d)-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

32.1Certification for DomusRealogy Holdings Corp. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2Certification for Realogy Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS ^XBRL Instance Document

101.SCH ^XBRL Taxonomy Extension Schema Document

101.CAL^XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF ^XBRL Taxonomy Extension Definition Linkbase Document

101.LAB ^XBRL Taxonomy Extension Label Linkbase Document

101.PRE ^XBRL Taxonomy Extension Presentation Linkbase Document
_______________
^Furnished electronically with this report.



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