Second-quarter revenue for Realogy Corp., a company formed this year through a spinoff of Cendant Corp.’s Real Estate Services division, fell $140 million, or 7 percent, from the division’s revenue in second-quarter 2005, according to a Cendant earnings report released Wednesday.


It was the last quarterly earnings report by Cendant, which has already begun the process of splitting up its business segments into three publicly traded and one privately held company.


Earnings before interest, taxes, depreciation and amortization, also known as EBITDA, fell $87 million, or 22 percent, in the second quarter compared to second-quarter 2005.

This reduction is a reflection of “reduced home-sale volumes, partially offset by growth in the average prices of homes sold and the impact of acquisitions,” Cendant reported.

Royalty revenue within the company’s real estate franchise business decreased $13 million (9 percent) in second-quarter 2006 compared to second-quarter 2005. The decrease “was primarily driven by a 16 percent decrease in the number of home-sale transactions from our third-party franchisees and a decrease in the average brokerage commission rate earned by our franchises from 2.52 percent in second-quarter 2005 to 2.47 percent in second-quarter 2006,” the company reported.

There was, however, a 5 percent increase in the average price of homes sold. In addition to royalties received from its third-party franchisees, the company’s NRT brokerage subsidiary continues to pay royalties to Realogy’s real estate franchise business. But these inter-company royalties, which totaled $96 million and $106 million during second-quarter 2006 and 2005, respectively, were eliminated in consolidation “and therefore have no impact on this segment’s revenues or EBITDA,” according to the earnings announcement.

Revenue within Realogy’s real estate brokerage business fell $154 million (9 percent) in second-quarter 2006 compared to second-quarter 2005. “This decrease is due to a reduction in commission revenue earned in 2006, partially offset by incremental revenues generated by acquisitions made by NRT during or subsequent to second-quarter 2005, which together contributed incremental revenues and EBITDA of $76 million and $11 million, respectively, to 2006 operating results,” the company announced.

Apart from these acquisitions, NRT’s revenue decreased $230 million (14 percent) in second-quarter 2006 compared to second-quarter 2005. The decrease was due mostly to reduced commission income on home-sale transactions, “which was primarily driven by a 17 percent decline in the number of home-sale transactions, partially offset by a 5 percent increase in the average price of homes sold,” the company announced.

“We believe that the 17 percent decline in home-sale transactions is reflective of industry trends in the premium coastal areas we serve, particularly Florida, California and New England. EBITDA further reflects a decrease of $157 million in commission expenses paid to real estate agents principally as a result of the reduction in revenues earned on home-sale transactions.”

NRT has a large 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 in West Coast and East Coast markets, while the real estate franchise business is more geographically diverse, the company noted in its earnings statement.

Revenue within Realogy’s relocation services business decreased $4 million (3 percent) during second-quarter 2006 compared to second-quarter 2005, “primarily reflecting a $9 million decrease in domestic revenue due to lower average fees and volume, as well as lower relocation referral volume. These decreases were partially offset by $5 million of incremental management fees and commissions earned in our international services due to increased international transaction volume.”

Revenues from the company’s title and settlement services business increased $21 million (22 percent) during second-quarter 2006 compared to second-quarter 2005, “primarily due to the acquisition of multiple title and underwriting companies in Texas in a single transaction in January 2006, which contributed $35 million of revenue and $4 million of EBITDA to our second-quarter-2006 operating results. These entities provide title and closing services, including title searches, title insurance, home-sale escrow and other closing services. This increase was partially offset by a $17 million decline in title and closing revenues principally from reduced resale and refinancing volume consistent with the decline in overall home-sale transactions noted in the other real estate services businesses.”

Cost savings within the company’s real estate brokerage business, primarily relating to reduced incentive compensation as a result of reduced profitability and marketing campaigns, were offset by restructuring and separation costs and inflationary and other office-related cost increases within our real estate brokerage business, the company reported.

Realogy Corp., based in Parsippany, N.Y., has four operating segments: real estate franchise services, company-owned real estate brokerage services, relocation services, and title and settlement services. Franchise and company-owned brands include Century 21, Coldwell Banker, ERA and Sotheby’s International Realty, among others.

Shares of Realogy Corp. began trading on the New York Stock Exchange under the symbol “H” on Aug. 2. The share price fell 58 cents Wednesday to close at $20.72.

As of June 30, 2006, Cendant Corp. was a global provider of real estate and travel services, though it has since spun off its real estate and hospitality segments. The company also anticipates a sale of Travelport Inc., its travel services segment, this month. The company’s continuing operations will include its car and truck rental segment and ancillary services to businesses and consumers.

Henry R. Silverman, Cendant chairman and CEO, said in a statement, “The past several months were a period of strategic milestones for Cendant. We completed the spin-offs of Realogy and Wyndham Worldwide to our shareholders and each is now an independent, publicly traded company. The sale of Travelport is expected to be completed this month, after which Avis Budget Group will be an independent, publicly traded company. These companies are leaders in their respective industries and we are excited about the prospects for each to grow, prosper and create long-term value for its shareholders.”

Cendant will host a conference call to discuss the second-quarter results at 11 a.m. Thursday, Aug. 10. Investors can access the call live at or by calling (913) 981-5509. A Web replay will be available at after the call. A telephone replay will be available from 2 p.m. EDT Aug. 10 until 8 p.m. EDT Aug. 17. at (719) 457-0820, access code 6465003.

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