XML 30 R8.htm IDEA: XBRL DOCUMENT
v3.20.2

Basis Of Presentation | 6 Months Ended
--- | ---
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Basis Of Presentation | BASIS OF PRESENTATION Realogy Holdings Corp. ("Realogy Holdings", "Realogy" or the "Company") is a holding company for its consolidated subsidiaries including Realogy Intermediate Holdings LLC ("Realogy Intermediate") and Realogy Group LLC ("Realogy Group") and its consolidated subsidiaries. Realogy, through its subsidiaries, is a global provider of residential real estate services. Neither Realogy Holdings, the indirect parent of Realogy Group, nor Realogy Intermediate, the direct parent company of Realogy Group, conducts any operations other than with respect to its respective direct or indirect ownership of Realogy Group. As a result, the consolidated financial positions, results of operations, comprehensive income and cash flows of Realogy Holdings, Realogy Intermediate and Realogy Group are the same. The accompanying Condensed Consolidated Financial Statements include the financial statements of Realogy Holdings and Realogy Group. Realogy Holdings' only asset is its investment in the common stock of Realogy Intermediate, and Realogy Intermediate's only asset is its investment in Realogy Group. Realogy Holdings' only obligations are its guarantees of certain borrowings and certain franchise obligations of Realogy Group. All expenses incurred by Realogy Holdings and Realogy Intermediate are for the benefit of Realogy Group and have been reflected in Realogy Group's Condensed Consolidated Financial Statements. The Condensed Consolidated Financial 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. In management's opinion, the accompanying unaudited Condensed Consolidated Financial Statements reflect all normal and recurring adjustments necessary for a fair statement of Realogy Holdings and Realogy Group's financial position as of June 30, 2020 and the results of operations and comprehensive (loss) income for the three and six months ended June 30, 2020 and 2019 and cash flows for the six months ended June 30, 2020 and 2019. The Consolidated Balance Sheet at December 31, 2019 was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2019. COVID-19 The COVID-19 pandemic continues to have a profound effect on the global economy and financial markets, creating considerable risks and uncertainties for almost all sectors, including the U.S. real estate services industry, as well as for the Company and its affiliated franchisees. Among other things, the crisis has created risks and uncertainties arising from the adverse effects on the economy as well as risks related to employees, independent sales agents, franchisees, and consumers. In mid-March 2020, we began taking a series of proactive cost-saving measures in reaction to the evolving crisis, including salary reductions, furloughs and reductions in spending which resulted in substantial cost-savings in the second quarter of 2020. Many of these cost-saving measures were or are temporary in nature and have been or will continue to be assessed and adjusted on an ongoing basis based upon the volume of homesale transactions and business needs. See Note 3, "Goodwill and Intangible Assets", to the Condensed Consolidated Financial Statements for additional information on goodwill and intangible asset impairment charges recorded in the first quarter of 2020 due to the impact on future earnings related to the COVID-19 pandemic which qualified as a triggering event for all of our reporting units as of March 31, 2020, Note 5, "Short and Long-Term Debt", to the Condensed Consolidated Financial Statements for additional information on our short- and long-term debt, and Note 11, "Subsequent Events", to the Condensed Consolidated Financial Statements for information on recent amendments to the Senior Secured Credit Agreement and Term Loan A Agreement. Fair Value Measurements The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.
Level Input: |  | Input Definitions:
Level I |  | Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level II |  | Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date.
Level III |  | Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.
The availability of observable inputs can vary from asset to asset and is affected by a wide variety of factors, including, for example, the type of asset, whether the asset is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level III. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The fair value of financial instruments is generally determined by reference to quoted market values. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques, as appropriate. The fair value of interest rate swaps is determined based upon a discounted cash flow approach. The Company measures financial instruments at fair value on a recurring basis and recognizes transfers within the fair value hierarchy at the end of the fiscal quarter in which the change in circumstances that caused the transfer occurred. The following table summarizes fair value measurements by level at June 30, 2020 for assets and liabilities measured at fair value on a recurring basis:
| Level I |  | Level II |  | Level III |  | Total
Deferred compensation plan assets (included in other non-current assets) | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | 1 |
Interest rate swaps (included in other current and non-current liabilities) | — |  |  | 99 |  |  | — |  |  | 99 |
Contingent consideration for acquisitions (included in accrued expenses and other current liabilities and other non-current liabilities) | — |  |  | — |  |  | 5 |  |  | 5 |
The following table summarizes fair value measurements by level at December 31, 2019 for assets and liabilities measured at fair value on a recurring basis:
| Level I |  | Level II |  | Level III |  | Total
Deferred compensation plan assets (included in other non-current assets) | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | 2 |
Interest rate swaps (included in other current and non-current liabilities) | — |  |  | 47 |  |  | — |  |  | 47 |
Contingent consideration for acquisitions (included in accrued expenses and other current liabilities and other non-current liabilities) | — |  |  | — |  |  | 4 |  |  | 4 |
The fair value of the Company’s contingent consideration for acquisitions is measured using a probability weighted-average discount rate to estimate future cash flows based upon the likelihood of achieving future operating results for individual acquisitions. These assumptions are deemed to be unobservable inputs and as such the Company’s contingent consideration is classified within Level III of the valuation hierarchy. The Company reassesses the fair value of the contingent consideration liabilities on a quarterly basis. The following table presents changes in Level III financial liabilities measured at fair value on a recurring basis:
|  | Level III
Fair value of contingent consideration at December 31, 2019 |  | $ | 4 |
Additions: contingent consideration related to acquisitions completed during the period |  | 1 |
Reductions: payments of contingent consideration |  | — |
Changes in fair value (reflected in general and administrative expenses) |  | — |
Fair value of contingent consideration at June 30, 2020 |  | $ | 5 |
The following table summarizes the principal amount of the Company’s indebtedness compared to the estimated fair value, primarily determined by quoted market values, at:
| June 30, 2020 |  |  |  | December 31, 2019 |  |
Debt | Principal Amount |  | Estimated Fair Value (a) |  | Principal Amount |  | Estimated Fair Value (a)
Senior Secured Credit Facility: |  |  |  |  |  |  |
Revolving Credit Facility | $ | 815 |  |  | $ | 815 |  |  | $ | 190 |  |  | $ | 190 |
Term Loan B | 1,053 |  |  | 963 |  |  | 1,058 |  |  | 1,048 |
Term Loan A Facility: |  |  |  |  |  |  |
Term Loan A | 703 |  |  | 650 |  |  | 717 |  |  | 705 |
7.625% Senior Secured Second Lien Notes | 550 |  |  | 549 |  |  | — |  |  | — |
5.25% Senior Notes | — |  |  | — |  |  | 550 |  |  | 557 |
4.875% Senior Notes | 407 |  |  | 383 |  |  | 407 |  |  | 401 |
9.375% Senior Notes | 550 |  |  | 513 |  |  | 550 |  |  | 572 |
_______________ (a)The fair value of the Company's indebtedness is categorized as Level II. Equity Method Investments At June 30, 2020 and December 31, 2019, the Company had various equity method investments which are recorded within other non-current assets on the accompanying Condensed Consolidated Balance Sheets. The Company's investment in Guaranteed Rate Affinity, LLC ("Guaranteed Rate Affinity") at Realogy Title Group had investment balances at June 30, 2020 and December 31, 2019 of $84 million and $60 million, respectively. For the three months ended June 30, 2020 and 2019, the Company recorded equity earnings of $35 million and $6 million, respectively, related to earnings from its investment in Guaranteed Rate Affinity. For the six months ended June 30, 2020 and 2019, the Company recorded equity earnings of $44 million and $7 million, respectively, related to earnings from its investment in Guaranteed Rate Affinity. The Company received $20 million in cash dividends from Guaranteed Rate Affinity during the six months ended June 30, 2020 and no cash dividends during the six months ended June 30, 2019. The Company invested $2 million of cash into Guaranteed Rate Affinity during the six months ended June 30, 2019. The Company's other equity method investments at Realogy Title Group had investment balances at June 30, 2020 and December 31, 2019 totaling $8 million and $9 million, respectively. The Company recorded equity earnings from the operations of these equity method investments of $1 million in each period during both the three and six months ended June 30, 2020 and 2019. The Company received $2 million and $1 million in cash dividends from other equity method investments during the six months ended June 30, 2020 and 2019, respectively. Income Taxes The provision for income taxes was an expense of $11 million and $33 million for the three months ended June 30, 2020 and 2019, respectively, and a benefit of $121 million and an expense of $1 million for the six months ended June 30, 2020 and 2019, respectively. Derivative Instruments The Company records derivatives and hedging activities on the balance sheet at their respective fair values. The Company enters into interest rate swaps to manage its exposure to changes in interest rates associated with its variable rate borrowings. As of June 30, 2020, the Company had interest rate swaps with an aggregate notional value of $1,600 million to offset the variability in cash flows resulting from the term loan facilities as follows:
Notional Value (in millions) |  | Commencement Date |  | Expiration Date |
$600 |  | August 2015 |  | August 2020 | (a)
$450 |  | November 2017 |  | November 2022 |
$400 |  | August 2020 | (a) | August 2025 |
$150 |  | November 2022 |  | November 2027 |
_______________ (a)Interest rate swaps with a notional value of $600 million expire on August 7, 2020, and interest rate swaps with a notional value of $400 million commence on August 14, 2020. The swaps help to protect our outstanding variable rate borrowings from future interest rate volatility. The Company has not elected to utilize hedge accounting for these interest rate swaps; therefore, any change in fair value is recorded in the Condensed Consolidated Statements of Operations. The fair value of derivative instruments was as follows:
Not Designated as Hedging Instruments |  | Balance Sheet Location |  | June 30, 2020 |  | December 31, 2019
Interest rate swap contracts |  | Other current and non-current liabilities |  | 99 |  |  | 47 |
The effect of derivative instruments on earnings was as follows:
Derivative Instruments Not Designated as Hedging Instruments |  | Location of Loss Recognized for Derivative Instruments |  | Loss Recognized on Derivatives |  |  |  |  |  |
|  |  |  | Three Months Ended June 30, |  |  |  | Six Months Ended June 30, |  |
|  |  |  | 2020 |  | 2019 |  | 2020 |  | 2019
Interest rate swap contracts |  | Interest expense |  | $ | 8 |  |  | $ | 24 |  |  | $ | 59 |  |  | $ | 38 |
Revenue Revenue is recognized upon the transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services in accordance with the revenue standard. The Company's revenue is disaggregated by major revenue categories on our Condensed Consolidated Statements of Operations and further disaggregated by business segment as follows:
| Three Months Ended June 30, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Realogy Franchise Group |  |  |  | Realogy Brokerage Group |  |  |  | Realogy Title Group |  |  |  | Corporate and Other |  |  |  | Total Company |  |
| 2020 |  | 2019 |  | 2020 |  | 2019 |  | 2020 |  | 2019 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Gross commission income (a) | $ | — |  |  | $ | — |  |  | $ | 919 |  |  | $ | 1,310 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 919 |  |  | $ | 1,310 |
Service revenue (b) | 14 |  |  | 26 |  |  | 4 |  |  | 3 |  |  | 154 |  |  | 154 |  |  | — |  |  | — |  |  | 172 |  |  | 183 |
Franchise fees (c) | 148 |  |  | 196 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (63) |  |  | (84) |  |  | 85 |  |  | 112 |
Other (d) | 17 |  |  | 38 |  |  | 10 |  |  | 18 |  |  | 6 |  |  | 6 |  |  | (2) |  |  | (3) |  |  | 31 |  |  | 59 |
Net revenues | $ | 179 |  |  | $ | 260 |  |  | $ | 933 |  |  | $ | 1,331 |  |  | $ | 160 |  |  | $ | 160 |  |  | $ | (65) |  |  | $ | (87) |  |  | $ | 1,207 |  |  | $ | 1,664 |
| Six Months Ended June 30, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Realogy Franchise Group |  |  |  | Realogy Brokerage Group |  |  |  | Realogy Title Group |  |  |  | Corporate and Other |  |  |  | Total Company |  |
| 2020 |  | 2019 |  | 2020 |  | 2019 |  | 2020 |  | 2019 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Gross commission income (a) | $ | — |  |  | $ | — |  |  | $ | 1,769 |  |  | $ | 2,109 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,769 |  |  | $ | 2,109 |
Service revenue (b) | 27 |  |  | 42 |  |  | 9 |  |  | 5 |  |  | 287 |  |  | 265 |  |  | — |  |  | — |  |  | 323 |  |  | 312 |
Franchise fees (c) | 275 |  |  | 319 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (119) |  |  | (137) |  |  | 156 |  |  | 182 |
Other (d) | 45 |  |  | 78 |  |  | 24 |  |  | 33 |  |  | 10 |  |  | 9 |  |  | (4) |  |  | (5) |  |  | 75 |  |  | 115 |
Net revenues | $ | 347 |  |  | $ | 439 |  |  | $ | 1,802 |  |  | $ | 2,147 |  |  | $ | 297 |  |  | $ | 274 |  |  | $ | (123) |  |  | $ | (142) |  |  | $ | 2,323 |  |  | $ | 2,718 |
______________ (a)Consists primarily of revenues related to gross commission income at Realogy Brokerage Group, which is recognized at a point in time at the closing of a homesale transaction. (b)Service revenue primarily consists of title and escrow fees at Realogy Title Group, which are recognized at a point in time at the closing of a homesale transaction. (c)Franchise fees at Realogy Franchise Group primarily include domestic royalties which are recognized at a point in time when the underlying franchisee revenue is earned (upon close of the homesale transaction). (d)Other revenue is comprised of brand marketing funds received at Realogy Franchise Group from franchisees, third-party listing fees in 2019 and other miscellaneous revenues across all of the business segments. The following table shows the change in the Company's contract liabilities (deferred revenue) related to revenue contracts by reportable segment for the period:
| Beginning Balance at January 1, 2020 |  | Additions during the period |  | Recognized as Revenue during the period |  | Ending Balance at June 30, 2020
Realogy Franchise Group: |  |  |  |  |  |  |
Deferred area development fees (a) | $ | 48 |  |  | $ | — |  |  | $ | (5) |  |  | $ | 43 |
Deferred brand marketing fund fees (b) | 13 |  |  | 22 |  |  | (32) |  |  | 3 |
Other deferred income related to revenue contracts | 11 |  |  | 14 |  |  | (14) |  |  | 11 |
Total Realogy Franchise Group | 72 |  |  | 36 |  |  | (51) |  |  | 57 |
Realogy Brokerage Group: |  |  |  |  |  |  |
Advanced commissions related to development business (c) | 9 |  |  | 2 |  |  | (2) |  |  | 9 |
Other deferred income related to revenue contracts | 4 |  |  | 1 |  |  | (2) |  |  | 3 |
Total Realogy Brokerage Group | 13 |  |  | 3 |  |  | (4) |  |  | 12 |
Total | $ | 85 |  |  | $ | 39 |  |  | $ | (55) |  |  | $ | 69 |
_______________ (a)The Company collects initial area development fees ("ADF") for international territory transactions, which are recorded as deferred revenue when received and recognized into franchise revenue over the average 25 year life of the related franchise agreement as consideration for the right to access and benefit from Realogy’s brands. In the event an ADF agreement is terminated prior to the end of its term, the unamortized deferred revenue balance will be recognized into revenue immediately upon termination. (b)Revenues recognized include intercompany marketing fees paid by Realogy Brokerage Group. (c)New development closings generally have a development period of between 18 and 24 months from contracted date to closing. Allowance for Doubtful Accounts The Company estimates the allowance necessary to provide for uncollectible accounts receivable. The estimate is based on historical experience, combined with a review of current conditions and forecasts of future losses, and includes specific accounts for which payment has become unlikely. The process by which the Company calculates the allowance begins in the individual business units where specific problem accounts are identified and reserved primarily based upon the age profile of the receivables and specific payment issues, combined with reasonable and supportable forecasts of future losses. Supplemental Cash Flow Information Significant non-cash transactions during the six months ended June 30, 2020 and 2019 included finance lease additions of $7 million and $9 million, respectively, which resulted in non-cash additions to property and equipment, net and other non-current liabilities. Leases Other than the Company's facility closures as described in Note 6, "Restructuring Costs," the Company's lease obligations as of June 30, 2020 have not changed materially from the amounts reported in our 2019 Form 10-K. Recently Adopted Accounting Pronouncements The Company adopted the new accounting standard on Financial Instruments—Credit Losses (Topic 326) effective January 1, 2020. The new standard amends the guidance for measuring credit losses on certain financial instruments and financial assets, including trade receivables. The standard requires that companies recognize an allowance that reflects the current estimate of credit losses expected to be incurred over the life of the financial instrument. The valuation allowance for credit losses should be recognized and measured based on historical experience, current conditions and expectations of the future. The initial adoption of this guidance did not have an impact to the Company’s Condensed Consolidated Financial Statements upon adoption on January 1, 2020. Recently Issued Accounting Pronouncements The Company considers the applicability and impact of all Accounting Standards Updates ("ASUs"). Recently issued standards were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

X
- References No definition available. + Details
Name: | us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI http://asc.fasb.org/topic&trid=2122149 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 + Details
Name: | us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration