Anywhere Real Estate Inc (HOUS) 2012 Q1 法說會逐字稿

Good afternoon and welcome to the Realogy Corporation first quarter 2012 earnings conference call via webcast.

Today's call is being recorded and a written transcript will be made available in the Investor Information section of the Company's website tomorrow.

A webcast replay will also be made available on the Company's website.

At this time, I would like to turn the conference over to Realogy's Senior Vice President, Alicia Swift.

Please go ahead, Alicia.

Thank you, Keshia.

Good afternoon and welcome to the Realogy first quarter 2012 earnings conference call.

On the call with me today are Realogy's Chairman and CEO, Richard Smith; and Chief Financial Officer, Tony Hull.

I would like to call your attention to three items.

First, you should have access to a copy of our financial results press release on our Form 10-Q for the quarter ended March 31, 2012, which we have filed with the Securities and Exchange Commission.

Both documents are available on the Investor Information section of our website as well as a copy of today's webcast slides.

Second, the Company will be making statements about its future results and other forward-looking statements during the call.

Statements about future results made during the call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements are based on current expectations and the current economic environment.

Forward-looking statements and projections are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management.

The Company cautions that these statements are not guarantees of future performance.

Actual results may differ materially from those expressed or implied in the forward-looking statements.

For those who listen to a rebroadcast of this presentation, we remind you that the remarks made herein are as of today, May 2, and have not been updated subsequent to the initial earnings call.

Important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements and projections are set forth under the headings Forward-Looking Statements - Risk Factors and Management's Discussion and Analysis of the Financial Condition and Results of Operation in our annual report on Form 10-K for the year ended December 31, 2011 and in our quarterly report on Form 10-Q for the quarter ended March 31, 2012, and in our other periodic reports filed from time to time.

Third, we will be referring to certain non-GAAP financial measures during the call.

Today's press release contains definitions of these terms, a reconciliation of these terms to their most comparable GAAP measure and a discussion of why we believe these non-GAAP financial measures are useful to our investors.

In terms of industry data, we use the National Association of Realtors and Fannie Mae as benchmarks of the direction of the residential housing market.

We believe changes in Realogy's home sale statistics will continue to vary from those reported by NAR because they use survey data as the basis of their historical reports; whereas, we use data on our actual reported results.

Let me briefly review the headlines of our release issued today regarding Realogy's first quarter 2012 results.

Specifically for the first quarter ended March 31, 2012, we reported revenue of $875 million, a 5% year-over-year increase; EBITDA before restructuring and other items of $36 million, a 44% increase from the first quarter of 2011.

We maintained covenant compliance with a ratio of 4.02 to 1, well under the allowable limit; and net loss attributable to Realogy of $192 million, which is largely due to the $170 million of interest expense and $45 million of depreciation and amortization.

Now, I will turn the call over to our Chairman, Richard Smith.

Thank you, Alicia, and thank you all for joining us on today's call.

Despite the seasonality that typically makes the first quarter the weakest quarter of the year for our industry, we are pleased with what we saw both in the market and in the operating results during the first quarter this year.

Realogy showed solid year-over-year improvement, posting strong gains in both revenue and operating results.

The significant business drivers we measure ourselves against are in favorable territory for our franchising, brokerage relocation and title service business segments.

The key takeaways from the first quarter are that unit volume was up solidly compared to 2011 and average home sale prices holding up better than expected.

While some of the volume gains were likely tied to unseasonably warm weather, the improvement occurred at about the same pace in the Northeast as it did across the country as a whole.

Also of note is that at the Realogy Franchise Group, we saw similar unit gains across all price ranges.

Looking ahead we expect to continue to see favorable unit gains throughout the second quarter as the impact of high affordability in the rent versus buy value proposition shift in favor of owning a home.

According to a recent report from Trulia, buying a home is now cheaper than renting in 98 of the 100 largest US markets.

The average sales price is slowly recovering.

We believe rising home prices are a function of reduced inventory in most major markets.

Regardless of whether you're talking about retail existing home inventory or foreclosed homes, demand is putting pressure on supply.

All in all, we believe we're off to a good start.

According to the National Association of Realtors, hereinafter referred to as NAR, existing home-sale transactions for first quarter of this year increased by 7% compared to the same period last year.

In comparison, in our TR Company-owned brokerage operations recorded an 8% gain in home-selling units in the first quarter, while the Realogy Franchise Group, hereinafter referred to as RFG, had a 7% year-over-year increase in home-sale units.

In terms of average home-sale price for the first quarter, NAR reported that average sales price was flat year over year, which is what RFG recorded.

At NRT, average sales price declined 3%, which for the most part was due to a shift in sales mix at NRT to more lower-priced homes, more often than not first buyers.

On a year-over-year basis, NAR's most recent monthly data showed that the reported existing home sales in March of this year were up 4% versus March last year.

This marks the ninth straight month of year-over-year gains in unit sales, which we believe is more meaningful than the seasonally adjusted month-to-month comparisons that tend to grab the headlines.

NAR's reported 3% month-over-month decline in the seasonally adjusted annual rate of home sales from February to March, was accompanied by a 5% increase in both median and average sales price versus February, an expected result of declining inventory and higher demand.

Now let's review the operating highlights for Realogy in each of our businesses during the first quarter.

In March, Realogy was recognized as one of the 2012 world's most ethical companies by Ethisphere Institute, the leading international business ethics think tank.

We are honored to be recognized for our leadership in this regard.

We believe that the enduring value of our commitment to ethics and integrity is reflected in how we operate our businesses.

More than 5,000 companies were evaluated for this global distinction, and only 145 were selected.

No other residential real estate firms made the list, which spans more than three dozen industries across both domestic and internationally based companies.

Turning to our business units, the RFG is the largest real estate brokerage franchisor in the world with approximately 241,000 independent sales associates, operating from 13,800 offices and 103 countries and territories.

In terms of domestic franchise, sales for the first quarter, RFG added new franchisees and sales associates, representing approximately $48 million in annualized franchisee gross commission income, or GCI.

Our reported franchise sales are defined as new franchise agreements as well as acquisitions made by our franchisees with our assistance.

Sotheby's International Realty led the way among our brands in terms of new franchisee signings, most of which will be launched during the second quarter.

Of note, the brand strengthened its luxury market leadership position in two key markets by assisting those affiliates in Aspen, Colorado and Princeton, New Jersey, growth through local market acquisitions.

Better Homes and Gardens Real Estate also had a good deal of momentum heading into the second quarter with new additions to its network in New York City, San Antonio and Scottsdale, Arizona, all during the first two weeks of April.

Better Homes and Gardens Real Estate has opened seven new US markets here today.

On the global front, RFG's international royalty revenues were up 8% year over year.

During the first quarter Sotheby International Realty executed a franchise agreement with a firm in Israel and will open offices in that market later this year.

Growth in the Asia-Pacific markets is a priority for the firm, which launched a sales and servicing center in Hong Kong during the first quarter.

Already this year, its franchisees have expanded the luxury brand's presence with office openings in Vietnam and Taiwan.

Across the globe in Europe, Sotheby International Realty celebrated its launch in Milan, Italy, which adds to the brands strong existing presence in Venice and Rome.

Our brands logged a number of other highlights during the quarter, including Coldwell Banker's CEO, Jim Gillespie, was named as one of the nation's ten most admired CEOs across 3,400 companies, and that's according to a recent survey by Career Bliss.

Century 21 executed a highly successful Super Bowl ad campaign that has led to a significant increase in its consumer website traffic, peaking at a 85% increase in February.

Site traffic remains up 35% year to date through April.

And ERA celebrated its 40th anniversary in March.

NRT, our Company-owned brokerage, was ranked as the nation's leading residential real estate brokerage company in the REAL Trends 500 Report for the 15th consecutive year.

With $108.9 billion in pro forma closed sales volume reported in 2011, NRT is approximately 3.5 times larger by sales volume than its next closest residential real estate brokerage competitor.

NRT has approximately 725 offices and 41,500 independent sales associates operating in 35 of the nation's largest metropolitan markets.

The company has an average sales price of $403,000 in the first quarter remains almost double NAR's national average sales price of $205,000, and reflects NRT's geographic diversity and presence, not only in major metro markets, but it's also its strong presence in the high end of those markets.

As we had previously discussed, NRT's management focus on organic growth through sales associate recruiting has been very effective, and the trend continued in the first quarter.

During the last 12 months, NRT has recruited new sales associates who collectively generated approximately $53 million in annualized gross commission income.

More traditional mergers and acquisitions over the same period added about $26 million in GCI.

And thus, between organic and nonorganic growth, NRT added approximately $79 million of GCI in its revenue base during the past 12 months.

The retention of high-performing sales associates is a high priority, and NRT management has been highly effective in that regard.

In the past 2+ years, NRT has consistently retained over 93% of the production from its first and second quartile sales associates, the top producing segments of its sales force.

Cartus, our relocation company, successfully won approximately $5.4 million of annualized business from 32 new clients during the quarter.

In addition, Cartus expanded its domestic and international assignment services with 89 of its existing clients.

International assignment services revenue grew approximately 9% year over year, aided by the new client and expansions.

Cartus' initiations were up 7% year over year, and referrals were up 11% compared with the first quarter of last year.

We believe Cartus' international reach is a critical differentiator that has led to a number of significant new client wins, including the Kellogg Company in the first quarter.

Cartus provides relocation services to 60% of the Fortune 50 and 54% of the Fortune 100.

Cartus was also awarded a US patent for its Acadia e-procurement online bidding platform.

Acadia is unique to the global relocation industry and involves inviting suppliers to submit online bids for specific segments of the business for which they want to be considered.

In effect, an auction.

Initially developed for household goods shipment, the Acadia platform is now also used for domestic moves and for matching transferees with cost-effective temporary housing.

Cartus' innovative system has resulted in documented client savings of approximately $70 million across this global client base over the past three years.

At Title Resource Group, hereinafter referred to as TRG, our title agency and underwriter business, the positive momentum also continues.

In the first quarter, TRG continued to experience growth in its lender channel, expanding the breadth of its existing relationships while adding new clients to the mix as well.

This increased business volume is driving significant growth at TRG, which had a 6% year-over-year increase in revenue during the first quarter.

TRG expects to increase the size of its workforce by 10% to 12% during the second quarter of this year to over 2,000 employees, up from approximately 1,800, to accommodate its recently added new business volume.

TRG's underwriter, the Title Resource Guaranty Company, continued its positive trend line with 6% growth in net premiums, and its underwriting claims loss ratio remains at approximately 1.5%, which continues to substantially outperform the industry average loss ratio of about 60%.

Accordingly, TRGC maintained an A-prime, or unsurpassed financial stability rating, in March from Demotech, a leading financial analysis firm covering the title insurance sector.

Now let's take a look at the operating environment.

During the first quarter of -- the fourth quarter of last year, we referenced the early signs of a stabilizing market.

The first quarter results of this year strongly support our earlier thesis and indicate the beginnings of a housing recovery.

Looking ahead, assuming the current economic path continues, we believe the housing recovery should continue to gain traction.

We believe demand is increasing and home values are starting to stabilize.

Current market conditions reflect declining inventory, which appears to be the prevailing factor in driving prices higher in many markets.

In its April 19 release, NAR reported 6.3 months inventories as of March 31 of this year, which is down considerably from the 2011 peak of 9.3 months inventory in July last year.

In mid-April, we fielded an informal survey to gain additional insights on market conditions, including a perspective on homebuyer attitudes.

Specifically, NRT gathered more than 900 survey responses from a geographically dispersed national sampling of its independent sales associates.

The informal survey of NRT agents indicated the top three factors influencing homebuyers to buy now are as follows.

74% said the opportunity to get a good deal.

41% indicated a growing confidence in the economy.

And 39% said the expectation that interest rates are about to rise.

One striking finding from the survey is that 79% of NRT agents said that they are seeing an increase in multiple offers in their local markets.

While this supports what we said previously about the lack of inventory driving demand and the average sales prices in select markets, the frequency of multiple bids, noted by our NRT agents, is higher than we expected.

When comparing today's market against the past couple of years, 42% of agents said today's market has improved greatly, and 48% said it is up slightly.

While there are signs of a housing recovery, it is not going to manifest itself in a straight, upward-bound line.

As we have always predicted, recovery is being driven at different paces by local economies and local housing markets, with varying degrees of strength, once again, based on local dynamics.

We have long said that when the focus on housing shifts back to the local markets, not the national averages, it will market the beginnings of a return to normalcy.

For full year 2012, NAR is forecasting 4.68 million units sold, which will amount to a 10% year-over-year increase, while Fannie Mae's forecast calls for an 8% increase to 4.6 million units this year, both nearly double the respective 2012 forecast from fourth quarter of last year.

NAR's current estimate for median sales price calls for a 2% increase in 2012, while Fannie indicates a price decline of 3% for 2012.

An expected high proportion of distressed sales and the mix of overall home sales is, in all likelihood, causing those two organizations to be cautious on their national median price forecasts.

We are encouraged by continued low interest rates, which average 3.91% for a 30-year conventional fixed-rate mortgage in April of this year, and record-high levels of home affordability.

That said, we need sustainable job growth and the macroeconomic growth that accompanies it to continue the rising demand for housing.

As we have discussed previously, we are actively involved in a wide range of economic, legislative and regulatory issues, working to make sure that our point of view is well represented in Washington, D.C.

While many important housing policy decisions may be delayed until after this election cycle, we continue to assert our views on matters of importance in Washington.

We are pleased to note that the business roundtable and influential association of CEOs of leading US companies, to which we belong, with our direct involvement recently issued a set of principles for revitalizing and reforming the US housing market.

The business roundtable's housing principles underscored its key message, which is that the importance of the US housing sector is an overall economic recovery -- to an overall economic recovery cannot be understated.

With regard to several current policy issues in the news, we are closely watching the proposed bulk sale of REO properties, which is currently being considered by the US government.

Through our REO experts group at NRT, we are one of the country's largest independent resellers of REO properties.

While we applaud any program that will take pressure off the so-called shadow inventory, we note that our foreclosure inventory is selling briskly.

In the first quarter, REO properties took approximately 71 days from list to contract, which is down from a peak of 103 days in July of last year.

Furthermore, we sell approximately 60% of our REO inventory to small investors, and in the first quarter, REOs sold at 99% of the list price, which reflects the local appraised value.

The sale of these properties to local investors bolsters local economies and is likely a better solution for taxpayers than a discounted bulk sale to institutional investors.

With regard to short sales, we applaud the Federal Housing Finance Agency for issuing new guidance requiring servicers of Fannie Mae and Freddie Mac loans to expedite the short sale cycle.

The new FHFA guidelines would require servicers to acknowledge receipt of short sale purchase offers within three business days, respond to short sale requests within 30 days with a possible 30-day extension, and make a final decision within 60 days of receiving a purchase offer.

These are much-needed enhancements to what has been a long and cumbersome process.

Keep in mind that compared to foreclosures, short sales minimize the negative impact on sellers and communities alike.

We are strongly in favor of immediate Congressional action to extend the Mortgage Debt Relief Act, which was initiated in 2007, but is now set to expire at the end of this year.

This legislation currently provides underwater homeowners with the opportunity to complete a short sale transaction and not be required to pay federal income taxes on the forgiven loan balance.

If the expiration date is not extended, a short sale, as a process, will decline dramatically, forestalling the recovery in housing.

In closing, we are encouraged by the developing trends in the housing market and believe that with job growth and improved macroeconomics, we are in the early stages of a housing and recovery.

With that, I'll turn the call over to Tony.

Tony?

Thank you, Richard.

Before I discuss the results for the first quarter of 2012 in detail, I have a few brief comments.

EBITDA before restructuring and other items for the quarter was $36 million, a 44% increase from Q1 2011 and primarily due to gains at NRT.

Compensation expense recorded in the first quarter of 2012 increased by $10 million.

The incremental expense in the quarter was due to the impact of recording both the previously instituted retention plan as well as the 2012 bonus plan.

Realogy did not have an annual bonus plan in 2011 but implemented a retention plan in November 2010, which will be expensed through September of this year.

Excluding the expense of $11 million for the retention plan, Realogy's EBITDA before restructuring and other items for the first quarter of 2012 would have been $47 million.

Expenses for the retention plan will continue to be accrued during the second and third quarters of 2012.

For the nine-month period ended September 30, 2012, there will be approximately $27 million retention expense, which we do not expect to recur in 2013.

Based on our trailing 12-month adjusted EBITDA, Realogy's senior secured leverage was 4.02 to 1 at March 31.

The first quarter EBITDA of every year is historically the smallest contributor of the four quarters due to seasonality.

Fixed cost of the business is spread evenly throughout the year, and the first quarter normally has the lowest transaction volume, which makes these expenses difficult to offset.

The second and third quarters are Realogy's largest EBITDA contributors and when operating cash flow generation is the largest.

Slide 12 shows revenue for the first quarter of 2012.

Overall, revenue was up 5% from 2011.

The breakdown by category of the $875 million of total net revenue was as follows.

Gross commission income totaled $606 million in NRT -- at NRT, an increase of 5% from Q1 2011.

Service revenues, principally from Cartus and Title Resource Group, increased to $172 million, up 5% from Q1 2011.

And the Realogy Franchise Group's third-party franchise fees increased $3 million to $54 million for the quarter.

On Slide 13, we compare expenses during Q1 2011 versus 2011.

Total commission and other related costs of $402 million increased $28 million or 7% year over year.

Operating expenses of $318 million remained flat year over year.

Marketing costs increased by 19% or $8 million primarily due to the timing of the Century 21's Super Bowl advertising program.

General and administrative costs increased $6 million primarily due to the incremental compensation expense outlined above.

Next I will discuss our key revenue drivers from Slide 14.

In the first quarter of 2012, RFG home sale sides increased 7% year over year, while average home sale price was flat at $194,000.

RFG's volume increase was largely a result of more unit sales across all price points.

At the high end of the market, the Sotheby's International Realty brand had a 25% increase in transaction sides in the quarter compared to the same period last year.

NRT home sale sides increased 8% year over year in the first quarter compared to 2011, and average home sale price decreased by 3% to $403,000.

The average price decline in the quarter was due to a contingent shift in mix in business to more lower-priced properties compared to Q1 2011.

At NRT, sales volume of homes below $300,000 was 23% of its total sales this past quarter, compared to 21% in the first quarter of 2011.

Moving from an overall perspective, here's a look at select regional NRT performance data for the first quarter of '12.

As we saw in the fourth quarter of 2011, an influx in buyers at lower price points continued to be seen in the first quarter's closed transactions.

NRT's Midwestern operations, which in the fourth quarter of last year saw a 13% increase in home sale sides, offset by an average sale price decrease of 8%, had a 21% increase of home sale sides, that was offset by a price decrease of 7% this past quarter.

NRT's Southern California operations continue to be relatively weak and reported a 1% increase in home sale sides, along with a 5% decrease in average sale price, compared to Q1 of 2011.

Northern California enjoyed a 12% increase in sides and only a 2% decrease in average sales price.

The Northeast experienced sides increases of 9%, offset by average sale price declines of 4%.

The comparisons for the Northeast were somewhat impacted by improved weather, but we believe that pent-up demand at lower price points was the more prominent reason for the increase.

This is supported by the decline in the average sales price in the region.

As we remarked before, Florida is starting to see overall market inventories return to more normal levels, and at lower price points, below-normal inventories.

That region experienced a 4% decline in units, more than offset by a 7% increase in average sale price.

Looking at what we are seeing in the second quarter, in April, preliminary closed home sale sides combined for RFG and NRT increased approximately 11% year over year and average sales price increased 4%, a net 15% gain on volume versus 2011.

Moving on, average broker conversion rates for the first quarter of 2012 increased one basis point at NRT to 2.51% year over year, while RFG's average commission rate increased two basis points to 2.56%.

Also, the Realogy Franchise Group's net effective royalty rate declined 12 basis points to 4.75% compared to Q1 2011, as its larger affiliates continued to achieve higher volume levels.

RFG's top 250 companies represent 55% of total franchisee GCI in Q1 2012 versus 53% in Q1 2011.

Cartus relocation initiations for the quarter increased 7% and referrals increased 11%.

The increase in initiations from referrals is driven primarily by a greater affinity business and new corporate clients side in late 2011.

Our affinity business provides real estate and relocation services, including home buying and selling assistance to organizations such as insurance companies and credit unions that are membership based.

At TRG, Q1 2012 purchase volume increased 8%, which is consistent with the NRT unit sales gains.

TRG's refinance title and closing units increased 31% in the first quarter 2012, compared to Q1 2011, due to the expanded business in our lender channel operations.

This compares favorably to the overall refinancing volume in the United States, which increased 23% in Q1 2012 compared to Q1 2011 according to data from Fannie Mae and the Mortgage Bankers Association.

TRG's average fee per closing decreased by 11% in the first quarter due to the increase in refinance volume, along with geographic mix of business in resale units.

Now let's review revenue and EBITDA before restructuring and other items by unit for the quarter ended March 31, 2012, as shown on Slide 15.

Total revenue at RFG was $129 million in Q1 2012 compared to $118 million in 2011.

The 9% revenue increase was due to the pickup in home sale sides, partially offset by the decrease in the net effective royalty rate discussed earlier.

Marketing revenue and the related marketing expenses increased $7 million and $8 million respectively, primarily due to the timing of advertising spend for the Century 21 Super Bowl advertising, compared to Q1 2011.

EBITDA before restructuring and other items at RFG was $61 million in the first quarter, compared with $62 million in the first quarter of 2011.

The $1 million EBITDA decrease was due to a $3 million increase in legal expenses, an increase of $3 million in employer-related costs due to the retention plan on top of the annual bonus plan, and a net $1 million increase in net marketing expense during the period.

These higher costs were mostly offset by royalty revenue increases, including NRT intercompany royalty revenue.

Revenue at NRT was up $30 million or 5% due to the increase in home sale sides, partially offset by the decline in average sales price.

NRT EBITDA before restructuring and other items in Q1 2012 was negative $16 million.

This was $19 million better than in Q1 2011.

The EBITDA improvement was due to the $30 million revenue increase, along with the $10 million increase in PHH Home Loans venture earnings and an $11 million decrease in operating expenses.

These improvements were partially offset by $28 million of higher commissions as a result of higher revenues, an increase in intercompany royalties paid to RFT and a $2 million increase in employer-related costs due to the retention plan on top of the annual bonus plan.

At Cartus, revenue increases of $1 million were largely driven by increased international transaction volume, offset by lower fixed-fee business.

EBITDA before restructuring and other items was $5 million in Q1 2012, down from $10 million in Q1 2011.

Revenue increases were more than offset by expenses to service higher volume and new accounts that will ramp up later in the year, $3 million of higher employee costs due to the retention plan on top of the annual bonus plan and $1 million of foreign currency exchange rate losses.

At TRG, revenue increased 6% or $5 million as a result of increased resale and refinancing transactions, as well as increased underwriting volume.

EBITDA before restructuring and other items increased $1 million due to the revenue increases, partially offset by a $3 million increase in variable operating costs from greater volume and $1 million of incremental claims reserves as would be expected given the pickup in underwriter transactions.

Turning to the balance sheet on Slide 16, we ended the quarter with a cash balance of $148 million, which includes $109 million of readily available cash and $39 million of statutory cash required for our title business.

Looking further down on the slide, other nonrecurring assets totaled $215 million.

The major components of this line include $81 million of RFG franchisee conversion notes and development advance notes, $71 million of deferred financing costs and $50 million related to our investment in the PHH Home Loans venture, along with TRG equity method investments.

Turning to the liability side of our balance sheet on Slide 17, at March 31, the amount borrowed under Apple Ridge, together with amounts borrowed under our UK securitization, was $302 million.

This was supported by relocation assets of $362 million.

We had no borrowings on our revolving credit facility at March 31, 2012, which was reduced from $175 million at the end of 2011 after giving effect to our 2012 senior secured notes offering.

At May 1, our revolver balance was $197 million.

The increase in borrowings was primarily due to the payment of our semiannual interest on the unsecured notes and the second-lien debt in April.

We expect that we will reduce the revolver borrowings to approximately $100 million by the end of June.

And then we expect that these borrowings will be further reduced in the third quarter, as that period typically generates the highest EBITDA and cash flow each year.

Accrued expenses increased to $641 million at March 31, 2012, from $520 million at yearend, mostly due to accrued interest expense that was paid in April.

Long-term debt increased from $6.8 billion December 31, 2011, to $7.1 billion at March 31, 2012, due to the 2012 senior secured notes offering completed in February 2012.

This transaction converted $289 million of revolver borrowings to long-term debt.

After giving effect to the refinancing, we do not have any significant corporate maturities due until 2016.

We made the $11 million (inaudible) payment in April, which was -- which has reduced the $52 million of PIK toggle notes outstanding at March 31, 2012, to $41 million as of today.

Realogy's capital structure remains in the unique position of having $2.1 million in convertible debt, all or a portion of which can be converted to equity at the option of our bondholders.

We are compliance with our senior secured leverage ratio at quarter end.

Our senior secured net debt to adjusted EBITDA ratio was 4.02 to 1, which is well within the required 4.75 to 1 allowable limit.

We expect to remain in compliance with our covenant for at least the next 12 months.

Let me provide you with the expectations for certain cash flow items for the full year 2012.

Corporate cash interest plus the (inaudible) payment are expected to be approximately $650 million to $660 million for the year.

Capital expenditures are expected to be approximately $55 million to $60 million for the full year, which includes $4 million related to our headquarters relocation to a smaller facility.

Working capital, inclusive of cash restructuring costs, is forecast to be a use of cash of between $25 million and $35 million, and net funding of legacy issues is expected to total approximately $10 million for the full year.

In conclusion, assuming current economic trends continue, we anticipate second quarter home sales to increase in the high single digits year over year and average sale price to be flat to modestly higher versus Q2 2011.

This is based on our April closings and pending contracts from March and April.

Low inventory levels in many of our markets, along with increasing activity at the high end, should continue to support improvements in our average sale price.

Our first quarter closed home sale sides were the highest we have seen in four years.

Although there remains several obstacles to a robust housing recovery, such as high unemployment and challenging mortgage underwriting standards, that being said, the value proposition shifting from renting to owning a home, record high affordability, pent-up buyer demand and increasing optimism in the market all point to an improved 2012.

With that, I'll turn it over to Alicia for some concluding remarks.

Thank you, Richard and Tony.

A few quick points of information before we conclude today's call.

First, a transcript of this webcast will be available on the Investor Information section of the realogy.com website tomorrow.

Second, we anticipate announcing our second quarter 2012 results at the beginning of August with the exact dates still to be determined.

We thank you for taking the time to join us on the call, and we look forward to speaking with you in August.

Thank you.

This does conclude today's conference.

Thank you for your participation.

You may now disconnect.