Exhibit 99.1
Press Release
| FOR IMMEDIATE RELEASE November 8, 2011 |
Investor and Media Contact: Whitney Finch Director of Investor Relations 813.421.7694 wfinch@walterinvestment.com |
WALTER INVESTMENT MANAGEMENT CORP. ANNOUNCES THIRD QUARTER 2011 FINANCIAL RESULTS
(Tampa, Fla.) — Walter Investment Management Corp. (NYSE Amex: WAC) (“Walter Investment” or
the “Company”) today announced results for the quarter ended September 30, 2011.
| • | The Company added approximately 97,000 accounts with an unpaid principal balance (“UPB”) of approximately $19 billion during the quarter. Total accounts serviced were 910,000 at the end of the quarter, with a UPB of $59 billion. On November 1, the Company received a transfer of approximately 85,000 accounts with an estimated UPB of $15 billion, and anticipates total transfers of approximately 65,000 accounts with a UPB of nearly $13 billion in December. The Company anticipates that with the additional new business transfers during the fourth quarter it will end 2011 with a total serviced portfolio exceeding 1,000,000 accounts with a UPB of approximately $85 billion. |
| • | Total revenue was $151.1 million, driven by the growing fee-based servicing revenue from the acquisition of GTCS Holdings LLC (“Green Tree”). |
| • | Core earnings for the third quarter was $16.5 million after taxes, or $0.58 per diluted share, and pro-forma adjusted EBITDA was $53.4 million, both in-line with management’s expectations. |
| • | Net income, adjusted for special charges, was $0.3 million or $0.01 per diluted share. Certain charges included income tax expense of $59.8 million, or $2.10 per diluted share, related to the Company no longer qualifying as a REIT, and $3.6 million, or $0.08 per diluted share, of transaction and integration-related costs associated with the acquisition of Green Tree. |
| • | The reported GAAP net loss was $61.8 million or $2.17 per diluted share including certain charges totaling $2.17 per share. |
“The significant growth this quarter in our serviced accounts and solid earnings results are
further confirmation of our belief that there is a continuing strong secular movement toward
special servicers and a solid validation of the strategic reasoning behind our acquisition of Green
Tree,” stated Mark J. O’Brien, Walter Investment’s Chairman and CEO. “We continue to see
significant movement of higher-risk assets to special servicers across the industry and anticipate
there will be continued high levels of servicing transfers for the next several years. The
acquisition of Green Tree has uniquely positioned us to assist owners of servicing and credit risk
by enhancing both the levels of servicing and regulatory compliance provided and by the value we
add to the assets through the application of our high-touch servicing protocols. We are confident
in our ability to continue to grow the business based on the opportunities in the market and our
solid business development pipeline.”
3000 Bayport Drive, Suite 1100, Tampa, Florida 33607
813.421.7600 www.walterinvestment.com
813.421.7600 www.walterinvestment.com
Third Quarter 2011 Financial and Operating Highlights
The Company’s results for all periods presented reflect the results for Walter Investment, with the
results for Green Tree included only for the post-acquisition period since July 1, 2011. In most
cases, material changes from prior periods are attributable to the acquisition of Green Tree.
| • | Core earnings after taxes for the third quarter was $16.5 million, or $0.58 per diluted share. The reported GAAP net loss before income taxes of $3.0 million was adjusted for $21.1 million of depreciation and amortization costs from a step-up in basis related to business combination transactions, transaction and integration related costs of $3.6 million, certain other non-cash adjustments totaling $1.3 million, and the net impact of the consolidated Non-Residual Trust Variable Interest Entities (“VIEs”) of $3.7 million. |
| • | During the quarter, Walter Investment generated cash of $66.2 million from operations and ended the quarter with liquidity of $62.9 million, including cash of $36.2 million and availability on our revolver of $26.7. Payments of $10.0 million were made to reduce outstanding Company indebtedness during the quarter. |
| • | Green Tree’s high touch servicing protocols yielded strong pool performance and improved value in pools serviced for third-parties. This performance lead the Company to earn a record $24.0 million of incentive and performance based servicing revenues in the quarter, including payments associated with exceeding certain pre-defined performance hurdles which are not expected to recur on a regular basis. |
| • | The Company’s Loans and Residuals segment, which is comprised of the legacy Walter Investment owned portfolio, generated stable revenues and strong portfolio performance during the third quarter of 2011. Results for the segment included higher interest expense associated with the securitization of the Company’s previously unencumbered assets near the end of the second quarter that generated a portion of the proceeds used in the Green Tree acquisition, as well as increased provision for losses and REO expenses due to slightly higher loss severities and an increase in reserves for aged REO inventory. |
Third Quarter 2011 Financial Summary
Total revenue for the third quarter was $151.1 million as compared to $43.5 million in the year-ago
period. Results for the current quarter reflect the addition of $88.0 million of servicing revenue
and fees, $17.0 million of insurance revenue and $4.9 million of other income, primarily from Green
Tree’s operations.
Total expense increased from $35.2 million for the third quarter of 2010 to $152.7 million for the
third quarter of 2010. The increase in total expense includes operating and overhead costs,
including salaries and benefits and general and administrative expenses at Green Tree. Expenses
for the third quarter of 2011 also included $26.0 million of increased depreciation and
amortization expense, $21.5 million of higher interest expense on corporate debt and $3.6 million
of transaction and integration-related costs associated with the Green Tree acquisition.
Income tax expense for the third quarter of 2011 reflected a charge of $59.8 million related to the
Company no longer qualifying as a REIT, requiring the recognition of all deferred tax items for US
GAAP purposes.
Servicing
The Company’s Servicing segment, which includes Green Tree’s servicing and asset recovery
operations, Marix and Walter Investment’s servicing operations, generated revenues of $97.2 million
in the third quarter, which included $57.9 million of servicing fees, $24.0 million of incentive
and performance-based fees, and $6.1 million of ancillary and other fees. Expense for the
Servicing segment was $84.0 million, which included $20.3 million of depreciation and amortization
costs resulting from Walter Investment’s acquisition of Green Tree. The segment generated income
before income taxes of $12.6 million for the quarter ended September 30, 2011. The Servicing
segment’s core earnings before income taxes for the quarter was $33.5 million after adjusting for
the impact of the step-up depreciation and amortization.
Insurance
Walter Investment’s Insurance segment generated revenues of $18.5 million, offset by expenses of
$12.4 million for the third quarter. Insurance segment income before income taxes for the quarter
was $6.2 million. Segment core earnings before income taxes was $7.4 million for the quarter ended
September 30, 2011.
Loans and Residuals
The Loans and Residuals segment, comprised of the legacy Walter Investment owned portfolio,
generated interest income of $41.2 million for the third quarter of 2011, in-line with interest
income generated in the second quarter of 2011. Total expense for the segment was $35.1 million,
including $24.8 million of interest expense on securitized debt. Interest expense for the quarter
was higher as a result of the securitization of the Company’s previously unencumbered residential
assets. The Loans and Residuals segment generated income before income taxes of $6.1 million and
core earnings of $6.4 million for the third quarter of 2011.
Portfolio performance remained solid during the quarter with delinquencies of 5.30% at September
30, 2011 as compared to 4.58% at June 30, 2011. The increase was in line with the historical
seasonal uptick in delinquencies that occurs from June to September. Loss severities for the third
quarter were 17.6% as compared to 15.4% in the second quarter and 16.9% in the prior year period,
as the levels of REO inventory, including aged REO were reduced. REO inventory levels have been
reduced by 22% over the course of the first nine months of the year.
Outlook
For the full year 2011, we are projecting pro-forma adjusted EBITDA to be in a range of between
$200 and $210 million. For 2012, we expect the legacy portfolios and businesses, including new
business boarded in 2011, to contribute pro-forma adjusted EBITDA of between $200 and $210 million.
Pro-forma adjusted EBITDA for 2012’s new business contribution on top of this $200 to $210 million
will be dependent on a variety of factors, including but not limited to the amount, timing, product
type and delinquency rates of the new business added.
Pro-forma Adjusted EBITDA
Pro-forma adjusted EBITDA is presented in accordance with its definition in the Company’s credit
agreements and represents income before income taxes, depreciation and amortization, interest
expense on corporate debt, transaction and integration related costs, the net effect of the
non-residual VIEs and certain other non-cash income and expense items. Pro-forma adjusted EBITDA
also includes an adjustment to reflect pro-forma synergies and, for periods prior to the
acquisition, adjustments to reflect Green Tree as having been acquired at the beginning of the
year.
Conference Call Webcast
Members of the Company’s leadership team will discuss Walter Investment’s third quarter results and
other general business matters during a conference call and live webcast to be held on Tuesday,
November 8, 2011, at 10 a.m. Eastern Time. To listen to the event live or in an archive, which
will be available for 30 days, visit the Company’s website at www.walterinvestment.com.
About Walter Investment Management Corp.
Walter Investment Management Corp. is an asset manager, mortgage servicer and mortgage portfolio
owner specializing in less-than-prime, non-conforming and other credit-challenged mortgage assets.
Based in Tampa, Fla., the Company services a diverse $59 billion loan portfolio consisting of
approximately 910,000 loans employing over 2,400 people. For more information about Walter
Investment Management Corp., please visit the Company’s website at www.walterinvestment.com.
Safe Harbor Statement
Certain statements in this release and in any of Walter Investment Management Corp.’s public
documents referred to herein, contain or incorporate by reference “forward-looking” statements as
defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Walter Investment Management Corp. is including this cautionary
statement to make applicable and take advantage of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Statements that are not historical fact are
forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “project,” “estimate,”
“forecast,” “objective,” “plan,” “goal,” “apparent” and similar expressions, and the opposites of
such words and expressions are intended to identify forward-looking statements. Forward-looking
statements, including the guidance provided in
this release, are based on the Company’s current beliefs, intentions and expectations; however,
forward-looking statements involve known and unknown risks, uncertainties and other important
factors that could cause actual results, performance or achievements, to differ materially from
those reflected in the statements made or incorporated in this release. Thus, these forward-looking
statements are not guarantees of future performance and should not be relied upon as predictions of
future events. The risks and uncertainties referred to above include, but are not limited to:
local regional, national and global economic and political trends and developments in general and
local, regional and national real estate and residential mortgage market trends in particular; the
occurrence of anticipated growth of the specialty servicing sector; the effects of competition
from a variety of local, regional, national and other mortgage servicers; our ability to
successfully integrate the Green Tree business into our historical business and to achieve expected
synergies; the continuation of regulatory pressures on large banks relating to their mortgage
servicing, as well as regulatory pressure on the rest of the mortgage servicing sector, including
increased performance standards and reporting obligations, changes to our insurance business,
including the involuntary placement of insurance for mortgagors, and/or the rights and obligations
of property owners, mortgagees and tenants; the effect of Company risk management strategies,
including the management and protection of personal and private information of our customers and
mortgage holders and the protection of our information systems from third party interference
(cyber-security); unexpected losses resulting from pending, threatened or unforeseen litigation or
other third party claims against the Company; risks related to the financing incurred in connection
with the acquisition of Green Tree, including our ability to achieve revenues sufficient to carry
our debt and otherwise to meet the covenants of our debt; and other risks detailed from time to
time in the Company’s filings with the Securities and Exchange Commission (the “SEC”). The
acquisition of Green Tree has resulted in significant changes to our risk factors. The reader is
directed to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 filed with the
SEC on August 8, 2011 for a detailed explanation of our current risk factors.
All forward-looking statements set forth herein are qualified by this cautionary statement and are
made only as of November 7, 2011. The Company undertakes no obligation to update or revise the
information contained herein, including without limitation, any forward-looking statements, whether
as a result of new information, subsequent events or circumstances, or otherwise, unless otherwise
required by law.
Walter Investment Management Corp.
Segment Revenues and Operating Income
For the Three Months Ended September 30, 2011
($ in thousands)
| Non- | ||||||||||||||||||||||||||||
| Business Segments | Residual | |||||||||||||||||||||||||||
| Loans and | Trusts and | Total | ||||||||||||||||||||||||||
| Servicing | Insurance | Residuals | Other | Corporate | Eliminations | Consolidated | ||||||||||||||||||||||
REVENUES |
||||||||||||||||||||||||||||
Servicing revenue and fees |
$ | 95,711 | $ | — | $ | — | $ | — | $ | — | $ | (7,699 | ) | $ | 88,012 | |||||||||||||
Interest income on loans |
— | — | 41,174 | — | 65 | — | 41,239 | |||||||||||||||||||||
Insurance revenue |
— | 17,787 | — | — | — | (833 | ) | 16,954 | ||||||||||||||||||||
Other income |
1,521 | 751 | — | 2,363 | 300 | — | 4,935 | |||||||||||||||||||||
Total revenues |
97,232 | 18,538 | 41,174 | 2,363 | 365 | (8,532 | ) | 151,140 | ||||||||||||||||||||
EXPENSES |
||||||||||||||||||||||||||||
Interest expense |
1,093 | 334 | 24,781 | — | 21,128 | — | 47,336 | |||||||||||||||||||||
Provision for loan losses |
— | — | 1,865 | — | — | — | 1,865 | |||||||||||||||||||||
Depreciation and amortization |
25,053 | 917 | — | 72 | — | — | 26,042 | |||||||||||||||||||||
Other expenses, net |
57,871 | 11,112 | 8,445 | 2,106 | 6,455 | (8,532 | ) | 77,457 | ||||||||||||||||||||
Total expenses |
84,017 | 12,363 | 35,091 | 2,178 | 27,583 | (8,532 | ) | 152,700 | ||||||||||||||||||||
OTHER INCOME (EXPENSE) |
||||||||||||||||||||||||||||
Net fair value losses |
(650 | ) | — | — | — | (754 | ) | — | (1,404 | ) | ||||||||||||||||||
Total other income (expense) |
(650 | ) | — | — | — | (754 | ) | — | (1,404 | ) | ||||||||||||||||||
Income (loss) before income taxes |
12,565 | 6,175 | 6,083 | 185 | (27,972 | ) | — | (2,964 | ) | |||||||||||||||||||
CORE EARNINGS |
||||||||||||||||||||||||||||
Step-up depreciation and amortization |
20,289 | 837 | — | — | — | — | 21,126 | |||||||||||||||||||||
Net impact of VIEs |
— | — | — | — | 3,686 | — | 3,686 | |||||||||||||||||||||
Transaction and integration costs |
45 | 9 | — | 1 | 3,475 | — | 3,530 | |||||||||||||||||||||
Non-cash interest expense |
649 | 334 | 281 | — | 18 | — | 1,282 | |||||||||||||||||||||
Total adjustments |
20,983 | 1,180 | 281 | 1 | 7,179 | — | 29,624 | |||||||||||||||||||||
Core earnings before income taxes |
$ | 33,548 | $ | 7,355 | $ | 6,364 | $ | 186 | $ | (20,793 | ) | $ | — | $ | 26,660 | |||||||||||||
| September 30, 2011 |
||||||||||||||||||||||||||||
Total assets |
$ | 1,341,043 | $ | 165,132 | $ | 1,629,732 | $ | 6,691 | $ | 954,291 | $ | — | $ | 4,096,889 | ||||||||||||||
Walter Investment Management Corp. and Subsidiaries
Consolidated Statements of Operations
Consolidated Statements of Operations
(dollars in thousands, except share and per share amounts)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
REVENUES |
||||||||||||||||
Servicing revenue and fees |
$ | 88,012 | $ | — | $ | 94,259 | $ | — | ||||||||
Interest income on loans |
41,239 | 41,307 | 124,623 | 124,817 | ||||||||||||
Insurance revenue |
16,954 | 1,778 | 21,123 | 6,636 | ||||||||||||
Other income |
4,935 | 437 | 6,123 | 2,213 | ||||||||||||
Total revenues |
151,140 | 43,522 | 246,128 | 133,666 | ||||||||||||
EXPENSES |
||||||||||||||||
Interest expense |
47,336 | 20,176 | 89,389 | 61,871 | ||||||||||||
Provision for loan losses |
1,865 | 1,377 | 3,365 | 4,541 | ||||||||||||
Salaries and benefits |
49,404 | 5,708 | 67,128 | 18,547 | ||||||||||||
Depreciation and amortization |
26,042 | 59 | 26,402 | 243 | ||||||||||||
General and administrative |
23,227 | 5,002 | 47,561 | 14,673 | ||||||||||||
Other expenses, net |
4,826 | 2,882 | 13,775 | 8,282 | ||||||||||||
Total expenses |
152,700 | 35,204 | 247,620 | 108,157 | ||||||||||||
OTHER INCOME (EXPENSE) |
||||||||||||||||
Net fair value losses |
(1,404 | ) | — | (1,404 | ) | — | ||||||||||
Other |
— | 1,680 | 95 | 1,680 | ||||||||||||
Other income (expense) |
(1,404 | ) | 1,680 | (1,309 | ) | 1,680 | ||||||||||
Income (loss) before income taxes |
(2,964 | ) | 9,998 | (2,801 | ) | 27,189 | ||||||||||
Income tax expense |
58,798 | 312 | 58,866 | 828 | ||||||||||||
Net income (loss) |
$ | (61,762 | ) | $ | 9,686 | $ | (61,667 | ) | $ | 26,361 | ||||||
Basic earnings (loss) per common and common equivalent share |
$ | (2.17 | ) | $ | 0.36 | $ | (2.26 | ) | $ | 0.98 | ||||||
Diluted earnings (loss) per common and common
equivalent share |
$ | (2.17 | ) | $ | 0.36 | $ | (2.26 | ) | $ | 0.98 | ||||||
Total dividends declared per common and common
equivalent share |
$ | 0.22 | $ | 0.50 | $ | 0.22 | $ | 1.00 | ||||||||
Weighted-average common and common equivalent shares outstanding — basic |
28,490,886 | 26,474,001 | 27,251,361 | 26,411,018 | ||||||||||||
Weighted-average common and common equivalent shares outstanding — diluted |
28,490,886 | 26,569,897 | 27,251,361 | 26,492,850 | ||||||||||||
Walter Investment Management Corp. and Subsidiaries
Consolidated Balance Sheets
Consolidated Balance Sheets
(dollars in thousands, except share amounts)
| September 30, 2011 | December 31, 2010 | |||||||
| (Unaudited) | ||||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 36,171 | $ | 114,352 | ||||
Restricted cash and cash equivalents |
259,278 | 52,289 | ||||||
Residential loans (includes $696,245 and $0 at fair value) |
2,325,951 | 1,637,392 | ||||||
Allowance for loan losses |
(13,296 | ) | (15,907 | ) | ||||
Residential loans, net |
2,312,655 | 1,621,485 | ||||||
Receivables, net (includes $80,565 and $0 at fair value) |
231,921 | 3,426 | ||||||
Servicer and protective advances, net |
135,730 | 10,440 | ||||||
Servicing rights, net |
264,341 | — | ||||||
Goodwill |
468,163 | — | ||||||
Intangible assets, net |
136,191 | — | ||||||
Premises and equipment, net |
133,005 | 2,286 | ||||||
Deferred tax asset, net |
— | 221 | ||||||
Other assets |
119,434 | 90,991 | ||||||
Total assets |
$ | 4,096,889 | $ | 1,895,490 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Accounts payable and other accrued liabilities (includes $23,699 and $0 at fair value) |
$ | 224,229 | $ | 41,762 | ||||
Dividends payable |
6,200 | 13,431 | ||||||
Servicing advance liabilities |
105,740 | 3,254 | ||||||
Debt |
774,285 | — | ||||||
Mortgage-backed debt (includes $830,488 and $0 at fair value) |
2,268,366 | 1,281,555 | ||||||
Servicer payables |
137,644 | — | ||||||
Deferred tax liability, net |
49,934 | — | ||||||
Total liabilities |
3,566,398 | 1,340,002 | ||||||
Commitments and contingencies |
||||||||
Stockholders’ equity: |
||||||||
Preferred stock, $0.01 par value per share: |
||||||||
Authorized — 10,000,000 shares |
||||||||
Issued and outstanding — 0 shares at September 30, 2011 and December 31, 2010 |
— | — | ||||||
Common stock, $0.01 par value per share: |
||||||||
Authorized — 90,000,000 shares |
||||||||
Issued and outstanding — 27,650,118 and 25,785,693 shares at September 30, 2011
and December 31, 2010, respectively |
277 | 258 | ||||||
Additional paid—in capital |
170,661 | 127,143 | ||||||
Retained earnings |
358,969 | 426,836 | ||||||
Accumulated other comprehensive income |
584 | 1,251 | ||||||
Total stockholders’ equity |
530,491 | 555,488 | ||||||
Total liabilities and stockholders’ equity |
$ | 4,096,889 | $ | 1,895,490 | ||||
| September 30, 2011 | December 31, 2010 | |||||||
| (Unaudited) | ||||||||
ASSETS OF THE CONSOLIDATED SECURITIZATION TRUSTS
THAT CAN ONLY BE USED TO SETTLE THE OBLIGATIONS
OF THE CONSOLIDATED SECURITIZATION TRUSTS: |
||||||||
Restricted cash and cash equivalents |
$ | 59,374 | $ | 42,859 | ||||
Residential loans (includes $696,245 and $0 at fair value) |
2,316,686 | 1,543,047 | ||||||
Allowance for loan losses |
(13,178 | ) | (15,217 | ) | ||||
Residential loans, net |
2,303,508 | 1,527,830 | ||||||
Receivables, net (includes $80,565 and $0 at fair value) |
80,565 | — | ||||||
Other assets |
60,478 | 57,658 | ||||||
Total assets |
$ | 2,503,925 | $ | 1,628,347 | ||||
LIABILITIES OF THE CONSOLIDATED SECURITIZATION
TRUSTS FOR WHICH CREDITORS OR BENEFICIAL INTEREST
HOLDERS DO NOT HAVE RECOURSE TO THE COMPANY: |
||||||||
Accounts payable and other accrued liabilities |
$ | 10,696 | $ | 8,593 | ||||
Mortgage-backed debt (includes $830,488 and $0 at fair value) |
2,268,366 | 1,281,555 | ||||||
Total liabilities |
$ | 2,279,062 | $ | 1,290,148 | ||||
Reconciliation of GAAP Income Before Income Taxes to Non-GAAP Core Earnings
and Pro-forma Adjusted EBITDA
For the Three Months Ended September 30, 2011
and Pro-forma Adjusted EBITDA
For the Three Months Ended September 30, 2011
($ in millions except per share amounts)
Core Earnings
Income before income taxes |
$ | (3.0 | ) | |
Add back: |
||||
Step-up depreciation & amortization |
21.1 | |||
Transaction & integration related costs |
3.6 | |||
Non-cash interest expense items |
1.3 | |||
VIE impact, net |
3.7 | |||
Pre-tax core earnings |
26.7 | |||
After tax core earnings (38% tax rate) |
$ | 16.5 | ||
Shares outstanding (millions) |
28.5 | |||
Core EPS |
$ | 0.58 | ||
Pro-Forma Adjusted EBITDA
Income before income taxes |
$ | (3.0 | ) | |
Add back: |
||||
Non-cash interest expense items |
1.3 | |||
Depreciation & amortization |
26.0 | |||
Interest expense on corporate debt & MSR facility |
21.5 | |||
Transaction & integration related costs |
3.6 | |||
VIE impact, net |
3.7 | |||
Misc. other |
0.3 | |||
Provision on loan losses |
1.9 | |||
Proforma synergies |
3.7 | |||
Less: |
||||
Non-cash interest income |
(5.6 | ) | ||
Adjusted EBITDA |
$ | 53.4 | ||
Use of Non-GAAP Measures
Generally Accepted Accounting Principles (“GAAP”) is the term used to refer to the standard
framework of guidelines for financial accounting. GAAP includes the standards, conventions, and
rules accountants follow in recording and summarizing transactions and in the preparation of
financial statements. In addition to reporting financial results in accordance with GAAP, the
Company has provided non-GAAP financial measures, which it believes are useful to help investors
better understand its financial performance, competitive position and prospects for the future.
Core earnings (pre-tax and after-tax), core earnings per share and pro-forma adjusted EBITDA are
financial measures that are not in accordance with GAAP. See the Non-GAAP Reconciliations above
for a reconciliation of these measures to the most directly comparable GAAP financial measures.
Core earnings (pre-tax and after-tax) and core earnings per share measure the Company’s financial
performance excluding depreciation and amortization costs related to business combination
transactions, transaction and merger integration-related costs, certain other non-cash adjustments,
and the net impact of the consolidated Non-Residual Trust VIEs.
Pro-forma adjusted EBITDA measures the Company’s financial performance excluding depreciation and
amortization costs, corporate and MSR facility interest expense, transaction and merger
integration-related costs, certain other non-cash adjustments, the net impact of the consolidated
Non-Residual Trust VIEs and certain other items as defined by our first and second lien credit
agreements, including, but not limited to pro-forma synergies.
Core earnings (pre-tax and after-tax) and core earnings per share may also include other
adjustments, as applicable based upon facts and circumstances, consistent with the intent of
providing investors a means of evaluating our core operating performance.
The Company believes that these Non-GAAP Financial Measures can be useful to investors because they
provide a means by which investors can evaluate the Company’s underlying key drivers and operating
performance of the business, exclusive of certain adjustments and activities that investors may
consider to be unrelated to the underlying economic performance of the business for a given period.
Use of Core Earnings and Pro-Forma Adjusted EBITDA by Management
The Company manages the business and has designed certain management incentives based upon the
achievement of core earnings, pro-forma adjusted EBITDA and similar targets in order to assess the
underlying operational performance of the continuing operations of the business for the year and to
have a basis to compare underlying operating results to prior and future periods.
Limitations on the Use of Core Earnings and Pro-Forma Adjusted EBITDA
Since core earnings (pre-tax and after-tax) and core earnings per share measure the Company’s
financial performance excluding depreciation and amortization costs related to acquisitions,
transaction and merger integration-related costs, certain other non-cash adjustments, and the net
impact of the consolidated Non-Residual Trust VIEs, they may not reflect all amounts associated
with our results as determined in accordance with GAAP.
Pro-forma adjusted EBITDA measures the Company’s financial performance excluding depreciation and
amortization costs, corporate and MSR facility interest expense, transaction and merger
integration-related costs, certain other non-cash adjustments, the net impact of the consolidated
Non-Residual Trust VIEs and certain other items as defined by our first and second lien credit
agreements, including, but not limited to pro-forma synergies, they may not reflect all amounts
associated with our results as determined in accordance with GAAP
Core earnings (pre-tax and after-tax), core earnings per share and pro-forma adjusted EBITDA
involve differences from segment profit (loss), income (loss) before income taxes, net income
(loss), basic earnings (loss) per share and diluted earnings (loss) per share computed in
accordance with GAAP. Core earnings (pre-tax and after-tax),core earnings per share and pro-forma
adjusted EBITDA should be considered as supplementary to, and not as a substitute for, segment
profit (loss),income (loss) before income taxes, net income (loss), basic earnings (loss) per share
and diluted earnings (loss) per share computed in accordance with GAAP as a measure of the
Company’s financial performance.
Any non-GAAP measures should be considered in context with the GAAP financial presentation and
should not be considered in isolation or as a substitute for GAAP earnings. Further, the non-GAAP
measures presented by Walter Investment may be defined or calculated differently from similarly
titled measures of other companies.
