Background and Basis of Presentation

3 Months Ended

Mar. 31, 2014

Background and Basis of Presentation

Background and Basis of Presentation

1. Background and Basis of Presentation

Organization and Description of Business Activities

JGWPT Holdings Inc., a Delaware holding company incorporated on June 21, 2013, provides liquidity to individuals with financial assets such as structured settlements, annuities, and lottery winnings, among others, by either purchasing these financial assets for a lump-sum payment, issuing installment obligations payable over time, or serving as a broker to other purchasers of those financial assets.  The Company also provides pre-settlement funding to people with pending personal injury claims.

The Company, operating through its subsidiaries and affiliates, has its principal office in Radnor, Pennsylvania. The Company engages in warehousing and subsequent resale or securitization of these various financial assets. The Company operates through its managing membership interest in Holdings LLC, the Company’s sole operating asset.  Holdings LLC is a minority-owned, controlled and consolidated subsidiary of the Company.  Holdings LLC’s sole asset is its membership interest in J.G. Wentworth, LLC.

Prior to the completion of the Company’s reorganization and IPO on November 14, 2013, described in Note 2, Holdings LLC was primarily owned by its members, JLL JGW Distribution, LLC, a Delaware limited liability company, and J.G. Wentworth, Inc.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Article 10 of Regulation S-X and do not include all of the information required by GAAP for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments which are necessary for a fair presentation of financial position, results of operations, and cash flows for the interim periods presented. All such adjustments are of a normal, recurring nature. The results of operations for interim periods are not necessarily indicative of the results for the entire year.

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts reported in the unaudited condensed consolidated financial statements and the amounts of revenues and expenses during the reporting periods. The most significant balance sheet accounts that could be affected by such estimates are variable interest entity (“VIE”) and other finance receivables, at fair market value, VIE derivative liabilities at fair market value, VIE long-term debt issued by securitization and permanent financing trusts at fair market value, intangible assets and goodwill. Actual results could differ from those estimates and such differences could be material. These interim financial statements should be read in conjunction with the Company’s 2013 audited consolidated financial statements that are included in its Form 10-K.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, including those entities that are considered VIEs, and where the Company has been determined to be the primary beneficiary in accordance with Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”). Excluded from the unaudited condensed consolidated financial statements of the Company are those entities that are considered VIEs and where the Company has been deemed not to be the primary beneficiary according to ASC 810.

As indicated above, the Company operates and controls all of the businesses and affairs of Holdings LLC and its subsidiaries.  As such, Holdings LLC meets the definition of a VIE under ASC 810.  Further, the Company is the primary beneficiary of Holdings LLC as a result of its control over Holdings LLC. As the primary beneficiary of Holdings LLC, the Company consolidates the financial results of Holdings LLC and records a non-controlling interest for the economic interest in Holdings LLC not owned by the Company. The Company’s and the non-controlling Common Interestholders’ economic interest in Holdings LLC was 40.7% and 59.3%, respectively, as of March 31, 2014.  The Company’s and the non-controlling Common Interestholders’ economic interest in Holdings LLC was 37.9% and 62.1%, respectively, as of December 31, 2013.

Net income attributable to the non-controlling interest in the unaudited condensed consolidated statements of operations represents the portion of earnings or loss attributable to the economic interest in Holdings LLC held by the non-controlling Common Interestholders. Non-controlling interest in the unaudited condensed consolidated balance sheets represents the portion of equity attributable to the non-controlling interests of Holdings LLC. The allocation of equity to the non-controlling interests in Holdings LLC is based on the percentage owned by the non-controlling interest in the entity.

All material inter-company balances and transactions are eliminated in consolidation.