FORT WASHINGTON, Pa.,
Aug. 9, 2017 /PRNewswire/ -- Walter Investment Management
Corp. (NYSE: WAC.BC) today announced GAAP net loss for the quarter
ended June 30, 2017 of $94.3
million, or $2.58 per share,
as compared to a GAAP net loss of $490.0
million, or $13.68 per share
for the quarter ended June 30, 2016. The current quarter net
loss included a non-cash fair value charge of $45.1 million due to changes in valuation inputs
and other assumptions. Adjusted Loss was $19.8 million and Adjusted EBITDA ("AEBITDA") was
$61.3 million in the current quarter
as compared to Adjusted Loss of $4.8
million and AEBITDA of $98.8
million in the prior year quarter.
"I am pleased with the progress we have made to date on our debt
restructuring initiative, and we continue to work towards execution
of a comprehensive deleveraging transaction," said Anthony Renzi, Chief Executive Officer and
President of Walter. "Improving our capital structure is
expected to better position Walter for future success."
"From an operational perspective, we continue to focus on
reducing costs and improving the performance of our core businesses
with a goal of returning the Company to profitability," Renzi
continued. "We are making investments in technology, such as
our recent implementation of a digital point of sale system in our
originations business, and have improved our operating
processes in all business segments, in each case with the goal of
enhancing the customer experience. We continue to make
progress in our default servicing operations as we emphasize
keeping customers in their homes and reducing delinquencies.
Finally, we have taken additional steps to streamline operations
and reduce our site footprint as we seek to continue to improve our
cost structure."
Second Quarter 2017 Financial and Operating Overview
Total revenue for the second quarter of 2017 was $208.8 million, an increase of $21.3 million as compared to the prior year
quarter, primarily due to an increase of $59.4 million in net servicing revenue and fees,
offset in part by a $29.6 million
decrease in net gains on sales of loans and an $8.6 million decrease in insurance revenue. The
increase in net servicing revenue and fees was driven by a
$120.8 million improvement in fair
value losses on mortgage servicing rights driven by changes in
valuation inputs or other assumptions, offset in part by a
$47.9 million decline in servicing
fees primarily due to the planned shift of the third-party
servicing portfolio from servicing to subservicing, combined with
runoff of the portfolio. The decrease in net gains on sales of
loans resulted from an overall lower volume of locked loans and a
shift in mix from the higher margin consumer channel to the lower
margin correspondent and wholesale channels. The decrease in
insurance revenue was due to the sale of the principal insurance
agency and substantially all of the insurance agency business
during the first quarter of 2017.
Total expenses for the second quarter of 2017 were $292.6 million, a decrease of $273.1 million as compared to the prior year
quarter, driven by $215.4 million in
goodwill impairment recorded during the second quarter of 2016,
$16.2 million lower compensation and
benefits resulting primarily from a lower average headcount driven
by site closures and various organizational changes to the scale
and proficiency of the leadership team and support functions, as
well as our decision to exit the reverse mortgage originations
business, $9.0 million in lower
contractor costs related to our servicing platform conversion that
occurred in the second quarter of 2016, as well as efforts to
reduce contractor costs throughout the Company's operations, a
$6.2 million decrease related to a
change in the commissions structure, and $5.7 million in lower compensating interest due
to a shift from servicing to subservicing, offset in part by
$7.5 million in higher costs
associated with corporate strategic initiatives. The remaining
variance related to cost savings and changes in reserves.
Results for the Company's segments are presented below.
Servicing
Ditech serviced 1.8 million accounts with a UPB of $213.6 billion as of June 30, 2017. During
the quarter ended June 30, 2017, the Company experienced a net
disappearance rate of 14.68%, a decrease of 0.91% as compared to
the prior year quarter.
The Servicing segment reported $44.0
million of pre-tax loss for the second quarter of 2017 as
compared to a pre-tax loss of $356.0
million in the prior year quarter. During the second quarter
of 2017, the segment generated revenue of $117.4 million, a $44.6
million increase as compared to the prior year quarter,
primarily due to an increase of $58.6
million in net servicing revenue and fees. The increase in
net servicing revenue and fees primarily resulted from a
$120.8 million improvement in fair
value losses on mortgage servicing rights driven by changes in
valuation inputs or other assumptions, partially offset by a
$48.0 million decline in servicing
fees primarily due to the planned shift of the third-party
servicing portfolio from servicing to subservicing combined with
runoff of the portfolio.
Total expenses in the Servicing segment for the second quarter
of 2017 were $160.8 million, a
decrease of $267.6 million as
compared to the prior year quarter. This decrease was driven by
$215.4 million in goodwill impairment
recorded during the second quarter of 2016. In addition, there were
decreases of $16.6 million in
compensation and benefits resulting primarily from a lower average
headcount driven by site closures and organizational changes,
$9.3 million due to lower expense
allocations, $6.9 million and
$1.9 million in lower contractor
costs and postage and printing costs, respectively, related to our
servicing platform conversion that occurred in the second quarter
of 2016, $5.7 million in lower
compensating interest due to a shift from servicing to
subservicing, $5.1 million related to
a change in the commissions structure, $2.9
million in lower charges associated with foreclosure and
bankruptcy practices, and $1.2
million reduction in overtime driven by cost reduction
measures. These decreases were partially offset by $2.9 million in additional costs associated with
the use of MSP and outsourcing initiatives and $2.2 million in higher advance loss provision.
Current quarter expenses included $12.9
million of interest expense and $8.5
million of depreciation and amortization.
The Servicing segment reported an Adjusted Loss of $3.5 million and AEBITDA of $45.6 million for the second quarter of 2017.
Adjusted Loss improved $4.9 million
as compared to the prior year quarter resulting from resulting from
lower adjusted general and administrative expense and salaries and
benefits, offset in part by lower adjusted servicing revenue,
insurance revenue and intersegment retention revenue. AEBITDA
decreased $19.1 million as compared
to the prior year quarter due to lower amortization of servicing
rights and other fair value adjustments.
Originations
Ditech generated total pull-through adjusted locked volume of
$4.2 billion for the second quarter
of 2017, a decrease of $1.1 billion
as compared to the prior year quarter, driven by an overall lower
volume of locked loans. Funded loans in the current quarter totaled
$4.2 billion, a decrease of
$0.6 billion from the prior year
quarter. The combined direct margin for the current quarter was 70
bps, consisting of a weighted average of 187 bps direct margin in
the consumer lending channel and 19 bps direct margin in the
correspondent and wholesale channels. The decrease in combined
direct margin of 17 bps from the prior year quarter was primarily
due to the shift in mix to the lower margin correspondent and
wholesale channels and lower margins in the consumer channel driven
by lower pull-through of locked loans and a lower portion of HARP
volume and lower margins in the correspondent channel. The
Originations business delivered a recapture rate of 18% for the
current quarter.
The Originations segment reported $20.0
million of pre-tax income for the second quarter of 2017, a
decrease of $25.6 million from the
prior year quarter. During the second quarter of 2017, this segment
generated revenue of $80.5 million, a
decrease of $29.7 million from the
prior year quarter. Net gains on sales of loans decreased
$29.4 million as compared to the
prior year quarter, primarily due to an overall lower volume of
locked loans combined with a shift in mix from the higher margin
consumer channel to the lower margin correspondent and wholesale
channels.
Total expenses for the Originations segment for the second
quarter of 2017 were $60.5 million, a
decrease of $4.1 million compared to
the prior year quarter, driven by a $6.5
million decrease in intersegment retention expense due
primarily to lower overall retention volume and a smaller
capitalized servicing portfolio resulting from sales of servicing
rights and portfolio runoff. Current quarter expenses included
$8.6 million of interest expense and
$0.7 million of depreciation and
amortization.
The Originations segment reported Adjusted Earnings of
$20.2 million and AEBITDA of
$18.5 million for the second quarter
of 2017, a decrease of $28.0 million
and $25.0 million, respectively, as
compared to the prior year quarter, due primarily to lower net
gains on sales of loans driven by lower volumes.
Reverse Mortgage
The Reverse Mortgage segment serviced 112,434 accounts with a
UPB of $20.1 billion at June 30,
2017. During the current quarter, the business securitized
$113.7 million of HECM loans.
The Reverse Mortgage segment reported $16.5 million of pre-tax loss for the second
quarter of 2017 as compared to pre-tax loss of $26.9 million in the prior year quarter. During
the second quarter of 2017, this segment generated revenue of
$15.4 million, a decline of
$0.7 million from the prior year
quarter. Cash generated by the origination, purchase and
securitization of HECMs decreased $4.3
million during the second quarter of 2017 as compared to the
prior year quarter primarily as a result of overall lower
origination volumes, partially offset by a shift in mix from lower
margin new originations to higher margin tails. The decrease in
cash generated was more than offset by a $2.5 million decrease in net non-cash fair value
losses and a $2.1 million increase in
net interest income. Current quarter revenues also included
$7.1 million in net servicing revenue
and fees and $0.5 million of other
revenues.
Total expenses for the Reverse Mortgage segment for the second
quarter of 2017 were $31.9 million, a
decrease of $11.2 million from the
prior year quarter. The decrease in total expenses was primarily
due to a $9.2 million decrease in
general and administrative expenses due to lower
curtailment-related accruals, advertising costs, loss accruals on
servicing advances, contractor fees, and purchased services, and a
$3.9 million decrease in salaries and
benefits due primarily to lower compensation, bonuses and
commissions as a result of lower origination volume and lower
average headcount resulting from our decision to exit the reverse
mortgage originations business. Current quarter expenses included
$4.3 million of interest expense and
$0.9 million of depreciation and
amortization.
The Reverse Mortgage segment reported an Adjusted Loss of
$3.8 million and AEBITDA of
($2.5) million for the second quarter
of 2017, an improvement of $6.2
million and $5.4 million,
respectively, as compared to the prior year quarter, primarily due
to the decrease in general and administrative expenses and in
salaries and benefits.
Other Non-Reportable Segment
The Other Non-Reportable segment reported $52.1 million of pre-tax loss for the second
quarter of 2017, an increase in loss of $9.9
million as compared to the prior year quarter. Other net
fair value losses were $8.2 million
for the second quarter of 2017 as compared to other net fair value
losses of $1.0 million in the same
period of 2016, primarily related to the impact of higher
delinquencies on the value of the assets and liabilities of the
Non-Residual Trusts.
The Other non-reportable segment had an Adjusted Loss of
$32.7 million and AEBITDA of
($0.3) million for the second quarter
of 2017 as compared to an Adjusted Loss of $34.6 million and AEBITDA of ($1.5) million in the second quarter of 2016.
Debt Restructuring Initiative
As previously announced, the Company has engaged legal and
financial debt restructuring advisors and has been reviewing a
number of potential actions to reduce its leverage.
On July 31, 2017, the Company
entered into a Restructuring Support Agreement with lenders
holding, as of July 31, 2017, more
than 50% of the loans and/or commitments outstanding, or the
Consenting Term Lenders, under the Company's Amended and Restated
Credit Agreement, dated as of December 19,
2013, or the Credit Agreement. As set forth in the
Restructuring Support Agreement, the parties thereto have agreed
to, among other things, the principal terms of a proposed financial
restructuring of the Company, which will include an extension of
the Credit Agreement's maturity until June
2022, and which will be implemented through an out-of-court
restructuring and, in the absence of sufficient stakeholder support
for an out-of-court restructuring, a prepackaged plan of
reorganization under Chapter 11 of Title 11 of the United States
Code.
The Restructuring Support Agreement contains a number of
conditions and milestones, including reaching an agreement with the
holders of 66⅔% aggregate principal amount of the
Company's 7.875% Senior Notes due 2021 to a restructuring support
agreement consistent with the terms specified in the Restructuring
Support Agreement. The Company and its debt restructuring advisors
continue to negotiate with the financial and legal advisors to ad
hoc groups of holders of the Company's indebtedness under the
Company's Senior Notes and Credit Agreement, as the Company seeks
to obtain sufficient stakeholder support for a comprehensive
de-leveraging transaction.
There can be no assurance as to when or whether the Company will
satisfy the conditions in the Restructuring Support Agreement,
including obtaining requisite support from various stakeholders for
the restructuring, whether the restructuring will be successful,
the effects on its business, or the Company's ability to achieve
our operational and strategic goals.
Filing of Amended Annual and Quarterly Reports
On or about the date hereof, due to the Restatement, the Company
is also filing amendments to its Annual Report on Form 10-K for the
year ended December 31, 2016 and
Quarterly Reports on Form 10-Q for the quarterly periods ended
June 30, 2016, September 30, 2016, and March 31, 2017. The Company also is filing its
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2017 (the "2017 Second
Quarter Report") on or about the date hereof. Due to
the possibility for a prepackaged plan of reorganization under
Chapter 11 of Title 11 of the United States Code, substantial doubt
has been raised about the Company's ability to continue as a going
concern, and the audit opinion included in the Company's amended
Annual Report on Form 10-K/A contains a going concern emphasis
paragraph and Note 3 to the Consolidated Financial Statements
included therein (and Note 2 to the financial statements included
in the 2017 Second Quarter Report) discusses such matters and
management's plans in respect thereof.
About Walter Investment Management Corp.
Walter Investment Management Corp. is an independent servicer
and originator of mortgage loans and servicer of reverse mortgage
loans. Based in Fort Washington,
Pennsylvania, the Company has approximately 4,400 employees
and services a diverse loan portfolio. For more information about
Walter Investment Management Corp., please visit the Company's
website at www.walterinvestment.com. The information
on the Company's website is not a part of this release.
This press release and the accompanying reconciliations include
non-GAAP financial measures. For a description of these non-GAAP
financial measures, including the reasons management uses each
measure, and reconciliations of these non-GAAP financial measures
to the most directly comparable financial measures prepared in
accordance with GAAP, please see the reconciliations as well as
"Non-GAAP Financial Measures" at the end of this press release.
The terms "Walter Investment", "Walter", the "Company", "we",
"us", and "our" as used throughout this release refer to Walter
Investment Management Corp. and its consolidated subsidiaries. We
use certain acronyms and terms throughout this release that are
defined in the Glossary of Terms in Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations in
our Annual Report on Form 10-K/A for the year ended
December 31, 2016, in our Quarterly Report on Form 10-Q/A for
the quarterly period ended March 31,
2017, and in our Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2017, and in our other filings
with the SEC.
Disclaimer and Cautionary Note Regarding Forward-Looking
Statements
Certain statements in this press release constitute
"forward-looking statements" within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act. Statements
that are not historical fact are forward-looking statements.
Certain of these forward-looking statements can be identified by
the use of words such as "believes," "anticipates," "expects,"
"intends," "plans," "projects," "estimates," "assumes," "may,"
"should," "will," "seeks," "targets," or other similar expressions.
Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors, and our actual results,
performance or achievements could differ materially from future
results, performance or achievements expressed in these
forward-looking statements. These forward-looking statements are
based on our current beliefs, intentions and expectations. These
statements are not guarantees or indicative of future performance,
nor should any conclusions be drawn or assumptions be made as to
any potential outcome of any strategic review we conduct. Important
assumptions and other important factors that could cause actual
results to differ materially from those forward-looking statements
include, but are not limited to, those factors, risks and
uncertainties described below and in more detail under the caption
"Risk Factors" of our Annual Report on Form 10-K/A for the year
ended December 31, 2016, our Quarterly Report on Form 10-Q/A
for the quarterly period ended March 31,
2017, and our Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2017, and in our other filings
with the SEC.
In particular (but not by way of limitation), the following
important factors, risks and uncertainties could affect our future
results, performance and achievements and could cause actual
results, performance and achievements to differ materially from
those expressed in the forward-looking statements:
- risks and uncertainties relating to the Company's proposed
financial restructuring, including: the ability of the Company to
comply with the terms of the RSA, including completing various
stages of the restructuring within the dates specified by the RSA;
the ability of the Company to obtain requisite support of the
restructuring from various stakeholders; and the effects of
disruption from the proposed restructuring making it more difficult
to maintain business, financing and operational relationships;
- risks and uncertainties relating to, or arising in connection
with, the restatement of financial statements included in the
amendments to our Annual Report on Form 10-K for the year ended
December 31, 2016 and our Quarterly
Reports on Form 10-Q for the quarterly periods ended June 30, 2016, September
30, 2016 and March 31, 2017,
including: reactions from the Company's creditors, stockholders, or
business partners; and the impact and result of any litigation or
regulatory inquiries or investigations related to the findings of
the Company's assessment or the restatement;
- our ability to operate our business in compliance with existing
and future laws, rules, regulations and contractual commitments
affecting our business, including those relating to the origination
and servicing of residential loans, default servicing and
foreclosure practices, the management of third-party assets and the
insurance industry, and changes to, and/or more stringent
enforcement of, such laws, rules, regulations and contracts;
- scrutiny of our industry by, and potential enforcement actions
by, federal and state authorities;
- the substantial resources (including senior management time and
attention) we devote to, and the significant compliance costs we
incur in connection with, regulatory compliance and regulatory
examinations and inquiries, and any consumer redress, fines,
penalties or similar payments we make in connection with resolving
such matters;
- uncertainties relating to interest curtailment obligations and
any related financial and litigation exposure (including exposure
relating to false claims);
- potential costs and uncertainties, including the effect on
future revenues, associated with and arising from litigation,
regulatory investigations and other legal proceedings, and
uncertainties relating to the reaction of our key counterparties to
the announcement of any such matters;
- our dependence on U.S. GSEs and agencies (especially Fannie
Mae, Freddie Mac and Ginnie Mae) and
their residential loan programs and our ability to maintain
relationships with, and remain qualified to participate in programs
sponsored by, such entities, our ability to satisfy various
existing or future GSE, agency and other capital, net worth,
liquidity and other financial requirements applicable to our
business, and our ability to remain qualified as a GSE and agency
approved seller, servicer or component servicer, including the
ability to continue to comply with the GSEs' and agencies'
respective residential loan selling and servicing guides;
- uncertainties relating to the status and future role of GSEs
and agencies, and the effects of any changes to the origination
and/or servicing requirements of the GSEs, agencies or various
regulatory authorities or the servicing compensation structure for
mortgage servicers pursuant to programs of GSEs, agencies or
various regulatory authorities;
- our ability to maintain our loan servicing, loan origination or
collection agency licenses, or any other licenses necessary to
operate our businesses, or changes to, or our ability to comply
with, our licensing requirements;
- our ability to comply with the terms of the stipulated orders
resolving allegations arising from an FTC and CFPB investigation of
Ditech Financial and a CFPB investigation of RMS;
- operational risks inherent in the mortgage servicing and
mortgage originations businesses, including our ability to comply
with the various contracts to which we are a party, and
reputational risks;
- risks related to the significant amount of senior management
turnover and employee reductions recently experienced by the
Company;
- risks related to our substantial levels of indebtedness,
including our ability to comply with covenants contained in our
debt agreements or obtain any necessary waivers or amendments,
generate sufficient cash to service such indebtedness and refinance
such indebtedness on favorable terms, or at all, as well as our
ability to incur substantially more debt;
- our ability to renew advance financing facilities or warehouse
facilities on favorable terms, or at all, and maintain adequate
borrowing capacity under such facilities;
- our ability to maintain or grow our residential loan servicing
or subservicing business and our mortgage loan originations
business;
- our ability to achieve our strategic initiatives, particularly
our ability to: increase the mix of our fee-for-service business,
including by entering into new subservicing arrangements; improve
servicing performance; successfully develop our originations
capabilities in the consumer and wholesale lending channels;
effectuate a satisfactory debt restructuring; and execute and
realize planned operational improvements and efficiencies,
including those relating to our core and non-core framework;
- the success of our business strategy in returning us to
sustained profitability;
- changes in prepayment rates and delinquency rates on the loans
we service or subservice;
- the ability of Fannie Mae, Freddie Mac and Ginnie Mae, as well as our other clients and
credit owners, to transfer or otherwise terminate our servicing or
subservicing rights, with or without cause;
- a downgrade of, or other adverse change relating to, or our
ability to improve, our servicer ratings or credit ratings;
- our ability to collect reimbursements for servicing advances
and earn and timely receive incentive payments and ancillary fees
on our servicing portfolio;
- our ability to collect indemnification payments and enforce
repurchase obligations relating to mortgage loans we purchase from
our correspondent clients and our ability to collect in a timely
manner indemnification payments relating to servicing rights we
purchase from prior servicers;
- local, regional, national and global economic trends and
developments in general, and local, regional and national real
estate and residential mortgage market trends in particular,
including the volume and pricing of home sales and uncertainty
regarding the levels of mortgage originations and prepayments;
- uncertainty as to the volume of originations activity we can
achieve and the effects of the expiration of HARP, which is
scheduled to occur on September 30,
2017, including uncertainty as to the number of
"in-the-money" accounts we may be able to refinance and uncertainty
as to what type of product or government program will be
introduced, if any, to replace HARP;
- risks associated with the reverse mortgage business, including
changes to reverse mortgage programs operated by FHA, HUD or
Ginnie Mae, our ability to
accurately estimate interest curtailment liabilities, our ability
to fund HECM repurchase obligations, our ability to fund principal
additions on our HECM loans, and our ability to securitize our HECM
tails;
- our ability to realize all anticipated benefits of past,
pending or potential future acquisitions or joint venture
investments;
- the effects of competition on our existing and potential future
business, including the impact of competitors with greater
financial resources and broader scopes of operation;
- changes in interest rates and the effectiveness of any hedge we
may employ against such changes;
- risks and potential costs associated with technology and
cybersecurity, including: the risks of technology failures and of
cyber-attacks against us or our vendors; our ability to adequately
respond to actual or alleged cyber-attacks; and our ability to
implement adequate internal security measures and protect
confidential borrower information;
- risks and potential costs associated with the implementation of
new or more current technology, such as MSP, the use of vendors
(including offshore vendors) or the transfer of our servers or
other infrastructure to new data center facilities;
- our ability to comply with evolving and complex accounting
rules, many of which involve significant judgment and
assumptions;
- risks related to our deferred tax assets, including the risk of
an "ownership change" under Section 382 of the Code;
- our ability to regain and maintain compliance with the
continued listing requirements of the NYSE, and risks arising from
the potential suspension of trading of our common stock on, and
delisting of our common stock from, the NYSE;
- our ability to continue as a going concern;
- uncertainties regarding impairment charges relating to our
goodwill or other intangible assets;
- risks associated with one or more material weaknesses
identified in our internal controls over financial reporting,
including the timing, expense and effectiveness of our remediation
plans;
- our ability to implement and maintain effective internal
controls over financial reporting and disclosure controls and
procedures;
- our ability to manage potential conflicts of interest relating
to our relationship with WCO; and
- risks related to our relationship with Walter Energy and
uncertainties arising from or relating to its bankruptcy filings
and liquidation proceedings, including potential liability for any
taxes, interest and/or penalties owed by the Walter Energy
consolidated group for the full or partial tax years during which
certain of the Company's former subsidiaries were a part of such
consolidated group and certain other tax risks allocated to us in
connection with our spin-off from Walter Energy.
All of the above factors, risks and uncertainties are difficult
to predict, contain uncertainties that may materially affect actual
results and may be beyond our control. New factors, risks and
uncertainties emerge from time to time, and it is not possible for
our management to predict all such factors, risks and
uncertainties.
Although we believe that the assumptions underlying the
forward-looking statements (including those relating to our
outlook) contained herein are reasonable, any of the assumptions
could be inaccurate, and therefore any of these statements included
herein may prove to be inaccurate. In light of the significant
uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as
a representation by us or any other person that the results or
conditions described in such statements or our objectives and plans
will be achieved. We make no commitment to revise or update any
forward-looking statements in order to reflect events or
circumstances after the date any such statement is made, except as
otherwise required under the federal securities laws. If we were in
any particular instance to update or correct a forward-looking
statement, investors and others should not conclude that we would
make additional updates or corrections thereafter except as
otherwise required under the federal securities laws.
In addition, this release may contain statements of opinion or
belief concerning market conditions and similar matters. In certain
instances, those opinions and beliefs could be based upon general
observations by members of our management, anecdotal evidence
and/or our experience in the conduct of our business, without
specific investigation or statistical analyses. Therefore, while
such statements reflect our view of the industries and markets in
which we are involved, they should not be viewed as reflecting
verifiable views and such views may not be shared by all who are
involved in those industries or markets.
Walter Investment
Management Corp. and Subsidiaries
|
Consolidated
Statements of Comprehensive Loss
|
(Unaudited)
|
(in thousands,
except per share data)
|
|
|
|
For the Three Months
Ended June 30,
|
|
For the Six Months
Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
REVENUES
|
|
|
|
|
|
|
|
|
Net servicing revenue and fees
|
|
$
|
91,321
|
|
|
$
|
31,936
|
|
|
$
|
204,508
|
|
|
$
|
(73,826)
|
|
Net gains on sales of loans
|
|
70,545
|
|
|
100,176
|
|
|
144,901
|
|
|
184,653
|
|
Net fair value gains on reverse loans and related
HMBS obligations
|
|
7,872
|
|
|
7,650
|
|
|
22,574
|
|
|
42,858
|
|
Interest income on loans
|
|
10,489
|
|
|
11,849
|
|
|
21,469
|
|
|
24,020
|
|
Insurance revenue
|
|
2,650
|
|
|
11,277
|
|
|
7,590
|
|
|
21,644
|
|
Other revenues
|
|
25,910
|
|
|
24,585
|
|
|
53,030
|
|
|
54,895
|
|
Total revenues
|
|
208,787
|
|
|
187,473
|
|
|
454,072
|
|
|
254,244
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
General and administrative
|
|
117,544
|
|
|
135,776
|
|
|
249,171
|
|
|
265,382
|
|
Salaries and benefits
|
|
101,071
|
|
|
133,681
|
|
|
209,028
|
|
|
266,320
|
|
Interest expense
|
|
60,884
|
|
|
64,400
|
|
|
121,294
|
|
|
128,648
|
|
Depreciation and amortization
|
|
10,042
|
|
|
14,540
|
|
|
20,974
|
|
|
28,963
|
|
Goodwill impairment
|
|
—
|
|
|
215,412
|
|
|
—
|
|
|
215,412
|
|
Other expenses, net
|
|
3,054
|
|
|
1,897
|
|
|
5,837
|
|
|
4,403
|
|
Total expenses
|
|
292,595
|
|
|
565,706
|
|
|
606,304
|
|
|
909,128
|
|
|
|
|
|
|
|
|
|
|
OTHER GAINS (LOSSES)
|
|
|
|
|
|
|
|
|
Gain on sale of business
|
|
7
|
|
|
—
|
|
|
67,734
|
|
|
—
|
|
Other net fair value losses
|
|
(8,105)
|
|
|
(819)
|
|
|
(3,022)
|
|
|
(2,963)
|
|
Gain (loss) on extinguishment
|
|
(709)
|
|
|
—
|
|
|
(709)
|
|
|
928
|
|
Other
|
|
—
|
|
|
(532)
|
|
|
—
|
|
|
(1,556)
|
|
Total other gains (losses)
|
|
(8,807)
|
|
|
(1,351)
|
|
|
64,003
|
|
|
(3,591)
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
(92,615)
|
|
|
(379,584)
|
|
|
(88,229)
|
|
|
(658,475)
|
|
Income tax expense
|
|
1,694
|
|
|
110,379
|
|
|
1,572
|
|
|
4,190
|
|
Net loss
|
|
$
|
(94,309)
|
|
|
$
|
(489,963)
|
|
|
$
|
(89,801)
|
|
|
$
|
(662,665)
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(94,314)
|
|
|
$
|
(489,947)
|
|
|
$
|
(89,823)
|
|
|
$
|
(662,624)
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(94,309)
|
|
|
$
|
(489,963)
|
|
|
$
|
(89,801)
|
|
|
$
|
(662,665)
|
|
Basic and diluted loss per common and common
equivalent share
|
|
$
|
(2.58)
|
|
|
$
|
(13.68)
|
|
|
$
|
(2.46)
|
|
|
$
|
(18.57)
|
|
Weighted-average common and common equivalent shares
outstanding — basic and diluted
|
|
36,536
|
|
|
35,811
|
|
|
36,475
|
|
|
35,679
|
|
Walter Investment
Management Corp. and Subsidiaries
|
Consolidated
Balance Sheets
|
(in thousands,
except share and per share data)
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
478,374
|
|
|
$
|
224,598
|
|
Restricted cash and cash
equivalents
|
|
172,677
|
|
|
204,463
|
|
Residential loans at amortized cost, net (includes
$6,021 and $5,167 in allowance for loan losses at June 30, 2017 and
December 31, 2016, respectively)
|
|
709,080
|
|
|
665,209
|
|
Residential loans at fair value
|
|
11,905,869
|
|
|
12,416,542
|
|
Receivables, net (includes $11,841 and $15,033 at
fair value at June 30, 2017 and December 31, 2016,
respectively)
|
|
155,250
|
|
|
267,962
|
|
Servicer and protective advances, net (includes
$152,683 and $146,781 in allowance for uncollectible advances at
June 30, 2017 and December 31, 2016,
respectively)
|
|
915,185
|
|
|
1,195,380
|
|
Servicing rights, net (includes $870,758 and $949,593
at fair value at June 30, 2017 and December 31, 2016,
respectively)
|
|
935,898
|
|
|
1,029,719
|
|
Goodwill
|
|
47,747
|
|
|
47,747
|
|
Intangible assets, net
|
|
9,718
|
|
|
11,347
|
|
Premises and equipment, net
|
|
66,162
|
|
|
82,628
|
|
Assets held for sale
|
|
—
|
|
|
71,085
|
|
Other assets (includes $40,522 and $87,937 at fair
value at June 30, 2017 and December 31, 2016,
respectively)
|
|
199,554
|
|
|
242,290
|
|
Total assets
|
|
$
|
15,595,514
|
|
|
$
|
16,458,970
|
|
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
|
|
|
|
Payables and accrued liabilities (includes $5,924 and
$11,804 at fair value at June 30, 2017 and December 31, 2016,
respectively)
|
|
$
|
701,390
|
|
|
$
|
759,011
|
|
Servicer payables
|
|
143,785
|
|
|
146,332
|
|
Servicing advance liabilities
|
|
544,134
|
|
|
783,229
|
|
Warehouse borrowings
|
|
1,332,126
|
|
|
1,203,355
|
|
Servicing rights related liabilities at fair
value
|
|
1,314
|
|
|
1,902
|
|
Corporate debt
|
|
2,116,960
|
|
|
2,129,000
|
|
Mortgage-backed debt (includes $470,600 and $514,025
at fair value at June 30, 2017 and December 31, 2016,
respectively)
|
|
877,775
|
|
|
943,956
|
|
HMBS related obligations at fair
value
|
|
9,986,409
|
|
|
10,509,449
|
|
Deferred tax liabilities, net
|
|
4,602
|
|
|
4,774
|
|
Liabilities held for sale
|
|
—
|
|
|
2,402
|
|
Total liabilities
|
|
15,708,495
|
|
|
16,483,410
|
|
Stockholders' deficit:
|
|
|
|
|
Preferred stock, $0.01 par value per
share:
|
|
|
|
|
Authorized - 10,000,000 shares
|
|
|
|
|
Issued and outstanding - 0 shares at June 30, 2017
and December 31, 2016
|
|
—
|
|
|
—
|
|
Common stock, $0.01 par value per
share:
|
|
|
|
|
Authorized - 90,000,000 shares
|
|
|
|
|
Issued and outstanding - 36,541,904 and 36,391,129
shares at June 30, 2017 and December 31, 2016,
respectively
|
|
365
|
|
|
364
|
|
Additional paid-in capital
|
|
597,348
|
|
|
596,067
|
|
Accumulated deficit
|
|
(711,605)
|
|
|
(621,804)
|
|
Accumulated other comprehensive
income
|
|
911
|
|
|
933
|
|
Total stockholders' deficit
|
|
(112,981)
|
|
|
(24,440)
|
|
Total liabilities and stockholders'
deficit
|
|
$
|
15,595,514
|
|
|
$
|
16,458,970
|
|
Non-GAAP Financial Measures
We manage our Company in three reportable segments: Servicing,
Originations and Reverse Mortgage. We evaluate the performance of
our business segments through the following measures: income (loss)
before income taxes, Adjusted Earnings (Loss), and Adjusted EBITDA.
Management considers Adjusted Earnings (Loss) and Adjusted EBITDA,
both non-GAAP financial measures, to be important in the evaluation
of our business segments and of the Company as a whole, as well as
for allocating capital resources to our segments. Adjusted Earnings
(Loss) and Adjusted EBITDA are supplemental metrics utilized by
management to assess the underlying key drivers and operational
performance of the continuing operations of the business. In
addition, analysts, investors, and creditors may use these measures
when analyzing our operating performance. Adjusted Earnings (Loss)
and Adjusted EBITDA are not presentations made in accordance with
GAAP and our use of these measures and terms may vary from other
companies in our industry.
Adjusted Earnings (Loss) is defined as income (loss) before
income taxes, plus changes in fair value due to changes in
valuation inputs and other assumptions; goodwill and intangible
assets impairment, if any; a portion of the provision for
curtailment expense, net of expected third-party recoveries, if
applicable; share-based compensation expense or benefit; non-cash
interest expense; exit costs; estimated settlements and costs for
certain legal and regulatory matters; fair value to cash
adjustments for reverse loans; and select other cash and non-cash
adjustments primarily including severance; gain or loss on
extinguishment of debt; the net impact of the Non-Residual Trusts;
transaction and integration costs; and certain non-recurring costs,
as applicable. Adjusted Earnings (Loss) excludes unrealized changes
in fair value of MSR that are based on projections of expected
future cash flows and prepayments. Adjusted Earnings (Loss)
includes both cash and non-cash gains from mortgage loan
origination activities. Non-cash gains are net of non-cash charges
or reserves provided. Adjusted Earnings (Loss) includes cash
generated from reverse mortgage origination activities for the
period in which we were originating reverse mortgages. Adjusted
Earnings (Loss) may from time to time also include other
adjustments, as applicable based upon facts and circumstances,
consistent with the intent of providing investors with a
supplemental means of evaluating our operating performance.
We revised our method of calculating Adjusted Earnings (Loss)
beginning with the Annual Report on Form 10-K/A for the fiscal year
ended December 31, 2016 to eliminate adjustments for the
step-up depreciation and amortization, which represents
depreciation and amortization costs related to the increased basis
in assets (including servicing rights and subservicing contracts)
acquired within business combination transactions. Prior period
amounts have been adjusted to reflect this revision.
Adjusted EBITDA eliminates the effects of financing, income
taxes and depreciation and amortization. Adjusted EBITDA is defined
as income (loss) before income taxes, plus amortization of
servicing rights and other fair value adjustments; interest expense
on corporate debt; depreciation and amortization; goodwill and
intangible assets impairment, if any; a portion of the provision
for curtailment expense, net of expected third-party recoveries, if
applicable; share-based compensation expense or benefit; exit
costs; estimated settlements and costs for certain legal and
regulatory matters; fair value to cash adjustments for reverse
loans; select other cash and non-cash adjustments primarily the net
provision for the repurchase of loans sold; non-cash interest
income; severance; gain or loss on extinguishment of debt; interest
income on unrestricted cash and cash equivalents; the net impact of
the Non-Residual Trusts; the provision for loan losses; Residual
Trust cash flows; transaction and integration costs; servicing fee
economics; and certain non-recurring costs, as applicable. Adjusted
EBITDA includes both cash and non-cash gains from mortgage loan
origination activities. Adjusted EBITDA excludes the impact of fair
value option accounting on certain assets and liabilities and
includes cash generated from reverse mortgage origination
activities for the period in which we were originating reverse
mortgages. Adjusted EBITDA may also include other adjustments, as
applicable based upon facts and circumstances, consistent with the
intent of providing investors a supplemental means of evaluating
our operating performance.
Adjusted Earnings (Loss) and Adjusted EBITDA should not be
considered as alternatives to (i) net income (loss) or any other
performance measures determined in accordance with GAAP or (ii)
operating cash flows determined in accordance with GAAP. Adjusted
Earnings (Loss) and Adjusted EBITDA have important limitations as
analytical tools, and should not be considered in isolation or as
substitutes for analysis of our results as reported under GAAP.
Some of the limitations of these metrics are:
- Adjusted Earnings (Loss) and Adjusted EBITDA do not reflect
cash expenditures for long-term assets and other items that have
been and will be incurred, future requirements for capital
expenditures or contractual commitments;
- Adjusted Earnings (Loss) and Adjusted EBITDA do not reflect
changes in, or cash requirements for, our working capital
needs;
- Adjusted Earnings (Loss) and Adjusted EBITDA do not reflect
certain tax payments that represent reductions in cash available to
us;
- Adjusted Earnings (Loss) and Adjusted EBITDA do not reflect any
cash requirements for the assets being depreciated and amortized
that may have to be replaced in the future;
- Adjusted Earnings (Loss) and Adjusted EBITDA do not reflect
non-cash compensation that is and will remain a key element of our
overall long-term incentive compensation package;
- Adjusted Earnings (Loss) and Adjusted EBITDA do not reflect the
change in fair value due to changes in valuation inputs and other
assumptions;
- Adjusted EBITDA does not reflect the change in fair value
resulting from the realization of expected cash flows; and
- Adjusted EBITDA does not reflect the significant interest
expense or the cash requirements necessary to service interest or
principal payments on our servicing rights related liabilities and
corporate debt, although it does reflect interest expense
associated with our servicing advance liabilities, master
repurchase agreements, mortgage-backed debt, and HMBS related
obligations.
Because of these limitations, Adjusted Earnings (Loss) and
Adjusted EBITDA should not be considered as measures of
discretionary cash available to us to invest in the growth of our
business. We compensate for these limitations by relying primarily
on our GAAP results and using Adjusted Earnings (Loss) and Adjusted
EBITDA only as supplements. Users of our financial statements are
cautioned not to place undue reliance on Adjusted Earnings (Loss)
and Adjusted EBITDA.
Walter Investment Management
Corp.
|
Segment Results of Operations and Non-GAAP Financial
Measures
|
For the Three Months Ended June 30,
2017
|
(in thousands)
|
|
|
|
Servicing
|
|
Originations
|
|
Reverse Mortgage
|
|
Other
|
|
Eliminations
|
|
Total Consolidated
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net servicing revenue and fees
|
|
$
|
86,648
|
|
|
$
|
—
|
|
|
$
|
7,083
|
|
|
$
|
—
|
|
|
$
|
(2,410)
|
|
|
$
|
91,321
|
|
Net gains (losses) on sales of
loans
|
|
(997)
|
|
|
70,910
|
|
|
—
|
|
|
—
|
|
|
632
|
|
|
70,545
|
|
Net fair value gains on reverse loans and related
HMBS obligations
|
|
—
|
|
|
—
|
|
|
7,872
|
|
|
—
|
|
|
—
|
|
|
7,872
|
|
Interest income on loans
|
|
10,477
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,489
|
|
Insurance revenue
|
|
2,650
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,650
|
|
Other revenues
|
|
18,648
|
|
|
9,598
|
|
|
454
|
|
|
200
|
|
|
(2,990)
|
|
|
25,910
|
|
Total revenues
|
|
117,426
|
|
|
80,520
|
|
|
15,409
|
|
|
200
|
|
|
(4,768)
|
|
|
208,787
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
12,860
|
|
|
8,599
|
|
|
4,288
|
|
|
35,137
|
|
|
—
|
|
|
60,884
|
|
Depreciation and amortization
|
|
8,473
|
|
|
704
|
|
|
865
|
|
|
—
|
|
|
—
|
|
|
10,042
|
|
Other expenses, net
|
|
139,488
|
|
|
51,210
|
|
|
26,756
|
|
|
8,983
|
|
|
(4,768)
|
|
|
221,669
|
|
Total expenses
|
|
160,821
|
|
|
60,513
|
|
|
31,909
|
|
|
44,120
|
|
|
(4,768)
|
|
|
292,595
|
|
OTHER GAINS (LOSSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of business
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
Other net fair value gains (losses)
|
|
111
|
|
|
—
|
|
|
—
|
|
|
(8,216)
|
|
|
—
|
|
|
(8,105)
|
|
Loss on extinguishment
|
|
(709)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(709)
|
|
Total other losses
|
|
(591)
|
|
|
—
|
|
|
—
|
|
|
(8,216)
|
|
|
—
|
|
|
(8,807)
|
|
Income (loss) before income
taxes
|
|
(43,986)
|
|
|
20,007
|
|
|
(16,500)
|
|
|
(52,136)
|
|
|
—
|
|
|
(92,615)
|
|
Adjustments to income (loss) before income
taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of business
|
|
(7)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7)
|
|
Changes in fair value due to changes in valuation
inputs and other assumptions
|
|
33,017
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33,017
|
|
Fair value to cash adjustment for reverse
loans
|
|
—
|
|
|
—
|
|
|
12,039
|
|
|
—
|
|
|
—
|
|
|
12,039
|
|
Transaction and integration costs
|
|
2,158
|
|
|
—
|
|
|
—
|
|
|
6,928
|
|
|
—
|
|
|
9,086
|
|
Exit costs
|
|
4,861
|
|
|
442
|
|
|
614
|
|
|
181
|
|
|
—
|
|
|
6,098
|
|
Non-cash interest expense
|
|
22
|
|
|
—
|
|
|
—
|
|
|
2,742
|
|
|
—
|
|
|
2,764
|
|
Share-based compensation expense
|
|
279
|
|
|
132
|
|
|
70
|
|
|
—
|
|
|
—
|
|
|
481
|
|
Other
|
|
109
|
|
|
(344)
|
|
|
(31)
|
|
|
9,597
|
|
|
—
|
|
|
9,331
|
|
Total adjustments
|
|
40,439
|
|
|
230
|
|
|
12,692
|
|
|
19,448
|
|
|
—
|
|
|
72,809
|
|
Adjusted Earnings (Loss)
|
|
(3,547)
|
|
|
20,237
|
|
|
(3,808)
|
|
|
(32,688)
|
|
|
—
|
|
|
(19,806)
|
|
EBITDA adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of servicing rights and other fair value
adjustments
|
|
41,505
|
|
|
—
|
|
|
383
|
|
|
—
|
|
|
—
|
|
|
41,888
|
|
Interest expense on debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,396
|
|
|
—
|
|
|
32,396
|
|
Depreciation and amortization
|
|
8,473
|
|
|
704
|
|
|
865
|
|
|
—
|
|
|
—
|
|
|
10,042
|
|
Other
|
|
(833)
|
|
|
(2,428)
|
|
|
27
|
|
|
2
|
|
|
—
|
|
|
(3,232)
|
|
Total adjustments
|
|
49,145
|
|
|
(1,724)
|
|
|
1,275
|
|
|
32,398
|
|
|
—
|
|
|
81,094
|
|
Adjusted EBITDA
|
|
$
|
45,598
|
|
|
$
|
18,513
|
|
|
$
|
(2,533)
|
|
|
$
|
(290)
|
|
|
$
|
—
|
|
|
$
|
61,288
|
|
Walter Investment Management
Corp.
|
Segment Results of Operations and Non-GAAP Financial
Measures
|
For the Three
Months Ended June 30, 2016
|
(in
thousands)
|
|
|
|
Servicing
|
|
Originations
|
|
Reverse Mortgage
|
|
Other
|
|
Eliminations
|
|
Total Consolidated
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net servicing revenue and fees
|
|
$
|
28,001
|
|
|
$
|
—
|
|
|
$
|
7,001
|
|
|
$
|
—
|
|
|
$
|
(3,066)
|
|
|
$
|
31,936
|
|
Net gains (losses) on sales of
loans
|
|
(1,191)
|
|
|
100,358
|
|
|
—
|
|
|
—
|
|
|
1,009
|
|
|
100,176
|
|
Net fair value gains on reverse loans and related
HMBS obligations
|
|
—
|
|
|
—
|
|
|
7,650
|
|
|
—
|
|
|
—
|
|
|
7,650
|
|
Interest income on loans
|
|
11,837
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,849
|
|
Insurance revenue
|
|
11,277
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,277
|
|
Other revenues
|
|
22,889
|
|
|
9,839
|
|
|
1,486
|
|
|
45
|
|
|
(9,674)
|
|
|
24,585
|
|
Total revenues
|
|
72,813
|
|
|
110,209
|
|
|
16,137
|
|
|
45
|
|
|
(11,731)
|
|
|
187,473
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
18,330
|
|
|
7,736
|
|
|
2,414
|
|
|
35,920
|
|
|
—
|
|
|
64,400
|
|
Depreciation and amortization
|
|
10,704
|
|
|
2,248
|
|
|
1,587
|
|
|
1
|
|
|
—
|
|
|
14,540
|
|
Goodwill impairment
|
|
215,412
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
215,412
|
|
Other expenses, net
|
|
183,996
|
|
|
54,610
|
|
|
39,080
|
|
|
5,399
|
|
|
(11,731)
|
|
|
271,354
|
|
Total expenses
|
|
428,442
|
|
|
64,594
|
|
|
43,081
|
|
|
41,320
|
|
|
(11,731)
|
|
|
565,706
|
|
OTHER GAINS (LOSSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other net fair value gains (losses)
|
|
135
|
|
|
—
|
|
|
—
|
|
|
(954)
|
|
|
—
|
|
|
(819)
|
|
Other
|
|
(532)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(532)
|
|
Total other losses
|
|
(397)
|
|
|
—
|
|
|
—
|
|
|
(954)
|
|
|
—
|
|
|
(1,351)
|
|
Income (loss) before income
taxes
|
|
(356,026)
|
|
|
45,615
|
|
|
(26,944)
|
|
|
(42,229)
|
|
|
—
|
|
|
(379,584)
|
|
Adjustments to income (loss) before income
taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in fair value due to changes in valuation
inputs and other assumptions
|
|
118,825
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
118,825
|
|
Fair value to cash adjustment for reverse
loans
|
|
—
|
|
|
—
|
|
|
14,512
|
|
|
—
|
|
|
—
|
|
|
14,512
|
|
Transaction and integration costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
539
|
|
|
—
|
|
|
539
|
|
Exit costs
|
|
4,126
|
|
|
303
|
|
|
407
|
|
|
—
|
|
|
—
|
|
|
4,836
|
|
Non-cash interest expense
|
|
18
|
|
|
—
|
|
|
—
|
|
|
2,940
|
|
|
—
|
|
|
2,958
|
|
Share-based compensation expense
|
|
3,160
|
|
|
820
|
|
|
610
|
|
|
256
|
|
|
—
|
|
|
4,846
|
|
Goodwill impairment
|
|
215,412
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
215,412
|
|
Other
|
|
6,065
|
|
|
1,515
|
|
|
1,398
|
|
|
3,854
|
|
|
—
|
|
|
12,832
|
|
Total adjustments
|
|
347,606
|
|
|
2,638
|
|
|
16,927
|
|
|
7,589
|
|
|
—
|
|
|
374,760
|
|
Adjusted Earnings (Loss)
(1)
|
|
(8,420)
|
|
|
48,253
|
|
|
(10,017)
|
|
|
(34,640)
|
|
|
—
|
|
|
(4,824)
|
|
EBITDA Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of servicing rights and other fair value
adjustments
|
|
61,960
|
|
|
—
|
|
|
446
|
|
|
—
|
|
|
—
|
|
|
62,406
|
|
Interest expense on debt
|
|
1,251
|
|
|
—
|
|
|
—
|
|
|
32,979
|
|
|
—
|
|
|
34,230
|
|
Depreciation and amortization
|
|
10,704
|
|
|
2,248
|
|
|
1,587
|
|
|
1
|
|
|
—
|
|
|
14,540
|
|
Other
|
|
(767)
|
|
|
(7,013)
|
|
|
21
|
|
|
169
|
|
|
—
|
|
|
(7,590)
|
|
Total adjustments
|
|
73,148
|
|
|
(4,765)
|
|
|
2,054
|
|
|
33,149
|
|
|
—
|
|
|
103,586
|
|
Adjusted EBITDA
|
|
$
|
64,728
|
|
|
$
|
43,488
|
|
|
$
|
(7,963)
|
|
|
$
|
(1,491)
|
|
|
$
|
—
|
|
|
$
|
98,762
|
|
(1)
|
We revised our method
of calculating Adjusted Earnings (Loss) beginning with the Annual
Report on Form 10-K for the fiscal year ended December 31,
2016 to eliminate adjustments for step-up depreciation and
amortization, which represents depreciation and amortization costs
related to the increased basis in assets (including servicing
rights and subservicing contracts) acquired within business
combination transactions. Prior period amounts have been adjusted
to reflect this revision.
|
Walter
Investment Management Corp.
|
Segment Results of Operations and Non-GAAP Financial
Measures
|
For the Six Months Ended June 30,
2017
|
(in thousands)
|
|
|
|
Servicing
|
|
Originations
|
|
Reverse Mortgage
|
|
Other
|
|
Eliminations
|
|
Total Consolidated
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net servicing revenue and fees
|
|
$
|
195,189
|
|
|
$
|
—
|
|
|
$
|
14,591
|
|
|
$
|
—
|
|
|
$
|
(5,272)
|
|
|
$
|
204,508
|
|
Net gains (losses) on sales of
loans
|
|
(1,317)
|
|
|
144,614
|
|
|
—
|
|
|
—
|
|
|
1,604
|
|
|
144,901
|
|
Net fair value gains on reverse loans and related
HMBS obligations
|
|
—
|
|
|
—
|
|
|
22,574
|
|
|
—
|
|
|
—
|
|
|
22,574
|
|
Interest income on loans
|
|
21,445
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,469
|
|
Insurance revenue
|
|
7,590
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,590
|
|
Other revenues
|
|
42,299
|
|
|
16,690
|
|
|
737
|
|
|
710
|
|
|
(7,406)
|
|
|
53,030
|
|
Total revenues
|
|
265,206
|
|
|
161,328
|
|
|
37,902
|
|
|
710
|
|
|
(11,074)
|
|
|
454,072
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
26,393
|
|
|
17,999
|
|
|
6,679
|
|
|
70,223
|
|
|
—
|
|
|
121,294
|
|
Depreciation and amortization
|
|
17,384
|
|
|
1,671
|
|
|
1,919
|
|
|
—
|
|
|
—
|
|
|
20,974
|
|
Other expenses, net
|
|
297,955
|
|
|
110,816
|
|
|
51,103
|
|
|
15,236
|
|
|
(11,074)
|
|
|
464,036
|
|
Total expenses
|
|
341,732
|
|
|
130,486
|
|
|
59,701
|
|
|
85,459
|
|
|
(11,074)
|
|
|
606,304
|
|
OTHER GAINS (LOSSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of business
|
|
67,734
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67,734
|
|
Other net fair value losses
|
|
(1,318)
|
|
|
—
|
|
|
—
|
|
|
(1,704)
|
|
|
—
|
|
|
(3,022)
|
|
Loss on extinguishment
|
|
(709)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(709)
|
|
Total other gains (losses)
|
|
65,707
|
|
|
—
|
|
|
—
|
|
|
(1,704)
|
|
|
—
|
|
|
64,003
|
|
Income (loss) before income
taxes
|
|
(10,819)
|
|
|
30,842
|
|
|
(21,799)
|
|
|
(86,453)
|
|
|
—
|
|
|
(88,229)
|
|
Adjustments to income (loss) before income
taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of business
|
|
(67,734)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(67,734)
|
|
Changes in fair value due to changes in valuation
inputs and other assumptions
|
|
40,414
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40,414
|
|
Fair value to cash adjustment for reverse
loans
|
|
—
|
|
|
—
|
|
|
15,378
|
|
|
—
|
|
|
—
|
|
|
15,378
|
|
Transaction and integration costs
|
|
4,331
|
|
|
—
|
|
|
—
|
|
|
9,963
|
|
|
—
|
|
|
14,294
|
|
Exit costs
|
|
5,684
|
|
|
875
|
|
|
1,292
|
|
|
118
|
|
|
—
|
|
|
7,969
|
|
Non-cash interest expense
|
|
1,535
|
|
|
—
|
|
|
—
|
|
|
5,413
|
|
|
—
|
|
|
6,948
|
|
Share-based compensation expense
(benefit)
|
|
421
|
|
|
(50)
|
|
|
204
|
|
|
771
|
|
|
—
|
|
|
1,346
|
|
Other
|
|
3,043
|
|
|
727
|
|
|
174
|
|
|
4,868
|
|
|
—
|
|
|
8,812
|
|
Total adjustments
|
|
(12,306)
|
|
|
1,552
|
|
|
17,048
|
|
|
21,133
|
|
|
—
|
|
|
27,427
|
|
Adjusted Earnings (Loss)
|
|
(23,125)
|
|
|
32,394
|
|
|
(4,751)
|
|
|
(65,320)
|
|
|
—
|
|
|
(60,802)
|
|
EBITDA Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of servicing rights and other fair value
adjustments
|
|
82,117
|
|
|
—
|
|
|
782
|
|
|
—
|
|
|
—
|
|
|
82,899
|
|
Interest expense on debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64,810
|
|
|
—
|
|
|
64,810
|
|
Depreciation and amortization
|
|
17,384
|
|
|
1,671
|
|
|
1,919
|
|
|
—
|
|
|
—
|
|
|
20,974
|
|
Other
|
|
(76)
|
|
|
(3,161)
|
|
|
55
|
|
|
(108)
|
|
|
—
|
|
|
(3,290)
|
|
Total adjustments
|
|
99,425
|
|
|
(1,490)
|
|
|
2,756
|
|
|
64,702
|
|
|
—
|
|
|
165,393
|
|
Adjusted EBITDA
|
|
$
|
76,300
|
|
|
$
|
30,904
|
|
|
$
|
(1,995)
|
|
|
$
|
(618)
|
|
|
$
|
—
|
|
|
$
|
104,591
|
|
Walter Investment Management
Corp.
|
Segment Results of Operations and Non-GAAP Financial
Measures
|
For the Six Months Ended June 30,
2016
|
(in thousands)
|
|
|
|
Servicing
|
|
Originations
|
|
Reverse Mortgage
|
|
Other
|
|
Eliminations
|
|
Total Consolidated
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net servicing revenue and fees
|
|
$
|
(81,519)
|
|
|
$
|
—
|
|
|
$
|
13,910
|
|
|
$
|
—
|
|
|
$
|
(6,217)
|
|
|
$
|
(73,826)
|
|
Net gains (losses) on sales of
loans
|
|
(5,727)
|
|
|
188,340
|
|
|
—
|
|
|
—
|
|
|
2,040
|
|
|
184,653
|
|
Net fair value gains on reverse loans and
related HMBS obligations
|
|
—
|
|
|
—
|
|
|
42,858
|
|
|
—
|
|
|
—
|
|
|
42,858
|
|
Interest income on loans
|
|
23,995
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,020
|
|
Insurance revenue
|
|
21,644
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,644
|
|
Other revenues
|
|
51,165
|
|
|
22,121
|
|
|
3,464
|
|
|
75
|
|
|
(21,930)
|
|
|
54,895
|
|
Total revenues
|
|
9,558
|
|
|
210,486
|
|
|
60,232
|
|
|
75
|
|
|
(26,107)
|
|
|
254,244
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
36,892
|
|
|
16,011
|
|
|
3,929
|
|
|
71,816
|
|
|
—
|
|
|
128,648
|
|
Depreciation and amortization
|
|
21,485
|
|
|
4,593
|
|
|
2,875
|
|
|
10
|
|
|
—
|
|
|
28,963
|
|
Goodwill impairment
|
|
215,412
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
215,412
|
|
Other expenses, net
|
|
347,810
|
|
|
127,866
|
|
|
74,321
|
|
|
12,215
|
|
|
(26,107)
|
|
|
536,105
|
|
Total expenses
|
|
621,599
|
|
|
148,470
|
|
|
81,125
|
|
|
84,041
|
|
|
(26,107)
|
|
|
909,128
|
|
OTHER GAINS (LOSSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other net fair value gains (losses)
|
|
226
|
|
|
—
|
|
|
—
|
|
|
(3,189)
|
|
|
—
|
|
|
(2,963)
|
|
Gain on extinguishment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
928
|
|
|
—
|
|
|
928
|
|
Other
|
|
(532)
|
|
|
—
|
|
|
(1,024)
|
|
|
—
|
|
|
—
|
|
|
(1,556)
|
|
Total other losses
|
|
(306)
|
|
|
—
|
|
|
(1,024)
|
|
|
(2,261)
|
|
|
—
|
|
|
(3,591)
|
|
Income (loss) before income
taxes
|
|
(612,347)
|
|
|
62,016
|
|
|
(21,917)
|
|
|
(86,227)
|
|
|
—
|
|
|
(658,475)
|
|
Adjustments to income (loss) before income
taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in fair value due to changes in valuation
inputs and other assumptions
|
|
359,154
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
359,154
|
|
Fair value to cash adjustment for reverse
loans
|
|
—
|
|
|
—
|
|
|
(3,197)
|
|
|
—
|
|
|
—
|
|
|
(3,197)
|
|
Transaction and integration costs
|
|
370
|
|
|
—
|
|
|
—
|
|
|
2,486
|
|
|
—
|
|
|
2,856
|
|
Exit costs
|
|
6,007
|
|
|
2,099
|
|
|
407
|
|
|
227
|
|
|
—
|
|
|
8,740
|
|
Non-cash interest expense
|
|
(11)
|
|
|
—
|
|
|
—
|
|
|
5,807
|
|
|
—
|
|
|
5,796
|
|
Share-based compensation expense
|
|
3,941
|
|
|
233
|
|
|
923
|
|
|
608
|
|
|
—
|
|
|
5,705
|
|
Goodwill impairment
|
|
215,412
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
215,412
|
|
Other
|
|
8,199
|
|
|
1,515
|
|
|
2,446
|
|
|
7,510
|
|
|
—
|
|
|
19,670
|
|
Total adjustments
|
|
593,072
|
|
|
3,847
|
|
|
579
|
|
|
16,638
|
|
|
—
|
|
|
614,136
|
|
Adjusted Earnings (Loss)
(1)
|
|
(19,275)
|
|
|
65,863
|
|
|
(21,338)
|
|
|
(69,589)
|
|
|
—
|
|
|
(44,339)
|
|
EBITDA Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of servicing rights and other fair value
adjustments
|
|
134,230
|
|
|
—
|
|
|
906
|
|
|
—
|
|
|
—
|
|
|
135,136
|
|
Interest expense on debt
|
|
3,986
|
|
|
—
|
|
|
—
|
|
|
66,009
|
|
|
—
|
|
|
69,995
|
|
Depreciation and amortization
|
|
21,485
|
|
|
4,593
|
|
|
2,875
|
|
|
10
|
|
|
—
|
|
|
28,963
|
|
Other
|
|
(1,102)
|
|
|
(3,212)
|
|
|
54
|
|
|
347
|
|
|
—
|
|
|
(3,913)
|
|
Total adjustments
|
|
158,599
|
|
|
1,381
|
|
|
3,835
|
|
|
66,366
|
|
|
—
|
|
|
230,181
|
|
Adjusted EBITDA
|
|
$
|
139,324
|
|
|
$
|
67,244
|
|
|
$
|
(17,503)
|
|
|
$
|
(3,223)
|
|
|
$
|
—
|
|
|
$
|
185,842
|
|
(1)
|
We revised our method
of calculating Adjusted Earnings (Loss) beginning with the Annual
Report on Form 10-K for the fiscal year ended December 31,
2016 to eliminate adjustments for step-up depreciation and
amortization, which represents depreciation and amortization costs
related to the increased basis in assets (including servicing
rights and subservicing contracts) acquired within business
combination transactions. Prior period amounts have been adjusted
to reflect this revision.
|
Reconciliation of GAAP Net Loss
to
|
Non-GAAP Adjusted Loss
|
(in millions,
except per share amounts)
|
|
|
|
For the Three Months Ended June
30,
|
|
For the Six Months
Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net loss
|
|
$
|
(94.3)
|
|
|
$
|
(490.0)
|
|
|
$
|
(89.8)
|
|
|
$
|
(662.7)
|
|
Income tax expense
|
|
1.7
|
|
|
110.4
|
|
|
1.6
|
|
|
4.2
|
|
Loss before income taxes
|
|
(92.6)
|
|
|
(379.6)
|
|
|
(88.2)
|
|
|
(658.5)
|
|
Adjustments to loss before income
taxes
|
|
|
|
|
|
|
|
|
Gain on sale of business
|
|
—
|
|
|
—
|
|
|
(67.7)
|
|
|
—
|
|
Changes in fair value due to changes in valuation
inputs
and other assumptions (1)
|
|
33.0
|
|
|
118.8
|
|
|
40.4
|
|
|
359.2
|
|
Fair value to cash adjustment for reverse loans
(2)
|
|
12.0
|
|
|
14.5
|
|
|
15.4
|
|
|
(3.2)
|
|
Transaction and integration costs
(3)
|
|
9.1
|
|
|
0.5
|
|
|
14.3
|
|
|
2.9
|
|
Exit costs (4)
|
|
6.1
|
|
|
4.8
|
|
|
8.0
|
|
|
8.7
|
|
Non-cash interest expense
|
|
2.8
|
|
|
3.0
|
|
|
6.9
|
|
|
5.8
|
|
Share-based compensation expense
|
|
0.5
|
|
|
4.9
|
|
|
1.3
|
|
|
5.7
|
|
Goodwill impairment
|
|
—
|
|
|
215.4
|
|
|
—
|
|
|
215.4
|
|
Other (5)
|
|
9.3
|
|
|
12.9
|
|
|
8.8
|
|
|
19.7
|
|
Total adjustments
|
|
72.8
|
|
|
374.8
|
|
|
27.4
|
|
|
614.2
|
|
Adjusted Loss
|
|
(19.8)
|
|
|
(4.8)
|
|
|
(60.8)
|
|
|
(44.3)
|
|
Tax benefit at estimated effective tax rate of
38%
|
|
(7.5)
|
|
|
(1.8)
|
|
|
(23.1)
|
|
|
(16.8)
|
|
Adjusted Loss after tax
|
|
$
|
(12.3)
|
|
|
(3.0)
|
|
|
$
|
(37.7)
|
|
|
$
|
(27.5)
|
|
Adjusted Loss after tax per common and common
equivalent share
|
|
$
|
(0.34)
|
|
|
$
|
(0.08)
|
|
|
$
|
(1.03)
|
|
|
$
|
(0.77)
|
|
Weighted-average common and common equivalent shares
outstanding
|
|
36.5
|
|
|
35.8
|
|
|
36.5
|
|
|
35.7
|
|
__________
(1)
|
Consists of the
change in fair value due to changes in valuation inputs and other
assumptions relating to servicing rights and charged-off
loans.
|
(2)
|
Represents the
non-cash fair value adjustment to arrive at cash generated from
reverse mortgage origination activities.
|
(3)
|
Transaction and
integration costs result primarily from the Company's debt
restructuring initiative.
|
(4)
|
Exit costs include
expenses related to the closing of offices and the termination and
replacement of certain employees as well as other expenses to
institute efficiencies. Exit costs incurred for the three and six
months ended June 30, 2017 include those relating to our exit from
the consumer retail channel of the Originations segment, our exit
from the reverse mortgage originations business, and actions
initiated in 2015, 2016 and 2017 in connection with our continued
efforts to enhance efficiencies and streamline processes in the
organization.
|
(5)
|
Includes severance,
costs associated with transforming the business and the net impact
of the Non-Residual Trusts.
|
Reconciliation of
GAAP Net Loss to
|
Non-GAAP AEBITDA
|
(in millions)
|
|
|
|
For the Three Months
Ended June
30,
|
|
For the Six Months
Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net loss
|
|
$
|
(94.3)
|
|
|
$
|
(490.0)
|
|
|
$
|
(89.8)
|
|
|
$
|
(662.7)
|
|
Income tax expense
|
|
1.7
|
|
|
110.4
|
|
|
1.6
|
|
|
4.2
|
|
Loss before income taxes
|
|
(92.6)
|
|
|
(379.6)
|
|
|
(88.2)
|
|
|
(658.5)
|
|
EBITDA Adjustments
|
|
|
|
|
|
|
|
|
Amortization of servicing rights and other fair
value
adjustments (1)
|
|
74.9
|
|
|
181.2
|
|
|
123.3
|
|
|
494.3
|
|
Interest expense
|
|
35.2
|
|
|
37.2
|
|
|
71.8
|
|
|
75.8
|
|
Gain on sale of business
|
|
—
|
|
|
—
|
|
|
(67.7)
|
|
|
—
|
|
Depreciation and amortization
|
|
10.0
|
|
|
14.6
|
|
|
21.0
|
|
|
29.0
|
|
Fair value to cash adjustment for reverse loans
(2)
|
|
12.0
|
|
|
14.5
|
|
|
15.4
|
|
|
(3.2)
|
|
Transaction and integration costs
(3)
|
|
9.1
|
|
|
0.5
|
|
|
14.3
|
|
|
2.9
|
|
Exit costs (4)
|
|
6.1
|
|
|
4.8
|
|
|
8.0
|
|
|
8.7
|
|
Share-based compensation expense
|
|
0.5
|
|
|
4.9
|
|
|
1.3
|
|
|
5.7
|
|
Goodwill impairment
|
|
—
|
|
|
215.4
|
|
|
—
|
|
|
215.4
|
|
Other (5)
|
|
6.1
|
|
|
5.3
|
|
|
5.4
|
|
|
15.7
|
|
Total adjustments
|
|
153.9
|
|
|
478.4
|
|
|
192.8
|
|
|
844.3
|
|
Adjusted EBITDA
|
|
$
|
61.3
|
|
|
$
|
98.8
|
|
|
$
|
104.6
|
|
|
$
|
185.8
|
|
__________
(1)
|
Consists of the
change in fair value due to changes in valuation inputs and other
assumptions relating to servicing rights and charged-off loans as
well as the amortization of servicing rights and the realization of
expected cash flows relating to servicing rights carried at fair
value.
|
(2)
|
Represents the
non-cash fair value adjustment to arrive at cash generated from
reverse mortgage origination activities.
|
(3)
|
Transaction and
integration costs result primarily from the Company's debt
restructuring initiative.
|
(4)
|
Exit costs include
expenses related to the closing of offices and the termination and
replacement of certain employees as well as other expenses to
institute efficiencies. Exit costs incurred for the three and six
months ended June 30, 2017 include those relating to our exit from
the consumer retail channel of the Originations segment, our exit
from the reverse mortgage originations business, and actions
initiated in 2015, 2016 and 2017 in connection with our continued
efforts to enhance efficiencies and streamline processes in the
organization.
|
(5)
|
Includes the net
provision for the repurchase of loans sold, non-cash interest
income, severance, interest income on unrestricted cash and cash
equivalents, costs associated with transforming the business, the
net impact of the Non-Residual Trusts, the provision for loan
losses and Residual Trust cash flows.
|
View original
content:http://www.prnewswire.com/news-releases/walter-investment-management-corp-announces-second-quarter-2017-highlights-and-financial-results-300502266.html
SOURCE Walter Investment Management Corp.