EX-99.1 9 ex991unauditedproformafina.htm EXHIBIT 99.1 Ex991UnauditedProFormaFinancialInformation
Exhibit 99.1

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma financial information of Home Loan Servicing Solutions, Ltd. (the “Company”) presents the effects of the Share and Asset Purchase Agreement (the “Purchase Agreement”) entered into on April 6, 2015, pursuant to which New Residential Investment Corp. (“NRZ”) acquired substantially all of the assets (including the issued share capital of the Company's two first-tier subsidiaries) and assumed substantially of the liabilities of the Company (including certain post-closing liabilities of the Company) in exchange for an amount in cash equal to $1.0 billion plus 28,286,980 newly issued shares of NRZ common stock (the “NRZ Shares”) with a par value $0.01 per share (the “Asset Sale”). The Company has sold the NRZ Shares and intends to distribute the proceeds together with its remaining cash, less a $50 million reserve, to its shareholders as soon as practicable. In conjunction with the Asset Sale, the Company repaid its senior secured term loan facility (the “Term Loan”). The unaudited pro forma balance sheet as of December 31, 2014 and the unaudited pro forma statements of operations for the years ended December 31, 2014, 2013 and 2012 are based on the Company's Annual Report on Form 10-K as of and for the year ended December 31, 2014 (the “2014 Form 10-K”). The unaudited pro forma financial information and the accompanying notes should be read in conjunction with the Company's historical consolidated financial statements and the notes thereto, which can be found in the 2014 Form 10-K.

The unaudited pro forma balance sheet as of December 31, 2014 gives effect to the Pro Forma Transactions (as defined below) as if the Pro Forma Transactions had occurred on December 31, 2014. The unaudited pro forma statements of operations for the years ended December 31, 2014, 2013 and 2012 give effect to the Pro Forma Transactions as if they had occurred on January 1, 2014, 2013 and 2012, respectively.

The historical financial information has been adjusted in the unaudited pro forma financial information to give effect to pro forma events that are (i) directly attributable to the Pro Forma Transactions, (ii) factually supportable and, (iii) with respect to the unaudited pro forma statements of operations, are expected to have a continuing impact on the Company's results of operations. However, such adjustments are estimates based on certain assumptions and may not prove to be accurate. Information regarding these adjustments is subject to risks and uncertainties that could cause actual results to differ materially from our unaudited pro forma financial information.

The unaudited pro forma financial information and accompanying notes present the impact of the following (collectively the “Pro Forma Transactions”):

A.
The effects of the Purchase Agreement;

B.
The liquidation of the NRZ Shares subsequent to the Asset Sale;

C.
The retirement of the the Term Loan in conjunction with the Asset Sale;

D.
On February 20, 2015, the Company sold its portfolios of re-performing loan (“RPLs”) to an unrelated third party purchaser for $337.6 million subject to a 5% holdback pending completion of the purchaser's due diligence, and the Company concurrently retired the related borrowings;

E.
The termination of the Company's interest rate swaps designated as cash flow hedges of interest related to the Company's variable-rate borrowings in conjunction with the Asset Sale;

F.
The termination of the Company's 2013 Equity Incentive Plan in conjunction with the Asset Sale; and

G.
The expected distribution of the Company's cash balance less a reserve in the amount of $50 million that will be held by the Company at the discretion of its Board of Directors to ensure that the Company will be able to meet known and unknown liabilities up to either the consummation of the Merger (as defined in the accompanying notes) or, if the Merger is not consummated, the date of completion of the Company's plan of complete liquidation and dissolution (the “Liquidation Plan”);

In the opinion of management, all adjustments necessary to reflect the effects of the transactions described in the notes to the unaudited pro forma balance sheet and unaudited pro forma statements of operations have been included and are based upon available information and assumptions that we believe are reasonable.

The unaudited pro forma financial information is provided for informational and illustrative purposes only and should be read in conjunction with the notes thereto and the 2014 Form 10-K. The unaudited pro forma financial information does not purport to reflect our results of operations or financial condition had the Pro Forma Transactions occurred at an earlier date. The unaudited pro forma financial information also should not be considered representative of our future financial condition or results of operations.

1

HOME LOAN SERVICING SOLUTIONS, LTD.
UNAUDITED PRO FORMA BALANCE SHEET
(Dollars in thousands, except share and per share data)
 
 
 
 
 
 
 
 
 
 
 
Historical as of December 31, 2014
 
Pro Forma Adjustments as of December 31, 2014
 
 
 
Pro Forma as of December 31, 2014
Assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
210,009

 
$
(160,009
)
 
A,B,C,D,G
 
$
50,000

Match funded advances
 
6,121,595

 
(6,121,595
)
 
A
 
—

Notes receivable – Rights to MSRs
 
614,465

 
(614,465
)
 
A
 
—

Loans held for investment
 
815,663

 
(815,663
)
 
A,D
 
—

Related party receivables
 
94,401

 
(94,401
)
 
A
 
—

Deferred tax assets
 
491

 
(491
)
 
A
 
—

Other assets
 
281,475

 
(281,475
)
 
A,B,C,D,E
 
—

Total assets
 
$
8,138,099

 
$
(8,088,099
)
 
 
 
$
50,000

Liabilities and Equity
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
Match funded liabilities
 
$
5,624,088

 
$
(5,624,088
)
 
A
 
$
—

Other borrowings
 
1,182,328

 
(1,182,328
)
 
A,C,D
 
—

Dividends payable
 
12,783

 
(12,783
)
 
G
 
—

Income taxes payable
 
173

 
(173
)
 
A
 
—

Deferred tax liabilities
 
491

 
(491
)
 
A
 
—

Related party payables
 
14,503

 
(14,503
)
 
A
 
—

Other liabilities
 
12,454

 
(12,454
)
 
A,C,D,E,F
 
—

Total liabilities
 
6,846,820

 
(6,846,820
)
 
 
 
—

Commitments and Contingencies
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
Equity – Ordinary shares, $0.01 par value; 200,000,000 shares authorized; 71,016,771 shares issued and outstanding
 
710

 
—

 
 
 
710

Additional paid-in capital
 
1,210,300

 
(1,161,010
)
 
F,G
 
49,290

Retained earnings
 
79,133

 
(79,133
)
 
A,C,D,E,F,G
 
—

Accumulated other comprehensive income, net of tax
 
1,136

 
(1,136
)
 
E
 
—

Total equity
 
1,291,279

 
(1,241,279
)
 
 
 
50,000

Total liabilities and equity
 
$
8,138,099

 
$
(8,088,099
)
 
 
 
$
50,000


See notes to unaudited pro forma financial information.

2

HOME LOAN SERVICING SOLUTIONS, LTD.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(Dollars in thousands, except share and per share data)
 
 
 
 
 
 
 
 
 
 
 
Historical for the Year Ended December 31, 2014
 
Pro Forma Adjustments for the Year Ended December 31, 2014
 
 
 
Pro Forma for the Year Ended December 31, 2014
Revenue
 
 
 
 
 
 
 
 
Interest income – notes receivable – Rights to MSRs
 
$
361,060

 
$
(361,060
)
 
A
 
$
—

Interest income – other
 
36,446

 
(36,378
)
 
A,D
 
68

Total interest income
 
397,506

 
(397,438
)
 
 
 
68

Related party revenue
 
1,843

 
(1,843
)
 
A
 
—

Other revenue
 
402

 
(402
)
 
A,D
 
—

Total revenue
 
399,751

 
(399,683
)
 
 
 
68

Operating expenses
 
 
 
 
 
 
 
 
Compensation and benefits
 
6,351

 
(6,351
)
 
A,F
 
—

Related party expenses
 
2,349

 
(2,349
)
 
A
 
—

General and administrative expenses
 
9,753

 
(9,720
)
 
A,D
 
33

Total operating expenses
 
18,453

 
(18,420
)
 
 
 
33

Income from operations
 
381,298

 
(381,263
)
 
 
 
35

Other expense
 
 
 
 
 
 
 
 
Interest expense
 
163,698

 
(163,698
)
 
A,C,D,E
 
—

Total other expense
 
163,698

 
(163,698
)
 
 
 
—

Income before income taxes
 
217,600

 
(217,565
)
 
 
 
35

Income tax expense
 
636

 
(636
)
 
A
 
—

Net income
 
$
216,964

 
$
(216,929
)
 
 
 
$
35

 
 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
 
Basic
 
$
3.05

 
$
(3.05
)
 
A,C,D,E,F
 
$
0.00

 
 
 
 
 
 
 
 
 
Diluted
 
$
3.05

 
$
(3.05
)
 
A,C,D,E,F
 
$
0.00

Weighted average shares outstanding
 
 
 
 
 
 
 
 
Basic
 
71,016,771

 
—

 
 
 
71,016,771

 
 
 
 
 
 
 
 
 
Diluted
 
71,020,808

 
(4,037
)
 
F
 
71,016,771


See notes to unaudited pro forma financial information.

3

HOME LOAN SERVICING SOLUTIONS, LTD.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(Dollars in thousands, except share and per share data)
 
 
 
 
 
 
 
 
 
 
 
Historical for the Year Ended December 31, 2013
 
Pro Forma Adjustments for the Year Ended December 31, 2013
 
 
 
Pro Forma for the Year Ended December 31, 2013
Revenue
 
 
 
 
 
 
 
 
Interest income – notes receivable – Rights to MSRs
 
$
235,826

 
$
(235,826
)
 
A
 
$
—

Interest income – other
 
2,195

 
(2,067
)
 
A
 
128

Total interest income
 
238,021

 
(237,893
)
 
 
 
128

Related party revenue
 
1,811

 
(1,811
)
 
A
 
—

Other revenue
 
—

 
—

 
 
 
—

Total revenue
 
239,832

 
(239,704
)
 
 
 
128

Operating expenses
 
 
 
 
 
 
 
 
Compensation and benefits
 
5,825

 
(5,825
)
 
A
 
—

Related party expenses
 
1,400

 
(1,400
)
 
A
 
—

General and administrative expenses
 
4,645

 
(4,583
)
 
A
 
62

Total operating expenses
 
11,870

 
(11,808
)
 
 
 
62

Income from operations
 
227,962

 
(227,896
)
 
 
 
66

Other expense
 
 
 
 
 
 
 
 
Interest expense
 
110,071

 
(110,071
)
 
A,C,E
 
—

Total other expense
 
110,071

 
(110,071
)
 
 
 
—

Income before income taxes
 
117,891

 
(117,825
)
 
 
 
66

Income tax expense
 
234

 
(234
)
 
A
 
—

Net income
 
$
117,657

 
$
(117,591
)
 
 
 
$
66

 
 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
 
Basic
 
$
1.83

 
$
(1.83
)
 
A,C,E
 
$
0.00

 
 
 
 
 
 
 
 
 
Diluted
 
$
1.83

 
$
(1.83
)
 
A,C,E
 
$
0.00

Weighted average shares outstanding
 
 
 
 
 
 
 
 
Basic
 
64,132,383

 
—

 
 
 
64,132,383

 
 
 
 
 
 
 
 
 
Diluted
 
64,132,383

 
—

 
 
 
64,132,383


See notes to unaudited pro forma financial information.

4

HOME LOAN SERVICING SOLUTIONS, LTD.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(Dollars in thousands, except share and per share data)
 
 
 
 
 
 
 
 
 
 
 
Historical for the Year Ended December 31, 2012
 
Pro Forma Adjustments for the Year Ended December 31, 2012
 
 
 
Pro Forma for the Year Ended December 31, 2012
Revenue
 
 
 
 
 
 
 
 
Interest income – notes receivable – Rights to MSRs
 
$
47,445

 
$
(47,445
)
 
A
 
$
—

Interest income – other
 
109

 
(83
)
 
A
 
26

Total interest income
 
47,554

 
(47,528
)
 
 
 
26

Related party revenue
 
2,316

 
(2,316
)
 
A
 
—

Other revenue
 
—

 
—

 
 
 
—

Total revenue
 
49,870

 
(49,844
)
 
 
 
26

Operating expenses
 
 
 
 
 
 
 
 
Compensation and benefits
 
3,751

 
(3,751
)
 
A
 
—

Related party expenses
 
755

 
(755
)
 
A
 
—

General and administrative expenses
 
1,644

 
(1,628
)
 
A
 
16

Total operating expenses
 
6,150

 
(6,134
)
 
 
 
16

Income from operations
 
43,720

 
(43,710
)
 
 
 
10

Other expense
 
 
 
 
 
 
 
 
Interest expense
 
24,057

 
(24,057
)
 
A,E
 
—

Total other expense
 
24,057

 
(24,057
)
 
 
 
—

Income before income taxes
 
19,663

 
(19,653
)
 
 
 
10

Income tax expense
 
46

 
(46
)
 
A
 
—

Net income
 
$
19,617

 
$
(19,607
)
 
 
 
$
10

 
 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
 
Basic
 
$
1.14

 
$
(1.14
)
 
A,E
 
$
0.00

 
 
 
 
 
 
 
 
 
Diluted
 
$
1.14

 
$
(1.14
)
 
A,E
 
$
0.00

Weighted average shares outstanding
 
 
 
 
 
 
 
 
Basic
 
17,230,858

 
—

 
 
 
17,230,858

 
 
 
 
 
 
 
 
 
Diluted
 
17,230,858

 
—

 
 
 
17,230,858


See notes to unaudited pro forma financial information.


5

NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION

On April 6, 2015, pursuant to the Purchase Agreement, NRZ acquired substantially all of the assets and assumed substantially all of the related liabilities of the Company, including all of the issued share capital of the Company's two first-tier subsidiaries and certain post-closing liabilities of the Company, for aggregate consideration consisting of $1.0 billion in cash and 28,286,980 NRZ Shares issued to the Company in a private placement. The Company has sold the NRZ Shares and and intends to distribute the proceeds together with its remaining cash, less a $50 million reserve, to its shareholders as soon as practicable. In conjunction with the Asset Sale, the Company repaid the Term Loan.

Immediately following the closing of the Asset Sale, the Company entered into: (i) an Agreement and Plan of Merger (the “Merger Agreement”) with NRZ and Hexagon Merger Sub, Ltd., a Cayman Islands exempted company and a wholly-owned subsidiary of NRZ (“Merger Sub”), pursuant to which, among other things, the Company will be merged with and into Merger Sub (the “Merger”), with the Company ceasing its corporate existence and Merger Sub surviving the Merger, (ii) a Services Agreement, pursuant to which HLSS Advances Acquisition Corp. (the “Manager”) will provide the Company with certain services following the consummation of the Asset Sale, including, among other things, handling (including defending, prosecuting or resolving) all claims, disputes or controversies (including any litigation, arbitration, governmental investigations or inquiries or any other proceedings or negotiations) in which the Company is a party or may otherwise be involved and (iii) a Registration Rights Agreement to memorialize certain rights relating to the registration of the NRZ Shares to be held by the Company upon the closing of the Asset Sale. On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each ordinary share, par value $0.01 per share, of the Company (the “Company Shares”) issued and outstanding immediately prior to the Effective Time (other than Company Shares owned by any direct or indirect wholly-owned subsidiary of NRZ (other than Merger Sub) or of Merger Sub and Company Shares as to which dissenters’ rights have been properly exercised) will be converted automatically into the right to receive (i) $0.704059 per share in cash, without interest, if all of the NRZ Shares have been sold by the Company prior to the Effective Time, or (ii)(A) $0.704059 per share in cash, without interest, plus (B) 93.91% of the value of the NRZ Shares that have not been sold by the Company prior to the Effective Time, if all or a portion of the NRZ Shares received by the Company in the Asset Sale have not been sold by the Company prior to the Effective Time pro rata per each outstanding Company Share. The parties’ obligations to consummate the Merger are subject to certain closing conditions, including approval of the Merger by the requisite vote of the shareholders, the absence of any legal restraints that would prohibit the consummation of the Merger and other conditions customary for a transaction of this type. Each of the Company, NRZ and Merger Sub has made certain customary representations, warranties and covenants in the Merger Agreement, including, among other things, covenants related to the conduct of our business during the interim period between the execution of the Merger Agreement and the consummation of the Merger. The Merger Agreement provides for certain termination rights for both the Company and NRZ, including, if approval of the Merger by the requisite vote of the shareholders is not obtained or if the Merger is not consummated by the nine month anniversary of the date of the Merger Agreement.

Subsequent to the Pro Forma Transactions, the Company expects to retain only cash balances pending either the consummation of the Merger or, if the Merger is not consummated, the completion of the Liquidation Plan. Therefore, the Company expects to have revenues and expenses related only to interest earned on bank balances and the related bank charges.

Pro Forma Adjustments for the Unaudited Pro Forma Financial Information

A.
The unaudited pro forma balance sheet includes adjustments to reflect the sale of substantially all of the Company's assets and liabilities in the historical balance sheet still held at the time of the Asset Sale and the consideration received in conjunction with the Asset Sale (cash and the NRZ Shares). The unaudited pro forma statements of operations includes adjustments for the elimination of the revenues and expenses related to the assets sold and liabilities assumed by NRZ.

B.
The unaudited pro forma balance sheet includes adjustments for the liquidation of the NRZ Shares. These adjustments did not impact the unaudited pro forma statements of operations. The NRZ Shares were liquidated at $15.25 per share, less certain transaction fees, resulting in net proceeds to the Company of $422.7 million.

C.
The unaudited pro forma balance sheet includes adjustments for the outstanding principal balance of the Term Loan and the related original issuance discount, deferred debt issuance costs and accrued interest payable. The unaudited pro forma statements of operations includes adjustments for interest expense on the Term Loan.

D.
The unaudited pro forma balance sheet includes adjustments for the carrying amount of the RPL portfolios, deferred debt issuance costs, accrued interest receivable, other receivables, the related borrowings to partially finance the RPL portfolios and accrued interest payable. The unaudited pro forma statement of operations for the year ended December 31, 2014 includes adjustments for

6

RPL interest income, other RPL revenues and expenses and interest expense on the related borrowings. The RPLs were acquired during the fiscal year ended December 31, 2014.

E.
The unaudited pro forma balance sheet also includes adjustments for the fair value of the interest rate swaps, accrued interest payable and accumulated comprehensive income. The unaudited pro forma statements of operations includes adjustments for interest expense related to the interest rate swaps.

F.
The unaudited pro forma balance sheet includes adjustments related to the Company's 2013 Equity Incentive Plan (which was terminated in conjunction with the Asset Sale) for dividend equivalents payable on vested stock options and additional paid-in capital recognized on stock options. The unaudited pro forma statements of operations includes adjustments for share-based compensation expense.

G.
The unaudited pro forma balance sheet includes adjustments for the expected distribution of the Company's cash balance, less a reserve in the amount of $50 million, and dividends accrued but not paid as of December 31, 2014. These adjustments did not impact the unaudited pro forma statements of operations.


7

Pro Forma Adjustments to the Unaudited Pro Forma Balance Sheet
As of December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro Forma Adjustments
 
Total Adjustments
(In thousands, except per share data)
 
A
 
B
 
C
 
D
 
E
 
F
 
G
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,006,875

 
$
422,749

 
$
(340,680
)
 
$
52,509

 
$
—

 
$
—

 
$
(1,301,462
)
 
$
(160,009
)
Match funded advances
 
(6,121,595
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(6,121,595
)
Notes receivable – Rights to MSRs
 
(614,465
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(614,465
)
Loans held for investment
 
(477,016
)
 
—

 
—

 
(338,647
)
 
—

 
—

 
—

 
(815,663
)
Related party receivables
 
(94,401
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(94,401
)
Deferred tax assets
 
(491
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(491
)
Other assets
 
136,656

 
(422,749
)
 
(4,403
)
 
11,467

 
(2,446
)
 
—

 
—

 
(281,475
)
Total assets
 
$
(6,164,437
)
 
$
—

 
$
(345,083
)
 
$
(274,671
)
 
$
(2,446
)
 
$
—

 
$
(1,301,462
)
 
$
(8,088,099
)
Liabilities and Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Match funded liabilities
 
$
(5,624,088
)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(5,624,088
)
Other borrowings
 
(570,219
)
 
—

 
(340,636
)
 
(271,473
)
 
—

 
—

 
—

 
(1,182,328
)
Dividends payable
 
—

 
—

 
—

 
—

 
—

 
—

 
(12,783
)
 
(12,783
)
Income taxes payable
 
(173
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(173
)
Deferred tax liabilities
 
(491
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(491
)
Related party payables
 
(14,503
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(14,503
)
Other liabilities
 
(10,148
)
 
—

 
(44
)
 
(625
)
 
(1,616
)
 
(21
)
 
—

 
(12,454
)
Total liabilities
 
(6,219,622
)
 
—

 
(340,680
)
 
(272,098
)
 
(1,616
)
 
(21
)
 
(12,783
)
 
(6,846,820
)
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ordinary shares, $0.01 par value
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Additional paid-in capital
 
—

 
—

 
—

 
—

 
—

 
(243
)
 
(1,160,767
)
 
(1,161,010
)
Retained earnings
 
55,185

 
—

 
(4,403
)
 
(2,573
)
 
306

 
264

 
(127,912
)
 
(79,133
)
Accumulated other comprehensive income, net of tax
 
—

 
—

 
—

 
—

 
(1,136
)
 
—

 
—

 
(1,136
)
Total equity
 
55,185

 
—

 
(4,403
)
 
(2,573
)
 
(830
)
 
21

 
(1,288,679
)
 
(1,241,279
)
Total liabilities and equity
 
$
(6,164,437
)
 
$
—

 
$
(345,083
)
 
$
(274,671
)
 
$
(2,446
)
 
$
—

 
$
(1,301,462
)
 
$
(8,088,099
)


8

Pro Forma Adjustments to the Unaudited Pro Forma Statement of Operations
For the Year Ended December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro Forma Adjustments
 
Total Adjustments
(In thousands, except share and per share data)
 
A
 
B
 
C
 
D
 
E
 
F
 
G
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income – notes receivable – Rights to MSRs
 
$
(361,060
)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(361,060
)
Interest income – other
 
(26,803
)
 
—

 
—

 
(9,575
)
 
—

 
—

 
—

 
(36,378
)
Total interest income
 
(387,863
)
 
—

 
—

 
(9,575
)
 
—

 
—

 
—

 
(397,438
)
Related party revenue
 
(1,843
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(1,843
)
Other revenue
 
(102
)
 
—

 
—

 
(300
)
 
—

 
—

 
—

 
(402
)
Total revenue
 
(389,808
)
 
—

 
—

 
(9,875
)
 
—

 
—

 
—

 
(399,683
)
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits
 
(6,108
)
 
—

 
—

 
—

 
—

 
(243
)
 
—

 
(6,351
)
Related party expenses
 
(2,349
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(2,349
)
General and administrative expenses
 
(9,326
)
 
—

 
—

 
(394
)
 
—

 
—

 
—

 
(9,720
)
Total operating expenses
 
(17,783
)
 
—

 
—

 
(394
)
 
—

 
(243
)
 
—

 
(18,420
)
Income from operations
 
(372,025
)
 
—

 
—

 
(9,481
)
 
—

 
243

 
—

 
(381,263
)
Other expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
(127,038
)
 
—

 
(30,710
)
 
(4,806
)
 
(1,144
)
 
—

 
—

 
(163,698
)
Total other expense
 
(127,038
)
 
—

 
(30,710
)
 
(4,806
)
 
(1,144
)
 
—

 
—

 
(163,698
)
Income before income taxes
 
(244,987
)
 
—

 
30,710

 
(4,675
)
 
1,144

 
243

 
—

 
(217,565
)
Income tax expense
 
(636
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(636
)
Net income
 
$
(244,351
)
 
$
—

 
$
30,710

 
$
(4,675
)
 
$
1,144

 
$
243

 
$
—

 
$
(216,929
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
(3.44
)
 
$
—

 
$
0.43

 
$
(0.06
)
 
$
0.02

 
$
0.00

 
$
—

 
$
(3.05
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted
 
$
(3.44
)
 
$
—

 
$
0.43

 
$
(0.06
)
 
$
0.02

 
$
0.00

 
$
—

 
$
(3.05
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted
 
—

 
—

 
—

 
—

 
—

 
(4,037
)
 
—

 
(4,037
)

9

Pro Forma Adjustments to the Unaudited Pro Forma Statement of Operations
For the Year Ended December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro Forma Adjustments
 
Total Adjustments
(In thousands, except share and per share data)
 
A
 
B
 
C
 
D
 
E
 
F
 
G
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income – notes receivable – Rights to MSRs
 
$
(235,826
)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(235,826
)
Interest income – other
 
(2,067
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(2,067
)
Total interest income
 
(237,893
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(237,893
)
Related party revenue
 
(1,811
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(1,811
)
Other revenue
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total revenue
 
(239,704
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(239,704
)
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits
 
(5,825
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(5,825
)
Related party expenses
 
(1,400
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(1,400
)
General and administrative expenses
 
(4,583
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(4,583
)
Total operating expenses
 
(11,808
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(11,808
)
Income from operations
 
(227,896
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(227,896
)
Other expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
(99,656
)
 
—

 
(9,058
)
 
—

 
(1,357
)
 
—

 
—

 
(110,071
)
Total other expense
 
(99,656
)
 
—

 
(9,058
)
 
—

 
(1,357
)
 
—

 
—

 
(110,071
)
Income before income taxes
 
(128,240
)
 
—

 
9,058

 
—

 
1,357

 
—

 
—

 
(117,825
)
Income tax expense
 
(234
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(234
)
Net income
 
$
(128,006
)
 
$
—

 
$
9,058

 
$
—

 
$
1,357

 
$
—

 
$
—

 
$
(117,591
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
(1.99
)
 
$
—

 
$
0.14

 
$
0.02

 
$
—

 
$
—

 
$
—

 
$
(1.83
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted
 
$
(1.99
)
 
$
—

 
$
0.14

 
$
0.02

 
$
—

 
$
—

 
$
—

 
$
(1.83
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—



10

Pro Forma Adjustments to the Unaudited Pro Forma Statement of Operations
For the Year Ended December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro Forma Adjustments
 
Total Adjustments
(In thousands, except share and per share data)
 
A
 
B
 
C
 
D
 
E
 
F
 
G
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income – notes receivable – Rights to MSRs
 
$
(47,445
)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(47,445
)
Interest income – other
 
(83
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(83
)
Total interest income
 
(47,528
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(47,528
)
Related party revenue
 
(2,316
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(2,316
)
Other revenue
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total revenue
 
(49,844
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(49,844
)
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits
 
(3,751
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(3,751
)
Related party expenses
 
(755
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(755
)
General and administrative expenses
 
(1,628
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(1,628
)
Total operating expenses
 
(6,134
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(6,134
)
Income from operations
 
(43,710
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(43,710
)
Other expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
(23,119
)
 
—

 
—

 
—

 
(938
)
 
—

 
—

 
(24,057
)
Total other expense
 
(23,119
)
 
—

 
—

 
—

 
(938
)
 
—

 
—

 
(24,057
)
Income before income taxes
 
(20,591
)
 
—

 
—

 
—

 
938

 
—

 
—

 
(19,653
)
Income tax expense
 
(46
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(46
)
Net income
 
$
(20,545
)
 
$
—

 
$
—

 
$
—

 
$
938

 
$
—

 
$
—

 
$
(19,607
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
(1.19
)
 
$
—

 
$
—

 
$
—

 
$
0.05

 
$
—

 
$
—

 
$
(1.14
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted
 
$
(1.19
)
 
$
—

 
$
—

 
$
—

 
$
0.05

 
$
—

 
$
—

 
$
(1.14
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—




11