Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On July 7, 2014, PHH Corporation (“PHH,” the “Company,” “we” or “our”) completed the sale of our wholly owned Fleet Management Services segment and related entities (collectively the “Fleet Business”) to certain wholly owned subsidiaries of Element Financial Corporation, an Ontario corporation for $1.4 billion in cash.
The following unaudited pro forma consolidated financial information of PHH Corporation was derived from our historical consolidated financial statements and is being presented to give effect to the disposition of the Fleet Business. The pro forma statements do not give any effect to the utilization of cash proceeds. The unaudited pro forma condensed consolidated statements of operations reflect the disposition of the Fleet Business as if it occurred at the beginning of the earliest period presented. The unaudited pro forma condensed consolidated balance sheet reflects the disposition as if it occurred on March 31, 2014, including the elimination of the net assets of the Fleet Business, the elimination of all intercompany amounts, plus pro forma adjustments for the net proceeds from the sale in cash and cash equivalents, the recording and settlement of certain tax amounts, and the estimated gain on the sale in retained earnings. The estimated proceeds and gain on the sale of the Fleet business may change based upon final determination and settlement of post-closing adjustments.
The unaudited pro forma financial statements should be read in conjunction with our historical financial statements and accompanying notes included in our 2013 Form 10-K and our first quarter 2014 Form 10-Q.
The unaudited pro forma financial information below is provided for information purposes only and is not intended to reflect what the actual financial position or results of operations of the Company would have been had the disposition occurred on the dates indicated, nor is it necessarily indicative of our future financial position or results of operations. In addition, the results of operations for the three months ended March 31, 2014 may not be indicative of the results of operations to be expected for the full year. The pro forma adjustments are based upon the best information available and certain assumptions that management believes to be reasonable in the circumstances. There can be no assurance that such information and assumptions will not change from those reflected in the pro forma financial statements and the accompanying notes.
PHH CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
| | March 31, 2014 | |
| | | | Pro Forma Adjustments | | | |
| | As Reported | | Disposition of
Fleet Business | | Other | | Pro Forma | |
| | | | | | | | | |
ASSETS | | | | | | | | | |
Cash and cash equivalents | | $ | 1,155 | | $ | (237 | ) | $ | 821 | (a) | $ | 1,739 | |
Restricted cash | | 336 | | (246 | ) | — | | 90 | |
Mortgage loans held for sale | | 605 | | — | | — | | 605 | |
Accounts receivable, net | | 1,000 | | (376 | ) | — | | 624 | |
Net investment in fleet leases | | 3,619 | | (3,619 | ) | — | | — | |
Mortgage servicing rights | | 1,224 | | — | | — | | 1,224 | |
Property and equipment, net | | 69 | | (24 | ) | — | | 45 | |
Goodwill | | 25 | | (25 | ) | — | | — | |
Other assets | | 509 | | (74 | ) | (4 | ) | 431 | |
Total assets | | $ | 8,542 | | $ | (4,601 | ) | $ | 817 | | $ | 4,758 | |
| | | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | | |
Accounts payable and accrued expenses | | $ | 763 | | $ | (225 | ) | $ | — | | $ | 538 | |
Debt | | 5,334 | | (3,452 | ) | — | | 1,882 | |
Deferred taxes | | 661 | | 2 | | (322 | )(b) | 341 | |
Other liabilities | | 140 | | (15 | ) | — | | 125 | |
Total liabilities | | 6,898 | | (3,690 | ) | (322 | ) | 2,886 | |
Commitments and contingencies | | — | | — | | — | | — | |
| | | | | | | | | |
EQUITY | | | | | | | | | |
Preferred stock | | — | | — | | — | | — | |
Common stock | | 1 | | — | | — | | 1 | |
Additional paid-in capital | | 1,147 | | — | | — | | 1,147 | |
Retained earnings | | 465 | | — | | 243 | (c) | 708 | |
Accumulated other comprehensive income | | 9 | | (15 | ) | — | | (6 | ) |
Total PHH Corporation stockholders’ equity | | 1,622 | | (15 | ) | 243 | | 1,850 | |
Noncontrolling interest | | 22 | | — | | — | | 22 | |
Total equity | | 1,644 | | (15 | ) | 243 | | 1,872 | |
Total liabilities and equity | | $ | 8,542 | | $ | (3,705 | ) | $ | (79 | ) | $ | 4,758 | |
Notes:
(a) Pro forma Adjustments to Cash and cash equivalents:
Cash received from the sale of Fleet business | | $ | 1,402 | |
Settlement of tax liabilities | | (531 | ) |
Payment of transaction costs | | (50 | ) |
| | $ | 821 | |
(b) Reflects the payment of deferred tax liabilities that are partially offset by the utilization of deferred tax assets in connection with the disposition of the Fleet business.
(c) Reflects the estimated net gain on the disposition of the Fleet business (which represents the net cash proceeds less the net assets disposed of) and other pro forma adjustments as of March 31, 2014. This amount does not reflect the final gain to be realized upon disposition primarily as a result of the actual closing date being July 7, 2014 and certain purchase price adjustments that may be made after closing.
PHH CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except share and per share amounts)
| | Three Months Ended March 31, 2014 | |
| | As Reported | | Disposition of
Fleet Business | | Pro Forma | |
REVENUES | | | | | | | |
Mortgage fees | | $ | 47 | | $ | — | | $ | 47 | |
Fleet management fees | | 44 | | (44 | ) | — | |
Net fee income | | 91 | | (44 | ) | 47 | |
Fleet lease income | | 343 | | (343 | ) | — | |
Gain on mortgage loans, net | | 51 | | — | | 51 | |
Mortgage net finance expense | | (30 | ) | — | | (30 | ) |
Loan servicing income | | 115 | | — | | 115 | |
Valuation adjustments related to mortgage servicing rights, net | | (73 | ) | — | | (73 | ) |
Net loan servicing income | | 42 | | — | | 42 | |
Other income | | 20 | | (19 | ) | 1 | |
Net revenues | | 517 | | (406 | ) | 111 | |
| | | | | | | |
EXPENSES | | | | | | | |
Salaries and related expenses | | 127 | | (23 | ) | 104 | |
Occupancy and other office expenses | | 17 | | (4 | ) | 13 | |
Depreciation on operating leases | | 300 | | (300 | ) | — | |
Fleet interest expense | | 13 | | (13 | ) | — | |
Other depreciation and amortization | | 8 | | (2 | ) | 6 | |
Other operating expenses | | 123 | | (43 | ) | 80 | |
Total expenses | | 588 | | (385 | ) | 203 | |
| | | | | | | |
Loss before income taxes | | (71 | ) | (21 | ) | (92 | ) |
Income tax benefit | | (27 | ) | (6 | ) | (33 | ) |
Net loss | | (44 | ) | (15 | ) | (59 | ) |
Less: net loss attributable to noncontrolling interest | | (2 | ) | — | | (2 | ) |
Net loss attributable to PHH Corporation | | $ | (42 | ) | $ | (15 | ) | $ | (57 | ) |
| | | | | | | |
Basic and diluted loss per share attributable to PHH Corporation | | $ | (0.73 | ) | $ | (0.27 | ) | $ | (1.00 | ) |
| | | | | | | |
Weighted-average common shares outstanding - basic and diluted | | 57,543,886 | | | | | |
PHH CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except share and per share amounts)
| | Year Ended December 31, 2013 | |
| | As Reported | | Disposition of
Fleet Business | | Pro Forma | |
REVENUES | | | | | | | |
Mortgage fees | | $ | 307 | | $ | — | | $ | 307 | |
Fleet management fees | | 175 | | (175 | ) | — | |
Net fee income | | 482 | | (175 | ) | 307 | |
Fleet lease income | | 1,386 | | (1,386 | ) | — | |
Gain on mortgage loans, net | | 575 | | — | | 575 | |
Mortgage net finance expense | | (115 | ) | — | | (115 | ) |
Loan servicing income | | 436 | | — | | 436 | |
Valuation adjustments related to mortgage servicing rights, net | | (6 | ) | — | | (6 | ) |
Net loan servicing income | | 430 | | — | | 430 | |
Other income | | 84 | | (81 | ) | 3 | |
Net revenues | | 2,842 | | (1,642 | ) | 1,200 | |
| | | | | | | |
EXPENSES | | | | | | | |
Salaries and related expenses | | 623 | | (88 | ) | 535 | |
Occupancy and other office expenses | | 65 | | (15 | ) | 50 | |
Depreciation on operating leases | | 1,211 | | (1,211 | ) | — | |
Fleet interest expense | | 58 | | (58 | ) | — | |
Other depreciation and amortization | | 33 | | (10 | ) | 23 | |
Other operating expenses | | 611 | | (161 | ) | 450 | |
Total expenses | | 2,601 | | (1,543 | ) | 1,058 | |
| | | | | | | |
Income before income taxes | | 241 | | (99 | ) | 142 | |
Income tax expense | | 77 | | (33 | ) | 44 | |
Net income | | 164 | | (66 | ) | 98 | |
Less: net income attributable to noncontrolling interest | | 29 | | — | | 29 | |
Net income attributable to PHH Corporation | | $ | 135 | | $ | (66 | ) | $ | 69 | |
| | | | | | | |
Basic earnings per share attributable to PHH Corporation | | $ | 2.36 | | $ | (1.15 | ) | $ | 1.21 | |
Diluted earnings per share attributable to PHH Corporation | | $ | 2.06 | | $ | (1.00 | ) | $ | 1.06 | |
| | | | | | | |
Weighted-average common shares outstanding - basic | | 57,357,339 | | | | | |
Weighted-average common shares outstanding - diluted | | 65,859,520 | | | | | |
PHH CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except share and per share amounts)
| | Year Ended December 31, 2012 | |
| | As Reported | | Disposition of
Fleet Business | | Pro Forma | |
REVENUES | | | | | | | |
Mortgage fees | | $ | 346 | | $ | — | | $ | 346 | |
Fleet management fees | | 180 | | (180 | ) | — | |
Net fee income | | 526 | | (180 | ) | 346 | |
Fleet lease income | | 1,364 | | (1,364 | ) | — | |
Gain on mortgage loans, net | | 942 | | — | | 942 | |
Mortgage net finance expense | | (121 | ) | — | | (121 | ) |
Loan servicing income | | 449 | | — | | 449 | |
Valuation adjustments related to mortgage servicing rights, net | | (502 | ) | — | | (502 | ) |
Net loan servicing loss | | (53 | ) | — | | (53 | ) |
Other income | | 85 | | (73 | ) | 12 | |
Net revenues | | 2,743 | | (1,617 | ) | 1,126 | |
| | | | | | | |
EXPENSES | | | | | | | |
Salaries and related expenses | | 595 | | (84 | ) | 511 | |
Occupancy and other office expenses | | 59 | | (16 | ) | 43 | |
Depreciation on operating leases | | 1,212 | | (1,212 | ) | — | |
Fleet interest expense | | 68 | | (68 | ) | — | |
Other depreciation and amortization | | 25 | | (10 | ) | 15 | |
Other operating expenses | | 697 | | (128 | ) | 569 | |
Total expenses | | 2,656 | | (1,518 | ) | 1,138 | |
| | | | | | | |
Income (loss) before income taxes | | 87 | | (99 | ) | (12 | ) |
Income tax benefit | | (6 | ) | (29 | ) | (35 | ) |
Net income | | 93 | | (70 | ) | 23 | |
Less: net income attributable to noncontrolling interest | | 59 | | — | | 59 | |
Net income (loss) attributable to PHH Corporation | | $ | 34 | | $ | (70 | ) | $ | (36 | ) |
| | | | | | | |
Basic earnings (loss) per share attributable to PHH Corporation | | $ | 0.60 | | $ | (1.24 | ) | $ | (0.64 | ) |
Diluted earnings (loss) per share attributable to PHH Corporation | | $ | 0.56 | | $ | (1.15 | ) | $ | (0.64 | ) |
| | | | | | | |
Weighted-average common shares outstanding - basic | | 56,815,473 | | | | | |
Weighted-average common shares outstanding - diluted | | 61,601,001 | | | | | |
PHH CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except share and per share amounts)
| | Year Ended December 31, 2011 | |
| | As Reported | | Disposition of
Fleet Business | | Pro Forma | |
REVENUES | | | | | | | |
Mortgage fees | | $ | 295 | | $ | — | | $ | 295 | |
Fleet management fees | | 173 | | (173 | ) | — | |
Net fee income | | 468 | | (173 | ) | 295 | |
Fleet lease income | | 1,400 | | (1,400 | ) | — | |
Gain on mortgage loans, net | | 567 | | — | | 567 | |
Mortgage net finance expense | | (88 | ) | 1 | | (87 | ) |
Loan servicing income | | 456 | | — | | 456 | |
Valuation adjustments related to mortgage servicing rights, net | | (736 | ) | — | | (736 | ) |
Net loan servicing loss | | (280 | ) | — | | (280 | ) |
Other income | | 147 | | (74 | ) | 73 | |
Net revenues | | 2,214 | | (1,646 | ) | 568 | |
| | | | | | | |
EXPENSES | | | | | | | |
Salaries and related expenses | | 507 | | (83 | ) | 424 | |
Occupancy and other office expenses | | 59 | | (16 | ) | 43 | |
Depreciation on operating leases | | 1,223 | | (1,223 | ) | — | |
Fleet interest expense | | 79 | | (79 | ) | — | |
Other depreciation and amortization | | 25 | | (11 | ) | 14 | |
Other operating expenses | | 523 | | (147 | ) | 376 | |
Total expenses | | 2,416 | | (1,559 | ) | 857 | |
| | | | | | | |
Loss before income taxes | | (202 | ) | (87 | ) | (289 | ) |
Income tax benefit | | (100 | ) | (37 | ) | (137 | ) |
Net loss | | (102 | ) | (50 | ) | (152 | ) |
Less: net income attributable to noncontrolling interest | | 25 | | — | | 25 | |
Net loss attributable to PHH Corporation | | $ | (127 | ) | $ | (50 | ) | $ | (177 | ) |
| | | | | | | |
Basic and diluted loss per share attributable to PHH Corporation | | $ | (2.26 | ) | $ | (0.89 | ) | $ | (3.15 | ) |
| | | | | | | |
Weighted-average common shares outstanding - basic and diluted | | 56,349,478 | | | | | |
