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8-K - 8-K - J.G. Wentworth Coa14-12797_18k.htm

Exhibit 99.1

 

JGWPT Holdings Inc. Reports First Quarter Financial Results

 

RADNOR, Pa.—(BUSINESS WIRE)—5.14.14 — JGWPT Holdings Inc. (“JGWPT” or the “Company”) (NYSE:JGW), a leading purchaser of structured settlement payments, annuity payments, lottery payments and other receivables, today reports its financial results for the first quarter of 2014. “Our performance in the past quarter demonstrates improved results from the fourth quarter of 2013 and a strong balance sheet that will allow us to explore broader options to diversify our product offerings through acquisition opportunities and strategic joint ventures.” said David Miller, Chief Executive Officer, JGWPT Holdings Inc.

 

The following are highlights from the first quarter results:

 

First Quarter Highlights

 

·                  Total Receivables Balance, or TRB, purchases were $260.6 million, as compared to $270.4 million in the first quarter of 2013 and $260.5 million in the fourth quarter of 2013.

·                  Adjusted unrealized gains on VIE and other finance receivables, long term debt and derivatives*, net of the loss on swap termination was $51.8 million in the first quarter, as compared to $64.7 million in the first quarter of 2013 and $44.6 million in the fourth quarter of 2013.

·                  Revenues were $136.6 million, a decrease of 25.4% from revenues of $183.2 million in the first quarter of 2013, due primarily to the impact of higher interest rates on unrealized gains on VIE and other finance receivables, long term debt and derivatives and lower TRB purchases.

·                  Net income decreased to $34.5 million, as compared to $89.7 million in the first quarter of 2013, driven by increased interest expense on the Company’s term loan as well as the impact of the aforementioned higher interest rates.

·                  Adjusted Net Income*, or ANI, decreased to $10.1 million, as compared to $23.5 million in the first quarter of 2013, driven primarily by lower revenues.

·                  ANI as a percentage of TRB was 3.88%, as compared to 8.70% in the first quarter of 2013.

·                  Term loan interest expense was $9.9 million, as compared to $7.7 million in the first quarter of 2013.

 

Mr. Miller said, “Our ANI margin remains consistent, with earnings of approximately $0.04 on every dollar of TRB purchased from customers.”  John Schwab, JGWPT’s Chief Financial Officer, said, “The impact of higher interest rates on our first quarter profitability was partially offset by reduced operating costs driven by our operating efficiency and cost reduction initiatives.”

 


*see Reconciliation of non-GAAP measures below

 

About JGWPT Holdings Inc.

 

JGWPT focuses on key sectors, including purchasing of structured settlement payments, annuity payments, lottery payments and pre-settlement funding. Through our two market leading and highly recognizable brands, J.G. Wentworth and Peachtree Financial Solutions, we have purchased over $9.6 billion of structured settlement payment streams from our customers since 1995.

 

For more information about JGWPT, visit www.jgwpt.com or use the contact information provided below.

 

Conference Call and Webcast

 

Management will host a webcast to discuss the first quarter 2014 financial results today, May 14, 2014, at 10:00 AM Eastern time. The webcast will include remarks from JGWPT’s Chief Executive Officer, David Miller, and Chief Financial Officer, John Schwab. A webcast of the conference call will be available live on the Investor Relations section of the Company’s website:

 

https://event.on24.com/eventRegistration/EventLobbyServlet?target=registration.jsp&eventid=792598&sessionid=1&key=5363E983AAC8472456A840F58A88C63E&sourcepage=register

 

Interested parties unable to access the conference call via the webcast may dial (877) 201-0168 and reference conference ID 43725898.  A playback of the call is available until April 15, 2014 at (855) 859-2056 with conference ID 43725898.

 



 

Forward-Looking Statements

 

Certain statements in this press release constitute “forward-looking statements.” All statements, other than statements of historical fact, are forward-looking statements. You can identify such statements because they contain words such as “plans,” “expects,” or “does expect,” “budget,” “forecasts,” “anticipates,” or “does not anticipate,” “believes,” “intends,” and similar expressions or statements that certain actions, events or results “may,” “could,” “would,” “might,” or “will,” be taken, occur or be achieved.  Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements.

 

A number of factors could cause actual results, performance or achievements to differ materially from the results expressed or implied in the forward-looking statements. These factors should be considered carefully and readers should not place undue reliance on the forward-looking statements. Forward-looking statements necessarily involve significant known and unknown risks, assumptions and uncertainties that may cause our actual results, performance and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. As set forth more fully under “Part 1, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014, these risks and uncertainties include, among other things:  our ability to continue to purchase structured settlement payments and other assets; our ability to complete future securitizations or other financings on beneficial terms; availability of or increases in the cost of our financing sources relative to our purchase discount rate; our dependence on the opinions of certain rating agencies; our dependence on outside parties to conduct our transactions including the court system, insurance companies, outside counsel, delivery services and notaries; our dependence on the effectiveness of our direct response marketing; the compression of the yield spread between the price we pay for and the price at which we sell assets; changes in tax or accounting policies or changes in interpretation of those policies as applicable to our business; the lack of an established market for the subordinated interest in the receivables that we retain after a securitization is executed; our exposure to underwriting risk; our ability to remain in compliance with the terms of our substantial indebtedness; changes in existing state laws governing the transfer of structured settlement payments or the interpretation thereof; the insolvency or downgrade of a material number of structured settlement issuers; any change in current tax law relating to the tax treatment of structured settlements; changes to state or federal, licensing and regulatory regimes; the impact of the March 2014 Consumer Financial Protection Bureau inquiry and any findings or regulations it issues as related to us, our industries, or products or in general; adverse judicial developments; potential litigation and regulatory proceedings; unfavorable press reports about our business model; our access to personally identifiable confidential information of current and prospective customers and the improper use or failure to protect that information; the public disclosure of the identities of structured settlement holders; our business model being susceptible to litigation; our dependence on a small number of key personnel; our ability to successfully enter new lines of business and broaden the scope of our business; changes in our expectations regarding the likelihood, timing or terms of any potential acquisitions described herein; our computer systems being subject to security and privacy breaches; and infringement of our trademarks or service marks.

 

Consideration should also be given to the areas of risk set forth under the heading “Risk Factors” in our filings with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K, and in our other filings made from time to time, in connection with considering any forward-looking statements that may be made by us and our businesses generally. Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law.

 



 

JGWPT Holdings Inc.

(Prior to November 14, 2013, J.G. Wentworth, LLC and Subsidiaries)

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

 

 

 

March 31,

 

December 31,

 

 

 

2014

 

2013

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

34,651

 

$

39,061

 

Restricted cash and investments

 

214,768

 

109,338

 

VIE finance receivables, at fair market value

 

4,017,985

 

3,818,704

 

Other finance receivables, at fair market value

 

42,147

 

51,945

 

VIE finance receivables, net of allowance for losses of $6,832 and $6,443, respectively

 

116,222

 

117,826

 

Other finance receivables, net of allowance for losses of $1,684 and $1,899, respectively

 

17,835

 

15,166

 

Notes receivable, at fair market value

 

5,855

 

5,610

 

Other receivables, net of allowance for losses of $252 and $243, respectively

 

12,912

 

13,529

 

Fixed assets, net of accumulated depreciation of $4,933 and $4,544, respectively

 

3,232

 

3,112

 

Intangible assets, net of accumulated amortization of $18,472 and $17,781, respectively

 

47,186

 

47,878

 

Goodwill

 

84,993

 

84,993

 

Marketable securities

 

116,682

 

121,954

 

Deferred tax assets, net

 

 

1,830

 

Other assets

 

38,600

 

41,151

 

Total assets

 

$

4,753,068

 

$

4,472,097

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Accounts payable

 

$

7,416

 

$

3,903

 

Accrued expenses

 

13,738

 

21,181

 

Accrued interest

 

15,473

 

14,485

 

VIE derivative liabilities, at fair market value

 

71,488

 

70,296

 

VIE borrowings under revolving credit facilities and other similar borrowings

 

55,519

 

41,274

 

VIE long-term debt

 

148,329

 

150,802

 

VIE long-term debt issued by securitization and permanent financing trusts, at fair market value

 

3,666,583

 

3,431,283

 

Term loan payable

 

434,934

 

434,184

 

Other liabilities

 

7,215

 

7,646

 

Deferred tax liabilities

 

7,333

 

1,707

 

Installment obligations payable

 

116,682

 

121,954

 

Total liabilities

 

$

4,544,710

 

$

4,298,715

 

Class A common stock, par value $0.00001 per share; 500,000,000 shares authorized, 12,037,816 and 12,033,887 issued and outstanding as of March 31, 2014, respectively, 11,220,358 and 11,216,429 issued and outstanding as of December 31, 2013, respectively.

 

 

 

Class B common stock, par value $0.00001 per share; 500,000,000 shares authorized, 14,001,583 and 13,161,563 issued and outstanding as of March 31, 2014, respectively, 14,001,583 and 13,984,065 issued and outstanding as of December 31, 2013, respectively.

 

 

 

Class C common stock, par value $0.00001 per share; 500,000,000 shares authorized, 0 issued and outstanding as of March 31, 2014 and December 31, 2013, respectively.

 

 

 

Additional paid-in-capital

 

75,188

 

70,236

 

Retained earnings (accumulated deficit)

 

3,445

 

(5,577

)

Accumulated other comprehensive income

 

771

 

612

 

Total stockholders’ equity

 

$

79,404

 

$

65,271

 

Non-controlling interests

 

128,954

 

108,111

 

Total stockholders’ equity

 

$

208,358

 

$

173,382

 

Total liabilities and stockholders’ equity

 

$

4,753,068

 

$

4,472,097

 

 



 

JGWPT Holdings Inc.

(Prior to November 14, 2013, J.G. Wentworth, LLC and Subsidiaries)

Consolidated Statements of Operations

(Dollars in thousands, except per share amounts)

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2014

 

2013

 

REVENUES

 

 

 

 

 

Interest income

 

$

47,822

 

$

42,639

 

Unrealized gains on VIE and other finance receivables, long-term debt, and derivatives

 

87,311

 

133,598

 

Loss on swap terminations, net

 

(574

)

(174

)

Servicing, broker, and other fees

 

1,142

 

1,113

 

Realized and unrealized gains on marketable securities, net

 

889

 

6,077

 

Other

 

 

(45

)

Total revenues

 

$

136,590

 

$

183,208

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

Advertising

 

$

17,493

 

$

16,454

 

Interest expense

 

51,230

 

42,624

 

Compensation and benefits

 

9,286

 

11,845

 

General and administrative

 

4,470

 

4,135

 

Professional and consulting

 

3,444

 

4,123

 

Debt issuance

 

3,001

 

3,028

 

Securitization debt maintenance

 

1,557

 

1,440

 

Provision for losses on finance receivables

 

1,091

 

1,096

 

Depreciation and amortization

 

1,081

 

1,377

 

Installment obligations expense, net

 

1,492

 

6,750

 

Total expenses

 

$

94,145

 

$

92,872

 

 

 

 

 

 

 

Income before income taxes

 

$

42,445

 

$

90,336

 

Provision for income taxes

 

7,912

 

631

 

Net income

 

34,533

 

$

89,705

 

Less net income attributable to non-controlling interests

 

25,511

 

 

 

Net income attributable to JGWPT Holdings Inc.

 

$

9,022

 

 

 

 

March 31, 2014

 

Weighted average shares of Class A common stock outstanding:

 

Basic

 

11,641,617

 

Diluted

 

11,642,283

 

 

Net income per share attributable to stockholders of Class A common stock of JGWPT Holdings Inc.

 

Basic

 

$

0.77

 

Diluted

 

$

0.77

 

 



 

ANI Bridge - Unaudited

 

J.G. Wentworth, LLC and Subsidiaries

 

Reconciliation of Net Income to Adjusted Net Income

 

We use Adjusted Net Income (a non-GAAP financial measure) as a measure of our results from operations, which we define as our net income under U.S. GAAP before certain non-cash compensation expenses, certain other expenses, provision for or benefit from income taxes and the amounts related to the consolidation of the securitization and permanent financing trusts we use to finance our business. We use Adjusted Net Income to measure our overall performance because we believe it represents the best measure of our operating performance, as the operations of the variable interest entities do not impact business performance. You should not consider Adjusted Net Income in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Because not all companies use identical calculations, our presentation of Adjusted Net Income may not be comparable to other similarly titled measures of other companies.

 

A reconciliation of Net Income to Adjusted Net Income for the three months ended March 31, 2014 and 2013 is provided below.

 



 

JGWPT Holdings Inc.

(Prior to November 14, 2013, J.G. Wentworth, LLC and Subsidiaries)

Reconciliation of Net Income to Adjusted Net Income - Unaudited

(Dollars in thousands)

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Net income

 

$

34,533

 

$

89,705

 

 

 

 

 

 

 

Adjustments to reflect deconsolidation of securitizations:

 

 

 

 

 

Elimination of unrealized gain/loss on finance receivables, long-term debt and derivatives from post securitization due to changes in interest rates

 

(34,891

)

(68,697

)

Elimination of interest income from securitized finance receivables

 

(43,303

)

(36,907

)

Interest income on retained interests in finance receivables

 

4,969

 

4,555

 

Servicing income on securitized finance receivables

 

1,258

 

1,441

 

Elimination of interest expense on long-term debt related to securitization and permanent financing trusts

 

37,285

 

30,357

 

Professional fees relating to securitizations

 

1,557

 

1,449

 

Other adjustments:

 

 

 

 

 

Share based compensation

 

502

 

629

 

Income tax provision

 

7,912

 

631

 

Severance, M & A, and consulting expenses

 

299

 

364

 

Adjusted Net Income

 

$

10,121

 

$

23,527

 

 

 

 

 

 

 

Other Data:

 

 

 

 

 

Securitized Product Total Receivables Balance (TRB) Purchases (1)

 

$

223,507

 

$

230,705

 

Other TRB Purchases (2)

 

37,074

 

39,666

 

Total TRB Purchases

 

$

260,581

 

$

270,371

 

Adjusted Net Income

 

$

10,121

 

$

23,527

 

Adjusted Net Income Margin (3)

 

3.88

%

8.70

%

 

 

 

 

 

 

Company retained interests in finance receivables at fair market value

 

$

280,208

 

$

249,345

 

 


(1) Securitized product TRB purchases includes purchases during the period of assets that will be securitized (guaranteed structured settlements, annuities, and lottery payment streams)

(2) Other TRB Purchases includes receivables purchased from life contingent structured settlements and the purchase price of pre-settlement fundings during the period

(3) Adjusted Net Income Margin is Adjusted Net Income divided by Total TRB Purchases during the period

 



 

JGWPT Holdings Inc.

(Prior to November 14, 2013, J.G. Wentworth, LLC and Subsidiaries)

Reconciliation of Net Income to Adjusted Net Income - Unaudited

(Dollars in thousands)

 

 

 

 

 

Adjustments

 

Interest

 

 

 

 

 

Severance

 

Reclassification

 

 

 

 

 

Q1 2014

 

to reflect

 

Income on

 

Share

 

 

 

M&A

 

Associated with

 

Q1 2014

 

 

 

GAAP

 

deconsolidation

 

Retained

 

Based

 

Income

 

and

 

Installment

 

Adjusted

 

 

 

Results

 

of securitizations

 

Interest

 

Compensation

 

Tax

 

Consulting

 

Obligation Payable

 

Net Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

47,822

 

$

(43,303

)

$

4,969

 

 

 

 

 

 

 

$

(603

)

$

8,885

 

Unrealized gains on VIE and other finance receivables, long-term debt and derivatives

 

87,311

 

(34,891

)

 

 

 

 

 

 

 

 

 

 

52,420

 

Loss on swap terminations, net

 

(574

)

 

 

 

 

 

 

 

 

 

 

 

 

(574

)

Servicing, broker, and other fees

 

1,142

 

1,258

 

 

 

 

 

 

 

 

 

 

 

2,400

 

Realized and unrealized gains on marketable securities, net

 

889

 

 

 

 

 

 

 

 

 

 

 

(889

)

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

136,590

 

$

(76,936

)

$

4,969

 

$

 

$

 

$

 

$

(1,492

)

$

63,131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising

 

$

17,493

 

 

 

 

 

 

 

 

 

 

 

 

 

$

17,493

 

Interest expense

 

51,230

 

(37,285

)

 

 

 

 

 

 

 

 

 

 

13,945

 

Compensation and benefits

 

9,286

 

 

 

 

 

(502

)

 

 

(27

)

 

 

8,757

 

General and administrative

 

4,470

 

 

 

 

 

 

 

 

 

 

 

 

 

4,470

 

Professional and consulting

 

3,444

 

 

 

 

 

 

 

 

 

(272

)

 

 

3,172

 

Debt issuance

 

3,001

 

 

 

 

 

 

 

 

 

 

 

 

 

3,001

 

Securitization debt maintenance

 

1,557

 

(1,557

)

 

 

 

 

 

 

 

 

 

 

 

Provision for losses on finance receivables

 

1,091

 

 

 

 

 

 

 

 

 

 

 

 

 

1,091

 

Depreciation and amortization

 

1,081

 

 

 

 

 

 

 

 

 

 

 

 

 

1,081

 

Installment obligations expense, net

 

1,492

 

 

 

 

 

 

 

 

 

 

 

(1,492

)

 

Total expenses

 

$

94,145

 

$

(38,842

)

$

 

$

(502

)

$

 

$

(299

)

$

(1,492

)

$

53,010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

$

42,445

 

$

(38,094

)

$

4,969

 

$

502

 

$

 

$

299

 

$

 

$

10,121

 

Provision for income taxes

 

7,912

 

 

 

 

 

 

 

(7,912

)

 

 

 

 

 

Net income

 

$

34,533

 

$

(38,094

)

$

4,969

 

$

502

 

$

7,912

 

$

299

 

$

 

$

10,121

 

 



 

JGWPT Holdings Inc.

(Prior to November 14, 2013, J.G. Wentworth, LLC and Subsidiaries)

Reconciliation of Net Income to Adjusted Net Income - Unaudited

(Dollars in thousands)

 

 

 

 

 

Adjustments

 

Interest

 

 

 

 

 

Severance

 

Reclassification

 

 

 

 

 

Q1 2013

 

to reflect

 

Income on

 

Share

 

 

 

M&A

 

Associated with

 

Q1 2013

 

 

 

GAAP

 

deconsolidation

 

Retained

 

Based

 

Income

 

and

 

Installment

 

Adjusted

 

 

 

Results

 

of securitizations

 

Interest

 

Compensation

 

Tax

 

Consulting

 

Obligation Payable

 

Net Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

42,639

 

$

(36,907

)

$

4,555

 

 

 

 

 

 

 

$

(673

)

$

9,614

 

Unrealized gains on VIE and other finance receivables, long-term debt and derivatives

 

133,598

 

(68,697

)

 

 

 

 

 

 

 

 

 

 

64,901

 

Loss on swap terminations, net

 

(174

)

 

 

 

 

 

 

 

 

 

 

 

 

(174

)

Servicing, broker, and other fees

 

1,113

 

1,441

 

 

 

 

 

 

 

 

 

 

 

2,554

 

Realized and unrealized gains on marketable securities, net

 

6,077

 

 

 

 

 

 

 

 

 

 

 

(6,077

)

 

Other

 

(45

)

 

 

 

 

 

 

 

 

 

 

 

 

(45

)

Total revenues

 

$

183,208

 

$

(104,163

)

$

4,555

 

$

 

$

 

$

 

$

(6,750

)

$

76,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising

 

$

16,454

 

 

 

 

 

 

 

 

 

 

 

 

 

$

16,454

 

Interest expense

 

42,624

 

(30,357

)

 

 

 

 

 

 

 

 

 

 

12,267

 

Compensation and benefits

 

11,845

 

 

 

 

 

(629

)

 

 

(102

)

 

 

11,114

 

General and administrative

 

4,135

 

 

 

 

 

 

 

 

 

(237

)

 

 

3,898

 

Professional and consulting

 

4,123

 

(9

)

 

 

 

 

 

 

(25

)

 

 

4,089

 

Debt issuance

 

3,028

 

 

 

 

 

 

 

 

 

 

 

 

 

3,028

 

Securitization debt maintenance

 

1,440

 

(1,440

)

 

 

 

 

 

 

 

 

 

 

 

Provision for losses on finance receivables

 

1,096

 

 

 

 

 

 

 

 

 

 

 

 

 

1,096

 

Depreciation and amortization

 

1,377

 

 

 

 

 

 

 

 

 

 

 

 

 

1,377

 

Installment obligations expense, net

 

6,750

 

 

 

 

 

 

 

 

 

 

 

(6,750

)

 

Total expenses

 

$

92,872

 

$

(31,806

)

$

 

$

(629

)

$

 

$

(364

)

$

(6,750

)

$

53,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

$

90,336

 

$

(72,357

)

$

4,555

 

$

629

 

$

 

$

364

 

$

 

$

23,527

 

Provision for income taxes

 

631

 

 

 

 

 

 

 

(631

)

 

 

 

 

 

Net income

 

$

89,705

 

$

(72,357

)

$

4,555

 

$

629

 

$

631

 

$

364

 

$

 

$

23,527

 

 

Source: JGWPT Holdings Inc.

 

Investor Relations:

866-386-3853

investor@jgwpt.com

 

Media Inquiries:

866-386-3853

media@jgwpt.com

 

or

 

Makovsky for JGWPT Holdings Inc.

Michael Goodwin, 212-508-9639

mgoodwin@makovsky.com