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8-K - 8-K - OneMain Holdings, Inc.a16-7672_18k.htm
EX-2.1 - EX-2.1 - OneMain Holdings, Inc.a16-7672_1ex2d1.htm
EX-99.1 - EX-99.1 - OneMain Holdings, Inc.a16-7672_1ex99d1.htm

Exhibit 99.2

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

The following unaudited pro forma condensed consolidated balance sheet information and statement of operations information (collectively, the Pro Forma Financial Information) are based on the previously reported consolidated financial statements of OneMain Holdings, Inc. (“OMH” or the “Company”).  The Pro Forma Financial Information has been prepared to illustrate the effect of the Sale (defined below) of SpringCastle Interests (as defined in Note 1 of the Notes to the Unaudited Pro Forma Condensed Consolidated Financial Information).

 

On March 31, 2016 (the “Transaction Date”), OMH, through indirect wholly owned subsidiaries, sold its 47% interest in each of SpringCastle America, LLC, SpringCastle Credit, LLC, SpringCastle Finance, LLC, and SpringCastle Acquisition LLC for an aggregate purchase price of $111,625,000 (the “Sale”), resulting in the derecognition of the SpringCastle Interests from OMH’s consolidated financial statements. The Company has determined that the sale does not meet the definition of discontinued operations.

 

Assumptions and estimates underlying the unaudited adjustments to the Pro Forma Financial Information are described in the accompanying notes. The historical consolidated financial statements have been adjusted in the unaudited Pro Forma Financial Information to give effect to pro forma events that are: (1) directly attributable to the Sale of SpringCastle Interests, (2) factually supportable; and (3) with respect to the pro forma statement of operations, expected to have a continuing impact on the consolidated results of OMH following the Sale of SpringCastle Interests. The unaudited Pro Forma Financial Information has been presented for illustrative purposes only and is not necessarily indicative of the operating results and financial position that would have been achieved had the Sale of SpringCastle Interests occurred on December 31, 2015, for purposes of the Pro Forma Condensed Consolidated Balance Sheet and January 1, 2015, for purposes of the Pro Forma Condensed Consolidated Statement of Operations. Further, the unaudited pro forma condensed consolidated financial information does not purport to project the future operating results or financial position of the consolidated company following the Sale of SpringCastle Interests.

 

See Note 1 of the Notes to the Unaudited Pro Forma Condensed Consolidated Financial Information herein for a description of the Sale of SpringCastle Interests. In the opinion of management, all adjustments necessary to reflect the effects of the Sale of the SpringCastle Interests described in the notes to the Unaudited Pro Forma Condensed Consolidated Financial Information have been included and are based upon available information and assumptions that the Company believes are reasonable.

 

The unaudited Fro Forma Financial Information has been developed from and should be read in conjunction with OMH’s Annual Report on Form 10-K filed February 29, 2016.

 

1



 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

 

As of December 31, 2015

 

The following unaudited pro forma condensed consolidated balance sheet as of December 31, 2015, presents the December 31, 2015 balance sheets of OMH assuming the Sale of SpringCastle Interests had been consummated on that date.

 

 

 

As reported
(A)

 

SpringCastle
Interest Sale
(B)

 

Pro forma

 

Assets

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

939

 

$

99

(C)

$

1,038

 

Investment securities

 

1,867

 

 

1,867

 

Net finance receivables:

 

 

 

 

 

 

 

Personal loans

 

13,267

 

 

13,267

 

 

 

 

 

 

 

 

 

SpringCastle Portfolio

 

1,576

 

(1,576

)(D)

0

 

Real estate loans

 

524

 

 

524

 

 

 

 

 

 

 

 

 

Retail sales finance

 

23

 

 

23

 

 

 

 

 

 

 

 

 

Net finance receivables

 

15,390

 

(1,576

)

13,814

 

Unearned insurance premium and claims reserve

 

(662

)

 

(662

)

 

 

 

 

 

 

 

 

Allowance for finance receivable losses

 

(587

)

4

(E)

(583

)

Net finance receivables, less allowance for finance receivable losses

 

14,141

 

(1,572

)

12,570

 

 

 

 

 

 

 

 

 

Finance receivables held for sale

 

796

 

 

796

 

Restricted cash

 

676

 

(69

)(F)

607

 

Goodwill

 

1,440

 

 

1,440

 

Other intangible assets

 

559

 

 

559

 

 

 

 

 

 

 

 

 

Other assets

 

638

 

(29

)(G)

609

 

Total assets

 

$

21,056

 

(1,570

)

$

19,486

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

$

17,300

 

(1,912

)(H)

$

15,388

 

Insurance claims and policyholder liabilities

 

747

 

 

747

 

 

 

 

 

 

 

 

 

Deferred and accrued taxes

 

20

 

57

(I)

77

 

 

 

 

 

 

 

 

 

Other liabilities

 

384

 

(5

)(J)

379

 

Total liabilities

 

18,451

 

(1,860

)

16,591

 

Common stock

 

1

 

 

1

 

Additional paid-in capital

 

1,533

 

 

 

1,533

 

Accumulated other comprehensive income

 

(33

)

 

(33

)

Retained earnings

 

1,250

 

144

(K)

1,394

 

Total OneMain Holdings, Inc. shareholders’ equity

 

2,751

 

144

 

2,895

 

Non-controlling interests

 

(146

)

146

(L)

0

 

Total shareholders’ equity

 

2,605

 

290

 

2,895

 

Total liabilities and shareholder’s equity

 

$

21,056

 

(1,570

)

$

19,486

 

 

2



 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

 

For the Year Ended December 31, 2015

 

The following unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2015, presents the historical income statements of OMH assuming the Sale of SpringCastle Interests was consummated on January 1, 2015.

 

In Millions

 

As reported
(A)

 

Spring Castle Interest
Sale
(M)

 

Pro forma

 

Interest income

 

$

1,931

 

$

(462

)(N)

$

1,469

 

 

 

 

 

 

 

 

 

Interest expense

 

715

 

(82

)(O)

633

 

 

 

 

 

 

 

 

 

Net interest income

 

1,216

 

(380

)

836

 

 

 

 

 

 

 

 

 

Provision for finance receivable losses

 

759

 

(89

)(P)

670

 

 

 

 

 

 

 

 

 

Net interest income after provision for finance receivable losses

 

457

 

(290

)

167

 

 

 

 

 

 

 

 

 

Other revenues:

 

 

 

 

 

 

 

Insurance

 

211

 

 

211

 

Investment

 

52

 

 

52

 

Net gain (loss) on repurchases and repayments of debt

 

 

 

 

Net gain (loss) on fair value adjustments on debt

 

 

 

 

Net gain on sales of real estate loans and related trust assets

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

(2

)

52

(Q)

50

 

Total other revenues

 

261

 

52

 

313

 

 

 

 

 

 

 

 

 

Other expenses

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Salaries and benefits

 

485

 

 

485

 

 

 

 

 

 

 

 

 

Other operating expenses

 

344

 

(8

)(R)

336

 

Acquisition related transaction and integration expenses

 

62

 

 

62

 

Insurance losses and loss adjustment expenses

 

96

 

 

96

 

Total other expenses

 

987

 

(8

)

979

 

 

 

 

 

 

 

 

 

Income (loss) before benefit from income taxes

 

(269

)

(230

)

(499

)

 

 

 

 

 

 

 

 

Provision for (benefit from) income taxes

 

(147

)

(40

)(S)

(187

)

 

 

 

 

 

 

 

 

Net income (loss)

 

(122

)

(190

)

(312

)

 

 

 

 

 

 

 

 

Net income attributable to non-controlling interests

 

120

 

(120

)

0

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to OneMain Holdings, Inc.

 

$

(242

)

$

(70

)

$

(312

)

 

3



 

Note 1—Description of Sale of SpringCastle Interests

 

On March 31, 2016, Springleaf Finance, Inc. (“SFI”), a wholly owned subsidiary of OneMain Holdings, Inc. (“OMH” or, collectively with its subsidiaries, the “Company”), SpringCastle Holdings, LLC (“SpringCastle Holdings”), an indirect wholly owned subsidiary of OMH, and Springleaf Acquisition Corporation, an indirect wholly owned subsidiary of OMH (“Springleaf Acquisition” and together with SpringCastle Holdings, the “Sellers”), entered into a Purchase Agreement (the “Purchase Agreement”) with NRZ Consumer LLC (“NRZ Consumer”), NRZ SC America LLC (“NRZ SC America”), NRZ SC Credit Limited (“NRZ SC Credit”), NRZ SC Finance I LLC (“NRZ SC Finance I”), NRZ SC Finance II LLC (“NRZ SC Finance II”), NRZ SC Finance III LLC (“NRZ SC Finance III”), NRZ SC Finance IV LLC (“NRZ SC Finance IV”), NRZ SC Finance V LLC (“NRZ SC Finance V” and together with NRZ Consumer, NRZ SC America, NRZ SC Credit, NRZ SC Finance I, NRZ SC Finance II, NRZ SC Finance III and NRZ SC Finance IV, collectively, the “NRZ Buyers”), BTO Willow Holdings II, L.P. (“BTO Willow”) and Blackstone Family Tactical Opportunities Investment Partnership - NQ - ESC L.P. (“BFTOIP” and together with BTO Willow, the “Blackstone Buyers,” and the Blackstone Buyers together with the NRZ Buyers, collectively, the “Buyers”), and solely with respect to Section 11(a) and Section 11(g), NRZ SC America Trust 2015-1,  NRZ SC Credit Trust 2015-1, NRZ SC Finance Trust 2015-1, and BTO Willow Holdings, L.P.  Pursuant to the Purchase Agreement, SpringCastle Holdings sold its 47% limited liability company interests in each of SpringCastle America, LLC, SpringCastle Credit, LLC and SpringCastle Finance, LLC, and Springleaf Acquisition sold its 47% limited liability company interest in SpringCastle Acquisition LLC (collectively, the “SpringCastle Interests”), to Buyers for an aggregate purchase price of $111,625,000 (the “Sale”).

 

In connection with the Sale, Buyers paid $100,462,500 of the aggregate purchase price to Sellers on March 31, 2016, with the remaining $11,162,500 (the “Holdback”) to be paid into an escrow account within 120 days following March 31, 2016.  Such escrowed funds are expected to be held in escrow for a period of up to five years following March 31, 2016, and, subject to the terms of the Purchase Agreement and assuming certain portfolio performance requirements are satisfied, paid to the Sellers at the end of such five year period.  The Sellers will account for the Holdback amount as a contingent gain; therefore, the Sellers have not recognized an amount for this contingent payment upon consummation of the closing of the Sale.

 

Note 2—Basis of Pro Forma Presentation

 

The unaudited pro forma condensed consolidated balance sheet related to the Sale of SpringCastle Interests is included as of December 31, 2015, and the unaudited pro forma condensed consolidated statement of operations is included for the year ended December 31, 2015. The Pro Forma Financial Information is based upon the Company’s previously reported consolidated financial statements included in its Annual Report on Form 10-K, previously filed with the Securities and Exchange Commission. The pro forma adjustments are based upon currently available information, and assumptions and estimates that management believes to be reasonable. The adoption of new or changes to existing accounting principles generally accepted in the United States of America subsequent to the unaudited pro forma condensed consolidated financial statement dates may result in changes to the presentation of the preliminary unaudited Pro Forma Financial Information.

 

Note 3—Pro Forma Adjustments

 

The following pro forma adjustments are included in the Pro Forma Financial Information:

 

(A)       Reflects the Company’s previously reported consolidated balance sheet and statement of operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

 

(B)       Represents the elimination of the assets and liabilities, as well as receipt of proceeds related to the sale of the SpringCastle Interests as if it had occurred on December 31, 2015.

 

(C)       Reflects the sales price of $111.6 million for the disposition of the SpringCastle Interests, less the Holdback of $11.2 million, as if it had occurred on December 31, 2015. In addition, this includes cash held within the SpringCastle Interests related legal entities of $1.1 million, removed from company’s balance as part of the disposition of the SpringCastle Interests.

 

(D)       Represents finance receivables that were previously recognized on the Company’s balance sheet through consolidation of the SpringCastle Interests that are now being deconsolidated as a result of the sale of the SpringCastle Interests.

 

4



 

(E)        Represents the elimination of the SpringCastle Interests related allowance for finance receivable losses that was previously recognized on the Company’s balance sheet through consolidation.

 

(F)         Represents restricted cash that was previously recognized on the Company’s balance sheet through consolidation of the SpringCastle Interests that is being deconsolidated as part of the sale of the SpringCastle Interests.

 

(G)       Represents the elimination of the other assets attributable to the SpringCastle Interests, including deferred tax assets of $28 million.

 

(H)      Represents the long term debt attributable to the SpringCastle Interests that is being deconsolidated as a part of the sale of the SpringCastle Interests.

 

(I)           Represents the net effect of tax of $57 million from gain on sale of the SpringCastle Interests as if it had occurred on December 31, 2015.  The tax effect is calculated based on the Company’s combined federal and state statutory rate of 37%.

 

(J)           Reflects the exclusion of accrued expenses as a part of the disposition of the SpringCastle Interests as if it had occurred on December 31, 2015.

 

(K)       Represents the gain, net of income tax effects, from the disposition of the SpringCastle Interests as if it had occurred on December 31, 2015.  The tax effect is calculated based on the Company’s combined federal and state statutory rate of 37%.

 

(L)        Represents the elimination of noncontrolling interest previously recorded for the SpringCastle Interests.

 

(M)    Represents the elimination of financial results and impact on the statement of operations relating to the sales of the SpringCastle Interests, as if it had occurred on January 1, 2015.

 

(N)       Represents the elimination of interest income attributable to the SpringCastle Interests operations.

 

(O)       Represents the elimination of interest expense related to the SpringCastle Interests operations that is being deconsolidated.

 

(P)         Represents the elimination of provision for finance receivable losses related to the SpringCastle Interests.

 

(Q)       Represents previously eliminated intercompany servicing revenues of $52 million that would have been recognized by the Company if the Sale had occurred on January 1, 2015.

 

(R)       Represents the elimination of operating expenses attributable to the SpringCastle Interests.

 

(S)         Represents the elimination of income tax benefit attributable to the SpringCastle Interests.

 

5