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associated with the impairment of fixed assets in the fourth quarter of 2013. During the latter part of the fourth quarter of 2013,
we completed an evaluation of a project to develop a new software application to manage our structured settlement business and
made a decision to discontinue the project. We determined the approximately $4.0 million of costs that had been capitalized in
conjunction with the software development project were no longer recoverable and wrote them down to their fair value of zero.
Restructuring Expense
InApril 2013, we announced our intention to restructure our Boynton Beach office. In connection with the announcement,
we recorded a restructure charge of $3.6 million for, primarily, severance and related expenses. The $3.6 million charge for the
year ended December31, 2013 was recorded in the following consolidated statement of operations line items: compensation and
benefits, $2.9 million, and general and administrative, $0.7 million.
Income Before Taxes
For the year ended December 31, 2013, we earned income before taxes of $64.4 million, a decrease of $54.9 million, or
46.0%, from $119.2 million for the year ended December 31, 2012, primarily due to an increase in interest expense resulting from
the increase in the principal amount of our term loan, an increase in general and administrative costs for the reasons noted above,
and an increase in provision for losses on pre-settlement funding transactions.
Income Taxes
Until the time of our IPO in November 2013, we and the majority of our subsidiaries operated in the U.S. as non-income
tax paying entities, and were treated as pass-through entities for U.S. federal and state income tax purposes and generally as
corporate entities in non-U.S. jurisdictions. In addition, certain of our wholly owned subsidiaries are operating as corporations
within the U.S. and subject to U.S. federal and state income tax. As non-income tax paying entities, the majority of our net income
or loss is attributable to the members of Common Interests in JGWLLC. In connection with our IPO, The J.G. Wentworth Company
was created to act as a holding company, holding an ownership interest in JGW LLC, our partnership. Following this structural
change, we recorded an income tax provision/benefit relating to our share of JGW LLC, and therefore the share of its earnings,
held by the public. The increase in our tax provision from 2012 to 2013 relates primarily to additional income at our income tax
paying subsidiaries during 2013 as well as a valuation allowance recorded against a portion of the Company’s deferred tax assets.
Net Income
Net income for the year ended December 31, 2013 was $61.8 million, a decrease of $57.6 million, or 48.3%, from $119.5
million for the year ended December 31, 2012, primarily due to an increase in interest expense primarily due to the increase in
the principal amount of our term loan, an increase in general and administrative costs for the reasons noted above, a loss on
disposal/impairment of fixed assets, and an increase in provision for losses on pre-settlement funding transactions.
Quarterly Financial Data (Unaudited)
For the Year Ended December 31, 2014
Fourth Quarter Third Quarter Second Quarter First Quarter
(Dollars in thousands, except for per share data)
Total revenue
$
127,274 $
107,024 $
123,488 $
136,590
Income before income taxes
32,654
14,865
27,789
42,445
Net income
27,683
12,689
21,708
34,533
Net income (loss) attributable to non-controlling
interests
15,854
8,597
15,440
25,511
Net income attributable to The J.G. Wentworth
Company
11,829
4,092
6,268
9,022
Net income per Class A common stock of The
J.G. Wentworth Company
Basic
$
0.81 $
0.31 $
0.50 $
0.77
Diluted
$
0.81 $
0.31 $
0.50 $
0.77
