INCOME STATEMENT HIGHLIGHTS

  2012 (1) 2011 (2) 2010 2009 (3)
Revenues $ 667.0 $ 402.5 $ 180.5 $ 188.3
Expenses   668.4   409.7   146.8   150.7
Other gains (losses)   (34.1)   1.1   4.7   -
  Income (loss) before income taxes   (35.5)   (6.1)   38.3   37.6
    Income tax expense (benefit)   (13.3)   60.3   1.3   (76.2)
Net income (loss) $ (22.1) $ (66.4) $ 37.1 $ 113.8
Diluted earnings (loss) per common and common equivalent share (4) $ (0.73) $ (2.41) $ 1.38 $ 5.25
Total dividends declared per common and common equivalent share $ - $ 0.22 $ 2.00 $ 1.50
Total assets $ 10,978.2 $ 4,113.5 $ 1,895.5 $ 1,887.7
Residential loans $ 8,200.5 $ 2,264.6 $ 1,621.5 $ 1,644.3
Long-term obligations:                
  Debt $ 1,146.2 $ 742.6   -   -
  Mortgage-backed debt $ 2,072.7 $ 2,224.8 $ 1,281.6 $ 1,267.5
  HMBS related obligations $ 5,874.6 $ - $ - $ -
    Total long-term obligations $ 9,093.5 $ 2,967.4 $ 1,281.6 $ 1,267.5
Total equity $ 894.9 $ 533.5 $ 555.5 $ 568.2

NOTE: Columns may not total due to rounding.

(1) During the year ended December 31, 2012, we recorded $48.6 million of losses on extinguishment of debt in connection with the repayment and termination of our second lien term loan and the refinancing of our first lien term loan and revolver. We also recorded $8.6 million in transaction costs related to our acquisitions of RMS and S1L and financing transactions. In addition, we recorded $5.6 billion in total assets, which includes $5.3 billion in residential loans, and assumed $5.3 billion in HMBS related obligations in connection with the acquisition of RMS and recorded $128.4 million in total assets in connection with the acquisition of S1L.

(2) During the year ended December 31, 2011, we recorded $12.9 million of Green Tree transactionrelated costs and a $65.3 million charge to income tax expense for the impact of the loss of our REIT status and being taxed as a C corporation. The loss of our REIT status was the direct result of the acquisition of Green Tree and is retroactive to January 1, 2011. In addition, we recorded $2.2 billion in total assets, which includes $729.2 million in residential loans and $861.7 million in mortgage-backed debt in connection with the acquisition of Green Tree.

(3) During the year ended December 31, 2009, we recorded $2.1 million of spin-off and Merger-related charges, as well as a $77.1 million tax benefit largely due to the reversal of $82.1 million in mortgage-related deferred tax liabilities that were no longer applicable as a result of our REIT qualification during the period.

(4) In accordance with applicable accounting standards on earnings per share, the basic and diluted earnings per share amounts have been adjusted for the years ended December 31, 2012, 2011, 2010 and 2009 to include outstanding dividend participating restricted stock and restricted stock units considered to be participating securities in the basic and diluted weighted-average shares calculations.

Adjusted EBITDA (1)

  For the year ended 12/31/2012     For the year ended 12/31/2011
Loss before income taxes $ (35.5)   $ (6.1)
         
Add back:          
     Depreciation and amortization   99.7     53.1
     Interest expense on debt   77.3     42.2
     EBITDA   141.5     89.2
         
Add back:        
     Losses on extinguishment of debt   48.6     -
     Non-cash share-based compensation expense   14.2     5.0
     Provision for loan losses   13.4     6.0
     Transaction and integration costs   15.8     19.2
     Residual Trusts cash flows   9.3     9.1
     Pro forma synergies   3.8     16.8
     Non-cash interest expense   6.1     3.0
     Non-cash fair value adjustment   2.6     -
     Net impact of Non-Residual Trusts   0.9     6.9
     Other   3.5     -
        Sub-total   118.2     66.0
         
Less:          
     Non-cash interest income   (18.0)     (17.3)
     Pro forma monetized assets   -     (13.3)
     Other   -     (1.1)
        Sub-total   (18.0)     (31.7)
Adjusted EBITDA $ 241.7   $ 123.5

(1) Adjusted EBITDA is presented in accordance with its definition in the Company's credit agreements and represents income before income taxes, depreciation and amortization, interest expense on corporate debt, transaction and integration related costs, the net effect of the non-residual VIEs and certain other non-cash income and expense items. Adjusted EBITDA also includes an adjustment to reflect pro-forma synergies and, for periods prior to the acquisition, adjustments to reflect Green Tree as having been acquired at the beginning of the year.

Core Earnings

  For the year ended 12/31/2012     For the year ended 12/31/2011
Loss before income taxes $ (35.5)     $ (6.1)
             
Add back:            
     Step-up depreciation & amortization   80.1       42.3
     Losses on extinguishment of debt   48.6       -
     Share-based compensation expense   14.2       5.0
     Transaction & integration related costs   15.8       19.2
     Non-cash fair value adjustments   2.6       -
     Non-cash interest expense   6.1       3.0
     Net impact of Non-Residual Trusts   0.9       6.9
     Other   1.3       (3.3)
Pre-tax core earnings $ 134.1     $ 67.0
         
After tax core earnings (38% tax rate) $ 83.1     $ 41.5
Shares outstanding   30.4       27.6
Core EPS $ 2.73     $ 1.50
Use of Non-GAAP Measures

Generally Accepted Accounting Principles ("GAAP") is the term used to refer to the standard framework of guidelines for financial accounting. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, the Company has provided non-GAAP financial measures, which it believes are useful to help investors better understand its financial performance, competitive position and prospects for the future. Core earnings (pre-tax and after-tax) ,core earnings per share and Adjusted EBITDA are financial measures that are not in accordance with GAAP. See the Definitions included in the presentation for a description of how these items are reported and see the Non-GAAP Reconciliations for a reconciliation of these measures to the most directly comparable GAAP financial measures. The Company believes that these Non-GAAP Financial Measures can be useful to investors because they provide a means by which investors can evaluate the Company's underlying key drivers and operating performance of the business, exclusive of certain adjustments and activities that investors may consider to be unrelated to the underlying economic performance of the business for a given period.

Use of Core Earnings and Adjusted EBITDA by Management
The Company manages the business based upon the achievement of core earnings, Adjusted EBITDA and similar targets and has designed certain management incentives based upon the achievement of Adjusted EBITDA in order to assess the underlying operational performance of the continuing operations of the business for the year and to have a basis to compare underlying operating results to prior and future periods.

Limitations on the Use of Core Earnings and Adjusted EBITDA
Since core earnings (pre-tax and after-tax) and core earnings per share measure the Company's financial performance excluding depreciation and amortization costs related to acquisitions, transaction and merger integration-related costs, certain other non-cash adjustments, and the net impact of the consolidated Non-Residual Trust VIEs, they may not reflect all amounts associated with our results as determined in accordance with GAAP. Adjusted EBITDA measures the Company's financial performance excluding depreciation and amortization costs, corporate and MSR facility interest expense, transaction and merger integration-related costs, share-based compensation expense, certain other non-cash adjustments, the net impact of the consolidated Non-Residual Trust VIEs and certain other items as defined by our first and second lien credit agreements, including, but not limited to pro-forma synergies, they may not reflect all amounts associated with our results as determined in accordance with GAAP. Core earnings (pre-tax and after-tax), core earnings per share and Adjusted EBITDA involve differences from segment profit (loss), income (loss) before income taxes, net income (loss), basic earnings (loss) per share and diluted earnings (loss) per share computed in accordance with GAAP. Core earnings (pre-tax and after-tax) ,core earnings per share and Adjusted EBITDA should be considered as supplementary to, and not as a substitute for, segment profit (loss), income (loss) before income taxes, net income (loss), basic earnings (loss) per share and diluted earnings (loss) per share computed in accordance with GAAP as a measure of the Company's financial performance. Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP earnings. Further, the non-GAAP measures presented by Walter Investment may be defined or calculated differently from similarly titled measures of other companies.