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Section 1: 10-Q (10-Q)

Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
 
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2016
 
OR
 
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from to
 
Commission file number 001-36129

ONEMAIN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Delaware
 
27-3379612
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
 
 
 
601 N.W. Second Street, Evansville, IN
 
47708
(Address of principal executive offices)
 
(Zip Code)

(812) 424-8031
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
 
 
 
 
(Do not check if a smaller reporting company)
 
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

At August 1, 2016, there were 134,753,304 shares of the registrant’s common stock, $0.01 par value, outstanding.
 


Table of Contents


TABLE OF CONTENTS

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.    

ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)

(dollars in millions, except par value amount)
 
June 30,
2016
 
December 31,
2015
 
 
 
 
 
Assets
 
 

 
 

Cash and cash equivalents
 
$
742

 
$
939

Investment securities
 
1,744

 
1,867

Net finance receivables:
 
 

 
 

Personal loans (includes loans of consolidated VIEs of $10.1 billion in 2016 and $11.4 billion in 2015)
 
13,532

 
13,295

SpringCastle Portfolio (includes loans of consolidated VIEs of $1.7 billion in 2015)
 

 
1,703

Real estate loans
 
209

 
538

Retail sales finance
 
16

 
23

Net finance receivables
 
13,757

 
15,559

Unearned insurance premium and claim reserves
 
(618
)
 
(662
)
Allowance for finance receivable losses (includes allowance of consolidated VIEs of $439 million in 2016 and $431 million in 2015)
 
(608
)
 
(592
)
Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses
 
12,531

 
14,305

Finance receivables held for sale (includes finance receivables held for sale of consolidated VIEs of $435 million in 2015)
 
420

 
793

Restricted cash and cash equivalents (includes restricted cash and cash equivalents of consolidated VIEs of $541 million in 2016 and $663 million in 2015)
 
550

 
676

Goodwill
 
1,422

 
1,440

Other intangible assets
 
523

 
559

Other assets
 
612

 
611

 
 
 
 
 
Total assets
 
$
18,544

 
$
21,190

 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 

 
 

Long-term debt (includes debt of consolidated VIEs of $8.3 billion in 2016 and $11.7 billion in 2015)
 
$
14,362

 
$
17,300

Insurance claims and policyholder liabilities
 
767

 
747

Deferred and accrued taxes
 
11

 
29

Other liabilities
 
384

 
384

Total liabilities
 
15,524

 
18,460

Commitments and contingent liabilities (Note 14)
 


 

 
 
 
 
 
Shareholders’ equity:
 
 

 
 

Common stock, par value $.01 per share; 2,000,000,000 shares authorized, 134,753,304 and 134,494,172 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively
 
1

 
1

Additional paid-in capital
 
1,543

 
1,533

Accumulated other comprehensive income (loss)
 
5

 
(33
)
Retained earnings
 
1,471

 
1,308

OneMain Holdings, Inc. shareholders’ equity
 
3,020

 
2,809

Non-controlling interests
 

 
(79
)
Total shareholders’ equity
 
3,020

 
2,730

 
 
 
 
 
Total liabilities and shareholders’ equity
 
$
18,544

 
$
21,190


See Notes to Condensed Consolidated Financial Statements.

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Table of Contents


ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)

(dollars in millions, except earnings (loss) per share)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 

 
 
 

Interest income:
 
 
 
 
 
 
 
 
Finance charges
 
$
723

 
$
406

 
$
1,508

 
$
805

Finance receivables held for sale originated as held for investment
 
18

 
4

 
64

 
8

Total interest income
 
741

 
410

 
1,572

 
813

 
 
 
 
 
 
 
 
 
Interest expense
 
214

 
171

 
440

 
329

 
 
 
 
 
 
 
 
 
Net interest income
 
527

 
239

 
1,132

 
484

 
 
 
 
 
 
 
 
 
Provision for finance receivable losses
 
214

 
74

 
411

 
154

 
 
 
 
 
 
 
 
 
Net interest income after provision for finance receivable losses
 
313

 
165

 
721

 
330

 
 
 
 
 
 
 
 
 
Other revenues:
 
 

 
 

 
 

 
 

Insurance
 
114

 
40

 
228

 
76

Investment
 
24

 
16

 
44

 
33

Net loss on repurchases and repayments of debt
 
(13
)
 

 
(16
)
 

Net gain on sale of personal loans
 
22

 

 
22

 

Net gain on sale of SpringCastle interests
 

 

 
167

 

Other
 
18

 
(1
)
 
23

 
(2
)
Total other revenues
 
165

 
55

 
468

 
107

 
 
 
 
 
 
 
 
 
Other expenses:
 
 

 
 

 
 

 
 

Operating expenses:
 
 

 
 

 
 

 
 

Salaries and benefits
 
192

 
112

 
406

 
205

Acquisition-related transaction and integration expenses
 
21

 
12

 
54

 
15

Other operating expenses
 
177

 
63

 
344

 
125

Insurance policy benefits and claims
 
46

 
20

 
91

 
36

Total other expenses
 
436

 
207

 
895

 
381

 
 
 
 
 
 
 
 
 
Income before provision for (benefit from) income taxes
 
42

 
13

 
294

 
56

 
 
 
 
 
 
 
 
 
Provision for (benefit from) income taxes
 
16

 
(8
)
 
103

 

 
 
 
 
 
 
 
 
 
Net income
 
26

 
21

 
191

 
56

 
 
 
 
 
 
 
 
 
Net income attributable to non-controlling interests
 

 
33

 
28

 
66

 
 
 
 
 
 
 
 
 
Net income (loss) attributable to OneMain Holdings, Inc.
 
$
26

 
$
(12
)
 
$
163

 
$
(10
)
 
 
 
 
 
 
 
 
 
Share Data:
 
 

 
 

 
 

 
 

Weighted average number of shares outstanding:
 
 

 
 

 
 

 
 

Basic
 
134,728,465

 
127,411,208

 
134,711,612

 
121,253,548

Diluted
 
134,952,992

 
127,411,208

 
134,930,370

 
121,253,548

Earnings (loss) per share:
 
 

 
 

 
 

 
 

Basic
 
$
0.19

 
$
(0.09
)
 
$
1.21

 
$
(0.08
)
Diluted
 
$
0.19

 
$
(0.09
)
 
$
1.21

 
$
(0.08
)

See Notes to Condensed Consolidated Financial Statements.

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ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(dollars in millions)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Net income
 
$
26

 
$
21

 
$
191

 
$
56

 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 

 
 

 
 

 
 

Net change in unrealized gains (losses) on non-credit impaired available-for-sale securities
 
31

 
(10
)
 
58

 
(5
)
Foreign currency translation adjustments
 
1

 
(1
)
 
7

 

Income tax effect:
 
 

 
 

 
 

 
 

Net unrealized (gains) losses on non-credit impaired available-for-sale securities
 
(10
)
 
4

 
(20
)
 
2

Foreign currency translation adjustments
 
(1
)
 

 
(3
)
 

Other comprehensive income (loss), net of tax, before reclassification adjustments
 
21

 
(7
)
 
42

 
(3
)
Reclassification adjustments included in net income:
 
 

 
 

 
 

 
 

Net realized gains on available-for-sale securities
 
(4
)
 
(4
)
 
(6
)
 
(10
)
Income tax effect:
 
 

 
 

 
 

 
 

Net realized gains on available-for-sale securities
 
1

 
1

 
2

 
3

Reclassification adjustments included in net income, net of tax
 
(3
)
 
(3
)
 
(4
)
 
(7
)
Other comprehensive income (loss), net of tax
 
18

 
(10
)
 
38

 
(10
)
 
 
 
 
 
 
 
 
 
Comprehensive income
 
44

 
11

 
229

 
46

 
 
 
 
 
 
 
 
 
Comprehensive income attributable to non-controlling interests
 

 
33

 
28

 
66

 
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to OneMain Holdings, Inc.
 
$
44

 
$
(22
)
 
$
201

 
$
(20
)

See Notes to Condensed Consolidated Financial Statements.


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ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

 
 
OneMain Holdings, Inc. Shareholders’ Equity
 
 
 
 
(dollars in millions)
 
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
 
OneMain
Holdings, Inc.
Shareholders’
Equity
 
Non-controlling Interests
 
Total
Shareholders’
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2016
 
$
1

 
$
1,533

 
$
(33
)
 
$
1,308

 
$
2,809

 
$
(79
)
 
$
2,730

Share-based compensation expense, net of forfeitures
 

 
12

 

 

 
12

 

 
12

Excess tax benefit from share-based compensation
 

 
3

 

 

 
3

 

 
3

Withholding tax on vested RSUs
 

 
(5
)
 

 

 
(5
)
 

 
(5
)
Change in non-controlling interests:
 
 
 
 
 
 
 
 
 
 

 
 
 
 

Distributions declared to joint venture partners
 

 

 

 

 

 
(18
)
 
(18
)
Sale of equity interests in SpringCastle joint venture
 

 

 

 

 

 
69

 
69

Other comprehensive income
 

 

 
38

 

 
38

 

 
38

Net income
 

 

 

 
163

 
163

 
28

 
191

Balance, June 30, 2016
 
$
1

 
$
1,543

 
$
5

 
$
1,471

 
$
3,020

 
$

 
$
3,020

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2015
 
$
1

 
$
529

 
$
3

 
$
1,528

 
$
2,061

 
$
(129
)
 
$
1,932

Sale of common stock, net of offering costs
 

 
976

 

 

 
976

 

 
976

Non-cash incentive compensation from Initial Stockholder
 

 
15

 

 

 
15

 

 
15

Share-based compensation expense, net of forfeitures
 

 
4

 

 

 
4

 

 
4

Excess tax benefit from share-based compensation
 

 
2

 

 

 
2

 

 
2

Withholding tax on vested RSUs
 

 
(4
)
 

 

 
(4
)
 

 
(4
)
Change in non-controlling interests:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributions declared to joint venture partners
 

 

 

 

 

 
(39
)
 
(39
)
Other comprehensive loss
 

 

 
(10
)
 

 
(10
)
 

 
(10
)
Net income (loss)
 

 

 

 
(10
)
 
(10
)
 
66

 
56

Balance, June 30, 2015
 
$
1

 
$
1,522

 
$
(7
)
 
$
1,518

 
$
3,034

 
$
(102
)
 
$
2,932


See Notes to Condensed Consolidated Financial Statements.


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ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)

(dollars in millions)
 
Six Months Ended June 30,
 
2016
 
2015
 
 
 
 
 
Cash flows from operating activities
 
 

 
 

Net income
 
$
191

 
$
56

Reconciling adjustments:
 
 

 
 

Provision for finance receivable losses
 
411

 
154

Depreciation and amortization
 
301

 
47

Deferred income tax benefit
 
22

 
(29
)
Net gain on sale of personal loans
 
(22
)
 

Net loss on repurchases and repayments of debt
 
16

 

Non-cash incentive compensation from Initial Stockholder
 

 
15

Share-based compensation expense, net of forfeitures
 
12

 
4

Net gain on sale of SpringCastle interests
 
(167
)
 

Other
 
(6
)
 
(13
)
Cash flows due to changes in:
 
 

 
 

Other assets and other liabilities
 
(9
)
 
(13
)
Insurance claims and policyholder liabilities
 
(29
)
 
13

Taxes receivable and payable
 
(74
)
 
(28
)
Accrued interest and finance charges
 
6

 
3

Restricted cash and cash equivalents not reinvested
 
4

 

Other, net
 
2

 

Net cash provided by operating activities
 
658

 
209

 
 
 
 
 
Cash flows from investing activities
 
 

 
 

Net principal collections (originations) of finance receivables held for investment and held for sale
 
(625
)
 
(305
)
Proceeds on sales of finance receivables held for sale originated as held for investment
 
624

 
74

Proceeds from sale of SpringCastle interests
 
101

 

Cash received from CitiFinancial Credit Company
 
23

 

Available-for-sale securities purchased
 
(263
)
 
(209
)
Trading and other securities purchased
 
(10
)
 
(1,318
)
Available-for-sale securities called, sold, and matured
 
454

 
223

Trading and other securities called, sold, and matured
 
26

 
1,963

Change in restricted cash and cash equivalents
 
47

 
(109
)
Proceeds from sale of real estate owned
 
4

 
10

Other, net
 
(11
)
 

Net cash provided by investing activities
 
370

 
329

 
 
 
 
 
Cash flows from financing activities
 
 

 
 

Proceeds from issuance of long-term debt, net of commissions
 
3,476

 
1,829

Proceeds from issuance of common stock, net of offering costs
 

 
976

Repayments of long-term debt
 
(4,687
)
 
(591
)
Distributions to joint venture partners
 
(18
)
 
(39
)
Excess tax benefit from share-based compensation
 
3

 
2

Net cash provided by (used for) financing activities
 
(1,226
)
 
2,177

 

Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
 
 
 
 
 
 
 
 
 
(dollars in millions)
 
Six Months Ended June 30,
 
2016
 
2015
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
 
1

 

 
 
 
 
 
Net change in cash and cash equivalents
 
(197
)
 
2,715

Cash and cash equivalents at beginning of period
 
939

 
879

Cash and cash equivalents at end of period
 
$
742

 
$
3,594

 
 
 
 
 
Supplemental non-cash activities
 
 
 
 
Transfer of finance receivables held for investment to finance receivables held for sale (prior to deducting allowance for finance receivable losses)
 
$
1,895

 
$

Transfer of finance receivables to real estate owned
 
$
4

 
$
5

Net unsettled investment security dispositions (purchases)
 
$
(2
)
 
$
13


See Notes to Condensed Consolidated Financial Statements.


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ONEMAIN HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2016

1. Business and Basis of Presentation    

OneMain Holdings, Inc. is referred to in this report as “OMH” or, collectively with its subsidiaries, whether directly or indirectly owned, the “Company,” “we,” “us,” or “our.” OMH is a Delaware corporation. At June 30, 2016, Springleaf Financial Holdings, LLC (the “Initial Stockholder”) owned approximately 58% of OMH’s common stock. The Initial Stockholder is owned primarily by a private equity fund managed by an affiliate of Fortress Investment Group LLC (“Fortress”).

On November 15, 2015, OMH completed its acquisition of OneMain Financial Holdings, LLC (“OMFH”) from CitiFinancial Credit Company (“Citigroup”) for $4.5 billion in cash (the “OneMain Acquisition”). As a result of the OneMain Acquisition, OMFH became a wholly owned, indirect subsidiary of OMH. See Note 2 for further information on the OneMain Acquisition.

OMH is a financial services holding company whose principal subsidiaries are Springleaf Finance, Inc. (“SFI”) and Independence Holdings, LLC (“Independence”). SFI’s principal subsidiary is Springleaf Finance Corporation (“SFC”), and Independence’s principal subsidiary is OMFH. SFC and OMFH are financial services holding companies with subsidiaries engaged in the consumer finance and insurance businesses. OMFH, collectively with its subsidiaries, is referred to in this report as “OneMain.” OMH and its subsidiaries (other than OneMain) is referred to in this report as “Springleaf.”

BASIS OF PRESENTATION

We prepared our condensed consolidated financial statements using generally accepted accounting principles in the United States of America (“GAAP”). These statements are unaudited. The year-end condensed balance sheet data was derived from our audited financial statements, but does not include all disclosures required by GAAP. The statements include the accounts of OMH, its subsidiaries (all of which are wholly owned, except for certain indirect subsidiaries associated with a joint venture in which we owned a 47% equity interest prior to March 31, 2016), and variable interest entities (“VIEs”) in which we hold a controlling financial interest and for which we are considered to be the primary beneficiary as of the financial statement date.

We eliminated all material intercompany accounts and transactions. We made judgments, estimates, and assumptions that affect amounts reported in our condensed consolidated financial statements and disclosures of contingent assets and liabilities. In management’s opinion, the condensed consolidated financial statements include the normal, recurring adjustments necessary for a fair statement of results. Ultimate results could differ from our estimates. We evaluated the effects of and the need to disclose events that occurred subsequent to the balance sheet date. To conform to the 2016 presentation, we have reclassified certain items in prior periods, including certain items in prior periods of our condensed consolidated financial statements. These statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (“2015 Annual Report on Form 10-K”). We follow the same significant accounting policies for our interim reporting, except for the change in accounting policy discussed below.

CHANGE IN ACCOUNTING POLICY

Effective April 1, 2016, we changed our accounting policy for the derecognition of loans within a purchased credit impaired (“PCI”) pool. Historically, we removed loans from a PCI pool upon charge-off of the loan, based on the Company’s charge-off accounting policy at their allocated carrying value. Under our new accounting policy, loans will be removed from a PCI pool when the loan is written-off, at which time further collections efforts would not be pursued, or sold or repaid. While both methods are acceptable under GAAP, we believe the new method for derecognition of PCI loans is preferable as it enhances consistency with our industry peers. As of April 1, 2016, the cumulative effect of applying the change in accounting policy increased shareholders’ equity by $42 million.

Our policy for derecognition of PCI loans following the change described above is presented below:

Purchased Credit Impaired Finance Receivables

As part of each of our acquisitions, we identify a population of finance receivables for which it is determined that it is probable that we will be unable to collect all contractually required payments. The population of accounts identified generally consists of those finance receivables that are (i) 60 days or more past due at acquisition, (ii) which had been classified as troubled debt

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restructured (“TDR”) finance receivables as of the acquisition date, (iii) may have been previously modified, or (iv) had other indications of credit deterioration as of the acquisition date.

We accrete the excess of the cash flows expected to be collected on the purchased credit impaired finance receivables over the discounted cash flows (the “accretable yield”) into interest income at a level rate of return over the expected lives of the underlying pools of the purchased credit impaired finance receivables. The underlying pools are based on finance receivables with common risk characteristics. We have established policies and procedures to periodically (at least once a quarter) update the amount of cash flows we expect to collect, incorporating assumptions regarding default rates, loss severities, the amounts and timing of prepayments and other factors that are reflective of then current market conditions. Probable decreases in expected finance receivable cash flows result in the recognition of impairment, which is recognized through the provision for finance receivable losses. Probable significant increases in expected cash flows to be collected would first reverse any previously recorded allowance for finance receivable losses; any remaining increases are recognized prospectively as adjustments to the respective pool’s yield.

Our purchased credit impaired finance receivables remain in our purchased credit impaired pools until liquidation or write-off. We do not reclassify modified purchased credit impaired finance receivables as TDR finance receivables.

We have additionally established policies and procedures related to maintaining the integrity of these pools. A finance receivable will not be removed from a pool unless we sell, foreclose, or otherwise receive assets in satisfaction of a particular finance receivable or a finance receivable is written-off. If a finance receivable is renewed and additional funds are lent and terms are adjusted to current market conditions, we consider this a new finance receivable and the previous finance receivable is removed from the pool. If the facts and circumstances indicate that a finance receivable should be removed from a pool, that finance receivable will be removed at its allocated carrying amount. Removal of the finance receivable from a pool does not affect the yield used to recognize accretable yield of the pool.


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We have retrospectively applied this change in accounting policy. The effect of this change in accounting policy on income (loss) before provision for (benefit from) income taxes, net income (loss) attributable to OMH, and earnings (loss) per share, and the cumulative effect of this change in accounting policy on shareholders’ equity attributable to OMH for the following prior periods are included in the table below.
(dollars in millions, except earnings (loss) per share)
 
As Reported
 
Adjustments
 
As Adjusted
 
 
 
 
 
 
 
Income (loss) before provision for (benefit from) income taxes
 
 
 
 
 
 
Year ended December 31, 2013
 
$
78

 
$
79

 
$
157

Year ended December 31, 2014
 
905

 
(44
)
 
861

Year ended December 31, 2015
 
(269
)
 
43

 
(226
)
 
 
 
 
 
 
 
Three months ended March 31, 2015
 
38

 
5

 
43

Three months ended March 31, 2016
 
275

 
(23
)
 
252

 
 
 
 
 
 
 
Net income (loss) attributable to OMH
 
 
 
 
 

Year ended December 31, 2013
 
$
(19
)
 
$
27

 
$
8

Year ended December 31, 2014
 
505

 
(42
)
 
463

Year ended December 31, 2015
 
(242
)
 
22

 
(220
)
 
 
 
 
 
 
 
Three months ended March 31, 2015
 

 
2

 
2

Three months ended March 31, 2016
 
153

 
(16
)
 
137

 
 
 
 
 
 
 
Earnings (loss) per share - Basic
 
 
 
 
 
 
Year ended December 31, 2013
 
$
(0.19
)
 
$
0.26

 
$
0.07

Year ended December 31, 2014
 
4.40

 
(0.37
)
 
4.03

Year ended December 31, 2015
 
(1.89
)
 
0.17

 
(1.72
)
 
 
 
 
 
 
 
Three months ended March 31, 2015
 

 
0.01

 
0.01

Three months ended March 31, 2016
 
1.14

 
(0.12
)
 
1.02

 
 
 
 
 
 
 
Earnings (loss) per share - Diluted
 
 
 
 
 
 
Year ended December 31, 2013
 
$
(0.19
)
 
$
0.26

 
$
0.07

Year ended December 31, 2014
 
4.38

 
(0.36
)
 
4.02

Year ended December 31, 2015
 
(1.89
)
 
0.17

 
(1.72
)
 
 
 
 
 
 
 
Three months ended March 31, 2015
 

 
0.01

 
0.01

Three months ended March 31, 2016
 
1.13

 
(0.12
)
 
1.01

 
 
 
 
 
 
 
Shareholders’ equity attributable to OMH
 
 
 
 
 
 
January 1, 2014
 
$
1,540

 
$
78

 
$
1,618

January 1, 2015
 
2,025

 
36

 
2,061

January 1, 2016
 
2,751

 
58

 
2,809


The following tables present the impact of the retrospective application of this change in accounting policy on the amounts previously reported in our (i) consolidated balance sheet as of December 31, 2015, (ii) condensed consolidated statements of operations for the three and six months ended June 30, 2015 and (iii) condensed consolidated statements of cash flows for the six months ended June 30, 2015.


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Revised Condensed Consolidated Balance Sheet
 
 
December 31, 2015
(dollars in millions)
 
As Reported
 
Adjustments
 
As Adjusted
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
Cash and cash equivalents
 
$
939

 
$

 
$
939

Investment securities
 
1,867

 

 
1,867

Net finance receivables:
 
 
 
 
 
 
Personal loans
 
13,267

 
28

 
13,295

SpringCastle Portfolio
 
1,576

 
127

 
1,703

Real estate loans
 
524

 
14

 
538

Retail sales finance
 
23

 

 
23

Net finance receivables
 
15,390

 
169

 
15,559

Unearned insurance premium and claim reserves
 
(662
)
 

 
(662
)
Allowance for finance receivable losses
 
(587
)
 
(5
)
 
(592
)
Net finance receivables, less unearned insurance premium and claim reserves and allowance for finance receivable losses
 
14,141

 
164

 
14,305

Finance receivables held for sale
 
796

 
(3
)
 
793

Restricted cash and cash equivalents
 
676

 

 
676

Goodwill
 
1,440

 

 
1,440

Other intangible assets
 
559

 

 
559

Other assets
 
638

 
(27
)
 
611

 
 
 
 
 
 
 
Total assets
 
$
21,056

 
$
134

 
$
21,190

 
 
 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
 
 
Long-term debt
 
$
17,300

 
$

 
$
17,300

Insurance claims and policyholder liabilities
 
747

 

 
747

Deferred and accrued taxes
 
20

 
9

 
29

Other liabilities
 
384

 

 
384

Total liabilities
 
18,451

 
9

 
18,460

 
 
 
 
 
 
 
Shareholders’ equity:
 
 
 
 
 
 
Common stock
 
1

 

 
1

Additional paid-in capital
 
1,533

 

 
1,533

Accumulated other comprehensive loss
 
(33
)
 

 
(33
)
Retained earnings
 
1,250

 
58

 
1,308

OneMain Holdings, Inc. shareholders’ equity
 
2,751

 
58

 
2,809

Non-controlling interests
 
(146
)
 
67

 
(79
)
Total shareholders’ equity
 
2,605

 
125

 
2,730

 
 
 
 
 
 
 
Total liabilities and shareholders’ equity
 
$
21,056

 
$
134

 
$
21,190



11

Table of Contents


Revised Condensed Consolidated Statements of Operations
(dollars in millions, except earnings (loss) per share)
 
Three Months Ended June 30, 2015
 
Six Months Ended June 30, 2015
 
As Reported
 
Adjustments
 
As Adjusted
 
As Reported
 
Adjustments
 
As Adjusted
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income:
 
 
 
 
 
 
 
 
 
 
 
 
Finance charges
 
$
408

 
$
(2
)
 
$
406

 
$
810

 
$
(5
)
 
$
805

Finance receivables held for sale originated as held for investment
 
5

 
(1
)
 
4

 
9

 
(1
)
 
8

Total interest income
 
413

 
(3
)
 
410

 
819

 
(6
)
 
813

 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
171

 

 
171

 
329

 

 
329

 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
242

 
(3
)
 
239

 
490

 
(6
)
 
484

 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for finance receivable losses
 
80

 
(6
)
 
74

 
167

 
(13
)
 
154

 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income after provision for finance receivable losses
 
162

 
3

 
165

 
323

 
7

 
330

 
 
 
 
 
 
 
 
 
 
 
 
 
Other revenues:
 
 

 
 
 
 

 
 

 
 
 
 

Insurance
 
40

 

 
40

 
76

 

 
76

Investment
 
16

 

 
16

 
33

 

 
33

Other
 

 
(1
)
 
(1
)
 
(2
)
 

 
(2
)
Total other revenues
 
56

 
(1
)
 
55

 
107

 

 
107

 
 
 
 
 
 
 
 
 
 
 
 
 
Other expenses:
 
 

 
 
 
 

 
 

 
 
 
 

Operating expenses:
 
 

 
 
 
 

 
 

 
 
 
 

Salaries and benefits
 
112

 

 
112

 
205

 

 
205

Acquisition-related transaction and integration expenses
 
12

 

 
12

 
15

 

 
15

Other operating expenses
 
63

 

 
63

 
125

 

 
125

Insurance policy benefits and claims
 
20

 

 
20

 
36

 

 
36

Total other expenses
 
207

 

 
207

 
381

 

 
381

 
 
 
 
 
 
 
 
 
 
 
 
 
Income before provision for (benefit from) income taxes
 
11

 
2

 
13

 
49

 
7

 
56

 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for (benefit from) income taxes
 
(8
)
 

 
(8
)
 
(1
)
 
1

 

 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
19

 
2

 
21

 
50

 
6

 
56

 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to non-controlling interests
 
31

 
2

 
33

 
62

 
4

 
66

 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to OneMain Holdings, Inc.
 
$
(12
)
 
$

 
$
(12
)
 
$
(12
)
 
$
2

 
$
(10
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Share Data:
 
 

 
 
 
 

 
 

 
 
 
 

Weighted average number of shares outstanding:
 
 

 
 
 
 

 
 

 
 
 
 

Basic
 
127,411,208

 
 
 
127,411,208

 
121,253,548

 
 
 
121,253,548

Diluted
 
127,411,208

 
 
 
127,411,208

 
121,253,548

 
 
 
121,253,548

Earnings (loss) per share:
 
 

 
 
 
 

 
 

 
 
 
 

Basic
 
$
(0.09
)
 
 
 
$
(0.09
)
 
$
(0.10
)
 
 
 
$
(0.08
)
Diluted
 
$
(0.09
)
 
 
 
$
(0.09
)
 
$
(0.10
)
 
 
 
$
(0.08
)


12

Table of Contents


Revised Condensed Consolidated Statement of Cash Flows
(dollars in millions)
 
Six Months Ended June 30, 2015
 
As Reported
 
Adjustments
 
As Adjusted
 
 
 
 
 
 
 
Cash flows from operating activities
 
 

 
 

 
 
Net income
 
$
50

 
$
6

 
$
56

Reconciling adjustments:
 
 

 
 
 
 
Provision for finance receivable losses
 
167

 
(13
)
 
154

Depreciation and amortization
 
41

 
6

 
47

Deferred income tax charge (benefit)
 
(30
)
 
1

 
(29
)
Non-cash incentive compensation from Initial Stockholder
 
15

 

 
15

Share-based compensation expense, net of forfeitures
 
4

 

 
4

Other
 
(13
)
 

 
(13
)
Cash flows due to changes in:
 
 

 


 
 
Other assets and other liabilities
 
(13
)
 

 
(13
)
Insurance claims and policyholder liabilities
 
13

 

 
13

Taxes receivable and payable
 
(28
)
 

 
(28
)
Accrued interest and finance charges
 
3

 

 
3

Net cash provided by operating activities
 
209

 

 
209

 
 
 
 
 
 
 
Cash flows from investing activities
 
 

 
 

 
 
Net principal collections (originations) of finance receivables held for investment and held for sale
 
(305
)
 

 
(305
)
Proceeds on sales of finance receivables held for sale originated as held for investment
 
74

 

 
74

Available-for-sale securities purchased
 
(209
)
 

 
(209
)
Trading and other securities purchased
 
(1,318
)
 

 
(1,318
)
Available-for-sale securities called, sold, and matured
 
223

 

 
223

Trading and other securities called, sold, and matured
 
1,963

 

 
1,963

Change in restricted cash and cash equivalents
 
(109
)
 

 
(109
)
Proceeds from sale of real estate owned
 
10

 

 
10

Net cash provided by investing activities
 
329

 

 
329

 
 
 
 
 
 
 
Cash flows from financing activities
 
 

 
 

 
 
Proceeds from issuance of long-term debt, net of commissions
 
1,829

 

 
1,829

Proceeds from issuance of common stock, net of offering costs
 
976

 

 
976

Repayments of long-term debt
 
(591
)
 

 
(591
)
Distributions to joint venture partners
 
(39
)
 

 
(39
)
Excess tax benefit from share-based compensation
 
2

 

 
2

Net cash provided by (used for) financing activities
 
2,177

 

 
2,177

 
 
 
 
 
 
 
Net change in cash and cash equivalents
 
2,715

 

 
2,715

Cash and cash equivalents at beginning of period
 
879

 

 
879

Cash and cash equivalents at end of period
 
$
3,594

 
$

 
$
3,594


We have also adjusted the applicable prior period amounts in the Notes to the Condensed Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 herein to reflect the impact of this change in accounting policy.


13

Table of Contents


2. Significant Transactions    

ONEMAIN ACQUISITION

On November 15, 2015, OMH completed its acquisition of OneMain from Citigroup for approximately $4.5 billion in cash after accounting for certain estimated adjustments at closing. OneMain is a leading consumer finance company in the United States, providing personal loans to primarily middle income households through a national, community based network.

We allocated the purchase price to the net tangible and intangible assets acquired and liabilities assumed, based on their respective estimated fair values as of October 31, 2015. Given the timing of this transaction and complexity of the purchase accounting, our estimate of the fair value adjustment specific to the acquired loans and intangible assets was preliminary, and our determination of the final tax positions with Citigroup was also preliminary. We intend to finalize the accounting for these matters as soon as reasonably possible and within the measurement period, which may be up to one year from the acquisition date.

The excess of the purchase price over the fair values, which we recorded as goodwill, was determined as follows:
(dollars in millions)
 
As
Reported
 
 
 
As
Adjusted
 
 
Adjustments *
 
 
 
 
 
 
 
 
Cash consideration
 
$
4,478

 
$
(23
)
(a)
$
4,455

Fair value of assets acquired:
 
 
 
 
 
 
Cash and cash equivalents
 
958

 

 
958

Investment securities
 
1,294

 

 
1,294

Personal loans
 
8,801

 
(6
)
(b)
8,795

Intangibles
 
555

 
3

(c)
558

Other assets
 
247

 
(3
)
(d)
244

Fair value of liabilities assumed:
 
 
 
 
 
 
Long-term debt
 
(7,725
)
 

 
(7,725
)
Unearned premium, insurance policy and claims reserves
 
(936
)
 

 
(936
)
Other liabilities
 
(156
)
 
1

(e)
(155
)
Goodwill
 
$
1,440

 
 
 
$
1,422

                                      
*
During the first half of 2016, we recorded the following adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill as new information, which existed as of the acquisition date, was brought to our attention:

(a)
Represents a subsequent