The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Business Wire

PHH Corporation Announces Fourth Quarter and Full-Year 2011 Results

<p class='bwalignc'> <i><b>4Q 2011 Net Earnings of $13 million, $0.22 per share</b></i> </p> <p class='bwalignc'> <i><b>Full-Year 2011 Net Loss of $127 million, $2.26 per share</b></i> </p> <p class='bwalignc'> <i><b>4Q 2011 Core Earnings (after-tax)* of $55 million, $0.98 per share</b></i> </p> <p class='bwalignc'> <i><b>Full-Year 2011 Core Earnings (after-tax) of $182 million, $3.23 per share</b></i> </p> <ul> <li class='bwlistitemmargb'> 4Q Interest Rate Lock Commitments (IRLCs) expected to close of $9.7 billion; $33.7 billion for full year </li> <li class='bwlistitemmargb'> Full-year total mortgage loan closings of $51.9 billion </li> <li class='bwlistitemmargb'> Unpaid principal balance (UPB) of capitalized mortgage servicing portfolio of $147 billion at December 31, 2011 </li> <li class='bwlistitemmargb'> Tangible book value per share* of $24.56 at December 31, 2011 </li> <li class='bwlistitemmargb'> Year-end liquidity included $414 million in unrestricted cash and equivalents and $509 million in unsecured revolving credit facility availability </li> <li class='bwlistitemmargb'> Closed $250 million aggregate principal amount of 6% convertible senior notes due 2017 in January 2012 </li> </ul>

Monday, February 06, 2012

PHH Corporation Announces Fourth Quarter and Full-Year 2011 Results17:42 EST Monday, February 06, 2012 MT. LAUREL, N.J. (Business Wire) -- PHH Corporation (NYSE: PHH) (“PHH” or the “Company”) today announced financial results for the quarter and year ended December 31, 2011. For the quarter ended December 31, 2011, the Company reported GAAP net income of $13 million or $0.22 per share. Core earnings (after-tax) for the quarter ended December 31, 2011, was $55 million, or $0.98 per share, an increase of 224% over the fourth quarter 2010. For the year ended December 31, 2011, PHH Corporation reported a GAAP net loss of $127 million or $2.26 per share. Core earnings (after-tax) for the year ended December 31, 2011, was $182 million, or $3.23 per share, an increase of 9% over the prior year.* Core earnings (after-tax) and Core earnings per share are financial measures that are not in accordance with GAAP and are designed to measure the Company's financial performance excluding unrealized changes in value of Mortgage Servicing Rights (MSR) that are based upon projections of expected future cash flows. Core earnings (after-tax) and Core earnings per share also exclude realized and unrealized changes in fair value of derivatives related to the MSR, if any. See the Note Regarding Non-GAAP Financial Measures below for a detailed description of these and certain other non-GAAP financial measures and reconciliations of such non-GAAP financial measures to their most directly comparable GAAP financial measures as required by Regulation G. “We delivered solid core earnings performance in the fourth quarter,” said Glen A. Messina, president and CEO of PHH Corporation. “In our Mortgage business, we took advantage of elevated levels of both volumes and priced-in margins while maintaining the quality of our mortgage servicing portfolio. Our continued focus on fee-based services in our Fleet Management segment continues to reap benefits and drive improvement in our ROE. “Going forward we are focusing on four key strategies: disciplined growth in our franchise platforms; industry leading operational execution; an unwavering commitment to customer service; and in the near term, an emphasis on liquidity, cash flow generation and deleveraging the balance sheet. These strategies are intended to maximize shareholder value by making PHH more efficient from both an operating and financial perspective while leveraging our scale and franchise to improve profitability. “We have taken decisive actions to significantly improve our liquidity, which combined with these strategies, should put us in a strong position to retire both our 2012 and 2013 debt maturities and to pursue opportunities to maximize value. While some of these actions, combined with lower expected mortgage industry origination volumes, may have a negative impact on our 2012 earnings, we believe our narrowed and deliberate growth strategy and focus on operational excellence, customer satisfaction, and liquidity will result ultimately in a more profitable, less volatile and better capitalized company.” Liquidity and Capital Raising Update At December 31, 2011: $414 million in unrestricted cash and equivalents $509 million in availability under unsecured revolving credit facility During the fourth quarter, the Company issued $100 million of 9¼% senior notes due 2016 and upsized the committed funding capacity available under its Chesapeake Variable Funding Notes by $300 million. On January 17, 2012, the Company closed its offering of $250 million in aggregate principal amount of 6% convertible senior notes due 2017. In January 2012, the Company repurchased $48 million in face value of its 4% convertible notes due 2012.   Summary Consolidated Results(In millions, except per share data)         Three Months EndedYear EndedDecember 31,   December 31,    2011  2010  2011  2010  Net revenues $ 649 $ 918 $ 2,214 $ 2,438 Income (loss) before income taxes 21 313 (202 ) 115 Net income (loss) attributable to PHH Corporation 13 181 (127 ) 48   Basic earnings (loss) per share attributable to PHH Corporation $ 0.22 $ 3.26 $ (2.26 ) $ 0.87   Non-GAAP Results* Core earnings (pre-tax) $ 85 $ 31 $ 297 $ 289 Core earnings (after-tax) 55 17 182 167 Core earnings per share $ 0.98 $ 0.31 $ 3.23 $ 3.01     Segment Results - Fourth Quarter(In millions)                   FourthFourth Quarter 2011Quarter 2010FleetMortgageMortgageManagementProductionServicingServicesTotal PHHTotal PHHSegmentSegmentSegment  OtherCorporationCorporation Net fee income $ 85 $ ―    $ 45 $ ―   $ 130 $ 139 Fleet lease income ―    ―    350 ―   350 340 Gain on mortgage loans 186 ―    ― ―   186 126 Mortgage net finance expense (6 ) (13 ) ― (1 ) (20 ) (16 ) Loan servicing income (1) ―    119 ― ―   119 112 MSR fair value adjustments: MSRs prepayments and recurring cash flows (2) ―    (64 ) ― ―   (64 ) (77 ) Market-related (3) ―    (55 ) ― ―   (55 ) 287 Credit-related (4) ―    (13 ) ― ―   (13 ) (11 ) Net derivative loss related to MSRs ―    (4 ) ― ―   (4 ) ―    Other income   2     ―      18   ―     20     18   Net revenues   267     (30 )   413   (1 )   649     918   Depreciation on operating leases ―    ―    301 ―     301 303 Fleet interest expense ―    ―    19 ―   19 19 Foreclosure-related charges ―    21 ― ―   21 21 Other expenses   173     39     74   1     287     262   Total expenses   173     60     394   1     628     605   Income (loss) before income taxes 94 (90 ) 19 (2 ) $ 21   $ 313   Less: income attributable to noncontrolling interest   8     ―      ―   ―   Segment profit (loss) $ 86   $ (90 ) $ 19 $ (2 )   (1)   Loan servicing income includes net reinsurance loss of $1 million and $2 million for the three months ended December 31, 2011 and 2010, respectively. (2) Represents the reduction in the fair value of MSRs due to actual prepayments and the receipt of recurring cash flows. (3) Represents the Change in fair value of mortgage servicing rights due to changes in market inputs and assumptions used in the valuation model. The fair value of our MSRs is estimated based upon projections of expected future cash flows from our MSRs considering prepayment estimates, our historical prepayment rates, portfolio characteristics, interest rates based on interest rate yield curves, implied volatility and other economic factors. (4) Represents the Change in fair value of mortgage servicing rights primarily due to the impact of changes in estimated portfolio delinquencies and foreclosures.     Segment Results - Full Year(In millions)                   Year EndedDecember 31,Year Ended December 31, 20112010FleetMortgageMortgageManagementProductionServicingServicesTotal PHHTotal PHHSegmentSegmentSegment  Other  CorporationCorporation Net fee income $ 295 $ ― $ 173 $ ― $ 468 $ 448 Fleet lease income ― ― 1,400 ― 1,400 1,370 Gain on mortgage loans 567 ― ― ― 567 635 Mortgage net finance expense (24 ) (61 ) ― (3 ) (88 ) (73 ) Loan servicing income (1) ― 456 ― ― 456 415 MSR fair value adjustments: MSRs prepayments and recurring cash flows (2) ― (212 ) ― ― (212 ) (225 ) Market-related (3) ― (510 ) ― ― (510 ) (166 ) Credit-related (4) ― (11 ) ― ― (11 ) (36 ) Net derivative loss related to MSRs ― (3 ) ― ― (3 ) ― Other income   76     (2 )   73   ―   147     70   Net revenues   914     (343 )   1,646   (3 )   2,214     2,438   Depreciation on operating leases ― ― 1,223 ― 1,223 1,224 Fleet interest expense ― ― 82 (3 ) 79 91 Foreclosure-related charges ― 80 ― ― 80 72 Other expenses   631     134     266   3     1,034     936   Total expenses   631     214     1,571   ―   2,416     2,323   Income (loss) before income taxes 283 (557 ) 75 (3 ) $ (202 ) $ 115   Less: income attributable to noncontrolling interest   25     ―   ―   ― Segment profit (loss) $ 258   $ (557 ) $ 75 $ (3 )   (1)   Loan servicing income includes net reinsurance loss of $16 million and $19 million for the years ended December 31, 2011 and 2010, respectively. (2) Represents the reduction in the fair value of MSRs due to actual prepayments and the receipt of recurring cash flows. (3) Represents the Change in fair value of mortgage servicing rights due to changes in market inputs and assumptions used in the valuation model. The fair value of our MSRs is estimated based upon projections of expected future cash flows from our MSRs considering prepayment estimates, our historical prepayment rates, portfolio characteristics, interest rates based on interest rate yield curves, implied volatility and other economic factors. (4) Represents the Change in fair value of mortgage servicing rights primarily due to the impact of changes in estimated portfolio delinquencies and foreclosures.   Mortgage Production and Mortgage ServicingMortgage Production Segment Profit Mortgage Production segment profit in the fourth quarter 2011 was $86 million, 161% greater than the fourth quarter of 2010 but down from $95 million in the third quarter 2011. Fourth quarter segment profit reflects a continued strong level of IRLCs expected to close from the continuation of the refinancing surge that began in the third quarter and continued strong gain on sale margins as well as significantly improved economic hedge results relative to the fourth quarter 2010. Mortgage Servicing Segment Loss Mortgage Servicing segment loss in the fourth quarter 2011 was $90 million. The segment loss includes $68 million in market-related and credit-related negative fair value adjustments on our mortgage servicing rights, which includes an unfavorable impact of approximately $20 million related to the implementation of HARP 2 and increased assumptions of foreclosure-related costs. This compares to market-related and credit-related fair value adjustments on our MSR of positive $276 million in the fourth quarter 2010 and negative $361 million in the third quarter 2011. Interest Rate Lock Commitments IRLCs expected to close of $9.7 billion in the fourth quarter 2011 represented a 6% increase from the fourth quarter 2010, reflecting the continuation of the refinancing surge that began in the third quarter 2011. For the fourth quarter 2011, IRLCs expected to close declined 15% from the third quarter 2011. Although mortgage interest rates remained at relatively low levels through 2011, many borrowers had already taken advantage of the low interest rate environment in 2010. As a result, IRLCs expected to close declined by 12% during 2011 compared to 2010, despite similar interest rate environments. Total Pricing Margins In the fourth quarter 2011, total pricing margins on IRLCs expected to close remained at an elevated level, declining only 2 basis points from the third quarter 2011 and increasing 5 basis points from the fourth quarter 2010. These margins reflect continuing high levels of refinancing activity. Mortgage Closing Volume Total fourth quarter mortgage closings were $15.6 billion of which 65% was retail and 35% was wholesale/correspondent. This volume represents a 23% increase from the third quarter 2011, reflecting the surge in IRLCs expected to close in the prior quarter. Full-year total mortgage loan closings were $51.9 billion of which 69% was retail and 31% was wholesale/correspondent. This volume represents a 6% increase from full-year 2010. Unpaid Principal Balance of Mortgage Servicing Portfolio At December 31, 2011, the UPB of our capitalized servicing portfolio was $147.1 billion, a 9% increase over the UPB at the end of 2010 and a 2% increase over the UPB at the end of the third quarter 2011. Also at December 31, 2011, the UPB of our total loan servicing portfolio was $182.4 billion, a 10% increase over the UPB at the end of 2010 and a 2% increase over the UPB at the end of the third quarter 2011. Mortgage Servicing Rights At December 31, 2011, the fair value of our mortgage servicing rights was $1.2 billion, an increase of 1% from the balance at the end of the third quarter 2011. This change reflects $143 million in MSR added partially offset by $132 million in negative fair value adjustments. The MSR added from the capitalization of new servicing rights reflects the increase in loans sold in the quarter, which resulted from the closing and sale of IRLCs expected to close in the third quarter 2011. Fleet Management ServicesSegment Profit Fleet Management Services segment profit was $19 million in the fourth quarter 2011, down 24% from the fourth quarter 2010, reflecting stronger net revenues offset by higher cost of goods sold related to lease syndications, technology investments, and higher incentive compensation expenses. Fourth quarter 2011 segment profit was $6 million less than in the fourth quarter 2010 and $2 million less than in the third quarter 2011. Fleet Lease Income Fleet lease income increased by $10 million in the fourth quarter 2011 compared to the fourth quarter 2010, due to a $12 million increase in lease syndication revenue that was partially offset by a decrease in lease revenue attributable to fewer units under lease. The increase in lease syndication revenue was substantially offset by a corresponding increase in other expenses, primarily due to higher cost of goods sold related to the lease syndications. Fleet Management Fees Fleet management fees increased to $45 million in the fourth quarter 2011 from $41 million in the fourth quarter of 2010, reflecting an increase in fee-for-service unit counts. Maintenance service, fuel, and accident management average units all increased in fourth quarter 2011 compared to fourth quarter 2010 despite a 5% decline in the number of leased vehicles, reflecting our strategy to increase penetration of our accounts with fee-based services. Conference Call/Webcast The Company will host a conference call at 10:00 a.m. (Eastern Time) on Tuesday, February 7, 2012, to discuss its fourth quarter 2011 results. All interested parties are welcome to participate. You can access the conference call by dialing (888) 510-1762 or (719) 457-2634 and using the conference ID 4120134 approximately 10 minutes prior to the call. The conference call will also be webcast at www.phh.com/invest under webcasts and presentations. Fourth Quarter 2011 supplemental schedules will be available by visiting the Investor Relations page of PHH's website at www.phh.com/invest on February 7, 2012, prior to the conference call. A replay will be available shortly after the end of the call through February 21, 2012, by dialing (888) 203-1112 or (719) 457-0820 and using conference ID 4120134 or by logging on to the company's website. About PHH Corporation Headquartered in Mount Laurel, New Jersey, PHH Corporation (NYSE: PHH) is a leading provider of business process management services for the mortgage and fleet industries. Its subsidiary, PHH Mortgage, is one of the top five retail originators of residential mortgages in the United States1, and its subsidiary, PHH Arval, is a leading fleet management services provider in the United States and Canada. PHH has more than 5,000 employees dedicated to delivering premier customer service and providing value-added solutions to its clients. For additional information about PHH and its subsidiaries, please visit the Company's website at www.phh.com. 1 Inside Mortgage Finance, Copyright 2011Forward-Looking Statements Certain statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, forward looking-statements are not based on historical facts but instead represent only our current beliefs regarding future events. All forward-looking statements are, by their nature, subject to risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied in such forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements. Such statements may be identified by words such as “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “may increase,” “may fluctuate” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could.” You should understand that forward-looking statements are not guarantees of performance or results and are preliminary in nature. You should consider the areas of risk described under the heading “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in our periodic reports filed with the U.S. Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, in connection with any forward-looking statements that may be made by us or our businesses generally. Such periodic reports are available in the “Investors” section of our website at http://www.phh.com and are also available at http://www.sec.gov. Except for our ongoing obligations to disclose material information under the federal securities laws, applicable stock exchange listing standards and unless otherwise required by law, we undertake no obligation to release publicly any updates or revisions to any forward-looking statements or to report the occurrence or non-occurrence of anticipated or unanticipated events.     PHH CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF OPERATIONS(In millions, except per share data)   Three Months EndedYear EndedDecember 31,December 31,2011   20102011   2010Revenues Mortgage fees $ 85 $ 98 $ 295 $ 291 Fleet management fees   45     41     173     157   Net fee income   130     139     468     448   Fleet lease income   350     340     1,400     1,370   Gain on mortgage loans, net   186     126     567     635   Mortgage interest income 32 41 114 110 Mortgage interest expense   (52 )   (57 )   (202 )   (183 ) Mortgage net finance expense   (20 )   (16 )   (88 )   (73 ) Loan servicing income   119     112     456     415   Change in fair value of mortgage servicing rights (132 ) 199 (733 ) (427 ) Net derivative loss related to mortgage servicing rights   (4 )   ―   (3 )   ― Valuation adjustments relating to mortgage servicing rights, net   (136 )   199     (736 )   (427 ) Net loan servicing (loss) income   (17 )   311     (280 )   (12 ) Other income   20     18     147     70   Net revenues   649     918     2,214     2,438     Expenses Salaries and related expenses 132 137 507 497 Occupancy and other office expenses 15 15 59 60 Depreciation on operating leases 301 303 1,223 1,224 Fleet interest expense 19 19 79 91 Other depreciation and amortization 6 5 25 22 Other operating expenses   155     126     523     429   Total expenses   628     605     2,416     2,323     Income (loss) before income taxes 21 313 (202 ) 115 Income tax expense (benefit)   ―   126     (100 )   39     Net income (loss) 21 187 (102 ) 76 Less: net income attributable to non-controlling interest   8     6     25     28     Net income (loss) attributable to PHH Corporation $ 13   $ 181   $ (127 ) $ 48     Basic earnings (loss) per share attributable to PHH Corporation $ 0.22   $ 3.26   $ (2.26 ) $ 0.87     Diluted earnings (loss) per share attributable to PHH Corporation $ 0.22   $ 3.25   $ (2.26 ) $ 0.86       PHH CORPORATION AND SUBSIDIARIES   CONDENSED CONSOLIDATED BALANCE SHEETS(In millions)   December 31,2011   2010   ASSETS Cash and cash equivalents $ 414 $ 195 Restricted cash, cash equivalents and investments 574 531 Mortgage loans held for sale 2,658 4,329 Accounts receivable, net 700 573 Net investment in fleet leases 3,515 3,492 Mortgage servicing rights 1,209 1,442 Property, plant and equipment, net 64 46 Goodwill 25 25 Other assets (1)   618   637 Total assets $ 9,777 $ 11,270   LIABILITIES AND EQUITY Accounts payable and accrued expenses $ 504 $ 521 Debt 6,914 8,085 Deferred taxes 626 728 Other liabilities   272   358   Total liabilities   8,316   9,692 Commitments and contingencies ― ―   Total PHH Corporation stockholders' equity 1,442 1,564 Noncontrolling interest   19   14   Total equity   1,461   1,578   Total liabilities and equity $ 9,777 $ 11,270   (1)   Other assets include intangible assets of $33 million and $36 million as of December 31, 2011 and 2010, respectively.     Mortgage Production Segment(In millions, except average loan amount)             Three Months EndedYear EndedDecember 31,December 31,2011   2010   Change2011   2010   Change Loans closed to be sold $ 11,807 $ 14,438 (18 )% $ 37,889 $ 37,747 ― Fee-based closings   3,812     3,996   (5 )%   14,056     11,247   25 % Total closings $ 15,619   $ 18,434   (15 )% $ 51,945   $ 48,994   6 %   Purchase closings $ 4,326 $ 5,316 (19 )% $ 20,404 $ 20,270 1 % Refinance closings   11,293     13,118   (14 )%   31,541     28,724   10 % Total closings $ 15,619   $ 18,434   (15 )% $ 51,945   $ 48,994   6 %   Fixed rate $ 11,888 $ 14,641 (19 )% $ 37,692 $ 38,657 (2 )% Adjustable rate   3,731     3,793   (2 )%   14,253     10,337   38 % Total closings $ 15,619   $ 18,434   (15 )% $ 51,945   $ 48,994   6 %   Retail closings $ 10,219 $ 11,333 (10 )% $ 35,592 $ 33,429 6 % Wholesale/correspondent closings   5,400     7,101   (24 )%   16,353     15,565   5 % Total closings $ 15,619   $ 18,434   (15 )% $ 51,945   $ 48,994   6 %   Average loan amount $ 261,653 $ 241,857 8 % $ 258,365 $ 238,187 8 % Loans sold $ 11,728 $ 12,583 (7 )% $ 40,035 $ 34,535 16 % Applications $ 18,580 $ 19,305 (4 )% $ 67,586 $ 74,628 (9 )% IRLCs expected to close $ 9,743 $ 9,170 6 % $ 33,717 $ 38,330 (12 )%     Three Months EndedYear EndedDecember 31,December 31,20112010Change20112010Change Mortgage fees $ 85 $ 98 (13 )% $ 295 $ 291 1 % Gain on mortgage loans, net 186 126 48 % 567 635 (11 )% Mortgage net finance expense (6 ) (3 ) (100 )% (24 ) (16 ) (50 )% Other income   2     ― 100 %   76     1   n/m(1)   Net revenues   267     221   21 %   914     911   ―   Total expenses   173     182   (5 )%   631     615   3 %   Income before income taxes 94 39 141 % 283 296 (4 )% Less: net income attributable to noncontrolling interest   8     6   33 %   25     28   (11 )%   Segment profit $ 86   $ 33   161 % $ 258   $ 268   (4 )%   (1) n/m ―Not meaningful     Mortgage Servicing Segment($ In millions)     As of December 31,20112010Change Ending total loan servicing portfolio $ 182,387 $ 166,075 10 % Number of loans serviced 1,063,884 1,005,950 6 % Ending capitalized loan servicing portfolio $ 147,088 $ 134,753 9 % Capitalized servicing rate 0.82 % 1.07 % ― Capitalized servicing multiple 2.7 3.5 ― Weighted-average servicing fee (in basis points) 31 30 ―         Three Months EndedYear EndedDecember 31,December 31,2011   2010   Change2011   2010   Change Average total loan servicing portfolio $ 180,366 $ 162,628 11 % $ 174,332 $ 156,825 11 % Average capitalized loan servicing portfolio 145,711 $ 133,277 9 % 142,128 130,462 9 % Payoffs and principal curtailments of capitalized portfolio 8,188 $ 8,850 (7 )% 25,168 25,887 (3 )%     Three Months EndedYear EndedDecember 31,December 31,20112010   Change2011   2010Change Mortgage net finance expense $ (13 ) $ (12 ) (8 )% $ (61 ) $ (54 ) (13 )% Loan servicing income 119 112 6 % 456 415 10 % Valuation adjustments related to mortgage servicing rights, net (136 ) 199 n/m(1) (736 ) (427 ) (72 )% Other income (expense)   ―   ― ―   (2 )   3   n/m(1)Net revenues   (30 )   299   n/m(1)   (343 )   (63 ) n/m(1) Foreclosure-related charges 21 21 ― 80 72 11 % Other expenses   39     27   44 %   134     106   26 % Total expenses   60     48   25 %   214     178   20 % Segment (loss) profit $ (90 ) $ 251   n/m(1) $ (557 ) $ (241 ) (131 )%   Portfolio Delinquency(2)       December 31,2011   2010Number of   UnpaidNumber of   UnpaidLoansBalanceLoansBalance 30 days 2.24 % 1.83 % 2.36 % 2.01 % 60 days 0.60 % 0.51 % 0.67 % 0.60 % 90 or more days 0.98 % 0.95 % 1.21 % 1.27 % Total delinquency 3.82 % 3.29 % 4.24 % 3.88 %   Foreclosure/real estate owned(3) 1.83 % 1.85 % 2.30 % 2.37 %   (1)   n/m ― Not meaningful. (2) Represents the loan servicing portfolio delinquencies as a percentage of the total number of loans and the total unpaid balance of the portfolio. (3) As of December 31, 2011 and 2010, there were 15,689 and 18,554 of loans in foreclosure with unpaid principal balance of $2.8 billion and $3.3 billion, respectively.     Fleet Management Services Segment             Average for theAverage for theThree Months EndedYear EndedDecember 31,December 31,  2011    2010  Change  2011    2010  Change(In thousands of units) Leased vehicles 270 284 (5 )% 274 290 (6 )% Maintenance service cards 336 315 7 % 324 287 13 % Fuel cards 300 283 6 % 295 276 7 % Accident management vehicles 308 293 5 % 298 290 3 %     Three Months EndedYear EndedDecember 31,December 31,20112010Change20112010Change(In millions) Fleet management fees $ 45 $ 41 10 % $ 173 $ 157 10 % Fleet lease income 350 340 3 % 1,400 1,370 2 % Other income   18   18 ―     73   66 11 % Net revenues   413   399 4 %   1,646   1,593 3 % Depreciation on operating leases 301 303 (1 )% 1,223 1,224 ―   Fleet interest expense 19 20 (5 )% 82 94 (13 )% Other expenses   74   51 45 %   266   212 25 % Total expenses   394   374 5 %   1,571   1,530 3 % Segment profit $ 19 $ 25 (24 )% $ 75 $ 63 19 %     AVAILABLE FUNDING UNDER ASSET-BACKED DEBT ARRANGEMENTS AND UNSECURED COMMITTED CREDIT FACILITIES Capacity under all borrowing agreements is dependent upon maintaining compliance with, or obtaining waivers of, the terms, conditions and covenants of the respective agreements. Available capacity under asset-backed funding arrangements may be further limited by asset eligibility requirements. Available capacity under committed asset-backed debt arrangements and unsecured credit facilities as of December 31, 2011 consisted of:       Utilized   Available  Capacity  Capacity  Capacity     (In millions) Vehicle Management Asset-Backed Debt:   Term notes, in revolving period $ 374 $ 374 $ ― Variable-funding notes 2,084 1,516 568   Mortgage Asset-Backed Debt: Committed warehouse facilities 3,615 2,313 1,302 Servicing advance facility 120 79 41   Unsecured Committed Credit Facilities(1) 530 16 514   (1) Utilized capacity reflects $16 million of letters of credit issued under the Amended Credit Facility, which are not included in Debt in the Consolidated Balance Sheet.   Capacity for Mortgage asset-backed debt shown above excludes $2.2 billion not drawn under uncommitted facilities, and $500 million available under committed off-balance sheet gestation facilities.   * NOTE REGARDING NON-GAAP FINANCIAL MEASURES Core earnings (loss) (pre-tax and after-tax), core earnings (loss) per share, tangible book value and tangible book value per share are financial measures that are not in accordance with GAAP. See Non-GAAP Reconciliations below for a reconciliation of these measures to the most directly comparable GAAP financial measures as required by Regulation G. Core earnings (loss) (pre-tax and after-tax) and core earnings (loss) per share involves differences from Segment profit (loss), Income (loss) before income taxes, Net income (loss) attributable to PHH Corporation and Basic earnings (loss) per share attributable to PHH Corporation computed in accordance with GAAP. Core earnings (loss) (pre-tax and after-tax) and core earnings (loss) per share should be considered as supplementary to, and not as a substitute for, Segment profit (loss), Income (loss) before income taxes, Net income (loss) attributable to PHH Corporation or Basic earnings (loss) per share attributable to PHH Corporation computed in accordance with GAAP as a measure of the Company's financial performance. Tangible book value and tangible book value per share involve differences from Total PHH Corporation stockholders' equity computed in accordance with GAAP. Tangible book value and tangible book value per share should be considered as supplementary to, and not as a substitute for, Total PHH Corporation stockholders' equity computed in accordance with GAAP as a measure of the Company's financial position. 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. The Company also believes that any meaningful analysis of the Company's financial performance by investors requires an understanding of the factors that drive the Company's underlying operating performance which can be obscured by significant unrealized changes in value of the Company's mortgage servicing rights, as well as any gain or loss on derivatives that are intended to offset market-related fair value adjustments on the Company's mortgage servicing rights, in a given period that are included in Segment profit (loss), Income (loss) before income taxes, Net income (loss) attributable to PHH Corporation and Basic earnings (loss) per share attributable to PHH Corporation in accordance with GAAP. Core earnings (loss) (pre-tax and after-tax) and core earnings (loss) per share Core earnings (loss) (pre-tax and after-tax) and core earnings (loss) per share measure the Company's financial performance excluding unrealized changes in fair value of the Company's mortgage servicing rights that are based upon projections of expected future cash flows and prepayments as well as realized and unrealized changes in the fair value of derivatives that are intended to offset changes in the fair value of mortgage servicing rights. The changes in fair value of mortgage servicing rights and related derivatives are highly sensitive to changes in interest rates and are dependent upon the level of current and projected interest rates at the end of each reporting period. Value lost from actual prepayments and recurring cash flows are recorded when actual cash payments or prepayments of the underlying loans are received, and are included in core earnings based on the current fair value of the mortgage servicing rights at the time the payments are received. The presentation of core earnings is designed to more closely align the timing of recognizing the actual value lost from prepayments in the mortgage servicing segment with the associated value created through new originations in the mortgage production segment. The Company believes that it will likely replenish most, if not all, realized value lost from changes in value from actual prepayments through new loan originations and actively manages and monitors economic replenishment rates to measure its ability to continue to do so. Therefore, management does not believe the unrealized change in value of the mortgage servicing rights is representative of the economic change in value of the business as a whole. Core earnings metrics are used in managing the Company's mortgage business. The Company has also designed certain management incentives based upon the achievement of core earnings targets, subject to potential adjustments that may be made at the discretion of the Human Capital and Compensation Committee of the Company's Board of Directors. Limitations on the use of Core Earnings Since core earnings (loss) (pre-tax and after-tax) and core earnings (loss) per share measure the Company's financial performance excluding unrealized changes in value of mortgage servicing rights, such measures may not appropriately reflect the rate of value lost on subsequent actual payments or prepayments over time. As such, core earnings (loss) (pre-tax and after-tax) and core earnings (loss) per share may tend to overstate operating results in a declining interest rate environment and understate operating results in a rising interest rate environment, absent the effect of any offsetting gains or losses on derivatives that are intended to offset changes in fair value on the Company's mortgage servicing rights. Tangible book value and Tangible book value per share Tangible book value is a measure of Total PHH Corporation stockholders' equity computed in accordance with GAAP excluding the value of goodwill and other intangible assets. Tangible book value per share is a measure of tangible book value, on a per share basis, using the number of shares of outstanding PHH Corporation common stock as of the applicable measurement date. Certain of the Company's debt agreements contain indebtedness-to-tangible net worth ratio covenants, and such ratios are calculated using a measure of tangible net worth that is calculated on a basis similar to the Company's calculation of tangible book value. Accordingly, the Company believes that tangible book value and tangible book value per share provide useful supplementary information to investors.   PHH CORPORATION AND SUBSIDIARIES   NON-GAAP RECONCILIATIONS – CORE EARNINGS(In millions, except per share data)   See “Note Regarding Non-GAAP Financial Measures” above in this press release for a description of the uses and limitations of these Non-GAAP Financial Measures.   Regulation G Reconciliation         Three Months Ended   Year EndedDecember 31,December 31,2011   20102011   2010 Income (loss) before income taxes ― as reported $ 21 $ 313 $ (202 ) $ 115 Less: net income attributable to noncontrolling interest   8   6     25     28 Segment profit (loss) 13 307 (227 ) 87 Certain MSR fair value adjustments: Market-related (1) 55 (287 ) 510 166 Credit-related (2) 13 11 11 36 Net derivative loss related to MSRs   4   ―   3     ― Core earnings (pre-tax) $ 85 $ 31   $ 297   $ 289   Net income (loss) attributable to PHH Corporation ― as reported $ 13 $ 181 $ (127 ) $ 48 Certain MSR fair value adjustments: Market-related, net of taxes (1)(3) 33 (170 ) 301 98 Credit-related, net of taxes (2)(3) 7 6 6 21 Net derivative loss related to MSRs   2   ―   2     ― Core earnings (after-tax) $ 55 $ 17   $ 182   $ 167   Basic earnings (loss) per share attributable to PHH Corporation ― as reported $ 0.22 $ 3.26 $ (2.26 ) $ 0.87 Certain MSR fair value adjustments: Market-related, net of taxes (1)(4) 0.58 (3.06 ) 5.34 1.76 Credit-related, net of taxes (2)(4) 0.14 0.11 0.12 0.38 Net derivative loss related to MSRs   0.04   ―   0.03     ― Core earnings per share $ 0.98 $ 0.31   $ 3.23   $ 3.01   (1)   Represents the Change in fair value of MSRs due to changes in market inputs and assumptions used in the valuation model. (2) Represents the Change in fair value of MSRs primarily due to the impact of changes in estimated portfolio delinquencies and foreclosures. (3) An incremental effective tax rate of 41% was applied to the MSRs fair value adjustments to arrive at the net of taxes amounts. (4) Basic weighted-average shares outstanding of 56.504 million and 55.699 million for the three months ended December 31, 2011 and 2010, respectively and 56.349 million and 55.480 million for the years ended December 31, 2011 and 2010, respectively were used to calculate per share amounts.   PHH CORPORATION AND SUBSIDIARIES   NON-GAAP RECONCILIATIONS – CORE EARNINGS BY SEGMENT(In millions)   Regulation G Reconciliation               Fourth Quarter 2011FleetMortgageMortgageManagementProductionServicingServicesSegmentSegmentSegment Other  Segment profit (loss) $ 86 $ (90 ) $ 19 $ (2 ) Certain MSRs fair value adjustments: Market-related (1) ― 55 ― ― Credit-related (2) ― 13 ― ― Net derivative loss related to MSRs   ―   4     ―   ― Core earnings (loss) $ 86 $ (18 ) $ 19 $ (2 )     Fourth Quarter 2010FleetMortgageMortgageManagementProductionServicingServicesSegmentSegmentSegment Other  Segment profit (loss) $ 33 $ 251 $ 25 $ (2 ) Certain MSRs fair value adjustments: Market-related (1) ― (287 ) ― ― Credit-related (2)   ―   11     ―   ― Core earnings (loss) $ 33 $ (25 ) $ 25 $ (2 )   (1)   Represents the Change in fair value of MSRs due to changes in market inputs and assumptions used in the valuation model. (2) Represents the Change in fair value of MSRs primarily due to the impact of change in estimated portfolio delinquencies and foreclosures.     PHH CORPORATION AND SUBSIDIARIES   NON-GAAP RECONCILIATIONS – CORE EARNINGS BY SEGMENT(In millions)   Regulation G Reconciliation               Year ended December 31, 2011FleetMortgageMortgageManagementProductionServicingServicesSegmentSegmentSegment  Other   Segment profit (loss) $ 258 $ (557 ) $ 75 $ (3 ) Certain MSRs fair value adjustments: Market-related (1) ― 510 ― ― Credit-related (2) ― 11 ― ― Net derivative loss related to MSRs   ―   3     ―   ― Core earnings (loss) $ 258 $ (33 ) $ 75 $ (3 )     Year ended December 31, 2010FleetMortgageMortgageManagementProductionServicingServicesSegmentSegmentSegment  Other   Segment profit (loss) $ 268 $ (241 ) $ 63 $ (3 ) Certain MSRs fair value adjustments: Market-related (1) ― 166 ― ― Credit-related (2)   ―   36     ―   ― Core earnings (loss) $ 268 $ (39 ) $ 63 $ (3 )     (1)   Represents the Change in fair value of MSRs due to changes in market inputs and assumptions used in the valuation model. (2) Represents the Change in fair value of MSRs primarily due to the impact of change in estimated portfolio delinquencies and foreclosures.     PHH CORPORATION AND SUBSIDIARIES           NON-GAAP RECONCILIATIONS ― TANGIBLE BOOK VALUE(in millions)   Regulation G Reconciliation   December 31,20112010 PHH Corporation stockholders' equity ― as reported $ 1,442 $ 1,564 Goodwill (25 ) (25 ) Intangible assets   (33 )   (36 ) Tangible book value $ 1,384   $ 1,503   Common shares issued and outstanding 56,361,155   55,699,218   Tangible book value per share $ 24.56   $ 26.98   PHH CorporationInvestors:Jim Ballan, 856-917-4311jim.ballan@phh.comorMedia:Heather McElrath, 856-917-7628heather.mcelrath@phh.com