2014

Encore Capital Group Announces Fourth Quarter and Full Year 2012 Financial Results Quarterly Net Income Increased 17% to $20.2 million; Quarterly Gross Collections Increased 24% to $230.5 million

SAN DIEGO, Feb. 13, 2013 /PRNewswire/ -- Encore Capital Group, Inc. (Nasdaq: ECPG), through its subsidiaries (the "Company"), a leading provider of debt management and recovery solutions for consumers and property owners across a broad range of assets, today reported consolidated financial results for the fourth quarter and full year ended December 31, 2012.

"2012 was an exceptional year for Encore," said Brandon Black, the Company's President and Chief Executive Officer. "We delivered record earnings, record collections and record operating cash flow, even as we made investments to strengthen our core business and expand our services for financially stressed consumers through the acquisition of Propel Financial Services. We believe that these strategic investments, combined with our analytic strength and our disciplined approach to deploying capital, position us well in an increasingly complex business and regulatory environment."

For the Fourth Quarter of 2012:

  • Gross collections from the portfolio purchasing and recovery business were $230.5 million, a 24% increase over the $185.9 million in the same period of the prior year.
  • Investment in receivable portfolios in the portfolio purchasing and recovery business was $153.6 million, to purchase $8.5 billion in face value of debt, compared to $136.7 million, to purchase $3.8 billion in face value of debt in the same period of the prior year. 
  • Available capacity under the Encore Capital Group revolving credit facility, subject to borrowing base and applicable debt covenants, was $187.0 million as of December 31, 2012.  Total debt, consisting of the Encore revolving credit and term loan facility, the Propel facility, the senior secured notes, and capital lease obligations, was $706.0 million as of December 31, 2012, compared to $389.0 million as of December 31, 2011.
  • Revenue from receivable portfolios in the portfolio purchasing and recovery business, net of allowance adjustments, was $139.6 million, a 20% increase over the $116.5 million in the same period of the prior year.  Revenue recognized on receivable portfolios, as a percentage of portfolio collections, excluding the effects of net portfolio allowances, decreased to approximately 59% from 64% in the same period of the prior year.
  • Total operating expenses were $103.9 million, a 24% increase over the $83.6 million in the same period of the prior year.  Adjusted operating expense per dollar collected for the portfolio purchasing and recovery business decreased to 43.2% compared to 44.1% in the same period of the prior year.
  • Adjusted EBITDA, defined as net income before interest, taxes, depreciation and amortization, stock-based compensation expense, and portfolio amortization, was $134.7 million, a 28% increase over the $105.0 million in the same period of the prior year.
  • Total interest expense for the portfolio purchasing and recovery segment increased to $6.5 million, as compared to $5.0 million in the same period of the prior year.
  • Income from continuing operations was $20.2 million, or $0.79 per fully diluted share, compared to income from continuing operations of $17.2 million, or $0.67 per fully diluted share in the same period of the prior year. For the full year of 2012:
  • Gross collections were $948.1 million, a 25% increase over the $761.2 million in 2011.
  • Investment in receivable portfolios in the portfolio purchasing and recovery business was $562.3 million, to purchase $18.5 billion in face value of debt, compared to $386.9 million, to purchase $11.7 billion in face value of debt in 2011.
  • Revenue from receivable portfolios in the portfolio purchasing and recovery business, net of allowance adjustments, was $545.4 million, a 22% increase over the $448.7 million in 2011.
  • Total operating expenses were $401.7 million, a 22% increase over the $328.6 million 2011. Adjusted operating expenses for the portfolio purchasing and recovery business per dollar collected decreased to 40.4% compared to 42.2% in 2011.
  • Adjusted EBITDA was $577.4 million, a 30% increase over the $443.9 million in 2011.
  • Income from continuing operations was $78.6 million or $3.04 per fully diluted share, compared to income from continuing operations of $60.6 million or $2.36 per fully diluted share in 2011.
  • Total stockholders' equity per share, excluding the effects of discontinued operations, was $16.06 at December 31, 2012, an 11% increase over $14.45 at December 31, 2011.

Conference Call and Webcast

The Company will hold a conference call today at 2:00 p.m. Pacific time / 5:00 p.m. Eastern time to discuss fourth quarter and full year results.

Members of the public are invited to listen to the event via a listen-only telephone conference call line or the Internet. To access the live telephone conference call, please dial (877) 670-9781 or (408) 940-3818. The Conference ID is 90236787. To access the live webcast via the Internet, log on at the Investors page of the Company's website at www.encorecapital.com.

Non-GAAP Financial Measures

The Company has included information concerning non-GAAP financial measures, including adjusted earnings per share, because management believes that investors regularly rely on non-GAAP adjusted earnings and adjusted earnings per share, to assess operating performance, in order to highlight trends in the Company's business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. The Company has also included information concerning adjusted EBITDA, because management utilizes this information, which is materially similar to a financial measure contained in covenants used in the Company's credit agreement, in the evaluation of its operations and believes that this measure is a useful indicator of the Company's ability to generate cash collections in excess of operating expenses through the liquidation of its receivable portfolios. Additionally, the Company has included information related to adjusted operating expenses for the portfolio purchasing and recovery business, in order to facilitate a comparison of approximate cash costs to cash collections for the portfolio purchasing and recovery business in the periods presented.  These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, net income and total operating expenses as indicators of the Company's operating performance. Further, these non-GAAP financial measures, as presented by the Company, may not be comparable to similarly titled measures reported by other companies. The Company has included a reconciliation of adjusted earnings per share to reported earnings under GAAP, a reconciliation of adjusted EBITDA to reported earnings under GAAP, a reconciliation of adjusted operating expenses for the portfolio purchasing and recovery business to the GAAP measure total operating expenses, and a reconciliation of adjusted stockholders' equity per share to reported stockholders' equity under GAAP in the attached financial tables.

About Encore Capital Group, Inc.

Encore Capital Group is a leading provider of debt management and recovery solutions for consumers and property owners across a broad range of assets. Through its subsidiaries, the Company purchases portfolios of consumer receivables from major banks, credit unions, and utility providers, and partners with individuals as they repay their obligations and work toward financial recovery. Through its Propel Financial Services, LLC subsidiary, the Company assists property owners who are delinquent on their property taxes by structuring affordable monthly payment plans.

Headquartered in San Diego, Encore Capital Group is a publicly traded NASDAQ Global Select company (ticker symbol: ECPG) and a component stock of the Russell 2000, the S&P SmallCap 600, and the Wilshire 4500. More information about the Company can be found at www.encorecapital.com. The Company's website and the information contained therein, is not incorporated into and is not a part of this press release.

Forward Looking Statements

The statements in this press release that are not historical facts, including, most importantly, those statements preceded by, or that include, the words "may," "believe," "projects," "expects," "anticipates" or the negation thereof, or similar expressions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). These statements may include, but are not limited to, statements regarding our future operating results, performance, business plans or prospects. For all "forward-looking statements," the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors are discussed in the reports filed by the Company with the Securities and Exchange Commission, including the most recent reports on Forms 10-K, 10-Q and 8-K, each as it may be amended from time to time. The Company disclaims any intent or obligation to update these forward-looking statements.

Contact:

Encore Capital Group, Inc.

Paul Grinberg (858) 309-6904
paul.grinberg@encorecapital.com

Adam Sragovicz (858) 309-9509
adam.sragovicz@encorecapital.com

 

FINANCIAL TABLES FOLLOW

 

 

 

ENCORE CAPITAL GROUP, INC.

Consolidated Statements of Financial Condition

(In Thousands, Except Par Value Amounts)






December 31,

2012


December 31,

2011

Assets




Cash and cash equivalents

$           17,510


$            8,047

Investment in receivable portfolios, net

873,119


716,454

Deferred court costs, net

35,407


38,506

Property tax payment agreements receivable, net

135,100


Interest receivable

4,042


Property and equipment, net

23,223


17,796

Other assets

27,006


15,233

Goodwill

55,446


15,985

Identifiable intangible assets, net

487


462





Total assets

$     1,171,340


$        812,483





Liabilities and stockholders' equity




Liabilities:




Accounts payable and accrued liabilities

$           45,450


$          29,628

Income tax payable

3,080


Deferred tax liabilities, net

8,236


15,709

Debt

706,036


388,950

Other liabilities

2,722


6,661





Total liabilities

765,524


440,948





Commitments and contingencies




Stockholders' equity:




Convertible preferred stock, $.01 par value, 5,000 shares authorized, no shares issued and outstanding


Common stock, $.01 par value, 50,000 shares authorized, 23,191 shares and 24,520 shares issued and outstanding as of December 31, 2012 and December 31, 2011, respectively

232


245

Additional paid-in capital

88,029


123,406

Accumulated earnings

319,329


249,852

Accumulated other comprehensive loss

(1,774)


(1,968)





Total stockholders' equity

405,816


371,535





Total liabilities and stockholders' equity

$     1,171,340


$        812,483





 

 

 

ENCORE CAPITAL GROUP, INC

Consolidated Statements of Comprehensive Income

(In Thousands, Except Per Share Amounts)










(Unaudited)
Three Months Ended
December 31,


Year Ended
December 31,


2012


2011


2012


2011

Revenues








Revenue from receivable portfolios, net

$    139,594


$    116,452


$    545,412


$    448,714

Tax lien transfer








Interest income

5,315



13,882


Interest expense

(1,297)



(3,422)










Net interest income

4,018



10,460










Total revenues

143,612


116,452


555,872


448,714









Operating expenses








Salaries and employee benefits

28,193


20,347


101,084


77,805

Cost of legal collections

45,500


39,686


168,703


157,050

Other operating expenses

10,085


8,764


48,939


35,708

Collection agency commissions

2,980


3,388


15,332


14,162

General and administrative expenses

15,467


10,289


61,798


39,760

Depreciation and amortization

1,647


1,165


5,840


4,081









Total operating expenses

103,872


83,639


401,696


328,566









Income from operations

39,740


32,813


154,176


120,148









Other (expense) income








Interest expense

(6,540)


(4,979)


(25,564)


(21,116)

Other income (expense)

328


(181)


1,713


(363)









Total other expense

(6,212)


(5,160)


(23,851)


(21,479)









Income from continuing operations before income taxes

33,528


27,653


130,325


98,669

Provision for income taxes

(13,361)


(10,418)


(51,754)


(38,076)









Income from continuing operations

20,167


17,235


78,571


60,593

(Loss) income from discontinued operations, net of tax


(101)


(9,094)


365









Net income

$      20,167


$      17,134


$      69,477


$      60,958









Weighted average shares outstanding:








Basic

24,639


24,689


24,855


24,572

Diluted

25,565


25,657


25,836


25,690

Basic earnings (loss) per share from:








Continuing operations

$           0.82


$           0.70


$           3.16


$           2.47

Discontinued operations

$           0.00


$         (0.01)


$         (0.36)


$           0.01









Net basic earnings per share

$           0.82


$           0.69


$           2.80


$           2.48









Diluted earnings (loss) per share from:








Continuing operations

$           0.79


$           0.67


$           3.04


$           2.36

Discontinued operations

$           0.00


$           0.00


$         (0.35)


$           0.01









Net diluted earnings per share

$           0.79


$           0.67


$           2.69


$           2.37









Other comprehensive (loss) gain:








Unrealized (loss) gain on derivative instruments

$          (791)


$          (870)


$            414


$       (2,964)

Income tax benefit (provision) related to unrealized (loss) gain on derivative instruments

252


26


(220)


845









Other comprehensive (loss) gain, net of tax

(539)


(844)


194


(2,119)









Comprehensive income

$      19,628


$      16,290


$      69,671


$      58,839









 

 

 

ENCORE CAPITAL GROUP, INC

Consolidated Statements of Cash Flows

(In Thousands)








Year Ended December 31,


2012


2011


2010

Operating activities:






Net income

$     69,477


$     60,958


$     49,052

Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation and amortization

5,840


4,661


3,199

Impairment charge for goodwill and identifiable intangible assets

10,400



Amortization of loan costs and premium on property tax payment agreements receivable

3,268


1,833


3,682

Stock-based compensation expense

8,794


7,709


6,010

Income tax provision (less than) in excess of income tax payments

(7,474)


(1,917)


646

Excess tax benefit from stock-based payment arrangements

(4,123)


(5,101)


(3,249)

Loss on sale of discontinued operations

2,416



(Reversal) provision for allowances on receivable portfolios, net

(4,221)


10,823


22,209

Changes in operating assets and liabilities






Deferred court costs

3,099


(6,348)


(6,201)

Other assets

(206)


2,179


(1,390)

Prepaid income tax and income taxes payable

7,060


6,495


(1,782)

Accounts payable, accrued liabilities and other liabilities

4,190


3,287


3,299







Net cash provided by operating activities

98,520


84,579


75,475







Investing activities:






Cash paid for acquisition, net of cash acquired

(186,731)



Purchases of receivable portfolios

(562,335)


(386,850)


(361,957)

Collections applied to investment in receivable portfolios, net

406,815


301,474


217,891

Proceeds from put-backs of receivable portfolios

3,076


2,852


3,981

Originations of property tax payment agreements receivable

(34,036)



Collections applied to property tax payment agreements receivable, net

35,706



Purchases of property and equipment

(6,265)


(5,564)


(2,722)







Net cash used in investing activities

(343,770)


(88,088)


(142,807)







Financing activities:






Payment of loan costs

(12,359)


(840)


(6,248)

Proceeds from senior secured notes


25,000


50,000

Repayment of senior secured notes

(2,500)



Proceeds from revolving credit facility and term loan facility

508,399


121,000


125,500

Repayment of revolving credit facility and term loan facility

(289,673)


(143,000)


(58,500)

Proceeds from issuance of convertible notes

115,000



Repayment of convertible notes



(42,920)

Purchases of convertible hedge instruments

(22,669)



Proceeds from sale of warrants

11,028



Repurchase of common stock

(49,270)



Proceeds from net settlement of certain call options



524

Proceeds from exercise of stock options

1,847


1,263


2,118

Taxes paid related to net share settlement of equity awards

(2,969)


(3,891)


(2,024)

Excess tax benefit from stock-based payment arrangements

4,123


5,101


3,249

Repayment of capital lease obligations

(6,244)


(3,982


(1,850)







Net cash provided by financing activities

254,713


651


69,849







Net increase (decrease) in cash and cash equivalents

9,463


(2,858)


2,517

Cash and cash equivalents, beginning of period

8,047


10,905


8,388







Cash and cash equivalents, end of period

$     17,510


$       8,047


$     10,905







Supplemental disclosures of cash flow information:






Cash paid for interest

$     25,218


$     19,038


$     15,652

Cash paid for income taxes

46,297


32,125


30,125

Supplemental schedule of non-cash investing and financing activities:






Fixed assets acquired through capital lease

$       5,287


$       2,949


$       4,317

 

 

ENCORE CAPITAL GROUP, INC.

Supplemental Financial Information

Reconciliation of Adjusted Earnings From Continuing Operations to GAAP Net Income From Continuing Operations, Adjusted EBITDA to GAAP Net Income, Adjusted Operating Expenses For The Portfolio Purchasing And Recovery Business to GAAP Total Operating Expenses, and Adjusted Stockholders' Equity Per Share to GAAP Total Stockholders' Equity

(In Thousands, Except Per Share amounts) (Unaudited)



Three Months Ended December 31, 


Year Ended December 31,


2012


2011


2012


2011


$


Per
Diluted
Share


$


Per
Diluted
Share


$


Per
Diluted
Share


$


Per
Diluted
Share

GAAP net income from continuing operations, as reported

$     20,167


$       0.79


$  17,235


$       0.67


$  78,571


$       3.04


$  60,593


$       2.36

Adjustment:
















Convertible notes non-cash interest and issuance cost amortization, net of tax

191


$       0.01




191


$       0.01



















Adjusted earnings from continuing operations

$     20,358


$       0.80


$  17,235


$       0.67


$  78,762


$       3.05


$  60,593


$       2.36

















 


 


Three Months Ended
December 31,


Year Ended

December 31,


2012


2011


2012


2011

GAAP net income, as reported

$ 20,167


$17,134


$69,477


$ 60,958

Adjustments:








Loss (income) from discontinued operations, net of tax


101


9,094


(365)

Interest expense

6,540


4,979


25,564


21,116

Provision for income taxes

13,361


10,418


51,754


38,076

Depreciation and amortization

1,647


1,165


5,840


4,081

Amount applied to principal on receivable portfolios

90,895


69,462


402,594


312,297

Stock-based compensation expense

2,084


1,729


8,794


7,709

Acquisition related expenses



4,263










Adjusted EBITDA

$134,694


$104,988


$577,380


$443,872

















 


 


Three Months Ended

December 31,


Year Ended

December 31,


2012


2011


2012


2011

GAAP total operating expenses, as reported

$ 103,872


$ 83,639


$ 401,696


$328,566

Adjustments:








Stock-based compensation expense

(2,084)


(1,729)


(8,794)


(7,709)

Tax lien transfer segment operating expenses

(2,113)



(5,681)


Acquisition related expenses



(4,263)










Adjusted operating expenses for the portfolio purchasing and recovery business

$99,675


$81,910


$382,958


$320,857









 


 




December 31,

2012


December 31,
2011

GAAP stockholders' equity, as reported

$              405,816


$ 371,535

Effect of discontinued operations

9,094


(365)





Adjusted stockholders' equity

$414,910


$371,170

Diluted shares outstanding

25,836


25,690





Adjusted stockholders' equity per share

$16.06


$14.45

 

 

SOURCE Encore Capital Group, Inc.



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