Encore Capital Group Announces Record Third Quarter 2012 Financial Results

  Encore Capital Group Announces Record Third Quarter 2012 Financial Results

PR Newswire

SAN DIEGO, Nov. 1, 2012

Earnings Per Share From Continuing Operations Increased 37% to $0.82 per Fully
Diluted Share; Quarterly Gross Collections Increased 30% to $246 Million

SAN DIEGO, Nov. 1, 2012 /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
third quarter ended September 30, 2012.

"For the quarter, we delivered strong financial results, including record
earnings, collections and operating cash flow," said Brandon Black, the
Company's President and Chief Executive Officer. "We've been very disciplined
with the investments we've made and how we've executed our strategies, and
this continues to drive our performance across the board."

The Company also discussed the major changes taking place in the industry that
are likely to lead to increased consolidation in the years ahead. "We built
Encore for the exact business and regulatory environment we're now entering,"
Black commented. "Only companies with access to low cost capital, a
differentiated operating model, an operating cost advantage and a real
commitment to respecting consumers will succeed."

Third Quarter of 2012 Highlights Include:

  oGross collections from the portfolio purchasing and recovery business were
    $246.0 million, a 30% increase over the $189.1 million in the same period
    of the prior year.
  oInvestment in receivable portfolios in the portfolio purchasing and
    recovery business was $47.3 million, to purchase $1.1 billion in face
    value of debt, compared to $65.7 million, to purchase $2.0 billion in face
    value of debt in the same period of the prior year.
  oAvailable capacity under the Encore Capital Group revolving credit
    facility, subject to borrowing base and applicable debt covenants, was
    $145.5 million as of September 30, 2012. Total debt, consisting of the
    revolving credit facility, senior secured notes and capital lease
    obligations, was $615.1 million as of September 30, 2012, compared to
    $389.0 million as of December 31, 2011.
  oRevenue from receivable portfolios in the portfolio purchasing and
    recovery business, net of allowance adjustments, was $140.7 million, a 21%
    increase over the $115.8 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 57% from 62% in the same period of the prior year.
  oTotal operating expenses were $103.6 million, a 22% increase over the
    $85.2 million in the same period of the prior year. Adjusted operating
    expense (operating expenses excluding stock-based compensation expense,
    and tax lien transfer segment operating expenses) per dollar collected
    decreased to 40.5% compared to 43.8% in the same period of the prior year.
  oAdjusted EBITDA, defined as net income before interest, taxes,
    depreciation and amortization, stock-based compensation expense, and
    portfolio amortization, was $150.9 million, a 41% increase over the $106.9
    million in the same period of the prior year.
  oTotal interest expense for the portfolio purchasing and recovery segment
    increased to $7.0 million, as compared to $5.2 million in the same period
    of the prior year.
  oIncome from continuing operations was $21.3 million, or $0.82 per fully
    diluted share, compared to income from continuing operations of $15.4
    million, or $0.60 per fully diluted share in the same period of the prior
    year.
  oTotal stockholders' equity per share was $16.64 at the end of the quarter,
    a 15.0% increase over $14.46 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 third 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. 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 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. The Company has included information concerning adjusted operating
expenses excluding stock-based compensation expense and tax lien transfer
segment operating expenses in order to facilitate a comparison of approximate
cash costs to cash collections for the debt purchasing business in the periods
presented. Adjusted EBITDA and adjusted operating expenses have not been
prepared in accordance with generally accepted accounting principles (GAAP).
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 EBITDA to reported earnings under GAAP and a
reconciliation of adjusted operating expenses excluding stock-based
compensation expense, and tax lien transfer segment operating expenses to the
GAAP measure total operating expenses.

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.

Condensed Consolidated Statements of Financial Condition

(In Thousands, Except Par Value Amounts)

(Unaudited)


                                                September 30,     December31,
                                                2012              2011
Assets
Cash and cash equivalents                       $     19,263 $   8,047
Accounts receivable, net                        2,471             3,265
Investment in receivable portfolios, net        811,620           716,454
Deferred court costs, net                       37,561            38,506
Property tax payment agreements receivable, net 135,190           —
Interest receivable                             4,180             —
Property and equipment, net                     19,771            17,796
Other assets                                    23,068            11,968
Goodwill                                        55,446            15,985
Identifiable intangible assets, net             515               462
 Total assets                          $   1,109,085   $ 812,483
Liabilities and stockholders' equity
Liabilities:
Accounts payable and accrued liabilities        $     43,108 $  29,628
Deferred tax liabilities, net                   17,532            15,709
Debt                                            615,131           388,950
Other liabilities                               2,132             6,661
Total liabilities                               677,903           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, 25,002 shares and 24,520 shares     250               245
issued and outstanding as of September 30, 2012
and December 31, 2011, respectively
Additional paid-in capital                      133,005           123,406
Accumulated earnings                            299,162           249,852
Accumulated other comprehensive loss            (1,235)           (1,968)
Total stockholders' equity                      431,182           371,535
Total liabilities and stockholders' equity      $   1,109,085   $ 812,483

See accompanying notes to condensed consolidated financial statements



ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(In Thousands, Except Per Share Amounts)


                             Three Months Ended        Nine Months Ended

                             September 30,             September 30,
                             2012         2011         2012         2011
Revenues
Revenue from receivable      $ 140,682    $ 115,843    $ 405,818    $ 332,262
portfolios, net
Tax lien transfer
 Interest income      5,585        —            8,567        —
 Interest expense     (1,475)      —            (2,125)      —
Net interest income          4,110        —            6,442        —
 Total         144,792      115,843      412,260      332,262
revenues
Operating expenses
Salaries and employee        25,397       20,087       72,891       57,458
benefits
Cost of legal collections    43,544       40,169       123,203      117,364
Other operating expenses     14,829       9,904        38,854       26,944
Collection agency            4,227        3,264        12,352       10,774
commissions
General and administrative   14,091       10,704       46,331       29,471
expenses
Depreciation and             1,533        1,054        4,193        2,916
amortization
 Total          103,621      85,182       297,824      244,927
operating expenses
Income from operations       41,171       30,661       114,436      87,335
Other (expense) income
Interest expense             (7,012)      (5,175)      (19,024)     (16,137)
Other income (expense)       1,036        (342)        1,385        (182)
 Total other expense   (5,976)      (5,517)      (17,639 )    (16,319 )
Income from continuing
operations before income     35,195       25,144       96,797       71,016
taxes
Provision for income taxes   (13,887)     (9,834)      (38,393)     (27,658)
Income from continuing       21,308       15,310       58,404       43,358
operations
Income (loss) from
discontinued operations, net —            60           (9,094)      466
of tax
Net income                   $  21,308   $  15,370   $  49,310   $  43,824
Weighted average shares
outstanding:
Basic                        25,071       24,638       24,930       24,493
Diluted                      26,047       25,604       25,920       25,636
Basic earnings (loss) per
share from:
Continuing operations        $    0.85 $    0.62 $    2.34 $   1.77
Discontinued operations      $    0.00 $    0.00 $   (0.36) $   0.02
Net basic earnings per share $    0.85 $    0.62 $    1.98 $   1.79
Diluted earnings (loss) per
share from:
Continuing operations        $    0.82 $    0.60 $    2.25 $   1.69
Discontinued operations      $    0.00 $    0.00 $   (0.36) $   0.02
Net diluted earnings per     $    0.82 $    0.60 $    1.90 $   1.71
share
Other comprehensive gain
(loss):
Unrealized gain (loss) on    3,027        (2,042 )     1,205        (2,094 )
derivative instruments
Income tax (provision)
benefit related to           (1,186)      796          (472)        819
unrealized gain (loss) on
derivative instruments
Other comprehensive gain     1,841        (1,246)      733          (1,275)
(loss), net of tax
Comprehensive income         $  23,149   $   14,124 $  50,043   $  42,549

See accompanying notes to condensed consolidated financial statements



ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, In Thousands)
                                                     Nine Months Ended

                                                     September 30,
                                                     2012         2011
Operating activities:
Net income                                           $   49,310 $   43,824
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization                        4,193        2,916
Impairment charge for goodwill and identifiable      10,400       —
intangible assets
Amortization of loan costs and premium on property   2,091        1,367
tax payment agreements receivable
Stock-based compensation expense                     6,710        5,980
Income tax provision in excess of (less than) income 1,823        (1,472)
tax payments
Excess tax benefit from stock-based payment          (3,600)      (4,904)
arrangements
Loss on sale of discontinued operations              2,416        —
(Reversal) provision for allowances on receivable    (1,506)      8,109
portfolios, net
Changes in operating assets and liabilities, net of
effects of acquisition
Other assets                                         (20)         1,944
Deferred court costs                                 945          (3,968)
Prepaid income tax and income taxes payable          (8,407)      3,423
Accounts payable, accrued liabilities and other      1,798        1,012
liabilities
 Net cash provided by operating activities  66,153       58,231
Investing activities:
Cash paid for acquisition, net of cash acquired      (186,731)    —
Purchases of receivable portfolios                   (408,757)    (250,107)
Collections applied to investment in receivable      313,205      234,726
portfolios, net
Proceeds from put-backs of receivable portfolios     1,892        2,343
Originations of property tax payment agreements      (22,912)     —
receivable
Collections applied to property tax payment          24,967       —
agreements receivable, net
Purchases of property and equipment                  (3,665)      (3,458)
 Net cash used in investing activities       (282,001)    (16,496)
Financing activities:
Payment of loan costs                                (1,832)      (835)
Proceeds from senior secured notes                   —            25,000
Proceeds from revolving credit facilities            390,399      61,000
Repayment of revolving credit facilities             (163,048)    (127,000)
Proceeds from exercise of stock options              5,181        1,287
Taxes paid related to net share settlement of equity (2,287)      (3,476)
awards
Excess tax benefit from stock-based payment          3,600        4,904
arrangements
Repayment of capital lease obligations               (4,949)      (2,848)
 Net cash provided by (used in)     227,064      (41,968)
financing activities
Net increase (decrease) in cash and cash equivalents 11,216       (233)
Cash and cash equivalents, beginning of period       8,047        10,905
Cash and cash equivalents, end of period             $   19,263 $   10,672
Supplemental disclosures of cash flow information:
Cash paid for interest                               $   18,634 $   14,591
Cash paid for income taxes                           36,840       24,860
Supplemental schedule of non-cash investing and
financing activities:
Fixed assets acquired through capital lease          2,817        2,434



See accompanying notes to condensed consolidated financial statements



ENCORE CAPITAL GROUP, INC.
Supplemental Financial Information
Reconciliation of Adjusted EBITDA to GAAP Net Income and Adjusted Operating
Expenses Excluding Stock-based Compensation Expense and Tax Lien Transfer
Segment Operating Expenses to GAAP Total Operating Expenses
(In Thousands) (Unaudited)


                                             Three Months Ended
                                             September 30,
                                             2012             2011
GAAP net income, as reported                 $  21,308       $ 15,310
Loss (income) from discontinued operations,  -                (60)
net of tax
Interest expense                             7,012            5,175
Provision for income taxes                   13,887           9,834
Depreciation and amortization                1,533            1,054
Amount applied to principal on receivable    105,283          73,187
portfolios
Stock-based compensation expense             1,905            2,405
Adjusted EBITDA                              $150,928         $106,905
                                             Three Months Ended
                                             September 30,
                                             2012             2011
GAAP total operating expenses, as reported   $  103,621     $ 85,182
Stock-based compensation expense             (1,905)          (2,405)
Tax lien transfer segment operating expenses (2,055)          —
Adjusted operating expenses excluding
stock-based compensation expense, and tax    $99,661          $82,777
lien transfer segment operating expenses
                                             As of            As of Dec 31,

                                             Sep 30, 2012     2011
GAAP stockholders' equity, as reported       $          $ 371,535
                                             431,182
Diluted shares outstanding                   25,920           25,690
Stockholders' equity per share               $16.64           $14.46



SOURCE Encore Capital Group, Inc.

Website: http://www.encorecapital.com
 
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