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 firstname.lastname@example.org Adam Sragovicz (858) 309-9509 email@example.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
Encore Capital Group Announces Record Third Quarter 2012 Financial Results
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