Encore Capital Group Announces Fourth Quarter and Full Year 2012 Financial Results

  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

PR Newswire

SAN DIEGO, Feb. 13, 2013

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:

  oGross 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.
  oInvestment 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.
  oAvailable 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.
  oRevenue 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.
  oTotal 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.
  oAdjusted 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.
  oTotal 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.
  oIncome 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:
  oGross collections were $948.1 million, a 25% increase over the $761.2
    million in 2011.
  oInvestment 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.
  oRevenue 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.
  oTotal 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.
  oAdjusted EBITDA was $577.4 million, a 30% increase over the $443.9 million
    in 2011.
  oIncome 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.
  oTotal 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)
                                        December31,        December31,

                                        2012                2011
Assets
Cash and cash equivalents               $      17,510  $      8,047
Investment in receivable portfolios,    873,119             716,454
net
Deferred court costs, net               35,407              38,506
Property tax payment agreements         135,100             —
receivable, net
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            $      45,450  $     29,628
liabilities
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 232                 245
of December 31, 2012 and December31,
2011, respectively
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'     $   1,171,340     $    812,483
equity







ENCORE CAPITAL GROUP, INC

Consolidated Statements of Comprehensive Income

(In Thousands, Except Per Share Amounts)
                         (Unaudited)                 Year Ended
                         Three Months Ended          December 31,
                         December 31,
                         2012          2011          2012          2011
Revenues
Revenue from receivable  $  139,594  $  116,452  $  545,412  $ 
portfolios, net                                                    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    28,193        20,347        101,084       77,805
benefits
Cost of legal            45,500        39,686        168,703       157,050
collections
Other operating expenses 10,085        8,764         48,939        35,708
Collection agency        2,980         3,388         15,332        14,162
commissions
General and              15,467        10,289        61,798        39,760
administrative expenses
Depreciation and         1,647         1,165         5,840         4,081
amortization
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 33,528        27,653        130,325       98,669
taxes
Provision for income     (13,361)      (10,418)      (51,754)      (38,076)
taxes
Income from continuing   20,167        17,235        78,571        60,593
operations
(Loss) income from
discontinued operations, —             (101)         (9,094)       365
net of tax
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            (791)        (870)        414          (2,964)
instruments
Income tax benefit
(provision) related to
unrealized (loss) gain   252           26            (220)         845
on derivative
instruments
Other comprehensive      (539)         (844)         194           (2,119)
(loss) gain, net of tax
Comprehensive income     $           $           $           $  
                         19,628       16,290       69,671       58,839







ENCORE CAPITAL GROUP, INC

Consolidated Statements of Cash Flows

(In Thousands)
                                   Year Ended December31,
                                   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 10,400         —              —
identifiable intangible assets
Amortization of loan costs and
premium on property tax payment    3,268          1,833          3,682
agreements receivable
Stock-based compensation expense   8,794          7,709          6,010
Income tax provision (less than)   (7,474)        (1,917)        646
in excess of income tax payments
Excess tax benefit from            (4,123)        (5,101)        (3,249)
stock-based payment arrangements
Loss on sale of discontinued       2,416          —              —
operations
(Reversal) provision for
allowances on receivable           (4,221)        10,823         22,209
portfolios, net
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      7,060          6,495          (1,782)
taxes payable
Accounts payable, accrued          4,190          3,287          3,299
liabilities and other liabilities
Net cash provided by operating     98,520         84,579         75,475
activities
Investing activities:
Cash paid for acquisition, net of  (186,731)      —              —
cash acquired
Purchases of receivable portfolios (562,335)      (386,850)      (361,957)
Collections applied to investment  406,815        301,474        217,891
in receivable portfolios, net
Proceeds from put-backs of         3,076          2,852          3,981
receivable portfolios
Originations of property tax       (34,036)       —              —
payment agreements receivable
Collections applied to property
tax payment agreements receivable, 35,706         —              —
net
Purchases of property and          (6,265)        (5,564)        (2,722)
equipment
Net cash used in investing         (343,770)      (88,088)       (142,807)
activities
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     508,399        121,000        125,500
facility and term loan facility
Repayment of revolving credit      (289,673)      (143,000)      (58,500)
facility and term loan facility
Proceeds from issuance of          115,000        —              —
convertible notes
Repayment of convertible notes     —              —              (42,920)
Purchases of convertible hedge     (22,669)       —              —
instruments
Proceeds from sale of warrants     11,028         —              —
Repurchase of common stock         (49,270)       —              —
Proceeds from net settlement of    —              —              524
certain call options
Proceeds from exercise of stock    1,847          1,263          2,118
options
Taxes paid related to net share    (2,969)        (3,891)        (2,024)
settlement of equity awards
Excess tax benefit from            4,123          5,101          3,249
stock-based payment arrangements
Repayment of capital lease         (6,244)        (3,982         (1,850)
obligations
Net cash provided by financing     254,713        651            69,849
activities
Net increase (decrease) in cash    9,463          (2,858)        2,517
and cash equivalents
Cash and cash equivalents,         8,047          10,905         8,388
beginning of period
Cash and cash equivalents, end of  $   17,510   $    8,047  $   10,905
period
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      $    5,287  $    2,949  $    4,317
capital lease





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               Per               Per               Per
              $       Diluted  $        Diluted  $        Diluted  $        Diluted
                      Share             Share             Share             Share
GAAP net
income from   $     $     $        $     $        $     $        $   
continuing    20,167  0.79     17,235  0.67     78,571  3.04     60,593  2.36
operations,
as reported
Adjustment:
Convertible
notes
non-cash              $                                $   
interest and  191     0.01     —        —        191      0.01     —        —
issuance cost
amortization,
net of tax
Adjusted
earnings from $     $     $        $     $        $     $        $   
continuing    20,358  0.80     17,235  0.67     78,762  3.05     60,593  2.36
operations





                                        Three Months Ended  Year Ended
                                        December 31,
                                                            December 31,
                                        2012      2011      2012      2011
GAAP net income, as reported            $ 20,167  $17,134   $69,477   $ 60,958
Adjustments:
Loss (income) from discontinued         —         101       9,094     (365)
operations, net of tax
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          90,895    69,462    402,594   312,297
receivable portfolios
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   Year Ended

                                      December 31,         December 31,
                                      2012       2011      2012       2011
GAAP total operating expenses, as     $ 103,872  $ 83,639  $ 401,696  $328,566
reported
Adjustments:
Stock-based compensation expense      (2,084)    (1,729)   (8,794)    (7,709)
Tax lien transfer segment operating   (2,113)    —         (5,681)    —
expenses
Acquisition related expenses          —          —         (4,263)    —
Adjusted operating expenses for the
portfolio purchasing and recovery     $99,675    $81,910   $382,958   $320,857
business





                                        December 31,            December 31,
                                                                2011
                                        2012
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.

Website: http://www.encorecapital.com