Encore Capital Group Announces First Quarter 2008 Results
SAN DIEGO, May 1 /PRNewswire-FirstCall/ -- Encore Capital Group, Inc. (Nasdaq: ECPG), a leading distressed consumer debt management company, today reported consolidated financial results for the first quarter ended March 31, 2008.
For the first quarter of 2008:
-- Gross collections were $104.4 million, a 15% increase over the
$90.5 million in the same period of the prior year.
-- Investments in receivable portfolios were $47.9 million, to purchase
$1.2 billion in face value of debt, compared to $45.4 million, to
purchase $2.5 billion in face value of debt in the same period of the
prior year.
-- Revenues from receivable portfolios were $64.1 million, a 3% increase
over the $62.2 million in the same period of the prior year. Revenue
recognized on receivable portfolios, as a percentage of portfolio
collections, excluding the effects of impairment provisions, was 67%,
compared to 69% in the same period of the prior year.
-- Revenues from bankruptcy servicing were $3.4 million, compared to
$3.2 million in the same period of the prior year.
-- Total operating expenses were $51.1 million, a 3% increase over the
$49.8 million in the same period of the prior year. Operating expense
(excluding stock-based compensation expense, bankruptcy servicing
operating expenses and costs related to the consideration of strategic
alternatives) per dollar collected decreased to 45.3% compared to
49.4% 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 $58.5 million, a 28% increase over the
$45.6 million in the same period of the prior year.
-- Total interest expense was $3.9 million, compared to $6.2 million in
the same period of the prior year.
-- Net income was $7.5 million or $0.32 per fully diluted share, compared
to net income of $5.7 million or $0.24 per fully diluted share in the
same period of the prior year.
Additional information:
Certain events affected the comparability of 2008 versus 2007 quarterly results, as outlined below. For a more detailed comparison of 2008 versus 2007 results, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008.
-- In the first quarter of 2008, the Company recorded a net impairment
provision of $5.3 million, compared to an impairment reversal of
$0.2 million in the same period of the prior year.
-- Effective January 1, 2008, the Company increased its collection
forecasts from 72 months to 84 months. This resulted in an increase in
the aggregate total estimated remaining collections for the receivable
portfolios by $67.3 million, or 7.5%, as of March 31, 2008. For the
quarter ended March 31, 2008, the impact of the change resulted in an
increase in revenue of $0.1 million, a reduction in the net impairment
provision of $3.1 million, an increase in net income of $1.9 million
and an increase in fully diluted earnings per share of $0.08.
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 total operating expenses excluding stock-based compensation expense, bankruptcy servicing operating expenses and costs related to the consideration of strategic alternatives in order to facilitate a comparison of approximate cash costs to cash collections for the debt purchasing 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 Encore Capital Group's operating performance. Neither Adjusted EBITDA nor operating expenses excluding stock-based compensation expense, bankruptcy servicing operating expenses and costs related to the consideration of strategic alternatives has been prepared in accordance with generally accepted accounting principles (GAAP). These non-GAAP financial measures, as presented by Encore Capital Group, 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 operating expenses excluding stock-based compensation expense, bankruptcy servicing operating expenses and costs related to the consideration of strategic alternatives to the GAAP measure total operating expenses in the attached financial tables.
About Encore Capital Group, Inc.
Encore Capital Group, Inc. is a systems-driven purchaser and manager of charged-off consumer receivables portfolios. More information on the company can be found at http://www.encorecapitalgroup.com.
Contact:
Encore Capital Group, Inc.
Paul Grinberg (858) 309-6904
paul.grinberg@encorecapitalgroup.com
or
Ren Zamora (858) 560-3598
ren.zamora@encorecapitalgroup.com
FINANCIAL TABLES FOLLOW
ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Financial Condition
(In Thousands, Except Par Value Amounts)
March 31, December 31,
2008 2007(A)
Unaudited
Assets
Cash and cash equivalents $9,024 $4,900
Restricted cash 3,713 3,776
Accounts receivable, net 3,238 4,136
Investment in receivable portfolios, net 398,207 392,209
Deferred court costs 23,439 20,533
Property and equipment, net 4,990 4,390
Prepaid income tax 5,544 10,346
Forward flow asset 12,937 15,863
Other assets 7,999 8,800
Goodwill 15,985 15,985
Identifiable intangible assets, net 2,352 2,557
Total assets $487,428 $483,495
Liabilities and stockholders' equity
Liabilities:
Accounts payable and accrued liabilities $17,210 $20,346
Deferred tax liabilities, net 13,091 13,669
Deferred revenue and purchased servicing
obligation 4,083 3,898
Debt 270,168 272,420
Other liabilities 3,072 1,642
Total liabilities 307,624 311,975
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, 22,994 shares and
22,992 shares issued and outstanding
as of March 31, 2008, and December 31,
2007, respectively 230 230
Additional paid-in capital 74,947 73,310
Accumulated earnings 106,475 98,975
Accumulated other comprehensive loss (1,848) (995)
Total stockholders' equity 179,804 171,520
Total liabilities and stockholders'
equity $487,428 $483,495
(A) Derived from the audited consolidated financial statements as of
December 31, 2007.
ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
March 31,
2008 2007
Revenues
Revenue from receivable portfolios, net $64,068 $62,153
Servicing fees and other related revenue 3,486 3,222
Total revenues 67,554 65,375
Operating expenses
Salaries and employee benefits
(excluding stock-based compensation
expense) 14,851 17,186
Stock-based compensation expense 1,094 801
Cost of legal collections 20,306 17,621
Other operating expenses 5,651 5,744
Collection agency commissions 4,031 3,294
General and administrative expenses 4,460 4,271
Depreciation and amortization 722 869
Total operating expenses 51,115 49,786
Income before other (expense) income
and income taxes 16,439 15,589
Other (expense) income
Interest expense (3,946) (2,920)
Contingent interest expense - (3,235)
Other income 21 116
Total other expense (3,925) (6,039)
Income before income taxes 12,514 9,550
Provision for income taxes (5,014) (3,893)
Net income $7,500 $5,657
Weighted average shares outstanding:
Basic 22,992 22,783
Diluted 23,431 23,314
Earnings per share:
Basic $0.33 $0.25
Diluted $0.32 $0.24
ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, In Thousands)
Three Months Ended
March 31,
2008 2007
Operating activities
Gross collections $104,355 $90,541
Amounts collected on behalf of third parties (75) (129)
Amounts applied to principal on receivable
portfolios (40,212) (28,259)
Provision for impairment (reversal) 5,335 (217)
Servicing fees 44 31
Operating expenses (49,868) (50,896)
Interest payments (4,172) (3,391)
Contingent interest payments - (4,319)
Other income 21 116
Decrease in restricted cash 63 521
Income tax refund (payments) 407 (1,899)
Excess tax benefits from stock-based payment
arrangements (5) (52)
Net cash provided by operating activities 15,893 2,047
Investing activities
Purchases of receivable portfolios, net of forward
flow allocation (44,976) (41,847)
Collections applied to investment in receivable
portfolios 34,877 28,476
Proceeds from put-backs of receivable portfolios 1,692 953
Purchases of property and equipment (1,117) (552)
Net cash used in investing activities (9,524) (12,970)
Financing activities
Proceeds from notes payable and other borrowings 9,000 7,000
Repayment of notes payable and other borrowings (11,169) -
Proceeds from exercise of stock options 2 14
Excess tax benefits from stock-based payment
arrangements 5 52
Repayment of capital lease obligations (83) (61)
Net cash (used in) provided by financing
activities (2,245) 7,005
Net increase (decrease) in cash 4,124 (3,918)
Cash and cash equivalents, beginning of period 4,900 10,791
Cash and cash equivalents, end of period $9,024 $6,873
ENCORE CAPITAL GROUP, INC.
Supplemental Financial Information
Reconciliation of Adjusted EBITDA to GAAP Net Income and Operating Expenses,
Excluding Stock-based Compensation Expense, Bankruptcy Servicing Operating
Expenses and Costs Related to the Consideration of Strategic Alternatives to
GAAP Total Operating Expenses
(Unaudited, In Thousands)
Three Months Ended
March 31,
2008 2007
GAAP net income, as reported $7,500 $5,657
Interest expense 3,946 2,920
Contingent interest expense - 3,235
Provision for income taxes 5,014 3,893
Depreciation and amortization 722 869
Amount applied to principal on receivable
portfolios 40,212 28,259
Stock-based compensation expense 1,094 801
Adjusted EBITDA $58,488 $45,634
GAAP total operating expenses, as reported $51,115 $49,786
Stock-based compensation expense (1,094) (801)
Bankruptcy servicing operating expenses (2,738) (4,120)
Costs related to the consideration of
strategic alternatives - (116)
Operating expenses, excluding stock-based
compensation expense, bankruptcy servicing
operating expenses and costs related to the
consideration of strategic alternatives $47,283 $44,749
SOURCE Encore Capital Group, Inc. -0- 05/01/2008
/CONTACT: Paul Grinberg, +1-858-309-6904,
paul.grinberg@encorecapitalgroup.com, or Ren Zamora, +1-858-560-3598,
ren.zamora@encorecapitalgroup.com, both of Encore Capital Group, Inc./
/Web site: http://www.encorecapitalgroup.com /
(ECPG)