Encore Capital Group Announces Fourth Quarter and Full Year 2008 Results
For the fourth quarter of 2008:
-- Gross collections were
-- Investment in receivable portfolios was
-- Revenue from receivable portfolios was
-- Revenue from bankruptcy servicing was
-- Total operating expenses were
-- Adjusted EBITDA, defined as net income before interest, taxes,
depreciation and amortization, stock-based compensation expense and
portfolio amortization, was
-- Total interest expense was
-- Net income was
For the full year of 2008:
-- Gross collections were
-- Total revenue was
-- Adjusted EBITDA was
-- Net income was
Additional information:
Certain events affected the comparability of 2008 versus 2007 quarterly
and annual 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 Annual
Report on Form 10-K for the year ended
-- In the fourth quarter of 2008, the Company recorded a net impairment
provision of
-- In the fourth quarter of 2008, the Company expensed
-- In the fourth quarter of 2008, the Company repurchased
-- For the full year of 2008, the Company recorded an income tax
provision of
-- In the second quarter of 2007, approximately
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 and bankruptcy servicing
operating expenses 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
About
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.
Consolidated Statements of Financial Condition
(In Thousands, Except Par Value Amounts)
December 31, December 31,
2008 2007
Assets
Cash and cash equivalents $10,341 $8,676
Accounts receivable, net 1,757 4,136
Investment in receivable portfolios, net 461,346 392,209
Deferred court costs 28,335 20,533
Property and equipment, net 6,272 4,390
Prepaid income tax 7,935 10,346
Forward flow asset 10,302 15,863
Other assets 5,286 8,800
Goodwill 15,985 15,985
Identifiable intangible assets, net 1,739 2,557
Total assets $549,298 $483,495
Liabilities and stockholders' equity
Liabilities:
Accounts payable and accrued liabilities $18,204 $20,346
Deferred tax liabilities, net 15,199 13,669
Deferred revenue and purchased servicing
obligation 5,203 3,898
Debt 311,319 272,420
Other liabilities 3,483 1,642
Total liabilities 353,408 311,975
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, 23,053 shares and
22,992 shares issued and outstanding
as of December 31, 2008 and 2007,
respectively 231 230
Additional paid-in capital 79,971 73,310
Accumulated earnings 117,809 98,975
Accumulated other comprehensive loss (2,121) (995)
Total stockholders' equity 195,890 171,520
Total liabilities and
stockholders' equity $549,298 $483,495
ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
Three Months Ended Years Ended
December 31, December 31,
2008 2007 2008 2007
Revenue
Revenue from receivable
portfolios, net $47,902 $55,813 $240,802 $241,402
Servicing fees and other
related revenue 4,040 2,904 15,087 12,609
Total revenue 51,942 58,717 255,889 254,011
Operating expenses
Salaries and employee
benefits (excluding
stock-based compensation
expense) 12,617 13,765 58,120 64,153
Stock-based compensation
expense 382 1,001 3,564 4,287
Cost of legal collections 26,662 18,987 96,187 78,636
Other operating expenses 5,996 4,563 23,652 21,533
Collection agency
commissions 2,310 3,772 13,118 12,411
General and
administrative expenses 5,540 4,513 19,445 17,478
Depreciation and
amortization 652 810 2,814 3,351
Total operating expenses 54,159 47,411 216,900 201,849
Income before other
(expense) income and
income taxes (2,217) 11,306 38,989 52,162
Other (expense) income
Interest expense (4,220) (4,000) (15,629) (13,904)
Contingent interest
expense - - - (4,123)
Pay-off of future
contingent interest - - - (11,733)
Gain on repurchase of
convertible notes, net 6,679 - 8,096 -
Other income 17 918 358 1,071
Total other expense 2,476 (3,082) (7,175) (28,689)
Income before income
taxes 259 8,224 31,814 23,473
Provision for income
taxes (28) (3,376) (12,980) (8,431)
Net income $231 $4,848 $18,834 $15,042
Weighted average shares
outstanding:
Basic 23,094 22,991 23,046 22,876
Diluted 23,632 23,466 23,577 23,386
Earnings per share:
Basic $0.01 $0.21 $0.82 $0.66
Diluted $0.01 $0.21 $0.80 $0.64
ENCORE CAPITAL GROUP, INC.
Consolidated Statements of Cash Flows
(In Thousands)
Years Ended
December 31,
2008 2007
Operating activities:
Net Income $18,834 $15,042
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,814 3,351
Amortization of loan costs 1,377 1,219
Stock-based compensation expense 3,564 4,287
Gain on repurchase of convertible notes,
net (8,096) -
Deferred income tax expense 1,531 3,002
Other non-cash tax benefits, net 3,075 2,145
Tax benefit from stock-based payment
arrangements - (698)
Provision for impairment on receivable
portfolios, net 41,400 11,230
Changes in operating assets and
liabilities
Restricted cash - 4,660
Other assets 4,135 545
Deferred court costs (7,803) (9,599)
Prepaid income tax 2,411 (6,619)
Accrued profit sharing arrangement - (6,869)
Deferred revenue and purchased service
obligation 1,305 1,108
Accounts payable and accrued liabilities (1,476) (3,194)
Net cash provided by operating activities 63,071 19,610
Investing activities:
Cash paid for India membership interest - (2,250)
Purchases of receivable portfolios, net of
forward flow allocation (224,717) (197,249)
Collections applied to investment in
receivable portfolios 116,101 102,093
Proceeds from put-backs of receivable
portfolios 3,640 3,769
Purchases of property and equipment (2,276) (1,422)
Net cash used in investing activities (107,252) (95,059)
Financing activities:
Proceeds from notes payable and other
borrowings 108,000 121,000
Repayment of notes payable and other
borrowings (42,169) (48,500)
Repurchase of convertible notes (20,101) -
Proceeds from exercise of stock options 23 348
Tax benefit from stock-based payment
arrangements - 698
Proceeds from capital lease obligations 400 -
Repayment of capital lease obligations (307) (212)
Net cash provided by financing activities 45,846 73,334
Net increase (decrease) in cash 1,665 (2,115)
Cash and cash equivalents, beginning of
period 8,676 10,791
Cash and cash equivalents, end of period $10,341 $8,676
Supplemental disclosures of cash flow
information:
Cash paid for interest $14,427 $35,707
Cash paid for income taxes $5,301 $8,730
Supplemental schedule of non-cash
investing and financing activities:
Fixed assets acquired through capital
lease $1,602 -
Allocation of forward flow asset to
acquired receivable portfolios $5,561 $11,704
ENCORE CAPITAL GROUP, INC.
Supplemental Financial Information
Reconciliation of Adjusted EBITDA to GAAP Net Income and Operating
Expenses, Excluding Stock-based Compensation Expense and Bankruptcy
Servicing Operating Expenses to GAAP Total Operating Expenses
(Unaudited, In Thousands)
Three Months Ended Years Ended
December 31, December 31,
2008 2007 2008 2007
GAAP net income, as reported $231 $4,848 $18,834 $15,042
Interest expense 4,220 4,000 15,629 13,904
Contingent interest expense - - - 4,123
Pay-off of future contingent
interest - - - 11,733
Provision for income taxes 28 3,376 12,980 8,431
Depreciation and amortization 652 810 2,814 3,351
Amount applied to principal on
receivable portfolios 46,364 29,498 157,501 113,323
Stock-based compensation expense 382 1,001 3,564 4,287
Adjusted EBITDA $51,877 $43,533 $211,322 $174,194
GAAP total operating expenses, as
reported $54,159 $47,411 $216,900 $201,849
Stock-based compensation expense (382) (1,001) (3,564) (4,287)
Bankruptcy servicing operating
expenses (3,192) (3,076) (13,369) (14,801)
Operating expenses, excluding
stock-based compensation expense
and bankruptcy servicing
operating expenses $50,585 $43,334 $199,967 $182,761
SOURCE
CONTACT:
paul.grinberg@encorecapitalgroup.com, or
ren.zamora@encorecapitalgroup.com, both of
Web Site: http://www.encorecapitalgroup.com
(ECPG)