Encore Capital Group Announces Second Quarter 2009 Results and Additions to Management Team
For the second quarter of 2009:
-- Gross collections were $122.4 million , a 20% increase over the $102.1
million in the same period of the prior year. Excluding portfolio
sales, collections were $121.6 million , a 24% increase over the $98.5
million in the same period of the prior year.
-- Investment in receivable portfolios was $82.0 million , to purchase
$1.9 billion in face value of debt, compared to $52.5 million , to
purchase $1.8 billion in face value of debt in the same period of the
prior year. Available capacity under the revolving credit facility,
subject to borrowing base and applicable debt covenants, was $56.0
million as of June 30, 2009 . Total debt, consisting of the revolving
credit facility, convertible senior notes and capital lease
obligations, was $320.3 million as of June 30, 2009 , an increase of 5%
from $303.7 million as of December 31, 2008 .
-- Revenue from receivable portfolios was $74.0 million , a 12% increase
over the $66.3 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 64%,
compared to 68% in the same period of the prior year.
-- Revenue from bankruptcy servicing was $4.0 million , a 9% increase over
the $3.7 million in the same period of the prior year.
-- Total operating expenses were $63.5 million , a 14% increase over the
$55.9 million in the same period of the prior year. Operating expense
(excluding stock-based compensation expense and bankruptcy servicing
operating expenses) per dollar collected decreased to 48.3% compared
to 50.0% 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 $64.7 million , a 22% increase over the
$53.0 million in the same period of the prior year.
-- Total interest expense was $4.0 million , compared to $4.8 million in
the same period of the prior year.
-- Net income was $6.6 million or $0.28 per fully diluted share, compared
to net income of $6.2 million or $0.26 per fully diluted share in the
same period of the prior year.
-- Tangible book value per share, computed by dividing total
stockholders' equity less goodwill and identifiable intangible assets
by the number of diluted shares outstanding, was $8.51 as of June 30,
2009 , an 8% increase over $7.86 as of December 31, 2008 .
Additional Financial Information:
Certain events affected the comparability of 2009 versus 2008 quarterly
results, as outlined below. For a more detailed comparison of 2009 versus
2008 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
-- In the second quarter of 2009, the Company recorded a net impairment
provision of $4.6 million , compared to a net impairment provision of
$3.4 million in the same period of the prior year.
-- In the second quarter of 2009, the Company expensed $10.6 million in
upfront court costs, compared to $9.2 million in the same period of
the prior year.
-- In the second quarter of 2009, general and administrative expenses
increased by $2.5 million to $7.1 million , compared to $4.6 million in
the same period of the prior year. The increase was primarily the
result of an increase of $2.2 million in corporate legal expenses
related primarily to our Jefferson Capital arbitration and an increase
of $0.4 million in building rent primarily in India where we are
incurring rental charges at two locations, as we build out a larger
site.
Additions to Management Team
Separately, the Company announced the planned addition of two new senior
executives.
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. The Company has included information concerning tangible book
value per share because management believes that this metric is a meaningful
measure that reflects the equity deployed in the business. 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
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 the appointment of additional management, future
operating results and industry trends. 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 from time to time in the reports
filed by the Company with the
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)
(Unaudited)
June 30, December 31,
2009 2008
Adjusted
Assets
Cash and cash equivalents $5,935 $10,341
Accounts receivable, net 3,385 1,757
Investment in receivable portfolios, net 506,708 461,346
Deferred court costs 29,760 28,335
Property and equipment, net 6,750 6,290
Prepaid income tax - 7,935
Forward flow asset 10,302 10,302
Other assets 5,073 5,049
Goodwill 15,985 15,985
Identifiable intangible assets, net 1,418 1,739
Total assets $585,316 $549,079
Liabilities and stockholders' equity
Liabilities:
Accounts payable and accrued liabilities $19,410 $18,204
Income tax payable 686 -
Deferred tax liabilities, net 15,468 15,108
Deferred revenue and purchased servicing
obligation 5,400 5,203
Debt 320,340 303,655
Other liabilities 2,648 3,483
Total liabilities 363,952 345,653
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, 23,138 shares and 23,053 shares
issued and outstanding as of June 30, 2009 ,
and December 31, 2008, respectively 231 231
Additional paid-in capital 100,321 98,521
Accumulated earnings 122,433 106,795
Accumulated other comprehensive loss (1,621) (2,121)
Total stockholders' equity 221,364 203,426
Total liabilities and stockholders'
equity $585,316 $549,079
ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Income
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
Adjusted Adjusted
Revenue
Revenue from receivable
portfolios, net $73,965 $66,275 $146,240 $130,343
Servicing fees and other
related revenue 4,070 3,745 8,241 7,231
Total revenue 78,035 70,020 154,481 137,574
Operating expenses
Salaries and employee
benefits (excluding
stock-based compensation
expense) 14,762 15,689 28,719 30,540
Stock-based compensation
expense 994 1,228 2,074 2,322
Cost of legal collections 28,626 23,829 58,573 44,135
Other operating expenses 6,598 5,987 12,578 11,638
Collection agency commissions 4,797 3,781 7,688 7,812
General and administrative
expenses 7,097 4,581 12,794 9,041
Depreciation and amortization 620 766 1,243 1,488
Total operating expenses 63,494 55,861 123,669 106,976
Income before other (expense)
income and income taxes 14,541 14,159 30,812 30,598
Other (expense) income
Interest expense (3,958) (4,831) (8,231) (10,031)
Gain on repurchase of
convertible notes, net 215 707 3,268 707
Other income (expense) 9 352 (72 ) 373
Total other expense (3,734) (3,772) (5,035) (8,951)
Income before income taxes 10,807 10,387 25,777 21,647
Provision for income taxes (4,166) (4,225) (10,139) (8,734)
Net income $6,641 $6,162 $15,638 $12,913
Weighted average shares
outstanding:
Basic 23,168 23,007 23,145 23,000
Diluted 23,971 23,512 23,811 23,468
Earnings per share:
Basic $0.29 $0.27 $0.68 $0.56
Diluted $0.28 $0.26 $0.66 $0.55
ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, In Thousands)
Six Months Ended
June 30,
2009 2008
Adjusted
Operating activities:
Net Income $15,638 $12,913
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,243 1,488
Amortization of loan costs and debt discount 2,160 3,110
Stock-based compensation expense 2,074 2,322
Gain on repurchase of convertible notes, net (3,268) (707)
Deferred income tax expense 360 36
Tax provision from stock-based payment
arrangements 43 12
Provision for impairment on receivable
portfolios, net 9,991 8,725
Changes in operating assets and liabilities
Other assets (2,456) 1,008
Deferred court costs (1,425) (4,622)
Prepaid income tax and income tax payable 8,577 8,846
Deferred revenue and purchased service
obligation 197 472
Accounts payable, accrued liabilities and other
liabilities 611 (217)
Net cash provided by operating activities 33,745 33,386
Investing activities:
Purchases of receivable portfolios, net of
forward flow allocation (137,946) (94,833)
Collections applied to investment in receivable
portfolios, net 81,163 67,272
Proceeds from put-backs of receivable portfolios 1,430 2,047
Purchases of property and equipment (1,400) (2,034)
Net cash used in investing activities (56,753) (27,548)
Financing activities:
Proceeds from revolving credit facility 62,500 15,000
Repayment of revolving credit facility (21,500) (17,169)
Repurchase of convertible notes (22,262) (3,500)
Proceeds from exercise of stock options 29 8
Tax provision from stock-based payment
arrangements (43) (12)
Repayment of capital lease obligations (122) (145)
Net cash provided by (used in) financing
activities 18,602 (5,818)
Net (decrease) increase in cash (4,406) 20
Cash and cash equivalents, beginning of period 10,341 8,676
Cash and cash equivalents, end of period $5,935 $8,696
Supplemental disclosures of cash flow
information:
Cash paid for interest $6,435 $6,792
Income tax payment (refund) $1,626 $(236)
Supplemental schedule of non-cash investing and
financing activities:
Allocation of forward flow asset to acquired
receivable portfolios $- $2,926
ENCORE CAPITAL GROUP, INC.
Supplemental Financial Information
Reconciliation of Adjusted EBITDA to GAAP Net Income, Operating
Expenses, Excluding Stock-based Compensation Expense and Bankruptcy
Servicing Operating Expenses to GAAP Total Operating Expenses, and
Tangible Book Value Per Share to GAAP Total Stockholders' Equity
(Unaudited, In Thousands, Except Per Share Amounts)
Three Months Ended
June 30,
2009 2008
Adjusted
GAAP net income, as reported $6,641 $6,162
Interest expense 3,958 4,831
Provision for income taxes 4,166 4,225
Depreciation and amortization 620 766
Amount applied to principal on receivable portfolios 48,303 35,785
Stock-based compensation expense 994 1,228
Adjusted EBITDA $64,682 $52,997
Three Months Ended
June 30,
2009 2008
GAAP total operating expenses, as reported $63,494 $55,861
Stock-based compensation expense (994) (1,228)
Bankruptcy servicing operating expenses (3,454) (3,576)
Operating expenses, excluding stock-based
compensation expense and bankruptcy servicing
operating expenses $59,046 $51,057
As of As of
June 30, 2009 December 2008
Adjusted
GAAP total stockholders' equity, as reported $221,364 $203,426
Goodwill (15,985) (15,985)
Identifiable intangible assets, net (1,418) (1,739)
Tangible book value $203,961 $185,702
Diluted shares outstanding 23,971 23,632
Tangible book value per share $8.51 $7.86
SOURCEEncore Capital Group, Inc. -0-07/30/2009 /CONTACT:Paul Grinberg , +1-858-309-6904, paul.grinberg@encorecapitalgroup.com; orRen Zamora , +1-858-560-3598, ren.zamora@encorecapitalgroup.com, both ofEncore Capital Group, Inc. / /Web Site: http://www.encorecapitalgroup.com / (ECPG) CO:Encore Capital Group, Inc. ST:California IN: FIN SU: ERN PER PR -- LA54239 -- 738907/30/2009 09:00 EDT http://www.prnewswire.com