Delaware (State or Other Jurisdiction of Incorporation) | 000-26489 (Commission File Number) | 48-1090909 (IRS Employer Identification No.) |
3111 Camino Del Rio North, Suite 1300, San Diego, California (Address of Principal Executive Offices) | 92108 (Zip Code) | |
(877) 445-4581 (Registrant’s telephone number, including area code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit Number | Description |
99.1 | Press release dated August 7, 2014 |
ENCORE CAPITAL GROUP, INC. | |
Date: August 7, 2014 | /s/ Paul Grinberg |
Paul Grinberg | |
Executive Vice President, Chief Financial Officer and Treasurer |
Exhibit Number | Description |
99.1 | Press release dated August 7, 2014 |
![]() | Exhibit 99.1 |
• | Encore deploys $328 million worldwide, $162 million in core U.S. market |
• | Collections increase 47%, to record $409 million |
• | Estimated Remaining Collections increase to record $4.9 billion |
• | GAAP EPS increases 95% to record $0.86 |
• | Non-GAAP Economic EPS increases 29% to record $1.10 |
• | Encore acquires Atlantic Credit & Finance servicing platform and portfolio |
• | Gross collections from the portfolio purchasing and recovery business grew 47% to $409.3 million, compared to $278.4 million in the same period of the prior year. |
• | Investment in receivable portfolios in the portfolio purchasing and recovery business was $225.8 million, to purchase $3.1 billion in face value of debt, compared to $423.1 million, to purchase $68.9 billion in face value of debt in the same period of the prior year. Much of the debt purchase in the second quarter of 2013 was associated with Encore’s acquisition of Asset Acceptance Capital Corporation in its entirety. |
• | Available capacity under Encore’s revolving credit facility, subject to borrowing base and applicable debt covenants, was $419 million as of June 30, 2014, not including the $250 million additional capacity provided by the facility’s accordion feature. Total debt was $2.7 billion as of June 30, 2014, compared to $1.9 billion as of December 31, 2013. |
• | Total revenues increased 72% to $269.2 million, compared to $156.1 million in the same period of the prior year. |
• | Total operating expenses increased 51% to $190.7 million, compared to $126.2 million in the same period of the prior year. Adjusted Operating Expenses (defined as operating expenses excluding stock-based compensation expense, expenses related to non-portfolio purchasing and recovery business, one-time charges, and acquisition and integration related expenses) per dollar collected for the portfolio purchasing and recovery business increased to 37.9%, compared to 37.8% in the same period of the prior year. |
• | Adjusted EBITDA (defined as net income before interest, taxes, depreciation and amortization, stock-based compensation expenses, portfolio amortization, one-time charges, and acquisition and integration related expenses), increased 48% to $255.8 million, compared to $172.5 million in the same period of the prior year. |
• | Total interest expense increased to $43.2 million, as compared to $7.5 million in the same period of the prior year, reflecting the financing of Encore’s recent acquisitions. |
• | Net income attributable to Encore was $23.6 million, or $0.86 per fully diluted share, compared to net income attributable to Encore of $11.0 million, or $0.44 per fully diluted share, in the same period of the prior year. |
• | Adjusted Income Attributable to Encore (defined as net income attributable to Encore excluding the noncontrolling interest, non-cash interest and issuance cost amortization, one-time charges, and acquisition and integration related expenses, all net of tax) increased to $29.1 million, compared to Adjusted Income Attributable to Encore of $21.2 million in the same period of the prior year. |
• | Adjusted Income Attributable to Encore per Share (also referred to as Economic EPS) grew 29% to $1.10, compared to $0.85 in the same period of the prior year. In the second quarter, Economic EPS adjusts for approximately 1.0 million shares associated with convertible notes that will not be issued but are reflected in the fully diluted share count for accounting purposes. |
June 30, 2014 | December 31, 2013 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 123,407 | $ | 126,213 | |||
Investment in receivable portfolios, net | 1,987,985 | 1,590,249 | |||||
Deferred court costs, net | 45,577 | 41,219 | |||||
Receivables secured by property tax liens, net | 279,608 | 212,814 | |||||
Property and equipment, net | 58,839 | 55,783 | |||||
Other assets | 217,471 | 154,783 | |||||
Goodwill | 879,910 | 504,213 | |||||
Total assets | $ | 3,592,797 | $ | 2,685,274 | |||
Liabilities and equity | |||||||
Liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 163,958 | $ | 137,272 | |||
Debt | 2,715,866 | 1,850,431 | |||||
Other liabilities | 99,209 | 95,100 | |||||
Total liabilities | 2,979,033 | 2,082,803 | |||||
Commitments and contingencies | |||||||
Redeemable noncontrolling interest | 31,730 | 26,564 | |||||
Redeemable equity component of convertible senior notes | 10,488 | — | |||||
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, 25,631 shares and 25,457 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively | 256 | 255 | |||||
Additional paid-in capital | 116,037 | 171,819 | |||||
Accumulated earnings | 441,369 | 394,628 | |||||
Accumulated other comprehensive gain | 10,936 | 5,195 | |||||
Total Encore Capital Group, Inc. stockholders’ equity | 568,598 | 571,897 | |||||
Noncontrolling interest | 2,948 | 4,010 | |||||
Total equity | 571,546 | 575,907 | |||||
Total liabilities, redeemable equity and equity | $ | 3,592,797 | $ | 2,685,274 |
June 30, 2014 | December 31, 2013 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 52,827 | $ | 62,403 | |||
Investment in receivable portfolios, net | 1,002,980 | 620,312 | |||||
Deferred court costs, net | 4,317 | — | |||||
Receivables secured by property tax liens, net | 127,273 | — | |||||
Property and equipment, net | 14,816 | 13,755 | |||||
Other assets | 91,366 | 33,772 | |||||
Goodwill | 728,045 | 376,296 | |||||
Liabilities | |||||||
Accounts payable and accrued liabilities | $ | 80,791 | $ | 47,219 | |||
Debt | 1,699,343 | 846,676 | |||||
Other liabilities | 7,261 | 1,897 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenues | |||||||||||||||
Revenue from receivable portfolios, net | $ | 248,231 | $ | 152,024 | $ | 485,799 | $ | 292,707 | |||||||
Other revenues | 14,149 | 380 | 25,498 | 681 | |||||||||||
Net interest income | 6,815 | 3,717 | 11,639 | 7,319 | |||||||||||
Total revenues | 269,195 | 156,121 | 522,936 | 300,707 | |||||||||||
Operating expenses | |||||||||||||||
Salaries and employee benefits | 64,355 | 32,969 | 122,492 | 61,801 | |||||||||||
Cost of legal collections | 50,029 | 44,483 | 99,854 | 86,741 | |||||||||||
Other operating expenses | 22,041 | 13,797 | 48,464 | 27,062 | |||||||||||
Collection agency commissions | 9,153 | 5,230 | 17,429 | 8,559 | |||||||||||
General and administrative expenses | 38,282 | 27,601 | 74,976 | 43,943 | |||||||||||
Depreciation and amortization | 6,829 | 2,158 | 12,946 | 4,004 | |||||||||||
Total operating expenses | 190,689 | 126,238 | 376,161 | 232,110 | |||||||||||
Income from operations | 78,506 | 29,883 | 146,775 | 68,597 | |||||||||||
Other (expense) income | |||||||||||||||
Interest expense | (43,218 | ) | (7,482 | ) | (81,180 | ) | (14,336 | ) | |||||||
Other income (expense) | 75 | (4,122 | ) | 340 | (3,963 | ) | |||||||||
Total other expense | (43,143 | ) | (11,604 | ) | (80,840 | ) | (18,299 | ) | |||||||
Income before income taxes | 35,363 | 18,279 | 65,935 | 50,298 | |||||||||||
Provision for income taxes | (14,010 | ) | (7,267 | ) | (25,752 | ) | (19,838 | ) | |||||||
Net income | 21,353 | 11,012 | 40,183 | 30,460 | |||||||||||
Net loss attributable to noncontrolling interest | 2,208 | — | 6,558 | — | |||||||||||
Net income attributable to Encore Capital Group, Inc. stockholders | $ | 23,561 | $ | 11,012 | $ | 46,741 | $ | 30,460 | |||||||
Earnings per share attributable to Encore Capital Group, Inc.: | |||||||||||||||
Basic | $ | 0.91 | $ | 0.46 | $ | 1.81 | $ | 1.28 | |||||||
Diluted | $ | 0.86 | $ | 0.44 | $ | 1.68 | $ | 1.24 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 25,798 | 23,966 | 25,774 | 23,707 | |||||||||||
Diluted | 27,492 | 24,855 | 27,790 | 24,652 |
Six Months Ended June 30, | |||||||
2014 | 2013 | ||||||
Operating activities: | |||||||
Net income | $ | 40,183 | $ | 30,460 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 12,946 | 4,004 | |||||
Other non-cash interest expense | 13,974 | 3,550 | |||||
Stock-based compensation expense | 9,551 | 5,180 | |||||
Recognized loss on termination of derivative contract | — | 3,630 | |||||
Deferred income taxes | 9,616 | (3,297 | ) | ||||
Excess tax benefit from stock-based payment arrangements | (10,756 | ) | (3,848 | ) | |||
Reversal of allowances on receivable portfolios, net | (6,652 | ) | (4,680 | ) | |||
Changes in operating assets and liabilities | |||||||
Deferred court costs and other assets | (23,801 | ) | (7,010 | ) | |||
Prepaid income tax and income taxes payable | (9,038 | ) | (19,559 | ) | |||
Accounts payable, accrued liabilities and other liabilities | 1,574 | 2,821 | |||||
Net cash provided by operating activities | 37,597 | 11,251 | |||||
Investing activities: | |||||||
Cash paid for acquisitions, net of cash acquired | (303,532 | ) | (293,329 | ) | |||
Purchases of receivable portfolios, net of put-backs | (475,121 | ) | (98,196 | ) | |||
Collections applied to investment in receivable portfolios, net | 325,451 | 260,531 | |||||
Originations and purchases of receivables secured by tax liens | (85,014 | ) | (87,961 | ) | |||
Collections applied to receivables secured by tax liens | 53,216 | 27,097 | |||||
Purchases of property and equipment | (8,943 | ) | (5,335 | ) | |||
Other | — | (5,530 | ) | ||||
Net cash used in investing activities | (493,943 | ) | (202,723 | ) | |||
Financing activities: | |||||||
Payment of loan costs | (14,673 | ) | (11,846 | ) | |||
Proceeds from credit facilities | 679,872 | 514,065 | |||||
Repayment of credit facilities | (732,857 | ) | (228,175 | ) | |||
Proceeds from senior secured notes | 288,645 | — | |||||
Repayment of senior secured notes | (7,500 | ) | (6,250 | ) | |||
Proceeds from issuance of convertible senior notes | 161,000 | 150,000 | |||||
Proceeds from issuance of securitized notes | 134,000 | — | |||||
Repayment of securitized notes | (8,793 | ) | — | ||||
Proceeds from issuance of preferred equity certificates | 20,596 | — | |||||
Repayment of preferred equity certificates | (6,297 | ) | — | ||||
Purchases of convertible hedge instruments | (33,576 | ) | (15,750 | ) | |||
Repurchase of common stock | (16,815 | ) | (729 | ) | |||
Taxes paid related to net share settlement of equity awards | (18,375 | ) | (8,420 | ) | |||
Excess tax benefit from stock-based payment arrangements | 10,756 | 3,848 | |||||
Other, net | 1,859 | (610 | ) | ||||
Net cash provided by financing activities | 457,842 | 396,133 | |||||
Net increase in cash and cash equivalents | 1,496 | 204,661 | |||||
Effect of exchange rate changes on cash | (4,302 | ) | — | ||||
Cash and cash equivalents, beginning of period | 126,213 | 17,510 | |||||
Cash and cash equivalents, end of period | $ | 123,407 | $ | 222,171 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid for interest | $ | 54,672 | $ | 12,537 | |||
Cash paid for income taxes | 37,805 | 40,513 | |||||
Supplemental schedule of non-cash investing and financing activities: | |||||||
Fixed assets acquired through capital lease | $ | 3,766 | $ | 1,189 |
Three Months Ended June 30, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
$ | Per Diluted Share— Accounting | Per Diluted Share— Economic | $ | Per Diluted Share— Accounting | Per Diluted Share— Economic | ||||||||||||||||||
GAAP net income attributable to Encore, as reported | $ | 23,561 | $ | 0.86 | $ | 0.89 | $ | 11,012 | $ | 0.44 | $ | 0.44 | |||||||||||
Adjustments: | |||||||||||||||||||||||
Convertible notes non-cash interest and issuance cost amortization, net of tax | 1,694 | 0.06 | 0.06 | 529 | 0.02 | 0.02 | |||||||||||||||||
Acquisition and integration related expenses, net of tax | 3,836 | 0.14 | 0.15 | 7,509 | 0.30 | 0.30 | |||||||||||||||||
Acquisition related other expenses, net of tax | — | — | — | 2,198 | 0.09 | 0.09 | |||||||||||||||||
Adjusted income attributable to Encore | $ | 29,091 | $ | 1.06 | $ | 1.10 | $ | 21,248 | $ | 0.85 | $ | 0.85 |
Six Months Ended June 30, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
$ | Per Diluted Share— Accounting | Per Diluted Share— Economic | $ | Per Diluted Share— Accounting | Per Diluted Share— Economic | ||||||||||||||||||
GAAP net income attributable to Encore, as reported | $ | 46,741 | $ | 1.68 | $ | 1.76 | $ | 30,460 | $ | 1.24 | $ | 1.24 | |||||||||||
Adjustments: | |||||||||||||||||||||||
Convertible notes non-cash interest and issuance cost amortization, net of tax | 2,985 | 0.11 | 0.11 | 1,000 | 0.04 | 0.04 | |||||||||||||||||
Acquisition and integration related expenses, net of tax | 8,194 | 0.29 | 0.31 | 8,284 | 0.33 | 0.33 | |||||||||||||||||
Acquisition related other expenses, net of tax | — | — | — | 2,198 | 0.09 | 0.09 | |||||||||||||||||
Adjusted income attributable to Encore | $ | 57,920 | $ | 2.08 | $ | 2.18 | $ | 41,942 | $ | 1.70 | $ | 1.70 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
GAAP net income, as reported | $ | 21,353 | $ | 11,012 | $ | 40,183 | $ | 30,460 | |||||||
Adjustments: | |||||||||||||||
Interest expense | 43,218 | 7,482 | 81,180 | 14,336 | |||||||||||
Provision for income taxes | 14,010 | 7,267 | 25,752 | 19,838 | |||||||||||
Depreciation and amortization | 6,829 | 2,158 | 12,946 | 4,004 | |||||||||||
Amount applied to principal on receivable portfolios | 161,048 | 126,364 | 320,154 | 255,851 | |||||||||||
Stock-based compensation expense | 4,715 | 2,179 | 9,551 | 5,180 | |||||||||||
Acquisition and integration related expenses | 4,645 | 12,403 | 15,726 | 13,679 | |||||||||||
Acquisition related other expenses | — | 3,630 | — | 3,630 | |||||||||||
Adjusted EBITDA | $ | 255,818 | $ | 172,495 | $ | 505,492 | $ | 346,978 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
GAAP total operating expenses, as reported | $ | 190,689 | $ | 126,238 | $ | 376,161 | $ | 232,110 | |||||||
Adjustments: | |||||||||||||||
Stock-based compensation expense | (4,715 | ) | (2,179 | ) | (9,551 | ) | (5,180 | ) | |||||||
Operating expenses related to non-portfolio purchasing and recovery business | (26,409 | ) | (6,367 | ) | (46,241 | ) | (11,641 | ) | |||||||
Acquisition and integration related expenses | (4,645 | ) | (12,403 | ) | (15,726 | ) | (13,679 | ) | |||||||
Adjusted operating expenses | $ | 154,920 | $ | 105,289 | $ | 304,643 | $ | 201,610 |
QC]3S6?=^);^YR$<0IZ)U_.J%W;M:7(J?#MZ'+*I+8ZGP MQ?VR1.D]Q_I,C9/F'KZ 7FKMGK=]88$,Q*#^!^1710QO(E&2-(5K*S M/0G174JZAE/!!&0:Y?5OAOX?U5FD^RFUE;J]N=N3].E.M/&D9P+RW9?]J,Y' MY5KVVO:==8\NZ0'T;Y3^M>A3Q,'\,C;FA,\\O/@TV2;'51CL)H_ZBLN7X1:X MA_=SV<@]=Y']*]F5T<91E8>H-+BNI5Y]Q>Q@SQ:/X1Z\S8>6S0>N\G^E=!HG MPBM[:=)M7N_M(4Y\F,;5/U/4BO2,44W6FP5&"(U141410JJ,`#H!28J3%)BL MC4CQ0!\P^M5;W5['3U+7-S&I'\(.3^59>D:T^OZV?LZ-'9VREOFZNQX&?UK- MU8I\O4ER5['35!]LB_V_^^#_`(5.*6K**YNX3P0Y'_7,_P"%(+J!?NJP^D9_ MPJ P%\XV[Q2 "0;V`$<8\P4FTMP)?MD7^W_`-\'_"C[9%_M_P#?!_PJ975D#JP*D9R#QBF) M #Q^=.Z`9]LB_P!O_O@_X4?;(O\`;_[X/^%0_P!LZ=_S_6__ M`'\%6H9XKB,20R+(AZ,IR*2DGL%R(W<)ZAS]8S_A0+J!?NAA](S_`(5(ES#) M,\22HTB?>4'D?6GLP12S$!0,DGM3N!#]LB_V_P#O@_X4?;(O]O\`[X/^%2Q2 MI-&LD3!T89#`Y!IU`$'VR+_;_P"^#_A2&Z@;[P8_6,_X58JG+J^GPR^7)>0* M_3:7&:3:6X,D%W"O0.![1G_"E^V1?[?_`'P?\*E5U=0R,&4\@@Y!JJ=8T\$@ MWL`(XQY@H &VO\`2Q<"39*Q.T'H17D8G#R=5\JWU.2I M3;GH8!IIJW>Z? :8U"`5+B:$YBED0 M_P"RQ%68]>U.+[E]-CT)S_.J1IAK13DMF4FT:P\6:NO'VK/U04'Q?K&/^/A? M^_8K':F&K5:? SN/3>:JFFX)(` M!)/0"G[2;W8N9L#ECW9C^9KTWPII!TK25$BXGF^>3V]!6-X6\*M'(E_J*8(Y MBB/;W-=I7=A:+C[\CHI0MJQ:***[38Y_Q=(PLK:(NT<$UPJ3,#C"U;?0=(-H M(VLX!$!][]NK6&]MW@N(Q)$XP5-9`\(V/"M+=/".D33';^592B^:]KD M-:FM+-%96;2.0L4*9/L`*X)KX,QUC,W]H>?O5/+;;Y73;GITKN;[38=0LOLD MVX0\953C(':K`B01",*-@&W;VQ2G!S"46R.UNH[VSCN(3E)$W`UQ6CM;_P!G MRI)HDMXYED_>K&"#STS78Z?IT.F6QM[ Q\.I#<@K(`QV$YV@Y(%1^$D5_#,",`58N"#W&XUM MLH92IZ$8JOI]A%IMHEM;[O+3.-QR>>:I0LT.VI@7NF62>*].A6TA$3Q2%D"# M!_"MF]N+?0])EE2-(XXQ\J*,`D]!^=2RZ=#-J,%ZV[SH5*ISQ@]:2_TV#4?) M%QN*Q.)`H/!(Z9I*#5[!:U['$6M['ILUKJ>Z=KJ1S]L#1L`58^O3BNWOW632 M;AT(*M"Q!'<8J:XMX[JVD@F4-'(I5A[5#!IT5OIPLE+F$(4&XY./K2A3<;H2 MBT5?#/\`R+=C_P! XK#/A*R!80S74,3')BCE(7\JBI!MW0I)D_AN>&XT9#;6YMXU9D$9 M;=C!]:YG2YK6WTJ9[C17NE620M,$!&,^O6NTLK*"PM5M[9`D2]!3+'3H-.M3 M;P@F,LS$,<]>M)TV[`XMV*'A6W>VT%-Q4B1FD15;(53T&:H^&K"TU&">]O8T MN+QY6$GF#.S!X&.U;FGZ;#ID;QVQ<1LQ;83D*3Z>E5+OPW9W-TUQ&TUM,_WV M@ DR6$<))E=E";ACI@ M=:ZNBEK2$.4I*P44458PHHHH`1@&4@]#38HEAC6.,!548`%%%(`DB25"LBJR MGL1FL6\\)V-SEHMT#'^[R/RHHJ)TXS7O(EQ3W,6Y\'WL>3`\ I0 M$[[.7`[J,_RHHKCJX6G%71C*E%%*2VGC_P!9#(OU4BH#117!)69@U8;L9S\J MDGV&:GBTJ_N,>39SMGOL-%%:4X*3U'%7-6S\$ZC G2P\(:I'7&G%&S2T45T%A1110`4444`%%%%`!11 M10`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%% $`'__V3\_ ` end