EX-99.1 2 exhibit991-proformafinanci.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1


Unaudited Pro Forma Condensed Consolidated Financial Information
The following unaudited pro forma condensed consolidated financial statements are based on the historical consolidated financial statements of Encore Capital Group, Inc. (the “Company”) and are adjusted to give effect to the divestiture of Propel Acquisition LLC (“Propel”) on March 31, 2016. The unaudited pro forma condensed consolidated statement of financial condition as of December 31, 2015 gives effect to the divestiture of Propel as if it had occurred on December 31, 2015. The unaudited pro forma condensed consolidated statements of income for the years ended December 31, 2015, 2014 and 2013 give effect to the divestiture of Propel as if it had occurred on January 1, 2013. The pro forma condensed consolidated financial statements do not necessarily reflect what the consolidated company’s financial condition or results of operations would have been had the divestiture occurred on the dates indicated. They also may not be useful in predicting the Company’s future financial condition and results of operations. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. Beginning in the first quarter of fiscal 2016, the historical financial results of the Propel tax lien business for periods prior to the divestiture will be reflected in the Company’s consolidated financial statements as discontinued operations.
The unaudited pro forma consolidated financial statements should be read in conjunction with the historical consolidated financial statements and notes thereto in the Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
ENCORE CAPITAL GROUP, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Financial Condition as of December 31, 2015
(In Thousands)

 
Historical Financial Statement
 
Pro Forma Adjustments
 
Pro Forma Financial Statement
Assets
 
 
 
 
 
Cash and cash equivalents
$
153,593

 
$
113,157

(a)
$
266,750

Investment in receivable portfolios, net
2,440,669

 
—

 
2,440,669

Receivables secured by property tax liens, net
306,380

 
(306,380
)
(b)
—

Property and equipment, net
73,504

 
(958
)
(b)
72,546

Deferred court costs, net
75,239

 
—

 
75,239

Other assets
245,620

 
(41,530
)
(b)
204,090

Goodwill
924,847

 
—

 
924,847

Total assets
$
4,219,852

 
$
(235,711
)
 
$
3,984,141

Liabilities and equity
 
 
 
 
 
Liabilities:
 
 
 
 
 
Accounts payable and accrued liabilities
$
294,243

 
$
(3,599
)
(c)
$
290,644

Debt
3,216,572

 
(230,854
)
(b)
2,985,718

Other liabilities
60,549

 
(1,323
)
(b)
59,226

Total liabilities
3,571,364

 
(235,776
)
 
3,335,588

Commitments and contingencies
 
 
 
 
 
Redeemable noncontrolling interest
38,624

 
—

 
38,624

Redeemable equity component of convertible senior notes
6,126

 
—

 
6,126

Equity:
 
 
 
 
 
Convertible preferred stock
—

 
—

 
—

Common stock
253

 
—

 
253

Additional paid-in capital
110,533

 
—

 
110,533

Accumulated earnings
543,489

 
65

(d)
543,554

Accumulated other comprehensive loss
(57,822
)
 
—

 
(57,822
)
Total Encore Capital Group, Inc. stockholders’ equity
596,453

 
65

 
596,518

Noncontrolling interest
7,285

 
—

 
7,285

Total equity
603,738

 
65

 
603,803

Total liabilities, redeemable equity and equity
$
4,219,852

 
$
(235,711
)
 
$
3,984,141

See accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements



ENCORE CAPITAL GROUP, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Income For The Year Ended December 31, 2015
(In Thousands, Except Per Share Amounts)

 
Historical Financial Statement
 
Pro Forma Adjustments (e)
 
Pro Forma Financial Statement
Revenues
 
 
 
 
 
Revenue from receivable portfolios, net
$
1,072,436

 
$
—

 
$
1,072,436

Other revenues
60,696

 
(3,165
)
 
57,531

Net interest income
28,440

 
(28,440
)
 
—

Total revenues
1,161,572

 
(31,605
)
 
1,129,967

Operating expenses
 
 
 
 
 
Salaries and employee benefits
270,334

 
(8,053
)
 
262,281

Cost of legal collections
229,847

 
—

 
229,847

Other operating expenses
98,182

 
(4,972
)
 
93,210

Collection agency commissions
37,858

 
—

 
37,858

General and administrative expenses
196,827

 
(5,470
)
 
191,357

Depreciation and amortization
33,945

 
(785
)
 
33,160

Goodwill impairment
49,277

 
(49,277
)
 
—

Total operating expenses
916,270

 
(68,557
)
 
847,713

Income from operations
245,302

 
36,952

 
282,254

Other (expense) income
 
 
 
 
 
Interest expense
(186,556
)
 
—

 
(186,556
)
Other income
2,235

 
—

 
2,235

Total other expense
(184,321
)
 
—

 
(184,321
)
Income before income taxes
60,981

 
36,952

 
97,933

Provision for income taxes
(13,597
)
 
(13,565
)
 
(27,162
)
Net income
47,384

 
23,387

 
70,771

Net income attributable to noncontrolling interest
(2,249
)
 
—

 
(2,249
)
Net income attributable to Encore Capital Group, Inc. stockholders
$
45,135

 
$
23,387

 
$
68,522

 
 
 
 
 
 
Earnings per share attributable to Encore Capital Group, Inc.:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
1.75

 
$
0.91

 
$
2.66

Diluted
$
1.69

 
$
0.88

 
$
2.57

 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic
25,722

 
25,722

 
25,722

Diluted
26,647

 
26,647

 
26,647

See accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements




ENCORE CAPITAL GROUP, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Income For The Year Ended December 31, 2014
(In Thousands, Except Per Share Amounts)

 
Historical Financial Statement
 
Pro Forma Adjustments (e)
 
Pro Forma Financial Statement
Revenues
 
 
 
 
 
Revenue from receivable portfolios, net
$
992,832

 
$
—

 
$
992,832

Other revenues
51,988

 
(1,391
)
 
50,597

Net interest income
27,969

 
(27,969
)
 
—

Total revenues
1,072,789

 
(29,360
)
 
1,043,429

Operating expenses
 
 
 
 
 
Salaries and employee benefits
246,247

 
(7,305
)
 
238,942

Cost of legal collections
205,661

 
—

 
205,661

Other operating expenses
93,859

 
(3,925
)
 
89,934

Collection agency commissions
33,343

 
—

 
33,343

General and administrative expenses
146,286

 
(6,309
)
 
139,977

Depreciation and amortization
27,949

 
(848
)
 
27,101

Total operating expenses
753,345

 
(18,387
)
 
734,958

Income from operations
319,444

 
(10,973
)
 
308,471

Other (expense) income
 
 
 
 
 
Interest expense
(166,942
)
 
—

 
(166,942
)
Other income
113

 
—

 
113

Total other expense
(166,829
)
 
—

 
(166,829
)
Income before income taxes
152,615

 
(10,973
)
 
141,642

Provision for income taxes
(52,725
)
 
4,156

 
(48,569
)
Income from continuing operations
99,890

 
(6,817
)
 
93,073

Loss from discontinued operations, net of tax
(1,612
)
 
—

 
(1,612
)
Net income
98,278

 
(6,817
)
 
91,461

Net loss attributable to noncontrolling interest
5,448

 
—

 
5,448

Net income attributable to Encore Capital Group, Inc. stockholders
$
103,726

 
$
(6,817
)
 
$
96,909

Amounts attributable to Encore Capital Group, Inc.:
 
 
 
 
 
Income from continuing operations
$
105,338

 
$
(6,817
)
 
$
98,521

Loss from discontinued operations, net of tax
(1,612
)
 
—

 
(1,612
)
Net income
$
103,726

 
$
(6,817
)
 
$
96,909

 
 
 
 
 
 
Earnings per share attributable to Encore Capital Group, Inc.:
 
 
 
 
 
 
 
 
 
 
 
Basic earnings (loss) per share from:
 
 
 
 
 
Continuing operations
$
4.07

 
$
(0.26
)
 
$
3.81

Discontinued operations
$
(0.06
)
 
$
—

 
$
(0.06
)
Basic
$
4.01

 
$
(0.26
)
 
$
3.75

Diluted earnings (loss) per share from:
 
 
 
 
 
Continuing operations
$
3.83

 
$
(0.25
)
 
$
3.58

Discontinued operations
$
(0.06
)
 
$
—

 
$
(0.06
)
Diluted
$
3.77

 
$
(0.25
)
 
$
3.52

 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic
25,853

 
25,853

 
25,853

Diluted
27,495

 
27,495

 
27,495

See accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements



ENCORE CAPITAL GROUP, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Income For The Year Ended December 31, 2013
(In Thousands, Except Per Share Amounts)

 
Historical Financial Statement
 
Pro Forma Adjustments (e)
 
Pro Forma Financial Statement
Revenues
 
 
 
 
 
Revenue from receivable portfolios, net
$
744,870

 
$
—

 
$
744,870

Other revenues
12,588

 
(1,181
)
 
11,407

Net interest income
15,906

 
(15,906
)
 
—

Total revenues
773,364

 
(17,087
)
 
756,277

Operating expenses
 
 
 
 
 
Salaries and employee benefits
165,040

 
(5,721
)
 
159,319

Cost of legal collections
186,959

 
—

 
186,959

Other operating expenses
66,649

 
(3,420
)
 
63,229

Collection agency commissions
33,097

 
—

 
33,097

General and administrative expenses
109,713

 
(2,900
)
 
106,813

Depreciation and amortization
13,547

 
(490
)
 
13,057

Total operating expenses
575,005

 
(12,531
)
 
562,474

Income from operations
198,359

 
(4,556
)
 
193,803

Other (expense) income
 
 
 
 
 
Interest expense
(73,269
)
 
—

 
(73,269
)
Other expense
(4,222
)
 
(3
)
 
(4,225
)
Total other expense
(77,491
)
 
(3
)
 
(77,494
)
Income before income taxes
120,868

 
(4,559
)
 
116,309

Provision for income taxes
(45,388
)
 
1,735

 
(43,653
)
Income from continuing operations
75,480

 
(2,824
)
 
72,656

Loss from discontinued operations, net of tax
(1,740
)
 
—

 
(1,740
)
Net income
73,740

 
(2,824
)
 
70,916

Net loss attributable to noncontrolling interest
1,559

 
—

 
1,559

Net income attributable to Encore Capital Group, Inc. stockholders
$
75,299

 
$
(2,824
)
 
$
72,475

Amounts attributable to Encore Capital Group, Inc.:
 
 
 
 
 
Income from continuing operations
$
77,039

 
$
(2,824
)
 
$
74,215

Loss from discontinued operations, net of tax
(1,740
)
 
—

 
(1,740
)
Net income
$
75,299

 
$
(2,824
)
 
$
72,475

 
 
 
 
 
 
Earnings per share attributable to Encore Capital Group, Inc.:
 
 
 
 
 
 
 
 
 
 
 
Basic earnings (loss) per share from:
 
 
 
 
 
Continuing operations
$
3.12

 
$
(0.11
)
 
$
3.01

Discontinued operations
$
(0.07
)
 
$
—

 
$
(0.07
)
Basic
$
3.05

 
$
(0.11
)
 
$
2.94

Diluted earnings (loss) per share from:
 
 
 
 
 
Continuing operations
$
2.94

 
$
(0.11
)
 
$
2.83

Discontinued operations
$
(0.07
)
 
$
—

 
$
(0.06
)
Diluted
$
2.87

 
$
(0.11
)
 
$
2.77

 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic
24,659

 
24,659

 
24,659

Diluted
26,204

 
26,204

 
26,204

See accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements



Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements


The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed consolidated financial information:
 
Adjustments to the pro forma condensed consolidated statement of financial condition

(a) Represents net cash received on sale less cash held at Propel which will transfer to buyer. The Company expects to use the proceeds to pay down the revolving credit facility and for general corporate purposes.

(b) Reflects the elimination of Propel’s historical assets and liabilities.

(c) Reflects the elimination of Propel’s historical accounts payable and accrued liabilities and adjustment for income taxes payable related to gain on sale.

(d) Represents the estimated gain on sale of Propel, less estimated income taxes payable. The actual gain to be recognized will be adjusted by the actual closing adjustments and actual transaction fees incurred. This estimated gain has not been reflected in the pro forma consolidated statement of income as it is considered to be nonrecurring in nature. No adjustment has been made to the sale proceeds to give effect to any potential post-closing adjustments under the terms of the purchase agreement.

Adjustments to the pro forma condensed consolidated statements of income

(e) Represents the elimination of Propel’s historical operating results for the periods presented. The anticipated nonrecurring after-tax gain on the sale is not reflected in the pro forma condensed consolidated statements of income.