Encore Capital Group Announces Fourth Quarter and Full Year 2012 Financial Results -- SAN DIEGO, Feb. 13, 2013 /PRNewswire/ -- SAN DIEGO, Feb. 13, 2013 /PRNewswire/ -- Encore Capital Group, Inc. (Nasdaq: ECPG), through its subsidiaries (the "Company"), a leading provider of debt management and recovery solutions for consumers and property owners across a broad range of assets, today reported consolidated financial results for the fourth quarter and full year ended December 31, 2012. "2012 was an exceptional year for Encore," said Brandon Black, the Company's President and Chief Executive Officer. We delivered record earnings, record collections and record operating cash flow, even as we made investments to strengthen our core business and expand our services for financially stressed consumers through the acquisition of Propel Financial Services. We believe that these strategic investments, combined with our analytic strength and our disciplined approach to deploying capital, position us well in an increasingly complex business and regulatory environment. For the Fourth Quarter of 2012: Gross collections from the portfolio purchasing and recovery business were $230.5 million, a 24% increase over the $185.9 million in the same period of the prior year. Investment in receivable portfolios in the portfolio purchasing and recovery business was $153.6 million, to purchase $8.5 billion in face value of debt, compared to $136.7 million, to purchase $3.8 billion in face value of debt in the same period of the prior year. Available capacity under the Encore Capital Group revolving credit facility, subject to borrowing base and applicable debt covenants, was $187.0 million as of December 31, 2012. Total debt, consisting of the Encore revolving credit and term loan facility, the Propel facility, the senior secured notes, and capital lease obligations, was $706.0 million as of December 31, 2012, compared to $389.0 million as of December 31, 2011. Revenue from receivable portfolios in the portfolio purchasing and recovery business, net of allowance adjustments, was $139.6 million, a 20% increase over the $116.5 million in the same period of the prior year. Revenue recognized on receivable portfolios, as a percentage of portfolio collections, excluding the effects of net portfolio allowances, decreased to approximately 59% from 64% in the same period of the prior year. Total operating expenses were $103.9 million, a 24% increase over the $83.6 million in the same period of the prior year. Adjusted operating expense per dollar collected for the portfolio purchasing and recovery business decreased to 43.2% compared to 44.1% 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 $134.7 million, a 28% increase over the $105.0 million in the same period of the prior year. Total interest expense for the portfolio purchasing and recovery segment increased to $6.5 million, as compared to $5.0 million in the same period of the prior year. Income from continuing operations was $20.2 million, or $0.79 per fully diluted share, compared to income from continuing operations of $17.2 million, or $0.67 per fully diluted share in the same period of the prior year. For the full year of 2012: Gross collections were $948.1 million, a 25% increase over the $761.2 million in 2011. Investment in receivable portfolios in the portfolio purchasing and recovery business was $562.3 million, to purchase $18.5 billion in face value of debt, compared to $386.9 million, to purchase $11.7 billion in face value of debt in 2011. Revenue from receivable portfolios in the portfolio purchasing and recovery business, net of allowance adjustments, was $545.4 million, a 22% increase over the $448.7 million in 2011. Total operating expenses were $401.7 million, a 22% increase over the $328.6 million 2011. Adjusted operating expenses for the portfolio purchasing and recovery business per dollar collected decreased to 40.4% compared to 42.2% in 2011. Adjusted EBITDA was $577.4 million, a 30% increase over the $443.9 million in 2011. Income from continuing operations was $78.6 million or $3.04 per fully diluted share, compared to income from continuing operations of $60.6 million or $2.36 per fully diluted share in 2011. Total stockholders' equity per share, excluding the effects of discontinued operations, was $16.06 at December 31, 2012, an 11% increase over $14.45 at December 31, 2011. The Company will hold a conference call today at 2:00 p.m. Pacific time / 5:00 p.m. Eastern time to discuss fourth quarter and full year results. Members of the public are invited to listen to the event via a listen-only telephone conference call line or the Internet. To access the live telephone conference call, please dial (877) 670-9781 or (408) 940-3818. The Conference ID is 90236787. To access the live webcast via the Internet, log on at the Investors page of the Company's website at www.encorecapital.com. The Company has included information concerning non-GAAP financial measures, including adjusted earnings per share, because management believes that investors regularly rely on non-GAAP adjusted earnings and adjusted earnings per share, to assess operating performance, in order to highlight trends in the Company's business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. The Company has also 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. Additionally, the Company has included information related to adjusted operating expenses for the portfolio purchasing and recovery business, in order to facilitate a comparison of approximate cash costs to cash collections for the portfolio purchasing and recovery 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 the Company's operating performance. Further, these non-GAAP financial measures, as presented by the Company, may not be comparable to similarly titled measures reported by other companies. The Company has included a reconciliation of adjusted earnings per share to reported earnings under GAAP, a reconciliation of adjusted EBITDA to reported earnings under GAAP, a reconciliation of adjusted operating expenses for the portfolio purchasing and recovery business to the GAAP measure total operating expenses, and a reconciliation of adjusted stockholders' equity per share to reported stockholders' equity under GAAP in the attached financial tables. About Encore Capital Group, Inc. Encore Capital Group is a leading provider of debt management and recovery solutions for consumers and property owners across a broad range of assets. Through its subsidiaries, the Company purchases portfolios of consumer receivables from major banks, credit unions, and utility providers, and partners with individuals as they repay their obligations and work toward financial recovery. Through its Propel Financial Services, LLC subsidiary, the Company assists property owners who are delinquent on their property taxes by structuring affordable monthly payment plans. Headquartered in San Diego, Encore Capital Group is a publicly traded NASDAQ Global Select company (ticker symbol: ECPG) and a component stock of the Russell 2000, the S&P SmallCap 600, and the Wilshire 4500. More information about the Company can be found at www.encorecapital.com. The Company's website and the information contained therein, is not incorporated into and is not a part of this press release. 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 our future operating results, performance, business plans or prospects. 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 in the reports filed by the Company with the Securities and Exchange Commission, including the most recent reports on Forms 10-K, 10-Q and 8-K, each as it may be amended from time to time. The Company disclaims any intent or obligation to update these forward-looking statements. Encore Capital Group, Inc. Paul Grinberg (858) 309-6904 paul.grinberg@encorecapital.com Adam Sragovicz (858) 309-9509 adam.sragovicz@encorecapital.com In Thousands, Except Par Value Amounts Investment in receivable portfolios, net Deferred court costs, net Property tax payment agreements receivable, net Identifiable intangible assets, net Liabilities and stockholders' equity Deferred tax liabilities, net Convertible preferred stock, $.01 par value, 5,000 shares authorized, no shares issued and outstanding Common stock, $.01 par value, 50,000 shares authorized, 23,191 shares and 24,520 shares issued and outstanding as of December 31, 2012 and December 31, 2011, respectively Accumulated earnings Consolidated Statements of Comprehensive Income In Thousands, Except Per Share Amounts Revenue from receivable portfolios, net Tax lien transfer Cost of legal collections Collection agency commissions Other (expense) income Total other expense (Loss) income from discontinued operations, net of tax Basic earnings (loss) per share from: Net basic earnings per share Diluted earnings (loss) per share from: Net diluted earnings per share Other comprehensive (loss) gain: Unrealized (loss) gain on derivative instruments Income tax benefit (provision) related to unrealized (loss) gain on derivative instruments Other comprehensive (loss) gain, net of tax Consolidated Statements of Cash Flows In Thousands Impairment charge for goodwill and identifiable intangible assets Amortization of loan costs and premium on property tax payment agreements receivable Income tax provision (less than) in excess of income tax payments Excess tax benefit from stock-based payment arrangements Loss on sale of discontinued operations (Reversal) provision for allowances on receivable portfolios, net Changes in operating assets and liabilities Deferred court costs Prepaid income tax and income taxes payable Accounts payable, accrued liabilities and other liabilities Cash paid for acquisition, net of cash acquired Purchases of receivable portfolios Collections applied to investment in receivable portfolios, net Proceeds from put-backs of receivable portfolios Originations of property tax payment agreements receivable Collections applied to property tax payment agreements receivable, net Payment of loan costs Proceeds from senior secured notes Repayment of senior secured notes Proceeds from revolving credit facility and term loan facility Repayment of revolving credit facility and term loan facility Proceeds from issuance of convertible notes Repayment of convertible notes Purchases of convertible hedge instruments Proceeds from sale of warrants Proceeds from net settlement of certain call options Taxes paid related to net share settlement of equity awards Repayment of capital lease obligations Supplemental schedule of non-cash investing and financing activities: Fixed assets acquired through capital lease Supplemental Financial Information Reconciliation of Adjusted Earnings From Continuing Operations to GAAP Net Income From Continuing Operations, Adjusted EBITDA to GAAP Net Income, Adjusted Operating Expenses For The Portfolio Purchasing And Recovery Business to GAAP Total Operating Expenses, and Adjusted Stockholders' Equity Per Share to GAAP Total Stockholders' Equity (In Thousands, Except Per Share amounts) (Unaudited) GAAP net income from continuing operations, as reported Adjustment: Convertible notes non-cash interest and issuance cost amortization, net of tax Adjusted earnings from continuing operations GAAP net income, as reported Loss (income) from discontinued operations, net of tax Amount applied to principal on receivable portfolios Acquisition related expenses GAAP total operating expenses, as reported Tax lien transfer segment operating expenses Adjusted operating expenses for the portfolio purchasing and recovery business GAAP stockholders' equity, as reported Effect of discontinued operations Adjusted stockholders' equity Diluted shares outstanding Adjusted stockholders' equity per share SOURCE Encore Capital Group, Inc. 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