|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
48-1090909
|
(State or other jurisdiction of
incorporation or organization)
|
(IRS Employer
Identification No.)
|
|
|
3111 Camino Del Rio North, Suite 103
San Diego, California
|
92108
|
(Address of principal executive offices)
|
(Zip code)
|
Class
|
|
Outstanding at October 28, 2014
|
Common Stock, $0.01 par value
|
|
25,719,591 shares
|
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
115,440
|
|
|
$
|
126,213
|
|
Investment in receivable portfolios, net
|
2,073,232
|
|
|
1,590,249
|
|
||
Deferred court costs, net
|
53,130
|
|
|
41,219
|
|
||
Receivables secured by property tax liens, net
|
276,081
|
|
|
212,814
|
|
||
Property and equipment, net
|
64,565
|
|
|
55,783
|
|
||
Other assets
|
218,119
|
|
|
154,783
|
|
||
Goodwill
|
921,519
|
|
|
504,213
|
|
||
Total assets
|
$
|
3,722,086
|
|
|
$
|
2,685,274
|
|
Liabilities and equity
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Accounts payable and accrued liabilities
|
$
|
192,309
|
|
|
$
|
137,272
|
|
Debt
|
2,790,746
|
|
|
1,850,431
|
|
||
Other liabilities
|
98,864
|
|
|
95,100
|
|
||
Total liabilities
|
3,081,919
|
|
|
2,082,803
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
Redeemable noncontrolling interest
|
30,280
|
|
|
26,564
|
|
||
Redeemable equity component of convertible senior notes
|
9,787
|
|
|
—
|
|
||
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, 25,720 shares and 25,457 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively
|
257
|
|
|
255
|
|
||
Additional paid-in capital
|
121,491
|
|
|
171,819
|
|
||
Accumulated earnings
|
471,704
|
|
|
394,628
|
|
||
Accumulated other comprehensive gain
|
3,274
|
|
|
5,195
|
|
||
Total Encore Capital Group, Inc. stockholders’ equity
|
596,726
|
|
|
571,897
|
|
||
Noncontrolling interest
|
3,374
|
|
|
4,010
|
|
||
Total equity
|
600,100
|
|
|
575,907
|
|
||
Total liabilities, redeemable equity and equity
|
$
|
3,722,086
|
|
|
$
|
2,685,274
|
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
34,261
|
|
|
$
|
62,403
|
|
Investment in receivable portfolios, net
|
1,008,885
|
|
|
620,312
|
|
||
Deferred court costs, net
|
9,407
|
|
|
—
|
|
||
Receivables secured by property tax liens, net
|
116,980
|
|
|
—
|
|
||
Property and equipment, net
|
13,491
|
|
|
13,755
|
|
||
Other assets
|
89,911
|
|
|
33,772
|
|
||
Goodwill
|
695,825
|
|
|
376,296
|
|
||
Liabilities
|
|
|
|
||||
Accounts payable and accrued liabilities
|
$
|
104,200
|
|
|
$
|
47,219
|
|
Debt
|
1,622,302
|
|
|
846,676
|
|
||
Other liabilities
|
6,885
|
|
|
1,897
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
Revenue from receivable portfolios, net
|
$
|
251,785
|
|
|
$
|
225,387
|
|
|
$
|
737,584
|
|
|
$
|
518,094
|
|
Other revenues
|
13,445
|
|
|
5,792
|
|
|
38,943
|
|
|
6,473
|
|
||||
Net interest income
|
8,052
|
|
|
4,379
|
|
|
19,691
|
|
|
11,698
|
|
||||
Total revenues
|
273,282
|
|
|
235,558
|
|
|
796,218
|
|
|
536,265
|
|
||||
Operating expenses
|
|
|
|
|
|
|
|
||||||||
Salaries and employee benefits
|
61,175
|
|
|
52,253
|
|
|
183,667
|
|
|
114,054
|
|
||||
Cost of legal collections
|
53,742
|
|
|
50,953
|
|
|
153,596
|
|
|
137,694
|
|
||||
Other operating expenses
|
22,061
|
|
|
19,056
|
|
|
72,196
|
|
|
46,118
|
|
||||
Collection agency commissions
|
9,517
|
|
|
14,158
|
|
|
25,275
|
|
|
22,717
|
|
||||
General and administrative expenses
|
35,532
|
|
|
33,486
|
|
|
110,508
|
|
|
77,429
|
|
||||
Depreciation and amortization
|
6,933
|
|
|
4,523
|
|
|
19,879
|
|
|
8,527
|
|
||||
Total operating expenses
|
188,960
|
|
|
174,429
|
|
|
565,121
|
|
|
406,539
|
|
||||
Income from operations
|
84,322
|
|
|
61,129
|
|
|
231,097
|
|
|
129,726
|
|
||||
Other expense
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(43,498
|
)
|
|
(29,186
|
)
|
|
(124,678
|
)
|
|
(43,522
|
)
|
||||
Other expense
|
(532
|
)
|
|
(299
|
)
|
|
(192
|
)
|
|
(4,262
|
)
|
||||
Total other expense
|
(44,030
|
)
|
|
(29,485
|
)
|
|
(124,870
|
)
|
|
(47,784
|
)
|
||||
Income before income taxes
|
40,292
|
|
|
31,644
|
|
|
106,227
|
|
|
81,942
|
|
||||
Provision for income taxes
|
(10,154
|
)
|
|
(10,272
|
)
|
|
(35,906
|
)
|
|
(30,110
|
)
|
||||
Income from continuing operations
|
30,138
|
|
|
21,372
|
|
|
70,321
|
|
|
51,832
|
|
||||
Loss from discontinued operations, net of tax
|
—
|
|
|
(308
|
)
|
|
—
|
|
|
(308
|
)
|
||||
Net income
|
30,138
|
|
|
21,064
|
|
|
70,321
|
|
|
51,524
|
|
||||
Net loss attributable to noncontrolling interest
|
197
|
|
|
822
|
|
|
6,755
|
|
|
822
|
|
||||
Net income attributable to Encore Capital Group, Inc. stockholders
|
$
|
30,335
|
|
|
$
|
21,886
|
|
|
$
|
77,076
|
|
|
$
|
52,346
|
|
Amounts attributable to Encore Capital Group, Inc.:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
30,335
|
|
|
$
|
22,194
|
|
|
$
|
77,076
|
|
|
$
|
52,654
|
|
Loss from discontinued operations, net of tax
|
—
|
|
|
(308
|
)
|
|
—
|
|
|
(308
|
)
|
||||
Net income
|
$
|
30,335
|
|
|
$
|
21,886
|
|
|
$
|
77,076
|
|
|
$
|
52,346
|
|
Earnings per share attributable to Encore Capital Group, Inc.:
|
|
|
|
|
|
|
|
||||||||
Basic earnings (loss) per share from:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.17
|
|
|
$
|
0.87
|
|
|
$
|
2.99
|
|
|
$
|
2.16
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
Basic
|
$
|
1.17
|
|
|
$
|
0.86
|
|
|
$
|
2.99
|
|
|
$
|
2.15
|
|
Diluted earnings (loss) per share from:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.11
|
|
|
$
|
0.82
|
|
|
$
|
2.79
|
|
|
$
|
2.06
|
|
Discontinued operations
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
Diluted
|
$
|
1.11
|
|
|
$
|
0.81
|
|
|
$
|
2.79
|
|
|
$
|
2.05
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
25,879
|
|
|
25,535
|
|
|
25,811
|
|
|
24,323
|
|
||||
Diluted
|
27,332
|
|
|
27,183
|
|
|
27,622
|
|
|
25,561
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Net income
|
$
|
30,138
|
|
|
$
|
21,064
|
|
|
$
|
70,321
|
|
|
$
|
51,524
|
|
Other comprehensive (loss) gain, net of tax:
|
|
|
|
|
|
|
|
||||||||
Unrealized (loss) gain on derivative instruments
|
(134
|
)
|
|
(768
|
)
|
|
2,095
|
|
|
(1,722
|
)
|
||||
Unrealized (loss) gain on foreign currency translation
|
(7,529
|
)
|
|
4,648
|
|
|
(4,016
|
)
|
|
3,951
|
|
||||
Other comprehensive (loss) gain, net of tax
|
(7,663
|
)
|
|
3,880
|
|
|
(1,921
|
)
|
|
2,229
|
|
||||
Comprehensive income
|
22,475
|
|
|
24,944
|
|
|
68,400
|
|
|
53,753
|
|
||||
Comprehensive loss (gain) attributable to noncontrolling interest:
|
|
|
|
|
|
|
|
||||||||
Net loss
|
197
|
|
|
822
|
|
|
6,755
|
|
|
822
|
|
||||
Unrealized loss (gain) on foreign currency translation
|
1,372
|
|
|
(2,633
|
)
|
|
902
|
|
|
(2,633
|
)
|
||||
Comprehensive loss (gain) attributable to noncontrolling interests
|
1,569
|
|
|
(1,811
|
)
|
|
7,657
|
|
|
(1,811
|
)
|
||||
Comprehensive income attributable to Encore Capital Group, Inc. stockholders
|
$
|
24,044
|
|
|
$
|
23,133
|
|
|
$
|
76,057
|
|
|
$
|
51,942
|
|
|
Nine Months Ended
September 30, |
||||||
|
2014
|
|
2013
|
||||
Operating activities:
|
|
|
|
||||
Net income
|
$
|
70,321
|
|
|
$
|
51,524
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
19,879
|
|
|
8,527
|
|
||
Other non-cash interest expense
|
20,989
|
|
|
5,411
|
|
||
Stock-based compensation expense
|
13,560
|
|
|
9,163
|
|
||
Recognized loss on termination of derivative contract
|
—
|
|
|
3,630
|
|
||
Deferred income taxes
|
(11,863
|
)
|
|
(217
|
)
|
||
Excess tax benefit from stock-based payment arrangements
|
(11,422
|
)
|
|
(5,238
|
)
|
||
Reversal of allowances on receivable portfolios, net
|
(12,455
|
)
|
|
(7,658
|
)
|
||
Changes in operating assets and liabilities
|
|
|
|
||||
Deferred court costs and other assets
|
(16,498
|
)
|
|
1,897
|
|
||
Prepaid income tax and income taxes payable
|
2,402
|
|
|
(25,785
|
)
|
||
Accounts payable, accrued liabilities and other liabilities
|
23,850
|
|
|
(1,388
|
)
|
||
Net cash provided by operating activities
|
98,763
|
|
|
39,866
|
|
||
Investing activities:
|
|
|
|
||||
Cash paid for acquisitions, net of cash acquired
|
(495,519
|
)
|
|
(413,055
|
)
|
||
Purchases of receivable portfolios, net of put-backs
|
(666,470
|
)
|
|
(156,438
|
)
|
||
Collections applied to investment in receivable portfolios, net
|
488,086
|
|
|
418,024
|
|
||
Originations and purchases of receivables secured by tax liens
|
(108,739
|
)
|
|
(100,278
|
)
|
||
Collections applied to receivables secured by tax liens
|
93,986
|
|
|
51,111
|
|
||
Purchases of property and equipment
|
(13,598
|
)
|
|
(8,178
|
)
|
||
Other
|
(1,987
|
)
|
|
(5,580
|
)
|
||
Net cash used in investing activities
|
(704,241
|
)
|
|
(214,394
|
)
|
||
Financing activities:
|
|
|
|
||||
Payment of loan costs
|
(15,271
|
)
|
|
(17,152
|
)
|
||
Proceeds from credit facilities
|
993,449
|
|
|
522,065
|
|
||
Repayment of credit facilities
|
(878,883
|
)
|
|
(491,462
|
)
|
||
Proceeds from senior secured notes
|
288,645
|
|
|
151,670
|
|
||
Repayment of senior secured notes
|
(11,250
|
)
|
|
(10,000
|
)
|
||
Proceeds from issuance of convertible senior notes
|
161,000
|
|
|
172,500
|
|
||
Proceeds from issuance of securitized notes
|
134,000
|
|
|
—
|
|
||
Repayment of securitized notes
|
(20,599
|
)
|
|
—
|
|
||
Repayment of preferred equity certificates, net
|
(702
|
)
|
|
(39,743
|
)
|
||
Purchases of convertible hedge instruments
|
(33,576
|
)
|
|
(18,113
|
)
|
||
Repurchase of common stock
|
(16,815
|
)
|
|
—
|
|
||
Taxes paid related to net share settlement of equity awards
|
(19,356
|
)
|
|
(9,270
|
)
|
||
Excess tax benefit from stock-based payment arrangements
|
11,422
|
|
|
5,238
|
|
||
Other, net
|
987
|
|
|
(1,073
|
)
|
||
Net cash provided by financing activities
|
593,051
|
|
|
264,660
|
|
||
Net (decrease) increase in cash and cash equivalents
|
(12,427
|
)
|
|
90,132
|
|
||
Effect of exchange rate changes on cash
|
1,654
|
|
|
2,514
|
|
||
Cash and cash equivalents, beginning of period
|
126,213
|
|
|
17,510
|
|
||
Cash and cash equivalents, end of period
|
$
|
115,440
|
|
|
$
|
110,156
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
120,125
|
|
|
$
|
48,243
|
|
Cash paid for income taxes
|
54,452
|
|
|
54,499
|
|
||
Supplemental schedule of non-cash investing and financing activities:
|
|
|
|
||||
Fixed assets acquired through capital lease
|
$
|
6,852
|
|
|
$
|
1,189
|
|
Purchase price:
|
|
||
Cash paid at acquisition
|
$
|
196,104
|
|
Allocation of purchase price:
|
|
||
Cash
|
$
|
16,743
|
|
Investment in receivable portfolios
|
105,399
|
|
|
Deferred court costs
|
3,100
|
|
|
Property and equipment
|
1,331
|
|
|
Other assets
|
14,229
|
|
|
Liabilities assumed
|
(20,955
|
)
|
|
Goodwill and identifiable intangible assets
|
76,257
|
|
|
Total net assets acquired
|
$
|
196,104
|
|
Purchase price:
|
|
||
Cash paid at acquisition
|
$
|
274,068
|
|
Allocation of purchase price:
|
|
||
Cash
|
$
|
16,342
|
|
Investment in receivable portfolios
|
208,450
|
|
|
Deferred court costs
|
914
|
|
|
Property and equipment
|
1,508
|
|
|
Other assets
|
18,091
|
|
|
Liabilities assumed
|
(302,915
|
)
|
|
Identifiable intangible assets
|
1,819
|
|
|
Goodwill
|
329,859
|
|
|
Total net assets acquired
|
$
|
274,068
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Consolidated pro forma revenue
|
$
|
278,913
|
|
|
$
|
250,977
|
|
|
$
|
834,301
|
|
|
$
|
586,952
|
|
Consolidated pro forma income from continuing operations attributable to Encore
|
31,106
|
|
|
24,444
|
|
|
81,989
|
|
|
56,773
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||
Weighted average common shares outstanding—basic
|
25,879
|
|
|
25,535
|
|
|
25,811
|
|
|
24,323
|
|
Dilutive effect of stock-based awards
|
410
|
|
|
843
|
|
|
684
|
|
|
940
|
|
Dilutive effect of convertible senior notes
|
1,043
|
|
|
805
|
|
|
1,118
|
|
|
298
|
|
Dilutive effect of warrants
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
Weighted average common shares outstanding—diluted
|
27,332
|
|
|
27,183
|
|
|
27,622
|
|
|
25,561
|
|
•
|
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
•
|
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
|
•
|
Level 3: Unobservable inputs, including inputs that reflect the reporting entity’s own assumptions.
|
|
Fair Value Measurements as of
September 30, 2014 |
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Foreign currency exchange contracts
|
$
|
—
|
|
|
$
|
791
|
|
|
$
|
—
|
|
|
$
|
791
|
|
Interest rate cap contracts
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Foreign currency exchange contracts
|
—
|
|
|
(1,449
|
)
|
|
—
|
|
|
(1,449
|
)
|
||||
Temporary Equity
|
|
|
|
|
|
|
|
||||||||
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
(30,280
|
)
|
|
(30,280
|
)
|
|
Fair Value Measurements as of
December 31, 2013 |
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Foreign currency exchange contracts
|
$
|
—
|
|
|
$
|
46
|
|
|
$
|
—
|
|
|
$
|
46
|
|
Interest rate cap contracts
|
—
|
|
|
202
|
|
|
—
|
|
|
202
|
|
||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Foreign currency exchange contracts
|
—
|
|
|
(4,123
|
)
|
|
—
|
|
|
(4,123
|
)
|
||||
Temporary Equity
|
|
|
|
|
|
|
|
||||||||
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
(26,564
|
)
|
|
(26,564
|
)
|
|
Amount
|
||
Balance at December 31, 2013
|
$
|
26,564
|
|
Initial redeemable noncontrolling interest related to business combinations
|
4,997
|
|
|
Net loss attributable to redeemable noncontrolling interests
|
(5,182
|
)
|
|
Adjustment of the redeemable noncontrolling interests to fair value
|
5,258
|
|
|
Effect of foreign currency translation attributable to redeemable noncontrolling interests
|
(1,357
|
)
|
|
Balance at September 30, 2014
|
$
|
30,280
|
|
|
September 30, 2014
|
|
December 31, 2013
|
||||||||
Balance Sheet
Location
|
|
Fair Value
|
|
Balance Sheet
Location
|
|
Fair Value
|
|||||
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
||||
Foreign currency exchange contracts
|
Other liabilities
|
|
$
|
(1,449
|
)
|
|
Other liabilities
|
|
$
|
(4,123
|
)
|
Foreign currency exchange contracts
|
Other assets
|
|
791
|
|
|
Other assets
|
|
46
|
|
||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
||||
Interest rate cap
|
Other assets
|
|
4
|
|
|
Other assets
|
|
202
|
|
|
Gain or (Loss)
Recognized in OCI- Effective Portion |
|
Location of Gain
or (Loss) Reclassified from OCI into Income - Effective Portion |
|
Gain or (Loss)
Reclassified from OCI into Income - Effective Portion |
|
Location of
Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing |
|
Amount of
Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing |
||||||||||||||||||
|
Three Months Ended
September 30, |
|
|
|
Three Months Ended
September 30, |
|
|
|
Three Months Ended
September 30, |
||||||||||||||||||
|
2014
|
|
2013
|
|
|
|
2014
|
|
2013
|
|
|
|
2014
|
|
2013
|
||||||||||||
Interest rate swaps
|
$
|
—
|
|
|
$
|
132
|
|
|
Interest expense
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other (expense)
income |
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency exchange contracts
|
(429
|
)
|
|
(1,871
|
)
|
|
Salaries and
employee benefits |
|
(243
|
)
|
|
(622
|
)
|
|
Other (expense)
income |
|
—
|
|
|
—
|
|
||||||
Foreign currency exchange contracts
|
(79
|
)
|
|
(381
|
)
|
|
General and
administrative expenses |
|
(46
|
)
|
|
(119
|
)
|
|
Other (expense)
income |
|
—
|
|
|
—
|
|
|
Gain or (Loss)
Recognized in OCI-
Effective Portion
|
|
Location of Gain
or (Loss)
Reclassified from
OCI into
Income - Effective
Portion
|
|
Gain or (Loss)
Reclassified
from OCI into
Income - Effective
Portion
|
|
Location of
Gain or (Loss)
Recognized -
Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing
|
|
Amount of
Gain or (Loss)
Recognized -
Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing
|
||||||||||||||||||
|
Nine Months Ended
September 30, |
|
|
|
Nine Months Ended
September 30, |
|
|
|
Nine Months Ended
September 30, |
||||||||||||||||||
|
2014
|
|
2013
|
|
|
|
2014
|
|
2013
|
|
|
|
2014
|
|
2013
|
||||||||||||
Interest rate swaps
|
$
|
—
|
|
|
$
|
506
|
|
|
Interest expense
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other (expense)
income |
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency exchange contracts
|
2,215
|
|
|
(3,809
|
)
|
|
Salaries and
employee benefits |
|
(818
|
)
|
|
(890
|
)
|
|
Other (expense)
income |
|
—
|
|
|
—
|
|
||||||
Foreign currency exchange contracts
|
242
|
|
|
(809
|
)
|
|
General and
administrative expenses |
|
(143
|
)
|
|
(171
|
)
|
|
Other (expense)
income |
|
—
|
|
|
—
|
|
|
Accretable
Yield
|
|
Estimate of
Zero Basis
Cash Flows
|
|
Total
|
||||||
Balance at December 31, 2013
|
$
|
2,391,471
|
|
|
$
|
8,465
|
|
|
$
|
2,399,936
|
|
Revenue recognized, net
|
(231,057
|
)
|
|
(6,511
|
)
|
|
(237,568
|
)
|
|||
Net additions on existing portfolios
|
92,325
|
|
|
8,555
|
|
|
100,880
|
|
|||
Additions for current purchases
(1)
|
591,205
|
|
|
—
|
|
|
591,205
|
|
|||
Balance at March 31, 2014
|
2,843,944
|
|
|
10,509
|
|
|
2,854,453
|
|
|||
Revenue recognized, net
|
(241,523
|
)
|
|
(6,708
|
)
|
|
(248,231
|
)
|
|||
Net additions on existing portfolios
|
80,582
|
|
|
6,135
|
|
|
86,717
|
|
|||
Additions for current purchases
|
218,047
|
|
|
—
|
|
|
218,047
|
|
|||
Balance at June 30, 2014
|
2,901,050
|
|
|
9,936
|
|
|
2,910,986
|
|
|||
Revenue recognized, net
|
(244,561
|
)
|
|
(7,224
|
)
|
|
(251,785
|
)
|
|||
Net additions on existing portfolios
|
161,622
|
|
|
54,184
|
|
|
215,806
|
|
|||
Additions for current purchases
(2)
|
179,604
|
|
|
—
|
|
|
179,604
|
|
|||
Balance at September 30, 2014
|
$
|
2,997,715
|
|
|
$
|
56,896
|
|
|
$
|
3,054,611
|
|
|
Accretable
Yield
|
|
Estimate of
Zero Basis
Cash Flows
|
|
Total
|
||||||
Balance at December 31, 2012
|
$
|
984,944
|
|
|
$
|
17,366
|
|
|
$
|
1,002,310
|
|
Revenue recognized, net
|
(135,072
|
)
|
|
(5,611
|
)
|
|
(140,683
|
)
|
|||
Net additions on existing portfolios
|
173,634
|
|
|
7,061
|
|
|
180,695
|
|
|||
Additions for current purchases
|
66,808
|
|
|
—
|
|
|
66,808
|
|
|||
Balance at March 31, 2013
|
1,090,314
|
|
|
18,816
|
|
|
1,109,130
|
|
|||
Revenue recognized, net
|
(144,186
|
)
|
|
(7,838
|
)
|
|
(152,024
|
)
|
|||
Net additions on existing portfolios
|
30,458
|
|
|
10,784
|
|
|
41,242
|
|
|||
Additions for current purchases
(3)
|
645,865
|
|
|
—
|
|
|
645,865
|
|
|||
Balance at June 30, 2013
|
1,622,451
|
|
|
21,762
|
|
|
1,644,213
|
|
|||
Revenue recognized, net
|
(218,182
|
)
|
|
(7,205
|
)
|
|
(225,387
|
)
|
|||
Net additions on existing portfolios
|
29,101
|
|
|
3,048
|
|
|
32,149
|
|
|||
Additions for current purchases
(4)
|
975,380
|
|
|
—
|
|
|
975,380
|
|
|||
Balance at September 30, 2013
|
$
|
2,408,750
|
|
|
$
|
17,605
|
|
|
$
|
2,426,355
|
|
(1)
|
Includes
$208.5 million
of portfolios acquired in connection with the Marlin Acquisition discussed in Note
2
, “Business Combinations.”
|
(2)
|
Includes
$105.4 million
of portfolios acquired in connection with the Atlantic Acquisition discussed in Note
2
, “Business Combinations.”
|
(3)
|
Includes
$383.4 million
of portfolios acquired in connection with the merger with AACC.
|
(4)
|
Includes
$559.0 million
of portfolios acquired in connection with the Cabot Acquisition.
|
|
Three Months Ended September 30, 2014
|
||||||||||||||
|
Accrual Basis
Portfolios
|
|
Cost Recovery
Portfolios
|
|
Zero Basis
Portfolios
|
|
Total
|
||||||||
Balance, beginning of period
|
$
|
1,978,493
|
|
|
$
|
9,492
|
|
|
$
|
—
|
|
|
$
|
1,987,985
|
|
Purchases of receivable portfolios
(1)
|
297,800
|
|
|
1,709
|
|
|
—
|
|
|
299,509
|
|
||||
Transfer of portfolios
|
(11,519
|
)
|
|
11,519
|
|
|
—
|
|
|
—
|
|
||||
Gross collections
(2)
|
(395,945
|
)
|
|
(4,056
|
)
|
|
(7,219
|
)
|
|
(407,220
|
)
|
||||
Put-backs and recalls
|
(2,817
|
)
|
|
1,278
|
|
|
(5
|
)
|
|
(1,544
|
)
|
||||
Foreign currency adjustments
|
(55,865
|
)
|
|
(1,418
|
)
|
|
—
|
|
|
(57,283
|
)
|
||||
Revenue recognized
|
241,502
|
|
|
—
|
|
|
4,480
|
|
|
245,982
|
|
||||
Portfolio allowance reversals, net
|
3,059
|
|
|
—
|
|
|
2,744
|
|
|
5,803
|
|
||||
Balance, end of period
|
$
|
2,054,708
|
|
|
$
|
18,524
|
|
|
$
|
—
|
|
|
$
|
2,073,232
|
|
Revenue as a percentage of collections
(3)
|
61.0
|
%
|
|
0.0
|
%
|
|
62.1
|
%
|
|
60.4
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended September 30, 2013
|
||||||||||||||
|
Accrual Basis
Portfolios
|
|
Cost Recovery
Portfolios
|
|
Zero Basis
Portfolios
|
|
Total
|
||||||||
Balance, beginning of period
|
$
|
1,090,922
|
|
|
$
|
5,776
|
|
|
$
|
—
|
|
|
$
|
1,096,698
|
|
Purchases of receivable portfolios
(4)
|
616,779
|
|
|
1,073
|
|
|
—
|
|
|
617,852
|
|
||||
Transfer of portfolios
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Gross collections
(2)
|
(371,482
|
)
|
|
(983
|
)
|
|
(7,205
|
)
|
|
(379,670
|
)
|
||||
Put-backs and recalls
|
(755
|
)
|
|
(242
|
)
|
|
—
|
|
|
(997
|
)
|
||||
Foreign currency adjustments
|
36,372
|
|
|
—
|
|
|
—
|
|
|
36,372
|
|
||||
Revenue recognized
|
218,182
|
|
|
—
|
|
|
4,227
|
|
|
222,409
|
|
||||
Portfolio allowance reversals, net
|
—
|
|
|
—
|
|
|
2,978
|
|
|
2,978
|
|
||||
Balance, end of period
|
$
|
1,590,018
|
|
|
$
|
5,624
|
|
|
$
|
—
|
|
|
$
|
1,595,642
|
|
Revenue as a percentage of collections
(3)
|
58.7
|
%
|
|
0.0
|
%
|
|
58.7
|
%
|
|
58.6
|
%
|
|
Nine Months Ended September 30, 2014
|
||||||||||||||
|
Accrual Basis
Portfolios
|
|
Cost Recovery
Portfolios
|
|
Zero Basis
Portfolios
|
|
Total
|
||||||||
Balance, beginning of period
|
$
|
1,585,587
|
|
|
$
|
4,662
|
|
|
$
|
—
|
|
|
$
|
1,590,249
|
|
Purchases of receivable portfolios
(1)(5)
|
991,127
|
|
|
1,709
|
|
|
—
|
|
|
992,836
|
|
||||
Transfer of portfolios
|
(18,682
|
)
|
|
18,682
|
|
|
—
|
|
|
—
|
|
||||
Gross collections
(2)
|
(1,186,431
|
)
|
|
(6,305
|
)
|
|
(20,438
|
)
|
|
(1,213,174
|
)
|
||||
Put-backs and recalls
|
(11,640
|
)
|
|
875
|
|
|
(5
|
)
|
|
(10,770
|
)
|
||||
Foreign currency adjustments
|
(22,394
|
)
|
|
(1,099
|
)
|
|
—
|
|
|
(23,493
|
)
|
||||
Revenue recognized
|
713,656
|
|
|
—
|
|
|
11,473
|
|
|
725,129
|
|
||||
Portfolio allowance reversals, net
|
3,485
|
|
|
—
|
|
|
8,970
|
|
|
12,455
|
|
||||
Balance, end of period
|
$
|
2,054,708
|
|
|
$
|
18,524
|
|
|
$
|
—
|
|
|
$
|
2,073,232
|
|
Revenue as a percentage of collections
(3)
|
60.2
|
%
|
|
0.0
|
%
|
|
56.1
|
%
|
|
59.8
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
|
Nine Months Ended September 30, 2013
|
||||||||||||||
|
Accrual Basis
Portfolios
|
|
Cost Recovery
Portfolios
|
|
Zero Basis
Portfolios
|
|
Total
|
||||||||
Balance, beginning of period
|
$
|
873,119
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
873,119
|
|
Purchases of receivable portfolios
(4)(6)
|
1,098,663
|
|
|
1,073
|
|
|
—
|
|
|
1,099,736
|
|
||||
Transfer of portfolios
|
(6,649
|
)
|
|
6,649
|
|
|
—
|
|
|
—
|
|
||||
Gross collections
(2)
|
(905,751
|
)
|
|
(1,825
|
)
|
|
(20,652
|
)
|
|
(928,228
|
)
|
||||
Put-backs and recalls
|
(2,512
|
)
|
|
(273
|
)
|
|
(2
|
)
|
|
(2,787
|
)
|
||||
Foreign currency adjustments
|
35,708
|
|
|
—
|
|
|
—
|
|
|
35,708
|
|
||||
Revenue recognized
|
496,804
|
|
|
—
|
|
|
13,632
|
|
|
510,436
|
|
||||
Portfolio allowance reversals, net
|
636
|
|
|
—
|
|
|
7,022
|
|
|
7,658
|
|
||||
Balance, end of period
|
$
|
1,590,018
|
|
|
$
|
5,624
|
|
|
$
|
—
|
|
|
$
|
1,595,642
|
|
Revenue as a percentage of collections
(3)
|
54.8
|
%
|
|
0.0
|
%
|
|
66.0
|
%
|
|
55.0
|
%
|
(1)
|
Purchases of portfolio receivables include
$105.4 million
acquired in connection with the Atlantic Acquisition in August 2014 discussed in Note
2
, “Business Combinations.”
|
(2)
|
Does not include amounts collected on behalf of others.
|
(3)
|
Revenue as a percentage of collections excludes the effects of net portfolio allowances or net portfolio allowance reversals.
|
(4)
|
Includes
$559.0 million
of portfolios acquired in connection with the Cabot Acquisition.
|
(5)
|
Includes
$208.5 million
acquired in connection with the Marlin Acquisition in February 2014 discussed in Note
2
, “Business Combinations.”
|
(6)
|
Includes
$383.4 million
of portfolios acquired in connection with the merger with AACC.
|
|
Valuation Allowance
|
||||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Balance at beginning of period
|
$
|
86,428
|
|
|
$
|
100,593
|
|
|
$
|
93,080
|
|
|
$
|
105,273
|
|
Provision for portfolio allowances
|
—
|
|
|
—
|
|
|
—
|
|
|
479
|
|
||||
Reversal of prior allowances
|
(5,803
|
)
|
|
(2,978
|
)
|
|
(12,455
|
)
|
|
(8,137
|
)
|
||||
Balance at end of period
|
$
|
80,625
|
|
|
$
|
97,615
|
|
|
$
|
80,625
|
|
|
$
|
97,615
|
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
Court costs advanced
|
$
|
505,951
|
|
|
$
|
399,274
|
|
Court costs recovered
|
(191,040
|
)
|
|
(147,166
|
)
|
||
Court costs reserve
|
(261,781
|
)
|
|
(210,889
|
)
|
||
|
$
|
53,130
|
|
|
$
|
41,219
|
|
|
Court Cost Reserve
|
||||||||||||||
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Balance at beginning of period
|
$
|
(243,832
|
)
|
|
$
|
(176,094
|
)
|
|
$
|
(210,889
|
)
|
|
$
|
(149,080
|
)
|
Provision for court costs
|
(17,949
|
)
|
|
(17,866
|
)
|
|
(50,892
|
)
|
|
(44,880
|
)
|
||||
Balance at end of period
|
$
|
(261,781
|
)
|
|
$
|
(193,960
|
)
|
|
$
|
(261,781
|
)
|
|
$
|
(193,960
|
)
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
Debt issuance costs, net of amortization
|
$
|
40,453
|
|
|
$
|
28,066
|
|
Prepaid income taxes
|
29,301
|
|
|
5,009
|
|
||
Prepaid expenses
|
21,940
|
|
|
23,487
|
|
||
Funds held in escrow
|
17,524
|
|
|
—
|
|
||
Deferred tax assets
|
17,209
|
|
|
13,974
|
|
||
Identifiable intangible assets, net
|
17,034
|
|
|
23,549
|
|
||
Service fee receivables
|
12,692
|
|
|
8,954
|
|
||
Interest receivable
|
12,178
|
|
|
7,956
|
|
||
Other financial receivables
|
7,666
|
|
|
7,962
|
|
||
Receivable from seller
|
7,357
|
|
|
—
|
|
||
Security deposits
|
4,814
|
|
|
2,500
|
|
||
Recoverable legal fees
|
2,826
|
|
|
3,049
|
|
||
Other
|
27,125
|
|
|
30,277
|
|
||
|
$
|
218,119
|
|
|
$
|
154,783
|
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
Encore revolving credit facility
|
$
|
429,000
|
|
|
$
|
356,000
|
|
Encore term loan facility
|
147,984
|
|
|
140,625
|
|
||
Encore senior secured notes
|
47,500
|
|
|
58,750
|
|
||
Encore convertible senior notes
|
448,500
|
|
|
287,500
|
|
||
Less: Debt discount
|
(53,461
|
)
|
|
(42,240
|
)
|
||
Propel facilities
|
109,660
|
|
|
170,630
|
|
||
Propel securitized notes
|
113,401
|
|
|
—
|
|
||
Cabot senior secured notes
|
1,118,628
|
|
|
603,272
|
|
||
Add: Debt premium
|
72,595
|
|
|
43,583
|
|
||
Cabot senior revolving credit facility
|
92,434
|
|
|
—
|
|
||
Preferred equity certificates
|
210,891
|
|
|
199,821
|
|
||
Capital lease obligations
|
15,274
|
|
|
12,219
|
|
||
Other
|
38,340
|
|
|
20,271
|
|
||
|
$
|
2,790,746
|
|
|
$
|
1,850,431
|
|
•
|
A revolving loan of
$692.6 million
, with interest at a floating rate equal to, at the Company’s option, either: (1) reserve adjusted London Interbank Offered Rate (“LIBOR”), plus a spread that ranges from
250
to
300 basis points
depending on the Company’s cash flow leverage ratio; or (2) Alternate Base Rate, plus a spread that ranges from
150
to
200 basis points
depending on the Company’s cash flow leverage ratio. “Alternate Base Rate,” as defined in the agreement, means the highest of (i) the per annum rate which the administrative agent publicly announces from time to time as its prime lending rate, (ii) the federal funds effective rate from time to time, plus
0.5%
per annum and (iii) reserved adjusted LIBOR determined on a daily basis for a one month interest period, plus
1.0%
per annum;
|
•
|
An
$87.5 million
five
-year term loan, with interest at a floating rate equal to, at the Company’s option, either: (1) reserve adjusted LIBOR, plus a spread that ranges from
250
to
300 basis points
, depending on the Company’s cash flow leverage ratio; or (2) Alternate Base Rate, plus a spread that ranges from
150
to
200 basis points
, depending on the Company’s cash flow leverage ratio. Principal amortizes
$4.4 million
in 2014,
$4.4 million
in 2015,
$6.6 million
in 2016,
$8.8 million
in 2017, and
$8.8 million
in 2018 with the remaining principal due at the end of the term;
|
•
|
A
$60.0 million
term loan maturing on
February 25, 2017
, with interest at a floating rate equal to, at the Company’s option, either: (1) reserve adjusted LIBOR, plus a spread that ranges from
200
to
250 basis points
, depending on the Company’s cash flow leverage ratio; or (2) Alternate Base Rate, plus a spread that ranges from
100
to
150 basis points
, depending on the Company’s cash flow leverage ratio. Principal amortizes
$3.0 million
in 2014,
$3.0 million
in 2015, and
$4.5 million
in 2016 with the remaining principal due at the end of the term;
|
•
|
A
$6.3 million
term loan maturing on
November 3, 2017
, with interest at a floating rate equal to, at the Company’s option, either: (1) reserve adjusted LIBOR, plus a spread that ranges from
250
to
300 basis points
, depending on the Company’s cash flow leverage ratio; or (2) Alternate Base Rate, plus a spread that ranges from
150
to
200 basis points
, depending on the Company’s cash flow leverage ratio. Principal amortizes
$0.4 million
in 2014,
$0.5 million
in 2015,
$0.6 million
in 2016 and
$0.5 million
in 2017 with the remaining principal due at the end of the term;
|
•
|
A borrowing base equal to (1) the lesser of (i)
30%
—
35%
(depending on the Company’s trailing 12-month cost per dollar collected) of all eligible non-bankruptcy estimated remaining collections, initially set at
33%
, plus
55%
of eligible estimated remaining collections for consumer receivables subject to bankruptcy, and (ii) the product of the net book value of all receivable portfolios acquired on or after January 1, 2005 multiplied by
95%
, minus (2) the sum of the aggregate principal amount outstanding of Encore’s Senior Secured Notes (as defined below) plus the aggregate principal amount outstanding under the term loans;
|
•
|
The allowance of additional unsecured or subordinated indebtedness not to exceed
$750.0 million
;
|
•
|
Restrictions and covenants, which limit the payment of dividends and the incurrence of additional indebtedness and liens, among other limitations;
|
•
|
Repurchases of up to
$50.0 million
of Encore’s common stock after February 25, 2014, subject to compliance with certain covenants and available borrowing capacity;
|
•
|
A change of control definition, which excludes acquisitions of stock by Red Mountain Capital Partners LLC, JCF FPK LLP and their respective affiliates of up to
50%
of the outstanding shares of Encore’s voting stock;
|
•
|
Events of default which, upon occurrence, may permit the lenders to terminate the facility and declare all amounts outstanding to be immediately due and payable;
|
•
|
A pre-approved acquisition limit of
$225.0 million
in the aggregate, for acquisitions after August 1, 2014;
|
•
|
A basket to allow for investments in unrestricted subsidiaries of
$250.0 million
;
|
•
|
A basket to allow for investments in certain subsidiaries of Propel of
$200.0 million
;
|
•
|
An annual foreign portfolio investment and loan basket of
$150.0 million
; and
|
•
|
Collateralization by all assets of the Company, other than the assets of unrestricted subsidiaries as defined in the Restated Credit Agreement.
|
|
2017 Convertible Notes
|
|
2020 Convertible Notes
|
|
2021 Convertible Notes
|
||||||
Initial conversion price
|
$
|
31.56
|
|
|
$
|
45.72
|
|
|
$
|
59.39
|
|
Closing stock price at date of issuance
|
$
|
25.66
|
|
|
$
|
33.35
|
|
|
$
|
47.51
|
|
Closing stock price date
|
November 27, 2012
|
|
|
June 24, 2013
|
|
|
March 5, 2014
|
|
|||
Conversion rate (shares per $1,000 principal amount)
|
31.6832
|
|
|
21.8718
|
|
|
16.8386
|
|
|||
Conversion date
(1)
|
May 27, 2017
|
|
|
January 1, 2020
|
|
|
September 15, 2020
|
|
(1)
|
2017 Convertible Notes became convertible on January 2, 2014, as certain early conversion events were satisfied. Refer to “Conversion and EPS impact” section below for further details.
|
|
2017 Convertible Notes
|
|
2020 Convertible Notes
|
|
2021 Convertible Notes
|
||||||
Debt component
|
$
|
100,298
|
|
|
$
|
140,271
|
|
|
$
|
143,604
|
|
Equity component
|
$
|
14,702
|
|
|
$
|
32,229
|
|
|
$
|
17,396
|
|
Equity issuance cost
|
$
|
788
|
|
|
$
|
1,113
|
|
|
$
|
575
|
|
Stated interest rate
|
3.000
|
%
|
|
3.000
|
%
|
|
2.875
|
%
|
|||
Effective interest rate
|
6.000
|
%
|
|
6.350
|
%
|
|
4.700
|
%
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
Liability component—principal amount
|
$
|
448,500
|
|
|
$
|
287,500
|
|
Unamortized debt discount
|
(53,461
|
)
|
|
(42,240
|
)
|
||
Liability component—net carrying amount
|
$
|
395,039
|
|
|
$
|
245,260
|
|
Equity component
|
$
|
54,523
|
|
|
$
|
46,954
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Interest expense—stated coupon rate
|
$
|
3,316
|
|
|
$
|
2,141
|
|
|
$
|
9,080
|
|
|
$
|
3,947
|
|
Interest expense—amortization of debt discount
|
2,228
|
|
|
1,570
|
|
|
6,164
|
|
|
2,887
|
|
||||
Total interest expense—convertible notes
|
$
|
5,544
|
|
|
$
|
3,711
|
|
|
$
|
15,244
|
|
|
$
|
6,834
|
|
|
2017 Convertible Notes
|
|
2020 Convertible Notes
|
|
2021 Convertible Notes
|
||||||
Cost of the hedge transaction(s)
|
$
|
50,595
|
|
|
$
|
18,113
|
|
|
$
|
19,545
|
|
Initial conversion price
|
$
|
31.56
|
|
|
$
|
45.72
|
|
|
$
|
59.39
|
|
Effective conversion price
|
$
|
60.00
|
|
|
$
|
61.55
|
|
|
$
|
83.14
|
|
•
|
Interest at Propel’s option, at either: (1) LIBOR, plus a spread that ranges from
300
to
375 basis points
, depending on Propel’s cash flow leverage ratio; or (2) Prime Rate, which is defined in the agreement as the rate of interest per annum equal to the sum of (a) the interest rate quoted in the “Money Rates” section of
The Wall Street Journal
from time to time and designated as the “Prime Rate”
plus
(b) the Prime Rate Margin, which is a spread that ranges from
0
to
75 basis points
, depending on Propel’s cash flow leverage ratio;
|
•
|
A borrowing base of
90%
of the face value of the tax lien collateralized payment arrangements;
|
•
|
Interest payable monthly; principal and interest due at maturity;
|
•
|
Restrictions and covenants, which limit, among other things, the payment of dividends and the incurrence of additional indebtedness and liens; and
|
•
|
Events of default which, upon occurrence, may permit the lender to terminate the Propel Facility I and declare all amounts outstanding to be immediately due and payable.
|
•
|
Propel could draw up to
$190.0 million
at any time during the period from July 1, 2014, up to and including September 30, 2014, and can draw up to
$150.0 million
through May 15, 2017;
|
•
|
The committed amount can be drawn on a revolving basis until May 15, 2017 (unless terminated earlier in accordance with the terms of the facility). During the following two years, until the May 10, 2019 expiration date,
no
additional draws are permitted, and all proceeds from the tax liens are used to repay any amounts outstanding under the facility. So long as no events or default have occurred, Propel may extend the expiration date for additional one year periods.
|
•
|
Prior to the expiration of the facility, interest at a per annum floating rate equal to LIBOR plus
3.25%
, other than for advances related to tax liens in Texas, for which interest is LIBOR plus
2.50%
;
|
•
|
Following the expiration of the facility, or upon the occurrence of an event of default, interest at
400 basis points
plus the greater of (i) a per annum floating rate equal to LIBOR plus
3.25%
(or
2.50%
for advances related to tax liens in Texas), or (ii) Prime Rate, which is defined in the agreement as the rate most recently announced by the lender at its branch in San Francisco, California, from time to time as its prime commercial rate for United States dollar-denominated loans made in the United States;
|
•
|
Proceeds from the tax liens are applied to pay interest, principal and other obligations incurred in connection with the Propel Facility II on a monthly basis as defined in the agreement;
|
•
|
Special purpose entity covenants designed to protect the bankruptcy-remoteness of the borrowers and additional restrictions and covenants, which limit, among other things, the payment of certain dividends, the occurrence of additional indebtedness and liens and use of the collections proceeds from the certain Tax Liens; and
|
•
|
Events of default which, upon occurrence, may permit the lender to terminate the Propel Facility II and declare all amounts outstanding to be immediately due and payable.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Interest expense—stated coupon rate
|
$
|
26,239
|
|
|
$
|
12,857
|
|
|
$
|
72,099
|
|
|
$
|
12,857
|
|
Interest income—accretion of debt premium
|
(2,760
|
)
|
|
(1,367
|
)
|
|
(7,565
|
)
|
|
(1,367
|
)
|
||||
Total interest expense—Cabot Notes and Marlin Bonds
|
$
|
23,479
|
|
|
$
|
11,490
|
|
|
$
|
64,534
|
|
|
$
|
11,490
|
|
•
|
Interest at LIBOR plus a maximum of
4.0%
depending on the loan to value (“LTV”) ratio determined quarterly, calculated as being the ratio of the net financial indebtedness of Cabot (as defined in the Cabot Credit Agreement) to Cabot’s estimated remaining collections capped at
84
-months;
|
•
|
A restrictive covenant that limits the LTV ratio to
0.75
;
|
•
|
Additional restrictions and covenants which limit, among other things, the payment of dividends and the incurrence of additional indebtedness and liens; and
|
•
|
Events of default which, upon occurrence, may permit the lenders to terminate the Cabot Credit Facility and declare all amounts outstanding to be immediately due and payable.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||
Federal provision
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State provision
|
5.8
|
%
|
|
5.2
|
%
|
|
5.8
|
%
|
|
5.2
|
%
|
State benefit
|
(2.0
|
)%
|
|
(1.8
|
)%
|
|
(2.0
|
)%
|
|
(1.8
|
)%
|
Changes in state apportionment
(1)
|
0.0
|
%
|
|
(4.0
|
)%
|
|
0.0
|
%
|
|
(1.7
|
)%
|
Tax reserves
(2)
|
0.0
|
%
|
|
1.8
|
%
|
|
0.0
|
%
|
|
0.7
|
%
|
International benefit
(3)
|
(8.7
|
)%
|
|
(4.8
|
)%
|
|
(5.0
|
)%
|
|
(2.0
|
)%
|
Permanent items
(4)
|
5.7
|
%
|
|
1.1
|
%
|
|
4.1
|
%
|
|
1.3
|
%
|
Other
(5)
|
(10.6
|
)%
|
|
0.0
|
%
|
|
(4.0
|
)%
|
|
0.0
|
%
|
Effective rate
|
25.2
|
%
|
|
32.5
|
%
|
|
33.9
|
%
|
|
36.7
|
%
|
(1)
|
Represents changes in state apportionment methodologies.
|
(2)
|
Represents reserves taken for certain tax positions adopted by the Company.
|
(3)
|
Relates primarily to the lower tax rate on the income attributable to international operations.
|
(4)
|
Represents a provision for nondeductible items.
|
(5)
|
Includes the effect of discrete items, primarily relates to the recognition of tax benefit as a result of a favorable tax settlement with taxing authorities as discussed below.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Portfolio purchasing and recovery
|
$
|
264,800
|
|
|
$
|
230,885
|
|
|
$
|
775,476
|
|
|
$
|
523,659
|
|
Tax lien business
|
8,482
|
|
|
4,673
|
|
|
20,742
|
|
|
12,606
|
|
||||
|
$
|
273,282
|
|
|
$
|
235,558
|
|
|
$
|
796,218
|
|
|
$
|
536,265
|
|
Operating income:
|
|
|
|
|
|
|
|
||||||||
Portfolio purchasing and recovery
|
$
|
91,470
|
|
|
$
|
67,803
|
|
|
$
|
256,756
|
|
|
$
|
143,961
|
|
Tax lien business
|
3,794
|
|
|
1,832
|
|
|
7,780
|
|
|
3,455
|
|
||||
|
95,264
|
|
|
69,635
|
|
|
264,536
|
|
|
147,416
|
|
||||
Depreciation and amortization
|
(6,933
|
)
|
|
(4,523
|
)
|
|
(19,879
|
)
|
|
(8,527
|
)
|
||||
Stock-based compensation
|
(4,009
|
)
|
|
(3,983
|
)
|
|
(13,560
|
)
|
|
(9,163
|
)
|
||||
Other expense
|
(44,030
|
)
|
|
(29,485
|
)
|
|
(124,870
|
)
|
|
(47,784
|
)
|
||||
Income from operations before income taxes
|
$
|
40,292
|
|
|
$
|
31,644
|
|
|
$
|
106,227
|
|
|
$
|
81,942
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Revenues
(1)
:
|
|
|
|
|
|
|
|
||||||||
Domestic
|
$
|
190,581
|
|
|
$
|
189,086
|
|
|
$
|
565,134
|
|
|
$
|
489,793
|
|
International
|
82,701
|
|
|
46,472
|
|
|
231,084
|
|
|
46,472
|
|
||||
|
$
|
273,282
|
|
|
$
|
235,558
|
|
|
$
|
796,218
|
|
|
$
|
536,265
|
|
(1)
|
Revenues are attributed to countries based on location of customer.
|
|
Portfolio
Purchasing and
Recovery
|
|
Tax Lien
Business
|
|
Total
|
||||||
Balance, December 31, 2013
|
$
|
454,936
|
|
|
$
|
49,277
|
|
|
$
|
504,213
|
|
Goodwill acquired
|
427,647
|
|
|
—
|
|
|
427,647
|
|
|||
Effect of foreign currency translation
|
(10,341
|
)
|
|
—
|
|
|
(10,341
|
)
|
|||
Balance, September 30, 2014
|
$
|
872,242
|
|
|
$
|
49,277
|
|
|
$
|
921,519
|
|
|
As of September 30, 2014
|
|
As of December 31, 2013
|
||||||||||||||||||||
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
||||||||||||
Customer relationships
|
$
|
6,012
|
|
|
$
|
(583
|
)
|
|
$
|
5,429
|
|
|
$
|
1,975
|
|
|
$
|
(74
|
)
|
|
$
|
1,901
|
|
Developed technologies
|
7,422
|
|
|
(1,570
|
)
|
|
5,852
|
|
|
4,909
|
|
|
(468
|
)
|
|
4,441
|
|
||||||
Trade name and other
|
4,890
|
|
|
(1,099
|
)
|
|
3,791
|
|
|
15,631
|
|
|
(386
|
)
|
|
15,245
|
|
||||||
Other intangibles—indefinite lived
|
1,962
|
|
|
—
|
|
|
1,962
|
|
|
1,962
|
|
|
—
|
|
|
1,962
|
|
||||||
Total intangible assets
|
$
|
20,286
|
|
|
$
|
(3,252
|
)
|
|
$
|
17,034
|
|
|
$
|
24,477
|
|
|
$
|
(928
|
)
|
|
$
|
23,549
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Credit card—Europe
(1),(2)
|
$
|
109,147
|
|
|
$
|
586,037
|
|
|
$
|
519,527
|
|
|
$
|
586,037
|
|
Credit card—United States
(3), (4)
|
190,362
|
|
|
31,089
|
|
|
473,309
|
|
|
454,926
|
|
||||
Consumer bankruptcy receivables—United States
(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
39,897
|
|
||||
Telecom—United States
|
—
|
|
|
726
|
|
|
—
|
|
|
18,876
|
|
||||
|
$
|
299,509
|
|
|
$
|
617,852
|
|
|
$
|
992,836
|
|
|
$
|
1,099,736
|
|
(1)
|
Purchases of consumer portfolio receivables in Europe for the three months ended
September 30, 2014
include $5.4 million for IVAs.
|
(2)
|
Purchases of consumer portfolio receivables in Europe for the nine months ended
September 30, 2014
include
$208.5 million
acquired in connection with the Marlin Acquisition. Purchases of consumer portfolio receivables in Europe for the three and nine month periods ended September 30, 2013 include
$559.0 million
acquired in connection with our acquisition of a controlling interest in Cabot (the “Cabot Acquisition”).
|
(3)
|
Purchases of consumer portfolio receivables for the three and nine months ended
September 30, 2014
include
$105.4 million
acquired in connection with the Atlantic Acquisition. Purchases of consumer portfolio receivables for the nine months ended September 30, 2013 include $383.4 million acquired in connection with the merger with Asset Acceptance Capital Corp. (“AACC”) ($347.7 million for credit card and $35.7 million for consumer bankruptcy receivables).
|
(4)
|
Purchases of consumer portfolio receivables in the United States include immaterial portfolios purchased in Latin America.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
United States:
|
|
|
|
|
|
|
|
||||||||
Legal collections
|
$
|
154,019
|
|
|
$
|
153,556
|
|
|
$
|
460,551
|
|
|
$
|
409,511
|
|
Collection sites
|
122,600
|
|
|
119,080
|
|
|
389,913
|
|
|
362,495
|
|
||||
Collection agencies
(1)
|
19,392
|
|
|
39,607
|
|
|
60,805
|
|
|
88,795
|
|
||||
Subtotal
|
296,011
|
|
|
312,243
|
|
|
911,269
|
|
|
860,801
|
|
||||
Europe:
|
|
|
|
|
|
|
|
||||||||
Collection sites
|
57,283
|
|
|
37,931
|
|
|
157,860
|
|
|
37,931
|
|
||||
Collection agencies
|
33,367
|
|
|
29,496
|
|
|
90,762
|
|
|
29,496
|
|
||||
Legal collections
|
11,764
|
|
|
—
|
|
|
31,846
|
|
|
—
|
|
||||
Subtotal
|
102,414
|
|
|
67,427
|
|
|
280,468
|
|
|
67,427
|
|
||||
Other geographies:
|
|
|
|
|
|
|
|
||||||||
Collection sites
|
8,795
|
|
|
—
|
|
|
21,437
|
|
|
—
|
|
||||
Total collections
|
$
|
407,220
|
|
|
$
|
379,670
|
|
|
$
|
1,213,174
|
|
|
$
|
928,228
|
|
(1)
|
Collections through our collection agency channel in the United States include accounts subject to bankruptcy filings collected by others. Additionally, collection agency collections often include accounts purchased from a competitor where we maintain the collection agency servicing until the accounts can be recalled and placed in our collection channels.
|
|
Three Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
||||||||||
Revenues
|
|
|
|
|
|
|
|
||||||
Revenue from receivable portfolios, net
|
$
|
251,785
|
|
|
92.1
|
%
|
|
$
|
225,387
|
|
|
95.7
|
%
|
Other revenues
|
13,445
|
|
|
4.9
|
%
|
|
5,792
|
|
|
2.5
|
%
|
||
Net interest income
|
8,052
|
|
|
3.0
|
%
|
|
4,379
|
|
|
1.8
|
%
|
||
Total revenues
|
273,282
|
|
|
100.0
|
%
|
|
235,558
|
|
|
100.0
|
%
|
||
Operating expenses
|
|
|
|
|
|
|
|
||||||
Salaries and employee benefits
|
61,175
|
|
|
22.4
|
%
|
|
52,253
|
|
|
22.2
|
%
|
||
Cost of legal collections
|
53,742
|
|
|
19.6
|
%
|
|
50,953
|
|
|
21.6
|
%
|
||
Other operating expenses
|
22,061
|
|
|
8.1
|
%
|
|
19,056
|
|
|
8.1
|
%
|
||
Collection agency commissions
|
9,517
|
|
|
3.5
|
%
|
|
14,158
|
|
|
6.0
|
%
|
||
General and administrative expenses
|
35,532
|
|
|
13.0
|
%
|
|
33,486
|
|
|
14.2
|
%
|
||
Depreciation and amortization
|
6,933
|
|
|
2.5
|
%
|
|
4,523
|
|
|
1.9
|
%
|
||
Total operating expenses
|
188,960
|
|
|
69.1
|
%
|
|
174,429
|
|
|
74.0
|
%
|
||
Income from operations
|
84,322
|
|
|
30.9
|
%
|
|
61,129
|
|
|
26.0
|
%
|
||
Other expense
|
|
|
|
|
|
|
|
||||||
Interest expense
|
(43,498
|
)
|
|
(15.9
|
)%
|
|
(29,186
|
)
|
|
(12.4
|
)%
|
||
Other expense
|
(532
|
)
|
|
(0.3
|
)%
|
|
(299
|
)
|
|
(0.1
|
)%
|
||
Total other expense
|
(44,030
|
)
|
|
(16.2
|
)%
|
|
(29,485
|
)
|
|
(12.5
|
)%
|
||
Income before income taxes
|
40,292
|
|
|
14.7
|
%
|
|
31,644
|
|
|
13.5
|
%
|
||
Provision for income taxes
|
(10,154
|
)
|
|
(3.7
|
)%
|
|
(10,272
|
)
|
|
(4.4
|
)%
|
||
Income from continuing operations
|
30,138
|
|
|
11.0
|
%
|
|
21,372
|
|
|
9.1
|
%
|
||
Loss from discontinued operations, net of tax
|
—
|
|
|
0.0
|
%
|
|
(308
|
)
|
|
(0.1
|
)%
|
||
Net income
|
30,138
|
|
|
11.0
|
%
|
|
21,064
|
|
|
9.0
|
%
|
||
Net loss attributable to noncontrolling interest
|
197
|
|
|
0.1
|
%
|
|
822
|
|
|
0.3
|
%
|
||
Net income attributable to Encore shareholders
|
$
|
30,335
|
|
|
11.1
|
%
|
|
$
|
21,886
|
|
|
9.3
|
%
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
||||||||||
Revenues
|
|
|
|
|
|
|
|
||||||
Revenue from receivable portfolios, net
|
$
|
737,584
|
|
|
92.6
|
%
|
|
$
|
518,094
|
|
|
96.6
|
%
|
Other revenues
|
38,943
|
|
|
4.9
|
%
|
|
6,473
|
|
|
1.2
|
%
|
||
Net interest income
|
19,691
|
|
|
2.5
|
%
|
|
11,698
|
|
|
2.2
|
%
|
||
Total revenues
|
796,218
|
|
|
100.0
|
%
|
|
536,265
|
|
|
100.0
|
%
|
||
Operating expenses
|
|
|
|
|
|
|
|
||||||
Salaries and employee benefits
|
183,667
|
|
|
23.1
|
%
|
|
114,054
|
|
|
21.3
|
%
|
||
Cost of legal collections
|
153,596
|
|
|
19.3
|
%
|
|
137,694
|
|
|
25.7
|
%
|
||
Other operating expenses
|
72,196
|
|
|
9.0
|
%
|
|
46,118
|
|
|
8.6
|
%
|
||
Collection agency commissions
|
25,275
|
|
|
3.2
|
%
|
|
22,717
|
|
|
4.2
|
%
|
||
General and administrative expenses
|
110,508
|
|
|
13.9
|
%
|
|
77,429
|
|
|
14.4
|
%
|
||
Depreciation and amortization
|
19,879
|
|
|
2.5
|
%
|
|
8,527
|
|
|
1.6
|
%
|
||
Total operating expenses
|
565,121
|
|
|
71.0
|
%
|
|
406,539
|
|
|
75.8
|
%
|
||
Income from operations
|
231,097
|
|
|
29.0
|
%
|
|
129,726
|
|
|
24.2
|
%
|
||
Other expense
|
|
|
|
|
|
|
|
||||||
Interest expense
|
(124,678
|
)
|
|
(15.7
|
)%
|
|
(43,522
|
)
|
|
(8.1
|
)%
|
||
Other expense
|
(192
|
)
|
|
0.0
|
%
|
|
(4,262
|
)
|
|
(0.8
|
)%
|
||
Total other expense
|
(124,870
|
)
|
|
(15.7
|
)%
|
|
(47,784
|
)
|
|
(8.9
|
)%
|
||
Income before income taxes
|
106,227
|
|
|
13.3
|
%
|
|
81,942
|
|
|
15.3
|
%
|
||
Provision for income taxes
|
(35,906
|
)
|
|
(4.5
|
)%
|
|
(30,110
|
)
|
|
(5.6
|
)%
|
||
Income from continuing operations
|
70,321
|
|
|
8.8
|
%
|
|
51,832
|
|
|
9.7
|
%
|
||
Loss from discontinued operations, net of tax
|
—
|
|
|
0.0
|
%
|
|
(308
|
)
|
|
(0.1
|
)%
|
||
Net income
|
70,321
|
|
|
8.8
|
%
|
|
51,524
|
|
|
9.6
|
%
|
||
Net loss attributable to noncontrolling interest
|
6,755
|
|
|
0.9
|
%
|
|
822
|
|
|
0.2
|
%
|
||
Net income attributable to Encore shareholders
|
$
|
77,076
|
|
|
9.7
|
%
|
|
$
|
52,346
|
|
|
9.8
|
%
|
|
Three Months Ended September 30, 2014
|
|
Three Months Ended September 30, 2013
|
||||||||||||||||||||
|
Janus Holdings
|
|
Encore Europe
(1)
|
|
Consolidated
|
|
Janus Holdings
|
|
Encore Europe
(1)
|
|
Consolidated
|
||||||||||||
Total revenues
|
$
|
75,739
|
|
|
$
|
—
|
|
|
$
|
75,739
|
|
|
$
|
46,472
|
|
|
$
|
—
|
|
|
$
|
46,472
|
|
Total operating expenses
|
(37,702
|
)
|
|
—
|
|
|
(37,702
|
)
|
|
(23,640
|
)
|
|
—
|
|
|
(23,640
|
)
|
||||||
Income from operations
|
38,037
|
|
|
—
|
|
|
38,037
|
|
|
22,832
|
|
|
—
|
|
|
22,832
|
|
||||||
Interest expense-non-PEC
|
(25,020
|
)
|
|
—
|
|
|
(25,020
|
)
|
|
(12,319
|
)
|
|
—
|
|
|
(12,319
|
)
|
||||||
PEC interest (expense) income
|
(11,044
|
)
|
|
5,309
|
|
|
(5,735
|
)
|
|
(10,875
|
)
|
|
4,998
|
|
|
(5,877
|
)
|
||||||
Other (expense) income
|
(561
|
)
|
|
—
|
|
|
(561
|
)
|
|
96
|
|
|
—
|
|
|
96
|
|
||||||
Income (loss) before income taxes
|
1,412
|
|
|
5,309
|
|
|
6,721
|
|
|
(266
|
)
|
|
4,998
|
|
|
4,732
|
|
||||||
Provision for income taxes
|
(1,045
|
)
|
|
—
|
|
|
(1,045
|
)
|
|
(1,174
|
)
|
|
—
|
|
|
(1,174
|
)
|
||||||
Net income (loss)
|
367
|
|
|
5,309
|
|
|
5,676
|
|
|
(1,440
|
)
|
|
4,998
|
|
|
3,558
|
|
||||||
Net (income) loss attributable to noncontrolling interests
|
(51
|
)
|
|
(158
|
)
|
|
(209
|
)
|
|
822
|
|
|
—
|
|
|
822
|
|
||||||
Net income (loss) attributable to Encore
|
$
|
316
|
|
|
$
|
5,151
|
|
|
$
|
5,467
|
|
|
$
|
(618
|
)
|
|
$
|
4,998
|
|
|
$
|
4,380
|
|
|
Nine Months Ended September 30, 2014
|
|
Nine Months Ended September 30, 2013
|
||||||||||||||||||||
|
Janus Holdings
|
|
Encore Europe
(1)
|
|
Consolidated
|
|
Janus Holdings
|
|
Encore Europe
(1)
|
|
Consolidated
|
||||||||||||
Total revenues
|
$
|
211,644
|
|
|
$
|
—
|
|
|
$
|
211,644
|
|
|
$
|
46,472
|
|
|
$
|
—
|
|
|
$
|
46,472
|
|
Total operating expenses
|
(113,908
|
)
|
|
—
|
|
|
(113,908
|
)
|
|
(23,640
|
)
|
|
—
|
|
|
(23,640
|
)
|
||||||
Income from operations
|
97,736
|
|
|
—
|
|
|
97,736
|
|
|
22,832
|
|
|
—
|
|
|
22,832
|
|
||||||
Interest expense-non-PEC
|
(72,424
|
)
|
|
—
|
|
|
(72,424
|
)
|
|
(12,319
|
)
|
|
—
|
|
|
(12,319
|
)
|
||||||
PEC interest (expense) income
|
(33,137
|
)
|
|
16,067
|
|
|
(17,070
|
)
|
|
(10,875
|
)
|
|
4,998
|
|
|
(5,877
|
)
|
||||||
Other (expense) income
|
(442
|
)
|
|
—
|
|
|
(442
|
)
|
|
96
|
|
|
—
|
|
|
96
|
|
||||||
(Loss) income before income taxes
|
(8,267
|
)
|
|
16,067
|
|
|
7,800
|
|
|
(266
|
)
|
|
4,998
|
|
|
4,732
|
|
||||||
Provision for income taxes
|
(1,891
|
)
|
|
—
|
|
|
(1,891
|
)
|
|
(1,174
|
)
|
|
—
|
|
|
(1,174
|
)
|
||||||
Net (loss) income
|
(10,158
|
)
|
|
16,067
|
|
|
5,909
|
|
|
(1,440
|
)
|
|
4,998
|
|
|
3,558
|
|
||||||
Net loss attributable to noncontrolling interests
|
1,459
|
|
|
4,341
|
|
|
5,800
|
|
|
822
|
|
|
—
|
|
|
822
|
|
||||||
Net (loss) income attributable to Encore
|
$
|
(8,699
|
)
|
|
$
|
20,408
|
|
|
$
|
11,709
|
|
|
$
|
(618
|
)
|
|
$
|
4,998
|
|
|
$
|
4,380
|
|
(1)
|
Includes only the results of operations related to Janus Holdings and therefore does not represent the complete financial performance of Encore Europe.
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||
|
2014
|
|
2013
|
||||||||||||||||||||
|
$
|
|
Per Diluted
Share—
Accounting
|
|
Per Diluted
Share—
Economic
|
|
$
|
|
Per Diluted
Share— Accounting |
|
Per Diluted
Share— Economic |
||||||||||||
GAAP net income from continuing operations attributable to Encore, as reported
|
$
|
30,335
|
|
|
$
|
1.11
|
|
|
$
|
1.15
|
|
|
$
|
22,194
|
|
|
$
|
0.82
|
|
|
$
|
0.84
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Convertible notes non-cash interest and issuance cost amortization, net of tax
|
1,773
|
|
|
0.06
|
|
|
0.07
|
|
|
1,103
|
|
|
0.04
|
|
|
0.05
|
|
||||||
Acquisition and integration related expenses, net of tax
|
1,001
|
|
|
0.04
|
|
|
0.04
|
|
|
4,775
|
|
|
0.18
|
|
|
0.18
|
|
||||||
Net effect of non-recurring tax adjustments
|
(2,291
|
)
|
|
(0.08
|
)
|
|
(0.09
|
)
|
|
(1,236
|
)
|
|
(0.05
|
)
|
|
(0.05
|
)
|
||||||
Adjusted income from continuing operations attributable to Encore
|
$
|
30,818
|
|
|
$
|
1.13
|
|
|
$
|
1.17
|
|
|
$
|
26,836
|
|
|
$
|
0.99
|
|
|
$
|
1.02
|
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||
|
2014
|
|
2013
|
||||||||||||||||||||
|
$
|
|
Per Diluted
Share—
Accounting
|
|
Per Diluted
Share—
Economic
|
|
$
|
|
Per Diluted
Share— Accounting |
|
Per Diluted
Share— Economic |
||||||||||||
GAAP net income from continuing operations attributable to Encore, as reported
|
$
|
77,076
|
|
|
$
|
2.79
|
|
|
$
|
2.91
|
|
|
$
|
52,654
|
|
|
$
|
2.06
|
|
|
$
|
2.08
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Convertible notes non-cash interest and issuance cost amortization, net of tax
|
4,758
|
|
|
0.17
|
|
|
0.18
|
|
|
2,103
|
|
|
0.08
|
|
|
0.08
|
|
||||||
Acquisition and integration related expenses, net of tax
|
9,195
|
|
|
0.33
|
|
|
0.35
|
|
|
13,060
|
|
|
0.51
|
|
|
0.52
|
|
||||||
Acquisition related other expenses, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
2,198
|
|
|
0.09
|
|
|
0.09
|
|
||||||
Net effect of non-recurring tax adjustments
|
(2,291
|
)
|
|
(0.08
|
)
|
|
(0.09
|
)
|
|
(712
|
)
|
|
(0.03
|
)
|
|
(0.03
|
)
|
||||||
Adjusted income from continuing operations attributable to Encore
|
$
|
88,738
|
|
|
$
|
3.21
|
|
|
$
|
3.35
|
|
|
$
|
69,303
|
|
|
$
|
2.71
|
|
|
$
|
2.74
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2014
|
|
2013
|
|
2014
|
|
2013
|
|||||||||
GAAP net income, as reported
|
$
|
30,138
|
|
|
$
|
21,064
|
|
|
$
|
70,321
|
|
|
$
|
51,524
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Loss from discontinued operations, net of tax
|
—
|
|
|
308
|
|
|
—
|
|
|
308
|
|
||||
Interest expense
|
43,498
|
|
|
29,186
|
|
|
124,678
|
|
|
43,522
|
|
||||
Provision for income taxes
|
10,154
|
|
|
10,272
|
|
|
35,906
|
|
|
30,110
|
|
||||
Depreciation and amortization
|
6,933
|
|
|
4,523
|
|
|
19,879
|
|
|
8,527
|
|
||||
Amount applied to principal on receivable portfolios
|
155,435
|
|
|
154,283
|
|
|
475,590
|
|
|
410,134
|
|
||||
Stock-based compensation expense
|
4,009
|
|
|
3,983
|
|
|
13,560
|
|
|
9,163
|
|
||||
Acquisition and integration related expenses
|
1,622
|
|
|
7,752
|
|
|
17,348
|
|
|
21,431
|
|
||||
Acquisition related other expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
3,630
|
|
||||
Adjusted EBITDA
|
$
|
251,789
|
|
|
$
|
231,371
|
|
|
$
|
757,282
|
|
|
$
|
578,349
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2014
|
|
2013
|
|
2014
|
|
2013
|
|||||||||
GAAP total operating expenses, as reported
|
$
|
188,960
|
|
|
$
|
174,429
|
|
|
$
|
565,121
|
|
|
$
|
406,539
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Stock-based compensation expense
|
(4,009
|
)
|
|
(3,983
|
)
|
|
(13,560
|
)
|
|
(9,163
|
)
|
||||
Operating expenses related to non-portfolio purchasing and recovery business
|
(25,058
|
)
|
|
(12,115
|
)
|
|
(71,299
|
)
|
|
(23,756
|
)
|
||||
Acquisition and integration related expenses
|
(1,622
|
)
|
|
(7,752
|
)
|
|
(17,348
|
)
|
|
(21,431
|
)
|
||||
Adjusted operating expenses
|
$
|
158,271
|
|
|
$
|
150,579
|
|
|
$
|
462,914
|
|
|
$
|
352,189
|
|
|
Three Months Ended September 30, 2014
|
|
As of
September 30, 2014 |
|||||||||||||||||||||
|
Collections
(1)
|
|
Gross
Revenue
(2)
|
|
Revenue
Recognition
Rate
(3)
|
|
Net
Portfolio
Allowance Reversal
|
|
Revenue
% of Total
Revenue
|
|
Unamortized
Balances
|
|
Monthly
IRR
|
|||||||||||
United States
(4)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
ZBA
(5)
|
$
|
7,219
|
|
|
$
|
4,480
|
|
|
62.1
|
%
|
|
$
|
2,744
|
|
|
1.8
|
%
|
|
$
|
—
|
|
|
—
|
|
2006
|
761
|
|
|
65
|
|
|
8.5
|
%
|
|
—
|
|
|
0.0
|
%
|
|
—
|
|
|
5.3
|
%
|
||||
2007
|
1,994
|
|
|
681
|
|
|
34.2
|
%
|
|
1,029
|
|
|
0.3
|
%
|
|
3,033
|
|
|
5.4
|
%
|
||||
2008
|
6,978
|
|
|
3,501
|
|
|
50.2
|
%
|
|
2,030
|
|
|
1.4
|
%
|
|
9,157
|
|
|
9.7
|
%
|
||||
2009
|
12,475
|
|
|
8,585
|
|
|
68.8
|
%
|
|
—
|
|
|
3.5
|
%
|
|
9,153
|
|
|
23.7
|
%
|
||||
2010
|
25,976
|
|
|
20,140
|
|
|
77.5
|
%
|
|
—
|
|
|
8.2
|
%
|
|
26,854
|
|
|
22.3
|
%
|
||||
2011
|
35,875
|
|
|
25,602
|
|
|
71.4
|
%
|
|
—
|
|
|
10.4
|
%
|
|
62,971
|
|
|
12.3
|
%
|
||||
2012
|
60,990
|
|
|
32,957
|
|
|
54.0
|
%
|
|
—
|
|
|
13.4
|
%
|
|
171,877
|
|
|
5.8
|
%
|
||||
2013
|
97,874
|
|
|
51,729
|
|
|
52.9
|
%
|
|
—
|
|
|
21.0
|
%
|
|
334,367
|
|
|
4.7
|
%
|
||||
2014
|
54,664
|
|
|
28,989
|
|
|
53.0
|
%
|
|
—
|
|
|
11.8
|
%
|
|
430,978
|
|
|
2.8
|
%
|
||||
Subtotal
|
304,806
|
|
|
176,729
|
|
|
58.0
|
%
|
|
5,803
|
|
|
71.8
|
%
|
|
1,048,390
|
|
|
5.2
|
%
|
||||
Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
2013
|
62,892
|
|
|
41,414
|
|
|
65.8
|
%
|
|
—
|
|
|
16.8
|
%
|
|
546,130
|
|
|
2.4
|
%
|
||||
2014
|
39,522
|
|
|
27,839
|
|
|
70.4
|
%
|
|
—
|
|
|
11.3
|
%
|
|
478,712
|
|
|
2.2
|
%
|
||||
Subtotal
|
102,414
|
|
|
69,253
|
|
|
67.6
|
%
|
|
—
|
|
|
28.2
|
%
|
|
1,024,842
|
|
|
2.3
|
%
|
||||
Total
|
$
|
407,220
|
|
|
$
|
245,982
|
|
|
60.4
|
%
|
|
$
|
5,803
|
|
|
100.0
|
%
|
|
$
|
2,073,232
|
|
|
3.2
|
%
|
|
Three Months Ended September 30, 2013
|
|
As of
September 30, 2013 |
|||||||||||||||||||||
|
Collections
(1)
|
|
Gross
Revenue
(2)
|
|
Revenue
Recognition
Rate
(3)
|
|
Net
Portfolio
Allowance Reversal
|
|
Revenue
% of Total
Revenue
|
|
Unamortized
Balances
|
|
Monthly
IRR
|
|||||||||||
United States
(4)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
ZBA
(5)
|
$
|
7,205
|
|
|
$
|
4,227
|
|
|
58.7
|
%
|
|
$
|
2,978
|
|
|
1.9
|
%
|
|
$
|
—
|
|
|
—
|
|
2006
|
2,112
|
|
|
665
|
|
|
31.5
|
%
|
|
—
|
|
|
0.3
|
%
|
|
3,420
|
|
|
5.1
|
%
|
||||
2007
|
3,002
|
|
|
1,102
|
|
|
36.7
|
%
|
|
—
|
|
|
0.5
|
%
|
|
5,433
|
|
|
5.5
|
%
|
||||
2008
|
9,581
|
|
|
5,445
|
|
|
56.8
|
%
|
|
—
|
|
|
2.4
|
%
|
|
20,428
|
|
|
7.6
|
%
|
||||
2009
|
18,828
|
|
|
13,104
|
|
|
69.6
|
%
|
|
—
|
|
|
5.9
|
%
|
|
24,920
|
|
|
12.7
|
%
|
||||
2010
|
36,888
|
|
|
24,895
|
|
|
67.5
|
%
|
|
—
|
|
|
11.2
|
%
|
|
59,430
|
|
|
10.6
|
%
|
||||
2011
|
52,408
|
|
|
32,613
|
|
|
62.2
|
%
|
|
—
|
|
|
14.7
|
%
|
|
118,627
|
|
|
7.4
|
%
|
||||
2012
|
82,056
|
|
|
39,458
|
|
|
48.1
|
%
|
|
—
|
|
|
17.7
|
%
|
|
314,483
|
|
|
3.6
|
%
|
||||
2013
|
100,163
|
|
|
59,708
|
|
|
59.6
|
%
|
|
—
|
|
|
26.9
|
%
|
|
452,741
|
|
|
4.2
|
%
|
||||
Subtotal
|
312,243
|
|
|
181,217
|
|
|
58.0
|
%
|
|
2,978
|
|
|
81.5
|
%
|
|
999,482
|
|
|
5.1
|
%
|
||||
Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
2013
|
67,427
|
|
|
41,192
|
|
|
61.1
|
%
|
|
—
|
|
|
18.5
|
%
|
|
596,160
|
|
|
2.4
|
%
|
||||
Total
|
$
|
379,670
|
|
|
$
|
222,409
|
|
|
58.6
|
%
|
|
$
|
2,978
|
|
|
100.0
|
%
|
|
$
|
1,595,642
|
|
|
4.3
|
%
|
|
Nine Months Ended September 30, 2014
|
|
As of
September 30, 2014 |
|||||||||||||||||||||
|
Collections
(1)
|
|
Gross
Revenue
(2)
|
|
Revenue
Recognition
Rate
(3)
|
|
Net
Portfolio
Allowance Reversal
|
|
Revenue
% of Total
Revenue
|
|
Unamortized
Balances
|
|
Monthly
IRR
|
|||||||||||
United States
(4)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
ZBA
(5)
|
$
|
20,438
|
|
|
$
|
11,473
|
|
|
56.1
|
%
|
|
$
|
8,970
|
|
|
1.6
|
%
|
|
$
|
—
|
|
|
—
|
|
2006
|
3,067
|
|
|
601
|
|
|
19.6
|
%
|
|
—
|
|
|
0.1
|
%
|
|
—
|
|
|
5.3
|
%
|
||||
2007
|
6,626
|
|
|
2,861
|
|
|
43.2
|
%
|
|
1,145
|
|
|
0.4
|
%
|
|
3,033
|
|
|
5.4
|
%
|
||||
2008
|
23,244
|
|
|
12,452
|
|
|
53.6
|
%
|
|
2,340
|
|
|
1.7
|
%
|
|
9,157
|
|
|
9.7
|
%
|
||||
2009
|
44,816
|
|
|
32,996
|
|
|
73.6
|
%
|
|
—
|
|
|
4.6
|
%
|
|
9,153
|
|
|
23.7
|
%
|
||||
2010
|
88,390
|
|
|
65,327
|
|
|
73.9
|
%
|
|
—
|
|
|
9.0
|
%
|
|
26,854
|
|
|
22.3
|
%
|
||||
2011
|
123,669
|
|
|
83,893
|
|
|
67.8
|
%
|
|
—
|
|
|
11.6
|
%
|
|
62,971
|
|
|
12.3
|
%
|
||||
2012
|
210,719
|
|
|
106,657
|
|
|
50.6
|
%
|
|
—
|
|
|
14.7
|
%
|
|
171,877
|
|
|
5.8
|
%
|
||||
2013
|
330,946
|
|
|
175,807
|
|
|
53.1
|
%
|
|
—
|
|
|
24.2
|
%
|
|
334,367
|
|
|
4.7
|
%
|
||||
2014
|
80,791
|
|
|
41,536
|
|
|
51.4
|
%
|
|
—
|
|
|
5.7
|
%
|
|
430,978
|
|
|
2.8
|
%
|
||||
Subtotal
|
932,706
|
|
|
533,603
|
|
|
57.2
|
%
|
|
12,455
|
|
|
73.6
|
%
|
|
1,048,390
|
|
|
5.2
|
%
|
||||
Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
2013
|
189,621
|
|
|
127,350
|
|
|
67.2
|
%
|
|
—
|
|
|
17.6
|
%
|
|
546,130
|
|
|
2.4
|
%
|
||||
2014
|
90,847
|
|
|
64,176
|
|
|
70.6
|
%
|
|
—
|
|
|
8.8
|
%
|
|
478,712
|
|
|
2.2
|
%
|
||||
Subtotal
|
280,468
|
|
|
191,526
|
|
|
68.3
|
%
|
|
—
|
|
|
26.4
|
%
|
|
1,024,842
|
|
|
2.3
|
%
|
||||
Total
|
$
|
1,213,174
|
|
|
$
|
725,129
|
|
|
59.8
|
%
|
|
$
|
12,455
|
|
|
100.0
|
%
|
|
$
|
2,073,232
|
|
|
3.2
|
%
|
|
Nine Months Ended September 30, 2013
|
|
As of
September 30, 2013 |
|||||||||||||||||||||
|
Collections
(1)
|
|
Gross
Revenue
(2)
|
|
Revenue
Recognition
Rate
(3)
|
|
Net
Reversal
(Portfolio
Allowance)
|
|
Revenue
% of Total
Revenue
|
|
Unamortized
Balances
|
|
Monthly
IRR
|
|||||||||||
United States
(4)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
ZBA
(5)
|
$
|
20,654
|
|
|
$
|
13,632
|
|
|
66.0
|
%
|
|
$
|
7,022
|
|
|
2.7
|
%
|
|
$
|
—
|
|
|
—
|
|
2005
|
2,364
|
|
|
239
|
|
|
10.1
|
%
|
|
10
|
|
|
0.0
|
%
|
|
—
|
|
|
—
|
%
|
||||
2006
|
7,133
|
|
|
2,707
|
|
|
38.0
|
%
|
|
(402
|
)
|
|
0.5
|
%
|
|
3,420
|
|
|
5.1
|
%
|
||||
2007
|
9,650
|
|
|
4,056
|
|
|
42.0
|
%
|
|
580
|
|
|
0.8
|
%
|
|
5,433
|
|
|
5.5
|
%
|
||||
2008
|
33,220
|
|
|
18,891
|
|
|
56.9
|
%
|
|
448
|
|
|
3.7
|
%
|
|
20,428
|
|
|
7.6
|
%
|
||||
2009
|
63,758
|
|
|
41,483
|
|
|
65.1
|
%
|
|
—
|
|
|
8.1
|
%
|
|
24,920
|
|
|
15.1
|
%
|
||||
2010
|
124,486
|
|
|
79,492
|
|
|
63.9
|
%
|
|
—
|
|
|
15.6
|
%
|
|
59,430
|
|
|
12.3
|
%
|
||||
2011
|
180,155
|
|
|
103,496
|
|
|
57.4
|
%
|
|
—
|
|
|
20.3
|
%
|
|
118,627
|
|
|
8.2
|
%
|
||||
2012
|
279,321
|
|
|
124,895
|
|
|
44.7
|
%
|
|
—
|
|
|
24.5
|
%
|
|
314,483
|
|
|
3.8
|
%
|
||||
2013
|
140,060
|
|
|
80,353
|
|
|
57.4
|
%
|
|
—
|
|
|
15.7
|
%
|
|
452,741
|
|
|
4.3
|
%
|
||||
Total
|
860,801
|
|
|
469,244
|
|
|
54.5
|
%
|
|
7,658
|
|
|
91.9
|
%
|
|
999,482
|
|
|
5.4
|
%
|
||||
Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
2013
|
67,427
|
|
|
41,192
|
|
|
61.1
|
%
|
|
—
|
|
|
8.1
|
%
|
|
596,160
|
|
|
2.4
|
%
|
||||
Total
|
$
|
928,228
|
|
|
$
|
510,436
|
|
|
55.0
|
%
|
|
$
|
7,658
|
|
|
100.0
|
%
|
|
$
|
1,595,642
|
|
|
4.3
|
%
|
(1)
|
Does not include amounts collected on behalf of others.
|
(2)
|
Gross revenue excludes the effects of net portfolio allowance or net portfolio allowance reversals.
|
(3)
|
Revenue recognition rate excludes the effects of net portfolio allowance or net portfolio allowance reversals.
|
(4)
|
United States data includes immaterial results from Latin America.
|
(5)
|
ZBA revenue typically has a 100% revenue recognition rate. However, collections on ZBA pool groups where a valuation allowance remains must first be recorded as an allowance reversal until the allowance for that pool group is zero. Once the entire valuation allowance is reversed, the revenue recognition rate will become 100%.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Salaries and employee benefits:
|
|
|
|
|
|
|
|
||||||||
Portfolio purchasing and recovery
|
$
|
59,291
|
|
|
$
|
50,774
|
|
|
$
|
178,433
|
|
|
$
|
109,721
|
|
Tax lien business
|
1,884
|
|
|
1,479
|
|
|
5,234
|
|
|
4,333
|
|
||||
|
$
|
61,175
|
|
|
$
|
52,253
|
|
|
$
|
183,667
|
|
|
$
|
114,054
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Other operating expenses:
|
|
|
|
|
|
|
|
||||||||
Portfolio purchasing and recovery
|
$
|
21,352
|
|
|
$
|
18,233
|
|
|
$
|
68,843
|
|
|
$
|
43,224
|
|
Tax lien business
|
709
|
|
|
823
|
|
|
3,353
|
|
|
2,894
|
|
||||
|
$
|
22,061
|
|
|
$
|
19,056
|
|
|
$
|
72,196
|
|
|
$
|
46,118
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
General and administrative expenses:
|
|
|
|
|
|
|
|
||||||||
Portfolio purchasing and recovery
|
$
|
33,436
|
|
|
$
|
32,949
|
|
|
$
|
106,132
|
|
|
$
|
75,505
|
|
Tax lien business
|
2,096
|
|
|
537
|
|
|
4,376
|
|
|
1,924
|
|
||||
|
$
|
35,532
|
|
|
$
|
33,486
|
|
|
$
|
110,508
|
|
|
$
|
77,429
|
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||||||
|
2014
|
|
2013
|
||||||||||||||||||||||||
|
Collections
|
|
Cost
|
|
Cost Per
Channel
Dollar
Collected
|
|
Cost Per
Total
Dollar
Collected
|
|
Collections
|
|
Cost
|
|
Cost Per
Channel
Dollar
Collected
|
|
Cost Per
Total
Dollar
Collected
|
||||||||||||
United States:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Collection sites
(1)
|
$
|
122,600
|
|
|
$
|
8,794
|
|
|
7.2
|
%
|
|
3.0
|
%
|
|
$
|
119,080
|
|
|
$
|
10,056
|
|
|
8.4
|
%
|
|
3.2
|
%
|
Legal outsourcing
|
125,771
|
|
|
44,820
|
|
|
35.6
|
%
|
|
15.1
|
%
|
|
118,511
|
|
|
44,379
|
|
|
37.4
|
%
|
|
14.2
|
%
|
||||
Internal legal
(2)
|
28,248
|
|
|
11,104
|
|
|
39.3
|
%
|
|
3.8
|
%
|
|
35,045
|
|
|
16,396
|
|
|
46.8
|
%
|
|
5.3
|
%
|
||||
Collection agencies
|
19,392
|
|
|
3,389
|
|
|
17.5
|
%
|
|
1.1
|
%
|
|
39,607
|
|
|
8,956
|
|
|
22.6
|
%
|
|
2.9
|
%
|
||||
Other indirect costs
(3)
|
—
|
|
|
56,693
|
|
|
—
|
|
|
19.2
|
%
|
|
—
|
|
|
52,432
|
|
|
—
|
|
|
16.7
|
%
|
||||
Subtotal
|
296,011
|
|
|
124,800
|
|
|
|
|
42.2
|
%
|
|
312,243
|
|
|
132,219
|
|
|
|
|
42.3
|
%
|
||||||
Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Collection sites
(1)
|
57,283
|
|
|
3,637
|
|
|
6.3
|
%
|
|
3.6
|
%
|
|
37,971
|
|
|
2,174
|
|
|
5.7
|
%
|
|
3.2
|
%
|
||||
Legal outsourcing
|
11,764
|
|
|
4,746
|
|
|
40.3
|
%
|
|
4.6
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Collection agencies
|
33,367
|
|
|
6,127
|
|
|
18.4
|
%
|
|
6.0
|
%
|
|
29,496
|
|
|
5,202
|
|
|
17.6
|
%
|
|
7.7
|
%
|
||||
Other indirect costs
(3)
|
—
|
|
|
16,492
|
|
|
—
|
|
|
16.1
|
%
|
|
—
|
|
|
10,984
|
|
|
—
|
|
|
16.3
|
%
|
||||
Subtotal
|
102,414
|
|
|
31,002
|
|
|
|
|
30.3
|
%
|
|
67,467
|
|
|
18,360
|
|
|
|
|
27.2
|
%
|
||||||
Other geographies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Collection sites
(1)
|
8,795
|
|
|
779
|
|
|
8.9
|
%
|
|
8.9
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other indirect costs
(3)
|
—
|
|
|
1,690
|
|
|
—
|
|
|
19.2
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Subtotal
|
8,795
|
|
|
2,469
|
|
|
|
|
28.1
|
%
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
||||||
Total
(4)
|
$
|
407,220
|
|
|
$
|
158,271
|
|
|
|
|
38.9
|
%
|
|
$
|
379,710
|
|
|
$
|
150,579
|
|
|
|
|
39.7
|
%
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||||
|
2014
|
|
2013
|
||||||||||||||||||||||||
|
Collections
|
|
Cost
|
|
Cost Per
Channel
Dollar
Collected
|
|
Cost Per
Total
Dollar
Collected
|
|
Collections
|
|
Cost
|
|
Cost Per
Channel
Dollar
Collected
|
|
Cost Per
Total
Dollar
Collected
|
||||||||||||
United States:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Collection sites
(1)
|
$
|
389,913
|
|
|
$
|
25,534
|
|
|
6.5
|
%
|
|
2.8
|
%
|
|
$
|
362,495
|
|
|
$
|
24,472
|
|
|
6.8
|
%
|
|
2.8
|
%
|
Legal outsourcing
|
371,068
|
|
|
132,425
|
|
|
35.7
|
%
|
|
14.5
|
%
|
|
347,340
|
|
|
124,278
|
|
|
35.8
|
%
|
|
14.5
|
%
|
||||
Internal legal
(2)
|
89,483
|
|
|
35,357
|
|
|
39.5
|
%
|
|
3.9
|
%
|
|
62,171
|
|
|
31,835
|
|
|
51.2
|
%
|
|
3.7
|
%
|
||||
Collection agencies
|
60,805
|
|
|
9,813
|
|
|
16.1
|
%
|
|
1.1
|
%
|
|
88,795
|
|
|
17,515
|
|
|
19.7
|
%
|
|
2.0
|
%
|
||||
Other indirect costs
(3)
|
—
|
|
|
169,580
|
|
|
—
|
|
|
18.6
|
%
|
|
—
|
|
|
135,729
|
|
|
—
|
|
|
15.8
|
%
|
||||
Subtotal
|
911,269
|
|
|
372,709
|
|
|
|
|
40.9
|
%
|
|
860,801
|
|
|
333,829
|
|
|
|
|
38.8
|
%
|
||||||
Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Collection sites
(1)
|
157,860
|
|
|
10,133
|
|
|
6.4
|
%
|
|
3.6
|
%
|
|
37,971
|
|
|
2,174
|
|
|
5.7
|
%
|
|
3.2
|
%
|
||||
Legal outsourcing
|
31,846
|
|
|
8,673
|
|
|
27.2
|
%
|
|
3.1
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Collection agencies
|
90,762
|
|
|
15,462
|
|
|
17.0
|
%
|
|
5.5
|
%
|
|
29,496
|
|
|
5,202
|
|
|
17.6
|
%
|
|
7.7
|
%
|
||||
Other indirect costs
(3)
|
—
|
|
|
49,511
|
|
|
—
|
|
|
17.7
|
%
|
|
—
|
|
|
10,984
|
|
|
—
|
|
|
16.3
|
%
|
||||
Subtotal
|
280,468
|
|
|
83,779
|
|
|
|
|
29.9
|
%
|
|
67,467
|
|
|
18,360
|
|
|
|
|
|
27.2
|
%
|
|||||
Other geographies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Collection sites
(1)
|
21,437
|
|
|
2,458
|
|
|
11.5
|
%
|
|
11.5
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other indirect costs
(3)
|
—
|
|
|
3,968
|
|
|
—
|
|
|
18.5
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Subtotal
|
21,437
|
|
|
6,426
|
|
|
|
|
30.0
|
%
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
||||||
Total
(4)
|
$
|
1,213,174
|
|
|
$
|
462,914
|
|
|
|
|
38.2
|
%
|
|
$
|
928,268
|
|
|
$
|
352,189
|
|
|
|
|
37.9
|
%
|
(1)
|
Cost in collection sites represents only account managers and their supervisors’ salaries, variable compensation, and employee benefits. Collection sites in the United States include collection site expenses for our India and Costa Rica call centers.
|
(2)
|
Cost in internal legal channel represents court costs expensed, internal legal channel employee salaries and benefits, and other related direct operating expenses.
|
(3)
|
Other indirect costs represent non-collection site salaries and employee benefits, general and administrative expenses, other operating expenses and depreciation and amortization.
|
(4)
|
Total cost represents all operating expenses, excluding stock-based compensation expense, operating expenses related to non-portfolio purchasing and recovery business, one-time charges, and acquisition and integration related operating expenses. We include this information in order to facilitate a comparison of approximate cash costs to cash collections for the debt purchasing business in the periods presented. Refer to the “Non-GAAP Disclosure” section for further details.
|
•
|
The cost from our collection sites, which includes account manager salaries, variable compensation, and employee benefits, as a percentage of total collections in the United States, decreased slightly to
3.0%
during the three months ended
September 30, 2014
from
3.2%
during the three months ended September 30,
2013
and, as a percentage of our site collections, decreased to
7.2%
during the three months ended
September 30, 2014
, from
8.4%
during the three months ended
September 30, 2013
. The decrease in cost as a percentage of site collections, through our collection sites in the United States, was primarily due to improvements in our collection techniques, including improved consumer insights, which allow us to more effectively determine which consumers have the ability to pay and how to best engage with them.
|
•
|
The cost of legal collections through our internal legal channel, as a percentage of total collections in the United States, decreased to
3.8%
during the three months ended
September 30, 2014
, from
5.3%
during the three months ended
September 30, 2013
and, as a percentage of channel collections, decreased to
39.3%
during the three months ended
September 30, 2014
, from
46.8%
during the three months ended
September 30, 2013
. The decrease in cost as a percentage of total collections was primarily due to decreased internal legal collections as a percentage of total collections. The decrease in cost as a percentage of channel collections was primarily due to improved productivity in our internal legal platform.
|
•
|
Collection agency commissions, as a percentage of total collections in the United States, decreased to
1.1%
during the three months ended
September 30, 2014
, from
2.9%
during the same period in the prior year. Our collection agency commission rate decreased to
17.5%
during the three months ended
September 30, 2014
, from
22.6%
during the same period in the prior year. The decrease in collection agency commissions as a percentage of total collections was primarily related to a decrease in this channel’s collections as a percentage of total collections. Commissions, as a percentage of collections in this channel, vary from period to period depending on, among other things, the amount of time that has passed since the charge-off of the accounts placed with an agency. Generally, freshly charged-off accounts have a lower commission rate than accounts that have been charged off for a longer period of time.
|
•
|
The cost of legal collections through our legal outsourcing channel, as a percentage of total collections in the United States, increased to
15.1%
during the three months ended
September 30, 2014
, from
14.2%
during the three months ended
September 30, 2013
. However, cost as a percentage of channel collections, decreased to
35.6%
during the three months ended September 30, 3014, from
37.4%
during the same period in the prior year. The increase in the cost of legal collections as a percentage of total collections was primarily due to an increase in this channel’s collections as a percentage of total collections. The decrease in cost as a percentage of channel collections was primarily due to a reduction in the commission rates we pay to our network of attorneys in the United States.
|
•
|
Other costs not directly attributable to specific channel collections (other indirect costs) increased to
19.2%
for the three months ended
September 30, 2014
, from
16.7%
for the three months ended
September 30, 2013
. These costs include non-collection site salaries and employee benefits, general and administrative expenses, other operating expenses, and depreciation and amortization. This increase and the increase in cost per dollar collected, were due to several factors, including increases in corporate legal expense, headcount, and general and administrative expenses necessary to support our growth and to invest in initiatives relating to the evolving regulatory environment.
|
•
|
The cost of legal collections through our internal legal channel, as a percentage of total collections in the United States, increased to
3.9%
during the
nine months ended
September 30, 2014
, from
3.7%
during the
nine months ended
September 30, 2013
and, as a percentage of channel collections, decreased to
39.5%
during the
nine months ended
September 30, 2014
, from
51.2%
during the
nine months ended
September 30, 2013
. This increase in cost as a percentage of total collections was primarily due to increased collections resulting from the continued expansion of our internal legal channel. The decrease in cost as a percentage of channel collections was primarily due to increased productivity in our internal legal platform.
|
•
|
Other costs not directly attributable to specific channel collections (other indirect costs) increased to
18.6%
for the
nine months ended
September 30, 2014
, from
15.8%
for the
nine months ended
September 30, 2013
. These costs include non-collection site salaries and employee benefits, general and administrative expenses, other operating expenses, and depreciation and amortization. This increase and the increase in cost per dollar collected, were due to several factors, including increases in corporate legal expense, headcount, and general and administrative expenses necessary to support our growth and to invest in initiatives relating to the evolving regulatory environment.
|
•
|
Collection agency commissions, as a percentage of total collections in the United States, decreased to
1.1%
during the
nine months ended
September 30, 2014
, from
2.0%
during the same period in the prior year. Our collection agency commission rate decreased to
16.1%
during the
nine months ended
September 30, 2014
, from
19.7%
during the same period in the prior year. The decrease in collection agency commissions as a percentage of total collections was primarily related to a decrease in this channel’s collections as a percentage of total collections. Commissions, as a percentage of collections in this channel, vary from period to period depending on, among other things, the amount of time that has passed since the charge-off of the accounts placed with an agency. Generally, freshly charged-off accounts have a lower commission rate than accounts that have been charged off for a longer period of time.
|
|
Three Months Ended September 30,
|
|||||||||||||
|
2014
|
|
2013
|
|
$ Change
|
|
% Change
|
|||||||
Stated interest on debt obligations
|
$
|
36,391
|
|
|
$
|
21,893
|
|
|
$
|
14,498
|
|
|
66.2
|
%
|
Interest expense on preferred equity certificates
|
5,738
|
|
|
5,877
|
|
|
(139
|
)
|
|
(2.4
|
)%
|
|||
Amortization of loan fees and other loan costs
|
1,900
|
|
|
1,249
|
|
|
651
|
|
|
52.1
|
%
|
|||
(Accretion of debt premium), net of amortization of debt discount
|
(531
|
)
|
|
167
|
|
|
(698
|
)
|
|
(418.0
|
)%
|
|||
Total interest expense
|
$
|
43,498
|
|
|
$
|
29,186
|
|
|
$
|
14,312
|
|
|
49.0
|
%
|
|
Nine Months Ended September 30,
|
|||||||||||||
|
2014
|
|
2013
|
|
$ Change
|
|
% Change
|
|||||||
Stated interest on debt obligations
|
$
|
101,910
|
|
|
$
|
33,130
|
|
|
$
|
68,780
|
|
|
207.6
|
%
|
Interest expense on preferred equity certificates
|
17,069
|
|
|
5,877
|
|
|
11,192
|
|
|
190.4
|
%
|
|||
Amortization of loan fees and other loan costs
|
7,099
|
|
|
3,031
|
|
|
4,068
|
|
|
134.2
|
%
|
|||
(Accretion of debt premium), net of amortization of debt discount
|
(1,400
|
)
|
|
1,484
|
|
|
(2,884
|
)
|
|
(194.3
|
)%
|
|||
Total interest expense
|
$
|
124,678
|
|
|
$
|
43,522
|
|
|
$
|
81,156
|
|
|
186.5
|
%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||
Federal provision
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State provision
|
5.8
|
%
|
|
5.2
|
%
|
|
5.8
|
%
|
|
5.2
|
%
|
State benefit
|
(2.0
|
)%
|
|
(1.8
|
)%
|
|
(2.0
|
)%
|
|
(1.8
|
)%
|
Changes in state apportionment
(1)
|
0.0
|
%
|
|
(4.0
|
)%
|
|
0.0
|
%
|
|
(1.7
|
)%
|
Tax reserves
(2)
|
0.0
|
%
|
|
1.8
|
%
|
|
0.0
|
%
|
|
0.7
|
%
|
International benefit
(3)
|
(8.7
|
)%
|
|
(4.8
|
)%
|
|
(5.0
|
)%
|
|
(2.0
|
)%
|
Permanent items
(4)
|
5.7
|
%
|
|
1.1
|
%
|
|
4.1
|
%
|
|
1.3
|
%
|
Other
(5)
|
(10.6
|
)%
|
|
0.0
|
%
|
|
(4.0
|
)%
|
|
0.0
|
%
|
Effective rate
|
25.2
|
%
|
|
32.5
|
%
|
|
33.9
|
%
|
|
36.7
|
%
|
(1)
|
Represents changes in state apportionment methodologies.
|
(2)
|
Represents reserves taken for certain tax positions adopted by the Company.
|
(3)
|
Relates primarily to the lower tax rate on the income attributable to international operations.
|
(4)
|
Represents a provision for nondeductible items.
|
(5)
|
Includes the effect of discrete items, primarily relates to the recognition of tax benefit as a result of a favorable tax settlement with taxing authorities as discussed below.
|
(1)
|
Adjusted for put-backs and account recalls. Put-backs represent accounts that are returned to the seller in accordance with the respective purchase agreement (“Put-Backs”). Recalls represent accounts that are recalled by the seller in accordance with the respective purchase agreement (“Recalls”).
|
(2)
|
Cumulative collections from inception through
September 30, 2014
, excluding collections on behalf of others.
|
(3)
|
Cumulative Collections Multiple (“CCM”) through
September 30, 2014
refers to collections as a multiple of purchase price.
|
(4)
|
United States data includes immaterial results from Latin America.
|
|
Purchase Price
(1)
|
|
Historical
Collections
(2)
|
|
Estimated
Remaining
Collections
(3)
|
|
Total Estimated
Gross Collections
|
|
Total Estimated Gross
Collections to
Purchase Price
|
|||||||||
Charged-off consumer receivables:
|
|
|
|
|
|
|
||||||||||||
United States
(4)
:
|
|
|
|
|
|
|
|
|
|
|||||||||
<2005
|
$
|
385,469
|
|
|
$
|
1,359,061
|
|
|
$
|
26
|
|
|
$
|
1,359,087
|
|
|
3.5
|
|
2005
|
192,585
|
|
|
489,121
|
|
|
3,703
|
|
|
492,824
|
|
|
2.6
|
|
||||
2006
|
141,026
|
|
|
322,094
|
|
|
6,938
|
|
|
329,032
|
|
|
2.3
|
|
||||
2007
|
204,064
|
|
|
500,838
|
|
|
13,821
|
|
|
514,659
|
|
|
2.5
|
|
||||
2008
|
227,768
|
|
|
574,520
|
|
|
27,673
|
|
|
602,193
|
|
|
2.6
|
|
||||
2009
|
253,244
|
|
|
706,061
|
|
|
100,402
|
|
|
806,463
|
|
|
3.2
|
|
||||
2010
|
345,748
|
|
|
859,556
|
|
|
194,979
|
|
|
1,054,535
|
|
|
3.1
|
|
||||
2011
|
382,413
|
|
|
771,797
|
|
|
282,380
|
|
|
1,054,177
|
|
|
2.8
|
|
||||
2012
|
474,368
|
|
|
699,833
|
|
|
420,301
|
|
|
1,120,134
|
|
|
2.4
|
|
||||
2013
|
543,510
|
|
|
535,666
|
|
|
811,017
|
|
|
1,346,683
|
|
|
2.5
|
|
||||
2014
|
472,554
|
|
|
81,166
|
|
|
844,976
|
|
|
926,142
|
|
|
2.0
|
|
||||
Subtotal
|
3,622,749
|
|
|
6,899,713
|
|
|
2,706,216
|
|
|
9,605,929
|
|
|
2.7
|
|
||||
Europe:
|
|
|
|
|
|
|
|
|
|
|||||||||
2013
|
619,079
|
|
|
323,880
|
|
|
1,292,583
|
|
|
1,616,463
|
|
|
2.6
|
|
||||
2014
|
515,442
|
|
|
90,847
|
|
|
1,047,865
|
|
|
1,138,712
|
|
|
2.2
|
|
||||
Subtotal
|
1,134,521
|
|
|
414,727
|
|
|
2,340,448
|
|
|
2,755,175
|
|
|
2.4
|
|
||||
Purchased bankruptcy receivables:
|
|
|
|
|
|
|
||||||||||||
2010
|
11,971
|
|
|
20,983
|
|
|
974
|
|
|
21,957
|
|
|
1.8
|
|
||||
2011
|
1,642
|
|
|
4,111
|
|
|
986
|
|
|
5,097
|
|
|
3.1
|
|
||||
2012
|
83,158
|
|
|
52,588
|
|
|
46,895
|
|
|
99,483
|
|
|
1.2
|
|
||||
2013
|
39,833
|
|
|
31,730
|
|
|
32,324
|
|
|
64,054
|
|
|
1.6
|
|
||||
Subtotal
|
136,604
|
|
|
109,412
|
|
|
81,179
|
|
|
190,591
|
|
|
1.4
|
|
||||
Total
|
$
|
4,893,874
|
|
|
$
|
7,423,852
|
|
|
$
|
5,127,843
|
|
|
$
|
12,551,695
|
|
|
2.6
|
|
(1)
|
Adjusted for Put-Backs and Recalls.
|
(2)
|
Cumulative collections from inception through
September 30, 2014
, excluding collections on behalf of others.
|
(3)
|
Estimated remaining collections (“ERC”) for charged off consumer receivables includes
$98.8 million
related to accounts that converted to bankruptcy after purchase.
|
(4)
|
United States data includes immaterial results from Latin America.
|
(1)
|
ERC for Zero Basis Portfolios can extend beyond our collection forecasts.
|
(2)
|
ERC for charged off consumer receivables includes
$98.8 million
related to accounts that converted to bankruptcy after purchase.
|
(3)
|
United States data includes immaterial results from Latin America.
|
|
Unamortized
Balance as of September 30, 2014 |
|
Purchase
Price
(1)
|
|
Unamortized
Balance as a
Percentage of
Purchase Price
|
|
Unamortized
Balance as a
Percentage
of Total
|
||||||
Charged-off consumer receivables:
|
|
|
|
|
|
|
|
||||||
United States
(2)
:
|
|
|
|
|
|
|
|
||||||
2007
|
$
|
3,033
|
|
|
$
|
204,064
|
|
|
1.5
|
%
|
|
0.3
|
%
|
2008
|
9,157
|
|
|
227,768
|
|
|
4.0
|
%
|
|
0.9
|
%
|
||
2009
|
9,153
|
|
|
253,244
|
|
|
3.6
|
%
|
|
0.9
|
%
|
||
2010
|
26,221
|
|
|
345,748
|
|
|
7.6
|
%
|
|
2.7
|
%
|
||
2011
|
62,962
|
|
|
382,413
|
|
|
16.5
|
%
|
|
6.4
|
%
|
||
2012
|
131,256
|
|
|
474,368
|
|
|
27.7
|
%
|
|
13.3
|
%
|
||
2013
|
314,638
|
|
|
543,510
|
|
|
57.9
|
%
|
|
31.9
|
%
|
||
2014
|
430,978
|
|
|
472,554
|
|
|
91.2
|
%
|
|
43.6
|
%
|
||
Subtotal
|
987,398
|
|
|
2,903,669
|
|
|
34.0
|
%
|
|
100.0
|
%
|
||
Europe:
|
|
|
|
|
|
|
|
||||||
2013
|
546,130
|
|
|
619,079
|
|
|
88.2
|
%
|
|
53.3
|
%
|
||
2014
|
478,712
|
|
|
515,442
|
|
|
92.9
|
%
|
|
46.7
|
%
|
||
Subtotal
|
1,024,842
|
|
|
1,134,521
|
|
|
90.3
|
%
|
|
100.0
|
%
|
||
Purchased bankruptcy receivables:
|
|
|
|
|
|
|
|
||||||
2010
|
633
|
|
|
11,971
|
|
|
5.3
|
%
|
|
1.0
|
%
|
||
2011
|
9
|
|
|
1,642
|
|
|
0.5
|
%
|
|
0.0
|
%
|
||
2012
|
40,621
|
|
|
83,158
|
|
|
48.8
|
%
|
|
66.7
|
%
|
||
2013
|
19,729
|
|
|
39,833
|
|
|
49.5
|
%
|
|
32.3
|
%
|
||
Subtotal
|
60,992
|
|
|
136,604
|
|
|
44.6
|
%
|
|
100.0
|
%
|
||
Total
|
$
|
2,073,232
|
|
|
$
|
4,174,794
|
|
|
49.7
|
%
|
|
100.0
|
%
|
(1)
|
Purchase price refers to the cash paid to a seller to acquire a portfolio less Put-Backs, Recalls, and other adjustments.
|
(2)
|
United States data includes immaterial results from Latin America.
|
Years Ending December 31,
|
Charged-off
Consumer
Receivables
United States
|
|
Charged-off
Consumer
Receivables
Europe
|
|
Purchased
Bankruptcy
Receivables
|
|
Total
Amortization
|
||||||||
2014
(1)
|
$
|
50,364
|
|
|
$
|
18,605
|
|
|
$
|
8,969
|
|
|
$
|
77,938
|
|
2015
|
249,883
|
|
|
84,371
|
|
|
28,287
|
|
|
362,541
|
|
||||
2016
|
234,348
|
|
|
132,544
|
|
|
15,734
|
|
|
382,626
|
|
||||
2017
|
159,502
|
|
|
117,990
|
|
|
6,053
|
|
|
283,545
|
|
||||
2018
|
103,203
|
|
|
105,894
|
|
|
1,949
|
|
|
211,046
|
|
||||
2019
|
53,641
|
|
|
100,484
|
|
|
—
|
|
|
154,125
|
|
||||
2020
|
70,007
|
|
|
103,534
|
|
|
—
|
|
|
173,541
|
|
||||
2021
|
34,358
|
|
|
116,468
|
|
|
—
|
|
|
150,826
|
|
||||
2022
|
20,475
|
|
|
125,623
|
|
|
—
|
|
|
146,098
|
|
||||
2023
|
8,558
|
|
|
99,034
|
|
|
—
|
|
|
107,592
|
|
||||
2024
|
3,059
|
|
|
20,295
|
|
|
—
|
|
|
23,354
|
|
||||
Total
|
$
|
987,398
|
|
|
$
|
1,024,842
|
|
|
$
|
60,992
|
|
|
$
|
2,073,232
|
|
(1)
|
2014 amount consists of three months data from October 1, 2014 to December 31, 2014.
|
|
Headcount as of September 30,
|
||||||||||
|
2014
|
|
2013
|
||||||||
|
Domestic
|
|
International
|
|
Domestic
|
|
International
|
||||
General & Administrative
|
1,021
|
|
|
1,571
|
|
|
1,035
|
|
|
1,008
|
|
Internal Legal Account Manager
|
43
|
|
|
61
|
|
|
73
|
|
|
32
|
|
Account Manager
|
322
|
|
|
2,294
|
|
|
370
|
|
|
1,743
|
|
|
1,386
|
|
|
3,926
|
|
|
1,478
|
|
|
2,783
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
United States
(1)
:
|
|
|
|
|
|
|
|
||||||||
Gross collections—collection sites
|
$
|
122,600
|
|
|
$
|
119,080
|
|
|
$
|
389,913
|
|
|
$
|
362,495
|
|
Average active Account Manager
|
1,482
|
|
|
1,705
|
|
|
1,579
|
|
|
1,634
|
|
||||
Collections per average active Account Manager
|
$
|
82.7
|
|
|
$
|
69.8
|
|
|
$
|
246.9
|
|
|
$
|
221.8
|
|
Europe:
|
|
|
|
|
|
|
|
||||||||
Gross collections—collection sites
|
$
|
57,283
|
|
|
$
|
37,931
|
|
|
$
|
157,860
|
|
|
$
|
37,931
|
|
Average active Account Manager
|
583
|
|
|
384
|
|
|
509
|
|
|
384
|
|
||||
Collections per average active Account Manager
|
$
|
98.3
|
|
|
$
|
98.8
|
|
|
$
|
310.1
|
|
|
$
|
98.8
|
|
Overall:
|
|
|
|
|
|
|
|
||||||||
Collections per average active Account Manager
|
$
|
87.1
|
|
|
$
|
75.2
|
|
|
$
|
262.3
|
|
|
$
|
198.4
|
|
(1)
|
United States represents account manager statistics for United States portfolios and includes collection statistics for our India and Costa Rica call centers.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
United States
(1)
:
|
|
|
|
|
|
|
|
||||||||
Gross collections—collection sites
|
$
|
122,600
|
|
|
$
|
119,080
|
|
|
$
|
389,913
|
|
|
$
|
362,495
|
|
Total hours paid
|
710
|
|
|
769
|
|
|
2,228
|
|
|
2,216
|
|
||||
Collections per hour paid
|
$
|
172.7
|
|
|
$
|
154.9
|
|
|
$
|
175.0
|
|
|
$
|
163.6
|
|
Europe
:
|
|
|
|
|
|
|
|
||||||||
Gross collections—collection sites
|
$
|
57,283
|
|
|
$
|
37,931
|
|
|
$
|
157,860
|
|
|
$
|
37,931
|
|
Total hours paid
|
159
|
|
|
103
|
|
|
426
|
|
|
103
|
|
||||
Collections per hour paid
|
$
|
360.3
|
|
|
$
|
368.3
|
|
|
$
|
370.6
|
|
|
$
|
368.3
|
|
Overall:
|
|
|
|
|
|
|
|
||||||||
Collections per hour paid
|
$
|
207.0
|
|
|
$
|
180.1
|
|
|
$
|
206.4
|
|
|
$
|
172.7
|
|
(1)
|
United States represents account manager statistics for United States portfolios and includes collection statistics for our India and Costa Rica call centers.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
United States
(1)
:
|
|
|
|
|
|
|
|
||||||||
Gross collections—collection sites
|
$
|
122,600
|
|
|
$
|
119,080
|
|
|
$
|
389,913
|
|
|
$
|
362,495
|
|
Direct cost
(2)
|
$
|
8,794
|
|
|
$
|
10,056
|
|
|
$
|
25,534
|
|
|
$
|
24,472
|
|
Cost per dollar collected
|
7.2
|
%
|
|
8.4
|
%
|
|
6.5
|
%
|
|
6.8
|
%
|
||||
Europe
:
|
|
|
|
|
|
|
|
||||||||
Gross collections—collection sites
|
$
|
57,283
|
|
|
$
|
37,931
|
|
|
$
|
157,860
|
|
|
$
|
37,931
|
|
Direct cost
(2)
|
$
|
3,637
|
|
|
$
|
2,174
|
|
|
$
|
10,133
|
|
|
$
|
2,174
|
|
Cost per dollar collected
|
6.3
|
%
|
|
5.7
|
%
|
|
6.4
|
%
|
|
5.7
|
%
|
||||
Overall:
|
|
|
|
|
|
|
|
||||||||
Cost per dollar collected
|
6.9
|
%
|
|
7.8
|
%
|
|
6.5
|
%
|
|
6.7
|
%
|
(1)
|
United States statistics include gross collections and direct costs for our India and Costa Rica call centers.
|
(2)
|
Represent account managers and their supervisors’ salaries, variable compensation, and employee benefits.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Portfolio purchasing and recovery activities
|
|
|
|
|
|
|
|
||||||||
Collection site salaries and employee benefits
(1)
|
$
|
13,210
|
|
|
$
|
12,230
|
|
|
$
|
38,125
|
|
|
$
|
26,646
|
|
Non-collection site salaries and employee benefits
(2)
|
41,176
|
|
|
34,561
|
|
|
125,307
|
|
|
73,912
|
|
||||
Subtotal
|
54,386
|
|
|
46,791
|
|
|
163,432
|
|
|
100,558
|
|
||||
Non portfolio purchasing and recovery
|
2,780
|
|
|
1,479
|
|
|
6,675
|
|
|
4,333
|
|
||||
|
$
|
57,166
|
|
|
$
|
48,270
|
|
|
$
|
170,107
|
|
|
$
|
104,891
|
|
(1)
|
Represents account managers and their supervisors’ salaries, variable compensation, and employee benefits.
|
(2)
|
Includes internal legal channel salaries and employee benefits of
$5.3 million
and
$5.7 million
for the three months ended
September 30, 2014
and
2013
, respectively, and
$17.1 million
and
$11.8 million
for the
nine months ended
September 30, 2014
and
2013
, respectively.
|
Quarter
|
# of
Accounts
|
|
Face Value
|
|
Purchase
Price
|
|||||
Q1 2012
|
2,132
|
|
|
$
|
2,902,409
|
|
|
$
|
130,463
|
|
Q2 2012
|
3,679
|
|
|
6,034,499
|
|
|
230,983
|
|
||
Q3 2012
|
1,037
|
|
|
1,052,191
|
|
|
47,311
|
|
||
Q4 2012
|
3,125
|
|
|
8,467,400
|
|
|
153,578
|
|
||
Q1 2013
|
1,678
|
|
|
1,615,214
|
|
|
58,771
|
|
||
Q2 2013
(1)
|
23,887
|
|
|
68,906,743
|
|
|
423,113
|
|
||
Q3 2013
(2)
|
4,232
|
|
|
13,437,807
|
|
|
617,852
|
|
||
Q4 2013
|
614
|
|
|
1,032,472
|
|
|
105,043
|
|
||
Q1 2014
(3)
|
1,104
|
|
|
4,288,159
|
|
|
467,565
|
|
||
Q2 2014
|
1,210
|
|
|
3,075,343
|
|
|
225,762
|
|
||
Q3 2014
(4)
|
2,203
|
|
|
3,970,145
|
|
|
299,509
|
|
(1)
|
Includes $383.4 million of portfolios acquired with a face value of approximately $68.2 billion in connection with the AACC Merger.
|
(2)
|
Includes $559.0 million of portfolios acquired with a face value of approximately $12.8 billion in connection with the Cabot Acquisition.
|
(3)
|
Includes
$208.5 million
of portfolios acquired with a face value of approximately $2.4 billion in connection with the Marlin Acquisition.
|
(4)
|
Includes
$105.4 million
of portfolios acquired with a face value of approximately $1.7 billion in connection with the Atlantic Acquisition.
|
|
Nine Months Ended
September 30, |
||||||
|
2014
|
|
2013
|
||||
Net cash provided by operating activities
|
$
|
98,763
|
|
|
$
|
39,866
|
|
Net cash used in investing activities
|
(704,241
|
)
|
|
(214,394
|
)
|
||
Net cash provided by financing activities
|
593,051
|
|
|
264,660
|
|
•
|
Tranche 1 will vest on the earlier of (A) the date that fair market value of a share of common stock equals or exceeds $49.51 for 15 days in any 20 consecutive trading-day period commencing on or after January 1, 2015 and ending on or before December 31, 2015 and the average of the fair market value of a share of common stock during such 20 consecutive trading-day equals or exceeds $49.51, or (B) the date that fair market value of a share of common stock equals or exceeds $65.47 for 15 days in any 20 consecutive trading-day period commencing on or after January 1, 2017 and ending on or before December 31, 2017 and the average of the fair market Value of a share of common stock during such 20 consecutive trading-day equals or exceeds $65.47.
|
•
|
Tranche 2 will vest on the earlier of (A) the date that fair market value of a share of common stock equals or exceeds $56.93 for 15 days in any 20 consecutive trading-day period commencing on or after January 1, 2016 and ending on or before December 31, 2016 and the average of the fair market value of a share of common stock during such 20 consecutive trading-day equals or exceeds $56.93, or (B) the date that fair market value of a share of common stock equals or exceeds $65.47 for 15 days in any 20 consecutive trading-day period commencing on or after January 1, 2017 and ending on or before December 31, 2017 and the average of the fair market value of a share of common stock during such 20 consecutive trading-day equals or exceeds $65.47.
|
•
|
Tranche 3 will vest on the date that fair market value of a share of common stock equals or exceeds $65.47 for 15 days in any 20 consecutive trading-day period commencing on or after January 1, 2017 and ending on or before December 31, 2017 and the average of the fair market value of a share of common stock during such 20 consecutive trading-day equals or exceeds $65.47.
|
•
|
Tranche 1 will vest on December 31, 2017.
|
•
|
Tranche 2 will vest on December 31, 2018.
|
•
|
Tranche 3 will vest on December 31, 2019.
|
•
|
Tranche 1 will performance vest if the fair market value of a share of common stock on the date of the change in control equals or exceeds $49.51.
|
•
|
Tranche 2 will performance vest if the fair market value of a share of common stock on the date of the change in control equals or exceeds $56.93.
|
•
|
Tranche 3 will performance vest if the fair market value of a share of common stock on the date of the change in control equals or exceeds $65.47.
|
Ordinary Course Separation
|
|||
General Cash Severance
|
Prorated Cash Bonus
|
Equity
|
Welfare Benefit Arrangements
|
1.5x base salary
|
Prorated actual bonus paid
|
Vesting continued for 12 months
|
Lump sum payment of 18 months of estimated COBRA costs
|
Change-in-Control Separation
|
|||
General Cash Severance
|
Prorated Cash Bonus
|
Equity
|
Welfare Benefit Arrangements
|
2.0x base salary
|
Prorated target bonus for current year;
plus
1.0x the greater of (i) target bonus or (ii) bonus that would have been paid if year-to-date performance were annualized
|
Time-based equity:
Accelerated vesting
|
Lump sum payment of 24 months of estimated COBRA costs
|
Performance-based equity (other than stock price performance-based equity):
Prorated accelerated vesting based on the greater of (i) target performance or (ii) the performance that would have been achieved if performance period-to-date performance were applied to the full performance period
|
|||
Stock price performance-based equity:
Accelerated vesting if the change-in-control price equals or exceeds the stock price target(s)
|
|||
Vested options or stock appreciation rights:
Remain exercisable for 90 days following separation
|
10.1+
|
|
Form of Performance Award Agreement (filed herewith)
|
|
|
|
10.2+
|
|
Encore Capital Group, Inc. Executive Separation Plan (filed herewith)
|
|
|
|
31.1
|
|
Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
|
|
|
|
31.2
|
|
Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
|
|
|
|
32.1
|
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
|
|
|
|
101
|
|
The following financial information from the Encore Capital Group, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Financial Condition; (ii) Condensed Consolidated Statements of Income; (iii) Condensed Consolidated Statements of Comprehensive Income; (iv) Condensed Consolidated Statements of Cash Flows; and (v) the Notes to Condensed Consolidated Financial Statements
|
|
ENCORE CAPITAL GROUP, INC.
|
||
|
|
|
|
|
By:
|
|
/s/ Paul Grinberg
|
|
|
|
Paul Grinberg
|
|
|
|
Executive Vice President,
|
|
|
|
Chief Financial Officer and Treasurer
|
|
|
Exhibit 10.1
|
•
|
Tranche 1: [1/3 of Shares]
|
•
|
Tranche 2: [1/3 of Shares]
|
•
|
Tranche 3: [1/3 of Shares]
|
[Name]
|
|
Date
|
Section 1
|
|
Definitions
|
Section 2
|
|
Purpose of Plan
|
Section 3
|
|
Eligibility and Participation
|
Section 4
|
|
Administration
|
Section 5
|
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Separation Due to Death
|
Section 6
|
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Separation Due to Disability
|
Section 7
|
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Separation Due to Retirement
|
Section 8
|
|
Separation for Cause or Quit
|
Section 9
|
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Separation without Cause or for Good Reason
|
Section 10
|
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Change in Control
|
Section 11
|
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Participant Obligations
|
Section 12
|
|
Claims
|
Section 13
|
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Taxes
|
Section 14
|
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Term of Plan; Amendment and Termination of Plan
|
Section 15
|
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Miscellaneous
|
1.0
|
DEFINITIONS
|
1.1
|
“Affiliate”
of a person or other entity shall mean a person or other entity that directly or indirectly controls, is controlled by, or is under common control with the person or other entity specified.
|
1.2
|
“Beneficiary”
shall mean a beneficiary designated in writing by the Participant to receive any Separation Benefits in accordance with Sections 5 through 10 below. If no beneficiary is designated by the Participant, then the Participant's estate shall be deemed to be the Participant's Beneficiary.
|
1.3
|
“Board”
shall mean the Board of Directors of the Company.
|
1.4
|
“Bonus”
shall mean the Participant’s annual cash bonus with respect to the year in which the Separation Date occurs.
|
1.5
|
“Cause”
shall mean – unless otherwise defined in an employment agreement between the Participant and the Company or Subsidiary – the occurrence of any of the following:
|
(1)
|
a conviction of the Participant of – or the plea of guilty or
nolo contendere
to – (i) a felony or (ii) a misdemeanor involving moral turpitude; or
|
(2)
|
willful misconduct or gross negligence by the Participant; or
|
(3)
|
failure by the Participant to carry out the lawful and reasonable directions of the Board or the Participant’s immediate supervisor, as the case may be; or
|
(4)
|
refusal to cooperate or non-cooperation by the Participant with any governmental regulatory authority; or
|
(5)
|
fraud, embezzlement, theft or dishonesty by the Participant against the Company or any Subsidiary or a material violation by the Participant of a policy or procedure of the Company or the Company’s Standards of Business Conduct, resulting, in any case, in harm to the Company or any Subsidiary.
|
1.6
|
“CEO”
shall mean the Executive serving as the chief executive officer of the Company at the relevant time.
|
1.7
|
“Change in Control”
shall mean the occurrence of any of the following events:
|
(1)
|
any “person,” as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act, becomes a “beneficial owner,” as such term is used in Rule 13d‑3 promulgated under the Exchange Act, of 50% or more of the Voting Stock (as defined below) of the Company; or
|
(2)
|
the majority of the Board consists of individuals other than Incumbent Directors; provided that any person becoming a director subsequent to the Effective Date whose election or nomination for
|
(3)
|
the Company adopts any plan of liquidation providing for the distribution of all or substantially all of its assets; or
|
(4)
|
all or substantially all of the assets or business of the Company are disposed of pursuant to a merger, consolidation or other transaction (unless the shareholders of the Company immediately prior to such merger, consolidation or other transaction beneficially own, directly or indirectly, in substantially the same proportion as they owned the Voting Stock of the Company, all of the Voting Stock or other ownership interests of the entity or entities, if any, that succeed to the business of the Company); or
|
(5)
|
the Company combines with another company and is the surviving corporation but, immediately after the combination, the shareholders of the Company immediately prior to the combination hold, directly or indirectly, 50% or less of the Voting Stock of the combined company (there being excluded from the number of shares held by such shareholders, but not from the Voting Stock of the combined company, any shares received by Affiliates of such other company in exchange for stock of such other company).
|
1.8
|
“Change-in-Control Date”
shall mean the date that a Change in Control first occurs.
|
1.9
|
“Change-in-Control Health Continuation Period”
shall mean the period commencing on the Separation Date and continuing until the end of the applicable period as shown on Schedule B and which is to be used if the Participant’s Separation is without Cause or – for certain Participants – for Good Reason in connection with a Change in Control.
|
1.10
|
“Change-in-Control Non-Competition Period”
shall mean the period commencing on the date the Executive becomes a Participant and continuing until the end of the applicable period as shown on Schedule B and which is to be used if the Participant’s Separation is without Cause or – for certain Participants – for Good Reason in connection with a Change in Control.
|
1.11
|
“Change-in-Control Non-Solicitation Period”
shall mean the period commencing on the date the Executive becomes a Participant and continuing until the end of the applicable period as shown on Schedule B.
|
1.12
|
“Change-in-Control Severance Multiple”
shall mean the multiplier that shall be used to determine cash Separation Benefits paid to the Participant as shown on Schedule B and which is to be used if the Participant’s Separation is without Cause or – for certain Participants – for Good Reason in connection with a Change in Control.
|
1.13
|
“Code”
shall mean the Internal Revenue Code of 1986, as amended from time to time.
|
1.14
|
“Committee”
shall mean the Board's Compensation Committee as constituted from time to time.
|
1.15
|
“Company”
shall mean Encore Capital Group, Inc., a Delaware corporation, including any successor entity or any successor to the assets of the Company that has assumed the Plan.
|
1.16
|
“
Competitive Activity
” shall mean the Participant’s engaging in an activity – whether as an employee, consultant, principal, member, agent, officer, director, partner or shareholder (except as a less than 1% shareholder of a publicly traded company) – that is competitive with any business of the Company or any Subsidiary conducted by the Company or such Subsidiary at any time during the Standard Non-Competition Period or the Change-in-Control Non-Competition Period (as applicable);
provided, however
, that the Participant may be employed by or otherwise associated with:
|
(i)
|
a business of which a subsidiary, division, segment, unit, etc. is in competition with the Company or any Subsidiary but as to which such subsidiary, division, segment, unit, etc. the Participant has absolutely no direct or indirect responsibilities or involvement, or
|
(ii)
|
a company where the Competitive Activity is:
|
(A)
|
from the perspective of such company,
de minimis
with respect to the business of such company and its affiliates, and
|
(B)
|
from the perspective of the Company or any Subsidiary, not in material competition with the Company or any Subsidiary.
|
1.17
|
“Disability”
shall mean a disability as determined in accordance with the Company's (or the applicable Subsidiary's) long-term disability plan or program in effect on the date that the disability first occurs, or if no such plan or program is in effect on the date that the disability first occurs, then a disability as defined under Code Section 22(e)(3).
|
1.18
|
“Effective Date”
shall mean the date the Board adopts the Plan.
|
1.19
|
“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.
|
1.20
|
“Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended from time to time.
|
1.21
|
“Executive”
shall mean a regular full-time employee of the Company or any Subsidiary with executive, managerial or similar duties and responsibilities.
|
1.22
|
“Good Reason”
shall mean – unless otherwise defined in an in-force employment agreement between the Participant and the Company or Subsidiary – the occurrence of any of the following within the 60-day period preceding a Separation Date without the Participant’s prior written consent:
|
(1)
|
a material reduction in the Participant's base salary or annual cash bonus opportunity (other than any reduction applicable to all similarly situated Executives generally); or
|
(2)
|
a material adverse diminution of the Participant’s titles, authority, duties or responsibilities, or the assignment to the Participant of titles, authority, duties or responsibilities that are materially inconsistent with his or her titles, authority, duties and/or responsibilities in a manner materially adverse to the Participant; or
|
(3)
|
a failure of the Company to obtain the assumption in writing of its obligations under the Plan by any successor to all or substantially all of the assets of the Company within 45 days after a merger, consolidation, sale or similar transaction that qualifies as a Change in Control; or
|
(4)
|
an actual relocation of the Participant’s primary office location to a location that is (i) more than 35 miles from the Participant’s present primary office location and (ii) more than 35 miles from the Participant’s primary residence at the time of such relocation.
|
1.23
|
“Incumbent Directors”
shall mean the members of the Board as of the Effective Date.
|
1.24
|
“Participant”
shall mean an Executive who has been designated to participate in the Plan in accordance with Section 3 below and who is participating in the Plan on the Separation Date.
|
1.25
|
“Plan”
shall mean the Encore Capital Group, Inc. Executive Separation Plan.
|
1.26
|
“Quit”
shall mean termination of the Participant’s employment by the Participant other than due to death, Disability, Retirement or – for certain Participants – for Good Reason.
|
1.27
|
“Retirement”
shall mean that the Participant has retired in accordance with the Company’s applicable benefit and compensation plans, including but not limited to the Company’s primary qualified pension benefit plan (as such term is defined under ERISA Section 3(2)).
|
1.28
|
“Salary”
shall mean the highest annual base salary paid to the Participant during the 12-month period immediately preceding the earlier of (i) the Separation Date or (ii) the Change-in-Control Date, with such amount increased (if applicable) to take into account any elective or mandatory deferrals.
|
1.29
|
“Separated Participant”
shall mean a Participant whose employment with the Company and/or any of its Subsidiaries has been terminated.
|
1.30
|
“Separation”
shall mean a termination of the Participant’s employment:
|
(1)
|
due to the death of the Participant; or
|
(2)
|
by the Company or by the Participant due to Disability; or
|
(3)
|
by the Participant as a Retirement; or
|
(4)
|
by the Company for Cause; or
|
(5)
|
by the Company without Cause; or
|
(6)
|
by the Participant as a Quit; or
|
(7)
|
for certain Participants, by the Participant for Good Reason.
|
1.31
|
“Separation Benefits”
shall mean the compensation and benefits payable or provided to a Separated Participant under the Plan.
|
1.32
|
“Separation Date”
shall mean the date the Participant's employment with the Company and/or a Subsidiary is terminated.
|
1.33
|
“Standard Health Continuation Period”
shall mean the period commencing on the Separation Date and continuing until the end of the applicable period as shown on Schedule A and which is to be used if the Participant’s Separation is without Cause or – for certain Participants – for Good Reason and is NOT in connection with a Change in Control.
|
1.34
|
“Standard Non-Competition Period”
shall mean the period commencing on the date the Executive becomes a Participant and continuing until the end of the applicable period as shown on Schedule A and which is to be used if the Participant’s Separation is without Cause or – for certain Participants – for Good Reason and is
NOT in connection with a Change in Control.
|
1.35
|
“Standard Non-Solicitation Period”
shall mean the period commencing on the date the Executive becomes a Participant and continuing until the end of the applicable period as shown on Schedule A.
|
1.36
|
“Standard Severance Multiple”
shall mean the multiplier that shall be used to determine cash Separation Benefits paid to the Participant as shown on Schedule A and which is to be used if the Participant’s Separation is without Cause or – for certain Participants – for Good Reason and is NOT in connection with a Change in Control.
|
1.37
|
“Standard Vesting Continuation Period”
shall mean the period over which equity-based compensation will continue to vest/become exercisable commencing on the Separation Date and continuing until the end of the applicable period as shown on Schedule A and which is to be used if the Participant’s Separation is without Cause or – for certain Participants – for Good Reason and is NOT in connection with a Change in Control.
|
1.38
|
“Subsidiary”
shall mean a corporation of which the Company directly or indirectly owns more than 50 percent of the Voting Stock or any other business entity in which the Company directly or indirectly has an ownership interest of more than 50 percent.
|
1.39
|
“
Voting Stock”
shall mean capital stock of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation.
|
2.0
|
PURPOSE OF PLAN
|
2.1
|
Purpose
. The purpose of the Plan is:
|
(a)
|
to provide the terms and conditions relating to an Executive’s separation from service from the Company and/or any of its Subsidiaries;
|
(b)
|
to retain certain highly qualified individuals as Executives; and
|
(c)
|
to maintain the focus of such Executives on the business of the Company and to mitigate the distractions caused by the possibility that (i) the Executive’s employment may be terminated or (ii) the Company may be the target of an acquisition.
|
3.0
|
ELIGIBILITY AND PARTICIPATION
|
3.1
|
Eligibility
. All Executives of the Company shall be eligible to participate in the Plan.
|
3.2
|
Participation
. Participants shall consist of the CEO and those Executives designated by the CEO in his or her sole discretion to participate in the Plan;
provided, however
, that the CEO shall not designate an Executive as a new Participant following a Change-in-Control Date. An Executive who becomes a Participant shall remain the Participant until the earlier of (i) a date certain as determined by the Committee or CEO or (ii) the termination of the Plan in accordance with Section 14 below.
|
3.3
|
Committee Approval
. Notwithstanding anything contained in the Plan to the contrary, an Executive designated by the CEO in accordance with Section 3.2 above shall not become a Participant until such designation has been approved in writing by the Committee.
|
4.0
|
ADMINISTRATION
|
4.1
|
Responsibility
. The Committee shall have the responsibility, in its sole discretion, to control, operate, manage and administer the Plan in accordance with its terms.
|
4.2
|
Authority of the Committee
. The Committee shall have the maximum discretionary authority permitted by law that may be necessary to enable it to discharge its responsibilities with respect to the Plan, including but not limited to the following:
|
(a)
|
to determine eligibility for participation in the Plan;
|
(b)
|
to approve Executives designated as Participants by the CEO;
|
(c)
|
to determine or calculate the Participant's Separation Benefits;
|
(d)
|
to correct any defect, supply any omission, or reconcile any inconsistency in the Plan in such manner and to such extent as it shall deem appropriate in its sole discretion to carry the same into effect;
|
(e)
|
to issue administrative guidelines as an aid to administer the Plan and make changes in such guidelines as it from time to time deems proper;
|
(f)
|
to make rules for carrying out and administering the Plan and make changes in such rules as it from time to time deems proper;
|
(g)
|
to the extent permitted under the Plan, grant waivers of Plan terms, conditions, restrictions, and limitations;
|
(h)
|
to make reasonable determinations as to the Participant's eligibility for benefits under the Plan, including determinations as to Cause and Good Reason; and
|
(i)
|
to take any and all other actions it deems necessary or advisable for the proper operation or administration of the Plan.
|
4.3
|
Action by the Committee
. The Committee may act only by a majority of its members. Any determination of the Committee may be made, without a meeting, by a writing or writings signed by all of the members of the Committee. In addition, the Committee may authorize any one or more of its members to execute and deliver documents on behalf of the Committee.
|
4.4
|
Delegation of Authority
. The Committee may delegate to one or more of its members, or to one or more agents, such administrative duties as it may deem advisable;
provided, however
, that any such delegation shall be in writing. In addition, the Committee, or any person to whom it has delegated duties as aforesaid, may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan. The Committee may employ such legal or other counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion or computation received from any such counsel, consultant or agent. Expenses incurred by the Committee in the engagement of such counsel, consultant or agent shall be paid by the Company, or the Subsidiary whose employees have benefited from the Plan, as determined by the Committee.
|
4.5
|
Determinations and Interpretations by the Committee
. All determinations and interpretations made by the Committee shall be binding and conclusive to the maximum extent permitted by law on all Participants and their heirs, successors, and legal representatives.
|
4.6
|
Information
. The Company shall furnish to the Committee in writing all information the Committee may deem appropriate for the exercise of its powers and duties in the administration of the Plan. Such information may include, but shall not be limited to, the full names of all Participants, their earnings and their dates of birth, employment, retirement or death. Such information shall be conclusive for all purposes of the Plan, and the Committee shall be entitled to rely thereon without any investigation thereof.
|
4.7
|
Liability
. No member of the Board, no member of the Committee and no employee of the Company shall be liable for any act or failure to act hereunder, except in circumstances involving his or her bad faith, gross negligence or willful misconduct, or for any act or failure to act hereunder by any other member or employee or by any agent to whom duties in connection with the administration of the Plan have been delegated.
|
4.8
|
Indemnification
. The Company shall indemnify members of the Committee and any agent of the Committee who is an employee of the Company, against any and all liabilities or expenses to which they may be subjected by reason of any act or failure to act with respect to their duties on behalf of the Plan, except in circumstances involving such person's bad faith, gross negligence or willful misconduct.
|
5.0
|
SEPARATION DUE TO DEATH
|
5.1
|
Separation Event
. The Participant’s employment with the Company and/or any of its Subsidiaries shall terminate on the date of the Participant’s death, and the Separated Participant shall be entitled to receive the Separation Benefits provided under this Section 5.
|
5.2
|
Accrued Obligations
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall pay to the Separated Participant during the 30-day period immediately following the Separation Date, a lump sum cash payment equal to the Participant’s earned but unpaid Salary, plus earned but unpaid bonus for prior years’ service, plus unreimbursed expenses, plus any and all other Company obligations that are accrued and due and owing to the Separated Participant.
|
5.3
|
Cash Severance Benefits
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall have no obligation to pay to the Separated Participant any cash severance benefits.
|
5.4
|
Long-Term Incentive Compensation.
Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, any and all long-term incentive arrangements shall vest, be exercisable and/or become payable in accordance with the terms and conditions of the long-term incentive compensation plan and award agreement.
|
5.5
|
Pension-Benefit Arrangements
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, all benefits under all pension-benefit arrangements, including deferred compensation arrangements, shall be paid in accordance with the terms and conditions of the applicable plan, program, agreement or arrangement. Notwithstanding the preceding sentence, the Committee may accelerate such payment, in its sole discretion, after having received advice from the Company’s tax advisors that such acceleration would not violate Code Section 409A or any other provision of the Code.
|
5.6
|
Welfare-Benefit Arrangements
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the dependents of the deceased Separated Participant shall be entitled to receive continued health coverage in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 and the Affordable Care Act of 2010. Unless otherwise provided for in any written agreement between the Company and a Separated Participant, or as otherwise agreed to by the Committee in its sole discretion, all other welfare benefits shall cease as of the Separation Date.
|
5.7
|
Payment of Separation Benefits to Beneficiaries
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, all Separation Benefits under this Section 5 shall be paid to the Separated Participant's Beneficiary.
|
5.8
|
Other Benefits.
Notwithstanding anything contained in the Plan to the contrary, the Company or the Committee may, in its sole discretion, provide benefits in addition to the benefits described under this Section 5.
|
6.0
|
SEPARATION DUE TO DISABILITY
|
6.1
|
Separation Event
. The Participant’s employment with the Company and/or any of its Subsidiaries shall terminate on the date the Participant or the Company (and/or any of its Subsidiaries) terminates such employment due to a Disability, and the Separated Participant shall be entitled to receive the Separation Benefits provided under this Section 6.
|
6.2
|
Accrued Obligations
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall pay to the Separated Participant during the 30-day period immediately following the Separation Date, a lump sum cash payment equal to the Participant’s earned but unpaid Salary, plus earned but unpaid bonus for prior years’ service, plus unreimbursed expenses, plus any and all other Company obligations that are accrued and due and owing to the Separated Participant.
|
6.3
|
Cash Severance Benefits
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall have no obligation to pay to the Separated Participant any cash severance benefits.
|
6.4
|
Long-Term Incentive Compensation.
Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, any and all long-term incentive arrangements shall vest, be exercisable and/or become payable in accordance with the terms and conditions of the long-term incentive compensation plan and award agreement.
|
6.5
|
Pension-Benefit Arrangements
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, all benefits under all pension-benefit arrangements, including deferred compensation arrangements, shall be paid in accordance with the terms and conditions of the applicable plan, program, agreement or arrangement. Notwithstanding the preceding sentence, the Committee may accelerate such payment, in its sole discretion, after having received advice from the Company’s tax advisors that such acceleration would not violate Code Section 409A or any other provision of the Code.
|
6.6
|
Welfare-Benefit Arrangements
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Separated Participant and his or her dependents shall be entitled to receive continued health coverage in accordance with rules and provisions under the Consolidated Omnibus Budget Reconciliation Act of 1985 and the Affordable Care Act of 2010. Unless otherwise provided for in any written plan, program, agreement or arrangement between the Company and a Separated Participant, or as otherwise agreed to by the Committee in its sole discretion, all other welfare benefits shall cease as of the Separation Date due to Disability.
|
6.7
|
Payment of Separation Benefits to Beneficiaries
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, in the event of the Separated Participant's death, all Separation Benefits that would have been paid to the Separated Participant under this Section 6 but for his or her death, shall be paid to the Separated Participant's Beneficiary.
|
6.8
|
Other Benefits.
Notwithstanding anything contained in the Plan to the contrary, the Company or the Committee may, in its sole discretion, provide benefits in addition to the benefits described under this Section 6.
|
7.0
|
SEPARATION DUE TO RETIREMENT
|
7.1
|
Separation Event
. The Participant’s employment with the Company and/or any of its Subsidiaries shall terminate on the date the Participant terminates his or her employment with the Company and/or any of its Subsidiaries due to a Retirement, and the Separated Participant shall be entitled to receive the Separation Benefits provided under this Section 7.
|
7.2
|
Accrued Obligations
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall pay to the Separated Participant during the 30-day period immediately following the Separation Date, a lump sum cash payment equal to the Participant’s earned but unpaid Salary, plus earned but unpaid bonus for prior years’ service, plus unreimbursed expenses, plus any and all other Company obligations that are accrued and due and owing to the Separated Participant.
|
7.3
|
Cash Severance Benefits
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall have no obligation to pay to the Separated Participant any cash severance benefits.
|
7.4
|
Long-Term Incentive Compensation.
Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, any and all long-term incentive arrangements shall vest, be exercisable and/or become payable in accordance with the terms and conditions of the long-term incentive compensation plan and award agreement.
|
7.5
|
Pension-Benefit Arrangements
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, all benefits under all pension-benefit arrangements, including deferred compensation arrangements, shall be paid in accordance with the terms and conditions of the applicable plan, program, agreement or arrangement. Notwithstanding the preceding sentence, the Committee may accelerate such payment, in its sole discretion, after having received advice from the Company’s tax advisors that such acceleration would not violate Code Section 409A or any other provision of the Code.
|
7.6
|
Welfare-Benefit Arrangements
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Separated Participant and his or her dependents shall be entitled to receive continued health coverage in accordance with rules and provisions under the Consolidated Omnibus Budget Reconciliation Act of 1985 and the Affordable Care Act of 2010. Unless otherwise provided for in any written plan, program, agreement or arrangement between the Company and a Separated Participant, or as otherwise agreed to by the Committee in its sole discretion, all other welfare benefits shall cease as of the Separation Date.
|
7.7
|
Payment of Separation Benefits to Beneficiaries
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, in the event of the Separated Participant's death, all Separation Benefits that would have been paid to the Separated Participant under this Section 7 but for his or her death, shall be paid to the Separated Participant's Beneficiary.
|
7.8
|
Other Benefits.
Notwithstanding anything contained in the Plan to the contrary, the Company or the Committee may, in its sole discretion, provide benefits in addition to the benefits described under this Section 7.
|
8.0
|
SEPARATION FOR CAUSE OR QUIT
|
8.1
|
Separation Event
. The Participant’s employment with the Company and/or any of its Subsidiaries shall terminate on the date that:
|
(a)
|
the Company and/or any of its Subsidiaries terminate(s) the Participant’s employment for Cause; or
|
(b)
|
the Participant Quits;
|
8.2
|
Accrued Obligations
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall pay to the Separated Participant during the 30-day period immediately following the Separation Date, a lump sum cash payment equal to the Participant’s earned but unpaid Salary, plus unreimbursed expenses, plus any and all other Company obligations that are accrued and due and owing to the Separated Participant.
|
8.3
|
Cash Severance Benefits
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall have no obligation to pay to the Separated Participant any cash severance benefits.
|
8.4
|
Long-Term Incentive Compensation.
Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, any and all long-term incentive arrangements shall immediately be forfeited as of the Separation Date.
|
8.5
|
Pension-Benefit Arrangements
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, all benefits under all pension-benefit arrangements, including deferred compensation arrangements, shall be immediately forfeited by the Separated Participant as of the Separation Date, provided that such forfeiture does not violate ERISA.
|
8.6
|
Welfare-Benefit Arrangements
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Separated Participant and his or her dependents shall be entitled to receive continued health coverage in accordance with rules and provisions under the Consolidated Omnibus Budget Reconciliation Act of 1985 and the Affordable Care Act of 2010. Unless otherwise provided for in any written plan, program, agreement or arrangement between the Company and a Separated Participant, or as otherwise agreed to by the Committee in its sole discretion, all other welfare benefits shall cease as of the Separation Date.
|
8.7
|
Payment of Separation Benefits to Beneficiaries
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, in the event of the Separated Participant's death, all Separation Benefits that would have been paid to the Separated Participant under this Section 8 but for his or her death, shall be paid to the Separated Participant's Beneficiary.
|
8.8
|
Other Benefits.
Notwithstanding anything contained in the Plan to the contrary, the Company or the Committee may, in its sole discretion, provide benefits in addition to the benefits described under this Section 8.
|
9.0
|
SEPARATION WITHOUT CAUSE OR FOR GOOD REASON
|
9.1
|
Separation Event.
The Participant’s employment with the Company and/or any of its Subsidiaries shall terminate on the date that the Company and/or any of its Subsidiaries terminate(s) the Participant’s
|
9.2
|
Accrued Obligations
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall pay to the Separated Participant during the 30-day period immediately following the Separation Date, a lump sum cash payment equal to the Participant’s earned but unpaid Salary, plus earned but unpaid bonus for prior years’ service, plus unreimbursed expenses, plus any and all other Company obligations that are accrued and due and owing to the Separated Participant.
|
9.3
|
Cash Severance Benefits
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall pay to the Separated Participant:
|
(b)
|
a lump sum cash payment equal to the product of (i) the Standard Severance Multiple times (i) the Separated Participant's Salary, payable on the 60th day immediately following the Separation Date, and
|
(a)
|
a pro rata Bonus based on (i) the number of full and partial months that the Participant was employed during the year in which the Separation Date occurs and (ii) achievement of the applicable performance conditions, payable when such bonuses are paid to other similarly situated Executives.
|
9.4
|
Equity-Based Compensation
. Notwithstanding anything contained in any written plan, program, agreement or arrangement between the Company and the Participant:
|
(a)
|
All shares underlying time-based and performance-based equity awards will continue to vest as if the Participant were still an employee during the Standard Vesting Continuation Period, and all unvested shares underlying time-based and performance-based equity awards that do not vest during the Standard Vesting Continuation shall be forfeited; and
|
(b)
|
Stock options and stock-settled stock appreciation rights held by the Participant that are vested as of the Separation Date or vest during the during the Standard Vesting Continuation Period shall remain exercisable until the earlier of (i) the 90th day immediately following the Standard Vesting Continuation Period or (ii) the stock option’s and/or stock appreciation right’s originally scheduled expiration date.
|
9.5
|
Long-Term Incentive Compensation.
Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, all long-term incentive arrangements (other than equity-based compensation) shall forfeit, vest and/or be paid in accordance with the terms and conditions of the applicable plan, program, agreement or arrangement. Notwithstanding the preceding sentence, the Committee may accelerate such payment, in its sole discretion, after having received advice from the Company’s tax advisors that such acceleration would not violate Code Section 409A or any other provision of the Code.
|
9.6
|
Pension-Benefit Arrangements
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, all benefits under all pension-benefit arrangements, including deferred compensation arrangements, shall be paid in accordance with the terms and conditions of the applicable plan, program, agreement or arrangement. Notwithstanding the preceding sentence, the Committee may accelerate such payment, in its sole discretion, after having received advice from the Company’s tax advisors that such acceleration would not violate Code Section 409A or any other provision of the Code.
|
9.7
|
Welfare-Benefit Arrangements
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall provide a Separated Participant with a lump sum cash payment equal to the estimated value of continued health coverage during the Standard Health Continuation Period, payable on the 60th day following the Separation Date. Unless otherwise provided for in any written plan, program, agreement or arrangement between the Company and a Separated Participant, or as otherwise agreed to by the Committee in its sole discretion, all other welfare benefits shall cease as of the Separation Date. Following the Separation Date, the Separated Participant and his or her
|
9.8
|
Payment of Separation Benefits to Beneficiaries
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, in the event of the Separated Participant's death, all Separation Benefits that would have been paid to the Separated Participant under this Section 9 but for his or her death, shall be paid to the Separated Participant's Beneficiary.
|
9.9
|
Other Benefits.
Notwithstanding anything contained in the Plan to the contrary, the Company or the Committee may, in its sole discretion, provide benefits in addition to the benefits described under this Section 9.
|
10.0
|
CHANGE IN CONTROL
|
10.1
|
Separation Event.
The Participant’s employment with the Company and/or any of its Subsidiaries shall terminate on the date that the Company and/or any of its Subsidiaries terminate(s) the Participant’s employment with the Company and/or any of its Subsidiaries without Cause (other than due to death, a Disability or a Retirement) or – for certain Participants – on the date that the Participant terminates his or her employment for Good Reason during the period commencing on the 180th day immediately preceding a Change-in-Control Date and ending on the 2nd anniversary of such Change-in-Control Date, and the Separated Participant shall be entitled to receive the Separation Benefits provided under this Section 10.
|
10.2
|
Accrued Obligations
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall pay to the Separated Participant during the 30-day period immediately following the Separation Date, a lump sum cash payment equal to the Participant’s earned but unpaid Salary, plus earned but unpaid bonus for prior years’ service, plus unreimbursed expenses, plus any and all other Company obligations that are accrued and due and owing to the Separated Participant.
|
10.3
|
Cash Severance Benefits
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall pay to the Separated Participant on the 60th day immediately following the Separation Date a lump sum cash amount equal to the sum of:
|
(a)
|
the product of (i) the Change-in-Control Severance Multiple times (ii) the Separated Participant's Salary, plus
|
(b)
|
a pro rata Bonus based on (i) the number of full and partial months that the Participant was employed during the year in which the Separation Date occurs and (ii) the Participant’s target Bonus, plus
|
(c)
|
the greater of (i) the Participant’s target Bonus or (ii) the Participant’s Bonus that would have been paid assuming that actual year-to-date performance was annualized.
|
10.4
|
Equity-Based Compensation
. Notwithstanding anything contained in any written plan, program, agreement or arrangement between the Company and the Participant:
|
(a)
|
Based on the greater of (i) the number of performance-based shares, performance-based stock units, performance-based stock options, and performance-based stock-settled stock appreciation rights at target level or (ii) the number of performance-based shares, performance-based stock units, performance-based stock options, and performance-based stock-settled stock appreciation rights that would have vested if performance as of the performance period to date was applied to the full performance period, a pro rata number of shares or units (based on the number of full and partial months that the Participant was employed during the applicable performance period underlying the performance equity award held by the Participant on the Separation Date shall immediately vest as of the Separation Date; provided that this Section 10.4(a) shall not apply to any performance-based equity the vesting of which solely occurs due to the achievement of a specific stock price;
|
(b)
|
any and all shares of restricted stock or restricted stock units held by the Participant on the Separation Date shall immediately vest as of the Separation Date; and
|
(c)
|
any and all unvested time-vested stock options or stock-settled stock appreciation rights shall immediately vest as of the Separation Date, and any and all stock options and stock appreciation rights held by the Participant on the Separation Date (including those stock options and/or stock appreciation rights that vest/become exercisable under this Section 10.4) shall remain exercisable until the earlier of (i) the 90th day immediately following the Separation Date or (ii) the stock option’s and/or stock appreciation right’s originally scheduled expiration date.
|
10.5
|
Long-Term Incentive Compensation.
Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, all long-term incentive arrangements (other than equity-based compensation) shall forfeit, vest and/or be paid in accordance with the terms and conditions of the applicable plan, program, agreement or arrangement. Notwithstanding the preceding sentence, the Committee may accelerate such payment, in its sole discretion, after having received advice from the Company’s tax advisors that such acceleration would not violate Code Section 409A or any other provision of the Code.
|
10.6
|
Pension-Benefit Arrangements
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, all benefits under all pension-benefit arrangements, including deferred compensation arrangements, shall be paid in accordance with the terms and conditions of the applicable plan, program, agreement or arrangement. Notwithstanding the preceding sentence, the Committee may accelerate such payment, in its sole discretion, after having received advice from the Company’s tax advisors that such acceleration would not violate Code Section 409A or any other provision of the Code.
|
10.7
|
Welfare-Benefit Arrangements
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, the Company shall provide a Separated Participant with a lump sum cash payment equal to the estimated value of continued health coverage during the Change-in-Control Health Continuation Period, payable on the 60th day following the Separation Date. Unless otherwise provided for in any written plan, program, agreement or arrangement between the Company and a Separated Participant, or as otherwise agreed to by the Committee in its sole discretion, all other welfare benefits shall cease as of the Separation Date. Following the Separation Date, the Separated Participant and his or her dependents shall be entitled to receive continued health coverage in accordance with rules and provisions under the Consolidated Omnibus Budget Reconciliation Act of 1985 and the Affordable Care Act of 2010, if applicable.
|
10.8
|
Payment of Separation Benefits to Beneficiaries
. Unless otherwise provided in any written plan, program, agreement or arrangement between the Company and the Participant, in the event of the Separated Participant's death, all Separation Benefits that would have been paid to the Separated Participant under this Section 10 but for his or her death, shall be paid to the Separated Participant's Beneficiary.
|
10.9
|
Other Benefits.
Notwithstanding anything contained in the Plan to the contrary, the Company or the Committee may, in its sole discretion, provide benefits in addition to the benefits described under this Section 10.
|
10.10
|
Right of Company to Cure
. If the Separation is by the Participant for Good Reason under this Section 10, then the Company and/or any of its Subsidiaries shall be given a reasonable period of time – but not less than 30 days – to cure the event that constitutes Good Reason (if curable) before the Separation Date.
|
11.0
|
PARTICIPANT OBLIGATIONS
|
11.1
|
Waiver and Release
. As a condition precedent for receiving the Separation Benefits provided under Section 9 or Section 10 above, a Separated Participant shall execute a waiver and release substantially in the form attached to the Plan as Exhibit A on or before the 50th day following the Separation Date.
|
11.2
|
Non-Competition.
If the Participant’s Separation is without Cause or – for certain Participants – for Good Reason, then during the Standard Non-Competition Period or the Change-in-Control Non-Competition Period, as applicable, a Separated Participant shall not at any time, directly or indirectly, engage in a Competitive Activity.
|
11.3
|
Non-Solicitation
. During the Standard Non-Solicitation Period or Change-in-Control Non-Solicitation Period, as applicable, a Separated Participant shall not at any time, directly or indirectly, whether on behalf of himself or herself or any other person or entity (x) solicit any client and/or customer of the Company or any Subsidiary with respect to a Competitive Activity or (y) solicit or employ any employee of the Company or any Subsidiary for the purpose of causing such employee to terminate his or her employment with the Company or such Subsidiary.
|
11.4
|
Confidentiality
. At all times prior to and following the Separation Date, the Participant shall not disclose to anyone or make use of any trade secret or proprietary or confidential information of the Company, including such trade secret or proprietary or confidential information of any customer or client or other entity to which the Company owes an obligation not to disclose such information, which he or she acquires during his or her employment with the Company, including but not limited to records kept in the ordinary course of business, except:
|
(a)
|
as such disclosure or use may be required or appropriate in connection with his or her work as an employee of the Company;
|
(b)
|
when required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order him or her to divulge, disclose or make accessible such information;
|
(c)
|
as to such confidential information that becomes generally known to the public or trade without his or her violation of this Section 11.4; or
|
(d)
|
to the Participant’s spouse, his or her attorneys, and his or her personal tax and financial advisors as reasonably necessary or appropriate to advance the Participant’s tax, financial and other personal planning (each an “Exempt Person”),
provided, however
, that any disclosure or use of any trade secret or proprietary or confidential information of the Company by an Exempt Person shall be deemed to be a breach of this Section 11.4 by the Participant.
|
11.5
|
Non-Disparagement
. At all times prior to and following the Separation Date, the Participant shall not make any statements or express any views that disparage the business reputation or goodwill of the Company and/or any of its Subsidiaries.
|
11.6
|
Resignation as Officer and Director
. On or before the Separation Date, the Separated Participant shall submit to the Company in writing his or her resignation (as applicable) as (i) an officer of the Company and of all Subsidiaries and (ii) a member of the Board and of the board of directors of all Subsidiaries.
|
11.7
|
Return of Company Property
. Immediately following the Separation Date, the Participant shall immediately return all Company property in his or her possession, including but not limited to all computer equipment (hardware and software), telephones, facsimile machines, smart phones and other communication devices, credit cards, office keys, security access cards, badges, identification cards and all copies (including drafts) of any documentation or information (however stored) relating to the business of the Company, its customers and clients or its prospective customers and clients.
|
11.8
|
Cooperation
. Following the Separation Date, the Participant shall give his or her assistance and cooperation willingly, upon reasonable advance notice with due consideration for his or her other business or personal commitments, in any matter relating to his or her position with the Company, or his or her expertise or experience as the Company may reasonably request, including his or her attendance and truthful testimony where deemed appropriate by the Company, with respect to any investigation or the Company's defense or prosecution of any existing or future claims or litigations or other proceeding relating to matters in which he or she was involved or potentially had knowledge by virtue of his or her employment with the Company. In no event shall his or her cooperation materially interfere with his or her services for a subsequent employer or other similar service recipient. The Company agrees that (i) it shall promptly reimburse the Separated Participant for his or her reasonable and documented expenses in connection with his or her rendering assistance and/or cooperation under this Section 11.8, upon his or her presentation of documentation for such expenses and (ii) the Separated Participant shall be reasonably compensated for any continued material services as required under this Section 11.8.
|
11.9
|
Enforcement of Section 11.
If a Separated Participant materially violates any provision of this Section 11, he or she shall immediately forfeit any right, title and interest to any Separation Benefits that have not yet been paid or provided and shall be required to repay to the Company a cash amount equal to the value of the Separation Benefits that he or she has already received.
|
11.10
|
Enforcement of Non-Competition, Non-Solicitation and Confidentiality Covenants.
In addition to Section 11.9 above, if a Separated Participant violates or threatens to violate Section 11.2, Section 11.3, and/or Section 11.4 above, the Company shall not have an adequate remedy at law. Accordingly, the Company shall be entitled to seek such equitable and injunctive relief as may be available to restrain the Separated Participant and any business, firm, partnership, individual, corporation or entity participating in the breach or threatened breach from the violation of the provisions of Section 11.2, Section 11.3, and/or Section 11.4 above. Nothing in the Plan shall be construed as prohibiting the Company from pursuing any other remedies available at law or in equity for breach or threatened breach of Section 11.2, Section 11.3, and/or Section 11.4 above, including the recovery of damages.
|
12.0
|
CLAIMS
|
12.1
|
Claims Procedure
. If any Participant or Beneficiary, or his or her legal representative, has a claim for benefits under the Plan which is not being paid, such claimant may file a written claim with the Committee setting forth the amount and nature of the claim, supporting facts, and the claimant's address. Written notice of the disposition of a claim by the Committee shall be furnished to the claimant within 90 days after the claim is filed. In the event of special circumstances, the Committee may extend the period for determination for up to an additional 90 days, in which case it shall so advise the claimant. If the claim is denied, the reasons for the denial shall be specifically set forth in writing, pertinent provisions of the Plan shall be cited, including an explanation of the Plan's claim review procedure, and, if the claim is perfectible, an explanation as to how the claimant can perfect the claim shall be provided.
|
12.2
|
Claims Review Procedure
. If a claimant whose claim has been denied wishes further consideration of his or her claim, he or she may request the Committee to review his or her claim in a written statement of the claimant's position filed with the Committee no later than 60 days after receipt of the written notification provided for in Section 12.1 above. The Committee shall fully and fairly review the matter and shall promptly advise the claimant, in writing, of its decision within the next 60 days. Due to special circumstances, the Committee may extend the period for determination for up to an additional 60 days.
|
12.3
|
Dispute Resolution
. Any disputes arising under or in connection with the Plan (other than disputes arising under or in connection with Sections 11.2, 11.3 and/or 11.4 above) shall be resolved by binding arbitration, to be held in San Diego, California) or in any other location mutually agreed to by the Company and the Participant in accordance with the rules and procedures of the American Arbitration Association. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.
|
12.4
|
Reimbursement of Expenses
. If there is any dispute between the Company and the Participant with respect to a claim under the Plan, the Company shall reimburse such Participant for all reasonable fees, costs and expenses incurred by such Participant with respect to such disputed claim;
provided, however
, that (i) such Participant is the prevailing party with respect to such disputed claim or (ii) the disputed claim is settled in the Participant’s favor.
|
13.0
|
TAXES
|
13.1
|
Withholding Taxes
. The Company shall be entitled to withhold from any and all payments made to the Participant under the Plan all federal, state, local and/or other taxes or imposts which the Company determines are required to be so withheld from such payments or by reason of any other payments made to or on behalf of the Participant or for his or her benefit hereunder.
|
13.2
|
Golden Parachute Excise Tax
. If the Participant becomes subject to the excise tax imposed by Code Section 4999 (the “Parachute Excise Tax”), then the Company and the Participant agree that the aggregate “parachute payment” (as such term is used under Code Section 280G) shall be reduced to 299.99% of the Participant’s “base amount” (as such term is used under Code Section 280G) if such reduction would result in the Participant retaining on an after-tax basis an amount equal to or greater than the amount that the
|
13.3
|
Code Section 409A
. The Plan is not intended to be subject to Code Section 409A. Notwithstanding anything contained in the Plan to the contrary, the Committee shall have full authority to operate the Plan and to override any provision in the Plan in order for the Plan to be fully compliant – both in form and in operation – with Code Section 409A.
|
13.4
|
No Guarantee of Tax Consequences
. No person connected with the Plan in any capacity, including, but not limited to, the Company and any Subsidiary and their directors, officers, agents and employees makes any representation, commitment, or guarantee that any tax treatment, including, but not limited to, federal, state and local income, estate and gift tax treatment, will be applicable with respect to amounts payable or provided under the Plan, or paid to or for the benefit of the Participant under the Plan, or that such tax treatment will apply to or be available to the Participant on account of participation in the Plan.
|
14.0
|
TERM OF PLAN; AMENDMENT AND TERMINATION OF PLAN
|
14.1
|
Term of Plan
. The Plan shall be effective as of the Effective Date and shall remain in effect until the Board terminates the Plan.
|
14.2
|
Amendment of Plan
. The Plan may be amended by the Board at any time with or without prior notice;
provided, however
, that the Plan shall not be amended during the period commencing on the 180th day immediately preceding a Change-in-Control Date and ending on the 2nd anniversary of such Change-in-Control Date without the written consent of each Participant.
|
14.3
|
Termination of Plan
. The Plan may be terminated or suspended by the Board at any time with or without prior notice;
provided, however
, that the Plan shall not be terminated or suspended during the period commencing on the 180th day immediately preceding a Change-in-Control Date and ending on the 2nd anniversary of such Change-in-Control Date without the written consent of each Participant.
|
14.4
|
No Adverse Effect
. If the Plan is amended, terminated, or suspended in accordance with Sections 14.2 or 14.3 above, such action shall not adversely affect the benefits of any Participant (including a Separated Participant) prior to the date of amendment, termination or suspension.
|
15.0
|
MISCELLANEOUS
|
15.1
|
No Mitigation
. A Separated Participant shall be under no obligation to seek other employment following the Separation Date and there shall be no offset against amounts due the Separated Participant under the Plan on account of any compensation attributable to any subsequent employment.
|
15.2
|
Offset
. Separation Benefits shall be reduced by any payment or benefit made or provided by the Company or any Subsidiary to the Participant pursuant to (i) any severance plan, program, policy or arrangement of the Company or any Subsidiary not otherwise referred to in the Plan, (ii) the termination-of-employment provisions of any employment agreement between the Company or any Subsidiary and the Participant, and (iii) any federal, state or local statute, rule, regulation or ordinance.
|
15.3
|
No Right, Title, or Interest in Company Assets
. Participants shall have no right, title, or interest whatsoever in or to any assets of the Company or any investments which the Company may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, Beneficiary, legal representative or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. Subject to this Section 15.3, all payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts;
provided, however
, that the Company may establish a grantor trust to provide for the payment of the benefits under the Plan of which the Company is the grantor within the meaning of subpart E, part I, subchapter J, chapter
|
15.4
|
No Right to Continued Employment.
The Participant's rights, if any, to continue to serve the Company as an employee shall not be enlarged or otherwise affected by his or her designation as the Participant under the Plan, and the Company or the applicable Subsidiary reserves the right to terminate the employment of any employee at any time. The adoption of the Plan shall not be deemed to give any employee, or any other individual any right to be selected as the Participant or to continued employment with the Company or any Subsidiary.
|
15.5
|
Indemnification.
During the period that the Executive is the Participant and – if the Participant becomes a Separated Participant – following the Separation Date, the Company shall indemnify the Participant or the Separated Participant, as the case may be, and hold him or her harmless, to the fullest extent permitted by, and subject to the limitations of Delaware law, for all claims against him or her by third parties by reason of his or her employment with the Company and/or any of its Subsidiaries, including without limitation, all costs, charges and expenses (including attorneys’ fees) whatsoever incurred or sustained by the Participant or Separated Participant, as the case may be, in connection with any action, suit or proceeding (other than any action, suit or proceeding brought by or in the name of the Company against the Participant or Separated Participant, as the case may be) to which he or she may be made a party by reason of being or having been a director, officer or employee of the Company and/or any of its Subsidiaries or his or her serving or having served any other enterprise as a director, officer or employee at the request of the Company.
|
15.6
|
Clawback.
Notwithstanding anything contained in the Plan to the contrary, the Participant’s paid, granted or awarded incentive compensation shall be subject to the Company’s Compensation Recovery Policy (as amended from time to time).
|
15.7
|
Other Rights.
The Plan shall not affect or impair the rights or obligations of the Company or the Participant under any other written plan, contract, arrangement, or pension, profit sharing or other compensation plan.
|
15.8
|
Governing Law.
The Plan shall be governed by and construed in accordance with the laws of Delaware without reference to principles of conflict of laws, except as superseded by ERISA and other applicable federal law.
|
15.9
|
Severability.
If any term or condition of the Plan shall be invalid or unenforceable to any extent or in any application, then the remainder of the Plan, with the exception of such invalid or unenforceable provision, shall not be affected thereby and shall continue in effect and application to its fullest extent.
|
15.10
|
Incapacity.
If the Committee determines that the Participant or a Beneficiary is unable to care for his or her affairs because of illness or accident or because he or she is a minor, any benefit due the Participant or Beneficiary may be paid to the Participant's spouse or to any other person deemed by the Committee to have incurred expense for such Participant (including a duly appointed guardian, committee or other legal representative), and any such payment shall be a complete discharge of the Company's obligation hereunder.
|
15.11
|
Transferability of Rights.
The Company shall have the unrestricted right to transfer its obligations under the Plan with respect to one or more Participants to any person, including, but not limited to, any purchaser of all or any part of the Company's business. No Participant or Beneficiary shall have any right to commute, encumber, transfer or otherwise dispose of or alienate any present or future right or expectancy which the Participant or Beneficiary may have at any time to receive payments of benefits hereunder, which benefits and the right thereto are expressly declared to be non-assignable and nontransferable, except to the extent required by law. Any attempt to transfer or assign a benefit, or any rights granted hereunder, by the Participant or the spouse of the Participant shall, in the sole discretion of the Committee (after consideration of such facts as it deems pertinent), be grounds for terminating any rights of the Participant or Beneficiary to any portion of the Plan benefits not previously paid.
|
STANDARD SEPARATION BENEFITS AND OBLIGATIONS
|
|||||||
Partici-pant Tier
|
Good Reason Applies
|
Sever-ance Multiple
|
Standard Vesting Continuation Period
|
Standard Health Continu-ation Period
|
Standard Non-Competition Period
|
Standard Non-Solicitation Period
|
|
Clients/ Customers
|
Employees
|
||||||
Tier 1
|
Yes
|
2.0x
|
12 months
|
24 months
|
24 months
|
24 months
|
24 months
|
Tier 2
|
Yes
|
1.5x
|
12 months
|
18 months
|
18 months
|
18 months
|
18 months
|
Tier 3
|
No
|
1.0x
|
9 months
|
12 months
|
12 months
|
12 months
|
12 months
|
Tier 4
|
No
|
0.5x
|
6 months
|
6 months
|
6 months
|
6 months
|
6 months
|
CHANGE-IN-CONTROL SEPARATION BENEFITS AND OBLIGATIONS
|
|||||||
Partici-pant Tier
|
Good Reason Applies
|
CIC Sever-ance Multiple
|
CIC Equity Vesting
|
CIC Health Continu-ation Period
|
CIC Non-Competition Period
|
CIC Non-Solicitation Period
|
|
Clients/ Customers
|
Employees
|
||||||
Tier 1
|
Yes
|
2.0x
|
Time-based equity accelerated vest
Performance-based (other than stock price performance-based equity) pro rata accelerated vest based on greater of target or to-date performance
Stock price performance equity accelerated vest if CIC price equals or exceed stock price target
Options/SARs remain exercisable for 90 days
|
24 months
|
24 months
|
24 months
|
24 months
|
Tier 2
|
Yes
|
1.5x
|
Same as Tier 1
|
18 months
|
18 months
|
18 months
|
18 months
|
Tier 3
|
Yes
|
1.0x
|
Same as Tier 1
|
12 months
|
12 months
|
12 months
|
12 months
|
Tier 4
|
No
|
0.5x
|
Same as Tier 1
|
6 months
|
6 months
|
6 months
|
6 months
|
|
ENCORE CAPITAL GROUP, INC.
By:_________________________ Name: Title: |
|
_____________________________
[Employee’s Name]
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Encore Capital Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons fulfilling the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
By:
|
|
/
S
/ K
ENNETH
A. V
ECCHIONE
|
|
|
Kenneth A. Vecchione
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Encore Capital Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons fulfilling the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
By:
|
|
/
S
/ PAUL GRINBERG
|
|
|
Paul Grinberg
Executive Vice President, Chief Financial Officer and Treasurer
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company.
|
|
|
/s/ K
ENNETH
A. V
ECCHIONE
|
|
Kenneth A. Vecchione
|
|
President and Chief Executive Officer
|
|
|
|
/s/ P
AUL
G
RINBERG
|
|
Paul Grinberg
|
|
Executive Vice President,
Chief Financial Officer and Treasurer
|
|