Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - ENCORE CAPITAL GROUP INC | d373209d8k.htm |
| EX-23.1 - CONSENT OF BKD, LLP - ENCORE CAPITAL GROUP INC | d373209dex231.htm |
| EX-99.3 - BALANCE SHEET OF BNC RETAX, LLC - ENCORE CAPITAL GROUP INC | d373209dex993.htm |
| EX-99.1 - CONSOLIDATED BALANCE SHEET OF PROPEL FINANCIAL SERVICES, LLC - ENCORE CAPITAL GROUP INC | d373209dex991.htm |
| EX-99.2 - BALANCE SHEET OF RIOPROP VENTURES, LLC - ENCORE CAPITAL GROUP INC | d373209dex992.htm |
Exhibit 99.4
Encore Capital Group, Inc.
Index to Pro Forma Condensed Consolidated Financial Statements (Unaudited)
| Page | ||||
| Pro Forma Condensed Consolidated Financial Statements: |
||||
| Introduction to Pro Forma Condensed Consolidated Financial Statements (Unaudited) |
2 | |||
| Pro Forma Condensed Consolidated Statement of Financial Condition as of March 31, 2012 (Unaudited) |
3 | |||
| Pro Forma Condensed Consolidated Statement of Comprehensive Income for the three months ended March 31, 2012 (Unaudited) |
4 | |||
| Pro Forma Condensed Consolidated Statement of Comprehensive Income for the year ended December 31, 2011 (Unaudited) |
5 | |||
| Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited) |
6 | |||
Encore Capital Group, Inc.
Introduction to Pro Forma Condensed Consolidated Financial Statements (Unaudited)
On May 8, 2012, Encore Capital Group, Inc. and its subsidiaries (collectively, “Encore”), through its subsidiary Propel Acquisition LLC, acquired Propel Financial Services, LLC (“PFS”), RioProp Ventures, LLC (“RioProp”), BNC Retax, LLC (“BNC”), and RioProp Holdings, LLC (“Holdings”) (collectively, “Propel”) for $186.8 million (the “Propel Acquisition”). The Propel Acquisition was financed by drawing down on Encore’s existing credit facility, entering into a new credit facility at Propel and using cash on hand. The accompanying Unaudited Pro Forma Condensed Consolidated Financial Statements are based on the historical financial statements of Encore and Propel. The information attempts to illustrate the effect that Encore’s acquisition of Propel would have had on Encore’s financial statements if the Propel Acquisition had been consummated at earlier dates, as described below. This information is hypothetical and does not necessarily reflect the financial performance that would have actually resulted if the Propel Acquisition had been completed on the dates assumed.
The Unaudited Pro Forma Condensed Consolidated Statement of Financial Condition presents the historical financial position of Encore as though the Propel Acquisition was consummated on March 31, 2012, the end of Encore’s first fiscal quarter. The Unaudited Pro Forma Condensed Consolidated Statements of Comprehensive Income present the historical results of operations of Encore for the three months ended March 31, 2012 and for the year ended December 31, 2011. The accompanying Unaudited Pro Forma Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2012 and for the year ended December 31, 2011, reflect pro forma adjustments for Propel as though the Propel Acquisition was consummated on January 1, 2011.
Encore’s historical results included in the Unaudited Pro Forma Condensed Consolidated Statement of Financial Condition and the Unaudited Pro Forma Condensed Consolidated Statement of Comprehensive Income as of, and for the three months ended March 31, 2012, are derived from Encore’s Unaudited Condensed Consolidated Financial Statements included in its Quarterly Report on Form 10-Q as of, and for the three months ended March 31, 2012. Encore’s historical results included in the Unaudited Pro Forma Condensed Consolidated Statement of Comprehensive Income for the year ended December 31, 2011 are derived from Encore’s Audited Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2011. The Unaudited Pro Forma Condensed Consolidated Statement of Financial Condition was prepared using Propel’s historical balance sheet as of March 31, 2012. The Unaudited Pro Forma Condensed Consolidated Statement of Comprehensive Income for the three months ended March 31, 2012 was prepared using Propel’s historical results of operations for the three months ended March 31, 2012. The Unaudited Pro Forma Condensed Consolidated Statement of Comprehensive Income for the year ending December 31, 2011 was prepared using Propel’s historical results of operations for the year ending December 31, 2011.
The Unaudited Pro Forma Condensed Consolidated Financial Statements have been prepared using the acquisition method of accounting. The allocation of the purchase price to the fair values of the identified tangible and intangible assets acquired and liabilities assumed was based upon an independent valuation and management estimates. The historical financial information has been adjusted to give effect to matters that are directly attributable to the Propel Acquisition, factually supportable, and with respect to the statements of operations, expected to have a continuing impact on the operating results of the combined company.
The accompanying Unaudited Pro Forma Condensed Consolidated Financial Statements should be read in conjunction with the Audited Consolidated Financial Statements and related notes thereto included in Encore’s 2011 Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for the three months ended March 31, 2012. Encore’s management believes that the assumptions used in preparing these Unaudited Pro Forma Condensed Consolidated Financial Statements provide a reasonable basis for presenting all of the significant effects of the Propel Acquisition. These Unaudited Pro Forma Condensed Consolidated Financial Statements presented are for informational purposes only and do not purport to be indicative of the results that would have actually occurred if the Propel Acquisition had been consummated on the dates indicated or of those results that may be achieved in the future.
2
ENCORE CAPITAL GROUP, INC.
Pro Forma Condensed Consolidated Statement of Financial Condition
(Dollars in thousands)
(Unaudited)
| As of March 31, 2012 | ||||||||||||||||||||||||||||
| Historical | ||||||||||||||||||||||||||||
| Encore | Propel Financial Services, LLC (A) |
RioProp Holdings LLC (A) |
RioProp Ventures, LLC (A) |
BNC Retax, LLC (A) |
Pro Forma Adjustments |
Pro Forma | ||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||
| Cash and cash equivalents |
$ | 15,446 | $ | 5,488 | $ | — | $ | — | $ | 827 | $ | (318 | )(B) | $ | 21,443 | |||||||||||||
| Accounts receivable, net |
3,615 | 295 | — | 494 | 213 | — | 4,617 | |||||||||||||||||||||
| Investment in receivable portfolios, net |
741,580 | — | — | — | — | — | 741,580 | |||||||||||||||||||||
| Deferred court costs, net |
39,839 | — | — | — | — | — | 39,839 | |||||||||||||||||||||
| Notes receivable |
— | 49,540 | 144 | 37,439 | 43,999 | 543 | (C) | 131,665 | ||||||||||||||||||||
| Accrued interest receivable |
— | 1,136 | 3 | 1,516 | 1,146 | — | 3,801 | |||||||||||||||||||||
| Investment in RioProp Ventures |
— | 5,866 | — | — | — | (5,866 | )(D) | — | ||||||||||||||||||||
| Property and equipment, net |
19,603 | 384 | — | 63 | 25 | — | 20,075 | |||||||||||||||||||||
| Other assets |
11,842 | 917 | 236 | 146 | 135 | 424 | (E) | 13,700 | ||||||||||||||||||||
| Receivables from related parties |
— | 992 | 91 | 1,967 | — | (3,050 | )(F) | — | ||||||||||||||||||||
| Goodwill |
6,047 | — | — | — | — | 46,663 | (G) | 52,710 | ||||||||||||||||||||
| Identifiable intangible assets, net |
— | — | — | — | — | 570 | (H) | 570 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total assets |
$ | 837,972 | $ | 64,618 | $ | 474 | $ | 41,625 | $ | 46,345 | $ | 38,966 | $ | 1,030,000 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Liabilities and stockholders’ equity | ||||||||||||||||||||||||||||
| Liabilities: |
||||||||||||||||||||||||||||
| Accounts payable and accrued liabilities |
$ | 31,161 | $ | 1,606 | $ | — | $ | 1,108 | $ | 1,023 | $ | 725 | (G) | $ | 35,623 | |||||||||||||
| Income tax payable |
2,078 | — | — | — | — | — | 2,078 | |||||||||||||||||||||
| Deferred tax liabilities, net |
16,333 | — | — | — | — | — | 16,333 | |||||||||||||||||||||
| Debt |
398,246 | 53,749 | — | 30,191 | 36,385 | 66,884 | (I) | 585,455 | ||||||||||||||||||||
| Payable to related parties |
— | 1,625 | 474 | — | 951 | (3,050 | )(F) | — | ||||||||||||||||||||
| Other liabilities |
5,297 | 15 | — | 193 | 149 | — | 5,654 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total liabilities |
453,115 | 56,995 | 474 | 31,492 | 38,508 | 64,559 | 645,143 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Commitments and contingencies |
||||||||||||||||||||||||||||
| Stockholders’ equity: |
||||||||||||||||||||||||||||
| Convertible preferred stock, $.01 par value, 5,000 shares authorized, no shares issued and outstanding |
— | — | — | — | — | — | — | |||||||||||||||||||||
| Common stock, $.01 par value, 50,000 shares authorized, 24,696 shares issued and outstanding as of March 31, 2012 |
247 | — | — | — | — | — | 247 | |||||||||||||||||||||
| Additional paid-in capital |
124,638 | 1,632 | — | 30 | 5,580 | (7,242 | )(J) | 124,638 | ||||||||||||||||||||
| Accumulated earnings |
261,258 | 5,991 | — | 10,103 | 2,257 | (18,351 | )(J) | 261,258 | ||||||||||||||||||||
| Accumulated other comprehensive loss |
(1,286 | ) | — | — | — | — | — | (1,286 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total stockholders’ equity |
384,857 | 7,623 | — | 10,133 | 7,837 | (25,593 | ) | 384,857 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total liabilities and stockholders’ equity |
$ | 837,972 | $ | 64,618 | $ | 474 | $ | 41,625 | $ | 46,345 | $ | 38,966 | $ | 1,030,000 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
3
ENCORE CAPITAL GROUP, INC.
Pro Forma Condensed Consolidated Statement of Comprehensive Income
(Dollars in thousands except per share data)
(Unaudited)
| Three Months Ended March 31, 2012 | ||||||||||||||||||||||||||||
| Historical | ||||||||||||||||||||||||||||
| Encore | Propel Financial Services, LLC (A) |
RioProp Holdings, LLC (A) |
RioProp Ventures, LLC (A) |
BNC Retax, LLC (A) |
Pro Forma Adjustments |
Pro Forma | ||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||
| Revenue from receivable portfolios, net |
$ | 126,405 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 126,405 | ||||||||||||||
| Servicing fees and other related revenue |
3,817 | 1,255 | — | 296 | 114 | (1,045 | )(K) | 4,437 | ||||||||||||||||||||
| Interest income |
— | 1,875 | 6 | 1,653 | 1,386 | (55 | )(L) | 4,865 | ||||||||||||||||||||
| Interest expense |
— | (627 | ) | — | (424 | ) | (350 | ) | 377 | (M) | (1,024 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net interest income |
— | 1,248 | 6 | 1,229 | 1,036 | 322 | 3,841 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total revenues |
130,222 | 2,503 | 6 | 1,525 | 1,150 | (723 | ) | 134,683 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Operating expenses |
||||||||||||||||||||||||||||
| Salaries and employee benefits (excluding stock-based compensation expense) |
23,109 | 1,027 | — | 128 | 92 | — | 24,356 | |||||||||||||||||||||
| Stock-based compensation expense |
2,266 | — | — | — | — | — | 2,266 | |||||||||||||||||||||
| Cost of legal collections |
38,635 | — | — | — | — | — | 38,635 | |||||||||||||||||||||
| Other operating expenses |
12,411 | 195 | 2 | 181 | 208 | — | 12,997 | |||||||||||||||||||||
| Collection agency commissions |
3,959 | — | — | — | — | — | 3,959 | |||||||||||||||||||||
| General and administrative expenses |
14,132 | 313 | — | 445 | 466 | (1,005 | )(N) | 14,351 | ||||||||||||||||||||
| Depreciation and amortization |
1,363 | 27 | — | 4 | 3 | 34 | (O) | 1,431 | ||||||||||||||||||||
| Impairment charge for goodwill and identifiable intangible assets |
10,349 | — | — | — | — | — | 10,349 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total operating expenses |
106,224 | 1,562 | 2 | 758 | 769 | (971 | ) | 108,344 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Income from operations |
23,998 | 941 | 4 | 767 | 381 | 248 | 26,339 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Other (expense) income |
||||||||||||||||||||||||||||
| Interest expense |
(5,515 | ) | — | — | — | — | (627 | )(P) | (6,142 | ) | ||||||||||||||||||
| Other income |
267 | — | — | — | — | — | 267 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total other expenses |
(5,248 | ) | — | — | — | — | (627 | ) | (5,875 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Income before income taxes |
18,750 | 941 | 4 | 767 | 381 | (379 | ) | 20,464 | ||||||||||||||||||||
| Provision for income taxes |
(7,344 | ) | — | — | — | — | (671 | )(Q) | (8,015 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net income |
$ | 11,406 | $ | 941 | $ | 4 | $ | 767 | $ | 381 | $ | (1,050 | ) | $ | 12,449 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Weighted average shares outstanding: |
||||||||||||||||||||||||||||
| Basic |
24,779 | 15 | (R) | 24,794 | ||||||||||||||||||||||||
| Diluted |
25,740 | 15 | (R) | 25,755 | ||||||||||||||||||||||||
| Earnings per share: |
||||||||||||||||||||||||||||
| Basic |
$ | 0.46 | $ | 0.50 | ||||||||||||||||||||||||
| Diluted |
$ | 0.44 | $ | 0.48 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Other comprehensive income, net of tax |
682 | — | — | — | — | — | 682 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Comprehensive income |
$ | 12,088 | $ | 941 | $ | 4 | $ | 767 | $ | 381 | $ | (1,050 | ) | $ | 13,131 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
4
ENCORE CAPITAL GROUP, INC.
Pro Forma Condensed Consolidated Statement of Comprehensive Income
(Dollars in thousands except per share data)
(Unaudited)
| Year Ended December 31, 2011 | ||||||||||||||||||||||||||||
| Historical | ||||||||||||||||||||||||||||
| Encore | Propel Financial Services, LLC (A) |
RioProp Holdings, LLC (A) |
RioProp Ventures, LLC (A) |
BNC
Retax, LLC (A) |
Pro Forma Adjustments |
Pro Forma | ||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||
| Revenue from receivable portfolios, net |
$ | 448,714 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 448,714 | ||||||||||||||
| Servicing fees and other related revenue |
18,657 | 4,348 | — | 1,343 | 404 | (3,312 | )(K) | 21,440 | ||||||||||||||||||||
| Interest income |
— | 6,504 | 58 | 6,602 | 4,892 | (46 | )(L) | 18,010 | ||||||||||||||||||||
| Interest expense |
— | (2,545 | ) | — | (1,718 | ) | (1,297 | ) | 1,419 | (M) | (4,141 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net interest income |
— | 3,959 | 58 | 4,884 | 3,595 | 1,373 | 13,869 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total revenues |
467,371 | 8,307 | 58 | 6,227 | 3,999 | (1,939 | ) | 484,023 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Operating expenses |
||||||||||||||||||||||||||||
| Salaries and employee benefits (excluding stock-based compensation expense) |
81,509 | 2,948 | — | 319 | 819 | — | 85,595 | |||||||||||||||||||||
| Stock-based compensation expense |
7,709 | — | — | — | — | — | 7,709 | |||||||||||||||||||||
| Cost of legal collections |
157,050 | — | — | — | — | — | 157,050 | |||||||||||||||||||||
| Other operating expenses |
39,776 | 247 | 28 | 125 | 788 | — | 40,964 | |||||||||||||||||||||
| Collection agency commissions |
14,162 | — | — | — | — | — | 14,162 | |||||||||||||||||||||
| General and administrative expenses |
41,730 | 1,697 | — | 2,135 | 1,062 | (1,139 | )(N) | 45,485 | ||||||||||||||||||||
| Depreciation and amortization |
4,661 | 96 | — | 8 | 19 | 118 | (O) | 4,902 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total operating expenses |
346,597 | 4,988 | 28 | 2,587 | 2,688 | (1,021 | ) | 355,867 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Income from operations |
120,774 | 3,319 | 30 | 3,640 | 1,311 | (918 | ) | 128,156 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Other (expense) income |
||||||||||||||||||||||||||||
| Interest expense |
(21,116 | ) | — | — | — | — | (2,597 | )(P) | (23,713 | ) | ||||||||||||||||||
| Other expense |
(394 | ) | — | — | — | — | — | (394 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total other expenses |
(21,510 | ) | — | — | — | — | (2,597 | ) | (24,107 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Income before income taxes |
99,264 | 3,319 | 30 | 3,640 | 1,311 | (3,515 | ) | 104,049 | ||||||||||||||||||||
| Provision for income taxes |
(38,306 | ) | — | — | — | — | (1,847 | )(Q) | (40,153 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net income |
$ | 60,958 | $ | 3,319 | $ | 30 | $ | 3,640 | $ | 1,311 | $ | (5,362 | ) | $ | 63,896 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Weighted average shares outstanding: |
||||||||||||||||||||||||||||
| Basic |
24,572 | 15 | (R) | 24,587 | ||||||||||||||||||||||||
| Diluted |
25,690 | 15 | (R) | 25,705 | ||||||||||||||||||||||||
| Earnings per share: |
||||||||||||||||||||||||||||
| Basic |
$ | 2.48 | $ | 2.60 | ||||||||||||||||||||||||
| Diluted |
$ | 2.37 | $ | 2.49 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Other comprehensive (loss) income, net of tax |
(2,119 | ) | 215 | — | — | — | (83 | )(Q) | (1,987 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Comprehensive income |
$ | 58,839 | $ | 3,534 | $ | 30 | $ | 3,640 | $ | 1,311 | $ | (5,445 | ) | $ | 61,909 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
5
Encore Capital Group, Inc.
Notes to Pro Forma Condensed Consolidated Financial Information (Unaudited)
| (A) | Represents the balance sheet and operations of Propel Financial Services, LLC, RioProp Holdings, LLC, RioProp Ventures, LLC, and BNC Retax, LLC, which were acquired on May 8, 2012 (collectively “Propel”). |
| (B) | Represents the following cash transactions: |
| Proceeds: |
||||
| Borrowings under the Propel facility |
$ | 122,209 | ||
| Borrowings under Encore’s existing credit facility |
65,000 | |||
| Uses: |
||||
| Payments |
(186,814 | ) | ||
| Financing costs |
(713 | ) | ||
|
|
|
|||
| Net pro forma cash adjustment |
$ | (318 | ) | |
|
|
|
| (C) | Represents the adjustment of Propel’s portfolio to fair value based on an independent valuation study. |
| (D) | Represents the elimination of the investment in RioProp Ventures, LLC and RioProp Holdings, LLC. |
| (E) | Represents the incremental capitalized financing costs incurred to finance the Propel Acquisition. |
| (F) | Represents the elimination of intercompany and related party receivables and payables. |
| (G) | Represents the residual of the acquisition price for Propel over the fair value of the assets acquired and liabilities assumed as of March 31, 2012, as follows: |
| Purchase price |
$ | 186,814 | ||
| Estimated purchase price adjustment |
725 | |||
| Less fair value of: |
||||
| Tangible assets acquired |
(144,490 | ) | ||
| Intangible assets |
(570 | ) | ||
| Plus fair value of: |
||||
| Liabilities assumed |
4,184 | |||
|
|
|
|||
| Goodwill |
$ | 46,663 | ||
|
|
|
| (H) | Represents the estimated fair value of identified intangible assets based on an independent valuation as of the date of acquisition, as follows: |
| Amortization Period |
Estimated Fair Value |
|||||
| Trade name |
15 years | $ | 420 | |||
| Covenants Not-to-Compete |
0-3 years | 150 | ||||
|
|
|
|||||
| Total |
$ | 570 | ||||
|
|
|
|||||
| (I) | Represents the additional borrowing incurred to finance the Propel Acquisition. Encore borrowed $65.0 million under its existing credit facility and Propel borrowed $122.2 million under a new syndicated loan facility. In addition, this adjustment reflects the elimination of Propel’s debt of $120.3 million that was not assumed in the acquisition. |
| (J) | Represents the elimination of Propel’s Members’ equity. |
6
| (K) | Represents the elimination of equity income and intercompany revenues, as follows: |
| Three Months Ended March 31, 2012 |
Year Ended December 31, 2011 |
|||||||
| Equity income |
$ | 385 | $ | 1,835 | ||||
| Intercompany revenue |
660 | 1,477 | ||||||
|
|
|
|
|
|||||
| Total servicing fees and other related revenue |
$ | 1,045 | $ | 3,312 | ||||
|
|
|
|
|
|||||
| (L) | Represents incremental amortization of loan premium identified as a result of an independent valuation study associated with the Propel Acquisition. |
| (M) | Represents the reduction in interest expense at Propel reflecting a lower interest rate under Propel’s new loan facility. |
| (N) | Represents the elimination of the following expenses: |
| Three Months Ended March 31, 2012 |
Year Ended December 31, 2011 |
|||||||
| Intercompany servicing fees |
$ | 207 | $ | 523 | ||||
| Intercompany administration fees |
309 | 616 | ||||||
| Acquisition related expenses incurred by Encore |
489 | — | ||||||
|
|
|
|
|
|||||
| Total general and administrative expenses |
$ | 1,005 | $ | 1,139 | ||||
|
|
|
|
|
|||||
| (O) | Represents additional amortization expense of acquired identifiable intangible assets associated with the Propel Acquisition. |
| (P) | Represents incremental interest expense on debt incurred by Encore to finance the Propel Acquisition. |
| (Q) | Represents the provision for income taxes for Propel and the provision for income taxes associated with the pro forma adjustments based upon an estimated combined federal and state statutory rate of 39.17% and 38.59% for the three months ended March 31, 2012 and the year ended December 31, 2011, respectively. |
| (R) | Represents the effect from shares sold to Propel’s CEO in connection with the Propel Acquisition. |
7