Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2020 | May 04, 2020 | |
Cover [Abstract] | ||
Amendment Flag | false | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0001084961 | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2020 | |
Document Transition Report | false | |
Entity File Number | 000-26489 | |
Entity Registrant Name | ENCORE CAPITAL GROUP, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 48-1090909 | |
Entity Address, Address Line One | 350 Camino De La Reina | |
Entity Address, Address Line Two | Suite 100 | |
Entity Address, City or Town | San Diego | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 92108 | |
City Area Code | 877 | |
Local Phone Number | 445 - 4581 | |
Title of 12(b) Security | Common Stock, $0.01 Par Value Per Share | |
Trading Symbol | ECPG | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Small Business | false | |
Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 31,234,420 |
Consolidated Statements of Fina
Consolidated Statements of Financial Condition - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Assets | ||
Cash and cash equivalents | $ 188,199 | $ 192,335 |
Investment in receivable portfolios, net | 3,166,018 | 3,283,984 |
Deferred court costs, net | 0 | 100,172 |
Property and equipment, net | 119,417 | 120,051 |
Other assets | 302,019 | 329,223 |
Goodwill | 839,301 | 884,185 |
Total assets | 4,614,954 | 4,909,950 |
Liabilities: | ||
Accounts payable and accrued liabilities | 168,481 | 223,911 |
Borrowings | 3,404,427 | 3,513,197 |
Other liabilities | 136,235 | 147,436 |
Total liabilities | 3,709,143 | 3,884,544 |
Commitments and Contingencies | ||
Equity: | ||
Convertible preferred stock, $0.01 par value, 5,000 shares authorized, no shares issued and outstanding | 0 | 0 |
Common stock, $0.01 par value, 75,000 shares authorized, 31,234 and 31,097 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively | 312 | 311 |
Additional paid-in capital | 222,403 | 222,590 |
Accumulated earnings | 833,366 | 888,058 |
Accumulated other comprehensive loss | (153,355) | (88,766) |
Total Encore Capital Group, Inc. stockholders’ equity | 902,726 | 1,022,193 |
Noncontrolling interest | 3,085 | 3,213 |
Total equity | 905,811 | 1,025,406 |
Total liabilities and equity | 4,614,954 | 4,909,950 |
Variable Interest Entity | ||
Assets | ||
Cash and cash equivalents | 90 | 34 |
Investment in receivable portfolios, net | 478,613 | 539,596 |
Other assets | 4,645 | 4,759 |
Liabilities: | ||
Borrowings | $ 435,099 | $ 464,092 |
Consolidated Statements of Fi_2
Consolidated Statements of Financial Condition (Parenthetical) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Convertible preferred stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Convertible preferred stock authorized (shares) | 5,000,000 | 5,000,000 |
Convertible preferred stock issued (shares) | 0 | 0 |
Convertible preferred stock outstanding (shares) | 0 | 0 |
Common stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Common stock authorized (shares) | 75,000,000 | 75,000,000 |
Common stock issued (shares) | 31,234,000 | 31,097,000 |
Common stock outstanding (shares) | 31,234,000 | 31,097,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenues | ||
Revenue from receivable portfolios | $ 357,365 | $ 311,158 |
Changes in expected current and future recoveries | (98,661) | 0 |
Servicing revenue | 28,680 | 34,023 |
Other revenues | 1,697 | 529 |
Total revenues | 289,081 | 345,710 |
Allowance reversals on receivable portfolios, net | 0 | 1,367 |
Total revenues, adjusted by net allowances | 289,081 | 347,077 |
Operating expenses | ||
Salaries and employee benefits | 93,098 | 91,834 |
Cost of legal collections | 66,279 | 49,027 |
Other operating expenses | 27,164 | 29,614 |
Collection agency commissions | 13,176 | 16,002 |
General and administrative expenses | 31,877 | 39,547 |
Depreciation and amortization | 10,285 | 9,995 |
Total operating expenses | 241,879 | 236,019 |
Income from operations | 47,202 | 111,058 |
Other (expense) income | ||
Interest expense | (54,662) | (54,967) |
Other income (expense) | 1,439 | (2,976) |
Total other expense | (53,223) | (57,943) |
(Loss) income before income taxes | (6,021) | 53,115 |
Provision for income taxes | (4,558) | (3,673) |
Net (loss) income | (10,579) | 49,442 |
Net loss (income) attributable to noncontrolling interest | 125 | (188) |
Net (loss) income attributable to Encore Capital Group, Inc. stockholders | $ (10,454) | $ 49,254 |
(Loss) earnings per share attributable to Encore Capital Group, Inc.: | ||
Basic (USD per share) | $ (0.33) | $ 1.58 |
Diluted (USD per share) | $ (0.33) | $ 1.57 |
Weighted average shares outstanding: | ||
Basic (shares) | 31,308 | 31,201 |
Diluted (shares) | 31,308 | 31,359 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Statement of Comprehensive Income [Abstract] | ||
Net (loss) income | $ (10,579) | $ 49,442 |
Change in unrealized gains/losses on derivative instruments: | ||
Unrealized loss on derivative instruments | (5,051) | (2,202) |
Income tax effect | 1,497 | 172 |
Unrealized loss on derivative instruments, net of tax | (3,554) | (2,030) |
Change in foreign currency translation: | ||
Unrealized (loss) gain on foreign currency translation | (61,038) | 7,580 |
Other comprehensive (loss) income, net of tax | (64,592) | 5,550 |
Comprehensive (loss) income | (75,171) | 54,992 |
Comprehensive loss (income) attributable to noncontrolling interest: | ||
Net loss (income) attributable to noncontrolling interest | 125 | (188) |
Unrealized loss (gain) on foreign currency translation | 3 | (427) |
Comprehensive loss (income) attributable to noncontrolling interest | 128 | (615) |
Comprehensive (loss) income attributable to Encore Capital Group, Inc. stockholders | $ (75,043) | $ 54,377 |
Consolidated Statements of Equi
Consolidated Statements of Equity - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Accumulated Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interest |
Balance at beginning of period (shares) at Dec. 31, 2018 | 30,884 | |||||
Balance at beginning of period at Dec. 31, 2018 | $ 819,688 | $ 309 | $ 208,498 | $ 720,189 | $ (110,987) | $ 1,679 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income (loss) | 49,442 | 49,254 | 188 | |||
Other comprehensive (loss) gain, net of tax | 5,550 | 5,123 | 427 | |||
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes (shares) | 83 | |||||
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes | (1,949) | $ 1 | (1,950) | |||
Stock-based compensation | 1,826 | 1,826 | ||||
Balance at end of period (shares) at Mar. 31, 2019 | 30,967 | |||||
Balance at end of period at Mar. 31, 2019 | 874,557 | $ 310 | 208,374 | 769,443 | (105,864) | 2,294 |
Balance at beginning of period (shares) at Dec. 31, 2019 | 31,097 | |||||
Balance at beginning of period at Dec. 31, 2019 | 1,025,406 | $ 311 | 222,590 | 888,058 | (88,766) | 3,213 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income (loss) | (10,579) | (10,454) | (125) | |||
Other comprehensive (loss) gain, net of tax | (64,592) | (64,589) | (3) | |||
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes (shares) | 137 | |||||
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes | (4,713) | $ 1 | (4,714) | |||
Stock-based compensation | 4,527 | 4,527 | ||||
Balance at end of period (shares) at Mar. 31, 2020 | 31,234 | |||||
Balance at end of period at Mar. 31, 2020 | $ 905,811 | $ 312 | $ 222,403 | $ 833,366 | $ (153,355) | $ 3,085 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Operating activities: | ||
Net (loss) income | $ (10,579) | $ 49,442 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 10,285 | 9,995 |
Other non-cash interest expense, net | 5,909 | 6,629 |
Stock-based compensation expense | 4,527 | 1,826 |
Deferred income taxes | (12,030) | 19,682 |
Changes in expected current and future recoveries | 98,661 | 0 |
Allowance reversals on receivable portfolios, net | 0 | (1,367) |
Other, net | 2,161 | 4,081 |
Changes in operating assets and liabilities | ||
Deferred court costs and other assets | 3,377 | 18,725 |
Prepaid income tax and income taxes payable | 14,970 | (30,247) |
Accounts payable, accrued liabilities and other liabilities | (46,476) | (67,775) |
Net cash provided by operating activities | 70,805 | 10,991 |
Investing activities: | ||
Purchases of receivable portfolios, net of put-backs | (209,045) | (258,635) |
Collections applied to investment in receivable portfolios, net | 169,914 | 202,695 |
Purchases of property and equipment | (7,538) | (10,227) |
Other, net | 3,414 | (3,347) |
Net cash used in investing activities | (43,255) | (69,514) |
Financing activities: | ||
Proceeds from credit facilities | 171,880 | 196,263 |
Repayment of credit facilities | (167,221) | (119,854) |
Repayment of senior secured notes | (16,250) | 0 |
Other, net | (10,171) | (4,862) |
Net cash (used in) provided by financing activities | (21,762) | 71,547 |
Net increase in cash and cash equivalents | 5,788 | 13,024 |
Effect of exchange rate changes on cash and cash equivalents | (9,924) | (3,346) |
Cash and cash equivalents, beginning of period | 192,335 | 157,418 |
Cash and cash equivalents, end of period | 188,199 | 167,096 |
Supplemental disclosure of cash information: | ||
Cash paid for interest | 60,495 | 62,135 |
Cash paid for taxes, net of refunds | $ 766 | $ 15,003 |
Variable Interest Entities
Variable Interest Entities | 3 Months Ended |
Mar. 31, 2020 | |
Variable Interest Entity, Measure of Activity [Abstract] | |
Variable Interest Entities | Variable Interest Entities A VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb expected losses, or the right to receive expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and the obligation to absorb expected losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The Company consolidates VIEs when it is the primary beneficiary. The Company evaluates its relationships with its VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary. A reconsideration event is significant if it changes the design of the entity or the entity’s equity investment at risk. Prior to the purchase of all of the outstanding equity of CCM not owned by the Company, CCM’s indirect holding Company Janus Holdings S.a r.l. (“Janus Holdings”) was a VIE. Upon completion of the Cabot Transaction on July 24, 2018 and the subsequent change in organizational structure, Janus Holdings no longer qualified as a VIE and CCM is consolidated via the voting interest model. As of March 31, 2020, the Company’s VIEs include certain securitized financing vehicles and other immaterial special purpose entities that were created to purchase receivable portfolios in certain geographies. The Company is the primary beneficiary of these VIEs. The Company has the power to direct the activities of the VIEs which includes but is not limited to the ability to exercise discretion in the servicing of the financial assets. Most assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the VIE. |
Ownership, Description of Busin
Ownership, Description of Business, and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Ownership, Description of Business, and Summary of Significant Accounting Policies | Ownership, Description of Business, and Summary of Significant Accounting Policies Encore Capital Group, Inc. (“Encore”), through its subsidiaries (collectively with Encore, the “Company”), is an international specialty finance company providing debt recovery solutions and other related services for consumers across a broad range of financial assets. The Company purchases portfolios of defaulted consumer receivables at deep discounts to face value and manages them by working with individuals as they repay their obligations and work toward financial recovery. Defaulted receivables are consumers’ unpaid financial commitments to credit originators, including banks, credit unions, consumer finance companies and commercial retailers. Defaulted receivables may also include receivables subject to bankruptcy proceedings. The Company also provides debt servicing and other portfolio management services to credit originators for non-performing loans. Through Midland Credit Management, Inc. and its domestic affiliates (collectively, “MCM”), the Company is a market leader in portfolio purchasing and recovery in the United States. Through Cabot Credit Management Limited (“CCM”) and its subsidiaries and European affiliates (collectively, “Cabot”), the Company is one of the largest credit management services providers in Europe and a market leader in the United Kingdom and Ireland. These are the Company’s primary operations. The Company also has investments and operations in Latin America and Asia-Pacific, which the Company refers to as “LAAP.” In August 2019, the Company completed the sale of Baycorp, which represented the Company’s investments and operations in Australia and New Zealand and was a component of LAAP. COVID-19 On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic, which continues to spread throughout the United States and around the world. The COVID-19 outbreak and resulting containment measures implemented by governments around the world, as well as increased business uncertainty, are having an adverse impact on the Company’s ability to collect and are expected to delay a portion of its near-term expected cash collections on purchased receivable portfolios. The resulting impact on expected recoveries has impacted our financial results. We may also incur increased costs or other adverse changes to our business, but such potential impacts are unknown at this time. Financial Statement Preparation and Presentation The accompanying interim consolidated financial statements have been prepared by the Company, without audit, in accordance with the instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of its consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s consolidated financial statements. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s financial statements and the accompanying notes. The inputs into the judgments and estimates consider the economic implications of COVID-19 on the Company’s critical and significant accounting estimates. Actual results could materially differ from those estimates. Basis of Consolidation The consolidated financial statements have been prepared in conformity with GAAP and reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. The Company also consolidates variable interest entities for which it is the primary beneficiary. The primary beneficiary has both (1) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance, and (2) either the obligation to absorb losses or the right to receive benefits. Refer to “Note 9: Variable Interest Entities”, for further details. All intercompany transactions and balances have been eliminated in consolidation. Translation of Foreign Currencies The financial statements of certain of the Company’s foreign subsidiaries are measured using their local currency as the functional currency. Assets and liabilities of foreign operations are translated into U.S. dollars using period-end exchange rates, and revenues and expenses are translated into U.S. dollars using average exchange rates in effect during each period. The resulting translation adjustments are recorded as a component of other comprehensive income or loss. Equity accounts are translated at historical rates, except for the change in retained earnings during the year which is the result of the income statement translation process. Intercompany transaction gains or losses at each period end arising from subsequent measurement of balances for which settlement is not planned or anticipated in the foreseeable future are included as translation adjustments and recorded within other comprehensive income or loss. Translation gains or losses are the material components of accumulated other comprehensive income or loss and are reclassified to earnings upon the substantial sale or liquidation of investments in foreign operations. Reclassifications Certain immaterial reclassifications have been made to the consolidated financial statements to conform to the current year’s presentation. Recently Adopted Accounting Pronouncement On January 1, 2020, the Company adopted the new accounting standard for Financial Instruments - Credit Losses (“CECL”). CECL introduces a new impairment approach for credit loss recognition based on current expected lifetime losses rather than incurred losses. CECL applies to all financial assets carried at amortized costs, including the Company’s investment in receivable portfolios, which are defined as purchased credit deteriorated (“PCD”) financial assets under CECL. The adoption of CECL represents a significant change from the previous U.S. GAAP guidance relating to purchased credit impaired assets and resulted in changes to the Company’s accounting for its investment in receivable portfolios and the related income from the receivable portfolios. As part of the adoption of CECL, the Company changed its accounting methodology for its court costs spent in its legal collection channel effective January 1, 2020. Previously, the Company capitalized its upfront court costs spent in its consolidated financial statements (“Deferred Court Costs”) and provided a reserve for those costs that it believed would ultimately be uncollectible. Effective January 1, 2020, the Company expenses all of its court costs as incurred. All expected cash flows, including all the expected collections from the legal channel, are included in the measurement of the negative allowance, or investment in receivable portfolios, at a discounted value. Upon transition, an adjustment was made to retained earnings to reflect the net change from an undiscounted to discounted value prior to writing-off uncollectible receivables and establishing a balance for discounted value of future recoveries of amounts expected to be collected. The Company has not adjusted prior period comparative information and will continue to disclose prior period financial information in accordance with the previous accounting guidance. The following table summarizes the cumulative effects of adopting the CECL guidance on the Company’s consolidated statements of financial condition at January 1, 2020 ( in thousands ): Balance as of December 31, 2019 Adjustment Opening Balance as of January 1, 2020 Assets Investment in receivable portfolios, net $ 3,283,984 $ 44,166 $ 3,328,150 Deferred court costs, net 100,172 (100,172) — Liabilities Other liabilities (for deferred tax liabilities) 147,436 (11,768) 135,668 Equity Accumulated earnings 888,058 (44,238) 843,820 Recent Accounting Pronouncements Not Yet Effective In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). The ASU provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU is effective as of March 12, 2020 through December 31, 2022. We will evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis. The ASU is currently not expected to have a material impact on our consolidated financial statements. With the exception of the updated standard discussed above, there have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2020, as compared to the recent accounting pronouncements described in our Annual Report, that have significance, or potential significance, to the Company’s consolidated financial statements. Accounting Policy Update As a result of the adoption of CECL, the Company revised its following accounting policies effective January 1, 2020: Investment in Receivable Portfolios The Company purchases portfolios of loans that have experienced significant deterioration of credit quality since origination from banks and other financial institutions. These financial assets are defined as PCD assets under CECL. Under the PCD accounting model, the purchased assets are grossed-up to their face value with an offsetting allowance and noncredit discount allocated to the individual receivables as the unit of account is at the individual loan level. Since each loan is deeply delinquent and deemed uncollectible at the individual loan level, the Company applies its charge-off policy and fully writes-off the amortized costs ( i.e. , face value net of noncredit discount) of the individual receivables immediately after purchasing the portfolio. The Company then records a negative allowance that represents the present value of all expected future recoveries for pools of receivables that share similar risk characteristics using a discounted cash flow approach, which ultimately equals the amount paid for a portfolio purchase and presented as “Investment in receivable portfolios, net” in the Company’s consolidated statements of financial condition. The discount rate is an effective interest rate (or “purchase EIR”) based on the purchase price of the portfolio and the expected future cash flows at the time of purchase. The amount of the negative allowance ( i.e., investment in receivable portfolios) will not exceed the total amortized cost basis of the loans written-off. Receivable portfolio purchases are aggregated into pools based on similar risk characteristics. Examples of risk characteristics include financial asset type, collateral type, size, interest rate, date of origination, term, and geographic location. The Company’s static pools are typically grouped into credit card, purchased consumer bankruptcy, and mortgage portfolios. The Company further groups these static pools by geographic location. Once a pool is established, the portfolios will remain in the designated pool unless the underlying risk characteristics change. The purchase EIR of a pool will not change over the life of the pool even if expected future cash flows change. Revenue is recognized for each static pool over the economic life of the pool. The Company continues to evaluate the reasonable economic life of a pool in each reporting period. Revenue primarily includes two components: (1) accretion of the discount on the negative allowance due to the passage of time, and (2) changes in expected cash flows, which includes (a) the current period variances between actual cash collected and expected cash recoveries and (b) the present value change of expected future recoveries. The Company elected not to maintain its previously formed pool groups with amortized costs at transition. Certain pools already fully recovered their cost basis and became zero basis portfolios (“ZBA”) prior to the transition. The Company did not establish a negative allowance from ZBA pools as the Company elected the Transition Resource Group for Credit Losses’ practical expedient to retain the integrity of its legacy pools. All subsequent collections to the ZBA pools are recognized as ZBA revenue, which is included in revenue from receivable portfolios in the Company’s consolidated statements of operations. See “Note 5: Investment in Receivable Portfolios, Net” for further discussion of investment in receivable portfolios. Deferred Court Costs The Company pursues legal collections using a network of attorneys that specialize in collection matters and through its internal legal channel. The Company generally pursues collections through legal means only when it believes a consumer has sufficient assets to repay their indebtedness but has, to date, been unwilling to pay. In order to pursue legal collections, the Company is required to pay certain upfront costs to the applicable courts that are recoverable from the consumer. Effective January 1, 2020, the Company expenses all of its court costs as incurred and no longer capitalizes such costs as Deferred Court Costs. All expected cash flows, including all the expected collections from the legal channel, are included in the measurement of the negative allowance, or investment in receivable portfolios, at a discounted value. |
(Loss) Earnings Per Share
(Loss) Earnings Per Share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
(Loss) Earnings Per Share | (Loss) Earnings Per Share Basic (loss) earnings per share is calculated by dividing net earnings attributable to Encore by the weighted average number of shares of common stock outstanding during the period. Diluted (loss) earnings per share is calculated based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options, restricted stock, and the dilutive effect of the convertible and exchangeable senior notes, if applicable. In computing the diluted net loss per share for the three months ended March 31, 2020, dilutive potential common shares are excluded from the diluted loss per share calculation because of their anti-dilutive effect. A reconciliation of shares used in calculating (loss) earnings per basic and diluted shares follows (in thousands, except per share amounts) : Three Months Ended March 31, 2020 2019 Net (loss) income attributable to Encore Capital Group, Inc. stockholders $ (10,454) $ 49,254 Total weighted-average basic shares outstanding 31,308 31,201 Dilutive effect of stock-based awards — 158 Total weighted-average dilutive shares outstanding 31,308 31,359 Basic (loss) earnings per share $ (0.33) $ 1.58 Diluted (loss) earnings per share $ (0.33) $ 1.57 Anti-dilutive employee stock options outstanding were approximately 13,000 and 217,000 for the three months ended March 31, 2020 and 2019, respectively. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received upon sale of an asset or the price paid to transfer a liability, in an orderly transaction between market participants at the measurement date ( i.e., the “exit price”). The Company uses a fair value hierarchy that prioritizes the inputs used in valuation techniques to measure fair value into three broad levels. The following is a brief description of each level: • 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. Financial Instruments Required To Be Carried At Fair Value Financial assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands) : Fair Value Measurements as of March 31, 2020 Level 1 Level 2 Level 3 Total Assets Interest rate cap contracts $ — $ 2,150 $ — $ 2,150 Liabilities Foreign currency exchange contracts — (2,177) — (2,177) Interest rate swap agreements — (14,735) — (14,735) Contingent consideration — — (27) (27) Fair Value Measurements as of December 31, 2019 Level 1 Level 2 Level 3 Total Assets Foreign currency exchange contracts $ — $ 1,473 $ — $ 1,473 Interest rate cap contracts — 2,460 — 2,460 Liabilities Interest rate swap agreements — (9,116) — (9,116) Contingent consideration — — (66) (66) Derivative Contracts: The Company uses derivative instruments to manage its exposure to fluctuations in interest rates and foreign currency exchange rates. Fair values of these derivative instruments are estimated using industry standard valuation models. These models project future cash flows and discount the future amounts to a present value using market-based observable inputs, including interest rate curves, foreign currency exchange rates, and forward and spot prices for currencies. Contingent Consideration: The Company carries certain contingent liabilities resulting from its mergers and acquisition activities. Certain sellers of the Company’s acquired entities could earn additional earn-out payments in cash based on the entities’ subsequent operating performance. The Company recorded the acquisition date fair values of these contingent liabilities, based on the likelihood of contingent earn-out payments, as part of the consideration transferred. The earn-out payments are subsequently remeasured to fair value at each reporting date based on actual and forecasted operating performance. The following table provides a roll-forward of the fair value of contingent consideration for the three months ended March 31, 2020 and year ended December 31, 2019 (in thousands) : Amount Balance as of December 31, 2018 $ 6,198 Change in fair value of contingent consideration (2,300) Payment of contingent consideration (3,686) Effect of foreign currency translation (146) Balance as of December 31, 2019 66 Payment of contingent consideration (35) Effect of foreign currency translation (4) Balance as of March 31, 2020 $ 27 Non-Recurring Fair Value Measurement: Certain assets are measured at fair value on a nonrecurring basis. These assets include real estate-owned assets classified as held for sale at the lower of their carrying value or fair value less cost to sell. The fair value of the assets held for sale and estimated selling expenses were determined at the time of initial recognition using Level 3 measurements. The fair value estimate of the assets held for sale was approximately $42.9 million and $46.7 million as of March 31, 2020 and December 31, 2019, respectively. Financial Instruments Not Required To Be Carried At Fair Value The table below summarizes fair value estimates for the Company's financial instruments that are not required to be carried at fair value. The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of the Company. The carrying amounts in the following table are included in the consolidated statements of financial condition as of March 31, 2020 and December 31, 2019 (in thousands) : March 31, 2020 December 31, 2019 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Financial Assets Investment in receivable portfolios, net $ 3,166,018 $ 3,547,965 $ 3,283,984 $ 3,464,050 Deferred court costs — — 100,172 100,172 Financial Liabilities Encore convertible notes and exchangeable notes (1) 645,591 567,691 642,547 693,708 Cabot senior secured notes (2) 1,077,548 996,060 1,127,435 1,170,945 _______________________ (1) Carrying amount represents the portion of the convertible and exchangeable notes classified as debt, while estimated fair value pertains to the face amount of the notes. (2) Carrying amount represents historical cost, adjusted for any related debt discount or debt premium. Investment in Receivable Portfolios: The fair value of investment in receivable portfolios is measured using Level 3 inputs by discounting the estimated future cash flows generated by its proprietary forecasting models. The key inputs include the estimated future gross cash flow, average cost to collect, and discount rate. The determination of such inputs requires significant judgment, including assessing the assumed market participant’s cost structure, its determination of whether to include fixed costs in its valuation, its collection strategies, and determining the appropriate weighted average cost of capital. The Company evaluates the use of these key inputs on an ongoing basis and refines the data as it continues to obtain better information from market participants in the debt recovery and purchasing business. Deferred Court Costs: Effective January 1, 2020, the Company no longer carries Deferred Court Costs as a result of its change in accounting policy. The fair value estimate for Deferred Court Costs as of December 31, 2019 involved Level 3 inputs as there was little observable market data available and management was required to use significant judgment in its estimates. Borrowings: The majority of the Company’s borrowings are carried at historical amounts, adjusted for additional borrowings less principal repayments, which approximate fair value. These borrowings include Encore’s senior secured notes and borrowings under its revolving credit and term loan facilities and Cabot’s borrowings under its revolving credit facility. The carrying value of the Company’s revolving credit and term loan facilities approximates fair value due to the short-term nature of the interest rate periods. The fair value of the Company’s senior secured notes was estimated using widely accepted valuation techniques, including discounted cash flow analyses using available market information on discount and borrowing rates with similar terms, maturities, and credit ratings. Accordingly, the Company used Level 2 inputs for these debt instrument fair value estimates. The Company’s borrowings also include finance lease liabilities for which the carrying value approximates fair value. |
Derivatives and Hedging Instrum
Derivatives and Hedging Instruments | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives and Hedging Instruments | Derivatives and Hedging InstrumentsThe Company may periodically enter into derivative financial instruments to manage risks related to interest rates and foreign currency. Certain of the Company’s derivative financial instruments qualify for hedge accounting treatment under the authoritative guidance for derivatives and hedging. The following table summarizes the fair value of derivative instruments as included in the Company’s consolidated statements of financial condition (in thousands) : March 31, 2020 December 31, 2019 Balance Sheet Fair Value Balance Sheet Fair Value Derivatives designated as hedging instruments: Interest rate cap contracts Other assets $ 2,150 Other assets $ 2,460 Foreign currency exchange contracts Other liabilities (134) Other assets 443 Interest rate swap agreements Other liabilities (14,735) Other liabilities (9,116) Derivatives not designated as hedging instruments: Foreign currency exchange contracts Other liabilities (2,043) Other assets 1,030 Derivatives Designated as Hedging Instruments The Company has operations in foreign countries which expose the Company to foreign currency exchange rate fluctuations due to transactions denominated in foreign currencies. To mitigate a portion of this risk, the Company enters into derivative financial instruments, principally foreign currency forward contracts with financial counterparties. The Company adjusts the level and use of derivatives as soon as practicable after learning that an exposure has changed and reviews all exposures and derivative positions on an ongoing basis. Certain of the Company’s foreign currency forward contracts are designated as cash flow hedging instruments and qualify for hedge accounting treatment. Gains and losses arising from such contracts are recorded as a component of accumulated other comprehensive income (“OCI”) as gains and losses on derivative instruments, net of income taxes. The hedging gains and losses in OCI are subsequently reclassified into earnings in the same period in which the underlying transactions affect the Company’s earnings. If all or a portion of the forecasted transaction is cancelled, the accumulated gains or losses in OCI would be reclassified into earnings. As of March 31, 2020, the total notional amount of the forward contracts that were designated as cash flow hedging instruments was $6.3 million. The Company estimates that approximately $0.1 million of net derivative loss included in OCI will be reclassified into earnings within the next 12 months. No gains or losses were reclassified from OCI into earnings as a result of forecasted transactions that failed to occur during the three months ended March 31, 2020 and 2019. The Company may periodically enter into interest rate swap agreements to reduce its exposure to fluctuations in interest rates on variable interest rate debt and their impact on earnings and cash flows. Under the swap agreements, the Company receives floating interest rate payments and makes interest payments based on fixed interest rates. In accordance with authoritative guidance relating to derivatives and hedging transactions, the Company designates its interest rate swap instruments as cash flow hedges. As of March 31, 2020, there were four interest rate swap agreements outstanding with a total notional amount of $327.9 million. Previously, the Company held two interest rate cap contracts that matured in 2021 (the “2018 Caps”) which hedged the risk of GBP-LIBOR interest rate fluctuations for interest payments of Cabot Securitisation’s senior facility agreement. As part of the amended and restated senior facility agreement as described in “Note 8: Borrowings”, the Company settled the 2018 Caps and ceased the hedge relationship which resulted in the reclassification of the associated other comprehensive loss balance to interest expense for approximately $2.5 million during the three months ended March 31, 2020. As of March 31, 2020, the Company held two interest rate cap contracts with a notional amount of approximately $876.4 million that are used to manage its risk related to interest rate fluctuations on the Company’s variable interest rate bearing debt. The interest rate cap hedging the fluctuations in three-month EURIBOR for the Cabot 2024 Floating Rate Notes (“2019 Cap”) has a notional amount of €400.0 million (approximately $435.1 million) and matures in 2024. The interest rate cap hedging the fluctuations in sterling overnight index average (“SONIA”) for the Cabot Securitisation UK Ltd senior facility agreement (“2020 Cap”) has a notional amount of £350.0 million (approximately $441.3 million) and matures in 2023. The 2019 Cap is structured as a series of European call options (“Caplets”) such that if exercised, the Company will receive a payment equal to 3-months EURIBOR on a notional amount equal to the hedged notional amount net of a fixed strike price. The 2020 Cap is also structured as a series of Caplets such that if exercised, the Company will receive a payment equal to SONIA on a notional amount equal to the hedged notional amount net of a fixed strike price. Each interest rate reset date, the Company will elect to exercise the Caplet or let it expire. The potential cash flows from each Caplet are expected to offset any variability in the cash flows of the interest payments to the extent SONIA or EURIBOR exceeds the strike price of the Caplets. The Company expects the hedge relationships to be highly effective and designates the 2019 Cap and 2020 Cap as cash flow hedge instruments. The following table summarizes the effects of derivatives in cash flow hedging relationships designated as hedging instruments in the Company’s consolidated statements of operations (in thousands) : Derivatives Designated as Hedging Instruments Gain (Loss) Location of Gain (Loss) Reclassified from Gain (Loss) Reclassified from OCI into Income (Loss) Three Months Ended Three Months Ended 2020 2019 2020 2019 Foreign currency exchange contracts $ (389) $ 935 Salaries and employee benefits $ 127 $ (95) Foreign currency exchange contracts (45) (78) General and administrative expenses 17 (84) Interest rate swap agreements (6,707) (2,086) Interest expense (1,088) (420) Interest rate cap contracts (1,396) (1,572) Interest expense (2,542) — Derivatives Not Designated as Hedging Instruments The Company enters into currency exchange forward contracts to reduce the effects of currency exchange rate fluctuations between the British Pound and Euro. These derivative contracts generally mature within one The following table summarizes the effects of derivatives in cash flow hedging relationships not designated as hedging instruments in the Company’s consolidated statements of operations (in thousands) : Amount of Gain Recognized in Income (Loss) Three Months Ended Derivatives Not Designated as Hedging Instruments Location of Gain Recognized in Income (Loss) on Derivative 2020 2019 Foreign currency exchange contracts Other income (expense) $ 1,943 $ — |
Investment in Receivable Portfo
Investment in Receivable Portfolios, Net | 3 Months Ended |
Mar. 31, 2020 | |
Receivables [Abstract] | |
Investment in Receivable Portfolios, Net | Investment in Receivable Portfolios, Net As discussed in “Note 1: Ownership, Description of Business, and Summary of Significant Accounting Policies”, effective January 1, 2020, the Company accounts for its investment in receivable portfolios as PCD assets under CECL and changed its accounting policy for reimbursable court costs. As a result, the Company wrote-off the previous Deferred Court Costs balance that represented an undiscounted value of recoverable historic spend as a result of a loss-rate methodology, and established a discounted value of expected future recoveries of these reimbursable court costs, which is included in the beginning balance of the investment in receivable portfolios. The table below illustrates the Company’s transition approach for its investment in receivable portfolios as of January 1, 2020 ( in thousands ): Amount Investment in receivable portfolios prior to transition $ 3,283,984 Initial transitioned deferred court costs 44,166 3,328,150 Allowance for credit losses 79,028,043 Amortized cost 82,356,193 Noncredit discount 132,533,142 Face value 214,889,335 Write-off of amortized cost (82,356,193) Write-off of noncredit discount (132,533,142) Negative allowance 3,328,150 Initial negative allowance from transition $ 3,328,150 The table below provides the detail on the establishment of negative allowance for expected recoveries of portfolios purchased during the three months ended March 31, 2020 ( in thousands ): Three Months Ended March 31, 2020 Purchase price $ 214,113 Allowance for credit losses 521,194 Amortized cost 735,307 Noncredit discount 967,715 Face value 1,703,022 Write-off of amortized cost (735,307) Write-off of noncredit discount (967,715) Negative allowance 214,113 Negative allowance for expected recoveries - current period purchases $ 214,113 The following table summarize the changes in the balance of the investment in receivable portfolios during the periods presented ( in thousands ): Three Months Ended March 31, 2020 2019 Balance, beginning of period $ 3,328,150 $ 3,137,893 Purchases of receivable portfolios 214,113 262,335 Put-backs and Recalls (5,068) (3,700) Transfers to assets held for sale (1,531) (3,589) Cash collections (527,279) (513,853) Revenue from receivable portfolios 357,365 311,158 Changes to expected current period recoveries 10,315 — Changes to expected future period recoveries (108,976) — Portfolios allowance reversal, net — 1,367 Foreign currency adjustments (101,071) 19,976 Balance, end of period $ 3,166,018 $ 3,211,587 Revenue as a percentage of collections 67.8 % 60.6 % During the three months ended March 31, 2020, the Company reassessed its future forecasts of expected recoveries of receivable portfolios based on its best estimate of the potential impact arising from the COVID-19 pandemic. The updated forecasts changed the timing of future recoveries by reducing the forecasted cash flows in 2020. The majority of the shortfall in near-term cash flows is expected to be recovered in 2021 and most of the rest of the shortfall is expected to be recovered in subsequent periods. As a result, the change in the total amount of estimated remaining collections (“ERC”) was negligible. The delay in expected future cash flows, when discounted to present-value, resulted in a provision for credit loss adjustment of approximately $109.0 million during the three months ended March 31, 2020. The circumstances around this pandemic are evolving rapidly and will continue to impact the Company’s business and its estimation of expected recoveries in future periods. The Company will continue to monitor the COVID-19 situation closely and update its assumptions accordingly. Accretable yield represented the amount of revenue on purchased receivable portfolios the Company expects to recognize over the remaining life of its existing portfolios. The following table summarizes the change in accretable yield under the previous accounting guidance during the three months ended March 31, 2019 (in thousands) : Three Months Ended 2019 Balance as of beginning of period $ 4,026,206 Revenue from receivable portfolios (311,158) Allowance reversals on receivable portfolios, net (1,367) Additions on existing portfolios, net 38,313 Additions for current purchases 285,637 Effect of foreign currency translation 26,461 Balance as of end of period $ 4,064,092 The following table summarizes the change in the valuation allowance for investment in receivable portfolios as accounted for under the previous accounting guidance during the three months ended March 31, 2019 (in thousands) : Three Months Ended 2019 Balance as of beginning of period $ 60,631 Provision for portfolio allowances 2,626 Reversal of prior allowances (3,993) Effect of foreign currency translation 164 Balance as of end of period $ 59,428 |
Deferred Court Costs, Net
Deferred Court Costs, Net | 3 Months Ended |
Mar. 31, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Deferred Court Costs, Net | Deferred Court Costs, Net As discussed in “Note 1: Ownership, Description of Business, and Summary of Significant Accounting Policies”, effective January 1, 2020 and as part of the adoption of CECL, the Company changed its method of accounting for court costs spent in its legal collection channel. The Company now expenses all of its court costs as incurred and includes all expected recoveries, including the recoveries from the legal channel, in the measurement of the investment in receivable portfolios at a discounted value. As a result, the Company no longer carries Deferred Court Costs. Net deferred court costs under the previous accounting method consisted of the following as of the date presented (in thousands) : December 31, 2019 Court costs advanced $ 891,207 Court costs recovered (369,043) Court costs reserve (421,992) Deferred court costs, net $ 100,172 A roll-forward of the Company’s court cost reserve as accounted for under the previous accounting method is as follows (in thousands) : Three Months Ended Balance at beginning of period $ (396,460) Provision for court costs (15,713) Charge-offs 13,779 Effect of foreign currency translation (1,597) Balance at end of period $ (399,991) |
Other Assets
Other Assets | 3 Months Ended |
Mar. 31, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Assets | Other Assets Other assets consist of the following (in thousands) : March 31, December 31, Operating lease right-of-use asset $ 74,113 $ 75,254 Identifiable intangible assets, net 46,371 51,371 Assets held for sale 42,947 46,717 Deferred tax assets 26,291 24,134 Service fee receivables 22,786 27,705 Prepaid expenses 22,191 22,272 Other financial receivables 16,213 17,308 Other 51,107 64,462 Total $ 302,019 $ 329,223 |
Borrowings
Borrowings | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Borrowings | Borrowings The Company is in compliance in all material respects with all covenants under its financing arrangements as of March 31, 2020. The components of the Company’s consolidated borrowings were as follows (in thousands) : March 31, December 31, Encore revolving credit facility $ 528,000 $ 492,000 Encore term loan facility 167,855 171,677 Encore senior secured notes 292,500 308,750 Encore convertible notes and exchangeable notes 672,855 672,855 Less: debt discount (27,264) (30,308) Cabot senior secured notes 1,078,965 1,129,039 Less: debt discount (1,417) (1,604) Cabot senior revolving credit facility 241,170 285,749 Cabot securitisation senior facilities 435,099 464,092 Other 47,924 54,151 Finance lease liabilities 8,642 8,121 3,444,329 3,554,522 Less: debt issuance costs, net of amortization (39,902) (41,325) Total $ 3,404,427 $ 3,513,197 Encore Revolving Credit Facility and Term Loan Facility The Company has a revolving credit facility (the “Revolving Credit Facility”) and term loan facility (the “Term Loan Facility,” and together with the Revolving Credit Facility, the “Senior Secured Credit Facilities”) pursuant to a Third Amended and Restated Credit Agreement dated December 20, 2016 (as amended, the “Restated Credit Agreement”). The total commitment for the Revolving Credit Facility is $884.2 million that matures in December 2021. The Term Loan Facility matures in December 2021 and the principal amortizes $15.3 million in 2020 with the remaining principal due in 2021. Provisions of the Restated Credit Agreement as of March 31, 2020 include, but are not limited to: • A Revolving Credit Facility 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 cash flow leverage ratio of Encore and its restricted subsidiaries as defined in the Restated Credit Agreement; or (2) alternate base rate, plus a spread that ranges from 150 to 200 basis points, depending on the cash flow leverage ratio of Encore and its restricted subsidiaries. “Alternate base rate,” as defined in the Restated Credit Agreement, means the highest of (a) the per annum rate which the administrative agent publicly announces from time to time as its prime lending rate, (b) the federal funds effective rate from time to time, plus 0.5% per annum, (c) reserved adjusted LIBOR determined on a daily basis for a one month interest period, plus 1.0% per annum and (d) zero; • A Term Loan Facility 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 cash flow leverage ratio of Encore and its restricted subsidiaries; or (2) alternate base rate, plus a spread that ranges from 150 to 200 basis points, depending on the cash flow leverage ratio of Encore and its restricted subsidiaries; • A borrowing base under the Revolving Credit Facility equal to 35% of all eligible non-bankruptcy estimated remaining collections plus 55% of eligible estimated remaining collections for consumer receivables subject to bankruptcy; • A maximum cash flow leverage ratio permitted of 3.00:1.00; • A maximum cash flow first-lien leverage ratio of 2.00:1.00; • A minimum interest coverage ratio of 1.75:1.00; • The allowance of indebtedness in the form of senior secured notes not to exceed $350.0 million; • The allowance of additional unsecured or subordinated indebtedness not to exceed $1.1 billion, including junior lien indebtedness not to exceed $400.0 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 $150.0 million of Encore’s common stock and permitted indebtedness after July 9, 2015, subject to compliance with certain covenants and available borrowing capacity; • A pre-approved acquisition limit of $225.0 million per fiscal year; • A basket to allow for investments not to exceed the greater of (1) 200% of the consolidated net worth of Encore and its restricted subsidiaries; and (2) an unlimited amount such that after giving effect to the making of any investment, the cash flow leverage ratio is less than 1.25:1:00; • A basket to allow for investments in persons organized under the laws of Canada in the amount of $50.0 million; • Collateralization by all assets of the Company, other than the assets of certain foreign subsidiaries and all unrestricted subsidiaries as defined in the Restated Credit Agreement. As of March 31, 2020, the outstanding balance under the Revolving Credit Facility was $528.0 million, which bore a weighted average interest rate of 4.58% and 5.50% for the three months ended March 31, 2020 and 2019, respectively. Available capacity under the Revolving Credit Facility, after taking into account borrowing base and applicable debt covenants, was $356.2 million as of March 31, 2020. As of March 31, 2020, the outstanding balance under the Term Loan Facility was $167.9 million. Encore Senior Secured Notes In August 2017, Encore entered into $325.0 million in senior secured notes with a group of insurance companies (the “Senior Secured Notes”). The Senior Secured Notes bear an annual interest rate of 5.625%, mature in 2024 and beginning in November 2019, require quarterly principal payments of $16.3 million. As of March 31, 2020, $292.5 million of the Senior Secured Notes remained outstanding. The covenants and material terms in the purchase agreement for the Senior Secured Notes are substantially similar to those in the Restated Credit Agreement. Encore Convertible Notes and Exchangeable Notes The following table provides a summary of the principal balance, maturity date and interest rate for the Company’s convertible and exchangeable senior notes (the “Convertible Notes” or “Exchangeable Notes,” as applicable) ($ in thousands) : March 31, December 31, Maturity date Interest rate 2020 Convertible Notes $ 89,355 $ 89,355 Jul 1, 2020 3.000 % 2021 Convertible Notes 161,000 161,000 Mar 15, 2021 2.875 % 2022 Convertible Notes 150,000 150,000 Mar 15, 2022 3.250 % Exchangeable Notes 172,500 172,500 Sep 1, 2023 4.500 % 2025 Convertible Notes 100,000 100,000 Oct 1, 2025 3.250 % $ 672,855 $ 672,855 The Exchangeable Notes were issued by Encore Capital Europe Finance Limited (“Encore Finance”), a 100% owned finance subsidiary of Encore, and are fully and unconditionally guaranteed by Encore. Unless otherwise indicated in connection with a particular offering of debt securities, Encore will fully and unconditionally guarantee any debt securities issued by Encore Finance. Amounts related to Encore Finance are included in the consolidated financial statements of Encore subsequent to April 30, 2018, the date of the incorporation of Encore Finance. Prior to the close of business on the business day immediately preceding their respective conversion or exchange date (listed below), holders may convert or exchange their Convertible Notes or Exchangeable Notes under certain circumstances set forth in the applicable indentures. On or after their respective conversion or exchange dates until the close of business on the scheduled trading day immediately preceding their respective maturity date, holders may convert or exchange their notes at any time. Certain key terms related to the convertible and exchangeable features as of March 31, 2020 are listed below: 2020 Convertible Notes 2021 Convertible Notes 2022 Convertible Notes 2023 Exchangeable Notes 2025 Convertible Notes Initial conversion or exchange price $ 45.72 $ 59.39 $ 45.57 $ 44.62 $ 40.00 Closing stock price at date of issuance $ 33.35 $ 47.51 $ 35.05 $ 36.45 $ 32.00 Closing stock price date Jun 24, 2013 Mar 5, 2014 Feb 27, 2017 Jul 20, 2018 Sep 4, 2019 Conversion or exchange rate (shares per $1,000 principal amount) 21.8718 16.8386 21.9467 22.4090 25.0000 Conversion or exchange date Jan 1, 2020 Sep 15, 2020 Sep 15, 2021 Mar 1, 2023 Jul 1, 2025 In the event of conversion or exchange, holders of the Company’s Convertible Notes or Exchangeable Notes will receive cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. The Company’s current intent is to settle conversions and exchanges through combination settlement ( i.e., convertible or exchangeable into cash up to the aggregate principal amount, and shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election and subject to certain restrictions contained in each of the indentures governing the Convertible Notes and Exchangeable Notes, for the remainder). As a result, and in accordance with authoritative guidance related to derivatives and hedging and earnings per share, only the conversion or exchange spread is included in the diluted earnings per share calculation, if dilutive. Under such method, the settlement of the conversion or exchange spread has a dilutive effect when, during any quarter, the average share price of the Company’s common stock exceeds the initial conversion or exchange prices listed in the above table. The debt and equity components, the issuance costs related to the equity component, the stated interest rate, and the effective interest rate for each of the Convertible Notes and Exchangeable Notes at the time of the original offering are listed below (in thousands, except percentages) : 2020 Convertible Notes (1) 2021 Convertible Notes 2022 Convertible Notes 2023 Exchangeable Notes 2025 Convertible Notes Debt component $ 140,247 $ 143,645 $ 137,266 $ 157,971 $ 91,024 Equity component $ 32,253 $ 17,355 $ 12,734 $ 14,009 $ 8,976 Equity issuance cost $ 1,106 $ 581 $ 398 $ — $ 224 Stated interest rate 3.000 % 2.875 % 3.250 % 4.500 % 3.250 % Effective interest rate 6.350 % 4.700 % 5.200 % 6.500 % 5.000 % ________________________ (1) The Company used a portion of the net proceeds from the issuance of the 2025 Convertible Notes to repurchase approximately $83.1 million aggregate principal amount of its 2020 Convertible Notes. As a result, the remaining principal amount of the 2020 Convertible Notes was $89.4 million as of March 31, 2020. The balances of the liability and equity components of all the Convertible Notes and Exchangeable Notes outstanding were as follows (in thousands) : March 31, December 31, Liability component—principal amount $ 672,855 $ 672,855 Unamortized debt discount (27,264) (30,308) Liability component—net carrying amount $ 645,591 $ 642,547 Equity component $ 83,127 $ 83,127 The debt discount is being amortized into interest expense over the remaining life of the Convertible Notes and Exchangeable Notes using the effective interest rates. Interest expense related to the Convertible Notes and Exchangeable Notes was as follows (in thousands) : Three Months Ended March 31, 2020 2019 Interest expense—stated coupon rate $ 5,799 $ 5,337 Interest expense—amortization of debt discount 3,044 3,121 Interest expense—Convertible Notes and Exchangeable Notes $ 8,843 $ 8,458 Hedge Transactions In order to reduce the risk related to the potential dilution and/or the potential cash payments the Company may be required to make in the event that the market price of the Company’s common stock becomes greater than the conversion or exchange prices of the Convertible Notes and the Exchangeable Notes, the Company maintains a hedge program that increases the effective conversion or exchange price for the 2020 Convertible Notes, the 2021 Convertible Notes and the Exchangeable Notes. The Company did not hedge the 2022 Convertible Notes or the 2025 Convertible Notes. The details of the hedge program are listed below (in thousands, except conversion price) : 2020 Convertible Notes 2021 Convertible Notes 2023 Exchangeable Notes Cost of the hedge transaction(s) $ 18,113 $ 19,545 $ 17,785 Initial conversion or exchange price $ 45.72 $ 59.39 $ 44.62 Effective conversion or exchange price $ 61.55 $ 83.14 $ 62.48 Cabot Senior Secured Notes The following table provides a summary of the Cabot senior secured notes ($ in thousands) : March 31, December 31, Maturity date Interest rate Floating rate senior secured notes due 2024 $ 441,336 $ 448,921 Jun 1, 2024 EURIBOR +6.375% Senior secured notes due 2023 637,629 680,118 Oct 1, 2023 7.500 % $ 1,078,965 $ 1,129,039 Interest expense related to the Cabot senior secured notes was as follows (in thousands) : Three Months Ended March 31, 2020 2019 Interest expense—stated coupon rate $ 19,417 $ 19,394 Interest expense—amortization of debt discount 85 202 Interest expense—Cabot senior secured notes $ 19,502 $ 19,596 Cabot Senior Revolving Credit Facility Cabot Financial (UK) Limited (“Cabot Financial UK”) has an amended and restated senior secured revolving credit facility agreement (as amended and restated, the “Cabot Credit Facility”). As of March 31, 2020, the Cabot Credit Facility provided for a total committed facility of £375.0 million that expires in September 2023 and included the following key provisions: • Interest at LIBOR (or EURIBOR for any loan drawn in euro) plus 3.00% per annum; • A restrictive covenant that limits the loan to value ratio to 0.75 in the event that the Cabot Credit Facility is more than 20% utilized; • A restrictive covenant that limits the super senior loan ( i.e., the Cabot Credit Facility and any super priority hedging liabilities) to value ratio to 0.275; and • Additional restrictions and covenants which limit, among other things, the payment of dividends and the incurrence of additional indebtedness and liens. As of March 31, 2020, the outstanding borrowings under the Cabot Credit Facility were £194.0 million (approximately $241.2 million). The weighted average interest rate was 3.55% and 3.37% for the three months ended March 31, 2020 and 2019, respectively. Available capacity under the Cabot Credit Facility, after taking into account borrowing base and applicable debt covenants, was £181.0 million (approximately $225.0 million) as of March 31, 2020. Cabot Securitisation Senior Facility Cabot’s wholly owned subsidiary Cabot Securitisation UK Ltd (“Cabot Securitisation”) entered into a senior facility agreement (the “Senior Facility Agreement”) for a committed amount of £300.0 million. In November 2018, Cabot’s wholly owned subsidiary Cabot Securitisation UK II Ltd (“Cabot Securitisation II”) entered into a non-recourse asset backed senior facility of £50.0 million. On February 18, 2020, Cabot Securitisation amended and restated its Senior Facility Agreement. Pursuant to the amendment and restatement of the Senior Facility Agreement, the total commitment amount was increased by £50.0 million from £300.0 million to £350.0 million, the repayment date was extended from September 15, 2023 to March 15, 2025 and SONIA replaced LIBOR as the reference rate. Funds drawn under the amended and restated Senior Facility Agreement bear interest at a rate per annum equal to SONIA plus a margin of 3.06% plus, for periods after March 15, 2023, a step-up margin ranging from zero to 1.00%. Cabot Securitisation has drawn down the additional £50.0 million and used the proceeds to purchase receivables from Cabot Securitisation II in order to effect the termination of the £50.0 million senior facility of Cabot Securitisation II. As of March 31, 2020, the outstanding borrowings under the Cabot Securitisation Senior Facility were £350.0 million (approximately $435.1 million). The obligations of Cabot Securitisation under the Senior Facility Agreement are secured by first ranking security interests over all of Cabot Securitisation’s property, assets and rights (including receivables purchased from Cabot Financial UK from time to time), the book value of which was approximately £377.6 million (approximately $469.4 million) as of March 31, 2020. The weighted average interest rate was 3.52% and 3.76% for the three months ended March 31, 2020 and 2019 respectively. Cabot Securitisation and Cabot Securitisation II are securitized financing vehicles and are VIEs for consolidation purposes. Refer to “Note 9: Variable Interest Entities”, for further details. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company recorded income tax expense of $4.6 million on consolidated loss before income taxes of $6.0 million during the three months ended March 31, 2020 and income tax expense of $3.7 million on consolidated income before income taxes of $53.1 million during the three months ended March 31, 2019. The income tax expense for the three months ended March 31, 2020 was primarily attributable to the recording of valuation allowances in certain foreign jurisdictions that incurred pre-tax losses. The income tax expense for the three months ended March 31, 2019 included a tax benefit of approximately $9.1 million related to a tax accounting method change for revenue reporting approved by the Internal Revenue Service during the period. The effective tax rates for the respective periods are shown below: Three Months Ended March 31, 2020 2019 Federal provision 21.0 % 21.0 % State provision (15.6) % 2.5 % Foreign income taxed at different rates (1) (3.2) % (0.9) % Change in valuation allowance (2) (66.5) % 1.9 % Change in tax accounting method (3) — % (17.1) % Foreign currency remeasurement (6.4) % 0.2 % Permanent items (4) (1.7) % 0.1 % Other (3.3) % (0.8) % Effective tax rate (75.7) % 6.9 % ________________________ (1) Relates primarily to the lower tax rates on the income or loss attributable to international operations. (2) Change in valuation allowance during 2020, recognized in the period under the discrete method, is attributable to losses incurred at certain foreign subsidiaries with cumulative operating losses for tax purposes. (3) In 2019, includes tax benefit resulting from tax accounting method change. (4) Represents a provision for nondeductible expenses The Company utilized the discrete effective tax rate method (“discrete method”) for recording income taxes for the three months ended March 31, 2020. The Company believes the use of the discrete method is more appropriate than the application of the estimated annual effective tax rate (“AETR”) method due to uncertainty in estimating annual pre-tax earnings primarily due to the ongoing COVID-19 pandemic. The Company will re-evaluate the use of the discrete method each quarter until it is deemed appropriate to return to the AETR method. The Company’s subsidiary in Costa Rica is operating under a 100% tax holiday through December 31, 2026. The impact of the tax holiday in Costa Rica for the three months ended March 31, 2020 and 2019, was immaterial. The Company had gross unrecognized tax benefits, inclusive of penalties and interest, of $8.2 million as of March 31, 2020. These unrecognized tax benefits, if recognized, would result in a net tax benefit of $7.6 million as of March 31, 2020. There was no material change in gross unrecognized tax benefits from December 31, 2019. The Company has not provided for applicable income or withholding taxes on the undistributed earnings from continuing operations for certain of its subsidiaries operating outside of the United States. Undistributed net income of these subsidiaries as of March 31, 2020 was approximately $117.1 million. Such undistributed earnings are considered permanently reinvested. The Company does not provide deferred taxes on translation adjustments on unremitted earnings under the indefinite reversal exemption. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practical due to the complexities of a hypothetical calculation. Subsidiaries operating outside of the United States for which the Company does not consider under the indefinite reversal exemption have no material undistributed earnings or outside basis differences and therefore no U.S. taxes have been provided. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Litigation and Regulatory The Company is involved in disputes, legal actions, regulatory investigations, inquiries, and other actions from time to time in the ordinary course of business. The Company, along with others in its industry, is routinely subject to legal actions based on the Fair Debt Collection Practices Act (“FDCPA”), comparable state statutes, the Telephone Consumer Protection Act (“TCPA”), state and federal unfair competition statutes, and common law causes of action. The violations of law investigated or alleged in these actions often include claims that the Company lacks specified licenses to conduct its business, attempts to collect debts on which the statute of limitations has run, has made inaccurate or unsupported assertions of fact in support of its collection actions and/or has acted improperly in connection with its efforts to contact consumers. Such litigation and regulatory actions could involve potential compensatory or punitive damage claims, fines, sanctions, injunctive relief, or changes in business practices. Many continue on for some length of time and involve substantial investigation, litigation, negotiation, and other expense and effort before a result is achieved, and during the process the Company often cannot determine the substance or timing of any eventual outcome. As of March 31, 2020, there were no material developments in any of the legal proceedings disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. In certain legal proceedings, the Company may have recourse to insurance or third-party contractual indemnities to cover all or portions of its litigation expenses, judgments, or settlements. The Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. The Company continuously assesses the potential liability related to its pending litigation and regulatory matters and revises its estimates when additional information becomes available. The Company’s legal costs are recorded to expense as incurred. As of March 31, 2020, the Company has no material reserves for legal matters. Purchase Commitments |
Segment and Geographic Informat
Segment and Geographic Information | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Segment and Geographic Information | Segment and Geographic Information The Company conducts business through several operating segments that have similar economic and other qualitative characteristics and have been aggregated in accordance with authoritative guidance into one reportable segment, portfolio purchasing and recovery. Since the Company operates in one reportable segment, all required segment information can be found in the consolidated financial statements. The Company has operations in the United States, Europe and other foreign countries. The following table presents the Company’s total revenues by geographic area in which the Company operates (in thousands) : Three Months Ended March 31, 2020 2019 Total revenues (1) : United States $ 208,218 $ 189,372 International Europe (2) 75,965 135,276 Other geographies 4,898 22,429 80,863 157,705 Total $ 289,081 $ 347,077 ________________________ (1) Total revenues for periods in 2019 are adjusted by net allowances. Total revenues are attributed to countries based on consumer location. (2) Based on the financial information that is used to produce the general-purpose financial statements, providing further geographic information is impracticable. |
Goodwill and Identifiable Intan
Goodwill and Identifiable Intangible Assets | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Identifiable Intangible Assets | Goodwill and Identifiable Intangible Assets Goodwill is tested for impairment at the reporting unit level annually and in interim periods if certain events occur that indicate that the fair value of a reporting unit may be below its carrying value. Determining the number of reporting units and the fair value of a reporting unit requires the Company to make judgments and involves the use of significant estimates and assumptions. The Company performs its annual goodwill impairment testing in the fourth quarter of each year. During the 2019 impairment testing, both of the two reporting units had fair values substantially in excess of their carrying values. In addition to the annual impairment test, the Company is required to assess whether a triggering event has occurred which would require interim impairment testing. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on each of the reporting units. Further, the Company assessed the current market capitalization, forecasts and the amount of headroom in the 2019 impairment test. The Company determined that it was not more likely than not that the fair value of each of the reporting units was less than its respective carrying value as of March 31, 2020. Therefore, an interim quantitative impairment test was not performed. Management continues to evaluate and monitor all key factors impacting the carrying value of the Company’s recorded goodwill and long-lived assets. Adverse changes in the Company’s actual or expected operating results, market capitalization, business climate, economic factors or other negative events that may be outside the control of management could result in a material non-cash impairment charge in the future. The Company’s goodwill is attributable to reporting units included in its portfolio purchasing and recovery segment. The following table summarizes the activity in the Company’s goodwill balance (in thousands): Three Months Ended March 31, 2020 2019 Balance, beginning of period $ 884,185 $ 868,126 Effect of foreign currency translation (44,884) 14,758 Balance, end of period $ 839,301 $ 882,884 The Company’s acquired intangible assets are summarized as follows (in thousands) : As of March 31, 2020 As of December 31, 2019 Gross Accumulated Net Gross Accumulated Net Customer relationships $ 60,718 $ (15,565) $ 45,153 $ 67,897 $ (18,191) $ 49,706 Developed technologies 4,257 (3,744) 513 4,734 (4,124) 610 Trade name and other 5,248 (4,543) 705 6,299 (5,244) 1,055 Total intangible assets $ 70,223 $ (23,852) $ 46,371 $ 78,930 $ (27,559) $ 51,371 |
Ownership, Description of Bus_2
Ownership, Description of Business, and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying interim consolidated financial statements have been prepared by the Company, without audit, in accordance with the instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of its consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s consolidated financial statements. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. |
Use of Estimates | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s financial statements and the accompanying notes. The inputs into the judgments and estimates consider the economic implications of COVID-19 on the Company’s critical and significant accounting estimates. Actual results could materially differ from those estimates. |
Basis of Consolidation | The consolidated financial statements have been prepared in conformity with GAAP and reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. The Company also consolidates variable interest entities for which it is the primary beneficiary. The primary beneficiary has both (1) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance, and (2) either the obligation to absorb losses or the right to receive benefits. Refer to “Note 9: Variable Interest Entities”, for further details. All intercompany transactions and balances have been eliminated in consolidation. |
Translation of Foreign Currencies | The financial statements of certain of the Company’s foreign subsidiaries are measured using their local currency as the functional currency. Assets and liabilities of foreign operations are translated into U.S. dollars using period-end exchange rates, and revenues and expenses are translated into U.S. dollars using average exchange rates in effect during each period. The resulting translation adjustments are recorded as a component of other comprehensive income or loss. Equity accounts are translated at historical rates, except for the change in retained earnings during the year which is the result of the income statement translation process. Intercompany transaction gains or losses at each period end arising from subsequent measurement of balances for which settlement is not planned or anticipated in the foreseeable future are included as translation adjustments and recorded within other comprehensive income or loss. Translation gains or losses are the material components of accumulated other comprehensive income or loss and are reclassified to earnings upon the substantial sale or liquidation of investments in foreign operations. |
Reclassifications | Certain immaterial reclassifications have been made to the consolidated financial statements to conform to the current year’s presentation. |
Recently Adopted Accounting Pronouncement and Recent Accounting Pronouncements Not Yet Effective | Recently Adopted Accounting Pronouncement On January 1, 2020, the Company adopted the new accounting standard for Financial Instruments - Credit Losses (“CECL”). CECL introduces a new impairment approach for credit loss recognition based on current expected lifetime losses rather than incurred losses. CECL applies to all financial assets carried at amortized costs, including the Company’s investment in receivable portfolios, which are defined as purchased credit deteriorated (“PCD”) financial assets under CECL. The adoption of CECL represents a significant change from the previous U.S. GAAP guidance relating to purchased credit impaired assets and resulted in changes to the Company’s accounting for its investment in receivable portfolios and the related income from the receivable portfolios. As part of the adoption of CECL, the Company changed its accounting methodology for its court costs spent in its legal collection channel effective January 1, 2020. Previously, the Company capitalized its upfront court costs spent in its consolidated financial statements (“Deferred Court Costs”) and provided a reserve for those costs that it believed would ultimately be uncollectible. Effective January 1, 2020, the Company expenses all of its court costs as incurred. All expected cash flows, including all the expected collections from the legal channel, are included in the measurement of the negative allowance, or investment in receivable portfolios, at a discounted value. Upon transition, an adjustment was made to retained earnings to reflect the net change from an undiscounted to discounted value prior to writing-off uncollectible receivables and establishing a balance for discounted value of future recoveries of amounts expected to be collected. The Company has not adjusted prior period comparative information and will continue to disclose prior period financial information in accordance with the previous accounting guidance. The following table summarizes the cumulative effects of adopting the CECL guidance on the Company’s consolidated statements of financial condition at January 1, 2020 ( in thousands ): Balance as of December 31, 2019 Adjustment Opening Balance as of January 1, 2020 Assets Investment in receivable portfolios, net $ 3,283,984 $ 44,166 $ 3,328,150 Deferred court costs, net 100,172 (100,172) — Liabilities Other liabilities (for deferred tax liabilities) 147,436 (11,768) 135,668 Equity Accumulated earnings 888,058 (44,238) 843,820 Recent Accounting Pronouncements Not Yet Effective In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). The ASU provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU is effective as of March 12, 2020 through December 31, 2022. We will evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional |
Investment in Receivable Portfolios, Net | Investment in Receivable Portfolios The Company purchases portfolios of loans that have experienced significant deterioration of credit quality since origination from banks and other financial institutions. These financial assets are defined as PCD assets under CECL. Under the PCD accounting model, the purchased assets are grossed-up to their face value with an offsetting allowance and noncredit discount allocated to the individual receivables as the unit of account is at the individual loan level. Since each loan is deeply delinquent and deemed uncollectible at the individual loan level, the Company applies its charge-off policy and fully writes-off the amortized costs ( i.e. , face value net of noncredit discount) of the individual receivables immediately after purchasing the portfolio. The Company then records a negative allowance that represents the present value of all expected future recoveries for pools of receivables that share similar risk characteristics using a discounted cash flow approach, which ultimately equals the amount paid for a portfolio purchase and presented as “Investment in receivable portfolios, net” in the Company’s consolidated statements of financial condition. The discount rate is an effective interest rate (or “purchase EIR”) based on the purchase price of the portfolio and the expected future cash flows at the time of purchase. The amount of the negative allowance ( i.e., investment in receivable portfolios) will not exceed the total amortized cost basis of the loans written-off. Receivable portfolio purchases are aggregated into pools based on similar risk characteristics. Examples of risk characteristics include financial asset type, collateral type, size, interest rate, date of origination, term, and geographic location. The Company’s static pools are typically grouped into credit card, purchased consumer bankruptcy, and mortgage portfolios. The Company further groups these static pools by geographic location. Once a pool is established, the portfolios will remain in the designated pool unless the underlying risk characteristics change. The purchase EIR of a pool will not change over the life of the pool even if expected future cash flows change. Revenue is recognized for each static pool over the economic life of the pool. The Company continues to evaluate the reasonable economic life of a pool in each reporting period. Revenue primarily includes two components: (1) accretion of the discount on the negative allowance due to the passage of time, and (2) changes in expected cash flows, which includes (a) the current period variances between actual cash collected and expected cash recoveries and (b) the present value change of expected future recoveries. |
Deferred Court Costs | Deferred Court Costs The Company pursues legal collections using a network of attorneys that specialize in collection matters and through its internal legal channel. The Company generally pursues collections through legal means only when it believes a consumer has sufficient assets to repay their indebtedness but has, to date, been unwilling to pay. In order to pursue legal collections, the Company is required to pay certain upfront costs to the applicable courts that are recoverable from the consumer. Effective January 1, 2020, the Company expenses all of its court costs as incurred and no longer capitalizes such costs as Deferred Court Costs. All expected cash flows, including all the expected collections from the legal channel, are included in the measurement of the negative allowance, or investment in receivable portfolios, at a discounted value. |
Earnings Per Share | Basic (loss) earnings per share is calculated by dividing net earnings attributable to Encore by the weighted average number of shares of common stock outstanding during the period. Diluted (loss) earnings per share is calculated based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options, restricted stock, and the dilutive effect of the convertible and exchangeable senior notes, if applicable. In computing the diluted net loss per share for the three months ended March 31, 2020, dilutive potential common shares are excluded from the diluted loss per share calculation because of their anti-dilutive effect. |
Fair Value Measurements | Fair value is defined as the price that would be received upon sale of an asset or the price paid to transfer a liability, in an orderly transaction between market participants at the measurement date ( i.e., the “exit price”). The Company uses a fair value hierarchy that prioritizes the inputs used in valuation techniques to measure fair value into three broad levels. The following is a brief description of each level: • 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. |
Derivatives | The Company may periodically enter into derivative financial instruments to manage risks related to interest rates and foreign currency. Certain of the Company’s derivative financial instruments qualify for hedge accounting treatment under the authoritative guidance for derivatives and hedging.The Company has operations in foreign countries which expose the Company to foreign currency exchange rate fluctuations due to transactions denominated in foreign currencies. To mitigate a portion of this risk, the Company enters into derivative financial instruments, principally foreign currency forward contracts with financial counterparties. The Company adjusts the level and use of derivatives as soon as practicable after learning that an exposure has changed and reviews all exposures and derivative positions on an ongoing basis.Certain of the Company’s foreign currency forward contracts are designated as cash flow hedging instruments and qualify for hedge accounting treatment. Gains and losses arising from such contracts are recorded as a component of accumulated other comprehensive income (“OCI”) as gains and losses on derivative instruments, net of income taxes. The hedging gains and losses in OCI are subsequently reclassified into earnings in the same period in which the underlying transactions affect the Company’s earnings. If all or a portion of the forecasted transaction is cancelled, the accumulated gains or losses in OCI would be reclassified into earnings. |
Variable Interest Entities | A VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb expected losses, or the right to receive expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and the obligation to absorb expected losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The Company consolidates VIEs when it is the primary beneficiary. The Company evaluates its relationships with its VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary. A reconsideration event is significant if it changes the design of the entity or the entity’s equity investment at risk. Prior to the purchase of all of the outstanding equity of CCM not owned by the Company, CCM’s indirect holding Company Janus Holdings S.a r.l. (“Janus Holdings”) was a VIE. Upon completion of the Cabot Transaction on July 24, 2018 and the subsequent change in organizational structure, Janus Holdings no longer qualified as a VIE and CCM is consolidated via the voting interest model. As of March 31, 2020, the Company’s VIEs include certain securitized financing vehicles and other immaterial special purpose entities that were created to purchase receivable portfolios in certain geographies. The Company is the primary beneficiary of these VIEs. The Company has the power to direct the activities of the VIEs which includes but is not limited to the ability to exercise discretion in the servicing of the financial assets. Most assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the VIE. |
Segment Reporting | The Company conducts business through several operating segments that have similar economic and other qualitative characteristics and have been aggregated in accordance with authoritative guidance into one reportable segment, portfolio purchasing and recovery. Since the Company operates in one reportable segment, all required segment information can be found in the consolidated financial statements. |
Goodwill | Goodwill is tested for impairment at the reporting unit level annually and in interim periods if certain events occur that indicate that the fair value of a reporting unit may be below its carrying value. Determining the number of reporting units and the fair value of a reporting unit requires the Company to make judgments and involves the use of significant estimates and assumptions.Management continues to evaluate and monitor all key factors impacting the carrying value of the Company’s recorded goodwill and long-lived assets. Adverse changes in the Company’s actual or expected operating results, market capitalization, business climate, economic factors or other negative events that may be outside the control of management could result in a material non-cash impairment charge in the future. |
Ownership, Description of Bus_3
Ownership, Description of Business, and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The following table summarizes the cumulative effects of adopting the CECL guidance on the Company’s consolidated statements of financial condition at January 1, 2020 ( in thousands ): Balance as of December 31, 2019 Adjustment Opening Balance as of January 1, 2020 Assets Investment in receivable portfolios, net $ 3,283,984 $ 44,166 $ 3,328,150 Deferred court costs, net 100,172 (100,172) — Liabilities Other liabilities (for deferred tax liabilities) 147,436 (11,768) 135,668 Equity Accumulated earnings 888,058 (44,238) 843,820 |
(Loss) Earnings Per Share (Tabl
(Loss) Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Reconciliation of Shares Used in Calculating Earnings Per Basic and Diluted Shares | A reconciliation of shares used in calculating (loss) earnings per basic and diluted shares follows (in thousands, except per share amounts) : Three Months Ended March 31, 2020 2019 Net (loss) income attributable to Encore Capital Group, Inc. stockholders $ (10,454) $ 49,254 Total weighted-average basic shares outstanding 31,308 31,201 Dilutive effect of stock-based awards — 158 Total weighted-average dilutive shares outstanding 31,308 31,359 Basic (loss) earnings per share $ (0.33) $ 1.58 Diluted (loss) earnings per share $ (0.33) $ 1.57 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Schedule of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis | Financial assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands) : Fair Value Measurements as of March 31, 2020 Level 1 Level 2 Level 3 Total Assets Interest rate cap contracts $ — $ 2,150 $ — $ 2,150 Liabilities Foreign currency exchange contracts — (2,177) — (2,177) Interest rate swap agreements — (14,735) — (14,735) Contingent consideration — — (27) (27) Fair Value Measurements as of December 31, 2019 Level 1 Level 2 Level 3 Total Assets Foreign currency exchange contracts $ — $ 1,473 $ — $ 1,473 Interest rate cap contracts — 2,460 — 2,460 Liabilities Interest rate swap agreements — (9,116) — (9,116) Contingent consideration — — (66) (66) |
Schedule of Roll Forward of the Fair Value of Contingent Consideration | The following table provides a roll-forward of the fair value of contingent consideration for the three months ended March 31, 2020 and year ended December 31, 2019 (in thousands) : Amount Balance as of December 31, 2018 $ 6,198 Change in fair value of contingent consideration (2,300) Payment of contingent consideration (3,686) Effect of foreign currency translation (146) Balance as of December 31, 2019 66 Payment of contingent consideration (35) Effect of foreign currency translation (4) Balance as of March 31, 2020 $ 27 |
Schedule of Financial Instruments Not Required to be Carried at Fair Value | The carrying amounts in the following table are included in the consolidated statements of financial condition as of March 31, 2020 and December 31, 2019 (in thousands) : March 31, 2020 December 31, 2019 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Financial Assets Investment in receivable portfolios, net $ 3,166,018 $ 3,547,965 $ 3,283,984 $ 3,464,050 Deferred court costs — — 100,172 100,172 Financial Liabilities Encore convertible notes and exchangeable notes (1) 645,591 567,691 642,547 693,708 Cabot senior secured notes (2) 1,077,548 996,060 1,127,435 1,170,945 _______________________ (1) Carrying amount represents the portion of the convertible and exchangeable notes classified as debt, while estimated fair value pertains to the face amount of the notes. (2) Carrying amount represents historical cost, adjusted for any related debt discount or debt premium. |
Derivatives and Hedging Instr_2
Derivatives and Hedging Instruments (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Fair Value of Derivative Instruments | The following table summarizes the fair value of derivative instruments as included in the Company’s consolidated statements of financial condition (in thousands) : March 31, 2020 December 31, 2019 Balance Sheet Fair Value Balance Sheet Fair Value Derivatives designated as hedging instruments: Interest rate cap contracts Other assets $ 2,150 Other assets $ 2,460 Foreign currency exchange contracts Other liabilities (134) Other assets 443 Interest rate swap agreements Other liabilities (14,735) Other liabilities (9,116) Derivatives not designated as hedging instruments: Foreign currency exchange contracts Other liabilities (2,043) Other assets 1,030 |
Effects of Derivatives in Cash Flow Hedging Relationships | The following table summarizes the effects of derivatives in cash flow hedging relationships designated as hedging instruments in the Company’s consolidated statements of operations (in thousands) : Derivatives Designated as Hedging Instruments Gain (Loss) Location of Gain (Loss) Reclassified from Gain (Loss) Reclassified from OCI into Income (Loss) Three Months Ended Three Months Ended 2020 2019 2020 2019 Foreign currency exchange contracts $ (389) $ 935 Salaries and employee benefits $ 127 $ (95) Foreign currency exchange contracts (45) (78) General and administrative expenses 17 (84) Interest rate swap agreements (6,707) (2,086) Interest expense (1,088) (420) Interest rate cap contracts (1,396) (1,572) Interest expense (2,542) — The following table summarizes the effects of derivatives in cash flow hedging relationships not designated as hedging instruments in the Company’s consolidated statements of operations (in thousands) : Amount of Gain Recognized in Income (Loss) Three Months Ended Derivatives Not Designated as Hedging Instruments Location of Gain Recognized in Income (Loss) on Derivative 2020 2019 Foreign currency exchange contracts Other income (expense) $ 1,943 $ — |
Investment in Receivable Port_2
Investment in Receivable Portfolios, Net (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Receivables [Abstract] | |
Receivable Portfolios | The table below illustrates the Company’s transition approach for its investment in receivable portfolios as of January 1, 2020 ( in thousands ): Amount Investment in receivable portfolios prior to transition $ 3,283,984 Initial transitioned deferred court costs 44,166 3,328,150 Allowance for credit losses 79,028,043 Amortized cost 82,356,193 Noncredit discount 132,533,142 Face value 214,889,335 Write-off of amortized cost (82,356,193) Write-off of noncredit discount (132,533,142) Negative allowance 3,328,150 Initial negative allowance from transition $ 3,328,150 The table below provides the detail on the establishment of negative allowance for expected recoveries of portfolios purchased during the three months ended March 31, 2020 ( in thousands ): Three Months Ended March 31, 2020 Purchase price $ 214,113 Allowance for credit losses 521,194 Amortized cost 735,307 Noncredit discount 967,715 Face value 1,703,022 Write-off of amortized cost (735,307) Write-off of noncredit discount (967,715) Negative allowance 214,113 Negative allowance for expected recoveries - current period purchases $ 214,113 |
Schedule of Investment in Receivable Portfolios | The following table summarize the changes in the balance of the investment in receivable portfolios during the periods presented ( in thousands ): Three Months Ended March 31, 2020 2019 Balance, beginning of period $ 3,328,150 $ 3,137,893 Purchases of receivable portfolios 214,113 262,335 Put-backs and Recalls (5,068) (3,700) Transfers to assets held for sale (1,531) (3,589) Cash collections (527,279) (513,853) Revenue from receivable portfolios 357,365 311,158 Changes to expected current period recoveries 10,315 — Changes to expected future period recoveries (108,976) — Portfolios allowance reversal, net — 1,367 Foreign currency adjustments (101,071) 19,976 Balance, end of period $ 3,166,018 $ 3,211,587 Revenue as a percentage of collections 67.8 % 60.6 % |
Schedule of Accretable Yield and an Estimate of Zero Basis Future Cash Flows | The following table summarizes the change in accretable yield under the previous accounting guidance during the three months ended March 31, 2019 (in thousands) : Three Months Ended 2019 Balance as of beginning of period $ 4,026,206 Revenue from receivable portfolios (311,158) Allowance reversals on receivable portfolios, net (1,367) Additions on existing portfolios, net 38,313 Additions for current purchases 285,637 Effect of foreign currency translation 26,461 Balance as of end of period $ 4,064,092 |
Schedule of Valuation Allowance for Investment in Receivable Portfolios | The following table summarizes the change in the valuation allowance for investment in receivable portfolios as accounted for under the previous accounting guidance during the three months ended March 31, 2019 (in thousands) : Three Months Ended 2019 Balance as of beginning of period $ 60,631 Provision for portfolio allowances 2,626 Reversal of prior allowances (3,993) Effect of foreign currency translation 164 Balance as of end of period $ 59,428 |
Deferred Court Costs, Net (Tabl
Deferred Court Costs, Net (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Deferred Court Costs | Net deferred court costs under the previous accounting method consisted of the following as of the date presented (in thousands) : December 31, 2019 Court costs advanced $ 891,207 Court costs recovered (369,043) Court costs reserve (421,992) Deferred court costs, net $ 100,172 |
Schedule of Court Cost Reserve | A roll-forward of the Company’s court cost reserve as accounted for under the previous accounting method is as follows (in thousands) : Three Months Ended Balance at beginning of period $ (396,460) Provision for court costs (15,713) Charge-offs 13,779 Effect of foreign currency translation (1,597) Balance at end of period $ (399,991) |
Other Assets (Tables)
Other Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Components of Other Assets | Other assets consist of the following (in thousands) : March 31, December 31, Operating lease right-of-use asset $ 74,113 $ 75,254 Identifiable intangible assets, net 46,371 51,371 Assets held for sale 42,947 46,717 Deferred tax assets 26,291 24,134 Service fee receivables 22,786 27,705 Prepaid expenses 22,191 22,272 Other financial receivables 16,213 17,308 Other 51,107 64,462 Total $ 302,019 $ 329,223 |
Borrowings (Tables)
Borrowings (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Consolidated Debt and Capital Lease Obligations | The components of the Company’s consolidated borrowings were as follows (in thousands) : March 31, December 31, Encore revolving credit facility $ 528,000 $ 492,000 Encore term loan facility 167,855 171,677 Encore senior secured notes 292,500 308,750 Encore convertible notes and exchangeable notes 672,855 672,855 Less: debt discount (27,264) (30,308) Cabot senior secured notes 1,078,965 1,129,039 Less: debt discount (1,417) (1,604) Cabot senior revolving credit facility 241,170 285,749 Cabot securitisation senior facilities 435,099 464,092 Other 47,924 54,151 Finance lease liabilities 8,642 8,121 3,444,329 3,554,522 Less: debt issuance costs, net of amortization (39,902) (41,325) Total $ 3,404,427 $ 3,513,197 |
Schedule of Notes | The following table provides a summary of the principal balance, maturity date and interest rate for the Company’s convertible and exchangeable senior notes (the “Convertible Notes” or “Exchangeable Notes,” as applicable) ($ in thousands) : March 31, December 31, Maturity date Interest rate 2020 Convertible Notes $ 89,355 $ 89,355 Jul 1, 2020 3.000 % 2021 Convertible Notes 161,000 161,000 Mar 15, 2021 2.875 % 2022 Convertible Notes 150,000 150,000 Mar 15, 2022 3.250 % Exchangeable Notes 172,500 172,500 Sep 1, 2023 4.500 % 2025 Convertible Notes 100,000 100,000 Oct 1, 2025 3.250 % $ 672,855 $ 672,855 The following table provides a summary of the Cabot senior secured notes ($ in thousands) : March 31, December 31, Maturity date Interest rate Floating rate senior secured notes due 2024 $ 441,336 $ 448,921 Jun 1, 2024 EURIBOR +6.375% Senior secured notes due 2023 637,629 680,118 Oct 1, 2023 7.500 % $ 1,078,965 $ 1,129,039 |
Schedule of Hedge Program for Convertible Notes | Certain key terms related to the convertible and exchangeable features as of March 31, 2020 are listed below: 2020 Convertible Notes 2021 Convertible Notes 2022 Convertible Notes 2023 Exchangeable Notes 2025 Convertible Notes Initial conversion or exchange price $ 45.72 $ 59.39 $ 45.57 $ 44.62 $ 40.00 Closing stock price at date of issuance $ 33.35 $ 47.51 $ 35.05 $ 36.45 $ 32.00 Closing stock price date Jun 24, 2013 Mar 5, 2014 Feb 27, 2017 Jul 20, 2018 Sep 4, 2019 Conversion or exchange rate (shares per $1,000 principal amount) 21.8718 16.8386 21.9467 22.4090 25.0000 Conversion or exchange date Jan 1, 2020 Sep 15, 2020 Sep 15, 2021 Mar 1, 2023 Jul 1, 2025 The details of the hedge program are listed below (in thousands, except conversion price) : 2020 Convertible Notes 2021 Convertible Notes 2023 Exchangeable Notes Cost of the hedge transaction(s) $ 18,113 $ 19,545 $ 17,785 Initial conversion or exchange price $ 45.72 $ 59.39 $ 44.62 Effective conversion or exchange price $ 61.55 $ 83.14 $ 62.48 |
Schedule of Balances of the Liability and Equity Components | The debt and equity components, the issuance costs related to the equity component, the stated interest rate, and the effective interest rate for each of the Convertible Notes and Exchangeable Notes at the time of the original offering are listed below (in thousands, except percentages) : 2020 Convertible Notes (1) 2021 Convertible Notes 2022 Convertible Notes 2023 Exchangeable Notes 2025 Convertible Notes Debt component $ 140,247 $ 143,645 $ 137,266 $ 157,971 $ 91,024 Equity component $ 32,253 $ 17,355 $ 12,734 $ 14,009 $ 8,976 Equity issuance cost $ 1,106 $ 581 $ 398 $ — $ 224 Stated interest rate 3.000 % 2.875 % 3.250 % 4.500 % 3.250 % Effective interest rate 6.350 % 4.700 % 5.200 % 6.500 % 5.000 % ________________________ (1) The Company used a portion of the net proceeds from the issuance of the 2025 Convertible Notes to repurchase approximately $83.1 million aggregate principal amount of its 2020 Convertible Notes. As a result, the remaining principal amount of the 2020 Convertible Notes was $89.4 million as of March 31, 2020. The balances of the liability and equity components of all the Convertible Notes and Exchangeable Notes outstanding were as follows (in thousands) : March 31, December 31, Liability component—principal amount $ 672,855 $ 672,855 Unamortized debt discount (27,264) (30,308) Liability component—net carrying amount $ 645,591 $ 642,547 Equity component $ 83,127 $ 83,127 |
Schedule of Interest Expense | Interest expense related to the Convertible Notes and Exchangeable Notes was as follows (in thousands) : Three Months Ended March 31, 2020 2019 Interest expense—stated coupon rate $ 5,799 $ 5,337 Interest expense—amortization of debt discount 3,044 3,121 Interest expense—Convertible Notes and Exchangeable Notes $ 8,843 $ 8,458 Interest expense related to the Cabot senior secured notes was as follows (in thousands) : Three Months Ended March 31, 2020 2019 Interest expense—stated coupon rate $ 19,417 $ 19,394 Interest expense—amortization of debt discount 85 202 Interest expense—Cabot senior secured notes $ 19,502 $ 19,596 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Effective Tax Rates | The effective tax rates for the respective periods are shown below: Three Months Ended March 31, 2020 2019 Federal provision 21.0 % 21.0 % State provision (15.6) % 2.5 % Foreign income taxed at different rates (1) (3.2) % (0.9) % Change in valuation allowance (2) (66.5) % 1.9 % Change in tax accounting method (3) — % (17.1) % Foreign currency remeasurement (6.4) % 0.2 % Permanent items (4) (1.7) % 0.1 % Other (3.3) % (0.8) % Effective tax rate (75.7) % 6.9 % ________________________ (1) Relates primarily to the lower tax rates on the income or loss attributable to international operations. (2) Change in valuation allowance during 2020, recognized in the period under the discrete method, is attributable to losses incurred at certain foreign subsidiaries with cumulative operating losses for tax purposes. (3) In 2019, includes tax benefit resulting from tax accounting method change. (4) Represents a provision for nondeductible expenses |
Segment and Geographic Inform_2
Segment and Geographic Information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Schedule of Geographical Areas of Operations | The Company has operations in the United States, Europe and other foreign countries. The following table presents the Company’s total revenues by geographic area in which the Company operates (in thousands) : Three Months Ended March 31, 2020 2019 Total revenues (1) : United States $ 208,218 $ 189,372 International Europe (2) 75,965 135,276 Other geographies 4,898 22,429 80,863 157,705 Total $ 289,081 $ 347,077 ________________________ (1) Total revenues for periods in 2019 are adjusted by net allowances. Total revenues are attributed to countries based on consumer location. (2) Based on the financial information that is used to produce the general-purpose financial statements, providing further geographic information is impracticable. |
Goodwill and Identifiable Int_2
Goodwill and Identifiable Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Activity in the Goodwill Balance | The Company’s goodwill is attributable to reporting units included in its portfolio purchasing and recovery segment. The following table summarizes the activity in the Company’s goodwill balance (in thousands): Three Months Ended March 31, 2020 2019 Balance, beginning of period $ 884,185 $ 868,126 Effect of foreign currency translation (44,884) 14,758 Balance, end of period $ 839,301 $ 882,884 |
Schedule of Acquired Intangible Assets | The Company’s acquired intangible assets are summarized as follows (in thousands) : As of March 31, 2020 As of December 31, 2019 Gross Accumulated Net Gross Accumulated Net Customer relationships $ 60,718 $ (15,565) $ 45,153 $ 67,897 $ (18,191) $ 49,706 Developed technologies 4,257 (3,744) 513 4,734 (4,124) 610 Trade name and other 5,248 (4,543) 705 6,299 (5,244) 1,055 Total intangible assets $ 70,223 $ (23,852) $ 46,371 $ 78,930 $ (27,559) $ 51,371 |
Ownership, Description of Bus_4
Ownership, Description of Business, and Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Jan. 01, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Investment in receivable portfolios, carrying value | $ 3,166,018 | $ 3,328,150 | $ 3,283,984 | $ 3,211,587 | $ 3,137,893 |
Deferred court costs, net | 0 | 100,172 | |||
Other liabilities | 136,235 | 147,436 | |||
Accumulated earnings | $ 833,366 | 888,058 | |||
Cumulative Effect, Period Of Adoption, Adjusted Balance | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Investment in receivable portfolios, carrying value | 3,328,150 | $ 3,328,150 | |||
Deferred court costs, net | 0 | ||||
Other liabilities | 135,668 | ||||
Accumulated earnings | 843,820 | ||||
Accounting Standards Update 2016-13 | Cumulative Effect, Period Of Adoption, Adjustment | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Investment in receivable portfolios, carrying value | 44,166 | ||||
Deferred court costs, net | (100,172) | ||||
Other liabilities | (11,768) | ||||
Accumulated earnings | $ (44,238) |
(Loss) Earnings Per Share - Sum
(Loss) Earnings Per Share - Summary (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Earnings Per Share [Abstract] | ||
Net (loss) income attributable to Encore Capital Group, Inc. stockholders | $ (10,454) | $ 49,254 |
Total weighted-average basic shares outstanding (shares) | 31,308 | 31,201 |
Dilutive effect of stock-based awards (shares) | 0 | 158 |
Total weighted-average dilutive shares outstanding (shares) | 31,308 | 31,359 |
Basic (loss) earnings per share (USD per share) | $ (0.33) | $ 1.58 |
Diluted (loss) earnings per share (USD per share) | $ (0.33) | $ 1.57 |
Antidilutive securities excluded from computation of earnings per share (shares) | 13 | 217 |
Fair Value Measurements - Finan
Fair Value Measurements - Financial Instruments Required to be Carried at Fair Value (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Liabilities | ||
Contingent consideration | $ (27) | $ (66) |
Interest rate cap contracts | ||
Assets | ||
Interest rate derivatives | 2,150 | 2,460 |
Foreign currency exchange contracts | ||
Assets | ||
Interest rate derivatives | 1,473 | |
Liabilities | ||
Foreign currency exchange contracts | (2,177) | |
Interest rate swap agreements | ||
Liabilities | ||
Interest rate swap agreements | (14,735) | (9,116) |
Level 1 | ||
Liabilities | ||
Contingent consideration | 0 | 0 |
Level 1 | Interest rate cap contracts | ||
Assets | ||
Interest rate derivatives | 0 | 0 |
Level 1 | Foreign currency exchange contracts | ||
Assets | ||
Interest rate derivatives | 0 | |
Liabilities | ||
Foreign currency exchange contracts | 0 | |
Level 1 | Interest rate swap agreements | ||
Liabilities | ||
Interest rate swap agreements | 0 | 0 |
Level 2 | ||
Liabilities | ||
Contingent consideration | 0 | 0 |
Level 2 | Interest rate cap contracts | ||
Assets | ||
Interest rate derivatives | 2,150 | 2,460 |
Level 2 | Foreign currency exchange contracts | ||
Assets | ||
Interest rate derivatives | 1,473 | |
Liabilities | ||
Foreign currency exchange contracts | (2,177) | |
Level 2 | Interest rate swap agreements | ||
Liabilities | ||
Interest rate swap agreements | (14,735) | (9,116) |
Level 3 | ||
Liabilities | ||
Contingent consideration | (27) | (66) |
Level 3 | Interest rate cap contracts | ||
Assets | ||
Interest rate derivatives | 0 | 0 |
Level 3 | Foreign currency exchange contracts | ||
Assets | ||
Interest rate derivatives | 0 | |
Liabilities | ||
Foreign currency exchange contracts | 0 | |
Level 3 | Interest rate swap agreements | ||
Liabilities | ||
Interest rate swap agreements | $ 0 | $ 0 |
Fair Value Measurements - Conti
Fair Value Measurements - Contingent Consideration Roll Forward (Details) - Contingent Consideration - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance at beginning of period | $ 66 | $ 6,198 |
Change in fair value of contingent consideration | (2,300) | |
Payment of contingent consideration | (35) | (3,686) |
Effect of foreign currency translation | (4) | (146) |
Balance at end of period | $ 27 | $ 66 |
Fair Value Measurements - Narra
Fair Value Measurements - Narrative (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair Value Disclosures [Abstract] | ||
Assets held for sale | $ 42,947 | $ 46,717 |
Fair Value Measurements - Fin_2
Fair Value Measurements - Financial Instruments Not Required to be Carried at Fair Value (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Jan. 01, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
Financial Assets | |||||
Investment in receivable portfolios, carrying value | $ 3,166,018 | $ 3,328,150 | $ 3,283,984 | $ 3,211,587 | $ 3,137,893 |
Deferred court costs, net | 0 | 100,172 | |||
Financial Liabilities | |||||
Convertible senior notes, carrying value | 672,855 | 672,855 | |||
Senior secured notes, carrying value | 292,500 | 308,750 | |||
Senior Notes | |||||
Financial Liabilities | |||||
Convertible senior notes, carrying value | 645,591 | 642,547 | |||
Secured Debt | |||||
Financial Liabilities | |||||
Senior secured notes, carrying value | 1,078,965 | 1,129,039 | |||
Cabot Senior Secured Notes | Senior Notes | |||||
Financial Liabilities | |||||
Senior secured notes, carrying value | 1,078,965 | 1,129,039 | |||
Cabot Senior Secured Notes | Secured Debt | |||||
Financial Liabilities | |||||
Senior secured notes, carrying value | 1,077,548 | 1,127,435 | |||
Fair Value | |||||
Financial Assets | |||||
Deferred court costs, net | 0 | 100,172 | |||
Fair Value | Senior Notes | |||||
Financial Liabilities | |||||
Convertible senior notes, fair value | 567,691 | 693,708 | |||
Fair Value | Cabot Senior Secured Notes | Secured Debt | |||||
Financial Liabilities | |||||
Senior secured notes, fair value | 996,060 | 1,170,945 | |||
Fair Value | Certain Loans Acquired in Transfer Not Accounted for as Debt Securities | |||||
Financial Assets | |||||
Investment in receivable portfolios, fair value | $ 3,547,965 | $ 3,464,050 |
Derivatives and Hedging Instr_3
Derivatives and Hedging Instruments - Fair Value of Derivative Instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Interest rate cap contracts | ||
Derivative [Line Items] | ||
Interest rate derivative - assets | $ 2,150 | $ 2,460 |
Foreign currency exchange contracts | ||
Derivative [Line Items] | ||
Interest rate derivative - assets | 1,473 | |
Foreign currency exchange contracts - liabilities | (2,177) | |
Interest rate swap agreements | ||
Derivative [Line Items] | ||
Interest rate swap agreements - liabilities | (14,735) | (9,116) |
Derivatives Designated as Hedging Instruments | Interest rate cap contracts | Other assets | ||
Derivative [Line Items] | ||
Interest rate derivative - assets | 2,150 | 2,460 |
Derivatives Designated as Hedging Instruments | Foreign currency exchange contracts | Other assets | ||
Derivative [Line Items] | ||
Foreign currency exchange contracts - assets | 443 | |
Derivatives Designated as Hedging Instruments | Foreign currency exchange contracts | Other liabilities | ||
Derivative [Line Items] | ||
Foreign currency exchange contracts - liabilities | (134) | |
Derivatives Designated as Hedging Instruments | Interest rate swap agreements | Other liabilities | ||
Derivative [Line Items] | ||
Interest rate swap agreements - liabilities | (14,735) | (9,116) |
Not Designated as Hedging Instrument | Foreign currency exchange contracts | Other assets | ||
Derivative [Line Items] | ||
Foreign currency exchange contracts - assets | $ 1,030 | |
Not Designated as Hedging Instrument | Foreign currency exchange contracts | Other liabilities | ||
Derivative [Line Items] | ||
Foreign currency exchange contracts - liabilities | $ (2,043) |
Derivatives and Hedging Instr_4
Derivatives and Hedging Instruments - Narrative (Details) | 3 Months Ended | |||
Mar. 31, 2020USD ($) | Mar. 31, 2019USD ($) | Mar. 31, 2020GBP (£)instrument | Mar. 31, 2020USD ($)instrument | |
Reclassification out of Accumulated Other Comprehensive Income | ||||
Derivative [Line Items] | ||||
Loss reclassified from OCI into income (loss) | $ 2,500,000 | |||
Forward contracts | ||||
Derivative [Line Items] | ||||
Net derivative gain (loss) included in OCI expected to be reclassified into earnings | (100,000) | |||
Gains or losses were reclassified from OCI into earnings | $ 0 | $ 0 | ||
Forward contracts | Derivatives Designated as Hedging Instruments | ||||
Derivative [Line Items] | ||||
Derivative instrument, notional amount | $ 6,300,000 | |||
Interest rate swap agreements | Cash Flow Hedging | ||||
Derivative [Line Items] | ||||
Derivative instrument, notional amount | $ 327,900,000 | |||
Number of interest rate derivative held | instrument | 4 | 4 | ||
Interest rate cap contracts | The 2019 Cap | ||||
Derivative [Line Items] | ||||
Derivative instrument, notional amount | £ 400,000,000 | $ 435,100,000 | ||
Interest rate cap contracts | Cash Flow Hedging | ||||
Derivative [Line Items] | ||||
Derivative instrument, notional amount | $ 876,400,000 | |||
Number of interest rate derivative held | instrument | 2 | 2 | ||
Interest rate cap contracts | Cash Flow Hedging | 2018 Caps | ||||
Derivative [Line Items] | ||||
Number of interest rate derivative held | instrument | 2 | 2 | ||
Interest rate cap contracts | Cash Flow Hedging | The 2020 Caps | ||||
Derivative [Line Items] | ||||
Derivative instrument, notional amount | £ 350,000,000 | $ 441,300,000 | ||
Minimum | Not Designated as Hedging Instrument | Cash Flow Hedging | ||||
Derivative [Line Items] | ||||
Term of contract (years) | 1 month | |||
Maximum | Not Designated as Hedging Instrument | Cash Flow Hedging | ||||
Derivative [Line Items] | ||||
Term of contract (years) | 3 months |
Derivatives and Hedging Instr_5
Derivatives and Hedging Instruments - Effects of Derivatives (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Derivative [Line Items] | ||
Gain (Loss) Recognized in OCI | $ (3,554) | $ (2,030) |
Foreign currency exchange contracts | Cash Flow Hedging | Other income (expense) | ||
Derivative [Line Items] | ||
Amount of Gain Recognized in Income (Loss) | 1,943 | 0 |
Derivatives Designated as Hedging Instruments | Foreign currency exchange contracts | Cash Flow Hedging | Salaries and employee benefits | ||
Derivative [Line Items] | ||
Gain (Loss) Recognized in OCI | (389) | 935 |
Gain (Loss) Reclassified from OCI into Income (Loss) | 127 | (95) |
Derivatives Designated as Hedging Instruments | Foreign currency exchange contracts | Cash Flow Hedging | General and administrative expenses | ||
Derivative [Line Items] | ||
Gain (Loss) Recognized in OCI | (45) | (78) |
Gain (Loss) Reclassified from OCI into Income (Loss) | 17 | (84) |
Derivatives Designated as Hedging Instruments | Interest rate swap agreements | Cash Flow Hedging | Interest Expense | ||
Derivative [Line Items] | ||
Gain (Loss) Recognized in OCI | (6,707) | (2,086) |
Gain (Loss) Reclassified from OCI into Income (Loss) | (1,088) | (420) |
Derivatives Designated as Hedging Instruments | Interest rate cap contracts | Cash Flow Hedging | Interest Expense | ||
Derivative [Line Items] | ||
Gain (Loss) Recognized in OCI | (1,396) | (1,572) |
Gain (Loss) Reclassified from OCI into Income (Loss) | $ (2,542) | $ 0 |
Investment in Receivable Port_3
Investment in Receivable Portfolios, Net - Transition Approach (Details) - USD ($) $ in Thousands | Jan. 01, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
Financing Receivable, Impaired [Line Items] | |||||
Investment in receivable portfolios, carrying value | $ 3,328,150 | $ 3,166,018 | $ 3,283,984 | $ 3,211,587 | $ 3,137,893 |
Allowance for credit losses | 79,028,043 | 521,194 | |||
Amortized cost | 82,356,193 | ||||
Noncredit discount | 132,533,142 | 967,715 | |||
Face value | 214,889,335 | 1,703,022 | |||
Write-off of amortized cost | (82,356,193) | (735,307) | |||
Write-off of noncredit discount | (132,533,142) | (967,715) | |||
Negative allowance | (3,328,150) | $ (214,113) | |||
Investment In Receivable Portfolios, Net | |||||
Financing Receivable, Impaired [Line Items] | |||||
Investment in receivable portfolios, carrying value | 3,328,150 | ||||
Accounting Standards Update 2016-13 | |||||
Financing Receivable, Impaired [Line Items] | |||||
Initial transitioned deferred court costs | $ 44,166 |
Investment in Receivable Port_4
Investment in Receivable Portfolios, Net - Establishment of Negative Allowance (Details) - USD ($) $ in Thousands | Jan. 01, 2020 | Mar. 31, 2020 | Mar. 31, 2019 |
Receivables [Abstract] | |||
Purchase price | $ 214,113 | ||
Allowance for credit losses | $ 79,028,043 | 521,194 | |
Amortized cost | 735,307 | ||
Noncredit discount | 132,533,142 | 967,715 | |
Face value | 214,889,335 | 1,703,022 | |
Write-off of amortized cost | (82,356,193) | (735,307) | |
Write-off of noncredit discount | (132,533,142) | (967,715) | |
Negative allowance | $ (3,328,150) | (214,113) | |
Negative allowance for expected recoveries - current period purchases | $ 214,113 | $ 262,335 |
Investment in Receivable Port_5
Investment in Receivable Portfolios, Net - Change in the Balance of the Investment in Receivable Portfolios (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Investment in Receivables Portfolio [Roll Forward] | ||
Balance, beginning of period | $ 3,283,984 | $ 3,137,893 |
Negative allowance for expected recoveries - current period purchases | 214,113 | 262,335 |
Put-backs and Recalls | (5,068) | (3,700) |
Transfers to assets held for sale | (1,531) | (3,589) |
Cash collections | (527,279) | (513,853) |
Revenue from receivable portfolios | 357,365 | 311,158 |
Changes to expected current period recoveries | 10,315 | 0 |
Changes to expected future period recoveries | (108,976) | 0 |
Portfolios allowance reversal, net | 0 | 1,367 |
Foreign currency adjustments | (101,071) | 19,976 |
Balance, end of period | $ 3,166,018 | $ 3,211,587 |
Revenue as a percentage of collections | 67.80% | 60.60% |
Cumulative Effect, Period Of Adoption, Adjusted Balance | ||
Investment in Receivables Portfolio [Roll Forward] | ||
Balance, beginning of period | $ 3,328,150 |
Investment in Receivable Port_6
Investment in Receivable Portfolios, Net - Accretable Yield and an Estimate of Zero Basis Future Cash Flows (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Investment in Receivables Portfolio [Roll Forward] | ||
Balance at beginning of period | $ 4,026,206 | |
Revenue from receivable portfolios | $ (357,365) | (311,158) |
Allowance reversals on receivable portfolios, net | $ 0 | (1,367) |
Additions on existing portfolios, net | 38,313 | |
Additions for current purchases | 285,637 | |
Effect of foreign currency translation | 26,461 | |
Balance at end of period | $ 4,064,092 |
Investment in Receivable Port_7
Investment in Receivable Portfolios, Net - Change in the Valuation Allowance for Investment in Receivable Portfolios (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Financing Receivable, Allowance for Credit Loss [Roll Forward] | |
Balance as of beginning of period | $ 60,631 |
Provision for portfolio allowances | 2,626 |
Reversal of prior allowances | (3,993) |
Effect of foreign currency translation | 164 |
Balance as of end of period | $ 59,428 |
Deferred Court Costs, Net - Sum
Deferred Court Costs, Net - Summary (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||
Court costs advanced | $ 891,207 | |||
Court costs recovered | (369,043) | |||
Court costs reserve | (421,992) | $ (399,991) | $ (396,460) | |
Deferred court costs, net | $ 0 | $ 100,172 |
Deferred Court Costs, Net - Cou
Deferred Court Costs, Net - Court Cost Reserve (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Deferred Costs, Capitalized, Prepaid, and Other Assets [Roll Forward] | |
Balance at beginning of period | $ (396,460) |
Provision for court costs | (15,713) |
Charge-offs | 13,779 |
Effect of foreign currency translation | (1,597) |
Balance at end of period | $ (399,991) |
Other Assets - Summary (Details
Other Assets - Summary (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Operating lease right-of-use asset | $ 74,113 | $ 75,254 |
Identifiable intangible assets, net | 46,371 | 51,371 |
Assets held for sale | 42,947 | 46,717 |
Deferred tax assets | 26,291 | 24,134 |
Service fee receivables | 22,786 | 27,705 |
Prepaid expenses | 22,191 | 22,272 |
Other financial receivables | 16,213 | 17,308 |
Other | 51,107 | 64,462 |
Total | $ 302,019 | $ 329,223 |
Borrowings - Consolidated Debt
Borrowings - Consolidated Debt and Capital Lease Obligations (Details) $ in Thousands, £ in Millions | Mar. 31, 2020GBP (£) | Mar. 31, 2020USD ($) | Dec. 31, 2019USD ($) |
Debt Instrument [Line Items] | |||
Senior secured notes | $ 292,500 | $ 308,750 | |
Encore convertible notes and exchangeable notes | 672,855 | 672,855 | |
Less: debt discount | (27,264) | (30,308) | |
Finance lease liabilities | 8,642 | 8,121 | |
Debt and capital lease obligations, gross | 3,444,329 | 3,554,522 | |
Less: debt issuance costs, net of amortization | (39,902) | (41,325) | |
Total | 3,404,427 | 3,513,197 | |
Other Debt Obligations | |||
Debt Instrument [Line Items] | |||
Other | 47,924 | 54,151 | |
Cabot securitisation senior facilities | |||
Debt Instrument [Line Items] | |||
Revolving credit facility | £ 350 | 435,100 | 464,092 |
Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Revolving credit facility | 528,000 | 492,000 | |
Cabot credit facility | |||
Debt Instrument [Line Items] | |||
Revolving credit facility | £ 194 | 241,200 | 285,749 |
Term Loan | |||
Debt Instrument [Line Items] | |||
Encore term loan facility | 167,855 | 171,677 | |
Senior Notes | |||
Debt Instrument [Line Items] | |||
Encore convertible notes and exchangeable notes | 645,591 | 642,547 | |
Less: debt discount | (27,264) | (30,308) | |
Senior Notes | Cabot senior secured notes | |||
Debt Instrument [Line Items] | |||
Senior secured notes | 1,078,965 | 1,129,039 | |
Less: debt discount | $ (1,417) | $ (1,604) |
Borrowings - Encore Revolving C
Borrowings - Encore Revolving Credit Facility and Term Loan Facility - Narrative (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Debt Instrument [Line Items] | |||
Principal amortization, 2020 | $ 15,300,000 | ||
Percentage to be added to base rate for alternate base rate (as a percent) | 0.50% | ||
Percentage to be added to adjusted base rate for alternate base rate (as a percent) | 1.00% | ||
Borrowing base as percentage of eligible estimated collection range end (as a percent) | 35.00% | ||
Eligible estimated remaining collections for consumer receivables (as a percent) | 55.00% | ||
Maximum cash flow leverage ratio | 300.00% | ||
Maximum cash flow secured leverage ratio | 200.00% | ||
Minimum interest coverage ratio | 175.00% | ||
Maximum senior secured notes | $ 350,000,000 | ||
Allowance of additional unsecured indebtedness (not to exceed) | 1,100,000,000 | ||
Company's repurchases, common stock (up to) | 150,000,000 | ||
Acquisition limit | $ 225,000,000 | ||
Credit facility, provision, investments not to exceed maximum percentage of consolidated net worth (as a percent) | 200.00% | ||
Basket allowed for investments under laws of Canada | $ 50,000,000 | ||
Minimum | |||
Debt Instrument [Line Items] | |||
Maximum cash flow leverage ratio | 125.00% | ||
Minimum | Base Rate | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 1.50% | ||
Maximum | Base Rate | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 2.00% | ||
Junior Lien Portion | |||
Debt Instrument [Line Items] | |||
Allowance of additional unsecured indebtedness (not to exceed) | $ 400,000,000 | ||
Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Revolving credit facility | $ 528,000,000 | $ 492,000,000 | |
Weighted average interest rate (as a percent) | 4.58% | 5.50% | |
Revolving Credit Facility | Restated Credit Agreement | |||
Debt Instrument [Line Items] | |||
Current borrowing capacity | $ 356,200,000 | ||
Revolving Credit Facility | Minimum | LIBOR | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 2.50% | ||
Revolving Credit Facility | Maximum | LIBOR | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 3.00% | ||
Term Loan One | Minimum | LIBOR | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 2.50% | ||
Term Loan One | Minimum | Base Rate | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 1.50% | ||
Term Loan One | Maximum | LIBOR | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 3.00% | ||
Term Loan One | Maximum | Base Rate | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 2.00% |
Borrowings - Encore Senior Secu
Borrowings - Encore Senior Secured Notes - Narrative (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Dec. 31, 2019 | Aug. 31, 2017 | |
Debt Instrument [Line Items] | |||
Debt issued | $ 672,855,000 | $ 672,855,000 | |
Senior secured notes | $ 292,500,000 | $ 308,750,000 | |
2017 Senior Secured Notes | Term Loan Facility | |||
Debt Instrument [Line Items] | |||
Debt issued | $ 325,000,000 | ||
Stated interest rate (as a percent) | 5.625% | ||
Senior secured notes, periodic principal repayment | $ 16,300,000 |
Borrowings - Encore Convertible
Borrowings - Encore Convertible Notes and Exchangeable Notes (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | |
Sep. 30, 2019USD ($) | Mar. 31, 2020USD ($)$ / shares | Dec. 31, 2019USD ($) | |
Debt Instrument [Line Items] | |||
Debt issued | $ | $ 672,855 | $ 672,855 | |
Convertible Notes | 2020 Convertible Notes | |||
Debt Instrument [Line Items] | |||
Debt issued | $ | $ 89,355 | 89,355 | |
Stated interest rate (as a percent) | 3.00% | ||
Extinguishment of debt | $ | $ 83,100 | ||
Initial conversion price (USD per share) | $ 45.72 | ||
Closing stock price at date of issuance (in dollars per share) | $ 33.35 | ||
Conversion rate (shares per $1,000 principal amount) | 0.0218718 | ||
Convertible Notes | 2021 Convertible Notes | |||
Debt Instrument [Line Items] | |||
Debt issued | $ | $ 161,000 | 161,000 | |
Stated interest rate (as a percent) | 2.875% | ||
Initial conversion price (USD per share) | $ 59.39 | ||
Closing stock price at date of issuance (in dollars per share) | $ 47.51 | ||
Conversion rate (shares per $1,000 principal amount) | 0.0168386 | ||
Convertible Notes | 2022 Convertible Notes | |||
Debt Instrument [Line Items] | |||
Debt issued | $ | $ 150,000 | 150,000 | |
Stated interest rate (as a percent) | 3.25% | ||
Initial conversion price (USD per share) | $ 45.57 | ||
Closing stock price at date of issuance (in dollars per share) | $ 35.05 | ||
Conversion rate (shares per $1,000 principal amount) | 0.0219467 | ||
Convertible Notes | 2023 Exchangeable Notes | |||
Debt Instrument [Line Items] | |||
Initial conversion price (USD per share) | $ 44.62 | ||
Closing stock price at date of issuance (in dollars per share) | $ 36.45 | ||
Conversion rate (shares per $1,000 principal amount) | 0.022409 | ||
Convertible Notes | 2025 Convertible Notes | |||
Debt Instrument [Line Items] | |||
Debt issued | $ | $ 100,000 | 100,000 | |
Stated interest rate (as a percent) | 3.25% | ||
Initial conversion price (USD per share) | $ 40 | ||
Closing stock price at date of issuance (in dollars per share) | $ 32 | ||
Conversion rate (shares per $1,000 principal amount) | 0.025 | ||
Term Loan Facility | 2023 Exchangeable Notes | |||
Debt Instrument [Line Items] | |||
Debt issued | $ | $ 172,500 | $ 172,500 | |
Stated interest rate (as a percent) | 4.50% | ||
Initial conversion price (USD per share) | $ 44.62 |
Borrowings - Debt and Equity Co
Borrowings - Debt and Equity Components and Issuance Costs of Convertible Notes (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | |
Sep. 30, 2019 | Mar. 31, 2020 | Dec. 31, 2019 | |
Debt Instrument [Line Items] | |||
Equity component | $ 83,127 | $ 83,127 | |
Debt issued | 672,855 | 672,855 | |
2020 Convertible Notes | Convertible Notes | |||
Debt Instrument [Line Items] | |||
Debt component | 140,247 | ||
Equity component | 32,253 | ||
Equity issuance cost | $ 1,106 | ||
Stated interest rate (as a percent) | 3.00% | ||
Effective interest rate (as a percent) | 6.35% | ||
Extinguishment of debt | $ 83,100 | ||
Debt issued | $ 89,355 | 89,355 | |
2021 Convertible Notes | Convertible Notes | |||
Debt Instrument [Line Items] | |||
Debt component | 143,645 | ||
Equity component | 17,355 | ||
Equity issuance cost | $ 581 | ||
Stated interest rate (as a percent) | 2.875% | ||
Effective interest rate (as a percent) | 4.70% | ||
Debt issued | $ 161,000 | 161,000 | |
2022 Convertible Notes | Convertible Notes | |||
Debt Instrument [Line Items] | |||
Debt component | 137,266 | ||
Equity component | 12,734 | ||
Equity issuance cost | $ 398 | ||
Stated interest rate (as a percent) | 3.25% | ||
Effective interest rate (as a percent) | 5.20% | ||
Debt issued | $ 150,000 | 150,000 | |
2023 Exchangeable Notes | Term Loan Facility | |||
Debt Instrument [Line Items] | |||
Debt component | 157,971 | ||
Equity component | 14,009 | ||
Equity issuance cost | $ 0 | ||
Stated interest rate (as a percent) | 4.50% | ||
Effective interest rate (as a percent) | 6.50% | ||
Debt issued | $ 172,500 | 172,500 | |
2025 Convertible Notes | Convertible Notes | |||
Debt Instrument [Line Items] | |||
Debt component | 91,024 | ||
Equity component | 8,976 | ||
Equity issuance cost | $ 224 | ||
Stated interest rate (as a percent) | 3.25% | ||
Effective interest rate (as a percent) | 5.00% | ||
Debt issued | $ 100,000 | $ 100,000 |
Borrowings - Balances of Liabil
Borrowings - Balances of Liability and Equity Components (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Debt Disclosure [Abstract] | ||
Liability component—principal amount | $ 672,855 | $ 672,855 |
Unamortized debt discount | (27,264) | (30,308) |
Liability component—net carrying amount | 645,591 | 642,547 |
Equity component | $ 83,127 | $ 83,127 |
Borrowings - Interest Expense (
Borrowings - Interest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Convertible Notes And Senior Notes | ||
Debt Instrument [Line Items] | ||
Interest expense—stated coupon rate | $ 5,799 | $ 5,337 |
Interest expense—amortization of debt discount | 3,044 | 3,121 |
Total interest expense | 8,843 | 8,458 |
Term Loan Facility | Cabot senior secured notes | ||
Debt Instrument [Line Items] | ||
Total interest expense | 19,502 | 19,596 |
Term Loan Facility | Cabot senior secured notes | Interest Expense | ||
Debt Instrument [Line Items] | ||
Interest expense—stated coupon rate | 19,417 | 19,394 |
Interest expense—amortization of debt discount | $ 85 | $ 202 |
Borrowings - Conversion and EPS
Borrowings - Conversion and EPS Impact of Convertible Notes Hedging Transactions (Details) $ / shares in Units, $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($)$ / shares | |
2020 Convertible Notes | Convertible Notes | |
Debt Instrument [Line Items] | |
Cost of the hedge transaction(s) | $ | $ 18,113 |
Conversion price (USD per share) | $ 45.72 |
2020 Convertible Notes | Hedging of Convertible Debt Instrument | Convertible Notes | |
Debt Instrument [Line Items] | |
Conversion price (USD per share) | $ 61.55 |
2021 Convertible Notes | Convertible Notes | |
Debt Instrument [Line Items] | |
Cost of the hedge transaction(s) | $ | $ 19,545 |
Conversion price (USD per share) | $ 59.39 |
2021 Convertible Notes | Hedging of Convertible Debt Instrument | Convertible Notes | |
Debt Instrument [Line Items] | |
Conversion price (USD per share) | 83.14 |
2023 Exchangeable Notes | Convertible Notes | |
Debt Instrument [Line Items] | |
Conversion price (USD per share) | $ 44.62 |
2023 Exchangeable Notes | Term Loan Facility | |
Debt Instrument [Line Items] | |
Cost of the hedge transaction(s) | $ | $ 17,785 |
Conversion price (USD per share) | $ 44.62 |
2023 Exchangeable Notes | Hedging of Convertible Debt Instrument | Term Loan Facility | |
Debt Instrument [Line Items] | |
Conversion price (USD per share) | $ 62.48 |
Borrowings - Cabot Senior Secur
Borrowings - Cabot Senior Secured Notes - Table and Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Debt Instrument [Line Items] | ||
Senior secured notes | $ 292,500 | $ 308,750 |
Debt issued | 672,855 | 672,855 |
Secured Debt | ||
Debt Instrument [Line Items] | ||
Senior secured notes | 1,078,965 | 1,129,039 |
Floating rate senior secured notes due 2024 | Secured Debt | ||
Debt Instrument [Line Items] | ||
Senior secured notes | 441,336 | 448,921 |
Senior secured notes due 2023 | Secured Debt | ||
Debt Instrument [Line Items] | ||
Senior secured notes | $ 637,629 | $ 680,118 |
Stated interest rate (as a percent) | 7.50% | |
Euro Interbank Offered Rate (EURIBOR) | Floating rate senior secured notes due 2024 | Secured Debt | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate (as a percent) | 6.375% |
Borrowings - Cabot Senior Revol
Borrowings - Cabot Senior Revolving Credit Facility - Narrative (Details) - Cabot credit facility $ in Thousands | 3 Months Ended | |||
Mar. 31, 2020GBP (£) | Mar. 31, 2019 | Mar. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |
Debt Instrument [Line Items] | ||||
Revolving credit facility | £ 375,000,000 | |||
Maximum loan to value ratio | 75.00% | |||
Credit facility, outstanding amount | £ 194,000,000 | $ 241,200 | $ 285,749 | |
Weighted average interest rate (as a percent) | 3.55% | 3.37% | ||
Remaining borrowing capacity | £ 181,000,000 | $ 225,000 | ||
Secured Debt | Cabot Credit Agreement, Tranche with Expiration in September 2022 | LIBOR | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate (as a percent) | 3.00% | |||
Senior Loans | ||||
Debt Instrument [Line Items] | ||||
Maximum loan to value ratio | 27.50% |
Borrowings - Cabot Securitisati
Borrowings - Cabot Securitisation Senior Facility (Details) $ in Thousands | Feb. 18, 2020GBP (£) | Mar. 31, 2020GBP (£) | Mar. 31, 2019 | Mar. 31, 2020USD ($) | Dec. 31, 2019GBP (£) | Dec. 31, 2019USD ($) | Nov. 30, 2018GBP (£) |
Debt Instrument [Line Items] | |||||||
Book value | $ | $ 4,614,954 | $ 4,909,950 | |||||
Cabot securitisation senior facilities | |||||||
Debt Instrument [Line Items] | |||||||
Facility agreement, borrowing capacity | £ 350 | £ 300,000,000 | £ 300 | ||||
Increase in borrowing capacity | 50 | ||||||
Proceeds from borrowing | £ 50 | ||||||
Credit facility, outstanding amount | 350,000,000 | 435,100 | $ 464,092 | ||||
Book value | £ 377,600,000 | $ 469,400 | |||||
Weighted average interest rate (as a percent) | 3.52% | 3.76% | |||||
Cabot securitisation senior facilities | Sterling Overnight Index Average (SONIA) | Debt Instrument, Redemption, Period One | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate (as a percent) | 3.06% | ||||||
Cabot securitisation senior facilities | Minimum | Sterling Overnight Index Average (SONIA) | Debt Instrument, Redemption, Period Two | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate (as a percent) | 0.00% | ||||||
Cabot securitisation senior facilities | Maximum | Sterling Overnight Index Average (SONIA) | Debt Instrument, Redemption, Period Two | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate (as a percent) | 1.00% | ||||||
Cabot Securitisation Non-Recourse Asset-Backed Senior Facility | |||||||
Debt Instrument [Line Items] | |||||||
Facility agreement, borrowing capacity | £ 50,000,000 | ||||||
Repayment of borrowings | £ 50 |
Borrowings - Finance Lease Liab
Borrowings - Finance Lease Liabilities - Narrative (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Debt Disclosure [Abstract] | ||
Finance lease liabilities | $ 8,642 | $ 8,121 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Contingency [Line Items] | ||
Provision for income taxes | $ (4,558) | $ (3,673) |
(Loss) income before income taxes | (6,021) | 53,115 |
Benefit (expense) of change in accounting method | $ 9,100 | |
Unrecognized tax benefit | 8,200 | |
Net tax benefit from unrecognized tax benefits, if recognized | 7,600 | |
Undistributed earnings of foreign subsidiaries | $ 117,100 | |
Costa Rica | Tax holiday through December 31, 2026 | ||
Income Tax Contingency [Line Items] | ||
Holiday tax rate | 100.00% |
Income Taxes - Effective Tax Ra
Income Taxes - Effective Tax Rates (Details) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Federal provision (as a percent) | 21.00% | 21.00% |
State provision (as a percent) | (15.60%) | 2.50% |
International provision (benefit) (as a percent) | (3.20%) | (0.90%) |
Change in valuation allowance (as a percent) | (66.50%) | 1.90% |
Change in tax accounting method (as a percent) | 0.00% | (17.10%) |
Foreign currency remeasurement (as a percent) | (6.40%) | 0.20% |
Permanent items (as a percent) | (1.70%) | 0.10% |
Other (as a percent) | (3.30%) | (0.80%) |
Effective rate (as a percent) | (75.70%) | 6.90% |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Details) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Long-term Purchase Commitment [Line Items] | |
Material reserves for litigation | $ 0 |
Purchase price of receivable portfolios | 3,000,000,000 |
Purchase price | $ 378,400,000 |
Segment and Geographic Inform_3
Segment and Geographic Information - Summary (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)Segment | Mar. 31, 2019USD ($) | |
Segment Reporting [Abstract] | ||
Number of reportable segments | Segment | 1 | |
Segment Reporting Information [Line Items] | ||
Revenues | $ 289,081 | $ 347,077 |
United States | ||
Segment Reporting Information [Line Items] | ||
Revenues | 208,218 | 189,372 |
International | ||
Segment Reporting Information [Line Items] | ||
Revenues | 80,863 | 157,705 |
Europe | ||
Segment Reporting Information [Line Items] | ||
Revenues | 75,965 | 135,276 |
Other geographies | ||
Segment Reporting Information [Line Items] | ||
Revenues | $ 4,898 | $ 22,429 |
Goodwill and Identifiable Int_3
Goodwill and Identifiable Intangible Assets - Activity in Goodwill Balance (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Goodwill [Roll Forward] | ||
Balance at beginning of period | $ 884,185 | $ 868,126 |
Effect of foreign currency translation | (44,884) | 14,758 |
Balance at end of period | $ 839,301 | $ 882,884 |
Goodwill and Identifiable Int_4
Goodwill and Identifiable Intangible Assets - Acquired Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 70,223 | $ 78,930 |
Accumulated Amortization | (23,852) | (27,559) |
Net Carrying Amount | 46,371 | 51,371 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 60,718 | 67,897 |
Accumulated Amortization | (15,565) | (18,191) |
Net Carrying Amount | 45,153 | 49,706 |
Developed technologies | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 4,257 | 4,734 |
Accumulated Amortization | (3,744) | (4,124) |
Net Carrying Amount | 513 | 610 |
Trade name and other | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 5,248 | 6,299 |
Accumulated Amortization | (4,543) | (5,244) |
Net Carrying Amount | $ 705 | $ 1,055 |
Uncategorized Items - ecpg-2020
Label | Element | Value |
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (44,238,000) |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 | 981,168,000 |
Noncontrolling Interest [Member] | ||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 | $ 3,213,000 |
Common Stock [Member] | ||
Shares, Issued | us-gaap_SharesIssued | 31,097,000 |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 | $ 311,000 |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | (44,238,000) |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 | 843,820,000 |
AOCI Attributable to Parent [Member] | ||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 | (88,766,000) |
Additional Paid-in Capital [Member] | ||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 | $ 222,590,000 |