PRA Investorroom
NORFOLK, VA, Apr 28, 2008 -- Portfolio Recovery Associates, Inc. (NASDAQ: PRAA), a company that purchases, collects and manages portfolios of defaulted consumer receivables and provides a broad range of accounts receivable management services, today reported net income of $11.9 million, or $0.78 per diluted share, for the quarter ended March 31, 2008.
The Company's first-quarter 2008 profit represents a decline of 8% from net income of $12.9 million, or $0.80 per diluted share, in the same period a year earlier. Pretax income during the 2008 quarter was reduced by approximately $2.4 million, or 10 cents a diluted share, of additional interest expense, net of tax, compared with the prior year. This stemmed from both the Company's substantial recent portfolio purchasing activity and its 2007 capital structure optimization plan.
Total revenue in the first quarter of 2008 increased 19% to a record $64.1 million, up from $54.0 million in the year-earlier period. Total revenue consists of cash collections reduced by amounts applied to principal on the Company's owned debt portfolios, plus commissions earned from its fee-for-service businesses. During the first quarter of 2008, the Company applied 33.7% of cash collections to reduce the carrying basis of its owned debt portfolios. This included a $2.8 million allowance charge, equivalent to approximately $1.7 million after tax, or 11 cents a diluted share, against certain pools of finance receivables accounts.
"Portfolio Recovery Associates continued during the first quarter to capitalize on improved market conditions in the defaulted consumer debt market, spending a near-record $95.4 million on portfolio acquisitions. Despite record cash collections of $79.4 million, higher interest expense and a non-cash allowance charge held back our bottom-line performance for the quarter. However, our substantial portfolio purchasing activity combined with progress on the collector-productivity front helps position Portfolio Recovery Associates well for future growth," said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.
Financial and Operating Highlights
-- Cash collections rose 18% to a record $79.4 million in the first
quarter of 2008, up from $67.3 million in the year-ago period. Call
center collections and other increased 19%, legal collections grew 5%
and purchased bankruptcy collections gained 50% when compared with the
year-earlier period.
The table below displays our cash collections by source, by quarter
Cash Collection Source ($ in
thousands) Q12008 Q42007 Q32007 Q22007 Q12007
======== ======== ======== ======== ========
Call Center Collections &
Other $ 46,702 $ 36,994 $ 37,450 $ 37,464 $ 39,241
Legal 21,880 20,861 21,384 20,911 20,844
Purchased Bankruptcy 10,820 7,245 6,317 6,231 7,223
Cash Collection Source ($ in
thousands) Q42006 Q32006 Q22006 Q12006
======== ======== ======== ========
Call Center Collections &
Other $ 32,437 $ 32,686 $ 33,736 $ 36,436
Legal 19,762 19,607 19,058 17,606
Purchased Bankruptcy 6,581 7,390 6,645 4,447
-- Productivity, as measured by cash collections per hour paid, the
Company's key measure of collector performance, finished at $133.31 for Q1
2008, down from $135.77 for all of 2007. Excluding the impact of trustee
remittances from purchased bankrupt accounts, the comparison is $116.35 for
Q1 2008 vs. $123.10 for all of 2007.
-- The Company purchased $1.5 billion of face-value debt during the first
quarter of 2008 for $95.4 million, the second-largest amount the Company
has spent on debt acquisitions in a single quarter. This debt was acquired
in 69 portfolios from 21 different sellers.
-- The Company's fee-for-service businesses generated revenue of $11.5
million in the first quarter of 2008, up 34% from $8.5 million in the same
period a year ago.
-- The Company's cash balances were $16.8 million as of March 31, 2008,
up slightly from $16.7 million as of December 31, 2007. Also during the
quarter, the Company made draws of $48.8 million on its line of credit,
leaving it with $216.8 million in outstanding borrowings at quarter's end.
Remaining borrowing availability under the line was $53.2 million at
quarter's end.
"In the first quarter of 2008, Portfolio Recovery Associates continued to execute its long-term plan. We made progress on a number of key operating initiatives, particularly improving collector productivity at our new Jackson, Tenn. call center. Despite the improved buyers' market for defaulted consumer debt, we continue to approach portfolio acquisitions in a disciplined and deliberate manner," said Kevin P. Stevenson, Chief Financial and Administrative Officer.
Conference Call Information
The Company will hold a conference call with investors tonight, Monday, April 28, 2008, at 5:30 p.m. EDT to discuss its first quarter results. Investors can access the call live by dialing 888-680-0892 for domestic callers or 617-213-4858 for international callers using the pass code 39592562.
In addition, investors may listen to the call via a taped replay, which will be available for seven days, by dialing 888-286-8010 for domestic callers and 617-801-6888 for international callers using the pass code 40861522. The replay will be available approximately two hours after today's conference call ends. Investors may also listen via webcast, both live and archived, at the Company's website, www.portfoliorecovery.com.
About Portfolio Recovery Associates, Inc.
Portfolio Recovery Associates is a full-service provider of outsourced receivables management and related services. The Company's primary business is the purchase, collection and management of portfolios of defaulted consumer receivables. These are the unpaid obligations of individuals to credit originators, which include banks, credit unions, consumer and auto finance companies, and retail merchants. Portfolio Recovery Associates also provides a broad range of collection services, including revenue administration for government entities through its RDS business, collateral-location services for credit originators via IGS Nevada, and fee-based collections through Anchor Receivables Management.
Statements herein which are not historical, including Portfolio Recovery Associates' or management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future, including statements with respect to future contributions of IGS Nevada and RDS to earnings and future portfolio-purchase opportunities, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include references to Portfolio Recovery Associates' presentations and web casts. The forward-looking statements in this press release are based upon management's beliefs, assumptions and expectations of the Company's future operations and economic performance, taking into account currently available information. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us. Actual events or results may differ from those expressed or implied in any such forward-looking statements as a result of various factors, including the risk factors and other risks that are described from time to time in the Company's filings with the Securities and Exchange Commission including but not limited to its annual reports on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K, filed with the Securities and Exchange Commission and available through the Company's website, which contain a more detailed discussion of the Company's business, including risks and uncertainties that may affect future results. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. Information in this press release may be superseded by more recent information or statements, which may be disclosed in later press releases, subsequent filings with the Securities and Exchange Commission or otherwise. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or to reflect any change in events, conditions or circumstances on which any such forward-looking statements are based, in whole or in part.
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Income Statements
(in thousands, except per share amounts)
Three Months Three Months
Ended Ended
March 31, March 31,
2008 2007
------------ ------------
Revenues:
Income recognized on finance receivables, net $ 52,628 $ 45,466
Commissions 11,476 8,542
------------ ------------
Total revenues 64,104 54,008
Operating expenses:
Compensation and employee services 21,127 16,435
Outside legal and other fees and services 14,573 11,437
Communications 2,869 1,884
Rent and occupancy 838 659
Other operating expenses 1,356 1,383
Depreciation and amortization 1,470 1,295
------------ ------------
Total operating expenses 42,233 33,093
------------ ------------
Income from operations 21,871 20,915
Other income and (expense):
Interest income 30 179
Interest expense (2,499) (67)
------------ ------------
Income before income taxes 19,402 21,027
Provision for income taxes 7,530 8,146
------------ ------------
Net income $ 11,872 $ 12,881
============ ============
Net income per common share:
Basic $ 0.78 $ 0.81
Diluted $ 0.78 $ 0.80
Weighted average number of shares outstanding:
Basic 15,170 15,993
Diluted 15,237 16,140
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Balance Sheets
(in thousands, except per share amounts)
March 31, December 31,
ASSETS 2008 2007
------------- -------------
Cash and cash equivalents $ 16,816 $ 16,730
Finance receivables, net 477,754 410,297
Income taxes receivable 2,791 3,022
Property and equipment, net 16,631 16,171
Goodwill 18,620 18,620
Intangible assets, net 4,684 5,046
Other assets 5,923 6,421
------------- -------------
Total assets $ 543,219 $ 476,307
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 13,325 $ 15,345
Deferred tax liability 64,661 57,579
Line of credit 216,800 168,000
Obligations under capital lease 70 103
------------- -------------
Total liabilities 294,856 241,027
------------- -------------
Stockholders' equity:
Preferred stock, par value $0.01, authorized
shares, 2,000, issued and outstanding
shares - 0 - -
Common stock, par value $0.01, authorized
shares, 30,000, issued and outstanding shares
- 15,183 at March 31, 2008 and 15,159 at
December 31, 2007 152 152
Additional paid-in capital 72,654 71,443
Retained earnings 175,557 163,685
------------- -------------
Total stockholders' equity 248,363 235,280
------------- -------------
Total liabilities and stockholders' equity $ 543,219 $ 476,307
============= =============
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
Three Months Three Months
Ended Ended
March 31, March 31,
2008 2007
------------ ------------
Cash flows from operating activities:
Net income $ 11,872 $ 12,881
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of share-based
compensation 739 527
Depreciation and amortization 1,470 1,295
Deferred tax expense 7,082 4,396
Changes in operating assets and
liabilities:
Other assets 498 (532)
Accounts payable (47) 1,329
Income taxes 231 3,468
Accrued expenses 28 407
Accrued payroll and bonuses (2,001) (2,042)
------------ ------------
Net cash provided by operating
activities 19,872 21,729
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (1,568) (1,813)
Acquisition of finance receivables, net of
buybacks (94,231) (38,964)
Collections applied to principal on finance
receivables 26,774 21,843
------------ ------------
Net cash used in investing activities (69,025) (18,934)
------------ ------------
Cash flows from financing activities:
Proceeds from exercise of options 261 67
Income tax benefit from share-based
compensation 211 71
Proceeds from line of credit 48,800 -
Principal payments on long-term debt - (118)
Principal payments on capital lease
obligations (33) (34)
------------ ------------
Net cash provided by/(used in)
financing activities 49,239 (14)
------------ ------------
Net increase in cash and cash
Equivalents 86 2,781
Cash and cash equivalents, beginning of period 16,730 25,101
------------ ------------
Cash and cash equivalents, end of period $ 16,816 $ 27,882
============ ============
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 2,587 $ 67
Cash paid for income taxes $ 1 $ 87
Contact:
Investor Relations
757-519-9300 ext. 13010
info@portfoliorecovery.com
SOURCE: Portfolio Recovery Associates, Inc.