PRA Investorroom
NORFOLK, VA, Oct 29, 2007 (MARKET WIRE via COMTEX News Network) -- 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 $11.7 million, or $0.75 per diluted share, for the quarter ended September 30, 2007.
Separately, the Company announced that it recently reached agreement with its bank group to increase its credit line to $270 million, from the existing $150 million, under terms similar to its prior facility.
The Company's third-quarter 2007 earnings represent growth of 4% from net income of $11.2 million, or $0.70 per diluted share, in the same period a year earlier. Net income during the quarter was reduced by approximately $665,000, or 4 cents a diluted share, of additional interest expense, net of tax, compared with the prior year, stemming from both the Company's debt purchasing activity and its capital structure optimization plan, which included the third-quarter repurchase of 900,000 shares of common stock at an average price of $50.41 a share. This stock repurchase completed Portfolio Recovery Associates' previously announced 1 million share buyback program.
Total revenue in the third quarter of 2007 increased 14% to $54.6 million, up from $47.8 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 third quarter of 2007, the Company applied 29.2% of cash collections to reduce the carrying basis of its owned debt portfolios. This included a $1.2 million net allowance charge, equivalent to approximately $730,000 after tax, or 5 cents a diluted share, against certain pools of finance receivables accounts.
"Portfolio Recovery Associates turned in a solid third quarter of 2007, though not the performance we desired. Increased interest expense, a higher-than-normal allowance charge, and sharply increased staffing during the quarter combined to limit earnings growth. However, we have taken significant steps to address collector productivity and had a very substantial portfolio-buying quarter, spending a total of $57.4 million. Already, this represents a record full year for portfolio acquisitions and underscores both the underlying strength and growth prospects for our business," said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.
The Company's earnings for the first nine months of 2007 totaled $37.6 million, or $2.35 per diluted share, compared with $33.1 million, or $2.06 per diluted share, for the first nine months of 2006. Revenue for the first nine months of 2007 was $163.4 million, compared with $139.4 million in first nine months of 2006.
Financial and Operating Highlights
-- Cash collections rose 9% to $65.2 million in the third quarter of
2007, up from $59.7 million in the year-ago period. Call center
collections increased 15%, legal collections increased 9% and purchased
bankruptcy collections fell 15% when compared with the year earlier period.
The table below displays our cash collections by source, by quarter:
(in thousands)
Cash Collection
Source Q32007 Q22007 Q12007 Q32006 Q22006 Q12006
======== ======== ======== ======== ======== ========
Call Center
Collections & Other $ 37,450 $ 37,464 $ 39,241 $ 32,686 $ 33,736 $ 36,436
Legal $ 21,384 $ 20,911 $ 20,844 $ 19,607 $ 19,058 $ 17,606
Purchased Bankruptcy $ 6,317 $ 6,231 $ 7,223 $ 7,390 $ 6,645 $ 4,447
-- Productivity, as measured by cash collections per hour paid, the
Company's key measure of collector performance, stands at $142.26 for the
first nine months of 2007, down just slightly from $146.03 for all of 2006.
Excluding the impact of trustee remittances from purchased bankrupt
accounts, the comparison is $129.35 for the first nine months of 2007 vs.
$132.15 for all of 2006.
-- The Company purchased $2.6 billion of face-value debt during the third
quarter of 2007 for $57.4 million, the third-largest amount the Company has
spent on debt acquisitions in a single quarter. This debt was acquired in
59 portfolios from 23 different sellers. Portfolio spending for the first
nine months of 2007 was a record $160 million, higher than any previous
full-year total.
-- The Company's fee-for-service businesses generated revenue of $8.5
million in the third quarter of 2007, up 40% from $6.1 million in the same
period a year ago.
-- The Company's cash balances were $14.5 million as of September 30,
2007, down from $15.0 million as of June 30, 2007, as a result of the
strong portfolio buying and the share repurchase completed during the third
quarter. Also during the quarter, the Company drew $62.0 million on its
line of credit, leaving it with $100 million in outstanding debt at
quarter's end.
-- The Company's RDS subsidiary made a small acquisition during the
quarter, acquiring a majority of the assets of a Louisiana-based firm that
specializes in insurance premium tax administration. The acquisition gives
RDS not only a new business expertise, premium tax administration, but also
more than 100 new clients and a new geographic footprint in the state of
Louisiana.
"In the third quarter of 2007, Portfolio Recovery Associates kept its sights on the long term. To begin, we followed through on our share repurchase program, buying back the final 900,000 shares of our planned 1 million share buyback. At the same time, in an opportune buying environment we were able to deploy more than $57 million on new purchases of charged-off debt at what we believe should be good returns. Finally, aggressive staffing in response to already record-breaking 2007 debt purchases increased compensation expense but positioned us to move a greater volume of debt through our collection operations in the quarters and years to come," said Kevin P. Stevenson, Chief Financial and Administrative Officer.
Conference Call Information
The Company will hold a conference call with investors today, Monday, October 29, 2007, at 5:30 p.m. EDT to discuss its third quarter results. Investors can access the call live by dialing 800-510-0178 for domestic callers or 617-614-3450 for international callers using the pass code 11570423.
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 25920547. 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 Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
30, 30, 30, 30,
2007 2006 2007 2006
Revenues:
Income recognized on finance
receivables, net $ 46,111 $ 41,760 $ 137,964 $ 121,528
Commissions 8,529 6,076 25,460 17,835
--------- --------- --------- ---------
Total revenues 54,640 47,836 163,424 139,363
Operating expenses:
Compensation and employee
services 17,322 14,550 50,438 42,982
Outside legal and other
fees and services 11,847 10,582 34,530 29,383
Communications 2,038 1,474 5,927 4,392
Rent and occupancy 819 573 2,217 1,693
Other operating expenses 1,606 1,212 4,467 3,494
Depreciation and
amortization 1,455 1,279 4,112 3,771
--------- --------- --------- ---------
Total operating expenses 35,087 29,670 101,691 85,715
--------- --------- --------- ---------
Income from operations 19,553 18,166 61,733 53,648
Other income and (expense):
Interest income 65 171 364 415
Interest expense (1,138) (66) (1,543) (309)
--------- --------- --------- ---------
Income before income
taxes 18,480 18,271 60,554 53,754
Provision for income
taxes 6,787 7,027 22,991 20,678
--------- --------- --------- ---------
Net income $ 11,693 $ 11,244 $ 37,563 $ 33,076
========= ========= ========= =========
Net income per common share:
Basic $ 0.76 $ 0.71 $ 2.37 $ 2.08
Diluted $ 0.75 $ 0.70 $ 2.35 $ 2.06
Weighted average number of
shares outstanding:
Basic 15,451 15,915 15,816 15,895
Diluted 15,577 16,071 15,962 16,074
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Balance Sheets
(in thousands, except share amounts)
September 30, December 31,
ASSETS 2007 2006
------------ ------------
Cash and cash equivalents $ 14,464 $ 25,101
Finance receivables, net 326,476 226,447
Income tax receivable 2,621 1,513
Property and equipment, net 15,217 11,193
Goodwill 18,620 18,288
Intangible assets, net 5,399 6,754
Other assets 4,435 4,082
------------ ------------
Total assets $ 387,232 $ 293,378
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 12,874 $ 11,715
Deferred tax liability 51,018 33,453
Lines of credit 100,000 -
Long-term debt and obligations under capital
lease 138 932
------------ ------------
Total liabilities 164,030 46,100
------------ ------------
Stockholders' equity:
Preferred stock, par value $0.01, authorized
shares, 2,000,000,
issued and outstanding shares - 0 - -
Common stock, par value $0.01, authorized
shares, 30,000,000,
issued and outstanding shares - 15,107,554 at
September 30, 2007 and 15,987,432 at
December 31, 2006 151 160
Additional paid-in capital 70,044 115,528
Retained earnings 153,007 131,590
------------ ------------
Total stockholders' equity 223,202 247,278
------------ ------------
Total liabilities and stockholders'
equity $ 387,232 $ 293,378
============ ============
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
Nine Months Nine Months
Ended Ended
September September
30, 30,
2007 2006
----------- -----------
Cash flows from operating activities:
Net income $ 37,563 $ 33,076
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of share-based compensation 2,218 1,544
Depreciation and amortization 4,112 3,771
Deferred tax expense 17,566 6,625
Changes in operating assets and liabilities:
Other assets (352) 801
Accounts payable (77) 431
Income taxes (918) (3,717)
Accrued expenses 958 400
Accrued payroll and bonuses 200 575
----------- -----------
Net cash provided by operating activities 61,270 43,506
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (6,655) (2,613)
Acquisition of finance receivables, net of
buybacks (159,130) (74,203)
Collections applied to principal on finance
receivables 59,102 56,084
Acquisition of The Palmer Group, including
acquisition costs (409) -
----------- -----------
Net cash used in investing activities (107,092) (20,732)
----------- -----------
Cash flows from financing activities:
Dividends paid (16,070) -
Proceeds from exercise of options and warrants 1,461 1,690
Income tax benefit from share-based compensation 1,145 1,665
Proceeds from lines of credit 103,000 -
Principal payments on lines of credit (3,000) (15,000)
Repurchase of common stock (50,557) -
Principal payments on long-term debt (690) (346)
Principal payments on capital lease obligations (104) (106)
----------- -----------
Net cash provided by/(used in) financing
activities 35,185 (12,097)
----------- -----------
Net (decrease)/increase in cash and cash
equivalents (10,637) 10,677
Cash and cash equivalents, beginning of period 25,101 15,985
----------- -----------
Cash and cash equivalents, end of period $ 14,464 $ 26,662
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,096 $ 323
Cash paid for income taxes $ 5,285 $ 16,105
Noncash investing and financing activities:
Acquisition of The Palmer Group-Common stock
issued $ 50 -
SFAS 123R adoption reclass of payroll
liability to additional paid in capital $ - $ 427
Contact:
Investor Relations
757-519-9300 ext. 13010
info@portfoliorecovery.com
SOURCE: Portfolio Recovery Associates, Inc.