PRA Investorroom
NORFOLK, VA, Oct 29, 2008 (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 $11.5 million, or $0.75 per diluted share, for the quarter ended September 30, 2008.
The Company's third-quarter 2008 profit represents a decline of 2.1% from net income of $11.7 million, or $0.75 per diluted share, in the same period a year earlier.
Total revenues in the third quarter of 2008 increased 26% to a record $68.6 million, up from $54.6 million in the year-earlier period. Total revenues consist 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 2008, the Company applied 36.5% of cash collections to reduce the carrying basis of its owned debt portfolios. This amount included a $3.8 million allowance charge, equivalent to approximately $2.4 million after tax, or 15 cents a diluted share, against certain pools of finance receivables accounts. Amortization was up 725 basis points from 29.2% in Q3 2007.
"Portfolio Recovery Associates continued to generate substantial cash in the third quarter as well as making strategic portfolio acquisitions and remaining focused on operational effectiveness. Cash receipts set a new record in the quarter, finishing just short of $100 million. This helped drive record quarterly revenues of $68.6 million. We moved to restructure our legal collections unit during the quarter, investing more heavily in this channel, as legal recoveries failed to meet our internal expectations. These moves should help improve future earnings both directly and indirectly, as our legal collections shortfall also played a role in the $3.8 million allowance charge taken in the quarter," said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.
Financial and Operating Highlights
-- Cash collections rose 27% to $83.0 million in the third quarter of
2008, up from $65.2 million in the year-ago period. Call center
collections and other increased 22%, external legal collections grew 1%,
internal legal collections grew 45% and purchased bankruptcy collections
gained 143% when compared with the year-earlier period.
The table below displays our cash collections by source, by quarter
Cash Collection
Source ($ in
thousands) Q32008 Q22008 Q12008 Q42007 Q32007 Q22007
======== ======== ======== ======== ======== ========
Call Center
Collections &
Other $ 43,949 $ 46,892 $ 44,883 $ 35,551 $ 36,001 $ 36,107
External Legal
Collections 21,590 22,471 21,880 20,861 21,384 20,911
Internal Legal
Collections 2,106 1,947 1,819 1,443 1,449 1,357
Purchased
Bankruptcy 15,362 13,732 10,820 7,245 6,317 6,231
Cash Collection
Source ($ in
thousands) Q12007 Q42006 Q32006 Q22006 Q12006
======== ======== ======== ======== ========
Call Center
Collections &
Other $ 37,841 $ 31,266 $ 31,630 $ 32,975 $ 35,811
External Legal
Collections 20,844 19,762 19,607 19,058 17,606
Internal Legal
Collections 1,400 1,171 1,056 761 625
Purchased
Bankruptcy 7,223 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 $134.23 for the
first nine months of 2008, down slightly from $135.77 for all of 2007.
Excluding the impact of trustee remittances from purchased bankrupt
accounts, the comparison is $114.37 for the first nine months of 2008 vs.
$123.10 for all of 2007.
-- Revenues were $68.6 million in the third quarter, up 26% from $54.6
million in the same period a year ago. This was driven by record cash
receipts of $98.9 million, up 34% from $73.7 million a year earlier. Cash
receipts comprise both cash collections and revenue from the Company's fee-
based businesses.
-- The Company purchased $857 million of face-value debt during the third
quarter of 2008 for $52.3 million. This debt was acquired in 56 portfolios
from 19 different sellers.
-- The Company's fee-for-service businesses generated revenue of $15.8
million in the third quarter of 2008, up 86% from $8.5 million in the same
period a year ago. These businesses accounted for a record 23% of the
Company's overall revenues in the third quarter.
-- On July 1, 2008, the Company completed its acquisition of
MuniServices, LLC, a provider of revenue administration to local
governments, based in Fresno, California.
-- On August 1, 2008, the Company completed and announced its acquisition
of the assets of Broussard Partners and Associates, Inc., a provider of
audit services to local governments, based in Houston, Texas.
-- During the third quarter of 2008, the Company reversed all estimated
share-based compensation costs that had been accrued during 2007 and 2008
related to the 2007 Long Term Incentive Program because the achievement of
the performance targets of the program were unlikely to be achieved. This
expense reversal of approximately $1.4 million resulted in an increase in
net income of approximately $850,000, or six cents per diluted share.
-- The Company's cash balances were $28.0 million as of September 30,
2008, up from $16.3 million as of June 30, 2008. Also during the quarter,
the Company made net draws of $33.0 million on its line of credit, leaving
it with $267.3 million in outstanding borrowings at quarter's end. With
the $25 million expansion of the line during the quarter, remaining
borrowing availability under the line was $97.7 million at September 30,
2008.
"Portfolio Recovery Associates continued to successfully pursue its overall strategy in the third quarter, despite the slowing economy and credit crunch. Our ability to expand our bank credit line by $25 million on top of existing borrowing capacity allowed the Company to continue taking advantage of portfolio acquisition opportunities, spending $52.3 million on defaulted debt. In addition, we closed on the MuniServices acquisition as well as the acquisition of the assets of Broussard Partners during the third quarter, as revenue from our fee-for-service businesses rose 86% vs. a year ago. These businesses now represent a record 23% of the Company's overall revenue," said Kevin P. Stevenson, Chief Financial and Administrative Officer.
The Company's year to date 2008 earnings totaled $34.8 million, or $2.27 per diluted share, compared with $37.6 million, or $2.35 per diluted share, for the first nine months of 2007. Year to date total 2008 revenues were $196.3 million, compared with $163.4 million in the comparable period of 2007.
Conference Call Information
The Company will hold a conference call with investors tonight, Wednesday, October 29, 2008, at 5:30 p.m. EDT to discuss its third quarter results. Investors can access the call live by dialing 888-713-4218 for domestic callers or 617-213-4870 for international callers using the pass code 57329861.
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 12611630. 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 and MuniServices businesses, and collateral-location services for credit originators via IGS.
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, RDS and MuniServices 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,
2008 2007 2008 2007
Revenues:
Income recognized on finance
receivables, net $ 52,738 $ 46,111 $ 158,412 $ 137,964
Commissions 15,848 8,529 37,891 25,460
--------- --------- --------- ---------
Total revenues 68,586 54,640 196,303 163,424
Operating expenses:
Compensation and employee
services 22,983 17,322 64,983 50,438
Outside legal and other
fees and services 16,709 11,847 46,400 34,530
Communications 2,263 2,038 7,535 5,927
Rent and occupancy 1,123 819 2,830 2,217
Other operating expenses 1,912 1,605 4,863 4,467
Depreciation and
amortization 2,162 1,455 5,138 4,112
--------- --------- --------- ---------
Total operating expenses 47,152 35,086 131,749 101,691
--------- --------- --------- ---------
Income from operations 21,434 19,554 64,554 61,733
Other income and (expense):
Interest income 17 65 50 364
Interest expense (3,066) (1,137) (8,215) (1,543)
--------- --------- --------- ---------
Income before income
taxes 18,385 18,482 56,389 60,554
Provision for income
taxes 6,930 6,787 21,638 22,991
--------- --------- --------- ---------
Net income $ 11,455 $ 11,695 $ 34,751 $ 37,563
========= ========= ========= =========
Net income per common share:
Basic $ 0.75 $ 0.76 $ 2.28 $ 2.37
Diluted $ 0.75 $ 0.75 $ 2.27 $ 2.35
Weighted average number of
shares outstanding:
Basic 15,267 15,451 15,210 15,816
Diluted 15,336 15,577 15,280 15,962
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Balance Sheets
(in thousands, except per share amounts)
September 30, December 31,
ASSETS 2008 2007
-------------- --------------
Cash and cash equivalents $ 28,006 $ 16,730
Finance receivables, net 535,430 410,297
Income taxes receivable 3,715 3,022
Property and equipment, net 23,354 16,171
Goodwill 28,058 18,620
Intangible assets, net 13,747 5,046
Other assets 9,251 6,421
-------------- --------------
Total assets $ 641,561 $ 476,307
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 19,426 $ 15,345
Deferred tax liability 81,350 57,579
Line of credit 267,300 168,000
Obligations under capital lease 23 103
-------------- --------------
Total liabilities 368,099 241,027
-------------- --------------
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 shares, 15,392,
outstanding shares, 15,280 at
September 30, 2008, and 15,159 issued and
outstanding at December 31, 2007 153 152
Additional paid-in capital 74,873 71,443
Retained earnings 198,436 163,685
-------------- --------------
Total stockholders' equity 273,462 235,280
-------------- --------------
Total liabilities and stockholders'
equity $ 641,561 $ 476,307
============== ==============
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Statements of Cash Flows
(in thousands)
Nine Months Nine Months
Ended Ended
September 30, September 30,
2008 2007
------------- -------------
Cash flows from operating activities:
Net income $ 34,751 $ 37,563
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of share-based
compensation 442 2,218
Depreciation and amortization 5,138 4,112
Deferred tax expense 23,771 17,566
Changes in operating assets and
liabilities:
Other assets 105 (352)
Accounts payable and accrued
liabilities 2,365 1,081
Income tax receivable (513) (918)
------------- -------------
Net cash provided by operating
activities 66,059 61,270
------------- -------------
Cash flows from investing activities:
Purchases of property and equipment (4,041) (6,655)
Acquisition of finance receivables, net of
buybacks (214,172) (159,130)
Collections applied to principal on finance
receivables 89,039 59,102
Acquisitions, including acquisition costs
and net of cash acquired (25,791) (409)
------------- -------------
Net cash used in investing activities (154,965) (107,092)
------------- -------------
Cash flows from financing activities:
Dividends paid - (16,070)
Proceeds from exercise of options 594 1,461
Income tax benefit from share-based
compensation 368 1,145
Proceeds from line of credit 146,300 103,000
Principal payments on line of credit (47,000) (3,000)
Repurchase of common stock - (50,557)
Principal payments on long-term debt - (690)
Principal payments on capital lease
obligations (80) (104)
------------- -------------
Net cash provided by financing
activities 100,182 35,185
------------- -------------
Net increase/(decrease) in cash and
cash equivalents 11,276 (10,637)
Cash and cash equivalents, beginning of
period 16,730 25,101
------------- -------------
Cash and cash equivalents, end of period $ 28,006 $ 14,464
============= =============
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 8,272 $ 1,096
Cash paid for income taxes $ 3 $ 5,285
Noncash investing and financing activities:
Common stock issued for acquisition $ 1,847 50
Contact:
Investor Relations
757-519-9300 ext. 13010
info@portfoliorecovery.com
SOURCE: Portfolio Recovery Associates, Inc.
mailto:info@portfoliorecovery.com