PRA Investorroom
NORFOLK, VA, Feb 12, 2009 (MARKET WIRE via COMTEX) -- 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 $10.6 million, or $0.69 per diluted share, for the quarter ended December 31, 2008.
The Company's fourth-quarter 2008 profit represents a 1% decline from net income of $10.7 million, or $0.70 per diluted share, in the same period a year earlier.
Total revenue in the fourth quarter of 2008 increased 17% to $67.0 million, up from $57.3 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 fourth quarter of 2008, the Company applied 39.3% of cash collections to reduce the carrying basis of its owned debt portfolios, compared with 28.2% in the fourth quarter of 2007. The 2008 amortization rate included an $8.9 million allowance charge, equivalent to approximately $5.4 million after tax, or 35 cents per diluted share, against certain pools of finance receivables accounts.
"In the face of a credit crunch and an economy falling into recession, Portfolio Recovery Associates held its ground -- and more -- in 2008. The Company's continued diversification into fee-based businesses, including the acquisitions of MuniServices and Broussard Partners' assets during the year, helped mitigate the effects of a slowing economy on owned-portfolio collections. While allowance charges did impact our bottom-line results, business remained solid and cash flows were strong, allowing us to spend a record $280 million on portfolio purchases for the full year and position the Company for long-term growth," said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.
The Company's full year 2008 earnings totaled $45.4 million, or $2.97 per diluted share, compared with $48.2 million, or $3.06 per diluted share, for all of 2007. Full year 2008 revenue was $263.3 million, up 19.3% from $220.7 million in 2007.
Financial and Operating Highlights
-- Cash collections rose 22% to $79.2 million in the fourth quarter of
2008, up from $65.1 million in the year-ago period. Call center and
other collections increased 16%, external legal collections decreased
12%, internal legal collections grew 84% and purchased bankruptcy
collections gained 133% when compared with the year-earlier period.
The table below displays our cash collections by source, by quarter for
the past several years.
Cash Collection Source
($ in thousands) Q42008 Q32008 Q22008 Q12008 Q42007
======== ======== ======== ======== ========
Call Center & Other
Collections $ 41,268 $ 43,949 $ 46,892 $ 44,883 $ 35,551
External Legal Collections 18,424 21,590 22,471 21,880 20,861
Internal Legal Collections 2,652 2,106 1,947 1,819 1,443
Purchased Bankruptcy 16,904 15,362 13,732 10,820 7,245
Cash Collection Source
($ in thousands) Q32007 Q22007 Q12007 Q42006
======== ======== ======== ========
Call Center & Other
Collections $ 36,001 $ 36,107 $ 37,841 $ 31,266
External Legal Collections 21,384 20,911 20,844 19,762
Internal Legal Collections 1,449 1,357 1,400 1,171
Purchased Bankruptcy 6,317 6,231 7,223 6,581
-- Full year cash receipts increased 28.6% to $383.5 million and 2008
cash collections on pools of owned accounts increased 24.6% to $326.7
million.
-- Productivity, as measured by cash collections per hour paid, the
Company's key measure of collector performance, finished at $131.29 for
the full year 2008, down 3% from $135.77 for all of 2007. Excluding the
impact of trustee remittances from purchased bankrupt accounts, the
comparison is $111.17 for the full year 2008 vs. $123.10 for all of
2007.
-- Revenue was $67.0 million in the fourth quarter, up 17% from $57.3
million in the same period a year ago. This was driven by cash receipts
of $98.1 million, up 30% from $75.7 million a year earlier. Cash
receipts is comprised of both cash collections and revenue from the
Company's fee-based businesses.
-- The Company purchased $1.3 billion of face-value debt during the
fourth quarter of 2008 for $61.5 million. This debt was acquired in 77
portfolios from 20 different sellers. For the full year, the Company
acquired $4.59 billion of face value debt for $280.3 million.
-- The Company's fee-for-service businesses generated record revenue of
$18.9 million in the fourth quarter of 2008, up 79% from $10.6 million
in the same period a year ago. These businesses accounted for a record
28.2% of the Company's overall revenue in the fourth quarter of 2008,
up from 18.5% in Q4 2007. For the full year, the fee businesses
generated revenue of $56.8 million, up 57.6% from $36.0 million in
2007.
-- The Company's cash balances were $13.9 million as of December 31,
2008, down from $28.0 million as of September 30, 2008. During the
quarter, the Company made net draws of $1.0 million on its line of
credit, leaving it with $268.3 million in outstanding borrowings at
quarter's end. Remaining borrowing availability under the line was
$96.7 million at December 31, 2008.
"Portfolio Recovery Associates performed solidly in the fourth quarter of 2008, concluding a year that saw more than its share of economic turbulence. The Company's strong cash flow allowed us to invest more than $60 million in pools of distressed debt, while only making net draws of $1 million on our line of credit. Results were negatively impacted by a sizable $8.9 million allowance charge. However, our fee businesses hit on all cylinders, posting record revenue in the fourth quarter and helping keep EPS nearly even with 2007 despite a significant deterioration in economic conditions," said Kevin P. Stevenson, Chief Financial and Administrative Officer.
Conference Call Information
The Company will hold a conference call with investors tonight, Thursday, February 12, 2009, at 5:30 p.m. EST to discuss its fourth quarter and full year results. Investors can access the call live by dialing 888-679-8038 for domestic callers or 617-213-4850 for international callers using the pass code 94774250.
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 14189690. 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 Months Three Months Year Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2008 2007 2008 2007
Revenues:
Income recognized
on finance
receivables,
net $ 48,073 $ 46,741 $ 206,486 $ 184,705
Commissions 18,898 10,583 56,789 36,043
------------ ------------ ------------ ------------
Total revenues 66,971 57,324 263,275 220,748
Operating expenses:
Compensation
and employee
services 23,091 18,584 88,073 69,022
Outside legal
and other
fees and
services 15,352 12,944 61,752 47,474
Communications 2,769 2,603 10,304 8,531
Rent and
occupancy 1,078 888 3,908 3,105
Other operating
expenses 2,114 1,448 6,977 5,915
Depreciation
and amortization 2,285 1,405 7,424 5,517
------------ ------------ ------------ ------------
Total operating
expenses 46,689 37,872 178,438 139,564
------------ ------------ ------------ ------------
Income from
operations 20,282 19,452 84,837 81,184
Other income and
(expense):
Interest income 10 55 60 419
Interest expense (2,937) (2,161) (11,151) (3,704)
------------ ------------ ------------ ------------
Income before
income taxes 17,355 17,346 73,746 77,899
Provision for
income taxes 6,746 6,667 28,384 29,658
------------ ------------ ------------ ------------
Net income $ 10,609 $ 10,679 $ 45,362 $ 48,241
============ ============ ============ ============
Net income per
common share:
Basic $ 0.69 $ 0.71 $ 2.98 $ 3.08
Diluted $ 0.69 $ 0.70 $ 2.97 $ 3.06
Weighted average
number of shares
outstanding:
Basic 15,283 15,136 15,229 15,646
Diluted 15,329 15,230 15,292 15,779
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Balance Sheets
(in thousands, except per share amounts)
December 31, December 31,
ASSETS 2008 2007
------------- -------------
Cash and cash equivalents $ 13,901 $ 16,730
Finance receivables, net 563,830 410,297
Income taxes receivable 3,587 3,022
Property and equipment, net 23,884 16,171
Goodwill 27,546 18,620
Intangible assets, net 13,429 5,046
Other assets 11,663 6,421
------------- -------------
Total assets $ 657,840 $ 476,307
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 17,602 $ 15,345
Deferred tax liability 88,070 57,579
Line of credit 268,300 168,000
Obligations under capital lease 5 103
------------- -------------
Total liabilities 373,977 241,027
------------- -------------
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, 15,398,
outstanding shares, 15,286 at December 31,
2008, and 15,159 issued and outstanding at
December 31, 2007 153 152
Additional paid-in capital 74,574 71,443
Retained earnings 209,047 163,685
Accumulated other comprehensive income 89 -
------------- -------------
Total stockholders' equity 283,863 235,280
------------- -------------
Total liabilities and stockholders'
equity $ 657,840 $ 476,307
============= =============
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Statements of Cash Flows
(in thousands)
Year Year
Ended Ended
December 31, December 31,
2008 2007
------------ ------------
Cash flows from operating activities:
Net income $ 45,362 $ 48,241
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of share-based
compensation 141 2,575
Depreciation and amortization 7,424 5,517
Deferred tax expense 30,854 24,126
Changes in operating assets and
liabilities:
Other assets (2,218) (2,339)
Accounts payable and accrued
liabilities 540 3,554
Income tax receivable (385) (1,319)
------------ ------------
Net cash provided by operating
activities 81,718 80,355
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (6,140) (8,661)
Acquisition of finance receivables,
net of buybacks (273,746) (261,310)
Collections applied to principal on
finance receivables 120,213 77,461
Acquisitions, including acquisition costs
and net of cash acquired (26,041) (409)
------------ ------------
Net cash used in investing
activities (185,714) (192,919)
------------ ------------
Cash flows from financing activities:
Dividends paid - (16,070)
Proceeds from exercise of options 607 2,074
Income tax benefit from share-based
compensation 357 1,575
Proceeds from line of credit 171,300 171,000
Principal payments on line of credit (71,000) (3,000)
Repurchase of common stock - (50,557)
Principal payments on long-term debt - (690)
Principal payments on capital lease
obligations (97) (139)
------------ ------------
Net cash provided by financing
activities 101,167 104,193
------------ ------------
Net decrease in cash and cash
equivalents (2,829) (8,371)
Cash and cash equivalents, beginning of year 16,730 25,101
------------ ------------
Cash and cash equivalents, end of year $ 13,901 $ 16,730
============ ============
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 11,322 $ 2,779
Cash paid for income taxes $ 3 $ 5,289
Noncash investing and financing activities:
Common stock issued for acquisition $ 1,847 $ 50
Basis - swap contract $ 89 $ -
Contact:
Investor Relations
757-519-9300 ext. 13010
info@portfoliorecovery.com
SOURCE: Portfolio Recovery Associates, Inc.
mailto:info@portfoliorecovery.com