The Company's third-quarter 2009 profit represents a 12% decrease from net income of $11.5 million, or $0.75 per diluted share, in the same period a year earlier.
Total revenue in the third quarter of 2009 was unchanged from the year-earlier period at $68.6 million. 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 2009, the Company applied 41.2% of cash collections to reduce the carrying basis of its owned debt portfolios, compared with 36.5% in the third quarter of 2008. The third quarter 2009 amortization rate included an $8.0 million net allowance charge, equivalent to approximately $4.8 million after tax, or 31 cents per diluted share, against certain pools of finance receivables accounts. During the third quarter of 2009, the Company recorded ongoing non-cash equity-based compensation expense of $589,000, equivalent to approximately $350,000 after tax, or 2 cents per diluted share.
"Portfolio Recovery Associates continued to perform solidly in the third quarter of 2009, despite an economy still struggling to recover from recession. Not only did the Company produce strong results operationally, but we continued to build for the future -- further refining our best-in-class platform and taking advantage of our access to capital to make significant portfolio acquisitions. An $8 million net allowance charge, equivalent to 31 cents a share, did undermine earnings growth. Nevertheless, Portfolio Recovery Associates is well-positioned to emerge from this economic downturn a stronger and more efficient competitor," said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.
Based on the quantity and quality of portfolios purchased over the past 18 months, continued advances in collections efficiency, and the level of expertise and scale achieved in the bankruptcy business, Portfolio Recovery Associates is budgeting internally for substantial revenue and earnings growth in 2010.
Financial and Operating Highlights
-- Cash collections rose 11% to a record $92.4 million in the third
quarter of 2009, up from $83.0 million in the year-ago period. Call center
and other collections increased 11%, external legal collections decreased
29%, internal legal collections grew 194%, and purchased bankruptcy
collections gained 45% when compared with the year-earlier period.
The table below displays our cash collections by source, by quarter for the past five quarters:
Cash Collection Source ($ in
thousands) Q32009 Q22009 Q12009 Q42008 Q32008
-------- -------- -------- -------- --------
Call Center & Other
Collections $ 48,590 $ 50,052 $ 50,914 $ 41,268 $ 43,949
External Legal Collections 15,330 16,527 17,790 18,424 21,590
Internal Legal Collections 6,196 4,263 3,539 2,652 2,106
Purchased Bankruptcy 22,251 19,637 17,628 16,904 15,362
-- Productivity, as measured by cash collections per hour paid, the
Company's key measure of collector performance, finished at $144.69 for the
first nine months of 2009 vs. $131.29 for all of 2008. Excluding the
impact of trustee remittances from purchased bankrupt accounts, the
comparison is $115.02 for the first nine months of 2009, compared with
$109.82 for all of 2008. Excluding trustee remittances on purchased
bankrupt accounts and legal collections, the comparison is $88.08 for the
first nine months of 2009 and $75.47 for all of 2008.
-- Revenue was $68.6 million in the third quarter, flat compared with the
same period a year ago. This was driven by near-record cash receipts of
$106.6 million, up 7.8% from $98.9 million a year earlier. Cash receipts
are comprised of both cash collections and revenue from the Company's fee-
based businesses.
-- The net allowance charge totaled $8.0 million in the third quarter.
The table below displays the Company's net allowance charges incurred by
quarter, by buying period since 2005:
($ in thousands)
-------------------------------------------
Purchase Period
Allowance 1996-
Period 2000 2001 2002 2003 2004 2005
------ ----- ------ ----- ------- ------
Q1 05 $ - $ - $ - $ - $ - $ -
Q2 05 - - - - - -
Q3 05 - - - - - -
Q4 05 - 200 - - - -
Q1 06 - - - - - 175
Q2 06 - 75 - - - 125
Q3 06 - 200 - - - 75
Q4 06 - - - - - 450
Q1 07 - (245) - - - 610
Q2 07 - 70 - 20 - -
Q3 07 - 50 - 150 320 660
Q4 07 - - - 190 150 615
Q1 08 - - - 120 650 910
Q2 08 - (140) - 400 720 -
Q3 08 - (30) - (60) 60 325
Q4 08 - (75) - (325) (140) 1,805
Q1 09 - (105) - (120) 35 1,150
Q2 09 - - - (230) (220) 495
Q3 09 - - - (25) (190) 1,170
------ ----- ------ ----- ------- ------
Total $ - $ - $ - $ 120 $ 1,385 $8,565
====== ===== ====== ===== ======= ======
($ in thousands)
-------------------------------------------
Purchase Period
Allowance YTD
Period 2006 2007 2008 2009 Total
-------- -------- -------- ------ --------
Q1 05 $ - $ - $ - $ - $ -
Q2 05 - - - - $ -
Q3 05 - - - - $ -
Q4 05 - - - - $ 200
Q1 06 - - - - $ 175
Q2 06 - - - - $ 200
Q3 06 - - - - $ 275
Q4 06 - - - - $ 450
Q1 07 - - - - $ 365
Q2 07 - - - - $ 90
Q3 07 - - - - $ 1,180
Q4 07 340 - - - $ 1,295
Q1 08 1,105 - - - $ 2,785
Q2 08 2,330 650 - - $ 3,960
Q3 08 1,135 2,350 - - $ 3,780
Q4 08 2,600 4,380 620 - $ 8,865
Q1 09 910 2,300 2,050 - $ 6,220
Q2 09 765 685 2,425 - $ 3,920
Q3 09 1,965 340 4,750 - $ 8,010
-------- -------- -------- ------ --------
Total $ 11,150 $ 10,705 $ 9,845 $ - $ 41,770
======== ======== ======== ====== ========
-- The Company purchased $1.75 billion of face-value debt during the
third quarter of 2009 for $76.7 million. This debt was acquired in 100
portfolios from 12 different sellers.
-- The Company's fee-for-service businesses generated revenue of $14.2
million in the third quarter of 2009, down 10.1% from $15.8 million in the
same period a year ago. These businesses accounted for 20.8% of the
Company's overall revenue in the third quarter of 2009, down from 23.1% in
Q3 2008.
-- The Company's cash balances were $19.9 million as of September 30,
2009, up from $15.7 million as of June 30, 2009. During the quarter, the
Company made net borrowings of $16.5 million on its line of credit, leaving
it with $306.3 million in outstanding borrowings at quarter's end.
Remaining borrowing availability under the line was $58.7 million at
September 30, 2009.
"Portfolio Recovery Associates turned in a strong third-quarter operating performance overall, highlighted by record cash collections of $92.4 million, year-over-year productivity improvements at all call centers, and portfolio acquisitions totaling $76.7 million even in a tight credit environment. The weak economy did impact our fee-for-service businesses, particularly in the government services area, and contributed to an $8 million net allowance charge. However, we remain extremely confident in our strategy of developing Portfolio Recovery Associates' businesses for the long term and look forward to emerging from this recession a stronger competitor than ever," said Kevin P. Stevenson, Chief Financial and Administrative Officer.
For the first nine months of 2009, the Company's earnings totaled $31.9 million, or $2.07 per diluted share, compared with $34.8 million, or $2.27 per diluted share, for the first nine months of 2008. Year-to-date 2009 revenue was $207.9 million, compared with $196.3 million in the first nine months of 2008.
Conference Call Information
The Company will hold a conference call with investors tonight, Thursday, October 29, 2009, at 5:30 p.m. EDT to discuss its third quarter results. Investors can access the call live by dialing 888-713-4209 for domestic callers or 617-213-4863 for international callers using the pass code 60750066.
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 10218295. 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 its IGS subsidiary.
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 future revenue and earnings growth, 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,
2009 2008 2009 2008
Revenues:
Income recognized on finance
receivables, net $ 54,336 $ 52,738 $ 159,650 $ 158,412
Commissions 14,229 15,831 48,225 37,874
--------- --------- --------- ---------
Total revenues 68,565 68,569 207,875 196,286
Operating expenses:
Compensation and employee
services 26,844 22,983 79,940 64,983
Legal and agency fees and
costs 11,296 14,386 34,460 39,530
Outside fees and services 2,284 2,323 6,854 6,870
Communications 3,472 2,263 11,157 7,535
Rent and occupancy 1,270 1,123 3,515 2,830
Other operating expenses 2,341 1,912 6,565 4,863
Depreciation and
amortization 2,269 2,162 6,874 5,138
--------- --------- --------- ---------
Total operating expenses 49,776 47,152 149,365 131,749
--------- --------- --------- ---------
Income from operations 18,789 21,417 58,510 64,537
Other income and (expense):
Interest income - 34 3 67
Interest expense (1,964) (3,066) (5,891) (8,215)
--------- --------- --------- ---------
Income before income
taxes 16,825 18,385 52,622 56,389
Provision for income
taxes 6,729 6,930 20,730 21,638
--------- --------- --------- ---------
Net income $ 10,096 $ 11,455 $ 31,892 $ 34,751
========= ========= ========= =========
Net income per common share:
Basic $ 0.65 $ 0.75 $ 2.07 $ 2.28
Diluted $ 0.65 $ 0.75 $ 2.07 $ 2.27
Weighted average number of
shares outstanding:
Basic 15,466 15,267 15,392 15,210
Diluted 15,502 15,336 15,428 15,280
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Balance Sheets
(in thousands, except per share amounts)
September December
30, 31,
ASSETS 2009 2008
--------- ----------
Cash and cash equivalents $ 19,874 $ 13,901
Finance receivables, net 660,879 563,830
Accounts receivable, net 6,909 8,278
Income taxes receivable 5,893 3,587
Property and equipment, net 22,093 23,884
Goodwill 29,299 27,546
Intangible assets, net 11,425 13,429
Other assets 3,310 3,385
--------- ----------
Total assets $ 759,682 $ 657,840
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 19,280 $ 17,602
Deferred tax liability 110,333 88,070
Line of credit 306,300 268,300
Long term debt and capital leases 1,663 5
--------- ----------
Total liabilities 437,576 373,977
--------- ----------
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, 15,573 issued and 15,491 outstanding shares
at September 30, 2009, and 15,398 issued and 15,286
outstanding shares at December 31, 2008 155 153
Additional paid-in capital 81,358 74,574
Retained earnings 240,939 209,047
Accumulated other comprehensive (loss)/income, net
of tax (346) 89
--------- ----------
Total stockholders' equity 322,106 283,863
--------- ----------
Total liabilities and stockholders' equity $ 759,682 $ 657,840
========= ==========
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Statements of Cash Flows
(in thousands)
Nine Months Nine Months
Ended Ended
September September
30, 30,
2009 2008
----------- -----------
Cash flows from operating activities:
Net income $ 31,892 $ 34,751
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of share-based compensation 3,240 442
Depreciation and amortization 6,874 5,138
Deferred tax expense 22,000 23,771
Changes in operating assets and
liabilities:
Other assets (14) 182
Accounts receivable 1,369 (77)
Accounts payable and accrued
liabilities 1,112 2,365
Income taxes (2,306) (513)
----------- -----------
Net cash provided by operating activities 64,167 66,059
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (3,079) (4,041)
Acquisition of finance receivables, net of
buybacks (210,116) (214,172)
Collections applied to principal on finance
receivables 113,067 89,039
Acquisitions, including acquisition costs and
net of cash acquired (100) (25,791)
----------- -----------
Net cash used in investing activities (100,228) (154,965)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of options 1,630 594
Income tax benefit from share-based compensation 746 368
Proceeds from line of credit 84,500 146,300
Principal payments on line of credit (46,500) (47,000)
Proceeds from long-term debt 2,036 -
Principal payments on long-term debt (373) -
Principal payments on capital lease obligations (5) (80)
----------- -----------
Net cash provided by financing activities 42,034 100,182
----------- -----------
Net increase in cash and cash equivalents 5,973 11,276
Cash and cash equivalents, beginning of year 13,901 16,730
----------- -----------
Cash and cash equivalents, end of period $ 19,874 $ 28,006
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 6,028 $ 8,272
Cash paid for income taxes $ 321 $ 3
Noncash investing and financing activities:
Common stock issued for acquisition $ 1,170 $ 1,847
Net unrealized change in fair value of
derivative instrument $ (655) $ -
Contact: Investor Relations 757-519-9300 ext. 13010 info@portfoliorecovery.com
SOURCE: Portfolio Recovery Associates, Inc.
mailto:info@portfoliorecovery.com