NORFOLK, VA, Jul 29, 2010 (MARKETWIRE 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 receivables management and payments processing services, today reported record net income of $19.5 million, or $1.14 per diluted share, for the quarter ended June 30, 2010.
The Company's second-quarter 2010 profit represents a 67% increase from net income of $11.7 million, or $0.76 per diluted share, in the same period a year earlier.
Total revenue in the second quarter of 2010 was up 31% from the year-earlier period to a record $93 million. Total revenue consists of cash collections reduced by amounts applied to principal on the Company's owned debt portfolios, plus fee income earned from its fee-for-service businesses. During the second quarter of 2010, the Company applied 40.1% of cash collections to reduce the carrying basis of its owned debt portfolios, compared with 40.3% in the second quarter of 2009. The second quarter 2010 amortization rate included a $6.3 million net allowance charge, equivalent to approximately $3.9 million after tax, or 23 cents per diluted share, against certain pools of finance receivables accounts. During the second quarter of 2010, the Company recorded ongoing non-cash equity-based compensation expense of $1.2 million, equivalent to approximately $731,000 after tax, or 4 cents per diluted share.
"Portfolio Recovery Associates concluded the first half of 2010 with strong second-quarter results across the board, setting new records for cash collections, cash receipts, revenue, net income and EPS," said Steven D. Fredrickson, chairman, president and chief executive officer. "This performance was the direct result of long-term investments the Company has made over the past several years -- and intends to continue making -- in portfolios, technology and people. Importantly, this financial performance was achieved despite a weak economy that brought with it high unemployment and limited availability of consumer credit."
Financial and Operating Highlights
-- Cash collections rose 42% to a record $128 million in the second
quarter of 2010, up from $90.5 million in the year-ago period. Call
center and other collections increased 9%, external legal collections
increased 14%, internal legal collections grew 167%, and purchased
bankruptcy collections gained 123% when compared with the year-earlier
period. The table below displays our cash collections by source, by
quarter for the past five quarters:
Cash Collection Source
($ in thousands) Q22010 Q12010 Q42009 Q32009 Q22009
--------- --------- --------- --------- --------
Call Center & Other
Collections $ 54,477 $ 56,987 $ 45,365 $ 48,590 $ 50,052
External Legal Collections 18,819 18,276 15,496 15,330 16,527
Internal Legal Collections 11,362 10,713 7,570 6,196 4,263
Purchased Bankruptcy 43,748 33,219 26,855 22,251 19,637
-- Internal legal collections, in which the Company uses its own staff
attorneys or in select cases third-party attorneys working on a fixed
price basis, represent an important, emerging collections channel the
Company has been developing over the past 4 years. In the second
quarter of 2010, collections from this channel grew 167% from the prior
year to $11.4 million.
-- Productivity, as measured by cash collections per hour paid, the
Company's key measure of collector performance, finished at a record
$185 for the first half of 2010 vs. $145 for all of 2009. Excluding
the impact of trustee remittances from purchased bankrupt accounts, the
comparison is $131 for first six months of 2010, compared with $113 for
all of 2009. Excluding trustee remittances on purchased bankrupt
accounts and external legal collections, the comparison is $103 for the
first half of 2010 and $87 for all of 2009.
-- Revenue was a record $93.0 million in the second quarter, up 31% when
compared with the same period a year ago. This was driven by record
cash receipts of $144.5 million, up 34.4% from $107.5 million a year
earlier. Cash receipts are comprised of both cash collections and
revenue from the Company's fee-based businesses.
-- The Company's net allowance charge totaled $6.3 million in the second
quarter. The table below displays net allowance charges incurred by
quarter, by buying period since 2005 as well as purchases of
charged-off consumer debt, net of buybacks:
($ in thousands)
----------------------------------------------------------
Allowance Purchase Period
Period 1996-2000 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
Q4 09 - - - (120) - 1,375
Q1 10 - - - - - 2,795
Q2 10 - - - - (80) 1,600
--------- -------- -------- -------- -------- ---------
Total $ - $ - $ - $ - $ 1,305 $ 14,335
========= ======== ======== ======== ======== =========
Portfolio
Purchases, net $ 65,772 $ 33,481 $ 42,325 $ 61,448 $ 59,177 $ 143,172
--------- -------- -------- -------- -------- ---------
-------------------------------------------------
Allowance Purchase Period
Period 2006 2007 2008 2009-2010 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
Q4 09 1,220 110 6,900 - 9,485
Q1 10 1,175 2,900 - - 6,870
Q2 10 2,100 700 2,000 - 6,320
--------- --------- --------- --------- ----------
Total $ 15,645 $ 14,415 $ 18,745 $ - $ 64,445
========= ========= ========= ========= ==========
Portfolio
Purchases, net $ 107,714 $ 258,306 $ 275,173 $ 470,783 $1,517,351
--------- --------- --------- --------- ----------
-- The Company purchased $1.67 billion of face-value debt during the
second quarter of 2010 for $86.8 million. This debt was acquired in 78
portfolios from 11 different sellers. The tables below display purchase
price amounts by year, net of buybacks, current net finance receivable
balance, cash collections to date including sales, estimated remaining
collections and purchase price multiples:
($ in thousands)
Entire Portfolio
Unamortized
Total Purchase Price
Purchase Purchase Estimated Balance at
Period Price Collections June 30, 2010
--------- ---------------- ---------------- --------------
1996 $ 3,080 $ 10,063 $ -
1997 7,685 25,206 -
1998 11,089 36,882 -
1999 18,898 68,002 -
2000 25,020 112,872 -
2001 33,481 167,936 -
2002 42,325 185,865 -
2003 61,448 246,521 -
2004 59,177 182,631 534
2005 143,172 312,170 27,246
2006 107,714 220,067 33,030
2007 258,306 508,710 123,845
2008 275,173 538,998 176,809
2009 282,381 698,905 230,682
YTD 2010 188,402 403,544 183,460
---------------- ---------------- --------------
Total $ 1,517,351 $ 3,718,372 $ 775,606
================ ================ ==============
Total
Actual Cash Estimated
Collections Estimated Collections
Purchase Including Cash Remaining to Purchase
Period Sales Collections Price
--------- ---------------- ---------------- -------------
1996 $ 10,005 $ 58 327%
1997 25,016 190 328%
1998 36,425 457 333%
1999 66,648 1,354 360%
2000 109,524 3,348 451%
2001 164,614 3,322 502%
2002 181,405 4,460 439%
2003 238,678 7,843 401%
2004 174,080 8,551 309%
2005 260,126 52,044 218%
2006 158,747 61,320 204%
2007 296,515 212,195 197%
2008 221,988 317,010 196%
2009 144,207 554,698 248%
YTD 2010 18,885 384,659 214%
---------------- ---------------- -------------
Total $ 2,106,863 $ 1,611,509 245%
================ ================ =============
($ in thousands)
Purchased Bankruptcy (BK)
Portfolio Unamortized
Total Purchase Price
Purchase Purchase Estimated Balance at
Period Price Collections June 30, 2010
--------- ---------------- ---------------- --------------
1996-2003 $ - $ - $ -
2004 7,469 14,092 7
2005 29,302 43,028 569
2006 17,643 29,393 279
2007 78,933 113,219 36,110
2008 108,610 183,569 77,555
2009 156,377 354,836 141,780
YTD 2010 114,778 225,538 114,265
---------------- ---------------- --------------
Total $ 513,112 $ 963,675 $ 370,565
================ ================ ==============
Total
Actual Cash Estimated
Collections Estimated Collections
Purchase Including Cash Remaining to Purchase
Period Sales Collections Price
--------- ---------------- ---------------- -------------
1996-2003 $ - $ - 0%
2004 14,064 28 189%
2005 42,277 751 147%
2006 27,585 1,808 167%
2007 68,485 44,734 143%
2008 68,915 114,654 169%
2009 52,137 302,699 227%
YTD 2010 7,847 217,691 196%
---------------- ---------------- -------------
Total $ 281,310 $ 682,365 188%
================ ================ =============
($ in thousands)
Entire Portfolio less
Purchased BK Unamortized
Total Purchase Price
Purchase Purchase Estimated Balance at
Period Price Collections June 30, 2010
--------- ---------------- ---------------- --------------
1996 $ 3,080 $ 10,063 $ -
1997 7,685 25,206 -
1998 11,089 36,882 -
1999 18,898 68,002 -
2000 25,020 112,872 -
2001 33,481 167,936 -
2002 42,325 185,865 -
2003 61,448 246,521 -
2004 51,708 168,539 527
2005 113,870 269,142 26,677
2006 90,071 190,674 32,751
2007 179,373 395,491 87,735
2008 166,563 355,429 99,254
2009 126,004 344,069 88,902
YTD 2010 73,624 178,006 69,195
---------------- ---------------- --------------
Total $ 1,004,239 $ 2,754,697 $ 405,041
================ ================ ==============
Total
Actual Cash Estimated
Collections Estimated Collections
Purchase Including Cash Remaining to Purchase
Period Sales Collections Price
--------- ---------------- ---------------- -------------
1996 $ 10,005 $ 58 327%
1997 25,016 190 328%
1998 36,425 457 333%
1999 66,648 1,354 360%
2000 109,524 3,348 451%
2001 164,614 3,322 502%
2002 181,405 4,460 439%
2003 238,678 7,843 401%
2004 160,016 8,523 326%
2005 217,849 51,293 236%
2006 131,162 59,512 212%
2007 228,030 167,461 220%
2008 153,073 202,356 213%
2009 92,070 251,999 273%
YTD 2010 11,038 166,968 242%
---------------- ---------------- -------------
Total $ 1,825,553 $ 929,144 274%
================ ================ =============
-- The Company's fee-for-service businesses generated revenue of $16.1
million in the second quarter of 2010, down 6% from $17.1 million in
the same period a year ago. These businesses accounted for 17.3% of
the Company's overall revenue in the second quarter of 2010, down from
24.0% in Q2 2009.
-- The Company's cash balances were $18.3 million as of June 30, 2010.
During the second quarter, the Company made net repayments of $6.8
million on its line of credit, leaving it with $289.5 million in
outstanding borrowings at quarter's end. Remaining borrowing
availability under the line was $75.5 million at June 30, 2010.
Kevin P. Stevenson, chief financial and administrative officer, said: "The second quarter of 2010 was another strong one for Portfolio Recovery Associates. Driving our performance was the continued maturation of our sizeable investments in bankruptcy portfolios as well as steady improvements in core call center and legal collections. Reflecting those improvements, recoveries per hour paid, our core measure of productivity, finished the first six months of the year at a record $185. Taken together, these factors allowed us to overcome both a $6.3 million allowance charge and a still-weakened U.S. economy."
The Company's first-half 2010 earnings totaled $34.3 million, or $2.06 per diluted share, compared with $21.8 million, or $1.42 per diluted share, for the first six months of 2009. First-half 2010 revenue was $176.4 million, compared with $139.3 million in the first half of 2009.
Conference Call Information
The Company will hold a conference call with investors tonight, Thursday, July 29, 2010, at 5:30 p.m. EDT to discuss its second-quarter results. Investors can access the call live by dialing 888-680-0879 for domestic callers or 617-213-4856 for international callers using the pass code 10874783. Investors may also listen via Webcast at the Company's Website, www.portfoliorecovery.com.
Following the live call, 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 28795897. The replay will be available approximately two hours after today's conference call ends. There will also be an archived Webcast available at the Company's Website.
About Portfolio Recovery Associates, Inc.
Portfolio Recovery Associates' business revolves around the detection, collection, and processing of both unpaid and normal-course receivables originally owed to credit grantors, governments, retailers and others. 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 fee-based services, including collateral-location services for credit originators via its IGS subsidiary, revenue administration, audit and debt discovery/recovery services for government entities through both its RDS and MuniServices businesses and class action claims recovery services and related payment processing through its CCB 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 its subsidiaries 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 Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
Revenues:
Income recognized on finance
receivables, net $ 76,920 $ 54,038 $ 144,871 $ 105,314
Fee income 16,109 17,069 31,536 33,996
--------- --------- --------- ---------
Total revenues 93,029 71,107 176,407 139,310
Operating expenses:
Compensation and employee
services 30,872 26,434 60,513 53,097
Legal and agency fees and
costs 13,488 11,047 26,826 23,164
Outside fees and services 3,155 2,459 5,984 4,570
Communications 4,102 4,213 9,160 7,685
Rent and occupancy 1,297 1,163 2,549 2,245
Depreciation and
amortization 3,206 2,330 5,756 4,605
Other operating expenses 2,580 2,236 4,854 4,224
--------- --------- --------- ---------
Total operating expenses 58,700 49,882 115,642 99,590
--------- --------- --------- ---------
Income from operations 34,329 21,225 60,765 39,720
Other income and (expense):
Interest income - - 35 3
Interest expense (2,177) (1,949) (4,357) (3,928)
--------- --------- --------- ---------
Income before income
taxes 32,152 19,276 56,443 35,795
Provision for income
taxes 12,474 7,554 21,960 14,001
--------- --------- --------- ---------
Net income $ 19,678 $ 11,722 $ 34,483 $ 21,794
========= ========= ========= =========
Less net income
attributable to
redeemable
noncontrolling
interest (150) - (155) -
--------- --------- --------- ---------
Net income attributable
to Portfolio Recovery
Associates, Inc. $ 19,528 $ 11,722 $ 34,328 $ 21,794
========= ========= ========= =========
Net income per common share:
Basic $ 1.15 $ 0.76 $ 2.07 $ 1.42
Diluted $ 1.14 $ 0.76 $ 2.06 $ 1.42
Weighted average number of
shares outstanding:
Basic 16,970 15,377 16,581 15,355
Diluted 17,080 15,415 16,641 15,391
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Balance Sheets
(in thousands, except per share amounts)
June 30, December 31,
ASSETS 2010 2009
------------ ------------
Cash and cash equivalents $ 18,250 $ 20,265
Finance receivables, net 775,606 693,462
Accounts receivable, net 8,159 9,169
Income taxes receivable 1,877 4,460
Property and equipment, net 23,230 21,864
Goodwill 61,665 29,299
Intangible assets, net 21,425 10,756
Other assets 4,809 5,158
------------ ------------
Total assets $ 915,021 $ 794,433
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 21,436 $ 20,948
Deferred tax liability 139,111 117,206
Line of credit 289,500 319,300
Long term debt 1,167 1,499
------------ ------------
Total liabilities 451,214 458,953
------------ ------------
Redeemable noncontrolling Interest 15,080 -
------------ ------------
Stockholders' equity:
Portfolio Recovery Associates, Inc.
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, 17,049 issued and
outstanding shares at June 30, 2010, and
15,596 issued and 15,514 outstanding shares
at December 31, 2009 170 155
Additional paid-in capital 161,267 82,400
Retained earnings 287,681 253,353
Accumulated other comprehensive loss, net
of taxes (391) (428)
------------ ------------
Total stockholders' equity 448,727 335,480
============ ============
Total liabilities and stockholders'
equity $ 915,021 $ 794,433
============ ============
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Statements of Cash Flows
(in thousands)
Six Months Six Months
Ended Ended
June 30, June 30,
2010 2009
------------ ------------
Cash flows from operating activities:
Net income $ 34,483 $ 21,794
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of share-based
compensation 2,074 2,652
Depreciation and amortization 5,756 4,605
Deferred tax expense 21,881 14,015
Changes in operating assets and
liabilities:
Other assets 351 (741)
Accounts receivable 1,010 963
Accounts payable and accrued
liabilities (847) (2,911)
Income taxes receivable 2,583 (626)
------------ ------------
Net cash provided by operating activities 67,291 39,751
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (4,784) (1,497)
Acquisition of finance receivables, net of
buybacks (184,874) (135,798)
Collections applied to principal on finance
receivables 102,730 75,036
Business acquisitions, net of cash acquired (23,000) -
Contingent payment made for business
acquisition (1,104) (100)
------------ ------------
Net cash used in investing activities (111,032) (62,359)
------------ ------------
Cash flows from financing activities:
Proceeds from exercise of options 57 725
Income tax benefit from share-based
compensation 113 324
Proceeds from line of credit 99,000 51,000
Principal payments on line of credit (128,800) (29,500)
Proceeds from stock offering, net of offering
costs 71,688 -
Proceeds from long-term debt - 2,036
Principal payments on long-term debt (332) (212)
Principal payments on capital lease
obligations - (5)
------------ ------------
Net cash provided by financing activities 41,726 24,368
------------ ------------
Net (decrease)/increase in cash and cash
equivalents (2,015) 1,760
Cash and cash equivalents, beginning of period 20,265 13,901
------------ ------------
Cash and cash equivalents, end of period $ 18,250 $ 15,661
============ ============
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 4,318 $ 4,069
Cash paid for income taxes $ 73 $ 321
Noncash investing and financing activities:
Net unrealized change in fair value of
derivative instrument $ 61 $ (304)
Acquisition contingent purchase price earned
and accrued $ 4,950 $ 1,170
Contact: Investor Relations 757-519-9300 ext. 13010 info@portfoliorecovery.com
SOURCE: Portfolio Recovery Associates, Inc.
mailto:info@portfoliorecovery.com