PRA Investorroom
Portfolio Recovery Associates Reports Record Fourth Quarter 2010 Results
NORFOLK, VA, Feb 15, 2011 (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 net income of $20.6 million for the quarter ended Dec. 31, 2010.
Net income increased 66% from $12.4 million in the same period a year earlier. Earnings per diluted share were $1.20 in the fourth quarter of 2010, up 50% from $0.80 in the fourth quarter of 2009.
In the fourth quarter of 2010, total revenue rose 38% from the year-earlier period to a record $100.8 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 fourth quarter of 2010, the Company applied 41.3% of cash collections to reduce the carrying basis of its owned debt portfolios, the same as in the fourth quarter of 2009. The fourth quarter 2010 amortization rate included a $5.4 million net allowance charge against certain pools of finance receivables accounts.
"Portfolio Recovery Associates concluded 2010 with record financial results, demonstrating exceptional performance across our debt purchasing business despite the still-weakened economy," said Steven D. Fredrickson, chairman, president and chief executive officer. "Our disciplined approach to underwriting together with our consistent and continued efforts to improve the efficiency of our collections operations helped drive record results in cash collections, cash receipts, revenue and earnings both in the fourth quarter and for the full year."
Fredrickson continued: "Importantly, these results stem from the long-term focus we have continuously espoused and the significant investments in both people and technology we have made over a number of years. I am excited to be starting the new year with such strong momentum and a truly great team of employees."
For full year 2010, net income rose 66% to $73.5 million, or $4.35 per diluted share, from $44.3 million, or $2.87 per diluted share, in 2009. Revenue for 2010 was $372.7 million, up 33% from $281.1 million in 2009.
Financial and Operating Highlights
-- Cash collections increased 52% to a record $144.4 million in the fourth
quarter of 2010 from $95.3 million in the year-ago period. Call center
and other collections increased 19%, external legal collections
increased 38%, internal legal collections grew 70%, and purchased
bankruptcy collections gained 110% when compared with the year-earlier
period. The table below displays cash collections by source, by quarter
for the past five quarters:
Cash Collection Source ($ in
thousands) Q42010 Q32010 Q22010 Q12010 Q42009
-------- -------- -------- -------- --------
Call Center & Other
Collections $ 53,775 $ 51,711 $ 54,477 $ 56,987 $ 45,365
External Legal Collections 21,446 20,217 18,819 18,276 15,496
Internal Legal Collections 12,841 12,130 11,362 10,714 7,570
Purchased Bankruptcy 56,301 53,319 43,748 33,219 26,855
-------- -------- -------- -------- --------
Total Cash Collections $144,363 $137,377 $128,406 $119,196 $ 95,286
-- Up 70% from the prior year, internal legal collections grew to $12.8
million in the fourth quarter of 2010. 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 four years.
-- Productivity rose to a record $194 for the full year 2010 from $145 for
all of 2009. Productivity is measured by cash collections per collector
hour paid, the Company's key measure of collector performance.
Excluding the impact of trustee remittances from purchased bankrupt
accounts, the comparison is $129 for the full year 2010, compared with
$113 for all of 2009. Excluding trustee remittances on purchased
bankrupt accounts and external legal collections, the comparison is
$100 for the full year 2010 and $87 for all of 2009.
-- In the fourth quarter, revenue was a record $100.8 million, up 38% when
compared with the same period a year ago. This was driven by record
cash receipts of $160.3 million in the fourth quarter, up 42.5% from
$112.5 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 $5.4 million in the fourth
quarter, representing 0.65% of net finance receivables at period-end
and 3.77% of cash collections. The table below displays net allowance
charges incurred by quarter, by buying period since 2005, as well as
purchases of charged-off consumer debt, net of buybacks:
($ in thousands)
-----------------------------------------------------------
Entire Portfolio Purchase Period
Allowance Period 1996-2003 2004 2005 2006 2007
---------- ---------- ----------- ----------- -----------
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 90 - - - -
Q3 07 200 320 660 - -
Q4 07 190 150 615 340 -
Q1 08 120 650 910 1,105 -
Q2 08 260 720 - 2,330 650
Q3 08 (90) 60 325 1,135 2,350
Q4 08 (400) (140) 1,805 2,600 4,380
Q1 09 (225) 35 1,150 910 2,300
Q2 09 (230) (220) 495 765 685
Q3 09 (25) (190) 1,170 1,965 340
Q4 09 (120) - 1,375 1,220 110
Q1 10 - - 2,795 1,175 2,900
Q2 10 - (80) 1,600 2,100 700
Q3 10 - (80) 1,650 2,050 2,750
Q4 10 - (10) 832 1,720 1,150
---------- ---------- ----------- ----------- -----------
Total $ - $ 1,215 $ 16,817 $ 19,415 $ 18,315
========== ========== =========== =========== ===========
Portfolio
Purchases, net $ 203,026 $ 59,177 $ 143,171 $ 107,713 $ 258,397
========== ========== =========== =========== ===========
($ in thousands)
----------------------------------------------
Allowance
Entire Portfolio Purchase Period Charge as
Allowance Period 2008 2009-2010 Total % of NFR
----------- ----------- ----------- ----------
Q1 05 $ - $ - $ - 0.0%
Q2 05 - - - 0.0%
Q3 05 - - - 0.0%
Q4 05 - - 200 0.1%
Q1 06 - - 175 0.1%
Q2 06 - - 200 0.1%
Q3 06 - - 275 0.1%
Q4 06 - - 450 0.2%
Q1 07 - - 365 0.1%
Q2 07 - - 90 0.0%
Q3 07 - - 1,180 0.4%
Q4 07 - - 1,295 0.3%
Q1 08 - - 2,785 0.6%
Q2 08 - - 3,960 0.8%
Q3 08 - - 3,780 0.7%
Q4 08 620 - 8,865 1.6%
Q1 09 2,050 - 6,220 1.1%
Q2 09 2,425 - 3,920 0.6%
Q3 09 4,750 - 8,010 1.2%
Q4 09 6,900 - 9,485 1.4%
Q1 10 - - 6,870 0.9%
Q2 10 2,000 - 6,320 0.8%
Q3 10 150 - 6,520 0.8%
Q4 10 1,750 - 5,442 0.7%
----------- ----------- -----------
Total $ 20,645 $ - $ 76,407
=========== =========== ===========
Portfolio
Purchases, net $ 275,145 $ 643,426 $ 1,690,055
=========== =========== ===========
($ in thousands)
------------------------------------------------------
Purchased BK
Portfolio Purchase Period
Allowance Period 1996-2003 2004 2005 2006 2007
---------- --------- --------- --------- ----------
Q3 07 $ - $ 320 $ 160 $ - $ -
Q4 07 - 150 - 150 -
Q1 08 - 530 60 405 -
Q2 08 - 15 - 450 -
Q3 08 - 115 - 30 -
Q4 08 - 110 315 325 -
Q1 09 - 10 100 50 -
Q2 09 - 15 (5) - -
Q3 09 - 20 70 - -
Q4 09 - - 100 70 110
Q1 10 - - 95 50 1,200
Q2 10 - (30) 25 - -
Q3 10 - (30) - (100) 600
Q4 10 - (10) (18) (30) 950
---------- --------- --------- --------- ----------
Total $ - $ 1,215 $ 902 $ 1,400 $ 2,860
========== ========= ========= ========= ==========
Portfolio Purchases,
net $ - $ 7,468 $ 29,301 $ 17,648 $ 78,557
========== ========= ========= ========= ==========
($ in thousands)
------------------------------------------
Purchased BK Allowance
Portfolio Purchase Period Charge as
Allowance Period 2008 2009-2010 Total % if NFR
---------- ---------- --------- ---------
Q3 07 $ - $ - $ 480 1.3%
Q4 07 - - 300 0.3%
Q1 08 - - 995 0.8%
Q2 08 - - 465 0.3%
Q3 08 - - 145 0.1%
Q4 08 - - 750 0.4%
Q1 09 - - 160 0.1%
Q2 09 - - 10 0.0%
Q3 09 - - 90 0.0%
Q4 09 - - 280 0.1%
Q1 10 - - 1,345 0.4%
Q2 10 - - (5) 0.0%
Q3 10 - - 470 0.1%
Q4 10 - - 892 0.2%
---------- ---------- ---------
Total $ - $ - $ 6,377
========== ========== =========
Portfolio Purchases,
net $ 108,615 $ 367,944 $ 609,533
========== ========== =========
($ in thousands)
-----------------------------------------------------------
Core Portfolio Purchase Period
Allowance Period 1996-2003 2004 2005 2006 2007
---------- ---------- ----------- ----------- -----------
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 90 - - - -
Q3 07 200 - 500 - -
Q4 07 190 - 615 190 -
Q1 08 120 120 850 700 -
Q2 08 260 705 - 1,880 650
Q3 08 (90) (55) 325 1,105 2,350
Q4 08 (400) (250) 1,490 2,275 4,380
Q1 09 (225) 25 1,050 860 2,300
Q2 09 (230) (235) 500 765 685
Q3 09 (25) (210) 1,100 1,965 340
Q4 09 (120) - 1,275 1,150 -
Q1 10 - - 2,700 1,125 1,700
Q2 10 - (50) 1,575 2,100 700
Q3 10 - (50) 1,650 2,150 2,150
Q4 10 - - 850 1,750 200
---------- ---------- ----------- ----------- -----------
Total $ - $ - $ 15,915 $ 18,015 $ 15,455
========== ========== =========== =========== ===========
Portfolio
Purchases, net $ 203,026 $ 51,709 $ 113,870 $ 90,065 $ 179,840
========== ========== =========== =========== ===========
($ in thousands)
----------------------------------------------
Allowance
Core Portfolio Purchase Period Charge as
Allowance Period 2008 2009-2010 Total % of NFR
----------- ----------- ----------- ----------
Q1 05 $ - $ - $ - 0.0%
Q2 05 - - - 0.0%
Q3 05 - - - 0.0%
Q4 05 - - 200 0.1%
Q1 06 - - 175 0.1%
Q2 06 - - 200 0.1%
Q3 06 - - 275 0.2%
Q4 06 - - 450 0.2%
Q1 07 - - 365 0.2%
Q2 07 - - 90 0.0%
Q3 07 - - 700 0.2%
Q4 07 - - 995 0.3%
Q1 08 - - 1,790 0.5%
Q2 08 - - 3,495 0.9%
Q3 08 - - 3,635 1.0%
Q4 08 620 - 8,115 2.1%
Q1 09 2,050 - 6,060 1.6%
Q2 09 2,425 - 3,910 1.0%
Q3 09 4,750 - 7,920 2.0%
Q4 09 6,900 - 9,205 2.3%
Q1 10 - - 5,525 1.4%
Q2 10 2,000 - 6,325 1.6%
Q3 10 150 - 6,050 1.5%
Q4 10 1,750 - 4,550 1.1%
----------- ----------- -----------
Total $ 20,645 $ - $ 70,030
=========== =========== ===========
Portfolio
Purchases, net $ 166,530 $ 275,482 $ 1,080,522
=========== =========== ===========
The Company purchased $1.87 billion of face-value debt during the fourth quarter of 2010 for $85.5 million. This was acquired in 75 portfolios from 11 different sellers. For the full year 2010, the company purchased face-value debt totaling $6.80 billion for $367.4 million, a record level of investment. The tables below display purchase price amounts by year, net of buybacks, current net finance receivable balance, cash collections to date including sales, estimated remaining collections and estimated purchase price multiples:
($ in thousands)
Entire Portfolio
Total
Net Finance Estimated
Receivables Actual Cash Collections
Total Balance at Collections Estimated to
Purchase Purchase Estimated December Including Remaining Purchase
Period Price Collections 31, 2010 Cash Sales Collections Price
---------- ---------- ---------- ---------- ---------- ---------
1996 $ 3,080 $ 10,143 $ - $ 10,043 $ 100 329%
1997 7,685 25,395 - 25,122 273 330%
1998 11,089 37,002 - 36,607 395 334%
1999 18,898 68,445 - 67,165 1,280 362%
2000 25,020 114,019 - 110,835 3,184 456%
2001 33,481 171,214 - 166,673 4,541 511%
2002 42,325 190,351 - 184,432 5,919 450%
2003 61,448 253,276 - 243,452 9,824 412%
2004 59,177 188,291 157 178,628 9,663 318%
2005 143,171 310,837 20,756 270,650 40,187 217%
2006 107,713 217,381 25,880 168,966 48,415 202%
2007 258,397 505,826 100,180 335,138 170,688 196%
2008 275,145 538,136 155,587 269,588 268,548 196%
2009 281,583 720,932 198,715 234,745 486,187 256%
2010 361,843 760,876 330,055 86,562 674,314 210%
---------- ---------- ---------- ---------- ---------- ---------
Total $1,690,055 $4,112,124 $ 831,330 $2,388,606 $1,723,518 243%
========== ========== ========== ========== ========== =========
($ in thousands)
Purchased Bankruptcy Portfolio
Total
Net Finance Estimated
Receivables Actual Cash Collections
Total Balance at Collections Estimated to
Purchase Purchase Estimated December Including Remaining Purchase
Period Price Collections 31, 2010 Cash Sales Collections Price
---------- ---------- ---------- ---------- ---------- ---------
1996-2003 $ - $ - $ - $ - $ - 0%
2004 7,468 14,176 2 14,145 31 190%
2005 29,301 43,059 222 42,756 303 147%
2006 17,648 30,973 218 28,955 2,018 176%
2007 78,557 111,742 26,584 79,281 32,461 142%
2008 108,615 183,857 67,637 87,892 95,965 169%
2009 156,064 366,721 125,270 98,415 268,306 235%
2010 211,880 389,812 199,960 39,486 350,326 184%
---------- ---------- ---------- ---------- ---------- ---------
Total $ 609,533 $1,140,340 $ 419,893 $ 390,930 $ 749,410 187%
========== ========== ========== ========== ========== =========
($ in thousands)
Core Portfolio
Total
Net Finance Estimated
Receivables Actual Cash Collections
Total Balance at Collections Estimated to
Purchase Purchase Estimated December Including Remaining Purchase
Period Price Collections 31, 2010 Cash Sales Collections Price
---------- ---------- ---------- ---------- ---------- ---------
1996 $ 3,080 $ 10,143 $ - $ 10,043 $ 100 329%
1997 7,685 25,395 - 25,122 273 330%
1998 11,089 37,002 - 36,607 395 334%
1999 18,898 68,445 - 67,165 1,280 362%
2000 25,020 114,019 - 110,835 3,184 456%
2001 33,481 171,214 - 166,673 4,541 511%
2002 42,325 190,351 - 184,432 5,919 450%
2003 61,448 253,276 - 243,452 9,824 412%
2004 51,709 174,115 155 164,483 9,632 337%
2005 113,870 267,778 20,534 227,894 39,884 235%
2006 90,065 186,408 25,662 140,011 46,397 207%
2007 179,840 394,084 73,596 255,857 138,227 219%
2008 166,530 354,279 87,950 181,696 172,583 213%
2009 125,519 354,211 73,445 136,330 217,881 282%
2010 149,963 371,064 130,095 47,076 323,988 247%
---------- ---------- ---------- ---------- ---------- ---------
Total $1,080,522 $2,971,784 $ 411,437 $1,997,676 $ 974,108 275%
========== ========== ========== ========== ========== =========
-- The Company's fee-for-service businesses, including CCB, generated
revenue of $16.0 million in the fourth quarter of 2010, an increase of
3% over the third quarter but down 7% from the same period a year ago.
Together, the fee businesses accounted for 15.9% of the Company's
overall revenue in the fourth quarter of 2010, down from 23.6% in
Q4 2009.
-- During the fourth quarter of 2010, the Company recorded ongoing
non-cash equity-based compensation expense of $1.1 million.
-- The Company expanded its available borrowings by entering into a new
credit facility of $407.5 million during the quarter. The new facility
consists of a $357.5 million revolving credit facility that matures on
Dec. 20, 2014 and a $50 million fixed rate loan that matures on
May 4, 2012. The revolving credit facility will automatically be
increased by $50 million upon maturity of the fixed-rate loan.
-- Cash balances were $41.1 million as of Dec. 31, 2010, up from $20.3
million as of September 30, 2010. During the fourth quarter, the
Company had net borrowings of $11.5 million on its line of credit,
leaving it with $300.0 million in outstanding borrowings at year end
2010. Remaining borrowing availability under the line was $107.5
million as of Dec. 31, 2010.
-- The Company has included tables with additional financial highlights
for the 3- and 12-month periods ended Dec. 31, 2010, as well as the
past five quarters of the same data, at the bottom of this release.
Kevin P. Stevenson, chief financial and administrative officer, said: "Portfolio Recovery Associates turned in another strong performance in the fourth quarter, driven largely by cash collections from our sizeable investments in bankruptcy portfolios as well as steady improvements in call center and legal collections. We took steps during the quarter to address the performance of our fee-for-service businesses, which continued to be impacted by the difficult economy. These included some of the same process improvements that have served our debt purchase business so well, and we look forward to seeing these efforts make an impact in the quarters to come."
Conference Call Information
The Company will hold a conference call with investors tonight, 5:30 p.m. EST, Tuesday, Feb. 15, 2011, to discuss its fourth-quarter and full year results. Investors can access the call live by dialing 888-679-8037 for domestic callers or 617-213-4849 for international callers using the pass code 72893346. 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 28959430. 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, Inc. is the parent of companies whose 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. The Company 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 its consolidated Government Services subsidiaries, 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
Months Months Year Year
Ended Ended Ended Ended
December December December December
31, 31, 31, 31,
2010 2009 2010 2009
--------- --------- --------- ---------
Revenues:
Income recognized on finance
receivables, net $ 84,783 $ 55,962 $ 309,680 $ 215,612
Fee income 15,972 17,254 63,026 65,479
--------- --------- --------- ---------
Total revenues 100,755 73,216 372,706 281,091
Operating expenses:
Compensation and employee
services 32,350 26,447 124,077 106,388
Legal and agency fees and
costs 17,367 12,518 60,941 46,978
Outside fees and services 3,100 2,716 12,554 9,570
Communications 4,066 3,616 17,226 14,773
Rent and occupancy 1,402 1,245 5,313 4,761
Depreciation and amortization 3,387 2,339 12,437 9,213
Other operating expenses 2,808 2,234 10,296 8,799
--------- --------- --------- ---------
Total operating expenses 64,480 51,115 242,844 200,482
--------- --------- --------- ---------
Income from operations 36,275 22,101 129,862 80,609
Other income and (expense):
Interest income 29 - 65 3
Interest expense (2,517) (2,018) (9,052) (7,909)
--------- --------- --------- ---------
Income before income taxes 33,787 20,083 120,875 72,703
Provision for income taxes 13,156 7,667 47,004 28,397
--------- --------- --------- ---------
Net income $ 20,631 $ 12,416 $ 73,871 $ 44,306
========= ========= ========= =========
Less net (loss)/income
attributable to
redeemable noncontrolling
interest (14) - 417 -
--------- --------- --------- ---------
Net income attributable to
Portfolio Recovery
Associates, Inc. $ 20,645 $ 12,416 $ 73,454 $ 44,306
========= ========= ========= =========
Net income per common share:
Basic $ 1.21 $ 0.80 $ 4.37 $ 2.87
Diluted $ 1.20 $ 0.80 $ 4.35 $ 2.87
Weighted average number of
shares outstanding:
Basic 17,063 15,505 16,820 15,420
Diluted 17,165 15,531 16,885 15,454
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Balance Sheets
(in thousands, except per share amounts)
December 31, December 31,
ASSETS 2010 2009
------------- ------------
Cash and cash equivalents $ 41,094 $ 20,265
Finance receivables, net 831,330 693,462
Accounts receivable, net 8,932 9,169
Income taxes receivable 2,363 4,460
Property and equipment, net 24,270 21,864
Goodwill 61,678 29,299
Intangible assets, net 18,466 10,756
Other assets 7,775 5,158
------------- ------------
Total assets $ 995,908 $ 794,433
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 23,576 $ 20,948
Deferred tax liability 164,971 117,206
Line of credit 300,000 319,300
Long term debt 2,396 1,499
------------- ------------
Total liabilities 490,943 458,953
------------- ------------
Redeemable noncontrolling Interest 14,449 -
------------- ------------
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, 17,064 issued and outstanding
shares at December 31, 2010, and 15,596 issued
and 15,514 outstanding shares at December 31, 2009 171 155
Additional paid-in capital 163,538 82,400
Retained earnings 326,807 253,353
Accumulated other comprehensive loss, net of
taxes - (428)
------------- ------------
Total stockholders' equity 490,516 335,480
============= ============
Total liabilities and stockholders' equity $ 995,908 $ 794,433
============= ============
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Statements of Cash Flows
(in thousands)
Year Year
Ended Ended
December 31, December 31,
2010 2009
------------ ------------
Cash flows from operating activities:
Net income $ 73,871 $ 44,306
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of share-based
compensation 4,203 3,820
Depreciation and amortization 12,437 9,213
Deferred tax expense 47,493 28,927
Changes in operating assets and
liabilities:
Other assets 1,204 (1,862)
Accounts receivable 237 (891)
Accounts payable and accrued
liabilities 2,039 2,645
Income taxes receivable 2,097 (873)
------------ ------------
Net cash provided by operating activities 143,581 85,285
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (9,546) (4,521)
Acquisition of finance receivables, net of
buybacks (357,530) (282,023)
Collections applied to principal on finance
receivables 219,662 152,391
Business acquisitions, net of cash acquired (23,000) -
Contingent payment made for business
acquisition (117) (100)
------------ ------------
Net cash used in investing activities (170,531) (134,253)
------------ ------------
Cash flows from financing activities:
Proceeds from exercise of options 57 1,915
Income tax benefit from share-based
compensation 256 923
Payment of liability-classified contingent
consideration (2,000) -
Proceeds from line of credit 177,500 123,500
Principal payments on line of credit (196,800) (72,500)
Payments of line of credit origination costs and
fees (3,819) -
Proceeds from stock offering, net of offering
costs 71,688 -
Proceeds from long-term debt 1,569 2,036
Principal payments on long-term debt (672) (537)
Principal payments on capital lease
obligations - (5)
------------ ------------
Net cash provided by financing activities 47,779 55,332
------------ ------------
Net increase in cash and cash equivalents 20,829 6,364
Cash and cash equivalents, beginning of year 20,265 13,901
------------ ------------
Cash and cash equivalents, end of year $ 41,094 $ 20,265
============ ============
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 9,398 $ 8,004
Cash paid for income taxes $ 107 $ 365
Noncash investing and financing activities:
Net unrealized change in fair value of
derivative instrument $ 701 $ (790)
Common stock issued for acquisition $ 4,950 $ 1,170
FINANCIAL HIGHLIGHTS
Three Months Ended Year Ended
(dollars in December 31, % December 31, %
thousands) 2010 2009 Change 2010 2009 Change
--------- --------- ----- --------- --------- -----
EARNINGS
Income recognized
on finance
receivables, net $ 84,783 $ 55,962 52% $ 309,680 $ 215,612 44%
Fee income 15,972 17,254 -7% 63,026 65,479 -4%
Total revenues 100,755 73,216 38% 372,706 281,091 33%
Operating
expenses 64,480 51,115 26% 242,844 200,482 21%
Income from
operations 36,275 22,101 64% 129,862 80,608 61%
Net interest
expense 2,488 2,018 23% 8,987 7,908 14%
Net income 20,631 12,416 66% 73,871 44,306 67%
Net income
attributable to
Portfolio
Recovery
Associates, Inc. 20,645 12,416 66% 73,454 44,306 66%
--------- --------- ----- --------- --------- -----
PERIOD-END
BALANCES
Cash and cash
equivalents $ 41,094 $ 20,265 103% $ 41,094 $ 20,265 103%
Finance
receivables, net 831,330 693,462 20% 831,330 693,462 20%
Goodwill and
intangible
assets, net 80,144 40,055 100% 80,144 40,055 100%
Total assets 995,908 794,433 25% 995,908 794,433 25%
Line of credit 300,000 319,300 -6% 300,000 319,300 -6%
Total liabilities 490,943 458,953 7% 490,943 458,953 7%
Total equity 490,516 335,480 46% 490,516 335,480 46%
--------- --------- ----- --------- --------- -----
FINANCE
RECEIVABLE
COLLECTIONS
Cash collections $ 144,363 $ 95,286 52% $ 529,342 $ 368,003 44%
Principal
amortization
without
allowance
charges 54,139 29,839 81% 194,509 124,756 56%
Principal
amortization
with allowance
charges 59,580 39,324 52% 219,662 152,391 44%
Principal
amortization w/
allowance
charges as % of
cash collections:
Including
fully
amortized
pools 41.3% 41.3% 0% 41.5% 41.4% 0%
Excluding
fully
amortized
pools 44.3% 44.8% -1% 44.8% 44.7% 0%
Estimated
remaining
collections -
core $ 974,108 $ 893,716 9% $ 974,108 $ 893,716 9%
Estimated
remaining
collections -
bankruptcy 749,410 521,730 44% 749,410 521,730 44%
Estimated
remaining
collections -
total 1,723,518 1,415,446 22% 1,723,518 1,415,446 22%
--------- --------- ----- --------- --------- -----
ALLOWANCE FOR
FINANCE
RECEIVABLES
Balance at
period-end $ 76,407 $ 51,255 49% $ 76,407 $ 51,255 49%
Balance at
period-end to
net finance
receivables 9.19% 7.39% 24% 9.19% 7.39% 24%
Allowance charge $ 5,442 $ 9,485 -43% $ 25,152 $ 27,635 -9%
Allowance charge
to finance
receivable
income 6.03% 14.49% -58% 7.51% 11.36% -34%
Allowance charge
to cash
collections 3.77% 9.95% -62% 4.75% 7.51% -37%
--------- --------- ----- --------- --------- -----
PURCHASES OF
FINANCE
RECEIVABLES
Purchase price -
core $ 44,852 $ 30,514 47% $ 149,998 $ 126,334 19%
Face value - core 1,357,301 915,044 48% 3,424,313 4,435,068 -23%
Purchase price -
bankruptcy 40,671 44,592 -9% 217,445 162,470 34%
Face value -
bankruptcy 511,588 1,099,677 -53% 3,380,639 3,674,626 -8%
Purchase price -
total 85,523 75,106 14% 367,442 288,804 27%
Face value -
total 1,868,889 2,014,721 -7% 6,804,952 8,109,694 -16%
Number of
portfolios -
total 75 101 -26% 305 407 -25%
--------- --------- ----- --------- --------- -----
PER SHARE DATA
Net income per
common share -
diluted $ 1.20 $ 0.80 50% $ 4.35 $ 2.87 52%
Weighted average
number of shares
outstanding -
diluted 17,165 15,531 11% 16,885 15,454 9%
Closing market
price $ 75.20 $ 44.85 68% $ 75.20 $ 44.85 68%
--------- --------- ----- --------- --------- -----
RATIOS AND OTHER
DATA
Return on average
equity (1) 17.09% 15.03% 14% 16.56% 14.16% 17%
Return on
revenue (2) 20.48% 16.96% 21% 19.82% 15.76% 26%
Operating margin (3) 36.00% 30.19% 19% 34.84% 28.68% 21%
Operating expense
to cash receipts(4) 40.22% 45.42% -11% 41.00% 46.25% -11%
Debt to equity (5) 61.65% 95.62% -36% 61.65% 95.62% -36%
Cash collections
per collector
hour paid:
Total $ 204 $ 148 38% $ 194 $ 145 34%
Excluding
bankruptcy
collections $ 129 $ 109 18% $ 129 $ 113 14%
Excluding
bankruptcy
and external
legal
collections $ 98 $ 84 17% $ 100 $ 87 15%
Number of
collectors 1,472 1,325 11% 1,472 1,325 11%
Number of
employees 2,473 2,213 12% 2,473 2,213 12%
Cash receipts (4) $ 160,335 $ 112,540 42% $ 592,367 $ 433,483 37%
Line of credit -
unused portion
at period end 107,500 45,700 135% 107,500 45,700 135%
--------- --------- ----- --------- --------- -----
Notes:
(1) Calculated as annualized net income divided by average equity for the
period
(2) Calculated as net income divided by total revenues
(3) Calculated as income from operations divided by total revenues
(4) "Cash receipts" is defined as cash collections plus fee income
(5) For purposes of this ratio, "debt" equals the line of credit balance
plus long-term debt
FINANCIAL HIGHLIGHTS For the Quarter Ended
-----------------------------------------------------
December September June March December
(dollars in 31 30 30 31 31
thousands) 2010 2010 2010 2010 2009
--------- --------- --------- --------- ---------
EARNINGS
Income recognized on
finance
receivables, net $ 84,783 $ 80,026 $ 76,920 $ 67,951 $ 55,962
Fee income 15,972 15,518 16,109 15,427 17,254
Total revenues 100,755 95,544 93,029 83,378 73,216
Operating expenses 64,480 62,721 58,700 56,943 51,115
Income from
operations 36,275 32,823 34,329 26,435 22,101
Net interest expense 2,488 2,178 2,177 2,144 2,018
Net income 20,631 18,757 19,678 14,805 12,416
Net income
attributable to
Portfolio Recovery
Associates, Inc. 20,645 18,481 19,528 14,800 12,416
--------- --------- --------- --------- ---------
PERIOD-END BALANCES
Cash and cash
equivalents $ 41,094 $ 20,297 $ 18,250 $ 23,006 $ 20,265
Finance receivables,
net 831,330 807,239 775,606 742,484 693,462
Goodwill and
intangible assets,
net 80,144 81,610 83,090 79,071 40,055
Total assets 995,908 947,737 915,021 882,450 794,433
Line of credit 300,000 288,500 289,500 296,300 319,300
Total liabilities 490,943 464,781 451,214 444,318 458,953
Total equity 490,516 468,425 448,727 422,804 335,480
--------- --------- --------- --------- ---------
FINANCE RECEIVABLE
COLLECTIONS
Cash collections $ 144,363 $ 137,377 $ 128,406 $ 119,196 $ 95,286
Principal
amortization
without allowance 54,139 50,830 45,166 44,374 29,839
Principal
amortization with
allowance 59,580 57,351 51,486 51,245 39,324
Principal
amortization w/
allowance as % of
cash collections:
Including fully
amortized pools 41.3% 41.7% 40.1% 43.0% 41.3%
Excluding fully
amortized pools 44.3% 44.7% 43.5% 47.1% 44.8%
Estimated remaining
collections - core $ 974,108 $ 934,942 $ 929,144 $ 912,423 $ 893,716
Estimated remaining
collections -
bankruptcy 749,410 734,632 682,365 623,706 521,730
Estimated remaining
collections - total 1,723,518 1,669,574 1,611,509 1,536,129 1,415,446
--------- --------- --------- --------- ---------
ALLOWANCE FOR
FINANCE RECEIVABLES
Balance at
period-end $ 76,407 $ 70,965 $ 64,445 $ 58,125 $ 51,255
Balance at
period-end to net
finance receivables 9.19% 8.79% 8.31% 7.83% 7.39%
Allowance charge $ 5,442 $ 6,520 $ 6,320 $ 6,870 $ 9,485
Allowance charge to
finance receivable
income 6.03% 7.53% 7.59% 9.18% 14.49%
Allowance charge to
cash collections 3.77% 4.75% 4.92% 5.76% 9.95%
--------- --------- --------- --------- ---------
PURCHASES OF FINANCE
RECEIVABLES
Purchase price -
core $ 44,852 $ 31,831 $ 42,277 $ 31,038 $ 30,514
Face value - core 1,357,301 588,551 885,321 593,139 915,044
Purchase price -
bankruptcy 40,671 60,687 44,505 71,582 44,592
Face value -
bankruptcy 511,588 788,967 781,976 1,298,108 1,099,677
Purchase price -
total 85,523 92,518 86,782 102,620 75,106
Face value - total 1,868,889 1,377,518 1,667,297 1,891,247 2,014,721
Number of portfolios
- total 75 68 78 84 101
--------- --------- --------- --------- ---------
PER SHARE DATA
Net income per
common share -
diluted $ 1.20 $ 1.08 $ 1.14 $ 0.91 $ 0.80
Weighted average
number of shares
outstanding -
diluted 17,165 17,093 17,080 16,203 15,531
Closing market price $ 75.20 $ 64.66 $ 66.78 $ 54.87 $ 44.85
--------- --------- --------- --------- ---------
RATIOS AND OTHER
DATA
Return on average
equity (1) 17.09% 16.04% 17.86% 15.05% 15.03%
Return on revenue
(2) 20.48% 19.63% 21.15% 17.76% 16.96%
Operating margin (3) 36.00% 34.35% 36.90% 31.71% 30.19%
Operating expense to
cash receipts (4) 40.22% 41.02% 40.62% 42.30% 45.42%
Debt to equity (5) 61.65% 61.80% 64.78% 70.40% 95.62%
Cash collections
per hour paid:
Total $ 204 $ 200 $ 188 $ 182 $ 148
Excluding
bankruptcy
collections $ 129 $ 127 $ 127 $ 135 $ 109
Excluding
bankruptcy and
external legal
collections $ 98 $ 97 $ 100 $ 106 $ 84
Number of collectors 1,472 1,422 1,384 1,379 1,325
Number of employees 2,473 2,421 2,377 2,329 2,213
Cash receipts (1) $ 160,335 $ 152,895 $ 144,515 $ 134,623 $ 112,540
Line of credit -
unused portion at
period end 107,500 76,500 75,500 68,700 45,700
--------- --------- --------- --------- ---------
Notes:
(1) Calculated as annualized net income divided by average equity for the
period
(2) Calculated as net income divided by revenue
(3) Calculated as income from operations divided by total revenue
(4) "Cash receipts" is defined as cash collections plus fee-based
commission revenue
(5) For purposes of this ratio, "debt" equals the line of credit balance
plus long-term debt
SOURCE: Portfolio Recovery Associates, Inc.