SOURCE: Portfolio Recovery Associates, Inc.

July 28, 2011 16:00 ET

Portfolio Recovery Associates Reports Record Second Quarter 2011 Results

EPS Totals $1.48 in Quarter as Net Income Increases 31% to Record $25.6 Million; Revenues Up 23% to Record $114.8 Million as Cash Collections Grow 37% to Record $176.3 Million; Portfolio Acquisitions Total $89.5 Million

NORFOLK, VA--(Marketwire - Jul 28, 2011) - Portfolio Recovery Associates, Inc. (NASDAQ: PRAA), a specialized financial services company and market leader in the consumer debt purchase and collection industry, today reported record second quarter results including net income of $25.6 million for the quarter ended June 30, 2011. The Company's net income for the second quarter of 2011 increased 31% from $19.5 million in the same period a year earlier. Earnings per diluted share were $1.48 in the second quarter of 2011, up 30% from $1.14 in the second quarter of 2010. The Company's second quarter 2011 earnings included ongoing non-cash equity-based compensation expense of $1.2 million, after tax, or $0.07 per share, and a gain from the sale of real property of $690,000, after tax, or $0.04 per share.

Total revenues for the second quarter of 2011 grew 23% from the year-earlier period to a record $114.8 million. Total revenues consist 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 2011, the Company applied 43.1% of cash collections to reduce the carrying value of its owned debt portfolios, up from 40.1% in the second quarter of 2010. The second quarter 2011 principal amortization rate included a $2.3 million net allowance charge against certain pools of finance receivables accounts.

"Portfolio Recovery Associates ended the first half of 2011 with yet another record quarter, which saw strong growth in net income, earnings per share, revenues and cash collections," said Steven D. Fredrickson, chairman, president and chief executive officer. "Collections were a key driver of our second-quarter performance. Bankruptcy collections were up strongly in the quarter, internal and external legal collections both produced impressive growth, and our call centers performed well despite the difficult economy. Collector productivity advanced to another new record as well."

Fredrickson continued: "This outstanding performance reflects the efforts of our entire PRA staff, including the Company's more than 1,500 call-center collectors. I'm proud of the hard work and dedication of our very talented team and look forward to our future successes."

Financial and Operating Highlights

  • Cash collections rose 37% to a record $176.3 million in the second quarter of 2011, up from $128.4 million in the year-ago period. Call center and other collections increased 19%, external legal collections increased 45%, internal legal collections grew 41%, and purchased bankruptcy collections gained 56% when compared with the year-earlier period. The table below displays cash collections by source, by quarter for the past five quarters:
Cash Collection Source ($ in thousands) Q22011 Q12011 Q42010 Q32010 Q22010
Call Center & Other Collections $ 64,566 $ 67,377 $ 53,775 $ 51,711 $ 54,477
External Legal Collections 27,329 25,378 21,446 20,217 18,819
Internal Legal Collections 16,007 15,598 12,841 12,130 11,362
Purchased Bankruptcy Collections 68,379 58,364 56,301 53,319 43,748
Total Cash Collections $ 176,281 $ 166,717 $ 144,363 $ 137,377 $ 128,406
  • Internal legal collections grew to $16.0 million in the second quarter of 2011 from $11.4 million in the year ago quarter. 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, developing collections channel.

  • Productivity rose to a record $242 per collector hour paid for the first half of 2011 from $194 for all of 2010. Productivity, the Company's key measure of collector performance, is measured by cash collections per collector hour paid. Excluding the impact of trustee remittances from purchased bankrupt accounts, the comparison is $158 for the first two quarters of 2011, compared to $129 for all of 2010. Excluding trustee remittances on purchased bankrupt accounts and external legal collections, the comparison is $121 for the first six months of 2011 and $100 for all of 2010.

  • In the second quarter of 2011, revenues were a record $114.8 million, up 23% compared with the same period a year ago. This was driven by record cash receipts of $190.8 million in the second quarter, up 32% from $144.5 million a year earlier. Cash receipts are comprised of both cash collections and revenues from the Company's fee-based businesses.

  • The Company's net allowance charge totaled $2.3 million in the second quarter of 2011, representing 0.26% of net finance receivables at period-end and 1.3% 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 2008 2009-2011 Total Net Allowance Charge as % of NFR
Q1 05 $ - $ - $ - $ - $ - $ - $ - $ - 0.0 %
Q2 05 - - - - - - - - 0.0 %
Q3 05 - - - - - - - - 0.0 %
Q4 05 200 - - - - - - 200 0.1 %
Q1 06 - - 175 - - - - 175 0.1 %
Q2 06 75 - 125 - - - - 200 0.1 %
Q3 06 200 - 75 - - - - 275 0.1 %
Q4 06 - - 450 - - - - 450 0.2 %
Q1 07 (245 ) - 610 - - - - 365 0.1 %
Q2 07 90 - - - - - - 90 0.0 %
Q3 07 200 320 660 - - - - 1,180 0.4 %
Q4 07 190 150 615 340 - - - 1,295 0.3 %
Q1 08 120 650 910 1,105 - - - 2,785 0.6 %
Q2 08 260 720 - 2,330 650 - - 3,960 0.8 %
Q3 08 (90 ) 60 325 1,135 2,350 - - 3,780 0.7 %
Q4 08 (400 ) (140 ) 1,805 2,600 4,380 620 - 8,865 1.6 %
Q1 09 (225 ) 35 1,150 910 2,300 2,050 - 6,220 1.1 %
Q2 09 (230 ) (220 ) 495 765 685 2,425 - 3,920 0.6 %
Q3 09 (25 ) (190 ) 1,170 1,965 340 4,750 - 8,010 1.2 %
Q4 09 (120 ) - 1,375 1,220 110 6,900 - 9,485 1.4 %
Q1 10 - - 2,795 1,175 2,900 - - 6,870 0.9 %
Q2 10 - (80 ) 1,600 2,100 700 2,000 - 6,320 0.8 %
Q3 10 - (80 ) 1,650 2,050 2,750 150 - 6,520 0.8 %
Q4 10 - (10 ) 832 1,720 1,150 1,750 - 5,442 0.7 %
Q1 11 - (15 ) 455 (100 ) 400 3,300 - 4,040 0.5 %
Q2 11 - - (217 ) - - 2,500 - 2,283 0.3 %
Total $ - $ 1,200 $ 17,055 $ 19,315 $ 18,715 $ 26,445 $ - $ 82,730
Portfolio Purchases, net $ 203,026 $ 59,177 $ 143,169 $ 107,705 $ 258,381 $ 275,141 $ 838,362 $ 1,884,961
($ in thousands)
Purchased Bankruptcy Portfolio Purchase Period
Allowance Period 1996-2003 2004 2005 2006 2007 2008 2009-2011 Total Net Allowance Charge as % of NFR
Q3 07 $ - $ 320 $ 160 $ - $ - $ - $ - $ 480 1.3 %
Q4 07 - 150 - 150 - - - 300 0.3 %
Q1 08 - 530 60 405 - - - 995 0.8 %
Q2 08 - 15 - 450 - - - 465 0.3 %
Q3 08 - 115 - 30 - - - 145 0.1 %
Q4 08 - 110 315 325 - - - 750 0.4 %
Q1 09 - 10 100 50 - - - 160 0.1 %
Q2 09 - 15 (5 ) - - - - 10 0.0 %
Q3 09 - 20 70 - - - - 90 0.0 %
Q4 09 - - 100 70 110 - - 280 0.1 %
Q1 10 - - 95 50 1,200 - - 1,345 0.4 %
Q2 10 - (30 ) 25 - - - - (5 ) 0.0 %
Q3 10 - (30 ) - (100 ) 600 - - 470 0.1 %
Q4 10 - (10 ) (18 ) (30 ) 950 - - 892 0.2 %
Q1 11 - (15 ) (95 ) (100 ) 1,150 1,300 - 2,240 0.5 %
Q2 11 - - (17 ) - - 500 - 483 0.1 %
Total $ - $ 1,200 $ 790 $ 1,300 $ 4,010 $ 1,800 $ - $ 9,100
Portfolio Purchases, net $ - $ 7,468 $ 29,301 $ 17,648 $ 78,551 $ 108,613 $ 449,563 $ 691,144
($ in thousands)
Core Portfolio Purchase Period
Allowance Period 1996-2003 2004 2005 2006 2007 2008 2009-2011 Total Net Allowance Charge as % of NFR
Q1 05 $ - $ - $ - $ - $ - $ - $ - $ - 0.0 %
Q2 05 - - - - - - - - 0.0 %
Q3 05 - - - - - - - - 0.0 %
Q4 05 200 - - - - - - 200 0.1 %
Q1 06 - - 175 - - - - 175 0.1 %
Q2 06 75 - 125 - - - - 200 0.1 %
Q3 06 200 - 75 - - - - 275 0.2 %
Q4 06 - - 450 - - - - 450 0.2 %
Q1 07 (245 ) - 610 - - - - 365 0.2 %
Q2 07 90 - - - - - - 90 0.0 %
Q3 07 200 - 500 - - - - 700 0.2 %
Q4 07 190 - 615 190 - - - 995 0.3 %
Q1 08 120 120 850 700 - - - 1,790 0.5 %
Q2 08 260 705 - 1,880 650 - - 3,495 0.9 %
Q3 08 (90 ) (55 ) 325 1,105 2,350 - - 3,635 1.0 %
Q4 08 (400 ) (250 ) 1,490 2,275 4,380 620 - 8,115 2.1 %
Q1 09 (225 ) 25 1,050 860 2,300 2,050 - 6,060 1.6 %
Q2 09 (230 ) (235 ) 500 765 685 2,425 - 3,910 1.0 %
Q3 09 (25 ) (210 ) 1,100 1,965 340 4,750 - 7,920 2.0 %
Q4 09 (120 ) - 1,275 1,150 - 6,900 - 9,205 2.3 %
Q1 10 - - 2,700 1,125 1,700 - - 5,525 1.4 %
Q2 10 - (50 ) 1,575 2,100 700 2,000 - 6,325 1.6 %
Q3 10 - (50 ) 1,650 2,150 2,150 150 - 6,050 1.5 %
Q4 10 - - 850 1,750 200 1,750 - 4,550 1.1 %
Q1 11 - - 550 - (750 ) 2,000 - 1,800 0.4 %
Q2 11 - - (200 ) - - 2,000 - 1,800 0.4 %
Total $ - $ - $ 16,265 $ 18,015 $ 14,705 $ 24,645 $ - $ 73,630
Portfolio Purchases, net $ 203,026 $ 51,709 $ 113,868 $ 90,057 $ 179,830 $ 166,528 $ 388,799 $ 1,193,817
  • The Company purchased $1.41 billion of face-value debt during the second quarter of 2011 for $89.5 million. This was acquired in 76 portfolios from 10 different sellers. The tables below display purchase price amounts by year, net of buybacks, current net finance receivable balance, cash collections to date including sales, estimated remaining and total collections and estimated purchase price multiples:
($ in thousands)
Entire Portfolio

Purchase
Period
Purchase
Price
Total
Estimated
Collections
Net Finance
Receivables
Balance at
June 30, 2011
Actual Cash
Collections
Including Cash
Sales
Estimated
Remaining
Collections
Total Estimated
Collections to
Purchase Price
1996 $ 3,080 $ 10,183 $ - $ 10,108 $ 75 331 %
1997 7,685 25,487 - 25,229 258 332 %
1998 11,089 37,203 - 36,789 414 335 %
1999 18,898 68,950 - 67,698 1,252 365 %
2000 25,020 115,279 - 112,216 3,063 461 %
2001 33,481 173,088 - 168,858 4,230 517 %
2002 42,325 192,679 - 187,667 5,012 455 %
2003 61,448 256,431 - 248,330 8,101 417 %
2004 59,177 191,865 - 183,432 8,433 324 %
2005 143,169 310,203 15,976 280,311 29,892 217 %
2006 107,705 218,391 21,788 179,297 39,094 203 %
2007 258,381 507,104 79,060 372,501 134,603 196 %
2008 275,141 531,342 125,937 317,577 213,765 193 %
2009 281,425 733,239 163,829 330,310 402,929 261 %
2010 359,235 785,719 280,349 194,466 591,253 219 %
YTD 2011 197,702 390,446 192,576 16,815 373,631 197 %
Total $ 1,884,961 $ 4,547,609 $ 879,515 $ 2,731,604 $ 1,816,005 241 %
($ in thousands)
Purchased Bankruptcy Portfolio









Purchase
Period
Purchase
Price
Total
Estimated
Collections
Net Finance
Receivables
Balance at
June 30, 2011
Actual Cash
Collections
Including Cash
Sales
Estimated
Remaining
Collections
Total Estimated
Collections to
Purchase Price
1996-2003 $ - $ - $ - $ - $ - 0 %
2004 7,468 14,373 - 14,243 130 192 %
2005 29,301 43,279 83 43,065 214 148 %
2006 17,648 31,285 123 29,935 1,350 177 %
2007 78,551 111,003 18,891 88,114 22,889 141 %
2008 108,613 183,599 55,426 105,998 77,601 169 %
2009 156,062 360,801 106,599 147,753 213,048 231 %
2010 209,693 385,918 176,991 86,796 299,122 184 %
YTD 2011 83,808 130,643 83,757 1,769 128,874 156 %
Total $ 691,144 $ 1,260,901 $ 441,870 $ 517,673 $ 743,228 182 %
($ in thousands)
Core Portfolio
Purchase
Period
Purchase
Price
Total
Estimated
Collections
Net Finance
Receivables
Balance at
June 30, 2011
Actual Cash
Collections
Including Cash
Sales
Estimated
Remaining
Collections
Total Estimated
Collections to
Purchase Price
1996 $ 3,080 $ 10,183 $ - $ 10,108 $ 75 331 %
1997 7,685 25,487 - 25,229 258 332 %
1998 11,089 37,203 - 36,789 414 335 %
1999 18,898 68,950 - 67,698 1,252 365 %
2000 25,020 115,279 - 112,216 3,063 461 %
2001 33,481 173,088 - 168,858 4,230 517 %
2002 42,325 192,679 - 187,667 5,012 455 %
2003 61,448 256,431 - 248,330 8,101 417 %
2004 51,709 177,492 - 169,189 8,303 343 %
2005 113,868 266,924 15,893 237,246 29,678 234 %
2006 90,057 187,106 21,665 149,362 37,744 208 %
2007 179,830 396,101 60,169 284,387 111,714 220 %
2008 166,528 347,743 70,511 211,579 136,164 209 %
2009 125,363 372,438 57,230 182,557 189,881 297 %
2010 149,542 399,801 103,358 107,670 292,131 267 %
YTD 2011 113,894 259,803 108,819 15,046 244,757 228 %
Total $ 1,193,817 $ 3,286,708 $ 437,645 $ 2,213,931 $ 1,072,777 275 %
  • The Company's fee-for-service businesses generated revenues of $14.5 million in the second quarter of 2011, a decline of 10% from the same period a year ago due largely to a decrease in revenues generated by PRA Location Services. Together, the fee-for-service businesses accounted for 12.6% of the Company's overall revenues in the second quarter of 2011, down from 17.3% in the second quarter of 2010.

  • Cash balances were $25.5 million as of June 30, 2011, down from $41.1 million as of December 31, 2010. During the second quarter of 2011, the Company had net repayments of $40 million on its line of credit, leaving it with $250 million in outstanding borrowings at quarter end. Remaining borrowing availability under the line was $157.5 million as of June 30, 2011.

Kevin P. Stevenson, chief financial and administrative officer, said: "Portfolio Recovery Associates turned in another strong performance in the second quarter of 2011, due in large part to the long-term investments we have made in people, technology and portfolios. The Company purchased $89.5 million of charged-off debt in the second quarter, bringing our total purchases for the first half of the year to $197.4 million. These portfolios will provide additional opportunities for our collectors in the quarters and years to come. Importantly, we were able to accomplish this while paying down $40 million in principal on our line of credit during the quarter, strengthening our ability to continue making smart investments in the future."

The Company's first-half 2011 earnings totaled $48.7 million, or $2.83 per diluted share, compared with $34.3 million, or $2.06 per diluted share, for the first six months of 2010. First-half 2011 revenues were $226.6 million, compared to $176.4 million in the first half of 2010.

Conference Call Information
The Company will hold a conference call with investors this evening at 5:30 p.m. EDT, Thursday, July 28, 2011, to discuss its second-quarter results. Investors can access the call live by dialing 888-713-4211 for domestic callers or 617-213-4864 for international callers using the pass code 68414138. 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 41859487. 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. (NASDAQ: PRAA), a specialized financial services company, is a market leader in the consumer debt purchase and collection industry. The Company, which has purchased more than $57 billion of face value defaulted consumer debt since its inception, has operations in 10 states, more than 25 million customer accounts and more than 2,500 employees. Portfolio Recovery Associates also provides a broad range of fee-based services through its subsidiaries: PRA Government Services, LLC; MuniServices, LLC; PRA Location Services, LLC; and Claims Compensation Bureau, LLC. Working every day with people in financial distress, the Company seeks to engage collaboratively with its customers to create realistic, affordable repayment plans. Portfolio Recovery Associates has a longstanding culture of compliance, and for four consecutive years has been named to the Forbes 100 Best Small Companies in America annual rankings list (2007 - 2010). Additional information about Portfolio Recovery Associates is available at www.portfoliorecovery.com.

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 Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
Revenues:
Income recognized on finance receivables, net $ 100,303 $ 76,920 $ 196,277 $ 144,871
Fee income 14,492 16,109 30,295 31,536
Total revenues 114,795 93,029 226,572 176,407
Operating expenses:
Compensation and employee services 34,815 30,872 68,968 60,513
Legal collection fees 5,970 4,131 11,719 8,203
Legal collection costs 9,879 6,430 19,218 12,069
Agent fees 1,724 2,927 4,362 6,554
Outside fees and services 4,066 3,155 7,481 5,984
Communications 5,706 4,102 12,020 9,160
Rent and occupancy 1,438 1,297 2,835 2,549
Depreciation and amortization 3,316 3,206 6,532 5,756
Other operating expenses 3,501 2,580 6,353 4,854
Total operating expenses 70,415 58,700 139,488 115,642
Gain on sale of property 1,157 - 1,157 -
Income from operations 45,537 34,329 88,241 60,765
Other income and (expense):
Interest income - - - 35
Interest expense (2,635 ) (2,177 ) (5,502 ) (4,357 )
Income before income taxes 42,902 32,152 82,739 56,443
Provision for income taxes 17,326 12,474 33,454 21,960
Net income $ 25,576 $ 19,678 $ 49,285 $ 34,483
Less net income attributable to redeemable noncontrolling interest 2 150 590 155
Net income attributable to Portfolio Recovery Associates, Inc. $ 25,574 $ 19,528 $ 48,695 $ 34,328
Net income per common share:
Basic $ 1.49 $ 1.15 $ 2.85 $ 2.07
Diluted $ 1.48 $ 1.14 $ 2.83 $ 2.06
Weighted average number of shares outstanding:
Basic 17,108 16,970 17,100 16,581
Diluted 17,225 17,080 17,212 16,641
Portfolio Recovery Associates, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
June 30, December 31,
ASSETS 2011 2010
Cash and cash equivalents $ 25,481 $ 41,094
Finance receivables, net 879,515 831,330
Accounts receivable, net 6,683 8,932
Property and equipment, net 23,810 24,270
Goodwill 61,678 61,678
Intangible assets, net 15,965 18,466
Other assets 8,485 10,138
Total assets $ 1,021,617 $ 995,908
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 23,155 $ 23,576
Net deferred tax liability 188,142 164,971
Line of credit 250,000 300,000
Long term debt 1,856 2,396
Total liabilities 463,153 490,943
Redeemable noncontrolling Interest 16,068 14,449
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, 60,000, 17,115 issued and outstanding shares at June 30, 2011, and 17,064 issued and outstanding shares at December 31, 2010

171


171
Additional paid-in capital 166,723 163,538
Retained earnings 375,502 326,807
Total stockholders' equity 542,396 490,516
Total liabilities and stockholders' equity $ 1,021,617 $ 995,908
Portfolio Recovery Associates, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Six Months Six Months
Ended Ended
June 30, June 30,
2011 2010
Cash flows from operating activities:
Net income $ 49,285 $ 34,483
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of share-based compensation 4,622 2,074
Depreciation and amortization 6,532 5,756
Deferred tax expense 23,171 21,881
Gain on sale of property (1,157 ) -
Changes in operating assets and liabilities:
Other assets 1,653 2,934
Accounts receivable 2,249 1,010
Accounts payable and accrued liabilities 622 (847 )
Net cash provided by operating activities 86,977 67,291
Cash flows from investing activities:
Purchases of property and equipment (3,682 ) (4,784 )
Proceeds from sale of property 1,267 -
Acquisition of finance receivables, net of buybacks (194,906 ) (184,874 )
Collections applied to principal on finance receivables 146,721 102,730
Business acquisitions, net of cash acquired - (23,000 )
Contingent payment made for business acquisition - (104 )
Net cash used in investing activities (50,600 ) (110,032 )
Cash flows from financing activities:
Proceeds from exercise of options 149 57
Income tax benefit from share-based compensation 459 113
Payment of liability-classified contingent consideration - (1,000 )
Proceeds from line of credit 2,000 99,000
Principal payments on line of credit (52,000 ) (128,800 )
Proceeds from stock offering, net of offering costs - 71,688
Distributions paid to noncontrolling interest (2,059 ) -
Principal payments on long-term debt (539 ) (332 )
Net cash (used in)/provided by financing activities (51,990 ) 40,726
Net decrease in cash and cash equivalents (15,613 ) (2,015 )
Cash and cash equivalents, beginning of year 41,094 20,265
Cash and cash equivalents, end of period $ 25,481 $ 18,250
Supplemental disclosure of cash flow information:
Cash paid for interest $ 5,256 $ 4,318
Cash paid for income taxes 6,784 73
Noncash investing and financing activities:
Distributions payable to noncontrolling interest $ 247 $ -
Adjustment of the noncontrolling interest measurement amount 2,045 -
Common stock issued for acquisition - 4,950
Net unrealized change in fair value of derivative instrument - 61
FINANCIAL HIGHLIGHTS Three Months Ended Six Months Ended
June 30, June 30,
(dollars in thousands) 2011 2010 %
Change
2011 2010 %
Change
EARNINGS
Income recognized on finance receivables, net $ 100,303 $ 76,920 30 % $ 196,277 $ 144,871 35 %
Fee income 14,492 16,109 -10 % 30,295 31,536 -4 %
Total revenues 114,795 93,029 23 % 226,572 176,407 28 %
Operating expenses 70,415 58,700 20 % 139,488 115,642 21 %
Income from operations 45,537 34,329 33 % 88,241 60,765 45 %
Net interest expense 2,635 2,177 21 % 5,502 4,322 27 %
Net income 25,576 19,678 30 % 49,285 34,483 43 %
Net income attributable to Portfolio Recovery Associates, Inc. 25,574 19,528 31 % 48,695 34,328 42 %
PERIOD-END BALANCES
Cash and cash equivalents $ 25,481 $ 18,250 40 % $ 25,481 $ 18,250 40 %
Finance receivables, net 879,515 775,606 13 % 879,515 775,606 13 %
Goodwill and intangible assets, net 77,643 83,090 -7 % 77,643 83,090 -7 %
Total assets 1,021,617 915,021 12 % 1,021,617 915,021 12 %
Line of credit 250,000 289,500 -14 % 250,000 289,500 -14 %
Total liabilities 463,153 451,214 3 % 463,153 451,214 3 %
Total equity 542,396 448,727 21 % 542,396 448,727 21 %
FINANCE RECEIVABLE COLLECTIONS
Cash collections $ 176,281 $ 128,406 37 % $ 342,998 $ 247,601 39 %
Principal amortization without allowance charges 73,695 45,166 63 % 140,398 89,540 57 %
Principal amortization with allowance charges 75,978 51,486 48 % 146,721 102,730 43 %
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools 43.1 % 40.1 % 7 % 42.8 % 41.5 % 3 %
Excluding fully amortized pools 45.7 % 43.5 % 5 % 45.5 % 44.7 % 2 %
Estimated remaining collections - core $ 1,072,777 $ 929,144 15 % $ 1,072,777 $ 929,144 15 %
Estimated remaining collections - bankruptcy 743,228 682,365 9 % 743,228 682,365 9 %
Estimated remaining collections - total 1,816,005 1,611,509 13 % 1,816,005 1,611,509 13 %
ALLOWANCE FOR FINANCE RECEIVABLES
Balance at period-end $ 82,730 $ 64,445 28 % $ 82,730 $ 64,445 28 %
Allowance charge $ 2,283 $ 6,320 -64 % $ 6,323 $ 13,190 -52 %
Allowance charge to period-end net finance receivables 0.26 % 0.81 % -68 % 0.72 % 1.70 % -58 %
Allowance charge to net finance receivable income 2.28 % 8.22 % -72 % 3.22 % 9.10 % -65 %
Allowance charge to cash collections 1.30 % 4.92 % -74 % 1.84 % 5.33 % -65 %
PURCHASES OF FINANCE RECEIVABLES
Purchase price - core $ 52,323 $ 42,277 24 % $ 113,617 $ 73,315 55 %
Face value - core 1,034,898 885,321 17 % 2,043,655 1,478,460 38 %
Purchase price - bankruptcy 37,204 44,505 -16 % 83,811 116,087 -28 %
Face value - bankruptcy 378,051 781,976 -52 % 860,993 2,080,084 -59 %
Purchase price - total 89,527 86,782 3 % 197,428 189,402 4 %
Face value - total 1,412,949 1,667,297 -15 % 2,904,648 3,558,544 -18 %
Number of portfolios - total 76 78 -3 % 155 162 -4 %
PER SHARE DATA
Net income per common share - diluted $ 1.48 $ 1.14 30 % $ 2.83 $ 2.06 37 %
Weighted average number of shares outstanding - diluted 17,225 17,080 1 % 17,212 16,641 3 %
Closing market price $ 84.79 $ 66.78 27 % $ 84.79 $ 66.78 27 %
RATIOS AND OTHER DATA
Return on average equity (1) 19.20 % 17.86 % 7 % 18.74 % 16.53 % 13 %
Return on revenue (2) 22.28 % 21.15 % 5 % 21.75 % 19.55 % 11 %
Operating margin (3) 39.67 % 36.90 % 7 % 38.95 % 34.45 % 13 %
Operating expense to cash receipts (4) 36.91 % 40.62 % -9 % 37.37 % 41.43 % -10 %
Debt to equity (5) 46.43 % 64.78 % -28 % 46.43 % 64.78 % -28 %
Cash collections per collector hour paid:
Core cash collections $ 154 $ 127 21 % $ 158 $ 113 40 %
Total cash collections $ 243 $ 188 29 % $ 242 $ 145 67 %
Excluding external legal collections $ 205 $ 160 28 % $ 205 $ 157 31 %
Excluding bankruptcy and external legal collections $ 116 $ 100 16 % $ 121 $ 103 17 %
Number of collectors 1,517 1,384 10 % 1,517 1,384 10 %
Number of employees 2,504 2,377 5 % 2,504 2,377 5 %
Cash receipts (4) $ 190,773 $ 144,515 32 % $ 373,292 $ 279,137 34 %
Line of credit - unused portion at period end 157,500 75,500 109 % 157,500 75,500 109 %
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
(dollars in thousands) June 30
2011
March 31
2011
December 31
2010
September 30
2010
June 30
2010
EARNINGS
Income recognized on finance receivables, net $ 100,303 $ 95,974 $ 84,783 $ 80,026 $ 76,920
Fee income 14,492 15,803 15,972 15,518 16,109
Total revenues 114,795 111,777 100,755 95,544 93,029
Operating expenses 70,415 69,072 64,480 62,721 58,700
Income from operations 45,537 42,705 36,275 32,823 34,329
Net interest expense 2,635 2,867 2,488 2,178 2,177
Net income 25,576 23,709 20,631 18,757 19,678
Net income attributable to Portfolio Recovery Associates, Inc. 25,574 23,121 20,645 18,481 19,528
PERIOD-END BALANCES
Cash and cash equivalents $ 25,481 $ 35,443 $ 41,094 $ 20,297 $ 18,250
Finance receivables, net 879,515 866,992 831,330 807,239 775,606
Goodwill and intangible assets, net 77,643 78,893 80,144 81,610 83,090
Total assets 1,021,617 1,020,099 995,908 947,737 915,021
Line of credit 250,000 290,000 300,000 288,500 289,500
Total liabilities 463,153 489,136 490,943 464,781 451,214
Total equity 542,396 515,710 490,516 468,425 448,727
FINANCE RECEIVABLE COLLECTIONS
Cash collections $ 176,281 $ 166,717 $ 144,363 $ 137,377 $ 128,406
Principal amortization without allowance 73,695 66,703 54,139 50,830 45,166
Principal amortization with allowance 75,978 70,743 59,580 57,351 51,486
Principal amortization w/ allowance as % of cash collections:
Including fully amortized pools 43.1 % 42.4 % 41.3 % 41.7 % 40.1 %
Excluding fully amortized pools 45.7 % 45.3 % 44.3 % 44.7 % 43.5 %
Estimated remaining collections - core $ 1,072,777 $ 1,040,140 $ 974,108 $ 934,942 $ 929,144
Estimated remaining collections - bankruptcy 743,228 753,130 749,410 734,632 682,365
Estimated remaining collections - total 1,816,005 1,793,270 1,723,518 1,669,574 1,611,509
ALLOWANCE FOR FINANCE RECEIVABLES
Balance at period-end $ 82,730 $ 80,447 $ 76,407 $ 70,965 $ 64,445
Allowance charge $ 2,283 $ 4,040 $ 5,442 $ 6,520 $ 6,320
Allowance charge to period-end net finance receivables 0.26 % 0.47 % 0.65 % 0.81 % 0.81 %
Allowance charge to net finance receivable income 2.28 % 4.21 % 6.42 % 8.15 % 8.22 %
Allowance charge to cash collections 1.30 % 2.42 % 3.77 % 4.75 % 4.92 %
PURCHASES OF FINANCE RECEIVABLES
Purchase price - core $ 52,323 $ 61,294 $ 44,852 $ 31,831 $ 42,277
Face value - core 1,034,898 1,008,758 1,357,301 588,551 885,321
Purchase price - bankruptcy 37,204 46,607 40,671 60,687 44,505
Face value - bankruptcy 378,051 482,941 511,588 788,967 781,976
Purchase price - total 89,527 107,901 85,523 92,518 86,782
Face value - total 1,412,949 1,491,699 1,868,889 1,377,518 1,667,297
Number of portfolios - total 76 79 75 68 78
PER SHARE DATA
Net income per common share - diluted $ 1.48 $ 1.34 $ 1.20 $ 1.08 $ 1.14
Weighted average number of shares outstanding - diluted 17,225 17,199 17,165 17,093 17,080
Closing market price $ 84.79 $ 85.13 $ 75.20 $ 64.66 $ 66.78
RATIOS AND OTHER DATA
Return on average equity (1) 19.20 % 18.25 % 17.09 % 16.04 % 17.86 %
Return on revenue (2) 22.28 % 21.21 % 20.48 % 19.63 % 21.15 %
Operating margin (3) 39.67 % 38.21 % 36.00 % 34.35 % 36.90 %
Operating expense to cash receipts (4) 36.91 % 37.84 % 40.22 % 41.02 % 40.62 %
Debt to equity (5) 46.43 % 56.64 % 61.65 % 61.80 % 64.78 %
Cash collections per hour paid:
Core cash collections $ 154 $ 162 $ 129 $ 127 $ 127
Total cash collections $ 243 $ 241 $ 204 $ 200 $ 188
Excluding external legal collections $ 205 $ 204 $ 174 $ 170 $ 160
Excluding bankruptcy and external legal collections $ 116 $ 125 $ 98 $ 97 $ 100
Number of collectors 1,517 1,486 1,472 1,422 1,384
Number of employees 2,504 2,482 2,473 2,421 2,377
Cash receipts (4) $ 190,773 $ 182,520 $ 160,335 $ 152,895 $ 144,515
Line of credit - unused portion at period end 157,500 117,500 107,500 76,500 75,500
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