Portfolio Recovery Associates (PRAA) Reports Fourth Quarter and Full Year 2009 Results
NORFOLK, VA — (Marketwire) — 02/11/10 — Portfolio Recovery Associates, Inc. (NASDAQ: PRAA), a company that purchases, collects and manages portfolios of defaulted consumer receivables and provides a broad range of accounts receivable management and payments processing services, today reported net income of $12.4 million, or $0.80 per diluted share, for the quarter ended December 31, 2009.
The Company’s fourth-quarter 2009 profit represents a 17% increase from net income of $10.6 million, or $0.69 per diluted share, in the same period a year earlier.
Total revenue in the fourth quarter of 2009 was up 9.3% from the year-earlier period to a record $73.2 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 fourth quarter of 2009, the Company applied 41.3% of cash collections to reduce the carrying basis of its owned debt portfolios, compared with 39.3% in the fourth quarter of 2008. The fourth quarter 2009 amortization rate included a $9.5 million net allowance charge, equivalent to approximately $5.9 million after tax, or 38 cents per diluted share, against certain pools of finance receivables accounts. During the fourth quarter of 2009, the Company recorded ongoing non-cash equity-based compensation expense of $580,000, equivalent to approximately $358,000 after tax, or 2 cents per diluted share.
“Portfolio Recovery Associates concluded a very challenging 2009 on a high note, producing strong fourth-quarter results that included solid earnings growth, record revenue and record cash collections. This was achieved in the face of a tepid economic recovery, seasonal weakness in consumer collections and a $9.5 million allowance charge recorded in the fourth quarter. Importantly, the Company was able to build for the future during the quarter, making $75.1 million in portfolio acquisitions, further improving collector productivity and taking steps to strengthen our fee businesses. I remain excited about the opportunities that lie ahead for Portfolio Recovery Associates in the New Year,” said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.
Financial and Operating Highlights
-- Cash collections rose 20% to a record $95.3 million in the fourth
quarter of 2009, up from $79.2 million in the year-ago period. Call
center and other collections increased 10%, external legal collections
decreased 16%, internal legal collections grew 185%, and purchased
bankruptcy collections gained 59% when compared with the year-earlier
period.
The table below displays our cash collections by source, by quarter for the past five quarters:
Cash Collection Source
($ in thousands) Q42009 Q32009 Q22009 Q12009 Q42008
-------- -------- -------- -------- --------
Call Center & Other
Collections $ 45,365 $ 48,590 $ 50,052 $ 50,914 $ 41,268
External Legal Collections 15,496 15,330 16,527 17,790 18,424
Internal Legal Collections 7,570 6,196 4,263 3,539 2,652
Purchased Bankruptcy Collections 26,855 22,251 19,637 17,628 16,904
-- Productivity, as measured by cash collections per hour paid, the
Company's key measure of collector performance, finished at $145.44 for
full year 2009 vs. $131.29 for all of 2008. Excluding the impact of
trustee remittances from purchased bankrupt accounts, the comparison is
$113.42 for full year 2009, compared with $109.82 for all of 2008.
Excluding trustee remittances on purchased bankrupt accounts and legal
collections, the comparison is $87.13 for the full year 2009 and $75.47
for all of 2008.
-- Revenue was $73.2 million in the fourth quarter, up 9% when compared
with the same period a year ago. This was driven by record cash
receipts of $112.5 million, up 14.7% from $98.1 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 $9.5 million in the fourth
quarter. The table below displays net allowance charges incurred by
quarter, by buying period since 2005 and purchases of charged-off
consumer debt, net of buybacks:
($ 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
Q4 09 - - - (120) - 1,375
-------- -------- -------- -------- -------- ---------
Total $ - $ - $ - $ - $ 1,385 $ 9,940
======== ======== ======== ======== ======== =========
Portfolio
Purchases, net $ 65,772 $ 33,481 $ 42,325 $ 61,449 $ 59,179 $ 143,173
======== ======== ======== ======== ======== =========
($ in thousands)
---------------------------------------------------
Allowance Purchase Period
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
Q4 09 1,220 110 6,900 - $ 9,485
--------- --------- --------- --------- -----------
Total $ 12,370 $ 10,815 $ 16,745 $ - $ 51,255
========= ========= ========= ========= ===========
Portfolio
Purchases, net $ 107,743 $ 258,357 $ 275,213 $ 285,834 $ 1,332,525
========= ========= ========= ========= ===========
-- The Company purchased $2.0 billion of face-value debt during the fourth
quarter of 2009 for $75.1 million. This debt was acquired in 101
portfolios from 13 different sellers. For the year the Company
acquired $8.1 billion of face-value debt for $289 million.
-- The Company's fee-for-service businesses generated revenue of $17.3
million in the fourth quarter of 2009, down 8.7% from $18.9 million in
the same period a year ago. These businesses accounted for 23.6% of
the Company's overall revenue in the fourth quarter of 2009, down from
28.2% in Q4 2008.
-- The Company's cash balances were $20.3 million as of December 31, 2009.
During the fourth quarter, the Company made net borrowings of $13
million on its line of credit, leaving it with $319.3 million in
outstanding borrowings at quarter's end. Remaining borrowing
availability under the line was $45.7 million at December 31, 2009.
“Portfolio Recovery Associates finished 2009 with a strong fourth-quarter performance that included record revenue, record cash receipts and record cash collections. These impressive top-line metrics drove solid bottom-line results, with earnings up 17% in the quarter to $12.4 million, or 80 cents a diluted share. This represents our highest quarterly net income in two and a half years, and was achieved despite an allowance charge totaling $9.5 million for the quarter, which was driven primarily by our 2008 vintage purchases. Looking forward, we believe our strong financial position and continued access to capital will help position us well to take advantage of opportunities for continued portfolio acquisitions as we move further into 2010,” said Kevin P. Stevenson, Chief Financial and Administrative Officer.
For the full year 2009, the Company’s earnings totaled $44.3 million, or $2.87 per diluted share, compared with $45.4 million, or $2.97 per diluted share, for the full year 2008. Full year 2009 revenue was $281.1 million, compared with $263.3 million in 2008.
Conference Call Information
The Company will hold a conference call with investors tonight, Thursday, February 11, 2010, at 5:30 p.m. EST to discuss its fourth quarter and full year results. Investors can access the call live by dialing 888-679-8034 for domestic callers or 617-213-4847 for international callers using the pass code 75743929.
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 42884873. 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, payment processing 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 Months Three Months Year Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
Revenues:
Income recognized on
finance receivables,
net $ 55,962 $ 48,073 $ 215,612 $ 206,486
Commissions 17,254 18,898 65,479 56,789
----------- ----------- ----------- -----------
Total revenues 73,216 66,971 281,091 263,275
Operating expenses:
Compensation and employee
services 26,447 23,091 106,388 88,073
Legal and agency fees
and costs 12,518 13,340 46,978 52,869
Outside fees and services 2,716 2,012 9,570 8,883
Communications 3,616 2,769 14,773 10,304
Rent and occupancy 1,245 1,078 4,761 3,908
Other operating expenses 2,234 2,114 8,799 6,977
Depreciation and
amortization 2,339 2,285 9,213 7,424
----------- ----------- ----------- -----------
Total operating
expenses 51,115 46,689 200,482 178,438
----------- ----------- ----------- -----------
Income from
operations 22,101 20,282 80,609 84,837
Other income and
(expense):
Interest income - 9 3 60
Interest expense (2,018) (2,936) (7,909) (11,151)
----------- ----------- ----------- -----------
Income before
income taxes 20,083 17,355 72,703 73,746
Provision for
income taxes 7,667 6,746 28,397 28,384
----------- ----------- ----------- -----------
Net income $ 12,416 $ 10,609 $ 44,306 $ 45,362
=========== =========== =========== ===========
Net income per common
share:
Basic $ 0.80 $ 0.69 $ 2.87 $ 2.98
Diluted $ 0.80 $ 0.69 $ 2.87 $ 2.97
Weighted average number
of shares outstanding:
Basic 15,505 15,283 15,420 15,229
Diluted 15,531 15,329 15,454 15,292
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Balance Sheets
(in thousands, except per share amounts)
December 31, December 31,
ASSETS 2009 2008
----------- ------------
Cash and cash equivalents $ 20,265 $ 13,901
Finance receivables, net 693,462 563,830
Accounts receivable, net 9,169 8,278
Income taxes receivable 4,460 3,587
Property and equipment, net 21,864 23,884
Goodwill 29,299 27,546
Intangible assets, net 10,756 13,429
Other assets 5,158 3,385
----------- ------------
Total assets $ 794,433 $ 657,840
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $ 20,948 $ 17,602
Deferred tax liability 117,206 88,070
Line of credit 319,300 268,300
Long term debt and capital leases 1,499 5
----------- ------------
Total liabilities 458,953 373,977
----------- ------------
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, 15,596 issued and 15,514
outstanding shares at December 31, 2009,
and 15,398 issued and 15,286 outstanding shares
at December 31, 2008 155 153
Additional paid-in capital 82,400 74,574
Retained earnings 253,353 209,047
Accumulated other comprehensive (loss)/income,
net of taxes (428) 89
----------- ------------
Total stockholders' equity 335,480 283,863
----------- ------------
Total liabilities and stockholders' equity $ 794,433 $ 657,840
=========== ============
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Summary Statements of Cash Flows
(in thousands)
Year Ended Year Ended
December 31, December 31,
2009 2008
----------- -----------
Cash flows from operating activities:
Net income $ 44,306 $ 45,362
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of share-based compensation 3,820 141
Depreciation and amortization 9,213 7,424
Deferred tax expense 28,927 30,854
Changes in operating assets and
liabilities:
Other assets (1,862) (555)
Accounts receivable (891) (1,663)
Accounts payable and accrued
liabilities 2,645 540
Income taxes receivable (873) (385)
----------- -----------
Net cash provided by operating
activities 85,285 81,718
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (4,521) (6,139)
Acquisition of finance receivables, net of
buybacks (282,023) (273,746)
Collections applied to principal on finance
receivables 152,391 120,213
Acquisitions, including acquisition costs and
net of cash acquired (100) (26,041)
----------- -----------
Net cash used in investing activities (134,253) (185,713)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of options 1,915 607
Income tax benefit from share-based compensation 923 357
Proceeds from line of credit 123,500 171,300
Principal payments on line of credit (72,500) (71,000)
Proceeds from long-term debt 2,036 -
Principal payments on long-term debt (537) -
Principal payments on capital lease obligations (5) (98)
----------- -----------
Net cash provided by financing activities 55,332 101,166
----------- -----------
Net increase/(decrease) in cash and cash
equivalents 6,364 (2,829)
Cash and cash equivalents, beginning of year 13,901 16,730
----------- -----------
Cash and cash equivalents, end of year $ 20,265 $ 13,901
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 8,004 $ 11,322
Cash paid for income taxes $ 365 $ 3
Noncash investing and financing activities:
Common stock issued for acquisition $ 1,170 $ 1,847
Net unrealized change in fair value of
derivative instrument $ (790) $ 89
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