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TheStreet Open House

PRA Reports Record Third Quarter 2013 Results

NORFOLK, Va., Oct. 30, 2013 (GLOBE NEWSWIRE) -- Portfolio Recovery Associates, Inc. (Nasdaq:PRAA), a financial and business services company operating in the U.S. and U.K, today reported its third quarter 2013 financial results.

Third Quarter Highlights

  • Cash collections of $291.7 million, up 27% from the third quarter of 2012.
  • Record revenues of $197.8 million, up 31%.
  • Record net income attributable to PRA of $47.3 million, up 42%.
  • $0.93 diluted EPS, compared with $0.65 a year ago, up 43%, adjusted for a 3:1 stock split effective August 1, 2013.
  • Fee income of $26.3 million, up 78%.
  • $6.4 million goodwill impairment charge for Location Services business.
  • 23.5% return on average equity, annualized.
  • $141.9 million investment in new portfolio purchases.

"In the third quarter, PRA continued the strong financial results of the first two quarters of 2013. Our employees again delivered record revenue and profitability for stockholders, as well as continued, significant investment in new portfolios of distressed debt," said Steve Fredrickson, chairman, president and chief executive officer, PRA.

"PRA's renewed focus on our fee-for-service businesses also contributed to our third quarter profitability. Fee income from these businesses substantially increased to $26.3 million during the quarter, aided by a single, large Claims Compensation Bureau case, helping to drive PRA's bottom-line results," Fredrickson said.

REVENUES

  • Revenues were $197.8 million in the third quarter 2013, up 31% from a year ago. Net finance receivables income increased 26% to $171.5 million in the quarter, from $135.8 million a year ago. And, fee income increased 78% from a year ago to $26.3 million.

Cash Collections from Finance Receivables

  • Cash collections increased 27% over the year-ago period to $291.7 million, including bankruptcy court trustee payments of $120.6 million; $89.5 million in call center and other collections; and $81.6 million in legal collections from customers with an ability to pay their debt, but who refuse attempts to collect.
 
 
Cash Collection Source ($ in thousands) Q32013 Q22013 Q12013 Q42012 Q32012
Call Center and Other Collections  $ 89,512  $ 90,229  $ 89,037  $ 72,624  $ 72,394
External Legal Collections  48,274  50,131  47,910  41,521  39,913
Internal Legal Collections  33,288  30,365  29,283  23,968  25,650
Bankruptcy Court Trustee Payments  120,577  125,672  109,233  91,098  91,095
Total Cash Collections  $ 291,651  $ 296,397  $ 275,463  $ 229,211  $ 229,052
 
  • Principal amortization was 41.2% of cash collections, compared with 40.7% in the year-ago quarter. Principal amortization included a net allowance reversal of $2.6 million recorded against certain pools of finance receivables in the quarter, compared with a net allowance charge of $1.6 million recorded a year ago. 

Fee Income

  • PRA's fee-based businesses generated $26.3 million in fee income in the quarter, compared with $14.8 million a year ago. The change was due primarily to a $10.5 million increase in fee income generated by Claims Compensation Bureau, largely attributable to a single case. Government Services fee income also increased, while fee income generated by the Company's Location Services unit declined. 

EXPENSES AND OPERATING INCOME

  • Operating expenses were $118.3 million in the third quarter of 2013, up $24.8 million or 27% from the year-ago quarter. 
  • PRA recorded a $6.4 million impairment of goodwill in the third quarter of 2013. This non-cash charge represents the full amount of goodwill previously recorded for the Company's Location Services subsidiary, and was taken primarily as a result of recent operating losses coupled with the loss of a significant client late in the quarter. Despite this charge, PRA is optimistic about the future of the Location Services business, and continues to invest in new technology, personnel, and facilities. 
  • Operating income was $79.5 million, compared with $57.1 million a year ago, an increase of 39%. The operating margin increased to 40.2% from 37.9% in the third quarter of last year.
  • The provision for income taxes was $26.3 million in the third quarter of 2013, up 21% from the third quarter of 2012. The provision in the third quarter of 2013 was positively impacted by a reduction in the Company's blended domestic state tax rate due to the enactment of certain state tax apportionment and other changes. The Company's provision for income taxes was 34.8% of income before taxes in the third quarter of 2013, compared with 39.6% in the year-earlier quarter. While these changes are expected to have some future benefit, the majority of the impact was due to the changes described above, and is not expected to reoccur.   

PORTFOLIO PURCHASES

  • PRA invested $141.9 million in new portfolio purchases from U.S and U.K. creditors in the third quarter of 2013, compared with $103.0 million a year ago.   Receivables purchased were acquired in 79 portfolios from 19 different sellers. The company has invested $756.4 million in portfolio purchases over the trailing twelve months.
 
 
Portfolio Purchase Source 
($ in thousands) Q32013 Q22013 Q12013 Q42012 Q32012
Core Customer Debt  $ 100,081  $ 118,195  $ 128,338  $ 88,107  $ 61,684
Bankruptcy Court Claims  41,794  82,273  86,595  111,001  41,277
Total Portfolio Purchases  $ 141,875  $ 200,468  $ 214,933  $ 199,108  $ 102,961
 
  • Core customer debt purchased in the third quarter of 2013 included $89.0 million in U.S. accounts and $11.0 million in U.K. accounts.

BALANCE SHEET

  • Borrowings totaled $452.2 million at September 30, 2013, and consisted of $255.8 million in convertible senior notes and $196.4 million in other long-term debt. Total borrowings were $250.7 million at September 30, 2012. 
  • During the quarter, the Company issued $287.5 million aggregate principal amount of 3.00% convertible senior notes due 2020. Proceeds were used to temporarily repay debt outstanding under its revolving credit facility and to repurchase approximately $50 million of common stock. The remaining proceeds were held in cash equivalent balances at quarter-end. As a result, cash and cash equivalents increased from $43.5 million at June 30, 2013 to $108.7 million at September 30, 2013. Cash and cash equivalents were $31.5 million at September 30, 2012. 
  • In August, the Company expanded its credit facility from $597.5 million to $633.0 million, which includes a $415.5 million domestic revolving credit facility and a $20 million multi-currency revolving credit facility, neither of which were drawn at September 30, 2013. 
  • Net deferred tax liabilities were $200.1 million at September 30, 2013, compared with $186.5 million a year ago. 
  • Stockholders' equity increased in the quarter to $816.6 million from $670.5 million at September 30, 2013.   

Conference Call Information

PRA will hold a conference call today with investors at 5:30 p.m. ET to discuss its third quarter 2013 results. Investors may access the call by calling 888-695-7639 in the U.S. or 970-315-0482 outside the U.S. The conference ID is 72546774. A replay will be available approximately one hour after the call ends and will remain available until November 6, 2013.  Investors may access the replay of the call by calling 855-859-2056 in the U.S. or 404-537-3406 outside the U.S. To access the replay, use the conference ID 72546774.  Investors also may listen to the conference call via webcast, both live and archived, at http://ir.PortfolioRecovery.com/events.cfm .

About PRA

As a leader in the U.S. debt buying industry, Portfolio Recovery Associates, Inc. (PRA) returns capital to banks and other creditors that helps expand financial services for consumers.  PRA collaborates with its customers to create affordable, realistic debt repayment plans. The company also provides a broad range of fee-based services to local governments and law enforcement, U.S. businesses, institutional investors, global hedge funds, and U.K. banks and creditors. 

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