PRA Reports Second Quarter 2014 Results

PRA Group Logo

NORFOLK, Va., Aug. 5, 2014 (GLOBE NEWSWIRE) -- PRA Group (Nasdaq:PRAA), a world leader in acquiring non-performing consumer debt, today reported its financial results for the second quarter 2014.

Second Quarter Highlights

  • Cash collections of $319.3 million, up 8% from the second quarter of 2013.
  • Revenues of $197.3 million, up 8%.
  • Net income of $37.5 million, down 14%.
  • $0.74 diluted earnings per share, compared with $0.85 in the year-ago quarter, down 13%. The Company incurred costs of $0.05 per diluted share in connection with the Aktiv Kapital acquisition and $0.08 per diluted share in foreign exchange currency losses related to the Aktiv Kapital acquisition. Excluding these costs, earnings per diluted share would have been $0.87, up 2%. A reconciliation of this non-GAAP financial measure to GAAP is included at the end of this press release.
  • 16.0% return on average equity, annualized. Excluding the costs related to the Aktiv Kapital acquisition and the foreign exchange currency loss, annualized return on average equity would have been 18.7%.
  • $109.2 million in portfolio acquisitions.

"We are excited to have closed both the acquisition of Aktiv Kapital and Pamplona Capital Management's Individual Voluntary Arrangements (IVA) Master Servicing Platform. Geir Olsen and his team at Aktiv Kapital bring us entry into 13 new countries and expertise with the dynamics of the European markets," said Steve Fredrickson, chairman, president and chief executive officer, PRA Group.

"Andrew Berardi and his team that join us with the IVA Master Servicing Platform acquisition bring with them the ability for us to acquire consumer insolvencies from major retail banks, credit card providers and other specialty finance providers in the U.K. These acquisitions align with our strategy of product and geographic diversification allowing us flexibility when investing capital," Fredrickson said.

REVENUES

  • Revenues of $197.3 million in the second quarter, largely driven by cash collections, included finance receivables income net of principal amortization and net allowance reversals. Net finance receivables income was $182.5 million, up 8% from $168.6 million in the year-ago quarter.
  • Cash collections increased 8% in the second quarter from the year-ago quarter to $319.3 million, and included collections from these finance receivables sources:

Cash Collection Source ($ in thousands) Q22014 Q12014 Q42013 Q32013 Q22013
Call Center and Other Collections $ 95,072 $ 97,736 $ 84,375 $ 89,512 $ 90,229
External Legal Collections 55,011 50,990 46,066 48,274 50,131
Internal Legal Collections 45,090 43,939 34,101 33,288 30,365
Bankruptcy Court Trustee Payments 124,101 120,702 114,384 120,577 125,672
Total Cash Collections $ 319,274 $ 313,367 $ 278,926 $ 291,651 $ 296,397

  • Principal amortization of finance receivables in the second quarter was $136.8 million or 42.8% of cash collections, compared with 43.1% in the year-ago quarter. Principal amortization included a net allowance reversal of $2.3 million recorded against certain pools of finance receivables in the quarter, compared with a net allowance reversal of $1.2 million recorded in the year-ago quarter.
  • Revenues in the second quarter also included income from PRA's fee-based businesses of $14.8 million, compared with $14.4 million in the year-ago quarter.

EXPENSES AND OPERATING INCOME

  • Operating expenses were $124.9 million in the second quarter of 2014, compared with $109.1 million a year ago, an increase of 14%. PRA incurred approximately $4.1 million of expenses during the quarter related to its acquisition of Aktiv Kapital. The increase in operating expenses was also impacted by an increase in legal collection expenses related to our legal collection strategy and by an increase in compensation and employee services expense due largely to an increase in headcount.
  • The Company also incurred $6.2 million in foreign exchange currency losses in relation to the acquisition of Aktiv Kapital that is included on the income statement below the operating expense line.
  • Operating income was $72.5 million, compared with $73.8 million in the year-ago quarter. The operating margin was 36.7% in the second quarter of 2014.
  • The provision for income taxes was $23.7 million in the second quarter, down 14% from the year-ago quarter. PRA's provision for income taxes was 38.7% of income before taxes in the second quarter, compared with 38.8% in the year-ago quarter.

PORTFOLIO ACQUISITIONS

  • PRA invested $109.2 million in new finance receivables from North American and U.K. creditors in the second quarter of 2014, compared with $200.5 million in the year-ago quarter. Receivables purchased were acquired in 85 portfolios from 14 different sellers.

Portfolio Purchase Source
($ in thousands)

Q22014

Q12014

Q42013

Q32013

Q22013
Core Customer Debt $ 93,025 $ 80,711 $ 67,522 $ 100,081 $ 118,195
Bankruptcy Court Claims 16,187 72,003 31,987 41,794 82,273
Total Portfolio Purchases $ 109,212 $ 152,714 $ 99,509 $ 141,875 $ 200,468

  • Core customer debt purchased in the second quarter included $91.9 million in North American accounts and $1.1 million in U.K. accounts.

BALANCE SHEET

  • Borrowings totaled $448.8 million at June 30, 2014, and consisted of $258.8 million in convertible senior notes and $190.0 million in other long-term debt. Total borrowings were $413.8 million at June 30, 2013.
  • Cash and cash equivalents were $270.5 million at June 30, 2014, compared with $43.5 million at June 30, 2013.
  • Net deferred tax liabilities were $226.0 million at June 30, 2014, compared with $187.7 million a year ago.
  • Stockholders' equity increased to $952.3 million at June 30, 2014, from $791.9 million at June 30, 2013.

Conference Call Information

PRA will hold a conference call today at 5:30 p.m. ET to discuss results with institutional investors and stock analysts. To listen to a webcast of the call, visit http://ir.pragroup.com/events.cfm until November 5, 2014. To listen by phone, call 888-695-7639 in the U.S. or 970-315-0482 outside the U.S. The conference ID is 69453282. A question-and-answer session on the call will be open only to analysts or investors. To listen to a replay of the call until August 13, 2014, use the same conference ID when calling 855-859-2056 in the U.S. or 404-537-3406 outside the U.S.

About PRA Group

By acquiring non-performing consumer debt, Portfolio Recovery Associates, Inc., doing business as PRA Group, returns capital to global banks and other creditors to help expand financial services for consumers in North America and Europe. PRA Group companies collaborate with customers to create affordable, realistic debt repayment plans and provide a broad range of additional revenue and recovery services to business and government clients in the U.S. and the U.K.

In 2013 and 2012, PRA was named one of Fortune's 100 Fastest-Growing Companies and one of Forbes' Top 25 Best Small Companies in America. PRA has been annually ranked on the Forbes list since 2007. PRA employs more than 4,000 people and is headquartered in Norfolk, Virginia. For more information, please visit www.pragroup.com.

About Forward-Looking Statements

Statements made herein which are not historical, including PRA's or its management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future, including, but not limited to, statements with respect to future revenue, earnings per share growth and return on equity, and statements with respect to future contributions of Aktiv Kapital; the ability of Aktiv Kapital, or of any of PRA's subsidiaries, to contribute to earnings and future portfolio-purchase opportunities, all of which, 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.

The forward-looking statements in this press release are based upon management's beliefs, assumptions and expectations of PRA's future operations and economic performance, taking into account currently available information. These statements are not statements of historical fact and there can be no assurance that we will achieve our targets. Forward-looking statements involve risks and uncertainties, some of which are not currently known to PRA.

Actual events or results may differ materially from those expressed or implied in any such forward-looking statements as a result of various factors, including our ability to successfully integrate the Aktiv Kapital business or fully realize the expected benefits of the acquisition of Aktiv Kapital; our ability to manage risks associated with our international operations, which risks will increase as a result of the Aktiv Kapital acquisition; our ability to realize the anticipated synergies and benefits of the Aktiv acquisition; a prolonged economic recovery or a deterioration in the economic or inflationary environment in the United States or Europe; changes in, or interpretations of, state or federal laws or the administrative practices of various bankruptcy courts, which may impact our ability to collect on our defaulted receivables; governmental investigations into or enforcement actions against our business practices; our ability to employ and retain qualified employees; the degree, nature, and resources of our competition; changes in interest or exchange rates; and the risk factors and other risks that are described from time to time in PRA's filings with the Securities and Exchange Commission including but not limited to PRA's 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 PRA's website, which contain detailed discussion of PRA's business, including risks and uncertainties that may affect future results.

Due to such uncertainties and risks, you are cautioned not to place undue reliance on such forward-looking statements, which speak only as of today. Information in this press release may be superseded by recent information or statements, which may be disclosed in later press releases, subsequent filings with the Securities and Exchange Commission or otherwise. Except as required by law, PRA assumes no obligation to publicly update or revise its forward-looking statements contained herein to reflect any change in PRA'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 Ended June 30, Six Months Ended June 30,
2014 2013 2014 2013
Revenues:
Income recognized on finance receivables, net $ 182,518 $ 168,570 $ 360,488 $ 323,362
Fee income 14,825 14,391 30,777 29,158
Total revenues 197,343 182,961 391,265 352,520
Operating expenses:
Compensation and employee services 52,461 48,202 103,846 93,199
Legal collection fees 11,371 10,609 22,204 21,138
Legal collection costs 25,429 22,717 51,962 43,218
Agent fees 1,464 1,280 2,914 2,889
Outside fees and services 12,113 8,634 22,904 16,081
Communications 7,958 6,675 17,112 14,754
Rent and occupancy 2,219 1,824 4,366 3,511
Depreciation and amortization 4,211 3,534 8,158 6,900
Other operating expenses 7,653 5,660 13,745 11,117
Total operating expenses 124,879 109,135 247,211 212,807
Income from operations 72,464 73,826 144,054 139,713
Other income and (expense):
Interest income 1 -- 2 --
Interest expense (5,068) (2,923) (9,928) (5,612)
Other expense (6,224) -- (6,224) --
Income before income taxes 61,173 70,903 127,904 134,101
Provision for income taxes 23,666 27,489 49,557 52,170
Net income $ 37,507 $ 43,414 $ 78,347 $ 81,931
Adjustment for loss attributable to redeemable noncontrolling interest -- 185 -- 268
Net income attributable to Portfolio Recovery Associates, Inc. $ 37,507 $ 43,599 $ 78,347 $ 82,199
Net income per common share attributable to Portfolio Recovery Associates, Inc.:
Basic $ 0.75 $ 0.86 $ 1.57 $ 1.62
Diluted $ 0.74 $ 0.85 $ 1.55 $ 1.60
Weighted average number of shares outstanding:
Basic 50,065 50,751 49,997 50,781
Diluted 50,437 51,183 50,400 51,228
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except per share amounts)
ASSETS June 30,
2014
December 31,
2013
Cash and cash equivalents $ 270,526 $ 162,004
Finance receivables, net 1,219,595 1,239,191
Accounts receivable, net 12,458 12,359
Income taxes receivable 6,072 11,710
Property and equipment, net 38,902 31,541
Net deferred tax asset 1,404 1,361
Goodwill 105,122 103,843
Intangible assets, net 13,805 15,767
Other assets 27,478 23,456
Total assets $ 1,695,362 $ 1,601,232
LIABILITIES AND EQUITY
Liabilities:
Accounts payable $ 20,396 $ 14,819
Accrued expenses and other liabilities 33,594 27,655
Accrued compensation 14,320 27,431
Net deferred tax liability 226,011 210,071
Borrowings 448,785 451,780
Total liabilities 743,106 731,756
Stockholders' equity:
Preferred stock, par value $0.01, authorized shares, 2,000, issued and outstanding shares - 0 -- --
Common stock, par value $0.01, 100,000 authorized shares, 50,073 issued and outstanding shares at June 30, 2014, and 49,840 issued and outstanding shares at December 31, 2013 501 498
Additional paid-in capital 137,512 135,441
Retained earnings 807,852 729,505
Accumulated other comprehensive income 6,391 4,032
Total stockholders' equity 952,256 869,476
Total liabilities and equity $ 1,695,362 $ 1,601,232
Portfolio Recovery Associates, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended June 30,
2014 2013
Cash flows from operating activities:
Net income $ 78,347 $ 81,931
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of share-based compensation 5,437 6,651
Depreciation and amortization 8,158 6,900
Amortization of debt discount 2,005 --
Deferred tax expense 15,940 2,488
Changes in operating assets and liabilities:
Other assets (3,874) (1,284)
Accounts receivable (34) (46)
Accounts payable 5,480 (2,633)
Income tax payable/receivable, net 5,665 (5,748)
Accrued expenses 5,886 7,313
Accrued compensation (20,635) 1,757
Net cash provided by operating activities 102,375 97,329
Cash flows from investing activities:
Purchases of property and equipment (13,224) (6,639)
Acquisition of finance receivables, net of buybacks (252,168) (407,347)
Collections applied to principal on finance receivables 272,153 248,498
Net cash provided by/(used in) investing activities 6,761 (165,488)
Cash flows from financing activities:
Income tax benefit from share-based compensation 4,152 2,659
Proceeds from line of credit -- 217,000
Principal payments on line of credit -- (128,000)
Repurchases of common stock -- (8,506)
Cash paid for noncontrolling interest -- (1,150)
Distributions paid to noncontrolling interest -- (51)
Principal payments on long-term debt (5,000) (2,768)
Net cash (used in)/provided by financing activities (848) 79,184
Effect of exchange rate on cash 234 (253)
Net increase in cash and cash equivalents 108,522 10,772
Cash and cash equivalents, beginning of period 162,004 32,687
Cash and cash equivalents, end of period $ 270,526 $ 43,459
Supplemental disclosure of cash flow information:
Cash paid for interest $ 7,634 $ 5,581
Cash paid for income taxes 25,414 52,809
Noncash investing and financing activities:
Adjustment of the redeemable noncontrolling interest measurement amount $ -- $ (245)
Purchase of noncontrolling interest -- 9,162
Distributions payable relating to noncontrolling interest -- 2
Employee stock relinquished for payment of taxes (7,515) (4,025)
FINANCIAL HIGHLIGHTS
As of and for the
Three Months Ended June 30,
As of and for the
Six Months Ended June 30,
2014 2013 Change 2014 2013 Change
EARNINGS (in thousands)
Income recognized on finance receivables, net $ 182,518 $ 168,570 8% $ 360,488 $ 323,362 11%
Fee income 14,825 14,391 3% 30,777 29,158 6%
Total revenues 197,343 182,961 8% 391,265 352,520 11%
Operating expenses 124,879 109,135 14% 247,211 212,807 16%
Income from operations 72,464 73,826 -2% 144,054 139,713 3%
Net interest expense 5,067 2,923 73% 9,926 5,612 77%
Net income 37,507 43,414 -14% 78,347 81,931 -4%
Net income attributable to Portfolio Recovery Associates, Inc. 37,507 43,599 -14% 78,347 82,199 -5%
PERIOD-END BALANCES (in thousands)
Cash and cash equivalents $ 270,526 $ 43,459 522% $ 270,526 $ 43,459 522%
Finance receivables, net 1,219,595 1,236,859 -1% 1,219,595 1,236,859 -1%
Goodwill and intangible assets, net 118,927 124,349 -4% 118,927 124,349 -4%
Total assets 1,695,362 1,457,246 16% 1,695,362 1,457,246 16%
Borrowings 448,785 413,774 8% 448,785 413,774 8%
Total liabilities 743,106 655,012 13% 743,106 655,012 13%
Total equity 952,256 791,898 20% 952,256 791,898 20%
FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)
Cash collections $ 319,274 $ 296,397 8% $ 632,641 $ 571,860 11%
Cash collections on fully amortized pools 16,943 10,612 60% 33,459 16,957 97%
Principal amortization without allowance charges 139,055 129,012 8% 276,405 247,510 12%
Principal amortization with allowance charges 136,756 127,827 7% 272,153 248,498 10%
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools 42.8% 43.1% -1% 43.0% 43.5% -1%
Excluding fully amortized pools 45.2% 44.7% 1% 45.4% 44.8% 1%
ALLOWANCE FOR FINANCE RECEIVABLES (dollars in thousands)
Allowance (reversal)/charge (2,299) (1,185) 94% (4,252) 988 -530%
Allowance (reversal)/charge to period-end net finance receivables -0.2% -0.1% 97% -0.3% 0.1% -537%
Allowance (reversal)/charge to net finance receivable income -1.3% -0.7% 79% -1.2% 0.3% -486%
Allowance (reversal)/charge to cash collections -0.7% -0.4% 80% -0.7% 0.2% -489%
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)
Purchase price - core $ 91,904 $ 113,314 -19% $ 170,989 $ 240,265 -29%
Face value - core 770,985 1,178,229 -35% 1,608,021 2,577,189 -38%
Purchase price - bankruptcy 16,187 82,273 -80% 81,688 168,868 -52%
Face value - bankruptcy 180,179 1,926,515 -91% 737,399 2,363,023 -69%
Purchase price - other 1,121 4,881 -77% 9,249 6,268 48%
Face value - other 15,747 81,852 -81% 534,865 100,422 433%
Purchase price - total 109,212 200,468 -46% 261,926 415,401 -37%
Face value - total 966,911 3,186,596 -70% 2,880,285 5,040,634 -43%
Number of portfolios - total 85 94 -10% 189 185 2%
ESTIMATED REMAINING COLLECTIONS (in thousands)
Estimated remaining collections - core $ 1,948,414 $ 1,694,262 15% $ 1,948,414 $ 1,694,262 15%
Estimated remaining collections - bankruptcy 729,406 925,223 -21% 729,406 925,223 -21%
Estimated remaining collections - other 24,119 16,744 44% 24,119 16,744 44%
Estimated remaining collections - total 2,701,939 2,636,229 2% 2,701,939 2,636,229 2%
SHARE DATA-ADJUSTED (7) (share amounts in thousands)
Net income per common share - diluted $ 0.74 $ 0.85 -13% $ 1.55 $ 1.60 -3%
Weighted average number of shares outstanding - diluted 50,437 51,183 -1% 50,400 51,228 -2%
Shares repurchased -- 166 -100% -- 214 -100%
Average price paid per share repurchased (including acquisitions costs) $ -- $ 39.82 -100% $ -- $ 39.71 -100%
Closing market price $ 59.53 $ 51.21 16% $ 59.53 $ 51.21 16%
RATIOS AND OTHER DATA (dollars in thousands)
Return on average equity (1) 16.0% 22.5% -29% 17.1% 21.8% -22%
Return on revenue (2) 19.0% 23.7% -20% 20.0% 23.2% -14%
Return on average assets (3) 9.0% 12.1% -26% 9.5% 11.7% -19%
Operating margin (4) 36.7% 40.4% -9% 36.8% 39.6% -7%
Operating expense to cash receipts (5) 37.4% 35.1% 6% 37.3% 35.4% 5%
Debt to equity (6) 47.1% 52.3% -10% 47.1% 52.3% -10%
Number of collectors 2,258 2,190 3% 2,258 2,190 3%
Number of full-time equivalent employees 3,567 3,362 6% 3,567 3,362 6%
Cash receipts (5) $ 334,099 $ 310,788 8% $ 663,418 $ 601,018 10%
Line of credit - unused portion at period end 650,000 184,000 253% 650,000 184,000 253%
(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 annualized net income divided by average assets for the period
(4) Calculated as income from operations divided by total revenues
(5) "Cash receipts" is defined as cash collections plus fee income
(6) For purposes of this ratio, "debt" equals borrowings
(7) All per share data has been adjusted for a 3 for 1 stock split by means of a stock dividend which was declared on June 10, 2013 and payable August 1, 2013 to holders of record as of July 1, 2013
FINANCIAL HIGHLIGHTS
For the Quarter Ended
June 30
2014
March 31
2014
December 31
2013
September 30
2013
June 30
2013
EARNINGS (in thousands)
Income recognized on finance receivables, net $ 182,518 $ 177,970 $ 168,728 $ 171,456 $ 168,570
Fee income 14,825 15,952 16,125 26,306 14,391
Total revenues 197,343 193,922 184,853 197,762 182,961
Operating expenses 124,879 122,332 106,503 118,294 109,135
Income from operations 72,464 71,590 78,350 79,468 73,826
Net interest expense 5,067 4,859 4,860 3,995 2,923
Net income 37,507 40,840 45,777 49,211 43,414
Net income attributable to Portfolio Recovery Associates, Inc. 37,507 40,840 45,777 47,338 43,599
PERIOD-END BALANCES (in thousands)
Cash and cash equivalents $ 270,526 $ 191,819 $ 162,004 $ 108,705 $ 43,459
Finance receivables, net 1,219,595 1,253,961 1,239,191 1,256,822 1,236,859
Goodwill and intangible assets, net 118,927 118,800 119,610 119,636 124,349
Total assets 1,695,362 1,642,613 1,601,232 1,547,985 1,457,246
Borrowings 448,785 450,278 451,780 452,229 413,774
Total liabilities 743,106 732,395 731,756 721,001 655,012
Total equity 952,256 910,218 869,476 816,647 791,898
FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)
Cash collections $ 319,274 $ 313,367 $ 278,926 $ 291,651 $ 296,397
Cash collections on fully amortized pools 16,943 16,516 9,801 8,762 10,612
Principal amortization without allowance charges 139,055 137,350 110,626 122,776 129,012
Principal amortization with allowance charges 136,756 135,397 110,197 120,195 127,827
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools 42.8% 43.2% 39.5% 41.2% 43.1%
Excluding fully amortized pools 45.2% 45.6% 40.9% 42.5% 44.7%
ALLOWANCE FOR FINANCE RECEIVABLES (dollars in thousands)
Allowance (reversal)/charge (2,299) (1,953) (429) (2,581) (1,185)
Allowance (reversal)/charge to period-end net finance receivables -0.2% -0.2% 0.0% -0.2% -0.1%
Allowance (reversal)/charge to net finance receivable income -1.3% -1.1% -0.3% -1.5% -0.7%
Allowance (reversal)/charge to cash collections -0.7% -0.6% -0.2% -0.9% -0.4%
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)
Purchase price - core $ 91,904 $ 79,085 $ 65,759 $ 89,044 $ 113,314
Face value - core 770,985 837,036 774,543 1,352,877 1,178,229
Purchase price - bankruptcy 16,187 65,501 31,987 41,794 82,273
Face value - bankruptcy 180,179 557,220 235,064 215,957 1,926,515
Purchase price - other 1,121 8,128 1,763 11,037 4,881
Face value - other 15,747 519,118 22,493 218,528 81,852
Purchase price - total 109,212 152,714 99,509 141,875 200,468
Face value - total 966,911 1,913,374 1,032,100 1,787,362 3,186,596
Number of portfolios - total 85 104 83 79 94
ESTIMATED REMAINING COLLECTIONS (in thousands)
Estimated remaining collections - core $ 1,948,414 $ 1,891,511 $ 1,824,132 $ 1,762,369 $ 1,694,262
Estimated remaining collections - bankruptcy 729,406 788,774 822,988 877,722 925,223
Estimated remaining collections - other 24,119 24,439 22,150 32,272 16,744
Estimated remaining collections - total 2,701,939 2,704,724 2,669,270 2,672,363 2,636,229
SHARE DATA-ADJUSTED (7) (share amounts in thousands)
Net income per common share - diluted $ 0.74 $ 0.81 $ 0.91 $ 0.93 $ 0.85
Weighted average number of shares outstanding - diluted 50,437 50,363 50,375 50,660 51,183
Shares repurchased -- -- -- 989 166
Average price paid per share repurchased (including acquisitions costs) $ -- $ -- $ -- $ 50.55 $ 39.82
Closing market price $ 59.53 $ 57.86 $ 52.84 $ 59.93 $ 51.21
RATIOS AND OTHER DATA (dollars in thousands)
Return on average equity (1) 16.0% 18.2% 21.5% 23.5% 22.5%
Return on revenue (2) 19.0% 21.1% 24.8% 24.9% 23.7%
Return on average assets (3) 9.0% 10.0% 11.5% 12.5% 12.1%
Operating margin (4) 36.7% 36.9% 42.4% 40.2% 40.4%
Operating expense to cash receipts (5) 37.4% 37.1% 36.1% 37.2% 35.1%
Debt to equity (6) 47.1% 49.5% 52.0% 55.4% 52.3%
Number of collectors 2,258 2,379 2,313 2,054 2,190
Number of full-time equivalent employees 3,567 3,621 3,543 3,223 3,362
Cash receipts (5) $ 334,099 $ 329,319 $ 295,051 $ 317,957 $ 310,788
Line of credit - unused portion at period end 650,000 435,500 435,500 435,500 184,000
(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 annualized net income divided by average assets for the period
(4) Calculated as income from operations divided by total revenues
(5) "Cash receipts" is defined as cash collections plus fee income
(6) For purposes of this ratio, "debt" equals borrowings
(7) All per share data has been adjusted to reflect the 3-for-1 stock split by means of a stock dividend which was declared on June 10, 2013 and payable August 1, 2013 to holders of record as of July 1, 2013
Summary Portfolio Data at June 30, 2014, Entire Domestic Portfolio
($ in thousands)


Purchase
Period


Purchase
Price

Total
Estimated
Collections

Net Finance
Receivables
Balance
Actual Cash
Collections
Including Cash
Sales

Estimated
Remaining
Collections

Total Estimated
Collections to
Purchase Price
1996 $ 3,080 $ 10,227 $ -- $ 10,214 $ 13 332%
1997 7,685 25,592 -- 25,534 58 333%
1998 11,089 37,634 -- 37,426 208 339%
1999 18,898 69,766 -- 69,495 271 369%
2000 25,020 118,549 -- 117,130 1,419 474%
2001 33,481 178,921 -- 176,789 2,132 534%
2002 42,325 204,216 -- 199,971 4,245 482%
2003 61,447 273,734 -- 267,451 6,283 445%
2004 59,176 206,543 -- 200,122 6,421 349%
2005 143,167 331,551 5,826 314,819 16,732 232%
2006 107,666 228,180 6,013 211,770 16,410 212%
2007 258,364 541,739 18,192 489,963 51,776 210%
2008 275,114 537,362 22,193 486,888 50,474 195%
2009 281,313 921,889 15,940 803,271 118,618 328%
2010 357,767 1,061,805 56,506 829,401 232,404 297%
2011 392,778 1,039,572 124,237 658,407 381,165 265%
2012 508,426 1,036,009 268,072 483,553 552,456 204%
2013 621,545 1,159,021 453,419 324,169 834,852 186%
2014 253,011 434,437 234,218 32,552 401,885 172%
Total $ 3,461,352 $ 8,416,747 $ 1,204,616 $ 5,738,925 $ 2,677,822 243%
Summary Portfolio Data at June 30, 2014, Purchased Bankruptcy Portfolio - Domestic
($ in thousands)


Purchase
Period


Purchase
Price

Total
Estimated
Collections

Net Finance
Receivables
Balance
Actual Cash
Collections
Including Cash
Sales

Estimated
Remaining
Collections

Total Estimated
Collections to
Purchase Price
1996-2003 $ -- $ -- $ -- $ -- $ -- 0%
2004 7,468 14,598 -- 14,538 60 195%
2005 29,301 43,794 26 43,699 95 149%
2006 17,627 31,913 52 31,716 197 181%
2007 78,526 106,108 319 104,523 1,585 135%
2008 108,584 169,098 1,525 165,351 3,747 156%
2009 156,027 480,855 1,771 442,339 38,516 308%
2010 209,160 536,047 29,442 445,475 90,572 256%
2011 181,784 326,398 64,713 208,701 117,697 180%
2012 252,363 348,010 137,798 170,889 177,121 138%
2013 229,189 303,806 164,703 93,104 210,702 133%
2014 81,587 103,526 69,938 14,412 89,114 127%
Total $ 1,351,616 $ 2,464,153 $ 470,287 $ 1,734,747 $ 729,406 182%
Summary Portfolio Data at June 30, 2014, Core Portfolio - Domestic
($ in thousands)


Purchase
Period


Purchase
Price

Total
Estimated
Collections

Net Finance
Receivables
Balance
Actual Cash
Collections
Including Cash
Sales

Estimated
Remaining
Collections

Total Estimated
Collections to
Purchase Price
1996 $ 3,080 $ 10,227 $ -- $ 10,214 $ 13 332%
1997 7,685 25,592 -- 25,534 58 333%
1998 11,089 37,634 -- 37,426 208 339%
1999 18,898 69,766 -- 69,495 271 369%
2000 25,020 118,549 -- 117,130 1,419 474%
2001 33,481 178,921 -- 176,789 2,132 534%
2002 42,325 204,216 -- 199,971 4,245 482%
2003 61,447 273,734 -- 267,451 6,283 445%
2004 51,708 191,945 -- 185,584 6,361 371%
2005 113,866 287,757 5,800 271,120 16,637 253%
2006 90,039 196,267 5,961 180,054 16,213 218%
2007 179,838 435,631 17,873 385,440 50,191 242%
2008 166,530 368,264 20,668 321,537 46,727 221%
2009 125,286 441,034 14,169 360,932 80,102 352%
2010 148,607 525,758 27,064 383,926 141,832 354%
2011 210,994 713,174 59,524 449,706 263,468 338%
2012 256,063 687,999 130,274 312,664 375,335 269%
2013 392,356 855,215 288,716 231,065 624,150 218%
2014 171,424 330,911 164,280 18,140 312,771 193%
Total $ 2,109,736 $ 5,952,594 $ 734,329 $ 4,004,178 $ 1,948,416 282%

Use of Non-GAAP Financial Measures

Management believes that the presentation of certain financial information in this press release, excluding the costs associated with the Aktiv Kapital acquisition and foreign exchange losses that were recorded during the three and six months ended June 30, 2014, which is non-GAAP financial information, is useful to investors and improves the comparability of the Company's ongoing operational results between periods. The non-GAAP information should be considered in addition to, not as a substitute for, financial information prepared in accordance with GAAP.

Portfolio Recovery Associates, Inc.
Reconciliation of Net Income, Earnings Per Share and Financial Ratios to GAAP Net Income, Earnings Per Share and Financial Ratios
(in thousands, except per share amounts)
GAAP Three
Months Ended
June 30, 2014
Less: Adjustments
Related to Aktiv
Kapital Acquisition
Adjusted Three
Months Ended
June 30, 2014
GAAP Six
Months Ended
June 30, 2014
Less: Adjustments
Related to Aktiv
Kapital Acquisition
Adjusted Six
Months Ended
June 30, 2014
Revenues:
Income recognized on finance receivables, net $ 182,518 $ 182,518 $ 360,488 $ 360,488
Fee income 14,825 14,825 30,777 30,777
Total revenues 197,343 197,343 391,265 391,265
Operating expenses:
Compensation and employee services 52,461 52,461 103,846 103,846
Legal collection fees 11,371 11,371 22,204 22,204
Legal collection costs 25,429 25,429 51,962 51,962
Agent fees 1,464 1,464 2,914 2,914
Outside fees and services 12,113 (4,052) 8,061 22,904 (8,413) 14,491
Communications 7,958 7,958 17,112 17,112
Rent and occupancy 2,219 2,219 4,366 4,366
Depreciation and amortization 4,211 4,211 8,158 8,158
Other operating expenses 7,653 7,653 13,745 13,745
Total operating expenses 124,879 (4,052) 120,827 247,211 (8,413) 238,798
Income from operations 72,464 4,052 76,516 144,054 8,413 152,467
Other income and (expense):
Interest income 1 1 2 2
Interest expense (5,068) (5,068) (9,928) (9,928)
Other expense (6,224) 6,224 -- (6,224) 6,224 --
Income before income taxes 61,173 10,276 71,449 127,904 14,637 142,541
Provision for income taxes 23,666 3,976 27,642 49,557 5,671 55,228
Net income $ 37,507 $ 6,300 $ 43,807 $ 78,347 $ 8,966 $ 87,313
Adjustment for loss attributable to redeemable noncontrolling interest -- -- -- --
Net income attributable to Portfolio Recovery Associates, Inc. $ 37,507 $ 6,300 $ 43,807 $ 78,347 $ 8,966 $ 87,313
Net income per common share attributable to Portfolio Recovery Associates, Inc.:
Basic $ 0.75 $ 0.13 $ 0.88 $ 1.57 $ 0.18 $ 1.75
Diluted $ 0.74 $ 0.13 $ 0.87 $ 1.55 $ 0.18 $ 1.73
Weighted average number of shares outstanding:
Basic 50,065 50,065 49,997 49,997
Diluted 50,437 50,437 50,400 50,400
Operating margin: 36.7% 38.8% 36.8% 39.0%
Net income margin: 19.0% 22.2% 20.0% 22.3%
Return on average equity: 16.0% 18.7% 17.1% 19.0%

CONTACT: Investor Contact: Darby Schoenfeld Director of Investor Relations (757) 431-7913 DCSchoenfeld@PRAGroup.com News Media Contact: Rick Goulart Vice President, Corporate Communications (757) 961-3525 RickGoulart@PRAGroup.com

Source:PRA Group