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PRA Group Reports Third Quarter 2014 Results

NORFOLK, Va., Nov. 10, 2014 (GLOBE NEWSWIRE) -- PRA Group (Nasdaq:PRAA), a world leader in acquiring non-performing consumer debt, today reported its financial results for the third quarter 2014. These results include the effect of the Company's Aktiv Kapital acquisition since the transaction closed on July 16, 2014.

Third Quarter Highlights

  • Cash collections of $372.7 million, up 28% from the third quarter of 2013.
  • Revenues of $239.0 million, up 21%.
  • Net income of $51.2 million, up 8%.
  • $1.01 diluted earnings per share, compared with $0.93 in the year-ago quarter, up 9%. The company incurred non-recurring expenses of $0.08 per diluted share in connection with its Aktiv Kapital acquisition and $0.03 per diluted share in foreign exchange currency losses specifically related to foreign currency forward contracts associated with the acquisition. Excluding these expenses, earnings per diluted share would have been $1.12, up 20%. A reconciliation of this non-GAAP financial measure to GAAP is included at the end of this press release.
  • 21.1% return on average equity, annualized. Excluding the non-recurring expenses related to the Aktiv Kapital acquisition and the foreign exchange currency loss, annualized return on average equity would have been 23.2%.
  • $891.4 million in portfolio acquisitions.

"PRA Group now offers global clients a compliant partner focused on a positive customer experience with the financial capacity to offer maximum value, purchasing consistency and post-sale support," said Steve Fredrickson, chairman, president and chief executive officer, PRA Group. "As I continue to meet with employees, clients, and service providers across Europe, I have found that the acquisition of Aktiv Kapital and integration are being met positively by all. The magnitude of our opportunity in Europe continues to impress me and by acquiring a pan-European leader, we are well positioned to capitalize on it."

REVENUES

  • Revenues of $239.0 million in the third quarter, largely driven by cash collections, included finance receivables income net of principal amortization and net allowance reversals. Net finance receivables income was $224.3 million, up 31% from $171.5 million in the year-ago quarter.
  • Cash collections increased 28% in the third quarter from the year-ago quarter to $372.7 million, and included collections from these finance receivables sources:

Cash Collection Source ($ in thousands) Q32014 Q22014 Q12014 Q42013 Q32013
Call Center and Other Collections $ 97,301 $ 95,072 $ 97,736 $ 84,375 $ 89,512
External Legal Collections 49,930 55,011 50,990 46,066 48,274
Internal Legal Collections 41,400 45,090 43,939 34,101 33,288
Insolvency Collections 110,544 124,101 120,702 114,384 120,577
Legacy Aktiv Kapital 73,568 -- -- -- --
Total Cash Collections $ 372,743 $ 319,274 $ 313,367 $ 278,926 $ 291,651

  • Principal amortization of finance receivables in the third quarter was $148.4 million or 39.8% of cash collections, compared with 41.2% in the year-ago quarter. Principal amortization included a net allowance reversal of $1.7 million recorded against certain pools of finance receivables in the quarter, compared with a net allowance reversal of $2.6 million recorded in the year-ago quarter.
  • Revenues in the third quarter also included income from PRA Group's fee-based businesses of $12.9 million, compared with $26.3 million in the year-ago quarter. The decline was primarily due to sizeable fee income from the Claims Compensation Bureau business during the third quarter of 2013.

EXPENSES AND OPERATING INCOME

  • Operating expenses were $150.8 million in the third quarter of 2014, compared with $118.3 million a year ago, an increase of 27%. PRA Group incurred approximately $5.9 million of non-recurring expenses during the quarter related to its acquisition of Aktiv Kapital.
  • The Company also incurred $2.0 million in foreign exchange currency losses related to the acquisition of Aktiv Kapital that are included on the income statement below the operating expense line.
  • Operating income was $88.2 million, compared with $79.5 million in the year-ago quarter. The operating margin was 36.9% in the third quarter of 2014.
  • The provision for income taxes was $28.5 million in the third quarter, up 8% from the year-ago quarter. PRA Group's provision for income taxes was 35.8% of income before taxes in the third quarter, compared with 34.8% in the year-ago quarter.

PORTFOLIO ACQUISITIONS

  • PRA Group invested $891.4 million in new finance receivables from North American and European creditors in the third quarter of 2014, including $728 million in finance receivables from the acquisition of Aktiv Kapital, compared with $141.9 million in the year-ago quarter.

Portfolio Purchase Source ($ in thousands) Q32014 Q22014 Q12014 Q42013 Q32013
Core Customer Debt $ 852,821 $ 93,025 $ 80,711 $ 67,522 $ 100,081
Insolvency Claims 38,535 16,187 72,003 31,987 41,794
Total Portfolio Purchases $ 891,356 $ 109,212 $ 152,714 $ 99,509 $ 141,875

BALANCE SHEET

  • Borrowings totaled $1,425.4 million at September 30, 2014, and consisted of $436.5 million drawn on the domestic revolver, $371.7 million in assumed debt from the acquisition of Aktiv Kapital, $259.8 million in convertible senior notes, $187.5 million in other long-term debt and $169.9 million in seller financing related to the purchase of Aktiv Kapital. Total borrowings were $452.2 million at September 30, 2013.
  • Cash and cash equivalents were $70.3 million at September 30, 2014, compared with $108.7 million at September 30, 2013.
  • Net deferred tax liabilities were $237.2 million at September 30, 2014, compared with $200.1 million a year ago.
  • Stockholders' equity increased to $959.9 million at September 30, 2014, from $816.6 million at September 30, 2013.

Conference Call Information

PRA Group will hold a conference call today at 5:00 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 February 10, 2015. To listen by phone, call 888-695-7639 in the U.S. or 970-315-0482 outside the U.S. The conference ID is 17664211. 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 November 17, 2014, call 855-859-2056 in the U.S. or 404-537-3406 outside the U.S. and use conference ID 17664211.

About PRA Group

PRA Group (Nasdaq:PRAA), a world leader in acquiring non-performing consumer debt, 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 help them resolve their debt and also provide a broad range of revenue and recovery services to business and government clients.

PRA has been recognized as one of Fortune's 100 Fastest-Growing Companies for the past three years and one of Forbes' Best Small Companies in America every year since 2007. For more information, please visit www.PRAgroup.com.

About Forward-Looking Statements

Statements made herein which are not historical in nature, including PRA Group's or its management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future, 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 current beliefs, estimates, assumptions and expectations of PRA Group's future operations and economic performance, taking into account currently available information. These statements are not statements of historical fact or guarantees of future performance, and there can be no assurance that anticipated events will transpire or that our expectations will prove to be correct. Forward-looking statements involve risks and uncertainties, some of which are not currently known to PRA Group. 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 risk factors and other risks that are described from time to time in PRA Group's filings with the Securities and Exchange Commission including but not limited to PRA Group'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 Group's website, which contain detailed discussion of PRA Group'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 Group'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.

PRA Group, Inc.
Unaudited Consolidated Income Statements
(in thousands, except per share amounts)
Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Revenues:
Income recognized on finance receivables, net $ 224,326 $ 171,456 $ 584,814 $ 494,818
Fee income 12,882 26,306 43,659 55,464
Other revenue 1,765 -- 1,765 --
Total revenues 238,973 197,762 630,238 550,282
Operating expenses:
Compensation and employee services 65,237 52,882 169,083 146,081
Legal collection fees 13,778 10,206 35,982 31,343
Legal collection costs 20,367 19,801 72,329 63,020
Agency fees 5,988 1,404 8,902 4,293
Outside fees and services 17,221 8,707 40,125 24,789
Communications 8,907 6,645 26,019 21,398
Rent and occupancy 3,018 1,950 7,384 5,462
Depreciation and amortization 4,949 3,753 13,107 10,653
Other operating expenses 11,311 6,549 25,068 17,665
Impairment of goodwill -- 6,397 -- 6,397
Total operating expenses 150,776 118,294 397,999 331,101
Income from operations 88,197 79,468 232,239 219,181
Other income and (expense):
Interest income -- -- 2 --
Interest expense (11,808) (3,995) (21,736) (9,607)
Foreign exchange gain/(loss) 3,251 -- (2,961) --
Income before income taxes 79,640 75,473 207,544 209,574
Provision for income taxes 28,473 26,262 78,030 78,432
Net income $ 51,167 $ 49,211 $ 129,514 $ 131,142
Adjustment for net income attributable to redeemable noncontrolling interest -- 1,873 -- 1,605
Net income attributable to PRA Group, Inc. $ 51,167 $ 47,338 $ 129,514 $ 129,537
Net income per common share attributable to PRA Group, Inc.:
Basic $ 1.02 $ 0.94 $ 2.59 $ 2.56
Diluted $ 1.01 $ 0.93 $ 2.57 $ 2.54
Weighted average number of shares outstanding:
Basic 50,075 50,154 50,023 50,571
Diluted 50,439 50,660 50,413 51,039
PRA Group, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except per share amounts)
September 30, December 31,
ASSETS 2014 2013
Cash and cash equivalents $ 70,300 $ 162,004
Finance receivables, net 1,913,710 1,239,191
Other receivables, net 18,217 12,359
Income taxes receivable 11,506 11,710
Net deferred tax asset 4,639 1,361
Property and equipment, net 45,969 31,541
Goodwill 594,401 103,843
Intangible assets, net 12,315 15,767
Other assets 86,372 23,456
Total assets $ 2,757,429 $ 1,601,232
LIABILITIES AND EQUITY
Liabilities:
Accounts payable $ 15,352 $ 14,819
Accrued expenses and other liabilities 65,294 27,655
Income taxes payable 5,547 --
Accrued compensation 21,466 27,431
Net deferred tax liability 237,201 210,071
Interest bearing deposits 27,300 --
Borrowings 1,425,409 451,780
Total liabilities 1,797,569 731,756
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, 50,077 issued and outstanding shares at September 30, 2014, and 49,840 issued and outstanding shares at December 31, 2013 501 498
Additional paid-in capital 141,490 135,441
Retained earnings 859,019 729,505
Accumulated other comprehensive (loss)/income (41,150) 4,032
Total stockholders' equity 959,860 869,476
Total liabilities and equity $ 2,757,429 $ 1,601,232
PRA Group, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
Nine Months Ended September 30,
2014 2013
Cash flows from operating activities:
Net income $ 129,514 $ 131,142
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of share-based compensation 9,456 10,209
Depreciation and amortization 13,107 10,653
Impairment of goodwill -- 6,397
Amortization of debt discount 3,027 525
Amortization of debt fair value (3,595) --
Deferred tax expense 31,055 2,359
Changes in operating assets and liabilities:
Other assets 1,622 (1,147)
Other receivables 4,225 (1,497)
Accounts payable (16,507) 2,237
Income tax receivable/payable, net (111) (5,062)
Accrued expenses 11,205 8,604
Accrued compensation (13,504) 7,660
Net cash provided by operating activities 169,494 172,080
Cash flows from investing activities:
Purchases of property and equipment (16,513) (9,913)
Acquisition of finance receivables, net of buybacks (412,740) (546,201)
Collections applied to principal on finance receivables 420,570 368,693
Business acquisition, net of cash acquired (851,183) --
Net cash used in investing activities (859,866) (187,421)
Cash flows from financing activities:
Income tax benefit from share-based compensation 4,159 2,742
Proceeds from lines of credit 485,000 217,000
Principal payments on lines of credit (48,500) (344,000)
Repurchases of common stock -- (58,511)
Cash paid for purchase of portion of noncontrolling interest -- (1,150)
Distributions paid to noncontrolling interest -- (51)
Principal payments on long-term debt (7,500) (4,109)
Proceeds from long-term debt 169,938 --
Net increase in interest bearing deposits 51 --
Proceeds from convertible debt, net -- 279,285
Net cash provided by financing activities 603,148 91,206
Effect of exchange rate on cash (4,480) 153
Net (decrease)/increase in cash and cash equivalents (91,704) 76,018
Cash and cash equivalents, beginning of period 162,004 32,687
Cash and cash equivalents, end of period $ 70,300 $ 108,705
Supplemental disclosure of cash flow information:
Cash paid for interest $ 21,097 $ 9,333
Cash paid for income taxes 41,682 78,434
Supplemental disclosure of non-cash information:
Adjustment of the redeemable noncontrolling interest measurement amount $ -- $ 393
Distributions payable relating to noncontrolling interest -- 1,237
Purchase of redeemable noncontrolling interest -- 9,162
Employee stock relinquished for payment of taxes (7,563) (4,103)
FINANCIAL HIGHLIGHTS
As of and for the As of and for the
Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 Change 2014 2013 Change
EARNINGS (in thousands)
Income recognized on finance receivables, net $ 224,326 $ 171,456 31% $ 584,814 $ 494,818 18%
Fee income 12,882 26,306 -51% 43,659 55,464 -21%
Total revenues 238,973 197,762 21% 630,238 550,282 15%
Operating expenses 150,776 118,294 27% 397,999 331,101 20%
Income from operations 88,197 79,468 11% 232,239 219,181 6%
Net interest expense 11,808 3,995 196% 21,734 9,607 126%
Net income 51,167 49,211 4% 129,514 131,142 -1%
Net income attributable to PRA Group, Inc. 51,167 47,338 8% 129,514 129,537 0%
PERIOD-END BALANCES (in thousands)
Cash and cash equivalents $ 70,300 $ 108,705 -35% $ 70,300 $ 108,705 -35%
Finance receivables, net 1,913,710 1,256,822 52% 1,913,710 1,256,822 52%
Goodwill and intangible assets, net 606,716 119,636 407% 606,716 119,636 407%
Total assets 2,757,429 1,547,985 78% 2,757,429 1,547,985 78%
Borrowings 1,425,409 452,229 215% 1,425,409 452,229 215%
Total liabilities 1,797,569 721,001 149% 1,797,569 721,001 149%
Total equity 959,860 816,647 18% 959,860 816,647 18%
FINANCE RECEIVABLE INCOME (dollars in thousands)
Cash collections $ 372,743 $ 291,651 28% $ 1,005,384 $ 863,511 16%
Cash collections on fully amortized pools 17,105 8,762 95% 50,564 25,719 97%
Principal amortization without allowance (reversals)/charges 150,115 122,776 22% 426,520 370,286 15%
Allowance (reversal)/charge (1,698) (2,581) -34% (5,950) (1,593) 274%
Principal amortization with allowance (reversals)/charges 148,417 120,195 23% 420,570 368,693 14%
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools 39.8% 41.2% -3% 41.8% 42.7% -2%
Excluding fully amortized pools 41.7% 42.5% -2% 44.0% 44.0% 0%
Allowance (reversal)/charge to period-end net finance receivables (0.1%) (0.2%) -57% (0.3%) (0.1%) 145%
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)
Purchase price - North America core $ 91,537 $ 89,044 3% $ 262,526 $ 329,309 -20%
Purchase price - North America insolvency 38,535 41,794 -8% 126,725 210,662 -40%
Purchase price - Europe core 761,284 11,037 6798% 764,031 17,305 4315%
Purchase price - total 891,356 141,875 528% 1,153,282 557,275 107%
Number of portfolios - total 125 79 58% 314 264 19%
ESTIMATED REMAINING COLLECTIONS (in thousands)
Estimated remaining collections - North America core $ 2,089,253 $ 1,762,369 19% $ 2,089,253 $ 1,762,369 19%
Estimated remaining collections - North America insolvency 697,662 877,722 -21% 697,662 877,722 -21%
Estimated remaining collections - Europe core 1,582,135 32,272 4803% 1,582,135 32,272 4803%
Estimated remaining collections - total 4,369,050 2,672,363 63% 4,369,050 2,672,363 63%
SHARE DATA (share amounts in thousands)
Net income per common share - diluted $ 1.01 $ 0.93 9% $ 2.57 $ 2.54 1%
Weighted average number of shares outstanding - diluted 50,439 50,660 0% 50,413 51,039 -1%
Shares repurchased -- 989 -100% -- 1,203 -100%
Average price paid per share repurchased (including acquisitions costs) $ -- $ 50.55 -100% $ -- $ 48.62 -100%
Closing market price $ 52.23 $ 59.93 -13% $ 52.23 $ 59.93 -13%
RATIOS AND OTHER DATA (dollars in thousands)
Return on average equity (1) 21.1% 23.5% -10% 18.5% 22.4% -17%
Return on revenue (2) 21.4% 24.9% -14% 20.6% 23.8% -14%
Return on average assets (3) 7.3% 12.5% -42% 8.5% 12.0% -29%
Operating margin (4) 36.9% 40.2% -8% 36.8% 39.8% -7%
Operating expense to cash receipts (5) 39.1% 37.2% 5% 37.9% 36.0% 5%
Debt to equity (6) 148.5% 55.4% 168% 148.5% 55.4% 168%
Number of full-time equivalent collectors 2,498 2,054 22% 2,498 2,054 22%
Number of full-time equivalent employees 3,913 3,223 21% 3,913 3,223 21%
Cash receipts (5) $ 385,625 $ 317,957 21% $ 1,049,043 $ 918,975 14%
Line of credit - unused portion at period end 513,800 435,500 18% 513,800 435,500 18%
(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
FINANCIAL HIGHLIGHTS
For the Quarter Ended
September 30 June 30 March 31 December 31 September 30
2014 2014 2014 2013 2013
EARNINGS (in thousands)
Income recognized on finance receivables, net $ 224,326 $ 182,518 $ 177,970 $ 168,728 $ 171,456
Fee income 12,882 14,825 15,952 16,125 26,306
Total revenues 238,973 197,343 193,922 184,853 197,762
Operating expenses 150,776 124,891 122,332 106,503 118,294
Income from operations 88,197 72,452 71,590 78,350 79,468
Net interest expense 11,808 5,067 4,859 4,860 3,995
Net income 51,167 37,507 40,840 45,777 49,211
Net income attributable to PRA Group, Inc. 51,167 37,507 40,840 45,777 47,338
PERIOD-END BALANCES (in thousands)
Cash and cash equivalents $ 70,300 $ 270,526 $ 191,819 $ 162,004 $ 108,705
Finance receivables, net 1,913,710 1,219,595 1,253,961 1,239,191 1,256,822
Goodwill and intangible assets, net 606,716 118,927 118,800 119,610 119,636
Total assets 2,757,429 1,695,362 1,642,613 1,601,232 1,547,985
Borrowings 1,425,409 448,785 450,278 451,780 452,229
Total liabilities 1,797,569 743,106 732,395 731,756 721,001
Total equity 959,860 952,256 910,218 869,476 816,647
FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)
Cash collections $ 372,743 $ 319,274 $ 313,367 $ 278,926 $ 291,651
Cash collections on fully amortized pools 17,105 16,943 16,516 9,801 8,762
Principal amortization without allowance (reversals)/charges 150,115 139,055 137,350 110,626 122,776
Allowance (reversal)/charge (1,698) (2,299) (1,953) (429) (2,581)
Principal amortization with allowance (reversals)/charges 148,417 136,756 135,397 110,197 120,195
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools 39.8% 42.8% 43.2% 39.5% 41.2%
Excluding fully amortized pools 41.7% 45.2% 45.6% 40.9% 42.5%
Allowance (reversal)/charge to period-end net finance receivables -0.1% -0.2% -0.2% 0.0% -0.2%
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)
Purchase price - North America core $ 91,537 $ 91,904 $ 79,085 $ 65,759 $ 89,044
Purchase price - North America insolvency 38,535 16,187 72,003 31,987 41,794
Purchase price - Europe core 761,284 1,121 1,626 1,763 11,037
Purchase price - total 891,356 109,212 152,714 99,509 141,875
Number of portfolios - total 125 85 104 83 79
ESTIMATED REMAINING COLLECTIONS (in thousands)
Estimated remaining collections - North America core $ 2,089,253 $ 1,948,414 $ 1,891,511 $ 1,824,132 $ 1,762,369
Estimated remaining collections - North America insolvency 697,662 733,176 793,855 822,988 877,722
Estimated remaining collections - Europe core 1,582,135 20,349 19,358 22,150 32,272
Estimated remaining collections - total 4,369,050 2,701,939 2,704,724 2,669,270 2,672,363
SHARE DATA-ADJUSTED (7) (share amounts in thousands)
Net income per common share - diluted $ 1.01 $ 0.74 $ 0.81 $ 0.91 $ 0.93
Weighted average number of shares outstanding - diluted 50,439 50,437 50,363 50,375 50,660
Shares repurchased -- -- -- -- 989
Average price paid per share repurchased (including acquisitions costs) $ -- $ -- $ -- $ -- $ 50.55
Closing market price $ 52.23 $ 59.53 $ 57.86 $ 52.84 $ 59.93
RATIOS AND OTHER DATA (dollars in thousands)
Return on average equity (1) 21.1% 16.0% 18.2% 21.5% 23.5%
Return on revenue (2) 21.4% 19.0% 21.1% 24.8% 24.9%
Return on average assets (3) 7.3% 9.0% 10.0% 11.5% 12.5%
Operating margin (4) 36.9% 36.7% 36.9% 42.4% 40.2%
Operating expense to cash receipts (5) 39.1% 37.4% 37.1% 36.1% 37.2%
Debt to equity (6) 148.5% 47.1% 49.5% 52.0% 55.4%
Number of collectors 2,498 2,258 2,379 2,313 2,054
Number of full-time equivalent employees 3,913 3,567 3,621 3,543 3,223
Cash receipts (5) $ 385,625 $ 334,099 $ 329,319 $ 295,051 $ 317,957
Line of credit - unused portion at period end 513,800 650,000 435,500 435,500 435,500
(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
Summary Portfolio Data at September 30, 2014, Entire Domestic Portfolio
($ in thousands)
Actual Cash
Total Net Finance Collections Estimated Total Estimated
Purchase Purchase Estimated Receivables Including Cash Remaining Collections to
Period Price Collections Balance Sales Collections Purchase Price
1996 $ 3,080 $ 10,224 $ -- $ 10,216 $ 8 332%
1997 7,685 25,587 -- 25,545 42 333%
1998 11,089 37,556 -- 37,449 107 339%
1999 18,898 69,761 -- 69,548 213 369%
2000 25,020 118,391 -- 117,310 1,081 473%
2001 33,481 178,991 -- 177,173 1,818 535%
2002 42,325 204,141 -- 200,602 3,539 482%
2003 61,447 273,534 -- 268,441 5,093 445%
2004 59,176 205,802 -- 200,901 4,901 348%
2005 143,166 333,216 5,993 316,453 16,763 233%
2006 107,666 227,350 6,539 213,147 14,203 211%
2007 258,363 546,218 18,235 494,865 51,353 211%
2008 275,110 538,083 20,690 492,107 45,976 196%
2009 281,322 926,638 12,652 822,517 104,121 329%
2010 357,753 1,078,653 45,823 866,812 211,841 302%
2011 392,759 1,040,740 107,758 705,102 335,638 265%
2012 508,261 1,041,273 241,840 540,178 501,095 205%
2013 620,906 1,222,177 410,745 407,264 814,913 197%
2014 382,835 669,849 346,946 67,335 602,514 175%
Total $ 3,590,342 $ 8,748,184 $ 1,217,221 $ 6,032,965 $ 2,715,219 244%
Summary Portfolio Data at September 30, 2014, Insolvency Portfolio - Domestic
($ in thousands)
Actual Cash
Total Net Finance Collections Estimated Total Estimated
Purchase Purchase Estimated Receivables Including Cash Remaining Collections to
Period Price Collections Balance Sales Collections Purchase Price
1996-2003 $ -- $ -- $ -- $ -- $ -- 0%
2004 7,468 14,605 -- 14,554 51 196%
2005 29,301 43,799 29 43,725 74 149%
2006 17,627 31,951 38 31,773 178 181%
2007 78,525 106,180 227 104,682 1,498 135%
2008 108,583 169,261 1,349 165,726 3,535 156%
2009 156,025 481,429 -- 453,149 28,280 309%
2010 209,155 550,456 21,007 469,920 80,536 263%
2011 181,779 333,312 54,187 229,952 103,360 183%
2012 252,247 347,183 120,800 193,487 153,696 138%
2013 228,851 307,972 149,295 114,062 193,910 135%
2014 120,476 153,742 102,312 23,610 130,132 128%
Total $ 1,390,037 $ 2,539,890 $ 449,244 $ 1,844,640 $ 695,250 183%
Summary Portfolio Data at September 30, 2014, Core Portfolio - Domestic
($ in thousands)
Actual Cash
Total Net Finance Collections Estimated Total Estimated
Purchase Purchase Estimated Receivables Including Cash Remaining Collections to
Period Price Collections Balance Sales Collections Purchase Price
1996 $ 3,080 $ 10,224 $ -- $ 10,216 $ 8 332%
1997 7,685 25,587 -- 25,545 42 333%
1998 11,089 37,556 -- 37,449 107 339%
1999 18,898 69,761 -- 69,548 213 369%
2000 25,020 118,391 -- 117,310 1,081 473%
2001 33,481 178,991 -- 177,173 1,818 535%
2002 42,325 204,141 -- 200,602 3,539 482%
2003 61,447 273,534 -- 268,441 5,093 445%
2004 51,708 191,197 -- 186,347 4,850 370%
2005 113,865 289,417 5,964 272,728 16,689 254%
2006 90,039 195,399 6,501 181,374 14,025 217%
2007 179,838 440,038 18,008 390,183 49,855 245%
2008 166,527 368,822 19,341 326,381 42,441 221%
2009 125,297 445,209 12,652 369,368 75,841 355%
2010 148,598 528,197 24,816 396,892 131,305 355%
2011 210,980 707,428 53,571 475,150 232,278 335%
2012 256,014 694,090 121,040 346,691 347,399 271%
2013 392,055 914,205 261,450 293,202 621,003 233%
2014 262,359 516,107 244,634 43,725 472,382 197%
Total $ 2,200,305 $ 6,208,294 $ 767,977 $ 4,188,325 $ 2,019,969 282%

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 the foreign exchange losses, specifically related to foreign currency forward contracts put in place between signing and closing of the Aktiv Kapital acquisition to mitigate the risk in converting dollars to euros, that were recorded during the three and nine months ended September 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.

PRA Group, 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 Less: Adjustments Adjusted Three GAAP Nine Less: Adjustments Adjusted Nine
Three Months Ended Related to Aktiv Months Ended Months Ended Related to Aktiv Months Ended
September 30, 2014 Kapital
Acquisition
September 30, 2014 September 30, 2014 Kapital
Acquisition
September 30, 2014
Revenues:
Income recognized on finance receivables, net $ 224,326 $ 224,326 $ 584,814 $ 584,814
Fee income 12,882 12,882 43,659 43,659
Other revenue 1,765 1,765 1,765 1,765
Total revenues 238,973 238,973 630,238 630,238
Operating expenses:
Compensation and employee services 65,237 65,237 169,083 169,083
Legal collection fees 13,778 13,778 35,982 35,982
Legal collection costs 20,367 20,367 72,329 72,329
Agency fees 5,988 5,988 8,902 8,902
Outside fees and services 17,221 (5,893) 11,328 40,125 (14,305) 25,820
Communications 8,907 8,907 26,019 26,019
Rent and occupancy 3,018 3,018 7,384 7,384
Depreciation and amortization 4,949 4,949 13,107 13,107
Other operating expenses 11,311 11,311 25,068 25,068
Total operating expenses 150,776 (5,893) 144,883 397,999 (14,305) 383,694
Income from operations 88,197 5,893 94,090 232,239 14,305 246,544
Other income and (expense):
Interest income -- -- 2 2
Interest expense (11,808) (11,808) (21,736) (21,736)
Foreign exchange gain/(loss) 3,251 2,016 5,267 (2,961) 8,240 5,279
Income before income taxes 79,640 7,909 87,549 207,544 22,545 230,089
Provision for income taxes 28,473 2,828 31,301 78,030 8,476 86,506
Net income $ 51,167 $ 5,081 $ 56,248 $ 129,514 $ 14,069 $ 143,583
Adjustment for net income attributable to redeemable noncontrolling interest -- -- -- --
Net income attributable to PRA Group, Inc. $ 51,167 $ 5,081 $ 56,248 $ 129,514 $ 14,069 $ 143,583
Net income per common share attributable to PRA Group, Inc.:
Basic $ 1.02 $ 0.10 $ 1.12 $ 2.59 $ 0.28 $ 2.87
Diluted $ 1.01 $ 0.10 $ 1.12 $ 2.57 $ 0.28 $ 2.85
Weighted average number of shares outstanding:
Basic 50,075 50,075 50,075 50,023 50,023 50,023
Diluted 50,439 50,439 50,439 50,413 50,413 50,413
Operating margin: 36.9% 39.3% 36.8% 39.1%
Net income margin: 21.4% 23.5% 20.6% 22.8%
Return on average equity: 21.1% 23.2% 18.5% 20.5%

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