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PRA Group Reports Fourth Quarter and Full Year 2014 Results

NORFOLK, Va., March 2, 2015 (GLOBE NEWSWIRE) -- PRA Group (Nasdaq:PRAA), a global leader in acquiring defaulted receivables, today reported its financial results for the fourth quarter and full year 2014.

Fourth Quarter Highlights

  • Cash collections of $373.4 million, up 34% from the fourth quarter of 2013.
  • Revenues of $250.7 million, up 36%.
  • Income from operations of $109.9 million, up 40%.
  • Net income of $47.0 million, up 3%.
  • $0.93 diluted earnings per share, compared with $0.91 in the year-ago quarter, up 2%.
  • 20.2% return on average equity, annualized.
  • $314.2 million in investments.

"PRA Group continued to produce solid operational results and demonstrated the power of our geographic diversification with an investment performance second only to last quarter which included the Aktiv Kapital portfolio," said Steve Fredrickson, chairman, president and chief executive officer, PRA Group. "During the quarter, we invested $314.2 million in North America and Europe and delivered record quarterly income before taxes of $93.5 million. We also increased value to shareholders by repurchasing $33.2 million in common stock."

REVENUES

  • Total revenues of $250.7 million in the fourth quarter, largely driven by cash collections, included finance receivables income net of principal amortization and net allowance reversals. Net finance receivables revenue was $222.7 million, up 32% from $168.7 million in the year-ago quarter. Total revenues for the full year were $881.0 million, up 20% from $735.1 million in full year 2013.
  • Cash collections increased 34% in the fourth quarter from the year-ago quarter to $373.4 million, and included collections from these finance receivables sources:

Cash Collection Source ($ in thousands) Q42014 Q32014 Q22014 Q12014 Q42013
North America-Core $ 185,921 $ 189,027 $ 190,229 $ 187,818 $ 158,828
North America-Insolvency 103,104 110,544 124,101 120,702 114,384
Europe-Core 84,398 73,172 4,944 4,847 5,714
Europe-Insolvency 5 -- -- -- --
Total Cash Collections $ 373,428 $ 372,743 $ 319,274 $ 313,367 $ 278,926

Cash collections for the year increased 21% to $1.38 billion, compared with $1.14 billion in full year 2013.

  • Principal amortization of finance receivables in the fourth quarter was $150.8 million or 40.4% of cash collections, compared with 39.5% in the year-ago quarter. Principal amortization included a net allowance charge of $1.0 million recorded against certain pools of finance receivables in the quarter, compared with a net allowance reversal of $0.4 million recorded in the year-ago quarter. Principal amortization of finance receivables for the year was $571.3 million or 41.4% of cash collections, compared with 41.9% in full year 2013.
  • Revenues in the fourth quarter also included income from PRA Group's fee-based businesses of $22.8 million, compared with $16.1 million in the year-ago quarter. Fee-based revenue for the full year was $65.7 million, compared with $71.5 million in full year 2013.

EXPENSES AND OPERATING INCOME

  • Operating expenses were $140.9 million in the fourth quarter of 2014, compared with $106.5 million a year ago, an increase of 32%. Operating expenses were $538.9 million for the full year, compared with $437.6 million in full year 2013.
  • Operating income in the fourth quarter was $109.9 million, compared with $78.3 million in the year-ago quarter. The operating margin was 43.8% in the fourth quarter of 2014. Operating income for the full year was $342.1 million, compared with $297.5 million in full year 2013.
  • The provision for income taxes was $46.5 million in the fourth quarter, up 68% from the year-ago quarter. PRA Group's provision for income taxes was 49.7% of income before taxes in the fourth quarter, compared with 37.7% in the year-ago quarter. The provision for income taxes was increased by $8.2 million primarily due to weakness of the Norwegian Kroner against the Euro. The provision for income taxes for the full year was $124.5 million, compared to $106.1 million in full year 2013.

PORTFOLIO ACQUISITIONS

  • PRA Group invested $279.5 million in new finance receivables from North American and European receivable sellers in the fourth quarter of 2014. The Company also invested $34.7 million in a securitized fund in Poland specifically formed to purchase and collect on Polish finance receivables. This brought total investment in the quarter to $314.2 million. This compares with $99.5 million in the year-ago quarter. For the full year, PRA Group invested $1.47 billion in new finance receivables including receivables associated with the Aktiv Kapital acquisition and the investment in Poland, compared to $656.8 million in full year 2013.

Portfolio Purchase Source
($ in thousands)

Q42014

Q32014

Q22014

Q12014

Q42013
North America-Core $ 119,714 $ 118,018 $ 91,904 $ 79,085 $ 65,759
North America-Insolvency 24,949 38,535 16,187 72,003 31,987
Europe-Core (1) 123,194 734,803 1,121 1,626 1,763
Europe-Insolvency 11,625 -- -- -- --
Total Portfolio Purchasing $ 279,482 $ 891,356 $ 109,212 $ 152,714 $ 99,509
(1) Excludes the $34.7 million investment in the securitized fund in Poland in Q4 2014.

BALANCE SHEET

  • Borrowings totaled $1,482.5 million at December 31, 2014, and consisted of $409.0 million drawn on the domestic revolver, $427.7 million drawn on the multi-currency revolver, $260.8 million in convertible senior notes, $215.0 million in other long-term debt and $169.9 million in seller financing related to the acquisition of Aktiv Kapital. Total borrowings were $451.8 million at December 31, 2013.
  • Cash and cash equivalents were $39.7 million at December 31, 2014, compared with $162.0 million at December 31, 2013.
  • During the fourth quarter of 2014, the company repurchased 573,900 shares of its common stock for $33.2 million and an average price of $57.79.
  • Net deferred tax liabilities were $255.6 million at December 31, 2014, compared with $210.1 million a year ago.
  • Stockholders' equity increased to $902.2 million at December 31, 2014, from $869.5 million at December 31, 2013.

Conference Call Information

PRA Group will hold a conference call today at 4:30 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. To listen by phone, call 888-695-7639 in the U.S. or 970-315-0482 outside the U.S. The conference ID is 89361286. 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 March 9, 2015, call 855-859-2056 in the U.S. or 404-537-3406 outside the U.S. and use conference ID 89361286.

About PRA Group

By acquiring defaulted receivables, 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.

PRA Group 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. PRA Group employs about 3,900 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 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 a 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 December 31, Year Ended December 31,
2014 2013 2014 2013
Revenues:
Income recognized on finance receivables, net $ 222,660 $ 168,728 $ 807,474 $ 663,546
Fee income 22,800 16,125 65,675 71,532
Other revenue 5,271 -- 7,820 57
Total revenues 250,731 184,853 880,969 735,135
Operating expenses:
Compensation and employee services 65,448 46,393 234,531 192,474
Legal collection fees 15,125 10,144 51,107 41,488
Legal collection costs 15,725 20,044 88,054 83,063
Agency fees 7,497 1,608 16,399 5,901
Outside fees and services 15,707 6,827 55,821 31,615
Communication 7,715 7,357 33,085 28,161
Rent and occupancy 3,477 2,254 11,509 8,311
Depreciation and amortization 5,307 3,730 18,414 14,417
Other operating expenses 4,870 8,152 29,981 25,781
Impairment of goodwill -- -- -- 6,397
Total operating expenses 140,871 106,509 538,901 437,608
Income from operations 109,860 78,344 342,068 297,527
Other income and (expense):
Interest income 1 3 4 3
Interest expense (13,494) (4,862) (35,230) (14,469)
Foreign exchange (loss)/gain (2,898) 6 (5,829) 4
Income before income taxes 93,469 73,491 301,013 283,065
Provision for income taxes 46,478 27,714 124,508 106,146
Net income $ 46,991 $ 45,777 $ 176,505 $ 176,919
Adjustment for net income attributable to redeemable noncontrolling interest -- -- -- 1,605
Net income attributable to PRA Group, Inc. $ 46,991 $ 45,777 $ 176,505 $ 175,314
Net income per common share attributable to PRA Group, Inc.:
Basic $ 0.94 $ 0.92 $ 3.53 $ 3.48
Diluted $ 0.93 $ 0.91 $ 3.50 $ 3.45
Weighted average number of shares outstanding:
Basic 49,892 49,750 49,990 50,366
Diluted 50,444 50,375 50,421 50,873
PRA Group, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except per share amounts)
ASSETS December 31,
2014
December 31,
2013
Cash and cash equivalents $ 39,661 $ 162,004
Investments 89,703 --
Finance receivables, net 2,001,790 1,239,191
Other receivables, net 12,959 12,359
Income taxes receivable -- 11,710
Net deferred tax asset 6,126 1,361
Property and equipment, net 48,258 31,541
Goodwill 527,445 103,843
Intangible assets, net 10,933 15,767
Other assets 41,876 23,456
Total assets $ 2,778,751 $ 1,601,232
LIABILITIES AND EQUITY
Liabilities:
Accounts payable $ 19,456 $ 14,819
Accrued expenses and other liabilities 57,320 27,655
Income taxes payable 11,020 --
Accrued compensation 22,993 27,431
Net deferred tax liability 255,587 210,071
Interest bearing deposits 27,704 --
Borrowings 1,482,456 451,780
Total liabilities 1,876,536 731,756
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, 49,577 issued and outstanding shares at December 31, 2014, and 60,000 authorized shares, 49,840 issued and outstanding shares at December 31, 2013 496 498
Additional paid-in capital 111,659 135,441
Retained earnings 906,010 729,505
Accumulated other comprehensive (loss)/income (115,950) 4,032
Total stockholders' equity 902,215 869,476
Total liabilities and equity $ 2,778,751 $ 1,601,232
PRA Group, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
For the Years Ended
December 31,
2014 2013
Cash flows from operating activities:
Net income $ 176,505 $ 176,919
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of share-based compensation 14,968 12,272
Depreciation and amortization 18,414 14,417
Impairment of goodwill -- 6,397
Amortization of debt discount 4,058 1,508
Amortization of debt fair value (4,827) --
Deferred tax expense 52,978 11,011
Changes in operating assets and liabilities:
Other assets (1,844) (4,783)
Other receivables 9,435 (1,786)
Accounts payable (13,934) 2,556
Income tax receivable/payable, net 16,862 (14,814)
Accrued expenses 5,037 14,179
Accrued compensation (15,579) 7,251
Net cash provided by operating activities 262,073 225,127
Cash flows from investing activities:
Purchases of property and equipment (24,385) (15,875)
Acquisition of finance receivables, net of buybacks (682,441) (638,616)
Collections applied to principal on finance receivables 571,338 478,891
Business acquisition, net of cash acquired (851,183) --
Purchase of investments (69,862) --
Proceeds from sales and maturities of investments 25,821 --
Net cash used in investing activities (1,030,712) (175,600)
Cash flows from financing activities:
Income tax benefit from share-based compensation 5,558 4,552
Payment of liability-classified contingent consideration (5,240)
Proceeds from lines of credit 543,000 217,000
Principal payments on lines of credit (134,000) (344,000)
Repurchases of common stock (33,164) (58,511)
Cash paid for purchase of portion of noncontrolling interest -- (5,663)
Distributions paid to noncontrolling interest -- (2,075)
Principal payments on long-term debt (359,281) (5,542)
Proceeds from long-term debt 623,354 --
Net increase in interest bearing deposits 2,492 --
Proceeds from convertible debt, net -- 279,281
Net cash provided by financing activities 647,959 79,802
Effect of exchange rate on cash (1,663) (12)
Net (decrease)/increase in cash and cash equivalents (122,343) 129,317
Cash and cash equivalents, beginning of period 162,004 32,687
Cash and cash equivalents, end of period $ 39,661 $ 162,004
Supplemental disclosure of cash flow information:
Cash paid for interest $ 31,831 $ 9,830
Cash paid for income taxes 47,947 105,719
Supplemental disclosure of non-cash information:
Adjustment of the redeemable noncontrolling interest measurement amount $ -- $ (184)
Purchase of redeemable noncontrolling interest -- 14,986
Employee stock relinquished for payment of taxes (11,146) (7,350)
FINANCIAL HIGHLIGHTS
As of and for the
Three Months Ended December 31,
As of and for the
Year Ended December 31,
2014 2013 Change 2014 2013 Change
EARNINGS (in thousands)
Income recognized on finance receivables, net $ 222,660 $ 168,728 32% $ 807,474 $ 663,546 22%
Fee income 22,800 16,125 41% 65,675 71,532 -8%
Other revenue 5,271 -- 100% 7,820 57 13619%
Total revenues 250,731 184,853 36% 880,969 735,135 20%
Operating expenses 140,871 106,509 32% 538,901 437,608 23%
Income from operations 109,860 78,344 40% 342,068 297,527 15%
Net interest expense 13,493 4,859 178% 35,226 14,466 144%
Net income 46,991 45,777 3% 176,505 176,919 0%
Net income attributable to PRA Group, Inc. 46,991 45,777 3% 176,505 175,314 1%
PERIOD-END BALANCES (in thousands)
Cash and cash equivalents $ 39,661 $ 162,004 -76% $ 39,661 $ 162,004 -76%
Finance receivables, net 2,001,790 1,239,191 62% 2,001,790 1,239,191 62%
Goodwill and intangible assets, net 538,378 119,610 350% 538,378 119,610 350%
Total assets 2,778,751 1,601,232 74% 2,778,751 1,601,232 74%
Borrowings 1,482,456 451,780 228% 1,482,456 451,780 228%
Total liabilities 1,876,536 731,756 156% 1,876,536 731,756 156%
Total equity 902,215 869,476 4% 902,215 869,476 4%
FINANCE RECEIVABLE INCOME (dollars in thousands)
Cash collections $ 373,428 $ 278,926 34% $ 1,378,812 $ 1,142,437 21%
Cash collections on fully amortized pools 17,785 9,801 81% 68,349 35,520 92%
Principal amortization without allowance (reversals)/charges 149,753 110,626 35% 576,273 480,912 20%
Allowance (reversal)/charge 1,015 (429) -337% (4,935) (2,022) 144%
Principal amortization with allowance (reversals)/charges 150,768 110,197 37% 571,338 478,890 19%
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools 40.4% 39.5% 2% 41.4% 41.9% -1%
Excluding fully amortized pools 42.4% 40.9% 4% 43.6% 43.3% 1%
Allowance (reversal)/charge to period-end net finance receivables 0.1% (0.0%) -246% (0.2%) (0.2%) 51%
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)
Purchase price - North America core $ 119,714 $ 65,759 82% $ 408,721 $ 395,068 3%
Purchase price - North America insolvency 24,949 31,987 -22% 151,674 242,649 -37%
Purchase price - Europe core 123,194 1,763 6888% 860,744 19,067 4414%
Purchase price - Europe insolvency 11,625 -- 100% 11,625 -- 100%
Purchase price - total 279,482 99,509 181% 1,432,764 656,783 118%
Number of portfolios - total 142 83 71% 456 347 31%
ESTIMATED REMAINING COLLECTIONS (in thousands)
Estimated remaining collections - North America core $ 2,229,403 $ 1,824,132 22% $ 2,229,403 $ 1,824,132 22%
Estimated remaining collections - North America insolvency 642,552 822,988 -22% 642,552 822,988 -22%
Estimated remaining collections - Europe core 1,478,738 22,150 6576% 1,478,738 22,150 6576%
Estimated remaining collections - Europe insolvency 15,021 -- 100% 15,021 -- 100%
Estimated remaining collections - total 4,365,714 2,669,270 64% 4,365,714 2,669,270 64%
SHARE DATA (share amounts in thousands)
Net income per common share - diluted $ 0.93 $ 0.91 2% $ 3.50 $ 3.45 1%
Weighted average number of shares outstanding - diluted 50,444 50,375 0% 50,421 50,873 -1%
Shares repurchased 574 -- 100% 574 1,203 -52%
Average price paid per share repurchased (including acquisitions costs) $ 57.79 $ -- 100% $ 57.79 $ 48.62 19%
Closing market price $ 57.93 $ 52.84 10% $ 57.93 $ 52.84 10%
RATIOS AND OTHER DATA (dollars in thousands)
Return on average equity (1) 20.2% 21.5% -6% 18.9% 22.2% -15%
Return on revenue (2) 18.7% 24.8% -24% 20.0% 24.1% -17%
Return on average assets (3) 6.9% 11.5% -40% 8.0% 11.9% -33%
Operating margin (4) 43.8% 42.4% 3% 38.8% 40.5% -4%
Operating expense to cash receipts (5) 35.6% 36.1% -2% 37.3% 36.0% 3%
Debt to equity (6) 164.3% 52.0% 216% 164.3% 52.0% 216%
Number of full-time equivalent collectors 2,457 2,313 6% 2,457 2,313 6%
Number of full-time equivalent employees 3,880 3,543 10% 3,880 3,543 10%
Cash receipts (5) $ 396,228 $ 295,051 34% $ 1,444,487 $ 1,213,969 19%
Line of credit - unused portion at period end 352,926 435,500 -19% 352,926 435,500 -19%
(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
December 31
2014
September 30
2014
June 30
2014
March 31
2014
December 31
2013
September 30
2013
EARNINGS (in thousands)
Income recognized on finance receivables, net $ 222,660 $ 224,326 $ 182,518 $ 177,970 $ 168,728 $ 171,456
Fee income 22,800 12,757 14,510 15,608 16,125 26,249
Other revenue 5,271 1,890 315 344 -- 57
Total revenues 250,731 238,973 197,343 193,922 184,853 197,762
Operating expenses 140,871 150,784 124,906 122,340 106,509 118,297
Income from operations 109,860 88,189 72,437 71,582 78,344 79,465
Net interest expense 13,493 11,807 5,067 4,859 4,859 3,995
Net income 46,991 51,167 37,507 40,840 45,777 49,211
Net income attributable to PRA Group, Inc. 46,991 51,167 37,507 40,840 45,777 47,338
PERIOD-END BALANCES (in thousands)
Cash and cash equivalents $ 39,661 $ 70,300 $ 270,526 $ 191,819 $ 162,004 $ 108,705
Finance receivables, net 2,001,790 1,913,710 1,219,595 1,253,961 1,239,191 1,256,822
Goodwill and intangible assets, net 538,378 606,716 118,927 118,800 119,610 119,636
Total assets 2,778,751 2,757,429 1,695,362 1,642,613 1,601,232 1,547,985
Borrowings 1,482,456 1,425,409 448,785 450,278 451,780 452,229
Total liabilities 1,876,536 1,797,569 743,106 732,395 731,756 721,001
Total equity 902,215 959,860 952,256 910,218 869,476 816,647
FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)
Cash collections $ 373,428 $ 372,743 $ 319,274 $ 313,367 $ 278,926 $ 291,651
Cash collections on fully amortized pools 17,785 17,105 16,943 16,516 9,801 8,762
Principal amortization without allowance (reversals)/charges 149,753 150,115 139,055 137,350 110,626 122,776
Allowance (reversal)/charge 1,015 (1,698) (2,299) (1,953) (429) (2,581)
Principal amortization with allowance (reversals)/charges 150,768 148,417 136,756 135,397 110,197 120,195
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools 40.4% 39.8% 42.8% 43.2% 39.5% 41.2%
Excluding fully amortized pools 42.4% 41.7% 45.2% 45.6% 40.9% 42.5%
Allowance (reversal)/charge to period-end net finance receivables 0.1% -0.1% -0.2% -0.2% 0.0% -0.2%
PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)
Purchase price - North America core $ 119,714 $ 118,018 $ 91,904 $ 79,085 $ 65,759 $ 89,044
Purchase price - North America insolvency 24,949 38,535 16,187 72,003 31,987 41,794
Purchase price - Europe core 123,194 734,803 1,121 1,626 1,763 11,037
Purchase price - Europe insolvency 11,625 -- -- -- -- --
Purchase price - total 279,482 891,356 109,212 152,714 99,509 141,875
Number of portfolios - total 142 125 85 104 83 79
ESTIMATED REMAINING COLLECTIONS (in thousands)
Estimated remaining collections - North America core $ 2,229,403 $ 2,089,253 $ 1,948,414 $ 1,891,511 $ 1,824,132 $ 1,762,369
Estimated remaining collections - North America insolvency 642,552 697,662 733,176 793,855 822,988 877,722
Estimated remaining collections - Europe core 1,478,738 1,582,135 20,349 19,358 22,150 32,272
Estimated remaining collections - Europe insolvency 15,021 -- -- -- -- --
Estimated remaining collections - total 4,365,714 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 $ 0.93 $ 1.01 $ 0.74 $ 0.81 $ 0.91 $ 0.93
Weighted average number of shares outstanding - diluted 50,444 50,439 50,437 50,363 50,375 50,660
Shares repurchased 574 -- -- -- -- 989
Average price paid per share repurchased (including acquisitions costs) $ 57.79 $ -- $ -- $ -- $ -- $ 50.55
Closing market price $ 57.93 $ 52.23 $ 59.53 $ 57.86 $ 52.84 $ 59.93
RATIOS AND OTHER DATA (dollars in thousands)
Return on average equity (1) 20.2% 21.1% 16.0% 18.2% 21.5% 23.5%
Return on revenue (2) 18.7% 21.4% 19.0% 21.1% 24.8% 24.9%
Return on average assets (3) 6.9% 7.3% 9.0% 10.0% 11.5% 12.5%
Operating margin (4) 43.8% 36.9% 36.7% 36.9% 42.4% 40.2%
Operating expense to cash receipts (5) 35.6% 39.1% 37.4% 37.2% 36.1% 37.2%
Debt to equity (6) 164.3% 148.5% 47.1% 49.5% 52.0% 55.4%
Number of collectors 2,457 2,498 2,258 2,379 2,313 2,054
Number of full-time equivalent employees 3,880 3,913 3,567 3,621 3,543 3,223
Cash receipts (5) $ 396,228 $ 385,500 $ 333,784 $ 328,975 $ 295,051 $ 317,900
Line of credit - unused portion at period end 352,926 513,800 650,000 435,500 435,500 435,500
(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

Use of Non-GAAP Financial Measures

Management believes that the presentation of certain financial information in this press release, excluding the costs associated with Aktiv Kapital acquisition and certain acquisition related foreign exchange losses that were recorded during the three and twelve months ended December 31, 2014, is useful to investors and improves the comparability of the Company's ongoing operational results between periods. The foreign exchange losses are related to foreign currency forward contracts put in place between signing and closing of the Aktiv Kapital acquisition to mitigate the risk of converting US dollars to Euros. 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
Months Ended
December 31, 2014
Less: Adjustments
Related to Aktiv
Kapital Acquisition
Adjusted Three
Months Ended
December 31, 2014
Revenues:
Income recognized on finance receivables, net $ 222,660 $ 222,660
Fee income 22,800 22,800
Other revenue 5,271 5,271
Total revenues 250,731 250,731
Operating expenses:
Compensation and employee services 65,448 65,448
Legal collection fees 15,125 15,125
Legal collection costs 15,725 15,725
Agency fees 7,497 7,497
Outside fees and services 15,707 (2,379) 13,328
Communication 7,715 7,715
Rent and occupancy 3,477 3,477
Depreciation and amortization 5,307 5,307
Other operating expenses 4,870 4,870
Impairment of goodwill --
Total operating expenses 140,871 (2,379) 138,492
Income from operations 109,860 2,379 112,239
Other income and (expense):
Interest income 1 1
Interest expense (13,494) (13,494)
Foreign exchange (loss)/gain (2,898) (2,898)
Income before income taxes 93,469 2,379 95,848
Provision for income taxes 46,478 1,183 47,661
Net income $ 46,991 $ 1,196 $ 48,187
Adjustment for net income attributable to redeemable noncontrolling interest -- --
Net income attributable to PRA Group, Inc. $ 46,991 $ 1,196 $ 48,187
Net income per common share attributable to PRA Group, Inc.:
Basic $ 0.94 $ 0.02 $ 0.97
Diluted $ 0.93 $ 0.02 $ 0.96
Weighted average number of shares outstanding:
Basic 49,892 49,892 49,892
Diluted 50,444 50,444 50,444
Operating margin: 43.82% 44.76%
Net income margin: 18.7% 19.2%
Return on average equity: 20.2% 20.7%
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 Year Ended
December 31, 2014
Less: Adjustments
Related to Aktiv
Kapital Acquisition

Adjusted Year Ended
December 31, 2014
Revenues:
Income recognized on finance receivables, net $ 807,474 $ 807,474
Fee income 65,675 65,675
Other revenue 7,820 7,820
Total revenues 880,969 880,969
Operating expenses:
Compensation and employee services 234,531 234,531
Legal collection fees 51,107 51,107
Legal collection costs 88,054 88,054
Agency fees 16,399 16,399
Outside fees and services 55,821 (17,214) 38,607
Communication 33,085 33,085
Rent and occupancy 11,509 11,509
Depreciation and amortization 18,414 18,414
Other operating expenses 29,981 29,981
Impairment of goodwill --
Total operating expenses 538,901 (17,214) 521,687
Income from operations 342,068 17,214 359,282
Other income and (expense):
Interest income 4 4
Interest expense (35,230) (35,230)
Foreign exchange (loss)/gain (5,829) 8,240 2,411
Income before income taxes 301,013 25,454 326,467
Provision for income taxes 124,508 10,529 135,037
Net income $ 176,505 $ 14,925 $ 191,430
Adjustment for net income attributable to redeemable noncontrolling interest -- --
Net income attributable to PRA Group, Inc. $ 176,505 $ 14,925 $ 191,430
Net income per common share attributable to PRA Group, Inc.:
Basic $ 3.53 $ 0.30 $ 3.83
Diluted $ 3.50 $ 0.30 $ 3.80
Weighted average number of shares outstanding:
Basic 49,990 49,990 49,990
Diluted 50,421 50,421 50,421
Operating margin: 38.83% 40.78%
Net income margin: 20.0% 21.7%
Return on average equity: 18.9% 20.5%

CONTACT: Investor Contact: Darby Schoenfeld Director of Investor Relations (757) 431-7913 DCSchoenfeld@PRAGroup.com News Media Contact: Nancy Porter Vice President, Corporate Communications (757) 431-7950 NAPorter@PRAGroup.com

Source:PRA Group