UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2012.~~

March 31, 2013.



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-50058

Portfolio Recovery Associates, Inc.

(Exact name of registrant as specified in its charter)



~~Delaware~~		~~75-3078675~~



Delaware		75-3078675
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

120 Corporate Boulevard, Norfolk, Virginia		23502
(Address of principal executive offices)		(zip code)

(888) 772-7326

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES xý NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES xý NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO xý

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class		Outstanding as of ~~November 1, 2012~~May 5, 2013
Common Stock, $0.01 par value		~~16,882,070~~16,904,120

PORTFOLIO RECOVERY ASSOCIATES, INC.

INDEX



		Page(s)
PART I.		~~Page(s)~~FINANCIAL INFORMATION
~~PART I.~~		~~FINANCIAL INFORMATION~~

~~Item 1.~~		~~Financial Statements~~
Item 1.	Financial Statements	3


		Consolidated Balance Sheets (unaudited) as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~ 2012	3
				3

		Consolidated Income Statements (unaudited) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	4
				4

		Consolidated Statements of Comprehensive Income (unaudited) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	5
				5

		Consolidated Statement of Changes in Stockholders’ Equity (unaudited) for the ~~nine~~three months ended ~~September 30, 2012~~ March 31, 2013	6
				6

		Consolidated Statements of Cash Flows (unaudited) for the ~~nine~~three months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	7
				7

		Notes to Consolidated Financial Statements (unaudited)	8-21
				~~8-25~~

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	22-47
				~~26-56~~

Item 3.		Quantitative and Qualitative Disclosure About Market Risk	47

~~56-57~~Item 4.	Controls and Procedures	48

PART II.	OTHER INFORMATION
~~Item 4.~~		~~Controls and Procedures~~
57Item 1.	Legal Proceedings	48

Item 1A.	Risk Factors	48
~~PART II.~~		~~OTHER INFORMATION~~

~~Item 1.~~		~~Legal Proceedings~~				57

~~Item 1A.~~		~~Risk Factors~~			57

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	49

58Item 3.	Defaults Upon Senior Securities	49

Item 4.	Mine Safety Disclosure	49
~~Item 3.~~		~~Defaults Upon Senior Securities~~
58Item 5.	Other Information	49

Item 6.	Exhibits	49
~~Item 4.~~			~~Mine Safety Disclosure~~			58
SIGNATURES		50
~~Item 5.~~		~~Other Information~~			58

~~Item 6.~~		~~Exhibits~~			58

~~SIGNATURES~~					59

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

PORTFOLIO RECOVERY ASSOCIATES, INC.

CONSOLIDATED BALANCE SHEETS

March 31, 2013

~~September 30, 2012~~ and December 31, ~~2011~~2012

(unaudited)

(Amounts in thousands, except per share amounts)

   September 30,
2012    December 31,
2011
Assets
Cash and cash equivalents
   $ 31,488       $ 26,697
Finance receivables, net
   973,594       926,734
Accounts receivable, net
   8,417       7,862
Property and equipment, net
   25,506       25,727
Goodwill
   100,456       61,678
Intangible assets, net
   21,167       14,596
Other assets
   9,070       7,829




Total assets
   $ 1,169,698       $ 1,071,123




Liabilities and Equity
Liabilities:

Accounts payable
   $ 10,234       $ 7,439
Accrued expenses and other liabilities
   11,197       6,076
Income taxes payable
   7,359       13,109
Accrued payroll and bonuses
   13,241       16,036
Net deferred tax liability
   186,506       193,898
Line of credit
   250,000       220,000
Long-term debt
   674       1,246




Total liabilities
   479,211       457,804




Commitments and contingencies (Note 13)

Redeemable noncontrolling interest
   19,998       17,831




Stockholders’ equity:

Preferred stock, par value $0.01, authorized shares, 2,000, issued and outstanding shares - 0
   —         —
Common stock, par value $0.01, 60,000 authorized shares, 16,881 issued and outstanding shares at September 30, 2012, and 17,134 issued and outstanding shares at December 31, 2011
   169       171
Additional paid-in capital
   149,818       167,719
Retained earnings
   518,389       427,598
Accumulated other comprehensive income
   2,113       —




Total stockholders’ equity
   670,489       595,488




Total liabilities and equity
   $ 1,169,698       $ 1,071,123

March 31,
2013 December 31,
2012
Assets
Cash and cash equivalents $ 39,111
$ 32,687
Finance receivables, net 1,169,747
1,078,951
Accounts receivable, net 9,234
10,486
Property and equipment, net 25,470
25,312
Goodwill 106,912
109,488
Intangible assets, net 18,550
20,364
Other assets 13,715
11,668
Total assets $ 1,382,739
$ 1,288,956
Liabilities and Equity
Liabilities:
Accounts payable $ 12,590
$ 12,155
Accrued expenses and other liabilities 20,283
18,953
Income taxes payable 22,349
3,125
Accrued payroll and bonuses 9,260
12,804
Net deferred tax liability 185,772
185,277
Line of credit 172,000
127,000
Long-term debt 199,159
200,542
Total liabilities 621,413
559,856
Commitments and contingencies (Note 11)

Redeemable noncontrolling interest 10,336
20,673
Stockholders’ equity:
Preferred stock, par value $0.01, authorized shares, 2,000, issued and outstanding shares - 0 —
—
Common stock, par value $0.01, 60,000 authorized shares, 16,959 issued and outstanding shares at March 31, 2013, and 16,909 issued and outstanding shares at December 31, 2012 170
169
Additional paid-in capital 159,596
151,216
Retained earnings 592,791
554,191
Accumulated other comprehensive (loss)/income (1,567 ) 2,851
Total stockholders’ equity 750,990
708,427
Total liabilities and equity $ 1,382,739
$ 1,288,956

The accompanying notes are an integral part of these consolidated financial statements.

PORTFOLIO RECOVERY ASSOCIATES, INC.

CONSOLIDATED INCOME STATEMENTS

For the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~

2012

(unaudited)

(Amounts in thousands, except per share amounts)

   Three Months Ended Nine Months Ended
   September 30, September 30,
   2012 2011 2012 2011
Revenues:

Income recognized on finance receivables, net
   $ 135,754    $ 102,875    $ 392,566    $ 299,152
Fee income
   14,765    11,401    45,983    41,696


Total revenues
   150,519    114,276    438,549    340,848


Operating expenses:

Compensation and employee services
   41,334    33,475    123,508    102,443
Legal collection fees
   8,635    5,962    25,241    17,681
Legal collection costs
   15,810    9,731    57,705    28,949
Agent fees
   1,545    1,643    4,495    6,005
Outside fees and services
   10,131    6,222    21,575    13,702
Communications
   6,777    5,865    22,037    17,884
Rent and occupancy
   1,786    1,517    5,053    4,353
Depreciation and amortization
   3,623    3,223    10,833    9,755
Other operating expenses
   3,820    2,808    12,027    9,161


Total operating expenses
   93,461    70,446    282,474    209,933


Gain on sale of property
   —      —      —      1,157


Income from operations
   57,058    43,830    156,075    132,072
Other income and (expense):

Interest income
   —      7    8    7
Interest expense
   (2,189 ) (2,555 ) (7,223 ) (8,057 )


Income before income taxes
   54,869    41,282    148,860    124,022
Provision for income taxes
   21,742    16,089    58,493    49,544


Net income
   $ 33,127    $ 25,193    $ 90,367    $ 74,478
Adjustment for (loss)/income attributable to redeemable noncontrolling interest
   (187 ) (313 ) (424 ) 277


Net income attributable to Portfolio Recovery Associates, Inc.
   $ 33,314    $ 25,506    $ 90,791    $ 74,201


Net income per common share attributable to Portfolio Recovery Associates, Inc:

Basic
   $ 1.97    $ 1.49    $ 5.33    $ 4.34
Diluted
   $ 1.96    $ 1.48    $ 5.30    $ 4.31
Weighted average number of shares outstanding:

Basic
   16,881    17,117    17,034    17,106
Diluted
   17,022    17,228    17,140    17,218

Three Months Ended March 31,
2013 2012
Revenues:
Income recognized on finance receivables, net $ 154,792
$ 124,226
Fee income 14,767
15,920
Total revenues 169,559
140,146
Operating expenses:
Compensation and employee services 44,997
39,694
Legal collection fees 10,529
7,617
Legal collection costs 20,501
23,669
Agent fees 1,609
1,627
Outside fees and services 7,447
5,860
Communications 8,961
8,253
Rent and occupancy 1,687
1,611
Depreciation and amortization 3,366
3,656
Other operating expenses 4,575
3,738
Total operating expenses 103,672
95,725
Income from operations 65,887
44,421
Other income and (expense):
Interest income —
1
Interest expense (2,689 ) (2,653 )
Income before income taxes 63,198
41,769
Provision for income taxes 24,681
16,580
Net income $ 38,517
$ 25,189
Adjustment for loss attributable to redeemable noncontrolling interest (83 ) (273 )
Net income attributable to Portfolio Recovery Associates, Inc. $ 38,600
$ 25,462
Net income per common share attributable to Portfolio Recovery Associates, Inc:
Basic $ 2.28
$ 1.48
Diluted $ 2.26
$ 1.47
Weighted average number of shares outstanding:
Basic 16,937
17,196
Diluted 17,091
17,267

The accompanying notes are an integral part of these consolidated financial statements.

PORTFOLIO RECOVERY ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~

2012

(unaudited)

(Amounts in thousands)

   Three Months Ended Nine Months Ended
   September 30, September 30,
   2012 2011 2012 2011
Net income
   $ 33,127    $ 25,193    $ 90,367    $ 74,478
Other comprehensive income:

Foreign currency translation adjustments
   1,792    —      2,113    —


Total other comprehensive income
   1,792    —      2,113    —


Comprehensive income
   34,919    25,193    92,480    74,478
Comprehensive (loss)/income attributable to noncontrolling interest
   (187 ) (313 ) (424 ) 277


Comprehensive income attributable to Portfolio Recovery Associates, Inc.
   $ 35,106    $ 25,506    $ 92,904    $ 74,201

Three Months Ended March 31,
2013 2012
Net income $ 38,517
$ 25,189
Other comprehensive (loss)/income:
Foreign currency translation adjustments (4,418 ) 1,347
Total other comprehensive (loss)/income (4,418 ) 1,347
Comprehensive income 34,099
26,536
Comprehensive loss attributable to noncontrolling interest (83 ) (273 )
Comprehensive income attributable to Portfolio Recovery Associates, Inc. $ 34,182
$ 26,809

The accompanying notes are an integral part of these consolidated financial statements.

PORTFOLIO RECOVERY ASSOCIATES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013

(unaudited)

(Amounts in thousands)

   Additional    Accumulated Other    Total
   Common Stock Paid-in Retained    Comprehensive    Stockholders’
   Shares Amount Capital Earnings    Income    Equity
Balance at December 31, 2011
   17,134    $ 171    $ 167,719    $ 427,598       $ —         $ 595,488
Components of comprehensive income:

Net income attributable to Portfolio Recovery Associates, Inc.
   —      —      —      90,791       —         90,791
Foreign currency translation adjustment
   —      —      —      —         2,113       2,113
Vesting of nonvested shares
   79    1    (1 ) —         —         —
Repurchase and cancellation of common stock
   (332 ) (3 ) (22,723 ) —         —         (22,726 )
Amortization of share-based compensation
   —      —      8,361    —         —         8,361
Income tax benefit from share-based compensation
   —      —      1,484    —         —         1,484
Employee stock relinquished for payment of taxes
   —      —      (2,170 ) —         —         (2,170 )
Adjustment of the noncontrolling interest measurement amount
   —      —      (2,852 ) —         —         (2,852 )






Balance at September 30, 2012
   16,881    $ 169    $ 149,818    $ 518,389       $ 2,113       $ 670,489

Accumulated
Additional Other Total
Common Stock Paid-in Retained Comprehensive Stockholders’
Shares Amount Capital Earnings Income Equity
Balance at December 31, 2012 16,909
$ 169
$ 151,216
$ 554,191
$ 2,851
$ 708,427
Components of comprehensive income:
Net income attributable to Portfolio Recovery Associates, Inc. —
—
—
38,600
—
38,600
Foreign currency translation adjustment —
—
—
—
(4,418 ) (4,418 )
Vesting of nonvested shares 66
1
(1 ) —
—
—
Repurchase and cancellation of common stock (16 ) —
(1,912 ) —
—
(1,912 )
Amortization of share-based compensation —
—
2,986
—
—
2,986
Income tax benefit from share-based compensation —
—
2,207
—
—
2,207
Employee stock relinquished for payment of taxes —
—
(4,002 ) —
—
(4,002 )
Purchase of noncontrolling interest —
—
9,162
—
—
9,162
Adjustment of the noncontrolling interest measurement amount —
—
(60 ) —
—
(60 )
Balance at March 31, 2013 16,959
$ 170
$ 159,596
$ 592,791
$ (1,567 ) $ 750,990

The accompanying notes are an integral part of these consolidated financial statements.

PORTFOLIO RECOVERY ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~

2012

(unaudited)

(Amounts in thousands)

   Nine Months Ended
   September 30,
   2012 2011
Cash flows from operating activities:

Net income
   $ 90,367    $ 74,478
Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of share-based compensation
   8,361    6,110
Depreciation and amortization
   10,833    9,755
Deferred tax (benefit)/expense
   (7,377 ) 27,327
Gain on sale of property
   —      (1,157 )
Changes in operating assets and liabilities:

Other assets
   (353 ) (953 )
Accounts receivable
   1,579    2,470
Accounts payable
   (856 ) 1,921
Income taxes
   (7,024 ) 5,014
Accrued expenses
   931    2,242
Accrued payroll and bonuses
   (2,799 ) (4,036 )


Net cash provided by operating activities
   93,662    123,171


Cash flows from investing activities:

Purchases of property and equipment
   (5,362 ) (4,851 )
Proceeds from sale of property
   —      1,267
Acquisition of finance receivables, net of buybacks
   (329,444 ) (314,162 )
Collections applied to principal on finance receivables
   286,907    226,014
Business acquisition, net of cash acquired
   (48,653 ) —


Net cash used in investing activities
   (96,552 ) (91,732 )


Cash flows from financing activities:

Proceeds from exercise of options
   —      150
Income tax benefit from share-based compensation
   1,484    503
Proceeds from line of credit
   160,000    27,000
Principal payments on line of credit
   (130,000 ) (67,000 )
Repurchases of common stock
   (22,726 ) —
Distributions paid to noncontrolling interest
   —      (2,308 )
Principal payments on long-term debt
   (572 ) (843 )


Net cash provided by/(used in) financing activities
   8,186    (42,498 )


Effect of exchange rate on cash
   (505 ) —
Net increase/(decrease) in cash and cash equivalents
   4,791    (11,059 )
Cash and cash equivalents, beginning of period
   26,697    41,094


Cash and cash equivalents, end of period
   $ 31,488    $ 30,035


Supplemental disclosure of cash flow information:

Cash paid for interest
   $ 7,577    $ 7,771
Cash paid for income taxes
   71,521    19,058
Noncash investing and financing activities:

Adjustment of the noncontrolling interest measurement amount
   $ (2,852 ) $ (3,175 )
Distributions payable relating to noncontrolling interest
   261    —
Employee stock relinquished for payment of taxes
   (2,170 ) —

Three Months Ended March 31,
2013 2012
Cash flows from operating activities:
Net income $ 38,517
$ 25,189
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of share-based compensation 2,986
2,347
Depreciation and amortization 3,366
3,656
Deferred tax expense 529
403
Changes in operating assets and liabilities:
Other assets (2,070 ) 711
Accounts receivable 1,149
2,922
Accounts payable 588
(3,687 )
Income taxes 19,088
1,118
Accrued expenses (2,503 ) (3,419 )
Accrued payroll and bonuses (3,537 ) (9,181 )
Net cash provided by operating activities 58,113
20,059
Cash flows from investing activities:
Purchases of property and equipment (2,466 ) (1,152 )
Acquisition of finance receivables, net of buybacks (212,389 ) (108,176 )
Collections applied to principal on finance receivables 120,671
93,770
Business acquisition, net of cash acquired —
(48,653 )
Net cash used in investing activities (94,184 ) (64,211 )
Cash flows from financing activities:
Income tax benefit from share-based compensation 2,207
1,440
Proceeds from line of credit 95,000
95,000
Principal payments on line of credit (50,000 ) (50,000 )
Repurchases of common stock (1,912 ) (2,081 )
Cash paid for purchase of portion of noncontrolling interest (1,150 ) —
Distributions paid to noncontrolling interest (51 ) —
Principal payments on long-term debt (1,384 ) (310 )
Net cash provided by financing activities 42,710
44,049
Effect of exchange rate on cash (215 ) 1,474
Net increase in cash and cash equivalents 6,424
1,371
Cash and cash equivalents, beginning of period 32,687
26,697
Cash and cash equivalents, end of period $ 39,111
$ 28,068
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,656
$ 2,557
Cash paid for income taxes 2,866
12,497
Noncash investing and financing activities:
Adjustment of the noncontrolling interest measurement amount $ (60 ) $ (1,225 )
Distributions payable relating to noncontrolling interest 2
—
Purchase of noncontrolling interest 9,162
—
Employee stock relinquished for payment of taxes (4,002 ) (2,066 )

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.
1.	Organization and Business:

Portfolio Recovery Associates, Inc., a Delaware corporation, and its subsidiaries (collectively, the “Company”) is a ~~specialized~~ financial and business service ~~company. Its~~company operating principally in the United States and the United Kingdom. Two call centers, one in the Philippines and one in Panama, operate under contract with the Company. The Company’s primary business is the purchase, collection and management of portfolios of defaulted consumer receivables. The Company also services receivables on behalf of clients on either a commission or transaction-fee basis and provides class action claims settlement recovery services and related payment processing to corporate clients.

The consolidated financial statements of the Company are prepared in accordance with U.S. generally accepted accounting principles and include the accounts of all of its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Under the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280 “Segment Reporting” (“ASC 280”), the Company has determined that it has several operating segments that meet the aggregation criteria of ASC 280, and therefore, it has one reportable segment, accounts receivable management, based on similarities among the operating units including homogeneity of services, service delivery methods and use of technology.

With the acquisition of Mackenzie Hall Holdings Limited, a limited company organized under the laws of England and Wales, and its subsidiaries (“MHH”) on January 16, 2012, the Company began doing business in the United Kingdom. The assets, liabilities and operations of the Company’s foreign subsidiary are recorded based on the functional currency of the entity. For MHH, the functional currency is the local currency, which is the Pound Sterling. Accordingly, the assets, liabilities and operations are translated, for consolidation purposes, from the local currency to the U.S. dollar reporting currency at period-end rates for assets and liabilities and generally at average rates for results of operations and cash flows. The resulting unrealized gains or losses are reported as a component of accumulated other comprehensive income. Realized gains and losses resulting from foreign currency transactions are recorded in “Other operating expenses” in the consolidated income statements.

The following table shows the amount of revenue generated for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012 and long-lived assets held at ~~September 30,~~March 31, 2013 and 2012 by geographical location (amounts in thousands):

   As Of And For The Three Months    As Of And For The Nine Months
   Ended September 30, 2012    Ended September 30, 2012
   Revenues    Long-Lived
Assets    Revenues    Long-Lived
Assets
United States
   $ 145,585       $ 23,596       $ 424,434       $ 23,596
United Kingdom
   4,934       1,910       14,115       1,910








Total
   $ 150,519       $ 25,506       $ 438,549       $ 25,506



	As Of And For The				As Of And For The
	Three Months Ended March 31, 2013				Three Months Ended March 31, 2012
	Revenues		Long-Lived Assets		Revenues		Long-Lived Assets
United States	$	166,929	$	23,770	$	135,508	$	25,137
United Kingdom	2,630		1,700		4,638		1,232
Total	$	169,559	$	25,470	$	140,146	$	26,369

Revenues are attributed to countries based on the location of the related ~~operations and long-lived~~operations. Long-lived assets consist of net property and equipment. ~~Prior to the acquisition of MHH on January 16, 2012, all revenue generated and long-lived assets held related to the Company’s United States operations.~~

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and disclosures required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of the Company, however, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s consolidated balance sheet as of ~~September 30, 2012,~~March 31, 2013, its consolidated income statements and statements of comprehensive income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ its consolidated statement of changes in stockholders’ equity for the ~~nine~~three months ended ~~September 30, 2012,~~March 31, 2013, and its consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011.~~2012. The consolidated income statements of the Company for the three ~~and nine~~ months ended

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~March 31, 2013

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~September 30, 2012~~ may not be indicative of future results. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s ~~2011~~2012 Annual Report on Form 10-K, filed on February 28, ~~2012.~~

2013.

2.
2.	Finance Receivables, net:

The Company accounts for its investment in finance receivables under the guidance of ASC Topic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC 310-30”). The Company acquires portfolios of accounts that have experienced deterioration of credit quality between origination and the ~~Company’s~~Company's acquisition of the accounts. The amount paid for a portfolio reflects the ~~Company’s~~Company's determination that it is probable the Company will be unable to collect all amounts due according to an ~~account’s~~account's contractual terms. At acquisition, the Company reviews the accounts to determine whether there is evidence of deterioration of credit quality since origination, and if it is probable that the Company will be unable to collect all amounts due according to the ~~loan’s~~loan's contractual terms. If both conditions exist, the Company then determines whether each such account is to be accounted for individually or whether such accounts will be assembled into pools based on common risk characteristics. The Company considers expected prepayments and estimates the amount and timing of undiscounted expected principal, interest and other cash flows (expected at acquisition) for each acquired portfolio based on the ~~Company’s~~Company's proprietary models, and the Company subsequently aggregates portfolios of accounts into pools. The Company determines the excess of the ~~pool’s~~

Table of Contents

PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

pool's scheduled contractual principal and contractual interest payments over all cash flows expected at acquisition as an amount that should not be accreted (nonaccretable difference). The remaining amount, representing the excess of the ~~pool’s~~pool's cash flows expected to be collected over the amount paid, is accreted into income recognized on finance receivables over the remaining estimated life of the pool (accretable yield). ASC 310-30 requires that the excess of the contractual cash flows over expected cash flows, based on the ~~Company’s~~Company's estimates derived from its proprietary collection models, not be recognized as an adjustment of revenue or expense or on the balance sheet.

Under ASC 310-30 static pools of accounts may be established. These pools are aggregated based on certain common risk criteria. Each static pool is recorded at cost, which ~~includes~~may include certain direct costs of acquisition paid to third parties, and is accounted for as a single unit for the recognition of income, payments applied to principal and loss provision. Once a static pool is established for a calendar quarter, individual receivable accounts are not added to the pool (unless replaced by the seller) or removed from the pool (unless sold or returned to the seller). ASC 310-30, utilizing the interest method, initially freezes the yield, estimated when the accounts are purchased, as the basis for subsequent impairment testing. The yield is estimated and periodically recalculated based on the timing and amount of anticipated cash flows using the ~~Company’s~~Company's proprietary collection models. Income on finance receivables is accrued quarterly based on each static ~~pool’s~~pool's effective yield. Significant increases in expected future cash flows may be recognized prospectively, through an upward adjustment of the yield, over a ~~pool’s~~pool's remaining life. Any increase to the yield then becomes the new benchmark for impairment testing. Under ASC 310-30, rather than lowering the estimated yield if the collection estimates are not received or projected to be received, the carrying value of a pool would be written down to maintain the then current yield and is shown as a reduction in revenue in the consolidated income statements with a corresponding valuation allowance offsetting finance receivables, net, on the consolidated balance sheets. Cash flows greater than the interest accrual will reduce the carrying value of the static pool. This reduction in carrying value is defined as payments applied to principal (also referred to as principal amortization). Likewise, cash flows that are less than the interest accrual will accrete the carrying balance. Generally, the Company does not record accretion in the first six to twelve months of the life of the pool; accordingly, the Company utilizes either the cost recovery method or cash method when necessary to prevent accretion as permitted by ASC 310-30. Under the cash method, revenue is recognized as it would be under the interest method up to the amount of cash collections. Under the cost recovery method, no revenue is recognized until the Company has fully collected the cost of

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

the pool. A pool can become fully amortized (zero carrying balance on the balance sheet) while still generating cash collections. In this case, all cash collections are recognized as revenue when received. Additionally, the Company uses the cost recovery method when collections on a particular pool of accounts cannot be reasonably predicted. These cost recovery pools are not aggregated with other pools. Under the cost recovery method, no revenue is recognized until the Company has fully collected the cost of the pool, or until such time that the Company considers the collections to be probable and estimable and begins to recognize income based on the interest method as described above. At ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ the Company had unamortized purchased principal (purchase price) in pools accounted for under the cost recovery method of ~~$4.5~~$12.3 million and ~~$12.8~~$0.8 million, respectively; at December 31, ~~2011,~~2012, the amount was ~~$7.4 million.~~

$4.2 million.

The Company establishes valuation allowances, if necessary, for acquired accounts subject to ASC 310-10. Valuation allowances are established only subsequent to acquisition of the accounts. At ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ the Company had a valuation allowance against its finance receivables of ~~$90.8~~$95.3 million and ~~$83.5~~$87.1 million, respectively; at December 31, ~~2011,~~2012, the valuation allowance was ~~$86.6 million.~~

$93.1 million.

The Company implements the accounting for income recognized on finance receivables under ASC 310-30 as follows. The Company creates each accounting pool using its projections of estimated cash flows and expected economic life. The Company then computes the effective yield that fully amortizes the pool to the end of its expected economic life based on the current projections of estimated cash flows. As actual cash flow results are recorded, the Company balances those results to the data contained in its proprietary models to ensure accuracy, then reviews each pool watching for trends, actual performance versus projections and curve shape (a graphical depiction of the timing of cash flows), ~~sometimes~~regularly re-forecasting future cash flows utilizing the ~~Company’s~~Company's statistical models. The review process is primarily performed by the ~~Company’s~~Company's finance staff; however, the ~~Company’s~~Company's operational and statistical staffs are also involved, providing updated statistical input and cash projections to the finance staff. ~~To the extent~~If there is ~~overperformance,~~an increase in expected cash flows, the Company will ~~either~~recognize the effect of the increase ~~the yield or release~~prospectively through an increase in yield. If a valuation allowance had been previously recognized for that pool, the allowance ~~and consider increasing future cash projections, if persuasive evidence indicates that the overperformance~~ is ~~considered to be a significant betterment.~~reversed before recording any prospective yield adjustments. If the over performance is considered more of an acceleration of cash flows (a timing difference), the Company will: a) adjust estimated future cash flows downward which effectively extends the amortization period to fall within a reasonable expectation of the ~~pool’s~~pool's economic life, b) introduce some level of future cash adjustment as noted previously coupled with an increase in yield in order for the amortization period to fall within a reasonable expectation of the ~~pool’s~~pool's economic life, or c) take no action at all if the amortization period falls within a reasonable expectation of the ~~pool’s~~pool's expected economic life. To the extent there is underperformance, the Company will record an allowance if the underperformance is significant

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PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

and will also consider revising estimated future cash flows based on current period information, or take no action if the ~~pool’s~~pool's amortization period is reasonable and falls within the currently projected economic life.

Changes in finance receivables, net for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~ were as follows (amounts in thousands):

   Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
   September 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
Balance at beginning of period
   $ 966,508    $ 879,515    $ 926,734    $ 831,330
Acquisitions of finance receivables, net of buybacks
   100,063    119,256    333,402    314,162
Foreign currency translation adjustment
   321    —      365    —
Cash collections
   (229,052 ) (182,168 ) (679,473 ) (525,166 )
Income recognized on finance receivables, net
   135,754    102,875    392,566    299,152


Cash collections applied to principal
   (93,298 ) (79,293 ) (286,907 ) (226,014 )


Balance at end of period
   $ 973,594    $ 919,478    $ 973,594    $ 919,478



	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012
Balance at beginning of period	$	1,078,951		$	926,734
Acquisitions of finance receivables, net of buybacks	212,389			112,093
Foreign currency translation adjustment	(922		)	185
Cash collections	(275,463		)	(217,996		)
Income recognized on finance receivables, net	154,792			124,226
Cash collections applied to principal	(120,671		)	(93,770		)
Balance at end of period	$	1,169,747		$	945,242

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

At the time of acquisition, the life of each pool is generally estimated to be between 60 to 96 months based on projected amounts and timing of future cash collections using the proprietary models of the Company. Based upon current projections, cash collections applied to principal on finance receivables as of ~~September 30, 2012~~March 31, 2013 are estimated to be as follows for the twelve months in the periods ending (amounts in thousands):

September 30, 2013
   $ 352,374
September 30, 2014
   273,710
September 30, 2015
   204,808
September 30, 2016
   105,186
September 30, 2017
   37,516


   $ 973,594



March 31, 2014	$	392,143
March 31, 2015	327,492
March 31, 2016	249,805
March 31, 2017	146,491
March 31, 2018	53,816
	$	1,169,747

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012, the Company purchased approximately ~~$1.26~~$1.85 billion and ~~$4.24~~$1.46 billion ~~respectively, in face value of charged-off consumer receivables. During the three and nine months ended September 30, 2011, the Company purchased approximately $5.68 billion and $8.59 billion,~~, respectively, in face value of charged-off consumer receivables. At ~~September 30, 2012,~~March 31, 2013, the estimated remaining collections (“ERC”) on the receivables purchased in the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012, were ~~$195.7~~$378.0 million and ~~$594.8~~$151.9 million, respectively. ~~At September 30, 2012, ERC on the receivables purchased in the three and nine months ended September 30, 2011, were $195.3 million and $468.9 million, respectively.~~

Accretable yield represents the amount of income recognized on finance receivables the Company can expect to generate over the remaining life of its existing portfolios based on estimated future cash flows as of the balance sheet date. Additions represent the original expected accretable yield, on portfolios purchased during the period, to be earned by the Company based on its proprietary buying models. ~~Reclassifications~~Net reclassifications from nonaccretable difference to accretable yield primarily result from ~~increases in~~ the Company’s ~~estimates~~increase in its estimate of future cash flows. ~~Reclassifications~~When applicable, net reclassifications to nonaccretable difference from accretable yield result from ~~decreases~~the Company’s decrease in ~~the Company’s~~its estimates of future cash flows and allowance charges that exceed ~~any increases in~~ the Company’s ~~estimates~~increase in its estimate of future cash flows. Changes in accretable yield for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~ were as follows (amounts in thousands):

   Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
   September 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
Balance at beginning of period
   $ 1,151,653    $ 936,490    $ 1,026,614    $ 892,188
Income recognized on finance receivables, net
   (135,754 ) (102,875 ) (392,566 ) (299,152 )
Additions
   102,997    155,680    325,165    356,848
Reclassifications from nonaccretable difference
   45,182    16,519    205,997    55,930
Foreign currency translation adjustment
   (104 ) —      (1,236 ) —


Balance at end of period
   $ 1,163,974    $ 1,005,814    $ 1,163,974    $ 1,005,814



	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012
Balance at beginning of period	$	1,239,674		$	1,026,614
Income recognized on finance receivables, net	(154,792		)	(124,226		)
Additions	182,505			99,552
Net reclassifications from nonaccretable difference	53,764			86,638
Foreign currency translation adjustment	(4,007		)	174
Balance at end of period	$	1,317,144		$	1,088,752

Table of Contents

PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

A valuation allowance is recorded for significant decreases in expected cash flows or a change in the expected timing of cash flows which would otherwise require a reduction in the stated yield on a pool of accounts. In any given period, the Company may be required to record valuation allowances due to pools of receivables underperforming expectations. Factors that may contribute to the recording of valuation allowances may include both internal as well as external factors. External factors which may have an impact on the collectability, and subsequently toon the overall profitability of purchased pools of defaulted consumer receivables would include: new laws or regulations relating to collections, new interpretations of existing laws or regulations, and the overall condition of the economy. Internal factors which may have an impact on the collectability, and subsequently the overall profitability of purchased pools of defaulted consumer receivables would ~~include~~include: necessary revisions to initial and post-acquisition scoring and modeling estimates, non-optimal operational activities (which relate to the collection and movement of accounts on both the collection floor of the Company and external channels), ~~and~~as well as decreases in productivity related to turnover and tenure of the Company’s collection staff.

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

The following is a summary of activity within the Company’s valuation allowance account, all of which relates to loans acquired with deteriorated credit quality, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~ (amounts in thousands):

   Three Months Ended September 30,
   2012 2011
   Core Portfolio ⁽¹⁾ Purchased Bankruptcy
Portfolio ⁽²⁾ Total Core Portfolio ⁽¹⁾ Purchased Bankruptcy
Portfolio ⁽²⁾ Total
Valuation allowance - finance receivables:

Beginning balance
   $ 75,850    $ 13,419    $ 89,269    $ 73,630    $ 9,100    $ 82,730
Allowance charges
   1,850    945    2,795    1,400    1    1,401
Reversal of previous recorded allowance charges
   (1,150 ) (82 ) (1,232 ) (500 ) (160 ) (660 )


Net allowance charge
   700    863    1,563    900    (159 ) 741


Ending balance
   $ 76,550    $ 14,282    $ 90,832    $ 74,530    $ 8,941    $ 83,471


Finance receivables, net⁽³⁾:
   $ 479,558    $ 480,402    $ 959,960    $ 453,168    $ 466,310    $ 919,478

   Nine Months Ended September 30,
   2012 2011
   Core Portfolio ⁽¹⁾ Purchased Bankruptcy
Portfolio⁽²⁾ Total Core Portfolio ⁽¹⁾ Purchased Bankruptcy
Portfolio⁽²⁾ Total
Valuation allowance - finance receivables:

Beginning balance
   $ 76,580    $ 9,991    $ 86,571    $ 70,030    $ 6,377    $ 76,407
Allowance charges
   4,000    4,620    8,620    6,250    2,951    9,201
Reversal of previous recorded allowance charges
   (4,030 ) (329 ) �� (4,359 ) (1,750 ) (387 ) (2,137 )


Net allowance charge
   (30 ) 4,291    4,261    4,500    2,564    7,064


Ending balance
   $ 76,550    $ 14,282    $ 90,832    $ 74,530    $ 8,941    $ 83,471


Finance receivables, net⁽³⁾:
   $ 479,558    $ 480,402    $ 959,960    $ 453,168    $ 466,310    $ 919,478



	Three Months Ended March 31, 2013
	Core Portfolio ⁽¹⁾			Purchased Bankruptcy Portfolio ⁽²⁾			Total
Valuation allowance - finance receivables:
Beginning balance	$	74,500		$	18,623		$	93,123
Allowance charges	300			4,660			4,960
Reversal of previous recorded allowance charges	(2,700		)	(87		)	(2,787		)
Net allowance charges	(2,400		)	4,573			2,173
Ending balance	$	72,100		$	23,196		$	95,296
Finance receivables, net ^(3):	$	586,916		$	570,877		$	1,157,793



	Three Months Ended March 31, 2012
	Core Portfolio ⁽¹⁾			Purchased Bankruptcy Portfolio ⁽²⁾			Total
Valuation allowance - finance receivables:
Beginning balance	$	76,580		$	9,991		$	86,571
Allowance charges	1,350			1,100			2,450
Reversal of previous recorded allowance charges	(1,820		)	(136		)	(1,956		)
Net allowance charges	(470		)	964			494
Ending balance	$	76,110		$	10,955		$	87,065
Finance receivables, net ^(3):	$	453,709		$	486,137		$	939,846


(1)	“Core” accounts or portfolios refer to accounts or portfolios that are defaulted consumer receivables and are not in a bankrupt status upon purchase. These accounts are aggregated separately from purchased bankruptcy accounts.


(2)	“Purchased bankruptcy” accounts or portfolios refer to accounts or portfolios that are in bankruptcy status when purchased, and as such, are purchased as a pool of bankrupt accounts.


(3)	At ~~September 30, 2012,~~March 31, 2013, the MHH finance receivables balance was ~~$13.6~~$12.0 million against which there was no valuation allowance recorded; therefore it is not included in this roll-forward.

3.
3.	~~Accounts Receivable, net:~~

Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and its customers’ financial condition, the amount of receivables in dispute, the current receivables aging, and current payment patterns. The Company reviews its allowance for doubtful accounts monthly. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The balance of the allowance for doubtful accounts at September 30, 2012 and December 31, 2011 was $2.3 million and $2.1 million, respectively. The Company does not have any off balance sheet credit exposure related to its customers.

Line of Credit:

On December ~~20, 2010,~~19, 2012, the Company entered into a credit agreement with Bank of America, N.A., as administrative agent, and a syndicate of lenders named therein (the “Credit Agreement”). Under the terms of the Credit Agreement, the credit facility includes an aggregate principal amount available of ~~$407.5~~$600.0 million (subject to the borrowing base and applicable debt covenants) ~~that~~which consists of a ~~$50~~$200.0 million ~~fixed~~ floating rate term loan that ~~matured~~matures on ~~May 4, 2012, which was transferred from the Company’s then existing credit agreement,~~December 19, 2017 and a ~~$357.5~~$400.0 million revolving credit facility that matures on December ~~20, 2014.~~19, 2017. The ~~revolving credit facility automatically increased by $50 million upon the maturity~~term and ~~repayment of the fixed rate loan. The fixed rate loan bore interest at a rate of 6.8% per annum, payable monthly in arrears. The~~ revolving loans accrue interest, at the option of the Company, at either

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

the base rate ~~plus 1.75% per annum~~ or the Eurodollar rate (as defined in the Credit Agreement) for the applicable term plus ~~2.75%~~2.50% per ~~annum.~~annum in the case of the Eurodollar rate loans and 1.50% in the case of the base rate loans. The base rate is the highest of (a) the Federal Funds Rate plus 0.50%, (b) Bank of America’s prime rate, and (c) the Eurodollar rate plus 1.00%. Interest is payable on base rate loans quarterly in arrears and on Eurodollar loans in arrears on the last day of each interest period or, if such interest period exceeds three months, every three months. The Company’s revolving

Table of Contents

PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

credit facility includes a ~~$20~~$20 million swingline loan sublimit, a ~~$20~~$20 million letter of credit sublimit and a $20 million alternative currency equivalent sublimit. It also contains an accordion loan feature that allows the Company to request an increase of up to ~~$142.5~~$250.0 million in the amount available for borrowing under the revolving credit facility, whether from existing or new lenders, subject to terms of the Credit Agreement. ~~Through September 30, 2012, the Company closed a series of transactions~~No existing lender is obligated to ~~exercise a portion of the accordion loan feature of~~increase its existing credit facility with its administrative agent and its syndicate of lenders, thereby increasing the lenders’ commitments by $57.0 million, resulting in $464.5 million aggregate principal amount available under the Company’s line of credit. The Company’s existing lenders under the Credit Agreement provided $41.0 million of this increase, and $16.0 million was provided by a new lender, which is now a party to the Credit Agreement. The Company may request additional increases of up to $85.6 million under its credit facility.commitment. The Credit Agreement is secured by a first priority lien on substantially all of the Company’s assets. The Credit Agreement contains restrictive covenants and events of default including the following:

borrowings may not exceed 30% of the ERC of all its ~~domestic~~ eligible asset pools plus 75% of its eligible accounts receivable;

the consolidated leverage ratio (as defined in the Credit Agreement) cannot exceed 2.0 to 1.0 as of the end of any fiscal quarter;

consolidated ~~Tangible Net Worth~~tangible net worth (as defined in the Credit Agreement) must equal or exceed ~~$309.5 million~~$455,091,200 plus 50% of positive cumulative consolidated net income for each fiscal quarter beginning with the quarter ended December 31, ~~2010,~~2012, plus 50% of the cumulative net proceeds of any equity offering;

capital expenditures during any fiscal year cannot exceed ~~$20 million;~~

$30 million;

cash dividends and distributions during any fiscal year cannot exceed ~~$20 million;~~

$20 million;

stock repurchases during the term of the agreement cannot exceed ~~$100 million;~~

$250 million and cannot exceed $100 million in a single fiscal year;

permitted acquisitions (as defined in the Credit Agreement) during any fiscal year cannot exceed ~~$100 million;~~

$250 million;

the Company must maintain positive consolidated income from operations (as defined in the Credit Agreement) during any fiscal quarter; and

restrictions on changes in control.

The revolving credit facility also bears an unused commitment fee of 0.375% per annum, payable quarterly in arrears.

The ~~Company had $250.0 million and $220.0 million of~~Company's borrowings ~~outstanding under its credit facility as of September 30, 2012 and December~~at March 31, 2011, respectively, of which $50 million represented borrowing under the non-revolving fixed rate loan at December 31, 2011. At September 30, 2012, the Company’s borrowings under its revolving credit facility2013 consisted of$148.0 million in 30-day Eurodollar rate loans and$24.0 million in base rate loans with a weighted average interest rate of 2.74%. In addition, the Company had $198.8 million outstanding on the term loan at March 31, 2013 with an annual interest rate ~~equal~~as of March 31, 2013 of 2.70%. Refer to ~~2.97%~~Note 4 "Long-Term Debt" for payment details related to the term loan.

The Company had $370.8 million and $327.0 million of borrowings outstanding on its credit facilities as of March 31, 2013 and December 31, 2012, respectively. These total borrowings include long-term debt as discussed in Note 4 "Long-Term Debt".

The Company was in compliance with all covenants of its credit ~~facility~~facilities as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011.~~

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

2012.

5.
4.	Long-Term Debt:

On ~~February 6, 2009,~~December 19, 2012, the Company entered into the Credit Agreement. Under the terms of the Credit Agreement, the credit facility includes a ~~commercial~~$200 million floating rate term loan ~~agreement to finance computer software and equipment purchases~~that matures on December 19, 2017. The term loan accrues interest, at the option of the Company, at either the base rate or the Eurodollar rate (as defined in the ~~amount~~Credit Agreement) for the applicable term plus 2.50% per annum. See Note 3 "Line of ~~approximately $2.0 million.~~Credit" for additional details regarding interest rates and restrictive covenants. The term loan ~~was collateralized by~~includes quarterly principal payments on the ~~related computer software~~last day of each calendar quarter beginning March 31, 2013 and ~~equipment. The loan was a three year loan with a fixed rate~~ending on the maturity date of ~~4.78% with monthly installments, including interest, of $60,823 beginning on June 30, 2009, and it matured on February 28, 2012.~~

December 19, 2017.

On December 15, 2010, the Company entered into a commercial loan agreement to finance computer software and equipment purchases in the amount of approximately ~~$1.6 million.~~$1.6 million. The loan is collateralized by the related computer software and equipment. The loan term is ~~a three year loan~~3 years with a fixed rate of 3.69% with monthly installments, including interest, of ~~$46,108~~$46,108 beginning on January 15, 2011, and it matures on December 15, ~~2013.~~

2013.

The following principal payments are due on the Company's long-term debt as of March 31, 2013 for the twelve month periods ending (amounts in thousands):



March 31, 2014	$	6,659
March 31, 2015	11,250
March 31, 2016	16,250
March 31, 2017	25,000
March 31, 2018	140,000
Total	$	199,159

Table of Contents

PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

6.
5.	Property and Equipment, net:

Property and equipment, at cost, consisted of the following as of the dates indicated (amounts in thousands):

   September 30, December 31,
   2012 2011
Software
   $ 29,004    $ 25,252
Computer equipment
   13,728    12,221
Furniture and fixtures
   6,924    6,501
Equipment
   8,268    7,798
Leasehold improvements
   6,833    6,117
Building and improvements
   7,014    6,987
Land
   1,269    1,269
Accumulated depreciation and amortization
   (47,534 ) (40,418 )


Property and equipment, net
   $ 25,506    $ 25,727



	March 31, 2013			December 31, 2012
Software	$	30,137		$	29,467
Computer equipment	13,862			14,129
Furniture and fixtures	7,311			7,220
Equipment	9,434			8,674
Leasehold improvements	7,323			7,231
Building and improvements	7,012			7,014
Land	1,269			1,269
Accumulated depreciation and amortization	(50,878		)	(49,692		)
Property and equipment, net	$	25,470		$	25,312

Depreciation and amortization expense relating to property and equipment for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012, was ~~$2.2~~$2.2 million and ~~$6.5~~$2.2 million, respectively. ~~Depreciation and amortization expense relating to property and equipment, for the three and nine months ended September 30, 2011, was $2.1 million and $6.0 million, respectively.~~

The Company, in accordance with the guidance of FASB ASC Topic 350-40 “Internal-Use Software” (“ASC 350-40”), capitalizes qualifying computer software costs incurred during the application development stage and amortizes them over their estimated useful life of three to seven years on a straight-line basis beginning when the project is completed. Costs associated with preliminary project stage activities, training, maintenance and all other post implementation stage activities are expensed as incurred. The Company’s policy provides for the capitalization of certain direct payroll costs for employees who are directly associated with internal use computer software projects, as well as external direct costs of services associated with developing or obtaining internal use software. Capitalizable personnel costs are limited to the time directly spent on such projects. As of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011,~~2012, the Company ~~has~~ incurred and capitalized approximately ~~$7.2~~$8.4 million and ~~$6.1~~$7.8 million, respectively, of these direct payroll costs and external direct costs related to software developed for internal use. Of these costs, at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011,~~2012, approximately ~~$0.8~~$1.4 million and ~~$1.3~~$1.3 million, respectively, is for projects that were in the development stage and, therefore are a component of “Other Assets.” Once the projects are completed, the costs are transferred to Software and amortized over their estimated useful life of three to seven years. Amortization expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012, was approximately ~~$0.3~~$0.3 million and ~~$0.9~~$0.3 million ~~respectively. Amortization expense for the three and nine months ended September 30, 2011, was approximately $0.2 million and $0.6 million,~~, respectively. The remaining unamortized costs relating to internally developed software at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012 were approximately ~~$4.0~~$4.0 million and ~~$3.3~~$3.9 million, respectively.

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

7.
6.	Redeemable Noncontrolling Interest:

In accordance with ASC 810, the Company has consolidated all financial statement accounts of Claims Compensation Bureau, LLC (“CCB”) in its consolidated balance sheets and its consolidated income statements. The redeemable noncontrolling interest amount is separately stated on the consolidated balance sheets and represents the 19% and 38% interest in CCB not owned by the ~~Company.~~Company at March 31, 2013 and December 31, 2012, respectively. In addition, net income/loss attributable to the noncontrolling interest is stated separately in the consolidated income statements.

The Company has the right through February 28, 2015 to purchase the remaining ~~38%~~19% of CCB at certain multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”). In addition, beginning March 1, 2012 and ending February 28, 2015, the noncontrolling interest can require the Company to purchase up to one-third of its membership units in CCB per annual period at pre-defined multiples of EBITDA, subject to achievement of a minimum amount of trailing EBITDA. Beginning March 31, 2015 and ending February 28, 2018, the noncontrolling interest can require the Company to purchase all or any portion of its remaining membership units in CCB at pre-defined multiples of ~~EBITDA.~~

~~The~~EBITDA, with no restrictions.

On February 1, 2013, the Company applies the provisions of FASB ASC Topic 480-10-S99 “Distinguishing Liabilities from Equity” (“ASC 480-10-S99”), which provides guidance on the accounting for equity securities that are subject to mandatory redemption requirements or whose redemption is outside the controlpurchased one-half of the ~~issuer.~~remaining interest in CCB for a purchase price of $1.1 million. The ~~noncontrolling interest “put” arrangement is accounted for under ASC 480-10-S99, as redemption under~~purchase price was derived from the “put” arrangement is outside the control of the Company. As such, the redeemable noncontrolling interest is recorded outside of “permanent” equity. The Company measures the redeemable noncontrolling interest at the greater of its ASC 480-10-S99 measurement amount (estimated redemption value of the “put” option embeddedformula stipulated in the ~~noncontrolling interest) or its measurement amount under the guidance~~contractual agreement and was based on prior levels of ASC 810. The ASC 810 measurement amount includes adjustments for the noncontrolling interest’s pro-rata share of earnings, losses and distributions, pursuant to the limited liability company agreement of CCB. Adjustments to the measurement amount are recorded to stockholders’ equity. The Company used a present value calculation to estimate the redemption value of the “put” option as of the reporting date. As such, for the three and nine months ended September 30, 2012, the Company increased the redeemable noncontrolling interest by $0.8 million and $2.8 million, respectively, with a corresponding reduction of stockholders’ equity. For the three and nine months ended September 30, 2011, the Company increased the redeemable noncontrolling interest by $1.1 million and $3.2 million, respectively, with a corresponding reduction of stockholders’ equity. If material, the Company adjusts the numerator of earnings per share calculations for the current period change in the excess of the noncontrolling interest’s ASC 480-10-S99 measurement amount over the greater of its ASC 810 measurement amount or the estimated fair value of the noncontrolling interest. EBITDA.

The maximum ~~estimated~~ redemption value of the noncontrolling interest, as if it were currently redeemable by the holder of the put option under the terms of the put arrangement, was ~~$22.8~~$11.4 million as at March 31, 2013.

Table of ~~September 30, 2012 and December 31, 2011.~~

Contents

PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following table represents the changes in the redeemable noncontrolling interest for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~ (amounts in thousands):

   Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
   September 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
Balance at beginning of period
   $ 19,381    $ 16,068    $ 17,831    $ 14,449
Net (loss)/income attributable to redeemable noncontrolling interest
   (187 ) (313 ) (424 ) 277
Distributions paid or payable
   —      —      (261 ) (1,017 )
Adjustment of the noncontrolling interest measurement amount
   804    1,129    2,852    3,175


Balance at end of period
   $ 19,998    $ 16,884    $ 19,998    $ 16,884



	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012
Balance at beginning of period	$	20,673		$	17,831
Net loss attributable to redeemable noncontrolling interest	(83		)	(273		)
Distributions payable	(2		)	—
Purchase of portion of noncontrolling interest	(10,312		)	—
Adjustment of the noncontrolling interest measurement amount	60			1,225
Balance at end of period	$	10,336		$	18,783

In accordance with the limited liability company agreement of CCB, distributions due to the members of CCB are accrued each quarter and are payable as soon as reasonably possible subsequent to each quarter end.

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

8.
7.	Goodwill and Intangible Assets, net:

In connection with the Company’s previous business acquisitions, the Company ~~purchased~~acquired certain tangible and intangible assets. Intangible assets purchased included client and customer relationships, non-compete agreements, trademarks and goodwill. Pursuant to ASC 350, goodwill is not amortized but rather is reviewed at least annually for impairment. During the fourth quarter of ~~2011,~~2012, the Company underwent its annual review of goodwill. Based upon the results of this review, which was conducted as of October 1, ~~2011,~~2012, no impairment charges to goodwill or the other intangible assets were necessary as of the date of this review. The Company believes that nothing has occurred since the review was performed through ~~September 30, 2012~~March 31, 2013 that would indicate a triggering event and thereby necessitate ~~testing~~further evaluation of goodwill or ~~the~~ other intangible ~~assets between annual tests.~~assets. Accordingly, there were no impairment losses during the three ~~or nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011.~~2012. The Company expects to perform its next annual goodwill review during the fourth quarter of ~~2012.~~2013. At ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011,~~2012, the carrying value of goodwill was ~~$100.5~~$106.9 million and ~~$61.7~~$109.5 million, respectively. ~~Refer to Note 9 “Business Acquisitions” for more information.~~ The following table represents the changes in goodwill for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~ (amounts in thousands):

   Three Months Ended Three Months Ended    Nine Months Ended    Nine Months Ended
   September 30, 2012 September 30, 2011    September 30, 2012    September 30, 2011
Balance at beginning of period
   $ 99,384    $ 61,678       $ 61,678       $ 61,678
Acquisition of MHH
   —      —         34,270       —
Adjustment to provisional amount
   (549 ) —         2,511       —
Foreign currency translation adjustment
   1,621    —         1,997       —






Balance at end of period
   $ 100,456    $ 61,678       $ 100,456       $ 61,678



	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012
Balance at beginning of period	$	109,488		$	61,678
Acquisition of MHH	—			34,270
Foreign currency translation adjustment	(2,576		)	1,532
Balance at end of period	$	106,912		$	97,480

Intangible assets, excluding goodwill, consist of the following at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012 (amounts in thousands):

   September 30, 2012    December 31, 2011
   Gross Amount    Accumulated
Amortization    Gross Amount    Accumulated
Amortization
Client and customer relationships
   $ 40,134       $ 21,337       $ 30,777       $ 17,950
Non-compete agreements
   3,747       3,374       3,103       2,771
Trademarks
   3,469       1,472       2,500       1,063








Total
   $ 47,350       $ 26,183       $ 36,380       $ 21,784

~~Increases in the gross amounts of~~



	March 31, 2013				December 31, 2012
	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
Client and customer relationships	$	40,046	$	23,448	$	40,698	$	22,516
Non-compete agreements	3,837		3,585		3,880		3,581
Trademarks	3,412		1,712		3,477		1,594
Total	$	47,295	$	28,745	$	48,055	$	27,691

Total intangible assets during the nine months ended September 30, 2012 relate to the purchase of MHH on January 16, 2012. The combined original weighted average amortization period related to the acquired intangible assets of MHH is approximately 13 years. In accordance with ASC 350, the Company is amortizing the intangible assets over the estimated useful lives as indicated:


	~~Acquisition Date~~	~~Customer Relationships~~	~~Non-Compete Agreements~~	~~Trademarks~~
~~MHH~~	~~January 16, 2012~~	~~15 years~~	~~1 year~~	~~3 years~~

~~Total intangible~~asset amortization expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012 was ~~$1.5~~$1.2 million and ~~$4.4~~$1.5 million ~~respectively. Total intangible amortization expense for the three and nine months ended September 30, 2011 was $1.2 million and $3.7 million,~~, respectively. The Company reviews these intangible assets ~~at least annually~~ for ~~impairment.~~

possible impairment upon the occurrence of a triggering event.

Table of Contents

PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

9.
8.	~~Business Acquisition:~~Share-Based Compensation:

~~On January 16, 2012,~~

The Company has a stock option and nonvested share plan. The Company created the 2002 Stock Option Plan (the “Plan”) on November 7, 2002. The Plan was amended in 2004 (the “Amended Plan”) to enable the Company ~~acquired 100%~~to issue nonvested shares of stock to its employees and directors. On March 19, 2010, the ~~equity interest in MHH.~~Company adopted the 2010 Stock Plan (the "2010 Stock Plan"), which was approved by its shareholders at the 2010 Annual Meeting. The ~~transaction was completed in cash at~~2010 Stock Plan is a price of £33.5 million (approximately $51.3 million). The Company financed the acquisition with borrowings under its existing line of credit. Based in Kilmarnock, Scotland, MHH employs approximately 250 people and offers outsourced and contingent consumer debt recovery on behalf of banks, credit providers and debt purchasers, as well as distressed and dormant niche portfolio purchasing. The acquisition of MHH expands the Company’s presence into new geographical markets outside the United States, further ~~diversifying its revenues and available service offerings.~~

The Company accounted for this purchase in accordance with ASC Topic 805, “Business Combinations.” Under this guidance, an entity is required to recognize the assets acquired, liabilities assumed and the consideration given at their fair value on the acquisition date. The following tables summarize the fair value of the consideration given for MHH, as well as the preliminary fair value of the assets acquired and liabilities assumed relatedamendment to the ~~acquisition.~~

~~Recognized amounts of identifiable assets~~Amended Plan, and ~~liabilities are as follows (amounts in thousands):~~

Purchase price
   $ 51,258
Cash
   (2,605 )
Finance receivables, net
   (3,906 )
Accounts receivable
   (2,038 )
Prepaid expenses (included in other assets)
   (330 )
Customer relationships
   (8,875 )
Non-compete agreements
   (612 )
Trademarks
   (918 )
Property and equipment
   (814 )
Accounts payable
   3,500
Accrued expenses
   912
Income tax payable
   1,209


Goodwill
   $ 36,781

The Company is evaluating the purchase price allocations and at the time of the filing of this Form 10-Q, the valuation has not been completed. However, the Company has recorded provisional amounts for the assets acquired in its consolidated financial statements and will adjust the allocations relative to the fair value of the assets, if necessary, during the remainder of the one-year measurement period.

~~10.~~

~~Share-Based Compensation:~~

~~The Company follows the provisions of FASB ASC Topic 718 “Compensation-Stock Compensation” (“ASC 718”)~~contains, among other things, specific performance metrics with respect to ~~its~~performance-based stock ~~plan.~~ awards. Up to 2,000,000 shares of common stock may be issued under the 2010 Stock Plan.

As of ~~September 30, 2012,~~March 31, 2013, total future compensation costs related to nonvested awards of nonvested shares (not including nonvested shares granted under the Long-Term Incentive ~~Programs~~Program (“LTI”)) is estimated to be ~~$4.0~~$5.7 million with a weighted average remaining life for all nonvested shares of ~~2.0~~2.1 years (not including nonvested shares granted under the LTI ~~Programs)~~program). As of ~~September 30, 2012,~~March 31, 2013, there are no future compensation costs related to stock options and there are no remaining vested stock options to be exercised.

Based upon historical data, the Company used an annual forfeiture rate of 14% for stock options and 15-40% for nonvested shares for most of the employee grants. Grants made to key employees and directors of the Company were assumed to have no forfeiture rates associated with them due to the historically low turnover among this group.

Total share-based compensation expense was ~~approximately $2.8~~$3.0 million and ~~$8.4~~$2.3 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013, and 2012, ~~respectively. Total share-based compensation expense was approximately $1.5 million and $6.1 million for the three and nine months ended September 30, 2011,~~ respectively. Tax benefits resulting from tax deductions in excess of share-based compensation expense (windfall tax benefits) recognized under the provisions of ASC 718 ~~(windfall tax benefits)~~ are credited to additional paid-in capital in the ~~Company’s~~Company's Consolidated Balance Sheets. Realized tax shortfalls, if any, are first offset against the cumulative balance of windfall tax benefits, if any,

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

and then charged directly to income tax expense. The total tax benefit realized from share-based compensation was approximately ~~$0.2~~$4.0 million and ~~$3.0~~$2.7 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012, respectively. ~~The total tax benefit realized from share-based compensation was approximately $0.1 million and $1.6 million for the three and nine months ended September 30, 2011, respectively.~~

Nonvested Shares

With the exception of the awards made pursuant to the LTI ~~Programs~~program and a few employee and director grants the nonvested shares ~~generally~~ vest ratably over three to five years and are expensed over their vesting period. These grants were made to key employees and directors of the Company and, therefore, were assumed to have no forfeiture rates associated with them due to the historically low turnover among this group.

The following summarizes all nonvested share transactions, ~~(excluding shares granted under~~excluding those related to the LTI ~~Programs)~~program, from December 31, ~~2010~~2011 through ~~September 30, 2012 (amounts~~March 31, 2013 (share amounts in ~~thousands, except per share amounts)~~thousands):

   Nonvested Shares
Outstanding Weighted-Average
Price at Grant Date
December 31, 2010
   91    $ 47.89
Granted
   48    76.59
Vested
   (53 ) 55.97
Cancelled
   (5 ) 50.34


December 31, 2011
   81    59.31
Granted
   49    63.18
Vested
   (31 ) 59.75


September 30, 2012
   99    $ 61.08



	Nonvested Shares Outstanding		Weighted-Average Price at Grant Date
December 31, 2011	81		$	59.31
Granted	53		65.99
Vested	(34	)	59.36
Cancelled	(4	)	69.92
December 31, 2012	96		62.52
Granted	31		104.54
Vested	(37	)	56.90
Cancelled	(6	)	65.40
March 31, 2013	84		$	80.30

The total grant date fair value of shares vested during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013, and 2012, was ~~approximately $0.2~~$2.1 million and ~~$1.8~~$1.2 million, respectively.

Table of Contents

PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Long-Term Incentive Program

Pursuant to the Amended Plan, the Compensation Committee may grant time-vested and performance based nonvested shares. All shares granted under the LTI program were granted to key employees of the Company. The following summarizes all LTI share transactions from December 31, 2011 through March 31, 2013 (share amounts in thousands):



	Nonvested LTI Shares Outstanding		Weighted-Average Price at Grant Date
December 31, 2011	183		$	51.03
Granted at target level	66		62.20
Adjustments for actual performance	40		54.01
Vested	(118	)	37.75
Cancelled	(5	)	67.66
December 31, 2012	166		65.14
Granted at target level	41		103.77
Adjustments for actual performance	35		53.62
Vested	(53	)	48.71
Cancelled	(1	)	75.50
March 31, 2013	188		$	75.53

The total grant date fair value of shares vested during the three ~~and nine~~ months ended ~~September 30, 2011 was approximately $0.2 million and $2.8 million, respectively.~~

~~Long-Term Incentive Programs~~

Pursuant to the Company’s stock plan, on January 14, 2010 and 2011 and January 9, 2012, the Compensation Committee approved the grant of 53,656, 73,914 and 65,647 performance and market based nonvested shares, respectively. All shares granted under the LTI Programs were granted to key employees of the Company. The 2009 grant was performance based and cliff vested after the requisite service period if certain financial goals were met. The goals were based upon diluted earnings per share (“EPS”) totals for 2009, the return on stockholders’ equity for the three year period beginning on January 1, 2009 and ending December 31, 2011, and the relative total stockholder return as compared to a peer group for the same three year period. The Company expensed the nonvested share grant over the requisite service period of two to three years beginning on January 1, 2009. The EPS component of the 2009 plan was not achieved and therefore no compensation expense was recognized relative to this component. The return on owners’ equity and relative total stockholder return components have been achieved at 98% and 145%, respectively, and the awards were paid to participants during the first quarter of 2012.

The 2010 grant is performance based and cliff vests after the requisite service period of two to three years if certain financial goals are met. The goals are based upon diluted EPS totals for 2010, the return on stockholders’ equity for the three year period beginning on January 1, 2010 and ending December 31, 2012, and the relative total stockholder return as compared to a peer group for the same three year period. For each component, the number of shares vested can double if the financial goals are exceeded and no shares will vest if the financial goals are not met. The EPS component of the 2010 plan was achieved at 190% and these shares vested at 50% on December 31, 2011

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

and the remaining 50% will vest on December 31, 2012. The Company is expensing the nonvested share grant over the requisite service period of two to three years beginning on January 1, 2010. If the Company believes that the number of shares granted will be more or less than originally projected, an adjustment to the expense will be made at that time based on the probable outcome.

The 2011 grant is performance based and cliff vests after the requisite service period of two to three years if certain financial goals are met. The goals are based upon the Company’s EBITDA for 2011, the return on stockholders’ equity for the three year period beginning on January 1, 2011 and ending DecemberMarch 31, 2013, and ~~the relative total stockholder return as compared to a peer group for the same three year period. For each component, the number of shares vested can double if the financial goals are exceeded~~2012, was $2.6 million and no shares will vest if the financial goals are not met. The Company is expensing the nonvested share grant over the requisite service period of two to three years beginning on January 1, 2011. If the Company believes that the number of shares granted will be more or less than originally projected, an adjustment to the expense will be made at that time based on the probable outcome. The EBITDA component of the 2011 plan was achieved at 200% and these shares will vest 50% on December$2.0 million, respectively.

At March 31, ~~2012 and 50% on December 31, 2013.~~

The 2012 grant is performance based and cliff vests after the requisite service period of two to three years if certain financial goals are met. The goals are based upon the Company’s EBITDA for 2012, the return on stockholders’ equity for the three year period beginning on January 1, 2012 and ending December 31, 2014, and the relative total stockholder return as compared to a peer group for the same three year period. For each component, the number of shares vested can double if the financial goals are exceeded and no shares will vest if the financial goals are not met. The Company is expensing the nonvested share grant over the requisite service period of two to three years beginning on January 1, 2012. If the Company believes that the number of shares granted will be more or less than originally projected, an adjustment to the expense will be made at that time based on the probable outcome.

~~At September 30, 2012,~~2013, total future compensation costs, assuming the current estimated performance levels are achieved, related to nonvested share awards granted under the ~~2010, 2011 and 2012~~ LTI ~~Programs~~program are estimated to be approximately ~~$8.6 million.~~$10.6 million. The Company assumed a 7.5% forfeiture rate for ~~this grant~~these grants and the remaining shares have a weighted average life of ~~1.29~~1.5 years at ~~September 30, 2012.~~

March 31, 2013.

~~11.~~
9.	Income Taxes:

The Company follows the guidance of FASB ASC Topic 740 “Income Taxes” (“ASC 740”) as it relates to the provision for income taxes and uncertainty in income taxes. The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. There were no unrecognized tax benefits at ~~both~~March 31, 2013 and 2012.

The Company was notified on June 21, 2007 that it was being examined by the Internal Revenue Service (IRS) for the 2005 calendar year. The IRS concluded the audit and on March 19, 2009 issued Form 4549-A, Income Tax Examination Changes, for tax years ended December 31, 2007, 2006 and 2005. The IRS has asserted that cost recovery for tax revenue recognition does not clearly reflect taxable income and that unused line fees paid on credit facilities should be capitalized and amortized rather than taken as a current deduction. The Company believes it has sufficient support for the technical merits of its positions and that it is more likely than not they will ultimately be sustained; therefore, a reserve for uncertain tax positions is not necessary. The Company believes cost recovery to be an acceptable tax revenue recognition method for companies in the bad debt purchasing industry. For tax purposes, collections on finance receivables are applied first to principal to reduce the finance receivables to zero before any taxable income is recognized. On April 22, 2009, the Company filed a formal protest of the findings contained in the examination report prepared by the IRS. On August 26, 2011, the IRS issued a Notice of Deficiency for the tax years ended December 31, 2007, 2006, and 2005. On November 2, 2011, the Company filed a petition in the United States Tax Court. If the Company is unsuccessful in the United States Tax Court, it can appeal to the federal Circuit Court of Appeals. Payment of the assessed taxes and interest could have an adverse affect on the Company’s financial condition, be material to the Company’s results of operations, and possibly require additional financing from other sources. In accordance with the Internal Revenue Code, underpayments of federal tax accrue interest, compounded daily, at the applicable federal short term rate plus three percentage points. An additional two percentage points applies to large corporate underpayments of $100,000 or more to periods after the applicable date as defined in the Internal Revenue Code. The Company files taxes in multiple state jurisdictions; therefore, any underpayment of state tax will accrue interest in accordance with the respective state statute. On June 30, 2011, the Company was notified by the IRS that the audit period will be expanded to include the tax years ended December 31, 2009 and 2008.

Table of Contents

PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

At March 31, 2013, the tax years subject to examination by the major taxing jurisdictions, including the IRS, are 2003, 2005 and subsequent years. The 2003 tax year remains open to examination because of a net operating loss that originated in that year but was not fully utilized until the 2005 tax year. The examination periods for the 2007, 2006 and 2005 tax years were extended through December 31, 2011; however, because the IRS issued the Notice of Deficiency prior to December 31, 2011, the period for assessment is suspended until a decision of the Tax Court becomes final. The statute of limitations for the 2008, 2009 and 2010 tax years has been extended to September ~~30,~~26, 2014.

ASC 740 requires the recognition of interest if the tax law would require interest to be paid on the underpayment of taxes, and recognition of penalties if a tax position does not meet the minimum statutory threshold to avoid payment of penalties. No interest or penalties were accrued or reversed in the three month periods ended March 31, 2013 or 2012.


10.	Earnings per Share:

Basic earnings per share (“EPS”) are computed by dividing net income available to common shareholders of Portfolio Recovery Associates, Inc. by weighted average common shares outstanding. Diluted EPS are computed using the same components as basic EPS with the denominator adjusted for the dilutive effect of nonvested share awards. Share-based awards that are contingent upon the attainment of performance goals are not included in the computation of diluted EPS until the performance goals have been attained. The dilutive effect of nonvested shares is computed using the treasury stock method, which assumes any proceeds that could be obtained upon the vesting of nonvested shares would be used to purchase common shares at the average market price for the period. The assumed proceeds include the windfall tax benefit that would be received upon assumed exercise. The following tables provide reconciliation between the computation of basic EPS and diluted EPS for the three months ended March 31, 2013 and 2012 (amounts in thousands, except per share amounts):



	For the Three Months Ended March 31,
	2013					2012
	Net Income attributable to Portfolio Recovery Associates, Inc.		Weighted Average Common Shares	EPS		Net Income attributable to Portfolio Recovery Associates, Inc.		Weighted Average Common Shares	EPS
Basic EPS	$	38,600	16,937	$	2.28	$	25,462	17,196	$	1.48
Dilutive effect of nonvested share awards			154					71
Diluted EPS	$	38,600	17,091	$	2.26	$	25,462	17,267	$	1.47

There were no antidilutive options outstanding for the three months ended March 31, 2013 and 2012.


11.	Commitments and Contingencies:

Employment Agreements:

The Company has employment agreements, most of which expire on December 31, 2014, with all of its executive officers and with several members of its senior management group. Such agreements provide for base salary payments as well as bonuses which are based on the attainment of specific management goals. At March 31, 2013, the estimated future compensation under these agreements is approximately $11.3 million. The agreements also contain confidentiality and non-compete provisions.

Leases:

The Company is party to various operating leases with respect to its facilities and equipment. The future minimum lease payments at March 31, 2013 is approximately $23.6 million.

Forward Flow Agreements:

The Company is party to several forward flow agreements that allow for the purchase of defaulted consumer receivables at pre-established prices. The maximum remaining amount to be purchased under forward flow agreements at March 31, 2013 is approximately $283.8 million.

Table of Contents

PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Redeemable Noncontrolling Interest:

In connection with the Company’s acquisition of 62% of the membership units of CCB on March 15, 2010, the Company acquired the right through February 28, 2015 to purchase, at a predetermined price, the remaining 38% of the membership units of CCB not held by the Company. In February 2013, the Company exercised its right to acquire one-half of the noncontrolling interest resulting in ownership of 81% of the membership units as of March 31, 2013. Also, the owners of the noncontrolling interest can require the Company to purchase their respective interest during the period beginning on March 1, 2012 and ~~2011.~~

ending on February 28, 2018 at pre-defined multiples of EBITDA, subject to achievement of a minimum amount of trailing EBITDA. While the actual amount or timing of any future payment related to the remaining 19% of outstanding interest is unknown at this time, the maximum amount of consideration to be paid for that interest is $11.4 million.

Contingent Purchase Price:

The ~~IRS~~NCM acquisition includes an earn-out provision whereby the sellers are able to earn additional cash consideration for achieving certain cash collection thresholds over a five year period. The maximum amount of earn-out during the period is $15.0 million. As of March 31, 2013, the Company has recorded a present fair value amount for this liability of $7.3 million.

Finance Receivables:

Certain agreements for the purchase of finance receivables portfolios contain provisions that may, in limited circumstances, require the Company to refund a portion or all of the collections subsequently received by the Company on particular accounts. The potential refunds as of the balance sheet date are not considered to be significant.

Litigation:

The Company is from time to time subject to routine legal claims and proceedings, most of which are incidental to the ordinary course of its business. The Company initiates lawsuits against customers and is occasionally countersued by them in such actions. Also, customers, either individually, as members of a class action, or through a governmental entity on behalf of customers, may initiate litigation against the Company in which they allege that the Company has violated a state or federal law in the process of collecting on an account. From time to time, other types of lawsuits are brought against the Company. Additionally, the Company receives subpoenas and other requests for information from regulators or governmental authorities who are investigating the Company's debt collection activities. The Company makes every effort to respond appropriately to such requests.

The Company accrues for potential liability arising from legal proceedings when it is probable that such liability has been incurred and the amount of the loss can be reasonably estimated. This determination is based upon currently available information for those proceedings in which the Company is involved, taking into account the Company's best estimate of such losses for those cases for which such estimates can be made. The Company's estimate involves significant judgment, given the varying stages of the proceedings (including the fact that many of them are currently in preliminary stages), the number of unresolved issues in many of the proceedings (including issues regarding class certification and the scope of many of the claims), and the related uncertainty of the potential outcomes of these proceedings. In making determinations of the likely outcome of pending litigation, the Company considers many factors, including, but not limited to, the nature of the claims, the Company's experience with similar types of claims, the jurisdiction in which the matter is filed, input from outside legal counsel, the likelihood of resolving the matter through alternative mechanisms, the matter's current status and the damages sought or demands made. Accordingly, the Company's estimate will change from time to time, and actual losses could be more than the current estimate.

Subject to the inherent uncertainties involved in such proceedings, the Company believes, based upon its current knowledge and after consultation with counsel, that the legal proceedings currently pending against it, including those that fall outside of the Company's routine legal proceedings, should not, either individually or in the aggregate, have a material adverse impact on the Company's financial condition. However, it is possible in light of the uncertainties involved in such proceedings or due to unexpected future developments, that an unfavorable resolution of a legal proceeding or claim could occur which may be material to the Company's financial condition, results of operations, or cash flows for a particular period.

Excluding the matters described below and other putative class action suits which the Company believes are not material, the high end of the range of potential litigation losses in excess of the amount accrued is estimated by management to be less than $1,000,000 as of March 31, 2013. Notwithstanding our attempt to estimate a range of possible losses in excess of the amount accrued based on current information, actual future losses may exceed both the Company's accrual and the range of potential litigation losses disclosed above.

Table of Contents

PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

In certain legal proceedings, the Company may have recourse to insurance or third party contractual indemnities to cover all or portions of its litigation expenses, judgments, or settlements. Loss estimates and accruals for potential liability related to legal proceedings are exclusive of potential recoveries, if any, under the Company's insurance policies or third party indemnities. The Company has not recorded any potential recoveries under the Company's insurance policies or third party indemnities.

The matters described below fall outside of the normal parameters of the Company’s routine legal proceedings.

Telephone Consumer Protection Act Litigation

The Company has been named as defendant in a number of putative class action cases, each alleging that the Company violated the Telephone Consumer Protection Act by calling consumers' cellular telephones without their prior express consent. On December 21, 2011, the United States Judicial Panel on Multi-District Litigation entered an order transferring these matters into one consolidated proceeding in the United States District Court for the Southern District of California. On November 14, 2012, the putative class plaintiffs filed their amended consolidated complaint in the matter, now styled as In re Portfolio Recovery Associates, LLC Telephone Consumer Protection Act Litigation, case No. 11-md-02295 (the “MDL action”). The Company has filed a motion to dismiss the amended consolidated complaint.

On October 12, 2012, the United States Court of Appeals for the Ninth Circuit, affirmed the decision of the United States District Court for the Southern District of California in the matter of Meyer v. Portfolio Recovery Associates, LLC, Case No. 11-cv-01008, which imposed a preliminary injunction prohibiting the Company from using its Avaya Proactive Contact Dialer to place calls to cellular telephones with California area codes that were obtained through skip-tracing. On December 28, 2012, the United States Court of Appeals for the Ninth Circuit denied the Company's petition seeking a rehearing en banc. Thereafter, the Company filed a Petition for Writ of Certiorari with the United States Supreme Court on March 28, 2013. The Supreme Court has yet to decide whether or not it will review this matter. Meyer is one of the cases included in the MDL action listed above. Both Meyer and the MDL action are ongoing and no final determination on the merits in either has been made.

Internal Revenue Service Audit

The U.S. Internal Revenue Service (the “IRS”) examined the ~~Company’s~~Company's tax returns for the 2005 calendar year. The IRS concluded the audit and on March 19, 2009 issued Form 4549-A, Income Tax Examination Changes, for tax years ended December 31, 2007, 2006 and 2005. The IRS has asserted that cost recovery for tax revenue recognition does not clearly reflect taxable income and that unused line fees paid on credit facilities should be capitalized and amortized rather than taken as a current deduction. The Company believes it has sufficient support for the technical merits of its positions and that it is more likely than not these positions will ultimately be sustained; therefore, a reserve for uncertain tax positions is not necessary. On April 22, 2009, the Company filed a formal protest of the findings contained in the examination report prepared by the IRS. On August 26, 2011, the IRS issued a Notice of Deficiency for the tax years ended December 31, 2007, 2006, and 2005. The Company subsequently filed a petition in the United States Tax Court to which the IRS responded on January 12, 2012. If the Company is unsuccessful in the United States Tax Court, it can appeal to the federal Circuit Court of Appeals. Payment of the assessed taxes and interest could have an adverse affect on the Company’s financial condition, be material to the Company’s results of operations, and possibly require additional financing from other sources. In accordance with the U.S. Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), underpayments of federal tax accrue interest, compounded daily, at the applicable federal short term rate plus three percentage points. An additional two percentage points applies to large

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

corporate underpayments of $100,000 or more to periods after the applicable date as defined in the Internal Revenue Code. The Company files taxes in multiple state jurisdictions; therefore, any underpayment of state tax will accrue interest in accordance with the respective state statute. In 2011, the IRS expanded the audit to include the tax years ended December 31, 2010, 2009 and 2008.

At September 30, 2012, the tax years subject to examination by the major taxing jurisdictions, including the IRS, are 2003, 2005 and subsequent years. The 2003 tax year remains open to examination because of a net operating loss that originated in that year but was not fully utilized until the 2005 tax year. The examination periods for the 2007, 2006 and 2005 tax years were extended through December 31, 2011; however, because the IRS issued the Notice of Deficiency for those tax periods prior to December 31, 2011, the period for assessment is suspended until a decision of the Tax Court becomes final. The examination period for the 2008 tax year has been extended through April 20, 2013.

~~12.~~

~~Earnings per Share:~~

Basic EPS are computed by dividing net income available to common stockholders of Portfolio Recovery Associates, Inc. by weighted average common shares outstanding. Diluted EPS are computed using the same components as basic EPS with the denominator adjusted for the dilutive effect of stock options and nonvested share awards. Share-based awards that are contingent upon the attainment of performance goals are not included in the computation of diluted EPS until the performance goals have been attained. The dilutive effect of stock options and nonvested shares is computed using the treasury stock method, which assumes any proceeds that could be obtained upon the exercise of stock options and vesting of nonvested shares would be used to purchase common shares at the average market price for the period. The assumed proceeds include the windfall tax benefit that would be received upon assumed exercise. The following tables provide reconciliation between the computation of basic EPS and diluted EPS for the three and nine months ended September 30, 2012 and 2011 (amounts in thousands, except per share amounts):

   For the Three Months Ended September 30,
   2012    2011
   Net Income
attributable to Portfolio
Recovery Associates, Inc.    Weighted Average
Common Shares    EPS    Net Income
attributable to Portfolio
Recovery Associates, Inc.    Weighted Average
Common Shares    EPS
Basic EPS
   $ 33,314       16,881       $ 1.97       $ 25,506       17,117       $ 1.49
Dilutive effect of nonvested share awards
      141             111












Diluted EPS
   $ 33,314       17,022       $ 1.96       $ 25,506       17,228       $ 1.48

   For the Nine Months Ended September 30,
   2012    2011
   Net Income
attributable to Portfolio
Recovery Associates, Inc.    Weighted Average
Common Shares    EPS    Net Income
attributable to Portfolio
Recovery Associates, Inc.    Weighted Average
Common Shares    EPS
Basic EPS
   $ 90,791       17,034       $ 5.33       $ 74,201       17,106       $ 4.34
Dilutive effect of nonvested share awards
      106             112












Diluted EPS
   $ 90,791       17,140       $ 5.30       $ 74,201       17,218       $ 4.31

~~There were no antidilutive options outstanding for the three or nine months ended September 30, 2012 and 2011.~~

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~13.~~

~~Commitments and Contingencies:~~

~~Employment Agreements:~~

The Company has employment agreements, most of which expire on December 31, 2014, with all of its executive officers and with several members of its senior management group. Such agreements provide for base salary payments as well as bonuses which are based on the attainment of specific management goals. Future compensation under these agreements is approximately $13.3 million. The agreements also contain confidentiality and non-compete provisions.

~~Leases:~~

~~The Company is party to various operating leases with respect to its facilities and equipment. The future minimum lease payments at September 30, 2012 is approximately $22.0 million.~~

~~Forward Flow Agreements:~~

~~Redeemable Noncontrolling Interest:~~

In connection with the Company’s acquisition of 62% of the membership units of CCB on March 15, 2010, the Company acquired the right through February 28, 2015 to purchase, at a predetermined price, the remaining 38% of the membership units of CCB not held by the Company. Also, the owners of the noncontrolling interest can require the Company to purchase their respective interest during the period beginning on March 1, 2012 and ending on February 28, 2018. While the actual amount or timing of any future payment is unknown at this time, the maximum amount of consideration to be paid for the 38% interest is $22.8 million.

~~Finance Receivables:~~

~~Litigation:~~

The Company is from time to time subject to routine legal claims and proceedings, most of which are incidental to the ordinary course of its business. The Company initiates lawsuits against customers and is occasionally countersued by them in such actions. Also, customers, either individually, as members of a class action, or through a governmental entity on behalf of customers, may initiate litigation against the Company in which they allege that the Company has violated a state or federal law in the process of collecting on an account. From time to time, other types of lawsuits are brought against the Company. Additionally, the Company receives subpoenas and other requests for information from regulators or governmental authorities who are investigating the Company’s debt collection activities. The Company makes every effort to respond appropriately to such requests. From time to time, other types of lawsuits are brought against the Company.

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

issues regarding class certification and the scope of many of the claims), and the related uncertainty of the potential outcomes of these proceedings. In making determinations of the likely outcome of pending litigation, the Company considers many factors, including, but not limited to, the nature of the claims, the Company’s experience with similar types of claims, the jurisdiction in which the matter is filed, input from outside legal counsel, the likelihood of resolving the matter through alternative mechanisms, the matter’s current status and the damages sought or demands made. Accordingly, the Company’s estimate will change from time to time, and actual losses may be more than the current estimate.

Subject to the inherent uncertainties involved in such proceedings, the Company believes, based upon its current knowledge and after consultation with counsel, that the legal proceedings currently pending against it, including those that fall outside of the Company’s routine legal proceedings, should not, either individually or in the aggregate, have a material adverse impact on the Company’s financial condition. However, it is possible, in light of the uncertainties involved in such proceedings or due to unexpected future developments, that an unfavorable resolution of a legal proceeding or claim could occur which may be material to the Company’s financial condition, results of operations, or cash flows for a particular period.

Excluding the matters described below and other putative class action suits which the Company believes are not material, the high end of the range of potential litigation losses in excess of the amount accrued is estimated by management to be less than $1,000,000 as of September 30, 2012. Notwithstanding our attempt to estimate a range of possible losses in excess of the amount accrued based on current information, actual future losses may exceed both the Company’s accrual and the range of potential litigation losses disclosed above.

In certain legal proceedings, the Company may have recourse to insurance or third party contractual indemnities to cover all or portions of its litigation expenses, judgments, or settlements. Loss estimates and accruals for potential liability related to legal proceedings are exclusive of potential recoveries, if any, under the Company’s insurance policies or third party indemnities. The Company has not recorded any potential recoveries under the Company’s insurance policies or third party indemnities.

~~The matters described below fall outside of the normal parameters of the Company’s routine legal proceedings.~~

~~Telephone Consumer Protection Act Litigation~~

As previously disclosed, the Company has been named as defendant in a number of putative class action cases, each alleging that the Company violated the Telephone Consumer Protection Act (“TCPA”) by calling consumers’ cellular telephones without their prior express consent. On December 21, 2011, the United States Judicial Panel on Multi-District Litigation entered an order transferring these matters into one consolidated proceeding in the United States District Court for the Southern District of California. On June 22, 2012, the putative class plaintiffs filed their consolidated complaint in the matter, now styled as~~In re Portfolio Recovery Associates, LLC Telephone Consumer Protection Act Litigation~~, case No. 11-md-02295 (“MDL action”). The Company filed a motion to dismiss the consolidated complaint. On October 9, 2012, the plaintiffs filed a motion requesting leave to file an amended consolidated complaint. A hearing on both motions is scheduled for November 26, 2012.

~~On October 12, 2012, the United States Court of Appeals for the Ninth Circuit, affirmed the decision of the United States District Court for the Southern District of California in the matter of~~~~Meyer v. Portfolio Recovery Associates, LLC~~, Case No. 11-cv-01008, which imposed a preliminary injunction prohibiting the Company from using its Avaya Proactive Contact Dialer to place calls to cellular telephones with California area codes that were obtained through skip-tracing. On October 26, 2012, the Company filed a petition seeking a rehearing~~en banc~~ ~~before the United States Court of Appeals for the Ninth Circuit.~~~~Meyer~~ ~~is one of the cases included in the MDL action listed above. Both~~~~Meyer~~~~and the MDL action are ongoing and no final determination on the merits in either has been made.~~

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~Internal Revenue Service Audit~~

The U.S. Internal Revenue Service (the “IRS”) examined the Company’s tax returns for the 2005 calendar year. The IRS concluded the audit and on March 19, 2009 issued Form 4549-A, Income Tax Examination Changes, for tax years ended December 31, 2007, 2006 and 2005. The IRS has asserted that cost recovery for tax revenue recognition does not clearly reflect taxable income and that unused line fees paid on credit facilities should be capitalized and amortized rather than taken as a current deduction. The Company believes it has sufficient support for the technical merits of its positions and that it is more likely than not these positions will ultimately be sustained; therefore, a reserve for uncertain tax positions is not necessary. On April 22, 2009, the Company filed a formal protest of the findings contained in the examination report prepared by the IRS. On August 26, 2011, the IRS issued a Notice of Deficiency for the tax years ended December 31, 2007, 2006, and 2005. The Company subsequently filed a petition in United States Tax Court to which the IRS responded on January 12, 2012. If the Company is unsuccessful in tax court, it can appeal to the federal Circuit Court of Appeals. Refer to Note 119 “Income Taxes” for additional information.

~~14.~~
12.	Fair Value Measurements and Disclosures:

In accordance with the disclosure requirements of FASB ASC Topic 825, “Financial Instruments” (“ASC 825”), the table below summarizes fair value estimates for the Company’s financial instruments. The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of the Company. The carrying amounts in the table are recorded in the consolidated balance sheet at March 31, 2013 and December 31, 2012, under the indicated captions (amounts in thousands):

   September 30, 2012    December 31, 2011
   Carrying
Amount    Estimated
Fair Value    Carrying
Amount    Estimated
Fair Value
Financial assets:

Cash and cash equivalents
   $ 31,488       $ 31,488       $ 26,697       $ 26,697
Finance receivables, net
   973,594       1,602,245       926,734       1,269,277
Financial liabilities:

Line of credit
   $ 250,000       $ 250,000       $ 220,000       $ 220,000
Long-term debt
   674       674       1,246       1,246

Table of Contents

PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



	March 31, 2013				December 31, 2012
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	39,111	$	39,111	$	32,687	$	32,687
Finance receivables, net	1,169,747		1,825,476		1,078,951		1,776,049
Financial liabilities:
Line of credit	$	172,000	$	172,000	$	127,000	$	127,000
Long-term debt	199,159		199,159		200,542		200,542

As of ~~September 30, 2012,~~March 31, 2013, and December 31, ~~2011,~~2012, the Company did not account for any financial assets or financial liabilities at fair value. As defined by FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”), fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also requires the consideration of differing levels of inputs in the determination of fair values. Those levels of input are summarized as follows:

•Level 1 –- Quoted prices in active markets for identical assets and liabilities.

Level 2 –- Observable inputs other than ~~Level~~level 1 quoted prices, such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 –- Unobservable inputs that are supported by little or no market activity. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques as well as instruments for which the determination of fair value requires significant management judgment or estimation.

~~PORTFOLIO RECOVERY ASSOCIATES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

Disclosure of the estimated fair values of financial instruments often requires the use of estimates. The Company uses the following methods and assumptions to estimate the fair value of financial instruments:

Cash and cash equivalents:The carrying amount approximates fair value and quoted prices for identical assets can be found in active markets. Accordingly, the Company estimates the fair value of cash and cash equivalents using level 1 inputs.

Finance receivables, net:The Company records purchased receivables at cost, which represents a significant discount from the contractual receivable balances due. The Company computed the estimated fair value of these receivables using proprietary pricing models that the Company utilizes to make portfolio purchase decisions. Accordingly, the ~~Company’s~~Company's fair value estimates use level 3 inputs as there is little observable market data available and management is required to use significant judgment in its estimates.

Line of credit:The carrying amount approximates fair value due to the short-term nature of the interest rate periods and the observable quoted prices for similar instruments in active markets. Accordingly, the Company uses level 2 inputs for its fair value estimates.

Long-term debt:The carrying amount approximates fair value asdue to the short-term nature of the interest ~~rates approximate~~rate periods and the ~~rate currently offered to the Company~~observable quoted prices for similar ~~debt~~ instruments ~~of comparable maturities by the Company’s bankers.~~in active markets. Accordingly, the Company uses level 2 inputs for its fair value estimates.

~~15.~~
13.	~~Stockholders’~~Stockholders' Equity:

On February 2, 2012, the Board of Directors of the Company authorized a share repurchase program of up to ~~$100~~$100 million of the Company’s outstanding shares of common ~~stock. The program is administered by a special committee of~~stock on the ~~Company’s Board of Directors. Repurchases would depend on prevailing market conditions and other factors. The repurchase program may be suspended or discontinued at any time.~~open market. During the first ~~nine months~~quarter of ~~2012,~~2013, the Company repurchased and retired ~~331,449~~16,200 shares at an average price of ~~$68.56~~$118.03 (including acquisition costs).

~~16.~~

~~Recent Accounting Pronouncements:~~

~~In May 2011,~~ At March 31, 2013, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” The amendments in ASU 2011-04 generally represent clarificationmaximum remaining purchase price for share repurchases under the plan is approximately $75.4 million.

Table of Topic 820, but also include instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. generally accepted accounting principles and International Financial Reporting Standards. The provisions of ASU 2011-04 are effective prospectively for interim and annual periods beginning after December 15, 2011. Early adoption is prohibited. The Company adopted ASU 2011-04 on January 1, 2012, and has included the required disclosures in its notes to its consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income” (Topic 220) to amend its accounting guidance on the presentation of other comprehensive income (“OCI”) in an entity’s financial statements. The amended guidance eliminates the option to present the components of OCI as part of the statement of changes in stockholders’ equity and provides two options for presenting OCI: in a statement included in the statements of comprehensive income or in a separate statement immediately following the statements of comprehensive income. The amendments do not change the guidance for the items that have to be reported in OCI or when an item of OCI has to be moved into net income. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company adopted ASU 2011-05 on January 1, 2012, and has included the required disclosures in its consolidated financial statements.

Contents

PORTFOLIO RECOVERY ASSOCIATES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

In September 2011, the FASB issued ASU 2011-08, “Intangibles-Goodwill and Other” (Topic 350): “Testing Goodwill for Impairment” to amend the accounting guidance on goodwill impairment testing. The amended guidance reduces the complexity and costs of goodwill impairment testing by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amended guidance also improves previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Company adopted ASU 2011-08 on January 1, 2012 which had no material impact on its consolidated financial statements.


14.	Recent Accounting Pronouncements:

In July 2012, the FASB issued ASU 2012-02, “Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” to amend the accounting guidance on intangible asset impairment testing. The ASU permits entities to perform an optional qualitative assessment for determining whether it is more likely than not that an indefinite-lived intangible asset is impaired. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The Company ~~is evaluating~~adopted ASU 2012-02 in the ~~impact~~first quarter of ~~the ASU; however, it is not expected to have a significant~~2013 which had no material impact on its consolidated financial statements.

In February 2013, the FASB issued ASU 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income," which requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income, by component. In addition, entities are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail on these amounts. The Company adopted ASU 2013-02 in the first quarter of 2013 which had no material impact on its consolidated financial statements.

In March 2013, the FASB issued ASU 2013-05, "Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity," which defines the treatment of the release of cumulative translation adjustments upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted and prior periods should not be adjusted. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

Table of Contents



Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statements Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995:

This report contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks, uncertainties and assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements, other than statements of historical fact, are forward-looking statements, including statements regarding overall trends, gross margin trends, operating cost trends, liquidity and capital needs and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. The risks, uncertainties and assumptions referred to above may include the following:

a prolonged economic recovery or a deterioration in the economic or inflationary environment in the United States or the European Union, particularly the United Kingdom, including the interest rate environment, ~~that~~ may have an adverse effect on our collections, results of operations, revenue and stock price or on the stability of the financial system as a whole;

changes in the credit or capital markets, which affect our ability to borrow money or raise capital;

our ability to purchase defaulted consumer receivables at appropriate prices;

our ability to replace our defaulted consumer receivables with additional receivables portfolios;

our ability to obtain accurate and authentic account documents relating to accounts that we acquire and the possibility that documents that we provide could contain errors;

our ability to successfully acquire receivables of new asset types;

~~changes in the business practices of credit originators in terms of selling defaulted consumer receivables;~~

~~changes in government regulations that affect~~ our ability to collect sufficient amounts on our defaulted consumer receivables;

changes in ~~or interpretation of~~ tax laws ~~or adverse results~~regarding earnings of ~~tax audits;~~

our subsidiaries located outside of the United States;

changes in bankruptcy or collection laws that could negatively affect our business, including by causing an increase in certain types of bankruptcy filings involving liquidations, which may cause our collections to decrease;

changes in state or federal laws or the administrative practices of various bankruptcy courts, which may impact our ability to collect on our defaulted receivables;

our ability to collect and enforce our finance receivables may be limited under federal and state laws;

our ability to employ and retain qualified employees, especially collection personnel, and our senior management team;

our work force could become unionized in the future, which could adversely affect the stability of our production and increase our costs;

~~changes in the credit or capital markets, which affect our ability to borrow money or raise capital;~~

the degree, nature, and ~~nature~~resources of our competition;

the possibility that we could incur goodwill or other intangible asset impairment charges;

our ability to retain existing clients and obtain new clients for our fee-for-service businesses;

our ability to comply with existing and new regulations of the collection ~~industry;~~

industry, the failure of which could result in penalties, fines, litigation, damage to our reputation or the suspension or termination of our ability to ~~successfully operate and/~~conduct our business;

changes in governmental laws and regulations which could increase our costs and liabilities or ~~integrate~~impact our operations;

the possibility that new business ~~acquisitions;~~

acquisitions prove unsuccessful or strain or divert our resources;

our ability to maintain, renegotiate or replace our credit facility;

our ability to satisfy the restrictive covenants in our debt agreements;

our ability to manage risks associated with our international operations;

the possibility that compliance with foreign and U.S. laws and regulations that apply to our international operations ~~acquired on January 16, 2012;~~

could increase our cost of doing business in international jurisdictions;

the imposition of additional taxes on us;

changes in interest or exchange rates, which could reduce our net income, and the possibility that future hedging strategies may not be successful, which could adversely affect our results of operations and financial condition, as could our failure to comply with hedge accounting principles and interpretations;

the possibility that we could incur significant allowance charges on our finance receivables;

our loss contingency accruals may not be adequate to cover actual losses;

our ability to manage growth successfully;

the possibility that we could incur business or technology disruptions or cyber incidents, or not adapt to technological advances;

the possibility that we or our industry could experience negative publicity or reputational attacks;

and

~~the sufficiency of our funds generated from operations, existing cash and available borrowings to finance our current operations; and~~

the risk factors listed from time to time in our filings with the ~~SEC.~~

Securities and Exchange Commission (the “SEC”).

You should assume that the information appearing in this quarterly report is accurate only as of the date it was issued. Our business, financial condition, results of operations and prospects may have changed since that date.

Table of Contents

For a discussion of the risks, uncertainties and assumptions that could affect our future events, developments or results, you should carefully review the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as the discussion of “Business” and “Risk Factors” described in our ~~2011~~2012 Annual Report on Form 10-K, filed on February 28, ~~2012.~~

2013.

Our forward-looking statements could be wrong in light of these and other risks, uncertainties and assumptions. The future events, developments or results described in this report could turn out to be materially different. ~~We have~~Except as required by law, we assume no obligation to publicly update or revise our forward-looking statements after the date of this report and you should not expect us to do so.

Investors should also be aware that while we do, from time to time, communicate with securities analysts and others, we do not, by policy, selectively disclose to them any material nonpublic information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst regardless of the content of the statement or report. We do not, by policy, confirm forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

~~Definitions:~~

Definitions

We use the following terminology throughout this document:

“Allowance charges” refers to a reduction in income recognized on finance receivables on pools of finance receivables whose cash collection estimates are not received or projected to not be received.

“Amortization rate” refers to cash collections applied to principal on finance receivables as a percentage of total cash collections.

“Buybacks” refers to purchase price refunded by the seller due to the return of non-compliant accounts.

“Cash collections” refers to collections ~~from customers~~ on our owned portfolios.

“Cash receipts” refers to collections on our owned portfolios plus fee income.

“Core” accounts or portfolios refer to accounts or portfolios that are defaulted consumer receivables and are not in a bankrupt status upon purchase. These accounts are aggregated separately from purchased bankruptcy accounts. Unless otherwise noted, Core accounts do not include the accounts we purchase in the United Kingdom.

“EBITDA” refers to earnings before interest, taxes, depreciation and amortization.

“Estimated remaining collections” or "ERC" refers to the sum of all future projected cash collections on our owned portfolios.

“Fee income” refers to revenues generated from our fee-for-service ~~subsidiaries.~~

businesses.

“Income recognized on finance receivables” refers to income derived from our owned debt portfolios.

“Income recognized on finance receivables, net” refers to income derived from our owned debt portfolios and is shown net of allowance charges.

“Net finance receivable balance” is recorded on our balance sheet and refers to the purchase price less principal amortization and net allowance charges.

“Principal amortization” refers to cash collections applied to principal on finance receivables.

“Purchase price” refers to the cash paid to a seller to acquire defaulted consumer receivables, plus certain capitalized costs, less buybacks.

“Purchase price multiple” refers to the total estimated collections on owned debt portfolios divided by purchase price.

“Purchased bankruptcy” accounts or portfolios refer to accounts or portfolios that are in bankruptcy when we purchase them and as such are purchased as a pool of bankrupt accounts.

“Total estimated collections” refers to the actual cash collections, including cash sales, plus estimated remaining collections.

~~“Total estimated collections to purchase price” refers to the total estimated collections divided by the purchase price.~~

Overview

The Company is a ~~specialized~~ financial and business services company. Our primary business is the purchase, collection and management of portfolios of defaulted consumer receivables. We also service receivables on behalf of clients on either a commission or transaction-fee basis ~~as well as providing~~and provide class action claims settlement recovery services and related payment processing to corporate clients.

The Company is headquartered in Norfolk, Virginia, and employs approximately ~~3,100~~3,250 team members. The ~~Company’s~~Company's shares of common stock are traded on the NASDAQ Global Select Market under the symbol “PRAA.”

On January 16, 2012, the Company acquired 100% of the equity interest in MHH. Based in Kilmarnock, Scotland, MHH employs approximately 250 people and offers outsourced and contingent consumer debt recovery on behalf of banks, credit providers and debt purchasers, as well as distressed and dormant niche portfolio purchasing.

Earnings Summary

During the ~~third~~first quarter of ~~2012,~~2013, net income attributable to the Company was ~~$33.3~~$38.6 million, or ~~$1.96~~$2.26 per diluted share, compared with $25.5 million, or ~~$1.48~~$1.47 per diluted share, in the ~~third~~first quarter of ~~2011.~~2012. Total revenue was ~~$150.5~~$169.6 million in the ~~third~~first quarter of ~~2012,~~2013, up ~~31.7%~~21.1% from the same quarter one year earlier. Revenues in the recently completed quarter consisted of ~~$135.8~~$154.8 million in income recognized on finance receivables, net of allowance charges, and $14.8 million in fee income. Income recognized

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on finance receivables, net of allowance charges, increased ~~$32.9~~$30.6 million, or ~~32.0%~~24.6%, over the same period in ~~2011,~~2012, primarily as a result of a significant increase in cash collections. Cash collections were ~~$229.1~~$275.5 million in the ~~third~~first quarter of ~~2012,~~2013, up ~~25.7%~~26.4% or ~~$46.9~~$57.5 million as compared to the ~~third~~first quarter of ~~2011.~~2012. During the quarter, ~~$1.6~~$2.2 million in net allowance charges were incurred, compared with ~~$0.7~~$0.5 million in the comparable quarter of ~~2011.~~2012. Our performance has been positively impacted by operational efficiencies surrounding the cash collections process, including the continued refinement of account scoring analytics as it relates to both legal and non-legal collection channels. Additionally, we have

continued to develop our internal legal collection staff resources, which enables us to place accounts into that channel that otherwise would have been prohibitively expensive for legal action and to collect these accounts more efficiently and profitably.

Fee income ~~increased from $11.4 million in the third quarter of 2011~~decreased to $14.8 million in the ~~third~~first quarter of 2013 from $15.9 million in the first quarter of 2012 primarily due to ~~the acquisition of~~lower fee income generated by MHH in the first quarter of ~~2012 and an increase~~2013, as well as decreases in revenue generated by our PRA Government Services (“~~PRA GS”~~PGS”) business ~~offset by a decline in revenue generated by our~~and PRA Location Services (“PLS”) business. ~~The decline from PLS is due primarily~~This was partially offset by higher fee income generated in the first quarter of 2013 by CCB and our Bankruptcy Services business when compared to the ~~adverse impact of the economic slowdown on automobile financing and related collateral recovery activities.~~

prior year period.

A summary of how our income was generated during the three months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~ is as follows:

   For the Three Months Ended
September 30,
($ in thousands)    2012 2011
Cash collections
   $ 229,052    $ 182,168
Amortization of finance receivables
   (91,735 ) (78,552 )
Allowance charges
   (1,563 ) (741 )


Finance receivable income
   135,754    102,875
Fee income
   14,765    11,401


Total revenue
   $ 150,519    $ 114,276



	For the Three Months Ended March 31,
($ in thousands)	2013			2012
Cash collections	$	275,463		$	217,996
Amortization of finance receivables	(118,498		)	(93,276		)
Net allowance charges	(2,173		)	(494		)
Finance receivable income	154,792			124,226
Fee income	14,767			15,920
Total revenue	$	169,559		$	140,146

Operating expenses were ~~$93.5~~$103.7 million in the ~~third~~first quarter of ~~2012,~~2013, up ~~32.8%~~8.3% over the ~~third~~first quarter of ~~2011,~~2012, due primarily to increases in compensation expense, ~~legal collection costs,~~ legal collection fees and outside fees and services. Compensation expense increased primarily as a result of larger staff ~~sizes, including the acquisition of MHH on January 16, 2012.~~sizes. Compensation and employee services expenses increased as total employees grew ~~23.9%~~7.8% to ~~3,103~~3,250 as of ~~September 30, 2012,~~March 31, 2013, from ~~2,504~~3,014 as of September 30, 2011. Legal collection costs were $15.8 million for the three months ended September 30, 2012 compared to $9.7 million for the three months ended September 30, 2011, an increase of $6.1 million or 62.9%. This increase was the result of an increased portfolio size as well as a refinement of our internal scoring methodology that expanded our account selections for legal action. This strategy to expand the accounts brought into the legal collection process resulted in significant initial expenses, which may drive additional future cash collections and revenue.March 31, 2012. Legal collection fees increased from ~~$6.0~~$7.6 million in the ~~third~~first quarter of ~~2011~~2012 to ~~$8.6~~$10.5 million in the ~~third~~first quarter of ~~2012,~~2013, an increase of ~~$2.6~~$2.9 million or ~~43.3%~~38.2%. This increase was the result of an increase in cash collections from outside attorneys from ~~$27.2~~$34.9 million in the three months ended ~~September 30, 2011~~March 31, 2012 to ~~$39.9~~$47.9 million for the three months ended ~~September 30, 2012,~~March 31, 2013, an increase of ~~$12.7~~$13.0 million or ~~46.7%~~37.2%. Outside fees and services increased primarily as a result of corporate legal related expenses as well as increases in ~~costs related to software development.~~

other outside fees and services.

Results of Operations

The results of operations include the financial results of ~~Portfolio Recovery Associates, Inc.~~the Company and all of our subsidiaries, all of which are in the receivables management business. Under the guidance of the FASB ASC Topic 280 “Segment Reporting” (“ASC 280”),we have determined that we have several operating segments that meet the aggregation criteria of ASC 280, and therefore, we have one reportable segment, accounts ~~receivable~~receivables management, based on similarities among the operating units including homogeneity of services, service delivery methods and use of technology.

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The following table sets forth certain operating data as a percentage of total revenues for the periods indicated:

   For the Three Months For the Nine Months
   Ended September 30, Ended September 30,
   2012 2011 2012 2011
Revenues:

Income recognized on finance receivables, net
   90.2 % 90.0 % 89.5 % 87.8 %
Fee income
   9.8 % 10.0 % 10.5 % 12.2 %


Total revenues
   100.0 % 100.0 % 100.0 % 100.0 %
Operating expenses:

Compensation and employee services
   27.5 % 29.3 % 28.2 % 30.1 %
Legal collection fees
   5.7 % 5.2 % 5.8 % 5.2 %
Legal collection costs
   10.5 % 8.5 % 13.2 % 8.5 %
Agent fees
   1.0 % 1.4 % 1.0 % 1.8 %
Outside fees and services
   6.7 % 5.4 % 4.9 % 4.0 %
Communication expenses
   4.5 % 5.1 % 5.0 % 5.2 %
Rent and occupancy
   1.2 % 1.3 % 1.2 % 1.3 %
Depreciation and amortization
   2.4 % 2.8 % 2.5 % 2.9 %
Other operating expenses
   2.5 % 2.5 % 2.7 % 2.7 %


Total operating expenses
   62.0 % 61.5 % 64.5 % 61.7 %
Gain on sale of property
   0.0 % 0.0 % 0.0 % 0.3 %


Income from operations
   38.0 % 38.5 % 35.5 % 38.6 %
Other income and (expense):

Interest income
   0.0 % 0.0 % 0.0 % 0.0 %
Interest expense
   (1.5 %) (2.2 %) (1.6 %) (2.4 %)


Income before income taxes
   36.5 % 36.3 % 33.9 % 36.2 %
Provision for income taxes
   14.4 % 14.1 % 13.3 % 14.5 %


Net income
   22.1 % 22.2 % 20.6 % 21.7 %
Adjustment for (loss)/income attributable to redeemable noncontrolling interest
   (0.1 %) (0.3 %) (0.1 %) 0.1 %


Net income attributable to Portfolio Recovery Associates, Inc.
   22.2 % 22.5 % 20.7 % 21.6 %

For the Three Months
Ended March 31,
2013 2012
Revenues:
Income recognized on finance receivables, net 91.3 % 88.6 %
Fee income 8.7 % 11.4 %
Total revenues 100.0 % 100.0 %
Operating expenses:
Compensation and employee services 26.5 % 28.3 %
Legal collection fees 6.2 % 5.4 %
Legal collection costs 12.1 % 16.9 %
Agent fees 0.9 % 1.2 %
Outside fees and services 4.4 % 4.2 %
Communication expenses 5.3 % 5.9 %
Rent and occupancy 1.0 % 1.1 %
Depreciation and amortization 2.0 % 2.6 %
Other operating expenses 2.7 % 2.7 %
Total operating expenses 61.1 % 68.3 %
Income from operations 38.9 % 31.7 %
Other income and (expense):
Interest income — % — %
Interest expense (1.6 )% (1.9 )%
Income before income taxes 37.3 % 29.8 %
Provision for income taxes 14.6 % 11.8 %
Net income 22.7 % 18.0 %
Adjustment for loss attributable to redeemable noncontrolling interest — % (0.2 )%
Net income attributable to Portfolio Recovery Associates, Inc. 22.8 % 18.2 %

Three Months Ended ~~September 30, 2012~~March 31, 2013 Compared To Three Months Ended ~~September 30, 2011~~

March 31, 2012

Revenues

~~Revenues~~

Total revenues were ~~$150.5~~$169.6 million for the three months ended ~~September 30, 2012,~~March 31, 2013, an increase of ~~$36.2~~$29.5 million, or ~~31.7%~~21.1%, compared to total revenues of ~~$114.3~~$140.1 million for the three months ended ~~September 30, 2011.~~

March 31, 2012.

Income Recognized on Finance Receivables, net

Income recognized on finance receivables, net was ~~$135.8~~$154.8 million for the three months ended ~~September 30, 2012,~~March 31, 2013, an increase of ~~$32.9~~$30.6 million, or ~~32.0%~~24.6%, compared to income recognized on finance receivables, net of ~~$102.9~~$124.2 million for the three months ended ~~September 30, 2011.~~March 31, 2012. The increase was primarily due to an increase in cash collections on our finance receivables to ~~$229.1~~$275.5 million for the three months ended ~~September 30, 2012,~~March 31, 2013, from ~~$182.2~~$218.0 million for the three months ended ~~September 30, 2011,~~March 31, 2012, an increase of ~~$46.9~~$57.5 million or ~~25.7%~~26.4%. Our finance receivables amortization rate, including net allowance charges, was 43.8% for the three months ended March 31, 2013 compared to 43.0% for the three months ended March 31, 2012. During the three months ended ~~September 30, 2012,~~March 31, 2013, we acquired defaulted consumer receivables portfolios with an aggregate face value amount of ~~$1.3~~$1.85 billion at a cost of ~~$102.9~~$214.9 million. During the three months ended ~~September 30, 2011,~~March 31, 2012, excluding the initial investment in the MHH portfolio, we acquired defaulted consumer receivable portfolios with an aggregate face value of ~~$5.7~~$1.46 billion at a cost of ~~$122.1~~$111.4 million. In any period, we acquire defaulted consumer receivables that can vary dramatically in their age, type and ultimate collectability. We may pay significantly different purchase rates for purchased receivables within any period as a result of this quality fluctuation. In addition, market forces can drive pricing rates up or down in any period, irrespective of other quality fluctuations. As a result, the average purchase rate paid for any given period can fluctuate dramatically based on our particular buying activity in that period. However, regardless of the average purchase price and for similar time frames, we intend to target a similar internal rate of return,

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after direct expenses, in pricing our portfolio acquisitions; therefore, the absolute rate paid is not necessarily relevant to the estimated profitability of a ~~period’s~~period's buying.

Income recognized on finance receivables, net, is shown net of changes in valuation allowances recognized under FASB ASC Topic 310-30 ~~“Loans~~“Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“(“ASC 310-30”), which requires that a valuation allowance be recorded for significant decreases in expected cash flows or a

change in timing of cash flows which would otherwise require a reduction in the stated yield on a pool of accounts. For the three months ended ~~September 30, 2012,~~March 31, 2013, we recorded net allowance charges of ~~$1.6~~$2.2 million, of which ~~$0.9~~$4.6 million related to purchased bankruptcy portfolios primarily purchased in 2007 and 2008, ~~$1.9~~offset by reversals of $2.4 million related to Core portfolios primarily purchased in ~~2006 and 2007. This was offset by an allowance reversal of $1.1 million on Core portfolios purchased in~~ 2005 and ~~a $0.1 million reversal on purchased bankruptcy portfolios.~~2008. In any given period, we may be required to record valuation allowances due to pools of receivables underperforming our expectations. Factors that may contribute to the recording of valuation allowances may include both internal as well as external factors. External factors which may have an impact on the collectability, and subsequently to the overall profitability, of purchased pools of defaulted consumer receivables include: new laws or regulations relating to collections, new interpretations of existing laws or regulations, and the overall condition of the economy. Internal factors which may have an impact on the collectability, and subsequently the overall profitability, of purchased pools of defaulted consumer receivables would include: necessary revisions to initial and post-acquisition scoring and modeling estimates, non-optimal operational activities (relating to the collection and movement of accounts on both our collection floor and external channels), and decreases in productivity related to turnover of our collection staff.

Fee Income

Fee income ~~increased from $11.4 million in the third quarter of 2011~~decreased to $14.8 million in the ~~third~~first quarter of 2013 from $15.9 million in the first quarter of 2012 primarily due to ~~the acquisition of~~lower fee income generated by MHH in the first quarter of ~~2012 and an increase~~2013, as well as decreases in revenue generated by our ~~PRA GS~~PGS business and PLS business. This was partially offset by ~~a decline~~higher fee income generated in ~~revenue generated~~the first quarter of 2013 by CCB and our ~~PLS business. The decline from PLS is due primarily~~Bankruptcy Services business when compared to the ~~adverse impact of the economic slowdown on automobile financing and related collateral recovery activities.~~

prior year period.

Operating Expenses

Total operating expenses were ~~$93.5~~$103.7 million for the three months ended ~~September 30, 2012,~~March 31, 2013, an increase of ~~$23.1~~$8.0 million or ~~32.8%~~8.4% compared to total operating expenses of ~~$70.4~~$95.7 million for the three months ended ~~September 30, 2011.~~March 31, 2012. Total operating expenses were ~~38.3%~~35.7% of cash receipts for the three months ended ~~September 30, 2012~~March 31, 2013 compared to ~~36.4%~~40.9% for the same period in ~~2011.~~

2012.

Compensation and Employee Services

Compensation and employee services expenses were ~~$41.3~~$45.0 million for the three months ended ~~September 30, 2012,~~March 31, 2013, an increase of ~~$7.8~~$5.3 million, or ~~23.3%~~13.4%, compared to compensation and employee services expenses of ~~$33.5~~$39.7 million for the three months ended ~~September 30, 2011.~~March 31, 2012. Compensation expense increased primarily as a result of larger staff ~~sizes, including the addition of new employees as a result of the acquisition of MHH on January 16, 2012.~~sizes. Compensation and employee services expenses increased as total employees grew ~~23.9%~~7.8% to ~~3,103~~3,250 as of ~~September 30, 2012,~~March 31, 2013, from ~~2,504~~3,014 as of ~~September 30, 2011.~~March 31, 2012. Compensation and employee services expenses as a percentage of cash receipts decreased to ~~17.0%~~15.5% for the three months ended ~~September 30, 2012,~~March 31, 2013, from ~~17.3%~~17.0% of cash receipts for the same period in ~~2011.~~

2012.

Legal Collection Fees

Legal collection fees represent contingent fees incurred for the cash collections generated by our independent third party attorney network. Legal collection fees were ~~$8.6~~$10.5 million for the three months ended ~~September 30, 2012,~~March 31, 2013, an increase of ~~$2.6~~$2.9 million, or ~~43.3%~~38.2%, compared to legal collection fees of ~~$6.0~~$7.6 million for the three months ended ~~September 30, 2011.~~March 31, 2012. This increase was the result of an increase in cash collections from outside attorneys from ~~$27.2~~$34.9 million in the three months ended ~~September 30, 2011~~March 31, 2012 to ~~$39.9~~$47.9 million for the three months ended ~~September 30, 2012,~~March 31, 2013, an increase of ~~$12.7~~$13.0 million or ~~46.7%~~37.2%. Legal collection fees for the three months ended ~~September 30, 2012~~March 31, 2013 were ~~3.5%~~3.6% of cash receipts, compared to ~~3.1%~~3.3% for the three months ended ~~September 30, 2011.~~

March 31, 2012.

Legal Collection Costs

Legal collection costs consist of costs paid to courts where a lawsuit is filed and the cost of documents received from sellers of defaulted consumer receivables. Legal collection costs were ~~$15.8~~$20.5 million for the three months ended ~~September 30, 2012, an increase~~March 31, 2013, a decrease of ~~$6.1~~$3.2 million, or ~~62.9%~~13.5%, compared to legal collection costs of ~~$9.7~~$23.7 million for the three months ended ~~September 30, 2011. This increase was~~March 31, 2012. During the first quarter of 2012, as a result of ~~an increased portfolio size as well as a~~the refinement of our internal scoring methodology that expanded our account selections for legal ~~action. This strategy to expand~~action, we expanded the accounts brought into the legal collection process which resulted in significant initial expenses, which may continue to drive additional future cash collections and revenue. These legal collection costs represent ~~6.5%~~7.1% and ~~4.4%~~10.1% of cash receipts for the three month periods ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively.

26
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Agent Fees

Agent fees primarily represent costs paid to repossession agents to repossess vehicles. Agent fees were ~~$1.5~~$1.6 million for both the three months ended March 31, 2013 and 2012.

Outside Fees and Services

Outside fees and services expenses were $7.4 million for the three months ended ~~September 30, 2012, a decrease of $0.1 million, or 6.3%~~March 31, 2013, compared to agent fees of $1.6 million for the three months ended September 30, 2011. The decrease was primarily due to a decline in agent fees related to reduced business activity associated with PLS.

~~Outside Fees and Services~~

~~Outside fees and services expenses were $10.1 million for the three months ended September 30, 2012,~~ an increase of ~~$3.9~~$1.5 million or ~~62.9%~~25.4% compared to outside fees and services expenses of ~~$6.2~~$5.9 million for the three months ended ~~September 30, 2011.~~March 31, 2012. Of the ~~$3.9~~$1.5 million increase, ~~$3.3~~$0.9 million of the increase was attributable to an increase in legal reserve accruals and corporate legal expenses and the remaining $0.6 million increase was mainly attributable to other outside fees and ~~services including increases in non-capitalized software development costs.~~

services.

Communication Expenses

Communication expenses were ~~$6.8~~$9.0 million for the three months ended ~~September 30, 2012,~~March 31, 2013, an increase of ~~$0.9~~$0.7 million, or ~~15.3%~~8.4%, compared to communications expenses of ~~$5.9~~$8.3 million for the three months ended ~~September 30, 2011.~~March 31, 2012. The increase was primarily due to additional postage expense resulting from an increase in special collection letter campaigns. The remaining increase was attributable to higher telephone ~~expenses driven by a greater number of finance receivables to work, as well as an expansion of our telephone system and a resulting increase in the number of collection calls made.~~expenses. Expenses related to customer mailings were responsible for ~~66.7%~~85.7% or $0.6 million of this increase, while the remaining ~~33.3%~~14.3% or ~~$0.3~~$0.1 million was attributable to ~~increased call volumes and other~~increases in telephone related charges.

Rent and Occupancy

Rent and occupancy expenses were ~~$1.8~~$1.7 million for the three months ended ~~September 30, 2012,~~March 31, 2013, an increase of ~~$0.3~~$0.1 million, or ~~20.0%~~6.3%, compared to rent and occupancy expenses of ~~$1.5~~$1.6 million for the three months ended September 30, 2011. The increase was primarily due to the additional space leased for our Birmingham call center operations, the addition of our MHH foreign operations as well as increased utility charges.

March 31, 2012.

Depreciation and Amortization

Depreciation and amortization expenses were ~~$3.6~~$3.4 million for the three months ended ~~September 30, 2012, an increase~~March 31, 2013, a decrease of ~~$0.4~~$0.3 million or ~~12.5%~~8.1% compared to depreciation and amortization expenses of ~~$3.2~~$3.7 million for the three months ended ~~September 30, 2011.~~March 31, 2012. The ~~increase~~decrease was primarily due to ~~the additional depreciation and~~decreased amortization expense ~~incurred as a result of the acquisition of the property and equipment and~~relating to our intangible ~~assets of MHH.~~

assets.

Other Operating Expenses

Other operating expenses were ~~$3.8~~$4.6 million for the three months ended ~~September 30, 2012,~~March 31, 2013, an increase of ~~$1.0~~$0.9 million or ~~35.7%~~24.3% compared to other operating expenses of ~~$2.8~~$3.7 million for the three months ended ~~September 30, 2011.~~March 31, 2012. Of the ~~$1.0~~$0.9 million increase, ~~$0.3 million was due to an increase in bad debt expense and~~ $0.2 million was due to an increase in ~~travel~~the provision for doubtful accounts and ~~travel~~$0.1 million was related ~~expenses when compared~~ to ~~same prior year period.~~insurance costs. None of the remaining ~~$0.5~~$0.6 million increase was attributable to any significant identifiable items.

Interest Income

Interest income was $0 and ~~$7,000~~$1,000 for the three months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively.

Interest Expense

Interest expense was ~~$2.2~~$2.7 million for both the three months ended March 31, 2013 and 2012.

Provision for Income Taxes

Provision for income taxes was $24.7 million for the three months ended ~~September 30, 2012, a decrease~~March 31, 2013, an increase of ~~$0.4~~$8.1 million, or 48.8%, compared to ~~interest expense~~provision for income taxes of ~~$2.6~~$16.6 million for the three months ended ~~September 30, 2011. The decrease was primarily due to a decrease in our weighted average interest rate, which decreased to 3.0% for the three months ended September 30,~~March 31, 2012 compared to 3.7% for the three months ended September 30, 2011. This was offset by an increase in average borrowings under our revolving credit facility for the three months ended September 30, 2012 compared to the same period in 2011. The average borrowings on our credit facility were $259.7 million and $248.9 million for the three months ended September 30, 2012 and 2011, respectively.

~~Provision for Income Taxes~~

Income tax expense was $21.7 million for the three months ended September 30, 2012, an increase of $5.6 million, or 34.8%, compared to income tax expense of $16.1 million for the three months ended September 30, 2011.. The increase is primarily due to an increase of ~~32.9%~~51.3% in income before taxes for the three months ended ~~September 30, 2012,~~March 31, 2013, compared to the same period in ~~2011, in addition to a increase in the effective tax rate to 39.6% for the three months ended September 30,~~ 2012, compared to an effective tax rate of 39.0% for the same period in 2011. The increase in the effective tax rate is primarily attributable to a change in the mix of income apportionment between various states.

~~Nine months Ended September 30, 2012 Compared To Nine months Ended September 30, 2011~~

~~Revenues~~

Total revenues were $438.5 million for the nine months ended September 30, 2012, an increase of $97.7 million, or 28.7%, compared to total revenues of $340.8 million for the nine months ended September 30, 2011.

~~Income Recognized on Finance Receivables, net~~

Income recognized on finance receivables, net was $392.6 million for the nine months ended September 30, 2012, an increase of $93.4 million, or 31.2%, compared to income recognized on finance receivables, net of $299.2 million for the nine months ended September 30, 2011. The increase was primarily due to an increase in cash collections on our finance receivables to $679.5 million for the nine months ended September 30, 2012, from $525.2 million for the nine months ended September 30, 2011, an increase of $154.3 million or 29.4%. During the nine months ended September 30, 2012, excluding the initial investment in the MHH portfolio, we acquired defaulted consumer receivables portfolios with an aggregate face value amount of $4.2 billion at a cost of $339.4 million. During the nine months ended September 30, 2011, we acquired defaulted consumer receivable portfolios with an aggregate face value of $8.6 billion at a cost of $319.5 million. In any period, we acquire defaulted consumer receivables that can vary dramatically in their age, type and ultimate collectability. We may pay significantly different purchase rates for purchased receivables within any period as a result of this quality fluctuation. In addition, market forces can drive pricing rates up or down in any period, irrespective of other quality fluctuations. As a result, the average purchase rate paid for any given period can fluctuate dramatically based on our particular buying activity in that period. However, regardless of the average purchase price and for similar time frames, we intend to target a similar internal rate of return, after direct expenses, in pricing our portfolio acquisitions; therefore, the absolute rate paid is not necessarily relevant to the estimated profitability of a period’s buying.

Income recognized on finance receivables, net is shown net of changes in valuation allowances recognized under FASB ASC Topic 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC 310-30”), which requires that a valuation allowance be recorded for significant decreases in expected cash flows or a change in timing of cash flows which would otherwise require a reduction in the stated yield on a pool of accounts. For the nine months ended September 30, 2012, we recorded net allowance charges of $4.3 million which related to purchased bankruptcy portfolios primarily purchased in 2008. In any given period, we may be required to record valuation allowances due to pools of receivables underperforming our expectations. Factors that may contribute to the recording of valuation allowances may include both internal as well as external factors. External factors which

may have an impact on the collectability, and subsequently to the overall profitability, of purchased pools of defaulted consumer receivables include: new laws or regulations relating to collections, new interpretations of existing laws or regulations, and the overall condition of the economy. Internal factors which may have an impact on the collectability, and subsequently the overall profitability, of purchased pools of defaulted consumer receivables would include: necessary revisions to initial and post-acquisition scoring and modeling estimates, non-optimal operational activities (relating to the collection and movement of accounts on both our collection floor and external channels), and decreases in productivity related to turnover of our collection staff.

~~Fee Income~~

Fee income was $46.0 million for the nine months ended September 30, 2012, an increase of $4.3 million, or 10.3%, compared to fee income of $41.7 million for the nine months ended September 30, 2011. Fee income increased primarily due to the acquisition of MHH in the first quarter of 2012 offset by declines in revenue generated by both our PLS business and Claims Compensation Bureau, LLC (“CCB”). The decline from PLS is due primarily to the adverse impact of the economic slowdown on automobile financing and related collateral recovery activities. The decline from CCB is due primarily to larger settlements of class action suits in the nine months ended September 30, 2011 as compared to the same period in 2012.

~~Operating Expenses~~

Total operating expenses were $282.5 million for the nine months ended September 30, 2012, an increase of $72.6 million or 34.6% compared to total operating expenses of $209.9 million for the nine months ended September 30, 2011. Total operating expenses were 38.9% of cash receipts for the nine months ended September 30, 2012 compared to 37.0% for the same period in 2011.

~~Compensation and Employee Services~~

Compensation and employee services expenses were $123.5 million for the nine months ended September 30, 2012, an increase of $21.1 million, or 20.6%, compared to compensation and employee services expenses of $102.4 million for the nine months ended September 30, 2011. Compensation expense increased primarily as a result of larger staff sizes, including the addition of new employees as a result of the acquisition of MHH on January 16, 2012. Compensation and employee services expenses increased as total employees grew 23.9% to 3,103 as of September 30, 2012, from 2,504 as of September 30, 2011. Compensation and employee services expenses as a percentage of cash receipts decreased to 17.0% for the nine months ended September 30, 2012, from 18.1% of cash receipts for the same period in 2011.

~~Legal Collection Fees~~

Legal collection fees represent contingent fees incurred for the cash collections generated by our independent third party attorney network. Legal collection fees were $25.2 million for the nine months ended September 30, 2012, an increase of $7.5 million, or 42.4%, compared to legal collection fees of $17.7 million for the nine months ended September 30, 2011. This increase was the result of an increase in our external legal collections which increased $36.2 million or 45.3%, from $80.0 million for the nine months ended September 30, 2011 to $116.2 million for the nine months ended September 30, 2012. Legal collection fees for the nine months ended September 30, 2012 were 3.5% of cash receipts, compared to 3.1% for the nine months ended September 30, 2011.

~~Legal Collection Costs~~

Legal collection costs consist of costs paid to courts where a lawsuit is filed and the cost of documents received from sellers of defaulted consumer receivables. Legal collection costs were $57.7 million for the nine months ended September 30, 2012, an increase of $28.8 million, or 99.7%, compared to legal collection costs of $28.9 million for the nine months ended September 30, 2011. This increase was the result of an increased portfolio size as well as a refinement of our internal scoring methodology that expanded our account selections for legal action. This strategy to expand the accounts brought into the legal collection process resulted in significant initial expenses, which may drive additional future cash collections and revenue. These legal collection costs represent 8.0% and 5.1% of cash receipts for the six month periods ended September 30, 2012 and 2011, respectively.

~~Agent Fees~~

Agent fees primarily represent costs paid to repossession agents to repossess vehicles. Agent fees were $4.5 million for the nine months ended September 30, 2012, a decrease of $1.5 million, or 25.0%, compared to agent fees of $6.0 million for the nine months ended September 30, 2011. The decrease was primarily due to a decline in agent fees related to reduced business activity associated with PLS.

~~Outside Fees and Services~~

Outside fees and services expenses were $21.6 million for the nine months ended September 30, 2012, an increase of $7.9 million or 57.7% compared to outside fees and services expenses of $13.7 million for the nine months ended September 30, 2011. Of the $7.9 million increase, $4.7 million was attributable to an increase in legal reserve accruals and corporate legal expenses and the remaining $3.2 million increase was attributable to other outside fees and services including increases in non-capitalized software development costs.

~~Communication Expenses~~

Communication expenses were $22.0 million for the nine months ended September 30, 2012, an increase of $4.1 million, or 22.9%, compared to communications expenses of $17.9 million for the nine months ended September 30, 2011. The increase was primarily due to additional postage expense resulting from an increase in special letter campaigns. The remaining increase was attributable to higher telephone expenses driven by a greater number of finance receivables to work, as well as an expansion of our telephone system and a resulting increase in the number of collection calls made. Expenses related to customer mailings were responsible for 85.4% or $3.5 million of this increase, while the remaining 14.6% or $0.6 million was attributable to increased call volumes and other telephone related charges.

~~Rent and Occupancy~~

Rent and occupancy expenses were $5.1 million for the nine months ended September 30, 2012, an increase of $0.7 million, or 15.9%, compared to rent and occupancy expenses of $4.4 million for the nine months ended September 30, 2011. The increase was primarily due to the additional space leased for our Birmingham call center operations, the addition of our MHH foreign operations as well as increased utility charges.

~~Depreciation and Amortization~~

Depreciation and amortization expenses were $10.8 million for the nine months ended September 30, 2012, an increase of $1.0 million or 10.2% compared to depreciation and amortization expenses of $9.8 million for the nine months ended September 30, 2011. The increase was primarily due to the additional depreciation and amortization expense incurred as a result of the acquisition of the property and equipment and intangible assets of MHH.

~~Other Operating Expenses~~

Other operating expenses were $12.0 million for the nine months ended September 30, 2012, an increase of $2.8 million or 30.4% compared to other operating expenses of $9.2 million for the nine months ended September 30, 2011. Of the $2.8 million increase, $0.4 increase was primarily attributable to additional taxes, fees and licenses and other operating expenses incurred by MHH, $0.8 million was due to an increase in bad debt expense, and $0.7 million was due to an increase in travel and travel related expenses when compared to same prior year period. None of the remaining $0.9 million increase was attributable to any significant identifiable items.

~~Gain on Sale of Property~~

Gain on sale of property was $0 for the nine months ended September 30, 2012, compared to $1.2 million for the nine months ended September 30, 2011. The decrease is the result of the sale of a parcel of land adjacent to our Norfolk headquarters during the second quarter of 2011.

~~Interest Income~~

~~Interest income was $8,000 and $7,000 for the nine months ended September 30, 2012 and 2011, respectively.~~

~~Interest Expense~~

Interest expense was $7.2 million for the nine months ended September 30, 2012, a decrease of $0.9 million compared to interest expense of $8.1 million for the nine months ended September 30, 2011. The decrease was primarily due to a decrease in average borrowings under our revolving credit facility for the nine months ended September 30, 2012 compared to the same period in 2011, in addition to a decrease in our weighted average interest rate, which decreased to 3.4% for the nine months ended September 30, 2012, compared to 3.7% for the nine months ended September 30, 2011. The average borrowings on our credit facility were $262.5 million and $271.4 million for the nine months ended September 30, 2012 and 2011, respectively

~~Provision for Income Taxes~~

Income tax expense was $58.5 million for the nine months ended September 30, 2012, an increase of $9.0 million, or 18.2%, compared to income tax expense of $49.5 million for the nine months ended September 30, 2011. The increase is primarily due to an increase of 20.0% in income before taxes for the nine months ended September 30, 2012, compared to the same period in 2011, partially offset by a decrease in the effective tax rate to ~~39.3%~~39.1% for the ~~nine~~three months ended ~~September 30, 2012,~~March 31, 2013, compared to an effective tax rate of ~~39.9%~~39.7% for the same period in ~~2011.~~2012. The decrease in the effective tax rate is primarily attributable to ~~a decrease in~~ the ~~state effective~~ tax ~~rate due to the impact~~benefits created by our international operations.

Table of ~~state tax credits.~~

Contents

Below are certain key financial data and ratios for the periods indicated:

~~FINANCIAL HIGHLIGHTS~~

Three Months Ended Nine Months Ended
September 30, % September 30, %
2012 2011 Change 2012 2011 Change
EARNINGS (in thousands)

Income recognized on finance receivables, net
$ 135,754    $ 102,875    32 % $ 392,566    $ 299,152    31 %
Fee income
14,765    11,401    30 % 45,983    41,696    10 %
Total revenues
150,519    114,276    32 % 438,549    340,848    29 %
Operating expenses
93,461    70,446    33 % 282,474    209,933    35 %
Income from operations
57,058    43,830    30 % 156,075    132,072    18 %
Net interest expense
2,189    2,548    -14 % 7,215    8,050    -10 %
Net income
33,127    25,193    31 % 90,367    74,478    21 %
Net income attributable to Portfolio Recovery Associates, Inc.
33,314    25,506    31 % 90,791    74,201    22 %
PERIOD-END BALANCES (in thousands)

Cash and cash equivalents
$ 31,488    $ 30,035    5 % $ 31,488    $ 30,035    5 %
Finance receivables, net
973,594    919,478    6 % 973,594    919,478    6 %
Goodwill and intangible assets, net
121,623    76,426    59 % 121,623    76,426    59 %
Total assets
1,169,698    1,064,104    10 % 1,169,698    1,064,104    10 %
Line of credit
250,000    260,000    -4 % 250,000    260,000    -4 %
Total liabilities
479,211    478,915    0 % 479,211    478,915    0 %
Total equity
670,489    568,305    18 % 670,489    568,305    18 %
FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)

Cash collections
$ 229,052    $ 182,168    26 % $ 679,473    $ 525,166    29 %
Principal amortization without allowance charges
91,735    78,552    17 % 282,646    218,950    29 %
Principal amortization with allowance charges
93,298    79,293    18 % 286,907    226,014    27 %
Principal amortization w/ allowance charges as % of cash collections:

Including fully amortized pools
40.7 % 43.5 % -6 % 42.2 % 43.0 % -2 %
Excluding fully amortized pools
42.0 % 45.7 % -8 % 43.7 % 45.6 % -4 %
ALLOWANCE FOR FINANCE RECEIVABLES (dollars in thousands)

Balance at period-end
$ 90,832    $ 83,471    9 % $ 90,832    $ 83,471    9 %
Allowance charge
1,563    741    111 % 4,261    7,064    -40 %
Allowance charge to period-end net finance receivables
0.16 % 0.08 % 99 % 0.44 % 0.77 % -43 %
Allowance charge to net finance receivable income
1.15 % 0.72 % 60 % 1.09 % 2.36 % -54 %
Allowance charge to cash collections
0.68 % 0.41 % 68 % 0.63 % 1.35 % -53 %
PURCHASES OF FINANCE RECEIVABLES (1) (dollars in thousands)

Purchase price - core
$ 52,703    $ 57,240    -8 % $ 174,319    $ 170,857    2 %
Face value - core
674,135    5,027,874    -87 % 2,679,734    7,071,530    -62 %
Purchase price - bankruptcy
41,277    64,848    -36 % 151,629    148,659    2 %
Face value - bankruptcy
341,359    654,508    -48 % 1,158,050    1,515,501    -24 %
Purchase price - total
93,980    122,088    -23 % 325,948    319,516    2 %
Face value - total
1,015,494    5,682,382    -82 % 3,837,784    8,587,031    -55 %
Number of portfolios - total
95    95    0 % 282    250    13 %
ESTIMATED REMAINING COLLECTIONS (1) (in thousands)

Estimated remaining collections - core
$ 1,323,134    $ 1,154,406    15 % $ 1,323,134    $ 1,154,406    15 %
Estimated remaining collections - bankruptcy
791,018    770,886    3 % 791,018    770,886    3 %
Estimated remaining collections - total
2,114,152    1,925,292    10 % 2,114,152    1,925,292    10 %
SHARE DATA (share amounts in thousands)

Net income per common share - diluted
$ 1.96    $ 1.48    32 % $ 5.30    $ 4.31    23 %
Weighted average number of shares outstanding - diluted
17,022    17,228    -1 % 17,140    17,218    0 %
Shares repurchased
—      —      100 % 331,449    —      100 %
Average price paid per share repurchased (including acquisitions costs)
$ —      —      100 % $ 68.56    —      100 %
Closing market price
$ 104.43    $ 62.22    68 % $ 104.43    $ 62.22    68 %
RATIOS AND OTHER DATA (dollars in thousands)

Return on average equity (2)
20.29 % 18.27 % 11 % 19.15 % 18.57 % 3 %
Return on revenue (3)
22.01 % 22.05 % 0 % 20.61 % 21.85 % -6 %
Operating margin (4)
37.91 % 38.35 % -1 % 35.59 % 38.75 % -8 %
Operating expense to cash receipts (5)
38.33 % 36.39 % 5 % 38.94 % 37.03 % 5 %
Debt to equity (6)
37.39 % 46.02 % -19 % 37.28 % 46.02 % -19 %
Number of collectors
1,992    1,520    31 % 1,992    1,520    31 %
Number of employees
3,103    2,504    24 % 3,103    2,504    24 %
Cash receipts (5)
$ 243,817    $ 193,569    26 % $ 725,456    $ 566,862    28 %
Line of credit - unused portion at period end
214,450    147,500    45 % 214,450    147,500    45 %

~~(1)~~

~~Domestic portfolio only~~

~~(2)~~

~~Calculated as annualized net income divided by average equity for the period~~

~~(3)~~

~~Calculated as net income divided by total revenues~~

~~(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 the line of credit balance plus long-term debt~~

~~FINANCIAL HIGHLIGHTS~~

   For the Quarter Ended
   September 30
2012 June 30
2012 March 31
2012 December 31
2011 September 30
2011
EARNINGS (in thousands)

Income recognized on finance receivables, net
   $ 135,754    $ 132,587    $ 124,226    $ 102,743    $ 102,875
Fee income
   14,765    15,298    15,920    15,344    11,401
Total revenues
   150,519    147,885    140,146    118,087    114,276
Operating expenses
   93,461    93,289    95,725    72,134    70,446
Income from operations
   57,058    54,596    44,421    45,953    43,830
Net interest expense
   2,189    2,374    2,652    2,512    2,548
Net income
   33,127    32,051    25,189    26,666    25,193
Net income attributable to Portfolio Recovery Associates, Inc.
   33,314    32,015    25,462    26,590    25,506
PERIOD-END BALANCES (in thousands)

Cash and cash equivalents
   $ 31,488    $ 42,621    $ 28,068    $ 26,697    $ 30,035
Finance receivables, net
   973,594    966,508    945,242    926,734    919,478
Goodwill and intangible assets, net
   121,623    121,748    124,659    76,274    76,426
Total assets
   1,169,698    1,173,738    1,142,026    1,071,123    1,064,104
Line of credit
   250,000    292,000    265,000    220,000    260,000
Total liabilities
   479,211    520,911    502,531    457,804    478,915
Total equity
   670,489    633,446    620,712    595,488    568,305
FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)

Cash collections
   $ 229,052    $ 232,425    $ 217,996    $ 180,324    $ 182,168
Principal amortization without allowance charges
   91,735    97,634    93,276    74,481    78,552
Principal amortization with allowance charges
   93,298    99,838    93,770    77,581    79,293
Principal amortization w/ allowance charges as % of cash collections:

Including fully amortized pools
   40.7 % 43.0 % 43.0 % 43.0 % 43.5 %
Excluding fully amortized pools
   42.0 % 44.4 % 44.8 % 44.9 % 45.7 %
ALLOWANCE FOR FINANCE RECEIVABLES (dollars in thousands)

Balance at period-end
   $ 90,832    $ 89,269    $ 87,065    $ 86,571    $ 83,471
Allowance charge
   1,563    2,204    494    3,100    741
Allowance charge to period-end net finance receivables
   0.16 % 0.23 % 0.05 % 0.33 % 0.08 %
Allowance charge to net finance receivable income
   1.15 % 1.66 % 0.40 % 3.02 % 0.72 %
Allowance charge to cash collections
   0.68 % 0.95 % 0.23 % 1.72 % 0.41 %
PURCHASES OF FINANCE RECEIVABLES (1) (dollars in thousands)

Purchase price - core
   $ 52,703    $ 69,512    $ 52,104    $ 42,532    $ 57,240
Face value - core
   674,135    1,033,331    972,268    829,232    5,027,874
Purchase price - bankruptcy
   41,277    53,460    56,892    46,360    64,848
Face value - bankruptcy
   341,359    448,244    368,447    376,094    654,508
Purchase price - total
   93,980    122,972    108,996    88,892    122,088
Face value - total
   1,015,494    1,481,575    1,340,715    1,205,326    5,682,382
Number of portfolios - total
   95    105    82    83    95
ESTIMATED REMAINING COLLECTIONS (1) (in thousands)

Estimated remaining collections - core
   $ 1,323,134    $ 1,305,641    $ 1,226,292    $ 1,159,086    $ 1,154,406
Estimated remaining collections - bankruptcy
   791,018    802,353    796,161    794,262    770,886
Estimated remaining collections - total
   2,114,152    2,107,994    2,022,453    1,953,348    1,925,292
SHARE DATA (share amounts in thousands)

Net income per common share - diluted
   $ 1.96    $ 1.87    $ 1.47    $ 1.54    $ 1.48
Weighted average number of shares outstanding - diluted
   17,022    17,133    17,267    17,269    17,228
Shares repurchased
   —      300,849    30,600    —      —
Average price paid per share repurchased (including acquisitions costs)
   $ —      $ 68.62    $ 68.02    —      —
Closing market price
   $ 104.43    $ 91.26    $ 71.72    $ 67.52    $ 62.22
RATIOS AND OTHER DATA (dollars in thousands)

Return on average equity (2)
   20.29 % 20.34 % 16.70 % 18.18 % 18.27 %
Return on revenue (3)
   22.01 % 21.67 % 17.97 % 22.58 % 22.05 %
Operating margin (4)
   37.91 % 36.92 % 31.70 % 38.91 % 38.35 %
Operating expense to cash receipts (5)
   38.33 % 37.66 % 40.92 % 36.87 % 36.39 %
Debt to equity (6)
   37.39 % 46.33 % 42.84 % 37.15 % 46.02 %
Number of collectors
   1,992    1,952    1,934    1,658    1,520
Number of employees
   3,103    3,032    3,014    2,641    2,504
Cash receipts (5)
   $ 243,817    $ 247,723    $ 233,916    $ 195,668    $ 193,569
Line of credit - unused portion at period end
   214,450    166,450    142,500    187,500    147,500

~~(1)~~

~~Domestic portfolio only~~

~~(2)~~

~~Calculated as annualized net income divided by average equity for the period~~

~~(3)~~

~~Calculated as net income divided by total revenues~~

~~(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 the line of credit balance plus long-term debt~~



FINANCIAL HIGHLIGHTS
	As of and for the Three Months Ended
	March 31,						%
	2013			2012			Change
EARNINGS (in thousands)
Income recognized on finance receivables, net	$	154,792		$	124,226		25	%
Fee income	14,767			15,920			(7	)%
Total revenues	169,559			140,146			21	%
Operating expenses	103,672			95,725			8	%
Income from operations	65,887			44,421			48	%
Net interest expense	2,689			2,652			1	%
Net income	38,517			25,189			53	%
Net income attributable to Portfolio Recovery Associates, Inc.	38,600			25,462			52	%

PERIOD-END BALANCES (in thousands)
Cash and cash equivalents	$	39,111		$	28,068		39	%
Finance receivables, net	1,167,747			945,242			24	%
Goodwill and intangible assets, net	125,462			124,659			1	%
Total assets	1,382,739			1,142,026			21	%
Line of credit and long-term debt	371,159			265,936			40	%
Total liabilities	621,413			502,531			24	%
Total equity	750,990			620,712			21	%

FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)
Cash collections	$	275,463		$	217,996		26	%
Principal amortization without allowance charges	118,498			93,276			27	%
Principal amortization with allowance charges	120,671			93,770			29	%
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools	43.8		%	43.0		%	2	%
Excluding fully amortized pools	45.2		%	44.8		%	1	%

ALLOWANCE FOR FINANCE RECEIVABLES (dollars in thousands)
Balance at period-end	$	95,296		$	87,065		9	%
Allowance charge	2,173			494			340	%
Allowance charge to period-end net finance receivables	0.19		%	0.05		%	256	%
Allowance charge to net finance receivable income	1.40		%	0.40		%	253	%
Allowance charge to cash collections	0.79		%	0.23		%	248	%

PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)
Purchase price - core	$	126,951		$	52,104		144	%
Face value - core	1,398,960			972,268			44	%
Purchase price - bankruptcy	86,595			56,892			52	%
Face value - bankruptcy	436,508			368,447			18	%
Purchase price - UK	1,387			2,421			(43	)%
Face value - UK	18,570			115,351			(84	)%
Purchase price - total	214,933			111,417			93	%
Face value - total	1,854,038			1,456,066			27	%
Number of portfolios - total	91			91			—	%

ESTIMATED REMAINING COLLECTIONS (in thousands)
Estimated remaining collections - core	$	1,562,383		$	1,236,712		26	%
Estimated remaining collections - bankruptcy	924,520			796,161			16	%
Estimated remaining collections - total	2,486,903			2,032,873			22	%

SHARE DATA (share amounts in thousands)
Net income per common share - diluted	$	2.26		$	1.47		54	%
Weighted average number of shares outstanding - diluted	17,091			17,267			(1	)%
Shares repurchased	16			31			(47	)%
Average price paid per share repurchased (including acquisitions costs)	$	118.03		$	68.02		74	%
Closing market price	$	126.92		$	71.72		77	%

RATIOS AND OTHER DATA (dollars in thousands)
Return on average equity (1)	21.1		%	16.7		%	26	%
Return on revenue (2)	22.7		%	18.0		%	26	%
Operating margin (3)	38.9		%	31.7		%	23	%
Operating expense to cash receipts (4)	35.7		%	40.9		%	(13	)%
Debt to equity (5)	49.4		%	42.8		%	15	%
Number of collectors	2,159			1,934			12	%
Number of full-time equivalent employees	3,250			3,014			8	%
Cash receipts (4)	$	290,231		$	233,916		24	%
Line of credit - unused portion at period end	228,000			142,500			60	%
(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 income from operations divided by total revenues
(4) "Cash receipts" is defined as cash collections plus fee income
(5) For purposes of this ratio, "debt" equals the line of credit balance plus long-term debt

Table of Contents



FINANCIAL HIGHLIGHTS
	As of and for the Quarter Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2013			2012			2012			2012			2012
EARNINGS (in thousands)
Income recognized on finance receivables, net	$	154,792		$	138,068		$	135,754		$	132,587		$	124,226
Fee income	14,767			16,183			14,765			15,298			15,920
Total revenues	169,559			154,251			150,519			147,885			140,146
Operating expenses	103,672			94,262			93,461			93,289			95,725
Income from operations	65,887			59,989			57,058			54,596			44,421
Net interest expense	2,689			1,816			2,189			2,374			2,652
Net income	38,517			35,732			33,127			32,051			25,189
Net income attributable to Portfolio Recovery Associates, Inc.	38,600			35,802			33,314			32,015			25,462

PERIOD-END BALANCES (in thousands)
Cash and cash equivalents	$	39,111		$	32,687		$	31,488		$	42,621		$	28,068
Finance receivables, net	1,167,747			1,078,951			973,594			966,508			945,242
Goodwill and intangible assets, net	125,462			129,852			121,623			121,748			124,659
Total assets	1,382,739			1,288,956			1,169,698			1,173,738			1,142,026
Line of credit and long-term debt	371,159			327,542			250,675			292,850			265,936
Total liabilities	621,413			559,856			479,211			520,911			502,531
Total equity	750,990			708,427			670,489			633,446			620,712

FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)
Cash collections	$	275,463		$	229,211		$	229,053		$	232,425		$	217,996
Principal amortization without allowance charges	118,498			88,851			91,736			97,634			93,276
Principal amortization with allowance charges	120,671			91,142			93,299			99,838			93,770
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools	43.8		%	39.8		%	40.7		%	43.0		%	43.0		%
Excluding fully amortized pools	45.2		%	40.9		%	42.0		%	44.4		%	44.8		%

ALLOWANCE FOR FINANCE RECEIVABLES (dollars in thousands)
Balance at period-end	$	95,296		$	93,123		$	90,832		$	89,269		$	87,065
Allowance charge	2,173			2,291			1,563			2,204			494
Allowance charge to period-end net finance receivables	0.19		%	0.21		%	0.16		%	0.23		%	0.05		%
Allowance charge to net finance receivable income	1.40		%	1.66		%	1.15		%	1.66		%	0.40		%
Allowance charge to cash collections	0.79		%	1.00		%	0.68		%	0.95		%	0.23		%

PURCHASES OF FINANCE RECEIVABLES (dollars in thousands)
Purchase price - core	$	126,951		$	85,476		$	52,703		$	69,512		$	52,104
Face value - core	1,398,960			901,512			674,135			1,033,331			972,268
Purchase price - bankruptcy	86,595			111,001			41,277			53,460			56,892
Face value - bankruptcy	436,508			946,927			341,359			448,244			368,447
Purchase price - UK	1,387			2,631			8,981			2,087			2,421
Face value - UK	18,570			59,953			248,667			44,779			115,351
Purchase price - total	214,933			199,108			102,961			125,059			111,417
Face value - total	1,854,038			1,908,392			1,264,161			1,526,354			1,456,066
Number of portfolios - total	91			104			107			114			91

ESTIMATED REMAINING COLLECTIONS (in thousands)
Estimated remaining collections - core	$	1,562,383		$	1,410,053		$	1,346,562		$	1,315,809		$	1,236,712
Estimated remaining collections - bankruptcy	924,520			905,136			791,018			802,353			796,161
Estimated remaining collections - total	2,486,903			2,315,189			2,137,580			2,118,162			2,032,873

SHARE DATA (share amounts in thousands)
Net income per common share - diluted	$	2.26		$	2.10		$	1.96		$	1.87		$	1.47
Weighted average number of shares outstanding - diluted	17,091			17,072			17,022			17,133			17,267
Shares repurchased	16			—			—			301			31
Average price paid per share repurchased (including acquisitions costs)	$	118.03		$	93.02		$	—		$	68.62		$	68.02
Closing market price	$	126.92		$	106.86		$	104.43		$	91.26		$	71.72

RATIOS AND OTHER DATA (dollars in thousands)
Return on average equity (1)	21.1		%	20.6		%	20.3		%	20.3		%	16.7		%
Return on revenue (2)	22.7		%	23.2		%	22.0		%	21.7		%	18.0		%
Operating margin (3)	38.9		%	38.9		%	37.9		%	36.9		%	31.7		%
Operating expense to cash receipts (4)	35.7		%	38.4		%	38.3		%	37.7		%	40.9		%
Debt to equity (5)	49.4		%	46.2		%	37.4		%	46.3		%	42.8		%
Number of collectors	2,159			2,153			1,992			1,952			1,934
Number of full-time equivalent employees	3,250			3,221			3,103			3,032			3,014
Cash receipts (4)	290,231			245,394			243,818			247,723			233,916
Line of credit - unused portion at period end	228,000			273,000			214,450			166,450			142,500
(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 income from operations divided by total revenues
(4) "Cash receipts" is defined as cash collections plus fee income
(5) For purposes of this ratio, "debt" equals the line of credit balance plus long-term debt

Table of Contents

Supplemental Performance Data

Domestic Finance Receivables Portfolio Performance:

The following tables show certain data related to our domestic finance receivables portfolio. These tables describe the purchase price, actual cash collections and future estimates of cash collections, income recognized on finance receivables (gross and net of allowance charges), principal amortization, allowance charges, net finance receivable balances and related multiples. Further, these tables disclose our entire domestic portfolio, as well as its subsets: the portfolio of purchased bankrupt accounts and our Core portfolio. The accounts represented in the purchased bankruptcy tables are those portfolios of accounts that were bankrupt at the time of purchase. This contrasts with accounts that file for bankruptcy after we purchase them, which continue to be tracked in their corresponding Core portfolio. Our United Kingdom portfolio is not significant and is therefore not included in these tables.

Core customers sometimes file for bankruptcy protection subsequent to our purchase of the related Core portfolio. When this occurs, we adjust our collection practices accordingly to comply with bankruptcy procedures; however, for accounting purposes, these accounts remain in the related Core portfolio. Conversely, bankrupt accounts may be dismissed voluntarily or involuntarily subsequent to our purchase of the related bankrupt portfolio. Dismissal occurs when the terms of the bankruptcy are not met by the petitioner. When this occurs, we are typically free to pursue collection outside of bankruptcy procedures; however, for accounting purposes, these accounts remain in the related bankruptcy pool.

The purchase price multiples (the ratio of total estimated collections to purchase price) from 2005 through ~~the third quarter of 2012~~2013 described in the tables below are lower than multiples in previous years. ~~This~~For the purchase years 2005-2008, this trend is primarily, but not entirely, related to increased pricing competition. When competition increases and/or supply decreases, pricing often becomes negatively impacted relative to expected collections, and yields tend to trend lower. The opposite tends to occur when competition decreases and/or supply increases.

The multiples associated with the purchase years 2009-2012 are additionally the result of pricing displacements that occurred as a result of the economic downturn.

To the extent that lower purchase price multiples are the ultimate result of more competitive pricing and lower yields, this will generally lead to higher amortization rates (payments applied to principal as a percentage of cash collections), lower operating margins and ultimately lower profitability. As portfolio pricing becomes more favorable on a relative basis, our profitability will tend to increase. It is important to consider, however, that to the extent we can improve our collection operations by collecting additional cash from a ~~discreet~~discrete quantity and quality of accounts, and/or by collecting cash at a lower cost structure, we can positively impact the collection to purchase price multiples and operating margins. We continue to make significant enhancements to our analytical abilities, management personnel and capabilities, all with the intent to collect more cash at lower cost.

Additionally, however, the processes we employ to initially book newly acquired pools of accounts and forecast future estimated collections for any given portfolio of accounts has evolved over the years due to a number of factors including economic conditions. Our revenue recognition under ASC 310-30 is driven by estimates of the ultimate magnitude of estimated lifetime collections as well as the timing of those collections. We have progressed towards booking new portfolio purchases using a higher confidence level for both estimated collection amounts and timing. Subsequent to the initial booking, as we gain collection experience and comfort with a pool of accounts, we continuously update ERC. These processes, along with the aforementioned operational enhancements, have tended to cause the ratio of collections, including ERC, to purchase price for any given year of buying to gradually increase over time. As a result, our estimate of lifetime collections to purchase price has generally, but not always, shown relatively steady increases as pools have aged. Thus, all factors being equal in terms of pricing, one would typically tend to see a higher collection to purchase price ratio from a pool of accounts that was six years from purchase than say a pool that was just two years from purchase.

Table of Contents

Domestic Portfolio Data – Life-to-Date

Entire Portfolio

      Inception through September 30, 2012    As of September 30, 2012
($ in thousands)    Actual Cash
Collections
Including Cash
Sales    Income
Recognized
on Finance
Receivables    Principal
Amortization    Allowance
Charges    Income
Recognized
on Finance
Receivables, Net    Net Finance
Receivables
Balance    Estimated
Remaining
Collections    Total
Estimated
Collections    Total Estimated
Collections to
Purchase Price
Purchase
Period
   Purchase
Price
1996
   $ 3,080       $ 10,171       $ 7,048       $ 3,123       $ 0       $ 7,048       $ 0       $ 43       $ 10,214       332 %
1997
   7,685       25,387       17,282       8,105       0       17,282       0       147       25,534       332 %
1998
   11,089       37,130       26,144       10,986       0       26,144       0       455       37,585       339 %
1999
   18,898       68,715       49,540       19,175       0       49,540       0       1,033       69,748       369 %
2000
   25,020       114,900       89,704       25,196       0       89,704       0       2,569       117,469       470 %
2001
   33,481       172,937       138,585       34,352       0       138,585       0       3,716       176,653       528 %
2002
   42,325       194,041       151,716       42,325       0       151,716       0       7,292       201,333       476 %
2003
   61,448       258,244       196,796       61,448    �� 0       196,796       0       12,915       271,159       441 %
2004
   59,176       192,361       134,384       57,977       1,200       133,184       0       12,368       204,729       346 %
2005
   143,168       298,170       178,552       119,618       14,697       163,855       8,853       16,062       314,232       219 %
2006
   107,673       197,088       122,525       74,563       22,615       99,910       10,496       18,173       215,261       200 %
2007
   258,379       440,216       242,527       197,689       22,325       220,202       38,359       68,421       508,637       197 %
2008
   275,148       415,563       237,716       177,847       29,995       207,721       67,272       111,076       526,639       191 %
2009
   281,438       558,585       362,283       196,302       0       362,283       85,138       261,958       820,543       292 %
2010
   358,149       484,149       280,949       203,200       0       280,949       154,974       411,458       895,607       250 %
2011
   394,261       258,182       147,227       110,955       0       147,227       283,307       610,947       869,129       220 %
2012
   324,627       39,508       26,455       13,053       0       26,455       311,561       575,519       615,027       189 %




















Total
   $ 2,405,045       $ 3,765,347       $ 2,409,433       $ 1,355,914       $ 90,832       $ 2,318,601       $ 959,960       $ 2,114,152       $ 5,879,499       244 %



			Inception through March 31, 2013										As of March 31, 2013
($ in thousands)			Actual Cash Collections Including Cash Sales		Income Recognized on Finance Receivables		Principal Amortization		Allowance Charges		Income Recognized on Finance Receivables, Net		Net Finance Receivables Balance		Estimated Remaining Collections		Total Estimated Collections		Total Estimated Collections to Purchase Price
Purchase Period	Purchase Price
1996	$	3,080	$	10,189	$	7,066	$	3,123	$	—	$	7,066	$	—	$	39	$	10,228	332	%
1997	7,685		25,447		17,342		8,105		—		17,342		—		122		25,569		333	%
1998	11,089		37,224		26,238		10,986		—		26,238		—		376		37,600		339	%
1999	18,898		69,012		49,837		19,175		—		49,837		—		914		69,926		370	%
2000	25,020		115,739		90,543		25,196		—		90,543		—		2,446		118,185		472	%
2001	33,481		174,230		139,878		34,352		—		139,878		—		3,910		178,140		532	%
2002	42,325		196,092		153,767		42,325		—		153,767		—		6,301		202,393		478	%
2003	61,448		261,489		200,041		61,448		—		200,041		—		11,229		272,718		444	%
2004	59,176		195,148		137,171		57,977		1,200		135,971		—		10,875		206,023		348	%
2005	143,168		304,195		181,346		122,849		12,851		168,495		7,470		12,860		317,055		221	%
2006	107,673		202,392		124,848		77,544		22,465		102,383		7,665		13,496		215,888		201	%
2007	258,397		458,569		251,396		207,173		23,835		227,561		27,384		50,668		509,237		197	%
2008	275,157		444,740		248,746		195,994		34,945		213,801		44,184		76,396		521,136		189	%
2009	281,443		638,313		419,717		218,596		—		419,717		62,846		221,889		860,202		306	%
2010	358,122		594,480		357,718		236,762		—		357,718		121,384		374,157		968,637		270	%
2011	394,145		380,981		213,724		167,257		—		213,724		226,888		519,963		900,944		229	%
2012	515,690		144,715		79,460		65,255		—		79,460		450,434		790,651		935,366		181	%
2013	213,740		10,656		6,465		4,191		$	—	6,465		209,537		375,873		386,529		181	%
Total	$	2,809,737	$	4,263,611	$	2,705,303	$	1,558,308	$	95,296	$	2,610,007	$	1,157,792	$	2,472,165	$	6,735,776	240	%

Purchased Bankruptcy Portfolio



			Inception through March 31, 2013										As of March 31, 2013
($ in thousands)			Actual Cash Collections Including Cash Sales		Income Recognized on Finance Receivables		Principal Amortization		Allowance Charges		Income Recognized on Finance Receivables, Net		Net Finance Receivables Balance		Estimated Remaining Collections		Total Estimated Collections		Total Estimated Collections to Purchase Price
Purchase Period	Purchase Price
1996- 2003	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	—	%
2004	7,468		14,422		8,154		6,268		1,200		6,954		—		75		14,497		194	%
2005	29,301		43,524		14,731		28,793		456		14,275		53		107		43,631		149	%
2006	17,630		31,280		14,603		16,677		850		13,753		103		343		31,623		179	%
2007	78,544		103,337		35,263		68,074		10,040		25,223		430		1,661		104,998		134	%
2008	108,604		157,158		70,041		87,117		10,650		59,391		10,837		13,629		170,787		157	%
2009	156,050		332,950		214,469		118,481		—		214,469		37,568		115,340		448,290		287	%
2010	209,215		299,758		167,603		132,155		—		167,603		77,060		186,902		486,660		233	%
2011	182,133		100,400		47,046		53,354		—		47,046		128,778		190,359		290,759		160	%
2012	256,209		42,118		19,225		22,893		—		19,225		233,316		303,317		345,435		135	%
2013	86,595		5,842		1,979		3,863		—		1,979		82,732		112,787		118,629		137	%
Total	$	1,131,749	$	1,130,789	$	593,114	$	537,675	$	23,196	$	569,918	$	570,877	$	924,520	$	2,055,309	182	%

Table of Contents

Core Portfolio

      Inception through September 30, 2012    As of September 30, 2012
($ in thousands)    Actual Cash
Collections
Including Cash
Sales    Income
Recognized
on Finance
Receivables    Principal
Amortization    Allowance
Charges    Income
Recognized
on Finance
Receivables, Net    Net Finance
Receivables
Balance    Estimated
Remaining
Collections    Total
Estimated
Collections    Total Estimated
Collections to
Purchase Price
Purchase
Period
   Purchase
Price
1996
   $ 3,080       $ 10,171       $ 7,048       $ 3,123       $ 0       $ 7,048       $ 0       $ 43       $ 10,214       332 %
1997
   7,685       25,387       17,282       8,105       0       17,282       0       147       25,534       332 %
1998
   11,089       37,130       26,144       10,986       0       26,144       0       455       37,585       339 %
1999
   18,898       68,715       49,540       19,175       0       49,540       0       1,033       69,748       369 %
2000
   25,020       114,900       89,704       25,196       0       89,704       0       2,569       117,469       470 %
2001
   33,481       172,937       138,585       34,352       0       138,585       0       3,716       176,653       528 %
2002
   42,325       194,041       151,716       42,325       0       151,716       0       7,292       201,333       476 %
2003
   61,448       258,244       196,796       61,448       0       196,796       0       12,915       271,159       441 %
2004
   51,708       177,983       126,274       51,709       0       126,274       0       12,284       190,267       368 %
2005
   113,867       254,752       163,846       90,906       14,145       149,701       8,815       15,988       270,740       238 %
2006
   90,043       166,077       108,074       58,003       21,615       86,459       10,426       17,726       183,803       204 %
2007
   179,835       338,166       207,473       130,693       13,695       193,778       35,441       64,881       403,047       224 %
2008
   166,541       269,201       169,920       99,281       27,095       142,825       40,131       75,458       344,659       207 %
2009
   125,384       275,617       182,203       93,414       0       182,203       31,971       130,364       405,981       324 %
2010
   148,925       246,852       153,635       93,217       0       153,635       55,732       221,532       468,384       315 %
2011
   212,081       194,912       114,720       80,192       0       114,720       131,891       384,664       579,576       273 %
2012
   174,994       29,804       19,974       9,830       0       19,974       165,151       372,067       401,871       230 %




















Total
   $ 1,466,404       $ 2,834,889       $ 1,922,934       $ 911,955       $ 76,550       $ 1,846,384       $ 479,558       $ 1,323,134       $ 4,158,023       284 %

~~Domestic Portfolio Data – Year-to-Date~~

~~Entire Portfolio~~

      Year to Date September 30, 2012    As of September 30, 2012
($ in thousands)    Actual Cash
Collections
Including Cash
Sales    Income
Recognized
on Finance
Receivables    Principal
Amortization    Allowance
Charges Income
Recognized
on Finance
Receivables, Net    Net Finance
Receivables
Balance    Estimated
Remaining
Collections    Total
Estimated
Collections    Total Estimated
Collections to
Purchase Price
Purchase
Period
   Purchase
Price
1996    $ 3,080       $ 28       $ 28       $ 0       $ 0    $ 28       $ 0       $ 43       $ 10,214       332 %
1997    7,685       76       76       0       0    76       0       147       25,534       332 %
1998    11,089       192       192       0       0    192       0       455       37,585       339 %
1999    18,898       552       552       0       0    552       0       1,033       69,748       369 %
2000    25,020       1,512       1,512       0       0    1,512       0       2,569       117,469       470 %
2001    33,481       2,473       2,473       0       0    2,473       0       3,716       176,653       528 %
2002    42,325       3,765       3,765       0       0    3,765       0       7,292       201,333       476 %
2003    61,448       5,847       5,847       0       0    5,847       0       12,915       271,159       441 %
2004    59,176       5,211       5,211       0       0    5,211       0       12,368       204,730       346 %
2005    143,168       10,286       4,624       5,662       (3,249 ) 7,873       8,853       16,062       314,233       219 %
2006    107,673       9,932       5,146       4,786       2,200    2,946       10,496       18,173       215,260       200 %
2007    258,379       37,990       17,016       20,974       2,860    14,156       38,359       68,421       508,638       197 %
2008    275,148       56,631       22,851       33,780       2,450    20,401       67,272       111,076       526,639       191 %
2009    281,438       136,721       90,154       46,567       0    90,154       85,138       261,958       820,543       292 %
2010    358,149       179,534       105,533       74,001       0    105,533       154,974       411,458       895,607       250 %
2011    394,261       180,992       101,282       79,710       0    101,282       283,307       610,947       869,129       220 %
2012    324,627       39,508       26,455       13,053       0    26,455       311,561       575,519       615,027       189 %


















Total    $ 2,405,045       $ 671,250       $ 392,717       $ 278,533       $ 4,261    $ 388,456       $ 959,960       $ 2,114,152       $ 5,879,501       244 %

~~Purchased Bankruptcy Portfolio~~

~~Core Portfolio~~

   Year to Date September 30, 2012    As of September 30, 2012
($ in thousands)    Actual Cash
Collections
Including Cash
Sales    Income
Recognized
on Finance
Receivables    Principal
Amortization    Allowance
Charges Income
Recognized
on Finance
Receivables, Net    Net Finance
Receivables
Balance    Estimated
Remaining
Collections    Total
Estimated
Collections    Total Estimated
Collections to
Purchase Price
Purchase
Period
   Purchase
Price
1996    $ 3,080       $ 28       $ 28       $ 0       $ 0    $ 28       $ 0       $ 43       $ 10,214       332 %
1997    7,685       76       76       0       0    76       0       147       25,534       332 %
1998    11,089       192       192       0       0    192       0       455       37,585       339 %
1999    18,898       552       552       0       0    552       0       1,033       69,748       369 %
2000    25,020       1,512       1,512       0       0    1,512       0       2,569       117,469       470 %
2001    33,481       2,473       2,473       0       0    2,473       0       3,716       176,653       528 %
2002    42,325       3,765       3,765       0       0    3,765       0       7,292       201,333       476 %
2003    61,448       5,847       5,847       0       0    5,847       0       12,915       271,159       441 %
2004    51,708       5,127       5,127       0       0    5,127       0       12,284       190,268       368 %
2005    113,867       10,090       4,587       5,503       (3,120 ) 7,707       8,815       15,988       270,741       238 %
2006    90,043       9,402       4,814       4,588       2,400    2,414       10,426       17,726       183,802       204 %
2007    179,835       31,314       16,010       15,304       (660 ) 16,670       35,441       64,881       403,048       224 %
2008    166,541       33,851       16,000       17,851       1,350    14,650       40,131       75,458       344,659       207 %
2009    125,384       54,948       40,439       14,509       0    40,439       31,971       130,364       405,981       324 %
2010    148,925       86,222       59,553       26,669       0    59,553       55,732       221,532       468,384       315 %
2011    212,081       132,940       79,282       53,658       0    79,282       131,891       384,664       579,576       273 %
2012    174,994       29,804       19,974       9,830       0    19,974       165,151       372,067       401,871       230 %


















Total    $ 1,466,404       $ 408,143       $ 260,231       $ 147,912       ($ 30 ) $ 260,261       $ 479,558       $ 1,323,134       $ 4,158,025       284 %



			Inception through March 31, 2013										As of March 31, 2013
($ in thousands)			Actual Cash Collections Including Cash Sales		Income Recognized on Finance Receivables		Principal Amortization		Allowance Charges		Income Recognized on Finance Receivables, Net		Net Finance Receivables Balance		Estimated Remaining Collections		Total Estimated Collections		Total Estimated Collections to Purchase Price
Purchase Period	Purchase Price
1996	$	3,080	$	10,189	$	7,066	$	3,123	$	—	$	7,066	$	—	$	39	$	10,228	332	%
1997	7,685		25,447		17,342		8,105		—		17,342		—		122		25,569		333	%
1998	11,089		37,224		26,238		10,986		—		26,238		—		376		37,600		339	%
1999	18,898		69,012		49,837		19,175		—		49,837		—		914		69,926		370	%
2000	25,020		115,739		90,543		25,196		—		90,543		—		2,446		118,185		472	%
2001	33,481		174,230		139,878		34,352		—		139,878		—		3,910		178,140		532	%
2002	42,325		196,092		153,767		42,325		—		153,767		—		6,301		202,393		478	%
2003	61,448		261,489		200,041		61,448		—		200,041		—		11,229		272,718		444	%
2004	51,708		180,726		129,017		51,709		—		129,017		—		10,800		191,526		370	%
2005	113,867		260,671		166,615		94,056		12,395		154,220		7,417		12,753		273,424		240	%
2006	90,043		171,112		110,245		60,867		21,615		88,630		7,562		13,153		184,265		205	%
2007	179,853		355,232		216,133		139,099		13,795		202,338		26,954		49,007		404,239		225	%
2008	166,553		287,582		178,705		108,877		24,295		154,410		33,347		62,767		350,349		210	%
2009	125,393		305,363		205,248		100,115		—		205,248		25,278		106,549		411,912		328	%
2010	148,907		294,722		190,115		104,607		—		190,115		44,324		187,255		481,977		324	%
2011	212,012		280,581		166,678		113,903		—		166,678		98,110		329,604		610,185		288	%
2012	259,481		102,597		60,235		42,362		—		60,235		217,118		487,334		589,931		227	%
2013	127,145		4,814		4,486		328		—		4,486		126,805		263,086		267,900		211	%
Total	$	1,677,988	$	3,132,822	$	2,112,189	$	1,020,633	$	72,100	$	2,040,089	$	586,915	$	1,547,645	$	4,680,467	279	%

Table of Contents

Domestic Portfolio Data – Current Quarter

Entire Portfolio

      Quarter Ended September 30, 2012 As of September 30, 2012
($ in thousands)    Actual Cash
Collections
Including Cash
Sales    Income
Recognized
on Finance
Receivables    Principal
Amortization    Allowance
Charges Income
Recognized
on Finance
Receivables, Net Net Finance
Receivables
Balance    Estimated
Remaining
Collections    Total
Estimated
Collections    Total Estimated
Collections to
Purchase Price
Purchase
Period
   Purchase
Price
1996    $ 3,080       $ 7       $ 7       $ 0       $ 0    $ 7    $ 0       $ 43       $ 10,214       332 %
1997    7,685       24       24       0       0    24    0       147       25,534       332 %
1998    11,089       71       71       0       0    71    0       455       37,585       339 %
1999    18,898       156       156       0       0    156    0       1,033       69,748       369 %
2000    25,020       421       421       0       0    421    0       2,569       117,469       470 %
2001    33,481       730       730       0       0    730    0       3,716       176,653       528 %
2002    42,325       1,123       1,123       0       0    1,123    0       7,292       201,333       476 %
2003    61,448       1,722       1,722       0       0    1,722    0       12,915       271,159       441 %
2004    59,176       1,542       1,542       0       0    1,542    0       12,368       204,730       346 %
2005    143,168       3,142       1,475       1,667       (1,182 ) 2,657    8,853       16,062       314,233       219 %
2006    107,673       2,822       1,379       1,443       1,550    (171 ) 10,496       18,173       215,260       200 %
2007    258,379       10,419       5,015       5,404       595    4,420    38,359       68,421       508,638       197 %
2008    275,148       17,051       6,675       10,376       600    6,075    67,272       111,076       526,639       191 %
2009    281,438       43,309       29,129       14,180       0    29,129    85,138       261,958       820,543       292 %
2010    358,149       57,605       36,146       21,459       0    36,146    154,974       411,458       895,607       250 %
2011    394,261       61,498       34,269       27,229       0    34,269    283,307       610,947       869,129       220 %
2012    324,627       23,948       15,464       8,484       0    15,464    311,561       575,519       615,027       189 %
















Total    $ 2,405,045       $ 225,590       $ 135,348       $ 90,242       $ 1,563    $ 133,785    $ 959,960       $ 2,114,152       $ 5,879,501       244 %



			Quarter Ended March 31, 2013											As of March 31, 2013
($ in thousands)			Actual Cash Collections Including Cash Sales		Income Recognized on Finance Receivables		Principal Amortization		Allowance Charges			Income Recognized on Finance Receivables, Net		Net Finance Receivables Balance		Estimated Remaining Collections		Total Estimated Collections		Total Estimated Collections to Purchase Price
Purchase Period	Purchase Price
1996	$	3,080	$	6	$	6	$	—	$	—		$	6	$	—	$	39	$	10,228	332	%
1997	7,685		24		24		—		—			24		—		122		25,569		333	%
1998	11,089		46		46		—		—			46		—		376		37,600		339	%
1999	18,898		140		140		—		—			140		—		914		69,926		370	%
2000	25,020		423		423		—		—			423		—		2,446		118,185		472	%
2001	33,481		662		662		—		—			662		—		3,910		178,140		532	%
2002	42,325		1,048		1,048		—		—			1,048		—		6,301		202,393		478	%
2003	61,448		1,615		1,615		—		—			1,615		—		11,229		272,718		444	%
2004	59,176		1,394		1,394		—		—			1,394		—		10,875		206,023		348	%
2005	143,168		3,009		1,344		1,665		(837		)	2,181		7,470		12,860		317,055		221	%
2006	107,673		2,676		1,122		1,554		(50		)	1,172		7,665		13,496		215,887		201	%
2007	258,397		9,207		4,239		4,968		960			3,279		27,384		50,668		509,239		197	%
2008	275,157		14,002		5,180		8,822		2,100			3,080		44,184		76,396		521,136		189	%
2009	281,443		39,176		28,575		10,601		—			28,575		62,846		221,889		860,202		306	%
2010	358,122		54,972		38,801		16,171		—			38,801		121,384		374,157		968,637		270	%
2011	394,145		62,951		34,405		28,546		—			34,405		226,888		519,963		900,943		229	%
2012	515,690		70,426		31,476		38,950		—			31,476		450,434		790,651		935,365		181	%
2013	213,740		10,656		6,465		4,191		—			6,465		209,537		375,873		386,529		181	%
Total	$	2,809,737	$	272,433	$	156,965	$	115,468	$	2,173		$	154,792	$	1,157,792	$	2,472,165	$	6,735,775	240	%

Purchased Bankruptcy Portfolio



			Quarter Ended March 31, 2013												As of March 31, 2013
($ in thousands)			Actual Cash Collections Including Cash Sales		Income Recognized on Finance Receivables		Principal Amortization		Allowance Charges			Income Recognized on Finance Receivables, Net			Net Finance Receivables Balance		Estimated Remaining Collections		Total Estimated Collections		Total Estimated Collections to Purchase Price
Purchase Period	Purchase Price
1996-2003	$	—	$	—	$	—	$	—	$	—		$	—		$	—	$	—	$	—	—	%
2004	7,468		20		20		—		—			20			—		75		14,497		194	%
2005	29,301		52		12		40		(37		)	49			53		107		43,631		149	%
2006	17,630		134		78		56		(50		)	128			103		343		31,623		179	%
2007	78,544		412		72		340		760			(688		)	430		1,661		104,998		134	%
2008	108,604		4,620		871		3,749		3,900			(3,029		)	10,837		13,629		170,787		157	%
2009	156,050		23,867		17,349		6,518		—			17,349			37,568		115,340		448,290		287	%
2010	209,215		30,753		20,528		10,225		—			20,528			77,060		186,902		486,660		233	%
2011	182,133		18,803		7,580		11,223		—			7,580			128,778		190,359		290,759		160	%
2012	256,209		24,730		8,708		16,022		—			8,708			233,316		303,317		345,435		135	%
2013	86,595		5,842		1,979		3,863		—			1,979			82,732		112,787		118,629		137	%
Total	$	1,131,749	$	109,233	$	57,197	$	52,036	$	4,573		$	52,624		$	570,877	$	924,520	$	2,055,309	182	%

Table of Contents

Core Portfolio

      Quarter Ended September 30, 2012 As of September 30, 2012
($ in thousands)    Actual Cash
Collections
Including Cash
Sales    Income
Recognized
on Finance
Receivables    Principal
Amortization    Allowance
Charges Income
Recognized
on Finance
Receivables, Net Net Finance
Receivables
Balance    Estimated
Remaining
Collections    Total
Estimated
Collections    Total Estimated
Collections to
Purchase Price
Purchase
Period
   Purchase
Price
1996    $ 3,080       $ 7       $ 7       $ 0       $ 0    $ 7    $ 0       $ 43       $ 10,214       332 %
1997    7,685       24       24       0       0    24    0       147       25,534       332 %
1998    11,089       71       71       0       0    71    0       455       37,585       339 %
1999    18,898       156       156       0       0    156    0       1,033       69,748       369 %
2000    25,020       421       421       0       0    421    0       2,569       117,469       470 %
2001    33,481       730       730       0       0    730    0       3,716       176,653       528 %
2002    42,325       1,123       1,123       0       0    1,123    0       7,292       201,333       476 %
2003    61,448       1,722       1,722       0       0    1,722    0       12,915       271,159       441 %
2004    51,708       1,522       1,522       0       0    1,522    0       12,284       190,268       368 %
2005    113,867       3,087       1,465       1,622       (1,150 ) 2,615    8,815       15,988       270,741       238 %
2006    90,043       2,663       1,283       1,380       1,600    (317 ) 10,426       17,726       183,802       204 %
2007    179,835       8,851       4,829       4,022       250    4,579    35,441       64,881       403,048       224 %
2008    166,541       10,202       4,761       5,441       0    4,761    40,131       75,458       344,659       207 %
2009    125,384       16,094       12,441       3,653       0    12,441    31,971       130,364       405,981       324 %
2010    148,925       26,021       19,376       6,645       0    19,376    55,732       221,532       468,384       315 %
2011    212,081       43,598       27,117       16,481       0    27,117    131,891       384,664       579,576       273 %
2012    174,994       18,203       11,902       6,301       0    11,902    165,151       372,067       401,871       230 %
















Total    $ 1,466,404       $ 134,495       $ 88,950       $ 45,545       $ 700    $ 88,250    $ 479,558       $ 1,323,134       $ 4,158,025       284 %



			Quarter Ended March 31, 2013											As of March 31, 2013
($ in thousands)			Actual Cash Collections Including Cash Sales		Income Recognized on Finance Receivables		Principal Amortization		Allowance Charges			Income Recognized on Finance Receivables, Net		Net Finance Receivables Balance		Estimated Remaining Collections		Total Estimated Collections		Total Estimated Collections to Purchase Price
Purchase Period	Purchase Price
1996	$	3,080	$	6	$	6	$	—	$	—		$	6	$	—	$	39	$	10,228	332	%
1997	7,685		24		24		—		—			24		—		122		25,569		333	%
1998	11,089		46		46		—		—			46		—		376		37,600		339	%
1999	18,898		140		140		—		—			140		—		914		69,926		370	%
2000	25,020		423		423		—		—			423		—		2,446		118,185		472	%
2001	33,481		662		662		—		—			662		—		3,910		178,140		532	%
2002	42,325		1,048		1,048		—		—			1,048		—		6,301		202,393		478	%
2003	61,448		1,615		1,615		—		—			1,615		—		11,229		272,718		444	%
2004	51,708		1,374		1,374		—		—			1,374		—		10,800		191,526		370	%
2005	113,867		2,957		1,332		1,625		(800		)	2,132		7,417		12,753		273,424		240	%
2006	90,043		2,542		1,044		1,498		—			1,044		7,562		13,153		184,264		205	%
2007	179,853		8,795		4,167		4,628		200			3,967		26,954		49,007		404,241		225	%
2008	166,553		9,382		4,309		5,073		(1,800		)	6,109		33,347		62,767		350,349		210	%
2009	125,393		15,309		11,226		4,083		—			11,226		25,278		106,549		411,912		328	%
2010	148,907		24,219		18,273		5,946		—			18,273		44,324		187,255		481,977		324	%
2011	212,012		44,148		26,825		17,323		—			26,825		98,110		329,604		610,184		288	%
2012	259,481		45,696		22,768		22,928		—			22,768		217,118		487,334		589,930		227	%
2013	127,145		4,814		4,486		328		—			4,486		126,805		263,086		267,900		211	%
Total	$	1,677,988	$	163,200	$	99,768	$	63,432	$	(2,400	)	$	102,168	$	586,915	$	1,547,645	$	4,680,466	279	%

The following graph shows the purchase price of our domestic portfolios by year and includes the acquisition amount for the ~~nine~~three months ended ~~September 30, 2012.~~March 31, 2013. The purchase price number represents the cash paid to the seller, plus certain capitalized costs, less buybacks.

As shown in the above chart, the composition of our domestic purchased portfolios has shifted in favor of bankrupt accounts in recent years. We began buying bankrupt accounts during 2004 and slowly increased the volume of accounts we acquired through 2006 as we tested our models, refined our processes and validated our operating assumptions. After observing a high level of modeling confidence in our early purchases, we began increasing our level of purchases more dramatically commencing in 2007.

Table of Contents

Our ability to profitably purchase and liquidate pools of bankrupt accounts provides diversity to our distressed asset acquisition business. Although we generally buy bankrupt portfolios from many of the same consumer lenders from whom we acquire Core customer portfolios, the volumes and pricing characteristics as well as the competitors are different. Based upon market dynamics, the profitability of portfolios purchased in the bankrupt and Core markets may differ over time. We have found periods when bankrupt accounts were more profitable and other times when Core accounts were more profitable. From 2004 through 2008, our bankruptcy buying fluctuated between 13% and 39% of our total portfolio purchasing in those years. In 2009, for the first time in our history, bankruptcy purchasing exceeded that of our Core buying, finishing at 55% of total portfolio purchasing for the year and during 2010 this percentage increased to 59%. This occurred as severe dislocations in the financial markets, coupled with legislative uncertainty, caused pricing in the bankruptcy market to decline substantially, thereby driving our strategy to make advantageous bankruptcy portfolio acquisitions during this period. For 2011 and ~~the first nine months of~~ 2012, bankruptcy buying represented 48% and ~~47%~~50%, respectively, of our total domestic portfolio purchasing.

In the first quarter of 2013, bankruptcy buying represented 41% of our total domestic portfolio purchasing.

In order to collect our Core portfolios, we generally need to employ relatively higher amounts of labor and incur additional collection costs to generate each dollar of cash collections as compared with bankruptcy portfolios. In order to achieve acceptable levels of net return on investment (after direct expenses), we are generally targeting a total cash collections to purchase price multiple in the ~~2.25-3.0x~~2.0-3.0x range. On the other hand, bankrupt accounts generate the majority of cash collections through the efforts of the U.S. bankruptcy courts. In this process, cash is remitted to our Company with no corresponding cost other than the cost of filing claims at the time of purchase and general administrative costs for monitoring the progress of each account through the bankruptcy process. As a result, overall collection costs are much lower for us when liquidating a pool of bankrupt accounts as compared to a pool of Core accounts, but conversely the price we pay for bankrupt accounts is generally higher than Core accounts. We generally target similar returns on investment (measured after direct expenses) for bankrupt and Core portfolios at any given point in the market cycles. However, because of the lower related collection costs, we can pay more for bankrupt portfolios, which causes the estimated total cash collections to purchase price multiples of bankrupt pools generally to be in the ~~1.4-2.0x range generally.~~1.2-2.0x range. In summary, compared to a pool of Core accounts, to the extent both pools had identical targeted returns on investment (measured after direct expenses), the bankrupt pool would be expected to generate less revenue, a lower yield, less direct expenses, similar operating income, and a higher operating margin.

In addition, collections on younger, newly filed bankrupt accounts tend to be of a lower magnitude in the earlier months when compared to Core charge-off accounts. This lower level of early period collections is due to the fact that we primarily purchase portfolios of accounts that represent unsecured claims in bankruptcy, and these unsecured claims are scheduled to begin paying out after payment of the secured and priority claims. As a result of the administrative processes regarding payout priorities within the court-administered bankruptcy plans, unsecured creditors do not generally begin receiving meaningful collections on unsecured claims until 12 to 18 months after the bankruptcy filing date. Therefore, to the extent that we purchase portfolios with more recent bankruptcy filing dates, as we did to a significant extent commencing in 2009, we would expect to experience a delay in cash collections compared with Core charged-off portfolios.

We utilize a long-term approach to collecting our owned portfolios of receivables. This approach has historically caused us to realize significant cash collections and revenues from purchased portfolios of finance receivables years after they are originally acquired. As a result, we have in the past been able to temporarily reduce our level of current period acquisitions without a corresponding negative current period impact on cash collections and revenue.

Table of Contents

The following tables, which exclude any proceeds from cash sales of finance receivables, demonstrate our ability to realize significant multi-year cash collection streams on our domestic portfolios.

Cash Collections By Year, By Year of Purchase – Entire Domestic Portfolio

(in thousands)

Purchase
Period
   Purchase
Price    Cash Collection Period
      1996-2002    2003    2004    2005    2006    2007    2008    2009    2010    2011    YTD 2012    Total
1996
   $ 3,080       $ 8,521       $ 398       $ 285       $ 210       $ 237       $ 102       $ 83       $ 78       $ 68       $ 100       $ 28       $ 10,110
1997
   7,685       19,597       1,324       1,022       860       597       437       346       215       216       187       76       24,877
1998
   11,089       26,081       2,797       2,200       1,811       1,415       882       616       397       382       332       192       37,105
1999
   18,898       39,895       7,336       5,615       4,352       3,032       2,243       1,533       1,328       1,139       997       552       68,022
2000
   25,020       45,870       16,628       14,098       10,924       8,067       5,202       3,604       3,198       2,782       2,554       1,512       114,439
2001
   33,481       41,879       28,003       26,717       22,639       16,048       10,011       6,164       5,299       4,422       3,791       2,473       167,446
2002
   42,325       15,073       36,258       35,742       32,497       24,729       16,527       9,772       7,444       6,375       5,844       3,765       194,026
2003
   61,448       —         24,308       49,706       52,640       43,728       30,695       18,818       13,135       10,422       8,945       5,847       258,244
2004
   59,176       —         —         18,019       46,475       40,424       30,750       19,339       13,677       9,944       8,522       5,211       192,361
2005
   143,168       —         —         —         18,968       75,145       69,862       49,576       33,366       23,733       17,234       10,286       298,170
2006
   107,673       —         —         —         —         22,971       53,192       40,560       29,749       22,494       18,190       9,932       197,088
2007
   258,379       —         —         —         —         —         42,263       115,011       94,805       83,059       67,088       37,990       440,216
2008
   275,148       —         —         —         —         —         —         61,277       107,974       100,337       89,344       56,631       415,563
2009
   281,438       —         —         —         —         —         —         —         57,338       177,407       187,119       136,721       558,585
2010
   358,149       —         —         —         —         —         —         —         —         86,562       218,053       179,534       484,149
2011
   394,261       —         —         —         —         —         —         —         —         —         77,190       180,992       258,182
YTD 2012
   324,627                                     39,508       39,508


























Total
   $ 2,405,045       $ 196,916       $ 117,052       $ 153,404       $ 191,376       $ 236,393       $ 262,166       $ 326,699       $ 368,003       $ 529,342       $ 705,490       $ 671,250       $ 3,758,091



(in thousands)
Purchase Period	Purchase Price		Cash Collection Period
			1996-2004		2005		2006		2007		2008		2009		2010		2011		2012		YTD 2013		Total
1996	$	3,080	$	9,204	$	210	$	237	$	102	$	83	$	78	$	68	$	100	$	39	$	6	$	10,127
1997	7,685		21,943		860		597		437		346		215		216		187		112		24		24,937
1998	11,089		31,078		1,811		1,415		882		616		397		382		332		241		46		37,200
1999	18,898		52,846		4,352		3,032		2,243		1,533		1,328		1,139		997		709		140		68,319
2000	25,020		76,596		10,924		8,067		5,202		3,604		3,198		2,782		2,554		1,927		423		115,277
2001	33,481		96,599		22,639		16,048		10,011		6,164		5,299		4,422		3,791		3,104		662		168,739
2002	42,325		87,073		32,497		24,729		16,527		9,772		7,444		6,375		5,844		4,768		1,048		196,077
2003	61,448		74,014		52,640		43,728		30,695		18,818		13,135		10,422		8,945		7,477		1,615		261,489
2004	59,176		18,019		46,475		40,424		30,750		19,339		13,677		9,944		8,522		6,604		1,394		195,148
2005	143,168		—		18,968		75,145		69,862		49,576		33,366		23,733		17,234		13,302		3,009		304,195
2006	107,673		—		—		22,971		53,192		40,560		29,749		22,494		18,190		12,560		2,676		202,392
2007	258,397		—		—		—		42,263		115,011		94,805		83,059		67,088		47,136		9,207		458,569
2008	275,157		—		—		—		—		61,277		107,974		100,337		89,344		71,806		14,002		444,740
2009	281,443		—		—		—		—		—		57,338		177,407		187,119		177,273		39,176		638,313
2010	358,122		—		—		—		—		—		—		86,562		218,053		234,893		54,972		594,480
2011	394,145		—		—		—		—		—		—		—		77,190		240,840		62,951		380,981
2012	515,690		—		—		—		—		—		—		—		—		74,289		70,426		144,715
YTD 2013	213,740		—		—		—		—		—		—		—		—		—		10,656		10,656
Total	$	2,809,737	$	467,372	$	191,376	$	236,393	$	262,166	$	326,699	$	368,003	$	529,342	$	705,490	$	897,080	$	272,433	$	4,256,354

Cash Collections By Year, By Year of Purchase – Purchased Bankruptcy Portfolio

(in thousands)

Purchase
Period
   Purchase
Price    Cash Collection Period
      1996-2002    2003    2004    2005    2006    2007    2008    2009    2010    2011    YTD 2012    Total
2004
   $ 7,468       $ —         $ —         $ 743       $ 4,554       $ 3,956       $ 2,777       $ 1,455       $ 496       $ 164       $ 149       $ 84       $ 14,378
2005
   29,301       —         —         —         3,777       15,500       11,934       6,845       3,318       1,382       466       196       43,418
2006
   17,630       —         —         —         —         5,608       9,455       6,522       4,398       2,972       1,526       530       31,011
2007
   78,544       —         —         —         —         —         2,850       27,972       25,630       22,829       16,093       6,676       102,050
2008
   108,607       —         —         —         —         —         —         14,024       35,894       37,974       35,690       22,780       146,362
2009
   156,054       —         —         —         —         —         —         —         16,635       81,780       102,780       81,773       282,968
2010
   209,224       —         —         —         —         —         —         —         —         39,486       104,499       93,312       237,297
2011
   182,180       —         —         —         —         —         —         —         —         —         15,218       48,052       63,270
YTD 2012
   149,633       —         —         —         —         —         —            —         —         —         9,704       9,704


























Total
   $    938,641       $          —         $          —         $        743       $     8,331       $   25,064       $   27,016       $   56,818       $   86,371       $ 186,587       $ 276,421       $ 263,107       $ 930,458


























Cash Collections By Year, By Year of Purchase – Core Portfolio
(in thousands)

Purchase
Period
   Purchase
Price    Cash Collection Period
      1996-2002    2003    2004    2005    2006    2007    2008    2009    2010    2011    YTD 2012    Total
1996
   $ 3,080       $ 8,521       $ 398       $ 285       $ 210       $ 237       $ 102       $ 83       $ 78       $ 68       $ 100       $ 28       $ 10,110
1997
   7,685       19,597       1,324       1,022       860       597       437       346       215       216       187       76       24,877
1998
   11,089       26,081       2,797       2,200       1,811       1,415       882       616       397       382       332       192       37,105
1999
   18,898       39,895       7,336       5,615       4,352       3,032       2,243       1,533       1,328       1,139       997       552       68,022
2000
   25,020       45,870       16,628       14,098       10,924       8,067       5,202       3,604       3,198       2,782       2,554       1,512       114,439
2001
   33,481       41,879       28,003       26,717       22,639       16,048       10,011       6,164       5,299       4,422       3,791       2,473       167,446
2002
   42,325       15,073       36,258       35,742       32,497       24,729       16,527       9,772       7,444       6,375       5,844       3,765       194,026
2003
   61,448       —         24,308       49,706       52,640       43,728       30,695       18,818       13,135       10,422       8,945       5,847       258,244
2004
   51,708       —         —         17,276       41,921       36,468       27,973       17,884       13,181       9,780       8,373       5,127       177,983
2005
   113,867       —         —         —         15,191       59,645       57,928       42,731       30,048       22,351       16,768       10,090       254,752
2006
   90,043       —         —         —         —         17,363       43,737       34,038       25,351       19,522       16,664       9,402       166,077
2007
   179,835       —         —         —         —         —         39,413       87,039       69,175       60,230       50,995       31,314       338,166
2008
   166,541       —         —         —         —         —         —         47,253       72,080       62,363       53,654       33,851       269,201
2009
   125,384       —         —         —         —         —         —         —         40,703       95,627       84,339       54,948       275,617
2010
   148,925       —         —         —         —         —         —         —         —         47,076       113,554       86,222       246,852
2011
   212,081       —         —         —         —         —         —         —         —         —         61,972       132,940       194,912
YTD 2012
   174,994       —         —         —         —         —         —         —         —         —         —         29,804       29,804


























Total
   $ 1,466,404       $ 196,916       $ 117,052       $ 152,661       $ 183,045       $ 211,329       $ 235,150       $ 269,881       $ 281,632       $ 342,755       $ 429,069       $ 408,143       $ 2,827,633



(in thousands)
Purchase Period	Purchase Price		Cash Collection Period
			1996-2004		2005		2006		2007		2008		2009		2010		2011		2012		YTD 2013		Total
2004	$	7,468	743		4,554		3,956		2,777		1,455		496		164		149		108		20		$	14,422
2005	29,301		—		3,777		15,500		11,934		6,845		3,318		1,382		466		250		52		43,524
2006	17,630		—		—		5,608		9,455		6,522		4,398		2,972		1,526		665		134		31,280
2007	78,544		—		—		—		2,850		27,972		25,630		22,829		16,093		7,551		412		103,337
2008	108,604		—		—		—		—		14,024		35,894		37,974		35,690		28,956		4,620		157,158
2009	156,050		—		—		—		—		—		16,635		81,780		102,780		107,888		23,867		332,950
2010	209,215		—		—		—		—		—		—		39,486		104,499		125,020		30,753		299,758
2011	182,133		—		—		—		—		—		—		—		15,218		66,379		18,803		100,400
2012	256,209		—		—		—		—				—		—		—		17,388		24,730		42,118
YTD 2013	86,595		—		—		—		—		—		—		—		—		—		5,842		5,842
Total	$	1,131,749	$	743	$	8,331	$	25,064	$	27,016	$	56,818	$	86,371	$	186,587	$	276,421	$	354,205	$	109,233	$	1,130,789

Table of Contents

Cash Collections By Year, By Year of Purchase – Core Portfolio



(in thousands)
Purchase Period	Purchase Price		Cash Collection Period
			1996-2004		2005		2006		2007		2008		2009		2010		2011		2012		YTD 2013		Total
1996	$	3,080	$	9,204	$	210	$	237	$	102	$	83	$	78	$	68	$	100	$	39	$	6	$	10,127
1997	7,685		21,943		860		597		437		346		215		216		187		112		24		24,937
1998	11,089		31,078		1,811		1,415		882		616		397		382		332		241		46		37,200
1999	18,898		52,846		4,352		3,032		2,243		1,533		1,328		1,139		997		709		140		68,319
2000	25,020		76,596		10,924		8,067		5,202		3,604		3,198		2,782		2,554		1,927		423		115,277
2001	33,481		96,599		22,639		16,048		10,011		6,164		5,299		4,422		3,791		3,104		662		168,739
2002	42,325		87,073		32,497		24,729		16,527		9,772		7,444		6,375		5,844		4,768		1,048		196,077
2003	61,448		74,014		52,640		43,728		30,695		18,818		13,135		10,422		8,945		7,477		1,615		261,489
2004	51,708		17,276		41,921		36,468		27,973		17,884		13,181		9,780		8,373		6,496		1,374		180,726
2005	113,867		—		15,191		59,645		57,928		42,731		30,048		22,351		16,768		13,052		2,957		260,671
2006	90,043		—		—		17,363		43,737		34,038		25,351		19,522		16,664		11,895		2,542		171,112
2007	179,853		—		—		—		39,413		87,039		69,175		60,230		50,995		39,585		8,795		355,232
2008	166,553		—		—		—		—		47,253		72,080		62,363		53,654		42,850		9,382		287,582
2009	125,393		—		—		—		—		—		40,703		95,627		84,339		69,385		15,309		305,363
2010	148,907		—		—		—		—		—		—		47,076		113,554		109,873		24,219		294,722
2011	212,012		—		—		—		—		—		—		—		61,972		174,461		44,148		280,581
2012	259,481		—		—		—		—		—		—		—		—		56,901		45,696		102,597
YTD 2013	127,145		—		—		—		—		—		—		—		—		—		4,814		4,814
Total	$	1,677,988	$	466,629	$	183,045	$	211,329	$	235,150	$	269,881	$	281,632	$	342,755	$	429,069	$	542,875	$	163,200	$	3,125,565

When we acquire a new pool of finance receivables, our estimates typically result in a ~~60 - 96~~60-96 month projection of cash collections, depending on the type of finance receivables acquired. The following chart shows our historical cash collections (including cash sales of finance receivables) in relation to the aggregate of the total estimated collection projections made at the time of each respective pool purchase, adjusted for buybacks, for the last ten years.

Table of Contents

Primarily as a result of the downturn in the economy, the decline in the availability of consumer credit, our efforts to help customers establish reasonable payment plans, and improvements in our collections capabilities which have allowed us to profitably collect on accounts with lower balances or lower quality, the average payment size has decreased over the past several years. However, due to improved scoring and segmentation, together with enhanced productivity, we have been able to ~~generate~~realize increased amounts of cash collections by generating enough incremental payments to overcome the decrease in payment size. The decreasing average payment size trend moderated during 2012 and the first ~~nine~~three months of ~~2012.~~

~~Collections Productivity~~

~~The following tables display various collections productivity measures that we track. The tables below contain our collector productivity metrics as defined by calendar quarter.~~

~~QTD Cash Collections per Collector Hour Paid (Domestic Portfolio Only)~~

   Core cash collections⁽¹⁾
   2007    2008    2009    2010    2011    2012
Q1
   $ 141       $ 116       $ 120       $ 135       $ 162       $ 166
Q2
   $ 129       $ 115       $ 114       $ 127       $ 154       $ 169
Q3
   $ 120       $ 110       $ 111       $ 127       $ 152       $ 171
Q4
   $ 107       $ 98       $ 109       $ 129       $ 137       —

   Total cash collections⁽²⁾
   2007    2008    2009    2010    2011    2012
Q1
   $ 156       $ 133       $ 147       $ 182       $ 241       $ 258
Q2
   $ 142       $ 136       $ 143       $ 188       $ 243       $ 275
Q3
   $ 131       $ 134       $ 144       $ 200       $ 249       $ 279
Q4
   $ 119       $ 123       $ 148       $ 204       $ 228       —

   Non-legal cash collections⁽³⁾
   2007    2008    2009    2010    2011    2012
Q1
   $ 108       $ 96       $ 118       $ 154       $ 204       $ 216
Q2
   $ 96       $ 99       $ 116       $ 160       $ 205       $ 225
Q3
   $ 88       $ 99       $ 119       $ 170       $ 212       $ 230
Q4
   $ 80       $ 94       $ 123       $ 174       $ 194       —

   Non-legal/non-bankruptcy cash collections ⁽⁴⁾
   2007    2008    2009    2010    2011    2012
Q1
   $   92       $ 79       $   90       $ 106       $ 125       $ 125
Q2
   $ 83       $ 78       $ 87       $ 100       $ 116       $ 120
Q3
   $ 76       $ 76       $ 87       $ 97       $ 115       $ 122
Q4
   $ 68       $ 69       $ 84       $ 98       $ 103       —

~~(1)~~

Represents total cash collections less purchased bankruptcy cash collections from trustee-administered accounts. This metric includes cash collections from purchased bankruptcy accounts administered by the Core call center collection floor as well as cash collections generated by our internal staff of legal collectors. This calculation does not include hours paid to our internal staff of legal collectors or to employees processing the bankruptcy-required notifications to trustees.

~~(2)~~

~~Represents total cash collections (assigned and unassigned) divided by total hours paid (including holiday, vacation and sick time) to collectors (including those in training).~~

~~(3)~~

Represents total cash collections less external legal cash collections. This does includes internal legal collections and all bankruptcy collections and excludes any hours associated with either of those functions.

~~(4)~~

Represents total cash collections less external legal cash collections and less purchased bankruptcy cash collections from trustee-administered accounts. This metric also does not include any labor hours associated with the bankruptcy or legal (internal or external) functions but does include internally-driven cash collections from the internal legal channel.

2013.

The following chart illustrates the excess of our cash collections on our owned portfolios over income recognized on finance receivables on a quarterly basis. The difference between cash collections and income recognized on finance receivables is referred to as payments applied to principal. It is also referred to as amortization of purchase price. This amortization is the portion of cash collections that is used to recover the cost of the portfolio investment represented on the balance sheet.


(1)	Includes cash collections on finance receivables only and excludes cash proceeds from sales of defaulted consumer receivables.

Seasonality

Collections tend to be higher in the first and second quarters of the year and lower in the third and fourth quarters of the year, due to customer payment patterns in connection with seasonal employment trends, income tax refunds and holiday spending habits. Historically, our growth has partially offset the impact of this seasonality.

The following table displays our quarterly cash collections by source, for the periods indicated.

Cash Collection Source ($ in thousands)
   Q32012    Q22012    Q12012    Q42011    Q32011    Q22011    Q12011    Q42010
Call Center & Other Collections
   $ 72,394       $ 73,582       $ 79,805       $ 61,227       $ 63,967       $ 64,566       $ 67,377       $ 53,775
External Legal Collections
   39,913       41,464       34,852       26,316       27,245       27,329       25,378       21,446
Internal Legal Collections
   25,650       25,361       23,345       17,615       16,444       16,007       15,598       12,841
Purchased Bankruptcy Collections
   91,095       92,018       79,994       75,166       74,512       68,379       58,364       56,301
















Total Cash Collections
   $ 229,052       $ 232,425       $ 217,996       $ 180,324       $ 182,168       $ 176,281       $ 166,717       $ 144,363

Cash Collection Source ($ in thousands) Q12013 Q42012 Q32012 Q22012 Q12012 Q42011 Q32011 Q22011
Call Center and Other Collections $ 89,037
$ 72,624
$ 72,394
$ 73,582
$ 79,805
$ 61,227
$ 63,967
$ 64,566
External Legal Collections 47,910
41,521
39,913
41,464
34,852
26,316
27,245
27,329
Internal Legal Collections 29,283
23,968
25,650
25,361
23,345
17,615
16,444
16,007
Bankruptcy Court Trustee Collections 109,233
91,098
91,095
92,018
79,994
75,166
74,512
68,379
Total Cash Collections $ 275,463
$ 229,211
$ 229,052
$ 232,425
$ 217,996
$ 180,324
$ 182,168
$ 176,281

38
Table of Contents

Rollforward of Net Finance Receivables

The following table shows the changes in finance receivables, net, including the amounts paid to acquire new portfolios (amounts in thousands).

   Three Months Ended
September 30, 2012 Three Months Ended
September 30, 2011 Nine Months Ended
September 30, 2012 Nine Months Ended
September 30, 2011
Balance at beginning of year
   $ 966,508    $ 879,515    $ 926,734    $ 831,330
Acquisitions of finance receivables⁽¹⁾
   100,063    119,256    333,402    314,162
Foreign currency translation adjustment
   321    —      365    —
Cash collections applied to principal on finance receivables ⁽²⁾
   (93,298 ) (79,293 ) (286,907 ) (226,014 )


Balance at end of year
   $ 973,594    $ 919,478    $ 973,594    $ 919,478


Estimated Remaining Collections
   $ 2,137,580    $ 1,925,292    $ 2,137,580    $ 1,925,292



	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012
Balance at beginning of year	$	1,078,951		$	926,734
Acquisitions of finance receivables ⁽¹⁾	212,389			112,093
Foreign currency translation adjustment	(922		)	185
Cash collections applied to principal on finance receivables ⁽²⁾	(120,671		)	(93,770		)
Balance at end of year	$	1,169,747		$	945,242
Estimated Remaining Collections	$	2,486,903		$	2,032,873


(1)	Acquisitions of finance receivables is net of buybacks and includes certain capitalized acquisition related costs.


(2)	Cash collections applied to principal (also referred to as amortization) on finance receivables consists of cash collections less income recognized on finance receivables, net of allowance charges.

Portfolios by Type and Geography (Domestic Portfolio Only)

The following table categorizes our life to date portfolio purchases as of ~~September 30, 2012,~~March 31, 2013, into the major asset types represented (amounts in thousands):

Asset Type
   No. of Accounts    % Life to Date Purchased
Face Value⁽¹⁾    % Original Purchase
Price⁽²⁾    %
Major Credit Cards
   17,168       57 % $ 48,070,374       70 % $ 1,782,221       72 %
Consumer Finance
   6,121       20    7,249,254       11    132,431       6
Private Label Credit Cards
   6,247       21    8,662,165       13    496,590       20
Auto Deficiency
   640       2    4,484,071       6    51,408       2








Total:
   30,176       100 % 68,465,864       100 % 2,462,650       100 %



Account Type	No. of Accounts	%		Life to Date Purchased Face Value ⁽¹⁾		%		Original Purchase Price ⁽²⁾		%
Major Credit Cards	17,815	56	%	$	50,378,631	70	%	$	2,015,177	70	%
Consumer Finance	6,175	19		7,446,648		10		135,795		5
Private Label Credit Cards	7,060	23		9,730,256		14		635,100		22
Auto Deficiency	651	2		4,594,236		6		86,600		3
Total:	31,701	100	%	72,149,771		100	%	2,872,672		100	%


(1)	Life to Date Purchased Face Value represents the original face amount purchased from sellers and has not been reduced by any adjustments including payments and buybacks.


(2)	Original Purchase Price represents the cash paid to sellers to acquire portfolios of defaulted consumer receivables.

The following table summarizes our life to date portfolio purchases as of ~~September 30, 2012,~~March 31, 2013, into the delinquency categories represented (amounts in thousands).

Account Type
   No. of Accounts    % Life to Date Purchased
Face Value (1)    % Original Purchase
Price (2)    %
Fresh
   2,151       7 % $ 5,681,556       8 % $ 535,821       22 %
Primary
   4,514       15    8,244,705       12    415,750       17
Secondary
   5,327       18    8,194,206       12    317,546       13
Tertiary
   4,011       13    5,411,196       8    75,675       3
BK Trustees
   4,152       14    18,735,945       27    984,485       40
Other
   10,021       33    22,198,256       33    133,373       5








Total:
   30,176       100 % 68,465,864       100 % 2,462,650       100 %



Account Type	No. of Accounts	%		Life to Date Purchased Face Value ⁽¹⁾		%		Original Purchase Price ⁽²⁾		%
Fresh	2,603	8	%	$	6,558,066	9	%	$	658,165	23	%
Primary	4,714	15		8,825,206		12		468,115		16
Secondary	5,683	18		8,661,377		12		345,182		12
Tertiary	4,049	13		5,455,392		8		76,829		3
BK Trustees	4,465	14		20,119,380		28		1,182,080		41
Other	10,187	32		22,530,350		31		142,301		5
Total:	31,701	100	%	72,149,771		100	%	2,872,672		100	%


(1)	Life to Date Purchased Face Value represents the original face amount purchased from sellers and has not been reduced by any adjustments including payments and buybacks.


(2)	Original Purchase Price represents the cash paid to sellers to acquire portfolios of defaulted consumer receivables.

We also review the geographic distribution of accounts within a portfolio because we have found that state specific laws and rules can have an effect on the collectability of accounts located there. In addition, economic factors and bankruptcy trends vary regionally and are factored into our maximum purchase price equation.

Table of Contents

The following table summarizes our life to date portfolio purchases as of ~~September 30, 2012,~~March 31, 2013, by geographic location (amounts in thousands):

Geographic Distribution
   No. of Accounts    % Life to Date Purchased
Face Value⁽¹⁾    % Original Purchase
Price⁽²⁾    %
California
   3,170       11 % $ 9,028,470       13 % $ 321,274       13 %
Texas
   4,412       15    7,678,914       11    216,471       9
Florida
   2,377       8    6,522,074       10    225,620       9
New York
   1,712       6    4,077,150       6    132,283       5
Ohio
   1,463       5    2,551,238       4    102,760       4
Pennsylvania
   1,077       4    2,516,136       4    89,565       4
Illinois
   1,127       4    2,384,400       3    94,577       4
North Carolina
   1,067       4    2,371,789       3    84,305       3
Georgia
   969       3    2,258,858       3    95,149       4
New Jersey
   689       2    1,851,392       3    69,952       3
Michigan
   798       3    1,839,273       3    75,366       3
Arizona
   527       2    1,463,913       2    52,072       2
Virginia
   822       3    1,458,304       2    57,810       2
Tennessee
   639       2    1,419,058       2    57,196       2
Massachusetts
   514       2    1,265,054       2    44,457       2
Indiana
   542       2    1,201,007       2    53,197       2
Other⁽³⁾
   8,271       24    18,578,834       27    690,596       29








Total:
   30,176       100 % 68,465,864       100 % 2,462,650       100 %



Geographic Distribution	No. of Accounts	%		Life to Date Purchased Face Value ⁽¹⁾		%		Original Purchase Price ⁽²⁾		%
California	3,360	11	%	$	9,499,719	13	%	$	369,174	13	%
Texas	4,563	14		7,979,201		11		250,096		9
Florida	2,505	8		6,827,064		9		259,070		9
New York	1,790	6		4,238,925		6		149,781		5
Ohio	1,521	5		2,710,452		4		121,521		4
Pennsylvania	1,130	4		2,632,299		4		103,267		4
North Carolina	1,139	4		2,545,318		4		100,076		3
Illinois	1,184	4		2,533,135		4		112,343		4
Georgia	1,025	3		2,399,035		3		114,981		4
Michigan	838	3		1,947,256		3		87,745		3
New Jersey	725	2		1,939,185		3		80,752		3
Arizona	565	2		1,551,391		2		61,501		2
Virginia	858	3		1,536,589		2		67,327		2
Tennessee	674	2		1,503,487		2		68,021		2
Massachusetts	538	2		1,321,884		2		51,052		2
Indiana	571	2		1,281,603		2		63,442		2
Other⁽³⁾	8,715	25		19,703,228		26		812,523		29
Total:	31,701	100	%	72,149,771		100	%	2,872,672		100	%


(1)	Life to Date Purchased Face Value represents the original face amount purchased from sellers and has not been reduced by any adjustments, including payments and buybacks.


(2)	Original Purchase Price represents the cash paid to sellers to acquire portfolios of defaulted consumer receivables.


(3)	Each state included in “Other” represents less than 2% of the face value of total defaulted consumer receivables.

Collections Productivity

The following tables display various collections productivity measures that we track. The tables below contain our collector productivity metrics as defined by calendar quarter.

Quarterly Cash Collections per Collector Hour Paid (Domestic Portfolio Only)



	Core cash collections ⁽¹⁾
	2009		2010		2011		2012		2013
Q1	$	120	$	135	$	162	$	166	$	186
Q2	$	114	$	127	$	154	$	169	$	—
Q3	$	111	$	127	$	152	$	171	$	—
Q4	$	109	$	129	$	137	$	150	$	—



	Total cash collections ⁽²⁾
	2009		2010		2011		2012		2013
Q1	$	147	$	182	$	241	$	258	$	298
Q2	$	143	$	188	$	243	$	275	$	—
Q3	$	144	$	200	$	249	$	279	$	—
Q4	$	148	$	204	$	228	$	245	$	—

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	Non-legal cash collections ⁽³⁾
	2009		2010		2011		2012		2013
Q1	$	118	$	154	$	204	$	216	$	244
Q2	$	116	$	160	$	205	$	225	$	—
Q3	$	119	$	170	$	212	$	230	$	—
Q4	$	123	$	174	$	194	$	200	$	—



	Non-legal/non-bankruptcy cash collections ⁽⁴⁾
	2009		2010		2011		2012		2013
Q1	$	90	$	106	$	125	$	125	$	133
Q2	$	87	$	100	$	116	$	120	$	—
Q3	$	87	$	97	$	115	$	122	$	—
Q4	$	84	$	98	$	103	$	105	$	—

(1)


(2)	Represents total cash collections (assigned and unassigned) divided by total hours paid (including holiday, vacation and sick time) to collectors (including those in training).


(3)	Represents total cash collections less external legal cash collections. This metric includes internal legal collections and all bankruptcy collections and excludes any hours associated with either of those functions.


(4)	Represents total cash collections less external legal cash collections and less purchased bankruptcy cash collections from trustee-administered accounts. This metric does not include any labor hours associated with the bankruptcy or legal (internal or external) functions but does include internally-driven cash collections from the internal legal channel.

Liquidity and Capital Resources

Historically, our primary sources of cash have been cash flows from operations, bank borrowings and equity offerings. Cash has been used for acquisitions of finance receivables, corporate acquisitions, repurchase of our common stock, payment of cash dividends, repayments of bank borrowings, operating expenses, purchases of property and equipment and working capital to support our growth.

As of ~~September 30, 2012,~~March 31, 2013, cash and cash equivalents totaled ~~$31.5~~$39.1 million, as compared to ~~$26.7~~$32.7 million at December 31, ~~2011.~~2012. Total debt outstanding on our ~~$464.5~~$600.0 million ~~line of~~ credit facility was ~~$250.0~~$370.8 million as of ~~September 30, 2012,~~March 31, 2013, which represents availability of ~~$214.5 million (subject to the borrowing base and applicable debt covenants).~~

$228.0 million.

We have in place forward flow commitments for the purchase of defaulted consumer receivables over the next 12 months of approximately ~~$166.3~~$283.8 million as of ~~September 30, 2012.~~March 31, 2013. Additionally we may enter into new or renewed flow commitments in the next twelve months and close on spot transactions in addition to the aforementioned flow agreements. We believe that funds generated from operations and from cash collections on finance receivables, together with existing cash and available borrowings under our credit agreement ~~with Bank Of America, N.A., as administrative agent, and a syndicate of lenders named therein (the “Credit Agreement”)~~ will be sufficient to finance our operations, planned capital expenditures, the aforementioned forward flow commitments, and a material amount of additional portfolio purchasing in excess of the currently committed flow amounts during the next twelve months.

We ~~are cognizant of~~entered into the ~~market fundamentals in~~$600.0 million secured credit facility referred to above, on December 19, 2012. Refer to the ~~debt purchase and company acquisition market which, because of significant supply and tight capital availability, could increase buying opportunities. Accordingly, we~~“Borrowings” section below for additional information on this facility.

We filed a $150 million shelf registration during the third quarter of 2009. We issued $75.5 million of equity securities under that registration statement during February of 2010 in order to take advantage of market opportunities while retaining the ability to issue up to an additional $74.5 million of equity or debt securities under the shelf registration statement in the future. The outcome of any future transaction is subject to market conditions. In addition, on April 20, 2012 and August 9, 2012, we closed a series of transactions to exercise a portion of the accordion loan feature of our existing credit thereby increasing the lenders’ commitments by $56,950,000, resulting in $464,450,000 aggregate principal amount available under our line of credit. Please see the “Borrowings” section below for additional information on the line of credit.

With the acquisition of a controlling interest in CCB, we have the right to call (purchase) the noncontrolling interest through February 2015. In addition, the noncontrolling interest has the right to put the remainder of the shares to us beginning in March 2012 and ending February 2018. ~~The~~From March 2012 to February 2015, the put option is subject to a minimum amount of trailing

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EBITDA. As of March 31, 2013, the total maximum amount we would have to pay for the noncontrolling interest in CCB inunder any ~~scenario~~circumstances is ~~$22.8~~$11.4 million.

In February 2013, we exercised our right to purchase half of the remaining noncontrolling interest for a purchase price of $1.1 million.

We file domestic income tax returns using the cost recovery method for tax revenue recognition as it relates to our debt purchasing business. ~~We were notified on June 21, 2007 that we were being examined by the IRS~~The Internal Revenue Service (“IRS”) has audited and issued a Notice of Deficiency for the ~~2005 tax year. The IRS concluded the audit and on March 19, 2009 issued Form 4549-A, Income Tax Examination Changes, for~~ tax years ended December 31, 2007, 2006 and 2005. ~~The IRS~~It has asserted that cost recovery for tax revenue recognition does not clearly reflect taxable income and that unused line fees paid on credit facilities should be capitalized and amortized rather than taken as a current deduction. On April 22, 2009, we filed a formal protest of the findings contained in the examination report prepared by the IRS. On August 26, 2011, the IRS issued a Notice of Deficiency for the tax years ended December 31, 2007, 2006, and 2005. We ~~subsequently~~have filed a petition in the United States Tax Court ~~to which the IRS responded on January 12, 2012. We~~and believe we have sufficient support for the technical merits of our positions and that it is more-likely-than-not that ~~these positions~~they will ultimately be sustained; therefore, a reserve for uncertain tax positions is not ~~necessary for these tax positions.~~necessary. If we are unsuccessful in ~~tax court,~~the United States Tax Court, we can appeal to the federal Circuit Court of Appeals. If judicial appeals prove unsuccessful, we may ultimately be required to pay the related deferred taxes, any potential interest, and penalties, possibly requiring additional financing from other sources. In accordance with the Internal Revenue Code, underpayments of federal tax accrue interest, compounded daily, at the applicable federal short term rate plus three percentage points. An additional two percentage points applies to large corporate underpayments of $100,000 or more to periods after the applicable date as defined in the Internal Revenue Code. ~~We file~~Deferred taxes ~~in multiple state jurisdictions; therefore, any underpayment of state tax will accrue interest in accordance with the respective state statute. The deferred tax liability~~ related to ~~revenue recognition on our debt purchasing business is $191.4~~this item were $190.2 million at ~~September 30, 2012. In 2011, the IRS expanded the audit to include the tax years ended December~~March 31, ~~2010, 2009 and 2008.~~

In forming our tax positions, we consider inputs based on industry practice, tax advice from professionals and drawing similarities of our facts and circumstances to those in established case law (most notably as it relates to revenue recognition,~~Underhill~~ ~~and~~~~Liftin~~). These tax positions deal not only with revenue recognition, but also with general tax compliance, including sales and use, franchise, gross receipts, payroll, property and income tax issues, including our tax base and apportionment factors.

A diverse group of companies participate in our industry including distressed debt purchasers, Wall Street hedge funds, small private collection companies and other such investment firms. These participants are diverse in their structure, processes, and profitability. We base our primary tax revenue recognition policy on the nature of the assets that we acquire. We therefore file income tax returns using the cost recovery method for tax revenue recognition as it relates to our debt purchasing business.

2013.

Cash generated from operations is dependent upon our ability to collect on our finance receivables. Many factors, including the economy and our ability to hire and retain qualified collectors and managers, are essential to our ability to generate cash flows. Fluctuations in these factors that cause a negative impact on our business could have a material impact on our future cash flows.

Our operating activities provided cash of ~~$93.7~~$58.1 million and ~~$123.2~~$20.1 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively. In these periods, cash from operations was generated primarily from net income earned through cash collections and fee income received for the period. The ~~decrease~~increase was ~~primarily~~ due ~~to a change~~ in ~~deferred tax expense from $27.3 million for the nine months ended September 30, 2011~~part to a deferred tax benefit of $7.4 million for the nine months ended September 30, 2012 as a result of the decrease in the deferred tax liability associated with the difference in accounting treatment for book and tax purposes related to income recognition on our finance receivables. This was offset by an increase in net income to ~~$90.4~~$38.5 million for the ~~nine~~three months ended ~~September 30, 2012,~~March 31, 2013, from ~~$74.5~~$25.2 million for the ~~nine~~three months ended ~~September 30, 2011.~~March 31, 2012. The remaining ~~changes were due~~increase was mainly attributable to ~~net changes in other accounts related to our operating activities.~~

the timing of income tax payments.

Our investing activities used cash of ~~$96.6~~$94.2 million and ~~$91.7~~$64.2 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively. Cash provided by investing activities is primarily driven by cash collections applied to principal on finance receivables. Cash used in investing activities is primarily driven by acquisitions of defaulted consumer receivables, purchases of property and equipment and business acquisitions. The majority of the increase was due to ~~net cash payments for business acquisitions totaling $48.7 million during the nine months ended September 30, 2012, as compared to $0 during the nine months ended September 30, 2011, as well as~~ an increase in acquisitions of finance receivables, which increased from ~~$314.2~~$108.2 million for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012 to ~~$329.4~~$212.4 million for the ~~nine~~three months ended ~~September 30, 2012,~~March 31, 2013, partially offset by an increase in collections applied to principal on finance receivables from ~~$226.0~~$93.8 million for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012 to ~~$286.9~~$120.7 million for the ~~nine~~three months ended ~~September 30, 2012.~~

March 31, 2013. In addition, cash of $48.7 million was used on business acquisitions during the three months ended March 31, 2012 compared to $0 in three months ended March 31, 2013.

Our financing activities provided cash of ~~$8.2~~$42.7 million and ~~used cash of $42.5~~$44.0 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively. Cash is primarily provided by draws on our line of credit. Cash used in financing activities is primarily driven by principal payments on our line of credit, principal payments on long-term debt and repurchases of our common stock. The majority of the increase was due to net cash proceeds received on our line of credit totaling $30.0 million during the nine months ended September 30, 2012, offset by $22.7 million of cash used to repurchase shares of our common stock, compared to net repayments on our line of credit of $40.0 million and no stock purchases during the nine months ended September 30, 2011.

Cash paid for interest was ~~$7.6~~$2.7 million and ~~7.8~~$2.6 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively. Interest was paid on our line of credit and long-term debt. Cash paid for income taxes was ~~$71.5~~$2.9 million and ~~$19.1~~$12.5 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively. The ~~increase~~decrease in ~~taxable income in~~the taxes paid for the three months ended March 31, 2013 as compared to the three months ended March 31, 2012, ~~versus 2011~~ is ~~due to more revenue recognized for income~~the result of the timing and amount of estimated taxes paid during the respective tax ~~purposes than financial book purposes primarily as the difference between the accounting for finance receivables under ASC 310-30 and under cost recovery for income tax purposes.~~

year.

Borrowings

~~Borrowings~~

On December ~~20, 2010,~~19, 2012, we entered into ~~the Credit Agreement.~~a credit agreement with Bank of America, N.A., as administrative agent, and a syndicate of lenders named therein (the “Credit Agreement”). Under the terms of the Credit Agreement, the credit facility includes an aggregate principal amount available of ~~$407.5~~$600.0 million (subject to the borrowing base and applicable debt covenants), which consists of a ~~$50~~$200.0 million ~~fixed~~floating rate term loan that ~~matured~~matures on ~~May 4, 2012, which was transferred from our then existing credit agreement,~~December 19, 2017 and a ~~$357.5~~$400.0 million revolving credit facility that matures on December ~~20, 2014.~~19, 2017. The ~~revolving credit facility automatically increased by $50 million upon the maturity~~term and ~~repayment of the fixed rate loan. The fixed rate loan bore interest at a rate of 6.8% per annum, payable monthly in arrears. The~~ revolving loans accrue interest, at our option, at either the base rate ~~plus 1.75% per annum~~ or the Eurodollar rate (as ~~defined)~~defined in the Credit Agreement) for the applicable term plus ~~2.75%~~2.50% per ~~annum.~~annum in the case of the Eurodollar rate loans and 1.50% in the case of the base rate loans. The base rate is the highest of (a) the Federal Funds Rate plus 0.50%, (b) Bank of America’s prime rate, and (c) the Eurodollar rate plus 1.00%. Interest is payable on base rate loans quarterly in arrears and on Eurodollar loans in arrears on the last day of each interest period or, if such interest period exceeds three months, every three months. Our revolving credit facility includes a ~~$20~~$20.0 million swingline loan sublimit, a ~~$20~~$20.0 million letter of credit sublimit and a $20.0 million alternative currency equivalent sublimit. It also contains an accordion loan feature that allows us to request an increase of up to ~~$142.5~~$250.0 million in the amount available for borrowing under the revolving credit facility, whether from existing

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or new lenders, subject to ~~the~~ terms of the Credit Agreement. ~~Through September 30, 2012,, we closed a series of transactions~~No existing lender is obligated to exercise a portion of the accordion loan feature of our existing credit facility with our administrative agent and our syndicate of lenders, thereby increasing the lenders’ commitments by $57.0 million, resulting in $464.5 million aggregate principal amount available under our line of credit. Our existing lenders under the Credit Agreement provided $41.0 million of this increase ~~and $16.0 million was provided by two new lenders which are now a party to the Credit Agreement. The Company may request additional increases of up to $85.6 million under~~ its ~~credit facility.~~commitment. The Credit Agreement is secured by a first priority lien on substantially all of our assets. The Credit Agreement contains restrictive covenants and events of default ~~include~~including the following:

borrowings may not exceed 30% of the ERC of all ~~its~~our eligible ~~domestic~~ asset pools plus 75% of ~~its~~our eligible accounts receivable;

the consolidated leverage ratio (as defined in the Credit Agreement) cannot exceed 2.0 to 1.0 as of the end of any fiscal quarter;

capital expenditures during any fiscal year cannot exceed ~~$20 million;~~

$30 million;

cash dividends and distributions during any fiscal year cannot exceed ~~$20 million;~~

$20 million;

stock repurchases during the term of the agreement cannot exceed $250 million and cannot exceed $100 ~~million;~~

million in a single fiscal year;

permitted acquisitions (as defined in the Credit Agreement) during any fiscal year cannot exceed ~~$100 million;~~

$250 million;

~~the Company~~we must maintain positive consolidated income from operations (as defined in the Credit Agreement) during any fiscal quarter; and

restrictions on changes in control.

The revolving credit facility also bears an unused commitment fee of 0.375% per annum, payable quarterly in arrears.

~~At September 30, 2012, all~~

Our borrowings at March 31, 2013 consisted of ~~our borrowings under our revolving credit facility consisted of~~$148.0 million in 30-day Eurodollar rate loans and $24.0 million in base rate loans with a weighted average interest rate of 2.74%. In addition, we had $198.8 million outstanding on the term loan at March 31, 2013 with an annual interest rate ~~equal to 2.97%~~of 2.70%.

We had ~~$250.0~~$370.8 million and ~~$220.0~~$327.0 million of borrowings outstanding ~~under~~on our credit facility as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011, respectively, of which $50.0 million represented borrowings under the non-revolving fixed rate loan at December 31, 2011.~~

2012, respectively.

We were in compliance with all covenants of our credit ~~facility~~facilities as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011.~~

2012.

Undistributed Earnings of Foreign Subsidiaries

We intend to use remaining accumulated and future undistributed earnings of foreign subsidiaries to expand operations outside the United States; therefore, such undistributed earnings of foreign subsidiaries are considered to be indefinitely reinvested outside the United States. Accordingly, no provision for U.S. federal and state income tax has been provided thereon. If management intentions change and eligible undistributed earnings of foreign subsidiaries are repatriated, taxes would be accrued and paid on such earnings.

Stockholders’ Equity

Stockholders’ equity was ~~$670.5~~$751.0 at ~~September 30, 2012~~March 31, 2013 and ~~$595.5~~$708.4 million at December 31, ~~2011.~~2012. The increase was primarily attributable to ~~$90.8~~$38.6 million in net income attributable to ~~the Company~~PRA during the first ~~nine~~three months of ~~2012 partially offset by a decrease of $22.7 million resulting from the repurchase of 331,449 shares of our common stock under our $100 million repurchase program.~~

2013.

Contractual Obligations

Our contractual obligations as of ~~September 30, 2012~~March 31, 2013 were as follows (amounts in thousands):

   Payments due by period
Contractual Obligations
   Total    Less
than 1
year    1 - 3
years    3 - 5
years    More
than 5
years
Operating Leases
   $ 22,022       $ 4,757       $ 8,855       $ 5,799       $ 2,611
Line of Credit⁽¹⁾
   269,303       8,549       260,754       —         —
Long-term Debt
   691       553       138       —         —
Purchase Commitments⁽²⁾⁽³⁾
   200,345       200,345       —         —         —
Employment Agreements
   13,285       7,831       5,401       53       —










Total
   $ 505,646       $ 222,035       $ 275,148       $ 5,852       $ 2,611



	Payments due by period
Contractual Obligations	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Operating Leases	$	23,638	$	5,637	$	10,116	$	5,958	$	1,927
Line of Credit ⁽¹⁾	203,244		5,855		12,088		185,301		—
Long-term Debt ⁽²⁾	226,088		12,118		38,817		175,153		—
Purchase Commitments ^(3) (4)	313,911		310,905		2,628		378		—
Employment Agreements	11,282		8,269		3,013		—		—
Total	$	778,163	$	342,784	$	66,662	$	366,790	$	1,927

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(1)

To the extent that a balance is outstanding on our line of credit, the balance ($250 million) would be due at its maturity in December 2014. Therefore, for purposes of this table and the related interest calculations, theThis amount includes principal, estimated interest and unused line fees due on the line of credit ~~assume~~and assumes that the balance on the line of credit remains constant from the ~~September 30, 2012~~March 31, 2013 balance of ~~$250.0~~$172.0 million and the balance is paid in full at its ~~maturity.~~respective maturity in December 2017.


(2)	This amount also includes estimated interest on our long-term borrowings under our credit facility.


(3)	This amount includes the maximum remaining amount to be purchased under forward flow contracts for the purchase of charged-off consumer debt in the amount of approximately ~~$166.3~~$283.8 million.

~~(3)~~
(4)	This amount includes the maximum remaining purchase price of ~~$22.8~~$11.4 million towhich is the maximum amount that could be paid to acquire the noncontrolling interest of CCB.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements as defined by Regulation S-K 303(a)(4) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”).

Recent Accounting Pronouncements

In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” The amendments in ASU 2011-04 generally represent clarification of Topic 820, but also include instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. generally accepted accounting principles and International Financial Reporting Standards. The provisions of ASU 2011-04 are effective prospectively for interim and annual periods beginning after December 15, 2011. Early adoption is prohibited. We adopted ASU 2011-04 on January 1, 2012, and have included the required disclosures in our notes to our consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income” (Topic 220) to amend its accounting guidance on the presentation of OCI in an entity’s financial statements. The amended guidance eliminates the option to present the components of OCI as part of the statement of changes in stockholders equity and provides two options for presenting OCI: in a statement included in the income statement or in a separate statement immediately following the income statement. The amendments do not change the guidance for the items that have to be reported in OCI or when an item of OCI has to be moved into net income. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We adopted ASU 2011-05 on January 1, 2012, and have included the required disclosures in our consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, “Intangibles-Goodwill and Other” (Topic 350): “Testing Goodwill for Impairment” to amend the accounting guidance on goodwill impairment testing. The amended guidance reduces the complexity and costs of goodwill impairment testing by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amended guidance also improves previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. We adopted ASU 2011-08 on January 1, 2012 which had no material impact on our consolidated financial statements.

In July 2012, the FASB issued ASU 2012-02, “Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” to amend the accounting guidance on intangible asset impairment testing. The ASU permits entities to perform an optional qualitative assessment for determining whether it is more likely than not that an indefinite-lived intangible asset is impaired. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. We ~~are evaluating~~adopted ASU 2012-02 in the ~~impact~~first quarter of ~~the ASU; however, we do not expect it to have a significant~~2013 which had no material impact on our consolidated financial statements.

In February 2013, the FASB issued ASU 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income," which requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income, by component. In addition, entities are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail on these amounts. We adopted ASU 2013-02 in the first quarter of 2013 which had no material impact on our consolidated financial statements.

In March 2013, the FASB issued ASU 2013-05, "Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity," which defines the treatment of the release of cumulative translation adjustments upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted and prior periods should not be adjusted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. ~~The preparation~~Our significant accounting policies are discussed in Note 1 of ~~these~~the Notes to the Consolidated Financial Statements. Our significant accounting policies are fundamental to understanding our results of operations and financial ~~statements requires estimation~~condition because they require that we use estimates, assumptions and ~~judgment~~judgments that affect the reported amounts of revenues, expenses, assets, and liabilities.

Three of these policies are considered to be critical because they are important to the portrayal of our financial condition and results, and because they require management to make judgments and estimates that are difficult, subjective, and complex regarding matters that are inherently uncertain.

We base our estimates on historical experience, current trends and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The following critical accounting policies are a subset of our significant accounting policies described in Note 1 to the consolidated financial statements. These critical accounting policies affect significant areas of our financial statements and involve judgment and estimates. If these estimates differ significantly from actual results, the impact on our consolidated financial statements may be material.

Management believes our critical accounting policies and estimates are those related to revenue recognition, valuation of acquired intangibles and goodwill, and income taxes. Management believes these policies to be critical because they are both important to the portrayal of our financial condition and results, and because they require management to make judgments and estimates about matters that are inherently uncertain. Our senior management has reviewed these critical accounting policies ~~and related disclosures~~ with the Company's Audit ~~Committee~~Committee.

Table of ~~our Board of Directors.~~

Contents

Revenue Recognition

Finance ~~Receivables:~~

Receivables:

We account for our investment in finance receivables under the guidance of ASC 310-30. We acquire portfolios of accounts that have experienced deterioration of credit quality between origination and our acquisition of the accounts. The amount paid for a portfolio reflects our determination that it is probable we will be unable to collect all amounts due according to an ~~account’s~~account's contractual terms. At acquisition, we review the accounts to determine whether there is evidence of deterioration of credit quality since origination, and if it is probable that we

will be unable to collect all amounts due according to the ~~loan’s~~loan's contractual terms. If both conditions exist, we then determine whether each such account is to be accounted for individually or whether such accounts will be assembled into pools based on common risk characteristics. We consider expected prepayments and estimate the amount and timing of undiscounted expected principal, interest and other cash flows (expected at acquisition) for each acquired portfolio based on our proprietary models, and then subsequently aggregate portfolios of accounts into pools. We determine the excess of the ~~pool’s~~pool's scheduled contractual principal and contractual interest payments over all cash flows expected at acquisition as an amount that should not be accreted (nonaccretable difference). The remaining amount, representing the excess of the ~~pool’s~~pool's cash flows expected to be collected over the amount paid, is accreted into income recognized on finance receivables over the remaining estimated life of the pool (accretable yield). ASC 310-30 requires that the excess of the contractual cash flows over expected cash flows, based on our estimates derived from our proprietary collection models, not be recognized as an adjustment of revenue or expense or on the balance sheet.

Under ASC 310-30 static pools of accounts may be established. These pools are aggregated based on certain common risk criteria. Each static pool is recorded at cost, which ~~includes~~may include certain direct costs of acquisition paid to third parties, and is accounted for as a single unit for the recognition of income, payments applied to principal and loss provision. Once a static pool is established for a calendar quarter, individual receivable accounts are not added to the pool (unless replaced by the seller) or removed from the pool (unless sold or returned to the seller). ASC 310-30, utilizing the interest method, initially freezes the yield, estimated when the accounts are purchased, as the basis for subsequent impairment testing. The yield is estimated and periodically recalculated based on the timing and amount of anticipated cash flows using our proprietary collection models. Income on finance receivables is accrued quarterly based on each static ~~pool’s~~pool's effective yield. Significant increases in expected future cash flows may be recognized prospectively, through an upward adjustment of the yield, over a ~~pool’s~~pool's remaining life. Any increase to the yield then becomes the new benchmark for impairment testing. Under ASC 310-30, rather than lowering the estimated yield if the collection estimates are not received or projected to be received, the carrying value of a pool would be written down to maintain the then current yield and is shown as a reduction in revenue in the consolidated income statements with a corresponding valuation allowance offsetting finance receivables, net, on the consolidated balance sheets. Quarterly cash flows greater than the interest accrual will reduce the carrying value of the static pool. This reduction in carrying value is defined as payments applied to principal (also referred to as principal amortization). Likewise, cash flows that are less than the interest accrual will accrete the carrying balance. Generally, we do not record accretion in the first six to twelve months of the estimated life of the pool; accordingly, we utilize either the cost recovery method or cash method when necessary to prevent accretion as permitted by ASC 310-30. Under the cash method, revenue is recognized as it would be under the interest method up to the amount of cash collections. Under the cost recovery method, no revenue is recognized until we have fully collected the cost of the pool. A pool can become fully amortized (zero carrying balance on the balance sheet) while still generating cash collections. In this case, all cash collections are recognized as revenue when received. Additionally, we use the cost recovery method when collections on a particular pool of accounts cannot be reasonably predicted. These cost recovery pools are not aggregated with other pools. Under the cost recovery method, no revenue is recognized until we have fully collected the cost of the pool, or until such time that we consider the collections to be probable and estimable and begin to recognize income based on the interest method as described above.

We establish valuation allowances, if necessary, for acquired accounts subject to ASC 310-10. Valuation allowances are established only subsequent to acquisition of the accounts.

We implement the accounting for income recognized on finance receivables under ASC 310-30 as follows. We create each accounting pool using our projections of estimated cash flows and expected economic life. We then compute the effective yield that fully amortizes the pool to the end of its expected economic life based on the current projections of estimated cash flows. As actual cash flow results are recorded, we ~~balances~~balance those results to the data contained in our proprietary models to ensure accuracy, then review each pool watching for trends, actual performance versus projections and curve shape (a graphical depiction of the timing of cash flows), ~~sometimes~~regularly re-forecasting future cash flows utilizing our statistical models. The review process is primarily performed by our finance staff; however, our operational and statistical staff is also involved, providing updated statistical input and cash projections to the finance staff. ~~To the extent~~If there is ~~overperformance,~~an increase in expected cash flows, we will ~~either~~recognize the effect of the increase ~~the yield or release~~prospectively through an increase in yield. If a valuation allowance had been previously recognized for that pool, the allowance ~~and consider increasing future cash projections, if persuasive evidence indicates that the overperformance~~ is ~~considered to be a significant betterment.~~reversed before recording any prospective yield adjustments. If the over performance is considered more of an acceleration of cash flows (a timing difference), we will: a) adjust estimated future cash flows downward which effectively extends the amortization period to fall within a reasonable expectation of the ~~pool’s~~pool's economic life, b)

introduce some level of future cash adjustment as

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noted previously coupled with an increase in yield in order for the amortization period to fall within a reasonable expectation of the ~~pool’s~~pool's economic life, or c) take no action at all if the amortization period falls within a reasonable expectation of the ~~pool’s~~pool's expected economic life. To the extent there is underperformance, we will record an allowance if the underperformance is significant and will also consider revising estimated future cash flows based on current period information, or take no action if the ~~pool’s~~pool's amortization period is reasonable and falls within the currently projected economic life.

Fee ~~Income:~~

Income:

We utilize the provisions of ASC Topic 605-45, “Principal Agent Considerations” (“ASC 605-45”), to account for fee income ~~revenue from our fee-for-service subsidiaries.~~revenue. ASC 605-45 requires an analysis to be completed to determine if certain revenues should be reported gross or reported net of their related operating expense. This analysis includes an assessment of who retains inventory/credit risk, controls vendor selection, establishes pricing and remains the primary obligor on the transaction. Each of these factors was considered to determine the correct method of recognizing ~~revenue from our subsidiaries.~~

revenue.

Our skip tracing subsidiary utilizes both gross and net reporting under ASC 605-45. We generate revenue by working an account and successfully locating a customer for our client. An “investigative fee” is received for these services. In addition, we incur “agent expenses” where we hire a third-party collector to effectuate repossession. In many cases we have an arrangement with our client which allows us to bill the client for these fees. We have determined these fees to be gross revenue based on the criteria in ASC 605-45 and they are recorded as such in the line item “Fee income,” because we are primarily liable to the third party collector. There is a corresponding expense in “Agent fees” for these pass-through items. We also incur fees to release liens on the repossessed collateral. These lien-release fees and related reimbursement of these fees are netted in the line “Agent fees.”

Our government processing and collection ~~business’~~business' primary source of income is derived from servicing taxing authorities in several different ways: processing all of their tax payments and tax forms, collecting delinquent taxes, identifying taxes that are not being paid and auditing tax payments. The processing and collection pieces are standard commission based billings or fee-for-service transactions. When an audit is conducted, there are two components. The first component is a billing for the hours incurred to conduct the audit. This billing is marked up from the actual costs incurred. The gross billing is a component of the line item “Fee income” and the expense is included in the line item “Compensation and employee services.” The second component is expenses incurred while conducting the audit. Most jurisdictions will reimburse us for direct expenses incurred for the audit including such items as travel and meals. The billed amounts are included in the line item “Fee income” and the expense component is included in its appropriate expense category, generally, “Other operating expenses.”

Our claims administration and payment processing business utilizes net reporting under ASC 605-45. We generate revenue by filing claims with the class action claims administrator on behalf of our clients and receiving the related settlement payment. Under SEC Staff Accounting Bulletin 104, ~~(“SAB 104”),~~ we have determined that our fee is not earned until we have received the settlement funds. When a payment is received from the claims administrator for settlement of a lawsuit, the fee is recorded on a net basis as revenue and included in the line item “Fee income.” The balance of the received amounts is recorded as a liability and included in the line item “Accounts payable.”

Our United Kingdom subsidiary generates revenue from both purchased finance receivables which is accounted for as described above and finance receivables serviced on a contingent fee basis. These serviced portfolios are owned by our clients and placed under a contingent fee commission arrangement. Our subsidiary is paid to collect funds from the client's debtors and earns a commission generally expressed as a percentage of the gross collections amount. The "Fee income" line of our income statement reflects the contingent fee amount earned, and not the gross collection amount.

Valuation of Acquired Intangibles and Goodwill

In accordance with ASC Topic 350, ~~“Intangibles—Goodwill~~“Intangibles-Goodwill and Other” (“ASC 350”), we amortize intangible assets over their estimated useful lives. Goodwill, pursuant to ASC 350, is not amortized but rather is reviewed for impairment annually or earlier if indicators of potential impairment exist. The review of goodwill for potential impairment is highly subjective and requires that: (1) goodwill is allocated to various reporting units of our business to which it relates; and (2) we estimate the fair value of those reporting units to which the goodwill relates and then determine the book value of those reporting units. During the review, we also consider qualitative factors that may have an impact on the final assessment regarding potential impairment. If the estimated fair value of reporting units with allocated goodwill is determined to be less than their book value, we are required to estimate the fair value of all identifiable assets and liabilities of those reporting units in a manner similar to a purchase price allocation for an acquired business. This requires independent valuation of certain unrecognized assets. Once this process is complete, the amount of goodwill impairment, if any, can be determined.

46
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Income Taxes

We follow the guidance of FASB ASC Topic 740 “Income Taxes” (“ASC 740”) as it relates to the provision for income taxes and uncertainty in income taxes. Accordingly, we record a tax provision for the anticipated tax consequences of the reported results of operations. In accordance with ASC 740, the provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and for operating losses and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. The evaluation of a tax position in accordance with the guidance is a two-step process. The first step is recognition: the enterprise determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, the enterprise should presume that the position will be examined by the appropriate taxing authority that would have full knowledge of all relevant information. The second step is measurement: a tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. We record interest and penalties related to unrecognized tax benefits as a component of income tax expense.

We utilize the cost recovery method of income recognition for tax purposes. We believe cost recovery to be an acceptable method for companies in the bad debt purchasing ~~industry, as under~~industry. Under the cost recovery method, ~~for tax purposes,~~ collections on finance receivables are applied first to principal to reduce the finance receivables to zero before any income is recognized.

In the event that all or part of the deferred tax assets are determined not to be realizable in the future, a valuation allowance would be established and charged to earnings in the period such determination is made. ~~Similarly, if~~If we subsequently realize deferred tax assets that were previously determined to be unrealizable, the respective valuation allowance would be reversed, resulting in a positive adjustment to earnings or a decrease in goodwill in the period such determination is made. ~~In addition, the~~The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations and financial position.



Item 3.	Quantitative and Qualitative Disclosure About Market Risk

Interest Rate Risk

We are subject to interest rate risk ~~with~~from outstanding borrowings on our variable rate credit ~~line.~~facility. We assess this interest rate risk by estimating the increase in interest expense that would occur due to an increase in short-term interest rates. The average borrowings on our variable rate credit ~~line~~facility were ~~$259.7~~$359.6 million and ~~$198.9~~$214.6 million for the three months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively. Assuming a 200 basis point increase in interest rates, for example, interest expense would have increased by ~~$1.3~~$1.8 million and ~~$1.0~~$1.1 million for the three months ended ~~September 30,~~March 31, 2013 and 2012, respectively, resulting in a decrease in income before income taxes of 2.8% and ~~2011,~~2.6%, respectively. As of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011,~~2012, we had ~~$250.0~~$370.8 million and ~~$170.0~~$265.0 million, respectively, of variable rate debt outstanding on our credit ~~lines.~~facility. We dodid not have any other variable rate debt outstanding as of ~~September 30, 2012.~~March 31, 2013. We had no interest rate hedging programs in place for the three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011.~~2012. Significant increases in future interest rates on ~~the~~our variable rate credit ~~line~~facility could lead to a material decrease in future earnings assuming all other factors remained constant.

Currency Exchange Risk

~~In the first quarter of 2012, we acquired MHH. MHH~~

We are subject to currency exchange risk from our UK subsidiary. It conducts business in the Pound Sterling, but we report our financial results in U.S. dollars. ~~Therefore, as a result of the MHH acquisition, we face exposure to fluctuations in currency exchange rates.~~ Significant fluctuations in exchange rates between the U.S. dollar and the Pound Sterling may adversely affect our net income. We may or may not implement a hedging program related to currency exchange rate ~~fluctuations.~~

fluctuation. In the first quarter of 2013 and 2012, MHH revenues were 1.6% and 3.3% of consolidated revenues, respectively. We had no currency exchange risk hedging programs in place for the three months ended March 31, 2013 or 2012.



Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures.We maintain disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial and Administrative Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, controls may become inadequate because of changes in conditions and the degree of compliance with the policies or procedures may deteriorate. We conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial and Administrative Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial and Administrative Officer have concluded that, as of ~~September 30, 2012,~~March 31, 2013, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting. There was no change in our internal control over financial reporting that occurred during the quarter ended ~~September 30, 2012~~March 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings~~

Item 1. Legal Proceedings

We are from time to time subject to routine legal claims and proceedings, most of which are incidental to the ordinary course of our business. We initiate lawsuits against customers and are occasionally countersued by them in such actions. Also, customers, either individually, as members of a class action, or through a governmental entity on behalf of customers, may initiate litigation against us in which they allege that we have violated a state or federal law in the process of collecting on an account. From time to time, other types of lawsuits are brought against us.

No legal proceedings were commenced during the period covered by this report that the Company believes could reasonably be expected to have a material adverse effect on its financial condition, results of operations and cash flows. Refer to Note 1311 “Commitments and Contingencies” of our Consolidated Financial Statements for material developments with respect to legal proceedings previously disclosed with respect to prior periods.

Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk. You should carefully consider the specific risk factors listed under Part I, Item 1A of our ~~2011~~2012 Annual Report on Form 10-K filed on February 28, ~~2012,~~2013, together with all other information included or incorporated in our reports filed with the SEC. Any such risks may materialize, and additional risks not known to us, or that we now deem immaterial, may arise. In such event, our business, financial condition, results of operations or prospects could be materially adversely affected. If that occurs, the market price of our common stock could fall, and you could lose all or part of your investment.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Program

~~None.~~

On February 2, 2012, the Company's board of directors authorized a share repurchase program to purchase up to $100,000,000 of the Company's outstanding shares of common stock on the open market. The following table provides information about the Company's common stock purchased during the first quarter of 2013.

Month Ended Total Number of Shares Purchased Average Price Paid per Share Maximum Remaining Purchase Price for Share Repurchases Under the Plan
February 28, 2013 8,600
$ 117.10
$ 76,257,886
March 31, 2013 7,600
119.08
75,352,887

Total 16,200
$ 118.03
$ 75,352,887

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits



31.1	Section 302 Certifications of Chief Executive Officer.



31.2	Section 302 Certifications of Chief Financial and Administrative Officer.



32.1	Section 906 Certifications of Chief Executive Officer and Chief Financial and Administrative Officer.



101.INS	XBRL Instance Document



101.SCH	XBRL Taxonomy Extension Schema Document



101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document



101.LAB	XBRL Taxonomy Extension Label Linkbase Document



101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document



101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




	PORTFOLIO RECOVERY ASSOCIATES, INC.
	(Registrant)

Date: ~~November 7, 2012~~May 8, 2013	By:	/s/ Steven D. Fredrickson
		Steven D. Fredrickson Chief Executive Officer, President and Chairman of the Board of Directors (Principal Executive Officer)

Date: ~~November 7, 2012~~May 8, 2013	By:	/s/ Kevin P. Stevenson
		Kevin P. Stevenson Chief Financial and Administrative Officer, Executive Vice President, Treasurer and Assistant Secretary (Principal Financial and Accounting Officer)


	September 30, 2012		December 31, 2011
Assets

Cash and cash equivalents	$	31,488	$	26,697
Finance receivables, net		973,594		926,734
Accounts receivable, net		8,417		7,862
Property and equipment, net		25,506		25,727
Goodwill		100,456		61,678
Intangible assets, net		21,167		14,596
Other assets		9,070		7,829


Total assets	$	1,169,698	$	1,071,123

Liabilities and Equity

Liabilities:
Accounts payable	$	10,234	$	7,439
Accrued expenses and other liabilities		11,197		6,076
Income taxes payable		7,359		13,109
Accrued payroll and bonuses		13,241		16,036
Net deferred tax liability		186,506		193,898
Line of credit		250,000		220,000
Long-term debt		674		1,246

Total liabilities		479,211		457,804

Commitments and contingencies (Note 13)

Redeemable noncontrolling interest		19,998		17,831


Stockholders’ equity:
Preferred stock, par value $0.01, authorized shares, 2,000, issued and outstanding shares - 0		—		—
Common stock, par value $0.01, 60,000 authorized shares, 16,881 issued and outstanding shares at September 30, 2012, and 17,134 issued and outstanding shares at December 31, 2011		169		171
Additional paid-in capital		149,818		167,719
Retained earnings		518,389		427,598
Accumulated other comprehensive income		2,113		—

Total stockholders’ equity		670,489		595,488


Total liabilities and equity	$	1,169,698	$	1,071,123


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011

Revenues:
Income recognized on finance receivables, net	$	135,754		$	102,875		$	392,566		$	299,152
Fee income		14,765			11,401			45,983			41,696

Total revenues		150,519			114,276			438,549			340,848

Operating expenses:
Compensation and employee services		41,334			33,475			123,508			102,443
Legal collection fees		8,635			5,962			25,241			17,681
Legal collection costs		15,810			9,731			57,705			28,949
Agent fees		1,545			1,643			4,495			6,005
Outside fees and services		10,131			6,222			21,575			13,702
Communications		6,777			5,865			22,037			17,884
Rent and occupancy		1,786			1,517			5,053			4,353
Depreciation and amortization		3,623			3,223			10,833			9,755
Other operating expenses		3,820			2,808			12,027			9,161

Total operating expenses		93,461			70,446			282,474			209,933


Gain on sale of property		—			—			—			1,157


Income from operations		57,058			43,830			156,075			132,072
Other income and (expense):
Interest income		—			7			8			7
Interest expense		(2,189	)		(2,555	)		(7,223	)		(8,057	)


Income before income taxes		54,869			41,282			148,860			124,022

Provision for income taxes		21,742			16,089			58,493			49,544


Net income	$	33,127		$	25,193		$	90,367		$	74,478

Adjustment for (loss)/income attributable to redeemable noncontrolling interest		(187	)		(313	)		(424	)		277


Net income attributable to Portfolio Recovery Associates, Inc.	$	33,314		$	25,506		$	90,791		$	74,201


Net income per common share attributable to Portfolio Recovery Associates, Inc:
Basic	$	1.97		$	1.49		$	5.33		$	4.34
Diluted	$	1.96		$	1.48		$	5.30		$	4.31

Weighted average number of shares outstanding:
Basic		16,881			17,117			17,034			17,106
Diluted		17,022			17,228			17,140			17,218



	Three Months Ended March 31,
	2013			2012
Revenues:
Income recognized on finance receivables, net	$	154,792		$	124,226
Fee income	14,767			15,920
Total revenues	169,559			140,146
Operating expenses:
Compensation and employee services	44,997			39,694
Legal collection fees	10,529			7,617
Legal collection costs	20,501			23,669
Agent fees	1,609			1,627
Outside fees and services	7,447			5,860
Communications	8,961			8,253
Rent and occupancy	1,687			1,611
Depreciation and amortization	3,366			3,656
Other operating expenses	4,575			3,738
Total operating expenses	103,672			95,725
Income from operations	65,887			44,421
Other income and (expense):
Interest income	—			1
Interest expense	(2,689		)	(2,653		)
Income before income taxes	63,198			41,769
Provision for income taxes	24,681			16,580
Net income	$	38,517		$	25,189
Adjustment for loss attributable to redeemable noncontrolling interest	(83		)	(273		)
Net income attributable to Portfolio Recovery Associates, Inc.	$	38,600		$	25,462
Net income per common share attributable to Portfolio Recovery Associates, Inc:
Basic	$	2.28		$	1.48
Diluted	$	2.26		$	1.47
Weighted average number of shares outstanding:
Basic	16,937			17,196
Diluted	17,091			17,267


							Additional					Accumulated Other		Total
	Common Stock						Paid-in			Retained		Comprehensive		Stockholders’
	Shares			Amount			Capital			Earnings		Income		Equity

Balance at December 31, 2011		17,134		$	171		$	167,719		$	427,598	$	—	$	595,488

Components of comprehensive income:
Net income attributable to Portfolio Recovery Associates, Inc.		—			—			—			90,791		—		90,791
Foreign currency translation adjustment		—			—			—			—		2,113		2,113
Vesting of nonvested shares		79			1			(1	)		—		—		—
Repurchase and cancellation of common stock		(332	)		(3	)		(22,723	)		—		—		(22,726	)
Amortization of share-based compensation		—			—			8,361			—		—		8,361
Income tax benefit from share-based compensation		—			—			1,484			—		—		1,484
Employee stock relinquished for payment of taxes		—			—			(2,170	)		—		—		(2,170	)
Adjustment of the noncontrolling interest measurement amount		—			—			(2,852	)		—		—		(2,852	)


Balance at September 30, 2012		16,881		$	169		$	149,818		$	518,389	$	2,113	$	670,489



										Accumulated
					Additional					Other			Total
	Common Stock				Paid-in			Retained		Comprehensive			Stockholders’
	Shares		Amount		Capital			Earnings		Income			Equity
Balance at December 31, 2012	16,909		$	169	$	151,216		$	554,191	$	2,851		$	708,427
Components of comprehensive income:
Net income attributable to Portfolio Recovery Associates, Inc.	—		—		—			38,600		—			38,600
Foreign currency translation adjustment	—		—		—			—		(4,418		)	(4,418		)
Vesting of nonvested shares	66		1		(1		)	—		—			—
Repurchase and cancellation of common stock	(16	)	—		(1,912		)	—		—			(1,912		)
Amortization of share-based compensation	—		—		2,986			—		—			2,986
Income tax benefit from share-based compensation	—		—		2,207			—		—			2,207
Employee stock relinquished for payment of taxes	—		—		(4,002		)	—		—			(4,002		)
Purchase of noncontrolling interest	—		—		9,162			—		—			9,162
Adjustment of the noncontrolling interest measurement amount	—		—		(60		)	—		—			(60		)
Balance at March 31, 2013	16,959		$	170	$	159,596		$	592,791	$	(1,567	)	$	750,990


	As Of And For The Three Months				As Of And For The Nine Months
	Ended September 30, 2012				Ended September 30, 2012
	Revenues		Long-Lived Assets		Revenues		Long-Lived Assets
United States	$	145,585	$	23,596	$	424,434	$	23,596
United Kingdom		4,934		1,910		14,115		1,910

Total	$	150,519	$	25,506	$	438,549	$	25,506


September 30, 2013	$	352,374
September 30, 2014		273,710
September 30, 2015		204,808
September 30, 2016		105,186
September 30, 2017		37,516

	$	973,594


	Three Months Ended September 30,
	2012									2011
	Core Portfolio ⁽¹⁾			Purchased Bankruptcy Portfolio ⁽²⁾			Total			Core Portfolio ⁽¹⁾			Purchased Bankruptcy Portfolio ⁽²⁾			Total
Valuation allowance - finance receivables:
Beginning balance	$	75,850		$	13,419		$	89,269		$	73,630		$	9,100		$	82,730
Allowance charges		1,850			945			2,795			1,400			1			1,401
Reversal of previous recorded allowance charges		(1,150	)		(82	)		(1,232	)		(500	)		(160	)		(660	)

Net allowance charge		700			863			1,563			900			(159	)		741

Ending balance	$	76,550		$	14,282		$	90,832		$	74,530		$	8,941		$	83,471


Finance receivables, net⁽³⁾:	$	479,558		$	480,402		$	959,960		$	453,168		$	466,310		$	919,478


	Nine Months Ended September 30,
	2012										2011
	Core Portfolio ⁽¹⁾			Purchased Bankruptcy Portfolio⁽²⁾				Total			Core Portfolio ⁽¹⁾			Purchased Bankruptcy Portfolio⁽²⁾			Total
Valuation allowance - finance receivables:
Beginning balance	$	76,580		$	9,991			$	86,571		$	70,030		$	6,377		$	76,407
Allowance charges		4,000			4,620				8,620			6,250			2,951			9,201
Reversal of previous recorded allowance charges		(4,030	)		(329	)	��		(4,359	)		(1,750	)		(387	)		(2,137	)

Net allowance charge		(30	)		4,291				4,261			4,500			2,564			7,064

Ending balance	$	76,550		$	14,282			$	90,832		$	74,530		$	8,941		$	83,471


Finance receivables, net⁽³⁾:	$	479,558		$	480,402			$	959,960		$	453,168		$	466,310		$	919,478


	September 30, 2012				December 31, 2011
	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization

Client and customer relationships	$	40,134	$	21,337	$	30,777	$	17,950
Non-compete agreements		3,747		3,374		3,103		2,771
Trademarks		3,469		1,472		2,500		1,063

Total	$	47,350	$	26,183	$	36,380	$	21,784


Purchase price	$	51,258
Cash		(2,605	)
Finance receivables, net		(3,906	)
Accounts receivable		(2,038	)
Prepaid expenses (included in other assets)		(330	)
Customer relationships		(8,875	)
Non-compete agreements		(612	)
Trademarks		(918	)
Property and equipment		(814	)
Accounts payable		3,500
Accrued expenses		912
Income tax payable		1,209

Goodwill	$	36,781


	Nonvested Shares Outstanding			Weighted-Average Price at Grant Date
December 31, 2010		91		$	47.89
Granted		48			76.59
Vested		(53	)		55.97
Cancelled		(5	)		50.34

December 31, 2011		81			59.31
Granted		49			63.18
Vested		(31	)		59.75

September 30, 2012		99		$	61.08


	For the Nine Months Ended September 30,
	2012						2011
	Net Income attributable to Portfolio Recovery Associates, Inc.		Weighted Average Common Shares		EPS		Net Income attributable to Portfolio Recovery Associates, Inc.		Weighted Average Common Shares		EPS
Basic EPS	$	90,791		17,034	$	5.33	$	74,201		17,106	$	4.34
Dilutive effect of nonvested share awards				106						112

Diluted EPS	$	90,791		17,140	$	5.30	$	74,201		17,218	$	4.31


	For the Three Months Ended September 30,
($ in thousands)	2012			2011
Cash collections	$	229,052		$	182,168
Amortization of finance receivables		(91,735	)		(78,552	)
Allowance charges		(1,563	)		(741	)

Finance receivable income		135,754			102,875
Fee income		14,765			11,401

Total revenue	$	150,519		$	114,276


	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2012			2011			2012			2011
Revenues:
Income recognized on finance receivables, net		90.2	%		90.0	%		89.5	%		87.8	%
Fee income		9.8	%		10.0	%		10.5	%		12.2	%

Total revenues		100.0	%		100.0	%		100.0	%		100.0	%
Operating expenses:
Compensation and employee services		27.5	%		29.3	%		28.2	%		30.1	%
Legal collection fees		5.7	%		5.2	%		5.8	%		5.2	%
Legal collection costs		10.5	%		8.5	%		13.2	%		8.5	%
Agent fees		1.0	%		1.4	%		1.0	%		1.8	%
Outside fees and services		6.7	%		5.4	%		4.9	%		4.0	%
Communication expenses		4.5	%		5.1	%		5.0	%		5.2	%
Rent and occupancy		1.2	%		1.3	%		1.2	%		1.3	%
Depreciation and amortization		2.4	%		2.8	%		2.5	%		2.9	%
Other operating expenses		2.5	%		2.5	%		2.7	%		2.7	%

Total operating expenses		62.0	%		61.5	%		64.5	%		61.7	%
Gain on sale of property		0.0	%		0.0	%		0.0	%		0.3	%


Income from operations		38.0	%		38.5	%		35.5	%		38.6	%
Other income and (expense):
Interest income		0.0	%		0.0	%		0.0	%		0.0	%
Interest expense		(1.5	%)		(2.2	%)		(1.6	%)		(2.4	%)

Income before income taxes		36.5	%		36.3	%		33.9	%		36.2	%
Provision for income taxes		14.4	%		14.1	%		13.3	%		14.5	%

Net income		22.1	%		22.2	%		20.6	%		21.7	%
Adjustment for (loss)/income attributable to redeemable noncontrolling interest		(0.1	%)		(0.3	%)		(0.1	%)		0.1	%


Net income attributable to Portfolio Recovery Associates, Inc.		22.2	%		22.5	%		20.7	%		21.6	%



	For the Three Months Ended March 31,
	2013		2012
Revenues:
Income recognized on finance receivables, net	91.3	%	88.6	%
Fee income	8.7	%	11.4	%
Total revenues	100.0	%	100.0	%
Operating expenses:
Compensation and employee services	26.5	%	28.3	%
Legal collection fees	6.2	%	5.4	%
Legal collection costs	12.1	%	16.9	%
Agent fees	0.9	%	1.2	%
Outside fees and services	4.4	%	4.2	%
Communication expenses	5.3	%	5.9	%
Rent and occupancy	1.0	%	1.1	%
Depreciation and amortization	2.0	%	2.6	%
Other operating expenses	2.7	%	2.7	%
Total operating expenses	61.1	%	68.3	%
Income from operations	38.9	%	31.7	%
Other income and (expense):
Interest income	—	%	—	%
Interest expense	(1.6	)%	(1.9	)%
Income before income taxes	37.3	%	29.8	%
Provision for income taxes	14.6	%	11.8	%
Net income	22.7	%	18.0	%
Adjustment for loss attributable to redeemable noncontrolling interest	—	%	(0.2	)%
Net income attributable to Portfolio Recovery Associates, Inc.	22.8	%	18.2	%


	For the Quarter Ended
	September 30 2012			June 30 2012			March 31 2012			December 31 2011			September 30 2011
EARNINGS (in thousands)
Income recognized on finance receivables, net	$	135,754		$	132,587		$	124,226		$	102,743		$	102,875
Fee income		14,765			15,298			15,920			15,344			11,401
Total revenues		150,519			147,885			140,146			118,087			114,276
Operating expenses		93,461			93,289			95,725			72,134			70,446
Income from operations		57,058			54,596			44,421			45,953			43,830
Net interest expense		2,189			2,374			2,652			2,512			2,548
Net income		33,127			32,051			25,189			26,666			25,193
Net income attributable to Portfolio Recovery Associates, Inc.		33,314			32,015			25,462			26,590			25,506

PERIOD-END BALANCES (in thousands)
Cash and cash equivalents	$	31,488		$	42,621		$	28,068		$	26,697		$	30,035
Finance receivables, net		973,594			966,508			945,242			926,734			919,478
Goodwill and intangible assets, net		121,623			121,748			124,659			76,274			76,426
Total assets		1,169,698			1,173,738			1,142,026			1,071,123			1,064,104
Line of credit		250,000			292,000			265,000			220,000			260,000
Total liabilities		479,211			520,911			502,531			457,804			478,915
Total equity		670,489			633,446			620,712			595,488			568,305

FINANCE RECEIVABLE COLLECTIONS (dollars in thousands)
Cash collections	$	229,052		$	232,425		$	217,996		$	180,324		$	182,168
Principal amortization without allowance charges		91,735			97,634			93,276			74,481			78,552
Principal amortization with allowance charges		93,298			99,838			93,770			77,581			79,293
Principal amortization w/ allowance charges as % of cash collections:
Including fully amortized pools		40.7	%		43.0	%		43.0	%		43.0	%		43.5	%
Excluding fully amortized pools		42.0	%		44.4	%		44.8	%		44.9	%		45.7	%

ALLOWANCE FOR FINANCE RECEIVABLES (dollars in thousands)
Balance at period-end	$	90,832		$	89,269		$	87,065		$	86,571		$	83,471
Allowance charge		1,563			2,204			494			3,100			741
Allowance charge to period-end net finance receivables		0.16	%		0.23	%		0.05	%		0.33	%		0.08	%
Allowance charge to net finance receivable income		1.15	%		1.66	%		0.40	%		3.02	%		0.72	%
Allowance charge to cash collections		0.68	%		0.95	%		0.23	%		1.72	%		0.41	%

PURCHASES OF FINANCE RECEIVABLES (1) (dollars in thousands)
Purchase price - core	$	52,703		$	69,512		$	52,104		$	42,532		$	57,240
Face value - core		674,135			1,033,331			972,268			829,232			5,027,874
Purchase price - bankruptcy		41,277			53,460			56,892			46,360			64,848
Face value - bankruptcy		341,359			448,244			368,447			376,094			654,508
Purchase price - total		93,980			122,972			108,996			88,892			122,088
Face value - total		1,015,494			1,481,575			1,340,715			1,205,326			5,682,382
Number of portfolios - total		95			105			82			83			95

ESTIMATED REMAINING COLLECTIONS (1) (in thousands)
Estimated remaining collections - core	$	1,323,134		$	1,305,641		$	1,226,292		$	1,159,086		$	1,154,406
Estimated remaining collections - bankruptcy		791,018			802,353			796,161			794,262			770,886
Estimated remaining collections - total		2,114,152			2,107,994			2,022,453			1,953,348			1,925,292

SHARE DATA (share amounts in thousands)
Net income per common share - diluted	$	1.96		$	1.87		$	1.47		$	1.54		$	1.48
Weighted average number of shares outstanding - diluted		17,022			17,133			17,267			17,269			17,228
Shares repurchased		—			300,849			30,600			—			—
Average price paid per share repurchased (including acquisitions costs)	$	—		$	68.62		$	68.02			—			—
Closing market price	$	104.43		$	91.26		$	71.72		$	67.52		$	62.22

RATIOS AND OTHER DATA (dollars in thousands)
Return on average equity (2)		20.29	%		20.34	%		16.70	%		18.18	%		18.27	%
Return on revenue (3)		22.01	%		21.67	%		17.97	%		22.58	%		22.05	%
Operating margin (4)		37.91	%		36.92	%		31.70	%		38.91	%		38.35	%
Operating expense to cash receipts (5)		38.33	%		37.66	%		40.92	%		36.87	%		36.39	%
Debt to equity (6)		37.39	%		46.33	%		42.84	%		37.15	%		46.02	%
Number of collectors		1,992			1,952			1,934			1,658			1,520
Number of employees		3,103			3,032			3,014			2,641			2,504
Cash receipts (5)	$	243,817		$	247,723		$	233,916		$	195,668		$	193,569
Line of credit - unused portion at period end		214,450			166,450			142,500			187,500			147,500


			Inception through September 30, 2012											As of September 30, 2012
($ in thousands)			Actual Cash Collections Including Cash Sales		Income Recognized on Finance Receivables		Principal Amortization			Allowance Charges		Income Recognized on Finance Receivables, Net		Net Finance Receivables Balance		Estimated Remaining Collections		Total Estimated Collections		Total Estimated Collections to Purchase Price
Purchase Period	Purchase Price		Actual Cash Collections Including Cash Sales		Income Recognized on Finance Receivables		Principal Amortization			Allowance Charges		Income Recognized on Finance Receivables, Net		Net Finance Receivables Balance		Estimated Remaining Collections		Total Estimated Collections		Total Estimated Collections to Purchase Price
1996	$	3,080	$	10,171	$	7,048	$	3,123		$	0	$	7,048	$	0	$	43	$	10,214		332	%
1997		7,685		25,387		17,282		8,105			0		17,282		0		147		25,534		332	%
1998		11,089		37,130		26,144		10,986			0		26,144		0		455		37,585		339	%
1999		18,898		68,715		49,540		19,175			0		49,540		0		1,033		69,748		369	%
2000		25,020		114,900		89,704		25,196			0		89,704		0		2,569		117,469		470	%
2001		33,481		172,937		138,585		34,352			0		138,585		0		3,716		176,653		528	%
2002		42,325		194,041		151,716		42,325			0		151,716		0		7,292		201,333		476	%
2003		61,448		258,244		196,796		61,448	��		0		196,796		0		12,915		271,159		441	%
2004		59,176		192,361		134,384		57,977			1,200		133,184		0		12,368		204,729		346	%
2005		143,168		298,170		178,552		119,618			14,697		163,855		8,853		16,062		314,232		219	%
2006		107,673		197,088		122,525		74,563			22,615		99,910		10,496		18,173		215,261		200	%
2007		258,379		440,216		242,527		197,689			22,325		220,202		38,359		68,421		508,637		197	%
2008		275,148		415,563		237,716		177,847			29,995		207,721		67,272		111,076		526,639		191	%
2009		281,438		558,585		362,283		196,302			0		362,283		85,138		261,958		820,543		292	%
2010		358,149		484,149		280,949		203,200			0		280,949		154,974		411,458		895,607		250	%
2011		394,261		258,182		147,227		110,955			0		147,227		283,307		610,947		869,129		220	%
2012		324,627		39,508		26,455		13,053			0		26,455		311,561		575,519		615,027		189	%

Total	$	2,405,045	$	3,765,347	$	2,409,433	$	1,355,914		$	90,832	$	2,318,601	$	959,960	$	2,114,152	$	5,879,499		244	%


			Year to Date September 30, 2012											As of September 30, 2012
($ in thousands)			Actual Cash Collections Including Cash Sales		Income Recognized on Finance Receivables		Principal Amortization		Allowance Charges			Income Recognized on Finance Receivables, Net		Net Finance Receivables Balance		Estimated Remaining Collections		Total Estimated Collections		Total Estimated Collections to Purchase Price
Purchase Period	Purchase Price		Actual Cash Collections Including Cash Sales		Income Recognized on Finance Receivables		Principal Amortization		Allowance Charges			Income Recognized on Finance Receivables, Net		Net Finance Receivables Balance		Estimated Remaining Collections		Total Estimated Collections		Total Estimated Collections to Purchase Price
1996	$	3,080	$	28	$	28	$	0	$	0		$	28	$	0	$	43	$	10,214		332	%
1997		7,685		76		76		0		0			76		0		147		25,534		332	%
1998		11,089		192		192		0		0			192		0		455		37,585		339	%
1999		18,898		552		552		0		0			552		0		1,033		69,748		369	%
2000		25,020		1,512		1,512		0		0			1,512		0		2,569		117,469		470	%
2001		33,481		2,473		2,473		0		0			2,473		0		3,716		176,653		528	%
2002		42,325		3,765		3,765		0		0			3,765		0		7,292		201,333		476	%
2003		61,448		5,847		5,847		0		0			5,847		0		12,915		271,159		441	%
2004		59,176		5,211		5,211		0		0			5,211		0		12,368		204,730		346	%
2005		143,168		10,286		4,624		5,662		(3,249	)		7,873		8,853		16,062		314,233		219	%
2006		107,673		9,932		5,146		4,786		2,200			2,946		10,496		18,173		215,260		200	%
2007		258,379		37,990		17,016		20,974		2,860			14,156		38,359		68,421		508,638		197	%
2008		275,148		56,631		22,851		33,780		2,450			20,401		67,272		111,076		526,639		191	%
2009		281,438		136,721		90,154		46,567		0			90,154		85,138		261,958		820,543		292	%
2010		358,149		179,534		105,533		74,001		0			105,533		154,974		411,458		895,607		250	%
2011		394,261		180,992		101,282		79,710		0			101,282		283,307		610,947		869,129		220	%
2012		324,627		39,508		26,455		13,053		0			26,455		311,561		575,519		615,027		189	%

Total	$	2,405,045	$	671,250	$	392,717	$	278,533	$	4,261		$	388,456	$	959,960	$	2,114,152	$	5,879,501		244	%


			Quarter Ended September 30, 2012												As of September 30, 2012
($ in thousands)			Actual Cash Collections Including Cash Sales		Income Recognized on Finance Receivables		Principal Amortization		Allowance Charges			Income Recognized on Finance Receivables, Net			Net Finance Receivables Balance		Estimated Remaining Collections		Total Estimated Collections		Total Estimated Collections to Purchase Price
Purchase Period	Purchase Price		Actual Cash Collections Including Cash Sales		Income Recognized on Finance Receivables		Principal Amortization		Allowance Charges			Income Recognized on Finance Receivables, Net			Net Finance Receivables Balance		Estimated Remaining Collections		Total Estimated Collections		Total Estimated Collections to Purchase Price
1996	$	3,080	$	7	$	7	$	0	$	0		$	7		$	0	$	43	$	10,214		332	%
1997		7,685		24		24		0		0			24			0		147		25,534		332	%
1998		11,089		71		71		0		0			71			0		455		37,585		339	%
1999		18,898		156		156		0		0			156			0		1,033		69,748		369	%
2000		25,020		421		421		0		0			421			0		2,569		117,469		470	%
2001		33,481		730		730		0		0			730			0		3,716		176,653		528	%
2002		42,325		1,123		1,123		0		0			1,123			0		7,292		201,333		476	%
2003		61,448		1,722		1,722		0		0			1,722			0		12,915		271,159		441	%
2004		59,176		1,542		1,542		0		0			1,542			0		12,368		204,730		346	%
2005		143,168		3,142		1,475		1,667		(1,182	)		2,657			8,853		16,062		314,233		219	%
2006		107,673		2,822		1,379		1,443		1,550			(171	)		10,496		18,173		215,260		200	%
2007		258,379		10,419		5,015		5,404		595			4,420			38,359		68,421		508,638		197	%
2008		275,148		17,051		6,675		10,376		600			6,075			67,272		111,076		526,639		191	%
2009		281,438		43,309		29,129		14,180		0			29,129			85,138		261,958		820,543		292	%
2010		358,149		57,605		36,146		21,459		0			36,146			154,974		411,458		895,607		250	%
2011		394,261		61,498		34,269		27,229		0			34,269			283,307		610,947		869,129		220	%
2012		324,627		23,948		15,464		8,484		0			15,464			311,561		575,519		615,027		189	%

Total	$	2,405,045	$	225,590	$	135,348	$	90,242	$	1,563		$	133,785		$	959,960	$	2,114,152	$	5,879,501		244	%


	Core cash collections⁽¹⁾
	2007		2008		2009		2010		2011		2012
Q1	$	141	$	116	$	120	$	135	$	162	$	166
Q2	$	129	$	115	$	114	$	127	$	154	$	169
Q3	$	120	$	110	$	111	$	127	$	152	$	171
Q4	$	107	$	98	$	109	$	129	$	137		—


	Total cash collections⁽²⁾
	2007		2008		2009		2010		2011		2012
Q1	$	156	$	133	$	147	$	182	$	241	$	258
Q2	$	142	$	136	$	143	$	188	$	243	$	275
Q3	$	131	$	134	$	144	$	200	$	249	$	279
Q4	$	119	$	123	$	148	$	204	$	228		—


	Non-legal cash collections⁽³⁾
	2007		2008		2009		2010		2011		2012
Q1	$	108	$	96	$	118	$	154	$	204	$	216
Q2	$	96	$	99	$	116	$	160	$	205	$	225
Q3	$	88	$	99	$	119	$	170	$	212	$	230
Q4	$	80	$	94	$	123	$	174	$	194		—


Cash Collection Source ($ in thousands)	Q32012		Q22012		Q12012		Q42011		Q32011		Q22011		Q12011		Q42010
Call Center & Other Collections	$	72,394	$	73,582	$	79,805	$	61,227	$	63,967	$	64,566	$	67,377	$	53,775
External Legal Collections		39,913		41,464		34,852		26,316		27,245		27,329		25,378		21,446
Internal Legal Collections		25,650		25,361		23,345		17,615		16,444		16,007		15,598		12,841
Purchased Bankruptcy Collections		91,095		92,018		79,994		75,166		74,512		68,379		58,364		56,301

Total Cash Collections	$	229,052	$	232,425	$	217,996	$	180,324	$	182,168	$	176,281	$	166,717	$	144,363



Cash Collection Source ($ in thousands)	Q12013		Q42012		Q32012		Q22012		Q12012		Q42011		Q32011		Q22011
Call Center and Other Collections	$	89,037	$	72,624	$	72,394	$	73,582	$	79,805	$	61,227	$	63,967	$	64,566
External Legal Collections	47,910		41,521		39,913		41,464		34,852		26,316		27,245		27,329
Internal Legal Collections	29,283		23,968		25,650		25,361		23,345		17,615		16,444		16,007
Bankruptcy Court Trustee Collections	109,233		91,098		91,095		92,018		79,994		75,166		74,512		68,379
Total Cash Collections	$	275,463	$	229,211	$	229,052	$	232,425	$	217,996	$	180,324	$	182,168	$	176,281


	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2011
Balance at beginning of year	$	966,508		$	879,515		$	926,734		$	831,330
Acquisitions of finance receivables⁽¹⁾		100,063			119,256			333,402			314,162
Foreign currency translation adjustment		321			—			365			—
Cash collections applied to principal on finance receivables ⁽²⁾		(93,298	)		(79,293	)		(286,907	)		(226,014	)


Balance at end of year	$	973,594		$	919,478		$	973,594		$	919,478


Estimated Remaining Collections	$	2,137,580		$	1,925,292		$	2,137,580		$	1,925,292


Asset Type	No. of Accounts		%			Life to Date Purchased Face Value⁽¹⁾		%			Original Purchase Price⁽²⁾		%
Major Credit Cards		17,168		57	%	$	48,070,374		70	%	$	1,782,221		72	%
Consumer Finance		6,121		20			7,249,254		11			132,431		6
Private Label Credit Cards		6,247		21			8,662,165		13			496,590		20
Auto Deficiency		640		2			4,484,071		6			51,408		2

Total:		30,176		100	%		68,465,864		100	%		2,462,650		100	%


Account Type	No. of Accounts		%			Life to Date Purchased Face Value (1)		%			Original Purchase Price (2)		%
Fresh		2,151		7	%	$	5,681,556		8	%	$	535,821		22	%
Primary		4,514		15			8,244,705		12			415,750		17
Secondary		5,327		18			8,194,206		12			317,546		13
Tertiary		4,011		13			5,411,196		8			75,675		3
BK Trustees		4,152		14			18,735,945		27			984,485		40
Other		10,021		33			22,198,256		33			133,373		5

Total:		30,176		100	%		68,465,864		100	%		2,462,650		100	%



Month Ended	Total Number of Shares Purchased	Average Price Paid per Share		Maximum Remaining Purchase Price for Share Repurchases Under the Plan
February 28, 2013	8,600	$	117.10	$	76,257,886
March 31, 2013	7,600	119.08		75,352,887

Total	16,200	$	118.03	$	75,352,887

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company