Net Income Rises to $7.0 Million; Per-Share Earnings Total $0.44
NORFOLK, VA -- 10/21/2004 -- Portfolio Recovery Associates, Inc. (NASDAQ: PRAA), a company that purchases, collects and manages portfolios of defaulted consumer receivables, today reported net income of $7.0 million, or $0.44 per fully-diluted share, for the quarter ended September 30, 2004.
The company's third-quarter 2004 earnings represent growth of 26% from net income of $5.5 million, or $0.35 per fully-diluted share, in the third quarter of 2003.
Total revenue advanced 28% to $28.3 million in the third quarter from $22.2 million in the year-ago period. Total revenue consists of cash collections, reduced by an amortization rate of 30.3% that is applied to the company's owned debt portfolios, plus commissions from its contingent-fee collection business.
"The third quarter brought another strong performance for Portfolio Recovery Associates, with record cash collections and continued high productivity levels despite entering the seasonally slow second half of the year. Separately, we announced early in the fourth-quarter our first-ever acquisition as a public company: the purchase of the IGS Nevada business. This highly complementary business provides us with a third earnings and revenue stream -- after our owned-portfolio and Anchor contingent fee businesses -- and represents a highly strategic use of our cash resources," said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.
For the first nine months of 2004, the company's earnings rose to $19.7 million, or $1.25 per fully-diluted share, from $15.3 million, or $0.97 per share, for the nine months ended September 30, 2003. Total revenue for the first nine months of 2004 climbed to $81.7 million from $61.9 million in the same period a year ago.
Financial and Operating Highlights
- -- Cash collections rose 29% to $38.8 million in the third quarter of 2004 from $30.2 million in the year-ago period. - -- Productivity as measured by cash collections per hour paid, the company's key measure of collector performance, stands at $117.85 for the first nine months of 2004, compared with $108.27 for all of 2003. - -- The company purchased $564.9 million of face-value debt during the third quarter of 2004 for $10.8 million, representing a blended rate of 1.91%. This debt was purchased in 20 pools from 13 different sellers. - -- The company announced on October 4 that it had acquired the assets of IGS Nevada, Inc., which specializes in asset-location services, for $14 million plus a potential $4 million in performance-based cash payments over the next 2 years. The transaction, which represents the company's first acquisition since its November 2002 initial public offering, is expected to be slightly accretive to earnings in the fourth quarter and contribute net income of $0.13 to $0.17 per fully diluted share in 2005. - -- The company's cash balances grew to $57 million from $42 million on June 30, 2004. Cash as of September 30 does not reflect any drawdown for the IGS Nevada acquisition, since the transaction closed in the fourth quarter. The company continues to have no debt outstanding under its $25 million revolving line of credit."Portfolio Recovery Associates made good progress on several fronts in the third quarter, with solid financial and operating results and strong execution of our overall growth strategy. Earnings, revenue and cash collections all advanced nicely in the quarter and productivity remained high even as we continued to hire new collectors. Further, the disciplined approach we have taken to debt purchasing given the relatively high pricing in the market this year has provided us with the financial flexibility to acquire the IGS Nevada business and still have ample cash for future portfolio-purchase opportunities," said Kevin P. Stevenson, Chief Financial Officer.
Conference Call Information
The company will hold a conference call with investors today, October 21, 2004, at 5:30 p.m. EDT to discuss its third quarter results. Investors can access the call live by dialing 800-259-0251 for domestic callers or 617-614-3671 for international callers using the pass code 67051214.
In addition, investors may listen to the call via a taped replay, which will be available for seven days, by dialing 888-286-8010 for domestic callers or 617-801-6888 for international callers using the pass code 19964010. The replay will be available approximately two hours after today's conference call ends. Investors may also listen via webcast, both live and archived, at the company's Web site, www.portfoliorecovery.com.
About Portfolio Recovery Associates, Inc.
Portfolio Recovery Associates is a full-service provider of outsourced receivables management. Portfolio Recovery Associates purchases, collects and manages portfolios of defaulted consumer receivables. Defaulted consumer receivables are the unpaid obligations of individuals to credit originators, including banks, credit unions, consumer and auto finance companies, retail merchants and other providers of goods and services. The defaulted consumer receivables Portfolio Recovery Associates collects are generally either purchased from the credit originator or are collected on behalf of clients on a commission basis.
Statements herein which are not historical, including Portfolio Recovery Associates' or management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future, including statements with respect to future contribution of the IGS Nevada business to earnings and future portfolio-purchase opportunities, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include references to Portfolio Recovery Associates' presentations and web casts. The forward-looking statements in this press release are based upon management's beliefs, assumptions and expectations of the Company's future operations and economic performance, taking into account currently available information. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us. Actual events or results may differ from those expressed or implied in any such forward-looking statements as a result of various factors, including the risk factors and other risks that are described from time to time in the Company's filings with the Securities and Exchange Commission, including but not limited to its Registration Statements on Forms S-1 and S-8, its annual reports on Form 10-K and quarterly reports on Form 10-Q and its current reports on Form 8-K filed with the Securities and Exchange Commission and available through the Company's website, which contain a more detailed discussion of the Company's business, including risks and uncertainties that may affect future results. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or to reflect any change in events, conditions or circumstances on which any such forward-looking statements are based, in whole or in part.
Portfolio Recovery Associates, Inc. Unaudited Consolidated Statements of Operations (in thousands, except per share amounts) Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2004 2003 2004 2003 Revenues: Income recognized on finance receivables $ 27,070 $ 21,389 $ 77,867 $ 59,625 Commissions 1,216 784 3,827 2,267 --------- --------- --------- --------- Total revenue 28,286 22,173 81,694 61,892 Operating expenses: Compensation and employee services 9,155 7,370 26,903 21,441 Outside legal and other fees and services 5,348 3,886 15,039 9,980 Communications 840 703 2,659 2,003 Rent and occupancy 435 317 1,297 872 Other operating expenses 649 393 2,028 1,322 Depreciation 488 383 1,398 1,054 --------- --------- --------- --------- Total operating expenses 16,915 13,052 49,324 36,672 --------- --------- --------- --------- Income from operations 11,371 9,121 32,370 25,220 Other income and (expense): Interest income 77 1 106 29 Interest expense (69) (84) (206) (243) --------- --------- --------- --------- Income before income taxes 11,379 9,038 32,270 25,006 Provision for income taxes 4,405 3,509 12,534 9,732 --------- --------- --------- --------- Net income $ 6,974 $ 5,529 $ 19,736 $ 15,274 ========= ========= ========= ========= Net income per common share Basic $ 0.45 $ 0.36 $ 1.29 $ 1.07 Diluted $ 0.44 $ 0.35 $ 1.25 $ 0.97 Weighted average number of shares outstanding Basic 15,342 15,149 15,323 14,312 Diluted 15,832 15,751 15,794 15,697 Portfolio Recovery Associates, Inc. Unaudited Consolidated Summary Statements of Financial Position (in thousands, except share amounts) September 30, December 31, ASSETS 2004 2003 Cash and cash equivalents $ 56,765 $ 24,912 Finance receivables, net 95,312 92,569 Property and equipment, net 6,033 5,166 Deferred tax asset - 2,009 Income tax receivable - 352 Other assets 827 1,386 --------- --------- Total assets $ 158,937 $ 126,394 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable and accrued liabilities 6,453 5,038 Deferred tax liability 9,719 - Long-term debt & capital lease obligations 2,677 2,208 --------- --------- Total liabilities 18,849 7,246 Stockholders' equity: Preferred stock, par value $0.01, authorized shares, 2,000,000, issued and outstanding shares - 0 - - Common stock, par value $0.01, authorized shares, 30,000,000, issued and outstanding shares - 15,352,475 at September 30, 2004, and 15,294,676 at December 31, 2003 154 153 Additional paid in capital 97,321 96,118 Retained earnings 42,613 22,877 --------- --------- Total stockholders' equity 140,088 119,148 --------- --------- Total liabilities and stockholders' equity $ 158,937 $ 126,394 ========= =========
Contact: Investor Relations 757-519-9300 ext. 13010 info@portfoliorecovery.com