Portfolio Recovery Q1 Earnings Up; Announces Repurchase and Special Dividend

Portfolio Recovery Associates, Inc., a company that purchases and manages portfolios of defaulted consumer receivables and provides a broad range of accounts receivable management services, reported net income of $12.9 million, or $0.80 per diluted share, for the quarter ended March 31, 2007. 

Separately, Portfolio Recovery Associates’ Board of Directors has authorized a special cash dividend to shareholders of $1.00 per share as well as a one million share stock repurchase program. (details below)

The Company’s first-quarter 2007 earnings represent growth of 20% from net income of $10.7 million, or $0.67 per diluted share, in the same period a year earlier.

Total revenue increased 19% to $54.0 million in the first quarter of 2007, up from $45.3 million in the year-earlier period. Total revenue consists of cash collections reduced by amounts applied to principal on the Company’s owned debt portfolios plus commissions from its fee-for-service businesses. During the first quarter of 2007, the Company applied 32.5% of cash collections to reduce the carrying basis of its owned debt portfolios. This included a $365,000 net allowance charge against various pools of finance receivables accounts.

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"Portfolio Recovery Associates’ performance in the first quarter of 2007 demonstrates both breadth and strength, highlighting not only the quality of the organization today but our very exciting prospects for the future. Strong debt purchasing supported by solid execution on the collections front were the keys to this performance. Moving forward, we are pleased to announce a new program to begin optimizing Portfolio Recovery Associates’ capital structure that includes a $1.00 special cash dividend to shareholders and a one million share stock repurchase program," said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.

Capital Structure

Portfolio Recovery Associates announced today the launch of a three-part program, approved by the Company’s Board of Directors, to work towards optimizing its capital structure. The program includes:

• A $1.00 per share, special one-time cash dividend payable to shareholders of record as of May 9, 2007.  The dividend will be paid on June 8, 2007.
• A one million share stock repurchase program that will include both open-market and planned stock purchases.
• The Company plans to expand its bank credit line to $150 million from the current $75 million, including an option for a 5-year fixed-rate tranche of $50 million (inclusive of the $150 million commitment). Portfolio Recovery Associates is currently working with its lenders to finalize this expansion.

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Financial and Operating Highlights

• Cash collections rose 15% to a record $67.3 million in the first quarter of 2007, up from $58.5 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 a record $155.91 for the first quarter of 2007, up from $146.03 for all of 2006.  Excluding the impact of trustee remittances from purchased bankrupt accounts, the comparison is $140.73 for the first quarter of 2007 vs. $132.15 for all of 2006.
• The Company purchased $2.3 billion of face-value debt during the first quarter of 2007 for $39.6 million, the second-largest amount the Company has spent on debt acquisitions in a single quarter.  This debt was acquired in 26 pools from 15 different sellers.
• The Company’s fee-for-service businesses generated record revenue of $8.5 million in the first quarter of 2007, up 43% from $6.0 million in the same period a year ago.
• The Company’s cash balances were $27.9 million as of March 31, 2007, up slightly from $25.1 million as of December 31, 2006.  During the 2007 first quarter, the Company made no use of its $75 million line of credit. No amount was outstanding on the line as of March 31, 2007.

"Portfolio Recovery Associates’ strong first-quarter performance underscores our Company’s ability to turn in impressive results in varying market conditions. Such performances over time prompted us to examine our capital structure, and we have determined that some financial leverage would be advantageous at this point. Our $1.00 per share special dividend, one million share repurchase program, and planned credit line expansion represent a continuation of our ongoing efforts to exploit the Company’s operational and financial strengths with a goal of rewarding shareholders over the long term," said Kevin P. Stevenson, Chief Financial and Administrative Officer.