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Portfolio Recovery Associates Reports Third Quarter 2011 Results


October 27, 2011 - Norfolk, VA

Portfolio Recovery Associates, Inc. (NASDAQ: PRAA), a specialized financial services company and market leader in the consumer debt purchase and collection industry, today reported results for the quarter ended September 30, 2011.

Third Quarter Highlights

  • Revenue increased 20% to $114.3 million as cash collections grew 33% to a record $182.2 million
  • Net income of $25.5 million, an increase of 38% over the comparable year-ago period
  • EPS totaled $1.48 in the quarter, compared with EPS of $1.08 in the third quarter of 2010
  • Portfolio acquisitions totaled $122.1 million

"Our third quarter results are indicative of our efforts to drive the top line, identify and improve operational efficiencies and maintain a strong and flexible capital structure," said Steven D. Fredrickson, chairman, president and chief executive officer. "The key drivers of our results continue to be strong cash collections from both bankruptcy and core portfolios, supported by an impressive performance at our call centers. We were able to deliver these results despite a weak and volatile economy. Looking ahead, we will continue to focus on strengthening our core business, reducing costs and allocating the necessary resources to support continued growth in our fee-for-service businesses."

Total revenues for the third quarter of 2011 grew 20% from the year-earlier period to $114.3 million. Total revenues consist of cash collections reduced by amounts applied to principal on the Company's owned debt portfolios, plus fee income earned from our fee-for-service businesses. During the third quarter of 2011, the Company applied 43.5% of cash collections to reduce the carrying value of its owned debt portfolios, up from 41.8% in the third quarter of 2010. The third quarter 2011 principal amortization rate included a $741,000 net allowance charge against certain pools of finance receivables accounts.

Financial and Operating Review

Kevin P. Stevenson, chief financial and administrative officer, said: "The earnings power of our debt purchase business was evident during Q3, as our strong results from both bankrupt and core portfolios more than overcame soft performance at our fee-for-service businesses."

  • Cash collections rose 33% to a record $182.2 million in the third quarter of 2011, up from $137.4 million in the year-ago period. Call center and other collections increased 24%, external legal collections increased 35%, internal legal collections grew 36%, and purchased bankruptcy collections gained 40% when compared with the year-earlier period. The table below displays cash collections by source, by quarter for the past five quarters:






Cash Collection Source ($ in
thousands) Q32011 Q22011 Q12011 Q42010 Q32010
------------------------------- -------- -------- -------- -------- --------
Call Center & Other Collections $ 63,967 $ 64,566 $ 67,377 $ 53,775 $ 51,711
External Legal Collections 27,245 27,329 25,378 21,446 20,217
Internal Legal Collections 16,444 16,007 15,598 12,841 12,130
Purchased Bankruptcy
Collections 74,512 68,379 58,364 56,301 53,319
-------- -------- -------- -------- --------
Total Cash Collections $182,168 $176,281 $166,717 $144,363 $137,377
======== ======== ======== ======== ========

  • Internal legal collections grew to $16.4 million in the third quarter of 2011 from $12.1 million in the year-ago quarter. Internal legal collections, in which the Company uses its own staff, represent an important, developing collections channel.
  • Productivity rose to a record $245 per collector hour paid for the first nine months of 2011 from $194 for all of 2010. Productivity, the Company's key measure of collector performance, is measured by cash collections per collector hour paid. Excluding the impact of trustee remittances on purchased bankrupt accounts, the comparison is $156 for the first three quarters of 2011, compared to $129 for all of 2010. Excluding trustee remittances on purchased bankrupt accounts and external legal collections, the comparison is $118 for the first nine months of 2011 and $100 for all of 2010.
  • In the third quarter of 2011, total revenues were $114.3 million, up 20% compared with the same period a year ago. This was driven by record cash receipts of $193.6 million in the third quarter, up 27% from $152.9 million a year earlier. Cash receipts are comprised of both cash collections and revenues from the Company's fee-for-service businesses.
  • The Company's net allowance charge totaled $0.7 million in the third quarter of 2011, representing 0.08% of net finance receivables at period-end and 0.41% of cash collections.
  • The Company purchased $5.68 billion of face-value debt during the third quarter of 2011 for $122.1 million. This was acquired in 95 portfolios from 12 different sellers.
  • The Company's fee-for-service businesses generated revenues of $11.4 million in the third quarter of 2011, a decline of 27% from the same period a year ago due largely to a decrease in revenues generated by PRA Location Services. Together, the fee-for-service businesses accounted for 10% of the Company's overall revenues in the third quarter of 2011, down from 16% in the third quarter of 2010.
  • Cash balances were $30.0 million as of September 30, 2011, down from $41.1 million as of December 31, 2010. During the third quarter of 2011, the Company had net borrowings of $10 million on its line of credit, leaving it with $260 million in outstanding borrowings at quarter end. Remaining borrowing availability under the line was $147.5 million as of September 30, 2011.

The Company's earnings for the first nine months of 2011 totaled $74.2 million, or $4.31 per diluted share, compared with $52.8 million, or $3.15 per diluted share, for the first nine months of 2010. Year-to-date 2011 revenues were $340.8 million, compared to $272.0 million in the first nine months of 2010.

Conference Call Information
The Company will hold a conference call with investors this evening at 5:30 p.m. EDT, Thursday, October 27, 2011, to discuss its third-quarter results. Investors can access the call by dialing 888-679-8034 for domestic callers or 617-213-4847 for international callers using the pass code 49267189. The replay will be available approximately one hour after the call ends and will remain available for seven days. Investors can access the replay of the call by dialing 888-286-8010 for domestic callers or 617-801-6888 for international callers using the pass code 68599056.

Investors may also listen to the conference call via webcast, both live and archived, at the Company's website, www.portfoliorecovery.com at the Investor Relations main page.

About Portfolio Recovery Associates, Inc.
Portfolio Recovery Associates, Inc. (NASDAQ: PRAA), a specialized financial services company, is a market leader in the consumer debt purchase and collection industry. The Company, which has purchased more than $63 billion of face value defaulted consumer debt since its inception, has operations in 10 states, more than 27 million customer accounts and more than 2,500 employees. Portfolio Recovery Associates also provides a broad range of fee-based services through its subsidiaries: PRA Government Services, LLC; MuniServices, LLC; PRA Location Services, LLC; and Claims Compensation Bureau, LLC. Working every day with people in financial distress, the Company seeks to engage collaboratively with its customers to create realistic, affordable repayment plans. Portfolio Recovery Associates has a longstanding culture of compliance, and for five consecutive years has been named to the Forbes 100 Best Small Companies in America annual rankings list (2007 - 2011). Additional information about Portfolio Recovery Associates is available at www.portfoliorecovery.com.

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 future revenue and earnings growth, statements with respect to future contributions of its subsidiaries 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 annual reports on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K, filed with the Securities and Exchange Commission and available through the Company's website, which contain a more detailed discussion of the Company's business, including risks and uncertainties that may affect future results. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. Information in this press release may be superseded by more recent information or statements, which may be disclosed in later press releases, subsequent filings with the Securities and Exchange Commission or otherwise. 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 Income Statements (in thousands, except per share amounts) Three Three Nine Nine Months Months Months Months Ended Ended Ended Ended September September September September 30, 30, 30, 30, 2011 2010 2011 2010 ---------- ---------- ---------- ---------- Revenues: Income recognized on finance receivables, net $ 102,875 $ 80,026 $ 299,152 $ 224,897 Fee income 11,401 15,518 41,696 47,054 ---------- ---------- ---------- ---------- Total revenues 114,276 95,544 340,848 271,951 Operating expenses: Compensation and employee services 33,475 31,213 102,443 91,725 Legal collection fees 5,962 4,577 17,681 12,779 Legal collection costs 9,731 9,329 28,949 21,398 Agent fees 1,643 2,842 6,005 9,396 Outside fees and services 6,222 3,470 13,702 9,454 Communications 5,865 4,000 17,884 13,160 Rent and occupancy 1,517 1,362 4,353 3,912 Depreciation and amortization 3,223 3,294 9,755 9,050 Other operating expenses 2,808 2,634 9,161 7,488 ---------- ---------- ---------- ---------- Total operating expenses 70,446 62,721 209,933 178,362 Gain on sale of property - - 1,157 - ---------- ---------- ---------- ---------- Income from operations 43,830 32,823 132,072 93,589 Other income and (expense): Interest income 7 - 7 35 Interest expense (2,555) (2,178) (8,057) (6,535) ---------- ---------- ---------- ---------- Income before income taxes 41,282 30,645 124,022 87,089 Provision for income taxes 16,089 11,888 49,544 33,847 ---------- ---------- ---------- ---------- Net income $ 25,193 $ 18,757 $ 74,478 $ 53,242 Less net (loss)/income attributable to redeemable noncontrolling interest (313) 276 277 431 ---------- ---------- ---------- ---------- Net income attributable to Portfolio Recovery Associates, Inc. $ 25,506 $ 18,481 $ 74,201 $ 52,811 ---------- ---------- ---------- ---------- Net income per common share: Basic $ 1.49 $ 1.08 $ 4.34 $ 3.15 Diluted $ 1.48 $ 1.08 $ 4.31 $ 3.15 Weighted average number of shares outstanding: Basic 17,117 17,058 17,106 16,740 Diluted 17,228 17,093 17,218 16,792



 Portfolio Recovery Associates, Inc. Unaudited Condensed Consolidated Balance Sheets (in thousands, except per share amounts) September 30, December 31,ASSETS 2011 2010 ------------- ------------- Cash and cash equivalents $ 30,035 $ 41,094Finance receivables, net 919,478 831,330Accounts receivable, net 6,462 8,932Property and equipment, net 22,975 24,270Goodwill 61,678 61,678Intangible assets, net 14,748 18,466Other assets 8,728 10,138 ------------- ------------- Total assets $ 1,064,104 $ 995,908 ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable and accrued liabilities $ 25,064 $ 23,576 Net deferred tax liability 192,298 164,971 Line of credit 260,000 300,000 Long term debt 1,553 2,396 ------------- ------------- Total liabilities 478,915 490,943 ------------- ------------- Redeemable noncontrolling Interest 16,884 14,449 ------------- ------------- Stockholders' equity: Preferred stock, par value $0.01, authorized shares, 2,000, issued and outstanding shares - 0 - - Common stock, par value $0.01, authorized shares, 60,000, 17,118 issued and outstanding shares at September 30, 2011, and 17,064 issued and outstanding shares at December 31, 2010 171 171 Additional paid-in capital 167,126 163,538 Retained earnings 401,008 326,807 ------------- ------------- Total stockholders' equity 568,305 490,516 ------------- ------------- Total liabilities and stockholders' equity $ 1,064,104 $ 995,908 ------------- -------------



 Portfolio Recovery Associates, Inc. Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) Nine Months Nine Months Ended Ended September 30, September 30, 2011 2010 ------------- ------------- Cash flows from operating activities: Net income $ 74,478 $ 53,242 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of share-based compensation 6,110 3,114 Depreciation and amortization 9,756 9,050 Deferred tax expense 27,327 34,368 Gain on sale of property (1,157) - Changes in operating assets and liabilities: Other assets (953) (244) Accounts receivable 2,470 1,380 Accounts payable and accrued liabilities 5,141 2,496 ------------- ------------- Net cash provided by operating activities 123,172 103,406 ------------- ------------- Cash flows from investing activities: Purchases of property and equipment (4,854) (6,162) Proceeds from sale of property 1,267 - Acquisition of finance receivables, net of buybacks (314,162) (273,858) Collections applied to principal on finance receivables 226,014 160,081 Business acquisitions, net of cash acquired - (23,000) Contingent payment made for business acquisition - (104) ------------- ------------- Net cash used in investing activities (91,735) (143,043) ------------- ------------- Cash flows from financing activities: Proceeds from exercise of options 150 57 Income tax benefit from share-based compensation 503 225 Payment of liability-classified contingent consideration - (1,000) Proceeds from line of credit 27,000 131,000 Principal payments on line of credit (67,000) (161,800) Proceeds from stock offering, net of offering costs - 71,688 Distributions paid to noncontrolling interest (2,306) - Principal payments on long-term debt (843) (501) ------------- ------------- Net cash (used in)/provided by financing activities (42,496) 39,669 ------------- ------------- Net (decrease)/increase in cash and cash equivalents (11,059) 32 Cash and cash equivalents, beginning of year 41,094 20,265 ------------- ------------- Cash and cash equivalents, end of period $ 30,035 $ 20,297 ------------- ------------- Supplemental disclosure of cash flow information: Cash paid for interest $ 7,771 $ 6,508 Cash paid for income taxes 19,058 89 Noncash investing and financing activities: Adjustment of the noncontrolling interest measurement amount $ 3,175 $ - Common stock issued for acquisition - 4,950 Net unrealized change in fair value of derivative instrument - 164 



 FINANCIAL HIGHLIGHTS Three Months Ended Nine Months Ended September 30, % September 30, %(dollars in thousands) 2011 2010 Change 2011 2010 Change---------------- ---------- ---------- ------ ---------- ---------- ------EARNINGS----------------Income recognized on finance receivables, net $ 102,875 $ 80,026 29% $ 299,152 $ 224,897 33%Fee income 11,401 15,518 -27% 41,696 47,054 -11%Total revenues 114,276 95,544 20% 340,848 271,951 25%Operating expenses 70,446 62,721 12% 209,933 178,362 18%Income from operations 43,830 32,823 34% 132,072 93,589 41%Net interest expense 2,548 2,178 17% 8,050 6,500 24%Net income 25,193 18,757 34% 74,478 53,242 40%Net income attributable to Portfolio Recovery Associates, Inc. 25,506 18,481 38% 74,201 52,811 41%---------------- ---------- ---------- ------ ---------- ---------- ------ PERIOD-END BALANCES----------------Cash and cash equivalents $ 30,035 $ 20,297 48% $ 30,035 $ 20,297 48%Finance receivables, net 919,478 807,239 14% 919,478 807,239 14%Goodwill and intangible assets, net 76,426 81,610 -6% 76,426 81,610 -6%Total assets 1,064,104 947,737 12% 1,064,104 947,737 12%Line of credit 260,000 288,500 -10% 260,000 288,500 -10%Total liabilities 478,915 464,781 3% 478,915 464,781 3%Total equity 568,305 468,425 21% 568,305 468,425 21%---------------- ---------- ---------- ------ ---------- ---------- ------ FINANCE RECEIVABLE COLLECTIONS----------------Cash collections $ 182,168 $ 137,377 33% $ 525,166 $ 384,978 36%Principal amortization without allowance charges 78,552 50,831 55% 218,950 140,372 56%Principal amortization with allowance charges 79,293 57,351 38% 226,014 160,081 41%Principal amortization w/ allowance charges as % of cash collections: Including fully amortized pools 43.5% 41.7% 4% 43.0% 41.6% 4% Excluding fully amortized pools 45.7% 44.7% 2% 45.6% 45.0% 1%Estimated remaining collections - core $1,154,406 $ 934,942 23% $1,154,406 $ 934,942 23%Estimated remaining collections - bankruptcy 770,886 734,632 5% 770,886 734,632 5%Estimated remaining collections - total 1,925,292 1,669,574 15% 1,925,292 1,669,574 15%---------------- ---------- ---------- ------ ---------- ---------- ------ ALLOWANCE FOR FINANCE RECEIVABLES----------------Balance at period-end $ 83,471 $ 70,965 18% $ 83,471 $ 70,965 18%Allowance charge $ 741 $ 6,520 -89% $ 7,064 $ 19,710 -64%Allowance charge to period-end net finance receivables 0.08% 0.81% -90% 0.77% 2.44% -69%Allowance charge to net finance receivable income 0.72% 8.15% -91% 2.36% 8.76% -73%Allowance charge to cash collections 0.41% 4.75% -91% 1.35% 5.12% -74%---------------- ---------- ---------- ------ ---------- ---------- ------ PURCHASES OF FINANCE RECEIVABLES----------------Purchase price - core $ 57,240 $ 31,831 80% $ 170,857 $ 105,145 62%Face value - core 5,027,874 588,551 754% 7,071,530 2,067,011 242%Purchase price - bankruptcy 64,848 60,687 7% 148,659 176,774 -16%Face value - bankruptcy 654,508 788,967 -17% 1,515,501 2,869,052 -47%Purchase price - total 122,088 92,518 32% 319,516 281,919 13%Face value - total 5,682,382 1,377,518 313% 8,587,031 4,936,063 74%Number of portfolios - total 95 68 40% 250 230 9%---------------- ---------- ---------- ------ ---------- ---------- ------ PER SHARE DATA----------------Net income per common share - diluted $ 1.48 $ 1.08 37% $ 4.31 $ 3.15 37%Weighted average number of shares outstanding - diluted 17,228 17,093 1% 17,218 16,792 3%Closing market price $ 62.22 $ 64.66 -4% $ 62.22 $ 64.66 -4%---------------- ---------- ---------- ------ ---------- ---------- ------ RATIOS AND OTHER DATA----------------Return on average equity (1) 18.27% 16.04% 14% 18.57% 16.36% 14%Return on revenue (2) 22.05% 19.63% 12% 21.85% 19.58% 12%Operating margin (3) 38.35% 34.35% 12% 38.75% 34.41% 13%Operating expense to cash receipts (4) 36.39% 41.02% -11% 37.03% 41.28% -10%Debt to equity (5) 46.02% 61.80% -26% 46.02% 61.80% -26%Cash collections per collector hour paid: Core cash collections $ 152 $ 127 20% $ 156 $ 129 21% Total cash collections $ 249 $ 200 25% $ 245 $ 190 29% Excluding external legal collections $ 212 $ 170 25% $ 207 $ 161 29% Excluding bankruptcy and external legal collections $ 115 $ 97 19% $ 118 $ 101 17%Number of collectors 1,520 1,422 7% 1,520 1,422 7%Number of employees 2,504 2,421 3% 2,504 2,421 3%Cash receipts (4) $ 193,569 $ 152,895 27% $ 566,862 $ 432,032 31%Line of credit - unused portion at period end 147,500 76,500 93% 147,500 76,500 93%---------------- ---------- ---------- ------ ---------- ---------- ------Notes:----------------(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 FINANCIAL HIGHLIGHTS For the Quarter Ended ---------------------------------------------------------- September December September(dollars in 30 June 30 March 31 31 30 thousands) 2011 2011 2011 2010 2010---------------- ---------- ---------- ---------- ---------- ----------EARNINGS----------------Income recognized on finance receivables, net $ 102,875 $ 100,303 $ 95,974 $ 84,783 $ 80,026Fee income 11,401 14,492 15,803 15,972 15,518Total revenues 114,276 114,795 111,777 100,755 95,544Operating expenses 70,446 70,415 69,072 64,480 62,721Income from operations 43,830 45,537 42,705 36,275 32,823Net interest expense 2,548 2,635 2,867 2,488 2,178Net income 25,193 25,576 23,709 20,631 18,757Net income attributable to Portfolio Recovery Associates, Inc. 25,506 25,574 23,121 20,645 18,481---------------- ---------- ---------- ---------- ---------- ---------- PERIOD-END BALANCES----------------Cash and cash equivalents $ 30,035 $ 25,481 $ 35,443 $ 41,094 $ 20,297Finance receivables, net 919,478 879,515 866,992 831,330 807,239Goodwill and intangible assets, net 76,426 77,643 78,893 80,144 81,610Total assets 1,064,104 1,021,617 1,020,099 995,908 947,737Line of credit 260,000 250,000 290,000 300,000 288,500Total liabilities 478,915 463,153 489,136 490,943 464,781Total equity 568,305 542,396 515,710 490,516 468,425---------------- ---------- ---------- ---------- ---------- ---------- FINANCE RECEIVABLE COLLECTIONS----------------Cash collections $ 182,168 $ 176,281 $ 166,717 $ 144,363 $ 137,377Principal amortization without allowance 78,552 73,695 66,703 54,139 50,831Principal amortization with allowance 79,293 75,978 70,743 59,580 57,351Principal amortization w/ allowance as % of cash collections: Including fully amortized pools 43.5% 43.1% 42.4% 41.3% 41.7% Excluding fully amortized pools 45.7% 45.7% 45.3% 44.3% 44.7%Estimated remaining collections - core $1,154,406 $1,072,777 $1,040,140 $ 974,108 $ 934,942Estimated remaining collections - bankruptcy 770,886 743,228 753,130 749,410 734,632Estimated remaining collections - total 1,925,292 1,816,005 1,793,270 1,723,518 1,669,574---------------- ---------- ---------- ---------- ---------- ---------- ALLOWANCE FOR FINANCE RECEIVABLES----------------Balance at period-end $ 83,471 $ 82,730 $ 80,447 $ 76,407 $ 70,965Allowance charge $ 741 $ 2,283 $ 4,040 $ 5,442 $ 6,520Allowance charge to period-end net finance receivables 0.08% 0.26% 0.47% 0.65% 0.81%Allowance charge to net finance receivable income 0.72% 2.28% 4.21% 6.42% 8.15%Allowance charge to cash collections 0.41% 1.30% 2.42% 3.77% 4.75%---------------- ---------- ---------- ---------- ---------- ---------- PURCHASES OF FINANCE RECEIVABLES----------------Purchase price - core $ 57,240 $ 52,323 $ 61,294 $ 44,852 $ 31,831Face value - core 5,027,874 1,034,898 1,008,758 1,357,301 588,551Purchase price - bankruptcy 64,848 37,204 46,607 40,671 60,687Face value - bankruptcy 654,508 378,051 482,941 511,588 788,967Purchase price - total 122,088 89,527 107,901 85,523 92,518Face value - total 5,682,382 1,412,949 1,491,699 1,868,889 1,377,518Number of portfolios - total 95 76 79 75 68---------------- ---------- ---------- ---------- ---------- ---------- PER SHARE DATA----------------Net income per common share - diluted $ 1.48 $ 1.48 $ 1.34 $ 1.20 $ 1.08Weighted average number of shares outstanding - diluted 17,228 17,225 17,199 17,165 17,093Closing market price $ 62.22 $ 84.79 $ 85.13 $ 75.20 $ 64.66---------------- ---------- ---------- ---------- ---------- ---------- RATIOS AND OTHER DATA----------------Return on average equity (1) 18.27% 19.20% 18.25% 17.09% 16.04%Return on revenue (2) 22.05% 22.28% 21.21% 20.48% 19.63%Operating margin (3) 38.35% 39.67% 38.21% 36.00% 34.35%Operating expense to cash receipts (4) 36.39% 36.91% 37.84% 40.22% 41.02%Debt to equity (5) 46.02% 46.43% 56.64% 61.65% 61.80%Cash collections per collector hour paid: Core cash collections $ 152 $ 154 $ 162 $ 129 $ 127 Total cash collections $ 249 $ 243 $ 241 $ 204 $ 200 Excluding external legal collections $ 212 $ 205 $ 204 $ 174 $ 170 Excluding bankruptcy and external legal collections $ 115 $ 116 $ 125 $ 98 $ 97Number of collectors 1,520 1,517 1,486 1,472 1,422Number of employees 2,504 2,504 2,482 2,473 2,421Cash receipts (4) $ 193,569 $ 190,773 $ 182,520 $ 160,335 $ 152,895Line of credit - unused portion at period end 147,500 157,500 117,500 107,500 76,500---------------- ---------- ---------- ---------- ---------- ----------Notes:----------------(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

 Net Allowance Charges, Entire Portfolio($ in thousands)---------------------------------------------------------------------------- Purchase PeriodAllowance Period 1996-2003 2004 2005 2006 ---------- ---------- ---------- ---------- 2005 $ 200 $ - $ - $ - 2006 275 - 825 - 2007 235 470 1,885 340 2008 (110) 1,290 3,040 7,170 2009 (600) (375) 4,190 4,860 Q1 10 - - 2,795 1,175 Q2 10 - (80) 1,600 2,100 Q3 10 - (80) 1,650 2,050 Q4 10 - (10) 832 1,720 Q1 11 - (15) 455 (100) Q2 11 - - (217) - Q3 11 - - 641 100 ---------- ---------- ---------- ----------Total $ - $ 1,200 $ 17,696 $ 19,415 ========== ========== ========== ========== Portfolio Purchases, net $ 203,026 $ 59,177 $ 143,169 $ 107,704 ---------- ---------- ---------- ---------- Net Allowance Charges, Entire Portfolio($ in thousands)----------------------------------------------------------------------- Purchase PeriodAllowance Period 2007 2008 2009-2011 Total ---------- ---------- ---------- ---------- 2005 $ - $ - $ - $ 200 2006 - - - 1,100 2007 - - - 2,930 2008 7,380 620 - 19,390 2009 3,435 16,125 - 27,635 Q1 10 2,900 - - 6,870 Q2 10 700 2,000 - 6,320 Q3 10 2,750 150 - 6,520 Q4 10 1,150 1,750 - 5,442 Q1 11 400 3,300 - 4,040 Q2 11 - 2,500 - 2,283 Q3 11 (500) 500 - 741 ---------- ---------- ---------- ----------Total $ 18,215 $ 26,945 $ - $ 83,471 ========== ========== ========== ========== Portfolio Purchases, net $ 258,401 $ 275,162 $ 957,578 $2,004,217 ---------- ---------- ---------- ---------- Net Allowance Charges, Purchased Bankruptcy Portfolio($ in thousands)---------------------------------------------------------------------------- Purchase PeriodAllowance Period 1996-2003 2004 2005 2006 ---------- ---------- ---------- ---------- 2007 $ - $ 470 $ 160 $ 150 2008 - 770 375 1,210 2009 - 45 265 120 Q1 10 - - 95 50 Q2 10 - (30) 25 - Q3 10 - (30) - (100) Q4 10 - (10) (18) (30) Q1 11 - (15) (95) (100) Q2 11 - - (17) - Q3 11 - - (59) (100) ---------- ---------- ---------- ----------Total $ - $ 1,200 $ 731 $ 1,200 ========== ========== ========== ========== Portfolio Purchases, net $ - $ 7,468 $ 29,301 $ 17,645 ---------- ---------- ---------- ---------- Net Allowance Charges, Purchased Bankruptcy Portfolio($ in thousands)----------------------------------------------------------------------- Purchase PeriodAllowance Period 2007 2008 2009-2011 Total ---------- ---------- ---------- ---------- 2007 $ - $ - $ - $ 780 2008 - - - 2,355 2009 110 - - 540 Q1 10 1,200 - - 1,345 Q2 10 - - - (5) Q3 10 600 - - 470 Q4 10 950 - - 892 Q1 11 1,150 1,300 - 2,240 Q2 11 - 500 - 483 Q3 11 - - - (159) ---------- ---------- ---------- ----------Total $ 4,010 $ 1,800 $ - $ 8,941 ========== ========== ========== ========== Portfolio Purchases, net $ 78,547 $ 108,609 $ 511,762 $ 753,332 ---------- ---------- ---------- ---------- Net Allowance Charges, Core Portfolio($ in thousands)---------------------------------------------------------------------------- Purchase PeriodAllowance Period 1996-2003 2004 2005 2006 ---------- ---------- ---------- ---------- 2005 $ 200 $ - $ - $ - 2006 275 - 825 - 2007 235 - 1,725 190 2008 (110) 520 2,665 5,960 2009 (600) (420) 3,925 4,740 Q1 10 - - 2,700 1,125 Q2 10 - (50) 1,575 2,100 Q3 10 - (50) 1,650 2,150 Q4 10 - - 850 1,750 Q1 11 - - 550 - Q2 11 - - (200) - Q3 11 - - 700 200 ---------- ---------- ---------- ----------Total $ - $ - $ 16,965 $ 18,215 ========== ========== ========== ========== Portfolio Purchases, net $ 203,026 $ 51,709 $ 113,868 $ 90,059 ---------- ---------- ---------- ---------- Net Allowance Charges, Core Portfolio($ in thousands)------------------------------------------------------------------------ Purchase PeriodAllowance Period 2007 2008 2009-2011 Total ---------- ---------- ---------- ---------- 2005 $ - $ - $ - $ 200 2006 - - - 1,100 2007 - - - 2,150 2008 7,380 620 - 17,035 2009 3,325 16,125 - 27,095 Q1 10 1,700 - - 5,525 Q2 10 700 2,000 - 6,325 Q3 10 2,150 150 - 6,050 Q4 10 200 1,750 - 4,550 Q1 11 (750) 2,000 - 1,800 Q2 11 - 2,000 - 1,800 Q3 11 (500) 500 - 900 ---------- ---------- ---------- ----------Total $ 14,205 $ 25,145 $ - $ 74,530 ========== ========== ========== ========== Portfolio Purchases, net $ 179,854 $ 166,553 $ 445,816 $1,250,885 ---------- ---------- ---------- ---------- Purchase Price Multiples at September 30, 2011, Entire Portfolio($ in thousands)---------------------------------------------------------------------------- Total Estimat Net Finance Actual Cash ed Receivables Collections Collect Total Balance at Including Estimated ions toPurchase Purchase Estimated September Cash Remaining Purchas Period Price Collections 30, 2011 Sales Collections e Price---------------------------------------------------------------------------- 1996 $ 3,080 $ 10,244 $ - $ 10,133 $ 111 333% 1997 7,685 25,542 - 25,276 266 332% 1998 11,089 37,372 - 36,870 502 337% 1999 18,898 69,217 - 67,958 1,259 366% 2000 25,020 115,723 - 112,831 2,892 463% 2001 33,481 173,562 - 169,712 3,850 518% 2002 42,325 194,567 - 189,071 5,496 460% 2003 61,448 258,690 - 250,428 8,262 421% 2004 59,177 193,917 - 185,401 8,516 328% 2005 143,169 309,864 13,377 284,295 25,569 216% 2006 107,704 218,184 19,983 183,555 34,629 203% 2007 258,401 507,831 70,611 388,573 119,258 197% 2008 275,162 531,849 114,070 339,458 192,391 193% 2009 281,442 744,873 146,078 377,599 367,274 265% 2010 358,349 793,259 252,628 251,198 542,061 221%YTD 2011 317,787 654,370 302,731 41,414 612,956 206%---------------------------------------------------------------------------- Total $ 2,004,217 $ 4,839,064 $ 919,478 $ 2,913,772 $ 1,925,292 241%---------------------------------------------------------------------------- Purchase Price Multiples at September 30, 2011, Purchased Bankruptcy Portfolio($ in thousands)---------------------------------------------------------------------------- Total Estimat Net Finance Actual Cash ed Receivables Collections Collect Total Balance at Including Estimated ions toPurchase Purchase Estimated September Cash Remaining Purchas Period Price Collections 30, 2011 Sales Collections e Price---------------------------------------------------------------------------- 1996- 2003 $ - $ - $ - $ - $ - 0% 2004 7,468 14,383 - 14,273 110 193% 2005 29,301 43,326 79 43,146 180 148% 2006 17,645 31,189 141 30,279 910 177% 2007 78,547 111,082 15,837 92,058 19,024 141% 2008 108,609 184,083 49,641 115,115 68,968 169% 2009 156,061 367,213 95,034 174,834 192,379 235% 2010 209,284 386,164 160,891 115,781 270,383 185%YTD 2011 146,417 225,631 144,687 6,699 218,932 154%---------------------------------------------------------------------------- Total $ 753,332 $ 1,363,071 $ 466,310 $ 592,185 $ 770,886 181%---------------------------------------------------------------------------- Purchase Price Multiples at September 30, 2011, Core Portfolio($ in thousands)---------------------------------------------------------------------------- Total Estimat Net Finance Actual Cash ed Receivables Collections Collect Total Balance at Including Estimated ions toPurchase Purchase Estimated September Cash Remaining Purchas Period Price Collections 30, 2011 Sales Collections e Price---------------------------------------------------------------------------- 1996 $ 3,080 $ 10,244 $ - $ 10,133 $ 111 333% 1997 7,685 25,542 - 25,276 266 332% 1998 11,089 37,372 - 36,870 502 337% 1999 18,898 69,217 - 67,958 1,259 366% 2000 25,020 115,723 - 112,831 2,892 463% 2001 33,481 173,562 - 169,712 3,850 518% 2002 42,325 194,567 - 189,071 5,496 460% 2003 61,448 258,690 - 250,428 8,262 421% 2004 51,709 179,534 - 171,128 8,406 347% 2005 113,868 266,538 13,298 241,149 25,389 234% 2006 90,059 186,995 19,842 153,276 33,719 208% 2007 179,854 396,749 54,774 296,515 100,234 221% 2008 166,553 347,766 64,429 224,343 123,423 209% 2009 125,381 377,660 51,044 202,765 174,895 301% 2010 149,065 407,095 91,737 135,417 271,678 273%YTD 2011 171,370 428,739 158,044 34,715 394,024 250%---------------------------------------------------------------------------- Total $ 1,250,885 $ 3,475,993 $ 453,168 $ 2,321,587 $ 1,154,406 278%----------------------------------------------------------------------------

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