PRAA's Net Income Nearly Doubles for Q2 2003

NORFOLK, VA – Portfolio Recovery Associates, Inc. (Nasdaq: PRAA), a company that purchases, collects and manages portfolios of defaulted consumer receivables, today reported net income of $5.2 million, or $0.33 per fully-diluted share, for the quarter ended June 30, 2003.

The company’s second-quarter 2003 earnings compare with pro forma net income of $2.7 million, or $0.24 per fully-diluted share, in the same period a year ago. The pro forma adjustment reflects the impact of corporate income tax on the pre-IPO period due to the company’s conversion from a limited liability company to a corporation in connection with its November 2002 initial public offering.

Total revenue rose to $21.4 million in the second quarter of 2003 from $13.4 million in the same period a year ago.

“Portfolio Recovery Associates has posted yet another strong quarter from an operating standpoint — with net income nearly doubling — by continuing to stick to our strategy of controlled growth and disciplined expense control,” said Steven D. Fredrickson, Chairman, President and Chief Executive Officer. “Importantly, the attractive market of charged off debt that has helped us build such a strong earnings stream continued through the second quarter, allowing us to purchase an additional $698 million of face-value paper at compelling prices.”

For the first half of 2003, the company’s earnings rose to $9.7 million, or $0.62 per fully-diluted share, from a pro forma $4.9 million, or $0.43 per share, for the six months ended June 30, 2002. Total revenue for the first half of 2003 climbed to $39.7 million from $24.9 million in the same period a year ago.

Financial and Operating Highlights

• Net income nearly doubled in the second quarter, advancing 93% to $5.2 million compared with pro forma net income from the year-ago period. Continued high levels of efficiency in the company’s debt-collection operation was again an important driver of profitability, as was the quality of the debt portfolios the company has been able to acquire over time.

• Total revenue grew 60% in the second quarter of 2003 to $21.4 million, from $13.4 million in the year ago period. The period’s total revenue consists of cash receipts, reduced by an amortization rate of 30.3%, applied to reduce the carrying value of the owned debt portfolios, plus commissions from the company’s contingent-fee collection business.

• Cash collections rose to $29.6 million in the second quarter of 2003 from $19.3 million in the year-ago period. Cash collections per hour paid, the company’s key measure of collector performance, improved to $111.21 for the first six months of 2003 from $96.37 for full-year 2002. Productivity rose to record levels at both the Norfolk, VA, and Hutchinson, KS, call centers.

• The company purchased $698 million of face-value debt during the second quarter of 2003 for $20.8 million, representing a blended rate of 2.98%. This debt was purchased in 22 transactions from 9 different sellers and reflects the large amount of well-priced defaulted consumer debt available in the market. The company purchased a mix of pools more highly weighted to fresher accounts than in recent quarters.

“Portfolio Recovery Associates’ second-quarter performance was driven in large part by our ability to keep collector productivity high, despite bringing new capacity on-line as we continued to add staff at our Hampton facility and the conclusion of the seasonally strong tax-refund period,” said Kevin P. Stevenson, Chief Financial Officer. “The company was able to achieve substantial growth while maintaining a strong balance sheet, providing ample resources for continued expansion in a controlled and profitable manner. Performance was strong across our portfolios, from our older, legacy pools right up through our most recent acquisitions.”

About Portfolio Recovery Associates, Inc.
Portfolio Recovery Associates (www.portfoliorecovery.com) 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 service providers. The defaulted consumer receivables Portfolio Recovery Associates collects are either purchased from the credit originator or are collected on behalf of clients on a commission basis.

For this complete release, including financial data, please visit PRAA’s Net Income Nearly Doubles for Q2 2003.