Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Portfolio Recovery Associates, Inc. (NASDAQ:PRAA)

Q2 2012 Earnings Call

August 1, 2012 5:00 p.m. EDT

Executives

Jim Fike – VP, Finance and Accounting

Steve Fredrickson – Chairman, President and CEO

Neal Stern – EVP, COO

Kevin Stevenson – EVP, CFO and Chief Administrative Officer

Analysts

Hugh Miller – Sidoti & Co.

Bob Napoli – William Blair & Co.

Mark Hughes – SunTrust Robinson Humphrey

Operator

Good day, ladies and gentlemen, and welcome to the second quarter 2012 Portfolio Recovery Associates Incorporated earnings conference call. My name is Melanie and I'll be your coordinator today. [Operator Instructions]. As a reminder, today's meeting will be recorded.

I would now like to turn the call over to Mr. Jim Fike. Please proceed.

Jim Fike

Good afternoon. I'm Jim Fike, Vice President of Finance and Accounting for Portfolio Recovery Associates. Thank you for joining our second quarter 2012 earnings call.

Speaking to you today will be Steve Fredrickson, our Chairman, President and Chief Executive Officer; Kevin Stevenson, our Chief Financial and Administrative Officer; and Neal Stern, our Executive Vice President and Chief Operations Officer, Loan Portfolios. We will begin with prepared comments and then follow up with a question-and-answer period.

Before we begin, I'd like everyone to please take note of our Safe Harbor language. Statements on this call which are not historical, including Portfolio Recovery Associates' or management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future, including with respect to the future portfolio performance, opportunities, future revenue and earnings growth, future cash collection, future space and staffing requirements, future productivity of collectors, and future contributions of the subsidiaries to earnings are forward-looking statements. These forward-looking statements 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 risk and uncertainties that may affect future results.

Due to such uncertainties and risks, you are cautioned not to place undue reliance on any forward-looking statements which speak only as of the date hereof. 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.

Now, here's Steve Fredrickson.

Steve Fredrickson

Thanks, Jim, and thank you all for joining us. Today I'm pleased to report record buying, cash collections, revenue and net income for a PRA quarter. I'll have our Q2 2012 highlights in a moment. Then I'll spend a few minutes on a midyear update of each of our fee-for-service businesses. Next, Neal Stern will comment on our operational strategies; Kevin Stevenson will discuss our key financials. Then we'll open the call to Q&A.

Our Q2 results continued our strong performance this year, demonstrating the strength of our business model focused on diverse revenue and earnings from our bankruptcy, core and fee businesses, as well as our strategy to in-stores collection. Here are the highlights of our Q2 results.

Cash collections, including those in the UK, were $232 million, up 32% from 2011. Domestic collections alone were $229.8 million, up 30% from a year ago. Revenue was up 29% year over year to $148 million. Net income increased 25% year over year to $32 million, translating into diluted earnings per share of $1.87 compared with $1.48 in the second quarter of 2011. Return on equity exceeded 20% in Q2, achieving the benchmark that we set as a long-term goal.

We acquired a record $1.48 billion of face value domestic finance receivables for $123 million in the second quarter. These receivables were at 105 defaulted debt portfolios from 12 different sellers. Pricing continues to be quite sensitive but steady relative to Q1 2012 in both the direct-from-issuer and resale markets.

With regard to expanded legal collections from those who can but won't pay their debts, I'm happy to report that we continue ahead of expectations to achieve both our two-to-one return and the six to 12-month recovery of court cost expenses. And we experienced a lower impact to earnings than expected by handily exceeding our internal projections for cash collections overall. Neal and Kevin will have more details in a moment.

In spite of our expanded investment in court costs, our net margin grew to 21.7% in Q2 from 18% in Q1 2012, and fell just slightly from 22.3% in Q2 2011. We continued executing opportunistic stock purchases under our existing program during the second quarter. Through June 30, we have acquired a total of 331,449 shares at an average price of $68.56 per share, spending a total of $22.7 million of the $100 million total authorized by the Board. We will continue to monitor market conditions as we administer the remaining $77 million under the current program.

We experienced a small sequential decline in our fee income from our fee-for-service businesses. I'd like now to give you a midyear update on each business.

Our large fee-for-service business, PRA Government Services, had a difficult quarter as a result of lower-than-anticipated contingency revenue from sales tax and use tax auditing. We believe this is a timing issue as the processing of collections from state agencies had been delayed. Government Services' hourly audit and revenue administration services performed well. As we're seeing sales efforts continuing to build Government Services book of business, we're investing more in our sales force. We anticipate improved results in Q3 and Q4.

PCB had a solid cash flow quarter and has been increasing marketing and sales efforts. Several very large cases are in the pipeline, including the recently announced Visa/MasterCard class action settling. The team is focusing on adding clients to the potential recipients of these large claims. PCB's strength has traditionally been in maximizing revenues to clients, and the team is now building a marketing engine to bring that message to market in order to expand the client base.

At PRA Location Services, we're seeing automotive delinquencies at historically low levels. This translates into fewer placements from existing clients and intense competition in the industry to secure new business. The result is pricing pressure. Although placements have been down significantly from last year, contributing to a year-over-year decline in revenue, overall results for Location Services improved as this business became more efficient. Meanwhile, automotive finance companies are starting to make more subprime loans. In the future, we anticipate more delinquencies will lead to more volume in this sector.

Several competitors have recently merged in an effort to survive and many are struggling to maintain viability. Location Services differentiates itself through technology, information, compliance and operational excellence. We believe that Location Services is the most efficient vendor to client, putting this business in a strong position when cyclicality moves in its favor.

In the UK, we continue to integrate local operations with PRA. We made significant progress on accounting, HR and operational front. We're now producing improved results for our UK clients as well as PRA by increasing the productivity of our UK call center staff. As a result, our standings in most league tables have increased nicely since we bought this business.

Our sales efforts in the UK have resulted in an increased level of placements from numerous lenders, while many of our UK debt-buying clients have cut back or eliminated new placements to Mackenzie Hall's contingency operations. We had anticipated that this would occur over time, but frankly, it has occurred more quickly than we thought. However, with our increased productivity, even with lower inventory, we have produced increasing levels of fee income. As we build our contingent work from financial service companies, we should be able to continue this growth. Our UK debt purchase activity in Q2 remained at very modest levels, $2.1 million in small and niche portfolios as we continue to analyze market opportunities.

We announced last week that we promoted Owen James to Mackenzie Hall CEO role. Owen has experience working in large matrix organizations as well as deep experience in the collections and finance industry in the UK. He's an ideal fit for this position and I'm very pleased to have him in this role.

For the last ten years, PRA has pursued a strategy of deliberate diversification into businesses outside of our historical route, in the purchase and collection of US-based charge-off debt. With each acquisition of our internal startup, we've sought to maintain the common characteristics of data and analytics-rich businesses that can differentiate themselves from the competition through operational excellence. Our bankruptcy business is a great example of this strategy in action. Starting from the business plan in 2001 to operational reality in 2003, it's become our largest contributor of profit for each of the past several years.

All of the acquired fee-for-service businesses are making progress along the 2012 business plan, and while we would certainly like to see more material earnings impact, each is providing positive cash flow for 2012. The Location Services business paid for itself years ago, and each of our acquisitions is performing to a cash-on-cash return [in mid-teens]. We remain committed to our diversification strategy.

The real story this quarter, however, is the exceptional performance of our debt purchase business, both core charge-off and bankruptcy. Let's keep that in perspective.

Finally, before I turn the call over to Neal, here's an update on US legislative and regulatory activity. Although some state legislatures remain in session, none have enacted proposals with any material effect on our debt-buying or collection business. As might be expected in a Presidential Election year, the pace of activity on Capitol Hill has been noticeably slow while members devote more time and attention to reelection campaigns and the upcoming nominating convention. As a result, we do not expect any significant new federal laws to be enacted before new Congress is sworn in next January.

The Consumer Financial Protection Bureau continues to increase [inaudible] these activities and grow into its intended role. During the second quarter, CFPB reviewed public comments for a ruling defining supervision and examination authority over large market participants in certain non-bank financial markets, including debt collectors. We expect to be included among the non-bank large market participants when the CFPB ruling is issued this fall.

The CFPB's director recently described its role as "helping honest debt collectors do their jobs responsibly while seeing that the rest are either rehabilitated or run out of business once and for all." Naturally we endorse that goal.

To summarize, this was a record quarter for PRA, resulting in exceptionally strong results at midyear. I want to publicly thank our employees who have worked so hard to deliver such extraordinary results for shareholders. We have an exceptional team that's putting even more room between us and our competitors. And we look forward to sustaining our future growth and success for all of 2012.

Now let me turn the call over to Neal Stern.

Neal Stern

Thanks, Steve.

Continuing Steve's commentary on a record quarter, I'm pleased to report that PRA collected more than 2 million US payments in a single quarter for the first time in our company's history. This milestone represented a 30% increase over Q2 2011. It's a strong testament to our staff's ability to find workable solutions to the financial difficulties that many US consumers continue to manage.

As was the case in the first quarter, our average payment size was consistent with Q2 2011, reversing the declining trend we've experienced for the last several years. We expect our average payment size to remain stable or increase and remain coupled with a four-year running trend of double-digit increases in the number of monthly payments. The result, cash collections will continue to be strong.

In Q2, our strong performance was again driven by significant increases in collections from our purchased bankruptcy portfolio and from our legal channel and benefited from continued seasonal strength this quarter. Purchased bankruptcy portfolio collections increased $23.6 million or 35% over the second quarter of 2011, while legal collections increased $23.5 million or 54%.

External legal collections were 52% higher and the internal legal collections were up 58%. Internal legal collections accounted for 38% of our total legal collections compared with 37% at the same quarter last year. This strong legal collections performance continues to be above what we expected from the incremental increase in court costs invested over the prior two quarters. Cash collections resulting from our incremental increase in Q1 court costs are now more than 30% above our internal expectations.

Collections from Q2 investments finished almost 10% ahead of our expectations. Even with these six months of performance results to examine, it's still difficult to assess whether or not these incremental cash collections represent acceleration or actual improvement in our longer-term cash collections. So we are now attributing at least some small percentage of that strong performance to an underlying improvement and have updated our models accordingly.

Our investment in court costs in Q3 will be similar to or slightly less than our Q2 legal expenses and will likely be lower yet in the fourth quarter as we begin to prepare for the Q1 2013 tax season. Again it's our expectation that we will deliver a 200-plus percent ROI on these incremental costs and recoup our costs within six to 12 months after making the investment.

I want to reiterate that these changes have not altered our philosophy about how and when to pursue legal collections. We will continue to only file lawsuits on the minority of accounts where we've attempted to collect in our call centers, identified an asset, and have not been able to compel the account holder to pay. In other words, won't pays, not can't pays. This philosophy currently limits the population of accounts selected for legal treatment to less than 7% of our inventory, a figure that remains well below many others in our industry.

Turning now to our call centers, cash collections were also strong in the second quarter, although they were down sequentially from Q1, which is generally our seasonally strongest quarter for call center collections. Call center collections were up by 10% over Q2 of last year.

Total paid hours at our US call centers were up by 15% over the prior year. These additional hours normally dampen collector productivity, but increased efficiencies negated most of that impact and allowed us to finish within 5% of the productivity results from Q2 of last year. As a reminder, Q3 and Q4 are both seasonally weaker than Q1 and Q2, with the most pronounced effects seen in Q4. We expect normal seasonal trends this year even with the added legal investments we've been making.

Finally, our work in the UK continue to produce encouraging results as we share best practices between our US and UK call centers. UK collector productivity has been favorably impacted by these changes and we continue to make slow but steady progress in building a platform in the UK in which we can leverage some of the scoring and account segmentation strategies that have made such a significant impact on our domestic performance over the last several years.

Now let me turn the call over to Kevin Stevenson for our key financial results. Kevin?

Kevin Stevenson

Thanks, Neal.

Hopefully you've had an opportunity to review our earnings results that were released earlier today. I'm going to run through the key items and try to leave additional time for Q&A. I'm going to note, the comparisons I'm about to make are between second quarter 2012 and second quarter 2011 unless otherwise noted.

Total revenues grew 29% to $147.9 million, up from $114.8 million. Revenue was comprised of $132.6 million in net finance receivables, or NFR revenues, and $15.3 million in fee revenues. The $132.6 million in finance receivable revenue for the quarter included $88.3 million in core portfolio revenue, including an allowance reversal of $260,000, and $43.1 million in bankruptcy portfolio revenue net of an allowance charge of $2.5 million. Net core portfolio revenues increased 35% while net bankruptcy portfolio revenues increased 23%.

Fee revenue of $15.3 million increased 6% and accounted for 10% of the company's overall revenue. Fee revenue from our UK operation offset a year-over-year decline in fee revenue from our domestic fee-for-service subsidiaries. During the quarter we generated approximately $1.1 million in finance receivable revenue from our UK operation and approximately $3.4 million in fee revenue.

Operating expenses for the quarter increased 32%. Operating expenses were impacted by a planned $8.3 million increase in legal costs related to our expanded focus on legal collections. Operating expenses were also impacted by a $7.7 million increase in compensation and employee services expenses, as well as other expense increases primarily related to growth in collection activities. We continue to anticipate court and document costs of $16 million to $18 million for the third quarter and then $14 million in the fourth quarter.

Operating income was $54.6 million compared with $45.5 million or a 20% increase. Our operating margin was 36.9% for the quarter, down from 39.7%. The decrease can be attributed in large part to the increased legal collection expenses associated with the company's longer-term focus on driving additional collections from the legal channel.

Net income of $32 million is up 25% from $25.6 million. The net margin for the quarter was 21.7%, down slightly from 22.3%. Diluted earnings per share advanced to $1.87 compared with $1.48, or a 26% increase.

Moving on to the balance sheet, cash balance at the end of the quarter is $43 million. During the quarter we invested $125 million in defaulted debt portfolios. This represented $1.5 billion in face value and included $53.5 million of bankrupt paper and $71.5 million of core charge-off paper, including investment made by our UK operation.

The NFR balance increased to $967 million, up from $880 million. The NFR balance is the amount of unamortized purchase price of acquired debt portfolios recorded on our balance sheet. The NFR revenue and amortization calculation this quarter resulted in 42% of cash collections being applied to principal. This is relatively consistent with the percentage in the year-earlier period. This percentage does not include the impact of allowance charges.

Our debt-to-equity ratio at quarter-end stood at 46%, consistent with the prior year. Our debt-to-equity ratio including net deferred tax liabilities was 76%.

As a reminder, in April, we increased our line of credit facility by $51 million to a total of $458.5 million. Existing lenders provided $41 million of the increase while $10 million was provided by a new lender. The balance on the line of credit was $292 million at June 30, moving availability under the line of $166.5 million, subject to borrowing base and debt covenants.

As Steve mentioned, our Board of Directors previously authorized during the first quarter the implementation of a share repurchase program of up to $100 million of our common stock. Today we've repurchased 331,449 shares at an average price of $68.56 per share. Our strong operating cash flows provide the flexibility to opportunistically use this program to enhance shareholder value and take advantage of market displacements should they develop. And our credit facility provides us with ample funding for portfolio purchases and other business opportunities. Overall our balance sheet remains strong.

Finally, let me turn to some other data. Return on equity was 20.3% in the quarter, up from 19.2%, and as such, surpassed our long disclosed goal of 20%. Cash collections increased 32% to $232 million in the quarter. Cash collected on fully-amortized pools was $7.5 million compared to $10.1 million.

And with that, we've completed our prepared comments. I'd like to open the call up to Q&A. Operator?

Question-and-Answer Session

Operator

Yes, sir. [Operator Instructions].

And our first question comes from the line of Hugh Miller with Sidoti.

Hugh Miller – Sidoti & Co.

Hi, good afternoon.

Steve Fredrickson

Hey there.

Hugh Miller – Sidoti & Co.

Hi. I guess one question I had was with regards to some of the markup you guys took in the quarter on the '09, '10 and '11 traditional vintages. Obviously, collections were very strong in the quarter, but was just wondering, as you look at where they stand now relative to kind of the underwriting process you did when you bought the paper, I guess, are they start to come more in line with how you are looking at them at the beginning, the accounting versus the underwriting forecast?

Kevin Stevenson

Well, to tell you the truth, Hugh, at this point, from an accounting perspective, we're running off of revised curves.

Hugh Miller – Sidoti & Co.

Right.

Kevin Stevenson

So, generally what we'll do, I know you know this, but just for the group's satisfaction, we'll get every quarter updated projections from Neal Stern and the operations bunch, and then we'll also get new projections from the acquisitions group. So we're going to track into those numbers. But certainly we continue to perform substantially better than underwritten.

Hugh Miller – Sidoti & Co.

Just wondering, you know, how conservative do you feel as though these new numbers? Just because I guess -- you've always done a great job of forecasting, but when I look at it relative to some peers, you know, it's just that they happened to be a bit higher. I'm just looking to get a sense of the level of conservativeness.

Kevin Stevenson

Well, I get asked this question a lot and I think every quarter I say the same thing. We feel like we're in a good spot right now and we'll have to let the numbers in the next couple of quarters guide us. But I think we continue to get, I guess maybe in general terms, we continue to get increasing percentages or projections from everyone basically that provides us projections. So I think we're in a good spot right now.

Hugh Miller – Sidoti & Co.

Okay. Okay. I guess as you look out on the competitive landscape, you gave us a little bit of color there. But I continue to hear about the potential for some other competitors to potentially exit the business. Do you foresee an environment where we could possibly see pricing come down in the next year or two, or do you think best case scenario is that it kind of just stays relative to where it is, steady?

Steve Fredrickson

I think it would probably be optimistic to look for declining prices. I would say that it's probably more likely that even if people exited, we'd continue to see a fair amount of competition in the market and pricing would remain relatively steady. But I guess that's all going to be dependent on the magnitude of supply we’d see coming out and what happens on the competitive front.

Hugh Miller – Sidoti & Co.

Okay. And as I look at the blended interest rate that you guys had in the quarter, it came in a bit lower than I was looking for, obviously despite the strong purchasing. Was the quarter's purchases fairly backend-loaded or was there anything unusual on this particular quarter?

Kevin Stevenson

Maybe the, you know, if you look at our financials, we had a fixed-rate tranche of $50 million that rolled into our floating base. So that probably had the delta you're looking at. I think that interest rate was 6.7%.

Neal Stern

Six-point-eight.

Kevin Stevenson

Six-point-eight percent on that $50 million tranche.

Hugh Miller – Sidoti & Co.

And so that should be then floating --

Kevin Stevenson

Yeah, it's normal floating with LIBOR, yeah.

Hugh Miller – Sidoti & Co.

Right. Okay. That's probably the difference there. And the other thing I noticed too was the stock-based comp, I guess in the first half of the year, I think you guys made a quick comment about it. This tends to be running substantially higher. Is there any particular reason why it's accruing at that rate? Should we see kind of a drop-off from the first half's levels as we think about that in the second half of the year?

Kevin Stevenson

No, we definitely made an adjustment to that, the long-term incentive program. That's what you're seeing this quarter.

Hugh Miller – Sidoti & Co.

Yeah.

Kevin Stevenson

And it just depends on the performance of the stock and all of our computations for all the components of LTI.

Hugh Miller – Sidoti & Co.

Okay. And last question I had was with regards to, you know, you made some commentary about the getting some decisions on the CFPB about who they may include as a large participant. Do you guys anticipate that they will kind of ratchet up that threshold and kind of oversee far fewer participants, or any thoughts there?

Steve Fredrickson

Well, we're certainly rooting for as many people to be participating in this as possible. Some of the early commentary the CFPB had put out in writing suggested that the number of 50 is fairly low, and we would get -- I think estimates were closer to 200 participants. So we'll wait and see what that number ultimately is, but naturally we're hoping that it's fairly expansive.

Hugh Miller – Sidoti & Co.

Okay. Thank you.

Operator

Our next question comes from the line of Bob Napoli with William Blair. Go ahead.

Bob Napoli – William Blair & Co.

Thank you. And I missed some of your opening comments, so I apologize if you did talk, discuss this in more depth. But the -- I guess I would like to get a little bit more color on your strategy in the UK and how it's progressing. I know you've taken best practices over there and you say, and I've heard it, you've improved productivity. But at what point do you -- I mean, how much work do you need to do over there before you start to look to grow that business? I mean, do you have PRA-ed yet or, you know, what else needs to be done?

Steve Fredrickson

I think that we're -- we feel good about where the business is and what we're really waiting on in terms of the increasing investment is how our portfolios are performing, just getting comfortable with the market dynamics there. And that's just a matter of quarter by quarter.

Bob Napoli – William Blair & Co.

And so this may be, I mean you may watch that business for a year or so -- obviously with the results you're driving, there's no hurry to ramp that business up. But I mean, will it take, say, a year of watching portfolios perform before you get more comfortable with growing that business more quickly, something like that?

Steve Fredrickson

No. It all depends on the type of performance that we see over time, Bob, and we'll just kind of follow that carefully. But again, the move to the UK was a long-term move for us and we'll go about this in an even pace.

Bob Napoli – William Blair & Co.

Is your one big competitor that suggested they would be out of the market for a quarter or so, are they out of the market?

Steve Fredrickson

It's difficult for us to establish exactly who's in the market and for how much. So I'd say at this point it's kind of difficult to tell.

Bob Napoli – William Blair & Co.

Your allowance, $89 million, your reserve, what are your thoughts around that reserve over the next several years? Do you think you'll recover a meaningful portion of that reserve or not?

Kevin Stevenson

Oh, I'm sorry. Total allowance number.

Bob Napoli – William Blair & Co.

Yes.

Kevin Stevenson

Dear. All right. I [inaudible] this quarter reserve, [of our own] numbers you're looking at.

Bob Napoli – William Blair & Co.

Yeah.

Kevin Stevenson

You know, so again, here we are, you know, we reversed all 350,000.

Bob Napoli – William Blair & Co.

Right.

Kevin Stevenson

It is actually interesting, a couple of deals, I'll give you a little bit of insight, a couple of older deals in '05 and '07 had reversed off all their allowance last quarter. Of course, we didn't do anything in regard to yield there. But again, second quarter, and again this couple of deals came in so strong that we did actually increase the interest rate, the yield on one of those deals. So there's an evidence that some of those vintages in '05 and '07 especially are showing some signs of reversing allowances, and a couple of them for the first time ever, and then in a couple of cases expanding yield.

So we're going to be very cautious still, Bob. When you have a deal that's got allowance on it, last thing you want to do is reverse it off and rebook it. So we're trying to be careful about that.

Bob Napoli – William Blair & Co.

Right. Congratulations on a nice job.

Steve Fredrickson

Thank you.

Neal Stern

Thank you.

Operator

Our next question comes from the line of Mark Hughes with SunTrust. Go ahead.

Mark Hughes – SunTrust Robinson Humphrey

Thank you very much.

Steve Fredrickson

Hey, Mark.

Mark Hughes – SunTrust Robinson Humphrey

Hello. The collections in the quarter, any stab you can make at how much contribution you got from the extra legal spending or expenditures in -- that you've done through the first six months?

Neal Stern

I mean, you know, when you think about the legal curve, we just talk about getting our money back within six to 12 months, so you know we expense an incremental $14 million or so in the Q, and you can imagine how that comes back over that six to 12-month time period. But we're really not in [a midi] part of the curve yet, so these first six months are still very early in terms of what we would realize from that spend.

Mark Hughes – SunTrust Robinson Humphrey

Would you say it's small, maybe a few points of total collections.

Steve Fredrickson

Yeah. Yeah, right.

Mark Hughes – SunTrust Robinson Humphrey

Kevin, the 2010 vintage, to the earlier discussion, and actually the collections increased year over year, which is very unusual, anything happening there? Any strange steps you've taken that target that 2010 paper, or is that just indicative of good collections overall?

Kevin Stevenson

We just wanted you think a victory lap on your prediction early on that 2010 was going to be a great year for us. But no, seriously, this question came up last quarter and I gave you credit for identifying that early on. But, no, tranches definitely performing very well; there's nothing Neal did out of the ordinary on that tranche. And so we're considering to move those projections upward.

Mark Hughes – SunTrust Robinson Humphrey

Okay, great. And then one more question, the payables and accrued liabilities, I can't remember whether you'd made a comment on this in Q1, but the dampening cash flow, what is going on there? And does that reverse at some point?

Kevin Stevenson

What name are you looking at?

Mark Hughes – SunTrust Robinson Humphrey

Out of the cash flow, I think it's payables and accrued liabilities, and then a negative for you through six months on the cash flow statement. Looking at negative $19.7 million, if I'm reading this properly.

Kevin Stevenson

All right. It's a negative number, right. I mean we're certainly looking at some additional accruals there.

Mark Hughes – SunTrust Robinson Humphrey

I think a lot of that was -- happened in Q1, so, I'm just curious if there's anything unusual or whether that's just a timing issue that[had on a] reverse in --

Kevin Stevenson

Yeah. So you can tell by our delay here, it's probably nothing unusual that kind of hit our radar screens. So we can take that apart and take a look at it. But nothing unusual coming to mind on that.

Mark Hughes – SunTrust Robinson Humphrey

Okay. All right. Thank you. Good quarter.

Kevin Stevenson

Thanks.

Steve Fredrickson

Thank you.

Operator

Ladies and gentlemen, that does conclude the time that we have available for questions. We'd like to thank you for your participation in today's conference. That does conclude the presentation. You may disconnect. Have a wonderful day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Portfolio Recovery Associates' CEO Discusses Q2 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts