PRA Group Inc (PRAA) 2009 Q4 法說會逐字稿

Welcome to the fourth quarter 2009 Portfolio Recovery Associates Incorporated earnings conference call. I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's conference, Mr. Jim Fike, Vice President of Finance and Accounting. Please proceed.

Good afternoon, and thank you for joining Portfolio Recovery Associates' fourth quarter and full year 2009 earnings call. Speaking to you today will be Steve Fredrickson, our Chairman, President and CEO, Kevin Stevenson, our Chief Financial and Administrative Officer, and Neal Stern, our Chief Operating Officer of Owned Portfolios. We will begin with prepared comments and then follow up with a question and answer period. Afterwards, Steve will wrap up the call with some final thoughts.

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's performance, opportunities, future revenue and earnings growth, future space and staffing requirements, future productivity of collectors, expansion of the RDS, IGS and munis services businesses, and future contribution of the RDS, IGS and munis services businesses 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 risks 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 and 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 is Steve Fredrickson, our Chief Executive Officer.

Thanks, Jim, and thank you all for attending Portfolio Recovery Associates' fourth quarter and full year 2009 earnings call. On today's call, I'll begin by covering the Company's results broadly. Neal Stern will then talk to you in more detail about our operational strategies, and finally, Kevin Stevenson will discuss our financial results in detail. After our prepared comments, we'll open up the call to Q&A.

Portfolio Recovery Associates concluded a very challenging 2009 on a high note. We produced strong fourth quarter financial results, recording our highest net income since the second quarter of 2007, in the face of a tepid economic recovery, seasonal weakness in consumer collections, and a large allowance charge of $9.5 million. In addition to excellent overall numbers, which I'll detail in a moment, Portfolio Recovery Associates continued to build for the future in the final quarter of 2009.

Our continued ability to access capital in the challenging economy allowed PRA to acquire large amounts of portfolios that we believe are well priced, even in a market where collections have grown more difficult. In addition, we were able to sequentially improve both revenue and income at our fee businesses compared with Q3, during which we experienced some notable weakness, thanks to our operational strategies, cost containment and some seasonal strength. Taken together, these efforts position PRA to realize strong operating and financial results in the future.

Now onto our fourth quarter numbers. PRA acquired $75.1 million of defaulted debt during the quarter. Cash collections were a record $95.3 million, up 20.2% from $79.2 million in the year ago period. These helped drive our record cash receipts of $112.5 million in the quarter, up 14.7% from $98.1 million in the same period a year ago. Fee revenue was $17.3 million in the fourth quarter, a decline of 8.7% year-over-year.

Operating expense to cash receipts continued its general trend downward. In the fourth quarter of 2009, the ratio stood at 45.4% compared with 47.6% in the fourth quarter of 2008. We continued to tightly control operating expenses despite the difficult economic conditions, particularly at our fee subsidiaries where expenses are mostly fixed over the short term. PRA realized productivity of $145.44 per hour paid for full year 2009, which compares with $131.29 for full year 2008. This includes an increase of 13 net collectors to our company-wide owned portfolio call center staff from Q3 2009, and an increase of 76 from the end of 2008.

As I mentioned, PRA recorded another sizeable allowance charge in the quarter in the amount of $9.5 million. Kevin will provide details about the charges in a few minutes.

Revenue grew 9.3% to a record $73.2 million compared with the year ago quarter at $67 million despite the charge. EPS advanced 16% to $0.80 versus $0.69 in the fourth quarter of 2008. Net income of $12.4 million was up 17% from $10.6 million a year ago.

In terms of year-over-year comparisons, we booked net interest expense of $2 million in the fourth quarter, which was down from $2.9 million in the year ago quarter due to lower interest rates.

In terms of resources, our balance sheet remains strong with ample cash availability to continue building for the future. During the fourth quarter, we slightly increased absolute debt outstanding to $321 million, including $1.5 million of long-term financing not associated with our line of credit. This continues the very controlled financial leverage we have employed over the past several years. Our debt to equity ratio at quarter end stood at 96%, up just slightly from 95% at year end 2008, while we maintained $46 million availability under our lines of credit.

Now let's review our operations in detail beginning with fourth quarter portfolio purchases and overall market conditions. During the quarter, we acquired 101 portfolios from 13 different sellers. The majority, about 91% of our fourth quarter purchase volume, in terms of dollars invested, was from major credit card asset class. The remainder came from pools of line of credit, auto, and installment loan accounts.

The majority of the bankrupt accounts acquired during the quarter are included in the major credit card category. Bankrupt accounts accounted for about 59% of our purchase activity in terms of dollars invested. In Q4 once again, the vast majority of our bankruptcy purchases were fresher bankruptcy filings.

Remember since we buy dissimilar IRR's regardless of the age of the account, we tend to see slightly higher collections to purchase price multiples from fresh filings, with more delayed cash flows and slightly lower multiples with more mature already cash flowing filings.

Portfolio pricing firmed slightly during the quarter. The resale market continues to experience little to no volume in terms of offerings. Most competitors with access to reasonable amounts of capital appear to be exerting a fair amount of discipline.

On the past several calls I have talked to you about our view of the political climate for our industry. Although that topic remains cloudy for many businesses, ours included, let me summarize what we see today. First of all, the latest stories in the press suggest that the proposed consumer financial protection agency is losing steam, and that instead we will see existing oversight agencies step up their activities.

As it relates to debt collection and debt purchasing, it is likely that the FTC would be that lead regulator. Whether related to that possibility or not, as I am sure many of you have read, during Q1 the FTC began gathering information about the debt purchase industry. PRA and other large debt purchasers have been sent requests for information about how we go about buying and collecting accounts.

We're working closely with the FTC in what we view as an appropriate and intelligent process of gathering facts with an apparent focus on debt resale and account record keeping and documentation. Importantly, PRA does not resell debt and does not rely on resale as an integral part of our business model.

On the state level, we've continued our ongoing dialogues with a number of state attorney general's offices to foster continued positive working relationships with them. Nevertheless, given the current political climate, it is reasonable to expect some challenges from regulators and state legislators. We are proactively dealing with these issues by working diligently both alone and in conjunction with industry groups, to help provide perspective and education about our Company and industry to these parties.

Moving onto collections, as I mentioned earlier. Portfolio Recovery Associates recovered a record $95.3 million in the fourth quarter from owned portfolios, up 20.2% from $79.2 million a year earlier. Each month of the quarter had strong year-over-year growth rates, with November and December both much stronger than October.

Offering a bit more detail on our collections performance, call center and other collections were $45.4 million, up 10% from the same quarter last year. Cash collections from our purchased bankrupt accounts were a record $26.9 million, (inaudible) 59% from Q4 2008.

As we've discussed for the past several quarters, collections from our internal legal collection strategy, in which we use our own staff attorneys or in selection cases use third party attorneys working on a fixed price basis, were once again a record at $7.6 million in Q4 2009. This is up 185% from the same quarter last year. We expect continued strong growth from this channel for the foreseeable future.

External legal collections were 16% of total cash collections in Q4 2009 at $15.5 million. This compares with 23% in Q4 2008 at $18.4 million, representing a 16% year-over-year decline.

We track owned portfolio productivity in terms of recoveries per hour paid. The core metric that measures the average amount of cash each collector brings in. As I said earlier, this metric finished at $145.44 for the full year 2009, compared with $131.29 for full year 2008.

Excluding the effect of trustee administered purchased bankrupty collections, PRA's productivity for full year 2009 was $113.42 versus $109.82 for the full year 2008. When excluding legal and trustee administered purchased bankruptcy collections, productivity for full year 2009 was $87.13 per hour paid versus $75.47 for all of 2008. Neil will give you more color on site specific productivity in a moment.

Company-wide at quarter's end, our own portfolio collector head count was 1,325, up about 13 from the end of September. As it relates to staffing, please remember that a majority of our recent buying has been related to pools of bankrupt accounts, which require relatively low levels of staff to handle. Please also note that our bankruptcy staff is not included in the collector head count numbers I just shared with you.

Now let's turn to PRA's fee for service businesses in the collateral location skip tracing and government services arenas. Our fee for service businesses saw revenue decline 8.7% from the same period a year earlier, to $17.3 million. Still, this was a significant 21% improvement from $14.2 million in Q3 2009, aided by seasonal strength. Although revenue increased at our skip tracing unit, net operating income fell somewhat from the same period a year ago, as we continued to deal with volume and business mix changes from clients.

Our increased physical capacity in Las Vegas, together with recently signed clients and the development of new product offerings, are working to restore growth to the IGS business over the short run. We expect this trend to continue.

The government services businesses performance improved from the prior quarter due to the anticipated lift from year end business license processing. But it continued to be hurt by declining sales and use tax in California, driven by the recession. Although we continue to sign new clients and see strong demand from municipalities given the fiscal pressures many of them face these days, this recession-related revenue slow down from some of our larger clients continues to be disappointing. The sales and use tax decline will undoubtedly keep persistent pressure on the government services business for some time.

Before I turn the call over to Kevin Stevenson, PRA's Chief Financial and Administrative Officer, I'd like to have Neal Stern, our Chief Operations Officer of the Owned Portfolio business, give you a summary of our operational strategies. Neal?

Thanks, Steve. During the fourth quarter, PRA's operational results reflected the trends we have been discussing with you throughout 2009. The number of people making monthly payments to us has continued to increase significantly. The benefit of this has been offset in the short term by the fact that those payments had smaller average balances, reflecting both our increased dialing capacity, and the difficult macroeconomic environment. In Q4, the total number of payments received was up a strong 40% over the prior year. For full year 2009, the number of payments finished 35% higher than 2008.

Clearly this is not just a reflection of our 2009 purchase activity. More people understand the importance of credit. And we have made significant strides in productivity through increased automation and improved analytics. In December, the total number of agent phone calls increased by 16% over the prior year, and we were able to much more narrowly target the groups that we felt were the most likely to have the ability to pay.

As I have indicated on prior calls, it is my contention that the short term issues related to average payment size, which for the call centers in December was down almost 15% over the prior year, can be more than overcome provided we're able to keep people on payment plans in an operationally efficient manner. To this point, our fourth quarter call center collections, on accounts that we've owned for more than five years, finished at $3.7 million, and for the full year 2009 that number was $16.5 million, a 50% increase over 2008.

Importantly, this result was obtained in a tremendously efficient manner. Obviously we could set about increasing the collection to purchase price multiple from any prior year if we focused all of our efforts on accounts purchased in that year. However, our overall productivity and profitability results would suffer as a result. Our ability to collect on these older accounts in such an efficient manner without undermining productivity or profits speaks directly to the quality of our staff, improvements in dialing, and our ability to leverage what I believe is the best scoring model in the industry.

Again, let me make our strategy very clear, we do not seek to maximize collection to purchase price multiples, but rather we work to maximize IRR's on invested capital. We feel this is a much more shareholder focused approach.

Our decision to aggressively build out our internal legal program in lieu of farming out work to external law firms was borne out in the fourth quarter by our results. Importantly, this internal capability has also allowed us to side step much of the turmoil currently underway as a result of regulatory and bankruptcy proceedings involving some of the largest external firms used by many in the industry. Our internal legal collections finished the fourth quarter up 185% over prior year. And our fourth quarter legal results in total finished 9% ahead of 2008.

While our full year legal results ended 7% lower than 2008, our decision to focus our 2009 efforts on building our internal legal process and refining our external legal efforts, clearly positions us to realize more of the healthy bottom line improvements from the fourth quarter in the years to come.

Closing the productivity gap between our collection sites remains at the front of our operational objectives, given the sizeable opportunity that gap represents. Had all of our call centers delivered the same cash collections per paid hour as our top site, we would have realized another $7.4 million in collections for the fourth quarter. Although this estimated theoretical value gap was down by almost $1.5 million from Q2, $3 million from Q1, and more than $1 million from Q4 2008, it was $1.5 million worse than in Q3.

During Q4, we saw increased site specific productivity per paid hour of about 10% year-over-year. As a reminder, this site specific productivity figure looks only at hourly paid productivity by collection reps. It excludes not only legal and bankrupt accounts, but also any non-collector assigned, in bound generated collections or collections coming from external activities such as collection agencies.

Productivity was up year-over-year at every call center location. In Jackson, Tennessee, productivity was up 15% year-over-year, and down 8% sequentially. Productivity was up 8% year-over-year and down 7% sequentially in Hampton. Up 4% year-over-year but down 2% sequentially in Kansas. Was up 10% year-over-year but down 11% sequentially in Norfolk. And was up 41% year-over-year but down 14% sequentially in Birmingham. The Philippines office was up 45% year-over-year, and up 4% sequentially.

On an absolute basis, Kansas remained our top call center for the quarter. During the quarter on a relative basis, Jackson was about 75% of the Kansas standard, Hampton was 86%, Norfolk was 87%, and Birmingham was 52%. Productivity in the Philippines office continued its trend of improving performance at 39% of the Kansas standard.

As a reminder, this center tends to receive more accounts that are difficult to collect. Since the Philippine collectors are less expensive to employ, we end up risking less to work these tougher accounts. Because of this change, the Philippine center's 39% performance measurement does understate that center's relative capabilities. During the quarter, we expanded employment at this office as we began working a segment of our Spanish speaking portfolio from the Philippines.

With that I'll turn the call over to Kevin Stevenson, PRA's Chief Financial and Administrative Officer. Kevin?

Thank you, Neal. Record cash receipts, record cash collections, and record revenue. We can talk about all of these in the fourth quarter. I look forward to a future where we can move beyond the larger allowance charges we have been discussing recently, and begin to talk about record net income as well. We're not there yet. But it is definitely our goal.

Nevertheless, PRA did report solid fourth quarter net income of $12.4 million, which is an improvement of 17% from $10.6 million a year ago, and represents our highest net income since the second quarter of 2007.

EPS advanced to $0.80 from $0.69 a year earlier. We achieved this despite incurring $9.5 million in allowance charges in the quarter, which cost us $0.38 in EPS. For the full year 2009, we incurred $27.6 million in allowance charges, costing us approximately $1.10 in foregone EPS. This compares with reported full year EPS of $2.87.

Total revenue for the quarter was $73.2 million, which was up 9.3% when compared to the same period one year ago. Operating income was $22.1 million, up 9% from the year earlier period, while net interest expense decreased from $2.9 million one year ago to $2 million in Q4.

For full year 2009, revenue was $281.1 million, up 6.8% from 2008. Operating income was $80.6 million, down 5% from $84.8 million in 2008. Full year 2009 net income was $44.3 million, down 2.3% from $45.4 million in 2008.

Return on equity improved from Q3 to 15% during the fourth quarter, leaving us at 14.3% for the full year 2009. We consider any ROE under 15% to be unacceptably low, and remained very focused on bringing that number back towards our historical 20%.

Our weighted average interest cost on the acquisition line during the quarter was 2.47%, and 2.62% for the full year 2009. At quarter end borrowing levels, each 100 basis point swing in LIBOR either costs or saves us about $225,000 monthly.

Breaking our fourth quarter revenue down into its components, the majority of total revenue or $56.0 million came from income recognized on finance receivables. This is revenue generated by our owned debt portfolios, and our Q4 performance represents a record for PRA. Income on finance receivables is derived from the $95.3 million in cash collections we recorded during the quarter, reduced by an amortization rate including the $9.5 million allowance charge of 41.3%.

During the prior four quarters, Q3 2009 to Q4, 2008, we incurred the following amortization rates, respectively. 41.2%, 40.3%, 42.9% and 39.3%, and our full year 2008 rate was 36.8%.

As I mentioned, during the quarter PRA recorded allowance charges totaling $9.5 million, which compares to $8.9 million in Q4 2008. Allowance charges for the full year 2009 totaled $27.6 million versus $19.4 million for all of 2008. Life to date reserves since the changed SOP O3-3 now stand at $51.3 million.

I would like to continue the approach discussing allowance charges that I initiated on our Q2 call. I will talk about a few of the larger charges, but not step through each and every pool For those interested in additional detail, we have included a chart in our press release that details our allowance charges by fiscal quarter, broken down by year of purchase.

I want to remind everybody that we account for revenue from our overall portfolio on a pool by pool basis. When pools underperform, as they're more likely to do in a recessionary environment, we do not lower their yields. Rather, we move relatively swiftly to take allowance charges, which show up right away as a revenue reduction on our income statement.

In contrast, when pools over-perform, that over-performance is not reflected right away. Only after there is sustained evidence of over-performance will we make an upward adjustment. And then we'll raise the yield on that pool going forward. This adjustment of an increased yield will not show up on our income statement right away, but will only show up in the future and gradually over the pool's remaining life.

I believe this bias exists today to a greater extent than we've seen in years. In particular, our 2009 purchases have been over-performing expectations by a sizeable margin. However, we feel it is too early to significantly adjust yield and/or cash flow expectations for these pools.

This conservative implementation of accounting guidelines is currently further compounded by our long standing position against permitting accretion during the first six months of a pool's new life. Instead of allowing accretion, we opt to use either cost recovery or cash method as permitted by the SOP. Accretion, or recognizing more revenue than cash collected, adds to the net finance receivable amount of a given pool, instead of amortizing it, in other words, capitalizing revenue.

Accretion is a technically acceptable event under the SOP, and generally occurs in situations where cash flows are ramping up early in a pool's life. Pools with low forecasted initial cash flow curves, coupled with a more robust cash flow projections in later portions of the curve are more apt to experience accretion. In pools with a more front end weighted cash flow curve, bankruptcy pools with mostly freshly filed Chapter 13 accounts are a perfect example of this kind of phenomenon.

Although we are not about to change our position on accretion at this time, it did cost us about $5.5 million in delayed revenue in 2009 from bankruptcy purchase made in 2009 alone. Of course, those revenues will be recognized in future periods.

As we said before, given what we believe to be the correct and conservative application of our accounting policies, some allowance charges are always going to be with us. So as I promised, I will not step you through each and every deal today. Instead I will just briefly mention the larger reserved portfolios.

2003 and 2004 contributed net reversals as they did for all of 2009. These tranches released nearly $1 million of allowances this year. For 2005 through 2007 nonbankruptcy tranches contributed a net charge of $2.4 million, down from $3.4 million charge in Q3 2009, and down from the Q1 2009 charge of $4.2 million, but up from the $1.9 million charge in Q2 of 2009.

When you review the chart in the press release, you will clearly see that approximately 70% of the fourth quarter's net allowance charge came from the 2008 tranch of accounts. During the prior two quarters, the 2008 tranch represented approximately 60% of those respective quarter's net allowance charges. The majority of the accounts in these pools come from several forward flow of transactions. They were priced in one during 2007. But that we were required to continue to buy throughout 2008.

As I mentioned last quarter, in hindsight these portfolios are likely some of the least profitable purchases we have made in our 14 years in business. As we look more closely at the $6.9 allowance charge from the 2008 tranch, we find that the 2008 Q1, Q2 and Q3 nonbankrupt portfolios contributed all of the $6.9 million recorded.

Looking back into Q1, Q2 and Q3 of this year, we had incurred $2.1 million, $2.4 million and $4.8 million on these very same deals. We continue to be very focused on these tranches of paper, since they now represent 58% of our total full year 2009 allowance charge. And we will continue to keep you apprised of their status.

Our bankruptcy portfolios are performing nicely. And as a group, ended with a mid allowance charge for the quarter of $280,000. I mentioned on our Q2 call that we were closely watching our bankrupt portfolios, and were evaluating booked yields and deal multiples. I promise to keep you apprised on that front.

In Q3, we did indeed allow our bankruptcy portfolio yields to increase, but generally not their deal multiples. During Q4, we allowed the yields that we set in Q3 to remain unchanged, and again left the deal multiples generally unchanged. As I have mentioned on prior calls, one of our goals has been to be very cautious on increasing yields and deal multiples on bankruptcy pools, given the allowances we incurred in 2007 and 2008 on older bankruptcy pools. However, our bankruptcy deals are performing nicely, and we have had no significant allowances on bankruptcy pools since that time.

The aforementioned changes to yields and to a lesser extent, deal multiples, impacted primarily the 2008 and 2009 bankruptcy deals, all of which are performing well relative to expectations.

Moving on, approximately $580,000 of operating expense in Q4 was due to noncash equity compensation that was booked during the quarter relating to our 2009 performance based restricted share plan, as well as other equity based awards. For the full year, noncash equity compensation amounted to $3.8 million or about $0.15 in EPS.

During the fourth quarter, cash collected on fully amortized pools was $7.6 million. During the prior four quarters, Q3 2009 to Q4 2008, we recorded cash collections on fully amortized pools respectively in the amounts of $6.6 million, $7.1 million, $5.9 million and $5.1 million.

In referring to fully amortized pools, I mean purchased pools with no remaining basis on our balance sheet. This 26% year-over-year improvement, 49% quarter over quarter improvement, and a continuation of a trend is attributed to numerous recent advances in our scoring and segmentation strategies, which is permitting us to more efficiently and effectively uncover individual accounts that are more prone to make payment from our portfolio. It is a very exciting development, especially in the face of the current economic conditions.

Eliminating the fully amortized pools from our amortization calculation gives us an amortization rate for Q4 of 44.6%, up modestly from the 42.0% we saw in the fourth quarter of 2008, but sequentially flat when compared with the 44.3% experienced in Q3 2009.

The performance of our government services group did improve in Q4, due to seasonal factors and operating strategies, following sequential declines in revenue and income in Q3. Still, these performance measures are down from what they could have been, due to the continued recession driven decline in sales and use tax revenue in the state of California, where we derive fees from auditing sales and use taxes.

We do have a good pipeline of clients in government services and are working hard to overcome this decline. Although we anticipate the impact will continue while the economy is slow, keeping a bit of a damper on revenue and income generated by government services.

At IGS, slightly improved year-over-year revenue did not translate fully to operating income due to a quality mix in client accounts. We have been working hard to address this by streamlining our operating processes without impacting effectiveness, as well as working with clients on pricing. We expect both of these initiatives, together with the expansion of our client list and product offerings, will help drive a nice 2010 for IGS.

Total commissions and fees generated by our fee for service businesses were $17.3 million. This compares with $14.2 million in Q3 and $18.9 million in the year ago quarter. Our fee based businesses accounted for 23.6% of the Company's overall revenue. For the full year, commissions and fees were $65.5 million or 23.3% of revenue, versus $56.8 million and 21.6% of revenue in 2008.

As a reminder, our quarterly amortization expense related to acquired intangibles from our various business acquisitions is about $668,000 per quarter.

Operating expenses in Q4 grew 9.5% when compared to Q4 2008. This was primarily driven by compensation in employees services growing $3.4 million or 14.5%, and communication expense increasing by $847,000 or 31%, primarily as strategically targeted letter campaigns increased. The increase in compensation expenses during Q4 relates primarily to the addition of IT employees, as we seek to increase project throughput, inside legal employees as we continue to build that capability, as well as growth in our call center collectors. Some of these cost increases were partially offset by a decrease in legal and agency cost and fees of 6% or $823,000 as we pulled more legal work in-house.

Operating margins during Q4 were 30.2%. Looking back on the prior four quarters, Q3 2009 to Q4 2008, operating margins were 27.4% in Q3, 29.9% in Q2, 27.1% in Q1, and 30.3% in Q4 2008. Without the margin dilution caused by the fee businesses, the operating margin would have been about 320 basis points higher at 33.4% in Q4. Without the amortization of intangibles, operating margin would have been 31.1% in Q4 2009 versus 31.4% in Q4 2008.

Operating expenses to cash received, as I mentioned before, is perhaps a more insightful efficiency ratio, since it removes the effect of variations in purchase price amortization rates as well as allowance charges. Operating expenses as a function of cash receipts during Q4 2009 were 45.4%, this is down nicely from 47.6% in Q4 2008, as well as from 46.7% in Q3 2009. For the year, this ratio is 46.2% versus 46.5% in 2008.

Our balance sheet remained strong during the quarter despite substantial purchases of new finance receivable portfolios in the amount of $75.1 million. As of quarter end, the outstanding balance on our line of credit was $319.3 million, up $13 million during the quarter. Our total credit facility is $365 million, leaving us with $45.7 million of availability.

Cash balances increased sequentially during the quarter to $20.3 million. We believe our leverage remains quite low and modest at a 96% of equity. We are producing strong internal cash flow and are well capitalized.

To update you on our financing, we believe that funds generated from operations together with existing cash and available borrowings under our credit agreement, would be sufficient to finance our operations, planned capital expenditures, as well as our currently committed forward flow transactions. And as well as a material amount of additional portfolio purchasing in excess of those currently committed cash flow amounts I just mentioned.

We remain however, very cognizant of the current market fundamentals in the debt purchase market, which because of significant sale supply and tight capital availability, could cause increased buying opportunities to arise. As a result, we have begun working with our bank group on a new expanded syndicated facility. Although we still have over a year to run on our current committed facility, we would prefer to lock into a larger facility during this period of plentiful buying. In doing so, we anticipate similar covenants, but increased pricing.

Also as a reminder, and as mentioned on prior conference calls, we had filed a $150 million shelf registration on September 30, 2009, in an effort to preserve all of our options relating to our financing alternatives.

We continue to operate all aspects of the business with a long-term focus. We feel this is particularly important in today's difficult economic environment, as it impacts on our businesses. We view our own portfolios as a long-term asset. And we do not make selection strategy decisions that favor short-term over longer-term results. Likewise, we continue to invest in all of our businesses so that we can compete from a position of strength, regardless of economic conditions.

I would like to close with some final important points. First, as I described in great detail, our revenue recognition methods typically cause us to take allowances quickly when pools underperform, while recognizing over-performance slowly over a pool's future life. This occurred to a significant degree in the third and fourth quarters, impacting our financial results. Second, we have been making significant investments in well-priced pools of charge off debt over the past 18 months. Based on our underwriting curves and actual collection trends, we anticipate strong cash production from these pools over the next 24 to 36 months.

Third, we have recently been very successful in improving our already strong account scoring and segmentation analytics, as well as our collection processes. We believe these will continue paying dividends in the form of improved operating ratios.

Fourth, relating to the prior point and also related to the payment phenomenon as described by Neal, we are modestly bullish on the longer-term tales of even some of the older portfolios, but have yet to have the comfort to increase the ERC expectations, which could lead to higher future yields.

Finally, on our bankruptcy business, has now achieved a level of underwriting expertise and operational scale that we feel will allow it to produce significant growth in cash collections and income contributions over the next several years.

With that I have completed my prepared comments, and would like to open the call up to Q&A. Steve, Neal and I will be available to answer your questions. Operator?

Thank you. (Operator Instructions). Your first question comes from the line of Mark Hughes with Suntrust.

Thank you very much. Congratulations on the quarter. Kevin, you talked about the accretion issue on BK, you said $5.5 million for the full year. Was that effect greater in the fourth quarter than it was in the third quarter, or less?

I have that data in front of me. I can grab it here in a second. I want to say it was greater than the fourth, but I can get that in a second.

Okay, and then I think I worked this out pretty closely, but cash from operations for the quarter or for the full year?

Sorry, what is the question, Mark?

What was your cash from operations for the quarter or for the full year?

So you are talking about cash flow or from the press release numbers?

Yes, maybe I didn't see it in the press release.

Yes, it is in the press release, so call center and other collections--.

No, I was talking cash from operations off the cash flow statement.

Cash flow statement, have to grab--. Net cash provided by operating activity was $85,285.

Thank you.

Yes.

That is all, thank you.

All right, and I'll dig that other number up for you.

Okay, thanks.

Your next question comes from the line of David Scharf with JMP Securities.

Yes, good afternoon. Steve, I wanted to ask you a little bit about how we ought to think about the supply and pricing environment. I am cognizant of your bullish comments. And by all indications, it should be a very positive year for supply, there are some anecdotes out there of some credit granters maybe pulling back a little bit from sales of fresh charge-offs, working more in-house. Is that purely kind of one-off anecdotal evidence, on the whole is that something we ought to be concerned about, that perhaps we don't have as much so-called desperate sellers. Or by all accounts are you seeing this is shaping up, it's just a very, very big volume year?

Well, I think there is a little bit of both going on. There is an awful lot of charge-off paper in the market. There is a record amount of charge-off paper that is being created. And I think it is just reasonable that as the credit issuers try to maximize their collections, on those portfolios, that they fill their agency pipelines as well as use the debt sale markets.

So actually long-term I see the use of agencies as very positive for our markets. I think that it implies that we're going to have pretty substantial portfolios for sale for some time to come. Eventually those pools will be liquidated to whatever their strategic end is, and they will be sold out at some point in time. And at that point, they become portfolios to folks like us.

So I certainly didn't mean to imply that all of this charge-off that is occurring is hitting the for sale market. That is definitely not the case, it is also filling agency pipelines, as well.

Okay, you actually preempted my next question, which was the dynamic between agency and debt buying. Also I was just curious -- the comment about the progression throughout the quarter. I think you had mentioned November and December were stronger than October. And was that in part just by more BK's that were liquidating, quicker sort of flowing into the stream? Or is that a more broad comment about the overall productivity and collection patterns?

Yes, I think that from our perspective we also had some year-over-year day comparison differences. But we had very similar looking November and December, as it related to kind of year-over-year growth. And October was a bit behind those two months. So I don't know that there is a whole lot to read into that. The months can tend to flow into each other fairly easily. And it is tough to dice our operations that tightly.

Got you. And lastly, can you just refresh my memory? The percentage of the fee for service businesses that is represented by sort of the sales and use tax business, how much of it is coming from that?

I don't think we've ever broken that out specifically for you. It is not -- gosh, I don't know quite how to parse it for you. It is enough to move the needle. But it's not a significant part of what is going on there. We just had a, in the third quarter there was a substantial drop-off in that particular part of things. And just because of the magnitude of the move, it influenced our overall fee income. But generally it is not the lion's share of what we do.

Okay, great. Thank you very much.

Your next question comes from the line of Bob Napoli with Piper Jaffray.

Good afternoon, guys. A question on the operating leverage in the business, I think it was a pretty significant move this quarter in operating expenses as a percentage of cash collections. And I know we have been looking for that benefit from the bankruptcy business. Is this kind of just the start of starting to see those margins, improve.

Yes, we would -- we would hope that this is a long-term trend that is going to be evident over the next couple of years. I don't know that we'll necessarily be able to observe a smooth trend quarter to quarter just because of a lot of other things that are going on. But again because of the volume of bankruptcy buying that we have been doing, and how the expenses flow there as well as, we like to think the efficiencies that we have been bringing to the charge-off or core debt buying business, we think we're going to see some continued push on that margin downward.

Is there any feel you can give for like the operating expenses for the bankruptcy business as a percentage of cash collections that would maybe help us a little bit in modeling that?

Yes -- I don't really have -- have something to share at this point on that one, Bob.

Okay, can you -- how much of the forward flow from 2008 that you said is the least profitable business that you have probably ever written in your history? How much of that is left? And the impairment charge that you took this quarter, do you feel like you now got it? But I know there is always going to be impairments, but are we turning the corner? How much of that worse pool is left?

Well, so you asked specifically about those flow deals. Remember they were part of the charge-off debt buying groups. They're aggregated with everything else, so if you kind of think about 2008, Q1, Q2, and Q3, there is going to be some percentage of that flow in that quarter's aggregated deal, but also it's going to have a big percentage of spot deals that are actually performing pretty well, and they all kind of mushed together in that particular quarter.

So -- I can't -- you asked how much is left. So I can't tell you how much is left in the books specifically to those deals because they're not accounted for that way.

And as far as allowances, I'm going to have to say what I always say. We're trying to take these allowances as they're dealt to us and deal with looking at the curve fitting. And we are just going to have to see how Q1 shakes out in Q2 and move our way through 2010.

Okay, and did you stop buying, there was none of that in the fourth quarter of 2008, and did it stop slow to a trickle in the third quarter? Maybe some feel like that? That seems to be kind of the key here to getting those impairments down to a much lower level, and obviously driving up earnings pretty substantial?

The volumes were coming down throughout the year. And obviously at this point, anything that we're still in has been long since repriced or we're out of.

Okay, and then last question just on your funding, would you expect to get something done over the next -- in the first half of this year? And in the market today, I mean what would we expect, like LIBOR 400, something like that?

We're going to work on that in a second. So -- Bob, we're getting some noise on the line. We'll -- your question about pricing on the, anticipated pricing on the bank line?

Yes, on the bank line, and when do you expect to kind of renew the line?

We're in the early stages of that process. So I would certainly hope that we would be done the first half of the year. As for pricing, it is going to be what the market clears. So we haven't got our-- I don't have a term sheet in hand at this point. So I don't have that answer for you.

Okay, okay, but clearly rates will go up and you'll get a larger line most likely to go along with it?

That is the goal, the goal is to get a larger line, not the same size, that wouldn't be a good move, and hopefully deploy that towards highly yielding assets.

Thank you very much.

Your next question comes from the line of Edward Hemmelgarn with Shaker Investments.

Yes, thanks. Just wanted to call about your bankruptcy purchases obviously are getting to be -- it has been the majority of purchases certainly recently this year. And you talked about the -- that you're buying earlier paper. When does -- when do you think on average that bankruptcy paper starts to collect relative to things you have talked about in the past? Is it two years, three years or what?

So I think, Steven, correct me if I'm wrong on this point. But I think if you look back at 2009, the average life, the average age of a piece of paper we bought in the bankruptcy arena was about five months. And prior to that we were up in the 14 to 15 month range. So you can see we have at least 10 months delta between kind of when those things were filed versus when we bought them. So what you're going to see is there are some cash flows in there. So don't think it is zero either.

The problem as I mentioned on the accretion point, since we don't allow accretion, there is not enough cash to start amortizing that pull down, so we limit the revenue to the amount of cash received. So a little bit of tying that into the accretion commentary. So generally we would take something like 10 months, 12 months, maybe even out to 18 months for those things to start flowing very heavily, from the time of filing.

Okay, and then when do you think they will start to, in terms of occurred -- when would you expect it to start to -- like reach a peak of collections? Because the curves certainly look different now than the ones you were buying back in 2005, 2006, those time frames.

Right, typically they're going to peak between 18 and 36 months. And a typical plan could continue out for five years. So -- again, the other thing you have to keep in mind is, we're not buying exclusively fresh filings. There is a mix in here. And so depending exactly on -- kind of what the mix is with each quarter, you're going to see slightly different cash flow dynamics and timing dynamics.

True, but I guess what I was trying to bring this up, by purchasing a lot more bankruptcy now, you're changing the shape of your profitability impacts relative to what it used to be. I mean you used to start collecting a lot up-front when it was nonbankruptcy. And now, so you got some of your best profitability early on. Now you're looking at, given the fact that your expenses are up front and your profits are later, you're kind of pushing it out of, you just have a different profitability curve than historically.

That is exactly right. And I think you hit the nail on the head when you brought up, not only is the cash flow and revenue elongated, delayed from what we would typically see, but the expenses are much more front-end loaded. And so there is definitely a negative impact there as we ramp up buying bankrupt assets versus deploying the same amount of capital to purchase core assets.

Do you think -- you really stepped up the bankruptcies. Just -- is it more of the pricing is better on the bankruptcy? Or is it more you just have gotten -- you feel so much better in your analysis and how well you can process it?

Well, we try to be very active in both parts of the market. And to some degree, it is just how the deals have come down. Just how the bids have come down.

Okay. Thanks.

You bet.

Your next question comes from the line of Bill Carcache with Macquarie Research.

Good evening, Steve, you mentioned that in the fee for service businesses that some of the challenges relating to sales and use tax concerns that you guys talked about last quarter, that you expect those to persist as we look out into the rest of the year. But we had a nice increase here sequentially, and I know that the fourth quarter is seasonally stronger. But is it fair to say that you're kind of thinking about commissions over the course of the year as kind of being flat on a year-over-year basis, over the next few quarters or are you thinking that they're going to be lower? Can you just give us a little bit of guidance there in terms of how to think about that?

Well, as it relates to specifically the sales and use tax piece, I think if one just keeps an eye on generally the California economy, you're going to get some kind of feel for how we're going to do on that specific sales and use tax piece of things. And I think things are kind of bouncing along there as opposed to necessarily spiraling downward. Some of the things that I had been reading recently suggested that the coastal areas were starting to get some legs. Although inland the economy was still tough. You're starting to see, again, the coastal areas get some recovery. The rest of our fee for service businesses are on a, hopefully an upward trajectory.

As we have been talking, we have been continuing to sign new clients. I think we have got some real solid things happening both in other aspects of the government services businesses and in the IGS skiptracing business. So hopefully we'll keep some upward pressure on fee income there as the year goes on.

Okay. And now, Kevin, there are a few things going on with the potential for -- the bank line and the change to -- the debt side of the balance sheet. And then the potential -- possibility that under the shelf registration if an opportunity presents itself you guys may use that. Can you kind of just give us a sense of how to think about the optimal capital structure, regardless of how all of that shakes out. I think you said you're at 96% debt to equity now, a couple of quarters ago you guys said that you had the capacity to go up to, I believe it was 130%. What is the optimal capital structure regardless of how these, what size the bank line gets increased to, and whether there is any kind of offering under the shelf.

Yes, I think optimal is a big word, but we do think about it a lot. So just to recount what you said, we're working towards those goals. We're at about 96% ratio at this point. I think in the past calls, Steve and I have talked about the concept that -- two to one ratio would kind of be out where we would feel some pressure internally just about where that is at. But clearly a lot of companies run higher debt to equity ratios than those. But for right now, I don't think we will be approaching the kind of ratios that make us uncomfortable at all.

Okay, and if you had to have an open line of available capacity, you're currently at I believe you said $46 million or so. How high would that be, not to say that that is what you would get from the banks, but what is a range where you would feel comfortable with available capacity?

Well, I think right now what we're looking for is to have available capacity, just in case we see the deals that we think we need to purchase. All I can tell you is that we're going to go after a line that is materially larger than the one we have.

Okay, and do you have a view on whether tax refunds are going to be up year-over-year in the first quarter?

I don't really have a read on that yet.

Okay, and last question, the forward flows, can you talk to us about any of that you may have entered into that you're currently in now and when those were priced? Just any perspective on that?

Sure in the normal course, we're generally going in and out of forward flow arrangements on a pretty regular basis. I will tell you that both sellers and buyers tended to shorten up flows during 2009. And there were a lot of, even three-month flows that we kind of bounced in and out of. So, at this point, I would say the flows that we are in tend to be on the shorter side, but they continue to be an important part of the debt purchase market certainly.

Okay, thanks very much.

If I could real quick here, for Mark Hughes, the earlier question, he had asked about the impact of accretion on Q4 versus Q3, and I don't have an exact reconciliation for you, Mark, but I can tell you that I think the impact in Q4 was lower than it was in Q3. Somewhat lower. Okay? Next caller.

Your next question comes from the line of Rick Shane with Jefferies.

Thanks guys, for taking my question, I realize it's getting late out there, I'll try to be pretty quick. One of the trends we've seen in the last couple of years is, if I were to look back, nine of the last 10 quarters you have seen year-over-year increases in impairments. There has also been fairly consistent commentary along the way that the purchasing environment is getting better. You maintained your discipline, there was some comments last year, you're still bidding on the same number of deals, et cetera. And clearly -- something is changed, because the impairments continue to come through fairly substantial levels. I think that a lot of folks thought that we probably were turning the corner after Q3, and a little bit surprised by the Q4 impairment number.

The silver lining here to me is that ordinarily in Q4, over the last several years, you start to impair the current years or the most recent years vintage. It is only a modest impairment, but at least for the 2009 -- excuse me for the 2009 vintage, we didn't see that impairment start to come through. So perhaps the trajectory is different there. That leads to sort of two parts to my question.

One, do you really think that the 2009 vintage, now that we've seen it seasoned for -- on a weighted average basis for about six months, is going to substantially out-perform the 2008, the 2007 and the 2006. And at the same time, do you think that what has happened to the industry and which changed the collectability and influenced these outcomes is some sort of behavioral shift. Do you think we've seen a moral decline in the obligation to pay debts based on things like media effect? Because everybody is sitting here hearing their neighbor modified their mortgage, you can pay off your credit card debt pennies on the dollar, do you think that that is actually starting to hurt your business?

Well, first of all as it relates to how does 2009 look, versus especially 2007 and 2008, I think looking at our multiples would suggest that, we think 2009 is going to be a healthier tranch than those others. No doubt about that.

We're in the business of buying charged off and bankrupt debt. And so we have always dealt with these adversely selected customers that either don't want to pay or can't pay their obligations. I don't know within that population like we feel as though we've seen any moral decay, if that's what you want to call it, as it relates to people's desire to repay. I think the biggest shift we've seen, and this very much has impacted the assumptions, the original underwriting assumptions that we had made during the years in which you correctly pointed out. We have been struggling with some of these allowance charges.

But we've really seen the subprime market or the consumer refinance market really go away. People are not rolling their credit card balances over from card to card anymore. People don't have the ability to take out a second or a third mortgage to refinance their troubled debts anymore. People are not rolling from house to house like they had been.

And it is all impacting our larger payments, our larger payments have almost fallen to nothing as it relates to the mortgage refi space. They had historically never been huge, but they had bounced around, say 4%, 5%, 6% of our total payments, total cash received and they have gone to nothing. And at the same time, our average payment size has come down.

And again we feel like we're seeing really more people inclined to pay. It is just a matter of what they're able to pay. And since they're relying really only on their cash flow from wage and salary, you have seen those payment sizes come down. Our settlements and our payments in full have dropped dramatically. And we have had to make it up by getting more payments. So actually if anything, the overall population of our customers seems more inclined to repay their debts. It is just they're doing so in smaller bites.

Got it. And guys, thank you. I always ask very pointed questions on the call, and I always really appreciate your patience in answering them, thank you.

No problem, and if I could also add, as we think about the curve, remember we're deal willing this accounting process, SOP 03-3 or ACS 310-30 that's now called, the curve set really is a situation where if that cash does come in even higher in the long-term, you can end up with allowance in the current period. So it is the nature of the accounting. And I would highly recommend people also look at the deal multiples when the K gets filed. And you will get a feel for what those tranches are really doing in terms of where they started and where they're at currently.

And I'll pile on, because I can't help myself, but I mentioned in my script we had 40% increase year-over-year in the number of payments received in Q4. That to me is a fairly impressive improvement. And so as I said in my script, I think people understand the importance of credit, and I think we've gotten more effective. And so I see nothing approaching the sentiment that you described.

All right, thank you.

You bet.

Your next question comes from the line of Hugh Miller with Sidoti and Company.

Thank you so much for taking my questions, I know it's been a long call. I just had a couple that were not asked and just wanted to get a better feel of the bankruptcy process if you had a second here. Was wondering historically, can you just give us a sense of what the fallout rate is for consumers going through the bankruptcy process that you guys have kind of seen?

Well, it would vary but it wouldn't be unusual for that number to be high. It could be in the 40% to 50% range.

Okay. And when that does happen, can you give us a sense of the consumer repayment patterns that you have seen with those types of customers relative to something that you would buy, that would be a traditional receivable repayment, tend to be better or worse, or about the same?

Well I think it is one of the benefits of having an integrated shop where we do bankruptcy work along with normal collections work. So when those people fall out, we quickly get them over to the other side of the house. Once they are there though, and once they are a -- kind of normal customer, the propensity to pay relative to just the average charge-off customer would be higher than a typical customer.

And I want to make sure that you're clear on that, Hugh, that number, so if a plus or minus let's say to a pricing perspective, when we price those bankruptcy deals we expect a certain fallout. So if you pick the 40% that Steve used as an example, as these things are priced you expect the 40% to fall out. So that is all part of the deal, and if that number goes to 30, it is probably better for us than if it goes to 50 or 60. We need to count on Neal to give us some cash from the collections.

Yes, I completely understand that. I just want to get a sense of that type of a figure -- on a relative basis because obviously a lot of your peers are going out there in the bankruptcy market and they're not collecting for themselves. So they have a different option with that type, so I guess the way you're able to price that out is a little bit different than the way that they would be looking at that type of business, correct?

Yes, that is right.

Okay, and then aside from that ability relative to some of those other bankruptcy buyers, where you are an integrated shop, are there any other things that you guys see as a competitive advantage? Because obviously most of that stuff is then being collected for you. So you're not using and leveraging the call center and the abilities you have there. But any other competitive advantages you kind of see with that business?

Well, I think that the other significant competitive advantage one can develop is just the ability to very accurately process these things at the lowest possible price. You don't want to miss filings. To do so can be very expensive, especially when you're dealing with a lot of numbers, and if you have a couple of missed percentages here and there. It can definitely effect your cash flow, and whether you can do it at x% or x minus 1%, the lower your operating costs there, the better and more mechanized your systems are, the more competitive you can be. And obviously the more profit you can bring to the bottom line at any given purchase point.

And I would just add so -- it helps us analytically as well. So there are charge-off accounts that go bankrupt and fly from my side to the other side of the house as well. And so having bankrupt accounts obviously helps us model that event to a better degree.

Certainly well taken, and I appreciate the insight there. The very last question I had was with regards to, I know you guys said in the past you kind of don't practice the kitchen sink method with regards to impairments. But I was wondering if you can give us any sense of given the strong performance in the fourth quarter with the bankruptcy improvement and so forth, would you say you may be a little more aggressive than you normally would have with the '08 vintage, any comments there?

Yes, I don't know if if was any more aggressive. I think we're pretty tight in terms of how we look at the allowances. So I think that if you look at the percentage coming from 2008, being 70% this quarter. It was a little out-sized compared to the prior ones. But again I think the process itself is pretty tight and pretty consistent .

Okay, thanks so much, I appreciate that.

Your next question comes from the line of Sameer Gokhale with KBW.

Thank you, if you can refresh my memory it would be great, I think maybe you were asked a few quarters about this, but how should we think about maybe a drop in unemployment and the benefit you may see on your productivity metrics. Unemployment, as it's been rising, you guys have been showing improvement in productivity because of changes you've made to your operations. And if unemployment falls, it suggests that you should see some sort of lift there in your productivity metrics, and I was wondering how you think about maybe a potential offset being decrease in unemployment accompanied by reductions in settlements. Fewer people going in for the up-front settlement, you guys collecting more over time as you pursue collections. Is that an offset or how do you think about that internally?

So at the highest level, I would just reiterate a point that Steve made earlier. And that is, we buy a subset of the population that has always been fairly troubled. Unemployment is not new to the folks that we're buying. So it doesn't impact us quite as much as it might normally otherwise impact somebody else doing recovery work.

However, this recession was clearly different and it did impact us. And as we've described the sizeable impact was this decrease in the average payment size. I do think there is some correlation to unemployment in our recovery figures. And I would expect that if unemployment improves, that we would improve in some way as well.

It doesn't seem like you specifically think that there is any sort of a statistical correlation that you have drawn that you can share with us today.

There is definitely a correlation, I am just saying it is not quite as strong as you might imagine. Given that a lot of the accounts that we buy haven't made a payment in two years. So their employment event may have been quite some time ago.

Okay, and then there seemed to be more opportunities for you guys to buy the charged off paper. And you're trying to negotiate an increase in your credit facility. Perhaps in anticipation of that or maybe looking for opportunities, but a few quarters ago I think you had tried to bid for a mortgage servicing business, which wasn't from what I understand that large of an acquisition. But as you think about making acquisitions, are you looking at things outside of your traditional debt portfolio purchasing business at this point in time? Are there any specific things you're looking at?

There is nothing specifically targeted in terms of a business that we want to get in. I would say that our strong desire as we look at potential fee businesses, it would be away from kind of the typical -- core collections business. As opposed to a part of it, and we continue to have our eyes opened for interesting little businesses that we think we can help out from a process technology capital marketing perspective, but are generally related to what we do, processing payments, dealing with call centers, that sort of thing.

Okay, that is helpful, and congratulations on a good quarter, again.

Thanks.

Ladies and gentlemen, this concludes our question and answer session, I would now like to hand the call over to Mr. Steve Fredrickson for closing remarks.

Thank you, operator. I would like to reiterate a few key points about our fourth quarter performance before concluding the call. Portfolio Recovery Associates concluded a very challenging 2009 on a high note. We produced strong fourth quarter financial results, in fact reporting our highest net income since the second quarter of 2007, in the face of a tepid economic recovery, seasonal weakness in consumer collections, and a large allowance charge of $9.5 million. In addition to the excellent overall numbers, Portfolio Recovery Associates continued to build for the future in the final quarter of 2009. Overall we have entered 2010 a stronger and more efficient competitor. Reiterating what I said on our third quarter call, I am as excited about PRA's future today as I have been in years.

I would like to thank all of you for participating in our conference call, we look forward to speaking with you again next quarter.

Thank you for your participation in today's conference, this concludes your presentation and you may now disconnect. Have a great day.