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Notice of Annual Meeting of Stockholders and 2013 Proxy Statement |v
Table of Contents

BUSINESS HIGHLIGHTS

Financial Performance: Portfolio Recovery Associates Inc. delivered another year of record growth in 2012. This growth was evident in all of our significant financial metrics including net income, EPS, revenue, and cash collections.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Metric

  

2008

 

  

2009

 

  

2010

 

  

2011

 

  

2012

 

  

Percent Increase from 2008

 

Net Income (in millions)

  

$

45.4

  

  

$

44.3

  

  

$

73.5

  

  

$

100.8

  

  

$

126.6

  

  

 

179



Diluted Earnings Per Share

  

$

2.97

  

  

$

2.87

  

  

$

4.35

  

  

$

5.85

  

  

$

7.39

  

  

 

149



Revenue (in millions)

  

$

263.3

  

  

$

281.1

  

  

$

372.7

  

  

$

458.9

  

  

$

592.8

  

  

 

125



Cash Collections (in millions)

  

$

326.7

  

  

$

368.0

  

  

$

529.3

  

  

$

705.5

  

  

$

908.7

  

  

 

178



 



Recognition: In addition to celebrating our 10th year as a public company, in 2012 our stock (Ticker Symbol PRAA on the NASDAQ Exchange) rose 58% year-over-year, significantly outperforming the leading stock indices and industry competitors. PRA’s financial performance was also recognized publicly in 2012. The company was named one of Fortune’s 100 Fastest Growing Companies in 2012, one of Forbes’ Top 25 Best Small Companies in America in 2012, and continued its ranking as one of Forbes’ 100 Best Small Companies, which it has been named each year since 2007.

Focus on Compliance: The Consumer Financial Protection Bureau began its supervision of larger consumer debt collectors in 2013. While PRA has always maintained a strong focus on compliance, the Board believed it was prudent to dedicate additional resources to this effort in 2012, creating a separate department focused on compliance. The objective of PRA’s Compliance Department is to assist the Company in maintaining the highest standards of integrity and ethical conduct, while continuing its focus on compliance with the variety of laws and regulations that have an impact on our business. This department has direct and regular access to the Board of Directors.

 

Notice of Annual Meeting of Stockholders and 2013 Proxy Statement |vi
Table of Contents

Strategic Acquisitions: In January 2012, we completed the acquisition of Mackenzie Hall Holdings Limited (Mackenzie Hall), a leading UK debt collection and purchasing group based in Kilmarnock, Scotland for approximately $51 Million. Mackenzie Hall is one of the UK’s fastest-growing businesses in consumer debt recovery, and with this acquisition, PRA expanded into the global market, giving us opportunities to continue to diversify revenue and services.

In December 2012, we completed the acquisition of certain finance receivables and other operating assets of National Capital Management, LLC (NCM) for $107 Million. With this acquisition, we increased our presence in the bankruptcy market by acquiring expertise in secured bankruptcy receivables.

Business and Government Services: In October 2012, Steven C. Roberts was hired as our President, Business and Government Services to improve sales and profitability of our Business and Government services.

COMPENSATION HIGHLIGHTS

The consistent, strong performance summarized on the previous page is reflected in the compensation that our senior executives earned in 2012, as described in the Compensation Discussion and Analysis in this Proxy Statement.

The Board awarded Steven D. Fredrickson, our CEO, incentive compensation for 2012 which was tied to business results, including a non-equity incentive plan award of $1,300,000 and a Long-Term Equity Program incentive equity award valued at $1,500,000. The compensation of our other senior Named Executive Officers (to whom, along with our CEO, we collectively refer as NEOs) further reflects both our strong 2012 performance and our compensation philosophy. Consistent with our executive compensation philosophy, a significant portion of both our CEO’s and other NEOs’ total compensation is incentive-based and at risk, as illustrated in the following graphs:

 



Comparing PRA to our peer group (as listed on page 40 of this Proxy Statement) on a one, three and five year basis, our percentile ranking in terms of total stockholder return significantly exceeds the percentile ranking of our CEO’s target and realizable pay.

 

 

 

 

 

 

 

 

 

  

One Year

  

Three Years

  

Five Years

Total Stockholder Return1

  

93rd Percentile

  

86th Percentile

  

64th Percentile

CEO Target Pay2

  

55th Percentile

  

35th Percentile

  

36th Percentile

CEO Realizable Pay3

  

70th Percentile

  

51st Percentile

  

43rd Percentile

 

(1) 

As of December 31, 2012; assumes reinvestment of dividends.

(2)

CEO target pay is based on compensation information reported in the most recently filed proxy statements of the Company’s 2012 compensation peer companies listed on page 40 of this proxy statement; target pay was calculated as the sum of (a) annual base pay, (b) target bonus, (c) grant date fair value of stock options, (d) grant date fair value of stock awards and (e) target long-term cash awards.

(3)

CEO realizable pay is based on compensation information reported in the most recently filed proxy statements of the Company’s 2012 compensation peer companies listed on page 40 of this proxy statement; realizable pay was calculated as the sum of (a) annual base pay, (b) actual bonus, and for long-term incentive awards granted during the measurement period, (c) intrinsic value of stock options as of December 31, 2012, (d) value of restricted stock as of the vesting date or December 31, 2012, if not vested, (e) performance shares earned or target shares if the performance period ends after December 31, 2012 (based on the stock price at the vesting date or December 31, 2012, if not vested), (h) earned performance cash awards or target values if the performance period ends after December 31, 2012.

Further detail on the total compensation for our CEO and all other NEOs can be found in the Compensation Discussion and Analysis and the corresponding tables and narratives in this Proxy Statement.

 

Notice of Annual Meeting of Stockholders and 2013 Proxy Statement |vii
Table of Contents
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