Good afternoon. Thank you for joining Portfolio Recovery Associates Third Quarter 2013 Earnings Conference Call. Your host of the call today will be Steve Fredrickson, PRA’s Chairman, President and Chief Executive Officer. Also on the call will be Kevin Stevenson, PRA’s Chief Financial and Administrative Officer, who will comment on the specifics of PRA’s results release today. Then Neal Stern, PRA’s Executive Vice President of Operations will comment on PRA’s collections experience in the quarter. Before beginning, I like to remind everyone that statements made by PRA on this call may constitute forward-looking statements under applicable securities laws. All statements other than statements of historical facts are considered forward-looking statements including statements regarding PRA’s or its management’s intentions, expectations, plans or projections for the future. Actual events or results could differ materially from historical results or those expressed or implied in any forward-looking statements as a result of various risks and uncertainties, some of which are not currently known to PRA or its management. These include the risk factors or other risks that are described from time to time in PRA’s filings with the Securities and Exchange Commission, including PRA’s annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Now let me introduce Steve Fredrickson.

Thank you operator. Good afternoon and thank you for joining our call. I am pleased today to provide you an update to our 2013 results. Following very strong quarterly results in each of this year’s first two quarters Q3 proved to be equally impressive with record quarterly revenue and earnings of particular note contributions from our fee businesses were substantial and well above our expectations. PRA’s quarterly results today reflect the success of our strategy to press the company’s many competitive advantages in a debt buying and collections marketplace where we continue to find opportunity and see future growth. Among the major selling banks stringent compliance demand contributed to competitor attrition in debt buying market which in turn has allowed us to make substantial investment in new portfolios of debt to the first nine months of 2013. This investment combined with our exceptional operating efficiencies and diversified business drove our current earnings and is expected to continue to drive future earnings. Cash collections in the third quarter were $292 million up 27% from the third quarter a year ago and comparable with the growth rates of Q1 and Q2. Neal will comment on our collections experience in more detail later in our call. Collections helped drive revenues up 31% to a record $198 million resulting in net income attributable to PRA of $47.3 million up 42% and also a record. In a few minutes Kevin will walk you through the specifics of our financial results released this afternoon. PRA generated diluted earnings per share of $0.93, up 43% from $0.65 a year ago and adjusted for our stock split effective August 1, 2013. We again exceeded our goal of a 20% ROE generating an annualized return on average equity of 23.5% for the quarter. In the third quarter PRA continued…

Thank you, Steve. As I discuss our financial results the comparisons I make today will be between Q3 2013 and Q3 2012 unless otherwise noted. PRA had a strong quarter. Revenues increased 31%. Our operating expenses increased at a slower rate of 27%. This led to a 42% increase in net income attributable to PRA and a 43% increase in earnings per share and 40.2% operating margin. Before I begin my review I would like to summarize some specific items that occurred during the quarter. The first CCB had an exceptional quarter generating revenue that exceeded the prior quarter by $10.9 million and that exceeded Q3 of 2012 by $10.5 million. This increase was due largely to a single claim as Steve discussed earlier. Our Q3 tax expense was favorably impacted by approximately $3 million in savings primarily related to state revenue enforcement and other changes made in tandem with our 2012 tax return filings. We do not expect such a large change in future periods. Our effective tax rate for the quarter was approximately 35%. We estimate that rate could increase to approximately 37% in Q4 and then 39% next year. On August 1st we completed our three for one stock split and on August 13th we completed the issuance of $287.5 million in convertible senior notes. We use the proceeds from that issuance to pay down our revolving line of credit and to repurchase $50 million of common stock. The excess proceeds reflected in our cash balance at quarter end. The notes carry a coupon rate of 3% however for accounting purposes we recorded the interest expense at a market rate of interest which was determined to be 4.92%. This resulted in approximately $525,000 of additional and GAAP interest expense during the quarter versus the amount we would…

Thanks Kevin. As I discuss third quarter result and operations I’ll be making comparisons with results from the third quarter 2012 unless otherwise noted. The third quarter results remained in-line with the trends from the last several quarters. The U.S. we received just under $2.6 million payments, which represented 22% increase over the prior year. Our average payment size increased by 3% which was worth almost $13.8 million more in cash collections. Cost under productivity improved by 12%, and legal collections increased by 24%. These results reflect our long term focus on being that complaint, patient and effective collector, the group of accounts making regular monthly payments to us has been expanding as a result of increased buying, improved operational efficiencies and most critically our staff’s ability to identify affordable repayments plans. Those negotiations can be delicate nuance, but also will prove to be among the most crucial things we do. With that in mind PRA in the third quarter made the decisions to see its all offshore collection activities for our U.S. accounts. This decision was the result of a number of factors including our observations of total net effectiveness overtime but the primary driver of the change was the decision from some top sellers in the U.S. to prohibit offshore collections on accounts they sell. All this was alluded to as a best practice in the OCC’s memo from earlier this year, we’re now seeing it appear as a condition in some sales contracts. Rather than attempt to construct a strategy by which we would segregate accounts our offshore collections are prohibited from accounts where sellers have not yet made such a requirement PRA decided to discontinue all offshoring of U.S. collections which for us was a minimal part of our overall strategy. As a reminder, our offshore…

Thank you, Neal. As we have discussed, our financial results this year have been exceptional, in fact not lost on Fortune Magazine which ranked PRA among its 100 fastest growing companies in 2013. This year PRA also moved in the top 20 of Forbes best small companies in America. We placed in Forbes annual ranking for each of the last 7 years. More importantly however is your recognition of PRA's long-term value that we find most gratifying. I thank you for your continued investment in PRA and your continued confidence in our ability to grow and deliver value to shareholders. Our operator will now open up the call to your questions.

Thank you, sir. (Operator Instructions). Our first question comes from David Scharf of JMP Securities. Your line is open.

Thank you. Good afternoon. Steve first question, this is the second quarter in a row after years where you actually said the average payment size increased and I think that you said it was up 3% this quarter, up from 1% last quarter. I guess a couple of questions one is just what are you seeing. Are there any kind of macro consumer behavior employment conclusions we can draw? And secondly is the increase in average size being disproportionately coming from a couple of vintages?

This is Neal. So I would say there is a number of factors that’s impossible to say at this event, but one that comes to mind is our increased legal activity that tends to generate an average payment size and I am sure it’s impacting the overall number. In terms of the vintages, you’ll probably look back to the vintages that are a couple of years where legal activities having its most impact. We don’t sue anyone out of the gate we put them in our call centers so there is a pretty good lag there. So it’s probably I think a modestly outsized impact the vintages from a couple of years back now.

Okay. So we shouldn’t read anything into this in terms of just consumer behavior or any macro conclusions probably legal channel growth?

Can’t say, I mean it was steady and average for a long time and so we're very encouraged. Any tiny uptick in payment size has a really outsize impact. This 3% was worth just under $14 million and that’s not just confined legal, that’s coming from a number of different sources. So it’s a good sign and if it continues it will be great.

Got it. And staying on the legal channel you had mentioned that the investment in recent quarters has been pretty consistent. Can you just remind us on a dollar basis, what you are to be thinking about for the fourth quarter which you said would be similar to Q3?

$20 million.

Got it. Okay. And then lastly just on the purchasing side it was a step down in chapter 13 purchasing, obviously bankruptcy filings, chapter 7 and 13 are down year-over-year. Was this sort of an anomaly or breather or in general should we be expecting much lower levels of BK purchases going forward?

Well, as we commented, we’re still in a competitive market on the bankruptcy side. And so what you observed in our purchases for any period certainly reflects whether we’re winning a little bit more or winning a little bit less of the offered tools. In Q3, I’d say the tie just went way from us a little bit and so you saw a decrease in realized purchases there.

Got it. And then just one more on the competitive front, I mean you’ve mentioned for a while that kind of the new regulatory pressure is driving some out of the business going to make it efforts for others to compete. Just reflecting on this past quarter, did you have a sense for whether they were clearly fewer bidders out there on the deals that you actually closed on?

Yeah. I think our sense and again this is going to vary by seller and where they’re at in the process of I would say adapting their sales process to what we’ve seen out of the OCC. But overall I’d say we’re competing against fewer participants with some sellers it’s more pronounced than with others.

Got it. Okay. Thanks very much.

Thank you. Our next question comes from Sameer Gokhale of Janney Capital. Your line is open.

Yeah. Thanks for taking my questions. Just to follow-up on that question about purchases, for core customer debt and I am sorry if I missed this in your comments, but when you look at the core purchases they were down slightly compared to Q3 and I would have thought that given that one of your large competitors is still largely out of the market like this would have been the one quarter where you could have really kind of pulled out all the stuffs to buy as much paper as you could on the core side recognizing that on the BK side it seems to be a lot more competitive. So can you just provide us a bit of flavor for that, I mean what happened there, is it just an issue of the supply just isn’t there until we see some large sellers coming back into the market or just some perspective on that would be helpful?

Sure Sameer. There is certainly more than two of us continuing to compete in the market. And again depending on which seller we are talking about, there is still a good number of competitors. And so it was just one of those cases where I guess like bankruptcy, we hit on a few less deals this quarter. Part of what we are trying to do is make sure that we aren’t pushing the market further than we would like and that’s not an exact science and so we are always trying to buy as intelligently as we can and as a result sometimes you lose transaction.

Good color, I just wanted to get a sense for, you have said earlier I think that it seems like some of the smaller competitors are facing more challenges it totally makes sense and that’s what we believe for a while too, but it just seems like at this point given all the new regulatory requirements the markets sort of became very concentrated and maybe there, you know what, maybe four of you guys at the very top of the food chain and then everyone else is a lot smaller. So it would team that if you take one of those four out of the equation then you are left with three other companies and that was the context I was asking about, but it’s possible that some other companies got more aggressive with their purchasing sounds like that was also going on?

Yeah. Well, I think the other thing is, Sameer in thinking about purchase levels year-over-year, we did say we are up almost 40% year-over-year. Certainly comparing things to Q1 or Q2 of this year I think is a top comparison, just pretty exceptional purchasing levels. So I think we saw a little bit of a normalization of volumes together with missing on a few deals and that’s what happened. The volumes just bounce around a little bit.

Okay. That’s helpful. And then the other question was related to the contracts like, can you give us a sense for what percentage of contract required onshore collectors or U.S. based collectors versus those that are okay with offshoring. And then what were the new ones, I mean some of you mentioned some of the things, but is there a certain [Asia] paper that they would rather not have collected offshore or what types of paper are acceptable from onshore versus offshore from that perspective. I mean what kind of flavor can you give us there?

Yeah. I don't think we saw any differentiation in terms of age or type of paper, it's really driven more by particular seller. And I think where the sellers are in their review and adaptation of the OCC's guidelines. And to answer your first question, we have seen a couple of sellers that are requiring the contract terms that we discussed regarding offshoring.

Okay. And then maybe one for Kevin on the litigation, Kevin did you say you had expenses this quarter of $1.9 million related to incremental reserve bidding for litigation?

Yeah. That's correct.

Okay. That is helpful. And then just lastly in terms of the fee revenue and you talked about the $9 million from the single case, the large case and fees you got from that. I thought originally you took $6 million plus and certainly 9 is more than 6. But was there anything else that happened related to that claims case that was different from your original expectation, it just seems that that number was significantly higher than what your original expectations were?

Yeah, definitely. It was really a function primarily of not being able to exactly predict how these things are going to come in and it just turned out to be a substantially larger payout as the trustee work through the settlement formula than we’d anticipated.

Okay. It looks like an early Christmas present. All right. Well, thank you. That’s all I had.

Thank you.

Thank you. Our next question comes from Hugh Miller of Sidoti. Your line is open. Hugh Miller - Sidoti & Co.: Hi. Thank you for taking my questions. I was wondering if you could obviously, we saw a tremendous strength in the fee-based businesses, but just as a housekeeping question if there. I assume that there still was some fee-based business margin dilution, if you could just give us a sense of where that’s certain?

Yeah. It’s about 227 basis points dilutive. Hugh Miller - Sidoti & Co.: Okay. And you talked about kind of caps on settlements that you can for some of these new contract terms, can you give us a sense of how far off you guys are from those caps in terms of the level of settlements that you’re achieving at this point?

As I think the cap you’re referring to is on the number of judgments that will be obtained in any given pool? Hugh Miller – Sidoti & Co.: Correct, correct.

Yeah, okay. So we have not felt a lot of pressure there. Again our model is different, we don’t sue out of the gate on a rate basis to the very small percentage of our portfolio on the legal channel so that sort of request is fairly easy for us to accommodate and our models are very precise at this point. Hugh Miller – Sidoti & Co.: So you would say that you’ve got plenty of room depending where those caps would hit?

It’s hard, plenty is the tough word. It’s hard to say pools are changing all the time and the composition of any one pool at any one point in time could make that interesting, but it’s harder to imagine that being the problem for us I guess.

I think though the most significant issue is we know about whatever these requirements are going to be upfront and that's built into our purchase price. And so it’s not a case of these contract requirements being applied retroactively to our own portfolio, this is all being valued and priced as we look at these new deals. Hugh Miller - Sidoti & Co.: Sure. I can certainly appreciate that I guess my question is and if you start to come up towards the cap rates at some point then I guess you have to make a decision on not only if there is a customer who is this [evil] and is not willing to pay us, but is this the best use our dollars relative to someone else who may be even more worthy to repay and what I mean just because you would at some point, you limit in exactly who you could sue? And is that your analysis going there?

We think we know exactly what you mean and that's why we think terms like this actually play to our strength. I firmly believe that we can model the behaviour of a customer in a legal environment better than anybody and that's going to be a huge competitive advantage as you have only so many of those legal chips to use in any portfolio. Hugh Miller - Sidoti & Co.: Okay. And given kind of the potential for further industry consolidation on the horizon, how do you guys foresee kind of some of the changes in portfolio re-sales for example in California, how will that likely play into the equation in your opinion?

I think we've said before, it will be more difficult to do a resale after January 1st, with the California Law emendating that there be direct access or contractually guaranteed access to the documentation from the original creditor. So hard to say, but I would predict it’s not going to an end to that marketplace. Hugh Miller - Sidoti & Co.: And are you seeing any pools coming about in the fourth quarter now ahead of that rule change that you could be buying?

First of all we are not the most active participant in the resale market, but even that being said, I don’t think that we would say we see anything we characterize as unusual volume and resale that looks to be getting ahead of that. Hugh Miller - Sidoti & Co.: Okay. And then I guess last question on the purchasing side is obviously you guys are maintaining a higher level of cash than you normally would just maybe given kind of the lighter purchasing than maybe some are expecting in the third quarter. But can you talk about the ability for you to quickly to deploy that and also are you seeing kind of greater than kind of seasonal pickup in fourth quarter supply coming to market?

Well, the cash is primarily sitting there because of the convertible debt deal that we did just a couple of months ago. So we anticipated that we’re probably going to run with a little bit more cash than usual. It’s not burning a hole in our pocket. We are going to I think have plenty of opportunity to deploy it over the kind of the medium-term horizon and that’s why we went after that capital raise. From a Q4 outlook perspective, I think we see a more normalized market as opposed to the hyper buying market that we saw in the first couple of quarters. And for a while now we haven’t seen the big year end rush to sales that we saw some time ago. So I think and then Q4 is going to be a relatively normal quarter from a buying perspective. Hugh Miller - Sidoti & Co.: Okay, very good color there. And then the last question I had was with the loss of the client technical location services business. Can you just talk about kind of what might be driving that decision? How should we thinking that in terms of kind of revenue headwinds? And obviously you guys are giving your outlook on the longer-term power of that particular subsidiary, but in the near term how should we be thinking about that?

Yeah, from a macro PRA perspective, I don’t think you are going to notice it. It’s not a -- it’s just not a big enough piece of things that you are going to see in effect net, net. Hugh Miller - Sidoti & Co.: Okay, thank you very much.

Our next question comes from Bob Napoli of William Blair. Your line is open.

Another question on the competitive environment, you mentioned some of these contracts, excluding the ability to collect from outside of the U.S. I think a couple of your large competitors also maybe outsourced the collections almost totally to agencies, even agency kind of, I mean whether it’s in U.S. or outside, but with the agency in the U.S. couple of your non-public competitors might be more active in that area. Is there any exclusion from outsourcing the collections to agencies in that and have you seen any change in competitive actions based on that?

I haven't seen a prohibition against outsourcing, but outsourcing does come with a new caveat that is to really audit very, very heavily. And so the burden on the people who have a big outsourcing model is going to be really significant. They're going to have to be there very, very frequently and have a very deep understanding and approval of all the actions that outsourcers undertaking. For us, it's part of the impetus to move from an external legal model to an internal legal model. There is other reasons as we have discussed, but that's definitely part of it.

Okay, thanks. The U.K. business, I mean just to understand it, I mean you're looking at this over the long term and have growing the business at a very gradual basis. It does seem like there is a pretty good opportunity over there. There was an IPO company in your space and obviously on core, but caveat in that market. I mean have you, how develop this year strategy there? I mean it seems like there is different, more pools of different types of paper maybe that make more sense in that market. There are companies that provide, that are purchasing, performing paper versus non-performing paper, larger balance, smaller balance. I mean, are you essentially looking to do there what you’re doing here or how are you acting differently in that market and how are you seeing that opportunity unfold for you?

I think long term, we like the expertise that we’ve built here and think that it really helps provide defensible value over time. So that being said, our approach in the U.K. is to be an entity that can take nonperforming asset and convert them into performing assets. And again that’s where we think our shareholders are going to get paid well over the years. We're less interested in big purchases of paying pools where perhaps there is a financial play in cutting the rate on the DCAs down from one number to a lesser number and extract some cash as a result. It’s a good way to deploy capital, but at the end of the day we don’t know how much expertise is really being built there and we're much more about as I said earlier the former strategy and being somebody that can convert non-paying accounts into paying accounts in long-term. We think that’s a big opportunity in the UK.

Now you did buy more this quarter, I mean are you getting into a more consistent flow in that market or are you still kind of in the buy and test phase?

Well, I would still characterize us overall as more in the buy and test phase than anything, although we are advancing our models pretty well. We are I’d say making some real advances on our modeling and Neal working in tandem with the operational guys in the UK have really been able to sophisticate how we’re using our work force over there and how we’re using predictive dialers and another collection metrics. And so we've really come a long, long way from where we began over there.

Great. Then last question. Just obviously with the capital you raised you have the lot of liquidity right now and I know do you like the one with the strong balance sheet and feel that that serves you very well over the long term. But I just wondered with that much capital available to you, if I mean you can slightly acquisitive here or there, are you interested in on the corporate acquisition side? If you were to be, I am sure, you are looking and you always are looking, where you looking more intently or is there a strategically, are there areas geographically your products that you may have interest in over the next couple of years?

I’d say that we’re interested in continuing to seek opportunities that provide both geographic and product diversification for us, but having done our first acquisition 10 years ago or so now, we also realize that you’ve got to live with them and operate them over time and so we want to be very careful about where it is, we pull the trigger and how it is we get involve with any acquisition. So we’re going to be pretty cautious about the whole process.

Great, thank you.

Our next question comes from Mark Hughes of SunTrust. Your line is open.

Could you talk about the margin impact of $9 million fee, was it more or less profitable than your typical fee income?

Yeah, it would be more profitable than our typical fee income.

I mean, can say how much have dropped to the bottom line?

Yeah, most of it.

Right.

The work on this thing was done years ago and that’s really the formula is that CCB business. You do the work and then you sit and wait for the fee to be paid out. Generally we are being paid on a contingency basis. And so Kevin’s point virtually everything dropped to be the bottom line in this quarter.

The non-controlling interest, the 1.9 million, is that an offset for that?

The 19%, yeah it will be come out of the MCI line in the income statement, so it will be taken out of the net attributable to PRA, yes.

Right, okay. So it would be pretty much all that less roughly 1.9 million.

Yes.

Okay. The bonus catch up in the quarter, will that be elevated next quarter or would one think that will drop back to more normalized level?

Yes, good question. So the 3.5 million I gave you in Q3 again was relative to Q2’s run rate. So I think the delta I ran the math, it was like another million bucks in Q4. So it’s not 3.5 it’s 1 million in Q4.

Right, it drops back to $1 million?

Yeah, again relative to Q2.

Right, okay, so it’s down?

Yes.

2.5 million sequentially?

Yes.

Okay. And then Neal, if you like you have been restrained from the capacity standpoint, you talk about the closing of (inaudible) etcetera not necessary working lower performing accounts, you bought a lot of paper, now you are increasing capacity in Texas, but you haven’t I presumed increased capacity much. Has that been any kind of restrained on your ability to collect?

Just a quick review of what we gave up in the Philippines. The majority of the work that was being done, the bulk of the collectors working on very low scoring accounts. And while it provided some good news in the short term, the total net return over the longer period of time was virtually nothing. And so we’ve really been feel like we gave up all hike from a lot there over the longer term. The Spanish speaking part of the portfolio, it’s a very small percentage of our collections, a couple of percent and so it was easily accommodated by the folks that we have here domestically. Dallas Center is opening as I tried to stress more as a result of the giant purchasing that we have done in Q1 and Q2 and that trend was so significant and we feel good about the future and what the marketplaces doing and contraction with our other competitors, and so that is really driving force behind the Dallas expansion. If we have the choice on where to expand it’s great to be able to expand somewhere we think we can find more bilingual collectors because we think that part of the portfolio will continue to expand at a sort of an outsized base. But to answer your question most simply, no capacity concern feel good about capacity, our models are better than ever and we are -- we feel very good about our ability to handle whatever the acquisition spokes for our way.

Right. Where you did win deals this quarter, how was the pricing on those deals relative to prior trends?

I would characterize it as fairly steady with what we have seen over the last few quarters.

Okay. And then you talked about a couple of sellers that are prohibiting offshoring, were those significant sellers, what proportion prefer to the market do they account for?

Yes, they are significant sellers.

And then any particular number you want to throw at it, third half the quarter less or?

The sellers are in and out of the market. I don't know that we can pin a number on it, but I’d characterize on both as kind of top 10 names.

Okay. And then you had I think talked about a couple of particular sellers, could you give us an update on where they are in their process? Is it anybody still out there that is working through that process and expecting to come back?

Yeah, I mean the various banks are in different places and we do believe that there is some participants that have been out, that are close to coming back and there is others that are probably more of the long term in that process. I think all of them are working at understanding exactly what the OCC and you know the other regulators that care about that sale are looking for. And I would firmly expect that there is going to be a little bit of ebb and flow on the part of the big sellers as they come to groups with the future of debt sales and what it means to the processes. So I think it’s going to be a journey for everybody here for the foreseeable future.

A final question, the Texas facility, how much will that increase your collection capacity, is there a number at it?

Set capacity for 550 employees.

And what is the total employee count now?

3200 total collectors.

Collector fees?

Collector’s fee is by about 2000.

I did 2000, then the new collectors in Texas, I am sorry how many?

It has capacity to 550, we are starting with the 150.

Okay, yes. All right, I think that’s it. Thank you very much.

Our final question for the hour comes from David Scharf of JMP Securities. Your line is open.

Just one quick follow-up, the increase in the litigation reserve, you said as soon as for the tax matter?

No, it’s for just various normal litigation stuff that we accrue for on a quarterly basis.

Okay, got it. Can you just give me a flavor for kind of what (inaudible) quarters of the year relative to the 1.9?

We’re up to 8.6 right now, so I got in total 8.9 in total reserve, that's a total bucket that we accrued to so far. I think it was 0.5 million last quarter.

Okay. So it’s nothing out of the ordinary?

No.

Got it. Thank you.

Thank you, sir. And thank you ladies and gentlemen, that does conclude Q&A portion for our call. We’d like to thank our host for today, Mr. Fredrickson, Mr. Stevenson, and Mr. Stern. That does conclude Portfolio Recovery Associates third quarter 2013 earnings conference call. You may disconnect your lines at this time. Have a great day.