Welcome to the third quarter 2008 Portfolio Recovery Associates Incorporated earnings conference call. My name is Gerri and I’ll be your coordinator for today. At this time all participants are in a listen only mode. We will facilitate a question and answer session towards the end of this conference. (Operator Instructions) I would now like to turn the call over to your host Ms. Jody [Zowa]. Jody [Zowa] : Thank you for joining Portfolio Recovery Associates third quarter 2008 earnings call. Speaking to you today will be Steve Fredrickson, our Chairman, President & CEO, Kevin Stevenson, our Chief Financial and Administrative Officer and Neal Stern, our Chief Operating Officer Owned Portfolio. 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 space and staffing requirements, future productivity of collectors, expansion of the RDF, IGF and MuniServices business and future contributions of the RDF, IGF and MuniServices businesses to earnings are forward-looking statements. These forward-looking statements are based upon management’s belief, assumptions and expectations of the company’s future operations and economic performance taking in to account currently available information. These statements are not statements of historical facts. Forward-looking statements involve risk and uncertainties, some of which are not currently known to us. Actual events or results may differ from those expressed or implied and any such forward-looking statements as a results 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 & Exchange Commission including but not limited to its annual report on Form 10K, its quarterly reports on Form 10Q and its current reports on Form 8K filed Securities & Exchange Commission and available through the company’s website which contain a more detailed discussion of the company’s business including risk and uncertainties that may affect future results. Due to such uncertainties and risks you are cautioned not to place undue reliance on any forward-looking statements which speak only as of the date hereof. The company expressly disclaims any obligation or undertaking to release publically any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with regard thereto or to reflect any change in events, conditions or circumstances on which any such forward-looking statements are based in whole or in part. Now, here’s Steve Fredrickson, our Chief Executive Officer.

Thank you all for attending Portfolio Recovery Associates third quarter 2008 earnings call. On today’s call I’ll begin by covering the company’s results broadly. We have Neal Stern on the call today and he will talk to you next about our operational strategies and of course, Kevin Stevenson will discuss our financial results in detail. After our prepared comments we’ll open the call up to Q&A. Before I get in to our results specifically I’d like to take a moment to discuss the current climate and what it means to our business. Clearly, the credit crisis and its impact on some of the worlds’ leading financial institutions are historic events. These come hand in hand with a softening economy which suggest we’re approaching a trough in the economic cycle. We’ve seen down cycles before but this credit crisis is adding a level of apprehension which is already causing consumer and businesses alike to hunker down perhaps a bit more than they normally would. For PRA, such an environment brings both positives and negatives. On the positive side in down economies charge offs increase as we’ve already begun to see, resulting in more opportunities for us to acquire debt at good price points. Interestingly, the credit crisis already has caused some of our competitors to pull back due to uncertainty and perhaps a concern over the availability of capital. We have not. In fact, we were able to increase our credit line by $25 million during the quarter, giving PRA additional capital to take advantage of the opportunities that may arise. This said we remain extremely conservative in our view of value. We are underwriting cautiously, bidding strategically and managing our dry powder so we can be an advantageous buyer throughout this cycle. The other side to an economic cycle as…

Our current operational focus is all about ROI, return on investment. In a business where perhaps 1% of the accounts might pay us in any given month, and where our labor cost run about half of all operating expenses, the work we don’t do each day is as important as the work we choose to do. In other words we have to use our collectors wisely. For this reason we’ve been incredibly focused on detailed portfolio segmentation, strategy design and execution by scored segment. During the quarter we continued to refine our segmentation methodology and strengthened our ability to dynamically alter the segmentation. Much of this work, along with a dramatic increase in predictive dialer seats was realized very late in the quarter and so had negligible impact for Q3 however I look forward to viewing what lift it may produce in Q4 and in to the future. As Steve mentioned, we determined that our legal portfolio is not liquidating as effectively as we believe it should. In addition to an organization redesign I’ve implemented two broad changes to our legal strategy that are already leading to a correct of the situation. First of all, we’re now far less reliant on the judgmental selection of legal accounts by collection ramps. Although this methodology supplemented with the automated selection based on account attributes worked well for the company for years, as of late it had been producing suboptimal account selection both in terms of timing and account type. We are now using automated processes to analysis accounts, balances, collection attempts, outcomes and a variety of other factors to select the right accounts at the right time to refer to the legal channel. Second, we have not been investing as deeply and intelligently in our referred legal accounts as we need to…

Our third quarter 2008 financial performance shows both a positive the benefits of our diversification in to the fee businesses as well as the negative, our allowance charges. Despite otherwise solid performance, especially in the face of an economic headwind allowance charges moved our net income down substantially from where it would have been otherwise keeping our EPS and net income essentially flat to the comparable period. Offering more granularity, net income in the quarter fell 2% to $11.5 million while EPS was flat at $0.75. Total revenue for the quarter was $68.6 million which represents growth of 25.5% from the same period a year ago. Operating income was $21.4 million, up about 10% from the year earlier period while net interest expense grew from $1.1 million one year ago to $3.1 million in Q3. This is up sequentially from $2.6 million in Q2 2008. Our average interest cost on the acquisition line during the quarter was 4.57%, down from 4.63% in Q2. At quarter end borrowing levels, each 100 basis point sling in LIBOR either costs or saves us about $181,000 monthly. Breaking our third quarter down in to its three components, the majority of total revenue or $52.7 million came from income recognized on financed receivables. This is revenue generated by our own debt portfolios. Income on finance receivables is derived from the $83 million in cash collections we recorded during the quarter, reduced by an amortization rate, including allowance charge of 36.5%. This amortization rate compares with 37.6% in Q2 2008, 29.2% in Q3 2007 and our full year 2007 rate of 29.6%. Our stated amortization rate year-to-date in 2008 is 36.0%. During the quarter PRA recorded allowance charges totaling $3.78 million which compares to $3.96 million in Q2. Life to date reserves since the changed SOP03-3…

(Operator Instructions) Our first question comes from David Scharf – JMP Securities. David Scharf – JMP Securities: Steve, I wanted to start off with a familiar topic, obviously this is kind of five quarters in a row now of material allowance charges. I know you’ve discussed this in the past but can you back up again and sort of walk through the process of determining at what juncture you decide to write down those collection curves and how you come up with the magnitude? Because obviously we’re looking at sequential quarters were unemployment is increasing, consumer confidence is dropping, there are a lot of moving pieces and I know in the past the topic has come up of whether or not the accounting rules actually permit you to really slash and burn those curves and take a lot of pain up front. I’m just sort of curious what factors keep changing every sequential three month period that kind of leads to these incremental charges. And, more importantly, as you kind of look at the macro environment today, what gives you confidence that, I think you commented Q4 may in fact be a turning point where we start to see the magnitude lessen.

I’ll look back through my notes, I’m not sure I remember saying that. But, let me answer your question, does accounting convention allow you to slash and burn, I don’t know that it does. Let me talk about how we do it. Every aggregated deal for a quarter and again remember aggregate deals in several different ways but one would be if I brought in cost recovery deals, that would be by itself and that would have no yield on it. There’d be kind of the core buying paper that’s aggregated in one deal, there be bankruptcy buying in another and then medical paper, if you bought some. That’s generally the four categories we’d put them in to. What we’ll do is that we set the curves and we’ve talked about from time-to-time we do try and take a pretty hopefully pragmatic approach to how we book these deals from the start and we’ll start watching these cash collections come in and generally in the first year, six months to a year we don’t allow any accretion so if cash collections came in light we don’t allow accretion we use either the cost recovery or cash method for those deals. Your question specifically though is when it comes in weak and so what we’ll try and do is that for instance, this legal component I’ve talked about, if indeed this investment in legal pays off down the road, I am not taking that consideration right now so I will look at current period cash short falls and then take a look at how that flows in to future projections and it’s literally on this aggregate deal-by-deal basis there are graphs that I work with, Jim [Fike] and we’ll call them the guys from bankruptcy purchasing as well as the core buying group and try to curve fit that. Look at the actual data points and setting them on the curve. We’ll come up with our best shot every quarter of what we think cash collections are going to come in at. It’s a very detailed, very painstaking process but that’s how we do it. So, we don’t say kind of what’s the worst case scenario and kind of slash it and burn it. No, we don’t do that. David Scharf – JMP Securities: Just to clarify, at the onset I had thought you made some comment that part of the allowances charges this quarter or really year-to-date have been the result of some of the under investing in legal and I thought you commented you’d see some relief here.

We said that could generate some relief. That’s a good clarification. But, if it does, it’s not in my ERC estimate. I am not counting on that. So, if I’m looking at an ’05 through early ’07 deal and Neal tells me, “Hey I’ve invested $2 million in legal costs, that’s going to generate something.” I generally don’t put any great weight in that. David Scharf – JMP Securities: On the fee for service side, the MuniServices in particular, you still in aggregate have some of that 400 basis point delta and just the inherent profitability of that versus the purchasing business. Is MuniServices, is it generally a more profitable business than Anchor? Than the contingency business? I would imagine that was the least profitable right?

Right. No, no, no, that’s a homerun you’re absolutely right. The margins of Muni and RD, again you’ve got to figure out if you’re going to take out the amortization intangible or not but they’re fairly similar. IGS can move around a little bit depending on how much pass through EITF or any of their [inaudible] fees are there. But, you’re right Anchor was definitely the lowest one. David Scharf – JMP Securities: So as we look over the next year is there much margin opportunity incrementally in RDS and Muni? I mean, obviously they’re very labor intensive but I would imagine wage rates are moderating as well?

I guess the opportunity is going to be moving Anchor out and moving Muni in then also as the amortization of the intangibles start to decline over time that’s going to be an opportunity. There’s also some opportunity for some back office production advantages so to speak that can hopefully take some back office support from Muni and let them focus on their business a little more. David Scharf – JMP Securities: Two more, Philippians do you have any sort of internal deadline in your mind as to when you sort of make a decision whether that’s working or not and you might possibly cut off that experiment or conversely expand the seats over there?

There’s no date in my mind. We watch their results closely every month and we’ll react accordingly. So the results they produce for the quarter were disappointing, we took the FTE number down some and like Steve said we’re hoping that will improve in the fourth quarter and if it does we could go the other direction. But, we watch this very, very closely every month in isolation and in comparison with our other centers. David Scharf – JMP Securities: Once again, back on the allowance charges I wanted to make sure I wrote it down correctly as you were speaking quickly, the allowances now grew to include I guess the pools from the second quarter ’07, is that correct?

That’s correct, yes. David Scharf – JMP Securities: And obviously last year was a tremendous ramp in purchase volumes, ’07 over ’06. Any early warning signs that the back half of the year of those pool purchased in the second half of ’07 may be seeing some write downs as well?

That’s a good question, again if I had seen them you’d have seen them in this conference call. That’s about the straightest answer I can give you. David Scharf – JMP Securities: Along those lines was there any material changes in the pricing environment from the first half of ’07 to the second half of ’07 because obviously a lot of folks are looking at just the magnitude of buying last year and wondering what another potential shoe to drop is. I think you put about $160 million to use in the second half?

No, we felt as though pricing moved along in the buyers favor as the year 2007 went along. So, Q1 was the most difficult and Q4 was probably the most advantageous pricing and the year kind of flowed that way David.

If you noticed in my script I talked about the Q1 2007 pool, that was about 50% of that $3.5 million allowance taken on those pools. David Scharf – JMP Securities: Last question, you mentioned obviously the pull back and inflation and really gas and grocery as potentially counter availing benefit here. Any anecdotal evidence that that’s started to kick in yet in terms of liquidations or is that pure speculation at this point?

I mean given the freshness of that data combined with the I think kind of incredible hunker down mentality that all of have felt over the last few weeks it’s kind of tough to sort out which one is impacting our consumers the most. I think that’s going to be more a question for Q4 performance than something we can give you a feel for right now.

Our next question comes from Mark Hughes – SunTrust Robinson Humphrey. Mark Hughes – SunTrust Robinson Humphrey: At what point in the last economic cycle did you see prices bottom out?

Well, I guess in looking at things from a multiple standpoint would be probably the purest way to answer that question. We saw things kind of bounce along there, I don’t have the statistics in front of me but I guess I’d refer you to our multiple tables and as the multiple expanded generally it’s a pretty good view on when pricing came down the most significantly. Mark Hughes – SunTrust Robinson Humphrey: How did that relate to the job market or GDP, any recollection on that relationship?

Again, you guys have as good historical data as I. I don’t have that in front of me.

Our next question comes from John Neff – William, Blair & Company, LLC. John Neff – William, Blair & Company, LLC: I’m curious if you could just comment on your financing flexibility and ability to keep on buying assuming prices would continue as I think you mentioned before, essentially really great opportunities in perhaps the fourth quarter of this year maybe early next year. You’ve got about $98 million in remaining borrowing capacity, that would get you less than two more quarters at the kind of pace you bought at in this most recent quarter. Could you just give us a sense of what your total, including cash flow, sense of your total purchasing capacity at this point and how you think about sort of metering that out over time and sort of an outlook on pricing?

Sure, and let me quickly follow up on the last question, we’ve got our multiple table up in front of us now and it looks like from a multiple standpoint we’re kind of peaking in 2000 through 2002. So, those were years where I think that the macroeconomic environment was fairly tough and obviously pricing was pretty attractive. We had originally booked those deals at pretty conservative numbers in those kind of 4.1 to 4.8 multiples that we’ve been able to achieve over time certainly weren’t apparent they won, they expanded as we experienced actual liquidation results on those things.

Your question then is how we think about buying. It think Steve addressed it in his script in terms of ours strategy, we don’t want to be the market but we also don’t want to sit on the sidelines. With about $100 million of line available and free cash flow, I think we’ve got a pretty healthy bit of capital to deploy. I’ll let you forecast what you think free cash flow will be next year but you can just add that to the $100 million.

Obviously this quarter we also used the line to some degree to acquire a couple of companies.

About $25 million, right. We think we’ve got pretty sufficient dry powder John to be a pretty aggressive buyer through the next 12 to 18 months. John Neff – William, Blair & Company, LLC: Kevin, my normal question about total PRA collectors and supervisors headcount at quarter end, you gave the collector number referencing last quarter would be 1,490?

Yes, 1,482 so down eight. John Neff – William, Blair & Company, LLC: Is the down eight does that include the Philippians FTEs?

Well, it’s a net number so we had people moving up, people moving down.

Right.

The Philippians did end up net down just about that much but it’s a complicated mix as opposed to saying it happened strictly because of the Philippians moves. John Neff – William, Blair & Company, LLC: But that was factor, the Philippians?

Yes. And of course, Neal mentioned dialer usage in the way he’s moving accounts around so that’s where Neal felt the number needed to be for that quarter. Remember that’s headcount, that’s headcount in the quarter, that doesn’t tell you much about FTEs, you’ll have to wait until the Q comes out on the FTE side. John Neff – William, Blair & Company, LLC: Again, I was kind of scrambling fast, could you walk through the breakdown of the impairment again. So it was net of $145,000 total reversal but could you walk through how much was from the pre ’04, how much was on bankruptcy and how much was on the more recent purchases?

Sure. As you pointed out it was $145,000 reversal for the older deals. Interestingly enough there was $145,000 charge on the bankruptcy deals. There was about $325,000 on the Q2 and Q3 2005 tranche and then $3.5 million on the ’06 through Q2 of ’07 pools. About 50% of that was on Q1 2007. John Neff – William, Blair & Company, LLC: Then, one last question and I can get back in the queue, I was just wondering could you just elaborate a little bit more on what the legal investment, the $2 million, the advancement of $1.3 million in the quarter, what is that an investment in, what is that going towards?

It’s predominately an investment in court costs, the fees that you pay the courts when you file the lawsuit. John Neff – William, Blair & Company, LLC: Tell me what that does for you?

Remember there’s two components to the legal side of the equation. One is the contingent fee you pay your attorneys when the cash collection comes in. That’s the easy one. The other one is when you sue somebody you’ve got to pay court costs and fees and those could range from a couple of hundred bucks out in California and there are some states where they are $50 to $80, I don’t know what else off the top of my head. But, you’ve got to pay that to the court to get that suit in front of the court.

Once you file the suit, if you’re awarded the judgment than you have a number of other collection options that can be used subsequent to having that judgment. John Neff – William, Blair & Company, LLC: I want to make sure I understand it, you were under investing in that and that was forcing attorneys to fork that over out-of-pocket and they don’t want to do that so the cases weren’t being filed?

No. We were not assigning accounts to attorneys, and remember when the attorney gets the account they’ve got different actions they can take with it as well. They can work on it from a contingent standpoint, they can collect it themselves or they can litigate it. We were distributing court cost allowance to them so to speak maybe not as deeply as we should have.

And, there’s some timing in play here too. We send the account to them and maybe they were waiting 120 days when in fact they should have gone at day 90 to court. So, really this involved tightening up our MIS which had some looseness about it and now that we’ve tightened those controls we’ve got much better insight in to how that inventory is moving through these various steps of our legal process and we’ll be much more mindful about making sure that accounts are moving through at the right velocity.

If you recall back in the Q1 conference call I mentioned that new MIS that we got for our legal department, that was one of the first things we did when Neal came aboard.

Our next question comes from Richard Shane – Jefferies & Co. Richard Shane – Jefferies & Co.: A couple of different things here, you made the point that the business model and the metric that you guys are really focused on is return on invested capital and I think that’s a really good way to be looking at this and frankly it really does fall squarely in with what our concern is. When you look at the ROIC what is the hurdle rate that you’re targeting?

I’m not throwing out a specific ROIC hurdle rate and I also don’t want to suggest that we’re looking at a single statistic but we feel that a number of those metrics taken in combination will help us over the long term make the right kind of shareholder friendly decisions on how we’re going about putting out capital. Richard Shane – Jefferies & Co.: What I’m getting at is this, I’m sort of wondering with the expected collections on vintages sort of in the 2 to 2.5 range, what sort of IRR you can expect on those types of acquisitions because again, the operating expenses associated with the collections seem to run about 50% of cash collections. So, I’m wondering in that range what type of IRR you think the pools generate? I think one of the subtleties we may be missing here is the impact of the bankruptcy portfolio on IRR.

I think there’s another mix of statistics you’ve got because you’re looking at our operating expenses including all of our fee for services businesses which magnifies the observed operating expenses that we’re lugging around there. So, our actual cost to collect on the bankruptcy side is much, much lower than 50% and for the most part regardless of what type of accounts we’re purchasing on the core side our operating expense ratio is also much lower than that. Richard Shane – Jefferies & Co.: Let me delve in to a couple of other things, maybe we’ll talk about this off line. Cash collections are up 20% year-over-year, the revenues on those collections are up only 14% and the portfolio size is up actually about 80%. When we look at it and the way we track the sort of efficiency of collection is we look at what the portfolio size is coming in to the quarter and then what percentage of that carrying value you actually collect in cash during the quarter. One observation we’ve made is that over the last 18 months that’s basically degraded about 50%. If this is really an investment for the future when is this sort of going to flip? When should we expect to see those cash collections start to move? They’re moving in the same direction as the portfolio growth but not nearly at the same rate of change. When should we see that conversion?

I think one of the things that you’ve got to take in to consideration is the rate of purchasing that we’ve done over the past 18 months, especially relative to what you’ve observed what we’ve experienced over much of the life of the company. You can’t expect if you take an example to the extreme making a huge buy in one quarter and then seeing that liquidate at a historical rate the next quarter, it just doesn’t happen that way. Certainly, the economic environment that we’re in is not helping create instant recoveries. We think in a lot of cases we’re going to be taking payments over a potentially longer period of time than we did historically maybe where we were taking a settlement or balance in full we’re going to have to take payments over a longer period of time in this environment so the cash flow dynamics may be changing somewhat. But, I would say the rate of growth and the current economy that we’re dealing with both are going to combine to affect that observed ratio and our ability to liquidate NFR or whatever number you’re looking at. Richard Shane – Jefferies & Co.: Then the last question, I’m not sure I followed this entirely and I apologize if I didn’t. I understood there was a question that basically said that during the first half the vintages or the purchases from early ’07 were subject to more impairment than purchases from the second half of ’07 and the intimation was that it turns out that there was better pricing in the back half of ’07 that you were able to take advantage of. Is that correct?

That’s right. Richard Shane – Jefferies & Co.: Okay, because I went back and I kind of looked at the transcripts as we were talking about this and basically quarter-after-quarter you guys said, “Slightly moderating, steady to slightly softening pricing throughout the year.” So, I’m curious is there something that you’ve seen now that really differentiates that or was there something going on back then when you were discussing pricing that is now apparent that wasn’t then?

Well, I don’t know. I guess I would characterize repeated progressive commentary of steady to slightly softening pricing as meaning pricing is getting a little better, pricing is getting a little better, pricing is getting a little better so I think our observation is fairly consistent with what we were saying at the time?

From a reserves standpoint again, I guess the numbers kind of speak for themselves, I haven’t seen any yet maybe on Q3 ’07 and Q4 ’07 and I guess time will tell how that goes. Richard Shane – Jefferies & Co.: Is that a function of you don’t reprice these for 12 months after they’re in the pool? Or could you start impairing things a lot faster than that if you saw slight variances?

No, if I saw variances – that’s a good question, I generally as we’re looking at level yield accounting as we call it SOP03-3, we generally wait to move ERCs up and you guys can see that when you look at the tables. You can tell really in that first year or so we assume collections ahead of projections are accelerations and not true betterments. It isn’t until say 18 months go by we let that ERC start to run a little bit. But, the converse is not true, the converse is if I’ve got some cash short falls coming in, indeed we could book impairment sooner.

Our next question comes from Edward Hemmelgarn – Shaker Investments, LLC. Edward Hemmelgarn – Shaker Investments, LLC: Just a couple, on your compensation I’m assuming that compensation would have been up higher by about $1.4 million if not for the reversal?

Yes. Edward Hemmelgarn – Shaker Investments, LLC: So we should assume that compensation is probably going up by that amount plus more for the extra month of Broussard in Q4?

That’s correct, yes. Edward Hemmelgarn – Shaker Investments, LLC: My question now is since we’re kind of in a recessionary period here, how would you characterize the pricing now relative to the pricing you were seeing back in 2000, 2001, 2002? We clearly understand that the pricing was based upon collections so far, the pricing environment was much tougher in ’05 and ’06 and the first part of ’07 than it was back then. But, you said that you’re seeing improvement but do you think you’re seeing the type of improvement that you saw back in the recession in the high write off period that we saw back in that time period?

I’ll tell you, when we purchased deals especially in that 2000 to 2002 period we felt as though we were getting very good value. I can tell you however we did not know at the time that we were buying assets that had the kind of multiples still in them that they ended up doing. We fell as though we are underwriting extremely conservative right now and that even with extremely conservative underwriting we are buying to significantly wider IRRs than we had been in some time. In addition, we are then booking things at we feel the highest possible confidence level so that again, we have the accounting guys don’t like to use the conservative word, I don’t know if I’ve got a better one though, we just try to book these things at a very high confidence level trying to make sure that allowances can be avoided. So, we’re in that kind of environment right now and even if it persists we believe that we’ve got collection curves drawn that will allow us to have appropriately profitable deals. If the economy picks up and if like the last cycle over the life of these assets we’re able to expand those multiples somewhat it should be all to the upside for us. Edward Hemmelgarn – Shaker Investments, LLC: Back at that time you saw and obviously in collections as a percentage of the purchase price were much higher than they’ve certainly been recently or it looks like. We haven’t seen obviously the data for ’08 yet in the third quarter of your 10Q but it doesn’t seem up, at least based upon the date through the second quarter 10Q that we’ve seen had a real much of a pick up yet in terms of increased collections as a percentage of the purchase price. Is that something that we should be concerned with? Or, are you really seeing that major of a change in the type of payment plans that you’re opting for with your collectees?

Well, we’ve definitely seen and we’ve talked about it the last couple of quarters a shift from the percentage of payment in fulls and settlements we get to more what we’d call a pure payment. A typical pure payment is smaller than the typical balance in full or settlement in full. So, that would suggest that liquidations are going to be more drawn out all things being equal and we’ll just have to see how the balance in full and settlement in full activity picks up after we’re able to hopefully get further through this economic trough. Edward Hemmelgarn – Shaker Investments, LLC: The collector productivity at your older centers really feel off in the third quarter relative to second quarter, it was a bigger fall off than I think I’ve ever seen before, maybe you’ve seen something similar. But, at least with the numbers you’ve sited is that something that you think is totally related to the economy or is it something that was more partially unique to the problems or issues that you were having at your collector centers?

Well actually, we’ve only been giving you that site specific data that I think you’re referring to for a relatively short period of time. I can’t recall when we first gave it to you but it hasn’t been that long. Typically, we’re giving you only that macro number which includes legal activity and non-collector specific activity which especially in down periods can somewhat offset what’s happening specifically with collector owned Qs. I think our view was more that it’s the normal economic downturn that we see in a typical Q3 compared to a Q2. But, again we’re calling on people that see and hear and feel all the same things that are apparent to all of us every day in looking at the general economic news and there is some detrimental affect there and accounts are liquidating somewhat slower as a result.

Edward, I’ll also say as you look at ’08 remember we do book things at a high confidence interval and it does – we generally wait call it 18 months before we start moving or allowing that ERC to expand. So, even if we were over collecting on the ’08 tranche which you can probably squeeze yourself when we get the Q out one way or another, it would be a while before you saw that ERC level expand as opposed to the ’06 tranche which now has some vintage on it and you can get a feel for it, that’s probably going to end up shaking out. Just make sure you’re looking at stuff ex-bankruptcy too, especially if you’re looking at stuff historically.

Our next question comes from the line of Robert Napoli – Piper Jaffray. Robert Napoli – Piper Jaffray: I was on all those calls in 2007 and clearly you guys suggested as the year went on that pricing got a little better so for my buddy Rick Shane who I’m sure is listening. But, and I’ll have to read the transcript, the Anchor business, the collectors that you shifted over, how is that going? And, on the collection side, I’m sorry I missed some of the discussion up front, did you talk about turnover trends and your collectors given tougher economic environment and job environment?

Well first of all turnover trends and the ability to attract new people has improved as the economy weakens as you would anticipate. Our open house attendance is up substantially, our turnover I think we could characterize it as down substantially for the quarter so that part of it is working well. I’ll turn the other part of it over to Neal.

I would say we’re pleased with the Anchor collection folks. They got out of the gate strong as we expected they would and I think they’ve added a lot of value today. Robert Napoli – Piper Jaffray: When did they essentially fully ramp up on the core business?

Well by the end of Q2 they had just about all been flipped or were in the pipeline to flip over so there was a short training period and they have been ramping up throughout the quarter. But, I think you could characterize the entire Q3 as having the benefit of that redeployment. Robert Napoli – Piper Jaffray: The purchases you made in the quarter ex the bankruptcies, they were in line with what our overall expectations were but I’ve got to believe there’s a fair amount of additional paper in the market. Have you tightened up your underwriting further or raised your prices or reduced your prices I guess I should say incrementally to moderate the amount you’re taking in?

We are underwriting conservatively, more conservatively than we have been and we have also raised internally our pricing hurdle requirements. So, both of those are impacting what’s going on. We are also not trying to solely base our projection of what we think future activities is going to be on how much we’re willing to take down but given the news that’s out there it would seem reasonable to expect that we’ll be seeing increasing levels of delinquency charge offs and portfolio sales in the next five quarters or so and so we’re trying to make sure that we are buying paper at nice prices today if that’s going to take us out of the market to some degree in the future so we’re trying to be careful. Robert Napoli – Piper Jaffray: What is going on in the competitive environment? There’s certainly several very stressed competitors, some who have gotten out of the business by choice, some that have gone out of the business because they’re very stressed economically. What are you seeing? Are you seeing any new competitors? How would you characterize the environment?

I don’t think we’re running in to a lot of new competitors. We seem to be reading more about people who are either pulling back their buying or in some cases exiting all together and there have been some very significant players over the last three or four months announced that they are either again pulling back or getting out of the business all together. So, volumes that are available to the rest of us have got to be affected and we think it’s got to push down prices. Robert Napoli – Piper Jaffray: On the collection front and this is probably a much more difficult environment than the last recession, it feels like it to me anyway for your type of business. What did you see in October relative to September? Noting the CNBC affect and headlines and consumer confidence and declining, as you moved September to October is October more difficult than September, September more difficult than August to collect?

The jury is still out on October. We like I think every collection firm in the US at least do a huge amount of business the last few days of the month. So, even though we’re very close I cannot give you a definitive call for how October looks. We’ve had days that have looked great, we’ve had days that look like our customers are all listening to CNBC and we’ll just see how the entire month plays out. Robert Napoli – Piper Jaffray: Then on the MuniServices business, I’m not sure you gave this but what is the growth rate and what do you think the organic growth rate of the business is? What is the organic growth rate of MuniServices? What is the revenue of the two businesses you acquired and what would be a reasonable goal for organic growth for those fee businesses that you currently have?

I think it’s really more than we’re wanting to talk about at this point Bob. Robert Napoli – Piper Jaffray: Can you give me any feel for historical MuniServices revenue growth or the opportunity or something like that? Try to size up?

We hope that we’ve got a nice opportunity to grow the combined government services businesses. We think that these companies, both RDS and Muni are really well positioned especially given the current economic environment to come in and help municipalities that are strapped for revenue find missing revenues or find under collected revenues really without raising taxes. It’s simply helping them close their tax gap as opposed to increasing taxes on their constituencies. We have from a sales environment certainly been feeling that’s the case and I think it’s incumbent upon our team now to close more and more of those opportunities and help improve our revenue and net income there. But, we think we’ve got some very nice growth opportunities over all.

Our next question comes from Bill Carcache – Fox-Pitt Kelton. Bill Carcache – Fox-Pitt Kelton: Can you talk about how generally speaking you think about the resilience of each of your collection channels through different phases of the cycle, particularly BK?

On BK, at the end of the day it’s a consumer either living with or not living with a plan and so just because they’re in BK doesn’t mean they’re immune to the rest of the economic pressures that are on them. We’re closely watching dividend rates and trying to make sure that we understand both trends there and also what’s happening to our particular consumers and we’re also watching fall out rates so that we can properly estimate how many people are going to complete or not complete plans. Both are key variables in our bankruptcy underwriting and we have as I would hope you’d imagine, we have been trying to be very conservative looking at both of those assumptions to make sure that we’re making proper decisions on pricing those bankruptcy pools. Bill Carcache – Fox-Pitt Kelton: You mentioned that you were keeping your eyes open for other acquisition opportunities in the contingency business area. Can you describe how you think about the tradeoff between putting your capital to work through additional portfolio purchases in this environment versus doing a deal? And, along those lines how much of your remaining capacity would you be willing to allocate towards acquisitions?

I think it all comes down to how much opportunity we think we’ve got in one versus the other. So, to the extent the pricing on the asset purchase market turns very positive or continues to offer us very wide IRRs that’s going to be a very compelling area and tough for us to walk away from. To the extent we see a particular transaction that maybe in kind of the right space or a nice tuck in for us in an existing business at what we think is an attractive price, we’ll do a company acquisition. Clearly, our pool of capital though is limited and if it goes in to a company purchase it won’t go in to an asset acquisition and vice versa. We are trying to be very careful in that capital acquisition decision. We’re trying to involve all of our management team in making those decisions so that we’re really understanding where long term we’re going to get more bang for the buck for the investment. Bill Carcache – Fox-Pitt Kelton: Along that thought process you wouldn’t necessarily be reluctant to if you got to the point where you used up the line, making investments in either area you thought were attractive if you thought it was important to seek a credit line increase even from where you are right now, you’d be open to that as well.

That’s right. Bill Carcache – Fox-Pitt Kelton: And the relationship between cash collections to receivables balances would you agree that there’s an apples and oranges issue to the extent that you’re comparing companies and using this metric giving the differing expectations of future cash collections would basically distort the result?

Absolutely, it’s going to have an affect not only between how you liquidate your paper but what the portfolio is composed of, etc. Bill Carcache – Fox-Pitt Kelton: Then finally, on the line increase and the addition of J.P. Morgan to your bank group, how much higher is the cost of the incremental funds that they’re making available to you?

It’s the same, LIBOR plus 1.40%.

Your next question comes from the line of Hugh Miller – Sidoti & Company. Hugh Miller – Sidoti & Company: I just had a quick question about the predictive dialer and update there, how many reps were using it in the third quarter? And, the productivity enhancements you were able to achieve?

It’s up significantly. We’re looking at the portfolio and segmenting it and trying to figure out who responds to a call from an automated dialer versus who responds to calls from a manually attempt and our conclusion is that we had some room to increase dialer capacity so we’ve ramped it in accordance to the opportunity that we saw. Hugh Miller – Sidoti & Company: Do you have a number as to how many reps were using the system in the third quarter? I believe you mentioned before that in prior quarters in the first half of the year you were able to work somewhere in the high teens, 17%, 18% more accounts per hour with that and what you were able to see then in the third quarter?

At the end, about half of our time now is spent on the dialer. We’ve got 1,300 collectors and there’s 400 seats but because they’re more productive when they’re in those seats by some factor, it equates to about half our given days on the dialer. Hugh Miller – Sidoti & Company: Any number there as to the increase in the accounts worked per hour?

I didn’t compute that this time. We had said earlier that some of the more discreet accounts were [inaudible], I didn’t do that this fall.

The number I think we gave last time was 17% or 18%. That number, we were comparing wherever we ended Q2 against where we were at December so that number now ending Q3 was 27% higher than it was in December. Hugh Miller – Sidoti & Company: Can you just give the figure again for the collector headcount at the end of the quarter.

Collector headcount, again this is actual headcount not FTEs, is 1,267 that’s the collectors. With their direct supervisors it’s about 1,482. Hugh Miller – Sidoti & Company: Do you give out the FTE number?

It will be on the Q as soon as we put that out which shouldn’t be very long. Can I just clarify one thing, FTE, if there is a part-time person in there it would be a .5 but the FTE’s we put out in the Q are based on real hours worked. I wanted to clear that up.

At this time there are no additional questions. This concludes the Q&A portion of your conference. I would now like to turn the call over to Mr. Steve Fredrickson for closing remarks.

First I’d like to thank all of you for participating in our conference call. Before we go I’d like to reiterate some key points about our third quarter. As I mentioned at the outset of our call we’re moving in to an economic environment that holds both challenges and opportunities for PRA. As we worked through the legal collections issues we’ve discussed at length today it’s important to understand that PRA enters this period with a very solid business that continues to produce cash and take advantage of opportunities we see in the market for portfolio and company acquisitions. Thanks again for your time and attention. We look forward to speaking with you again next quarter.

This now concludes the presentation. You may now disconnect and have a great day.