Business Context and Reporting Period
Company: Portfolio Recovery Associates, Inc. (PRA Group Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: December 21, 2011
Subject: Entry into new three-year employment agreements with Named Executive Officers (NEOs) effective January 1, 2012, and the establishment of a Supplemental Long-Term Equity Program for the President of Bankruptcy Services.
Key Financial Metrics
This filing does not contain revenue, profit, cash flow, margin, debt, or liquidity metrics. The report focuses exclusively on executive compensation arrangements.
Material Changes and Compensation Terms
The Company entered into new employment agreements with six NEOs, superseding prior agreements. Key terms include:
- Term: Three years (January 1, 2012, to December 31, 2014).
- Severance: Payments upon involuntary termination without Cause or non-renewal, conditioned on a general release. Amounts range from one to two times base salary plus average bonus.
- Change in Control: "Double trigger" arrangements providing up to two times base salary and two times average bonus.
- Base Salaries:
- Steven Fredrickson (CEO): $725,000
- Kevin Stevenson (EVP/CFO): $375,000
- Neal Stern (EVP, Operations): $325,000
- Michael Petit (President, Bankruptcy Services): $325,000
- Peter K. McCammon (President, Revenue Enhancement): $300,000
- Judith Scott (EVP, General Counsel): $277,000
Outlook, Risks, and Unusual Items
Supplemental Long-Term Equity Program: A new performance-based program was approved for Michael Petit (President, Bankruptcy Services). Vesting is contingent on the Bankruptcy Department achieving specific annual revenue targets for 2012, 2013, and 2014.
| Year | Target Revenue ($ Millions) | Threshold for 0% Vesting | Threshold for 100% Vesting | Threshold for 200% Vesting |
|---|---|---|---|---|
| 2012 | $140.0 | $140.0 | $160.0 | $190.0 |
| 2013 | $145.0 | $145.0 | $165.0 | $195.0 |
| 2014 | $150.0 | $150.0 | $170.0 | $200.0 |
Risks and Contingencies:
- Awards under the equity program are subject to claw-back provisions.
- Severance payments require the execution of a general release.
- NEOs are subject to non-compete and non-solicitation provisions.
Investor Verification Checklist
- Verify the specific revenue targets for the Bankruptcy Department against actual performance in subsequent quarterly reports to assess equity vesting for Michael Petit.
- Review the 2012 Proxy Statement for a comprehensive review of executive compensation and detailed claw-back provisions.
- Confirm the total potential liability for severance and change-in-control payments based on the "double trigger" clauses.
- Monitor the Company's ability to meet the 50th percentile compensation benchmark relative to the Compensation Peer Group.