AACC Asset Acceptance Capital Corp. (MM)

WARREN, Mich., April 30 /PRNewswire-FirstCall/ -- Asset Acceptance Capital Corp. (NASDAQ:AACC), a leading purchaser and collector of charged-off consumer debt, today announced results for the first quarter of 2009. The Company's first-quarter results included cash collections of $94.1 million and operating expenses of 50.0 percent of cash collections. The Company reported earnings of $0.15 per fully diluted share for the period. Asset Acceptance reported cash collections of $94.1 million in the first quarter ended March 31, 2009 versus cash collections of $100.3 million in the same period of 2008. Total revenues were $57.0 million for the first quarter 2009, compared to total revenues of $64.4 million in the first quarter of 2008. Amortization of purchased receivables in the first quarter of 2009 was 39.7 percent of total cash collections versus 36.4 percent in the year ago period. For the 2009 first quarter, the Company reported a net impairment charge of $3.4 million, versus a net impairment charge of $0.4 million in the prior-year first quarter. Net income for the quarter was $4.6 million, or $0.15 per fully diluted share, compared to net income of $6.8 million, or $0.22 per fully diluted share, for the first quarter of 2008. Earnings Before Interest, Taxes, Depreciation and Amortization, including purchased receivable amortization ("Adjusted EBITDA"), decreased 7.4 percent in the first quarter 2009 to $48.3 million when compared to the year-ago period. Please refer to the table on page 3, which reconciles net income according to Generally Accepted Accounting Principles ("GAAP") to Adjusted EBITDA. Rion Needs, President and CEO, commented: "The collections environment continued to be difficult this quarter, but we saw some easing during March. We knew we would face strong headwinds as we entered 2009, and against this backdrop we achieved what we set out to do this quarter. We managed cash collections by continuing to balance our overall capacity and increasing the use of our network of outside collection channels. And we remained focused on achieving a high level of operational discipline as evidenced by our 50 percent cost-to-collect, matching last year's first quarter operating efficiency despite a much more difficult environment." During the first quarter of 2009, the Company invested $22.1 million to purchase charged-off consumer debt portfolios with a face value of $747.8 million, representing a blended rate of 2.95 percent of face value. This compares to the prior-year first quarter, when the Company invested $22.0 million to purchase consumer debt portfolios with a face value of $542.8 million, representing a blended rate of 4.06 percent of face value. All purchase data is adjusted for buybacks. Mark Redman, Senior Vice President and CFO of Asset Acceptance Capital Corp. commented: "As we signaled last quarter, we carefully controlled our levels of purchasing in the first quarter and expect to do so again in the second quarter in order to free up capital to purchase at what we expect will be more advantageous pricing in the second half of 2009 and early 2010. This strategy allowed us to generate excess cash during the quarter, which we used to pay down our outstanding debt by approximately $19.5 million." Needs concluded: "During the first quarter we prudently managed our business with an eye toward what we believe will be the inevitable rebound in industry conditions as the economy turns higher. Having said that, the pricing environment has continued to decline during the quarter and we were able to make investments at lower average pricing levels, which reflect a concurrent decline in liquidation rates. However, our more than 45 years of experience reminds us that collecting on receivables at this stage of delinquency is not a sprint, but more like a marathon. We believe that the actions we've taken will generate attractive returns over the long term." Reconciliation of GAAP Net Income to Adjusted EBITDA (Unaudited) The Company provided the following table which reconciles GAAP net income, as reported, to Adjusted EBITDA. The Company indicated that the measure "Adjusted EBITDA" is the basis for its management bonus program and a similar computation is used in its credit agreement's financial covenants. The Company believes that Adjusted EBITDA, which is generally cash collections less operating expenses (other than non-cash operating expenses, such as depreciation and amortization) represents the Company's cash generation which can be used to purchase receivables, service debt, pay income taxes, return to shareholders and for other uses. Adjusted EBITDA, which is a non-GAAP financial measure, should not be considered an alternative to, or more meaningful than, net income prepared on a GAAP basis. Additionally, Adjusted EBITDA as computed by the Company may not be comparable to similar metrics used by others in the industry. 3 months ended March 31, ------------------------ 2009 2008 ---- ---- Net income $4,602,144 $6,777,824 Add: interest income and expense (net), income taxes, depreciation 6,344,980 8,520,369 Add (subtract): (gain) loss on disposal of equipment and other assets 1,404 (153,522) Add: impairment of assets - 445,651 Add (subtract): other (income) expense (71,777) (17,983) -------- -------- Subtotal 10,876,751 15,572,339 Change to balance of purchased receivables 37,410,073 36,689,362 Non-cash revenue (32,815) (147,769) -------- --------- Adjusted EBITDA $48,254,009 $52,113,932 =========== =========== Cash collections $94,116,937 $100,264,281 Other revenues, net 251,519 472,937 Operating expenses (47,001,669) (50,102,324) Depreciation and amortization 885,818 1,027,804 Impairment of assets - 445,651 Loss (gain) on disposal of equipment 1,404 5,583 ----- ----- Adjusted EBITDA $48,254,009 $52,113,932 =========== =========== First Quarter 2009 Earnings Conference Call Asset Acceptance Capital Corp. will host a conference call at 10 a.m. Eastern today to discuss these results and current business trends. To listen to a live Web cast of the call, please go to the investor section of the Company's web site at http://www.assetacceptance.com/. A replay of the Web cast will be available until April 30, 2010. About Asset Acceptance Capital Corp. For more than 45 years, Asset Acceptance has provided credit originators, such as credit card issuers including private label card issuers, consumer finance companies, utilities and others, an efficient alternative in recovering defaulted consumer debt. For more information, please visit http://www.assetacceptance.com/. Asset Acceptance Capital Corp. Safe Harbor Statement This press release contains certain statements, including the Company's plans and expectations regarding its operating strategies, charged-off receivables and costs, which are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include reference to the Company's presentations and Web casts. These forward-looking statements reflect the Company's views, expectations and beliefs at the time such statements were made with respect to such matters, as well as the Company's future plans, objectives, events, portfolio purchases and pricing, collections and financial results such as revenues, expenses, income, earnings per share, capital expenditures, operating margins, financial position, expected results of operations and other financial items. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Risk Factors") that make the timing, extent, likelihood and degree of occurrence of these matters difficult to predict. Words such as "anticipates," "believes," "estimates," "expects," "intends," "should," "could," "will," variations of such words and similar expressions are intended to identify forward-looking statements. There are a number of factors, many of which are beyond the Company's control, which could cause actual results and outcomes to differ materially from those described in the forward-looking statements. Risk Factors include, among others: ability to purchase charged-off consumer receivables at appropriate prices, ability to continue to acquire charged-off receivables in sufficient amounts to operate efficiently and profitably, employee turnover, ability to compete in the marketplace and acquiring charged-off receivables in industries that the Company has little or no experience. These Risk Factors also include, among others, the Risk Factors discussed under "Item 1A Risk Factors" in the Company's most recently filed Annual Report on Form 10-K and in other SEC filings, in each case under a section titled "Risk Factors" or similar headings and those discussions regarding risk factors as well as the discussion of forward-looking statements in such sections are incorporated herein by reference. Other Risk Factors exist, and new Risk Factors emerge from time to time that may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Furthermore, the Company expressly disclaims any obligation to update, amend or clarify forward-looking statements. Supplemental Financial Data --------------------------- (Unaudited, Dollars in Millions, except collections per account representative) Q1 '09 Q4 '08 Q3 '08 Q2 '08 Q1 '08 Total revenues $57.0 $55.0 $58.4 $56.5 $64.4 Cash collections $94.1 $83.3 $90.8 $95.2 $100.3 Operating expenses to cash collections 50.0% 55.2% 55.2% 52.2% 50.0% Traditional call center collections (Note 1) $41.0 $35.1 $38.4 $42.2 $47.5 Legal collections $38.7 $34.9 $38.1 $39.9 $38.2 Other collections (Note 1) $14.4 $13.3 $14.3 $13.1 $14.6 Amortization rate 39.7% 34.2% 36.0% 41.0% 36.4% Collections on fully amortized portfolios $18.3 $17.7 $18.4 $20.3 $22.2 Core amortization rate (Note 2) 49.3% 43.4% 45.1% 52.1% 46.8% Investment in purchased receivables (Note 3) $22.1 $32.1 $35.7 $64.9 $22.0 Face value of purchased receivables (Note 3) $747.8 $634.3 $720.6 $1,920.0 $542.8 Average cost of purchased receivables (Note 3) 2.95% 5.06% 4.96% 3.38% 4.06% Number of purchased receivable portfolios 31 23 42 52 47 Collections per account representative FTE $42,940 $34,994 $39,866 $45,538 $53,908 Average account representative FTE's 955 1,003 966 939 901 Note 1: Amounts reclassified for purposes of comparability to current periods. Note 2: Core amortization rate is amortization divided by collections on non-fully amortized portfolios. Note 3: All purchase data is adjusted for buybacks. The Company provided the following details regarding purchased receivable revenues: Three months ended March 31, 2009 ----------------------------------------------------------- Amort- Net Year of ization Monthly Impair- Zero Basis Purchase Collections Revenue Rate(1) Yield(2) ments Collections -------- ----------- ------- ------- -------- ----- ----------- 2003 and prior $17,233,931 $16,193,556 N/M% N/M% $(76,300) $14,133,389 2004 6,876,528 3,323,676 51.7 5.46 2,017,600 1,032,336 2005 7,438,156 3,777,544 49.2 4.38 257,000 42,505 2006 16,272,598 11,240,280 30.9 5.73 796,000 1,997,549 2007 21,118,819 11,223,873 46.9 3.74 - 958,309 2008 24,144,876 10,422,230 56.8 2.68 455,000 89,472 2009 1,032,029 558,520 45.9 3.43 - - --------- ------- --- --- Totals $94,116,937 $56,739,679 39.7 5.31 $3,449,300 $18,253,560 =========== =========== ========== =========== Three months ended March 31, 2008 ----------------------------------------------------------- Amort- Net Year of ization Monthly Impair- Zero Basis Purchase Collections Revenue Rate(1) Yield(2) ments Collections -------- ----------- ------- ------- -------- ----- ----------- 2002 and prior $14,575,197 $14,187,683 N/M% N/M% $(550,000) $13,079,109 2003 11,897,021 10,145,297 14.7 31.89 (481,050) 6,196,687 2004 9,594,231 6,579,328 31.4 7.11 1,050,347 975,199 2005 10,611,978 5,759,834 45.7 3.91 92,986 36,408 2006 24,887,906 15,533,913 37.6 5.56 92,000 1,958,947 2007 27,347,947 11,201,973 59.0 2.50 180,000 - 2008 1,350,001 314,660 76.7 1.38 - - --------- ------- --- --- Totals $100,264,281 $63,722,688 36.4 6.20 $384,283 $22,246,350 ============ =========== ======== =========== (1) "N/M" indicates that the calculated percentage for aggregated vintage years is not meaningful. (2) The monthly yield is a weighted-average yield determined by dividing purchased receivable revenues recognized in the period by the average of the beginning monthly carrying values of the purchased receivables for the period presented. Asset Acceptance Capital Corp. Consolidated Statements of Income (Unaudited) Three months ended March 31, ---------------------------- 2009 2008 ---- ---- Revenues Purchased receivable revenues, net $56,739,679 $63,722,688 Gain on sale of purchased receivables - 159,105 Other revenues, net 251,519 472,937 ------- ------- Total revenues 56,991,198 64,354,730 ---------- ---------- Expenses Salaries and benefits 19,846,517 22,071,973 Collections expense 22,126,683 21,955,673 Occupancy 1,810,861 1,927,488 Administrative 2,330,386 2,668,152 Depreciation and amortization 885,818 1,027,804 Impairment of assets - 445,651 Loss on disposal of equipment and other assets 1,404 5,583 ----- ----- Total operating expenses 47,001,669 50,102,324 ---------- ---------- Income from operations 9,989,529 14,252,406 Other income (expense) Interest income 961 23,251 Interest expense (2,642,126) (3,344,597) Other 71,777 17,983 ------ ------ Income before income taxes 7,420,141 10,949,043 Income taxes 2,817,997 4,171,219 --------- --------- Net income $4,602,144 $6,777,824 ========== ========== Weighted average number of shares: Basic 30,610,988 30,553,019 Diluted 30,624,101 30,565,690 Earnings per common share outstanding: Basic $0.15 $0.22 Diluted $0.15 $0.22 Asset Acceptance Capital Corp. Consolidated Statements of Financial Position (Unaudited) March 31, December 31, 2009 2008 ----- ----- ASSETS Cash $8,262,457 $6,042,859 Purchased receivables, net 346,048,993 361,808,502 Income taxes receivable 1,991,561 3,934,029 Property and equipment, net 12,217,904 12,526,817 Goodwill 14,323,071 14,323,071 Intangible assets 2,400,975 2,453,117 Other assets 6,529,066 7,082,721 --------- --------- Total assets $391,774,027 $408,171,116 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable $2,371,682 $3,388,320 Accrued liabilities 19,339,111 21,476,207 Income taxes payable 1,142,554 658,329 Notes payable 162,047,514 181,550,000 Deferred tax liability, net 64,936,256 64,470,002 ---------- ---------- Total liabilities 249,837,117 271,542,858 ----------- ----------- Stockholders' equity: Preferred stock, $0.01 par value, 10,000,000 shares authorized; no shares issued and outstanding - - Common stock, $0.01 par value, 100,000,000 shares authorized; issued shares - 33,169,552 at March 31, 2009 and December 31, 2008 2005 331,696 331,696 Additional paid in capital 147,152,609 146,915,791 Retained earnings 39,790,458 35,188,314 Accumulated other comprehensive loss, net of tax (4,195,172) (4,664,862) Common stock in treasury; at cost, 2,596,521 shares at March 31, 2009 and December 31, 2008 (41,142,681) (41,142,681) ------------ ------------ Total stockholders' equity 141,936,910 136,628,258 ----------- ----------- Total liabilities and stockholders' equity $391,774,027 $408,171,116 ============= ============= Asset Acceptance Capital Corp. Consolidated Statements of Cash Flows (Unaudited) Three months ended March 31, ---------------------------- 2009 2008 ---- ---- Cash flows from operating activities Net income $4,602,144 $6,777,824 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 885,818 1,027,804 Deferred income taxes 470,561 1,510,293 Share-based compensation and other non-cash compensation expense 236,818 246,433 Net impairment of purchased receivables 3,449,300 384,283 Non-cash revenue (32,815) (147,769) Loss on disposal of equipment and other assets 1,404 5,583 Gain on sale of purchased receivables - (159,105) Impairment of intangible assets - 445,651 Changes in assets and liabilities: (Decrease) increase in accounts payable and other accrued liabilities (2,688,351) 3,429,300 Decrease in other assets 553,655 536,083 Increase in net income taxes 2,426,693 2,601,488 --------- --------- Net cash provided by operating activities 9,905,227 16,657,868 --------- ---------- Cash flows from investing activities Investment in purchased receivables, net of buy backs (21,617,749) (20,472,028) Principal collected on purchased receivables 33,960,773 36,305,079 Proceeds from the sale of purchased receivables - 161,331 Purchase of property and equipment (526,377) (2,419,214) Proceeds from sale of property and equipment 210 - --- - Net cash provided by investing activities 11,816,857 13,575,168 ---------- ---------- Cash flows from financing activities Borrowings under notes payable 15,500,000 - Repayment of notes payable (35,002,486) (27,375,000) Payment of deferred financing costs - (569,544) Repayment of capital lease obligations - (9,056) --- ------- Net cash used in financing activities (19,502,486) (27,953,600) ------------ ------------ Net increase in cash 2,219,598 2,279,436 Cash at beginning of period 6,042,859 10,474,479 --------- ---------- Cash at end of period $8,262,457 $12,753,915 ========== =========== Supplemental disclosure of cash flow information Cash paid for interest $2,772,175 $3,434,253 Cash paid for income taxes 27,490 73,390 Non-cash investing and financing activities: (Increase) decrease in fair value of swap liability (465,383) 3,374,207 Decrease (increase) in unrealized loss on interest rate swap 469,690 (2,174,008) DATASOURCE: Asset Acceptance Capital Corp. CONTACT: Jeff Tryka or Jeff Lambert, both of Lambert, Edwards & Associates, Inc., +1-616-233-0500, , for Asset Acceptance Capital Corp. Web Site: http://www.assetacceptance.com/

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