AACC Asset Acceptance Capital Corp. (MM)

Asset Acceptance Capital Corp. Announces 10th Straight Year of Record Results Revenues up 53 percent for the fourth quarter, 59 percent for the year WARREN, Mich., March 10 /PRNewswire-FirstCall/ -- Asset Acceptance Capital Corp. , a leading purchaser and collector of charged-off consumer receivables, today announced record earnings for the fourth quarter and year ended December 31, 2003. The company said its fourth quarter and 2003 fiscal year results reflect its operations prior to its reorganization into Asset Acceptance Capital Corp. on February 4, 2004. The company reorganized in preparation for its initial public offering, which it commenced on February 5, 2004. Revenues for the fourth quarter of 2003 were $44.3 million, a 53.1 percent increase compared to the $28.9 million reported for the fourth quarter of 2002. Net income for the fourth quarter increased to $11.1 million, a 73.2 percent increase compared to $6.4 million in the same period of 2002. Pro forma net income for the fourth quarter 2003 was $9.1 million and $5.0 million for the same period in 2002. Net income for the fourth quarter of 2003 and 2002 includes income tax expense on 60 percent of the pretax income as the other 40 percent of pretax income was attributable to a pass through entity. As used in this press release, pro forma net income includes income tax expense assuming that all the company's subsidiaries were 100 percent owned and the company was a C corporation for all periods reported. Total revenues for fiscal 2003 climbed to $160.2 million, a 59.0 percent increase over the $100.7 million in 2002. Net income for 2003 was $37.7 million compared with $27.9 million the previous year. On a pro forma basis, Asset Acceptance Capital reported a 62.7 percent increase in net income for 2003 of $30.1 million from $18.5 million. Net income for 2003 includes income tax expense on 60 percent of the pretax income as the other 40 percent of pretax income was attributable to a pass through entity. In 2002, net income includes income tax expense on 60 percent of the pretax income in the fourth quarter only, as the entire company was a pass through entity for the first nine months of the year and thus recognized no income tax expense during that period. "From both an operational and financial perspective, 2003 was a very good year for us," said Brad Bradley, CEO of Asset Acceptance Capital. "We continued our track record of strong growth in both portfolio acquisitions and collections, demonstrating the success of our disciplined, returns-based approach." Mark Redman, CFO of Asset Acceptance Capital added: "We are pleased with the market response to our recent IPO, which allowed us to pay down a significant amount of debt, giving us a strong balance sheet and firm financial foundation heading into 2004." During the fourth quarter of 2003, Asset Acceptance said it paid $24.6 million to purchase consumer debt portfolios with a face value of $1.5 billion, for a blended rate of 1.68 percent of face value. Purchases during the fourth quarter consisted of 20 pools from 11 sellers. This compares to the fourth quarter of 2002, when the company purchased consumer debt portfolios with a face value of $1.6 billion for $33.0 million for a blended rate of 2.05 percent of face value. The company said all purchase data is adjusted for buybacks. For 2003, Asset Acceptance Capital paid $89.6 million to purchase consumer debt portfolios with a value of $4.2 billion, for a blended rate of 2.12 percent of face value. Purchases during 2003 consisted of 76 pools from 42 sellers. This compares to 2002, when the Company purchased consumer debt portfolios with a face value of $5.1 billion for $72.4 million for a blended rate of 1.42 percent of face value. Purchases during 2002 include one portfolio with a face value of $1.2 billion at a cost of $1.2 million. Excluding this purchase, the blended rate for 2002 was 1.81 percent. "While our blended rate increased moderately for the year, we expect this increase to have little bearing on our ability to collect our target of three times the purchase price on these portfolios," said Bradley. "Our proprietary pricing model and more than 40 years of experience in this business have allowed us to post strong returnsin a variety of pricing environments, and marginal changes in our blended rate have not affected our returns." Fourth Quarter 2003 Review * Revenues in the quarter were $44.3 million compared to $28.9 million in the fourth quarter of 2002, an increase of 53.1 percent. * During the fourth quarter, cash collections rose to $54.0 million, an increase of 61.5 percent from $33.4 million for the same period last year. * Total operating expenses for the fourth quarter of 2003 were $28.1 million, or 52 percent of cash collections. This compares with operating expenses of 57.1 percent of cash collections during the same period last year. * Pro forma earnings per diluted share for the quarter were $0.32, a 77.8 percent increase compared to the $0.18 per diluted share for the same period last year. * Call center collections for the fourth quarter were $31.3 million, or 57.9 percent of total cash collections, up 49.1 percent from the same period last year. * Legal collections for the fourth quarter were $16.6 million, or 30.8 percent of total cash collections, up 88.4 percent from the same period last year. "As we enter our 43rd year of operations, I am proud of what we've been able to accomplish," said Bradley. "We have a great team that is committed to the continued success of the company." 2003 Year-End Review * Revenues for 2003 were $160.2 million compared with $100.7 million for 2002, an increase of 59.0 percent. * Cash collections rose to $197.8 million for 2003, an increase of 64.1 percent from $120.5 million for 2002. * Total operating expenses in 2003 were $105.4 million, or 53.3 percent of cash collections. This compares to operating expenses of 55.9 percent of cash collections in 2002. * Pro forma earnings per diluted share for 2003 were $1.06, a 63.1 percent increase compared to the $0.65 per diluted share for the prior year. * Call center collections for 2003 were $120.2 million, or 60.8 percent of total cash collections, compared with 63.2 percent of cash collections in 2002, up 57.8 percent for the year. * Legal collections for 2003 were $56.4 million, or 28.5 percent of total collections, compared with 26.5 percent of collections in 2002, up 76.6 percent for the year. * The company's turnover rate in2003 was 55.3 percent and as of December 31, 2003, the company employed 1,490 people. "2003 was marked not just by our record financial results and operating leverage, but also by our continued ability to grow and diversify our pool of sellers and thetypes of industries we serve," said Bradley. "As a pioneer in the charged-off receivables industry, we will seek to take the lead in expanding the market among all types of credit issuers and continue to build our already diverse portfolio acquisitionstrategy." Asset Acceptance said that it is currently collecting on purchases made from credit card issuers, retailers, finance companies, utilities, healthcare providers and other credit originators. First Quarter 2004 Charges As described in the company's IPO prospectus, during the first quarter, the company will take a one-time compensation charge of $45.0 million ($28.2 million on an after-tax basis) due to the vesting of share appreciation rights which occurred upon the initial public offering of the company. This compensation charge includes a cash charge of $18.4 million used to pay withholding taxes and a non cash charge of $26.6 million for the issuance of 1,776,826 restricted shares of common stock to holders of share appreciation rights. As a result of the company's reorganization prior to its initial public offering, the company will recognize a non cash deferred income tax charge of $18 to $20 million in the first quarter. This charge will be partially offset by an income tax benefit resulting from the one-time compensation charge to be taken in the first quarter. Fourth Quarter and 2003 Year-End Conference Call Asset Acceptance Capital 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 call will be available until 5 p.m. Eastern, Wednesday, March 24, 2004. About Asset Acceptance Capital Corp. For more than 40 years, Asset Acceptance has provided credit originators, such as credit card issuers, consumer finance companies, retail merchants, utilities and others -- an efficient alternative in recovering defaulted consumer debt. For more information, please visit http://www.assetacceptance.com/ . 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 Securities Litigation Reform Act of 1995. These forward-looking statements reflect the company's views, at the time such statementswere made, with respect to the company's future plans, objectives, events and financial results such as revenues, expenses, income, earnings per share, capital expenditures, and other financial items. Forward- looking statements are not guarantees of future performance; they are subject to risks and uncertainties. In addition, words such as "estimates," "expects," "intends," "should," "will," variations of such words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Risk Factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. 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 consumerreceivables 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, acquiring charged-off receivables in industries that the company has little or no experience, integration and operations of newly acquired businesses, and additional factors discussed in the company's reports filed with the Securities and Exchange Commission and exhibits thereto. 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 Asset Acceptance Capital Corp. Consolidated Statements of Income Successor Successor Successor Combined Predecessor and Successor Three Months Three Months Year Year ended ended ended ended December 31, December 31, December 31, December 31, 2003 2002 2003 2002 (in thousands, except per-share data) Revenues Purchased receivable revenues $44,176 $28,767 $159,628 $100,004 Gain on sales of purchased receivables -33 - 326 Finance contract revenues 127 133 565 411 Total revenues 44,303 28,933 160,193 100,741 Expenses Salaries and benefits 14,067 9,06651,296 33,438 Collections expense 10,952 7,509 43,656 26,051 Occupancy 1,537 891 4,633 3,064 Administrative 837 891 3,259 2,682 Depreciation 682 641 2,572 1,910 Loss on disposal of equipment 1 76 4 198 Total operating expense 28,076 19,074 105,420 67,343 Income from operations 16,227 9,859 54,773 33,398 Net interest expenses 1,730 1,781 7,195 3,427 Other expenses (income) (94) 25 (448) 423 Income before income taxes 14,591 8,053 48,026 29,548 Income taxes 3,452 1,623 10,283 1,624 Net income $11,139 $6,430 $37,743 $27,924 Pro forma income taxes $5,442 $3,008 $17,914 $11,038 Pro forma net income $9,149 $5,045 $30,112 $18,510 Weighted average number of shares 28,448 28,448 28,448 - Proforma weighted average number of shares - - - 28,448 Earnings per common share outstanding: Basic 0.39 0.23 1.33 n/a Diluted 0.39 0.23 1.33 n/a Proforma earnings per common share outstanding: Basic 0.32 0.18 1.06 0.65 Diluted 0.32 0.18 1.06 0.65 Asset Acceptance Capital Corp. Consolidated Statements of Financial Position Successor (in thousands) December 31, 2003 December 31, 2002 Assets Cash $5,499 $2,281 Purchased receivables 183,720 133,336 Finance contract receivables, net 642 561 Property and equipment, net 7,9706,523 Goodwill 6,340 6,340 Other assets 2,939 2,236 Total assets $207,110 $151,277 Liabilities Line of credit $72,950 $67,200 Notes payable - related party 39,560 35,882 Deferred tax liability 11,906 1,624 Accounts payable and other liabilities 8,093 4,818 Capital lease obligations 218 110 Total liabilities 132,727 109,634 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, 28,448,449 shares issued and outstanding 284 284 Additional paid in capital 36,385 36,385 Retained earnings 37,714 4,974 Total equity 74,383 41,643 Total liabilities and equity $207,110 $151,277 DATASOURCE: Asset Acceptance Capital Corp. CONTACT: Jeff Lambert or Tim Hanson of Lambert, Edwards & Associates, Inc., +1-616-233-0500, , for Asset Acceptance Capital Corp. Web site: http://www.assetacceptance.com/

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