Asset Acceptance Impairment Charge is $13.8 Million

Asset Acceptance Capital Corp. (NASDAQ: AACC) reported third quarter results today that reaffirmed many of the numbers the Warren, Mich.-based debt purchaser announced Oct. 25 in a preliminary third quarter release that warned of potential problems.

Asset Acceptance will take a $13.8 million impairment charge on its purchased receivables, leading to a net loss for the quarter of $1.7 million, or 5 cents a share, on the high end of its warning release ("Asset Acceptance to Post $15 Million in Revenue Impairments," 10/26). The company reported profits of $10.7 million in the third quarter of 2006.

Cash collections rose more than 12 percent to $90.7 million. Total revenues fell more than 11 percent to $52.6 million, while purchased receivables revenues declined nearly 13 percent to $52 million, primarily due to the impairment charge.

Traditional call center collections in the third quarter rose 10 percent to $41.0 million, and represented more than 45 percent of total cash collections, compared with 46 percent in the same period of 2006.

Legal collections were $36.6 million, an increase of nearly 9 percent from the same period in 2006. Legal collections accounted for more than 40 percent of total cash collections in the quarter, versus nearly 42 percent in the same period of 2006. 

Other collections in the third quarter of 2007, including forwarding, bankruptcy and probate collections, were $13.1 million, a rise of 31 percent from the year-ago period. Other collections were more than 14 percent of total cash collections in the third quarter, versus more than 12 percent. 

Quarterly account representative productivity rose nearly 20 percent to $45,549 in the third quarter 2007. 

The impairment costs on debt from 2004 and 2005 were determined after the company conducted a review of its collections forecasts, Brad Bradley, chairman, president and CEO, said during a conference call with analysts on Oct. 25. 

Asset Acceptance provided further impact of the impairment, noting that its “amortization rate, or the difference between cash collections and revenue, increased” from more than 26 percent in the third quarter 2006 to nearly 43 percent in the third quarter 2007. That means that “a lower proportion of cash collections (are) being recognized as revenue,” the company reported. 

Bradley said in a statement today that the current debt purchasing environment is solid with a steady supply and generally reasonable prices. The company paid out a special one time cash dividend of $2.45 per share in the third quarter.