Asset Acceptance Capital Corp. Announces Second Quarter Results

WARREN, MI - Asset Acceptance Capital Corp., a leading purchaser and collector of charged-off consumer debt, today announced second quarter 2005 results, highlighted by a 33.6 percent year-on-year increase in total revenues, a 25.6 percent year-on- year increase in cash collections and record net income of $0.44 per fully diluted share, a 41.9 percent year-on-year increase in earnings per fully diluted share.

Revenues grew to $68.8 million for the second quarter ended June 30, 2005, compared with revenues of $51.5 million in the second quarter of 2004. Asset Acceptance reported cash collections of $84.9 million in the second quarter of 2005, versus cash collections of $67.6 million in the same period of 2004.

Net income for the quarter was a record $16.3 million, or $0.44 per fully diluted share, compared with net income of $11.6 million, or $0.31 per fully diluted share, for the second quarter of 2004.

"Our record second quarter results reflect broad-based strength in cash collections, particularly within our legal collections department," said Brad Bradley, president and CEO of Asset Acceptance Capital Corp. "By continuing our established commitment to a disciplined purchasing strategy, we have been able to identify portfolios that best suit our long-term collection strategy."

During the second quarter of 2005, Asset Acceptance invested $16.4 million to purchase consumer debt portfolios with a face value of $1.1 billion, representing a blended rate of 1.51 percent of face value. This compares to the prior year second quarter, when the Company invested $32.7 million to purchase consumer debt portfolios with a face value of $2.0 billion, representing a blended rate of 1.64 percent of face value. During the first six months of 2005, Asset Acceptance invested $49.4 million to purchase consumer debt portfolios, up 10.5 percent from the same period in 2004. All purchase data is adjusted for buybacks.

"We are encouraged by the continued success of our collections strategy, the results of which have helped to drive another record quarter of profitability for our Company," said Bradley. "While we reviewed numerous promising investment opportunities during the period, our experienced purchasing team remains focused on investing only in those portfolios that meet or exceed our long-term total return objective of three to five times cost over five years. With our sixth quarter as a public Company successfully completed, we believe our operational success remains tied to both the quality work put forth by our employees and the simplicity of our business model, each of which are reflected in our record performance this quarter."

"While the macro pricing environment remains competitive, we generally see price stabilization continuing from the first quarter. On the supply side, we have seen moderate large deal activity, across a broad spectrum of traditional and non-traditional asset classes. As always, we remain opportunistic buyers at the right price."

Second Quarter and First Half 2005: Key Highlights

• Total revenues grew 33.6 percent year-on-year to $68.8 million for the second quarter 2005, compared with revenues of $51.5 million in the second quarter of 2004. Total revenues year-to-date increased to $134.8 million, up 33.2 percent from the first-half of 2004.

• Investment in purchased receivables year-to-date increased to $49.4 million, up 10.5 percent from the first-half of 2004.

• Total cash collections increased 25.6 percent year-on-year to $84.9 million in the second quarter of 2005, versus cash collections of $67.6 million in the second quarter of 2004. Total cash collections year-to-date increased to $165.3 million, up 24.5 percent from the first-half of 2004.

• Call center, legal and other collections all increased in the second quarter of 2005 versus the same period in 2004.
  • Call center collections increased year-on-year by 14.9 percent to $44.3 million. Call center collections year-to-date increased to $88.8 million, up 11.7 percent from the first-half of 2004.

  • Legal collections increased year-on-year by 44.8 percent to $31.0 million. Legal collections year-to-date increased to $56.9 million, up 47.7 percent from the first-half of 2004.

  • Other collections, which include forwarding, bankruptcy and probate collections, increased year-on-year by 25.7 percent to $9.6 million. Other collections year-to-date increased to $19.5 million, up 33.0 percent from the first-half of 2004.
• Collections on fully amortized portfolios, commonly referred to as zero-basis collections, more than doubled year-on-year to $15.0 million, the sixth consecutive quarter of sequential increase. Zero-basis collections year-to-date increased to $27.1 million, up 115.9 percent from the first-half of 2004.

• Net income for the second quarter 2005 increased 40.9 percent year-on- year to $16.3 million or $0.44 per fully diluted share. Net Income year-to- date increased to $31.5 million or $0.84 per fully diluted share, compared to a reported net loss of $24.6 million, or a loss of $0.69 per fully diluted share, incurred during the first-half of 2004, including one-time items recognized within the first-half of 2004. On an adjusted basis net income increased 40.4 percent in the first-half of 2005 versus the year ago period, where the company earned adjusted net income of $22.4 million or $0.63 per fully diluted share. The reported (GAAP) results accounted for within the first-half of 2004 included a previously announced one-time $45.7 million compensation and related payroll tax charge resulting from the vesting of share appreciation rights upon the initial public offering and a deferred income tax charge of $19.3 million as a result of the reorganization in anticipation of the initial public offering. A reconciliation of reported GAAP net income (loss) to the adjusted basis is set forth below.

• Quarterly collector productivity on a full-time equivalent basis was $41,987, the second highest level in the past four quarters, and fractionally less from the second quarter 2004. The Company reported that on a year-on- year basis, the average number of collectors increased 14.9 percent to 1,054 collectors in the current period.

• Asset Acceptance collected on purchases made from credit card issuers, retailers, finance companies, utilities, healthcare providers and other credit originators during the second quarter of 2005 and continues to maintain a diverse mix of asset types in its consumer debt portfolios.

Mark A. Redman, vice president-finance and CFO of Asset Acceptance Capital Corp., concluded: "We remain committed to providing our shareholders with the highest level of operational transparency, a reflection of our belief in the demonstrated strength of our business model. Our capital structure has never been stronger, supported by a strong cash position, untapped credit facility and a debt-free balance sheet. As we move into the second-half of 2005, we remain an opportunistic acquirer of appropriately-priced portfolios."