Asset Acceptance Posts Profit on Lower Impairments

Accounts receivable management company Asset Acceptance Capital Corp. (Nasdaq: AACC) announced Tuesday net income of $3 million in the third quarter of 2008 on a sharp decline in portfolio impairment charges and an increase in revenues.

The Warren, Mich.-based debt buyer and collector said that the $3 million profit in the quarter stood in contrast to the $1.7 million net loss reported in the third quarter of 2007.

The company reported a third quarter 2008 net impairment charge of $3.1 million, versus a net impairment charge of $13.8 million in the prior year quarter. Net impairments for the first nine months of 2008 have totaled $8.4 million versus $23.5 million for the first nine months of 2007.

Revenues were up 11 percent to $58.4 million, while cash collections ticked up slightly to $90.8 million from $90.7 million in Q3 2007.

Brad Bradley, the company’s president and CEO, noted in a conference call Tuesday morning that management was “very pleased” with the results, considering the difficult economic environment facing consumers. “We know that there are still many challenges facing the economy,” Bradley said, “but we are seeing a modest improvement in the portfolio purchasing environment as a result.”

Rion Needs, Asset Acceptance SVP and COO – and soon-to-be CEO (“Asset Acceptance Reports Rough Second Quarter; Announces Change at CEO,” Aug. 5) – echoed Bradley’s take on debt purchasing opportunities. “Credit card charge-offs could reach record levels in 2009,” said Needs, “We understand that the optimum purchasing environment will be realized in the next 12-18 months.”

Asset Acceptance was an active purchaser of consumer debt portfolios in the third quarter, investing $36 million to buy $725.8 million of face value debt. In the year-ago period, the company spent $35.1 million to purchase consumer debt portfolios with a face value of $1.9 billion.

Bradley said that average price paid for the portfolios in the most recent quarter spiked dramatically from a year ago. He explained that Asset Acceptance had purchased much higher-quality paper in Q3 2008 compared to a year ago.

The company reported cash collections of $38.4 million from its internal call centers, $38.1 million from its legal collections channel, and $14.3 million from “Other” channels, principally collection agency outsourcing but also including bankruptcy and probate collections.

Asset Acceptance said it averaged 966 full-time collection staff during the third quarter.