Asset Acceptance Reports Record Revenues and Cash Collections

WARREN, MI - Asset Acceptance Capital Corp. (Nasdaq: AACC), a leading purchaser and collector of charged-off consumer debt, today announced its results for the fourth quarter and year ended December 31, 2004, highlighted by a 29.8 percent increase in total revenues and a 26.6 percent increase in cash collections for the quarter.

Revenues for the fourth quarter of 2004 climbed to $57.5 million, compared to $44.3 million reported for the fourth quarter of 2003. Asset Acceptance reported net income of $12.6 million, or $0.34 per fully diluted share, for the fourth quarter of 2004 compared to net income of $11.1 million, or $0.39 per fully diluted share, for the fourth quarter of 2003.

Net income for the quarter was up 37.4 percent to $12.6 million compared to pro forma net income of $9.1 million for the fourth quarter of 2003. Net income for the fourth quarter of 2004 is calculated on a consistent basis with pro forma income for the same period of 2003. Pro forma income in 2003 includes income tax expense assuming all the Company's subsidiaries had been 100 percent owned and the Company was a C corporation during the period. Fully diluted earnings per share were $0.34 for the fourth quarter of 2004 compared to pro forma fully diluted earnings per share of $0.32 for the same quarter of 2003. Cash collections for the quarter increased 26.6 percent to $68.3 million, compared to the $54.0 million reported for the same period of last year.

The Company said its results before February 4, 2004 include its operations prior to its reorganization into Asset Acceptance Capital Corp.

"The fourth quarter of 2004 was another strong quarter for the Company," said Brad Bradley, President and CEO of Asset Acceptance Capital Corp. "Cash collections increased by 26.6 percent, and we continued to show solid growth in earnings. Additionally, we moved into our new corporate headquarters during the fourth quarter. Our accomplishments would not have been possible without the hard work and dedication of our employees."

During the fourth quarter of 2004, Asset Acceptance invested $28.0 million in consumer debt portfolios, with a face value of $1.3 billion, for a blended rate of 2.11 percent of face value. This compares to the fourth quarter of 2003, when the Company invested $24.1 million in consumer debt portfolios, with a face value of $1.4 billion, for a blended rate of 1.68 percent of face value. The Company said all purchase data is adjusted for buybacks.

"I am pleased that we were able to invest more in portfolio purchases compared to the same period of 2003, even though the pricing environment continues to be competitive. It is a testament to our resourcefulness, discipline, and knowledge of the industry," said Bradley. "We were able to find the right deals, at the right prices — with the expectation to achieve our benchmark of three times cost as measured over a five year period which we strive for on portfolio purchases."

Fourth Quarter 2004 Highlights

• Revenues in the quarter were $57.5 million compared to $44.3 million in the fourth quarter of 2003, an increase of 29.8 percent.

• Cash collections rose to $68.3 million, an increase of 26.6 percent from $54.0 million for the same period last year.

• Net income rose to $12.6 million for the fourth quarter of 2004, or $0.34 per fully diluted share, compared to net income of $11.1 million, or $0.39 per fully diluted share, for the same period of 2003. Pro forma net income for the fourth quarter of 2003 was $9.1 million yielding pro forma fully diluted earnings per share of $0.32.

• Total operating expenses for the fourth quarter of 2004 were $37.4 million, or 54.7 percent of cash collections. This compares with operating expenses of 52.0 percent of cash collections during the same period last year.

• Traditional call center collections for the fourth quarter were $37.1 million, or 54.4 percent of total cash collections, up 18.7 percent from the same period last year.

• Legal collections for the fourth quarter were $22.8 million, or 33.4 percent of total cash collections, up 37.1 percent from the same period last year.

• Other collections, including forwarding, bankruptcy and probate collections, accounted for the remaining 12.2 percent of cash collections.

• Quarterly collector productivity on a full-time equivalent basis for the fourth quarter increased 8.5 percent to $39,368 compared to the same period last year. Collector productivity includes all collectors regardless of their length of employment.

2004 Summary
Total revenues for fiscal 2004 increased to $214.8 million, a 34.1 percent increase over the $160.2 million for 2003. Cash collections for 2004 rose 35.4 percent to $267.9 million compared to the $197.8 million reported for 2003. The Company reported net income for 2004 of $0.7 million due to previously announced one-time charges during the first quarter for the vesting of share appreciation rights and related payroll taxes totaling $45.7 million and a deferred income tax charge of $19.3 million that was incurred upon the initial public offering of the Company and the corporate reorganization in anticipation of that event, respectively. Adjusted net income, as described below, for 2004 was up 58.6 percent to $47.8 million compared to pro forma net income of $30.1 million for 2003. Adjusted net income for 2004 is calculated on a consistent basis with pro forma income for 2003. Adjusted fully diluted earnings per share were $1.31 for 2004 compared to pro forma fully diluted earnings per share of $1.06 for 2003.

For 2004, Asset Acceptance invested $89.2 million in consumer debt portfolios, with a face value of $4.5 billion, for a blended rate of 1.99 percent of face value. This compares to 2003, when the Company invested $87.5 million in consumer debt portfolios, with a face value of $4.1 billion, for a blended rate of 2.12 percent of face value.

Bradley concluded: "2004 was a historic year for the Company, and we are excited about our prospects for 2005. We have a broad range of portfolios under management, and we will utilize our patient and opportunistic approach to portfolio purchasing in seeking out both traditional and non-traditional asset classes."

Mark A. Redman, Vice President of Finance and CFO of Asset Acceptance Capital Corp., added: "In 2004 we reduced our operating expenses excluding one-time charges to 51.2 percent of cash collections, compared to 53.3 percent of cash collections in 2003. As a result of the IPO proceeds and robust internal cash flow from operations, we strengthened our balance sheet by paying off our line of credit and our notes payable in 2004."

2004 Year-End Highlights

• Revenues for 2004 were $214.8 million compared with $160.2 million for 2003, an increase of 34.1 percent.

• Cash collections rose to $267.9 million for 2004, an increase of 35.4 percent from $197.8 million for 2003.

• Net income was $0.7 million for 2004, or $0.02 per fully diluted share, compared to net income of $37.7 million, or $1.33 per fully diluted share for 2003. On an adjusted basis, as further discussed below, the Company had net income of $47.8 million up 58.6 percent from $30.1 million for the comparable period in 2003. Adjusted fully diluted earnings per share were $1.31 versus $1.06 in 2003, as more fully discussed below.

• Total operating expenses in 2004 were $182.7 million, or 68.2 percent of cash collections, including the previously disclosed one-time charges of $45.7 million due the vesting of share appreciation rights and related payroll taxes in the first quarter of 2004. Factoring out these one-time charges, operating expenses were $137.1 million, or 51.2 percent of total cash collections. This compares to operating expenses of 53.3 percent of cash collections in 2003.

• Traditional call center collections for the year were $153.3 million, or 57.2 percent of total cash collections, up 27.5 percent over 2003.

• Legal collections for 2004 were $83.0 million, or 31.0 percent of total cash collections, up 47.1 percent from last year.

• Other collections, including forwarding, bankruptcy and probate collections, accounted for the remaining 11.8 percent of cash collections for 2004.

• Annual collector productivity on a full-time equivalent basis for 2004 increased 12.3 percent compared to 2003.

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.