Asset Acceptance Revenue, Cash Collections and Earnings Up in Q1

WARREN, MI - Asset Acceptance Capital Corp. (Nasdaq: AACC), a leading purchaser and collector of charged-off consumer debt, today announced first quarter 2005 results, highlighted by a 32.7 percent increase in total revenues, a 23.3 percent increase in cash collections and record net income of $0.41 per fully diluted share.

Revenues climbed to $66.0 million for the first quarter ended March 31, 2005, compared with revenues of $49.7 million in the first quarter of 2004. Asset Acceptance reported cash collections of $80.4 million in the first quarter of 2005, versus cash collections of $65.2 million in the same period of 2004.

Net income for the quarter was a record $15.1 million, or $0.41 per fully diluted share, compared with a net loss of $36.2 million, or $1.07 per fully diluted share, for the first quarter of 2004. The prior year period 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. Prior to the reorganization, a portion of the consolidated company was taxed as an S corporation. The Company said its 2004 first quarter results include operations prior to its reorganization into Asset Acceptance Capital Corp. on February 4, 2004.

Exclusive of the one-time charges, the Company had adjusted net income, as defined below, of $10.9 million, or $0.32 per fully diluted share, for the first quarter of 2004.

"The first quarter was a continuation of our momentum as we posted record revenues, collections and net income," said Brad Bradley, president and CEO of Asset Acceptance Capital Corp. "We capitalized on our track record of disciplined purchasing and diligent collections to post strong growth, and I continue to be pleased with the ability of our employees to leverage our information resources, technology and proprietary processes to connect with consumers and consistently collect on portfolios where others have not."

During the first quarter of 2005, Asset Acceptance invested $33.1 million to purchase consumer debt portfolios with a face value of $1.1 billion, representing a blended rate of 2.99 percent of face value. This compares to the prior year first quarter when the Company invested $12.1 million to purchase consumer debt portfolios with a face value of $501.0 million, representing a blended rate of 2.42 percent of face value. The Company said all purchase data is adjusted for buybacks.

"We are off to a good start in 2005 on the purchasing front as we acquired more than twice the face value of debt portfolios in the first quarter compared with the prior year," said Bradley. "Of course, our focus has never been on quarterly purchasing activity or even our blended rate. Rather, our focus is on being opportunistic and buying portfolios that meet our long-term total return objective of three to five times cost over five years.

"From a macro viewpoint, the pricing environment remains competitive, though we believe prices are generally stabilizing. In addition, we experienced increased deal flow during the first quarter of 2005."

First Quarter 2005 Highlights

• Revenues grew 32.7 percent to $66.0 million in the current quarter, versus $49.7 million in the prior year first quarter.

• Cash collections rose 23.3 percent to $80.4 million in the current quarter, versus $65.2 million in the prior year first quarter.

• Net income increased 39.4 percent to $15.1 million in the current quarter, versus adjusted net income of $10.9 million in the prior year first quarter. Net income per fully diluted share increased to $0.41, compared with adjusted net income per fully diluted share of $0.32 in the prior year quarter.

• Total operating expenses were $41.8 million, or 52.0 percent of cash collections. This compares with operating expenses of 48.3 percent of cash collections during the same period last year, excluding one-time charges, and 54.7 percent in the fourth quarter of 2004. Total operating expenses for the first quarter of 2004, including the one-time compensation and related payroll tax charge of $45.7 million due to the vesting of share appreciation rights which occurred upon the IPO of the Company, were $77.2 million or 118.3 percent of cash collections. Asset Acceptance said higher collection expenses and approximately $400,000 in expenses in the 2005 first quarter related to the Company's secondary public offering led to the increase in operating expenses as a percent of cash collections.

• Traditional call center collections were $44.6 million, or 55.4 percent of total cash collections, an increase of 8.6 percent from the same period last year.

• Legal collections for the quarter were $25.9 million, or 32.3 percent of total cash collections, an increase of 51.2 percent from the same period last year.

• Other collections, including forwarding, bankruptcy and probate collections, accounted for $9.9 million or the remaining 12.3 percent of cash collections.

• Quarterly collector productivity on a full-time equivalent basis was $44,535, the second highest level since the Company began measuring productivity this way at the beginning of 2003, but a modest decline from the 2004 first quarter. Asset reported that its average number of collectors grew 15.7 percent on a year-over-year basis to 1,000 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 first quarter of 2005 and continues to maintain a diverse mix of asset types in its consumer debt portfolios.

Asset Acceptance closed a secondary public offering of 5.75 million shares of its common stock on April 21, 2005. All of the shares, which represented approximately 15.4 percent of the Company's outstanding shares of common stock, were offered by selling stockholders and Asset Acceptance did not receive any of the proceeds.

"By nearly all measures it was a strong quarter and a good start to the year as we executed on both the purchasing and collections front," said Bradley. "We also invested a good deal of time to work through our secondary stock offering, and I am pleased to report that the secondary offering was completed in the early part of the second quarter, affirming the confidence investors have in the financial strength and proven operating model of Asset Acceptance."

Mark A. Redman, vice president of finance and CFO of Asset Acceptance Capital Corp., concluded: "We continue to scale the business to keep pace with our growth, and thanks to our strong balance sheet with no indebtedness, we believe we're well positioned to continue to expand our portfolio acquisitions and revenue and earnings performance in the coming year. The completion of our secondary offering was also a key milestone and allowed us to boost the float and create further liquidity for our shareholders."