Asset Acceptance Reports Rough Second Quarter; Announces Change at CEO

Accounts receivable management firm Asset Acceptance Tuesday reported a drop in cash collections, revenue and income for the second quarter of 2008 in the face of a “challenging” collections environment. The bad debt buyer also announced that Brad Bradley would step aside as President and CEO at the beginning of 2009 to make way for Rion Needs.

Warren, Mich.-based Asset Acceptance Capital Corp. (Nasdaq: AACC) said that net income in the quarter was $2.1 million, or $0.07 per share, compared to $8.3 million -- $0.24 per share –- in the second quarter of 2007. The company noted that net impairments in the last quarter were $5 million, which drained $0.10 per share from earnings. Analysts had expected earnings of $0.19 per share before special items.

Revenues at the company declined 14.3 percent to $56.5 million. Asset Acceptance also reported a slight drop in cash collections from $95.4 million in the second quarter last year to $95.2 million in the quarter ended June 30, 2008.

Traditional call center collections were $42.2 million, a decline of 6.1 percent and 44.4 percent of total cash collections. Legal collections were $39.9 million, an increase of 5.4 percent and 41.9 percent of total cash collections. Other collections, consisting primarily of collection agency forwarding, bankruptcy and probate collections, accounted for $13.1 million or the remaining 13.7 percent of total cash collections.

In a conference call with investors Tuesday morning, Asset Acceptance’s Chairman, President and CEO Brad Bradley said that “collections became more difficult in the second quarter,” and categorizing the period as “challenging.” He noted that the collection impact of federal stimulus checks was “muted.”

The company did note that it set a record for debt portfolio purchasing in the quarter, spending $65.3 million on 52 portfolios with a face value of $1.9 billion. Bradley said that 31 of the portfolios were bought through 12 different forward flow agreements.

In a separate press release, Asset Acceptance announced that Brad Bradley would be stepping down as president and CEO and Rion Needs, current chief operating officer, would take the helm effective January 1, 2009. Bradley will remain on as non-executive chairman of the company’s board.

“After 30 years in the industry, it’s time for me to step back and allow a new leader to take the reins of the company,” Bradley said on the conference call.

Bradley joined the company in 1979 and has been president since 1994, adding the CEO title in 2003. He was Asset Acceptance’s leader when the company went public in 2004.

Needs joined Asset Acceptance in July 2007 as chief operating officer (“Executive Change: Rion Needs to Asset Acceptance as COO,” July 23, 2007). Needs spent 22 years at credit card giant American Express, serving in a variety of executive positions, rising to Senior Vice President at the time he came on board at Asset Acceptance.

In the conference call Tuesday, Needs said that it was “an honor to be selected as Asset Acceptance’s president and CEO.”

He also noted that he will continue his initiative to increase collection agency outsourcing as a portfolio liquidation channel.