Asset Acceptance Capital announced results for the first quarter ended March 31, 2004, highlighted by a 48.1 percent increase in cash collections to $65.2 million and a 43.1 percent increase in total revenues to $49.7 million.
Asset Acceptance Capital’s net loss was $36.2 million, or $1.07 per diluted share for the first quarter, which included a previously announced one-time compensation charge of $45.0 million due to the vesting of share appreciation rights, together with $0.7 million of related payroll taxes which occurred upon the initial public offering and the 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 had adjusted net income, as defined below, for the first quarter of 2004 of $10.9 million, a 73.0 percent increase compared to $6.3 million for the same period last year.
The Company said its first quarter results include operations prior to its reorganization into Asset Acceptance Capital Corp. on February 4, 2004.
First Quarter 2004 Highlights
* Total revenues in the quarter were $49.7 million compared to $34.8 million in the first quarter of 2003, an increase of 43.1 percent.
* During the first quarter, cash collections rose to a record $65.2 million, an increase of 48.1 percent compared to $44.0 million for the same period last year.
* Total operating expenses for the first quarter of 2004 were $77.2 million or 118.3 percent of cash collections, including a one-time compensation charge of $45.0 million due to the vesting of share appreciation rights which occurred upon the initial public offering of the Company. Payroll taxes related to this charge totaled $0.7 million. Factoring out these one-time charges for compensation related to share appreciation rights and related payroll taxes, operating expenses were $31.5 million or 48.3 percent of cash collections. This compares with operating expenses of 52.2 percent of cash collections during the same period last year.
* Losses per diluted share for the quarter were $1.07, compared to earnings of $0.28 per diluted share for the same period last year. On an adjusted basis, as further discussed below, the Company earned $0.31 per diluted share for the quarter and $0.22 for the same quarter last year.
* Traditional call center collections for the first quarter were $40.7 million, or 62.4 percent of cash collections, up 40.1 percent from the same period last year.
* Legal collections for the first quarter were $17.2 million, or 26.3 percent of cash collections, up 65.6 percent from the same period last year.
* Agency forwarding, bankruptcy and probate collections account for the remaining 11.3 percent of cash collections.
* During the first quarter, the Company relocated its Florida office, doubling the size of its collection facility to support growth and taking advantage of favorable leasing conditions.
“We are focused on prudent growth, disciplined and diverse portfolio purchasing and strong cash collections,” said Brad Bradley, president and CEO of Asset Acceptance Capital Corp. “We anticipate that 2004 will be another record year for cash collections.
“Perhaps the biggest accomplishment in the first quarter was our initial public offering. We are motivated by the confidence of our shareholders, and we’re driven to deliver value to them. We continue to believe that our IPO was not the pinnacle for the Company, but is just the beginning.”
The Company provided the following reconciliation of reported GAAP net income (loss) to adjusted net income. Operating expenses in the first quarter of 2004 were adjusted to exclude the one-time compensation and related payroll tax charges. Additionally, income taxes were adjusted to assume the Company had always been a C corporation and its subsidiaries were all 100 percent owned. Adjusted income taxes in this reconciliation are computed based upon an estimated effective income tax rate of approximately 37.2 percent of the adjusted net income before adjusted income taxes.
(In thousands except earnings per share amounts) Three months ended
GAAP net income (loss) $(36,159) $7,976
Add income tax expense 7,782 2,024
Net income (loss) before income taxes (28,377) 10,000
Add one-time compensation and related
payroll tax charge 45,673 –
Adjusted net income before
adjusted income taxes 17,296 10,000
Adjusted income taxes 6,434 3,720
Adjusted net income $10,862 $6,280
Weighted average number of shares outstanding:
Basic 33,850 28,448
Diluted 33,850 28,448
Earnings (loss) per common share outstanding
Basic $(1.07) $0.28
Diluted $(1.07) $0.28
Adjusted weighted average number of shares outstanding:
Basic 33,850 28,448
Diluted 34,537 28,448
Adjusted earnings per common share outstanding
Basic $0.32 $0.22
Diluted $0.31 $0.22
“We had a strong first quarter, highlighted by our successful initial public offering,” said Bradley. “Absent one-time charges related to our IPO, adjusted net income climbed 73 percent and cash collections posted their best quarterly results ever, increasing 48 percent to $65.2 million when compared to last year. We continued to execute well on our disciplined portfolio acquisition and collection strategies.”
Mark Redman, CFO of Asset Acceptance Capital Corp., added: “The one-time charges in the first quarter should not mask what was a strong quarter by operational measures. We posted strong adjusted net income gains and continued revenue growth.”
During the first quarter of 2004, the Company said it paid $12.4 million to purchase consumer debt portfolios with a face value of $514.1 million, for a blended rate of 2.42 percent of face value. Purchases during the first quarter consisted of 17 portfolio pools from 14 sellers. This compares to the first quarter of 2003, when the Company purchased consumer debt portfolios with a face value of $897.9 million for $23.1 million for a blended rate of 2.57 percent of face value. The Company said all purchase data is adjusted for buybacks.
“We have found over our history that the volume of purchased portfolios can swing fairly dramatically from quarter to quarter,” said Bradley. “In the second quarter of 2004, we are seeing significant market activity. In fact, just three weeks into the second quarter, we have already invested more in consumer debt than we did during the entire first quarter of this year, and we will continue to be opportunistic when we see the potential for our return targets.”
About Asset Acceptance Capital Corp.
For more than 40 years, Asset Acceptance Capital Corp. and its predecessors have provided credit originators, such as credit card issuers, consumer finance companies, retail merchants, utilities and others an efficient alternative in recovering defaulted consumer debt. For more information, please visit .
For complete details on Asset Acceptance Capital’s first quarter performance visit CardData ([www.carddata.com]).