Asset Acceptance Income Slips in Q3, Closes Office, Updates on FTC Action

Debt buyer Asset Acceptance Capital Corp. (Nasdaq: AACC) late Tuesday reported earnings for the third quarter of 2011 marked by a decline in net income that was driven in part by money set aside to settle an action by the FTC.

Warren, Mich.-based Asset Acceptance said that net income fell 26 percent to $3.1 million in the third quarter of 2011 compared to the same period a year ago. Adjusted Earnings Before Interest Taxes Depreciation and Amortization (Adjusted EBITDA) was $41.7 million, a 23.2 percent increase from the third quarter of 2010.

The company noted that Q3 results included an incremental $1.25 million, or $0.04 per share, related to an additional accrual for the FTC matter, bringing the total accrual to $2.5 million.

Commenting on the FTC matter, Asset Acceptance said “the company and its counsel continue to seek to resolve the matter and the company believes it is nearing a final resolution.” Asset Acceptance disclosed in the first quarter of 2010 that the FTC had launched an investigation into some of its practices and that a settlement was forthcoming.

The company said Tuesday that it expects the final resolution “would include a consent decree that will, among other things, require additional disclosures to consumers and a monetary penalty.” Asset Acceptance does not expect the resolution will have a material adverse effect on its business.

Total revenues in the third quarter of 2011 were up 16.7 percent to $56.6 million. Cash collections increased 10.8 percent to $87.4 million. The percentage of collections coming from the company’s two primary channels remained unchanged compared to the prior year, with call center collections accounting for 55.1 percent of the total and legal collections accounting for the remaining 44.9 percent.

Rion Needs, President and CEO of Asset Acceptance Capital Corp., commented: “Following considerable growth during the first half of the year, the Company delivered significant year-over-year operating results, including double digit growth in cash collections, purchased receivable revenue and Adjusted EBITDA. Importantly, we are beginning to experience the full impact of the strategic initiatives implemented to enhance cost structure and streamline the business, which served to reduce operating costs and drive revenue growth. Critical to our strong performance has been the continued adoption and implementation of enhanced analytics throughout our operations and the evolution and utilization of our Cogent platform.”

During the third quarter of 2011, the company invested $38.5 million to purchase charged-off consumer debt portfolios with a face value of $1.3 billion, down 6.3 percent from the same period a year ago. Asset Acceptance said that general purpose credit cards made up the majority of face value of the purchases (52.5 percent) while private label credit cards accounted for 15.5 percent and telecom accounts made up 6.9 percent.

Asset Acceptance also announced that it was closing a collection office in San Antonio, Texas. The company in 2010 had announced a number of collection offices, including facilities in Chicago, Cleveland, and Florida.

The company reported that its total in-house account representative headcount, including supervisors, has fallen 20 percent to 648 since the third quarter of 2010.