Asta Funding Inc. (ASFI) filed Quarterly Report for the period ended 2009-06-30.
Asta Funding Inc. is a consumer finance company specializing in the business of purchasing selling and servicing retail automobile installment contracts originated by dealers in the sale primarily of used automobiles. Through its purchases the company provides indirect financing to borrowers with limited credit histories lower than average incomes or past credit problems. Asta Funding Inc. has a market cap of $97.7 million; its shares were traded at around $6.84 with a P/E ratio of 2.3 and P/S ratio of 0.8. The dividend yield of Asta Funding Inc. stocks is 1.2%. Asta Funding Inc. had an annual average earning growth of 42.6% over the past 5 years.
Highlight of Business Operations:
Finance income. During the nine-month period ended June 30, 2009, finance income decreased $37.9 million or 41.3% to $53.7 million from $91.6 million for the nine-month period ended June 30, 2008. The decrease was, in part, attributable to the transfer of the $6.9 billion in face value receivables for a purchase price of $300 million in March 2007 (the “Portfolio Purchase”) from the interest method to the cost recovery method effective at the beginning of the third quarter of fiscal year 2008. $17.7 million in finance income was recognized through the second quarter of fiscal year 2008 . Due to uncertainties related to the timing of the collections of the older judgments purchased in this portfolio as a result of the economic environment, the lack of reasonable delivery of media requests, the lack of validation of certain account components, and the sale of the primary servicer (which was commonly owned by the seller), the Company determined that it no longer has the ability to develop a reasonable expectation of the timing of the cash flows to be collected and therefore, transferred the Portfolio Purchase to the cost recovery method. As a result of the transfer, no finance income was recognized on the Portfolio Purchase for the nine month period ended June 30, 2009. In addition, finance income is lower due to the lower level of portfolio purchases and older portfolios aging out. Average receivables under the interest method of accounting, declined approximately $72 million from $242.2 million at June 30, 2008 to $170.0 million at June 30, 2009. The decrease in the average level of consumer receivables is attributable to impairments recorded, continued amortization of principal and our reduced level of portfolio purchases which were down from $1.6 billion of face value receivables at a cost of $48.9 million during the nine-month period ended June 30, 2008, as compared to $427.1 million of face value receivables at a cost of $16.5 million during the nine-month period ended June 30, 2009. Income recognized from fully amortized portfolios (zero basis revenue) was $31.1 million and $34.2 million for the nine months ended June 30, 2009 and 2008, respectively.
During the first nine months of fiscal year 2009, net cash collections of consumer receivables acquired for liquidation decreased by $40.1 million, or 25.5%, to $116.6 million from $156.7 million for the nine months ended June 30, 2008. The decrease in net collections is attributable to the aging of the portfolio, and the declining purchase volume over the last year and half. Collections have also been impacted by the overall slowdown in the economy. Commissions and fees associated with gross collections from our third party collection agencies and attorneys decreased $38.0 million, or 38.7%, to $60.1 million for the nine months ended June 30, 2009
General and Administrative Expenses. During the nine months ended June 30, 2009, general and administrative expenses decreased $0.5 million, or 2.6% to $20.0 million from $20.5 million for the nine months ended June 30, 2008, and represented 27.4% of total expenses (excluding income taxes) for the nine months ended June 30, 2009 as compared to 26.3% for the nine month period ended June 30, 2008. The decrease in general and administrative expenses was primarily due to reduced salary and salary related expenses and postage expense due to lower portfolio levels, offset by professional fees related to the banking amendment signed in the second and third quarters of this year, and higher collection expenses with increased legal costs related to the collection cycle and maintaining a higher level of debtor accounts acquired in the past several years. In the second quarter of fiscal year 2009 we closed the Pennsylvania collection facility. The cost of closing the Pennsylvania call center in February 2009 was approximately $250,000 and was included in general and administrative expense in the three month period ended March 31, 2009. The closure yielded savings of approximately $375,000 in the third quarter of fiscal year 2009.
Finance income. For the three months ended June 30, 2009, finance income decreased $6.4 million or 27.0% to $17.2 million from $23.6 million for the three months ended June 30, 2008. The decrease is primarily attributable to the reduced level of portfolio purchases under the interest method over the last year and a half, the aging out of older portfolios . Average receivables under the interest method of accounting declined approximately $91 million from $239.4 million at June 30, 2008 to $137.0 million at June 30, 2009. The decrease in the average level of consumer receivables is attributable to impairments recorded, continued amortization of principal and decline in the level of portfolio purchases over the last year and a half. Income recognized from fully amortized portfolios (zero basis revenue) was $10.5 million and $10.4 million for the three months ended June 30, 2009 and 2008, respectively.
On July 10, 2009 the Company entered into the Eighth Amendment to the Fourth Amended and Restated Loan Agreement. This Amendment revised the Commitment Termination Date from July 11, 2009 to December 31, 2009. Also, the Credit Facility commitment shall not exceed the following amounts: (1) $40.0 million through July 30, 2009; (2) $34.0 million from July 31, 2009 through August 30, 2009; (3) $30.8 million from August 31, 2009 through September 29, 2009; (4) $22.9 million from September 30, 2009 through October 30, 2009; (5) $15.0 million from October 31, 2009 through November 29, 2009; (6) $7.4 million from November 30, 2009 through December 30, 2009; and (6) Zero Dollars on December 31, 2009. In addition, use of Advances to finance portfolio purchases in excess of $7.5 million shall require the consent of the Administrative Agent and use of Advances to finance portfolio purchases in excess of (a) $15.0 million in the aggregate as of July 31, 2009 and August 31, 2009; (b) $8.0 million in the aggregate as of September 30, 2009; (c) $6.0 million in the aggregate as of October 31, 2009 and November 30, 2009; and (d) $2.0 million in the aggregate as of December 31, 2009, during any 120 day period shall require the consent of the Requisite Lenders. In addition, the Company shall have no net loss on a consolidated basis during any Fiscal Year, provided however, for Fiscal Year ending September 30, 2009 only, a net loss not to exceed $10.0 million will be permitted under this Amendment
Net cash provided by operating activities was $21.6 million during the nine months ended June 30, 2009, compared to $44.6 million during the nine months ended June 30, 2008. The decrease in net cash provided by operating activities is primarily attributable to lower net income (excluding non-cash items), partially offset by an increase in deferred and current income taxes receivable. Net cash provided by investing activities was $46.9 million during the nine months ended June 30, 2009, compared to $16.5 million during the nine months ended June 30, 2008. The increase in net cash provided by investing activities is primarily the reflection of decreased accounts acquired for liquidation purchases during the nine months ended June 30, 2009. Decreased collections and cash distributions received from venture were somewhat offset by a favorable exchange effect on receivable accounts acquired for liquidation in South America. Net cash used in financing activities was $68.9 million during the nine month period ended June 30, 2009, as compared to cash provided by financing activities of $62.9 million in the prior period. The change in net cash used by financing activities was primarily due to an advance under related party subordinated debt issued during the third quarter of fiscal year 2008 partially offset by a decrease in the paydown of the lines of credit during the nine months ended June 30, 2009. In addition, there was approximately a $13,000 unfavorable foreign exchange rate effect on cash for the nine month period ended June 30, 2009 compared to approximately a $42,000 unfavorable exchange impact in the prior year.
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