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Asset Acceptance Capital Corp. Reports Operating Results (10-Q)

July 31, 2012 | About:
10qk

10qk

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Asset Acceptance Capital Corp. (AACC) filed Quarterly Report for the period ended 2012-06-30.

Asset Acceptance Capital Corp. has a market cap of $187.1 million; its shares were traded at around $6 with a P/E ratio of 10.2 and P/S ratio of 0.9.

Highlight of Business Operations:

Purchased receivable revenues were significantly higher during the second quarter of 2012 compared to the same period in 2011. This increase in revenue was primarily related to improved collection strategies and analytics, higher average carrying balances of purchased receivables, higher weighted-average yields and higher net impairment reversals. Estimated remaining collections on most of our amortizing pools continued to improve during 2012, which led us to increase yields on six portfolios during the second quarter of 2012. In addition, we recorded net reversals of purchased receivables impairments of $4.4 million in second quarter 2012 compared to net impairment reversals of $2.0 million in the same period last year.

The amortization rate of 36.4% for the three months ended June 30, 2012 was 260 basis points lower than the amortization rate of 39.0% for the same period of 2011. The decline in the amortization rate for the quarter was a result of higher weighted-average yields and higher net purchased receivable impairment reversals. Net reversals in the second quarter of 2012 were $4.4 million, compared to net reversals of $2.0 million in the second quarter of 2011. Current quarter net impairment reversals were primarily a result of increased expectations for future collections on 2005, 2006, 2007 and 2009 vintages, and resulted in $6.1 million of impairment reversals, and were partially offset by a $1.7 million impairment to a portfolio in the 2011 vintage. During the second quarter, we increased assigned yields on six portfolios from the 2007 to 2010 vintages, which results in a higher percentage of cash collections being applied to purchased receivable revenue and less to amortization. Refer to Supplemental Performance Data on Page 34 for a summary of purchased receivable revenues and amortization rates by year of purchase (vintage) and an analysis of the components of collections and amortization on Page 35. Cash collections included collections from fully amortized portfolios of $12.2 million and $13.1 million for the second quarter of 2012 and 2011, respectively, of which 100% were reported as revenue.

The amortization rate of 37.8% for the six months ended June 30, 2012 was 430 basis points lower than the amortization rate of 42.1% for the same period of 2011. The decline in the amortization rate for 2012 was a result of higher weighted-average yields and higher net purchased receivable impairment reversals. Net reversals in the first half of 2012 were $8.9 million, compared to net reversals of $0.9 million in 2011. In addition, during the first half of the year, we increased assigned yields on 11 portfolios. Refer to Supplemental Performance Data on Page 34 for a summary of purchased receivable revenues and amortization rates by year of purchase (vintage) and an analysis of the components of collections and amortization on Page 35. Cash collections included collections from fully amortized portfolios of $24.9 million and $26.3 million for the first half of 2012 and 2011, respectively, of which 100% were reported as revenue.

declining zero basis collections in the second quarter and first half of 2012 compared to the same periods in 2011 increased the amortization rate because 100% of these collections are recorded as revenue and do not contribute towards portfolio amortization.

We believe it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with the tax effects of the deferred tax liabilities, will be sufficient to fully recover the remaining deferred tax assets. In the event that all or part of the deferred tax assets are determined not to be realizable in the future, a valuation allowance would be established and charged to earnings in the period such determination is made. If we subsequently realize deferred tax assets that were previously determined to be unrealizable, the respective valuation allowance would be reversed, resulting in a positive adjustment to earnings in the period such determination is made. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations and financial position. We account for uncertain tax positions using a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

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