Asset Acceptance Capital Corp. (AACC, Financial) filed Quarterly Report for the period ended 2009-06-30.
Asset Acceptance provides credit originators such as credit card issuers consumer finance companies retail merchants utilities and others -- an efficient alternative in recovering defaulted consumer debt. Asset Acceptance Capital Corp. has a market cap of $236.64 million; its shares were traded at around $7.74 with a P/E ratio of 19.35 and P/S ratio of 1.01.
Net income for the six months ended June 30, 2009 was $5.4 million, a decline of 38.8% from $8.9 million for the six months ended June 30, 2008. Purchased receivable revenues declined by $14.3 million primarily because of a $14.1 million decrease in cash collections, but also because of an increase in purchased receivable amortization of $0.2 million. The increased purchased receivables amortization rate was primarily the result of lower multiples of purchase price expected to be collected. As prices for paper rose through mid-2007, our expected collection multiple of purchase price on investments in new paper was reduced from prior levels. Macro-economic factors negatively affecting consumers are also a factor in the lower multiples of purchase price expected to be collected on all vintages of paper. The lower multiple of purchase price expected to be collected generally results in a lower yield to be assigned for revenue recognition purposes. When lower yields are assigned, a larger proportion of our cash collections are treated as purchased receivable amortization instead of purchase receivable revenues. In addition, amortization increased because of an increase in net impairments of purchased receivables to $10.3 million in the first half of 2009 from $5.4 million in the first half of 2008. Impairments are generated when currently assigned yields are too high in relation to the timing and/or amount of current or future collections, which have changed because of macro-economic factors affecting the consumers ability to repay their obligations or for other reasons. Amortization of purchased receivables, as a percentage of cash collections, increased to 41.8% of cash collections for the six months ended June 30, 2009 versus 38.6% in the six months ended June 30, 2008.
We reduced our operating expenses in absolute dollars for the six months ended June 30, 2009 compared to the same period in 2008. Total operating expenses were $92.1 million for the six months ended June 30, 2009 a decrease of $7.7 million from $99.8 million for the six months ended June 30, 2008. As a percentage of cash collections, operating expenses were 50.7% for the six months ended June 30, 2009 compared with 51.0% for the six months ended June 30, 2008. Salaries and benefits declined in the six months ended June 30, 2009 by $4.7 million, compared to the six months ended June 30, 2008. In the first half of 2009, collections expense decreased by $1.2 million versus the first half of 2008. Administrative expenses decreased by $1.1 million in the six months ended June 30, 2009 compared to the six months ended June 30, 2008. All other operating expense categories decreased individually, including occupancy, depreciation and amortization and impairment of assets by a total of $0.7 million in the six months ended June 30, 2009 compared to June 30, 2008. The reduced salaries and benefits costs reflect our managing staffing levels for non-revenue generating positions and incentive compensation programs to the current level of collections. Our collections from third party relationships (attorneys and collection agencies) have increased to 31.7% of total cash collections for the six months ended June 30, 2009 from 28.9% for the six months ended June 30, 2008. Total forwarding fees on cash collections from these third party relationships have increased to $19.7 million for the six months ended June 30, 2009 from $16.6 million for the six months ended June 30, 2008. The remaining expenses included in collections expense declined by $4.3 million during the same period. The $4.3 million decline in the six months ended June 30, 2009 primarily reflected reduced data provider, letter and mailing, telephone and legal costs.
Total revenues were $49.1 million for the three months ended June 30, 2009, a decrease of $7.4 million, or 13.1%, from total revenues of $56.5 million for the three months ended June 30, 2008. Purchased receivable revenues were $48.8 million for the three months ended June 30, 2009, a decrease of $7.4 million, or 13.1%, from the three months ended June 30, 2008 amount of $56.2 million. Purchased receivable revenues reflect an amortization rate, or the difference between cash collections and revenue, of 44.1%, an increase of 3.1 percentage points, from the amortization rate of 41.0% for the three months ended June 30, 2008. The increased amortization rate is primarily due to lower average internal rates of return assigned to recent years purchases compared to older vintages, and increased impairments as expected collections have been reduced in the current macro-economic environment. Purchased receivable revenues reflect net impairments recognized during the three months ended June 30, 2009 and 2008 of $6.8 million and $5.0 million, respectively. Cash collections on charged-off consumer receivables decreased 8.3% to $87.3 million for the three months ended June 30, 2009 from $95.2 million for the same period in 2008. Cash collections for the three months ended June 30, 2009 and 2008 include collections from fully amortized portfolios of $15.8 million and $20.3 million, respectively, of which 100% were reported as revenue.
During the three months ended June 30, 2009, we acquired charged-off consumer receivable portfolios with an aggregate face value of $727.9 million at a cost of $20.0 million, or 2.74% of face value, net of buybacks. Included in these purchase totals were 17 portfolios with an aggregate face value of $501.7 million at a cost of $14.5 million, or 2.90% of face value, which were acquired through seven forward flow contracts. Forward flow contracts commit a debt seller to sell a steady flow of charged-off receivables to us, and commit us to purchase receivables for a fixed percentage of the face value. Revenues on portfolios purchased from our top three sellers during vintage years 1993 through 2009 were $14.2 million and $14.8 million during the three months ended June 30, 2009 and 2008, respectively, with one of the three sellers included in the top three in both three-month periods. During the three months ended June 30, 2008, we acquired charged-off consumer
receivable portfolios with an aggregate face value of $1.9 billion at a cost of $64.8 million, or 3.38% of face value (adjusted for buybacks through June 30, 2009). Included in these purchase totals were 31 portfolios with an aggregated face value of $303.9 million at a cost of $19.5 million, or 6.41% of face value (adjusted for buybacks through June 30, 2009), which were acquired through 12 forward flow contracts. From period to period we may buy charged-off receivables of varying age, types and demographics. As a result, the cost of our purchases, as a percent of face value, may fluctuate from one period to the next.
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Asset Acceptance provides credit originators such as credit card issuers consumer finance companies retail merchants utilities and others -- an efficient alternative in recovering defaulted consumer debt. Asset Acceptance Capital Corp. has a market cap of $236.64 million; its shares were traded at around $7.74 with a P/E ratio of 19.35 and P/S ratio of 1.01.
Highlight of Business Operations:
Cash collections declined for the six months ended June 30, 2009 when compared to the same period in 2008, reflecting a more difficult collections environment due to the macro-economic factors, particularly on our older vintages of paper. Cash collections decreased by $14.1 million or 7.2% to $181.4 million for the six months ended June 30, 2009 compared to $195.5 million for the six months ended June 30, 2008. Traditional call center collections declined by $12.6 million or 14.1% as account representative productivity fell by 17.5% in the six months ended June 30, 2009 when compared to the six months ended June 30, 2008. We continue to balance our volume of paper outsourced to our agency network with our capacity-constrained in-house collection staff. We believe that our agency network is experiencing productivity declines similar to, or greater than, our in-house traditional call center collections associates. We expect to increase our in-house traditional call center staffing levels by approximately 20% from mid-second quarter levels during the remainder of 2009 inNet income for the six months ended June 30, 2009 was $5.4 million, a decline of 38.8% from $8.9 million for the six months ended June 30, 2008. Purchased receivable revenues declined by $14.3 million primarily because of a $14.1 million decrease in cash collections, but also because of an increase in purchased receivable amortization of $0.2 million. The increased purchased receivables amortization rate was primarily the result of lower multiples of purchase price expected to be collected. As prices for paper rose through mid-2007, our expected collection multiple of purchase price on investments in new paper was reduced from prior levels. Macro-economic factors negatively affecting consumers are also a factor in the lower multiples of purchase price expected to be collected on all vintages of paper. The lower multiple of purchase price expected to be collected generally results in a lower yield to be assigned for revenue recognition purposes. When lower yields are assigned, a larger proportion of our cash collections are treated as purchased receivable amortization instead of purchase receivable revenues. In addition, amortization increased because of an increase in net impairments of purchased receivables to $10.3 million in the first half of 2009 from $5.4 million in the first half of 2008. Impairments are generated when currently assigned yields are too high in relation to the timing and/or amount of current or future collections, which have changed because of macro-economic factors affecting the consumers ability to repay their obligations or for other reasons. Amortization of purchased receivables, as a percentage of cash collections, increased to 41.8% of cash collections for the six months ended June 30, 2009 versus 38.6% in the six months ended June 30, 2008.
We reduced our operating expenses in absolute dollars for the six months ended June 30, 2009 compared to the same period in 2008. Total operating expenses were $92.1 million for the six months ended June 30, 2009 a decrease of $7.7 million from $99.8 million for the six months ended June 30, 2008. As a percentage of cash collections, operating expenses were 50.7% for the six months ended June 30, 2009 compared with 51.0% for the six months ended June 30, 2008. Salaries and benefits declined in the six months ended June 30, 2009 by $4.7 million, compared to the six months ended June 30, 2008. In the first half of 2009, collections expense decreased by $1.2 million versus the first half of 2008. Administrative expenses decreased by $1.1 million in the six months ended June 30, 2009 compared to the six months ended June 30, 2008. All other operating expense categories decreased individually, including occupancy, depreciation and amortization and impairment of assets by a total of $0.7 million in the six months ended June 30, 2009 compared to June 30, 2008. The reduced salaries and benefits costs reflect our managing staffing levels for non-revenue generating positions and incentive compensation programs to the current level of collections. Our collections from third party relationships (attorneys and collection agencies) have increased to 31.7% of total cash collections for the six months ended June 30, 2009 from 28.9% for the six months ended June 30, 2008. Total forwarding fees on cash collections from these third party relationships have increased to $19.7 million for the six months ended June 30, 2009 from $16.6 million for the six months ended June 30, 2008. The remaining expenses included in collections expense declined by $4.3 million during the same period. The $4.3 million decline in the six months ended June 30, 2009 primarily reflected reduced data provider, letter and mailing, telephone and legal costs.
Total revenues were $49.1 million for the three months ended June 30, 2009, a decrease of $7.4 million, or 13.1%, from total revenues of $56.5 million for the three months ended June 30, 2008. Purchased receivable revenues were $48.8 million for the three months ended June 30, 2009, a decrease of $7.4 million, or 13.1%, from the three months ended June 30, 2008 amount of $56.2 million. Purchased receivable revenues reflect an amortization rate, or the difference between cash collections and revenue, of 44.1%, an increase of 3.1 percentage points, from the amortization rate of 41.0% for the three months ended June 30, 2008. The increased amortization rate is primarily due to lower average internal rates of return assigned to recent years purchases compared to older vintages, and increased impairments as expected collections have been reduced in the current macro-economic environment. Purchased receivable revenues reflect net impairments recognized during the three months ended June 30, 2009 and 2008 of $6.8 million and $5.0 million, respectively. Cash collections on charged-off consumer receivables decreased 8.3% to $87.3 million for the three months ended June 30, 2009 from $95.2 million for the same period in 2008. Cash collections for the three months ended June 30, 2009 and 2008 include collections from fully amortized portfolios of $15.8 million and $20.3 million, respectively, of which 100% were reported as revenue.
During the three months ended June 30, 2009, we acquired charged-off consumer receivable portfolios with an aggregate face value of $727.9 million at a cost of $20.0 million, or 2.74% of face value, net of buybacks. Included in these purchase totals were 17 portfolios with an aggregate face value of $501.7 million at a cost of $14.5 million, or 2.90% of face value, which were acquired through seven forward flow contracts. Forward flow contracts commit a debt seller to sell a steady flow of charged-off receivables to us, and commit us to purchase receivables for a fixed percentage of the face value. Revenues on portfolios purchased from our top three sellers during vintage years 1993 through 2009 were $14.2 million and $14.8 million during the three months ended June 30, 2009 and 2008, respectively, with one of the three sellers included in the top three in both three-month periods. During the three months ended June 30, 2008, we acquired charged-off consumer
receivable portfolios with an aggregate face value of $1.9 billion at a cost of $64.8 million, or 3.38% of face value (adjusted for buybacks through June 30, 2009). Included in these purchase totals were 31 portfolios with an aggregated face value of $303.9 million at a cost of $19.5 million, or 6.41% of face value (adjusted for buybacks through June 30, 2009), which were acquired through 12 forward flow contracts. From period to period we may buy charged-off receivables of varying age, types and demographics. As a result, the cost of our purchases, as a percent of face value, may fluctuate from one period to the next.
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