Asset Acceptance Capital Corp. (AACC, Financial) filed Quarterly Report for the period ended 2010-03-31.
Asset Acceptance Capital Corp. has a market cap of $226.1 million; its shares were traded at around $7.39 with a P/E ratio of 23.8 and P/S ratio of 1.3. AACC is in the portfolios of David Nierenberg of D3 Family of Funds.
We believe that lower cash collections is primarily a result of macro-economic factors that continue to affect consumers liquidity and their ability to repay their obligations, and lower purchasing in 2009. Macro-economic factors reducing consumers ability to pay include the unemployment rate, which increased from 8.6% in March 2009 to 9.7% in March 2010, a depressed housing market, a continued tight credit environment for consumers, among other factors. During 2009, we invested 21.3% less in purchased receivables than we did in 2008. Generally, collections are strongest on portfolios six months to 18 months after purchase, therefore, the reduction in purchasing is having a negative impact on collections in the first quarter of 2010 when compared to the prior year. Cash collections include collections from fully amortized portfolios of $14.9 million and $18.3 million for 2010 and 2009, respectively, of which 100% were reported as revenue.
The amortization rate of 42.7% for first quarter of 2010 was 3.0 percentage points higher than the amortization rate of 39.7% for the first quarter of 2009. The increase in the amortization rate is primarily the result of the actions we took in the fourth quarter of 2009 to evaluate and adjust the expected future cash flows of our receivable portfolios. We observed a significant difference between our estimated and actual cash collections, which caused us to perform a more in-depth review of our portfolios and their expected performance. Based on our review, we determined these older vintages would continue to underperform our previous collections forecasts. This reduction in future expectations of cash collections on the 2004-2007 vintages resulted in an impairment of $32.4 million. The impairment reduced the carrying balance of purchased receivables as of December 31, 2009, which led to lower purchased receivable revenues during the first quarter of 2010 compared to the same period in 2009. Lower estimates of future cash collections has generally lead us to apply lower initial IRRs in recent periods, which also contributes to lower revenue. Total net impairments recognized in the first quarter of 2010 were $0.1 million compared to $3.4 million for 2009. Refer to Supplemental Performance Data on Page 26 for a summary of purchased receivable revenues and amortization rates by year of purchase.
Revenues on portfolios purchased from our top three sellers during vintage years 1993 through 2010 were $18.3 million and $16.1 million during the three months ended March 31, 2010 and 2009, respectively, with two of the three sellers included in the top three in both three month periods.
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Asset Acceptance Capital Corp. has a market cap of $226.1 million; its shares were traded at around $7.39 with a P/E ratio of 23.8 and P/S ratio of 1.3. AACC is in the portfolios of David Nierenberg of D3 Family of Funds.
Highlight of Business Operations:
We have been purchasing and collecting charged-off accounts receivable portfolios from consumer credit originators since the formation of our predecessor company in 1962. Charged-off receivables are the unpaid obligations of individuals to credit originators, such as credit card issuers including private label card issuers, consumer finance companies, healthcare providers, telecommunications and utility providers. Since these receivables are delinquent or past due, we purchase them at a substantial discount. Since January 1, 2000, we purchased 1,118 consumer debt portfolios, with an original charged-off face value of $41.2 billion for an aggregate purchase price of $1.0 billion, or 2.49% of face value, net of buybacks. We purchase and collect charged-off consumer receivable portfolios for our own account as we believe this affords us the best opportunity to use long-term strategies to maximize our profits.We believe that lower cash collections is primarily a result of macro-economic factors that continue to affect consumers liquidity and their ability to repay their obligations, and lower purchasing in 2009. Macro-economic factors reducing consumers ability to pay include the unemployment rate, which increased from 8.6% in March 2009 to 9.7% in March 2010, a depressed housing market, a continued tight credit environment for consumers, among other factors. During 2009, we invested 21.3% less in purchased receivables than we did in 2008. Generally, collections are strongest on portfolios six months to 18 months after purchase, therefore, the reduction in purchasing is having a negative impact on collections in the first quarter of 2010 when compared to the prior year. Cash collections include collections from fully amortized portfolios of $14.9 million and $18.3 million for 2010 and 2009, respectively, of which 100% were reported as revenue.
The amortization rate of 42.7% for first quarter of 2010 was 3.0 percentage points higher than the amortization rate of 39.7% for the first quarter of 2009. The increase in the amortization rate is primarily the result of the actions we took in the fourth quarter of 2009 to evaluate and adjust the expected future cash flows of our receivable portfolios. We observed a significant difference between our estimated and actual cash collections, which caused us to perform a more in-depth review of our portfolios and their expected performance. Based on our review, we determined these older vintages would continue to underperform our previous collections forecasts. This reduction in future expectations of cash collections on the 2004-2007 vintages resulted in an impairment of $32.4 million. The impairment reduced the carrying balance of purchased receivables as of December 31, 2009, which led to lower purchased receivable revenues during the first quarter of 2010 compared to the same period in 2009. Lower estimates of future cash collections has generally lead us to apply lower initial IRRs in recent periods, which also contributes to lower revenue. Total net impairments recognized in the first quarter of 2010 were $0.1 million compared to $3.4 million for 2009. Refer to Supplemental Performance Data on Page 26 for a summary of purchased receivable revenues and amortization rates by year of purchase.
Revenues on portfolios purchased from our top three sellers during vintage years 1993 through 2010 were $18.3 million and $16.1 million during the three months ended March 31, 2010 and 2009, respectively, with two of the three sellers included in the top three in both three month periods.
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