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8-K - FORM 8-K - ASSET ACCEPTANCE CAPITAL CORP | d8k.htm |
Exhibit 99.1
28405 Van Dyke Avenue Warren, Michigan 48093 www.AssetAcceptance.com |
Contact:
Victoria Sivrais
FD
312-553-6715 / victoria.sivrais@fd.com
Asset Acceptance Capital Corp. Reports Fourth Quarter and Full Year 2010 Results
The Company increased year-over-year purchasing and implemented significant cost reduction actions
Warren, Mich., March 3, 2011 Asset Acceptance Capital Corp. (NASDAQ: AACC), a leading purchaser and collector of charged-off consumer debt, today reported results for the quarter and fiscal year ended December 31, 2010.
Fourth Quarter 2010 Financial Highlights
Cash collections for the fourth quarter of 2010 increased 2.3% compared to the prior year period, to $76.5 million. Excluding healthcare portfolios, which were sold in the third quarter 2010, cash collections increased 4.3% to $76.4 million.
Fourth quarter revenues were $47.5 million, an increase of 153.3% from the same period of the prior year. The Company reported net impairment reversals of $0.7 million on purchased receivables versus net impairment charges of $32.4 million in the prior year period. The Company also reported $0.4 million, or $0.01 per fully diluted share, in gain on sale of its healthcare portfolios.
Operating expenses were $54.2 million, or 70.8% of cash collections, for the fourth quarter of 2010, an increase of $5.7 million when compared to the year earlier period. Operating expenses for the quarter included several items that impact comparability to prior periods. The Company incurred a charge of $5.3 million, or $0.11 per fully diluted share, net of income taxes, resulting from the termination for performance of a relationship with a third party provider. The charge relates to a cash settlement payment to reimburse the third party for court costs incurred on the Companys behalf that the third party would otherwise have recovered through commissions in future periods. In addition, the Company incurred $3.0 million, or $0.06 per fully diluted share, net of income taxes, of restructuring charges related to the closing of the Chicago, IL and Cleveland, OH collection offices, The Company also recorded $1.7 million of charges, or $0.05 per fully diluted share, net of income taxes, related to the ongoing FTC matter.
The Company reported a net loss of $7.0 million, or $0.23 per diluted share, during the fourth quarter of 2010, compared to a loss of $20.2 million, or $0.66 per fully diluted share, in the fourth quarter of 2009.
Adjusted Earnings Before Interest Taxes Depreciation and Amortization (Adjusted EBITDA) was $26.3 million, a 6.7% decline from $28.2 million in the fourth quarter of 2009. Adjusted EBITDA for the quarter was adversely impacted by the $5.3 million charge resulting from the termination of a third party service provider contract and $2.6 million of the restructuring charges related to the closing of the Chicago and Cleveland collection offices.
Asset Acceptance Fourth Quarter 2010 Results
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Please see a reconciliation of net income according to U.S. Generally Accepted Accounting Principles (GAAP) to Adjusted EBITDA on page 12.
The Company acquired $16.8 million in charged-off consumer receivables with a face value of $298.1 million, for a blended rate of 5.65% of face value in the fourth quarter of 2010. This compares to the prior year period when the Company purchased $42.6 million of charged-off consumer receivables with a face value of $1,378.3 million, for a blended rate of 3.09% of face value. All purchase data is adjusted for buybacks.
Rion Needs, President and CEO of Asset Acceptance Capital Corp, commented: 2010 proved to be a period of noteworthy progress for our business. During the year we were able to execute on a number of key initiatives aimed at positioning our company for long-term growth including making our cost structure more competitive, rationalizing underperforming assets, improving our analytics and streamlining our overall business model. Although industry dynamics remained challenging, we saw positive momentum in the second half in collection growth, underlying cost to collect and Adjusted EBITDA excluding the cost actions we implemented. We believe these actions, along with the increased purchasing we made during the year, position us well for improved performance in 2011 and beyond.
Full Year 2010 Financial Highlights:
Cash collections for 2010 were $328.8 million compared to $334.0 million for 2009, a decline of 1.6%. Cash collections excluding healthcare portfolios, which were sold in the third quarter 2010, were $325.4 million compared to $327.8 million.
For the full year, revenues increased 15.0% to $198.4 million from $172.5 million in 2009. Net impairment reversals for the full year of 2010 were $2.3 million compared to net impairments of $49.5 million for 2009. The Company also reported $0.9 million, or $0.03 per fully diluted share, in gain on sale of its healthcare portfolios.
Operating expenses were $197.3 million, or 60.0% of cash collections for 2010, an increase of 4.6% from $188.7, or 56.5% of cash collections, for 2009. Operating expenses for the full year included several items that impact comparability to the prior year. The Company incurred a charge of $5.3 million, or $0.11 per fully diluted share, net of income taxes, resulting from the termination for performance of a relationship with a third party provider. The charge relates to a cash settlement payment to reimburse the third party for court costs incurred on the Companys behalf that the third party would otherwise have recovered through commissions in future periods. In addition, the Company incurred restructuring charges of $4.2 million, or $0.10 per fully diluted share, net of income taxes, related to the closing of the Deerfield Beach, FL, Chicago, IL and Cleveland, OH collection offices, The Company also recorded $2.0 million of charges, or $0.06 per fully diluted share, net of income taxes, related to the ongoing FTC matter.
The Company reported a net loss of $1.6 million, or $0.05 per fully diluted share, for 2010 compared to a loss of $16.4 million, or $0.54 per fully diluted share in 2009. During the year, the Company recorded a tax benefit related to the dissolution of its PARC subsidiary of $0.17 per fully diluted share.
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Asset Acceptance Fourth Quarter 2010 Results
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Adjusted EBITDA was $142.2 million, a 7.2% decline from $153.3 million in 2009. Adjusted EBITDA for the year was adversely impacted by the $5.3 million charge resulting from the termination of a third party service provider contract and $3.0 million of the restructuring charges related to the closing of the Deerfield Beach, Chicago and Cleveland collection offices.
The Company acquired $136.3 million of charged-off consumer receivables with a face value of $3,790.3 million for a blended rate of 3.60% of face value in 2010. This compares to the prior year when the Company purchased $120.9 million in charged-off consumer receivables with a face value of $4,416.5 million for a blended rate of 2.74% of face value. All purchase data is adjusted for buybacks.
Full Year 2010 Operational Highlights:
| Successfully completed implementation of new collection platform software with minimal impact to collections; |
| Closed the Deerfield Beach, FL and Chicago, IL collection offices and announced the closure of the Cleveland, OH collections office. Successfully transitioned all non-healthcare inventory to other collection channels. Combined actions are expected to yield annualized savings of $7.5 million; |
| Terminated for performance a relationship with a third party service provider, an action that is expected save approximately $7.5 million over the next three years; and |
| Implemented a number of additional initiatives, focusing specifically on third party vendor spending, that are expected to favorably impact 2011 expenses. |
Fourth Quarter 2010 Earnings Conference Call
Asset Acceptance Capital Corp. will host a conference call at 4:30 p.m. Eastern today to discuss these results and current business trends. To listen to a live webcast of the call and access the presentation, please go to the investor section of the Companys web site at www.AssetAcceptance.com. A replay of the webcast will be available until March 3, 2012.
About Asset Acceptance Capital Corp.
For more than 45 years, Asset Acceptance has provided credit originators, such as credit card issuers, consumer finance companies, retail merchants, utilities and others an efficient alternative in recovering defaulted consumer debt. For more information, please visit www.AssetAcceptance.com.
Asset Acceptance Capital Corp. Safe Harbor Statement
This press release contains certain statements, including the Companys plans and expectations regarding its operating strategies, charged-off receivables, collections and costs, which are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include reference to the Companys presentations and webcasts. These forward-looking statements reflect the Companys views, expectations and beliefs at the time such statements were made with respect to such matters, as well as the Companys future plans, objectives, events, portfolio purchases and pricing, collections and financial results such as revenues, expenses, income, earnings per share, capital expenditures, operating margins, financial position, expected results of operations and
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Asset Acceptance Fourth Quarter 2010 Results
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other financial items. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (Risk Factors) that make the timing, extent, likelihood and degree of occurrence of these matters difficult to predict. Words such as anticipates, believes, estimates, expects, intends, should, could, will, variations of such words and similar expressions are intended to identify forward-looking statements.
There are a number of factors, many of which are beyond the Companys control, which could cause actual results and outcomes to differ materially from those described in the forward-looking statements. These Risk Factors include the Risk Factors discussed under Item 1A Risk Factors in the Companys most recently filed Annual Report on Form 10-K and in other SEC filings, in each case under a section titled Risk Factors or similar headings and those discussions regarding risk factors as well as the discussion of forward-looking statements in such sections are incorporated herein by reference. Other Risk Factors exist, and new Risk Factors emerge from time to time that may cause actual results to differ materially from those contained in any forward-looking statements. Factors that could affect our results and cause them to materially differ from those contained in the forward-looking statements include the following:
| our ability to maintain existing, and to secure additional financing on acceptable terms; |
| failure to comply with government regulation, including our ability to successfully conclude the on-going FTC matter; |
| a decrease in collections if changes in or enforcement of debt collection laws impair our ability to collect, including any unknown ramifications from the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act; |
| the costs, uncertainties and other effects of legal and administrative proceedings impacting our ability to collect on judgments in our favor; |
| ongoing risks of litigation in our litigious industry, including individual and class actions under consumer credit, collections and other laws; |
| a decrease in collections as a result of negative attention or news regarding the debt collection industry and debtors willingness to pay the debt we acquire; |
| instability in the financial markets and continued economic weakness limiting our ability to access capital and to acquire and collect on charged-off receivable portfolios; |
| our ability to purchase charged-off receivable portfolios on acceptable terms and in sufficient amounts; |
| concentration of a significant portion of our portfolio purchases during any period with a small number of sellers; |
| our ability to respond to changes in technology to remain competitive; |
| our ability to substantiate our application of tax rules against examinations and challenges made by tax authorities; |
| our ability to make reasonable estimates of the timing and amount of future cash receipts and assumptions underlying the calculation of the net impairment charges or IRR increases for purposes of recording purchased receivable revenues; |
| our ability to collect sufficient amounts from our purchases of charged-off receivable portfolios; |
| our ability to diversify beyond collecting on our purchased receivables portfolios into ancillary lines of business; |
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Asset Acceptance Fourth Quarter 2010 Results
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| our ability to successfully hire, train, integrate into our collections operations and retain in-house account representatives; |
| our ability to acquire and to collect on charged-off receivable portfolios in industries in which we have little or no experience; |
| any significant and unanticipated changes in circumstances leading to goodwill impairment could adversely impact earnings and reduce our net worth; and |
| other unanticipated events and conditions that may hinder our ability to compete. |
Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Furthermore, the Company expressly disclaims any obligation to update, amend or clarify forward-looking statements.
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Asset Acceptance Fourth Quarter 2010 Results
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Supplemental Financial Data
Quarterly trends for certain financial metrics are shown in the table below.
(Unaudited, $ in Millions, except collections per account representative) |
Q4 10 | Q3 10 | Q2 10 | Q1 10 | Q4 09 | |||||||||||||||
Total revenues |
$ | 47.5 | $ | 48.5 | $ | 50.9 | $ | 51.6 | $ | 18.7 | ||||||||||
Cash collections |
$ | 76.5 | $ | 78.9 | $ | 84.2 | $ | 89.2 | $ | 74.8 | ||||||||||
Operating expenses to cash collections |
70.8 | % | 60.9 | % | 55.6 | % | 54.2 | % | 64.9 | % | ||||||||||
Call center collections (1) |
$ | 41.7 | $ | 43.7 | $ | 45.5 | $ | 50.5 | $ | 40.5 | ||||||||||
Legal collections (1) |
$ | 34.8 | $ | 35.2 | $ | 38.7 | $ | 38.7 | $ | 34.3 | ||||||||||
Amortization rate |
38.9 | % | 40.0 | % | 39.9 | % | 42.7 | % | 75.6 | % | ||||||||||
Core amortization (2) |
44.8 | % | 46.2 | % | 47.7 | % | 51.3 | % | 93.4 | % | ||||||||||
Collections on fully amortized portfolios |
$ | 10.1 | $ | 10.6 | $ | 13.8 | $ | 14.9 | $ | 14.2 | ||||||||||
Investment in purchased receivables (3) |
$ | 16.8 | $ | 41.3 | $ | 48.5 | $ | 29.6 | $ | 42.6 | ||||||||||
Face value of purchased receivables (3) |
$ | 298.1 | $ | 1,175.3 | $ | 1,498.1 | $ | 818.8 | $ | 1,378.3 | ||||||||||
Average cost of purchased receivables (3) |
5.65 | % | 3.51 | % | 3.24 | % | 3.62 | % | 3.09 | % | ||||||||||
Number of purchased receivable portfolios |
19 | 34 | 41 | 28 | 37 | |||||||||||||||
Collections per account representative FTE (1,4) |
$ | 40,762 | $ | 41,292 | $ | 40,400 | $ | 41,645 | $ | 32,044 | ||||||||||
Average account representative FTEs (1,4) |
679 | 723 | 796 | 913 | 981 |
(1) | Historical amounts have been reclassified to conform to the current period presentation. |
(2) | The core amortization rate is calculated as total amortization divided by collections on non-fully amortized portfolios. |
(3) | All purchase data is adjusted for buybacks. |
(4) | Historical information has not been adjusted for the 2010 collection center closings. |
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Asset Acceptance Fourth Quarter 2010 Results
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The Company provided the following details of purchased receivable revenues by year of purchase:
Three months ended December 31, 2010 | ||||||||||||||||||||||||
Year of Purchase |
Collections | Revenue | Amortization Rate (1) |
Monthly Yield (2) |
Net Impairments (Reversals) |
Zero Basis Collections |
||||||||||||||||||
2005 and prior |
12,516,811 | 10,685,155 | N/M | N/M | (443,367 | ) | 8,417,502 | |||||||||||||||||
2006 |
6,654,211 | 4,238,416 | 36.3 | % | 7.21 | % | (379,054 | ) | 677,510 | |||||||||||||||
2007 |
10,003,406 | 5,253,606 | 47.5 | 4.01 | 105,467 | 319,224 | ||||||||||||||||||
2008 |
12,893,739 | 6,273,102 | 51.3 | 3.61 | | 621,624 | ||||||||||||||||||
2009 |
18,170,966 | 10,921,329 | 39.9 | 4.44 | | 63,766 | ||||||||||||||||||
2010 |
16,289,028 | 9,385,296 | 42.4 | 2.68 | | | ||||||||||||||||||
Totals |
$ | 76,528,161 | $ | 46,756,904 | 38.9 | % | 4.74 | % | $ | (716,954 | ) | $ | 10,099,626 | |||||||||||
Three months ended December 31, 2009 | ||||||||||||||||||||||||
Year of Purchase |
Collections | Revenue | Amortization Rate (1) |
Monthly Yield (2) |
Net Impairments (Reversals) |
Zero Basis Collections |
||||||||||||||||||
2004 and prior |
$ | 15,242,351 | $ | 9,368,895 | N/M | N/M | $ | 4,238,000 | $ | 10,708,969 | ||||||||||||||
2005 |
4,330,183 | (6,349,293 | ) | N/M | N/M | 9,025,000 | 1,069,404 | |||||||||||||||||
2006 |
10,496,427 | (6,605,124 | ) | N/M | N/M | 13,587,000 | 1,380,421 | |||||||||||||||||
2007 |
14,272,149 | 2,619,833 | 81.6 | % | 1.25 | % | 5,546,000 | 880,453 | ||||||||||||||||
2008 |
17,064,373 | 8,847,629 | 48.2 | 3.17 | 26,316 | 78,279 | ||||||||||||||||||
2009 |
13,382,243 | 10,344,066 | 22.7 | 4.00 | | 86,345 | ||||||||||||||||||
Totals |
$ | 74,787,726 | $ | 18,226,006 | 75.6 | % | 1.92 | % | $ | 32,422,316 | $ | 14,203,871 | ||||||||||||
Twelve months ended December 31, 2010 | ||||||||||||||||||||||||
Year of Purchase |
Collections | Revenue | Amortization Rate (1) |
Monthly Yield (2) |
Net Impairments (Reversals) |
Zero Basis Collections |
||||||||||||||||||
2005 and prior |
$ | 66,351,793 | $ | 53,860,550 | N/M | N/M | $ | (1,852,856 | ) | $ | 41,245,515 | |||||||||||||
2006 |
35,935,075 | 20,699,103 | 42.4 | % | 6.88 | % | (588,054 | ) | 4,132,956 | |||||||||||||||
2007 |
49,142,614 | 25,669,601 | 47.8 | 4.08 | 105,467 | 2,375,440 | ||||||||||||||||||
2008 |
62,549,786 | 29,168,202 | 53.4 | 3.42 | | 849,701 | ||||||||||||||||||
2009 |
81,170,136 | 45,049,351 | 44.5 | 3.91 | | 825,894 | ||||||||||||||||||
2010 |
33,669,086 | 21,346,794 | 36.6 | 2.73 | | | ||||||||||||||||||
Totals |
$ | 328,818,490 | $ | 195,793,601 | 40.5 | 5.05 | % | $ | (2,335,443 | ) | $ | 49,429,506 | ||||||||||||
Twelve months ended December 31, 2009 | ||||||||||||||||||||||||
Year of Purchase |
Collections | Revenue | Amortization Rate (1) |
Monthly Yield (2) |
Net Impairments (Reversals) |
Zero Basis Collections |
||||||||||||||||||
2004 and prior |
$ | 76,818,620 | $ | 59,351,726 | N/M | N/M | $ | 9,916,500 | $ | 51,005,995 | ||||||||||||||
2005 |
22,725,619 | 2,276,130 | 90.0 | % | 0.88 | % | 11,770,000 | 1,968,651 | ||||||||||||||||
2006 |
53,239,336 | 19,573,500 | 63.2 | 3.00 | 19,855,000 | 6,523,756 | ||||||||||||||||||
2007 |
69,890,696 | 31,214,488 | 55.3 | 3.05 | 6,994,000 | 3,204,897 | ||||||||||||||||||
2008 |
83,430,138 | 38,422,017 | 53.9 | 2.91 | 969,254 | 332,543 | ||||||||||||||||||
2009 |
27,926,188 | 20,437,420 | 26.8 | 3.98 | | 124,996 | ||||||||||||||||||
Totals |
$ | 334,030,597 | $ | 171,275,281 | 48.7 | % | 4.27 | % | $ | 49,504,754 | $ | 63,160,838 | ||||||||||||
(1) | N/M indicates that the calculated percentage is not meaningful. |
(2) | The monthly yield is the weighted-average yield determined by dividing purchased receivable revenues recognized in the period by the average of the beginning monthly carrying values of the purchased receivables for the period presented. |
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Asset Acceptance Fourth Quarter 2010 Results
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Purchased Receivable Revenues
The table below shows components of revenue from purchased receivables, the amortization rate and the core amortization rate. The Company uses the core amortization rate to monitor performance of pools with remaining balances, and to determine if impairments, impairment reversals, or yield increases should be recorded. Core amortization trends may identify over or under performance compared to forecast for pools with remaining balances.
The following factors contributed to the change in amortization rates from the prior year for both the three and twelve month periods:
| Amortization of receivables balances increased for the three and twelve month periods in 2010 compared to the prior year periods. Portfolio balances that amortize too slowly in relation to current or expected collections may lead to impairments. If portfolio balances amortize too quickly and the Company expects collections to continue to exceed expectations, previously recognized impairments may be reversed, or if there are no impairments to reverse, assigned yields may increase. |
| Net impairments are recorded as additional amortization, and increase the amortization rate, while net reversals have the opposite effect. Net impairment reversals for the three and twelve month periods in 2010 reduced total amortization compared to the prior year periods. |
| Lower zero basis collections in 2010 compared to the prior year periods increased the amortization rate because 100% of these collections are recorded as revenue and do not contribute towards portfolio amortization. These collections are excluded from core amortization. |
Three Months
Ended December 31, |
Twelve Months
Ended December 31, |
|||||||||||||||
($ in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Cash collections: |
||||||||||||||||
Collections on amortizing pools |
$ | 66,428.6 | $ | 60,583.8 | $ | 279,389.0 | $ | 270,869.8 | ||||||||
Zero basis collections |
10,099.6 | 14,203.9 | 49,429.5 | 63,160.8 | ||||||||||||
Total collections |
$ | 76,528.2 | $ | 74,787.7 | $ | 328,818.5 | $ | 334,030.6 | ||||||||
Amortization: |
||||||||||||||||
Amortization of receivables balances |
$ | 30,103.2 | $ | 23,389.4 | $ | 133,445.5 | $ | 105,928.8 | ||||||||
Impairments |
516.8 | 32,422.3 | 1,140.8 | 50,274.3 | ||||||||||||
Reversals of impairments |
(1,233.8 | ) | | (3,476.2 | ) | (769.5 | ) | |||||||||
Cost recovery amortization |
385.1 | 750.0 | 1,914.8 | 7,321.7 | ||||||||||||
Total amortization |
$ | 29,771.3 | $ | 56,561.7 | $ | 133,024.9 | $ | 162,755.3 | ||||||||
Purchased receivable revenues, net |
$ | 46,756.9 | $ | 18,226.0 | $ | 195,793.6 | $ | 171,275.3 | ||||||||
Amortization rate |
38.9 | % | 75.6 | % | 40.5 | % | 48.7 | % | ||||||||
Core amortization rate (1) |
44.8 | % | 93.4 | % | 47.6 | % | 60.1 | % |
(1) | The core amortization rate is calculated as total amortization divided by collections on non-fully amortized portfolios. |
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Asset Acceptance Capital Corp.
Consolidated Statements of Operations
(Unaudited)
Three months ended December 31, | Twelve months ended December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenues |
||||||||||||||||
Purchased receivable revenues, net |
$ | 46,756,904 | $ | 18,226,006 | $ | 195,793,601 | $ | 171,275,281 | ||||||||
Gain on sale of purchased receivables |
354,500 | 396,133 | 1,212,042 | 399,373 | ||||||||||||
Other revenues, net |
351,083 | 118,490 | 1,394,177 | 812,947 | ||||||||||||
Total revenues |
47,462,487 | 18,740,629 | 198,399,820 | 172,487,601 | ||||||||||||
Expenses |
||||||||||||||||
Salaries and benefits |
15,770,837 | 20,349,896 | 72,388,974 | 77,666,083 | ||||||||||||
Collections expense |
28,754,981 | 22,575,623 | 99,298,403 | 89,095,287 | ||||||||||||
Occupancy |
1,557,735 | 2,128,572 | 6,729,589 | 7,588,100 | ||||||||||||
Administrative |
3,761,512 | 2,050,788 | 9,818,058 | 8,694,344 | ||||||||||||
Depreciation and amortization |
1,188,379 | 1,164,412 | 4,665,775 | 4,107,635 | ||||||||||||
Restructuring charges |
2,969,140 | | 4,224,899 | | ||||||||||||
Impairment of assets |
| | | 1,167,600 | ||||||||||||
Loss on disposal of equipment and other assets |
209,272 | 244,293 | 213,794 | 354,634 | ||||||||||||
Total operating expenses |
54,211,856 | 48,513,584 | 197,339,492 | 188,673,683 | ||||||||||||
(Loss) income from operations |
(6,749,369 | ) | (29,772,955 | ) | 1,060,328 | (16,186,082 | ) | |||||||||
Other income (expense) |
||||||||||||||||
Interest expense |
(2,689,237 | ) | (2,629,954 | ) | (11,203,730 | ) | (10,168,671 | ) | ||||||||
Interest income |
6,125 | 18,975 | 7,598 | 33,765 | ||||||||||||
Other |
(2,421 | ) | 127,058 | 68,004 | 129,442 | |||||||||||
Loss before income taxes |
(9,434,902 | ) | (32,256,876 | ) | (10,067,800 | ) | (26,191,546 | ) | ||||||||
Income tax benefit |
(2,441,534 | ) | (12,020,016 | ) | (8,451,668 | ) | (9,757,449 | ) | ||||||||
Net loss |
$ | (6,993,368 | ) | $ | (20,236,860 | ) | $ | (1,616,132 | ) | $ | (16,434,097 | ) | ||||
Weighted-average number of shares: |
||||||||||||||||
Basic |
30,716,034 | 30,657,948 | 30,693,315 | 30,633,936 | ||||||||||||
Diluted |
30,716,034 | 30,657,948 | 30,693,315 | 30,633,936 | ||||||||||||
Loss per common share outstanding: |
||||||||||||||||
Basic |
$ | (0.23 | ) | $ | (0.66 | ) | $ | (0.05 | ) | $ | (0.54 | ) | ||||
Diluted |
$ | (0.23 | ) | $ | (0.66 | ) | $ | (0.05 | ) | $ | (0.54 | ) |
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Asset Acceptance Capital Corp.
Consolidated Statements of Financial Position
(Unaudited)
December 31, 2010 |
December 31, 2009 |
|||||||
ASSETS | ||||||||
Cash |
$ | 5,635,503 | $ | 4,935,248 | ||||
Purchased receivables, net |
321,318,255 | 319,772,006 | ||||||
Income taxes receivable |
3,760,731 | 5,553,181 | ||||||
Property and equipment, net |
13,055,723 | 14,521,666 | ||||||
Goodwill |
14,323,071 | 14,323,071 | ||||||
Intangible assets, net |
| 1,079,065 | ||||||
Other assets |
5,680,237 | 6,231,732 | ||||||
Total assets |
$ | 363,773,520 | $ | 366,415,969 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Liabilities: |
||||||||
Accounts payable |
$ | 2,958,214 | $ | 3,002,299 | ||||
Accrued liabilities |
25,178,707 | 21,294,388 | ||||||
Income taxes payable |
1,407,794 | 1,196,071 | ||||||
Notes payable |
157,259,956 | 160,022,514 | ||||||
Capital lease obligations |
202,479 | 278,459 | ||||||
Deferred tax liability, net |
52,863,654 | 57,524,754 | ||||||
Total liabilities |
239,870,804 | 243,318,485 | ||||||
Stockholders equity: |
||||||||
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding |
| | ||||||
Common stock, $0.01 par value, 100,000,000 shares authorized; issued shares 33,248,915 and 33,220,132 at December 31, 2010 and 2009, respectively |
332,489 | 332,201 | ||||||
Additional paid in capital |
149,438,202 | 148,243,688 | ||||||
Retained earnings |
17,138,085 | 18,754,217 | ||||||
Accumulated other comprehensive loss, net of tax |
(1,680,370 | ) | (2,955,451 | ) | ||||
Common stock in treasury; at cost, 2,627,339 and 2,616,424 shares at December 31, 2010 and 2009, respectively |
(41,325,690 | ) | (41,277,171 | ) | ||||
Total stockholders equity |
123,902,716 | 123,097,484 | ||||||
Total liabilities and stockholders equity |
$ | 363,773,520 | $ | 366,415,969 | ||||
See accompanying notes.
10
Asset Acceptance Fourth Quarter 2010 Results
Page 11 of 12 ~
Asset Acceptance Capital Corp.
Consolidated Statements of Cash Flows
(Unaudited)
For the Years Ended December 31, | ||||||||
2010 | 2009 | |||||||
Cash flows from operating activities |
||||||||
Net loss |
$ | (1,616,132 | ) | $ | (16,434,097 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
4,665,775 | 4,107,635 | ||||||
Amortization of deferred financing costs |
1,285,437 | 670,559 | ||||||
Deferred income taxes |
(5,278,029 | ) | (7,806,252 | ) | ||||
Share-based compensation expense |
1,194,802 | 1,328,402 | ||||||
Net (impairment reversal) impairment of purchased receivables |
(2,335,443 | ) | 49,504,755 | |||||
Non-cash revenue |
(12,752 | ) | (1,499,743 | ) | ||||
Loss on disposal of equipment and other assets |
213,794 | 354,634 | ||||||
Gain on sale of purchased receivables |
(1,212,042 | ) | (399,373 | ) | ||||
Non-cash restructuring charges and impairment of assets |
1,189,900 | 1,167,600 | ||||||
Changes in assets and liabilities: |
||||||||
Decrease in other assets |
164,376 | 2,016,356 | ||||||
Increase (decrease) in accounts payable and other accrued liabilities |
7,621,184 | (397,257 | ) | |||||
Decrease (increase) in net income taxes receivable |
2,004,173 | (1,081,410 | ) | |||||
Net cash provided by operating activities |
7,885,043 | 31,531,809 | ||||||
Cash flows from investing activities |
||||||||
Investment in purchased receivables, net of buybacks |
(137,489,164 | ) | (118,319,478 | ) | ||||
Principal collected on purchased receivables |
135,373,084 | 114,750,304 | ||||||
Proceeds from sale of purchased receivables |
1,730,236 | 399,863 | ||||||
Purchase of property and equipment |
(2,347,584 | ) | (5,976,404 | ) | ||||
Payments made for asset acquisition |
(793,750 | ) | | |||||
Proceeds from sale of property and equipment |
5,255 | 4,197 | ||||||
Net cash used in investing activities |
(3,521,923 | ) | (9,141,518 | ) | ||||
Cash flows from financing activities |
||||||||
Borrowings under notes payable |
112,100,000 | 49,200,000 | ||||||
Repayments of notes payable |
(114,862,558 | ) | (70,727,486 | ) | ||||
Payment of deferred financing costs |
(775,808 | ) | (1,835,926 | ) | ||||
Repayment of capital lease obligations |
(75,980 | ) | | |||||
Purchase of treasury shares |
(48,519 | ) | (134,490 | ) | ||||
Net cash used in financing activities |
(3,662,865 | ) | (23,497,902 | ) | ||||
Net increase (decrease) in cash |
700,255 | (1,107,611 | ) | |||||
Cash at beginning of year |
4,935,248 | 6,042,859 | ||||||
Cash at end of year |
$ | 5,635,503 | $ | 4,935,248 | ||||
Supplemental disclosure of cash flow information |
||||||||
Cash paid for interest, net of capitalized interest |
$ | 10,184,277 | $ | 9,593,119 | ||||
Net cash received for income taxes |
$ | (5,177,813 | ) | $ | (869,787 | ) | ||
Non-cash investing and financing activities: |
||||||||
Change in fair value of swap liability |
$ | (1,892,010 | ) | $ | (2,570,415 | ) | ||
Change in unrealized loss on cash flow hedge |
$ | 1,275,081 | $ | 1,709,411 | ||||
Change in purchased receivable obligations |
$ | (2,399,832 | ) | $ | 2,399,832 | |||
Capital lease obligations incurred |
$ | | $ | 278,459 |
11
Asset Acceptance Fourth Quarter 2010 Results
Page 12 of 12 ~
Reconciliation of GAAP Net Loss to Adjusted EBITDA (Unaudited)
This press release includes a discussion of Adjusted EBITDA, which is a non-GAAP financial measure. The Company defines Adjusted EBITDA as net income or loss plus (a) the (benefit) provision for income taxes, (b) interest expense, net, (c) depreciation and amortization, (d) share-based compensation, (e) (gain) or loss on sale of assets, net, (f) non-cash restructuring charges and impairment of assets, (g) purchased receivables amortization, and (h) in accordance with the Companys credit facilities, certain FTC related charges.
The Company believes this non-GAAP financial measure provides important supplemental information to management and investors. This non-GAAP financial measure reflects an additional way of viewing aspects of the Companys operations that, when viewed with the GAAP results and the accompanying reconciliation to the most directly comparable GAAP financial measure, provide a more complete understanding of factors and trends affecting the Companys business and results of operations.
Management uses Adjusted EBITDA for planning purposes, including the preparation of internal budgets and forecasts; in communications with the Board of Directors, stockholders, analysts and investors concerning its financial performance; as a key component in managements annual incentive compensation plan; and as a measure of operating performance for the financial covenants in the Companys amended credit agreement. The Company also believes that analysts and investors use Adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies in its industry.
Adjusted EBITDA, which is a non-GAAP financial measure, should not be considered an alternative to, or more meaningful than, net income or loss prepared on a GAAP basis. Management strongly encourages investors to review the Companys consolidated financial statements in their entirety and to not rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare this financial measure with other companies non-GAAP financial measures having the same or similar names. In addition, the Company expects to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from the Companys non-GAAP measure should not be construed as an inference that these costs are unusual, infrequent or non-recurring.
The Company provided the following table which reconciles GAAP net loss, as reported, to Adjusted EBITDA.
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net loss |
$ | (6,993,368 | ) | $ | (20,236,860 | ) | $ | (1,616,132 | ) | $ | (16,434,097 | ) | ||||
Adjustments: |
||||||||||||||||
Income tax benefit |
(2,441,534 | ) | (12,020,016 | ) | (8,451,668 | ) | (9,757,449 | ) | ||||||||
Interest expense, net |
2,683,112 | 2,610,979 | 11,196,132 | 10,134,906 | ||||||||||||
Depreciation and amortization |
1,188,379 | 1,164,412 | 4,665,775 | 4,107,635 | ||||||||||||
Share-based compensation |
222,302 | 254,309 | 1,194,802 | 1,328,402 | ||||||||||||
Gain on sale of assets, net |
(145,228 | ) | (151,840 | ) | (998,248 | ) | (44,739 | ) | ||||||||
Non-cash restructuring charges and impairment of assets |
324,076 | | 1,189,900 | 1,167,600 | ||||||||||||
Purchased receivables amortization |
29,771,257 | 56,561,720 | 133,024,889 | 162,755,316 | ||||||||||||
FTC related charges |
1,662,879 | | 1,966,468 | | ||||||||||||
Adjusted EBITDA |
$ | 26,271,875 | $ | 28,182,704 | $ | 142,171,918 | $ | 153,257,574 | ||||||||
12