Asset Acceptance Reports Loss for Q4 and Full Year 2009 on Impairments

Accounts receivable management firm Asset Acceptance Capital Corp. (Nasdaq: AACC) reported significant losses late Wednesday for the fourth quarter and full year 2009 on massive impairment charges taken in the last three months of the year.

The Warren, Mich.-based debt buyer said that it recorded a net loss of $16.4 million, or $0.54 per share, for the full year 2009 compared to net income of $15.7 million, or $0.51 per share, in 2008. In the fourth quarter alone, Asset Acceptance reported a net loss of $20.2 million.

Much of the loss was attributed to a non-cash net impairment of purchased receivables of $32.4 million in the fourth quarter. The company recorded an impairment of only $4.6 million in the fourth quarter of 2008.

Rion Needs, President and CEO, commented in a press release, "The operating environment in 2009 has been one of the most challenging periods in our Company’s history, with the fourth quarter proving to be one of the most difficult quarters of the year. The macroeconomic environment continued to adversely impact our cash collections, particularly on our older vintages. In connection with the preparation of our financial statements for the quarter and year ended December 31, 2009, we observed a significant difference between actual and projected cash collections in some of these older portfolios, which caused us to perform a more in depth review of our expectation of future cash collections. This resulted in a large non-cash impairment charge of $32.4 million, or $0.66 per share, net of the tax benefit. As a result, we reported a net loss for fourth quarter and the year. We are hopeful that this action will aid in minimizing non-cash impairments going forward."

The large impairment drove down revenues in the fourth quarter. The company reported total revenues of $18.7 million in the fourth quarter of 2009, compared to total revenues of $55 million in the fourth quarter of 2008. Total revenues in the fiscal year 2009 were $172.5 million versus $234.2 million in 2008.

Asset Acceptance reported cash collections of $74.8 million in the fourth quarter ended December 31, 2009, versus cash collections of $83.3 million in the year-ago period. For the full year, the company reported cash collections of $334 million compared to cash collections of $369.6 million in 2008.

The company reported an even split between traditional collection channels and legal collections for the year, with traditional channels accounting for $142.4 million and legal collections bringing in $141.7 million. The remainder, $49.9 million, was classified as “Other” (bankruptcy, collection agency forwarding and probate).

"While the economic headwinds persisted throughout the year, the pricing environment remained attractive as supply of charge-offs from issuers continued to expand and the overall demand remained soft,” said Needs. “We continued to ramp up our purchasing during the back half of the year, and expect this initiative to pay dividends as we move through 2010 and collect on the newer vintage.”

The company invested $121.9 million to purchase charged-off consumer debt portfolios with a face value of $4.5 billion, for a blended rate of 2.73 percent during 2009, compared to $154.2 million with a face value of $3.8 billion, for a blended rate of 4.05 percent in 2008.