Attached files
| file | filename |
|---|---|
| 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 Second Quarter 2010 Results
Cash Collections of $84.2 million during the second quarter; Net Income of $774.5 thousand, or $0.03 per fully diluted share
Warren, Mich., July 29, 2010 – Asset Acceptance Capital Corp. (NASDAQ: AACC), a leading purchaser and collector of charged-off consumer debt, today reported results for the quarter ended June 30, 2010.
Financial highlights from the second quarter 2010 included:
| • | Cash collections of $84.2 million; |
| • | Revenues of $50.9 million; |
| • | Operating expenses of $46.8 million, or 55.6% percent of cash collections; and |
| • | Net income of $774.5 thousand, or $0.03 per diluted share. |
The Company’s operational highlights included:
| • | Amended its credit facility, which nearly doubled purchasing capacity; |
| • | Acquired $48.6 million (net of buybacks) in charged-off consumer receivable portfolios with an aggregate value of $1,502.4 million, or 3.24% of face value; |
| • | Furthered its strategic initiatives to improve operational efficiency through the sale of its PARC healthcare receivables and acquiring substantially all of the assets of BSI eSolutions, LLC, the Company’s collections platform software partner. |
Rion Needs, President and CEO of Asset Acceptance Capital Corp., commented: “We are beginning to see improving trends in our business and are encouraged by the financial and operational results during the quarter. Consistent with our efforts to accelerate portfolio acquisitions, we purchased $48.6 million in charged-off receivables and reported $84.2 million in cash collections during the second quarter. In addition, during the quarter, we increased yields on certain portfolios as a result of better than anticipated performance during the first half of 2010. We have targeted purchases to grow further through the second half of 2010, which should fuel continued improvement in cash collection performance.”
Second Quarter 2010 Financial Highlights
Asset Acceptance reported cash collections of $84.2 million in the quarter ended June 30, 2010, compared to cash collections of $87.3 million in the year-ago period.
Total revenues were $50.9 million in the second quarter of 2010, an increase of 3.7% compared to total revenues of $49.1 million in the second quarter of 2009. Amortization of purchased
Asset Acceptance First Quarter 2010 Results
Page 2 of 10 ~
receivables in the second quarter of 2010 was 39.9% of total cash collections versus 44.1% of total cash collections in the second quarter of 2009. The Company reported a non-cash net impairment reversal of $1.1 million on purchased receivables in the second quarter, versus a net impairment charge of $6.8 million in the prior year quarter.
Total operating expenses in the quarter increased 3.8% to $46.8 million, from $45.1 million in the second quarter of 2009. For the 2010 second quarter, Asset Acceptance reported operating expenses of 55.6% of cash collections, up from 51.6% of cash collections in the prior year quarter.
Net income for the quarter was $774.5 thousand, or $0.03 per fully diluted share, compared to net income of $842.3 thousand, or $0.03 per fully diluted share, in the second quarter of 2009. Earnings Before Interest, Taxes, Depreciation and Amortization, including purchased receivables amortization (“Adjusted EBITDA”), was $39.5 million in the second quarter of 2010, down 10.1% compared to the year-ago period.
During the second quarter of 2010, the Company invested $48.6 million to purchase charged-off consumer debt portfolios with a face value of $1,502.4 million, for a blended rate of 3.24% of face value. This compares to the prior-year second quarter, when the Company invested $19.6 million to purchase consumer debt portfolios with a face value of $716.5 million, representing a blended rate of 2.74% of face value. All purchase data is adjusted for buybacks.
First Six Months 2010 Financial Highlights
For the six-month period ended June 30, 2010, the Company reported cash collections of $173.4 million compared to cash collections of $181.4 million in the first six months of 2009.
Total revenues in the first half of 2010 were $102.5 million versus $106.1 million in the first six months of 2009. For the first six months of 2010, amortization of purchased receivables was 41.4% of total cash collections versus 41.8% of total cash collections in the same period of last year. Net impairment reversals for the first six months of 2010 totaled $1.0 versus a $10.3 million net impairment for the first six months of 2009.
Total operating expenses in first half of 2010 increased 3.3% to $95.1 million, from $92.1 million in the first half of 2009. For the first six months of 2010, Asset Acceptance reported operating expenses of 54.9% of cash collections, up from 50.8% of cash collections in the prior year period.
Net income for the first two quarters of 2010 was $1.1 million, or $0.04 per fully diluted share, compared to net income of $5.4 million, or $0.18 per fully diluted share, in the same period of 2009. For the six-month period ended June 30, 2010, Adjusted EBITDA declined to $82.0 million, a decrease of 11.3% when compared to the same six-month period in 2009. Please refer to the table on page ten, which reconciles net income according to Generally Accepted Accounting Principles (“GAAP”) to Adjusted EBITDA.
During the first six months of 2010, the Company invested $78.4 million to purchase charged-off consumer debt portfolios with a face value of $2.3 billion, for a blended rate of 3.37% of face value. This compares to the prior-year first half, when the Company invested $41.4 million to purchase consumer debt portfolios with a face value of $1.5 billion, representing a blended rate of 2.85% of face value. All purchase data is adjusted for buybacks.
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Asset Acceptance First Quarter 2010 Results
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Reid Simpson, Senior Vice President and CFO commented: “During the second quarter we made progress on a number of fronts. We successfully amended our credit facility, which nearly doubled our capacity and will help enable us to achieve our purchasing goals for 2010. In addition, we continued to increase our purchasing levels. We have now seen a steady increase over the past 12 months and we are focused on continuing the purchasing momentum we have generated during the first half of the year. Finally, we have made good progress on evaluating our cost structure and are focusing on eliminating underperforming assets and on identifying other opportunities to increase operating efficiencies – all focused on driving long-term sustainable growth and value creation.”
Second 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 Company’s web site at www.AssetAcceptance.com. A replay of the webcast will be available until July 29, 2011.
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 Company’s 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 Company’s presentations and webcasts. These forward-looking statements reflect the Company’s views, expectations and beliefs at the time such statements were made with respect to such matters, as well as the Company’s 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 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 Company’s 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 Company’s 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
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Asset Acceptance First Quarter 2010 Results
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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:
| • | instability in the financial markets and a prolonged economic recession limiting our ability to access capital and to acquire and collect on charged-off receivable portfolios; |
| • | our ability to maintain existing, and secure additional financing on acceptable terms; |
| • | 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; |
| • | failure to comply with government regulation, including our ability to successfully conclude the on-going FTC matter; |
| • | our ability to purchase charged-off receivable portfolios on acceptable terms and in sufficient amounts; |
| • | 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; |
| • | 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; |
| • | 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 values and assumptions underlying the calculation of the net impairment charges for purposes of recording purchased receivable revenues; |
| • | our ability to respond to changes in technology to remain competitive, including our ability to successfully complete the conversion of our legacy debt collection platform to a different software system; |
| • | our ability to successfully hire, train, integrate into our collections operations and retain in-house account representatives; |
| • | our ability to successfully seek opportunities to diversify beyond collecting on our purchased receivables portfolios; |
| • | 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 or other impairment of intangible asset, which, in turn, 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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Supplemental Financial Data
| (Unaudited, Dollars in Millions, except collections per account representative) |
Q2 ‘10 | Q1 ‘10 | Q4 ‘09 | Q3 ‘09 | Q2 ‘09 | |||||||||||||||
| Total revenues |
$ | 50.9 | $ | 51.6 | $ | 18.7 | $ | 47.7 | $ | 49.1 | ||||||||||
| Cash collections |
$ | 84.2 | $ | 89.2 | $ | 74.8 | $ | 77.8 | $ | 87.3 | ||||||||||
| Operating expenses to cash collections |
55.6 | % | 54.2 | % | 64.9 | % | 61.8 | % | 51.6 | % | ||||||||||
| Call center collections (Note 1) |
$ | 45.5 | $ | 50.5 | $ | 40.5 | $ | 41.7 | $ | 45.9 | ||||||||||
| Legal collections (Note 1) |
$ | 38.7 | $ | 38.7 | $ | 34.3 | $ | 36.1 | $ | 41.4 | ||||||||||
| Amortization rate |
39.9 | % | 42.7 | % | 75.6 | % | 39.0 | % | 44.1 | % | ||||||||||
| Collections on fully amortized portfolios |
$ | 13.8 | $ | 14.9 | $ | 14.2 | $ | 14.9 | $ | 15.8 | ||||||||||
| Investment in purchased receivables (Note 2) |
$ | 48.6 | $ | 29.8 | $ | 42.7 | $ | 36.9 | $ | 19.6 | ||||||||||
| Face value of purchased receivables (Note 2) |
$ | 1,502.4 | $ | 822.2 | $ | 1,381.1 | $ | 1,585.9 | $ | 716.5 | ||||||||||
| Average cost of purchased receivables (Note 2) |
3.24 | % | 3.62 | % | 3.09 | % | 2.33 | % | 2.74 | % | ||||||||||
| Number of purchased receivable portfolios |
41 | 28 | 37 | 33 | 22 | |||||||||||||||
| Collections per account representative FTE |
$ | 36,132 | $ | 37,704 | $ | 29,345 | $ | 31,413 | $ | 38,858 | ||||||||||
| Average account representative FTE’s |
925 | 1,047 | 1,112 | 1,040 | 929 | |||||||||||||||
Note 1: Amounts have been reclassified to conform to the current period presentation.
Note 2: All purchase data is adjusted for buybacks.
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The Company provided the following details of purchased receivable revenues by year of purchase:
| Three months ended June 30, 2010 | |||||||||||||||||||
| Year of Purchase |
Collections | Revenue | Amortization Rate (1) |
Monthly Yield (2) |
Net Impairments |
Zero
Basis Collections | |||||||||||||
| 2004 and prior |
$ | 14,012,401 | $ | 12,232,427 | N/M | N/M | $ | 38,089 | $ | 10,501,033 | |||||||||
| 2005 |
4,047,269 | 3,018,844 | 25.4 | % | 15.44 | % | (1,153,800 | ) | 786,911 | ||||||||||
| 2006 |
9,974,216 | 5,363,233 | 46.2 | 6.78 | 51,000 | 1,241,187 | |||||||||||||
| 2007 |
13,156,759 | 6,923,550 | 47.4 | 4.22 | — | 847,372 | |||||||||||||
| 2008 |
16,654,669 | 7,599,601 | 54.4 | 3.38 | — | 98,532 | |||||||||||||
| 2009 |
21,343,084 | 11,633,662 | 45.5 | 3.87 | — | 362,640 | |||||||||||||
| 2010 |
5,025,675 | 3,855,557 | 23.3 | 2.88 | — | — | |||||||||||||
| Totals |
$ | 84,214,073 | $ | 50,626,874 | 39.9 | 5.36 | $ | (1,064,711 | ) | $ | 13,837,675 | ||||||||
| Three months ended June 30, 2009 | |||||||||||||||||||
| Year of Purchase |
Collections | Revenue | Amortization Rate (1) |
Monthly Yield (2) |
Net Impairments |
Zero
Basis Collections | |||||||||||||
| 2003 and prior |
$ | 14,882,021 | $ | 13,402,082 | N/M | N/M | $ | 489,000 | $ | 12,484,108 | |||||||||
| 2004 |
5,633,013 | 2,475,410 | 56.1 | % | 4.96 | % | 1,941,000 | 901,949 | |||||||||||
| 2005 |
6,103,487 | 864,320 | 85.8 | 1.23 | 2,488,000 | 34,537 | |||||||||||||
| 2006 |
14,512,193 | 9,086,793 | 37.4 | 5.11 | 1,701,000 | 1,610,591 | |||||||||||||
| 2007 |
18,191,261 | 9,907,523 | 45.5 | 3.67 | — | 706,439 | |||||||||||||
| 2008 |
22,974,091 | 9,838,611 | 57.2 | 2.85 | 227,000 | 88,705 | |||||||||||||
| 2009 |
4,997,511 | 3,244,604 | 35.1 | 3.90 | — | 6,250 | |||||||||||||
| Totals |
$ | 87,293,577 | $ | 48,819,343 | 44.1 | 4.83 | $ | 6,846,000 | $ | 15,832,579 | |||||||||
| Six months ended June 30, 2010 | |||||||||||||||||||
| Year of Purchase |
Collections | Revenue | Amortization Rate (1) |
Monthly Yield (2) |
Net Impairments |
Zero
Basis Collections | |||||||||||||
| 2004 and prior |
$ | 30,205,907 | $ | 25,612,953 | N/M | N/M | $ | 137,769 | $ | 21,485,227 | |||||||||
| 2005 |
9,253,696 | 5,487,498 | 40.7 | % | 12.06 | % | (1,153,800 | ) | 1,903,412 | ||||||||||
| 2006 |
21,619,661 | 11,857,884 | 45.2 | 6.78 | 51,000 | 2,654,458 | |||||||||||||
| 2007 |
28,096,125 | 14,521,971 | 48.3 | 4.14 | — | 1,737,603 | |||||||||||||
| 2008 |
35,005,726 | 16,342,011 | 53.3 | 3.40 | — | 211,662 | |||||||||||||
| 2009 |
43,308,909 | 23,399,814 | 46.0 | 3.69 | — | 762,128 | |||||||||||||
| 2010 |
5,939,379 | 4,491,289 | 24.4 | 2.78 | — | — | |||||||||||||
| Totals |
$ | 173,429,403 | $ | 101,713,420 | 41.4 | 5.35 | $ | (965,031 | ) | $ | 28,754,490 | ||||||||
| Six months ended June 30, 2009 | |||||||||||||||||||
| Year of Purchase |
Collections | Revenue | Amortization Rate (1) |
Monthly Yield (2) |
Net Impairments |
Zero
Basis Collections | |||||||||||||
| 2003 and prior |
$ | 32,115,952 | $ | 29,595,638 | N/M | N/M | $ | 412,700 | $ | 26,617,497 | |||||||||
| 2004 |
12,509,541 | 5,799,086 | 53.6 | % | 5.23 | % | 3,958,600 | 1,934,285 | |||||||||||
| 2005 |
13,541,643 | 4,641,864 | 65.7 | 2.97 | 2,745,000 | 77,042 | |||||||||||||
| 2006 |
30,784,791 | 20,327,073 | 34.0 | 5.44 | 2,497,000 | 3,608,141 | |||||||||||||
| 2007 |
39,310,080 | 21,131,396 | 46.2 | 3.70 | — | 1,664,748 | |||||||||||||
| 2008 |
47,118,967 | 20,260,841 | 57.0 | 2.76 | 682,000 | 178,177 | |||||||||||||
| 2009 |
6,029,540 | 3,803,124 | 36.9 | 3.82 | — | 6,250 | |||||||||||||
| Totals |
$ | 181,410,514 | $ | 105,559,022 | 41.8 | 5.08 | $ | 10,295,300 | $ | 34,086,140 | |||||||||
| (1) | “N/M” indicates that the calculated percentage for aggregated vintage years 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 First Quarter 2010 Results
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Asset Acceptance Capital Corp.
Consolidated Statements of Operations
(Unaudited)
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Revenues |
||||||||||||||||
| Purchased receivable revenues, net |
$ | 50,626,874 | $ | 48,819,343 | $ | 101,713,420 | $ | 105,559,022 | ||||||||
| Gain on sale of purchased receivables |
107,825 | — | 324,848 | — | ||||||||||||
| Other revenues, net |
180,152 | 262,610 | 431,247 | 514,129 | ||||||||||||
| Total revenues |
50,914,851 | 49,081,953 | 102,469,515 | 106,073,151 | ||||||||||||
| Expenses |
||||||||||||||||
| Salaries and benefits |
18,660,755 | 18,367,377 | 38,165,621 | 38,213,894 | ||||||||||||
| Collections expense |
23,072,450 | 21,640,610 | 47,265,390 | 43,767,293 | ||||||||||||
| Occupancy |
1,697,154 | 1,859,381 | 3,449,281 | 3,670,242 | ||||||||||||
| Administrative |
2,201,611 | 2,228,678 | 3,942,979 | 4,559,064 | ||||||||||||
| Depreciation and amortization |
1,146,329 | 959,496 | 2,308,711 | 1,845,314 | ||||||||||||
| Loss on disposal of equipment and other assets |
5,342 | 5,137 | 5,543 | 6,541 | ||||||||||||
| Total operating expenses |
46,783,641 | 45,060,679 | 95,137,525 | 92,062,348 | ||||||||||||
| Income from operations |
4,131,210 | 4,021,274 | 7,331,990 | 14,010,803 | ||||||||||||
| Other income (expense) |
||||||||||||||||
| Interest expense |
(2,888,677 | ) | (2,471,838 | ) | (5,517,102 | ) | (5,113,964 | ) | ||||||||
| Interest income |
371 | 3,731 | 1,413 | 4,692 | ||||||||||||
| Other |
40,961 | (67,963 | ) | 55,563 | 3,814 | |||||||||||
| Income before income taxes |
1,283,865 | 1,485,204 | 1,871,864 | 8,905,345 | ||||||||||||
| Income tax expense |
509,408 | 642,917 | 740,890 | 3,460,914 | ||||||||||||
| Net income |
$ | 774,457 | $ | 842,287 | $ | 1,130,974 | $ | 5,444,431 | ||||||||
| Weighted-average number of shares: |
||||||||||||||||
| Basic |
30,682,152 | 30,623,320 | 30,676,471 | 30,617,189 | ||||||||||||
| Diluted |
30,781,363 | 30,711,491 | 30,760,432 | 30,668,037 | ||||||||||||
| Earnings per common share outstanding: |
||||||||||||||||
| Basic |
$ | 0.03 | $ | 0.03 | $ | 0.04 | $ | 0.18 | ||||||||
| Diluted |
$ | 0.03 | $ | 0.03 | $ | 0.04 | $ | 0.18 | ||||||||
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Asset Acceptance Capital Corp.
Consolidated Statements of Financial Position
(Unaudited)
| June 30, 2010 | December 31, 2009 | |||||||
| ASSETS | ||||||||
| Cash |
$ | 5,900,221 | $ | 4,935,248 | ||||
| Purchased receivables, net |
325,380,271 | 319,772,006 | ||||||
| Income taxes receivable |
5,360,500 | 5,553,181 | ||||||
| Property and equipment, net |
13,902,380 | 14,521,666 | ||||||
| Goodwill |
14,323,071 | 14,323,071 | ||||||
| Intangible assets, net |
979,065 | 1,079,065 | ||||||
| Other assets |
7,797,533 | 6,231,732 | ||||||
| Total assets |
$ | 373,643,041 | $ | 366,415,969 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Liabilities: |
||||||||
| Accounts payable |
$ | 3,342,798 | $ | 3,002,299 | ||||
| Accrued liabilities |
17,797,411 | 21,294,388 | ||||||
| Income taxes payable |
1,787,460 | 1,196,071 | ||||||
| Notes payable |
167,359,956 | 160,022,514 | ||||||
| Capital lease obligations |
242,391 | 278,459 | ||||||
| Deferred tax liability, net |
57,553,566 | 57,524,754 | ||||||
| Total liabilities |
$ | 248,083,582 | $ | 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 — 33,220,757 and 33,220,132 at June 30, 2010 and December 31, 2009, respectively |
332,208 | 332,201 | ||||||
| Additional paid in capital |
148,942,125 | 148,243,688 | ||||||
| Retained earnings |
19,885,191 | 18,754,217 | ||||||
| Accumulated other comprehensive loss, net of tax |
(2,321,921 | ) | (2,955,451 | ) | ||||
| Common stock in treasury; at cost, 2,616,582 and 2,616,424 shares at June 30, 2010 and December 31, 2009, respectively |
(41,278,144 | ) | (41,277,171 | ) | ||||
| Total stockholders’ equity |
125,559,459 | 123,097,484 | ||||||
| Total liabilities and stockholders’ equity |
$ | 373,643,041 | $ | 366,415,969 | ||||
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ASSET ACCEPTANCE CAPITAL CORP.
Consolidated Statements of Cash Flows
(Unaudited)
| Six months ended June 30, | ||||||||
| 2010 | 2009 | |||||||
| Cash flows from operating activities |
||||||||
| Net income |
$ | 1,130,974 | $ | 5,444,431 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
2,308,711 | 1,845,314 | ||||||
| Amortization of deferred financing costs |
577,355 | 263,303 | ||||||
| Deferred income taxes |
(181,161 | ) | 176,278 | |||||
| Share-based compensation expense |
698,444 | 761,230 | ||||||
| Net (reversal of impairment) impairment of purchased receivables |
(965,031 | ) | 10,295,300 | |||||
| Non-cash revenue |
(258,845 | ) | (45,442 | ) | ||||
| Loss on disposal of equipment and other assets |
5,543 | 6,541 | ||||||
| Gain on sale of purchased receivables |
(324,848 | ) | — | |||||
| Changes in assets and liabilities: |
||||||||
| Increase (decrease) in accounts payable and other accrued liabilities |
86,857 | (2,840,763 | ) | |||||
| (Increase) decrease in other assets |
(1,367,348 | ) | 1,258,018 | |||||
| Decrease in income taxes receivable, net |
784,070 | 4,120,061 | ||||||
| Net cash provided by operating activities |
2,494,721 | 21,284,271 | ||||||
| Cash flows from investing activities |
||||||||
| Investments in purchased receivables, net of buy backs |
(79,724,106 | ) | (41,138,254 | ) | ||||
| Principal collected on purchased receivables |
72,939,859 | 65,601,634 | ||||||
| Proceeds from the sale of purchased receivables |
324,874 | — | ||||||
| Purchase of property and equipment |
(1,594,968 | ) | (1,885,272 | ) | ||||
| Proceeds from sale of property and equipment |
— | 210 | ||||||
| Net cash (used in) provided by investing activities |
(8,054,341 | ) | 22,578,318 | |||||
| Cash flows from financing activities |
||||||||
| Borrowings under notes payable |
60,700,000 | 17,800,000 | ||||||
| Repayment of notes payable |
(53,362,558 | ) | (54,777,486 | ) | ||||
| Payment of deferred financing costs |
(775,808 | ) | — | |||||
| Purchase of treasury shares |
(973 | ) | (923 | ) | ||||
| Repayment of capital lease obligations |
(36,068 | ) | — | |||||
| Net cash provided by (used in) financing activities |
6,524,593 | (36,978,409 | ) | |||||
| Net increase in cash |
964,973 | 6,884,180 | ||||||
| Cash at beginning of period |
4,935,248 | 6,042,859 | ||||||
| Cash at end of period |
$ | 5,900,221 | $ | 12,927,039 | ||||
| Supplemental disclosure of cash flow information |
||||||||
| Cash paid for interest, net of capitalized interest |
$ | 4,998,502 | $ | 5,208,677 | ||||
| Net cash paid (received) for income taxes |
137,980 | (705,644 | ) | |||||
| Non-cash investing and financing activities: |
||||||||
| Increase in fair value of derivative instruments |
843,503 | 1,639,023 | ||||||
| Decrease in unrealized loss on cash flow hedge |
(633,530 | ) | (1,171,921 | ) | ||||
9
Asset Acceptance First Quarter 2010 Results
Page 10 of 10 ~
Reconciliation of GAAP Net Income 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 plus (a) the provision for income taxes, (b) interest expense, net, (c) depreciation and amortization, (d) share-based compensation, (e) (gain) loss on sale of assets, net, (f) impairment of assets and (g) purchased receivables amortization.
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 Company’s 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 Company’s 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 management’s annual incentive compensation plan; and as a measure of operating performance for the financial covenants in our 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 prepared on a GAAP basis. Management strongly encourages investors to review the Company’s 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 Company’s 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 income, as reported, to Adjusted EBITDA.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||
| Net income |
$ | 774,457 | $ | 842,287 | $ | 1,130,974 | $ | 5,444,431 | ||||||
| Adjustments: |
||||||||||||||
| Income tax expense |
509,408 | 642,917 | 740,890 | 3,460,914 | ||||||||||
| Interest expense, net |
2,888,306 | 2,468,107 | 5,515,689 | 5,109,272 | ||||||||||
| Depreciation and amortization |
1,146,329 | 959,496 | 2,308,711 | 1,845,314 | ||||||||||
| Share-based compensation |
479,435 | 524,412 | 698,444 | 761,230 | ||||||||||
| (Gain) loss on sale of assets, net |
(102,483 | ) | 5,137 | (319,305 | ) | 6,541 | ||||||||
| Purchased receivables amortization |
33,587,199 | 38,474,234 | 71,715,983 | 75,851,492 | ||||||||||
| Other |
219,137 | — | 219,137 | — | ||||||||||
| Adjusted EBITDA |
$ | 39,501,788 | $ | 43,916,590 | $ | 82,010,523 | $ | 92,479,194 | ||||||
10