Asset Acceptance Reports Narrower Loss in Q4 and Full-Year 2010

Debt buyer Asset Acceptance Capital Corp. late Thursday reported financial results for the fourth quarter and full year 2010, marked by lower losses and increased revenues. The company also noted the impact of winding down its healthcare ARM business and an ongoing investigation by the Federal Trade Commission.

Warren, Mich.-based Asset Acceptance (Nasdaq: AACC) 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 share, in 2009. In the fourth quarter of 2010, the company’s net loss was $7 million, or $0.23 per share, during the fourth quarter of 2010, compared to a loss of $20.2 million in the same period of 2009.

Analysts polled by Thomson Reuters expected the company to report a loss of $0.02 per share for the fourth quarter. But analysts’ estimates typically do not include special items.

Fourth quarter performance was adversely impacted by a $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.

For the year, the company incurred $4.2 million in restricting costs related to the closing of the offices in Chicago and Cleveland and one in Deerfield Beach, Fla. that housed Asset Acceptance’s healthcare division, Premium Asset Recovery Corporation (PARC). The company announced in July 2010 that it was exiting the health care receivables space – a sector it entered in 2006 when it bought PARC. CFO Reid Simpson told insideARM at that time, “It’s a financial decision. This line of business for us was in fact underperforming for some time.  The cost to collect was much higher than our other lines of business.”

Asset Acceptance also noted that over the course of 2010, it incurred $2 million in costs related to an ongoing investigation by the FTC. On April 6, 2010, the FTC delivered a letter to the company which stated its view that Asset Acceptance may have engaged in certain violations of those laws, offered the company an opportunity to resolve the matter through consent negotiations, and forwarded a proposed consent decree. The company has said that it does not expect the resolution of the matter to have a material adverse impact on the business, but that external legal expenses would be higher than normal until the action is resolved.

The company said on a conference call for investors late Thursday that it had also incurred special charges related to the implementation of a new collection technology platform that it acquired in 2010.

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.”

The company acquired $136.3 million of charged-off consumer receivables with a face value of $3.8 billion in 2010. This compares to the prior year when Asset Acceptance purchased $120.9 million in charged-off consumer receivables with a face value of $4.4 billion.

For the full year, revenues increased 15 percent to $198.4 million.