Asset Acceptance Capital Corp. Announces Second Quarter 2008 Results

Reports Cash Collections of $95.2 Million, Operating Expenses of 52.2% of Cash
Collections and Record Purchasing of $65.3 Million

WARREN, Mich., Aug. 5 /PRNewswire-FirstCall/ -- Asset Acceptance Capital
Corp. (Nasdaq: AACC), a leading purchaser and collector of charged-off
consumer debt, today announced second quarter 2008 results, highlighted by
record investments in purchased receivables of $65.3 million and reduced
operating expenses of 52.2 percent of cash collections.
Asset Acceptance reported cash collections of $95.2 million in the second
quarter ended June 30, 2008, versus cash collections of $95.4 million in the
year-ago period. For the six-month period ended June 30, 2008, the Company
reported cash collections of $195.5 million, an increase of 2.2 percent
compared to the same six-month period in 2007.
Total revenues declined 14.3 percent to $56.5 million in the second
quarter 2008, compared to total revenues of $65.9 million in the second
quarter of 2007. Purchased receivable revenues were $56.2 million for the
quarter ended June 30, 2008, a decrease of $9.3 million, or 14.2 percent, from
$65.5 million in the quarter ended June 30, 2007. During the second quarter
of 2008, the Company's amortization rate, that is cash collections applied to
principal, increased to 41.0% from 31.3% in the second quarter of 2007. The
Company reported a second quarter 2008 net impairment charge of $5.0 million,
versus a net impairment charge of $5.1 million in the prior year quarter. Net
impairments for the first six months of 2008 totaled $5.4 million versus $9.6
million for the first six months of 2007.
Net income for the quarter was $2.1 million, or $0.07 per fully diluted
share, compared to net income of $8.3 million, or $0.24 per fully diluted
share, in the second quarter of 2007. Earnings Before Interest, Taxes,
Depreciation and Amortization, including purchased receivable amortization
("Adjusted EBITDA"), increased to $46.7 million in the second quarter of 2008,
up 3.3 percent compared to the year-ago period. For the six-month period
ended June 30, 2008, Adjusted EBITDA grew to $98.8 million, an increase of 8.2
percent when compared to the same six-month period in 2007. Please refer to
the table on page 5, which reconciles net income according to Generally
Accepted Accounting Principles ("GAAP") to Adjusted EBITDA.
Rion Needs, Senior Vice President and COO, commented: "Operating expenses
were 52.2 percent of total cash collections in the quarter and 51.0 percent
for the first half of the year, comparing favorably to 54.1 percent in the
same quarter a year ago and 53.8 percent for the first two quarters of 2007.
As I indicated last quarter, we are realizing the benefit of our efforts to
focus on improving expense management and, specifically, the initiative
implemented in the first quarter to better match our legal collections and
expenses, which contributed to the lower collection cost. We believe that
these efforts, coupled with our drive to better manage our account inventory
by increasing our numbers of accounts forwarded for collection to outside
agencies and attorneys will at least partially offset the impact on
collections from the current challenging environment."
During the second quarter of 2008, the Company invested $65.3 million to
purchase charged-off consumer debt portfolios with a face value of $1.9
billion, for a blended rate of 3.38 percent of face value. This compares to
the prior-year second quarter, when the Company invested $37.6 million to
purchase consumer debt portfolios with a face value of $1.1 billion,
representing a blended rate of 3.39 percent of face value. All purchase data
is adjusted for buybacks.
"We are pleased with our level of debt purchasing in the second quarter
and through the first six months of the year," said Brad Bradley, Chairman,
President and CEO of Asset Acceptance Capital Corp. "The supply side of the
business continues to improve as charge-offs rise in response to more
difficult economic times. We continue to be opportunistic but selective in
our approach to purchasing charged-off debt and quite frankly, we have been
looking forward to this type of purchasing environment. We expect to
capitalize on the robust supply of charged-off debt as we execute our proven
collection strategy over the next several years, while adjusting our
collection tactics and operations to address today's more difficult collection
environment."
The Company provided the following details regarding purchased receivable
revenues:

Three months ended June 30, 2008

Amort-
Year of ization Monthly Net Zero Basis
Purchase Collections Revenue Rate Yield(1) Impairments Collections

2002 and
prior $12,784,399 $12,101,312 N/M% N/M% $- $11,609,421
2003 10,546,373 9,274,480 12.1 34.90 (537,150) 5,902,566
2004 8,920,506 6,239,920 30.0 7.47 637,317 819,045
2005 10,082,486 2,547,583 74.7 2.02 2,513,000 7,892
2006 21,342,389 11,672,311 45.3 4.72 2,356,000 1,898,018
2007 24,315,224 11,120,941 54.3 2.80 - 35,260
2008 7,201,366 3,252,132 54.8 2.64 - 27,779
Totals $95,192,743 $56,208,679 41.0 5.58 $4,969,167 $20,299,981

Three months ended June 30, 2007

Amort-
Year of ization Monthly Net Zero Basis
Purchase Collections Revenue Rate Yield(1) Impairments Collections

2001 and
prior $10,350,761 $10,448,031 N/M% N/M% $- $10,349,860
2002 10,415,239 7,617,746 26.9 38.27 (7,700) 5,302,384
2003 15,650,934 10,123,237 35.3 15.36 861,000 3,360,172
2004 12,820,784 7,470,809 41.7 5.79 2,544,800 851,464
2005 13,733,997 8,952,035 34.8 4.17 1,745,000 19,692
2006 26,210,165 17,622,050 32.8 5.00 - 1,962,401
2007 6,250,141 3,280,990 47.5 2.38 - -
Totals $95,432,021 $65,514,898 31.3 7.13 $5,143,100 $21,845,973

Six months ended June 30, 2008

Amort-
Year of ization Monthly Net Zero Basis
Purchase Collections Revenue Rate Yield(1) Impairments Collections

2002 and
prior $27,359,596 $26,288,995 N/M% N/M% $(550,000) $24,688,531
2003 22,443,394 19,419,777 13.5 33.26 (1,018,200) 12,099,253
2004 18,514,737 12,819,248 30.8 7.28 1,687,664 1,794,244
2005 20,694,464 8,307,417 59.9 3.04 2,605,986 44,299
2006 46,230,295 27,206,224 41.2 5.17 2,448,000 3,856,965
2007 51,663,171 22,322,914 56.8 2.64 180,000 35,260
2008 8,551,367 3,566,792 58.3 2.58 - 27,779
Totals $195,457,024 $119,931,367 38.6 5.92 $5,353,450 $42,546,331

Six months ended June 30, 2007

Amort-
Year of ization Monthly Net Zero Basis
Purchase Collections Revenue Rate Yield(1) Impairments Collections

2001 and
prior $20,681,711 $20,692,285 N/M% N/M% $- $20,515,823
2002 22,432,000 15,560,961 30.6 30.38 209,100 9,856,188
2003 32,430,994 21,772,454 32.9 14.66 1,624,300 6,036,566
2004 26,855,142 16,650,174 38.0 6.07 4,475,800 1,619,898
2005 28,474,658 19,388,065 31.9 4.38 2,679,000 30,229
2006 52,723,217 34,002,699 35.5 4.61 628,000 2,243,741
2007 7,687,649 4,230,294 45.0 2.36 - -
Totals $191,285,371 $132,296,932 30.8 7.21 $9,616,200 $40,302,445

(1) The monthly yield is a 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.

Mark Redman, Senior Vice President-Finance and CFO of Asset Acceptance
Capital Corp., said: "Increased amortization rates in the quarter had a
negative impact on earnings. The increased rate included the impact of $5.0
million in net impairments for the quarter, equivalent to approximately $3.0
million after-tax or $0.10 per share. It is important to note that $4.5
million of the impairments came from two aggregate portfolios acquired in 2005
and 2006 that have outperformed our original expectations. Due to the strong
early performance on these pools, yields were previously increased to reflect
higher overall expectations of performance. During the quarter, we saw a
decline in actual collection results from historical patterns on a number of
pools, due in part, we believe, to macro-economic factors and capacity issues.
Due to our concern that the difficult collections environment will continue,
we moved proactively to recognize impairments now in the hopes of heading off
potentially larger impairments in the future."
Second Quarter 2008: Key Financial Highlights
-- Cash collections declined 0.3 percent to $95.2 million in the second
quarter 2008, versus $95.4 million in the prior year second quarter.
-- Total revenues fell 14.3 percent to $56.5 million in the second quarter
2008, versus $65.9 million in the prior year second quarter.
-- Net income decreased 74.3 percent to $2.1 million in the second quarter
2008, versus net income of $8.3 million in the prior year second quarter. Net
income per fully diluted share decreased to $0.07, compared with $0.24 in the
prior year quarter.
-- Total operating expenses were $49.7 million, or 52.2 percent of cash
collections in the second quarter 2008, an improvement over operating expenses
of 54.1 percent of cash collections during the same period last year.
-- Traditional call center collections were $42.2 million, a decline of
6.1 percent and 44.4 percent of total cash collections.
-- Legal collections were $39.9 million, an increase of 5.4 percent and
41.9 percent of total cash collections.
-- Other collections, consisting primarily of agency forwarding,
bankruptcy and probate collections, accounted for $13.1 million or the
remaining 13.7 percent of total cash collections.
-- Quarterly account representative productivity on a full-time equivalent
basis was $45,538 in the second quarter 2008, a decline of 7.9 percent from
the same period in 2007.
Brad Bradley concluded: "The recognition of $4.5 million in combined
impairments on the fourth quarter 2005 aggregate pool and the first quarter
2006 aggregate pool negatively impacted the quarter, but we believe it makes
sense to be cautious given current economic conditions. We continue to be
pleased with both of these vintages of purchases, as these pools have
outperformed our original expectations."
Reconciliation of GAAP Net Income to Adjusted EBITDA (Unaudited)
The Company provided the following table which reconciles GAAP net income,
as reported, to Adjusted EBITDA. The Company indicated that the measure
"Adjusted EBITDA" is the basis for its management bonus program and a similar
computation is used in its credit agreement's financial covenants. The
Company believes that Adjusted EBITDA, which is generally cash collections
less operating expenses (other than non-cash operating expenses, such as
depreciation and amortization) represents the Company's cash generation which
can be used to purchase receivables, pay down debt, pay income taxes, return
to shareholders and for other uses. 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. Additionally, Adjusted
EBITDA as computed by the Company may not be comparable to similar metrics
used by others in the industry.

3 months ended June 30, 6 months ended June 30,
2008 2007 2008 2007

Net income $2,124,158 $8,279,165 $8,901,982 $18,130,418
Add: interest income
and expense (net),
income taxes,
depreciation and
amortization 5,600,322 7,010,951 14,120,691 14,264,102
Add (subtract): (gain)
loss on disposal of
assets (2,035) 6,714 (155,557) 1,299
Add: impairment of
intangible assets - - 445,651 -
Add (subtract): other
(income) expense 1,650 (10,256) (16,333) (22,465)
Subtotal 7,724,095 15,286,574 23,296,434 32,373,354

Change to balance of
purchased
receivables 39,152,564 30,163,588 75,841,926 59,673,379
Non-cash revenue (168,500) (246,465) (316,269) (684,940)
Adjusted EBITDA $46,708,159 $45,203,697 $98,822,091 $91,361,793

Cash collections $95,192,743 $95,432,021 $195,457,024 $191,285,371
Other revenues, net 264,885 350,976 737,822 874,969
Operating expenses (49,675,339) (51,665,388) (99,777,663) (102,968,112)
Depreciation and
amortization 921,970 1,079,374 1,949,774 2,168,266
Impairment of
intangible assets - - 445,651 -
Loss on disposal of
equipment 3,900 6,714 9,483 1,299
Adjusted EBITDA $46,708,159 $45,203,697 $98,822,091 $91,361,793

Second Quarter 2008 Earnings Conference Call
Asset Acceptance Capital Corp. will host a conference call at 10 a.m.
Eastern today to discuss these results and current business trends. To listen
to a live Web cast of the call, please go to the investor section of the
Company's web site at www.AssetAcceptance.com. A replay of the Web cast will
be available until August 5, 2009.
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 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. 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. Risk Factors include, among others: ability to purchase charged-
off consumer receivables at appropriate prices, ability to continue to acquire
charged-off receivables in sufficient amounts to operate efficiently and
profitably, ability to recover sufficient amounts on our charged-off
receivable portfolios, employee turnover, ability to compete in the
marketplace and acquiring charged-off receivables in industries with which the
Company has little or no experience. These Risk Factors also include, among
others, 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 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. 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.

Supplemental Financial Data

(Unaudited, Dollars in Millions,
except collections per
account representative) Q2 '08 Q1 '08 Q4 '07 Q3 '07 Q2 '07

Total revenues $56.5 $64.4 $62.2 $52.6 $65.9
Cash collections $95.2 $100.3 $89.1 $90.7 $95.4
Operating expenses to cash
collections 52.2% 50.0% 58.8% 57.4% 54.1%
Traditional call center
collections (Note 1) $42.2 $47.5 $38.6 $41.0 $45.0
Legal collections $39.9 $38.2 $37.6 $36.6 $37.8
Other collections (Note 1) $13.1 $14.6 $12.9 $13.1 $12.6
Amortization rate 41.0% 36.4% 31.2% 42.7% 31.3%
Collections on fully
amortized portfolios $20.3 $22.2 $20.4 $21.3 $21.8
Core amortization rate
(Note 2) 52.1% 46.8% 40.5% 55.7% 41.1%
Investment in purchased
receivables (Note 3) $65.3 $22.3 $60.9 $35.1 $37.6
Face value of purchased
receivables (Note 3) $1,932.8 $548.2 $1,483.1 $1,854.3 $1,108.5
Average cost of purchased
receivables (Note 3) 3.38% 4.07% 4.11% 1.89% 3.39%
Number of purchased
receivable portfolios 52 47 46 42 37
Collections per account
representative FTE
(Note 1) $45,538 $53,908 $44,235 $45,549 $49,458
Average account
representative FTE's
(Note 1) 939 901 889 916 930

Note 1: Amounts reclassified for purposes of comparability to current
periods.
Note 2: Core amortization rate is amortization divided by collections on
non-fully amortized portfolios.
Note 3: All purchase data is adjusted for buybacks.

Asset Acceptance Capital Corp.
Consolidated Statements of Income
(Unaudited)

Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007

Revenues
Purchased receivable
revenues, net $56,208,679 $65,514,898 $119,931,367 $132,296,932
Gain on sale of
purchased receivables 5,935 - 165,040 -
Other revenues, net 264,885 350,976 737,822 874,969
Total revenues 56,479,499 65,865,874 120,834,229 133,171,901
Expenses
Salaries and benefits 20,735,930 20,952,579 42,666,895 43,401,034
Collections expense 23,133,891 23,709,050 45,230,572 46,778,990
Occupancy 1,928,829 2,307,643 3,856,317 4,647,028
Administrative 2,950,819 3,281,103 5,618,971 5,494,459
Restructuring charges - 328,925 - 477,036
Depreciation and
amortization 921,970 1,079,374 1,949,774 2,168,266
Impairment of intangible
assets - - 445,651 -
Loss on disposal of
equipment 3,900 6,714 9,483 1,299
Total operating
expenses 49,675,339 51,665,388 99,777,663 102,968,112
Income from operations 6,804,160 14,200,486 21,056,566 30,203,789
Other income (expense)
Interest income 6,778 206,397 30,029 222,124
Interest expense (3,250,063) (1,138,562) (6,594,660) (1,402,380)
Other (1,650) 10,256 16,333 22,465
Income before income
taxes 3,559,225 13,278,577 14,508,268 29,045,998
Income taxes 1,435,067 4,999,412 5,606,286 10,915,580
Net income $2,124,158 $8,279,165 $8,901,982 $18,130,418

Weighted-average number
of shares:
Basic 30,561,421 34,279,507 30,557,220 34,498,008
Diluted 30,606,807 34,293,511 30,586,249 34,508,368
Earnings per common
share outstanding:
Basic $0.07 $0.24 $0.29 $0.53
Diluted $0.07 $0.24 $0.29 $0.53

Dividends declared per
common share $- $2.45 $- $2.45

Asset Acceptance Capital Corp.
Consolidated Statements of Financial Position
(Unaudited)

June 30, December 31,
2008 2007

ASSETS
Cash $9,159,212 $10,474,479
Purchased receivables, net 355,647,646 346,198,900
Income taxes receivable 3,224,535 3,424,788
Property and equipment, net 13,926,234 11,006,658
Goodwill and other intangible assets 16,880,471 17,464,688
Other assets 6,290,707 6,083,211
Total assets $405,128,805 $394,652,724

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
Accounts payable $4,108,450 $3,377,068
Accrued liabilities 18,950,606 17,423,378
Notes payable 189,500,000 191,250,000
Deferred tax liability, net 60,563,459 60,164,784
Capital lease obligations 4,475 18,242
Total liabilities $273,126,990 $272,233,472

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 -
33,119,597 at June 30, 2008 and
December 31, 2007, respectively 331,196 331,196
Additional paid in capital 146,348,892 145,610,742
Retained earnings 28,367,100 19,465,118
Accumulated other comprehensive loss, net
of tax (2,069,444) (2,012,127)
Common stock in treasury; at cost, 2,576,670
and 2,551,556 shares at June 30, 2008 and
December 31, 2007, respectively (40,975,929) (40,975,677)
Total stockholders' equity 132,001,815 122,419,252
Total liabilities and stockholders' equity $405,128,805 $394,652,724

Asset Acceptance Capital Corp.
Consolidated Statements of Cash Flows
(Unaudited)

Six months ended June 30,
2008 2007

Cash flows from operating activities
Net income $8,901,982 $18,130,418
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,949,774 2,168,266
Deferred income taxes 428,777 1,895,917
Share-based compensation expense 737,898 1,076,038
Net impairment of purchased receivables 5,353,450 9,616,200
Non-cash revenue (316,269) (684,940)
Loss on disposal of equipment 9,483 1,299
Gain on sale of purchased receivables (165,040) -
Impairment of intangible assets 445,651 -
Changes in assets and liabilities:
Increase in accounts payable and accrued
liabilities 2,171,191 3,659,597
Increase (decrease)in other assets 453,080 (3,334,412)
Decrease in income taxes receivable 200,253 212,963
Net cash provided by operating activities 20,170,230 32,741,346

Cash flows from investing activities
Investment in purchased receivables, net of
buy backs (84,976,768) (73,511,945)
Principal collected on purchased receivables 70,488,476 50,057,179
Proceeds from the sale of purchased
receivables 167,405 -
Purchase of property and equipment (4,742,783) (770,485)
Proceeds from the sale of property and
equipment 2,515 4,807
Net cash (used in) investing activities (19,061,155) (24,220,444)

Cash flows from financing activities
Borrowings under notes payable 57,000,000 199,000,000
Repayment of notes payable (58,750,000) (54,000,000)
Payment of credit facility charges (660,575) -
Repayment of capital lease obligations (13,767) (36,896)
Repurchase of common stock - (78,743,296)
Net cash (used in) provided by financing
activities (2,424,342) 66,219,808
Net (decrease) increase in cash (1,315,267) 74,740,710
Cash at beginning of period 10,474,479 11,307,451
Cash at end of period $9,159,212 $86,048,161

Supplemental disclosure of cash flow
information
Cash paid for interest $6,502,385 $484,377
Cash paid for income taxes 4,993,390 8,826,290
Change in fair value of swap liability (87,419) -
Non-cash investing and financing activities:
Change in unrealized loss on cash flow hedge (57,317) -
Accrual for dividends payable - 74,845,716
Accrual for common stock repurchases from
former employees - 1,947,270
Accrual for tender offer transaction costs - 941,914

SOURCE Asset Acceptance Capital Corp.

Jeff Lambert, or Jeff Tryka, both of Lambert, Edwards & Associates,
+1-616-233-0500, aacc@lambert-edwards.com, for Asset Acceptance Capital Corp.