Asset Acceptance Capital Corp. Announces Solid First Quarter 2006 Results, Record Cash Collections

Asset Acceptance Capital Corp., a leading purchaser and collector of charged-off consumer debt, today announced first quarter 2006 results, highlighted by an 11.2 percent increase in cash collections.

Revenues increased 2.0 percent to $67.4 million for the first quarter ended March 31, 2006, compared with revenues of $66.0 million in the first quarter of 2005. Growth in collections year over year exceeded revenue growth due to a higher amortization rate reducing purchased receivable revenues in the first quarter this year compared to the same period in the prior year. Net impairments for the quarter were $2.7 million, a significant reduction from the fourth quarter of 2005 when $15.3 million of impairments were recognized. Asset Acceptance reported cash collections of $89.4 million in the first quarter of 2006, versus cash collections of $80.4 million in the same period of 2005. Net income for the quarter was $12.6 million, or $0.34 per fully diluted share, compared with a net income of $15.1 million, or $0.41 per fully diluted share, for the first quarter of 2005.

“We are encouraged by our performance in the first quarter of 2006, highlighted by the strongest quarter of cash collections achieved in our 44- year history,” said Brad Bradley, chairman, president and CEO of Asset Acceptance Capital Corp. “We believe the results for the period are a direct reflection of our ongoing efforts to align our strategic and operational objectives, as outlined over the past two quarters. Since the implementation of our recruiting, retention and training initiatives at the end of the third quarter 2005, we have benefited from an improvement in the retention of our collection professionals. As we look to further apply these initiatives throughout our organization, we remain focused on capturing additional productivity from our account representatives.”

During the first quarter of 2006, Asset Acceptance invested $26.9 million to purchase consumer debt portfolios with a face value of $738.7 million, representing a blended rate of 3.64 percent of face value. This compares to the prior year first quarter when the Company invested $32.5 million to purchase consumer debt portfolios with a face value of $1.1 billion, representing a blended rate of 2.99 percent of face value. The Company said all purchase data is adjusted for buybacks.

“In keeping with our proven approach to purchasing charged-off consumer receivables, we remained disciplined yet opportunistic buyers of both traditional and non-traditional asset classes in the first quarter,” said Bradley. “We purchased several portfolios in the first quarter of 2006 which we believe are of a higher quality than the typical delinquent portfolios which have historically made up the bulk of our purchases. These higher quality portfolios provide us with an opportunity to leverage our collections expertise.”

“Looking to the macro supply environment, portfolio prices remained at elevated levels in the first quarter, consistent with the pricing environment exhibited over the past several quarters. Having said that, we experienced good deal flow during the first quarter of 2006 and remain optimistic on the remainder of the year as it relates to portfolio supply.”

On April 28, 2006, Asset announced a definitive agreement to acquire the capital stock of privately-held Premium Asset Recovery Corp. (PARC) of Deerfield Beach, Florida and related agreements for approximately $16.5 million in cash, not including the assumption of certain outstanding indebtedness and fees associated with the acquisition. With nearly a decade of experience in the medical debt markets, the PARC team is anticipated to enhance AACC’s expertise in charged-off medical receivables, a vast yet still emerging opportunity.

“With the acquisition of PARC, Asset is positioned to become a leading participant in the purchase and collection of charged-off medical receivables,” continued Bradley. “Our ability to diversify our purchasing presence into growing niche markets like medical remains a primary objective within our longer term growth strategy.”

First Quarter 2006 Highlights

• Revenues grew 2.0 percent to $67.4 million in the current quarter, versus $66.0 million in the prior year first quarter.

• Cash collections rose 11.2 percent to $89.4 million in the current quarter, versus $80.4 million in the prior year first quarter.

• Net income decreased 16.9 percent to $12.6 million in the current quarter, versus net income of $15.1 million in the prior year first quarter. Net income per fully diluted share narrowed to $0.34, compared with net income per fully diluted share of $0.41 in the prior year quarter.

• Total operating expenses were $47.6 million, or 53.2 percent of cash collections. This compares with operating expenses of 52.0 percent of cash collections during the same period last year and 57.3 percent in the fourth quarter of 2005.

• Traditional call center collections were $45.5 million, an increase of 2.1 percent from the same period last year and 50.9 percent of total cash collections.

• Legal collections for the quarter were $32.9 million, an increase of 26.7 percent from the same period last year and 36.8 percent of total cash collections.

• Other collections, including forwarding, bankruptcy and probate collections, accounted for $11.0 million or the remaining 12.3 percent of cash collections.

• Quarterly account representative productivity on a full-time equivalent basis was $41,995, a marginal decline from the first quarter 2005, but up from the fourth quarter 2005. Asset reported that its average number of account representatives grew 8.4 percent on a year-over-year basis to 1,084 account representatives in the current period.

• Asset Acceptance collected on purchases made from credit card issuers, retailers, finance companies, utilities, healthcare providers and other credit originators during the first quarter of 2006 and continues to maintain a diverse mix of asset types in its consumer debt portfolios.

“With record collections in the call center, legal and other collection channels, we believe we are well-positioned to build on our current momentum as we enter the second quarter,” continued Bradley. “We are encouraged by the progress our team has made during the past year, characterized by a continued focus on strategic and operational execution. In the first quarter 2006, account representative turnover declined to an annualized rate of 61.5 percent – about even with last quarter’s annualized turnover rate of 59.3 percent and down from the same quarter last year when the annualized rate was 84.2 percent. As we continue to hire and retain talent, we remain focused on staffing in accordance with the needs of our business, and are committed to maximizing productivity at all levels of the organization.”

Mark Redman, vice president of finance and CFO of Asset Acceptance Capital Corp., concluded: “We are pleased with the record cash collections achieved by each of our departments, the sum of which contributed to a solid start to the year. In addition, we remain dedicated to reducing operating expenses as a percent of cash collections. Our cash flow generation was strong this quarter as evidenced by our cash position increasing from $50.5 million at the prior year end to $69.5 million at the end of the first quarter while investing $26.9 million in new portfolios. This strong cash position combined with no debt outstanding on our line of credit has allowed us to take advantage of the opportunity to expand our purchasing and collection expertise with the acquisition of PARC.”