Asta Funding Reports Rise in Net Income, Touts Balance Sheet Strength

Debt buyer Asta Funding, Inc. early Wednesday reported financial results for the first quarter of its fiscal year 2011 highlighted by an increase in net income and an improved balance sheet position.

Englewood Cliffs, N.J.-based Asta (Nasdaq: ASFI) said that net income in its fiscal first quarter ended December 31, 2010 was $2.67 million – or $0.18 per share – an increase of 7.7 percent from the same period a year ago. But revenue declined in its most recent period to $10.8 million, down 2 percent.

The decline in revenue was due to a sharp drop in cash collections. The company reported net cash collections of $21.1 million in the quarter, down 28 percent from a year ago. But Asta noted that it received around $2.4 million more from account sales a year ago that counted toward cash collections.

Operating expenses also declined 2.5 percent in the quarter.

Asta said it had no senior or subordinated debt as of December 31, 2010, as compared to $4.4 million of subordinated debt as of September 30, 2010. In addition, the balance of the non-recourse debt to the Bank of Montreal was $79.3 million at December 31, 2010 down from $90.5 million at September 30, 2010.

“The progress we made last year in strengthening our balance sheet, increasing our cash position and generating strong cash flow has continued into fiscal year 2011,” commented Gary Stern, Chairman and CEO of the Company, in a press release. “Although there are signs of economic recovery, the current economic environment remains challenging and we continue to be selective buyers of distressed, performing or semi performing debt portfolios. Exclusive of the non-recourse debt, we are funding our business through our cash flow from operations without the need for borrowing.”

Asta noted that its investments in new debt portfolios totaled $2.9 million during the first quarter of fiscal year 2011, as compared to $2.3 million in the first quarter of fiscal year 2010. The portfolios acquired during the quarter included semi-performing litigation-related medical accounts receivable portfolios. As a portion of the accounts are performing, the cost of the portfolio was higher than the traditional charged off non-performing assets.

Asta is holding an investor conference call today at 4pm Eastern to discuss the financial results.