Asset Acceptance Earnings Down on High Portfolio Prices

Asset Acceptance Capital Corp., a leading purchaser and collector of charged-off consumer debt, today announced third quarter 2006 results, highlighted by a 3.5 percent increase in cash collections.

Asset Acceptance reported cash collections of $80.9 million in the third quarter of 2006 — the highest third quarter cash collections in the history of the Company, versus cash collections of $78.2 million in the same period of 2005.

"Historically, our cash collections tend to be seasonally higher in the first two quarters of the year when compared to the third and fourth quarters," said Brad Bradley, Chairman, President and CEO of Asset Acceptance Capital Corp. "We experienced that trend again this year, however, third quarter cash collections reached record levels when compared to our third quarter performance in previous year periods. While competition for quality portfolios has increased during the past 24-36 months, we continue to assess traditional and non-traditional avenues of opportunity where we are able to leverage our purchasing expertise and collections infrastructure."

Revenues declined 7.6 percent to $59.2 million for the third quarter ended September 30, 2006, compared with revenues of $64.0 million in the third quarter of 2005. Net income for the quarter was $10.7 million, or $0.29 per fully diluted share, compared with a net income of $13.7 million, or $0.37 per fully diluted share, for the third quarter of 2005. Although cash collections increased in the quarter compared to the third quarter of 2005, revenues declined due to a $6.3 million net impairment charge on purchased receivables, a $1.3 million charge on a dealer finance contract portfolio and lower expected returns on many purchases made since 2004 due to an increasingly competitive purchasing environment.

During the third quarter of 2006, Asset Acceptance invested $27.6 million to purchase consumer debt portfolios with a face value of $779.5 million, representing a blended rate of 3.54 percent of face value. This compares to the prior year third quarter when the Company invested $27.2 million to purchase consumer debt portfolios with a face value of $1.1 billion, representing a blended rate of 2.49 percent of face value. The Company said all of its purchase data is adjusted for buybacks.

"We've continued to invest in new portfolios encompassing both traditional and non-traditional asset classes which position us to achieve attractive returns over a multi-year period," continued Bradley. While competitive headwinds have undoubtedly impacted our industry in recent quarters, I am encouraged by the efforts displayed and dedication shown by our team in the third quarter. We are committed to purchasing receivables when we believe we can achieve acceptable returns as opposed to purchasing paper to maintain growth in cash collections and revenues."

"Turning to the macro supply environment, we continue to see steady deal volume, albeit at elevated prices. While the quality and cost of a portfolio are key factors in determining our decision to invest, we continue to seek out portfolios in which we are able to leverage our experience and varying collection channels," said Bradley.

During June 2006, the Company approved a stock repurchase program of up to 2.5 million shares, or approximately 6.7% of the total outstanding common stock. During the third quarter of 2006, the Company repurchased 1,307,985 shares for $19.8 million with an average purchase price of $15.15 per share.

Third Quarter 2006 Highlights

• Cash collections increased 3.5 percent to $80.9 million in the current quarter, versus $78.2 million in the prior year third quarter.

• Revenues declined 7.6 percent to $59.2 million in the current quarter, versus $64.0 million in the prior year third quarter.

• Net income decreased 21.9 percent to $10.7 million in the current quarter, versus net income of $13.7 million in the prior year third quarter. Net income per fully diluted share narrowed to $0.29, compared with net income per fully diluted share of $0.37 in the prior year third quarter.

• Total operating expenses were $42.9 million, or 53.0 percent of cash collections. This compares favorably with operating expenses of 54.0 percent of cash collections during the same period last year.

• Traditional call center collections were $37.2 million, a decrease of 4.3 percent from the same period last year and 46.0 percent of total cash collections.

• Legal collections for the quarter were $33.7 million, an increase of 15.9 percent from the same period last year and 41.6 percent of total cash collections.

• Other collections, including forwarding, bankruptcy and probate collections, accounted for $10.0 million, or the remaining 12.4 percent of cash collections.

• Quarterly account representative productivity on a full-time equivalent basis was $38,082, a 4.5 percent increase from the third quarter 2005. The average number of account representatives declined 12.3 percent on a year-over-year basis to a total of 936 account representatives in the current period.

• Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") increased by 3.5 percent to $38.2 million in the current year quarter. (Please refer to the table below which reconciles net income according to Generally Accepted Accounting Principles ("GAAP") to adjusted EBITDA.

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

Mark Redman, Vice President of Finance and CFO of Asset Acceptance Capital Corp., said, "During the third quarter we invested $27.6 million in new portfolios. Additionally, we invested $19.8 million to repurchase approximately 1.3 million shares of Asset Acceptance common stock during the quarter, in accordance with our previously announced plan to repurchase up to 2.5 million shares of our common stock. We were able to expend these amounts while maintaining a conservative capital structure due to the consistency of our cash flow."

"We continued to operate in the third quarter with no borrowings on our $100 million line of credit and had $47.7 million in cash and short-term investments at quarter end. I believe we have made progress managing our operations as reflected by our operating expenses compared to cash collections which was 53.0 percent in the third quarter of this year comparing favorably to 54.0 percent in the same quarter last year. However, our work is not complete as we must continue to improve in all facets of our business in order to perform well in an increasingly competitive environment," concluded Redman.

Reconciliation of GAAP Net Income to Adjusted EBITDA

The Company provided the following table which reconciles GAAP net income, as reported, to adjusted EBITDA. The Company indicated the measure "adjusted EBITDA" is the basis for the management bonus program and a similar computation is used in the line of credit 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 or 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.

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