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Asset Acceptance Capital Corp. Reports Third Quarter 2012 Results

  Asset Acceptance Capital Corp. Reports Third Quarter 2012 Results

 Increased investment in the Legal channel, which recorded a 15% increase in
                              collection growth

Business Wire

WARREN, Mich. -- October 29, 2012

Asset Acceptance Capital Corp. (NASDAQ: AACC), a leading purchaser and
collector of charged-off consumer debt, today reported results for the quarter
ended September 30, 2012.

Third Quarter 2012 Financial Highlights:

Cash collections for the third quarter of 2012 were $89.2 million, an increase
of 2.0% compared to the prior year period. Results included 14.8%, or $5.8
million, cash collection growth from the Company’s legal channel.

Third quarter revenues were $54.7 million, down 3.4% compared to the prior
year period. The Company reported net impairment reversals of $0.5 million
compared to net impairment reversals of $2.7 million in the prior year period.
Results in the current quarter included a non-cash impairment of $1.7 million,
or $0.06 per fully diluted share, pre-tax, on one pool.

Operating expenses were $48.6 million representing a slight increase of $0.1
million, or 0.1% from the prior year. Results reflected a continued investment
in the Company’s legal channel and an increase in the associated up-front
costs. Legal investments increased to $10.2 million, or $0.33 per fully
diluted share, pre-tax, during the quarter compared to $8.3 million, or $0.27
per fully diluted share, pre-tax, in the prior year period. Operating expenses
also included $0.3 million, or $0.01 per fully diluted share, pre-tax, of
restructuring costs related to actions taken to close the Tempe, Arizona
collections office. Cost to collect for the quarter was 54.5%, an improvement
of 100 basis points from the third quarter 2011, notwithstanding the
unfavorable comparative impacts of the increased legal investment and
restructuring charges.

Income tax expense was a net benefit of $0.5 million which was due to tax
credits, state tax refund claims from prior years, and additional benefits
achieved through a state sourcing strategy. As a result of these benefits, the
year-to-date effective tax rate was lowered to 24.5%.

The Company reported net income of $1.5 million, or $0.05 per fully diluted
share, net of tax, during the third quarter of 2012, compared to a net income
of $3.1 million, or $0.10 per fully diluted share, net of tax, in the third
quarter of 2011.

Adjusted Earnings Before Interest Taxes Depreciation and Amortization
(“Adjusted EBITDA”) was $42.5 million, a 1.8% increase from $41.7 million in
the third quarter of 2011. Adjusted EBITDA was adversely impacted by the
increased investment in legal costs compared to prior year.

During the third quarter of 2012, the Company invested $23.9 million to
purchase charged-off consumer debt portfolios  with a face value of $766.2
million, for a blended rate of 3.13%. This compares to the prior-year third
quarter, when the Company invested $38.3 million to purchase consumer debt
portfolios with a face value of $1.3 billion, for a blended rate of 2.91%. All
purchase data is adjusted for buybacks.

Rion Needs, President and CEO of Asset Acceptance Capital Corp., commented,
“While we are not content with the reported results for the quarter, we are
executing on initiatives and investments that we expect will position the
Company for accelerated growth going forward. These include the restructuring
actions we took during the quarter and the continued investments in our legal
channel. Our investments in this channel are beginning to pay dividends as
evidenced by the continued momentum in this business, specifically the
sequential growth rate in this channel during the quarter. In addition, we
maintained a focus on further streamlining our business operations by reducing
our cost and geographic footprint. We expect the closure of our Tempe, Arizona
collections call center and expansion of our legal collections operations in
our Riverview, Florida office to drive improved results in 2013 and beyond.”

On September 10, 2012, the Company announced that it will be expanding its
legal collections operations in Riverview, Florida and closing its Tempe,
Arizona collections call center. The closing of the Tempe collections office,
along with related inventory reallocations is expected to increase earnings on
an annual basis by approximately $4.0 million or $0.10 per share, net of tax.

First Nine Months 2012 Financial Highlights

For the nine-month period ended September 30, 2012, the Company reported cash
collections of $282.2 million compared to cash collections of $267.9 million
in the first nine months of 2011, an increase of $14.3 million or 5.3%.
Results included 9.1%, or $10.9 million, cash collection growth from the
Company’s legal channel.

Total revenues in the first nine months of 2012 were $175.2 million compared
to $161.7 million in the prior year. Revenue on purchased receivables was
$174.5 million during the first nine months of 2012, an increase of 8.5% from
the prior year.

Total operating expenses in the first nine months of 2012 were $145.3 million,
an increase of $5.4 million or 3.8%. Cost to collect was 51.5% of cash
collections compared to 52.2% from the prior year period. Results included
legal channel investment of $25.7 million, or $0.83 per fully diluted share,
pre-tax, compared to $21.5 million, or $0.70 per fully diluted share, pre-tax,
for the comparable period last year.

Net income for the first nine months of 2012 was $10.7 million, or $0.34 per
fully diluted share, net of tax, compared to net income of $7.8 million, or
$0.25 per fully diluted share, net of tax, in the same period of 2011, an
increase of 36.7%.

For the first nine months of 2012, Adjusted EBITDA was $142.5 million, a 6.0%
increase from $134.5 million in the first nine months of 2011.

During the first nine months of 2012, the Company invested $104.0 million to
purchase charged-off consumer debt portfolios with a face value of $3,651.0
million, for a blended rate of 2.85% of face value. This compares to the
prior-year nine month period, when the Company invested $133.9 million to
purchase charged-off consumer debt portfolios with a face value of $4,140.9
million, for a blended rate of 3.23% of face value. All purchase data is
adjusted for buybacks.

Please refer to Supplemental Financial Data beginning on page six for
additional information about the Company’s financial results for the three and
nine months ended September 30, 2012 and prior year periods. In addition,
please see a reconciliation of net income according to Generally Accepted
Accounting Principles (“GAAP”) to Adjusted EBITDA beginning on page 13.

Third Quarter 2012 Earnings Conference Call

Asset Acceptance Capital Corp. will host a conference call at 4:30 p.m.
Eastern today to discuss these results and current business trends. To listen
to a live webcast of the call, please go to the investor section of the
Company’s web site at www.AssetAcceptance.com. A replay of the webcast will be
available until October 29, 2013.

About Asset Acceptance Capital Corp.

For 50 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,
collections 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. Forward-looking statements include reference to the
Company’s presentations and webcasts. 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. These Risk Factors include 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. Factors that could affect our results and
cause them to materially differ from those contained in the forward-looking
statements include the following:

  *failure to comply with government regulation;
  *increased costs or a decrease in collections if changes in the way we
    conduct business or additional costs to conduct business result from
    supervision and regulation by the Consumer Financial Protection Bureau or
    unknown ramifications from the Dodd-Frank Wall Street Reform and Consumer
    Protection Act;
  *our ability to purchase charged-off receivable portfolios on acceptable
    terms and in sufficient amounts;
  *instability in the financial markets and continued economic weakness or
    recession impacting our ability to acquire and collect on charged-off
    receivable portfolios and our operating results;
  *our ability to maintain existing, and to secure additional financing on
    acceptable terms;
  *changes in relationships with third parties collecting on our behalf;
  *intense competition on bids for portfolio purchases that could impair our
    ability to achieve our goals;
  *ongoing risks of litigation in our litigious industry, including
    individual and class actions under consumer credit, collections and other
    laws;
  *concentration of a significant portion of our portfolio purchases during
    any period with a small number of sellers;
  *our ability to substantiate our application of tax rules against
    examinations and challenges made by tax authorities;
  *our ability to collect sufficient amounts from our purchases of
    charged-off receivable portfolios;
  *our ability to diversify beyond collecting on our purchased receivables
    portfolios into ancillary lines of business;
  *a decrease in collections as a result of negative attention or news
    regarding the debt collection industry and debtors’ willingness to pay the
    debt we acquire;
  *our ability to respond to technology downtime and changes in technology to
    remain competitive;
  *our ability to make reasonable estimates of the timing and amount of
    future cash receipts and assumptions underlying the calculation of the net
    impairment charges or IRR increases for purposes of recording purchased
    receivable revenues;
  *the costs, uncertainties and other effects of legal and administrative
    proceedings impacting our ability to collect on judgments in our favor;
  *our ability to successfully hire, train, integrate into our collections
    operations and retain in-house account representatives; and
  *other unanticipated events and conditions that may hinder our ability to
    compete.

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

Quarterly trends for certain financial metrics are shown in the table below.

(Unaudited, $
in Millions,
except           Q3 ‘12      Q2 ‘12       Q1 ‘12      Q4 ‘11       Q3 ‘11
collections per
account
representative)
Total revenues   $ 54.7     $ 58.7      $ 61.8     $ 56.4      $ 56.6    
Cash             $ 89.2     $ 91.9      $ 101.1    $ 82.1      $ 87.4    
collections
Operating
expenses to       54.5   %   52.7    %   47.8   %   55.1    %   55.5    %
cash
collections
Call center      $ 44.1     $ 48.8      $ 58.7     $ 44.7      $ 48.2    
collections
Legal            $ 45.1     $ 43.1      $ 42.4     $ 37.4      $ 39.2    
collections
Amortization      39.0   %   36.4    %   39.1   %   31.6    %   35.6    %
rate
Core
amortization      44.4   %   42.0    %   44.7   %   36.9    %   41.6    %
(1)
Collections on
fully amortized  $ 10.9     $ 12.2      $ 12.7     $ 11.8      $ 12.6    
portfolios
Investment in
purchased        $ 23.9     $ 58.9      $ 21.2     $ 26.7      $ 38.3    
receivables (2)
Face value of
purchased        $ 766.2    $ 2,080.7   $ 804.1    $ 1,180.4   $ 1,317.1 
receivables (2)
Average cost of
purchased         3.13   %   2.83    %   2.63   %   2.27    %   2.91    %
receivables (2)
Number of
purchased         17        28         27        26         31      
receivable
portfolios
Collections per
account          $ 47,593   $ 49,873    $ 60,482   $ 42,282    $ 42,135  
representative
FTE (3)
Average account
representative    413       446        480       546        601     
FTE’s (3)
                                                                  

(1)  The core amortization rate is calculated as total amortization divided
      by collections on amortizing portfolios.
(2)   All purchase data is adjusted for buybacks.
(3)   Historical information has not been adjusted for collection center
      closings.
      
      
      

The following table summarizes purchased receivable revenues and amortization
rates by year of purchase:

          Three months ended September 30, 2012
Year                                                    Monthly   Net              Zero Basis
of         Collections   Revenue       Amortization           Impairments    
Purchase                                 Rate (1)       Yield     (Reversals)      Collections
                                                        (2)
2006 and   $ 13,002,016   $ 11,848,325   N/M            N/M       $ (1,584,800 )   $ 8,726,718
prior
2007         5,968,564      4,167,287    30.2    %      8.62  %     (618,000   )     1,271,044
2008         8,135,013      5,207,535    36.0           7.51        —                882,334
2009         12,589,633     8,163,725    35.2           7.71        —                38,364
2010         15,003,601     7,797,744    48.0           3.99        —                —
2011         22,769,691     9,824,350    56.9           2.70        1,717,000        —
2012        11,699,729    7,424,774    36.5           2.89       —              —
Totals     $ 89,168,247   $ 54,433,740   39.0    %      5.11  %   $ (485,800   )   $ 10,918,460
                                                                                     
                                                                                     

          Three months ended September 30, 2011
Year                                     Amortization   Monthly   Net              Zero Basis
of         Collections   Revenue       Rate (1)      Yield    Impairments    
Purchase                                                (2)       (Reversals)      Collections
2005 and   $ 12,851,763   $ 12,121,177   N/M            N/M       $ (1,228,100 )   $ 10,282,392
prior
2006         6,458,530      4,176,153    35.3    %      11.27 %     (1,155,000 )     634,018
2007         8,804,890      4,353,546    50.6           5.14        (350,000   )     250,263
2008         11,593,862     6,374,200    45.0           5.45        —                1,448,771
2009         16,156,896     9,550,306    40.9           5.67        —                11,734
2010         18,249,572     9,280,467    49.1           3.11        —                —
2011        13,322,377    10,438,718   21.6           3.26       —              —
Totals     $ 87,437,890   $ 56,294,567   35.6    %      5.42  %   $ (2,733,100 )   $ 12,627,178
                                                                                     
                                                                                     

          Nine months ended September 30, 2012
Year                                                      Monthly   Net
           Collections    Revenue        Amortization  Yield                    Zero Basis
of                                         Rate (1)       (2)       Impairments      Collections
Purchase                                                            (Reversals)
2006 and   $ 45,613,202    $ 41,303,484    N/M            N/M       $ (6,889,600 )   $ 28,805,984
prior
2007         20,898,497      14,438,725    30.9    %      8.92  %     (3,611,400 )     3,419,320
2008         28,521,507      18,199,860    36.2           7.65        —                3,419,482
2009         43,607,885      29,325,416    32.8           8.12        (2,304,000 )     149,997
2010         50,883,808      25,316,350    50.2           3.81        —                —
2011         73,170,271      34,555,839    52.8           2.85        3,427,000        —
2012        19,474,946     11,356,088    41.7           2.95       —              —
Totals     $ 282,170,116   $ 174,495,762   38.2    %      5.61  %   $ (9,378,000 )   $ 35,794,783
                                                                                       
                                                                                       

          Nine months ended September 30, 2011
Year                                                      Monthly   Net
                                           Amortization                              Zero Basis
of         Collections    Revenue        Rate (1)      Yield    Impairments    
Purchase                                                  (2)                        Collections
                                                                    (Reversals)
2005 and   $ 41,869,974    $ 37,104,776    N/M            N/M       $ (3,367,100 )   $ 31,083,506
prior
2006         20,279,215      12,713,065    37.3    %      9.61  %     (2,705,800 )     2,109,765
2007         29,072,113      13,449,001    53.7           4.49        117,000          863,639
2008         37,871,244      19,602,641    48.2           4.84        —                4,812,507
2009         54,729,671      29,209,017    46.6           5.04        2,304,000        11,734
2010         60,288,455      30,236,967    49.8           3.06        —                —
2011        23,783,710     18,441,263    22.5           3.30       —              —
Totals     $ 267,894,382   $ 160,756,730   40.0    %      5.33  %   $ (3,651,900 )   $ 38,881,151
                                                                                       

(1)  “N/M” indicates that the calculated percentage is not meaningful.
      The monthly yield is the weighted-average yield determined by dividing
(2)   purchased receivable revenues recognized in the period by the average of
      the beginning monthly carrying values of the purchased receivables for
      the period presented.
      
      
      

Purchased Receivable Revenues

The table below shows components of revenue from purchased receivables, the
amortization rate and the core amortization rate. We use the core amortization
rate to monitor performance of pools with remaining balances, and to determine
if impairments, impairment reversals, or yield increases should be recorded.
Core amortization trends may identify over or under performance compared to
forecasts for pools with remaining balances.

The following factors contributed to the change in amortization rates from the
prior year:

  *total amortization and the amortization rate increased for the third
    quarter of 2012 compared to 2011. For the first nine months of 2012
    compared to the same period in 2011, total amortization increased while
    the amortization rate decreased. The increase in the amortization rate for
    the third quarter was due to lower zero basis collections and net
    impairment reversals in 2012, while the decrease in the rate during the
    first nine months of 2012 compared to 2011 was primarily the result of
    higher net impairment reversals and higher total collections. Portfolio
    balances that amortize too slowly in relation to current or expected
    collections may lead to impairments. If portfolio balances amortize too
    quickly and we expect collections to continue to exceed expectations,
    previously recognized impairments may be reversed, or if there are no
    impairments to reverse, assigned yields may increase;
  *amortization of receivable balances for each period of 2012 increased
    compared to 2011 as a result of higher collections on amortizing pools;
  *net impairment reversals are recorded as a reduction to amortization and
    decrease the amortization rate, while net impairments have the opposite
    effect. Higher net impairment reversals for the first nine months of 2012
    decreased total amortization compared to the same period in 2011, while
    lower net impairment reversals for the third quarter of 2012 had the
    opposite effect; and
  *declining zero basis collections in the third quarter and first nine
    months of 2012 compared to the same periods in 2011 increased the
    amortization rate because 100% of these collections are recorded as
    revenue and do not contribute towards portfolio amortization.

                                   Three Months Ended    Nine Months Ended
($ in millions)                                       
                                   September 30,         September 30,
                                   2012      2011       2012       2011
Cash collections:
Collections on amortizing pools    $ 78.3     $ 74.8     $ 246.4     $ 229.0
Zero basis collections              10.9     12.6     35.8      38.9  
Total collections                  $ 89.2    $ 87.4    $ 282.2    $ 267.9 
                                                                     
Amortization:
Amortization of receivables        $ 35.3     $ 33.5     $ 116.9     $ 109.0
balances
Reversals of impairments             (2.2 )     (2.7 )     (12.8 )     (6.5  )
Impairments                          1.7        —          3.4         2.8
Cost recovery amortization          —        0.3      0.2       1.8   
Total amortization                 $ 34.8    $ 31.1    $ 107.7    $ 107.1 
                                                                     
Purchased receivable revenues,     $ 54.4    $ 56.3    $ 174.5    $ 160.8 
net
                                                                     
Amortization rate                    39.0 %     35.6 %     38.2  %     40.0  %
                                                                     
Core amortization rate (1)           44.4 %     41.6 %     43.7  %     46.8  %
                                                                             

(1)  The core amortization rate is calculated as total amortization divided
      by collections on amortizing portfolios.
      
      
      

ASSET ACCEPTANCE CAPITAL CORP.

Consolidated Statements of Operations

(Unaudited)
                                                  
                                                     
                   Three Months Ended September      Nine Months Ended September 30,
                   30,
                   2012            2011             2012             2011
Revenues
Purchased
receivable         $ 54,433,740     $ 56,294,567     $ 174,495,762     $ 160,756,730
revenues, net
Gain on sale of
purchased            —                —                7,727             —
receivables
Other revenues,     261,055        318,965        734,274         943,210     
net
Total revenues      54,694,795     56,613,532     175,237,763     161,699,940 
Expenses
Salaries and         14,389,078       16,943,855       45,881,833        51,702,960
benefits
Collections          28,922,617       26,089,521       84,782,927        73,828,877
expense
Occupancy            1,466,425        1,465,568        4,287,620         4,302,259
Administrative       2,333,977        3,155,217        6,519,031         7,190,614
Depreciation and     1,166,107        944,118          3,655,785         2,994,633
amortization
Restructuring        284,842          —                358,467           —
charges
Gain on disposal
of equipment and    —              (92,075    )    (174,451    )    (86,182     )
other assets
Total operating     48,563,046     48,506,204     145,311,212     139,933,161 
expenses
Income from          6,131,749        8,107,328        29,926,551        21,766,779
operations
Other income
(expense)
Interest expense     (5,137,234 )     (2,631,787 )     (15,832,845 )     (7,932,278  )
Interest income      139              152              22,885            283
Other               673            476            33,579          (1,640      )
Income before        995,327          5,476,169        14,150,170        13,833,144
income taxes
Income tax
(benefit)           (539,974   )    2,405,567      3,469,622       6,018,137   
expense
Net income         $ 1,535,301     $ 3,070,602     $ 10,680,548     $ 7,815,007   
                                                                       
Weighted-average
number of
shares:
Basic                30,924,121       30,781,016       30,871,237        30,752,965
Diluted              31,179,325       30,843,313       31,038,925        30,834,889
Earnings per
common share
outstanding:
Basic              $ 0.05           $ 0.10           $ 0.35            $ 0.25
Diluted            $ 0.05           $ 0.10           $ 0.34            $ 0.25
                                                                                     
                                                                                     
                                                                                     

ASSET ACCEPTANCE CAPITAL CORP.

Consolidated Statements of Comprehensive Income

(Unaudited)
                                                
                                                   
                   Three Months Ended September    Nine Months Ended September
                   30,                             30,
                   2012           2011            2012            2011
Net income         $ 1,535,301     $ 3,070,602     $ 10,680,548     $ 7,815,007
Other
comprehensive
income (loss):
Unrealized gain
(loss) on cash
flow hedging:
Unrealized
(loss) gain          (143,362  )     69,528          (969,535   )     (60,359   )
arising during
period
Less:
reclassification
adjustment for      310,265       544,663       1,008,677      1,714,648 
loss included in
net income
Net unrealized
gain on cash         166,903         614,191         39,142           1,654,289
flow hedging
                                                                    
Other
comprehensive        166,903         614,191         39,142           1,654,289
gain, before tax
Income tax
expense related
to other            (80,879   )    (219,716  )    (84,789    )    (613,976  )
comprehensive
income
Other
comprehensive       86,024        394,475       (45,647    )    1,040,313 
income (loss),
net of tax
Comprehensive      $ 1,621,325    $ 3,465,077    $ 10,634,901    $ 8,855,320 
income
                                                                                
                                                                                
                                                                                

ASSET ACCEPTANCE CAPITAL CORP.

Consolidated Statements of Financial Position
                                       
                                        September 30, 2012  December 31, 2011
                                        (Unaudited)
ASSETS
                                                             
Cash                                    $  13,585,816        $  6,990,757
Purchased receivables, net                 344,497,047          348,710,787
Income taxes receivable                    604,670              354,241
Property and equipment, net                12,076,571           14,488,659
Goodwill                                   14,323,071           14,323,071
Other assets                              10,867,028         11,172,804   
Total assets                            $  395,954,203      $  396,040,319  

LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                             
Liabilities:
Accounts payable                        $  3,096,373         $  3,296,905
Accrued liabilities                        18,103,252           20,018,561
Income taxes payable                       716,885              1,925,761
Notes payable                              159,125,247          172,122,870
Capital lease obligations                  37,657               221,420
Deferred tax liability, net               65,327,152         60,474,041   
Total liabilities                         246,406,566        258,059,558  
                                                             
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 — 33,437,571 and 33,334,281 at      334,376              333,343
September 30, 2012 and December 31,
2011, respectively
Additional paid in capital                 151,469,966          150,449,620
Retained earnings                          39,843,193           29,162,645
Accumulated other comprehensive loss,      (578,239     )       (532,592     )
net of tax
Common stock in treasury; at cost,
2,667,479 and 2,649,729 shares at         (41,521,659  )      (41,432,255  )
September 30, 2012 and December 31,
2011, respectively
Total stockholders’ equity                149,547,637        137,980,761  
Total liabilities and stockholders’     $  395,954,203      $  396,040,319  
equity
                                                                             
                                                                             
                                                                             

ASSET ACCEPTANCE CAPITAL CORP.

Consolidated Statements of Cash Flows

(Unaudited)
                                         
                                           Nine Months Ended September 30,
                                           2012              2011
Cash flows from operating activities
Net income                                 $ 10,680,548       $ 7,815,007
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization                3,655,785          2,994,633
Amortization of deferred financing costs     2,667,453          1,062,123
and debt discount
Amortization of de-designated hedge          116,696            —
Deferred income taxes                        4,768,322          5,783,570
Share-based compensation expense             1,021,379          1,073,241
Net impairment reversals of purchased        (9,378,000   )     (3,651,900   )
receivables
Non-cash revenue                             (6,184       )     (129         )
Gain on disposal of equipment and other      (174,451     )     (86,182      )
assets
Gain on sale of purchased receivables        (7,727       )     —
Changes in assets and liabilities:
Increase in other assets                     (593,331     )     (862,185     )
Decrease in accounts payable and other       (2,096,402   )     (5,452,798   )
accrued liabilities
(Increase) decrease in net income taxes     (1,459,305   )    3,068,923    
payable
Net cash provided by operating              9,194,783        11,744,303   
activities
                                                              
Cash flows from investing activities
Investments in purchased receivables,        (103,548,645 )     (133,906,306 )
net of buybacks
Principal collected on purchased             117,058,538        110,789,681
receivables
Purchases of property and equipment          (1,518,315   )     (2,491,159   )
Proceeds from sale of property and           352,076            99,000
equipment
Proceeds from sale of purchased             95,758           —            
receivables
Net cash provided by (used in) investing    12,439,412       (25,508,784  )
activities
                                                              
Cash flows from financing activities
Repayments of term loan facility             (6,562,500   )     (1,125,000   )
Net borrowings on revolving credit           (8,200,000   )     17,500,000
facility
Payments of deferred financing costs         (3,469       )     (260,878     )
Payments on capital lease obligations        (183,763     )     (65,247      )
Purchases of treasury shares                (89,404      )    (106,565     )
Net cash (used in) provided by financing    (15,039,136  )    15,942,310   
activities
Net increase in cash                         6,595,059          2,177,829
Cash at beginning of period                 6,990,757        5,635,503    
Cash at end of period                      $ 13,585,816      $ 7,813,332    
                                                              
Supplemental disclosure of cash flow
information
Cash paid for interest, net of             $ 13,282,699       $ 6,909,686
capitalized interest
Net cash paid (received) for income          160,606            (2,817,694   )
taxes
Non-cash investing and financing
activities:
Change in fair value of interest rate        (77,554      )     1,654,289
swap liabilities
Change in unrealized loss on cash flow       45,647             (1,040,313   )
hedge, net of tax
                                                                             
                                                                             
                                                                             

Reconciliation of GAAP Net Income to Adjusted EBITDA (Unaudited)

This press release includes a discussion of "Adjusted EBITDA," which is a
non-GAAP financial measure. The Company defines Adjusted EBITDA as net income
or loss plus (a) the provision for income taxes, (b) interest expense, (c)
depreciation and amortization, (d) share-based compensation, (e) gain or loss
on sale of assets, net, (f) non-cash restructuring charges and impairment of
assets, (g) purchased receivables amortization, (h) loss on extinguishment of
debt, and (i) in accordance with the Company’s credit facilities, certain FTC
related charges and cash restructuring charges (not to exceed $2.25 million
for any period of four consecutive fiscal quarters).

The Company believes this non-GAAP financial measure provides important
supplemental information to management and investors. This non-GAAP financial
measure reflects an additional way of viewing aspects of the Company's
operations that, when viewed with the GAAP results and the accompanying
reconciliation to the most directly comparable GAAP financial measure, provide
a more complete understanding of factors and trends affecting the Company's
business and results of operations.

Management uses Adjusted EBITDA for planning purposes, including the
preparation of internal budgets and forecasts; in communications with the
Board of Directors, stockholders, analysts and investors concerning its
financial performance; as a key component in management’s annual incentive
compensation plan; and as a measure of operating performance for the financial
covenants in the Company’s amended credit agreement. The Company also believes
that analysts and investors use Adjusted EBITDA as a supplemental measure to
evaluate the overall operating performance of companies in its industry.

Adjusted EBITDA, which is a non-GAAP financial measure, should not be
considered an alternative to, or more meaningful than, net income or loss
prepared on a GAAP basis. Management strongly encourages investors to review
the Company's consolidated financial statements in their entirety and to not
rely on any single financial measure. Because non-GAAP financial measures are
not standardized, it may not be possible to compare this financial measure
with other companies' non-GAAP financial measures having the same or similar
names. In addition, the Company expects to continue to incur expenses similar
to the non-GAAP adjustments described above, and exclusion of these items from
the Company's non-GAAP measure should not be construed as an inference that
these costs are unusual, infrequent or non-recurring.

The Company provided the following table which reconciles GAAP net income, as
reported, to Adjusted EBITDA:

               Three Months Ended September     Nine Months Ended September 30,
                30,
                2012            2011             2012             2011
Net income      $ 1,535,301      $ 3,070,602      $ 10,680,548      $ 7,815,007
Adjustments:
Income tax
(benefit)         (539,974   )     2,405,567        3,469,622         6,018,137
expense
Interest          5,137,234        2,631,787        15,832,845        7,932,278
expense
Depreciation
and               1,166,107        944,118          3,655,785         2,994,633
amortization
Share-based       180,334          289,581          1,021,379         1,073,241
compensation
Purchased
receivables       34,734,507       31,143,323       107,674,354       107,137,652
amortization
Gain on sale
of assets,        —                (92,075    )     (182,178    )     (86,182     )
net
Non-cash
restructuring     206,386          —                195,103           —
charges
Cash
restructuring     78,456           —                163,364           —
charges
FTC related      —              1,354,633      7,898           1,597,560   
charges
Adjusted        $ 42,498,351    $ 41,747,536    $ 142,518,720    $ 134,482,326 
EBITDA
                                                                                  

      Adjusted EBITDA as reported for 2011 has been restated to be consistent
      with the current presentation. The definition of Adjusted EBITDA was
      updated during 2011 in order to be consistent with a similar definition
(1)  used in our Credit Agreement. The restatement increased the amounts
      previously disclosed by $152 and $283 for the three and nine months
      ended September 30, 2011. We believe the revised definition of Adjusted
      EBITDA better matches the uses as described above.

Contact:

Asset Acceptance Capital Corp.
Mary Arraf, 586-983-7087
marraf@assetacceptance.com