##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 000-50552
 Asset Acceptance Capital Corp.
 Exact name of registrant as specified in its charter
 Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    80-0076779
(I.R.S.Employer Identification No.)
 28405 Van Dyke Avenue
Warren, Michigan 48093  Address of principal executive offices
 Registrants telephone number, including area code:
(586) 939-9600
  þ o
  o þ o
  o þ




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##### 



ASSET ACCEPTANCE CAPITAL CORP.
 Quarterly Report on Form 10-Q
 TABLE OF CONTENTS
 PagePART I  Financial InformationItem 1.
    
    Consolidated Financial Statements (unaudited)
    
    
    3Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    32Item 4.
    
    Controls and Procedures
    
    
    32PART II  Other InformationItem 1.
    
    Legal Proceedings
    
    
    32Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    33Item 6.
    
    Exhibits
    
    
    34Signatures
    
    
    
    
    35Exhibits:
    
    10.1 Stock Repurchase Agreement dated as of May 8, 2007, among Asset Acceptance Capital Corp., AAC Quad-C Investors LLC, Nathaniel F.
Bradley IV and Mark A. Redman (Incorporated by reference to Exhibit 99(D)(2) included with Asset Acceptance Capital Corp.s Schedule TO as filed
on May 9, 2007)10.2 Amendment to the 2004 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 included with Current Report on Form 8-K
filed on May 29, 2007)10.3
Credit Agreement dated June 5, 2007, between Asset Acceptance Capital Corp. and JPMorgan Chase Bank, National
Association (Incorporated by reference to Exhibit 10.1 included with Current Report on Form 8-K filed on June 5, 2007)31.1 Rule 13a-14(a) Certification of Chief Executive Officer31.2 Rule 13a-14(a) Certification of Chief Financial Officer32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
  Quarterly Report on Form 10-Q
 www.assetacceptance.com
 2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1 . Consolidated Financial Statements
 ASSET ACCEPTANCE CAPITAL CORP.
 Consolidated Statements of Financial Position
(Unaudited)
 June 30, 2007
    
    
    December 31, 2006ASSETSCash
    
    $
    86,048,161
    
    
    $
    11,307,451Purchased receivables, net
    
    
    315,364,014
    
    
    
    300,840,508Property and equipment, net
    
    
    11,428,098
    
    
    
    12,708,611Goodwill
    
    
    14,323,071
    
    
    
    14,323,071Income taxes receivable
    
    
    3,022,463
    
    
    
    3,235,426Other assets
    
    
    11,378,793
    
    
    
    8,167,755Total assets
    
    $
    441,564,600
    
    
    $
    350,582,822LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Accounts payable
    
    $
    3,678,088
    
    
    $
    3,666,042Accrued liabilities
    
    
    16,674,173
    
    
    
    13,026,622Dividends payable
    
    
    74,845,716
    
    
    
    Notes payable
    
    
    162,000,000
    
    
    
    17,000,000Deferred tax liability, net
    
    
    62,528,135
    
    
    
    60,632,218Capital lease obligations
    
    
    42,925
    
    
    
    79,821Total liabilities
    
    
    319,769,037
    
    
    
    94,404,703Stockholders 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  33,120,571 and
37,225,275 at June 30, 2007 and December
31, 2006, respectively
    
    
    331,206
    
    
    
    372,253Additional paid in capital
    
    
    145,232,183
    
    
    
    161,841,103Retained earnings
    
    
    17,207,851
    
    
    
    134,244,500Common stock in treasury; at cost,
2,551,556 and 2,505,160 shares at June
30, 2007 and December 31, 2006,
respectively
    
    
    (40,975,677
    )
    
    
    (40,279,737
    )Total stockholders equity
    
    
    121,795,563
    
    
    
    256,178,119Total liabilities and stockholders equity
    
    $
    441,564,600
    
    
    $
    350,582,822
  3




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##### Table of Contents



ASSET ACCEPTANCE CAPITAL CORP.
 Consolidated Statements of Income
(Unaudited)
 Three months ended June 30,
    
    
    Six months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006RevenuesPurchased receivable revenues, net
    
    $
    65,514,898
    
    
    $
    63,943,322
    
    
    $
    132,296,932
    
    
    $
    131,208,102Gain on sale of purchased receivables
    
    
    
    
    
    
    2,326,335
    
    
    
    
    
    
    
    2,326,335Other revenues, net
    
    
    350,976
    
    
    
    511,535
    
    
    
    874,969
    
    
    
    627,740Total revenues
    
    
    65,865,874
    
    
    
    66,781,192
    
    
    
    133,171,901
    
    
    
    134,162,177ExpensesSalaries and benefits
    
    
    20,952,579
    
    
    
    20,558,512
    
    
    
    43,401,034
    
    
    
    43,884,014Collections expense
    
    
    23,709,050
    
    
    
    20,376,282
    
    
    
    46,778,990
    
    
    
    39,191,130Occupancy
    
    
    2,307,643
    
    
    
    2,254,632
    
    
    
    4,647,028
    
    
    
    4,429,488Administrative
    
    
    3,281,103
    
    
    
    2,965,691
    
    
    
    5,494,459
    
    
    
    5,316,190Restructuring charges
    
    
    328,925
    
    
    
    
    
    
    
    477,036
    
    
    
    Depreciation and amortization
    
    
    1,079,374
    
    
    
    1,056,167
    
    
    
    2,168,266
    
    
    
    1,945,784Loss on disposal of equipment
    
    
    6,714
    
    
    
    5,377
    
    
    
    1,299
    
    
    
    5,522Total operating expenses
    
    
    51,665,388
    
    
    
    47,216,661
    
    
    
    102,968,112
    
    
    
    94,772,128Income from operations
    
    
    14,200,486
    
    
    
    19,564,531
    
    
    
    30,203,789
    
    
    
    39,390,049Other income (expense)Interest income
    
    
    206,397
    
    
    
    623,224
    
    
    
    222,124
    
    
    
    1,204,181Interest expense
    
    
    (1,138,562
    )
    
    
    (191,562
    )
    
    
    (1,402,380
    )
    
    
    (369,106
    )Other
    
    
    10,256
    
    
    
    (176,015
    )
    
    
    22,465
    
    
    
    (185,554
    )Income before income taxes
    
    
    13,278,577
    
    
    
    19,820,178
    
    
    
    29,045,998
    
    
    
    40,039,570Income taxes
    
    
    4,999,412
    
    
    
    7,401,332
    
    
    
    10,915,580
    
    
    
    15,030,629Net income
    
    $
    8,279,165
    
    
    $
    12,418,846
    
    
    $
    18,130,418
    
    
    $
    25,008,941Weighted-average number of shares:Basic
    
    
    34,279,507
    
    
    
    37,215,664
    
    
    
    34,498,008
    
    
    
    37,210,419Diluted
    
    
    34,293,511
    
    
    
    37,256,039
    
    
    
    34,508,368
    
    
    
    37,285,998Earnings per common share
outstanding:Basic
    
    $
    0.24
    
    
    $
    0.33
    
    
    $
    0.53
    
    
    $
    0.67Diluted
    
    $
    0.24
    
    
    $
    0.33
    
    
    $
    0.53
    
    
    $
    0.67Dividends declared per common share
    
    $
    2.45
    
    
    $
    
    
    
    $
    2.45
    
    
    $
    
  4




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##### Table of Contents



ASSET ACCEPTANCE CAPITAL CORP.
 Consolidated Statements of Cash Flows
(Unaudited)
 Six months ended June 30,2007
    
    
    2006Cash flows from operating activitiesNet income
    
    $
    18,130,418
    
    
    $
    25,008,941Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    2,168,266
    
    
    
    1,945,784Deferred income taxes
    
    
    1,895,917
    
    
    
    429,399Share-based compensation expense
    
    
    1,076,038
    
    
    
    1,199,050Net impairment of purchased receivables
    
    
    9,616,200
    
    
    
    8,151,500Non-cash revenue
    
    
    (684,940
    )
    
    
    (1,018,991
    )Loss on disposal of equipment
    
    
    1,299
    
    
    
    5,522Gain on sale of purchased receivables
    
    
    
    
    
    
    (2,326,335
    )Changes in assets and liabilities, net of effects from
purchase of PARC in 2006:Increase in accounts payable and other liabilities
    
    
    3,659,597
    
    
    
    290,616(Decrease) increase in other assets
    
    
    (3,334,412
    )
    
    
    220,292Increase (decrease) in income taxes payable
    
    
    212,963
    
    
    
    (728,065
    )Net cash provided by operating activities
    
    
    32,741,346
    
    
    
    33,177,713Cash flows from investing activitiesProceeds from the sale of purchased receivables
    
    
    
    
    
    
    2,750,539Investment in purchased receivables, net of buy backs
    
    
    (73,511,945
    )
    
    
    (44,531,507
    )Principal collected on purchased receivables
    
    
    50,057,179
    
    
    
    40,659,229Purchase of property and equipment
    
    
    (770,485
    )
    
    
    (3,261,654
    )Proceeds from the sale of property and equipment
    
    
    4,807
    
    
    
    158,135Purchase of investment securities
    
    
    
    
    
    
    (4,935,010
    )Payment for purchase of PARC, net of cash acquired
    
    
    
    
    
    
    (14,688,104
    )Net cash used in investing activities
    
    
    (24,220,444
    )
    
    
    (23,848,372
    )Cash flows from financing activitiesRepurchase of common stock
    
    
    (78,743,296
    )
    
    
    (302,406
    )Proceeds received for treasury shares
    
    
    
    
    
    
    283,350Borrowings
under notes payable
    
    
    199,000,000
    
    
    
    Repayment of
notes payable
    
    
    (54,000,000
    )
    
    
    Repayment of capital lease obligations
    
    
    (36,896
    )
    
    
    (75,423
    )Repayment of bank and other secured debt assumed from PARC
    
    
    
    
    
    
    (4,413,380
    )Net cash provided by (used in) financing activities
    
    
    66,219,808
    
    
    
    (4,507,859
    )Net increase in cash
    
    
    74,740,710
    
    
    
    4,821,482Cash at beginning of period
    
    
    11,307,451
    
    
    
    50,518,934Cash at end of period
    
    $
    86,048,161
    
    
    $
    55,340,416Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    484,377
    
    
    $
    133,993Cash paid for income taxes
    
    $
    8,826,290
    
    
    $
    15,999,736Non-cash investing and financing activities: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
    
    
    
    Capital lease obligations incurred
    
    
    
    
    
    
    24,797Assumption of liabilities in conjunction with purchase of PARC:Fair value of assets acquired less cash acquired
    
    $
    
    
    
    $
    20,323,409Cash paid for capital stock less cash acquired
    
    
    
    
    
    
    (14,688,104
    )Net liabilities assumed
    
    $
    
    
    
    $
    5,635,305
  5




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##### Table of Contents



ASSET ACCEPTANCE CAPITAL CORP.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Basis of Presentation and Summary of Significant Accounting Policies
  Nature of Operations
   Reporting Entity
  Purchased Receivables Portfolios and Revenue Recognition
   6




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Three months ended June 30,
    
    
    Six months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Beginning balance
    
    $
    307,983,677
    
    
    $
    252,898,222
    
    
    $
    300,840,508
    
    
    $
    248,990,772Investment in purchased
receivables, net of buybacks
    
    
    37,297,460
    
    
    
    18,498,979
    
    
    
    73,511,945
    
    
    
    44,531,507Investment in purchased
receivables acquired from
PARC on April 28, 2006
    
    
    
    
    
    
    8,293,763
    
    
    
    
    
    
    
    8,293,763Cost of sale of purchased
receivables, net of returns
    
    
    
    
    
    
    (424,204
    )
    
    
    
    
    
    
    (424,204
    )Cash collections
    
    
    (95,432,021
    )
    
    
    (89,609,982
    )
    
    
    (191,285,371
    )
    
    
    (178,999,840
    )Purchased receivable revenues
    
    
    65,514,898
    
    
    
    63,943,322
    
    
    
    132,296,932
    
    
    
    131,208,102Ending balance
    
    $
    315,364,014
    
    
    $
    253,600,100
    
    
    $
    315,364,014
    
    
    $
    253,600,100
 7




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##### Table of Contents



Three months ended June 30,
    
    
    Six months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Beginning balance
    
    $
    975,706,637
    
    
    $
    887,672,269
    
    
    $
    958,629,284
    
    
    $
    848,545,458Revenue recognized on purchased receivables
    
    
    (65,514,898
    )
    
    
    (63,943,322
    )
    
    
    (132,296,932
    )
    
    
    (131,208,102
    )Additions due to purchases during the period
    
    
    73,023,794
    
    
    
    58,449,860
    
    
    
    136,576,902
    
    
    
    113,144,041Reclassifications from nonaccretable yield
    
    
    1,477,537
    
    
    
    11,715,945
    
    
    
    21,783,816
    
    
    
    63,413,355Ending balance (1)
    
    $
    984,693,070
    
    
    $
    893,894,752
    
    
    $
    984,693,070
    
    
    $
    893,894,752
 
 (1)
    
    Accretable yields are a function of estimated remaining cash flows and are based on
historical cash collections. Please refer to Forward-Looking Statements on page 17 and
Critical Accounting Policies on page 31 for further information regarding these estimates.  Three months ended June 30,
    
    
    Six months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenue from fully amortized pools:Pools that amortized before 60 months
    
    $
    7,536,316
    
    
    $
    7,148,243
    
    
    $
    11,836,008
    
    
    $
    13,821,064Pools that are 60 months or older
    
    
    13,177,866
    
    
    
    8,946,849
    
    
    
    25,850,802
    
    
    
    17,593,028Pools under full cost recovery
    
    
    1,446,120
    
    
    
    1,111,529
    
    
    
    2,935,974
    
    
    
    2,498,637Total revenue from fully amortized pools
    
    $
    22,160,302
    
    
    $
    17,206,621
    
    
    $
    40,622,784
    
    
    $
    33,912,729
  Three months ended June 30,
    
    
    Six months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Beginning balance
    
    $
    43,825,155
    
    
    $
    24,979,355
    
    
    $
    39,714,055
    
    
    $
    22,285,355Impairments
    
    
    5,320,000
    
    
    
    6,900,000
    
    
    
    10,034,000
    
    
    
    10,195,000Reversal of impairments (1)
    
    
    (176,900
    )
    
    
    (1,442,500
    )
    
    
    (417,800
    )
    
    
    (2,043,500
    )Deductions (2)
    
    
    (552,600
    )
    
    
    (29,500
    )
    
    
    (914,600
    )
    
    
    (29,500
    )Ending balance
    
    $
    48,415,655
    
    
    $
    30,407,355
    
    
    $
    48,415,655
    
    
    $
    30,407,355
 
 (1)
    
    The impairment reversals relate to impairment charges recognized during the fiscal years
ended December 31, 2006 and 2005.(2)
    
    Deductions represent impairments on fully amortized purchased receivable portfolios that were
written-off and cannot be reversed. Seasonality
  Collections from Third Parties
  8




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##### Table of Contents



Accrued Liabilities
  June 30, 2007
    
    
    December 31, 2006Accrued payroll, benefits and bonuses
    
    $
    7,824,628
    
    
    $
    8,408,244Accrued general and administrative expenses
    
    
    4,885,419
    
    
    
    1,394,762Deferred rent
    
    
    2,739,296
    
    
    
    2,858,418Accrued restructuring charges
    
    
    168,123
    
    
    
    Other accrued expenses
    
    
    1,056,707
    
    
    
    365,198Total accrued liabilities
    
    $
    16,674,173
    
    
    $
    13,026,622
  Concentration of Risk
  Earnings Per Share
  Reclassifications
  Recently Issued Accounting Pronouncements
 SFAS Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of
FASB Statement No. 109
  SFAS No. 157, Fair Value Measurements
  9




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##### Table of Contents



2. Recapitalization
        10




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##### Table of Contents



Pro Forma Financial InformationThree months ended June 30,
    
    
    Six months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Income before income taxes, as reported
    
    $
    13,278,577
    
    
    $
    19,820,178
    
    
    $
    29,045,998
    
    
    $
    40,039,570Add back reported interest expense
    
    
    1,138,562
    
    
    
    191,562
    
    
    
    1,402,380
    
    
    
    369,106Add back costs related to extinguishment of
financing
    
    
    227,775
    
    
    
    
    
    
    
    227,775
    
    
    
    Deductions pro forma interest expense
    
    
    (3,435,562
    )
    
    
    (3,113,562
    )
    
    
    (6,622,380
    )
    
    
    (6,214,106
    )Pro forma income before income taxes
    
    
    11,209,352
    
    
    
    16,898,178
    
    
    
    24,053,773
    
    
    
    34,194,570Pro forma income taxes
    
    
    (4,192,298
    )
    
    
    (6,319,919
    )
    
    
    (8,996,111
    )
    
    
    (12,788,769
    )Pro forma net income
    
    $
    7,017,054
    
    
    $
    10,578,259
    
    
    $
    15,057,662
    
    
    $
    21,405,801Pro forma basic net income per common share
    
    $
    0.23
    
    
    $
    0.32
    
    
    $
    0.49
    
    
    $
    0.65Pro forma diluted net income per common share
    
    $
    0.23
    
    
    $
    0.32
    
    
    $
    0.49
    
    
    $
    0.65Reported interest expense
    
    $
    1,138,562
    
    
    $
    191,562
    
    
    $
    1,402,380
    
    
    $
    369,106Incremental interest on new borrowings
    
    
    2,255,000
    
    
    
    2,859,000
    
    
    
    5,115,000
    
    
    
    5,719,000Incremental amortization of new credit
facility fees
    
    
    42,000
    
    
    
    63,000
    
    
    
    105,000
    
    
    
    126,000Pro forma interest expense
    
    $
    3,435,562
    
    
    $
    3,113,562
    
    
    $
    6,622,380
    
    
    $
    6,214,106Pro forma effective tax rates
    
    
    37.4
    %
    
    
    37.4
    %
    
    
    37.4
    %
    
    
    37.4
    %Weighted-average common shares outstanding
during the period
    
    
    34,279,507
    
    
    
    37,215,664
    
    
    
    34,498,008
    
    
    
    37,210,419Incremental full period impact of
repurchased shares
    
    
    (3,710,492
    )
    
    
    (4,129,818
    )
    
    
    (3,918,996
    )
    
    
    (4,129,818
    )Pro forma basic shares outstanding
    
    
    30,569,015
    
    
    
    33,085,846
    
    
    
    30,579,012
    
    
    
    33,080,601Weighted-average common shares outstanding
during the period plus dilutive potential
common shares
    
    
    34,293,511
    
    
    
    37,256,039
    
    
    
    34,508,368
    
    
    
    37,285,998Incremental impact of the special dividend
on the number of dilutive deferred stock
units outstanding
    
    
    355
    
    
    
    
    
    
    
    174
    
    
    
    Incremental full period impact of
repurchased shares
    
    
    (3,710,492
    )
    
    
    (4,129,818
    )
    
    
    (3,918,996
    )
    
    
    (4,129,818
    )Pro forma diluted shares outstanding
    
    
    30,583,374
    
    
    
    33,126,221
    
    
    
    30,589,546
    
    
    
    33,156,180
 3. Notes Payable
  
    
    Leverage Ratio (as defined) cannot exceed 1.25 to 1.0 at any time on or before December
30, 2008, 1.125 to 1.0 at any time on or after December 31, 2008 and on or before December
30, 2010, or 1.0 to 1.0 at any time thereafter;
    
    Ratio of Total Liabilities to Tangible Net Worth cannot exceed 3.0 to 1.0 at any time on
or before December 30, 2007, 2.5 to 1.0 at any time on or after
December 31, 2007 and on or before December 30, 2008, 2.0 to 1.0 at any
 11




---



##### Table of Contents



time on or after December 31, 2008 and
on or before December 30, 2009, 1.75 to 1.0 at any time on or after December 31, 2009 and on
or before December 30, 2010, or 1.5 to 1.0 at any time thereafter;
    
    Tangible Net Worth must equal or exceed $80.0 million plus 50% of positive consolidated
net income for three consecutive fiscal quarters ending December 31, 2007 and for each
fiscal year ending thereafter, such amount to be added as of December 31, 2007 and as of the
end of each such fiscal year thereafter.
   Termination of Former Credit Agreement.
  4. Property and Equipment
  June 30, 2007
    
    
    December 31, 2006Computers and software
    
    $
    12,761,085
    
    
    $
    12,343,711Furniture and fixtures
    
    
    10,125,619
    
    
    
    10,001,986Leasehold improvements
    
    
    2,054,509
    
    
    
    2,051,391Equipment under capital lease
    
    
    307,001
    
    
    
    321,783Automobiles
    
    
    51,709
    
    
    
    47,404Total property and equipment, cost
    
    
    25,299,923
    
    
    
    24,766,275Less accumulated depreciation
    
    
    (13,871,825
    )
    
    
    (12,057,664
    )Net property and equipment
    
    $
    11,428,098
    
    
    $
    12,708,611
 5. Restructuring Charges
   12




---



##### Table of Contents



Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2007
    
    
    June 30, 2007One-time termination benefits
    
    $
    170,322
    
    
    $
    254,441Long-lived assets charge (1)
    
    
    154,713
    
    
    
    206,284Other exit costs
    
    
    3,890
    
    
    
    16,311Total restructuring charges
    
    $
    328,925
    
    
    $
    477,036
 
 (1)
    
    The accelerated depreciation related to long-lived assets charge is included in
property and equipment, net in the consolidated statements of financial position.   One-Time
    
    
    Long-LivedTermination
    
    
    Assets
    
    
    OtherBenefits
    
    
    Charge
    
    
    Exit Costs
    
    
    TotalRestructuring liability as of January 1, 2007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Costs incurred and charged to expense
    
    
    84,119
    
    
    
    51,571
    
    
    
    12,421
    
    
    
    148,111Costs paid
    
    
    
    
    
    
    
    
    
    
    (12,421
    )
    
    
    (12,421
    )Restructuring liability as of March 31, 2007
    
    
    84,119
    
    
    
    51,571
    
    
    
    
    
    
    
    135,690Costs incurred and charged to expense
    
    
    84,004
    
    
    
    (51,571
    )
    
    
    
    
    
    
    32,433Costs paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restructuring liability as of June 30, 2007
    
    $
    168,123
    
    
    $
    
    
    
    $
    
    
    
    $
    168,123
   6. Share-Based Compensation
     13




---



##### Table of Contents



Stock Options
  Options issue year:
    
    2007
    
    2006Expected volatility
    
    45.89%-47.00%
    
    46.00%Expected dividends
    
    0.00%
    
    0.00%Expected term
    
    5 Years
    
    5 YearsRisk-free rate
    
    4.68%-4.76%
    
    4.55%-5.02%
  Weighted-Average
    
    
    AggregateOptions
    
    
    Weighted-Average
    
    
    Remaining
    
    
    IntrinsicOutstanding
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    ValueJanuary 1, 2007
    
    
    327,726
    
    
    $
    18.95Granted
    
    
    70,301
    
    
    
    18.69Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Outstanding at June 30, 2007
    
    
    398,027
    
    
    
    18.91
    
    
    
    8.27
    
    
    $
    190,218Exercisable at June 30, 2007
    
    
    360,527
    
    
    $
    18.96
    
    
    
    8.20
    
    
    $
    136,418
    14




---



##### Table of Contents



Deferred Stock Units
    Weighted-AverageGrant-DateDSUs
    
    
    Fair ValueJanuary 1, 2007
    
    
    
    
    
    $
    Granted
    
    
    3,312
    
    
    
    16.98Balance at June 30, 2007
    
    
    3,312
    
    
    $
    16.98
  Restricted Shares
    7. Litigation Contingencies
  8. Income Taxes
     15




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Company Overview
        16




---



##### Table of Contents



Forward-Looking Statements
   
    
    our ability to purchase charged-off receivable portfolios on acceptable terms and in sufficient amounts;
    
    our ability to recover sufficient amounts on our charged-off receivable portfolios;
    
    our ability to hire and retain qualified personnel;
    
    a decrease in collections if bankruptcy filings increase or if bankruptcy laws or other debt collection laws change;
    
    a decrease in collections as a result of negative attention or news regarding the debt
collection industry and debtors willingness to pay the debt we acquire;
    
    our ability to make reasonable estimates of the timing and amount of future cash
receipts for purposes of recording purchased receivable revenues in accordance with
Accounting Standards Executive Committee Statement of Position 03-3 as well as the
Accounting Standards Executive Committee Practice Bulletin 6;
    
    our ability to acquire and to collect on charged-off receivable portfolios in industries
in which we have little or no experience;
    
    our ability to maintain existing, and secure additional financing on acceptable terms;
    
    the loss of any of our executive officers or other key personnel;
    
    the costs, uncertainties and other effects of legal and administrative proceedings;
    
    our ability to effectively manage excess capacity, reduce workforce or close remote call center locations;
    
    the temporary or permanent loss of our computer or telecommunications systems, as well
as our ability to respond to changes in technology and increased competition;
    
    changes in our overall performance based upon significant macroeconomic conditions;
    
    our ability to substantiate our application of tax rules against examinations and
challenges made by tax authorities; and
    
    other unanticipated events and conditions that may hinder our ability to compete.
 17




---



##### Table of Contents



Results of Operations
  Percent of Total Revenues
    
    
    Percent of Cash CollectionsThree Months Ended
    
    Six Months Ended
    
    
    Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,
    
    
    June 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006
    
    
    2007
    
    2006
    
    2007
    
    2006RevenuesPurchased receivable revenues, net
    
    
    99.5
    %
    
    
    95.7
    %
    
    
    99.3
    %
    
    
    97.8
    %
    
    
    
    68.6
    %
    
    
    71.3
    %
    
    
    69.2
    %
    
    
    73.3
    %Gain on sale of purchased
receivables
    
    
    0.0
    
    
    
    3.5
    
    
    
    0.0
    
    
    
    1.7
    
    
    
    
    0.0
    
    
    
    2.6
    
    
    
    0.0
    
    
    
    1.3Other revenues, net
    
    
    0.5
    
    
    
    0.8
    
    
    
    0.7
    
    
    
    0.5
    
    
    
    
    0.4
    
    
    
    0.6
    
    
    
    0.4
    
    
    
    0.4Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    
    69.0
    
    
    
    74.5
    
    
    
    69.6
    
    
    
    75.0ExpensesSalaries and benefits
    
    
    31.8
    
    
    
    30.8
    
    
    
    32.6
    
    
    
    32.7
    
    
    
    
    22.0
    
    
    
    23.0
    
    
    
    22.7
    
    
    
    24.5Collections expense
    
    
    36.0
    
    
    
    30.5
    
    
    
    35.1
    
    
    
    29.2
    
    
    
    
    24.8
    
    
    
    22.7
    
    
    
    24.5
    
    
    
    21.9Occupancy
    
    
    3.5
    
    
    
    3.4
    
    
    
    3.5
    
    
    
    3.3
    
    
    
    
    2.4
    
    
    
    2.5
    
    
    
    2.4
    
    
    
    2.5Administrative
    
    
    5.0
    
    
    
    4.4
    
    
    
    4.1
    
    
    
    4.0
    
    
    
    
    3.4
    
    
    
    3.3
    
    
    
    2.9
    
    
    
    3.0Restructuring charges
    
    
    0.5
    
    
    
    0.0
    
    
    
    0.4
    
    
    
    0.0
    
    
    
    
    0.4
    
    
    
    0.0
    
    
    
    0.2
    
    
    
    0.0Depreciation and amortization
    
    
    1.6
    
    
    
    1.6
    
    
    
    1.6
    
    
    
    1.4
    
    
    
    
    1.1
    
    
    
    1.2
    
    
    
    1.1
    
    
    
    1.1Loss on disposal of
equipment
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0Total operating expenses
    
    
    78.4
    
    
    
    70.7
    
    
    
    77.3
    
    
    
    70.6
    
    
    
    
    54.1
    
    
    
    52.7
    
    
    
    53.8
    
    
    
    53.0Income from operations
    
    
    21.6
    
    
    
    29.3
    
    
    
    22.7
    
    
    
    29.4
    
    
    
    
    14.9
    
    
    
    21.8
    
    
    
    15.8
    
    
    
    22.0Other income (expense)Interest income
    
    
    0.3
    
    
    
    0.9
    
    
    
    0.2
    
    
    
    0.9
    
    
    
    
    0.2
    
    
    
    0.7
    
    
    
    0.1
    
    
    
    0.7Interest expense
    
    
    (1.7
    )
    
    
    (0.3
    )
    
    
    (1.1
    )
    
    
    (0.3
    )
    
    
    
    (1.2
    )
    
    
    (0.2
    )
    
    
    (0.7
    )
    
    
    (0.2
    )Other
    
    
    0.0
    
    
    
    (0.2
    )
    
    
    0.0
    
    
    
    (0.2
    )
    
    
    
    0.0
    
    
    
    (0.2
    )
    
    
    0.0
    
    
    
    (0.1
    )Income before income taxes
    
    
    20.2
    
    
    
    29.7
    
    
    
    21.8
    
    
    
    29.8
    
    
    
    
    13.9
    
    
    
    22.1
    
    
    
    15.2
    
    
    
    22.4Income taxes
    
    
    7.6
    
    
    
    11.1
    
    
    
    8.2
    
    
    
    11.2
    
    
    
    
    5.2
    
    
    
    8.2
    
    
    
    5.7
    
    
    
    8.4Net Income
    
    
    12.6
    %
    
    
    18.6
    %
    
    
    13.6
    %
    
    
    18.6
    %
    
    
    
    8.7
    %
    
    
    13.9
    %
    
    
    9.5
    %
    
    
    14.0
    %
 Three Months Ended June 30, 2007 Compared To Three Months Ended June 30, 2006
 Revenue
   18




---



##### Table of Contents



Operating Expenses
  Salaries and Benefits.
 Collections Expense.
 Occupancy.
 Administrative.
 Restructuring Charges.
 Depreciation and Amortization.
 Interest Income.
 Interest Expense.
 19




---



##### Table of Contents



Income
Taxes.
 Six Months Ended June 30, 2007 Compared To Six Months Ended June 30, 2006
 Revenue
   Operating Expenses
  Salaries and Benefits.
 20




---



##### Table of Contents



Collections Expense.
 Occupancy.
 Administrative.
 Restructuring Charges.
 Depreciation and Amortization.
 Interest Income.
 Interest Expense.
 Income
Taxes.
 21




---



##### Table of Contents



Supplemental Performance Data
 Portfolio Performance
  Total EstimatedCash Collections
    
    
    Estimated
    
    
    Total
    
    
    Collections as aNumber of
    
    
    Purchase
    
    
    Including Cash
    
    
    Remaining
    
    
    Estimated
    
    
    Percentage ofPurchase Period
    
    Portfolios
    
    
    Price (1)
    
    
    Sales (2)
    
    
    Collections(3)(4)
    
    
    Collections
    
    
    Purchase Price (2)(dollars in thousands)1997
    
    
    45
    
    
    $
    4,345
    
    
    $
    29,758
    
    
    $
    89
    
    
    $
    29,847
    
    
    
    687
    %1998
    
    
    61
    
    
    
    16,411
    
    
    
    82,739
    
    
    
    2,534
    
    
    
    85,273
    
    
    
    5201999
    
    
    51
    
    
    
    12,924
    
    
    
    61,488
    
    
    
    4,330
    
    
    
    65,818
    
    
    
    5092000
    
    
    49
    
    
    
    20,592
    
    
    
    121,746
    
    
    
    14,820
    
    
    
    136,566
    
    
    
    6632001
    
    
    62
    
    
    
    43,031
    
    
    
    248,499
    
    
    
    44,118
    
    
    
    292,617
    
    
    
    6802002
    
    
    94
    
    
    
    72,258
    
    
    
    311,128
    
    
    
    87,473
    
    
    
    398,601
    
    
    
    5522003
    
    
    76
    
    
    
    87,156
    
    
    
    336,885
    
    
    
    169,841
    
    
    
    506,726
    
    
    
    5812004
    
    
    106
    
    
    
    86,577
    
    
    
    181,247
    
    
    
    173,611
    
    
    
    354,858
    
    
    
    4102005
    
    
    104
    
    
    
    100,801
    
    
    
    112,214
    
    
    
    204,311
    
    
    
    316,525
    
    
    
    3142006 (5)
    
    
    154
    
    
    
    142,517
    
    
    
    85,474
    
    
    
    392,847
    
    
    
    478,321
    
    
    
    3362007 (6)
    
    
    70
    
    
    
    74,775
    
    
    
    7,687
    
    
    
    206,083
    
    
    
    213,770
    
    
    
    286Total
    
    
    872
    
    
    $
    661,387
    
    
    $
    1,578,865
    
    
    $
    1,300,057
    
    
    $
    2,878,922
    
    
    
    435
    %
 
 (1)
    
    Purchase price refers to the cash paid to a seller to acquire a portfolio less the
purchase price refunded by a seller due to the return of non-compliant accounts (also defined
as buybacks) less the purchase price for accounts that were sold at the time of purchase to
another debt purchaser.(2)
    
    For purposes of this table, cash collections include selected cash sales which were entered
into subsequent to purchase. Cash sales, however, exclude the sales of portfolios which
occurred at the time of purchase.(3)
    
    Estimated remaining collections are based on historical cash collections. Please refer to
Forward-Looking Statements on page 17 and Critical Accounting policies on page 31 for further
information regarding these estimates.(4)
    
    Estimated remaining collections refers to the sum of all future projected cash collections on
our owned portfolios using a 120 month collection forecast from the date of purchase.(5)
    
    Includes 62 portfolios from the acquisition of PARC on April 28, 2006 that were allocated a
purchase price value of $8.3 million.(6)
    
    Includes only six months of activity through June 30, 2007.  Unamortized
    
    
    UnamortizedUnamortized
    
    
    
    
    
    
    Balance as a
    
    
    Balance as aBalance as of
    
    
    Purchase
    
    
    Percentage of
    
    
    Percentage ofPurchase Period
    
    June 30, 2007
    
    
    Price (1)
    
    
    Purchase Price
    
    
    Total(dollars in thousands)2002
    
    $
    4,928
    
    
    $
    72,258
    
    
    
    6.8
    %
    
    
    1.6
    %2003
    
    
    18,635
    
    
    
    87,156
    
    
    
    21.4
    
    
    
    5.92004
    
    
    40,254
    
    
    
    86,577
    
    
    
    46.5
    
    
    
    12.82005
    
    
    68,772
    
    
    
    100,801
    
    
    
    68.2
    
    
    
    21.82006 (2)
    
    
    111,458
    
    
    
    142,517
    
    
    
    78.2
    
    
    
    35.32007
    
    
    71,317
    
    
    
    74,775
    
    
    
    95.4
    
    
    
    22.6Total
    
    $
    315,364
    
    
    $
    564,084
    
    
    
    55.9
    %
    
    
    100.0
    %
 
 (1)
    
    Purchase price refers to the cash paid to a seller to acquire a portfolio less the purchase
price refunded by a seller due to the return of non-compliant accounts (also defined as
buybacks) less the purchase price for accounts that were sold at the time of purchase to
another debt purchaser.(2)
    
    Includes 62 portfolios from the acquisition of PARC on April 28, 2006 that were allocated a
purchase price value of $8.3 million. 22




---



##### Table of Contents



Three months ended June 30, 2007Year of
    
    
    
    
    
    
    
    
    
    Amortization
    
    
    Monthly
    
    
    Net
    
    
    Zero BasisPurchase
    
    Collections
    
    
    Revenue
    
    
    Rate
    
    
    Yield(1)
    
    
    Impairments
    
    
    Collections2001 and prior
    
    $
    10,350,761
    
    
    $
    10,448,031
    
    
    
    N/M
    %
    
    
    N/M
    %
    
    $
    
    
    
    $
    10,446,3752002
    
    
    10,415,239
    
    
    
    7,617,746
    
    
    
    26.9
    
    
    
    38.23
    
    
    
    (7,700
    )
    
    
    5,303,4572003
    
    
    15,650,934
    
    
    
    10,123,237
    
    
    
    35.3
    
    
    
    16.67
    
    
    
    861,000
    
    
    
    3,360,2462004
    
    
    12,820,784
    
    
    
    7,470,809
    
    
    
    41.7
    
    
    
    7.76
    
    
    
    2,544,800
    
    
    
    851,6262005
    
    
    13,733,997
    
    
    
    8,952,035
    
    
    
    34.8
    
    
    
    4.99
    
    
    
    1,745,000
    
    
    
    19,6932006
    
    
    26,210,165
    
    
    
    17,622,050
    
    
    
    32.8
    
    
    
    5.00
    
    
    
    
    
    
    
    2,178,9052007
    
    
    6,250,141
    
    
    
    3,280,990
    
    
    
    47.5
    
    
    
    2.12
    
    
    
    
    
    
    
    Totals
    
    $
    95,432,021
    
    
    $
    65,514,898
    
    
    
    31.3
    
    
    
    7.55
    
    
    $
    5,143,100
    
    
    $
    22,160,302
 Three months ended June 30, 2006Year of
    
    
    
    
    
    
    
    
    
    Amortization
    
    
    Monthly
    
    
    Net
    
    
    Zero BasisPurchase
    
    Collections
    
    
    Revenue
    
    
    Rate
    
    
    Yield(1)
    
    
    Impairments
    
    
    Collections2001 and prior
    
    $
    13,689,505
    
    
    $
    11,955,694
    
    
    
    12.7
    %
    
    
    N/M
    %
    
    $
    343,000
    
    
    $
    11,293,1832002
    
    
    14,677,512
    
    
    
    10,248,012
    
    
    
    30.2
    
    
    
    15.74
    
    
    
    307,500
    
    
    
    2,544,9852003
    
    
    20,935,583
    
    
    
    14,921,541
    
    
    
    28.7
    
    
    
    12.63
    
    
    
    1,606,000
    
    
    
    2,573,8102004
    
    
    16,762,796
    
    
    
    12,709,035
    
    
    
    24.2
    
    
    
    6.82
    
    
    
    (353,000
    )
    
    
    772,9392005
    
    
    15,908,332
    
    
    
    9,400,689
    
    
    
    40.9
    
    
    
    4.92
    
    
    
    3,554,000
    
    
    
    2006
    
    
    7,636,254
    
    
    
    4,708,351
    
    
    
    38.3
    
    
    
    3.62
    
    
    
    
    
    
    
    21,7042007
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotals
    
    $
    89,609,982
    
    
    $
    63,943,322
    
    
    
    28.6
    
    
    
    8.88
    
    
    $
    5,457,500
    
    
    $
    17,206,621
 Six months ended June 30, 2007Year of
    
    
    
    
    
    
    
    
    
    Amortization
    
    


    Monthly
    
    
    
    Net
    
    
    Zero BasisPurchase
    
    Collections
    
    
    Revenue
    
    
    Rate
    
    
    Yield(1)
    
    
    Impairments
    
    
    Collections2001 and prior
    
    $
    20,681,710
    
    
    $
    20,692,285
    
    
    
    N/M
    %
    
    
    N/M
    %
    
    $
    
    
    
    $
    20,613,1372002
    
    
    22,432,000
    
    
    
    15,560,961
    
    
    
    30.6
    
    
    
    30.72
    
    
    
    209,100
    
    
    
    9,857,9782003
    
    
    32,430,995
    
    
    
    21,772,454
    
    
    
    32.9
    
    
    
    15.76
    
    
    
    1,624,300
    
    
    
    6,036,7502004
    
    
    26,855,142
    
    
    
    16,650,174
    
    
    
    38.0
    
    
    
    7.69
    
    
    
    4,475,800
    
    
    
    1,620,2442005
    
    
    28,474,658
    
    
    
    19,421,293
    
    
    
    31.8
    
    
    
    4.97
    
    
    
    2,679,000
    
    
    
    30,2292006
    
    
    52,723,217
    
    
    
    33,969,471
    
    
    
    35.6
    
    
    
    4.69
    
    
    
    628,000
    
    
    
    2,464,4462007
    
    
    7,687,649
    
    
    
    4,230,294
    
    
    
    45.0
    
    
    
    1.37
    
    
    
    
    
    
    
    Totals
    
    $
    191,285,371
    
    
    $
    132,296,932
    
    
    
    30.8
    
    
    
    7.22
    
    
    $
    9,616,200
    
    
    $
    40,622,784
 Six months ended June 30, 2006Year of
    
    
    
    
    
    
    
    
    
    Amortization
    
    
    Monthly
    
    
    Net
    
    
    Zero BasisPurchase
    
    Collections
    
    
    Revenue
    
    
    Rate
    
    
    Yield(1)
    
    
    Impairments
    
    
    Collections2001 and prior
    
    $
    28,100,333
    
    
    $
    24,624,893
    
    
    
    12.4
    %
    
    
    N/M
    %
    
    $
    333,000
    
    
    $
    21,755,7742002
    
    
    30,759,950
    
    
    
    22,326,578
    
    
    
    27.4
    
    
    
    15.41
    
    
    
    415,500
    
    
    
    5,312,4052003
    
    
    44,742,980
    
    
    
    32,377,801
    
    
    
    27.6
    
    
    
    12.46
    
    
    
    2,740,000
    
    
    
    5,627,8262004
    
    
    35,008,501
    
    
    
    25,326,009
    
    
    
    27.7
    
    
    
    6.69
    
    
    
    (14,000
    )
    
    
    1,195,0202005
    
    
    32,338,595
    
    
    
    21,339,966
    
    
    
    34.0
    
    
    
    4.76
    
    
    
    4,677,000
    
    
    
    2006
    
    
    8,049,481
    
    
    
    5,212,855
    
    
    
    35.2
    
    
    
    2.36
    
    
    
    
    
    
    
    21,7042007
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotals
    
    $
    178,999,840
    
    
    $
    131,208,102
    
    
    
    26.7
    
    
    
    8.72
    
    
    $
    8,151,500
    
    
    $
    33,912,729
 
 (1)
    
    The monthly yield is the 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. 23




---



##### Table of Contents



Account Representative Productivity and Turnover
  Account Representatives by Experience
 Three months ended
    
    Six months ended
    
    Year endedJune 30,
    
    June 30,
    
    December 31,2007
    
    2006(3)
    
    2007
    
    2006(3)
    
    2006(3)
    
    2005(3)Number of account representatives:One year or more (1)
    
    
    576
    
    
    
    574
    
    
    
    589
    
    
    
    567
    
    
    
    573
    
    
    
    510Less than one year (2)
    
    
    346
    
    
    
    421
    
    
    
    321
    
    
    
    472
    
    
    
    399
    
    
    
    540Total account representatives
    
    
    922
    
    
    
    995
    
    
    
    910
    
    
    
    1,039
    
    
    
    972
    
    
    
    1,050
 
 (1)
    
    Based on number of average traditional call center Full Time Equivalent (FTE) account
representatives and supervisors with one or more years of service.(2)
    
    Based on number of average traditional call center FTE account representatives and
supervisors with less than one year of service, including new employees in training.(3)
    
    Excludes PARCs FTE account representatives for periods prior to January 1, 2007. Collection Averages by Experience
 Three months ended
    
    Six months ended
    
    Year endedJune 30,
    
    June 30,
    
    December 31,2007
    
    2006(3)
    
    2007
    
    2006(3)
    
    2006(3)
    
    2005(3)Collection averages:One year or more (1)
    
    $
    54,982
    
    
    $
    49,629
    
    
    $
    115,387
    
    
    $
    101,899
    
    
    $
    193,951
    
    
    $
    199,734Less than one year (2)
    
    
    40,249
    
    
    
    32,819
    
    
    
    81,400
    
    
    
    63,598
    
    
    
    123,253
    
    
    
    117,859Overall average
    
    
    49,458
    
    
    
    42,515
    
    
    
    103,384
    
    
    
    84,488
    
    
    
    164,932
    
    
    
    157,661
 
 (1)
    
    Based on number of average traditional call center FTE account representatives and
supervisors with one or more years of service.(2)
    
    Based on number of average traditional call center FTE account representatives and
supervisors with less than one year of service, including new employees in training.(3)
    
    Excludes PARCs FTE account representatives for periods prior to January 1, 2007.  Turnover by Experience
 Three months ended
    
    Six months ended
    
    Year endedJune 30,
    
    June 30,
    
    December 31,2007
    
    2006(3)
    
    2007
    
    2006(3)
    
    2006
    
    2005(3)Collection department turnover:One year or more (1)
    
    
    34.4
    %
    
    
    54.5
    %
    
    
    39.4
    %
    
    
    41.8
    %
    
    
    44.9
    %
    
    
    39.3
    %Less than one year (2)
    
    
    137.8
    
    
    
    107.0
    
    
    
    128.0
    
    
    
    102.1
    
    
    
    107.4
    
    
    
    117.8Overall turnover
    
    
    70.8
    
    
    
    75.7
    
    
    
    68.7
    
    
    
    68.3
    
    
    
    69.5
    
    
    
    78.8
 
 (1)
    
    Based on number of traditional call center employees within the collection department
with one or more years of service.(2)
    
    Based on number of traditional call center employees within the collection department
with less than one year of service, including new employees in training.(3)
    
    Excludes traditional call center employees within PARCs collection department for periods
prior to January 1, 2007. 24




---



##### Table of Contents



Cash Collections
  Historical Collections (1)
 Six MonthsEndedPurchase
    
    Purchase
    
    
    Year Ended December 31,
    
    
    June 30,Period
    
    Price(3)
    
    
    1997
    
    
    1998
    
    
    1999
    
    
    2000
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007(dollars in thousands)Pre-1997
    
    
    
    
    
    $
    7,713
    
    
    $
    5,684
    
    
    $
    4,493
    
    
    $
    3,718
    
    
    $
    2,607
    
    
    $
    1,862
    
    
    $
    1,605
    
    
    $
    1,283
    
    
    $
    1,270
    
    
    $
    918
    
    
    $
    4371997
    
    $
    4,345
    
    
    
    1,682
    
    
    
    4,919
    
    
    
    5,573
    
    
    
    5,017
    
    
    
    3,563
    
    
    
    2,681
    
    
    
    1,785
    
    
    
    1,526
    
    
    
    1,342
    
    
    
    1,090
    
    
    
    4701998
    
    
    16,411
    
    
    
    
    
    
    
    4,835
    
    
    
    15,220
    
    
    
    15,045
    
    
    
    12,962
    
    
    
    11,021
    
    
    
    7,987
    
    
    
    5,582
    
    
    
    4,653
    
    
    
    3,352
    
    
    
    1,5041999
    
    
    12,924
    
    
    
    
    
    
    
    
    
    
    
    3,761
    
    
    
    11,331
    
    
    
    10,862
    
    
    
    9,750
    
    
    
    8,278
    
    
    
    6,675
    
    
    
    5,022
    
    
    
    3,935
    
    
    
    1,6262000
    
    
    20,592
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,895
    
    
    
    23,444
    
    
    
    22,559
    
    
    
    20,318
    
    
    
    17,196
    
    
    
    14,062
    
    
    
    10,603
    
    
    
    4,1922001
    
    
    43,031
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,630
    
    
    
    50,327
    
    
    
    50,967
    
    
    
    45,713
    
    
    
    39,865
    
    
    
    30,472
    
    
    
    12,4532002
    
    
    72,258
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,340
    
    
    
    70,813
    
    
    
    72,024
    
    
    
    67,649
    
    
    
    55,373
    
    
    
    22,4322003
    
    
    87,156
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,067
    
    
    
    94,564
    
    
    
    94,234
    
    
    
    79,423
    
    
    
    32,4312004
    
    
    86,577
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,365
    
    
    
    68,354
    
    
    
    62,673
    
    
    
    26,8552005
    
    
    100,801
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,459
    
    
    
    60,280
    
    
    
    28,4752006 (2)
    
    
    142,517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,751
    
    
    
    52,7232007
    
    
    74,775
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,687Total
    
    
    
    
    
    $
    9,395
    
    
    $
    15,438
    
    
    $
    29,047
    
    
    $
    44,006
    
    
    $
    71,068
    
    
    $
    120,540
    
    
    $
    197,820
    
    
    $
    267,928
    
    
    $
    319,910
    
    
    $
    340,870
    
    
    $
    191,285
 Cumulative Collections (1)
 TotalThroughPurchase
    
    Purchase
    
    Total Through December 31,
    
    June 30,Period
    
    Price(3)
    
    1997
    
    1998
    
    1999
    
    2000
    
    2001
    
    2002
    
    2003
    
    2004
    
    2005
    
    2006
    
    2007(dollars in thousands)1997
    
    $
    4,345
    
    
    $
    1,682
    
    
    $
    6,601
    
    
    $
    12,174
    
    
    $
    17,191
    
    
    $
    20,754
    
    
    $
    23,435
    
    
    $
    25,220
    
    
    $
    26,746
    
    
    $
    28,088
    
    
    $
    29,178
    
    
    $
    29,6481998
    
    
    16,411
    
    
    
    
    
    
    
    4,835
    
    
    
    20,055
    
    
    
    35,100
    
    
    
    48,062
    
    
    
    59,083
    
    
    
    67,070
    
    
    
    72,652
    
    
    
    77,305
    
    
    
    80,657
    
    
    
    82,1611999
    
    
    12,924
    
    
    
    
    
    
    
    
    
    
    
    3,761
    
    
    
    15,092
    
    
    
    25,954
    
    
    
    35,704
    
    
    
    43,982
    
    
    
    50,657
    
    
    
    55,679
    
    
    
    59,614
    
    
    
    61,2402000
    
    
    20,592
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,895
    
    
    
    32,339
    
    
    
    54,898
    
    
    
    75,216
    
    
    
    92,412
    
    
    
    106,474
    
    
    
    117,077
    
    
    
    121,2692001
    
    
    43,031
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,630
    
    
    
    67,957
    
    
    
    118,924
    
    
    
    164,637
    
    
    
    204,502
    
    
    
    234,974
    
    
    
    247,4272002
    
    
    72,258
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,340
    
    
    
    93,153
    
    
    
    165,177
    
    
    
    232,826
    
    
    
    288,199
    
    
    
    310,6312003
    
    
    87,156
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,067
    
    
    
    130,631
    
    
    
    224,865
    
    
    
    304,288
    
    
    
    336,7192004
    
    
    86,577
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,365
    
    
    
    91,719
    
    
    
    154,392
    
    
    
    181,2472005
    
    
    100,801
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,459
    
    
    
    83,739
    
    
    
    112,2142006 (2)
    
    
    142,517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,751
    
    
    
    85,4742007
    
    
    74,775
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,687
 Cumulative Collections as Percentage of Purchase Price (1)
 TotalThroughPurchase
    
    Purchase
    
    Total Through December 31,
    
    June 30,Period
    
    Price(3)
    
    1997
    
    1998
    
    1999
    
    2000
    
    2001
    
    2002
    
    2003
    
    2004
    
    2005
    
    2006
    
    20071997
    
    $
    4,345
    
    
    
    39
    %
    
    
    152
    %
    
    
    280
    %
    
    
    396
    %
    
    
    478
    %
    
    
    539
    %
    
    
    580
    %
    
    
    616
    %
    
    
    646
    %
    
    
    672
    %
    
    
    682
    %1998
    
    
    16,411
    
    
    
    
    
    
    
    29
    
    
    
    122
    
    
    
    214
    
    
    
    293
    
    
    
    360
    
    
    
    409
    
    
    
    443
    
    
    
    471
    
    
    
    491
    
    
    
    5011999
    
    
    12,924
    
    
    
    
    
    
    
    
    
    
    
    29
    
    
    
    117
    
    
    
    201
    
    
    
    276
    
    
    
    340
    
    
    
    392
    
    
    
    431
    
    
    
    461
    
    
    
    4742000
    
    
    20,592
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    157
    
    
    
    267
    
    
    
    365
    
    
    
    449
    
    
    
    517
    
    
    
    569
    
    
    
    5892001
    
    
    43,031
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    158
    
    
    
    276
    
    
    
    383
    
    
    
    475
    
    
    
    546
    
    
    
    5752002
    
    
    72,258
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    129
    
    
    
    229
    
    
    
    322
    
    
    
    399
    
    
    
    4302003
    
    
    87,156
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    150
    
    
    
    258
    
    
    
    349
    
    
    
    3862004
    
    
    86,577
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    106
    
    
    
    178
    
    
    
    2092005
    
    
    100,801
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    83
    
    
    
    1112006 (2)
    
    
    142,517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    602007
    
    
    74,775
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
 
 (1)
    
    Does not include proceeds from sales of any receivables.(2)
    
    Includes $8.3 million of portfolios acquired from the acquisition of PARC on April 28, 2006.(3)
    
    Purchase price refers to the cash paid to a seller to acquire a portfolio less the purchase
price refunded by a seller due to the return of non-compliant accounts (also referred to as
buybacks) less the purchase price for accounts that were sold at the time of purchase to
another debt purchaser. 25




---



##### Table of Contents



Seasonality
   Quarterly Cash Collections
 
 Cash Collections
 Quarter
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007First
    
    $
    44,017,730
    
    
    $
    65,196,055
    
    
    $
    80,397,640
    
    
    $
    89,389,858
    
    
    $
    95,853,350Second
    
    
    51,190,533
    
    
    
    67,566,031
    
    
    
    84,862,856
    
    
    
    89,609,982
    
    
    
    95,432,021Third
    
    
    48,622,829
    
    
    
    66,825,822
    
    
    
    78,159,364
    
    
    
    80,914,791
    
    
    
    Fourth
    
    
    53,988,333
    
    
    
    68,339,797
    
    
    
    76,490,350
    
    
    
    80,955,115
    
    
    
    Total cash collections
    
    $
    197,819,425
    
    
    $
    267,927,705
    
    
    $
    319,910,210
    
    
    $
    340,869,746
    
    
    $
    191,285,371
  Three months ended June 30,
    
    Six months ended June 30,2007
    
    2006
    
    2007
    
    2006Traditional collections
    
    
    46.7
    %
    
    
    48.2
    %
    
    
    48.1
    %
    
    
    49.6
    %Legal collections
    
    
    39.7
    
    
    
    39.4
    
    
    
    38.5
    
    
    
    38.1Other collections
    
    
    13.6
    
    
    
    12.4
    
    
    
    13.4
    
    
    
    12.3Total cash collections
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 26




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##### Table of Contents



Face Value ofCharged-off
    
    
    
    
    
    
    No. ofAsset Type
    
    Receivables (2)
    
    
    %
    
    
    Accounts
    
    
    %(in thousands)Visa®/MasterCard®/Discover®
    
    $
    13,760,128
    
    
    
    47.7
    %
    
    
    6,720
    
    
    
    25.5
    %Private Label Credit Cards
    
    
    3,985,505
    
    
    
    13.8
    
    
    
    5,608
    
    
    
    21.3Telecommunications/Utility/Gas
    
    
    2,642,662
    
    
    
    9.2
    
    
    
    6,719
    
    
    
    25.5Health Club
    
    
    1,550,278
    
    
    
    5.4
    
    
    
    1,533
    
    
    
    5.8Auto Deficiency
    
    
    1,391,908
    
    
    
    4.8
    
    
    
    248
    
    
    
    0.9Installment Loans
    
    
    801,394
    
    
    
    2.8
    
    
    
    285
    
    
    
    1.1Wireless Telecommunications
    
    
    719,337
    
    
    
    2.5
    
    
    
    1,728
    
    
    
    6.5Other (1)
    
    
    3,978,790
    
    
    
    13.8
    
    
    
    3,547
    
    
    
    13.4Total
    
    $
    28,830,002
    
    
    
    100.0
    %
    
    
    26,388
    
    
    
    100.0
    %
 
 (1)
    
    Other includes charged-off receivables of several debt types, including student loan,
mobile home deficiency and retail mail order. This excludes the purchase of a single portfolio
in June 2002 with a face value of $1.2 billion at a cost of $1.2 million (or 0.1% of face
value) and consisting of approximately 3.8 million accounts.(2)
    
    Face value of charged-off receivables represents the cumulative amount of purchases net of
buybacks. The amount is not adjusted for payments received, settlements or additional accrued
interest on any accounts in such portfolios after the date we purchased the applicable
portfolio.  
    
    Fresh accounts are typically 120 to 270 days past due, have been charged-off by the
credit originator and are either being sold prior to any post charged-off collection
activity or are placed with a third party collector for the first time. These accounts
typically sell for the highest purchase price.
    
    Primary accounts are typically 270 to 360 days past due, have been previously placed
with one third party collector and typically receive a lower purchase price.
    
    Secondary and tertiary accounts are typically more than 360 days past due, have been
placed with two or three third party collectors and receive even lower purchase prices.
   Face Value ofCharged-off
    
    
    
    
    
    
    No. ofAccount Type
    
    Receivables (2)
    
    
    %
    
    
    Accounts
    
    
    %(in thousands)Fresh
    
    $
    1,543,466
    
    
    
    5.3
    %
    
    
    807
    
    
    
    3.1
    %Primary
    
    
    4,230,670
    
    
    
    14.7
    
    
    
    3,430
    
    
    
    13.0Secondary
    
    
    5,130,584
    
    
    
    17.8
    
    
    
    5,544
    
    
    
    21.0Tertiary (1)
    
    
    14,505,675
    
    
    
    50.3
    
    
    
    13,963
    
    
    
    52.9Other
    
    
    3,419,607
    
    
    
    11.9
    
    
    
    2,644
    
    
    
    10.0Total
    
    $
    28,830,002
    
    
    
    100.0
    %
    
    
    26,388
    
    
    
    100.0
    %
 27




---



##### Table of Contents



(1)
    
    Excluding the purchase of a single portfolio in June 2002 with a face value of $1.2 billion
at a cost of $1.2 million (or 0.1% of face value), and consisting of approximately 3.8 million
accounts.(2)
    
    Face value of charged-off receivables represents the cumulative amount of purchases net of
buybacks. The amount is not adjusted for payments received, settlements or additional accrued
interest on any accounts in such portfolios after the date we purchased the applicable
portfolio.  Face Value ofCharged-off
    
    
    
    
    
    
    No. ofGeographic Location
    
    Receivables (3)(4)
    
    
    %
    
    
    Accounts
    
    
    %(in thousands)Texas (1)
    
    $
    3,510,139
    
    
    
    12.2
    %
    
    
    3,330
    
    
    
    12.6
    %California
    
    
    2,680,642
    
    
    
    9.3
    
    
    
    2,731
    
    
    
    10.4Florida (1)
    
    
    2,503,140
    
    
    
    8.7
    
    
    
    1,586
    
    
    
    6.0Michigan (1)
    
    
    1,480,248
    
    
    
    5.1
    
    
    
    1,942
    
    
    
    7.4New York
    
    
    1,353,350
    
    
    
    4.6
    
    
    
    902
    
    
    
    3.4Ohio (1)
    
    
    1,289,422
    
    
    
    4.5
    
    
    
    1,586
    
    
    
    6.0Illinois (1)
    
    
    1,090,448
    
    
    
    3.8
    
    
    
    1,350
    
    
    
    5.1New Jersey
    
    
    1,033,646
    
    
    
    3.5
    
    
    
    820
    
    
    
    3.1South Carolina
    
    
    811,447
    
    
    
    2.8
    
    
    
    507
    
    
    
    1.9Pennsylvania
    
    
    796,520
    
    
    
    2.8
    
    
    
    622
    
    
    
    2.4North Carolina
    
    
    687,686
    
    
    
    2.4
    
    
    
    451
    
    
    
    1.7Georgia
    
    
    626,252
    
    
    
    2.2
    
    
    
    463
    
    
    
    1.8Massachusetts
    
    
    593,942
    
    
    
    2.1
    
    
    
    512
    
    
    
    1.9Other (2)
    
    
    10,373,120
    
    
    
    36.0
    
    
    
    9,586
    
    
    
    36.3Total
    
    $
    28,830,002
    
    
    
    100.0
    %
    
    
    26,388
    
    
    
    100.0
    %
 
 (1)
    
    Collection site located in this state.(2)
    
    Each state included in Other represents under 2.0% individually of the face value of total
charged-off consumer receivables.(3)
    
    Face value of charged-off receivables represents the cumulative amount of purchases net of
buybacks. The amount is not adjusted for payments received, settlements or additional accrued
interest on any accounts in such portfolios after the date we purchased the applicable
portfolio.(4)
    
    Excluding the purchase of a single portfolio in June 2002 with a face value of $1.2 billion
at a cost of $1.2 million (or 0.1% of face value) and consisting of approximately 3.8 million
accounts. Liquidity and Capital Resources
  Special Cash Dividend and Share Repurchase
  28




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##### Table of Contents



Borrowings
  
    
    Leverage Ratio (as defined) cannot exceed 1.25 to 1.0 at any time on or before December
30, 2008, 1.125 to 1.0 at any time on or after December 31, 2008 and on or before December
30, 2010, or 1.0 to 1.0 at any time thereafter;
    
    Ratio of Total Liabilities to Tangible Net Worth cannot exceed 3.0 to 1.0 at any time
on or before December 30, 2007, 2.5 to 1.0 at any time on or after December 31, 2007 and on
or before December 30, 2008, 2.0 to 1.0 at any time on or after December 31, 2008
and on or before December 30, 2009, 1.75 to 1.0 at any time on or after December 31, 2009
and on or before December 30, 2010, or 1.5 to 1.0 at any time thereafter;
    
    Tangible Net Worth must equal or exceed $80.0 million plus 50% of positive consolidated
net income for three consecutive fiscal quarters ending December 31, 2007 and for each
fiscal year ending thereafter, such amount to be added as of December 31, 2007 and as of
the end of each such fiscal year thereafter.
   Termination of Former Credit Agreement.
 There was $162.0 million balance outstanding on our New Credit Facilities at June 30, 2007.
 29




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##### Table of Contents



Cash Flows
      30




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##### Table of Contents



Future Contractual Cash Obligations
  Year Ending December 31,2007
    
    
    2008(3)
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    ThereafterCapital lease obligations (1)
    
    $
    25,470
    
    
    $
    18,634
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating lease obligations (1)
    
    
    3,339,087
    
    
    
    5,791,926
    
    
    
    4,920,354
    
    
    
    3,972,945
    
    
    
    3,739,779
    
    
    
    14,364,097Purchased receivables (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Revolving credit (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,000,000Term loan (4)
    
    
    750,000
    
    
    
    1,500,000
    
    
    
    1,500,000
    
    
    
    1,500,000
    
    
    
    1,500,000
    
    
    
    143,250,000Employment agreements
    
    
    407,500
    
    
    
    315,000
    
    
    
    105,000
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    4,522,057
    
    
    $
    7,625,560
    
    
    $
    6,525,354
    
    
    $
    5,472,945
    
    
    $
    5,239,779
    
    
    $
    169,614,097
 
 (1)
    
    Future minimum lease payments under capital lease obligations and operating lease obligations
have not been reduced by the amount of our restructuring activities that relates to the leased
equipment or facilities.(2)
    
    During 2007, we renewed three forward flow contracts, entered into two new forward flow
contracts as well as maintained two on-going forward flow contracts that commit us to purchase
receivables for a fixed percentage of the face amount of the receivables. The seven forward
flow contracts have terms beyond June 30, 2007 with the last contract expiring in April 2008.
The five forward flow contracts have estimated monthly purchases of approximately $1.8
million, depending upon circumstances, and the other two on-going forward flow contracts have
estimated monthly purchases of approximately $11,900 over the next twelve months.(3)
    
    To the extent that a balance is outstanding on our line of credit, it would be due in June
2012 or earlier as defined in the New Credit Agreement.(4)
    
    To the extent that a balance is outstanding on our term loan, it would be due in June 2013. Off-Balance Sheet Arrangements
  Critical Accounting Policies
    31




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
   
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  32




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Companys Repurchases of Its Common Stock
  Average
    
    
    Total Number of
    
    
    Maximum Number ofTotal Number
    
    
    Price
    
    
    Shares Purchased as Part
    
    
    Shares that May Yetof Shares
    
    
    Paid per
    
    
    of Publicly Announced
    
    
    Be Purchased UnderPeriod
    
    Purchased (1)
    
    
    Share
    
    
    Plans or Programs
    
    
    the Plans or ProgramsApril 1, 2007
- April 30, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    May 1, 2007 - May
31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    June 1, 2007 - June
30, 2007
    
    
    4,129,818
    
    
    
    18.63
    
    
    
    4,000,000
    
    
    
    Total
    
    
    4,129,818
    
    
    $
    18.63
    
    
    
    4,000,000
    
    
    
    
 
 (1)
    
    Includes the  Company exercise of its right to repurchase 129,818 of its shares from former employees at
$15.00 per share. 
 Item 4. Submission of Matters to a Vote of Security Holders
   Director
    
    Votes for
    
    
    Votes WithheldNathaniel F. Bradley, IV
    
    
    29,261,634
    
    
    
    3,181,566Anthony R. Ignaczak
    
    
    30,707,071
    
    
    
    1,736,129William I Jacobs
    
    
    31,491,498
    
    
    
    951,702
  
  Votes for
    
    Votes Against
    
    Votes abstained21,749,127
    
    8,484,317
    
    3,244
 33




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##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    Description10.1
    
    
    Stock Repurchase Agreement dated as of May 8, 2007, among Asset Acceptance
Capital Corp., AAC Quad-C Investors LLC, Nathaniel F. Bradley IV and Mark A.
Redman (Incorporated by reference to Exhibit 99(D)(2) included with Asset
Acceptance Capital Corp.s Schedule TO as filed on May 9, 2007)10.2
    
    
    Amendment to the 2004 Stock Incentive Plan (Incorporated by reference to Exhibit
10.1 included with Current Report on Form 8-K filed on May 29, 2007)10.3
    
    
    Credit Agreement dated June 5, 2007, between Asset Acceptance Capital
Corp. and JPMorgan Chase Bank, National Association (Incorporated by
reference to Exhibit 10.1 included with Current Report on Form 8-K filed on June
5, 2007)31.1
    *
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    *
    
    Rule 13a-14(a) Certification of Chief Financial Officer32.1
    *
    
    Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
 
 *
    
    Filed herewith 34




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##### Table of Contents



SIGNATURES
  ASSET ACCEPTANCE CAPITAL CORP.Date: August 6, 2007
    By:
    /s/ Nathaniel F. Bradley IVNathaniel F. Bradley IVChairman of the Board, President and

Chief Executive Officer

(Principal Executive Officer) Date: August 6, 2007
    By:
    /s/ Mark A. RedmanMark A. RedmanSenior Vice President - Finance and

Chief Financial Officer

(Principal Financial and Accounting Officer) 35