Asta Funding Reports Decrease in Income, Revenue and Collections in Quarter

Debt buyer Asta Funding reported a large drop in earnings for their fiscal third quarter ended June 30, 2008 as it shifted a $6.9 billion portfolio to the cost recovery method of accounting from the interest method.

Englewood Cliffs, N.J.-based Asta Funding, Inc. (Nasdaq: ASFI) said late Monday that net income in the fiscal third quarter dropped to $2.4 million — $0.17 per share – from $15.3 million, or $1.03 per share, in the same period last year.

Asta said that revenues, or finance income, declined 39 percent in the quarter to $23.6 million. Asta reported finance income of $38.8 million in the year ago quarter.

The company explained that it had shifted the $300 million purchase cost of a $6.9 billion portfolio acquired in March 2007 to the cost recovery method of accounting from the interest method. This resulted in a $7.3 million reduction in finance income in the quarter and a decrease in net income per share of approximately $0.30. Asta said that it will recognize income on the portfolio only after it has recovered its carrying value, which as of June 30, 2008, was $219 million.

In the quarter, Asta greatly reduced the amount of debt it purchased, spending $7.6 million for $289.2 million of face value of charged-off consumer receivables compared to the $15.6 million it spent in the same period a year ago.

"While our finance income has contracted due to the transfer of our large portfolio purchase in March of 2007 to cost recovery and our slower than usual buying, we continue to seek strategic and disciplined opportunities in our portfolio purchases while we focus on reducing our debt in this difficult economic environment,” said Gary Stern, Asta president and CEO, in a press release.

Asta also said that net cash collections totaled $49 million in the fiscal third quarter of 2008, a 33 percent decline from the $73 million in collections reported a year ago. Of the $49 million, $2.8 million was attributable to portfolio sales in the quarter compared to $9.8 million in sales in the third quarter of 2007. Asta paid commissions and fees of $29.1 million to its network of outside collection agencies and attorneys.