SOUTHFIELD, Mich., Feb. 1, 2008 (PRIME NEWSWIRE) -- Credit Acceptance Corporation (Nasdaq:CACC) (referred to as the "Company," "we," "our," or "us") announced consolidated net income of $12.5 million, or $0.40 per diluted share, for the three months ended December 31, 2007 compared to consolidated net income of $8.5 million, or $0.27 per diluted share, for the same period in 2006. For the year ended December 31, 2007 consolidated net income was $54.9 million, or $1.76 per diluted share, compared to consolidated net income of $58.6 million, or $1.66 per diluted share, for the same period in 2006.
Income from continuing operations for the three months ended December 31, 2007 was $12.3 million, or $0.40 per diluted share, compared to $8.5 million, or $0.27 per diluted share, for the same period in 2006. For the year ended December 31, 2007, income from continuing operations was $53.6 million, or $1.72 per diluted share, compared to $58.8 million, or $1.67 per diluted share, for the same period in 2006.
Adjusted net income, a non-GAAP financial measure, for the three months ended December 31, 2007 was $15.9 million, or $0.51 per diluted share, compared to $15.8 million, or $0.50 per diluted share, for the same period in 2006. For the year ended December 31, 2007, adjusted net income was $63.4 million, or $2.04 per diluted share, compared to $63.5 million, or $1.80 per diluted share, for the same period in 2006.
Operating Results
-----------------
Results for the three months and year ended December 31, 2007 compared
to the same periods in 2006 include the following:
% Change
---------------------------
Three Months Year
Ended Ended
December 31, December 31,
2007 2007
------------ ------------
Consumer loan unit volume 13.8% 16.8%
Consumer loan dollar volume 23.3% 27.4%
Number of active dealer-partners 21.9% 27.7%
Average loans receivable balance, net 27.7% 23.3%
Originations
------------
The following table summarizes consumer loan dollar growth in each of
the last eight quarters compared with the same period in the previous
year:
Year over Year
Growth in Consumer Loan Dollar Volume
-------------------------------------------
Three Months Ended % Change*
-------------------------------------------
March 31, 2006 11.1%
June 30, 2006 6.1%
September 30, 2006 26.4%
December 31, 2006 36.1%
March 31, 2007 41.1%
June 30, 2007 43.9%
September 30, 2007 2.2%
December 31, 2007 23.3%
* Percentages are different than those previously reported.
The table above reflects loan volume based on the date funds
are disbursed to the dealer-partner. Previously, the information
reported in this table reflected loan volume based on the date
the consumer loan was received.
The increase in loan dollar volume during the three months ended December 31, 2007 is attributed to a new credit scorecard and an improving competitive environment.
The following table summarizes the changes in active dealer-partners and corresponding consumer loan unit volume:
Three Months Ended December 31,
------------------------------
2007 2006 % change
------ ------ --------
Consumer loan unit volume 25,156 22,100 13.8%
Active dealer-partners (1) 2,052 1,684 21.9%
------ ------
Average volume per
dealer-partner 12.3 13.1 -6.1%
Consumer loan unit volume
from dealer-partners active
both periods 16,885 17,815 -5.2%
Dealer-partners active
both periods 1,097 1,097 0.0%
------ ------
Average volume from
dealer-partners active
both periods 15.4 16.2 -5.2%
Consumer loan unit volume
from new dealer-partners 1,624 1,566 3.7%
New active dealer-partners (2) 310 248 25.0%
------ ------
Average volume per new
active dealer-partners 5.2 6.3 -17.5%
Attrition (3) -19.4% -18.8%
1) Active dealer-partners are dealer-partners who have received
funding for at least one dealer loan or purchased loan during
the period.
2) New active dealer-partners are dealer-partners who enrolled in
our program and have received funding for their first dealer loan
or purchased loan from us during the periods presented.
3) Attrition is measured according to the following formula:
decrease in consumer loan unit volume from dealer-partners who
have received funding for at least one dealer loan or purchased
loan during the comparable period of the prior year but who
received funding for no dealer loans or purchased loans during
the current period divided by prior year comparable period
consumer loan unit volume.
The increase in loan unit volume in the three months ended December 31, 2007 was the result of an increase in the number of active dealer-partners, partially offset by lower volume per dealer-partner. Volume per dealer-partner was negatively impacted by reductions in advance rates during the first six months of 2007 and the impact of new dealer-partners. Advance rates were reduced to increase the spread between the advance rate and the collection rate and reduce the risk of future advance losses.
Purchase Program ----------------
We began offering a Purchase Program on a limited basis in March of 2005. The Purchase Program differs from our traditional Portfolio Program in that the dealer-partner receives a single upfront payment from us at the time of origination instead of a cash advance and dealer holdback. Loans acquired through the Purchase Program are referred to as purchased loans. Loans acquired through the Portfolio Program are referred to as dealer loans. Purchase Program volume increased in 2007 as the program was offered to additional dealer-partners.
The following table summarizes key information regarding purchased
loans:
Year Ended Year Ended
December 31, December 31,
2007 2006
------------ ------------
New purchased loan unit volume as a
percentage of total unit volume 17.3% 4.0%
Net purchased loan receivable
balance as a percentage of the
total net receivable balance
as of the end of the period 17.2% 4.6%
Loans originated under the Purchase Program represented 29.2% of total unit volume for the three months ended December 31, 2007.
Consumer Loan Performance -------------------------
Although the majority of loan originations are recorded in our financial statements as dealer loans, each transaction starts with a loan from the dealer-partner to the individual purchasing the vehicle. Since the cash flows available to repay the dealer loans are generated, in most cases, from the underlying consumer loans, the performance of the consumer loans is critical to our financial results. The following table presents forecasted consumer loan collection rates, advance rates (includes amounts paid to acquire purchased loans), the spread (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections that had been realized as of December 31, 2007. Payments of dealer holdback and accelerated payments of dealer holdback are not included in the advance percentage paid to the dealer-partner. All amounts are presented as a percentage of the initial balance of the consumer loan (principal + interest). The table includes both dealer loans and purchased loans.
Loan % of
Origination Forecasted Forecast
Year Collection % Advance % Spread % Realized
----------- ------------ --------- -------- ----------
1998 67.4% 46.1% 21.3% 99.8%
1999 72.3% 48.7% 23.6% 99.1%
2000 72.8% 47.9% 24.9% 98.4%
2001 67.8% 46.0% 21.8% 97.8%
2002 71.0% 42.2% 28.8% 97.4%
2003 74.6% 43.4% 31.2% 97.1%
2004 73.7% 44.0% 29.7% 93.7%
2005 74.3% 46.9% 27.4% 85.1%
2006 69.9% 46.6% 23.3% 59.9%
2007 70.2% 46.5% 23.7% 19.9%
The following table presents the same information as the table above
for purchased loans and dealer loans in 2007.
Loan
Origination Forecasted
Year Collection % Advance % Spread %
----------- ------------ --------- --------
Purchased loans 2007 71.0% 49.5% 21.5%
Dealer loans 2007 70.0% 45.8% 24.2%
The following tables compare our forecast of consumer loan collection rates as of December 31, 2007, with the forecast as of December 31, 2006 and September 30, 2007. The tables include both dealer loans and purchased loans:
December 31, December 31,
Loan 2007 2006
Origination Forecasted Forecasted
Year Collection % Collection % Variance
----------- ---------------- -------------- ---------
1998 67.4% 67.5% -0.1%
1999 72.3% 72.4% -0.1%
2000 72.8% 73.0% -0.2%
2001 67.8% 67.7% 0.1%
2002 71.0% 70.7% 0.3%
2003 74.6% 74.2% 0.4%
2004 73.7% 73.9% -0.2%
2005 74.3% 74.2%* 0.1%
2006 69.9% 71.1%* -1.2%
2007 70.2% 70.7%** -0.5%
December 31, September 30,
Loan 2007 2007
Origination Forecasted Forecasted
Year Collection % Collection % Variance
----------- ---------------- -------------- ---------
1998 67.4% 67.4% 0.0%
1999 72.3% 72.3% 0.0%
2000 72.8% 72.9% -0.1%
2001 67.8% 67.8% 0.0%
2002 71.0% 71.0% 0.0%
2003 74.6% 74.5% 0.1%
2004 73.7% 73.9% -0.2%
2005 74.3% 74.3% 0.0%
2006 69.9% 70.4% -0.5%
2007 70.2% 70.1% 0.1%
* These forecasted collection percentages differ from those
previously reported in our Annual Report on Form 10-K for the
year ended December 31, 2006 and our 2006 earnings release as
they have been revised for a seasonality factor. This
seasonality factor was first applied during the first quarter
of 2007.
** Collection percentage represents the initial forecasted
collection percentage for 2007 originations at the time of
pricing.
Adjusted Financial Results
--------------------------
Adjusted financial results are provided to help shareholders understand our financial performance. The financial data below is non-GAAP, unless labeled otherwise. We use adjusted financial information internally to measure financial performance and to determine incentive compensation. The tables below show our results following adjustments to reflect non-GAAP accounting methods. These adjustments are explained in the table footnotes and the subsequent "Floating Yield Adjustment" and "License Fee Yield Adjustment" sections. Measures such as adjusted average capital, adjusted net income, adjusted net income per diluted share, adjusted net income plus interest expense after-tax, adjusted return on capital, adjusted revenue, adjusted operating expenses, and economic profit are all non-GAAP financial measures. These non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP.
Adjusted financial results for the three months and year ended December 31, 2007 compared to the same periods in 2006 include the following:
For the Three Months Ended
December 31,
----------------------------------
(Dollars in thousands, except
per share data) 2007 2006 % Change
----------------------------------
Adjusted average capital $ 777,642 $ 573,959 35.5%
Adjusted net income $ 15,864 $ 15,836 0.2%
Interest expense after-tax $ 5,928 $ 5,203 13.9%
Adjusted net income plus
interest expense after-tax $ 21,791 $ 21,039 3.6%
Adjusted return on capital 11.2% 14.7% -23.6%
Cost of capital 6.8% 7.3% -6.8%
Economic profit $ 8,491 $ 10,562 -19.6%
GAAP diluted weighted average
shares outstanding 30,897,546 31,569,813 -2.1%
Adjusted net income per diluted
share $ 0.51 $ 0.50 2.0%
For the Year Ended
December 31,
----------------------------------
(Dollars in thousands, except
per share data) 2007 2006 % Change
----------------------------------
Adjusted average capital $ 710,113 $ 548,482 29.5%
Adjusted net income $ 63,401 $ 63,496 -0.1%
Interest expense after-tax $ 22,798 $ 14,699 55.1%
Adjusted net income plus
interest expense after-tax $ 86,199 $ 78,195 10.2%
Adjusted return on capital 12.1% 14.3% -14.9%
Cost of capital 7.0% 8.1% -13.6%
Economic profit $ 36,193 $ 33,892 6.8%
GAAP diluted weighted average
shares outstanding 31,153,688 35,283,478 -11.7%
Adjusted net income per diluted
share $ 2.04 $ 1.80 13.3%
Economic profit decreased 19.6% for the three months and increased 6.8% for the year ended December 31, 2007 compared to the same periods in 2006. Economic profit is a function of the return on capital in excess of the cost of capital and the amount of capital invested in the business.
For the three months ended December 31, 2007, adjusted average capital grew at 35.5% while the adjusted return on capital declined from 14.7% to 11.2%. For the year ended December 31, 2007, adjusted average capital grew at 29.5% while the adjusted return on capital declined from 14.3% to 12.1%.
Pricing changes implemented in the third quarter of 2006 positively impacted growth in adjusted average capital and negatively impacted the adjusted return on capital for the 2007 periods. We believe the strategy of accepting lower returns on capital in exchange for higher growth rates has been successful to date. First, we believe economic profit to date is higher than would have been achieved without the pricing change. Second, while the pricing changes have reduced revenue as a percentage of average capital (the "loan yield"), they have resulted in increases in the amount of capital invested and decreases in operating expenses as a percentage of adjusted average capital. We expect the negative impact to loan yields will moderate in 2008, but expect the positive impact on the rate of growth and operating efficiencies to continue for a longer period of time. While the changing competitive environment may provide additional opportunities to adjust pricing going forward, we believe our current pricing strategy will result in continued improvements in economic profit in 2008 and 2009.
The expectations outlined above depend on the Company's ability to continue to grow loan originations and produce collection results consistent with expectations.
The following table shows adjusted revenue and adjusted operating expenses as a percentage of adjusted average capital and the percentage change in adjusted average capital for the last four quarters and for each of the last two years compared to the same period in the prior year:
For the Three Months Ended For the Year Ended
December 31,
-------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
2007 2007 2007 2007 2007 2006
-------------------------------------------------
Adjusted revenue
as a percentage
of adjusted
average capital 35.7% 32.3% 32.5% 31.7% 32.9% 37.1%
Adjusted operating
expenses as a
percentage of
adjusted average
capital 14.1% 13.6% 13.6% 14.7% 14.0% 15.1%
Percentage change
in adjusted
average capital 20.8% 29.4% 34.2% 35.5% 29.5% 4.8%
Fourth quarter operating expenses were impacted by higher than normal sales and marketing expenses as a result of expenses associated with our annual Dealer-Partner convention ($1.1 million pre-tax), and higher salaries and wages as a result of a change in the expected vesting period of previously issued performance based restricted stock and restricted stock units ($1.2 million pre-tax). Pre-tax expense related to restricted stock and restricted stock units was $2.3 million and $4.6 million for the three and twelve months ended December 31, 2007, respectively, compared to $0.2 million and $0.6 million for the same periods in 2006.
The following tables show how non-GAAP measures reconcile to GAAP measures. All after-tax adjustments are calculated using a 37% tax rate as we estimate that to be our long term average effective tax rate. Amounts do not recalculate due to rounding.
For the Three Months Ended
December 31,
(Dollars in thousands, -----------------------------
except per share data) 2007 2006 % Change
-------- -------- -------
Adjusted net income
-------------------
GAAP net income $ 12,484 $ 8,495
Floating yield adjustment (after-tax) 1,591 917
License fee yield adjustment
(after-tax) 1,353 (824)
Loss (gain) from discontinued United
Kingdom segment and other related
items (after-tax)(1) 323 14
Litigation expenses (after-tax) (2) -- 7,045
Interest expense related to interest
rate swap agreement (3) 302 --
Adjustment resulting in comparable tax
rate for both periods (4) (189) 189
-------- --------
Adjusted net income $ 15,864 $ 15,836 0.2%
======== ========
Adjusted net income per diluted share $ 0.51 $ 0.50 2.0%
-------------------------------------
Diluted weighted average shares
outstanding 30,897,546 31,569,813 -2.1%
Adjusted average capital
------------------------
GAAP average debt $515,031 $365,708
GAAP average shareholders' equity 256,838 209,927
Floating yield adjustment 9,784 6,406
License fee yield adjustment (4,011) (8,082)
-------- --------
Adjusted average capital $777,642 $573,959 35.5%
======== ========
Adjusted return on capital
--------------------------
Adjusted net income $ 15,864 $ 15,836
Interest expense after-tax 5,928 5,203
-------- --------
Adjusted net income plus interest
expense after-tax $ 21,791 $ 21,039 3.6%
======== ========
Adjusted return on capital (5) 11.2% 14.7% -23.6%
======== ========
Economic profit
---------------
Adjusted return on capital 11.2% 14.7%
Cost of capital (6) 6.8% 7.3%
-------- --------
Adjusted return on capital in excess
of cost of capital 4.4% 7.4%
Adjusted average capital $777,642 $573,959
-------- --------
Economic profit $ 8,491 $ 10,562 -19.6%
======== ========
For the Year Ended
December 31,
(Dollars in thousands, -----------------------------
except per share data) 2007 2006 % Change
---------- --------- -------
Adjusted net income
--------------------
GAAP net income $ 54,916 $ 58,640
Floating yield adjustment (after-tax) 3,555 359
License fee yield adjustment
(after-tax) 4,986 (2,759)
Loss (gain) from discontinued United
Kingdom segment and other related
items (after-tax)(1) (760) 207
Litigation expenses (after-tax) (2) 406 7,045
Interest expense related to interest
rate swap agreement (3) 302 --
Adjustment resulting in comparable tax
rate for both periods (4) (4) 4
---------- ---------
Adjusted net income $ 63,401 $ 63,496 -0.1%
========== =========
Adjusted net income per diluted share $ 2.04 $ 1.80 13.3%
-------------------------------------
Diluted weighted average shares
outstanding 31,153,688 35,283,478 -11.7%
Adjusted average capital
------------------------
GAAP average debt $ 469,704 $ 259,802
GAAP average shareholders' equity 238,050 290,215
Floating yield adjustment 8,198 5,510
License fee yield adjustment (5,839) (7,045)
---------- ---------
Adjusted average capital $ 710,113 $ 548,482 29.5%
========== =========
Adjusted return on capital
--------------------------
Adjusted net income $ 63,401 $ 63,496
Interest expense after-tax 22,798 14,699
---------- ---------
Adjusted net income plus interest
expense after-tax $ 86,199 $ 78,195 10.2%
========== =========
Adjusted return on capital (5) 12.1% 14.3% -14.9%
========== =========
Economic profit
---------------
Adjusted return on capital 12.1% 14.3%
Cost of capital (6) 7.0% 8.1%
---------- ---------
Adjusted return on capital in excess
of cost of capital 5.1% 6.2%
Adjusted average capital $ 710,113 $ 548,482
---------- ---------
Economic profit $ 36,193 $ 33,892 6.8%
========== =========
1) On December 30, 2005, the Company sold the remaining consumer
loan portfolio of its United Kingdom subsidiary.
2) During the fourth quarter of 2006, the Company provided for
$11.2 million pre-tax of additional legal expenses related to an
increase in its estimated loss related to a class action lawsuit
in the state of Missouri. The Company expects litigation of this
size and nature to be infrequent. The Company provided for an
additional $0.6 million pre-tax of legal expenses related to the
lawsuit during 2007. Pursuant to the Memorandum of Understanding
reached in February 2007, the Company transferred funds into a
Qualified Settlement Fund in June and December, 2007. The Court
entered the Order and Final Judgment on December 5, 2007, and the
appeal period lapsed on January 19, 2008.
3) The three month period ended December 31, 2007 includes $0.5
million in interest expense related to an interest rate swap on
our secured financing that was completed in October 2007. The
interest rate swap converts the floating portion of the secured
financing debt to a fixed rate. As rates decreased during the
fourth quarter, the market value of the interest rate swap
declined. However, this decline in market value does not impact
the amount of interest we actually pay on the secured financing.
Since we intend to hold the interest rate swap until maturity, the
additional interest expense recorded in the fourth quarter will
reverse by the maturity date.
4) This adjustment allows the reader to compare the current period
to the prior period assuming a comparable tax rate in both
periods.
5) Adjusted return on capital is defined as annualized adjusted net
income plus interest expense after-tax divided by adjusted average
capital.
6) The cost of capital includes both a cost of equity and a cost of
debt. The cost of equity capital is determined based on a formula
that considers the risk of the business and the risk associated
with our use of debt. The formula utilized for determining the
cost of equity capital is as follows: (the average 30 year
treasury rate + 5%) + ((1 - tax rate) x (the average 30 year
treasury rate + 5% - pre-tax average cost of debt rate) x average
debt/(average equity + average debt x tax rate)). For the three
months and year ended December 31, 2007, the average 30 year
treasury rate was 4.6% and 4.8%, respectively. The pre-tax average
cost of debt was 7.3% and 7.8%, respectively.
For the Three Months Ended
--------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
(Dollars in thousands) 2007 2007 2007 2007
-------- -------- -------- --------
Adjusted revenue
----------------
GAAP total revenue $ 57,351 $ 58,286 $ 61,058 $ 63,232
Floating yield adjustment 131 979 2,008 2,525
License fee yield
adjustment 2,483 1,816 1,470 2,150
Provision for credit
losses (3,723) (3,968) (5,629) (6,345)
-------- -------- -------- --------
$ 56,242 $ 57,113 $ 58,907 $ 61,562
======== ======== ======== ========
Adjusted average capital
-------------------------
GAAP average debt $412,715 $473,141 $477,930 $515,031
GAAP average shareholders'
equity 217,977 233,465 243,922 256,838
Floating yield adjustment 6,587 8,073 8,348 9,784
License fee yield
adjustment (7,684) (6,345) (5,316) (4,011)
-------- -------- -------- --------
$629,595 $708,334 $724,884 $777,642
======== ======== ======== ========
Adjusted revenues as a
percentage of adjusted
average capital 35.7% 32.3% 32.5% 31.7%
======== ======== ======== ========
Adjusted operating expenses
---------------------------
GAAP salaries and wages $ 11,861 $ 13,092 $ 13,620 $ 16,823
GAAP general and
administrative 5,917 7,359 7,266 6,729
GAAP sales and marketing 4,472 4,144 3,835 4,990
Litigation expense -- (500) (145) --
-------- -------- -------- --------
$ 22,250 $ 24,095 $ 24,576 $ 28,542
======== ======== ======== ========
Adjusted operating
expenses as a percentage
of adjusted average
capital 14.1% 13.6% 13.6% 14.7%
======== ======== ======== ========
Percentage change in
adjusted average capital
compared to the same
period in the prior year 20.8% 29.4% 34.2% 35.5%
For the Year Ended
December 31,
-----------------------
2007 2006
-----------------------
Adjusted revenue
----------------
GAAP total revenue $ 239,927 $ 219,332
Floating yield adjustment 5,643 570
License fee yield adjustment 7,919 (4,379)
Provision for credit losses (19,665) (11,882)
--------- ---------
$ 233,824 $ 203,641
========= =========
Adjusted average capital
------------------------
GAAP average debt $ 469,704 $ 259,802
GAAP average shareholders' equity 238,050 290,215
Floating yield adjustment 8,198 5,510
License fee yield adjustment (5,839) (7,045)
--------- ---------
$ 710,113 $ 548,482
========= =========
Adjusted revenues as a percentage
of adjusted average capital 32.9% 37.1%
========= =========
Adjusted operating expenses
---------------------------
GAAP salaries and wages $ 55,396 $ 41,015
GAAP general and administrative 27,271 36,485
GAAP sales and marketing 17,441 16,624
Litigation expense (645) (11,183)
--------- ---------
$ 99,463 $ 82,941
========= =========
Adjusted operating expenses as a
percentage of adjusted average capital 14.0% 15.1%
========= =========
Percentage change in adjusted average
capital compared to the same period
in the prior year 29.5% 4.8%
Floating Yield Adjustment
-------------------------
The purpose of this adjustment is to modify the calculation of our GAAP-based finance charge revenue so that favorable and unfavorable changes in expected cash flows from loans receivable are treated consistently. To make the adjustment understandable, we must first explain how GAAP requires us to account for finance charge revenue, our primary revenue source.
Finance charge revenue equals the cash inflows from our loan portfolio less cash outflows to acquire the loans. Our GAAP finance charge revenue is based on estimates of future cash flows and is recognized on a level-yield basis over the estimated life of the loan. With the level-yield approach, the amount of finance charge revenue recognized from a loan in a given period, divided by the loan asset, is a constant percentage. Under GAAP, favorable changes in expected cash flows are treated as increases to the yield and are recognized over time, while unfavorable changes are recorded as a current period expense. The non-GAAP methodology that we use (the "floating yield" method) is identical to the GAAP approach except that, under the "floating yield" method, all changes in expected cash flows (both positive and negative) are treated as yield adjustments and therefore impact earnings over time. The GAAP treatment always results in a lower carrying value of the loan receivable asset, but may result in either higher or lower earnings for any given period depending on the timing and amount of expected cash flow changes.
We believe floating yield earnings are a more accurate reflection of the performance of our business, since both favorable and unfavorable changes in estimated cash flows are treated consistently.
License Fee Yield Adjustment ----------------------------
The purpose of this adjustment is to make revenue from license fees comparable across time periods. In 2001, we began charging dealer-partners a monthly licensing fee for access to our internet-based Credit Approval Processing System, also known as CAPS.
Effective January 1, 2007, we implemented a change in the way these fees are charged designed to positively impact dealer-partner attrition. We continue to charge a monthly license fee of $599, but instead of collecting the fee in the current period, we collect it from future dealer holdback payments.
As a result of this change, (as of January 1, 2007) we record license fees on a GAAP basis as a yield adjustment, recognizing these fees as finance charge revenue over the term of the dealer loan because collection is dependent on the future cash flows of the loan. Previously, we had recorded the fee as license fee revenue in the month the fee was charged. The current GAAP treatment is more consistent with the cash economics of the business.
To allow for proper comparisons between periods, we make an adjustment to our financial results as though license fees had always been recorded as a yield adjustment.
Cautionary Statement Regarding Forward-Looking Information ----------------------------------------------------------
We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all of our forward-looking statements. Statements in this release that are not historical facts, such as those using terms like "may," "will," "should," "believe," "expect," "anticipate," "assume," "forecast," "estimate," "intend," "plan" and those regarding our future results, plans and objectives, are "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements represent our outlook only as of the date of this release. Actual results could differ materially from these forward-looking statement since the statements are based on our current expectations, which are subject to risks and uncertainties. Factors that might cause such a difference include, but are not limited to, the factors set forth in Item 1A of our Form 10-K for the year ended December 31, 2006, other risk factors discussed herein or listed from time to time in our reports filed with the Securities and Exchange Commission and the following:
* Our inability to accurately forecast the amount and timing of future collections could have a material adverse effect on our results of operations.
* Due to increased competition from traditional financing sources and non-traditional lenders, we may not be able to compete successfully.
* Our ability to maintain and grow the business is dependent on our ability to continue to access funding sources and obtain capital on favorable terms.
* We may not be able to generate sufficient cash flow to service our outstanding debt and fund operations.
* The substantial regulation to which we are subject limits the business, and such regulation or changes in such regulation could result in potential liability.
* Adverse changes in economic conditions, or in the automobile or finance industries or the non-prime consumer finance market, could adversely affect our financial position, liquidity and results of operations and our ability to enter into future financing transactions.
* Litigation we are involved in from time to time may adversely affect our financial condition, results of operations and cash flows.
* We are dependent on our senior management and the loss of any of these individuals or an inability to hire additional personnel could adversely affect our ability to operate profitably.
* Natural disasters, acts of war, terrorist attacks and threats or the escalation of military activity in response to such attacks or otherwise may negatively affect our business, financial condition and results of operations.
Other factors not currently anticipated by management may also materially and adversely affect our results of operations. We do not undertake, and expressly disclaim any obligation, to update or alter our statements whether as a result of new information, future events or otherwise, except as required by applicable law.
Description of Credit Acceptance Corporation --------------------------------------------
Since 1972, Credit Acceptance has provided auto loans to consumers, regardless of their credit history. Our product is offered through a nationwide network of automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and referral sales generated by these same customers; and from sales to customers responding to advertisements for our product, but who actually end up qualifying for traditional financing.
Without our product, consumers are often unable to purchase a vehicle or they purchase an unreliable one and are not provided the opportunity to improve their credit standing. As we report to the three national credit reporting agencies, a significant number of our consumers improve their lives by improving their credit score and move on to more traditional sources of financing. Credit Acceptance is publicly traded on the NASDAQ under the symbol CACC. For more information, visit creditacceptance.com.
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED INCOME STATEMENTS
(Dollars in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
---------------------- ----------------------
(Unaudited) (Unaudited)
2007 2006 2007 2006
---------- ---------- ---------- ----------
Revenue:
Finance charges $ 58,233 $ 47,205 $ 220,473 $ 188,605
License fees 57 3,889 283 13,589
Other income 4,942 4,729 19,171 17,138
---------- ---------- ---------- ----------
Total revenue 63,232 55,823 239,927 219,332
---------- ---------- ---------- ----------
Costs and expenses:
Salaries and wages 16,823 9,548 55,396 41,015
General and
administrative 6,729 17,360 27,271 36,485
Sales and marketing 4,990 4,917 17,441 16,624
Provision for
credit losses 6,345 3,437 19,947 11,006
Interest 9,888 8,259 36,669 23,330
Other expense 17 49 91 226
---------- ---------- ---------- ----------
Total costs and
expenses 44,792 43,570 156,815 128,686
---------- ---------- ---------- ----------
Operating income 18,440 12,253 83,112 90,646
Foreign currency
gain (loss) 5 (18) 69 (6)
---------- ---------- ---------- ----------
Income from
continuing
operations before
provision for
income taxes
18,445 12,235 83,181 90,640
Provision for
income taxes 6,180 3,726 29,567 31,793
---------- ---------- ---------- ----------
Income from
continuing
operations 12,265 8,509 53,614 58,847
---------- ---------- ---------- ----------
Discontinued
operations
Loss from
discontinued
United Kingdom
operations (282) (20) (562) (297)
Benefit for income
taxes (501) (6) (1,864) (90)
---------- ---------- ---------- ----------
Gain (loss) on
discontinued
operations 219 (14) 1,302 (207)
---------- ---------- ---------- ----------
Net income $ 12,484 $ 8,495 $ 54,916 $ 58,640
========== ========== ========== ==========
Net income per
common share:
Basic $ 0.42 $ 0.28 $ 1.83 $ 1.78
========== ========== ========== ==========
Diluted $ 0.40 $ 0.27 $ 1.76 $ 1.66
========== ========== ========== ==========
Income from
continuing
operations per
common share:
Basic $ 0.41 $ 0.28 $ 1.78 $ 1.78
========== ========== ========== ==========
Diluted $ 0.40 $ 0.27 $ 1.72 $ 1.67
========== ========== ========== ==========
Gain (loss) from
discontinued
operations per
common share:
Basic $ 0.01 $ (0.00) $ 0.04 $ (0.01)
========== ========== ========== ==========
Diluted $ 0.01 $ (0.00) $ 0.04 $ (0.01)
========== ========== ========== ==========
Weighted average
shares
outstanding:
Basic 30,007,476 29,921,196 30,053,129 33,035,693
Diluted 30,897,546 31,569,813 31,153,688 35,283,478
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
As of
December 31,
2007 2006
--------- ---------
(Unaudited)
ASSETS:
Cash and cash equivalents $ 712 $ 8,528
Restricted cash and cash equivalents 74,102 45,609
Restricted securities available for sale 3,290 3,564
Loans receivable (including $16,125 and $23,038
from affiliates as of December 31,
2007 and December 31, 2006, respectively) 944,698 754,571
Allowance for credit losses (134,145) (128,791)
--------- ---------
Loans receivable, net 810,553 625,780
--------- ---------
Property and equipment, net 20,124 16,203
Income taxes receivable 20,712 11,734
Other assets 12,689 13,795
--------- ---------
Total Assets $ 942,182 $ 725,213
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Accounts payable and accrued liabilities $ 79,834 $ 78,294
Line of credit 36,300 38,400
Secured financing 488,065 345,144
Mortgage note and capital lease obligations 7,765 8,631
Deferred income taxes, net 64,768 44,397
--------- ---------
Total Liabilities 676,732 514,866
--------- ---------
Shareholders' Equity:
Preferred stock, $.01 par value, 1,000,000
shares authorized, none issued -- --
Common stock, $.01 par value, 80,000,000 shares
authorized, 30,240,859 and 30,179,959 shares
issued and outstanding as of December 31, 2007
and December 31, 2006, respectively 302 302
Paid-in capital 4,134 828
Retained earnings 261,001 209,253
Accumulated other comprehensive income (loss),
net of tax of $(7) and $19 at December 31, 2007
and December 31, 2006, respectively 13 (36)
--------- ---------
Total Shareholders' Equity 265,450 210,347
--------- ---------
Total Liabilities and Shareholders' Equity $ 942,182 $ 725,213
========= =========