SOUTHFIELD, Mich., Oct. 26, 2005 (PRIMEZONE) -- Credit Acceptance Corporation (Pink Sheets:CACC) (the "Company") announced certain operating results for the third quarter of 2005. Results for the quarter and nine months ended September 30, 2005 compared to the same periods in 2004 include the following:
-- Loan origination dollar volume decreased 3.3% for the quarter
and increased 2.3% for the nine months.
-- Loan origination unit volume increased 9.0% for the quarter
and 9.1% for the nine months.
-- The number of active dealer-partners increased 37.7% for the
quarter and 45.6% for the nine months.
-- Loan origination unit volume per active dealer-partner
decreased 20.8% for the quarter and 25.1% for the nine
months.
Dealer-Partner Enrollments and Volume
The number of active dealer-partners is a function of new dealer-partner enrollments and attrition. Active dealer-partners are dealer-partners who submit at least one loan during the period. The following table summarizes the changes in active dealer-partners and corresponding unit volume for the three and twelve months ended September 30, 2005 and 2004:
Three Months Ended Three Months Ended
September 30, 2005 September 30, 2004
Dealer- Unit Dealer- Unit
Partners Volume Average Partners Volume Average
Production from
quarter ended
June 30 of
the same year 1,224 19,018 15.5 899 17,268 19.2
Attrition(a) (140) (565) 4.0 (66) (254) 3.8
Volume change
from dealer-
partners active
in both periods n/a (8) n/a n/a 161 n/a
------------------------ -----------------------
Current period
volume from
dealer-partners
active both
periods 1,084 18,445 17.0 833 17,175 20.6
New dealer-
partners (b) 198 1,442 7.3 105 962 9.2
Restarts (c) 36 150 4.2 19 238 12.5
------------------------ -----------------------
Current period
production 1,318 20,037 15.2 957 18,375 19.2
Twelve Months Ended Twelve Months Ended
September 30, 2005 September 30, 2004
Dealer- Unit Dealer- Unit
Partners Volume Average Partners Volume Average
Production from
12 month period
ending 1 year
ago 1,125 73,331 65.2 850 59,246 69.7
Attrition (a) (209) (3,404) 16.3 (156) (4,193) 26.9
Volume change
from dealer-
partners active
in both periods n/a (5,442) n/a n/a 3,534 n/a
------------------------ -----------------------
Current period
volume from
dealer-partners
active both
periods 916 64,485 70.4 694 58,587 84.4
New dealer-
partners (b) 697 16,320 23.4 408 13,831 33.9
Restarts (c) 34 568 16.7 23 913 39.7
------------------------ -----------------------
Current period
production 1,647 81,373 49.4 1,125 73,331 65.2
(a) Dealer-partner attrition is measured according to the following
formula: dealer-partners active during the prior period who
become inactive in the current period.
(b) Excludes new dealer-partners that have enrolled in the Company's
program, but have not submitted at least one loan during the
period.
(c) Restarts are previously active dealer-partners that were inactive
during the prior period who became active during the current
period.
Unit volumes produced in the current quarter exceeded the comparable period of 2004 by 1,662 units (9.0%). Unit volumes produced over the prior 12 months exceeded the comparable period by 8,042 units (11.0%).
The increase in unit volumes is primarily the result of production from new dealer-partners, partially offset by a decline in volumes from existing dealer-partners and from volume lost due to attrition.
The Company believes the decline in loans per dealer-partner is primarily the result of a more difficult competitive environment.
The increase in new dealer-partner enrollments in the third quarter of 2005 is primarily due to the new policy implemented in the first quarter of 2005. The new policy allows prospective dealer-partners to enroll in the Company's program without paying the $9,850 enrollment fee. Prospective dealer-partners choosing this option instead agree to allow the Company to keep 50% of the first accelerated dealer holdback payment. This payment, called Portfolio Profit Express, is paid to qualifying dealer-partners after 100 loans have been originated and assigned to the Company. Based on the historical average of Portfolio Profit Express payments, the Company expects average enrollment fee revenue per dealer-partner for those dealer-partners electing the new option and reaching 100 loans will be approximately $15,000 - $20,000. Approximately 65% of the dealer-partners that enrolled during the third quarter of 2005 took advantage of this new enrollment option.
Loan Originations and Loans Outstanding (a)
(Dollars in thousands)
Three Months Ended September 30,
2005 2004 % Change
Number of loans originated 20,037 18,375 9.0%
Loan originations $232,358 $240,236 (3.3%)
Average loan size $11.6 $13.1 (11.5%)
Number of loans outstanding
at period end (b) 162,512 140,491 15.7%
Nine Months Ended September 30,
2005 2004 % Change
Number of loans originated 64,902 59,484 9.1%
Loan originations $772,084 $754,635 2.3%
Average loan size $11.9 $12.7 (6.3%)
Number of loans outstanding
at period end (b) 162,512 140,491 15.7%
(a) Data reported in the table above relates to the United States,
the Company's only business segment that continues to originate
new loans.
(b) The number of loans outstanding at period end is comprised of
active loans with an outstanding balance that have not been
written off. The Company's policy is to write off loans after
270 days have passed and no payment has been received.
The average contract size generated in the current quarter decreased 11.5%. The Company generally expects the average contract size to increase over time following the trend of used vehicle prices and average wage rates. This expectation is consistent with our historical experience. Periodically, program changes impact this overall trend. The Company made changes to its loan program in the fourth quarter of 2004 and in the second quarter of 2005 that had the effect of reducing the average contract size. The Company believes these program changes had an overall positive impact on the Company's financial results.
Loan Portfolio Performance
The following table compares the Company's forecast of collection rates for loans originated by year in the United States as of September 30, 2005 with the forecast as of December 31, 2004:
Loan Origination September 30, 2005 December 31, 2004
Year Forecasted Forecasted Variance
Collection % Collection %
1992 82.0% 81.8% 0.2%
1993 76.2% 76.0% 0.2%
1994 62.3% 62.1% 0.2%
1995 55.4% 55.3% 0.1%
1996 55.4% 55.5% (0.1%)
1997 58.4% 58.6% (0.2%)
1998 67.6% 67.6% 0.0%
1999 72.0% 72.0% 0.0%
2000 72.2% 72.2% 0.0%
2001 67.4% 67.3% 0.1%
2002 69.5% 69.1% 0.4%
2003 72.1% 71.8% 0.3%
2004 71.3% 70.5% 0.8%
During the quarter ended September 30, 2005, collection rates were generally consistent with the Company's expectations.
The following table presents forecasted collection rates, advance rates, the spread (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections in the United States that have been realized as of September 30, 2005. The amounts presented are expressed as a percent of the original loan amount by year of loan origination.
Loan Origination Forecasted Advance % Spread % % of Forecast
Year Collection % Realized
1992 82.0% 35.3% 46.7% 100.0%
1993 76.2% 37.3% 38.9% 100.0%
1994 62.3% 41.8% 20.5% 100.0%
1995 55.4% 45.3% 10.1% 100.0%
1996 55.4% 48.4% 7.0% 99.6%
1997 58.4% 48.3% 10.1% 99.1%
1998 67.6% 49.4% 18.2% 99.0%
1999 72.0% 52.3% 19.7% 98.5%
2000 72.2% 50.9% 21.3% 97.9%
2001 67.4% 48.0% 19.4% 96.2%
2002 69.5% 45.7% 23.8% 92.9%
2003 72.1% 47.0% 25.1% 78.6%
2004 71.3% 48.3% 23.0% 50.7%
2005 -- 50.8% -- --
Although the advance percentage is higher in 2005 as compared to 2004, the Company expects loans originated to date during 2005 to be slightly more profitable than 2004 originations as a result of (a) higher expected collection rates, (b) additional fee revenue related to the Company's GAP product introduced in the first quarter of 2005, and (c) an increase in the monthly fee charged to dealer-partners for access to the Company's patented Credit Application Processing System ("CAPS") from $499 to $599 effective March 1, 2005.
Liquidity (in thousands)
September 30, September 30, Cash
2005 2004 Increase/(Decrease)
Cash $14,336 $1,135 $13,201
Restricted Cash(a) 30,401 21,910 8,491
---------- ---------- ----------
Total Cash $44,737 $23,045 $21,692
Outstanding
Revolving Credit $169,500 $98,700 $70,800
Other Debt (b) 24,569 110,148 (85,579)
---------- ---------- ----------
Total Debt $194,069 $208,848 $(14,779)
Repurchase of
common stock,
net of stock
options
exercised $(1,418)
Revolving Credit
Capacity
Available (c) $160,150 $230,950
(a) Restricted cash includes funds in trust accounts that are
utilized by the Company's third party vehicle service contract
administrators to pay claims on vehicle service contracts. As of
September 30, 2005 and September 30, 2004, there was $9.7 million
and $4.2 million, respectively, available in the trusts to pay
claims.
(b) Other debt includes the Company's term secured financing,
mortgage note, and capital lease obligations.
(c) Revolving credit capacity available consists of the Company's
$135 million line of credit facility with a commercial bank
syndicate and $200 million revolving warehouse facility with an
institutional investor less $5.4 million for letters of credit
issued less the amount of outstanding revolving credit.
Over the last twelve months, cash flow from operations was used to reduce outstanding debt by $14.8 million, increase cash balances by $21.7 million, repurchase $1.4 million in common stock (net of stock option proceeds) and increase the Company's investment in loans receivable. The precise amount of the increase in loans receivable is not available at this time, as it will be impacted by the change in accounting methodology discussed below.
Restatement
On June 24, 2005, the Company issued a press release announcing a change in accounting methodology for its loan portfolio and the Company's pending restatement of its previously reported financial results. The Company currently anticipates completing this process and filing its past due reports in early 2006.
The Company has two debt facilities that require the Company to timely file its public reports. The Company has received waivers of this requirement on both debt facilities through December 15, 2005. The Company intends to continue to provide its lenders with quarterly financial statements based on the Company's historical loan accounting policies until the restatement is complete and is confident that any necessary waivers providing the Company with additional time to complete its public filings will be received.
Cautionary Statement Regarding Forward Looking Information
Certain statements in this release that are not historical facts, such as those using terms like "believes," "expects," "anticipates," "assumes," "forecasts," "estimates," "intends" and those regarding the Company's future results, plans and objectives, are "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements represent the Company's outlook only as of the date of this release. While the Company believes that its forward-looking statements are reasonable, actual results could differ materially since the statements are based on current expectations, which are subject to risks and uncertainties. Factors that might cause such a difference include the following:
-- the Company's potential inability to accurately forecast and
estimate the amount and timing of future collections,
-- the Company's pending restatement of prior years financial
statements,
-- increased competition from traditional financing sources and
from non-traditional lenders,
-- the unavailability of funding at competitive rates of
interest,
-- the Company's potential inability to continue to obtain third
party financing on favorable terms,
-- the Company's potential inability to generate sufficient cash
flow to service its debt and fund its future operations,
-- adverse changes in applicable laws and regulations,
-- adverse changes in economic conditions,
-- adverse changes in the automobile or finance industries or in
the non-prime consumer finance market,
-- the Company's potential inability to maintain or increase the
volume of automobile loans,
-- an increase in the amount or severity of litigation against
the Company,
-- the loss of key management personnel or the inability to hire
qualified personnel,
-- the effect of terrorist attacks and potential attacks, and
-- various other factors discussed in the Company's reports
filed with the Securities and Exchange Commission.
Other factors not currently anticipated by management may also materially and adversely affect the Company's results of operations. The Company does not undertake, and expressly disclaims any obligation, to update or alter its 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 may be unable to purchase a vehicle or they may purchase an unreliable one, or they may not have the opportunity to improve their credit standing. As we report to the three national credit reporting agencies, a significant number of our customers improve their lives by improving their credit score and move on to more traditional sources of financing. Credit Acceptance is publicly traded under the symbol CACC. For more information, visit www.creditacceptance.com.