Michigan
|
000-20202
|
38-1999511
|
||
(State or other jurisdiction of incorporation)
|
(Commission File Number)
|
(I.R.S. Employer Identification No.)
|
||
25505 West Twelve Mile Road
|
48034-8339
|
|||
Southfield, Michigan
|
||||
(Address of principal executive offices)
|
(Zip Code)
|
Not Applicable
|
||
Former name or former address, if changed since last report
|
CREDIT ACCEPTANCE CORPORATION
|
|||
Date: February 2, 2012
|
By:
|
/s/ Kenneth S. Booth
|
|
Kenneth S. Booth
|
|||
Chief Financial Officer
|
|||
Exhibit No.
|
Description
|
|||
99.1
|
Press Release dated February 2, 2012.
|
Forecasted Collection Percentage as of
|
Variance in Forecasted Collection Percentage from
|
|||||||||||||||||||||||||||
Consumer Loan Assignment Year
|
December 31, 2011
|
September 30, 2011
|
December 31, 2010
|
Initial
Forecast
|
September 30, 2011
|
December 31, 2010
|
Initial
Forecast
|
|||||||||||||||||||||
2002
|
70.5
|
%
|
70.5
|
%
|
70.5
|
%
|
67.9
|
%
|
0.0
|
%
|
0.0
|
%
|
2.6
|
%
|
||||||||||||||
2003
|
73.7
|
%
|
73.7
|
%
|
73.7
|
%
|
72.0
|
%
|
0.0
|
%
|
0.0
|
%
|
1.7
|
%
|
||||||||||||||
2004
|
73.0
|
%
|
73.0
|
%
|
73.0
|
%
|
73.0
|
%
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
||||||||||||||
2005
|
73.6
|
%
|
73.6
|
%
|
73.7
|
%
|
74.0
|
%
|
0.0
|
%
|
-0.1
|
%
|
-0.4
|
%
|
||||||||||||||
2006
|
70.0
|
%
|
70.1
|
%
|
70.2
|
%
|
71.4
|
%
|
-0.1
|
%
|
-0.2
|
%
|
-1.4
|
%
|
||||||||||||||
2007
|
68.1
|
%
|
68.1
|
%
|
67.9
|
%
|
70.7
|
%
|
0.0
|
%
|
0.2
|
%
|
-2.6
|
%
|
||||||||||||||
2008
|
70.0
|
%
|
69.9
|
%
|
69.9
|
%
|
69.7
|
%
|
0.1
|
%
|
0.1
|
%
|
0.3
|
%
|
||||||||||||||
2009
|
79.4
|
%
|
79.2
|
%
|
78.5
|
%
|
71.9
|
%
|
0.2
|
%
|
0.9
|
%
|
7.5
|
%
|
||||||||||||||
2010
|
76.8
|
%
|
76.5
|
%
|
75.8
|
%
|
73.6
|
%
|
0.3
|
%
|
1.0
|
%
|
3.2
|
%
|
||||||||||||||
2011 (1)
|
73.2
|
%
|
73.3
|
%
|
-
|
72.5
|
%
|
-0.1
|
%
|
-
|
0.7
|
%
|
(1)
|
The forecasted collection rate for 2011 consumer loans as of December 31, 2011 includes both consumer loans that were in our portfolio as of September 30, 2011 and consumer loans assigned during the most recent quarter. The following table provides forecasted collection rates for each of these segments:
|
Forecasted Collection Percentage as of
|
||||||||||||
2011 Consumer Loan Assignment Period
|
December 31, 2011
|
September 30, 2011
|
Variance
|
|||||||||
January 1, 2011 through September 30, 2011
|
73.8
|
%
|
73.3
|
%
|
0.5
|
%
|
||||||
October 1, 2011 through December 31, 2011
|
71.2
|
%
|
-
|
-
|
As of December 31, 2011
|
||||||||||||||||
Consumer Loan Assignment Year
|
Forecasted Collection %
|
Advance % (1)
|
Spread %
|
% of Forecast Realized (2)
|
||||||||||||
2002
|
70.5
|
%
|
42.2
|
%
|
28.3
|
%
|
99.6
|
%
|
||||||||
2003
|
73.7
|
%
|
43.4
|
%
|
30.3
|
%
|
99.5
|
%
|
||||||||
2004
|
73.0
|
%
|
44.0
|
%
|
29.0
|
%
|
99.4
|
%
|
||||||||
2005
|
73.6
|
%
|
46.9
|
%
|
26.7
|
%
|
99.2
|
%
|
||||||||
2006
|
70.0
|
%
|
46.6
|
%
|
23.4
|
%
|
98.3
|
%
|
||||||||
2007
|
68.1
|
%
|
46.5
|
%
|
21.6
|
%
|
96.6
|
%
|
||||||||
2008
|
70.0
|
%
|
44.6
|
%
|
25.4
|
%
|
92.0
|
%
|
||||||||
2009
|
79.4
|
%
|
43.9
|
%
|
35.5
|
%
|
82.6
|
%
|
||||||||
2010
|
76.8
|
%
|
44.7
|
%
|
32.1
|
%
|
53.4
|
%
|
||||||||
2011
|
73.2
|
%
|
45.5
|
%
|
27.7
|
%
|
18.0
|
%
|
(1)
|
Represents advances paid to dealer-partners on consumer loans assigned under our portfolio program and one-time payments made to dealer-partners to purchase consumer loans assigned under our purchase program as a percentage of the initial balance of the consumer loans. Payments of dealer holdback and accelerated dealer holdback are not included.
|
(2)
|
Presented as a percentage of total forecasted collections.
|
Consumer Loan Assignment Year
|
Forecasted Collection %
|
Advance % (1)
|
Spread %
|
||||||||||
Dealer loans
|
2007
|
68.0
|
%
|
45.8
|
%
|
22.2
|
%
|
||||||
2008
|
70.5
|
%
|
43.3
|
%
|
27.2
|
%
|
|||||||
2009
|
79.5
|
%
|
43.5
|
%
|
36.0
|
%
|
|||||||
2010
|
76.8
|
%
|
44.4
|
%
|
32.4
|
%
|
|||||||
2011
|
73.1
|
%
|
45.1
|
%
|
28.0
|
%
|
|||||||
Purchased loans
|
2007
|
68.3
|
%
|
49.1
|
%
|
19.2
|
%
|
||||||
2008
|
69.1
|
%
|
46.7
|
%
|
22.4
|
%
|
|||||||
2009
|
79.3
|
%
|
45.4
|
%
|
33.9
|
%
|
|||||||
2010
|
76.8
|
%
|
46.7
|
%
|
30.1
|
%
|
|||||||
2011
|
74.0
|
%
|
49.3
|
%
|
24.7
|
%
|
(1)
|
Represents advances paid to dealer-partners on consumer loans assigned under our portfolio program and one-time payments made to dealer-partners to purchase consumer loans assigned under our purchase program as a percentage of the initial balance of the consumer loans. Payments of dealer holdback and accelerated dealer holdback are not included.
|
Year over Year Percent Change
|
||||||||
Three Months Ended
|
Unit Volume
|
Dollar Volume (1)
|
||||||
March 31, 2010
|
11.2
|
%
|
21.6
|
%
|
||||
June 30, 2010
|
22.7
|
%
|
42.2
|
%
|
||||
September 30, 2010
|
26.9
|
%
|
51.5
|
%
|
||||
December 31, 2010
|
37.7
|
%
|
66.9
|
%
|
||||
March 31, 2011
|
36.7
|
%
|
59.3
|
%
|
||||
June 30, 2011
|
28.7
|
%
|
41.3
|
%
|
||||
September 30, 2011
|
28.6
|
%
|
40.5
|
%
|
||||
December 31, 2011
|
25.3
|
%
|
32.1
|
%
|
(1)
|
Represents advances paid to dealer-partners on consumer loans assigned under our portfolio program and one-time payments made to dealer-partners to purchase consumer loans assigned under our purchase program. Payments of dealer holdback and accelerated dealer holdback are not included.
|
For the Three Months Ended December 31,
|
||||||||||||
2011
|
2010
|
% Change
|
||||||||||
Consumer loan unit volume
|
40,482
|
32,299
|
25.3
|
%
|
||||||||
Active dealer-partners (1)
|
3,203
|
2,546
|
25.8
|
%
|
||||||||
Average volume per active dealer-partner
|
12.6
|
12.7
|
-0.8
|
%
|
(1)
|
Active dealer-partners are dealer-partners who have received funding for at least one dealer loan or purchased loan during the period.
|
For the Three Months Ended December 31,
|
||||||||||||
2011
|
2010
|
% Change
|
||||||||||
Consumer loan unit volume from dealer-partners active both periods
|
30,994
|
28,971
|
7.0
|
%
|
||||||||
Dealer-partners active both periods
|
1,943
|
1,943
|
-
|
|||||||||
Average volume per dealer-partners active both periods
|
16.0
|
14.9
|
7.0
|
%
|
||||||||
Consumer loan unit volume from new dealer-partners
|
1,713
|
1,397
|
22.6
|
%
|
||||||||
New active dealer-partners (1)
|
382
|
274
|
39.4
|
%
|
||||||||
Average volume per new active dealer-partners
|
4.5
|
5.1
|
-11.8
|
%
|
||||||||
Attrition (2)
|
-10.3
|
%
|
-15.0
|
%
|
(1)
|
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 period.
|
(2)
|
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 did not receive funding for any dealer loans or purchased loans during the current period divided by prior year comparable period consumer loan unit volume.
|
For the Three Months Ended December 31,
|
For the Years Ended December 31,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Dealer loan unit volume as a percentage of total unit volume
|
92.6
|
%
|
91.8
|
%
|
92.5
|
%
|
90.9
|
%
|
||||||||
Dealer loan dollar volume as a percentage of total dollar volume (1)
|
90.4
|
%
|
89.9
|
%
|
90.4
|
%
|
88.7
|
%
|
(1)
|
Represents advances paid to dealer-partners on consumer loans assigned under our portfolio program and one-time payments made to dealer-partners to purchase consumer loans assigned under our purchase program. Payments of dealer holdback and accelerated dealer holdback are not included.
|
For the Three Months Ended December 31,
|
For the Years Ended December 31,
|
|||||||||||||||||||||||
(Dollars in thousands, except per share data)
|
2011
|
2010
|
% Change
|
2011
|
2010
|
% Change
|
||||||||||||||||||
Adjusted average capital
|
$ | 1,512,825 | $ | 1,129,721 | 33.9 | % | $ | 1,371,102 | $ | 1,074,210 | 27.6 | % | ||||||||||||
Adjusted net income
|
$ | 51,348 | $ | 43,639 | 17.7 | % | $ | 194,084 | $ | 160,488 | 20.9 | % | ||||||||||||
Adjusted interest expense after-tax
|
$ | 9,490 | $ | 7,398 | 28.3 | % | $ | 36,059 | $ | 30,084 | 19.9 | % | ||||||||||||
Adjusted net income plus interest expense after-tax
|
$ | 60,838 | $ | 51,037 | 19.2 | % | $ | 230,143 | $ | 190,572 | 20.8 | % | ||||||||||||
Adjusted return on capital
|
16.1 | % | 18.1 | % | -11.0 | % | 16.8 | % | 17.7 | % | -5.1 | % | ||||||||||||
Cost of capital
|
5.8 | % | 6.8 | % | -14.7 | % | 6.4 | % | 7.2 | % | -11.1 | % | ||||||||||||
Economic profit
|
$ | 38,889 | $ | 31,765 | 22.4 | % | $ | 143,143 | $ | 112,685 | 27.0 | % | ||||||||||||
GAAP diluted weighted average shares outstanding
|
26,259 | 27,865 | -5.8 | % | 26,601 | 29,985 | -11.3 | % | ||||||||||||||||
Adjusted net income per diluted share
|
$ | 1.96 | $ | 1.57 | 24.8 | % | $ | 7.30 | $ | 5.35 | 36.4 | % |
Year over Year Change in Economic Profit
|
||||||||
(In thousands)
|
For the Three Months Ended December 31, 2011
|
For the Year Ended
December 31, 2011
|
||||||
Increase in adjusted average capital
|
$
|
10,772
|
$
|
31,144
|
||||
Decrease in cost of capital
|
3,858
|
12,413
|
||||||
Decrease in adjusted return on capital
|
(7,506
|
)
|
(13,099
|
)
|
||||
Increase in economic profit
|
$
|
7,124
|
$
|
30,458
|
·
|
An increase in adjusted average capital of 33.9% due to growth in our loan portfolio as a result of increases in active dealer-partners, the size of the average consumer loan assignment, and advance rates.
|
·
|
A decrease in our cost of capital of 100 basis points primarily due to a decline in the average cost of equity resulting from a decline in the average 30 year treasury rate.
|
·
|
A decrease in our adjusted return on capital of 200 basis points primarily as a result of the following:
|
·
|
Finance charges decreased as a percentage of adjusted average capital primarily as a result of a decrease in the yield on our loan portfolio due to higher advance rates on consumer loans assigned in 2010 and 2011. The decrease in finance charges negatively impacted the adjusted return on capital by 310 basis points.
|
·
|
Operating expenses decreased as a percentage of adjusted average capital primarily as a result of decreased support and origination expenses. The decline in support expenses was mainly due to lower expenses related to information technology and finance activities. The decline in origination expenses was primarily due to consumer loan unit volume growing at a slower rate than adjusted average capital. The decrease in operating expenses positively impacted the adjusted return on capital by 120 basis points.
|
·
|
An increase in adjusted average capital of 27.6% due to growth in our loan portfolio as a result of increases in active dealer-partners, the size of the average consumer loan assignment, and advance rates.
|
·
|
A decrease in our cost of capital of 80 basis points primarily due to a decline in the average cost of debt resulting from a reduction in fixed fees as a percentage of average outstanding debt and a change in the mix of our outstanding debt.
|
·
|
A decrease in our adjusted return on capital of 90 basis points primarily as a result of the following:
|
·
|
Finance charges decreased as a percentage of adjusted average capital primarily as a result of a decrease in the yield on our loan portfolio due to higher advance rates on consumer loans assigned in 2010 and 2011. The decrease in finance charges negatively impacted the adjusted return on capital by 190 basis points.
|
·
|
Operating expenses decreased as a percentage of adjusted average capital primarily as a result of decreased support expenses mainly due to lower expenses related to information technology and finance activities. The decrease in operating expenses positively impacted the adjusted return on capital by 110 basis points.
|
For the Three Months Ended
|
||||||||||||||||||||||||||||||||
Dec. 31, 2011
|
Sept. 30, 2011
|
Jun. 30, 2011
|
Mar. 31, 2011
|
Dec. 31, 2010
|
Sept. 30, 2010
|
Jun. 30, 2010
|
Mar. 31,
2010
|
|||||||||||||||||||||||||
Adjusted revenue as a percentage of adjusted average capital
|
33.2
|
%
|
33.9
|
%
|
35.0
|
%
|
37.9
|
%
|
38.1
|
%
|
38.0
|
%
|
38.7
|
%
|
37.8
|
%
|
||||||||||||||||
Operating expenses as a percentage of adjusted average capital
|
7.6
|
%
|
7.8
|
%
|
8.2
|
%
|
9.3
|
%
|
9.5
|
%
|
10.4
|
%
|
9.3
|
%
|
10.9
|
%
|
||||||||||||||||
Adjusted return on capital
|
16.1
|
%
|
16.4
|
%
|
16.9
|
%
|
18.0
|
%
|
18.1
|
%
|
17.4
|
%
|
18.5
|
%
|
17.0
|
%
|
||||||||||||||||
Percentage change in adjusted average capital compared to the same period in the prior year
|
33.9
|
%
|
30.6
|
%
|
26.0
|
%
|
19.2
|
%
|
14.1
|
%
|
8.7
|
%
|
6.0
|
%
|
1.4
|
%
|
For the Three Months Ended
|
||||||||||||||||||||||||||||||||
(Dollars in thousands, except per share data)
|
Dec. 31,
2011
|
Sept. 30,
2011
|
Jun. 30,
2011
|
Mar. 31,
2011
|
Dec. 31,
2010
|
Sept. 30,
2010
|
Jun. 30,
2010
|
Mar. 31,
2010
|
||||||||||||||||||||||||
Adjusted net income
|
||||||||||||||||||||||||||||||||
GAAP net income
|
$
|
50,049
|
$
|
49,960
|
$
|
44,844
|
$
|
43,191
|
$
|
46,980
|
$
|
42,047
|
$
|
49,040
|
$
|
32,010
|
||||||||||||||||
Floating yield adjustment (after-tax)
|
810
|
(449
|
)
|
2,817
|
3,822
|
(10
|
)
|
(1,526
|
)
|
(330
|
)
|
2,349
|
||||||||||||||||||||
Program fee yield adjustment (after-tax)
|
228
|
33
|
35
|
43
|
49
|
61
|
79
|
115
|
||||||||||||||||||||||||
Loss from discontinued United Kingdom segment (after-tax)
|
-
|
-
|
-
|
-
|
-
|
-
|
25
|
5
|
||||||||||||||||||||||||
Adjustment to record taxes at 37% (1)
|
261
|
(399
|
)
|
(344
|
)
|
(817
|
)
|
(3,380
|
)
|
(974
|
)
|
(7,085
|
)
|
1,033
|
||||||||||||||||||
Adjusted net income
|
$
|
51,348
|
$
|
49,145
|
$
|
47,352
|
$
|
46,239
|
$
|
43,639
|
$
|
39,608
|
$
|
41,729
|
$
|
35,512
|
||||||||||||||||
Adjusted net income per diluted share
|
$
|
1.96
|
$
|
1.88
|
$
|
1.81
|
$
|
1.68
|
$
|
1.57
|
$
|
1.39
|
$
|
1.32
|
$
|
1.12
|
||||||||||||||||
Diluted weighted average shares outstanding
|
26,259
|
26,136
|
26,111
|
27,489
|
27,865
|
28,452
|
31,601
|
31,584
|
||||||||||||||||||||||||
Adjusted revenue
|
||||||||||||||||||||||||||||||||
GAAP total revenue
|
$
|
137,976
|
$
|
133,739
|
$
|
129,965
|
$
|
123,512
|
$
|
115,433
|
$
|
111,661
|
$
|
111,779
|
$
|
103,262
|
||||||||||||||||
Floating yield adjustment
|
1,286
|
(712
|
)
|
4,472
|
6,067
|
(16
|
)
|
(2,423
|
)
|
(524
|
)
|
3,729
|
||||||||||||||||||||
Program fee yield adjustment
|
361
|
53
|
56
|
67
|
77
|
97
|
125
|
182
|
||||||||||||||||||||||||
Provision for credit losses
|
(6,569
|
)
|
(4,565
|
)
|
(8,953
|
)
|
(8,921
|
)
|
(1,978
|
)
|
24
|
(1,782
|
)
|
(6,433
|
)
|
|||||||||||||||||
Provision for claims
|
(7,666
|
)
|
(8,363
|
)
|
(7,771
|
)
|
(6,599
|
)
|
(5,823
|
)
|
(6,112
|
)
|
(6,282
|
)
|
(5,212
|
)
|
||||||||||||||||
Adjusted revenue
|
$
|
125,388
|
$
|
120,152
|
$
|
117,769
|
$
|
114,126
|
$
|
107,693
|
$
|
103,247
|
$
|
103,316
|
$
|
95,528
|
||||||||||||||||
Adjusted average capital
|
||||||||||||||||||||||||||||||||
GAAP average debt
|
$
|
985,668
|
$
|
941,531
|
$
|
918,153
|
$
|
723,781
|
$
|
676,978
|
$
|
645,383
|
$
|
509,867
|
$
|
492,069
|
||||||||||||||||
GAAP average shareholders' equity
|
516,806
|
467,290
|
418,402
|
476,281
|
448,825
|
437,288
|
553,297
|
514,364
|
||||||||||||||||||||||||
Floating yield adjustment
|
10,530
|
11,139
|
9,549
|
6,294
|
4,280
|
5,230
|
5,485
|
5,619
|
||||||||||||||||||||||||
Program fee yield adjustment
|
(179
|
)
|
(244
|
)
|
(278
|
)
|
(317
|
)
|
(362
|
)
|
(417
|
)
|
(486
|
)
|
(583
|
)
|
||||||||||||||||
Adjusted average capital
|
$
|
1,512,825
|
$
|
1,419,716
|
$
|
1,345,826
|
$
|
1,206,039
|
$
|
1,129,721
|
$
|
1,087,484
|
$
|
1,068,163
|
$
|
1,011,469
|
||||||||||||||||
Adjusted revenue as a percentage of adjusted average capital
|
33.2
|
%
|
33.9
|
%
|
35.0
|
%
|
37.9
|
%
|
38.1
|
%
|
38.0
|
%
|
38.7
|
%
|
37.8
|
%
|
||||||||||||||||
Adjusted interest expense
|
||||||||||||||||||||||||||||||||
GAAP interest expense
|
$
|
15,063
|
$
|
14,600
|
$
|
14,950
|
$
|
12,623
|
$
|
11,742
|
$
|
12,038
|
$
|
12,267
|
$
|
11,705
|
||||||||||||||||
Adjustment to record tax effect at 37%
|
(5,573
|
)
|
(5,402
|
)
|
(5,531
|
)
|
(4,671
|
)
|
(4,344
|
)
|
(4,454
|
)
|
(4,539
|
)
|
(4,331
|
)
|
||||||||||||||||
Adjusted interest expense (after-tax)
|
$
|
9,490
|
$
|
9,198
|
$
|
9,419
|
$
|
7,952
|
$
|
7,398
|
$
|
7,584
|
$
|
7,728
|
$
|
7,374
|
For the Three Months Ended
|
||||||||||||||||||||||||||||||||
(Dollars in thousands, except per share data)
|
Dec. 31,
2011
|
Sept. 30,
2011
|
Jun. 30,
2011
|
Mar. 31,
2011
|
Dec. 31,
2010
|
Sept. 30,
2010
|
Jun. 30,
2010
|
Mar. 31,
2010
|
||||||||||||||||||||||||
Adjusted return on capital
|
||||||||||||||||||||||||||||||||
Adjusted net income
|
$ | 51,348 | $ | 49,145 | $ | 47,352 | $ | 46,239 | $ | 43,639 | $ | 39,608 | $ | 41,729 | $ | 35,512 | ||||||||||||||||
Adjusted interest expense (after-tax)
|
9,490 | 9,198 | 9,419 | 7,952 | 7,398 | 7,584 | 7,728 | 7,374 | ||||||||||||||||||||||||
Adjusted net income plus interest expense (after-tax)
|
$ | 60,838 | $ | 58,343 | $ | 56,771 | $ | 54,191 | $ | 51,037 | $ | 47,192 | $ | 49,457 | $ | 42,886 | ||||||||||||||||
Adjusted return on capital (2)
|
16.1 | % | 16.4 | % | 16.9 | % | 18.0 | % | 18.1 | % | 17.4 | % | 18.5 | % | 17.0 | % | ||||||||||||||||
Economic profit
|
||||||||||||||||||||||||||||||||
Adjusted return on capital
|
16.1 | % | 16.4 | % | 16.9 | % | 18.0 | % | 18.1 | % | 17.4 | % | 18.5 | % | 17.0 | % | ||||||||||||||||
Cost of capital (3)
|
5.8 | % | 6.2 | % | 6.5 | % | 7.1 | % | 6.8 | % | 6.7 | % | 7.7 | % | 7.9 | % | ||||||||||||||||
Adjusted return on capital in excess of cost of capital
|
10.3 | % | 10.2 | % | 10.4 | % | 10.9 | % | 11.3 | % | 10.7 | % | 10.8 | % | 9.1 | % | ||||||||||||||||
Adjusted average capital
|
$ | 1,512,825 | $ | 1,419,716 | $ | 1,345,826 | $ | 1,206,039 | $ | 1,129,721 | $ | 1,087,484 | $ | 1,068,163 | $ | 1,011,469 | ||||||||||||||||
Economic profit
|
$ | 38,889 | $ | 36,374 | $ | 34,985 | $ | 32,895 | $ | 31,765 | $ | 29,085 | $ | 28,799 | $ | 23,036 | ||||||||||||||||
Operating expenses
|
||||||||||||||||||||||||||||||||
GAAP salaries and wages
|
$ | 15,636 | $ | 15,929 | $ | 15,402 | $ | 16,071 | $ | 15,034 | $ | 16,133 | $ | 14,050 | $ | 16,110 | ||||||||||||||||
GAAP general and administrative
|
7,439 | 6,044 | 6,509 | 5,633 | 6,762 | 7,208 | 5,920 | 6,542 | ||||||||||||||||||||||||
GAAP sales and marketing
|
5,752 | 5,587 | 5,772 | 6,409 | 5,045 | 4,972 | 4,834 | 4,810 | ||||||||||||||||||||||||
Operating expenses
|
$ | 28,827 | $ | 27,560 | $ | 27,683 | $ | 28,113 | $ | 26,841 | $ | 28,313 | $ | 24,804 | $ | 27,462 | ||||||||||||||||
Operating expenses as a percentage of adjusted average capital
|
7.6 | % | 7.8 | % | 8.2 | % | 9.3 | % | 9.5 | % | 10.4 | % | 9.3 | % | 10.9 | % | ||||||||||||||||
Percentage change in adjusted average capital compared to the same period in the prior year
|
33.9 | % | 30.6 | % | 26.0 | % | 19.2 | % | 14.1 | % | 8.7 | % | 6.0 | % | 1.4 | % |
For the Years Ended December 31,
|
||||||||
(In thousands, except per share data)
|
2011
|
2010
|
||||||
Adjusted net income
|
||||||||
GAAP net income
|
$
|
188,044
|
$
|
170,077
|
||||
Floating yield adjustment (after-tax)
|
7,000
|
483
|
||||||
Program fee yield adjustment (after-tax)
|
339
|
304
|
||||||
Loss from discontinued United Kingdom segment (after-tax)
|
-
|
30
|
||||||
Adjustment to record taxes at 37%
|
(1,299
|
)
|
(10,406
|
)
|
||||
Adjusted net income
|
$
|
194,084
|
$
|
160,488
|
||||
Adjusted net income per diluted share
|
$
|
7.30
|
$
|
5.35
|
||||
Diluted weighted average shares outstanding
|
26,601
|
29,985
|
||||||
Adjusted average capital
|
||||||||
GAAP average debt
|
$
|
892,283
|
$
|
581,074
|
||||
GAAP average shareholders' equity
|
469,695
|
488,444
|
||||||
Floating yield adjustment
|
9,379
|
5,154
|
||||||
Program fee yield adjustment
|
(255
|
)
|
(462
|
)
|
||||
Adjusted average capital
|
$
|
1,371,102
|
$
|
1,074,210
|
||||
Adjusted interest expense
|
||||||||
GAAP interest expense
|
$
|
57,236
|
$
|
47,752
|
||||
Adjustment to record tax effect at 37%
|
(21,177
|
)
|
(17,668
|
)
|
||||
Adjusted interest expense (after-tax)
|
$
|
36,059
|
$
|
30,084
|
||||
Adjusted return on capital
|
||||||||
Adjusted net income
|
$
|
194,084
|
$
|
160,488
|
||||
Adjusted interest expense after-tax
|
36,059
|
30,084
|
||||||
Adjusted net income plus interest expense after-tax
|
$
|
230,143
|
$
|
190,572
|
||||
Adjusted return on capital (2)
|
16.8
|
%
|
17.7
|
%
|
||||
Economic profit
|
||||||||
Adjusted return on capital
|
16.8
|
%
|
17.7
|
%
|
||||
Cost of capital (3)
|
6.4
|
%
|
7.2
|
%
|
||||
Adjusted return on capital in excess of cost of capital
|
10.4
|
%
|
10.5
|
%
|
||||
Adjusted average capital
|
$
|
1,371,102
|
$
|
1,074,210
|
||||
Economic profit
|
$
|
143,143
|
$
|
112,685
|
(1)
|
The adjustment for the three months ended June 30, 2010 is primarily related to the reversal of reserves for uncertain tax positions and associated interest as a result of the completion of the IRS audit during the period, which reduced our effective tax rate under GAAP.
|
(2)
|
Adjusted return on capital is defined as annualized adjusted net income plus adjusted interest expense after-tax divided by adjusted average capital.
|
(3)
|
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 periods presented, the average 30 year treasury rate and the adjusted pre-tax average cost of debt were as follows:
|
For the Three Months Ended
|
||||||||||||||||||||||||||||||||
Dec. 31,
2011
|
Sept. 30,
2011
|
Jun. 30,
2011
|
Mar. 31,
2011
|
Dec. 31,
2010
|
Sept. 30,
2010
|
Jun. 30,
2010
|
Mar. 31,
2010
|
|||||||||||||||||||||||||
Average 30 year treasury rate
|
3.0
|
%
|
3.8
|
%
|
4.4
|
%
|
4.5
|
%
|
4.1
|
%
|
3.8
|
%
|
4.4
|
%
|
4.6
|
%
|
||||||||||||||||
Adjusted pre-tax average cost of debt
|
6.1
|
%
|
6.2
|
%
|
6.5
|
%
|
7.0
|
%
|
6.9
|
%
|
7.5
|
%
|
9.6
|
%
|
9.5
|
%
|
For the Years Ended December 31,
|
||||||||
2011
|
2010
|
|||||||
Average 30 year treasury rate
|
3.9
|
%
|
4.2
|
%
|
||||
Adjusted pre-tax average cost of debt
|
6.4
|
%
|
8.2
|
%
|
·
|
Our inability to accurately forecast and estimate the amount and timing of future collections could have a material adverse effect on results of operations.
|
·
|
We may be unable to execute our business strategy due to current economic conditions.
|
·
|
We may be unable to continue to access or renew funding sources and obtain capital needed to maintain and grow our business.
|
·
|
The terms of our debt limit how we conduct our business.
|
·
|
A violation of the terms of our asset-backed secured financing facilities or revolving secured warehouse facilities could have a materially adverse impact on our operations.
|
·
|
The conditions of the U.S. and international capital markets may adversely affect lenders with which we have relationships, causing us to incur additional costs and reducing our sources of liquidity, which may adversely affect our financial position, liquidity and results of operations.
|
·
|
Our substantial debt could negatively impact our business, prevent us from satisfying our debt obligations and adversely affect our financial condition.
|
·
|
Due to competition from traditional financing sources and non-traditional lenders, we may not be able to compete successfully.
|
·
|
We may not be able to generate sufficient cash flows to service our outstanding debt and fund operations and may be forced to take other actions to satisfy our obligations under such debt.
|
·
|
Interest rate fluctuations may adversely affect our borrowing costs, profitability and liquidity.
|
·
|
Reduction in our credit rating could increase the cost of our funding from, and restrict our access to, the capital markets and adversely affect our liquidity, financial condition and results of operations.
|
·
|
We may incur substantially more debt and other liabilities. This could exacerbate further the risks associated with our current debt levels.
|
·
|
The regulation to which we are or may become subject could result in a material adverse effect on our business.
|
·
|
Adverse changes in economic conditions, the automobile or finance industries, or the non-prime consumer market could adversely affect our financial position, liquidity and results of operations, the ability of key vendors that we depend on to supply us with services, 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.
|
·
|
Changes in tax laws and the resolution of uncertain income tax matters could have a material adverse effect on our results of operations and cash flows from operations.
|
·
|
Our operations are dependent on technology.
|
·
|
Reliance on third parties to administer our ancillary product offerings could adversely affect our business and financial results.
|
·
|
We are dependent on our senior management and the loss of any of these individuals or an inability to hire additional team members could adversely affect our ability to operate profitably.
|
·
|
Our reputation is a key asset to our business, and our business may be affected by how we are perceived in the marketplace.
|
·
|
The concentration of our dealer-partners in several states could adversely affect us.
|
·
|
Failure to properly safeguard confidential consumer information could subject us to liability, decrease our profitability and damage our reputation.
|
·
|
Our Chairman and founder controls a significant percentage of our common stock, has the ability to control matters requiring shareholder approval and has interests which may conflict with the interests of our other security holders.
|
·
|
Reliance on our outsourced business functions could adversely affect our business.
|
·
|
Natural disasters, acts of war, terrorist attacks and threats or the escalation of military activity in response to these attacks or otherwise may negatively affect our business, financial condition and results of operations.
|
(In thousands, except per share data)
|
For the Three Months Ended December 31,
|
For the Years Ended
December 31,
|
||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
Revenue:
|
||||||||||||||||
Finance charges
|
$
|
122,384
|
$
|
103,583
|
$
|
460,622
|
$
|
388,050
|
||||||||
Premiums earned
|
10,824
|
8,083
|
40,019
|
32,659
|
||||||||||||
Other income
|
4,768
|
3,767
|
24,551
|
21,426
|
||||||||||||
Total revenue
|
137,976
|
115,433
|
525,192
|
442,135
|
||||||||||||
Costs and expenses:
|
||||||||||||||||
Salaries and wages
|
15,636
|
15,034
|
63,038
|
61,327
|
||||||||||||
General and administrative
|
7,439
|
6,762
|
25,625
|
26,432
|
||||||||||||
Sales and marketing
|
5,752
|
5,045
|
23,520
|
19,661
|
||||||||||||
Provision for credit losses
|
6,562
|
1,819
|
28,956
|
10,037
|
||||||||||||
Interest
|
15,063
|
11,742
|
57,236
|
47,752
|
||||||||||||
Provision for claims
|
7,666
|
5,823
|
30,399
|
23,429
|
||||||||||||
Total costs and expenses
|
58,118
|
46,225
|
228,774
|
188,638
|
||||||||||||
Income from continuing operations before provision for income taxes
|
79,858
|
69,208
|
296,418
|
253,497
|
||||||||||||
Provision for income taxes
|
29,809
|
22,228
|
108,374
|
83,390
|
||||||||||||
Income from continuing operations
|
50,049
|
46,980
|
188,044
|
170,107
|
||||||||||||
Loss from discontinued United Kingdom operations
|
-
|
-
|
-
|
(30
|
)
|
|||||||||||
Net income
|
$
|
50,049
|
$
|
46,980
|
$
|
188,044
|
$
|
170,077
|
||||||||
Net income per share:
|
||||||||||||||||
Basic
|
$
|
1.92
|
$
|
1.72
|
$
|
7.15
|
$
|
5.79
|
||||||||
Diluted
|
$
|
1.91
|
$
|
1.69
|
$
|
7.07
|
$
|
5.67
|
||||||||
Income from continuing operations per share:
|
||||||||||||||||
Basic
|
$
|
1.92
|
$
|
1.72
|
$
|
7.15
|
$
|
5.79
|
||||||||
Diluted
|
$
|
1.91
|
$
|
1.69
|
$
|
7.07
|
$
|
5.67
|
||||||||
Loss from discontinued United Kingdom operations per share:
|
||||||||||||||||
Basic
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
Diluted
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
Weighted average shares outstanding:
|
||||||||||||||||
Basic
|
26,022
|
27,351
|
26,302
|
29,393
|
||||||||||||
Diluted
|
26,259
|
27,865
|
26,601
|
29,985
|
(In thousands, except per share data)
|
As of December 31,
|
|||||||
2011
|
2010
|
|||||||
(Unaudited)
|
||||||||
ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
4,657
|
$
|
3,792
|
||||
Restricted cash and cash equivalents
|
104,679
|
66,536
|
||||||
Restricted securities available for sale
|
810
|
805
|
||||||
Loans receivable (including $4,949 and $9,031 from affiliates as of December 31, 2011 and December 31, 2010, respectively)
|
1,752,891
|
1,344,881
|
||||||
Allowance for credit losses
|
(154,318
|
)
|
(126,868
|
)
|
||||
Loans receivable, net
|
1,598,573
|
1,218,013
|
||||||
Property and equipment, net
|
18,472
|
16,311
|
||||||
Income taxes receivable
|
506
|
12,002
|
||||||
Other assets
|
30,901
|
26,056
|
||||||
Total Assets
|
$
|
1,758,598
|
$
|
1,343,515
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY:
|
||||||||
Liabilities:
|
||||||||
Accounts payable and accrued liabilities
|
$
|
95,858
|
$
|
75,297
|
||||
Revolving secured line of credit
|
43,900
|
136,700
|
||||||
Secured financing
|
599,281
|
300,100
|
||||||
Mortgage note
|
4,288
|
4,523
|
||||||
Senior notes
|
350,378
|
244,344
|
||||||
Deferred income taxes, net
|
123,449
|
108,077
|
||||||
Income taxes payable
|
1,493
|
-
|
||||||
Total Liabilities
|
1,218,647
|
869,041
|
||||||
Shareholders' Equity:
|
||||||||
Preferred stock, $.01 par value, 1,000 shares authorized, none issued
|
-
|
-
|
||||||
Common stock, $.01 par value, 80,000 shares authorized, 25,624 and 27,304 shares issued and outstanding as of December 31, 2011 and December 31, 2010, respectively
|
256
|
273
|
||||||
Paid-in capital
|
38,801
|
30,985
|
||||||
Retained earnings
|
500,888
|
443,326
|
||||||
Accumulated other comprehensive income (loss)
|
6
|
(110
|
)
|
|||||
Total Shareholders' Equity
|
539,951
|
474,474
|
||||||
Total Liabilities and Shareholders' Equity
|
$
|
1,758,598
|
$
|
1,343,515
|
(In thousands)
|
For the Years Ended December 31,
|
|||||||
2011
|
2010
|
|||||||
(Unaudited)
|
||||||||
Cash Flows From Operating Activities:
|
||||||||
Net income
|
$
|
188,044
|
$
|
170,077
|
||||
Adjustments to reconcile cash provided by operating activities:
|
||||||||
Provision for credit losses
|
28,956
|
10,037
|
||||||
Depreciation
|
4,145
|
4,437
|
||||||
Amortization
|
5,904
|
6,643
|
||||||
Loss on retirement of property and equipment
|
28
|
65
|
||||||
Loss on impairment of software
|
-
|
1,362
|
||||||
Provision for deferred income taxes
|
15,309
|
13,863
|
||||||
Stock-based compensation
|
1,881
|
4,127
|
||||||
Change in operating assets and liabilities:
|
||||||||
Increase (decrease) in accounts payable and accrued liabilities
|
20,737
|
(730
|
)
|
|||||
Decrease (increase) in income taxes receivable
|
11,496
|
(8,046
|
)
|
|||||
Increase in income taxes payable
|
1,493
|
-
|
||||||
Increase in other assets
|
(2,345
|
)
|
(1,137
|
)
|
||||
Net cash provided by operating activities
|
275,648
|
200,698
|
||||||
Cash Flows From Investing Activities:
|
||||||||
(Increase) decrease in restricted cash and cash equivalents
|
(38,143
|
)
|
15,920
|
|||||
Purchases of restricted securities available for sale
|
(532
|
)
|
(1,063
|
)
|
||||
Proceeds from sale of restricted securities available for sale
|
76
|
2,111
|
||||||
Maturities of restricted securities available for sale
|
454
|
1,256
|
||||||
Principal collected on loans receivable
|
996,927
|
785,947
|
||||||
Advances to dealer-partners
|
(1,152,537
|
)
|
(786,909
|
)
|
||||
Purchases of consumer loans
|
(122,197
|
)
|
(100,430
|
)
|
||||
Accelerated payments of dealer holdback
|
(47,411
|
)
|
(32,629
|
)
|
||||
Payments of dealer holdback
|
(85,184
|
)
|
(44,220
|
)
|
||||
Net decrease in other loans
|
886
|
207
|
||||||
Purchases of property and equipment
|
(6,334
|
)
|
(3,440
|
)
|
||||
Net cash used in investing activities
|
(453,995
|
)
|
(163,250
|
)
|
||||
Cash Flows From Financing Activities:
|
||||||||
Borrowings under revolving secured line of credit
|
2,384,900
|
1,097,900
|
||||||
Repayments under revolving secured line of credit
|
(2,477,700
|
)
|
(1,058,500
|
)
|
||||
Proceeds from secured financing
|
1,164,500
|
327,700
|
||||||
Repayments of secured financing
|
(865,319
|
)
|
(432,197
|
)
|
||||
Principal payments under mortgage note and capital lease obligations
|
(235
|
)
|
(559
|
)
|
||||
Proceeds from sale of senior notes
|
106,000
|
243,738
|
||||||
Payments of debt issuance costs
|
(8,370
|
)
|
(15,171
|
)
|
||||
Repurchase of common stock
|
(130,886
|
)
|
(202,247
|
)
|
||||
Proceeds from stock options exercised
|
2,921
|
2,903
|
||||||
Tax benefits from stock-based compensation plans
|
3,401
|
610
|
||||||
Net cash provided by (used in) financing activities
|
179,212
|
(35,823
|
)
|
|||||
Effect of exchange rate changes on cash
|
-
|
(3
|
)
|
|||||
Net increase in cash and cash equivalents
|
865
|
1,622
|
||||||
Cash and cash equivalents, beginning of period
|
3,792
|
2,170
|
||||||
Cash and cash equivalents, end of period
|
$
|
4,657
|
$
|
3,792
|
||||
Supplemental Disclosure of Cash Flow Information:
|
||||||||
Cash paid during the period for interest
|
$
|
51,360
|
$
|
42,548
|
||||
Cash paid during the period for income taxes
|
$
|
76,458
|
$
|
81,750
|
(Unaudited)
|
||||||||||||
(In thousands)
|
For the Year Ended December 31, 2011
|
|||||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||||
Balance, beginning of period
|
$
|
1,082,039
|
$
|
262,842
|
$
|
1,344,881
|
||||||
New consumer loan assignments (1)
|
1,152,537
|
122,197
|
1,274,734
|
|||||||||
Principal collected on loans receivable
|
(843,100
|
)
|
(153,827
|
)
|
(996,927
|
)
|
||||||
Accelerated dealer holdback payments
|
47,411
|
-
|
47,411
|
|||||||||
Dealer holdback payments
|
85,184
|
-
|
85,184
|
|||||||||
Transfers (2)
|
(15,493
|
)
|
15,493
|
-
|
||||||||
Write-offs
|
(3,055
|
)
|
(433
|
)
|
(3,488
|
)
|
||||||
Recoveries
|
1,902
|
80
|
1,982
|
|||||||||
Net change in other loans
|
(886
|
)
|
-
|
(886
|
)
|
|||||||
Balance, end of period
|
$
|
1,506,539
|
$
|
246,352
|
$
|
1,752,891
|
||||||
(In thousands)
|
For the Year Ended December 31, 2010
|
|||||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||||
Balance, beginning of period
|
$
|
869,603
|
$
|
297,955
|
$
|
1,167,558
|
||||||
New consumer loan assignments (1)
|
786,909
|
100,430
|
887,339
|
|||||||||
Principal collected on loans receivable
|
(632,616
|
)
|
(153,331
|
)
|
(785,947
|
)
|
||||||
Accelerated dealer holdback payments
|
32,629
|
-
|
32,629
|
|||||||||
Dealer holdback payments
|
44,220
|
-
|
44,220
|
|||||||||
Transfers (2)
|
(17,807
|
)
|
17,807
|
-
|
||||||||
Write-offs
|
(3,043
|
)
|
(143
|
)
|
(3,186
|
)
|
||||||
Recoveries
|
2,318
|
124
|
2,442
|
|||||||||
Net change in other loans
|
(207
|
)
|
-
|
(207
|
)
|
|||||||
Currency translation
|
33
|
-
|
33
|
|||||||||
Balance, end of period
|
$
|
1,082,039
|
$
|
262,842
|
$
|
1,344,881
|
(1)
|
The dealer loans amount represents advances paid to dealer-partners on consumer loans assigned under our portfolio program. The purchased loans amount represents one-time payments made to dealer-partners to purchase consumer loans assigned under our purchase program.
|
(2)
|
Under our portfolio program, certain events may result in dealer-partners forfeiting their rights to dealer holdback. We transfer the dealer-partner’s outstanding dealer loan balance to purchased loans in the period this forfeiture occurs.
|
(Unaudited)
|
||||||||||||
(In thousands)
|
For the Year Ended December 31, 2011
|
|||||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||||
Balance, beginning of period
|
$
|
113,227
|
$
|
13,641
|
$
|
126,868
|
||||||
Provision for credit losses
|
29,638
|
(682
|
)
|
28,956
|
||||||||
Write-offs
|
(3,055
|
)
|
(433
|
)
|
(3,488
|
)
|
||||||
Recoveries
|
1,902
|
80
|
1,982
|
|||||||||
Balance, end of period
|
$
|
141,712
|
$
|
12,606
|
$
|
154,318
|
||||||
(In thousands)
|
For the Year Ended December 31, 2010
|
|||||||||||
Dealer Loans
|
Purchased Loans
|
Total
|
||||||||||
Balance, beginning of period
|
$
|
108,792
|
$
|
8,753
|
$
|
117,545
|
||||||
Provision for credit losses
|
5,130
|
4,907
|
10,037
|
|||||||||
Write-offs
|
(3,043
|
)
|
(143
|
)
|
(3,186
|
)
|
||||||
Recoveries
|
2,318
|
124
|
2,442
|
|||||||||
Currency translation
|
30
|
-
|
30
|
|||||||||
Balance, end of period
|
$
|
113,227
|
$
|
13,641
|
$
|
126,868
|