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: May 2, 2012
|
By:
|
/s/ Kenneth S. Booth
|
|
Kenneth S. Booth
|
|||
Chief Financial Officer
|
|||
Exhibit No.
|
Description
|
|||
99.1
|
Press Release dated May 2, 2012.
|
Forecasted Collection Percentage as of
|
Variance in Forecasted Collection Percentage from
|
|||||||||||||||||||
Consumer Loan
Assignment Year
|
March 31,
2012
|
December 31,
2011
|
Initial
Forecast
|
December 31,
2011
|
Initial
Forecast
|
|||||||||||||||
2003
|
73.7
|
%
|
73.7
|
%
|
72.0
|
%
|
0.0
|
%
|
1.7
|
%
|
||||||||||
2004
|
73.0
|
%
|
73.0
|
%
|
73.0
|
%
|
0.0
|
%
|
0.0
|
%
|
||||||||||
2005
|
73.6
|
%
|
73.6
|
%
|
74.0
|
%
|
0.0
|
%
|
-0.4
|
%
|
||||||||||
2006
|
70.0
|
%
|
70.0
|
%
|
71.4
|
%
|
0.0
|
%
|
-1.4
|
%
|
||||||||||
2007
|
68.1
|
%
|
68.1
|
%
|
70.7
|
%
|
0.0
|
%
|
-2.6
|
%
|
||||||||||
2008
|
70.1
|
%
|
70.0
|
%
|
69.7
|
%
|
0.1
|
%
|
0.4
|
%
|
||||||||||
2009
|
79.5
|
%
|
79.4
|
%
|
71.9
|
%
|
0.1
|
%
|
7.6
|
%
|
||||||||||
2010
|
76.9
|
%
|
76.8
|
%
|
73.6
|
%
|
0.1
|
%
|
3.3
|
%
|
||||||||||
2011
|
73.0
|
%
|
73.2
|
%
|
72.5
|
%
|
-0.2
|
%
|
0.5
|
%
|
As of March 31, 2012
|
||||||||||||||||
Consumer Loan Assignment Year
|
Forecasted Collection %
|
Advance % (1)
|
Spread %
|
% of Forecast Realized (2)
|
||||||||||||
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
|
%
|
99.3
|
%
|
||||||||
2006
|
70.0
|
%
|
46.6
|
%
|
23.4
|
%
|
98.5
|
%
|
||||||||
2007
|
68.1
|
%
|
46.5
|
%
|
21.6
|
%
|
97.1
|
%
|
||||||||
2008
|
70.1
|
%
|
44.6
|
%
|
25.5
|
%
|
94.1
|
%
|
||||||||
2009
|
79.5
|
%
|
43.9
|
%
|
35.6
|
%
|
87.4
|
%
|
||||||||
2010
|
76.9
|
%
|
44.7
|
%
|
32.2
|
%
|
61.5
|
%
|
||||||||
2011
|
73.0
|
%
|
45.5
|
%
|
27.5
|
%
|
27.6
|
%
|
||||||||
2012
|
70.5
|
%
|
45.0
|
%
|
25.5
|
%
|
3.5
|
%
|
(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
|
70.6
|
%
|
43.3
|
%
|
27.3
|
%
|
|||||||
2009
|
79.5
|
%
|
43.5
|
%
|
36.0
|
%
|
|||||||
2010
|
76.9
|
%
|
44.4
|
%
|
32.5
|
%
|
|||||||
2011
|
72.9
|
%
|
45.2
|
%
|
27.7
|
%
|
|||||||
2012
|
70.5
|
%
|
44.7
|
%
|
25.8
|
%
|
|||||||
Purchased loans
|
2007
|
68.3
|
%
|
49.1
|
%
|
19.2
|
%
|
||||||
2008
|
69.3
|
%
|
46.7
|
%
|
22.6
|
%
|
|||||||
2009
|
79.4
|
%
|
45.3
|
%
|
34.1
|
%
|
|||||||
2010
|
76.9
|
%
|
46.5
|
%
|
30.4
|
%
|
|||||||
2011
|
74.0
|
%
|
48.3
|
%
|
25.7
|
%
|
|||||||
2012
|
70.9
|
%
|
49.1
|
%
|
21.8
|
%
|
(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, 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
|
%
|
||||
March 31, 2012
|
10.6
|
%
|
10.7
|
%
|
(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 March 31,
|
||||||||||||
2012
|
2011
|
% Change
|
||||||||||
Consumer loan unit volume
|
58,796
|
53,183
|
10.6
|
%
|
||||||||
Active dealer-partners (1)
|
3,594
|
2,775
|
29.5
|
%
|
||||||||
Average volume per active dealer-partner
|
16.4
|
19.2
|
-14.6
|
%
|
(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 March 31,
|
||||||||||||
2012
|
2011
|
% Change
|
||||||||||
Consumer loan unit volume from dealer-partners active both periods
|
44,369
|
48,303
|
-8.1
|
%
|
||||||||
Dealer-partners active both periods
|
2,146
|
2,146
|
-
|
|||||||||
Average volume per dealer-partners active both periods
|
20.7
|
22.5
|
-8.1
|
%
|
||||||||
Consumer loan unit volume from new dealer-partners
|
4,089
|
2,177
|
87.8
|
%
|
||||||||
New active dealer-partners (1)
|
554
|
321
|
72.6
|
%
|
||||||||
Average volume per new active dealer-partners
|
7.4
|
6.8
|
8.8
|
%
|
||||||||
Attrition (2)
|
-9.2
|
%
|
-10.9
|
%
|
(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 March 31,
|
||||||||
2012
|
2011
|
|||||||
Dealer loan unit volume as a percentage of total unit volume
|
93.3
|
%
|
92.9
|
%
|
||||
Dealer loan dollar volume as a percentage of total dollar volume (1)
|
91.5
|
%
|
91.1
|
%
|
(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 March 31,
|
||||||||||||
(Dollars in thousands, except per share data)
|
2012
|
2011
|
% Change
|
|||||||||
Adjusted average capital
|
$
|
1,602,590
|
$
|
1,206,039
|
32.9
|
%
|
||||||
Adjusted net income
|
$
|
48,962
|
$
|
46,239
|
5.9
|
%
|
||||||
Adjusted interest expense after-tax
|
$
|
9,584
|
$
|
7,952
|
20.5
|
%
|
||||||
Adjusted net income plus interest expense after-tax
|
$
|
58,546
|
$
|
54,191
|
8.0
|
%
|
||||||
Adjusted return on capital
|
14.6
|
%
|
18.0
|
%
|
-18.9
|
%
|
||||||
Cost of capital
|
5.8
|
%
|
7.1
|
%
|
-18.3
|
%
|
||||||
Economic profit
|
$
|
35,377
|
$
|
32,895
|
7.5
|
%
|
||||||
GAAP diluted weighted average shares outstanding
|
26,284
|
27,489
|
-4.4
|
%
|
||||||||
Adjusted net income per diluted share
|
$
|
1.86
|
$
|
1.68
|
10.7
|
%
|
Year over Year Change in Economic Profit
|
||||
(In thousands)
|
For the Three Months Ended March 31, 2012
|
|||
Increase in adjusted average capital
|
$
|
10,816
|
||
Decrease in cost of capital
|
5,130
|
|||
Decrease in adjusted return on capital
|
(13,464
|
)
|
||
Increase in economic profit
|
$
|
2,482
|
·
|
An increase in adjusted average capital of 32.9% due to growth in our loan portfolio primarily as a result of an increase in active dealer-partners.
|
·
|
A decrease in our cost of capital of 130 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 340 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 2011 and 2012. The decrease in finance charges negatively impacted the adjusted return on capital by 290 basis points.
|
·
|
Other income decreased as a percentage of adjusted average capital primarily as a result of a decrease in Guaranteed Asset Protection (“GAP”) profit sharing income from $2.3 million (after-tax) in the first quarter of 2011 to $0.1 million (after-tax) in the first quarter of 2012. Prior to the second quarter of 2011, we received and recognized GAP profit sharing payments annually in the first quarter of each year. During the second quarter of 2011, we modified our revenue recognition to begin recognizing this income as earned over the life of the GAP contracts. In addition, profit sharing income for the first quarter of 2012 was reduced by a $0.3 million (after-tax) reversal of previously recognized income as a result of a change in our profit sharing arrangement. The decrease in other income negatively impacted the adjusted return on capital by 90 basis points.
|
·
|
Operating expenses decreased as a percentage of adjusted average capital as operating expenses grew 23.0% while average capital grew 32.9%. The 23.0% increase ($6.5 million) in operating expenses includes a 20.7% ($3.3 million) increase in salaries and wages, a 31.5% ($1.8 million) increase in general and administrative expenses and a 21.0% ($1.4 million) increase in sales and marketing expenses. The increase in salaries and wages includes a 47.2% ($0.9 million) increase in fringe benefits, primarily related to medical claims. Salaries and wages, excluding the increase in fringe benefits, grew 17.2% ($2.4 million) including an increase of 27.3% in loan servicing ($1.4 million) and 9.7% for support functions ($0.8 million). The remaining increase in operating expenses ($3.2 million) included an increase in sales and marketing expenses of $1.4 million as a result of an increase in the size of the field sales force as well as an increase in general and administrative expenses of $1.8 million. The $1.8 million increase in general and administrative expenses included a larger expense recorded for property taxes ($0.6 million), as a result of a property tax refund recognized in the first quarter of 2011, an increase in legal expenses ($0.5 million) and an increase in information technology expenses ($0.6 million).
|
For the Three Months Ended
|
||||||||||||||||||||||||||||||||
Mar. 31, 2012
|
Dec. 31, 2011
|
Sept. 30, 2011
|
Jun. 30, 2011
|
Mar. 31, 2011
|
Dec. 31, 2010
|
Sept. 30, 2010
|
Jun. 30, 2010
|
|||||||||||||||||||||||||
Adjusted revenue as a percentage of adjusted average capital
|
31.8
|
%
|
33.2
|
%
|
33.9
|
%
|
35.0
|
%
|
37.9
|
%
|
38.1
|
%
|
38.0
|
%
|
38.7
|
%
|
||||||||||||||||
Operating expenses as a percentage of adjusted average capital
|
8.6
|
%
|
7.6
|
%
|
7.8
|
%
|
8.2
|
%
|
9.3
|
%
|
9.5
|
%
|
10.4
|
%
|
9.3
|
%
|
||||||||||||||||
Adjusted return on capital
|
14.6
|
%
|
16.1
|
%
|
16.4
|
%
|
16.9
|
%
|
18.0
|
%
|
18.1
|
%
|
17.4
|
%
|
18.5
|
%
|
||||||||||||||||
Percentage change in adjusted average capital compared to the same period in the prior year
|
32.9
|
%
|
33.9
|
%
|
30.6
|
%
|
26.0
|
%
|
19.2
|
%
|
14.1
|
%
|
8.7
|
%
|
6.0
|
%
|
·
|
Finance charges decreased as a percentage of adjusted average capital primarily as a result of lower yields on more recent consumer loan assignments, which was the result of the advance rate increases we made during 2011. The decrease in finance charges negatively impacted the adjusted return on capital by 70 basis points.
|
·
|
Prior to the most recent quarter, operating expenses as a percentage of capital had been steadily declining on a sequential basis. While year over year operating expenses as a percentage of capital declined in the first quarter of 2012, operating expenses as a percentage of capital were higher in the most recent quarter on a sequential basis by 100 basis points, as operating expenses grew 19.9% (or $5.7 million) and adjusted average capital grew 5.9%. The first quarter is unusual in that both payroll taxes and sales and marketing expenses are typically highest in the first quarter of each year. Payroll taxes increased by 138.5% ($1.2 million) as compared to the fourth quarter of 2011 as a result of the seasonal impact of both taxes that are subject to income limitations and the annual vesting of equity awards. Sales and marketing expenses increased by 34.8% ($2.0 million) as a result of higher sales commissions which increase as unit volumes increase as well as the expansion of our sales force, which creates additional expense without an immediate proportional increase in originations as it takes some time for new sales personnel to become productive. In addition, we increased the size of our loan origination department, in anticipation of higher first quarter volumes. While most of our loan origination costs are deferred and recorded as a reduction in finance charge revenue, the portion that is not deferred increased by ($0.5 million) as compared to the fourth quarter of 2011. We also experienced a marked increase of 56.3% ($1.0 million) in fringe benefits, primarily related to medical claims during the first quarter, while the number of FTE’s increased 6.4% in Q1 as compared to Q4. While we cannot be certain, we believe it is likely that medical expenses will move closer to their prior levels and grow in proportion to the number of employees in the future. The remaining increase in operating expenses is a result of a change in the monthly cash incentive plan for our collection personnel, ($0.4 million) and an increase in the amount accrued to cover year-end cash incentive compensation ($0.6 million).
|
(In thousands)
|
||||||
Year Ended December 31,
|
||||||
2012
|
$
|
8,848
|
||||
2013
|
9,929
|
|||||
2014
|
7,874
|
|||||
2015
|
6,506
|
|||||
2016
|
5,110
|
|||||
2017-2027 |
14,983
|
|||||
Total
|
$
|
53,250
|
||||
For the Three Months Ended
|
||||||||||||||||||||||||||||||||
(Dollars in thousands, except per share data)
|
Mar. 31,
2012
|
Dec. 31,
2011
|
Sept. 30,
2011
|
Jun. 30,
2011
|
Mar. 31,
2011
|
Dec. 31,
2010
|
Sept. 30,
2010
|
Jun. 30,
2010
|
||||||||||||||||||||||||
Adjusted net income
|
||||||||||||||||||||||||||||||||
GAAP net income
|
$
|
50,338
|
$
|
50,049
|
$
|
49,960
|
$
|
44,844
|
$
|
43,191
|
$
|
46,980
|
$
|
42,047
|
$
|
49,040
|
||||||||||||||||
Floating yield adjustment (after-tax)
|
(699
|
)
|
810
|
(449
|
)
|
2,817
|
3,822
|
(10
|
)
|
(1,526
|
)
|
(330
|
)
|
|||||||||||||||||||
Program fee yield adjustment (after-tax)
|
-
|
228
|
33
|
35
|
43
|
49
|
61
|
79
|
||||||||||||||||||||||||
Loss from discontinued United Kingdom segment (after-tax)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
25
|
||||||||||||||||||||||||
Adjustment to record taxes at 37% (1)
|
(677
|
)
|
261
|
(399
|
)
|
(344
|
)
|
(817
|
)
|
(3,380
|
)
|
(974
|
)
|
(7,085
|
)
|
|||||||||||||||||
Adjusted net income
|
$
|
48,962
|
$
|
51,348
|
$
|
49,145
|
$
|
47,352
|
$
|
46,239
|
$
|
43,639
|
$
|
39,608
|
$
|
41,729
|
||||||||||||||||
Adjusted net income per diluted share
|
$
|
1.86
|
$
|
1.96
|
$
|
1.88
|
$
|
1.81
|
$
|
1.68
|
$
|
1.57
|
$
|
1.39
|
$
|
1.32
|
||||||||||||||||
Diluted weighted average shares outstanding
|
26,284
|
26,259
|
26,136
|
26,111
|
27,489
|
27,865
|
28,452
|
31,601
|
||||||||||||||||||||||||
Adjusted revenue
|
||||||||||||||||||||||||||||||||
GAAP total revenue
|
$
|
142,404
|
$
|
137,976
|
$
|
133,739
|
$
|
129,965
|
$
|
123,512
|
$
|
115,433
|
$
|
111,661
|
$
|
111,779
|
||||||||||||||||
Floating yield adjustment
|
(1,110
|
)
|
1,286
|
(712
|
)
|
4,472
|
6,067
|
(16
|
)
|
(2,423
|
)
|
(524
|
)
|
|||||||||||||||||||
Program fee yield adjustment
|
-
|
361
|
53
|
56
|
67
|
77
|
97
|
125
|
||||||||||||||||||||||||
Provision for credit losses
|
(5,264
|
)
|
(6,569
|
)
|
(4,565
|
)
|
(8,953
|
)
|
(8,921
|
)
|
(1,978
|
)
|
24
|
(1,782
|
)
|
|||||||||||||||||
Provision for claims
|
(8,552
|
)
|
(7,666
|
)
|
(8,363
|
)
|
(7,771
|
)
|
(6,599
|
)
|
(5,823
|
)
|
(6,112
|
)
|
(6,282
|
)
|
||||||||||||||||
Adjusted revenue
|
$
|
127,478
|
$
|
125,388
|
$
|
120,152
|
$
|
117,769
|
$
|
114,126
|
$
|
107,693
|
$
|
103,247
|
$
|
103,316
|
||||||||||||||||
Adjusted average capital
|
||||||||||||||||||||||||||||||||
GAAP average debt
|
$
|
1,031,160
|
$
|
985,668
|
$
|
941,531
|
$
|
918,153
|
$
|
723,781
|
$
|
676,978
|
$
|
645,383
|
$
|
509,867
|
||||||||||||||||
GAAP average shareholders' equity
|
558,829
|
516,806
|
467,290
|
418,402
|
476,281
|
448,825
|
437,288
|
553,297
|
||||||||||||||||||||||||
Floating yield adjustment
|
12,601
|
10,530
|
11,139
|
9,549
|
6,294
|
4,280
|
5,230
|
5,485
|
||||||||||||||||||||||||
Program fee yield adjustment
|
-
|
(179
|
)
|
(244
|
)
|
(278
|
)
|
(317
|
)
|
(362
|
)
|
(417
|
)
|
(486
|
)
|
|||||||||||||||||
Adjusted average capital
|
$
|
1,602,590
|
$
|
1,512,825
|
$
|
1,419,716
|
$
|
1,345,826
|
$
|
1,206,039
|
$
|
1,129,721
|
$
|
1,087,484
|
$
|
1,068,163
|
||||||||||||||||
Adjusted revenue as a percentage of adjusted average capital
|
31.8
|
%
|
33.2
|
%
|
33.9
|
%
|
35.0
|
%
|
37.9
|
%
|
38.1
|
%
|
38.0
|
%
|
38.7
|
%
|
||||||||||||||||
Adjusted interest expense
|
||||||||||||||||||||||||||||||||
GAAP interest expense
|
$
|
15,212
|
$
|
15,063
|
$
|
14,600
|
$
|
14,950
|
$
|
12,623
|
$
|
11,742
|
$
|
12,038
|
$
|
12,267
|
||||||||||||||||
Adjustment to record tax effect at 37%
|
(5,628
|
)
|
(5,573
|
)
|
(5,402
|
)
|
(5,531
|
)
|
(4,671
|
)
|
(4,344
|
)
|
(4,454
|
)
|
(4,539
|
)
|
||||||||||||||||
Adjusted interest expense (after-tax)
|
$
|
9,584
|
$
|
9,490
|
$
|
9,198
|
$
|
9,419
|
$
|
7,952
|
$
|
7,398
|
$
|
7,584
|
$
|
7,728
|
For the Three Months Ended
|
||||||||||||||||||||||||||||||||
(Dollars in thousands, except per share data)
|
Mar. 31,
2012
|
Dec. 31,
2011
|
Sept. 30,
2011
|
Jun. 30,
2011
|
Mar. 31,
2011
|
Dec. 31,
2010
|
Sept. 30,
2010
|
Jun. 30,
2010
|
||||||||||||||||||||||||
Adjusted return on capital
|
||||||||||||||||||||||||||||||||
Adjusted net income
|
$
|
48,962
|
$
|
51,348
|
$
|
49,145
|
$
|
47,352
|
$
|
46,239
|
$
|
43,639
|
$
|
39,608
|
$
|
41,729
|
||||||||||||||||
Adjusted interest expense (after-tax)
|
9,584
|
9,490
|
9,198
|
9,419
|
7,952
|
7,398
|
7,584
|
7,728
|
||||||||||||||||||||||||
Adjusted net income plus interest expense (after-tax)
|
$
|
58,546
|
$
|
60,838
|
$
|
58,343
|
$
|
56,771
|
$
|
54,191
|
$
|
51,037
|
$
|
47,192
|
$
|
49,457
|
||||||||||||||||
Adjusted return on capital (2)
|
14.6
|
%
|
16.1
|
%
|
16.4
|
%
|
16.9
|
%
|
18.0
|
%
|
18.1
|
%
|
17.4
|
%
|
18.5
|
%
|
||||||||||||||||
Economic profit
|
||||||||||||||||||||||||||||||||
Adjusted return on capital
|
14.6
|
%
|
16.1
|
%
|
16.4
|
%
|
16.9
|
%
|
18.0
|
%
|
18.1
|
%
|
17.4
|
%
|
18.5
|
%
|
||||||||||||||||
Cost of capital (3)
|
5.8
|
%
|
5.8
|
%
|
6.2
|
%
|
6.5
|
%
|
7.1
|
%
|
6.8
|
%
|
6.7
|
%
|
7.7
|
%
|
||||||||||||||||
Adjusted return on capital in excess of cost of capital
|
8.8
|
%
|
10.3
|
%
|
10.2
|
%
|
10.4
|
%
|
10.9
|
%
|
11.3
|
%
|
10.7
|
%
|
10.8
|
%
|
||||||||||||||||
Adjusted average capital
|
$
|
1,602,590
|
$
|
1,512,825
|
$
|
1,419,716
|
$
|
1,345,826
|
$
|
1,206,039
|
$
|
1,129,721
|
$
|
1,087,484
|
$
|
1,068,163
|
||||||||||||||||
Economic profit
|
$
|
35,377
|
$
|
38,889
|
$
|
36,374
|
$
|
34,985
|
$
|
32,895
|
$
|
31,765
|
$
|
29,085
|
$
|
28,799
|
||||||||||||||||
Operating expenses
|
||||||||||||||||||||||||||||||||
GAAP salaries and wages
|
$
|
19,404
|
$
|
15,636
|
$
|
15,929
|
$
|
15,402
|
$
|
16,071
|
$
|
15,034
|
$
|
16,133
|
$
|
14,050
|
||||||||||||||||
GAAP general and administrative
|
7,409
|
7,439
|
6,044
|
6,509
|
5,633
|
6,762
|
7,208
|
5,920
|
||||||||||||||||||||||||
GAAP sales and marketing
|
7,753
|
5,752
|
5,587
|
5,772
|
6,409
|
5,045
|
4,972
|
4,834
|
||||||||||||||||||||||||
Operating expenses
|
$
|
34,566
|
$
|
28,827
|
$
|
27,560
|
$
|
27,683
|
$
|
28,113
|
$
|
26,841
|
$
|
28,313
|
$
|
24,804
|
||||||||||||||||
Operating expenses as a percentage of adjusted average capital
|
8.6
|
%
|
7.6
|
%
|
7.8
|
%
|
8.2
|
%
|
9.3
|
%
|
9.5
|
%
|
10.4
|
%
|
9.3
|
%
|
||||||||||||||||
Percentage change in adjusted average capital compared to the same period in the prior year
|
32.9
|
%
|
33.9
|
%
|
30.6
|
%
|
26.0
|
%
|
19.2
|
%
|
14.1
|
%
|
8.7
|
%
|
6.0
|
%
|
(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
|
||||||||||||||||||||||||||||||||
Mar. 31,
2012
|
Dec. 31,
2011
|
Sept. 30,
2011
|
Jun. 30,
2011
|
Mar. 31,
2011
|
Dec. 31,
2010
|
Sept. 30,
2010
|
Jun. 30,
2010
|
|||||||||||||||||||||||||
Average 30 year treasury rate
|
3.1
|
%
|
3.0
|
%
|
3.8
|
%
|
4.4
|
%
|
4.5
|
%
|
4.1
|
%
|
3.8
|
%
|
4.4
|
%
|
||||||||||||||||
Adjusted pre-tax average cost of debt
|
5.9
|
%
|
6.1
|
%
|
6.2
|
%
|
6.5
|
%
|
7.0
|
%
|
6.9
|
%
|
7.5
|
%
|
9.6
|
%
|
·
|
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 significantly influence 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 March 31,
|
|||||||
2012
|
2011
|
|||||||
(Unaudited)
|
||||||||
Revenue:
|
||||||||
Finance charges
|
$
|
126,066
|
$
|
106,503
|
||||
Premiums earned
|
10,770
|
8,543
|
||||||
Other income
|
5,568
|
8,466
|
||||||
Total revenue
|
142,404
|
123,512
|
||||||
Costs and expenses:
|
||||||||
Salaries and wages
|
19,404
|
16,071
|
||||||
General and administrative
|
7,409
|
5,633
|
||||||
Sales and marketing
|
7,753
|
6,409
|
||||||
Provision for credit losses
|
5,247
|
8,916
|
||||||
Interest
|
15,212
|
12,623
|
||||||
Provision for claims
|
8,552
|
6,599
|
||||||
Total costs and expenses
|
63,577
|
56,251
|
||||||
Income before provision for income taxes
|
78,827
|
67,261
|
||||||
Provision for income taxes
|
28,489
|
24,070
|
||||||
Net income
|
$
|
50,338
|
$
|
43,191
|
||||
Net income per share:
|
||||||||
Basic
|
$
|
1.92
|
$
|
1.59
|
||||
Diluted
|
$
|
1.92
|
$
|
1.57
|
||||
Weighted average shares outstanding:
|
||||||||
Basic
|
26,158
|
27,196
|
||||||
Diluted
|
26,284
|
27,489
|
(In thousands, except per share data)
|
As of
|
|||||||
March 31, 2012
|
December 31, 2011
|
|||||||
(Unaudited)
|
||||||||
ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
4,691
|
$
|
4,657
|
||||
Restricted cash and cash equivalents
|
160,069
|
104,679
|
||||||
Restricted securities available for sale
|
819
|
810
|
||||||
Loans receivable (including $5,291 and $9,031 from affiliates as of March 31, 2012 and December 31, 2011, respectively)
|
1,897,169
|
1,752,891
|
||||||
Allowance for credit losses
|
(159,373
|
)
|
(154,318
|
)
|
||||
Loans receivable, net
|
1,737,796
|
1,598,573
|
||||||
Property and equipment, net
|
21,168
|
18,472
|
||||||
Income taxes receivable
|
406
|
506
|
||||||
Other assets
|
30,084
|
30,901
|
||||||
Total Assets
|
$
|
1,955,033
|
$
|
1,758,598
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY:
|
||||||||
Liabilities:
|
||||||||
Accounts payable and accrued liabilities
|
$
|
107,325
|
$
|
95,858
|
||||
Revolving secured line of credit
|
173,600
|
43,900
|
||||||
Secured financing
|
604,550
|
599,281
|
||||||
Mortgage note
|
4,227
|
4,288
|
||||||
Senior notes
|
350,354
|
350,378
|
||||||
Deferred income taxes, net
|
129,388
|
123,449
|
||||||
Income taxes payable
|
13,023
|
1,493
|
||||||
Total Liabilities
|
1,382,467
|
1,218,647
|
||||||
Shareholders' Equity:
|
||||||||
Preferred stock, $.01 par value, 1,000 shares authorized, none issued
|
-
|
-
|
||||||
Common stock, $.01 par value, 80,000 shares authorized, 25,628 and 25,624 shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively
|
256
|
256
|
||||||
Paid-in capital
|
40,760
|
38,801
|
||||||
Retained earnings
|
531,540
|
500,888
|
||||||
Accumulated other comprehensive income
|
10
|
6
|
||||||
Total Shareholders' Equity
|
572,566
|
539,951
|
||||||
Total Liabilities and Shareholders' Equity
|
$
|
1,955,033
|
$
|
1,758,598
|