-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FKUUyCvDYNqBqmJRCMpjRwp7pB2dDY2U53GiDdP7V8hO5mkNcgEe+OH/Gmcnrn6r G71uOaaivyxVF8Yzlf4cRA== 0000950124-06-000950.txt : 20060302 0000950124-06-000950.hdr.sgml : 20060302 20060302170830 ACCESSION NUMBER: 0000950124-06-000950 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060227 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060302 DATE AS OF CHANGE: 20060302 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CREDIT ACCEPTANCE CORPORATION CENTRAL INDEX KEY: 0000885550 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 381999511 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20202 FILM NUMBER: 06660742 BUSINESS ADDRESS: STREET 1: 25505 W TWELVE MILE RD STREET 2: STE 3000 CITY: SOUTHFIELD STATE: MI ZIP: 48034-8334 BUSINESS PHONE: 8103532700 MAIL ADDRESS: STREET 1: 25505 WEST TWELVE MILE ROAD STREET 2: SUITE 3000 CITY: SOUTHFIELD STATE: MI ZIP: 48034-8334 8-K 1 k02927e8vk.txt CURRENT REPORT, DATED FEBRUARY 27, 2006 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): FEBRUARY 27, 2006 CREDIT ACCEPTANCE CORPORATION (Exact name of registrant as specified in its charter) Commission File Number 000-20202 MICHIGAN 38-1999511 (State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.) 25505 W. TWELVE MILE ROAD, SUITE 3000 48034-8339 SOUTHFIELD, MICHIGAN (Zip Code) (Address of principal executive offices)
Registrant's telephone number, including area code: 248-353-2700 ----------------- Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written Communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION. On February 27, 2006, Credit Acceptance Corporation (the "Company"), issued a press release announcing its financial results for the three and twelve month periods ended December 31, 2005. The press release is attached as Exhibit 99.1 to this Form 8-K and incorporated herein by reference. ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits. 99.1 Press Release dated February 27, 2006 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CREDIT ACCEPTANCE CORPORATION (Registrant) By: /s/ Kenneth S. Booth ------------------------------ Kenneth S. Booth Chief Financial Officer March 2, 2006 Exhibit Index
Exhibit No. Description - ------------ -------------------------------------------------------------- Exhibit 99.1 Press Release dated February 27, 2006.
EX-99.1 2 k02927exv99w1.txt PRESS RELEASE DATED FEBRUARY 27, 2006 SILVER TRIANGLE BUILDING 25505 WEST TWELVE MILE ROAD. SUITE 3000 SOUTHFIELD, MI 48034-8339 (248) 353-2700 WWW.CREDITACCEPTANCE.COM NEWS RELEASE FOR IMMEDIATE RELEASE DATE: FEBRUARY 27, 2006 INVESTOR RELATIONS: DOUGLAS W. BUSK TREASURER (248) 353-2700 EXT. 4432 IR@CREDITACCEPTANCE.COM PINK SHEETS SYMBOL: CACC CREDIT ACCEPTANCE ANNOUNCES: FOURTH QUARTER AND 2005 EARNINGS SOUTHFIELD, MICHIGAN - FEBRUARY 27, 2006 - CREDIT ACCEPTANCE CORPORATION (PINK SHEETS: CACC) (the "Company") announced consolidated net income for the three months ended December 31, 2005 of $25.2 million or $0.65 per diluted share compared to $13.9 million or $0.35 per diluted share for the same period in 2004. For the year ended December 31, 2005, consolidated net income was $72.6 million or $1.85 per diluted share compared to $57.3 million or $1.40 per diluted share for the same period in 2004. Results for the three months and year ended December 31, 2005 compared to the same periods in 2004 include the following: - Consumer Loan unit volume increased 13.3% for the three months and 10.0% for the year. - The number of active dealer-partners increased 32.2% for the three months and 45.3% for the year. - Consumer Loan unit volume per active dealer-partner decreased 14.4% for the three months and 24.3% for the year. FINANCIAL RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 (Dollars in thousands, except per share data)
FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 2004 % CHANGE -------- -------- -------- Net income $ 25,240 $ 13,932 81.2 Net income per common share: Basic 0.68 0.38 78.9 Diluted 0.65 0.35 85.7 Net operating profit after-tax 27,109 16,144 67.9 Average capital 522,856 497,150 5.2 Return on capital 20.7% 13.0% 59.2 Economic profit 16,261 6,585 146.9 Total revenue $ 51,573 $ 46,064 12.0
The increase in consolidated net income for the three months ended December 31, 2005 compared to the same period in 2004 was primarily due to: (i) an 11.2% increase in finance charge revenue primarily due to an increase in the size of the Dealer Loan portfolio, (ii) an after-tax gain of $2.1 million on the sale of the United Kingdom Consumer Loan portfolio recognized during the fourth quarter of 2005, (iii) a $2.0 million after-tax foreign currency exchange gain recognized during the fourth quarter of 2005 following the 1 determination that the liquidation of businesses in the United Kingdom and Canada were substantially complete, (iv) a $3.1 million decrease in the provision for credit losses primarily due to a reduction in the provision for credit losses required to maintain the initial yield established at the inception of the Dealer Loan, (v) a decrease in general and administrative expenses, as a percentage of revenue, primarily related to the resolution of a dispute over previously paid audit fees, and (vi) a decrease in the Company's effective tax rate from 40.7% to 33.7% primarily due to the impact of the foreign exchange gain related to the liquidation of the United Kingdom and Canadian businesses not being taxable. FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2005 (Dollars in thousands, except per share data)
FOR THE YEARS ENDED DECEMBER 31, 2005 2004 % CHANGE --------- --------- -------- Net income $ 72,601 $ 57,325 26.6 Net income per common share: Basic 1.96 1.48 32.4 Diluted 1.85 1.40 32.1 Net operating profit after-tax 81,627 64,904 25.8 Average capital 520,376 478,345 8.8 Return on capital 15.7% 13.6% 15.4 Economic profit 39,253 26,204 49.8 Total revenue $ 201,268 $ 172,071 17.0
The increase in consolidated net income for the year ended December 31, 2005 compared to the same period in 2004 was primarily due to: (i) a 17.1% increase in finance charge revenue primarily due to an increase in the size of the Dealer Loan portfolio, (ii) a $3.9 million increase in license fees primarily due to an increase in the number of active dealer-partners. License fees represent monthly fees charged to dealer-partners for access to CAPS, the Company's patented Internet-based Credit Approval Processing System, (iii) an after-tax gain of $2.1 million on the sale of the United Kingdom Consumer Loan portfolio recognized during the fourth quarter of 2005, (iv) a decrease in general and administrative expenses, as a percentage of revenue, primarily related to the resolution of a dispute over previously paid audit fees, and (v) a $0.8 million decrease in the provision for credit losses primarily due to a reduction in the provision for credit losses required to maintain the initial yield established at the inception of a Dealer Loan. 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 December 31, 2005 and 2004:
THREE MONTHS ENDED DECEMBER 31, 2005 THREE MONTHS ENDED DECEMBER 31, 2004 UNIT UNIT DEALER-PARTNERS VOLUME AVERAGE DEALER-PARTNERS VOLUME AVERAGE --------------- ------ ------- --------------- ------ ------- Production from quarter ended September 30 of the same year 1,318 20,037 15.2 957 18,375 19.2 Attrition (1) (184) (743) 4.0 (80) (304) 3.8 Volume change from dealer-partners active in both periods n/a (2,094) n/a n/a (2,642) n/a ---------------------------- --------------------------- Current period volume from dealer-partners active both periods 1,134 17,200 15.2 877 15,429 17.6 New dealer-partners (2) 184 1,288 7.0 136 996 7.3 Restarts (3) 41 177 4.3 15 46 3.1 ---------------------------- --------------------------- Current period production 1,359 18,665 13.7 1,028 16,471 16.0
2
TWELVE MONTHS ENDED DECEMBER 31, 2005 TWELVE MONTHS ENDED DECEMBER 31, 2004 UNIT UNIT DEALER-PARTNERS VOLUME AVERAGE DEALER-PARTNERS VOLUME AVERAGE --------------- ------- ------- --------------- ------ ------- Production from 12 month period ending 1 year ago 1,215 75,955 62.5 916 62,334 68.1 Attrition (1) (239) (4,291) 18.0 (182) (4,459) 24.5 Volume change from dealer-partners active in both periods n/a (5,147) n/a n/a 2,875 n/a ----------------------------- ----------------------------- Current period volume from dealer-partners active both periods 976 66,517 68.2 734 60,750 82.8 New dealer-partners (2) 745 16,278 21.8 460 14,482 31.5 Restarts (3) 45 772 17.2 21 723 34.4 ----------------------------- ------------------------------ Current period production 1,766 83,567 47.3 1,215 75,955 62.5
(1) Dealer-partner attrition is measured according to the following formula: dealer-partners active during the prior period who become inactive in the current period. (2) Excludes new dealer-partners that have enrolled in the Company's program, but have not submitted at least one loan during the period. (3) Restarts are previously active dealer-partners that were inactive during the prior period who became active during the current period. Unit volume produced in the current quarter exceeded the comparable period of 2004 by 2,194 units (13.3%). Unit volume produced over the prior twelve months exceeded the comparable period by 7,612 units (10.0%). The increase in unit volume is primarily the result of production from new dealer-partners, partially offset by a decline in volume from existing dealer-partners and from volume lost due to attrition. COMPARISON OF GAAP RETURN ON CAPITAL TO FLOATING YIELD RETURN ON CAPITAL The following table presents selected financial data that compares the Company's GAAP basis financial results to a non-GAAP measure. The non-GAAP measure ("Floating Yield") is identical to the Company's GAAP basis results except that, under the Floating Rate method, all changes in expected cash flows are treated as yield adjustments. Under GAAP, favorable changes in expected cash flows are treated as yield adjustments, while unfavorable changes are recorded as a current period expense. 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. (Dollars in thousands)
FOR THE YEARS ENDED DECEMBER 31, 2005 2004 ----------------------- GAAP Return on Capital 15.7% 13.6% Floating Yield Return on Capital 15.0% 13.3% ---------------------- Difference 0.7% 0.3% GAAP net operating profit after-tax $ 81,627 $ 64,904 Adjustment to Floating Yield (2,202) (58) ---------------------- Floating Yield net operating profit after-tax $ 79,425 $ 64,846 GAAP average capital $ 520,376 $ 478,345 Adjustment to Floating Yield 7,574 8,731 ---------------------- Floating Yield average capital $ 527,950 $ 487,076
3 CONSUMER LOAN PERFORMANCE IN THE UNITED STATES The United States is the Company's only business segment that continues to originate Dealer Loans. The following table compares the Company's forecast of Consumer Loan collection rates for loans accepted by year in the United States as of December 31, 2005 with the forecast as of December 31, 2004:
December 31, 2005 December 31, 2004 Loan Origination Year Forecasted Collection % Forecasted Collection % Variance - --------------------- ----------------------- ----------------------- -------- 1995 54.9% 54.9% 0.0% 1996 55.0% 55.0% 0.0% 1997 58.3% 58.4% (0.1%) 1998 67.7% 67.7% 0.0% 1999 72.7% 72.8% (0.1%) 2000 73.2% 73.2% 0.0% 2001 67.2% 67.2% 0.0% 2002 70.3% 70.2% 0.1% 2003 74.0% 74.0% 0.0% 2004 72.9% 73.4% (0.5%)
The following table presents forecasted Consumer Loan collection rates, advance rates, the spread (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections that have been realized as of December 31, 2005 for the United States business segment.
As of December 31, 2005 --------------------------------------------------- Year of Forecasted % of Forecast Origination Collection % Advance % Spread % Realized - ----------- ------------ --------- -------- ------------- 1995 54.9% 44.2% 10.7% 100.0% 1996 55.0% 46.9% 8.1% 99.8% 1997 58.3% 47.9% 10.4% 99.2% 1998 67.7% 46.1% 21.6% 98.5% 1999 72.7% 48.9% 23.8% 97.6% 2000 73.2% 48.0% 25.2% 96.7% 2001 67.2% 45.8% 21.4% 96.4% 2002 70.3% 42.2% 28.1% 94.1% 2003 74.0% 43.4% 30.6% 82.8% 2004 72.9% 44.0% 28.9% 59.7% 2005 73.6% 47.1% 26.5% 22.7%
4 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" 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, - 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 natural disasters, terrorist attacks and other potential disasters or 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 on the Pink Sheets under the symbol CACC. For more information, visit www.creditacceptance.com. 5 CREDIT ACCEPTANCE CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data)
DECEMBER 31, ----------------------- 2005 2004 (UNAUDITED) ----------- --------- ASSETS: Cash and cash equivalents $ 7,090 $ 614 Restricted cash 13,473 23,927 Restricted securities available for sale 3,345 928 Loans receivable (including $14,622 and $18,353 from affiliates in 2005 and 2004, respectively) 694,939 667,394 Allowance for credit losses (131,411) (141,383) --------- --------- Loans receivable, net 563,528 526,011 --------- --------- Property and equipment, net 17,992 19,706 Income taxes receivable 4,022 9,444 Other assets 9,944 10,683 --------- --------- Total Assets $ 619,394 $ 591,313 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY: LIABILITIES: Accounts payable and accrued liabilities $ 55,705 $ 49,384 Dealer reserve payable, net - 15,675 Line of credit 36,300 7,700 Secured financing 101,500 176,000 Mortgage note and capital lease obligations 9,105 9,847 Deferred income taxes, net 43,758 31,817 --------- --------- Total Liabilities 246,368 290,423 --------- --------- SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued - - Common stock, $.01 par value, 80,000,000 shares authorized, 37,027,286 and 36,897,242 shares issued and outstanding at year-end 2005 and 2004, respectively 370 369 Paid-in capital 29,746 25,640 Unearned stock-based compensation (1,566) - Retained earnings 344,513 271,912 Accumulated other comprehensive (loss) income, net of tax of $22 and $2 at year-end 2005 and 2004, respectively (37) 2,969 --------- --------- Total Shareholders' Equity 373,026 300,890 --------- --------- Total Liabilities and Shareholders' Equity $ 619,394 $ 591,313 ========= =========
6 CREDIT ACCEPTANCE CORPORATION CONSOLIDATED INCOME STATEMENTS (Dollars in thousands, except per share data)
THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, ---------------------------- --------------------------- (UNAUDITED) (UNAUDITED) 2005 2004 2005 2004 ------------ ------------ ----------- ------------ REVENUE: Finance charges $ 44,989 $ 40,454 $ 176,369 $ 150,651 License fees 2,905 1,688 9,775 5,835 Other income 3,679 3,922 15,124 15,585 ------------ ------------ ----------- ------------ Total revenue 51,573 46,064 201,268 172,071 ------------ ------------ ----------- ------------ COSTS AND EXPENSES: Salaries and wages 9,350 8,256 36,853 32,720 General and administrative 3,979 6,149 20,834 20,724 Sales and marketing 3,319 3,309 14,275 11,915 Provision for credit losses (1,668) 1,457 5,705 6,526 Interest 2,875 3,403 13,886 11,660 Stock-based compensation 484 523 2,240 2,580 Other expense 41 257 931 1,270 ------------ ------------ ----------- ------------ Total costs and expenses 18,380 23,354 94,724 87,395 ------------ ------------ ----------- ------------ Operating income 33,193 22,710 106,544 84,676 Foreign exchange gain (loss) 1,998 (81) 3,017 1,650 ------------ ------------ ----------- ------------ Income from continuing operations before provision for income taxes 35,191 22,629 109,561 86,326 Provision for income taxes 11,871 9,202 40,159 30,073 ------------ ------------ ----------- ------------ Income from continuing operations 23,320 13,427 69,402 56,253 ------------ ------------ ----------- ------------ Discontinued operations Gain from operations of discontinued United Kingdom segment (including gain on sale of United Kingdom loan portfolio of $3,033 during the fourth quarter of 2005) before provision for income taxes 3,182 753 4,989 1,556 Provison for income taxes 1,262 248 1,790 484 ------------ ------------ ----------- ------------ Gain on discontinued operations 1,920 505 3,199 1,072 ------------ ------------ ----------- ------------ Net income $ 25,240 $ 13,932 $ 72,601 $ 57,325 ============ ============ =========== ============ Net income per common share: Basic $ 0.68 $ 0.38 $ 1.96 $ 1.48 ============ ============ =========== ============ Diluted $ 0.65 $ 0.35 $ 1.85 $ 1.40 ============ ============ =========== ============ Income from continuing operations per common share: Basic $ 0.63 $ 0.36 $ 1.88 $ 1.46 ============ ============ =========== ============ Diluted $ 0.60 $ 0.34 $ 1.77 $ 1.37 ============ ============ =========== ============ Weighted average shares outstanding: Basic 37,025,517 36,819,410 36,991,136 38,617,787 Diluted 39,088,720 39,473,105 39,207,680 41,017,205
7 CREDIT ACCEPTANCE CORPORATION SUMMARY FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) RETURN ON CAPITAL The return on capital is equal to net operating profit after-tax (net income plus interest expense after-tax) divided by average capital as follows:
FOR THE THREE MONTHS ENDED DECEMBER 31, FOR THE YEARS ENDED DECEMBER 31, 2005 2004 2005 2004 --------- --------- --------- --------- Net income $ 25,240 $ 13,932 $ 72,601 $ 57,325 Interest expense after-tax (1) 1,869 2,212 9,026 7,579 --------- --------- --------- --------- Net operating profit after-tax $ 27,109 $ 16,144 $ 81,627 $ 64,904 ========= ========= ========= ========= Average debt $ 163,687 $ 203,261 $ 186,901 $ 167,137 Average shareholders' equity 359,169 293,889 333,475 311,208 --------- --------- --------- --------- Average capital $ 522,856 $ 497,150 $ 520,376 $ 478,345 ========= ========= ========= ========= Return on capital 20.7% 13.0% 15.7% 13.6%
(1) Interest expense after-tax calculated using a 35% tax rate. ECONOMIC PROFIT The Company defines economic profit as net income less an imputed cost of equity. Economic profit measures how efficiently the Company utilizes its capital. To consider the cost of both debt and equity, the Company's calculation of economic profit deducts from net income a cost of equity equal to 10% of average equity, which approximates the S&P 500's rate of return since 1965. Management uses economic profit to assess the Company's performance as well as to make capital allocation decisions. Management believes this information is important to shareholders because it allows shareholders to compare the returns earned by the Company with the return they could expect if the Company returned capital to shareholders and they invested in other securities.
FOR THE THREE MONTHS ENDED DECEMBER 31, FOR THE YEARS ENDED DECEMBER 31, 2005 2004 2005 2004 -------------- ---------- --------------- ----------- Net income $ 25,240 $ 13,932 $ 72,601 $ 57,325 Imputed cost of equity at 10% (1) (8,979) (7,347) (33,348) (31,121) ------------ ------------ ------------ ------------ Total economic profit $ 16,261 $ 6,585 $ 39,253 $ 26,204 ============ ============ ============ ============ Diluted weighted average shares outstanding 39,088,720 39,473,105 39,207,680 41,017,205 Economic profit per diluted share (2) $ 0.42 $ 0.17 $ 1.00 $ 0.64
(1) Cost of equity is equal to 10% (on an annual basis) of average shareholders' equity, as disclosed in the Return on Capital calculation. (2) Economic profit per diluted share equals the economic profit divided by the diluted weighted average number of shares outstanding. 8 CREDIT ACCEPTANCE CORPORATION SUMMARY FINANCIAL DATA CONTINUED (DOLLARS IN THOUSANDS) A summary of changes in loans receivable is as follows:
YEAR ENDED DECEMBER 31, 2005 ------------------------------------------------------------ DEALER LOANS CONSUMER LOANS OTHER LOANS TOTAL ------------ -------------- ----------- ---------- Balance, beginning of period $ 626,284 $ 36,760 $ 4,350 $ 667,394 New loans 461,877 13,354 - 475,231 Dealer holdback payments 52,512 - - 52,512 Net cash collections on loans (454,636) (16,871) - (471,507) Write-offs (10,215) (10,760) - (20,975) Recoveries - 2,367 - 2,367 Sale of United Kingdom loan portfolio - (8,579) - (8,579) Net change in floorplan receivables, notes receivable and lines of credit - - (573) (573) Other - 954 - 954 Currency translation (130) (1,755) - (1,885) --------- -------- ------- --------- Balance, end of period $ 675,692 $ 15,470 $ 3,777 $ 694,939 ========= ======== ======= =========
YEAR ENDED DECEMBER 31, 2004 ----------------------------------------------------------- DEALER LOANS CONSUMER LOANS OTHER LOANS TOTAL ------------ -------------- ----------- ---------- Balance, beginning of period $ 537,671 $ 75,098 $ 6,668 $ 619,437 New loans 427,866 7,938 - 435,804 Dealer holdback payments 33,326 - - 33,326 Net cash collections on loans (365,119) (27,615) - (392,734) Write-offs (7,104) (23,783) - (30,887) Recoveries - 2,157 - 2,157 Net change in floorplan receivables, notes receivable and lines of credit - - (2,318) (2,318) Other - 584 - 584 Currency translation (356) 2,381 - 2,025 --------- -------- ------- --------- Balance, end of period $ 626,284 $ 36,760 $ 4,350 $ 667,394 ========= ======== ======= =========
9 CREDIT ACCEPTANCE CORPORATION SUMMARY FINANCIAL DATA CONCLUDED (DOLLARS IN THOUSANDS) A summary of the allowance for credit losses is as follows:
FOR THE YEAR ENDED DECEMBER 31, 2005 ---------------------------------------------------------- DEALER LOANS CONSUMER LOANS OTHER LOANS TOTAL ------------ -------------- ----------- --------- Balance, beginning of period $ 134,599 $ 6,774 $ 10 $ 141,383 Provision for credit losses (1) 6,290 (2,344) (37) 3,909 Write-offs (10,215) (1,985) - (12,200) Recoveries - 2,312 - 2,312 Sale of United Kingdom loan portfolio - (3,439) - (3,439) Other change in floorplan receivables, notes receivable, and lines of credit - - 27 27 Currency translation 48 (629) - (581) --------- ------- ---- --------- Balance, end of period $ 130,722 $ 689 $ - $ 131,411 ========= ======= ==== =========
FOR THE YEAR ENDED DECEMBER 31, 2004 ---------------------------------------------------------- DEALER LOANS CONSUMER LOANS OTHER LOANS TOTAL ------------ -------------- ----------- --------- Balance, beginning of period $ 136,514 $ 6,689 $ 106 $ 143,309 Provision for credit losses (2) 5,094 (978) 1,174 5,290 Write-offs (7,104) (1,305) - (8,409) Recoveries - 2,023 - 2,023 Other change in floorplan receivables, notes receivable, and lines of credit - - (1,270) (1,270) Currency translation 95 345 - 440 --------- ------- ------- --------- Balance, end of period $ 134,599 $ 6,774 $ 10 $ 141,383 ========= ======= ======= =========
(1) Does not include a provision of $70 primarily related to earned but unpaid revenue related to license fees. (2) Does not include a provision of $467 for earned but unpaid revenue related to license fees. 10 -----END PRIVACY-ENHANCED MESSAGE-----