-----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, JjV2HNvWYSGJ8bijhmWLl7Tdpv/SCjN2BnE0oGkS33UM7rJvRuiBI/3IXt3QTtlH 0OVFtRhNpz1osYux1vn1Hg== 0000950124-06-002493.txt : 20060504 0000950124-06-002493.hdr.sgml : 20060504 20060504170747 ACCESSION NUMBER: 0000950124-06-002493 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060503 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060504 DATE AS OF CHANGE: 20060504 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: 06809337 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 k04971e8vk.txt CURRENT REPORT, DATED MAY 3, 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): MAY 3, 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 (I.R.S. Employer of incorporation) 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 May 3, 2006, Credit Acceptance Corporation (the "Company"), issued a press release announcing its financial results for the three month period ended March 31, 2006. 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 May 3, 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 May 4, 2006 INDEX OF EXHIBITS
EXHIBIT NO. DESCRIPTION - ----------- ----------- 99.1 Press Release dated May 3, 2006
EX-99 2 k04971exv99.txt PRESS RELEASE DATED MAY 3, 2006 SILVER TRIANGLE BUILDING 25505 WEST TWELVE MILE ROAD - SUITE 3000 SOUTHFIELD, MI 48034-8339 (248) 353-2700 CREDITACCEPTANCE.COM NEWS RELEASE FOR IMMEDIATE RELEASE DATE: MAY 3, 2006 INVESTOR RELATIONS: DOUGLAS W. BUSK TREASURER (248) 353-2700 EXT. 4432 IR@CREDITACCEPTANCE.COM NASDAQ SYMBOL: CACC CREDIT ACCEPTANCE ANNOUNCES: FIRST QUARTER 2006 EARNINGS SOUTHFIELD, MICHIGAN - MAY 3, 2006 - CREDIT ACCEPTANCE CORPORATION (NASDAQ: CACC) (the "Company") announced consolidated net income for the three months ended March 31, 2006 of $17.2 million or $0.45 per diluted share compared to $15.7 million or $0.40 per diluted share for the same period in 2005. Results for the three months ended March 31, 2006 compared to the same period in 2005 include the following: - Consumer Loan unit volume increased 12.2%. - Consumer Loan dollar volume increased 10.3%. - The number of active dealer-partners increased 34.1%. - Consumer Loan unit volume per active dealer-partner decreased 16.4%. FINANCIAL RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2006 (Dollars in thousands, except per share data)
FOR THE THREE MONTHS ENDED MARCH 31, ------------------------------ 2006 2005 % CHANGE -------- -------- -------- Net income $ 17,197 $ 15,714 9.4 Net income per common share: Basic 0.48 0.43 11.6 Diluted 0.45 0.40 12.5 Net operating profit after-tax 19,520 18,147 7.6 Average capital 521,934 502,565 3.9 Return on capital 15.0% 14.4% 4.2 Economic profit 8,273 8,031 3.0 Total revenue $ 53,026 $ 47,736 11.1
1 The increase in consolidated net income for the three months ended March 31, 2006 compared to the same period in 2005 primarily reflects the following: - Finance charge revenue increased $4.0 million (9.4%) primarily due to a 6.8% increase in the average size of the loan portfolio. - License fees increased $0.9 million primarily due to an increase in the number of active dealer-partners and an increase in the monthly rate for CAPS fees from $499 to $599. - Stock-based compensation expense decreased $0.9 million due to a decline in the number of unvested stock options outstanding and the Company's adoption of SFAS No. 123R. Partially offsetting these improvements: - Salaries and wages, as a percentage of revenue, increased to 20.2% from 19.0% primarily due to increased costs of information systems personnel. - General and administrative expenses, as a percentage of revenue, increased to 12.8% from 11.6% primarily due to additional professional fees associated with the restatement and an increase in corporate legal expenses. - Sales and marketing expenses, as a percentage of revenue, increased to 8.2% from 7.4% primarily due to an increase in dealer support products and sales promotions. DEALER-PARTNER ACTIVITY AND CONSUMER LOAN UNIT VOLUME The following table summarizes the changes in active dealer-partners and corresponding consumer loan unit volume for the three months ended March 31, 2006 and 2005:
THREE MONTHS ENDED MARCH 31, ---------------------------- 2006 2005 % CHANGE ------ ------ -------- Consumer loan unit volume 28,994 25,847 12.2% Active dealer-partners (1) 1,491 1,112 34.1% ------ ------ Average volume per dealer-partner 19.4 23.2 -16.3% Consumer loan unit volume from dealer-partners active both periods 18,685 21,503 -13.1% Dealer-partners active both periods 760 760 -- ------ ------ Average volume per dealer-partners active both periods 24.6 28.3 -13.1% Consumer loan unit volume from new dealer-partners 2,099 1,409 49.0% New active dealer-partners (2) 220 141 56.0% ------ ------ Average volume per new active dealer-partner 9.5 10.0 -4.5% Attrition (3) -16.8% -8.8%
(1) Active dealer-partners are dealer-partners who submit at least one loan during the period. (2) New dealer-partners are dealer-partners that have enrolled in the Company's program and have submitted their first loan to the Company during the period. (3) Attrition is measured according to the following formula: decrease in consumer loan unit volume from dealer-partners who submitted at least one consumer loan during the comparable period of the prior year but who submitted no consumer loans during the current period divided by prior year comparable period consumer loan unit volume. 2 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 Company's finance charge revenue is based on estimates of future cash flows. Under GAAP, favorable changes in expected cash flows are treated as yield adjustments, while unfavorable changes are recorded as a current period expense. The non-GAAP measure ("Floating-Yield") is identical to the Company's GAAP basis results except that, under the Floating Yield method, all changes in expected cash flows are treated as yield adjustments and therefore impact earnings over time. The GAAP treatment always results in a lower carrying value of the loan receivable asset, but may result in either higher or lower earnings for any given period depending on the timing and amount of expected cash flow changes. (Dollars in thousands)
FOR THE THREE MONTHS ENDED MARCH 31, ------------------- 2006 2005 -------- -------- GAAP Return on Capital 15.0% 14.4% Floating Yield Return on Capital 13.3% 13.2% -------- -------- Difference 1.7% 1.2% GAAP net operating profit after-tax $ 19,520 $ 18,147 Adjustment to Floating Yield (1,950) (1,309) -------- -------- Floating Yield net operating profit after-tax $ 17,570 $ 16,838 GAAP average capital $521,934 $502,565 Adjustment to Floating Yield 5,244 7,964 -------- -------- Floating Yield average capital $527,178 $510,529
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 March 31, 2006 with the forecast as of December 31, 2005:
March 31, 2006 December 31, 2005 Loan Origination Year Forecasted Collection % Forecasted Collection % Variance - --------------------- ----------------------- ----------------------- -------- 1996 55.0% 55.0% 0.0% 1997 58.3% 58.3% 0.0% 1998 67.6% 67.7% (0.1%) 1999 72.6% 72.7% (0.1%) 2000 73.2% 73.2% 0.0% 2001 67.4% 67.2% 0.2% 2002 70.4% 70.3% 0.1% 2003 74.4% 74.0% 0.4% 2004 73.6% 72.9% 0.7% 2005 75.4% 73.6% 1.8%
Collection results during the first quarter of 2006 generally exceeded the Company's expectations at December 31, 2005 and had a positive impact on forecasted Consumer Loan collection rates. 3 CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION The Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all of its forward-looking statements. These forward-looking statements represent the Company's outlook only as of the date of this report. While the Company believes that its forward-looking statements are reasonable, actual results could differ materially since the statements are based on our current expectations, which are subject to risks and uncertainties. Factors that might cause such a difference include, but are not limited to, the factors set forth in Item 1A of the Company's Form 10-K for the year ended December 31, 2005, other risk factors discussed herein or listed from time to time in the Company's reports filed with the Securities and Exchange Commission and the following: - The Company's inability to accurately forecast and estimate the amount and timing of future collections could have a material adverse effect on results of operations. - Due to increased competition from traditional financing sources and non-traditional lenders, the Company may not be able to compete successfully. - The Company's ability to maintain and grow the business is dependent on the ability to continue to access funding sources and obtain capital on favorable terms. - The Company may not be able to generate sufficient cash flow to service its outstanding debt and fund operations. - The substantial regulation to which the Company is subject limits the business, and such regulation or changes in such regulation could result in potential liability. - Adverse changes in economic conditions, or in the automobile or finance industries or the non-prime consumer finance market, could adversely affect the Company's financial position, liquidity and results of operations and its ability to enter into future financing transactions. - Litigation the Company is involved in from time to time may adversely affect its financial condition, results of operations and cash flows. - The Company is dependent on its senior management and the loss of any of these individuals or an inability to hire additional personnel could adversely affect its ability to operate profitably. - Natural disasters, acts of war, terrorist attacks and threats or the escalation of military activity in response to such attacks or otherwise may negatively affect the business, financial condition and results of operations. 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 NASDAQ under the symbol CACC. For more information, visit creditacceptance.com. 4 CREDIT ACCEPTANCE CORPORATION CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
AS OF -------------------------- MARCH 31, 2006 DECEMBER 31, (UNAUDITED) 2005 ----------- ------------ ASSETS: Cash and cash equivalents $ 1,920 $ 7,090 Restricted cash and cash equivalents 15,663 13,473 Restricted securities available for sale 3,366 3,345 Loans receivable (including $19,939 and $19,722 from affiliates in 2006 and 2005, respectively) 721,381 694,939 Allowance for credit losses (130,614) (131,411) --------- --------- Loans receivable, net 590,767 563,528 --------- --------- Property and equipment, net 17,075 17,992 Income taxes receivable 731 4,022 Other assets 11,338 9,944 --------- --------- Total Assets $ 640,860 $ 619,394 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY: LIABILITIES: Accounts payable and accrued liabilities $ 61,868 $ 55,705 Line of credit 101,930 36,300 Secured financing 132,500 101,500 Mortgage note and capital lease obligations 8,737 9,105 Deferred income taxes, net 49,569 43,758 --------- --------- Total Liabilities 354,604 246,368 --------- --------- SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued -- -- Common stock, $.01 par value, 80,000,000 shares authorized, 33,005,365 and 37,027,286 shares issued and outstanding as of March 31, 2006 and December 31, 2005, respectively 330 370 Paid-in capital -- 29,746 Unearned stock-based compensation (1,692) (1,566) Retained earnings 287,674 344,513 Accumulated other comprehensive income, net of tax of $32 and $22 at March 31, 2006 and December 31, 2005, respectively (56) (37) --------- --------- Total Shareholders' Equity 286,256 373,026 --------- --------- Total Liabilities and Shareholders' Equity $ 640,860 $ 619,394 ========= =========
5 CREDIT ACCEPTANCE CORPORATION CONSOLIDATED INCOME STATEMENTS (UNAUDITED) (Dollars in thousands, except per share data)
THREE MONTHS ENDED MARCH 31, ------------------------- 2006 2005 ----------- ----------- REVENUE: Finance charges $ 46,007 $ 42,038 License fees 2,897 1,960 Other income 4,122 3,738 ----------- ----------- Total revenue 53,026 47,736 ----------- ----------- COSTS AND EXPENSES: Salaries and wages 10,752 9,067 General and administrative 6,765 5,530 Sales and marketing 4,359 3,527 Provision for credit losses 524 854 Interest 3,574 3,743 Stock-based compensation expense (158) 755 Other expense 82 135 ----------- ----------- Total costs and expenses 25,898 23,611 ----------- ----------- Operating income 27,128 24,125 Foreign currency gain 5 645 ----------- ----------- Income from continuing operations before provision for income taxes 27,133 24,770 Provision for income taxes 9,928 9,240 ----------- ----------- Income from continuing operations 17,205 15,530 ----------- ----------- Discontinued operations (Loss) gain from operations of discontinued United Kingdom operations (13) 255 (Credit) provision for income taxes (5) 71 ----------- ----------- (Loss) gain on discontinued operations (8) 184 ----------- ----------- Net income $ 17,197 $ 15,714 =========== =========== Other comprehensive loss, net of tax (19) (731) ----------- ----------- Comprehensive income $ 17,178 $ 14,983 =========== =========== Net income per common share: Basic $ 0.48 $ 0.43 =========== =========== Diluted $ 0.45 $ 0.40 =========== =========== Income from continuing operations per common share: Basic $ 0.48 $ 0.42 =========== =========== Diluted $ 0.45 $ 0.39 =========== =========== Weighted average shares outstanding: Basic 36,146,994 36,900,449 Diluted 38,609,257 39,457,287
6 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 MARCH 31, -------------------- 2006 2005 -------- --------- Net income $ 17,197 $ 15,714 Interest expense after-tax (1) 2,323 2,433 -------- -------- Net operating profit after-tax $ 19,520 $ 18,147 ======== ======== Average debt $164,955 $195,238 Average shareholders' equity 356,979 307,327 -------- -------- Average capital $521,934 $502,565 ======== ======== Return on capital 15.0% 14.4%
(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 MARCH 31, ------------------------- 2006 2005 ----------- ----------- Net income $ 17,197 $ 15,714 Imputed cost of equity at 10% (1) (8,924) (7,683) ----------- ----------- Total economic profit $ 8,273 $ 8,031 =========== =========== Diluted weighted average shares outstanding 38,609,257 39,457,287 Economic profit per diluted share (2) $ 0.21 $ 0.20
(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. 7 CREDIT ACCEPTANCE CORPORATION SUMMARY FINANCIAL DATA CONTINUED A summary of changes in Loans receivable is as follows (in thousands):
THREE MONTHS ENDED MARCH 31, 2006 ------------------------------------------ DEALER CONSUMER OTHER LOANS LOANS LOANS TOTAL --------- -------- ------- --------- Balance, beginning of period $ 675,692 $15,470 $ 3,777 $ 694,939 New Loans 156,646 3,335 -- 159,981 Dealer holdback payments 17,644 -- -- 17,644 Net cash collections on loans (145,501) (2,848) -- (148,349) Write-offs (1,255) (62) -- (1,317) Recoveries -- 36 -- 36 Net change in floorplan receivables, notes receivable, and lines of credit -- -- (1,712) (1,712) Other -- 162 -- 162 Currency translation (3) -- -- (3) --------- ------- ------- --------- Balance, end of period $ 703,223 $16,093 $ 2,065 $ 721,381 ========= ======= ======= =========
THREE MONTHS ENDED MARCH 31, 2005 ----------------------------------------- DEALER CONSUMER OTHER LOANS LOANS LOANS TOTAL --------- -------- ------ -------- Balance, beginning of period $ 626,284 $36,760 $4,350 $ 667,394 New Loans 137,991 2,937 -- 140,928 Dealer holdback payments 11,742 -- -- 11,742 Net cash collections on loans (115,050) (4,781) -- (119,831) Write-offs (3,003) (3,307) -- (6,310) Recoveries -- 478 -- 478 Net change in floorplan receivables, notes receivable, and lines of credit -- -- (535) (535) Other -- 203 -- 203 Currency translation (115) (409) -- (524) --------- ------- ------ --------- Balance, end of period $ 657,849 $31,881 $3,815 $ 693,545 ========= ======= ====== =========
A summary of changes in the Allowance for credit losses is as follows (in thousands):
THREE MONTHS ENDED MARCH 31, 2006 -------------------------------------- DEALER CONSUMER OTHER LOANS LOANS LOANS TOTAL -------- -------- ----- -------- Balance, beginning of period $130,722 $ 689 $-- $131,411 Provision for credit losses (1) 78 408 -- 486 Write-offs (1,255) (62) -- (1,317) Recoveries -- 36 -- 36 Currency translation (2) -- -- (2) -------- ------ --- -------- Balance, end of period $129,543 $1,071 $-- $130,614 ======== ====== === ========
THREE MONTHS ENDED MARCH 31, 2005 --------------------------------------- DEALER CONSUMER OTHER LOANS LOANS LOANS TOTAL -------- -------- ----- -------- Balance, beginning of period $134,599 $6,774 $ 10 $141,383 Provision for credit losses (2) 674 (176) -- 498 Write-offs (3,003) (334) -- (3,337) Recoveries -- 631 -- 631 Other changes in floorplan receivables, notes receivable, and lines of credit -- -- (10) (10) Currency translation (14) (163) -- (177) -------- ------ ---- -------- Balance, end of period $132,256 $6,732 $ -- $138,988 ======== ====== ==== ========
(1) Does not include a provision for credit losses of $38 on license fees receivable and other items. (2) Does not include a provision for credit losses of $205 on license fees receivable and other items. 8 -----END PRIVACY-ENHANCED MESSAGE-----