8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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): July 20, 2005

CREDIT ACCEPTANCE CORPORATION
__________________________________________
(Exact name of registrant as specified in its charter)

Michigan	000-20202	38-1999511
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
25505 West Twelve Mile Road, Suite 3000, Southfield, Michigan		48034-8339
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: 248-353-2700

Not Applicable
______________________________________________
Former name or former address, if changed since last report

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 July 21, 2005, Credit Acceptance Corporation (the "Company"), issued a press release announcing operational data for the three and six months ended June 30, 2005. The press release is attached as Exhibit 99.1 to this Form 8-K and incorporated herein by reference.

Item 4.01 Changes in Registrant's Certifying Accountant.

The Company also announced in the July 21, 2005 press release that its Audit Committee of the Board of Directors has appointed Grant Thornton LLP ("Grant Thornton") as its new independent registered public accounting firm, effective July 20, 2005. During the Company’s two most recent years ended December 31, 2003, and December 31, 2004, and through July 20, 2005, neither the Company nor anyone acting on its behalf consulted with Grant Thornton regarding either: (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).

During 2003, the Company discussed a draft response to a routine SEC comment letter with Grant Thornton. The Company was charged $1,140 for the discussions by Grant Thornton.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits.

99.1 Press Release dated July 21, 2005

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
July 26, 2005	By:	/s/ Kenneth S. Booth
		Name: Kenneth S. Booth
		Title: Chief Financial Officer

Exhibit Index

Exhibit No.	Description
99.1	Press Release dated July 21, 2005

EX-99.1

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: July 21, 2005

Investor Relations: Douglas W. Busk
Treasurer
(248) 353-2700 Ext. 4432
IR@creditacceptance.com

Pink Sheets Symbol: CACC

CREDIT ACCEPTANCE ANNOUNCES OPERATING RESULTS FOR THE SECOND QUARTER OF 2005 AND APPOINTMENT OF
NEW INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Southfield, Michigan – July 21, 2005 – Credit Acceptance Corporation (Pink Sheets: CACC) (the “Company”) announced certain operating results for the second quarter of 2005. Results for the quarter and six months ended June 30, 2005 compared to the same periods in 2004 include the following:

• Loan origination dollar volume grew 6.4% for the quarter and 4.9% for the six months.

• Loan origination unit volume grew 10.1% for the quarter and 9.1% for the six months.

• The number of active dealer-partners grew 36.2% for the quarter and 40.7% for the six months.

• Loan origination unit volume per active dealer-partner decreased 19.3% for the quarter and 22.4% for the six months.

Loan Originations ⁽¹⁾ and Loans Outstanding

(Dollars in thousands)

	Three Months Ended June 30,							Six Months Ended June 30,
	2005		2004		% Change			2005		2004		% Change
Loan originations	$	228,788	$	215,103		6.4	%	$	539,726	$	514,399		4.9	%
Number of loans originated		19,018		17,268		10.1	%		44,865		41,109		9.1	%
Number of loans outstanding at period end (2)		157,953		134,114		17.8	%		157,953		134,114		17.8	%
Number of active dealer-partners (3)		1,224		899		36.2	%		1,348		958		40.7	%
Loans per active dealer-partner		15.5		19.2		(19.3	%)		33.3		42.9		(22.4	%)
Average loan size	$	12.0	$	12.5		(4.0	%)	$	12.0	$	12.5		(4.0	%)

(1) Loan origination information relates to the United States, the Company’s only business segment that continues to originate new loans.

(2) Number of loans outstanding at period end includes active loans with an outstanding balance that have not been written off. The Company’s policy is to write off loans after 270 days have passed and no payment has been received.

(3) Active dealer-partners are dealer-partners who submitted at least one loan during the period.

The Company believes the decline in loans per dealer-partner is primarily the result of a more difficult competitive environment.

Dealer-Partner Enrollments

The number of active dealer-partners is a function of new dealer-partner enrollments and attrition. Active dealer-partners are dealer-partners who submitted at least one loan during the period. New dealer-partner enrollments are a function of the number of sales personnel (“Market Area Managers” or “MAM’s”) and their productivity. The following table summarizes the changes in active dealer-partners and MAM productivity for the three months and six months ended June 30, 2005 and 2004:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Balance, beginning of period		1,112			843			1,028			763
New dealer-partner enrollments (1)		214			96			351			216
Attrition (2)		(102	)		(40	)		(31	)		(21	)
Balance, end of period		1,224			899			1,348			958
Average number of MAM’s		57			48			57			45
New dealer-partner enrollments per MAM		3.8			2.0			6.2			4.8

(1) Excludes new dealer-partners that have enrolled in the Company’s program, but have not submitted at least one loan during the period.

(2) Dealer-partner attrition is measured according to the following formula: dealer-partners active during the prior period who become inactive in the current period less dealer-partners who were inactive during the prior period who become active in the current period.

The increase in new dealer-partner enrollments in the second quarter of 2005 is primarily due to a change in policy implemented in March 2005. The new policy allows prospective dealer-partners to enroll in the Company’s program without paying the $9,850 enrollment fee. Prospective dealer-partners choosing this option instead agree to allow the Company to keep 50% of the first accelerated dealer holdback payment. This payment, called Portfolio Profit Express, is generally paid to dealer-partners after 100 loans have been originated and assigned to the Company. While the Company will lose enrollment fee revenue on those dealer-partners choosing this option and not reaching 100 loans or otherwise qualifying for a Portfolio Profit Express payment, the Company will realize higher per dealer-partner enrollment fee revenue from those dealer-partners choosing this option and qualifying for a Portfolio Profit Express payment. Based on the historical average of Portfolio Profit Express payments, the Company expects average enrollment fee revenue per dealer-partner for those dealer-partners electing the new option and reaching 100 loans will be approximately $15,000 — $20,000. Approximately 50% of the dealer-partners that enrolled during the second quarter took advantage of this new enrollment option.

Loan Portfolio Performance

The following table compares the Company’s forecast of collection rates for loans originated by year in the United States as of June 30, 2005 with the forecast as of December 31, 2004:

	June 30, 2005			December 31, 2004
Loan Origination Year	Forecasted Collection %			Forecasted Collection %			Variance
1992		81.9	%		81.8	%		0.1	%
1993		76.1	%		76.0	%		0.1	%
1994		62.2	%		62.1	%		0.1	%
1995		55.3	%		55.3	%		0.0	%
1996		55.4	%		55.5	%		(0.1	%)
1997		58.5	%		58.6	%		(0.1	%)
1998		67.6	%		67.6	%		0.0	%
1999		72.1	%		72.0	%		0.1	%
2000		72.3	%		72.2	%		0.1	%
2001		67.4	%		67.3	%		0.1	%
2002		69.5	%		69.1	%		0.4	%
2003		72.4	%		71.8	%		0.6	%
2004		72.2	%		70.5	%		1.7	%

During the quarter ended June 30, 2005, collection rates were generally consistent with the Company’s expectations.

The following table presents forecasted collection rates, advance rates, the spread (the forecasted collection rate less the advance rate), and the percentage of the forecasted collections in the United States that have been realized as of June 30, 2005. The amounts presented are expressed as a percent of the original loan amount by year of loan origination.

Loan Origination	Forecasted									% of Forecast
Year	Collection %			Advance %			Spread %			Realized
1992	81.9%			35.3%			46.6%			100.0%
1993		76.1	%		37.3	%		38.8	%		100.0	%
1994		62.2	%		41.8	%		20.4	%		100.0	%
1995		55.3	%		45.3	%		10.0	%		100.0	%
1996		55.4	%		48.4	%		7.0	%		99.4	%
1997		58.5	%		48.3	%		10.2	%		98.8	%
1998		67.6	%		49.4	%		18.2	%		98.7	%
1999		72.1	%		52.3	%		19.8	%		98.3	%
2000		72.3	%		50.9	%		21.4	%		97.6	%
2001		67.4	%		48.0	%		19.4	%		95.5	%
2002		69.5	%		45.7	%		23.8	%		90.7	%
2003		72.4	%		47.0	%		25.4	%		72.7	%
2004		72.2	%		48.3	%		23.9	%		40.8	%
2005		-			49.9	%		-		—

Although the advance percentage is higher in 2005 as compared to 2004, the Company expects loans originated to date during 2005 to be slightly more profitable than 2004 originations as a result of (1) higher expected collection rates, (2) additional fee revenue related to our GAP product introduced in the first quarter of 2005, and (3) an increase in the monthly fee charged to dealer-partners from $499 to $599 effective March 1, 2005.

Liquidity (in thousands)

	June 30, 2005		June 30, 2004		Activity
Cash	$	988	$	1,282	$	(294	)
Restricted Cash		35,045		30,769		4,276
Total Cash	$	36,033	$	32,051	$	3,982
Outstanding Revolving Credit	$	147,700	$	130,600	$	17,100
Other Debt (1)		57,584		40,682		16,902
Total Debt	$	205,284	$	171,282	$	34,002
Repurchase of common stock, net of stock options exercised.					$	(50,144	)
Revolving Credit Capacity (2)	$	335,000	$	235,000

(1) Other debt includes the Company’s term secured financing, mortgage note, and capital lease obligations.

(2) Revolving credit capacity includes the Company’s $135 million line of credit facility with a commercial bank syndicate and $200 million revolving warehouse facility with an institutional investor at June 30, 2005. Revolving credit capacity at June 30, 2004 includes $135 million line of credit facility and $100 million revolving warehouse facility.

Over the last twelve months, the Company’s outstanding debt increased $34.0 million and cash balances increased $4.0 million. The net change of $30 million, along with cash flow from operations, was primarily used to (1) repurchase $50.1 million of common stock (net of stock option proceeds) and (2) increase the Company’s investment in loans receivable. The precise amount of the increase in loans receivable is not available at this time, as it will be impacted by financial statement restatements discussed in prior press releases.

The Company has three debt facilities that require the Company to timely file its public reports. The Company has received waivers of this requirement on all three debt facilities through July 31, 2005. The Company will not be able to complete its filings by this date and is in the process of requesting additional extensions of the waivers from its lenders. The Company intends to continue to provide its lenders with financial statements based on the Company’s historical loan accounting policies until the restatement is complete and is confident that waivers providing the Company with sufficient time to complete its public filings will be received.

Appointment of New Independent Registered Public Accounting Firm

The Company announced that effective July 20, 2005, the Audit Committee of the Board of Directors has appointed Grant Thornton LLP (“Grant Thornton”) as its new independent registered public accounting firm. Grant Thornton replaces Deloitte and Touche LLP whom the Audit Committee dismissed on June 24, 2005. The quarterly operating results and other historical and projected financial information are unaudited and have not been subject to review by Grant Thornton.

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,” “assumptions,” “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,

• the Company’s pending restatement of prior years financial statements,

• increased competition from traditional financing sources and from non-traditional lenders,

• the unavailability of funding at competitive rates of interest,

• the Company’s potential inability to continue to obtain third party financing on favorable terms,

• the Company’s potential inability to generate sufficient cash flow to service its debt and fund its future operations,

• adverse changes in applicable laws and regulations,

• adverse changes in economic conditions,

• adverse changes in the automobile or finance industries or in the non-prime consumer finance market,

• the Company’s potential inability to maintain or increase the volume of automobile loans,

• an increase in the amount or severity of litigation against the Company,

• the loss of key management personnel or the inability to hire qualified personnel,

• the effect of terrorist attacks and potential attacks, and

• various other factors discussed in the Company’s reports filed with the Securities and Exchange Commission.

Other factors not currently anticipated by management may also materially and adversely affect the Company’s results of operations. The Company does not undertake, and expressly disclaims any obligation, to update or alter its statements whether as a result of new information, future events or otherwise, except as required by applicable law.

Description of Credit Acceptance Corporation

Since 1972, Credit Acceptance has provided auto loans to consumers, regardless of their credit history. Our product is offered through a nationwide network of automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and referral sales generated by these same customers; and from sales to customers responding to advertisements for our product, but who actually end up qualifying for traditional financing.

Without our product, consumers may be unable to purchase a vehicle or they may purchase an unreliable one, or they may not have the opportunity to improve their credit standing. As we report to the three national credit reporting agencies, a significant number of our customers improve their lives by improving their credit score and move on to more traditional sources of financing. Credit Acceptance is publicly traded under the symbol CACC. For more information, visit www.creditacceptance.com.