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): August 2, 2006

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 August 2, 2006, Credit Acceptance Corporation (the "Company"), issued a press release announcing its financial results for the three and six month periods ended June 30, 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 August 2, 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
August 2, 2006	By:	/s/ Kenneth S. Booth
		Name: Kenneth S. Booth
		Title: Chief Financial Officer

Exhibit Index

Exhibit No.	Description
99.1	Press Release dated August 2, 2006

EX-99.1

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: August 2, 2006

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

NASDAQ Symbol: CACC

CREDIT ACCEPTANCE ANNOUNCES:
SECOND QUARTER 2006 EARNINGS AND EXPANSION OF STOCK REPURCHASE PROGRAM

Southfield, Michigan – August 2, 2006 – Credit Acceptance Corporation (NASDAQ: CACC) (the “Company”) announced consolidated net income for the three months ended June 30, 2006 of $17.6 million or $0.50 per diluted share compared to $17.1 million or $0.44 per diluted share for the same period in 2005. For the six months ended June 30, 2006, consolidated net income was $34.8 million or $0.94 per diluted share compared to $32.8 million or $0.83 per diluted share for the same period in 2005.

Income from continuing operations for the three months ended June 30, 2006 was $17.7 million, or $0.50 per diluted share compared to $16.6 million or $0.43 per diluted share for the same period in 2005. For the six months ended June 30, 2006, income from continuing operations was $34.9 million or $0.94 per diluted share compared to $32.1 million or $0.82 per diluted share for the same period in 2005.

Floating Yield income from continuing operations (defined below), a non-GAAP financial measure, was $17.8 million for the three months ended June 30, 2006 or $0.50 per diluted share, compared to $16.3 million or $0.42 per diluted share for the same period in 2005. For the six months ended June 30, 2006, Floating Yield income from continuing operations was $33.1 million or $0.89 per diluted share compared to $31.0 million or $0.79 per diluted share for the same period in 2005.

Results for the three months ended June 30, 2006 compared to the same period in 2005 include the following:

• Consumer loan unit volume increased 6.1%.

• Consumer loan dollar volume increased 5.1%.

• The number of active dealer-partners increased 23.4%.

• Consumer loan unit volume per active dealer-partner decreased 13.5%.

• Net cash collections on loans increased 19.2%.

• Dealer holdback payments increased 40.9%.

GAAP Financial Results

	For the Three Months Ended June 30,									For the Six Months Ended June 30,
	2006			2005			% Change			2006			2005			% Change
(Dollars in thousands, except per share data)
.
Net income	$	17,606		$	17,053			3.2		$	34,803		$	32,767			6.2
Income from continuing operations		17,699			16,603			6.6			34,904			32,133			8.6
Income from continuing operations per diluted share		0.50			0.43			16.3			0.94			0.82			14.6
Net operating profit after tax		21,172			19,329			9.5			40,620			37,401			8.6
.
Average debt	$	256,162		$	203,800			25.7		$	205,900		$	199,434			3.2
Average shareholders’ equity		294,023			325,359			(9.6	)		331,107			316,292			4.7
Average capital	$	550,185		$	529,159			4.0		$	537,007		$	515,726			4.1
.
Average debt to average shareholders’ equity ratio		0.9 to 1.0			0.6 to 1.0						0.6 to 1.0			0.6 to 1.0
.
Return on capital		15.4	%		14.6	%		5.5			15.1	%		14.5	%		4.1

Floating Yield Financial Results

The Company’s GAAP finance charge revenue is based on estimates of future cash flows and is recognized on a level yield basis. Under the level yield basis, the amount of finance charge revenue recognized in a given period, divided by the loan asset, is a constant percentage. Under GAAP, favorable changes in expected cash flows are treated as increases to the level yield and are recognized over time, while unfavorable changes are recorded as a current period expense. The non-GAAP measure (“Floating Yield”) is identical to the Company’s GAAP 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.

The Company believes Floating Yield earnings are a more accurate reflection of the economics of the business since both favorable and unfavorable changes in estimated cash flows are treated consistently. The Company uses Floating Yield earnings to measure performance internally including financial performance measures utilized in incentive compensation plans.

The following table presents selected non-GAAP Floating Yield financial data.

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2006			2005			% Change		2006			2005			% Change
(Dollars in thousands, except per share data)
.
Net income	$	17,725		$	16,752			5.8	$	32,972		$	31,641			4.2
Income from continuing operations		17,818			16,302			9.3		33,073			31,007			6.7
Income from continuing operations per diluted share		0.50			0.42			19.0		0.89			0.79			12.7
Net operating profit after tax		21,291			19,028			11.9		38,789			36,275			6.9
.
Average capital	$	554,818		$	536,849			3.3	$	542,023		$	523,569			3.5
.
Return on capital		15.3	%		14.2	%		7.7		14.3	%		13.9	%		2.9

The following table reconciles selected financial data that compares the Company’s GAAP financial results to the Floating Yield financial results.

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2006		2005			2006			2005
(Dollars in thousands)
.
GAAP net operating profit after tax	$	21,172	$	19,329		$	40,620		$	37,401
Floating Yield adjustment		119		(301	)		(1,831	)		(1,126	)
Floating Yield net operating profit after tax	$	21,291	$	19,028		$	38,789		$	36,275
.
GAAP average capital	$	550,185	$	529,159		$	537,007		$	515,726
Floating Yield adjustment		4,633		7,690			5,016			7,843
Floating Yield average capital	$	554,818	$	536,849		$	542,023		$	523,569

Consumer Loan Performance

The following table compares the Company’s forecast of consumer loan collection rates as of June 30, 2006 with the forecast as of December 31, 2005:

	June 30, 2006			December 31, 2005
Loan Origination Year	Forecasted Collection %			Forecasted Collection %			Variance
1996		55.0	%		55.0	%		0.0	%
1997		58.4	%		58.3	%		0.1	%
1998		67.6	%		67.7	%		(0.1	%)
1999		72.5	%		72.7	%		(0.2	%)
2000		73.1	%		73.2	%		(0.1	%)
2001		67.6	%		67.2	%		0.4	%
2002		70.5	%		70.3	%		0.2	%
2003		74.4	%		74.0	%		0.4	%
2004		73.7	%		72.9	%		0.8	%
2005		74.8	%		73.6	%		1.2	%

Collection results during the first and second quarters of 2006 generally exceeded the Company’s expectations at December 31, 2005 and had a positive impact on forecasted consumer loan collection rates.

Stock Repurchase Program

Additionally, the Company announced that its Board of Directors authorized the repurchase of up to $25 million of the Company’s common stock in addition to the Board’s prior authorizations. The additional shares may be repurchased through the open market or in privately negotiated transactions from time to time under terms defined by the Board. Unless terminated earlier by resolution of the Board, the share repurchase program will expire when the Company has repurchased all shares authorized for repurchase thereunder. Through August 1, 2006, a total of 6.8 million common shares had been purchased under prior authorizations.

Refer to the Company’s Form 10-Q, which has been filed today with the Securities and Exchange Commission, and will appear on the Company’s website at creditacceptance.com for a complete discussion of the results of operations and financial data for the three and six months ended June 30, 2006.

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. Certain statements in this release that are not historical facts, such as those using terms like “may,” “will,” “should,” “believes,” “expects,” “anticipates,” “assumes,” “forecasts,” “estimates,” “intends,” “plans” 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 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 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.