Credit Acceptance Announces: Certain Operating Results for the Two Months Ended February 28, 2013 and for the Three Months Ended March 31, 2013 and Share Repurchase Activity for the Three Months Ended March 31, 2013
Southfield, Michigan, April 8, 2013 (GLOBE NEWSWIRE) -- Credit Acceptance Corporation (NASDAQ: CACC)
(referred to as the "Company", "Credit Acceptance", "we", "our", or
"us") announced today certain operating results for the two months
ended February 28, 2013 and for the three months ended March 31,
2013 and results of the Company's share repurchase program
activities for the three months ended March 31, 2013.
Consumer Loan Performance
Dealers assign retail installment contracts (referred to as
"Consumer Loans") to Credit Acceptance. At the time a
Consumer Loan is submitted to us for assignment, we forecast future
expected cash flows from the Consumer Loan. Based on the
amount and timing of these forecasts and expected expense levels,
an advance or one-time purchase payment is made to the related
dealer at a price designed to achieve an acceptable return on
capital. If Consumer Loan performance equals or exceeds our
initial expectation, it is likely our target return on capital will
be achieved.
We use a statistical model to estimate the expected collection
rate for each Consumer Loan at the time of assignment. We
continue to evaluate the expected collection rate of each Consumer
Loan subsequent to assignment. Our evaluation becomes more
accurate as the Consumer Loans age, as we use actual performance
data in our forecast. By comparing our current expected
collection rate for each Consumer Loan with the rate we projected
at the time of assignment, we are able to assess the accuracy of
our initial forecast. The following table compares our
forecast of Consumer Loan collection rates as of February 28, 2013
with the forecasts as of December 31, 2012, and at the time of
assignment, segmented by year of assignment:
|
|
Forecasted
Collection Percentage as of |
|
|
Variance in
Forecasted Collection Percentage from |
|
Consumer
Loan Assignment Year |
|
February 28, 2013 |
|
|
December 31, 2012 |
|
|
Initial Forecast |
|
|
December 31, 2012 |
|
|
Initial Forecast |
|
|
2004 |
|
73.1 |
% |
|
73.0 |
% |
|
73.0 |
% |
|
0.1 |
% |
|
0.1 |
% |
|
2005 |
|
73.6 |
% |
|
73.6 |
% |
|
74.0 |
% |
|
0.0 |
% |
|
-0.4 |
% |
|
2006 |
|
69.9 |
% |
|
69.9 |
% |
|
71.4 |
% |
|
0.0 |
% |
|
-1.5 |
% |
|
2007 |
|
68.0 |
% |
|
68.0 |
% |
|
70.7 |
% |
|
0.0 |
% |
|
-2.7 |
% |
|
2008 |
|
70.3 |
% |
|
70.3 |
% |
|
69.7 |
% |
|
0.0 |
% |
|
0.6 |
% |
|
2009 |
|
79.5 |
% |
|
79.5 |
% |
|
71.9 |
% |
|
0.0 |
% |
|
7.6 |
% |
|
2010 |
|
77.3 |
% |
|
77.3 |
% |
|
73.6 |
% |
|
0.0 |
% |
|
3.7 |
% |
|
2011 |
|
74.1 |
% |
|
74.1 |
% |
|
72.5 |
% |
|
0.0 |
% |
|
1.6 |
% |
|
2012 |
|
72.5 |
% |
|
72.2 |
% |
|
71.4 |
% |
|
0.3 |
% |
|
1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Loans assigned in 2009 through 2012 have yielded
forecasted collection results materially better than our initial
estimates, while Consumer Loans assigned in 2006 and 2007 have
yielded forecasted collection results materially worse than our
initial estimates. For all other assignment years presented,
actual results have been very close to our initial estimates.
For the two months ended February 28, 2013, forecasted collection
rates improved for Consumer Loans assigned during 2012 and were
generally consistent with expectations at the start of the period
for all other assignment years presented.
Forecasting collection rates precisely at loan inception is
difficult. With this in mind, we establish advance rates that
are intended to allow us to achieve acceptable levels of
profitability, even if collection rates are less than we currently
forecast.
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 had been realized as of February 28, 2013.
All amounts, unless otherwise noted, are presented as a percentage
of the initial balance of the Consumer Loan (principal +
interest). The table includes both dealer loans and purchased
loans.
|
|
As of February
28, 2013 |
|
Consumer Loan Assignment
Year |
|
Forecasted
Collection % |
|
|
Advance %
(1) |
|
|
Spread
% |
|
|
% of Forecast
Realized (2) |
|
2004 |
|
|
73.1 |
% |
|
|
44.0 |
% |
|
|
29.1 |
% |
|
|
99.6 |
% |
2005 |
|
|
73.6 |
% |
|
|
46.9 |
% |
|
|
26.7 |
% |
|
|
99.5 |
% |
2006 |
|
|
69.9 |
% |
|
|
46.6 |
% |
|
|
23.3 |
% |
|
|
99.0 |
% |
2007 |
|
|
68.0 |
% |
|
|
46.5 |
% |
|
|
21.5 |
% |
|
|
98.1 |
% |
2008 |
|
|
70.3 |
% |
|
|
44.6 |
% |
|
|
25.7 |
% |
|
|
97.1 |
% |
2009 |
|
|
79.5 |
% |
|
|
43.9 |
% |
|
|
35.6 |
% |
|
|
95.9 |
% |
2010 |
|
|
77.3 |
% |
|
|
44.7 |
% |
|
|
32.6 |
% |
|
|
81.9 |
% |
2011 |
|
|
74.1 |
% |
|
|
45.5 |
% |
|
|
28.6 |
% |
|
|
56.0 |
% |
2012 |
|
|
72.5 |
% |
|
|
46.3 |
% |
|
|
26.2 |
% |
|
|
24.2 |
% |
2013 |
|
|
71.6 |
% |
|
|
47.1 |
% |
|
|
24.5 |
% |
|
|
1.8 |
% |
(1) Represents advances paid to dealers
on Consumer Loans assigned under our portfolio program and one-time
payments made to dealers 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.
The risk of a material change in our forecasted collection rate
declines as the Consumer Loans age. For 2009 and prior
Consumer Loan assignments, the risk of a material forecast variance
is modest, as we have currently realized in excess of 90% of the
expected collections. Conversely, the forecasted collection
rates for more recent Consumer Loan assignments are less certain as
a significant portion of our forecast has not been realized.
The spread between the forecasted collection rate and the
advance rate declined during the 2005 through 2007 period as we
increased advance rates during this period in response to a more
difficult competitive environment. During 2008 and 2009, the
spread increased as the competitive environment improved, and we
reduced advance rates. In addition, during 2009, the spread
was positively impacted by better than expected Consumer Loan
performance. During the 2010 through 2013 period, the spread
decreased as we again increased advance rates in response to the
competitive environment.
The following table presents forecasted Consumer Loan collection
rates, advance rates, and the spread (the forecasted collection
rate less the advance rate) as of February 28, 2013 for dealer
loans and purchased loans separately. All amounts are
presented as a percentage of the initial balance of the Consumer
Loan (principal + interest).
|
Consumer Loan Assignment
Year |
|
Forecasted Collection
% |
|
|
Advance % (1) |
|
|
Spread % |
|
Dealer loans |
2007 |
|
67.9 |
% |
|
45.8 |
% |
|
22.1 |
% |
|
2008 |
|
70.7 |
% |
|
43.3 |
% |
|
27.4 |
% |
|
2009 |
|
79.5 |
% |
|
43.5 |
% |
|
36.0 |
% |
|
2010 |
|
77.4 |
% |
|
44.4 |
% |
|
33.0 |
% |
|
2011 |
|
74.0 |
% |
|
45.2 |
% |
|
28.8 |
% |
|
2012 |
|
72.4 |
% |
|
46.1 |
% |
|
26.3 |
% |
|
2013 |
|
71.6 |
% |
|
46.8 |
% |
|
24.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased loans |
2007 |
|
68.4 |
% |
|
49.1 |
% |
|
19.3 |
% |
|
2008 |
|
69.7 |
% |
|
46.7 |
% |
|
23.0 |
% |
|
2009 |
|
79.5 |
% |
|
45.3 |
% |
|
34.2 |
% |
|
2010 |
|
77.2 |
% |
|
46.4 |
% |
|
30.8 |
% |
|
2011 |
|
74.3 |
% |
|
48.1 |
% |
|
26.2 |
% |
|
2012 |
|
73.3 |
% |
|
49.4 |
% |
|
23.9 |
% |
|
2013 |
|
71.5 |
% |
|
50.5 |
% |
|
21.0 |
% |
(1) Represents advances paid to dealers on Consumer
Loans assigned under our portfolio program and one-time payments
made to dealers 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.
The advance rates presented for each Consumer Loan assignment
year change over time due to the impact of transfers between dealer
and purchased loans. Under our portfolio program,
certain events may result in dealers forfeiting their rights to
dealer holdback. We transfer the dealer's Consumer Loans
from the dealer loan portfolio to the purchased loan portfolio in
the period this forfeiture occurs.
Although the advance rate on purchased loans is higher as
compared to the advance rate on dealer loans, purchased loans do
not require us to pay dealer holdback.
Consumer Loan Volume
The following table summarizes changes in Consumer Loan
assignment unit volume in each of the last five quarters, as
compared to the same period in the previous year:
Period |
|
|
|
|
Year over
Year
Percent Change in
Unit Volume |
|
March 31, 2012 |
|
|
|
|
|
|
10.6 |
% |
|
June 30, 2012 |
|
|
|
|
|
|
7.3 |
% |
|
September 30, 2012 |
|
|
|
|
|
|
5.4 |
% |
|
December 31, 2012 |
|
|
|
|
|
|
2.4 |
% |
|
March 31, 2013 |
|
|
|
|
|
|
-2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Loan assignment volumes depend on a number of factors
including (1) the overall demand for our product, (2) the amount of
capital available to fund new loans, and (3) our assessment of the
volume that our infrastructure can support. Our pricing strategy is
intended to maximize the amount of economic profit we generate,
within the confines of capital and infrastructure
constraints.
Unit volume decreased 2.9% during the first quarter of 2013 as
the number of active dealers grew 21.2% and average volume per
active dealer declined 20.1%. We believe the decline in volume per
dealer is the result of increased competition. We increased advance
rates in April 2012 and September 2012, which positively impacted
unit volume while reducing the return on capital we expect to earn
on new assignments. We believe these advance rate increases
had a positive impact on economic profit as we believe the positive
impact of the increased volume exceeded the negative impact of the
reduced return on capital.
The following table summarizes the changes in Consumer Loan unit
volume and active dealers:
|
|
For the Three
Months Ended March 31, |
|
|
|
2013 |
|
|
2012 |
|
|
%
Change |
|
Consumer Loan unit volume |
|
|
57,105 |
|
|
|
58,796 |
|
|
|
-2.9 |
% |
Active dealers (1) |
|
|
4,355 |
|
|
|
3,594 |
|
|
|
21.2 |
% |
Average volume per active dealer |
|
|
13.1 |
|
|
|
16.4 |
|
|
|
-20.1 |
% |
(1) Active dealers are dealers who have
received funding for at least one dealer loan or purchased loan
during the period.
The following table provides additional information on the
changes in Consumer Loan unit volume and active dealers:
|
|
For the Three
Months Ended March 31, |
|
|
|
2013 |
|
|
2012 |
|
|
%
Change |
|
Consumer Loan unit volume from dealers active
both periods |
|
|
42,207 |
|
|
|
51,521 |
|
|
|
-18.1 |
% |
Dealers active both periods |
|
|
2,525 |
|
|
|
2,525 |
|
|
|
-- |
|
Average volume per dealers active both
periods |
|
|
16.7 |
|
|
|
20.4 |
|
|
|
-18.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Loan unit volume from new
dealers |
|
|
3,440 |
|
|
|
4,089 |
|
|
|
-15.9 |
% |
New active dealers (1) |
|
|
678 |
|
|
|
554 |
|
|
|
22.4 |
% |
Average volume per new active dealers |
|
|
5.1 |
|
|
|
7.4 |
|
|
|
-31.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Attrition (2) |
|
|
-12.4 |
% |
|
|
-9.2 |
% |
|
|
|
|
(1) New active dealers are dealers 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 dealers 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.
Share Repurchase Program
During the first quarter of 2013, pursuant to its share
repurchase program, we repurchased 530,795 shares of our
outstanding common stock at a total cost of approximately $59.0
million, excluding commissions paid. As of March 21, 2013, we
had 23,587,496 shares of common stock outstanding. We did not
repurchase any shares between March 21, 2013 and March 31,
2013. As of March 21, 2013, we had authorization to
repurchase 1,003,417 shares of our common stock. Unless
terminated earlier by resolution of the Board, the share repurchase
program will expire when we have repurchased all shares authorized
for repurchase thereunder.
Cautionary Statement Regarding Forward-Looking
Information
We claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform
Act of 1995 for all of our forward-looking statements.
Statements in this release that are not historical facts, such as
those using terms like "may," "will," "should," "believe,"
"expect," "anticipate," "assume," "forecast," "estimate," "intend,"
"plan," "target" and those regarding our future results, plans and
objectives, are "forward-looking statements" within the meaning of
the federal securities laws. These forward-looking statements
represent our outlook only as of the date of this release.
Actual results could differ materially from these forward-looking
statements 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 to our Form 10-K for
the year ended December 31, 2012, filed with the Securities and
Exchange Commission on February 20, 2013, other risk factors
discussed herein or listed from time to time in our reports filed
with the Securities and Exchange Commission and the following:
· 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 dependence
on technology could have a material adverse effect on our
business.
· 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 dealers 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.
Other factors not currently anticipated by management may also
materially and adversely affect our results of operations. We
do not undertake, and expressly disclaim any obligation, to update
or alter our 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 offered automobile dealers
financing programs that enable them to sell vehicles to consumers,
regardless of their credit history. Our financing programs
are 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 financing programs, consumers are often unable to
purchase a vehicle or they purchase an unreliable one.
Further, as we report to the three national credit reporting
agencies, an important ancillary benefit of our program is that we
provide a significant number of our consumers with an opportunity
to 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.
CONTACT: Investor Relations: Douglas W. Busk
Senior Vice President and Treasurer
(248) 353-2700 Ext. 4432
IR@creditacceptance.com