Credit Acceptance Announces: - 2nd Quarter Earnings.Business Editors SOUTHFIELD Southfield, city (1990 pop. 75,728), Oakland co., SE Mich., a suburb of Detroit, on the Rouge River; laid out 1817, inc. as a city 1958. There are electronics research, meat-processing, and printing facilities, and manufactures include plastic, metal, rubber, and , Mich.--(BUSINESS WIRE)--Aug. 5, 2003 Credit Acceptance Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CACC CACC Center for Animal Care and Control CACC Canadian Association for Community Care CACC Central Alabama Community College CACC Chilterns Association of Camera Clubs (United Kingdom) ) Credit Acceptance Corporation (the "Company") announced consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: net income for the three months ended June June: see month. 30, 2003 of $1,008,000 or $0.02 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share compared to $8,466,000 or $0.19 per diluted share for the same period in 2002. For the six months ended June 30, 2003, consolidated net income was $9,601,000 or $0.23 per diluted share compared to $14,663,000 or $0.34 per diluted share for the same period in 2002. Excluding the impact of one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. expenses, including expenses incurred relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Company's previously reported decision to stop loan originations The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. in the United Kingdom, consolidated net income for the three and six months ended June 30, 2003 was $8,246,000 or $0.19 per diluted share and $16,439,000 or $0.39 per diluted share, respectively, compared to $8,466,000 or $0.19 per diluted share and $17,264,000 or $0.40 per diluted share for the same periods in 2002. As a result of the decision in the most recent quarter to stop loan originations in the United Kingdom and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and the decision to stop lease originations in early 2002, the Company's sole active business unit consists of providing "guaranteed credit approval" through a network of automobile automobile, self-propelled vehicle used for travel on land. The term is commonly applied to a four-wheeled vehicle designed to carry two to six passengers and a limited amount of cargo, as contrasted with a truck, which is designed primarily for the transportation of dealer-partners located in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Segment information follows:
(Dollars in thousands, except Three Months Ended June 30,
---------------------------------
per share data) 2003 2002 % Change
----------- ----------- ---------
Net Income
-----------------------------------
United States (2), (3) $8,703 $7,320 18.9 %
United Kingdom (1) (7,594) 1,296 (686.0)
Automobile Leasing (153) (305) 49.8
Other 52 155 (66.5)
----------- -----------
Consolidated $1,008 $8,466 (88.1)%
=========== ===========
Net Income Per Share
-----------------------------------
United States (2), (3) $0.20 $0.17 21.5 %
United Kingdom (1) (0.18) 0.03 (699.0)
Automobile Leasing (0.00) (0.01) 48.7
Other 0.00 0.00 (65.7)
----------- -----------
Consolidated $0.02 $0.19 (87.8)%
=========== ===========
(Dollars in thousands, except Six Months Ended June 30,
----------------------------------
per share data) 2003 2002 % Change
----------- ----------- ----------
Net Income
-----------------------------------
United States (2), (3) $16,181 $12,482 29.6 %
United Kingdom (1) (6,288) 2,483 (353.2)
Automobile Leasing (468) (856) 45.3
Other 176 554 (68.2)
----------- -----------
Consolidated $9,601 $14,663 (34.5)%
=========== ===========
Net Income Per Share
-----------------------------------
United States (2), (3) $0.38 $0.29 32.8 %
United Kingdom (1) (0.15) 0.06 (359.5)
Automobile Leasing (0.01) (0.02) 44.0
Other 0.00 0.01 (67.4)
----------- -----------
Consolidated $0.23 $0.34 (32.9)%
=========== ===========
(1) For the three and six months ended June 30, 2003, includes
impairment and other expenses associated with the decision to
liquidate the United Kingdom operation, which decreased net income
by $7,238,000 after-tax, or $0.17 per diluted share.
(2) For the six months ended June 30, 2003, includes interest income
from the Internal Revenue Service, which increased net income by
$400,000 after-tax, or $0.01 per diluted share.
(3) For the six months ended June 30, 2002, includes a reduction in
state tax related expense, which increased net income by $963,000
after-tax, or $0.02 per diluted share, and an increase in federal
tax related expense, which decreased net income by $3,564,000
after-tax, or $0.08 per diluted share.
The Company intends to utilize proceeds from businesses being liquidated DAMAGES, LIQUIDATED, contracts. When the parties to a contract stipulate for the payment of a certain sum, as a satisfaction fixed and agreed upon by them, for the not doing of certain things particularly mentioned in the agreement, the sum so fixed upon is called liquidated damages. (q.v. to: (i) fund dealer-partner advances on loans originated in the United States and (ii) fund share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. . Detail of expected net liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy proceeds follows:
(Dollars in thousands) As of June 30, 2003
--------------------
United Kingdom $50,900
Canada 6,300
Automobile Leasing 7,800
-------------------
$65,000
===================
It is expected that approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 70% of the liquidation proceeds will be recovered within one year, 90% within two years, and the remainder within three years. The Company also reported the following: -- Consolidated loan originations for the three and six months ended June 30, 2003 were $206.9 million and $438.9 million, representing increases of 40.8% and 29.5% compared to the same periods in 2002. Detail of amounts by business unit follows:
(Dollars in Originations
thousands)
-----------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- -----------------------------
% %
2003 2002 Change 2003 2002 Change
--------- --------- --------- --------- --------- ---------
United
States $190,870 $134,829 41.6 % $411,152 $306,883 34.0 %
United
Kingdom(a) 13,358 9,365 42.6 22,784 26,903 (15.3)
Other(b) 2,631 2,675 (1.6) 4,969 5,164 (3.8)
--------- --------- --------- ---------
$206,859 $146,869 40.8 $438,905 $338,950 29.5
========= ========= ========= =========
(a) Effective June 30, 2003, the Company stopped originating loans in
the United Kingdom.
(b) Includes Canada.
The increase in Loan originations in the United States in 2003 is due to: (i) an increase in the number of active dealer-partners due to increased dealer-partner enrollments and reduced levels of dealer-partner attrition Attrition The reduction in staff and employees in a company through normal means, such as retirement and resignation. This is natural in any business and industry. Notes: and (ii) a continued increase in the number of loans per active dealer-partner. The Company made no material changes in credit policy or pricing in the second quarter, other than routine changes designed to maintain current profitability levels. The Company's historical results indicate the risk of an unintended adverse change in the profitability of loan originations is increased during periods of high growth. The growth rate experienced in the second quarter of 2003 is higher than the Company's expected long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth rate. However, the Company believes that the investments in infrastructure in 2002, combined with decreases in loan origination volumes in 2002, have adequately prepared the Company for this growth. -- Forecasted collection rates in the United States business segment stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. during the quarter. Prior to this quarter, forecasted collection rates had declined during the three previous quarters. Most of this decline occurred in the second half of 2002 when a difficult system conversion negatively impacted collection results, and during the first quarter of 2003 when post repossession The taking back of an item that has been sold on credit and delivered to the purchaser because the payments have not been made on it. For example, if an individual fails to render prompt payments on a new car, the car might be subject to repossession by the finance company, collections declined from the prior trend line. As a result, the current quarter's results include a reduction in the amount recorded for advance losses in the United States business segment compared to the prior three quarters. Results for the three and six months ended June 30, 2003 include an expense for asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. and accrued expenses Accrued Expense An accounting expense recognized in the books before it is paid for. It is a liability, usually current. These expenses are typically periodic and documented upon a company's balance sheet due to the high probability of collection. related to the Company's decision to stop loan originations in the United Kingdom as reported in the Company's June 2, 2003 news release. The expense of $7.2 million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. , or $0.17 per diluted share, consists of: (i) $6.8 million after-tax increase in expense due to the impairment of dealer-partner advance balances and other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. , (ii) $300,000 after-tax increase in salaries and wages resulting from employee severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when expenses, and (iii) $100,000 after-tax reduction in other income due to a refund TO REFUND. To pay back by the party who has received it, to the party who has paid it, money which ought not to have been paid. 2. On a deficiency of assets, executors and administrators cum testamento annexo, are entitled to have refunded to them legacies of income earned from an ancillary Subordinate; aiding. A legal proceeding that is not the primary dispute but which aids the judgment rendered in or the outcome of the main action. A descriptive term that denotes a legal claim, the existence of which is dependent upon or reasonably linked to a main claim. product profit sharing profit sharing, arrangement by which employees receive, in addition to their wages, a share of the net profits of a business. The purpose is to give them an incentive to increase their output through enhanced morale, less wasteful use of materials, better care of agreement. The following table reconciles the reported net income and adjusted net income (reported net income excluding certain adjustments) for the three and six months ended June 30, 2003 and 2002:
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
(Dollars in thousands,
except per share data) 2003 2002 2003 2002
----------- ----------- ----------- -----------
Reported net income $1,008 $8,466 $9,601 $14,663
State tax expense
resulting from
re-characterization of
income - - - (963)
United Kingdom
repatriation tax
expense - - - 3,564
United Kingdom
impairment expenses 7,238 - 7,238 -
Interest income from
Internal Revenue
Service - - (400) -
----------- ----------- ----------- -----------
Adjusted net income 8,246 8,466 16,439 17,264
Diluted weighted
average shares
outstanding 42,868,265 43,821,716 42,629,844 43,684,127
Adjusted net income per
share $0.19 $0.19 $0.39 $0.40
=========== =========== =========== ===========
Results for the three and six months ended June 30, 2003 also include $915,000 and $1.2 million, respectively, compared to $366,000 and $678,000 for the same periods in 2002 in after-tax expense due to the Company's adoption of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 123"), which requires the Company to expense the fair market value of stock options granted to employees over the expected life of the options. The fair market value of stock options is dependent upon a number of variables including the number of options outstanding, the historical volatility Historical Volatility The past standard deviation of a security that is used in security analysis. Standard deviation measures the changes in the past price of a security the higher the standard deviation the more volatile the security. of the stock price, and the expected life of the options, among other factors. While the number of stock options outstanding declined in 2003 compared to 2002, stock-based compensation expense increased as a result of a change in assumptions that reduced the period over which certain performance based stock options are expected to vest. The Company has restated all prior periods to reflect the stock-based compensation expense that would have been recognized had the recognition provisions of SFAS No. 123 been applied to all awards granted to employees or directors after January January: see month. 1, 1995. Prior period results restated for the effect of SFAS No. 123 are detailed in the Company's Form 10-Q Form 10-Q See 10-Q. , which is being filed concurrently con·cur·rent adj. 1. Happening at the same time as something else. See Synonyms at contemporary. 2. Operating or acting in conjunction with another. 3. Meeting or tending to meet at the same point; convergent. with this news release. Refer to the Company's Form 10-Q, which has been filed with the Securities and Exchange Commission, and appears on the Company's website at www.creditacceptance.com for a complete discussion of the results of operations and financial data for the three and six months ended June 30, 2003. Cautionary Statement Regarding Forward Looking Information Certain statements in this release that are not historical facts, including those regarding the Company's future plans and objectives, are "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the federal securities laws. These forward-looking statements represent our 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 the following: increased competition from traditional financing sources and from non-traditional lenders, unavailability un·a·vail·a·ble adj. Not available, accessible, or at hand. un  a·vail of funding at competitive rates
of interest or the Company's potential inability to continue to
obtain third party financing on favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. 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, the Company's potential inability to accurately forecast and estimate future collections and historical collection rates and the associated default risk, the Company's potential inability to accurately estimate the residual values Residual value Usually refers to the value of a lessor's property at the time the lease expires. residual value The price at which a fixed asset is expected to be sold at the end of its useful life. of leased vehicles, an increase in the amount or severity of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. against the Company, the loss of key management personnel, the effects 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 forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law. Description of Credit Acceptance Corporation Credit Acceptance is a financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. company specializing in products and services for a network of automobile dealer-partners. Credit Acceptance provides participating dealer-partners with financing sources for consumers with limited access to credit by offering "guaranteed credit approval". The Company delivers credit approvals through the internet. Other services include marketing, sales training and a wholesale purchasing cooperative purchasing cooperative, n a group of dental professionals pooling their financial resources to purchase large quantities of supplies and equipment for the purpose of obtaining a discount. . Through its financing program, Credit Acceptance helps consumers change their lives by providing an opportunity to strengthen and reestablish Re`es`tab´lish v. t. 1. To establish anew; to fix or confirm again; to restore; as, to reëstablish a covenant; to reëstablish health. s> Verb 1. their credit standing by making timely monthly payments. Credit Acceptance is publicly traded on NASDAQ under the symbol CACC. For more information, visit www.creditacceptance.com.
CREDIT ACCEPTANCE CORPORATION
Consolidated Income Statements
(Dollars in thousands, except per share data)
(Dollars in thousands,
except per share data) Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
Revenue:
Finance charges $26,431 $25,522 $50,687 $50,407
Lease revenue 1,784 4,428 4,120 9,587
Ancillary product
income 4,233 3,794 9,966 7,391
Premiums earned 757 1,054 1,512 2,494
Other income 2,767 3,791 6,616 7,568
----------- ----------- ----------- -----------
Total revenue 35,972 38,589 72,901 77,447
----------- ----------- ----------- -----------
Costs and expenses:
General and
administrative 5,198 6,383 10,961 12,100
Salaries and wages 8,687 7,448 17,204 14,952
Sales and marketing 2,483 1,809 4,660 3,590
Stock-based
compensation expense 1,428 565 1,803 1,047
Provision for
insurance and warranty
claims 209 570 308 1,133
Provision for credit
losses 2,863 3,562 6,772 7,077
Depreciation of leased
assets 1,167 2,566 2,715 5,507
United Kingdom asset
impairment expense 10,493 - 10,493 -
Interest 1,401 2,457 2,997 4,762
----------- ----------- ----------- -----------
Total costs and
expenses 33,929 25,360 57,913 50,168
----------- ----------- ----------- -----------
Operating income 2,043 13,229 14,988 27,279
Foreign exchange gain 14 11 29 27
----------- ----------- ----------- -----------
Income before provision
for income taxes 2,057 13,240 15,017 27,306
Provision for income
taxes 1,049 4,774 5,416 12,643
----------- ----------- ----------- -----------
Net income $1,008 $8,466 $9,601 $14,663
=========== =========== =========== ===========
Net income per common
share:
Basic $0.02 $0.20 $0.23 $0.35
=========== =========== =========== ===========
Diluted $0.02 $0.19 $0.23 $0.34
=========== =========== =========== ===========
Weighted average shares
outstanding:
Basic 42,321,170 42,535,312 42,317,443 42,486,667
Diluted 42,868,265 43,821,716 42,629,844 43,684,127
CREDIT ACCEPTANCE CORPORATION
Consolidated Balance Sheets
(Dollars in thousands)
(Dollars in thousands) As of
----------------------------------
June 30, 2003 December 31, 2002
--------------- ------------------
ASSETS: (Unaudited)
Cash and cash equivalents $22,068 $13,466
Investments -- held to maturity 456 173
Loans receivable 857,502 778,674
Allowance for credit losses (5,100) (5,497)
--------------- -----------------
Loans receivable, net 852,402 773,177
--------------- -----------------
Floor plan receivables 2,964 4,450
Lines of credit 2,817 3,655
Notes receivable (including $1,548
and $1,513 from affiliates as of
June 30, 2003
and December 31,2002, respectively) 2,074 3,899
Investment in operating leases 9,328 17,879
Property and equipment, net 18,355 19,951
Other assets 7,077 5,166
--------------- -----------------
Total Assets $917,541 $841,816
=============== =================
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Liabilities:
Lines of credit $8,305 $43,555
Secured financing 100,000 58,153
Mortgage note 5,813 6,195
Capital lease obligations 1,538 1,938
Accounts payable and accrued
liabilities 33,034 28,341
Dealer holdbacks, net 417,043 362,534
Deferred income taxes, net 4,010 10,058
Income taxes payable 11,700 6,094
--------------- -----------------
Total Liabilities 581,443 516,868
--------------- -----------------
Shareholders' Equity:
Common stock 422 423
Paid-in capital 124,446 124,263
Retained earnings 208,459 198,858
Accumulated other comprehensive
income - cumulative translation
adjustment 2,771 1,404
--------------- -----------------
Total Shareholders' Equity 336,098 324,948
--------------- -----------------
Total Liabilities and Shareholders'
Equity $917,541 $841,816
=============== =================
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