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 monthsended February 28, 2013 and for the three months ended March 31,2013 and results of the Company's share repurchase programactivities 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 aConsumer Loan is submitted to us for assignment, we forecast futureexpected cash flows from the Consumer Loan. Based on theamount and timing of these forecasts and expected expense levels,an advance or one-time purchase payment is made to the relateddealer at a price designed to achieve an acceptable return oncapital. If Consumer Loan performance equals or exceeds ourinitial expectation, it is likely our target return on capital willbe achieved. We use a statistical model to estimate the expected collectionrate for each Consumer Loan at the time of assignment. Wecontinue to evaluate the expected collection rate of each ConsumerLoan subsequent to assignment. Our evaluation becomes moreaccurate as the Consumer Loans age, as we use actual performancedata in our forecast. By comparing our current expectedcollection rate for each Consumer Loan with the rate we projectedat the time of assignment, we are able to assess the accuracy ofour initial forecast. The following table compares ourforecast of Consumer Loan collection rates as of February 28, 2013with the forecasts as of December 31, 2012, and at the time ofassignment, segmented by year of assignment:
|ForecastedCollection Percentage as of||Variance inForecasted Collection Percentage from|
|ConsumerLoanAssignment Year||February 28,2013||December 31,2012||InitialForecast||December 31,2012||InitialForecast|
Forecasting collection rates precisely at loan inception isdifficult. With this in mind, we establish advance rates thatare intended to allow us to achieve acceptable levels ofprofitability, even if collection rates are less than we currentlyforecast.The following table presents forecasted Consumer Loan collectionrates, advance rates, the spread (the forecasted collection rateless the advance rate), and the percentage of the forecastedcollections that had been realized as of February 28, 2013. All amounts, unless otherwise noted, are presented as a percentageof the initial balance of the Consumer Loan (principal +interest). The table includes both dealer loans and purchasedloans.
|As of February28, 2013|
|Consumer Loan AssignmentYear||ForecastedCollection %||Advance %(1)||Spread%||% of ForecastRealized (2)|
(2) Presented as a percentage of totalforecasted collections.The risk of a material change in our forecasted collection ratedeclines as the Consumer Loans age. For 2009 and priorConsumer Loan assignments, the risk of a material forecast varianceis modest, as we have currently realized in excess of 90% of theexpected collections. Conversely, the forecasted collectionrates for more recent Consumer Loan assignments are less certain asa significant portion of our forecast has not been realized. The spread between the forecasted collection rate and theadvance rate declined during the 2005 through 2007 period as weincreased advance rates during this period in response to a moredifficult competitive environment. During 2008 and 2009, thespread increased as the competitive environment improved, and wereduced advance rates. In addition, during 2009, the spreadwas positively impacted by better than expected Consumer Loanperformance. During the 2010 through 2013 period, the spreaddecreased as we again increased advance rates in response to thecompetitive environment. The following table presents forecasted Consumer Loan collectionrates, advance rates, and the spread (the forecasted collectionrate less the advance rate) as of February 28, 2013 for dealerloans and purchased loans separately. All amounts arepresented as a percentage of the initial balance of the ConsumerLoan (principal + interest).
|Consumer Loan AssignmentYear||Forecasted Collection%||Advance % (1)||Spread %|
The advance rates presented for each Consumer Loan assignmentyear change over time due to the impact of transfers between dealerand purchased loans. Under our portfolio program,certain events may result in dealers forfeiting their rights todealer holdback. We transfer the dealer's Consumer Loansfrom the dealer loan portfolio to the purchased loan portfolio inthe period this forfeiture occurs.Although the advance rate on purchased loans is higher ascompared to the advance rate on dealer loans, purchased loans donot require us to pay dealer holdback. Consumer Loan Volume The following table summarizes changes in Consumer Loanassignment unit volume in each of the last five quarters, ascompared to the same period in the previous year:
|Period||Year overYearPercent Change inUnit 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||%|
Unit volume decreased 2.9% during the first quarter of 2013 asthe number of active dealers grew 21.2% and average volume peractive dealer declined 20.1%. We believe the decline in volume perdealer is the result of increased competition. We increased advancerates in April 2012 and September 2012, which positively impactedunit volume while reducing the return on capital we expect to earnon new assignments. We believe these advance rate increaseshad a positive impact on economic profit as we believe the positiveimpact of the increased volume exceeded the negative impact of thereduced return on capital.The following table summarizes the changes in Consumer Loan unitvolume and active dealers:
|For the ThreeMonths Ended March 31,|
|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||%|
|For the ThreeMonths Ended March 31,|
|Consumer Loan unit volume from dealers activeboth periods||42,207||51,521||-18.1||%|
|Dealers active both periods||2,525||2,525||--|
|Average volume per dealers active bothperiods||16.7||20.4||-18.1||%|
|Consumer Loan unit volume from newdealers||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||%|
(2) Attrition is measured according tothe following formula: decrease in Consumer Loan unit volumefrom dealers who have received funding for at least one dealer loanor purchased loan during the comparable period of the prior yearbut did not receive funding for any dealer loans or purchased loansduring the current period divided by prior year comparable periodConsumer Loan unit volume.Share Repurchase Program During the first quarter of 2013, pursuant to its sharerepurchase program, we repurchased 530,795 shares of ouroutstanding common stock at a total cost of approximately $59.0million, excluding commissions paid. As of March 21, 2013, wehad 23,587,496 shares of common stock outstanding. We did notrepurchase any shares between March 21, 2013 and March 31,2013. As of March 21, 2013, we had authorization torepurchase 1,003,417 shares of our common stock. Unlessterminated earlier by resolution of the Board, the share repurchaseprogram will expire when we have repurchased all shares authorizedfor repurchase thereunder. Cautionary Statement Regarding Forward-LookingInformation We claim the protection of the safe harbor for forward-lookingstatements contained in the Private Securities Litigation ReformAct of 1995 for all of our forward-looking statements. Statements in this release that are not historical facts, such asthose using terms like "may," "will," "should," "believe,""expect," "anticipate," "assume," "forecast," "estimate," "intend,""plan," "target" and those regarding our future results, plans andobjectives, are "forward-looking statements" within the meaning ofthe federal securities laws. These forward-looking statementsrepresent our outlook only as of the date of this release. Actual results could differ materially from these forward-lookingstatements since the statements are based on our currentexpectations, which are subject to risks and uncertainties. Factors that might cause such a difference include, but are notlimited to, the factors set forth in Item 1A to our Form 10-K forthe year ended December 31, 2012, filed with the Securities andExchange Commission on February 20, 2013, other risk factorsdiscussed herein or listed from time to time in our reports filedwith the Securities and Exchange Commission and the following:
· Our inabilityto accurately forecast and estimate the amount and timing of futurecollections could have a material adverse effect on results ofoperations.· We may beunable to execute our business strategy due to current economicconditions. · We may beunable to continue to access or renew funding sources and obtaincapital needed to maintain and grow our business. · The terms ofour debt limit how we conduct our business. · A violation ofthe terms of our asset-backed secured financing facilities orrevolving secured warehouse facilities could have a materiallyadverse impact on our operations. · The conditionsof the U.S. and international capital markets may adversely affectlenders with which we have relationships, causing us to incuradditional costs and reducing our sources of liquidity, which mayadversely affect our financial position, liquidity and results ofoperations. · Oursubstantial debt could negatively impact our business, prevent usfrom satisfying our debt obligations and adversely affect ourfinancial condition. · Due tocompetition from traditional financing sources and non-traditionallenders, we may not be able to compete successfully. · We may not beable to generate sufficient cash flows to service our outstandingdebt and fund operations and may be forced to take other actions tosatisfy our obligations under such debt. · Interest ratefluctuations may adversely affect our borrowing costs,profitability and liquidity. · Reduction inour credit rating could increase the cost of our funding from, andrestrict our access to, the capital markets and adversely affectour liquidity, financial condition and results of operations. · We may incursubstantially more debt and other liabilities. This couldexacerbate further the risks associated with our current debtlevels. · The regulationto which we are or may become subject could result in a materialadverse effect on our business.
· Adversechanges in economic conditions, the automobile or financeindustries, or the non-prime consumer market could adversely affectour financial position, liquidity and results of operations, theability of key vendors that we depend on to supply us withservices, and our ability to enter into future financingtransactions.· Litigation weare involved in from time to time may adversely affect ourfinancial condition, results of operations and cash flows. · Changes in taxlaws and the resolution of uncertain income tax matters could havea material adverse effect on our results of operations and cashflows from operations. · Our dependenceon technology could have a material adverse effect on ourbusiness. · Reliance onthird parties to administer our ancillary product offerings couldadversely affect our business and financial results. · We aredependent on our senior management and the loss of any of theseindividuals or an inability to hire additional team members couldadversely affect our ability to operate profitably. · Our reputationis a key asset to our business, and our business may be affected byhow we are perceived in the marketplace. · Theconcentration of our dealers in several states could adverselyaffect us. · Failure toproperly safeguard confidential consumer information could subjectus to liability, decrease our profitability and damage ourreputation. · Our Chairmanand founder controls a significant percentage of our common stock,has the ability to significantly influence matters requiringshareholder approval and has interests which may conflict with theinterests of our other security holders. · Reliance onour outsourced business functions could adversely affect ourbusiness. · Naturaldisasters, acts of war, terrorist attacks and threats or theescalation of military activity in response to these attacks orotherwise may negatively affect our business, financial conditionand results of operations.
Other factors not currently anticipated by management may alsomaterially and adversely affect our results of operations. Wedo not undertake, and expressly disclaim any obligation, to updateor alter our statements whether as a result of new information,future events or otherwise, except as required by applicablelaw.Description of Credit AcceptanceCorporation Since 1972, Credit Acceptance has offered automobile dealersfinancing programs that enable them to sell vehicles to consumers,regardless of their credit history. Our financing programsare offered through a nationwide network of automobile dealers whobenefit from sales of vehicles to consumers who otherwise could notobtain financing; from repeat and referral sales generated by thesesame customers; and from sales to customers responding toadvertisements for our product, but who actually end up qualifyingfor traditional financing. Without our financing programs, consumers are often unable topurchase a vehicle or they purchase an unreliable one. Further, as we report to the three national credit reportingagencies, an important ancillary benefit of our program is that weprovide a significant number of our consumers with an opportunityto improve their lives by improving their credit score and move onto more traditional sources of financing. Credit Acceptanceis publicly traded on the NASDAQ under the symbol CACC. Formore information, visit creditacceptance.com.
CONTACT: Investor Relations: Douglas W. Busk Senior Vice President and Treasurer (248) 353-2700 Ext. 4432 IR@creditacceptance.com