Credit Acceptance Announces: 4th Quarter Earnings; 2002 Earnings
SOUTHFIELD, Mich.--Jan. 31, 2003--Credit Acceptance Corporation announced consolidated net income for the three months ended December 31, 2002 of $5,406,000 or $0.13 per diluted share compared to $7,240,000 or $0.17 per diluted share for the same period in 2001. For the year ended December 31, 2002, consolidated net income was $29,701,000 or $0.68 per diluted share compared to $29,203,000 or $0.68 per diluted share for the same period in 2001.The results for the quarter include:
| -- | $2.5 million in after-tax provisions for losses on advances in North America compared to $296,000 for the same period in 2001. During the third and fourth quarter of 2002, the Company experienced a decline in loan performance in North America. The Company believes the decline is temporary and is primarily related to the installation of a new collection system late in the second quarter of 2002. However, it is impossible to determine whether external factors, such as economic conditions also may have contributed to the decline. The Company regularly forecasts future collections on its portfolio of loans. As a result of the decline in loan performance, the Company's forecast of future collections on its North America portfolio of loans declined approximately 5% and 2% during the third and fourth quarter respectively. The Company believes that significant improvement was made during the fourth quarter. Collection activity returned to pre-system conversion levels as measured by calls and contacts per delinquent account. The level of charge offs was unsatisfactory in October, but improved significantly in November and December. The Company believes that it is too early to conclude what effect these improvements will have on the provision for losses on advances in 2003. The Company believes the new collection system will ultimately provide operational efficiencies, and improvements in collection rates, which could not have occurred without the new system. |
| -- | Consolidated loan originations of $140.1 million, a 17.6% decline from the same period in 2001. Detail by business unit follows: |
(Dollars in thousands) Originations
Quarter Ended December 31,
------------------------------
Business Unit 2002 2001 % Change
------------------------------------------------ --------- ----------
North America $132,759 $143,538 (7.5) %
United Kingdom 7,349 26,521 (72.3)
--------- ---------
$140,108 $170,059 (17.6)
========= =========
In North America, the Company has experienced reduced loan originations due to a reduction in the number of active dealer-partners, partially offset by an increase in the number of loans per active dealer-partner. The reduction in active dealer-partners was primarily due to the Company exiting dealer-partner relationships that did not meet its return on capital goals. This occurred most dramatically in the first quarter of 2002. The number of active dealer-partners remained relatively constant during the second half of 2002. While origination levels continued to be lower in the fourth quarter compared to the same period in 2001, the rate of decline slowed during the quarter. The percentage change in unit volumes compared to the prior year same period were -20%, -13% and 2% for October, November, and December, respectively.
The reduction in loan origination volume in the United Kingdom was a result of the Company's increased focus on improving the return on capital. To improve the United Kingdom's return on capital the Company has increased the spread between the advance rate and the forecasted collection rate and stopped accepting business from a large dealer group whose business did not meet the Company's return on capital objectives. In order for these changes to result in improved returns on capital, increased unit volume will be required in order to absorb fixed operating expenses.
| -- | The Company's profitability models (which depend on significant estimates including forecasts of collection rates and future expense levels) indicate that business originated in 2002 will likely generate greater returns on capital for the Company than business originated in prior years. The Company's 2002 reported results do not fully reflect this profitability due to: (i) the Company's reported results reflecting the profitability of the Company's portfolio of automobile loans which includes both 2002 originations and less profitable loans originated prior to 2002, (ii) the reported results including losses from businesses in which the Company is exiting or reducing its investment, (iii) the impact of the collection system conversion, which the Company believes will not have a long term adverse impact on the Company's results, and (iv) investments which the Company has made in corporate infrastructure which have produced very little short term financial benefit but are necessary to enable the Company to meet its long term goals. |
| -- | A $740,000, after-tax loss on the disposal of computer hardware. |
| -- | $570,000 in after-tax income as a result of a change in estimated taxes due upon repatriation of earnings in the United Kingdom. |
| -- | $462,000 in after-tax income as a result of a change in estimated state income tax due to the re-characterization of income as a result of an Internal Revenue Service examination. |
Selected Financial and Operating Data
-------------------------------------
The following tables present income statement and limited balance
sheet data on a consolidated basis as well as for the Company's three
business segments, North America, United Kingdom and Automobile
Leasing.
Consolidated
------------
Three Months % of Three Months % of
Ended Average Ended Average
(Dollars in thousands, December 31, Capital December 31, Capital
except per share data) 2002 (1) 2001 (1)
------------ --------- ------------ ---------
Revenue: (Unaudited) (Unaudited)
Finance charges $23,554 19.6 % $23,986 18.2 %
Lease revenue 2,900 2.4 5,485 4.2
Other income 8,000 6.6 8,975 6.8
----------- --------- ----------- ---------
Total revenue 34,454 28.6 38,446 29.2
Costs and expenses:
Operating expenses 16,887 14.0 13,616 10.3
Provision for credit
losses 7,095 5.9 3,563 2.7
Depreciation of leased
assets 1,911 1.6 3,214 2.4
Interest 1,932 1.6 2,979 2.3
----------- --------- ----------- ---------
Total costs and
expenses 27,825 23.1 23,372 17.7
----------- --------- ----------- ---------
Operating income 6,629 5.5 15,074 11.5
Foreign exchange loss (2) - (1) -
----------- --------- ----------- ---------
Income before provision
for income taxes 6,627 5.5 15,073 11.5
Provision for income
taxes 1,221 1.0 7,833 5.9
----------- --------- ----------- ---------
Net income $5,406 4.5 % $7,240 5.6 %
=========== ========= =========== =========
Economic loss
Imputed cost of equity
at 10% (2) (8,848) (7,959)
----------- -----------
Economic loss $(3,442) $(719)
=========== ===========
Earnings per share
Diluted weighted
average shares
outstanding 42,853 43,536
Earnings per share $0.13 $0.17
Return on capital (3)
North America 6.2% 7.6%
United Kingdom 4.8% 8.8%
Automobile Leasing (7.0%) (4.5%)
Consolidated 5.5% 7.0%
Change in book value
per share
Shareholders' equity at
period end $323,848 $288,439
Actual shares
outstanding 42,326 42,163
Book value per share $7.65 $6.84
Annualized change in
book value per share 8.4% 9.7%
% of % of
Year Ended Average Year Ended Average
(Dollars in thousands, December 31, Capital December 31, Capital
except per share data) 2002 (1) 2001 (1)
---------- --------- ---------- ---------
Revenue:
Finance charges $97,744 19.5 % $90,169 18.1 %
Lease revenue 16,101 3.2 21,853 4.4
Other income 40,489 8.1 35,307 7.1
--------- --------- --------- ---------
Total revenue 154,334 30.8 147,329 29.6
Costs and expenses:
Operating expenses 66,333 13.2 59,822 12.0
Provision for credit losses 20,694 4.1 11,915 2.4
Depreciation of leased
assets 9,669 1.9 12,485 2.5
Interest 9,058 1.8 14,688 2.9
--------- --------- --------- ---------
Total costs and
expenses 105,754 21.0 98,910 19.8
--------- --------- --------- ---------
Operating income 48,580 9.8 48,419 9.8
Foreign exchange loss - - (42) -
--------- --------- --------- ---------
Income before provision for
income taxes 48,580 9.8 48,377 9.8
Provision for income taxes 18,879 3.8 19,174 3.8
--------- --------- --------- ---------
Net income $29,701 6.0 % $29,203 6.0 %
========= ========= ========= =========
Economic loss
Imputed cost of equity at
10% (2) (34,088) (30,575)
--------- ---------
Economic loss $(4,387) $(1,372)
========= =========
Earnings per share
Diluted weighted average
shares outstanding 43,363 43,151
Earnings per share $0.68 $0.68
Return on capital (3)
North America 7.4% 8.3%
United Kingdom 8.3% 9.1%
Automobile Leasing (2.1%) (1.2%)
Consolidated 7.1% 7.8%
Change in book value per
share
Shareholders' equity at
period end $323,848 $288,439
Actual shares outstanding 42,326 42,163
Book value per share $7.65 $6.84
Annualized change in book
value per share 11.8% 10.8%
(1) Average capital is equal to the average amount of debt and
shareholders' equity during the period. The Company has added to
shareholders' equity as reported under GAAP $33,570,000 and
$34,297,000 in the three months and year ended December 31, 2002,
respectively, and $34,234,000 and $33,226,000 in the three months
and year ended December 31, 2001, respectively. The amounts added
to shareholders' equity represent the average options outstanding
for the period multiplied by the weighted average exercise price.
Refer to the Company's website at www.creditacceptance.com for
information about the Company's practices regarding stock
options.
(2) Cost of equity is equal to 10% of average shareholders' equity,
which includes the additions to shareholders' equity as reported
under GAAP discussed in footnote (1).
(3) Return on capital is equal to annualized net income
plus interest expense after-tax, divided by average capital.
(Dollars in thousands) Consolidated Operating Data
(Unaudited)
-----------------------------------------------------------
Three Months Ended December 31, Year Ended December 31,
-------------------------------- --------------------------
2002 2001 % Change 2002 2001 % Change
----------- --------- ---------- --------- --------- ------
Loan
originations $140,108 $170,059 (17.6)% $625,385 $782,302 (20.1)%
Number of
loans
originated 11,501 14,427 (20.3) 53,901 71,796 (24.9)
Collections $112,795 $110,547 2.0 $464,966 $433,500 7.3
Dealer-partners:
Number of
active
dealer-
partners 647 874 (26.0) 980 1,384 (29.2)
Loans per
active
dealer-
partner 17.8 16.5 7.9 55.0 51.9 6.0
Average
loan size $12.2 $11.8 3.4 $11.6 $10.9 6.4
North America
-------------
Three Months % of Three Months % of
Ended Average Ended Average
(Dollars in thousands, December 31, Capital December 31, Capital
except per share data) 2002 (1) 2001 (1)
------------ --------- ------------ ---------
Revenue: (Unaudited) (Unaudited)
Finance charges $19,824 20.2 % $18,272 18.6 %
Other income 7,466 7.6 7,543 7.7
----------- --------- ----------- ---------
Total revenue 27,290 27.8 25,815 26.3
Costs and expenses:
Operating expenses 14,607 14.9 9,218 9.4
Provision for credit
losses 4,805 4.9 847 0.9
Interest 1,532 1.6 1,950 2.0
----------- --------- ----------- ---------
Total costs and
expenses 20,944 21.4 12,015 12.3
----------- --------- ----------- ---------
Operating income 6,346 6.4 13,800 14.0
Foreign exchange gain
(loss) (5) - 1 -
----------- --------- ----------- ---------
Income before provision
for income taxes 6,341 6.4 13,801 14.0
Provision for income
taxes 1,260 1.3 7,581 7.7
----------- --------- ----------- ---------
Net income $5,081 5.1 % $6,220 6.3 %
=========== ========= =========== =========
Earnings per share
Diluted weighted
average shares
outstanding 42,853 43,536
Earnings per share $0.12 $0.14
Return on capital
Net operating profit
after-tax ("NOPAT")(2) $6,077 $7,488
Average capital $393,368 $392,916
Return on capital (3) 6.2% 7.6%
% of % of
Year Ended Average Year Ended Average
(Dollars in thousands, December 31, Capital December 31, Capital
except per share data) 2002 (1) 2001 (1)
---------- --------- ---------- ---------
Revenue:
Finance charges $80,073 20.4 % $68,367 18.7 %
Other income 35,761 9.1 31,158 8.5
--------- --------- --------- ---------
Total revenue 115,834 29.5 99,525 27.2
Costs and expenses:
Operating expenses 55,870 14.2 45,848 12.6
Provision for credit losses 11,071 2.8 2,390 0.7
Interest 6,419 1.6 9,127 2.5
--------- --------- --------- ---------
Total costs and
expenses 73,360 18.6 57,365 15.8
--------- --------- --------- ---------
Operating income 42,474 10.9 42,160 11.4
Foreign exchange loss (6) - (37) -
--------- --------- --------- ---------
Income before provision for
income taxes 42,468 10.9 42,123 11.4
Provision for income taxes 17,491 4.5 17,582 4.8
--------- --------- --------- ---------
Net income $24,977 6.4 % $24,541 6.6 %
========= ========= ========= =========
Earnings per share
Diluted weighted average
shares outstanding 43,363 43,151
Earnings per share $0.58 $0.57
Return on capital
NOPAT (2) $29,149 $30,474
Average capital $392,757 $364,978
Return on capital (3) 7.4% 8.3%
(1) Average capital is equal to the average amount of debt and
shareholders' equity during the period. The Company has added to
shareholders' equity as reported under GAAP $32,227,000 and
$33,085,000 in the three months and year ended December 31, 2002,
respectively, and $33,207,000 and $32,910,000 in the three months
and year ended December 31, 2001, respectively. The amounts added
to shareholders' equity represent the average options outstanding
for the period multiplied by the weighted average exercise price.
(2) Net operating profit after-tax ("NOPAT") is equal to reported net
income plus interest expense after-tax.
(3) Return on capital is equal to annualized NOPAT divided by average
capital.
(Dollars in thousands) North America Operating Data
(Unaudited)
-----------------------------------------------------------
Three Months Ended December 31, Year Ended December 31,
----------------------------- -----------------------------
2002 2001 % Change 2002 2001 % Change
--------- --------- --------- --------- --------- ---------
Loan
origina-
tions $132,759 $143,538 (7.5)% $582,060 $659,485 (11.7)%
Number of
loans
originated 11,001 12,507 (12.0) 50,839 62,675 (18.9)
Collections $94,715 $88,608 6.9 $383,555 $347,892 10.3
Dealer-
partners:
Number of
active
dealer-
partners 583 756 (22.9) 833 1,170 (28.8)
Loans per
active
dealer-
partner 18.9 16.5 14.5 61.0 53.6 13.8
Average
loan size $12.1 $11.5 5.2 $11.4 $10.5 8.6
United Kingdom
--------------
Three Months % of Three Months % of
Ended Average Ended Average
(Dollars in thousands, December 31, Capital December 31, Capital
except per share data) 2002 (1) 2001 (1)
------------- --------- ------------ ---------
Revenue: (Unaudited) (Unaudited)
Finance charges $3,730 20.7 % $5,714 23.7 %
Other income 259 1.4 1,058 4.4
----------- --------- ----------- ---------
Total revenue 3,989 22.1 6,772 28.1
Costs and expenses:
Operating expenses 1,624 9.0 2,691 11.1
Provision for credit
losses 1,255 7.0 1,088 4.5
Interest 4 - 492 2.0
----------- --------- ----------- ---------
Total costs and
expenses 2,883 16.0 4,271 17.6
----------- --------- ----------- ---------
Operating income 1,106 6.1 2,501 10.5
Foreign exchange gain 3 - - -
----------- --------- ----------- ---------
Income before provision
for income taxes 1,109 6.1 2,501 10.5
Provision for income
taxes 253 1.4 710 2.9
----------- --------- ----------- ---------
Net income $856 4.7 % $1,791 7.6 %
=========== ========= =========== =========
Earnings per share
Diluted weighted
average shares
outstanding 42,853 43,536
Earnings per share $0.02 $0.04
Return on capital
NOPAT (2) $859 $2,135
Average capital $72,223 $96,609
Return on capital (2) 4.8% 8.8%
Year % of Year % of
Ended Average Ended Average
(Dollars in thousands, December Capital December Capital
except per share data) 31, 2002 (1) 31, 2001 (1)
--------- --------- --------- ---------
Revenue:
Finance charges $17,671 21.0 %$21,802 22.5 %
Other income 3,449 4.1 2,810 2.9
-------- --------- -------- ---------
Total revenue 21,120 25.1 24,612 25.4
Costs and expenses:
Operating expenses 6,983 8.3 8,664 8.9
Provision for credit losses 4,489 5.3 3,399 3.5
Interest 647 0.8 2,196 2.3
-------- --------- -------- ---------
Total costs and expenses 12,119 14.4 14,259 14.7
-------- --------- -------- ---------
Operating income 9,001 10.7 10,353 10.7
Foreign exchange gain 5 - - -
-------- --------- -------- ---------
Income before provision for
income taxes 9,006 10.7 10,353 10.7
Provision for income taxes 2,458 2.9 3,057 3.2
-------- --------- -------- ---------
Net income $6,548 7.8 % $7,296 7.5 %
======== ========= ======== =========
Earnings per share
Diluted weighted average
shares outstanding 43,363 43,151
Earnings per share $0.15 $0.17
Return on capital
NOPAT (2) $7,001 $8,833
Average capital $84,288 $96,980
Return on capital (2) 8.3% 9.1%
(1) Average capital is equal to the average amount of debt and
shareholders' equity during the period. The Company has added to
shareholders' equity as reported under GAAP $1,343,000 and
$1,212,000 in the three months and year ended December 31, 2002,
respectively, and $1,027,000 and $316,000 in the three months and
year ended December 31, 2001, respectively. The amounts added to
shareholders' equity represent the average options outstanding for
the period multiplied by the weighted average exercise price.
(2) For further explanation see corresponding footnotes in the North
America section.
(Dollars in thousands) United Kingdom Operating Data
(Unaudited)
-----------------------------------------------------------
Three Months Ended December 31, Year Ended December 31,
------------------------------ ----------------------------
2002 2001 % Change 2002 2001 % Change
----------- -------- --------- -------- --------- ---------
Loan
origina-
tions $7,349 $26,521 (72.3)% $43,325 $122,817 (64.7)%
Number of
loans
originated 500 1,920 (74.0) 3,062 9,121 (66.4)
Collections $18,080 $21,939 (17.6) $81,411 $85,608 (4.9)
Dealer-
partners:
Number of
active
dealer-
partners 64 118 (45.8) 147 214 (31.3)
Loans per
active
dealer-
partner 7.8 16.3 (52.1) 20.8 42.6 (51.2)
Average
loan size $14.7 $13.8 6.5 $14.1 $13.5 4.4
Automobile Leasing
------------------
Three Three
(Dollars in thousands, Months % of Months % of
except per share data) Ended Average Ended Average
December Capital December Capital
31, 2002 (1) 31, 2001 (1)
----------- --------- ----------- ---------
Revenue: (Unaudited) (Unaudited)
Lease revenue $2,900 74.2 % $5,485 58.7%
Other income 275 7.0 374 4.0
----------- --------- ----------- ---------
Total revenue 3,175 81.2 5,859 62.7
Costs and expenses:
Operating expenses 656 16.8 1,707 18.3
Provision for credit losses 1,035 26.5 1,628 17.4
Depreciation of leased
assets 1,911 48.9 3,214 34.4
Interest 396 10.1 537 5.7
----------- --------- ----------- ---------
Total costs and
expenses 3,998 102.3 7,086 75.8
----------- --------- ----------- ---------
Operating loss (823) (21.1) (1,227) (13.1)
Foreign exchange loss - - (2) -
----------- --------- ----------- ---------
Loss before credit for
income taxes (823) (21.1) (1,229) (13.1)
Credit for income taxes (292) (7.5) (458) (4.9)
----------- --------- ----------- ---------
Net loss $(531) (13.6) % $(771) (8.2)%
=========== ========= =========== =========
Earnings per share
Diluted weighted average
shares outstanding 42,853 43,536
Earnings per share $(0.01) $(0.02)
Return on capital
NOPAT (2) $(274) $(422)
Average capital $15,643 $37,358
Return on capital (2) (7.0%) (4.5%)
(Dollars in thousands, Year % of Year % of
except per share data) Ended Average Ended Average
December Capital December Capital
31, 2002 (1) 31,2001 (1)
-------- --------- -------- ---------
Revenue:
Lease revenue $16,101 63.5% $21,853 60.2%
Other income 1,279 5.0 1,339 3.7
-------- --------- -------- ---------
Total revenue 17,380 68.5 23,192 63.9
Costs and expenses:
Operating expenses 3,480 13.7 5,310 14.6
Provision for credit losses 5,134 20.2 6,126 16.9
Depreciation of leased assets 9,669 38.1 12,485 34.4
Interest 1,992 7.9 3,365 9.3
-------- --------- -------- ---------
Total costs and expenses 20,275 79.9 27,286 75.2
-------- --------- -------- ---------
Operating loss (2,895) (11.4) (4,094) (11.3)
Foreign exchange gain (loss) 1 - (5) -
-------- --------- -------- ---------
-
Loss before credit for income
taxes (2,894) (11.4) (4,099) (11.3)
Credit for income taxes (1,070) (4.2) (1,465) (4.0)
-------- --------- -------- ---------
Net loss $(1,824) (7.2)% $(2,634) (7.3)%
======== ========= ======== =========
Earnings per share
Diluted weighted average shares
outstanding 43,363 43,151
Earnings per share $(0.04) $(0.06)
Return on capital
NOPAT (2) $(529) $(447)
Average capital $25,359 $36,313
Return on capital (2) (2.1%) (1.2%)
(1) Average capital is equal to the average amount of debt and
shareholders' equity during the period.
(2) For further explanation see corresponding footnotes in the North
America section.
(Dollars in thousands) Automobile Leasing Operating Data
(Unaudited)
---------------------------------------------------------
Three Months Ended December 31, Year Ended December 31,
------------------------------ --------------------------
2002 2001 % Change 2002 2001 % Change
----------- -------- --------- ------- -------- ---------
Lease
originations $- $4,922 (100.0)% $1,075 $29,186 (96.3)%
Number of
leases
originated - 546 (100.0) 123 3,088 (96.0)
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" 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 of funding at competitive rates of interest or 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, the Company's potential inability to accurately estimate future collections and collection rates and the associated default risk, the Company's potential inability to accurately estimate the residual values of leased vehicles, an increase in the amount or severity of litigation against the Company, the loss of key management personnel, the effects of terrorist attacks and potential attacks and the 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 company specializing in products and services for a network of automobile dealer-partners in North America and Europe. 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. Through its financing program, Credit Acceptance helps consumers change their lives by providing an opportunity to strengthen and reestablish 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)
Three Months Ended Year Ended
December 31, December 31,
----------------------- -----------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
(Unaudited)
Revenue:
Finance charges $23,554 $23,986 $97,744 $90,169
Lease revenue 2,900 5,485 16,101 21,853
Other income 8,000 8,975 40,489 35,307
----------- ----------- ----------- -----------
Total revenue 34,454 38,446 154,334 147,329
----------- ----------- ----------- -----------
Costs and expenses:
Operating expenses 16,887 13,616 66,333 59,822
Provision for credit
losses 7,095 3,563 20,694 11,915
Depreciation of leased
assets 1,911 3,214 9,669 12,485
Interest 1,932 2,979 9,058 14,688
----------- ----------- ----------- -----------
Total costs and
expenses 27,825 23,372 105,754 98,910
----------- ----------- ----------- -----------
Operating income 6,629 15,074 48,580 48,419
Foreign exchange loss (2) (1) - (42)
----------- ----------- ----------- -----------
Income before provision
for income taxes 6,627 15,073 48,580 48,377
Provision for income
taxes 1,221 7,833 18,879 19,174
----------- ----------- ----------- -----------
Net income $5,406 $7,240 $29,701 $29,203
=========== =========== =========== ===========
Net income per common
share:
Basic $0.13 $0.17 $0.70 $0.69
=========== =========== =========== ===========
Diluted $0.13 $0.17 $0.68 $0.68
=========== =========== =========== ===========
Weighted average shares
outstanding:
Basic 42,371,316 42,104,971 42,438,292 42,140,961
Diluted 42,852,646 43,536,237 43,362,741 43,150,804
CREDIT ACCEPTANCE CORPORATION
Consolidated Balance Sheets
---------------------------
(Dollars in thousands)
As of December 31,
-------------------
2002 2001
--------- ---------
ASSETS:
Cash and cash equivalents $13,466 $15,773
Investments -- held to maturity 173 173
Automobile loans receivable 778,674 762,031
Allowance for credit losses (5,497) (4,745)
--------- ---------
Automobile loans receivable, net 773,177 757,286
--------- ---------
Floor plan receivables, net 4,450 6,446
Notes receivable, net 7,554 11,167
Investment in operating leases, net 17,879 42,774
Property and equipment, net 19,951 19,646
Other assets 5,675 8,169
--------- ---------
Total Assets $842,325 $861,434
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Lines of credit $43,555 $73,215
Secured financing 58,153 122,396
Mortgage note 6,195 6,918
Capital lease obligations 1,938 -
Accounts payable and accrued liabilities 28,341 39,307
Dealer holdbacks, net 362,534 315,393
Deferred income taxes, net 11,667 10,668
Income taxes payable 6,094 5,098
--------- ---------
Total Liabilities 518,477 572,995
--------- ---------
Shareholders' Equity:
Common stock 423 422
Paid-in capital 107,164 109,000
Retained earnings 214,857 185,156
Accumulated other comprehensive income (loss)-
cumulative translation adjustment 1,404 (6,139)
--------- ---------
Total Shareholders' Equity 323,848 288,439
--------- ---------
Total Liabilities and Shareholders' Equity $842,325 $861,434
========= =========
CREDIT ACCEPTANCE CORPORATION
Consolidated Statements of Cash Flows
-------------------------------------
(Dollars in thousands)
Year Ended December 31,
-----------------------
2002 2001
------------ ----------
Cash Flows From Operating Activities:
Net income $29,701 $29,203
Adjustments to reconcile net cash provided by
operating activities:
Provision for credit losses 20,694 11,915
Depreciation 4,718 4,652
Depreciation of leased assets 9,669 12,485
Gain on securitization clean-up - (1,082)
Loss on retirement of property and equipment 1,417 -
Provision (credit) for deferred income taxes 999 (66)
Tax benefit from exercise of stock options 1,561 -
Amortization of retained interest in
securitization - (96)
Change in operating assets and liabilities:
Accounts payable and accrued liabilities (11,106) 11,607
Income taxes payable 996 5,098
Income taxes receivable - 351
Lease payment receivable 1,197 (348)
Unearned insurance premiums, insurance reserves
and fees (2,850) (1,044)
Deferred dealer enrollment fees, net 140 767
Other assets 2,494 (4,654)
------------ ----------
Net cash provided by operating activities 59,630 68,788
------------ ----------
Cash Flows From Investing Activities:
Principal collected on automobile loans
receivable 334,353 315,958
Advances to dealers (282,808) (377,087)
Payments of dealer holdback (32,890) (29,301)
Operating lease acquisitions (874) (25,816)
Deferred costs from lease acquisitions (201) (3,371)
Operating lease liquidations 9,854 10,834
Decreases in floor plan receivables 1,996 1,648
Decrease (increase) in notes receivable 3,613 (4,182)
Purchases of property and equipment (6,439) (5,880)
------------ ----------
Net cash provided by (used in) investing
activities 26,604 (117,197)
------------ ----------
Cash Flows From Financing Activities:
Proceeds under lines of credit, net (29,660) (14,881)
Proceeds from secured financings 103,551 264,423
Repayments of secured financings (167,794) (187,066)
Proceeds under capital lease obligation 2,249 -
Principal payments under capital lease
obligation (311) -
Repayment of senior notes and mortgage note (723) (16,620)
Repurchase of common stock (7,011) (3,262)
Proceeds from stock options exercised 3,615 2,033
------------ ----------
Net cash (used in) provided by financing
activities (96,084) 44,627
------------ ----------
Effect of exchange rate changes on cash 7,543 (1,761)
------------ ----------
Net decrease in cash and cash equivalents (2,307) (5,543)
Cash and cash equivalents, beginning of period 15,773 21,316
------------ ----------
Cash and cash equivalents, end of period $13,466 $15,773
============ ==========
CREDIT ACCEPTANCE CORPORATION
Summary Financial Data
----------------------
(Dollars in thousands)
Automobile Loans Receivable
--------------------------
The following table summarizes the composition of automobile loans
receivable:
As of December 31,
-------------------
2002 2001
--------- ---------
Gross automobile loans receivable $919,022 $906,808
Unearned finance charges (136,954) (138,533)
Unearned insurance premiums, insurance reserves and
fees (3,394) (6,244)
--------- ---------
Automobile loans receivable $778,674 $762,031
========= =========
Non-accrual automobile loans $220,978 $181,759
========= =========
Non-accrual automobile loans as a percent of total
gross automobile loans 24.0% 20.0%
========= =========
A summary of changes in gross automobile loans receivable is as
follows:
Three Months Ended Year Ended
December 31, December 31,
------------------- -------------------
2002 2001 2002 2001
--------- --------- --------- ---------
(Unaudited)
Balance, beginning of period $941,107 $882,820 $906,808 $674,402
Gross amount of automobile
loans accepted 140,108 170,059 625,385 782,302
Gross automobile loans
reacquired from securitization - - - 2,918
Net cash collections on
automobile loans (106,390) (104,486) (440,851) (409,728)
Charge-offs (59,412) (39,283) (186,788) (137,158)
Currency translation 3,609 (2,302) 14,468 (5,928)
--------- --------- --------- ---------
Balance, end of period $919,022 $906,808 $919,022 $906,808
========= ========= ========= =========
Investment in Operating Leases
------------------------------
The following table summarizes the composition of investment in
operating leases, net:
As of December 31,
----------------------------
2002 2001
-------------- ------------
Gross leased assets $29,486 $50,054
Accumulated depreciation (12,304) (11,657)
Gross deferred costs 3,956 6,831
Accumulated amortization of deferred costs (2,706) (2,786)
Lease payments receivable 2,112 3,308
-------------- ------------
Investment in operating leases 20,544 45,750
Less: Allowance for lease vehicle losses (2,665) (2,976)
-------------- ------------
Balance, end of period $17,879 $42,774
============== ============
CREDIT ACCEPTANCE CORPORATION
Summary Financial Data
----------------------
(Dollars in thousands)
Investment in Operating Leases - (concluded)
--------------------------------------------
A summary of changes in the investment in operating leases is as
follows:
Three Months Ended Year Ended
December 31, December 31,
------------------- -----------------
2002 2001 2002 2001
---------- -------- -------- --------
(Unaudited)
Balance, beginning of period $25,699 $47,961 $45,750 $44,944
Gross operating leases originated - 4,922 1,075 29,187
Depreciation and amortization of
operating leases (1,911) (3,214) (9,669) (12,485)
Lease payments due 2,995 5,737 16,062 21,862
Collections on operating leases (2,883) (5,384) (15,031) (19,555)
Charge-offs (458) (491) (2,228) (1,959)
Operating lease liquidations (2,920) (3,716) (15,491) (16,046)
Currency translation 22 (65) 76 (198)
---------- -------- -------- --------
Balance, end of period $20,544 $45,750 $20,544 $45,750
========== ======== ======== ========
Reserves
--------
A summary of changes in the allowance for credit losses, the
reserve for advance losses, and the reserve on investment in operating
leases are as follows:
Three Months Ended Year Ended
December 31, December 31,
------------------ ---------------
2002 2001 2002 2001
---------- ------- ------- -------
Allowance for Credit Losses (Unaudited)
---------------------------
Balance, beginning of period $5,479 $4,241 $4,745 $4,640
Provision for loan losses 1,077 604 3,402 1,142
Charge-offs (1,088) (89) (2,773) (1,015)
Currency translation 29 (11) 123 (22)
---------- ------- ------- -------
Balance, end of period $5,497 $4,745 $5,497 $4,745
========== ======= ======= =======
Three Months Ended Year Ended
December 31, December 31,
------------------- ----------------
2002 2001 2002 2001
----------- ------- -------- -------
Reserve for Advance Losses (Unaudited)
--------------------------
Balance, beginning of period $12,089 $8,497 $9,161 $6,788
Provision for losses on advances 4,787 1,331 12,041 4,647
Charge-offs (1,449) (639) (6,027) (2,196)
Currency translation 67 (28) 319 (78)
----------- ------- -------- -------
Balance, end of period $15,494 $9,161 $15,494 $9,161
=========== ======= ======== =======
CREDIT ACCEPTANCE CORPORATION
Summary Financial Data
----------------------
(Dollars in thousands)
Reserves - (concluded)
---------------------
Three Months Ended Year Ended
December 31, December 31,
------------------- ---------------
2002 2001 2002 2001
----------- ------- ------- -------
Reserve on Investment in Operating (Unaudited)
Leases
-----------------------------------
Balance, beginning of period $2,455 $2,764 $2,976 $2,023
Provision for lease vehicle losses 1,231 1,628 5,251 6,126
Charge-offs (1,021) (1,416) (5,562) (5,173)
----------- ------- ------- -------
Balance, end of period $2,665 $2,976 $2,665 $2,976
=========== ======= ======= =======
Dealer Holdbacks
----------------
The following table summarizes the composition of dealer holdbacks:
As of December 31,
-------------------
2002 2001
-------------------
Dealer holdbacks $734,625 $721,365
Less: advances (net of reserve of $15,494 and
$9,161
at December 31, 2002 and 2001, respectively) (372,091) (405,972)
--------- ---------
Dealer holdbacks, net $362,534 $315,393
========= =========