Credit Acceptance Corporation Reports Q2 Earnings
22 July 1998
Credit Acceptance Corporation Reports Second Quarter Earnings of $7,443,000 or $.16 per Diluted Share
SOUTHFIELD, Mich.--July 22, 1998--Credit Acceptance Corporation announced today that consolidated net income for the quarter ended June 30, 1998, was $7,443,000 or $.16 per diluted share compared to $12,050,000 or $.26 per diluted share for the same period in 1997. Total revenue for the quarter ended June 30, 1998 was $37,836,000 compared to $44,853,000 for the same period in 1997.The Company has continued to utilize more conservative advance programs in 1998 and has continued to closely monitor business with marginally profitable dealers in order to improve the performance of its portfolio of installment contracts. These changes, while resulting in reduced levels of originations have also resulted in increased levels of collections. The Company originated $153,515,000 and $356,480,000 in new installment contracts for the three and six months ended June 30, 1998 compared with $242,660,000 and $533,641,000 for the same periods in 1997. Cash collections on installment contracts receivable were $137,139,000 and $276,243,000 for the three and six months ended June 30, 1998 compared with $130,833,000 and $258,806,000 for the same periods in 1997.
Credit Acceptance Corporation is a specialized financial services company which provides funding, receivables management, collection, sales training and related products and services to automobile dealers selling vehicles to consumers with limited access to traditional sources of consumer credit.
CREDIT ACCEPTANCE CORPORATION
Summary Financial Data
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
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Income Statements 1998 1997 1998 1997
_________________ _________ _______ ________ ________
REVENUE
Finance charges $27,894 $32,602 $55,949 $63,293
Vehicle service contract
fees and other income 6,298 7,494 13,180 14,399
Dealer enrollment fees 1,014 2,132 2,464 3,922
Premiums earned 2,630 2,625 5,553 5,008
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Total revenue 37,836 44,853 77,146 86,622
COSTS AND EXPENSES
Salaries and wages 5,675 4,261 10,597 8,071
General and administrative 6,900 5,315 14,142 9,494
Provision for credit losses 4,666 7,669 10,462 14,722
Sales and marketing 1,444 2,059 3,901 3,957
Provision for claims 937 878 1,972 1,681
Interest 6,829 6,808 14,175 12,477
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Total costs and expenses 26,451 26,990 55,249 50,402
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OPERATING INCOME 11,385 17,863 21,897 36,220
Foreign exchange gain(loss) (7) 5 5 (15)
Provision for income taxes 3,935 5,818 7,572 12,117
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NET INCOME $ 7,443 $12,050 $14,330 $24,088
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Net income per common share:
Basic $ 0.16 $ 0.26 $ 0.31 $ 0.52
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Diluted $ 0.16 $ 0.26 $ 0.30 $ 0.52
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Weighted average shares outstanding:
Basic 46,113,115 46,112,448 46,113,115 46,094,448
Diluted 47,410,190 46,594,721 47,179,931 46,748,606
CREDIT ACCEPTANCE CORPORATION
Summary Financial Data
(Dollars in thousands)
As of June 30
Balance Sheets 1998 1997
______________ ____________ ___________
ASSETS
Cash and investments $ 12,730 $ 7,673
Installment contracts receivable 874,662 1,185,592
Allowance for credit losses (9,174) (14,556)
____________ ___________
Installment contracts receivable, net 865,488 1,171,036
Other assets, net 51,749 41,241
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TOTAL ASSETS $ 929,967 $1,219,950
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LIABILITIES
Total debt $ 314,486 $ 354,834
Dealer holdbacks, net 306,539 552,840
Other liabilities 44,646 40,112
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TOTAL LIABILITIES $ 665,671 $ 947,786
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TOTAL SHAREHOLDERS' EQUITY 264,296 272,164
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 929,967 $1,219,950
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CREDIT ACCEPTANCE CORPORATION
Summary Financial Data
(Dollars in thousands)
Installment Contracts Receivable
________________________________
The following table summarizes the composition of installment
contracts receivable:
As of June 30
1998 1997
__________ ___________
Gross installment contracts
receivable $1,040,670 $ 1,420,620
Unearned finance charges (157,183) (226,959)
Unearned insurance premiums,
insurance reserves and fees (8,825) (8,069)
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Installment contracts
receivable $ 874,662 $ 1,185,592
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Non-accrual installment contracts
as a percent of total gross
installment contracts (a) 32.3% 35.5%
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(a) 1998 non-accrual percentage based on 90 day recency method;
1997 based on 120 day contractual method.
A summary of changes in gross installment contracts receivable is as
follows:
Three Months Ended Six Months Ended
June 30 June 30
________________________ ______________________
1998 1997 1998 1997
___________ ___________ ___________ ___________
Balance, beginning of
period $ 1,143,469 $ 1,360,899 $ 1,254,858 $ 1,251,139
Gross amount of
installment contracts
accepted 153,515 242,660 356,480 533,641
Cash collections on
installment contracts
receivable (137,139) (130,833) (276,243) (258,806)
Charge offs (b) (121,789) (55,317) (296,678) (101,594)
Currency translation 2,614 3,211 2,253 (3,760)
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Balance, end of
period $ 1,040,670 $ 1,420,620 $ 1,040,670 $ 1,420,620
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(b) 1998 charge offs based on nine month recency method; 1997 based on
one year recency method
Dealer Holdbacks
________________
The following table summarizes the composition of dealer holdbacks:
As of June 30
_____________________________
1998 1997
__________ __________
Dealer holdbacks $ 830,885 $1,134,941
Less:
Advances (net of reserve of
$25,274 and $19,816 at June 30,
1998 and 1997, respectively) (524,346) (582,101)
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Dealer holdbacks, net $ 306,539 $ 552,840
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CREDIT ACCEPTANCE CORPORATION
Summary Financial Data
(Dollars in thousands)
Reserves
_________
A summary of changes in the allowance for credit losses and the
reserve on advances is as follows:
Three Months Ended Six Months Ended
June 30 June 30
____________________ ____________________
1998 1997 1998 1997
________ _________ _________ ________
Allowance for Credit Losses
___________________________
Balance, beginning of
period $ 10,473 $ 13,665 $ 13,119 $ 12,194
Provision for loan
losses 875 2,062 1,905 4,615
Charge offs (2,197) (1,204) (5,869) (2,238)
Currency translation 23 33 19 (15)
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Balance, end of period $ 9,174 $ 14,556 $ 9,174 $ 14,556
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Three Months Ended Six Months Ended
June 30 June 30
______________________ ___________________
1998 1997 1998 1997
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Reserve on Advances
___________________
Balance, beginning of
period $ 21,262 $ 14,168 $ 16,369 $ 8,754
Provision for advance
losses 3,791 5,607 8,557 10,107
Advance reserve fees 15 944 167 2,274
Charge offs -- (994) -- (1,321)
Currency translation 206 91 181 2
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Balance, end of period $ 25,274 $ 19,816 $ 25,274 $ 19,816
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