Credit Acceptance Corporation Reports 1998 Earnings
28 January 1999
Credit Acceptance Corporation Reports 1998 Earnings of $24,966,000 or $.53 Per Diluted Share; Fourth Quarter Earnings of $5,025,000 or $.11 Per Diluted Share
SOUTHFIELD, Mich.--Jan. 27, 1999--Credit Acceptance Corporation announced today that consolidated net income for the year ended December 31, 1998 was $24,966,000 or $.53 per diluted share compared to $1,537,000 or $.03 per diluted share for the year ended December 31, 1997.For the quarter ended December 31, 1998, consolidated net income was $5,025,000 or $.11 per diluted share compared to $5,157,000 or $.11 per diluted share for the same period in 1997.
The Company's continued focus on the quality of installment contracts accepted has resulted in improvements in the performance of the Company's portfolio of installment contracts. Cash collections on installment contracts receivable, as a percent of average gross installment contracts receivable, were 48.4% for the year ended December 31, 1998 compared with 37.5% for 1997. The Company's average yield on its installment contract portfolio improved to 11.4% for the year ended December 31, 1998 from 10.4% for 1997. The improvement in the average yield resulted from a decrease in the percentage of installment contracts which were in non-accrual status to 32.4% as of December 31, 1998 from 37.6% for 1997. The improvement in the average yield also resulted from increased collection levels on non-accrual installment contracts. In addition, the improved collection levels resulted in lower provisions needed for loan and advance losses.
The Company originated $580,578,000 in new installment contracts for the year ended December 31, 1998 compared with $983,459,000 in 1997. The reduced origination levels result primarily from more conservative advance programs being utilized by the Company in 1998.
The improved collection levels and reduced origination volume allowed the Company to reduce its overall debt levels in 1998. Total debt decreased from $391,666,000 as of December 31, 1997 to $218,798,000 as of December 31, 1998. The ratio of the Company's total debt to shareholders' equity decreased from 1.57 as of December 31, 1997 to 0.79 as of December 31, 1998.
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 Year Ended
December 31 December 31
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Income Statement 1998 1997 1998 1997
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REVENUE
Finance charges $20,350 $24,771 $ 98,007 $117,020
Premiums earned 2,610 3,185 10,904 11,304
Dealer enrollment
fees 457 1,641 3,614 7,313
Gain on sale
of receivables -- -- 685 --
Other income 8,558 7,123 29,139 28,598
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Total revenue 31,975 36,720 142,349 164,235
COSTS AND EXPENSES
Operating expenses 15,658 13,095 59,004 45,911
Provision for
credit losses 2,505 6,679 16,405 85,472
Provision for claims 866 1,135 3,734 3,911
Interest 5,467 7,958 25,565 27,597
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Total costs and
expenses 24,496 28,867 104,708 162,891
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OPERATING INCOME 7,479 7,853 37,641 1,344
Foreign exchange loss (44) (19) (116) (41)
Provision (credit)
for income taxes 2,410 2,677 12,559 (234)
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NET INCOME $ 5,025 $ 5,157 $ 24,966 $ 1,537
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Net income per common share:
Basic $0.11 $0.11 $0.54 $0.03
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Diluted $0.11 $0.11 $0.53 $0.03
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Weighted average
shares outstanding:
Basic 46,291,487 46,113,115 46,190,208 46,081,804
Diluted 46,583,910 46,679,434 46,960,290 46,754,713
Credit Acceptance Corporation
Summary Financial Data
(Dollars in thousands, except per share data)
As of December 31
-----------------------------
1998 1997
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Balance Sheet
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ASSETS
Cash and investments $ 23,966 $ 10,322
Installment contracts receivable 671,768 1,049,818
Allowance for credit losses (7,075) (13,119)
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Installment contracts receivable, net 664,693 1,036,699
Other assets, net 63,270 68,589
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TOTAL ASSETS $ 751,929 $ 1,115,610
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LIABILITIES
Total debt 218,798 391,666
Dealer holdbacks, net 222,275 439,554
Other liabilities 34,593 35,399
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TOTAL LIABILITIES $ 475,666 $ 866,619
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TOTAL SHAREHOLDERS' EQUITY 276,263 248,991
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 751,929 $ 1,115,610
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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 December 31
---------------------------------
1998 1997
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Gross installment contracts
receivable $ 794,831 $ 1,254,858
Unearned finance charges (114,617) (196,357)
Unearned insurance premiums,
insurance reserves
and fees (8,446) (8,683)
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Installment contracts receivable $ 671,768 $ 1,049,818
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Non-accrual installment
contracts as a percent of
total gross installment contracts 32.4% 37.6%
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A summary of changes in gross
installment contracts is as follows:
Three Months Ended Year Ended
December 31 December 31
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1998 1997 1998 1997
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Balance, beginning
of period $ 871,704 $ 1,464,022 $ 1,254,858 $ 1,251,139
Gross amount of
installment
contracts
accepted 102,611 207,928 580,578 983,459
Gross installment
contracts
securitized -- -- (98,591) --
Cash collections
on installment
contracts
receivable (104,364) (118,989) (493,900) (505,925)
Charge offs (72,233) (302,297) (449,870) (467,532)
Currency
translation (2,887) 4,194 1,756 (6,283)
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Balance, end
of period $ 794,831 $ 1,254,858 $ 794,831 $ 1,254,858
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Dealer Holdbacks
----------------
The following table summarizes the
composition of dealer holdbacks:
As of December 31
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1998 1997
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Dealer holdbacks $ 634,102 $ 1,002,033
Less: Advances (net reserve of
$19,954 and $16,369
at December 31, 1998
and 1997, respectively) (411,827) (562,479)
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Dealer holdbacks, net $ 222,275 $ 439,554
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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 Year Ended
December 31 December 31
--------------------- ---------------------
1998 1997 1998 1997
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Allowance for Credit Losses
---------------------------
Balance, beginning
of period $ 7,661 $ 17,211 $ 13,119 $ 12,195
Provision for
loan losses 605 2,366 3,432 11,072
Allowance on
securitized
installment
contracts -- -- (1,107) --
Charge offs (1,171) (6,539) (8,392) (10,138)
Currency translation (20) 81 23 (10)
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Balance, end
of period $ 7,075 $ 13,119 $ 7,075 $ 13,119
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Three Months Ended Year Ended
December 31 December 31
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1998 1997 1998 1997
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Reserve on Advances
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Balance, beginning
of period $ 19,655 $ 77,308 $ 16,369 $ 8,754
Provision for
advance losses 1,900 4,313 12,973 74,400
Advance reserve
fees 7 1,168 181 4,673
Charge offs (1,504) (66,557) (9,744) (71,391)
Currency
translation (104) 137 175 (67)
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Balance, end
of period $ 19,954 $ 16,369 $ 19,954 $ 16,369
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