Credit Acceptance Reports 1999 Q4 and Year End Operating Results
27 January 2000
Credit Acceptance Corporation Reports 1999 Fourth Quarter and Year End Operating Results
SOUTHFIELD, Mich.--Jan. 26, 2000--Credit Acceptance Corporation announced today consolidated net income for the quarter ended December 31, 1999 was $3,805,000 or $.08 per diluted share compared to $5,025,000 or $.11 per diluted share for the same period in 1998. For the year ended December 31, 1999, the consolidated net loss was ($10,686,000) or ($.23) per share compared to consolidated net income of $24,966,000 or $.53 per diluted share for the year ended December 31, 1998.Earnings for the quarter include pre-tax charges of $850,000 resulting from the settlement of consumer litigation and $400,000 from the acceleration of amortization of certain deferred debt issuance costs in connection with the repurchase of senior notes. The loss for the year included the previously announced $60.3 million non-cash charge in the third quarter relating to dealer advance losses and the write down of a portion of the retained interest in the July 1998 securitization. Management's third quarter analysis of collection results led to a conclusion that the actual collection results will be below previous forecasts produced by its static pool model, as the static pool loss curves for the business originated in 1995, 1996 and 1997 began to show a negative variance from the loss curves for business originated in prior years.
Management's analysis of its static pool model continues to indicate that the business originated in 1998 and 1999 is of higher quality than that originated in the prior three years. Cash collections on installment contracts receivable, as a percent of average gross installment contracts receivable, improved to 57.3% for the year ended December 31, 1999 compared with 48.4% for 1998. The Company's average annualized yield on its installment contract portfolio improved to 12.7% for the year ended December 31, 1999 from 11.4% for 1998. The improvement in the average yield resulted from a decrease in the percentage of installment contracts which were in non-accrual status to 23.0% as of December 31, 1999 from 32.4% for 1998.
The Company's consolidated originations totaled $136,649,000 and $541,615,000 for the three months and year ended December 31, 1999 compared with $102,611,000 and $580,578,000 for the same periods in 1998, representing an increase of 33.1% for the three month period and a decrease of 6.7% for the year.
The Company's North American operations originated $90,957,000 and $408,499,000 in new installment contracts for the three months and year ended December 31, 1999 compared with $86,063,000 and $521,471,000 for the same periods in 1998, representing an increase of 5.7% for the three month period and a decrease of 21.7% for the year.
The Company's United Kingdom operations originated $40,816,000 and $124,566,000 in new installment contracts for the three months and year ended December 31, 1999 compared with $16,548,000 and $59,107,000 for the same periods in 1998, representing increases of 146.7% and 110.7%, respectively.
Originations for the Company's automobile leasing operations were $4,876,000 and $8,550,000 for the three months and year ended December 31, 1999. The Company began originating operating leases in the first quarter of 1999.
Positive cash flow, which primarily resulted from collections on installment contracts receivable exceeding cash advances to dealers and payments of dealer holdbacks, allowed the Company to continue to reduce its overall debt levels. Total balance sheet debt decreased from $218,798,000 to $158,985,000 as of December 31, 1998 and 1999, respectively. Included in balance sheet debt as of December 31, 1999 is $83.2 million related to the Company's July and December 1999 securitizations which were structured and recorded as secured financings. The ratio of the Company's total balance sheet debt to shareholders' equity decreased from .79 to .60 as of December 31, 1998 and 1999, respectively.
The Company also announced that Michael W. Knoblauch and Brett A. Roberts have been named to the Office of the President. As Co-Presidents, Messrs. Knoblauch and Roberts will be primarily responsible for running CAC's North American operations. Donald A. Foss will continue as the Company's Chairman and Chief Executive Officer and will focus his efforts on corporate strategy and oversight of the Company's three business units, CAC North America, CAC United Kingdom and AutoNet Finance.com which offers a sub-prime leasing program. Mr. Knoblauch has been with the Company since 1992 and most recently served as the Company's Chief Operating Officer. Mr. Roberts has been with the Company since 1991 and had served as the Company's Chief Financial Officer since 1995. Douglas W. Busk, formerly the Company's Vice President of Finance, will succeed Mr. Roberts as Chief Financial Officer.
Donald Foss commented, "Mike and Brett are proven performers and are extremely well qualified to lead our plans to improve and expand our business in North America."
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
--------------------- ---------------------
Income Statement 1999 1998 1999 1998
---------------- ---------- ---------- ---------- ----------
REVENUE
Finance charges $ 18,512 $ 20,350 $ 76,497 $ 98,007
Premiums earned 2,579 2,610 10,389 10,904
Gain on sale of
receivables - - - 685
Other income 7,172 9,015 29,169 32,753
---------- ---------- ---------- ----------
Total revenue 28,263 31,975 116,055 142,349
COSTS AND EXPENSES
Operating expenses 14,982 15,658 56,604 59,004
Provision for credit
losses 2,456 2,505 56,241 16,405
Provision for claims 889 866 3,498 3,734
Valuation adjustment
on retained interest
in securitization - - 13,517 -
Interest 4,104 5,467 16,576 25,565
---------- ---------- ---------- ----------
Total costs and expenses 22,431 24,496 146,436 104,708
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) 5,832 7,479 (30,381) 37,641
Gain on sale of subsidiary - - 14,720 -
Foreign exchange loss (74) (44) (66) (116)
Provision (credit) for
income taxes 1,953 2,410 (5,041) 12,559
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 3,805 $ 5,025 $ (10,686)$ 24,966
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income (loss) per common share:
Basic $ 0.08 $ 0.11 $ (0.23)$ 0.54
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted $ 0.08 $ 0.11 $ (0.23)$ 0.53
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average shares outstanding:
Basic 46,074,009 46,291,487 46,222,730 46,190,208
Diluted 46,252,798 46,583,910 46,222,730 46,960,290
Credit Acceptance Corporation
Summary Financial Data
----------------------
(Dollars in thousands, except per share data)
As of December 31
------------------------------
1999 1998
------------ ------------
Balance Sheet
-------------
ASSETS
Cash and investments $ 22,691 $ 23,966
Installment contracts receivable 573,120 672,649
Allowance for credit losses (4,742) (7,075)
------------ ------------
Installment contracts receivable, net 568,378 665,574
Other assets, net 69,171 62,389
------------ ------------
TOTAL ASSETS $ 660,240 $ 751,929
------------ ------------
------------ ------------
LIABILITIES
Total debt 158,985 218,798
Dealer holdbacks, net 202,143 222,275
Other liabilities 36,137 34,593
------------ ------------
TOTAL LIABILITIES $ 397,265 $ 475,666
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 262,975 276,263
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 660,240 $ 751,929
------------ ------------
------------ ------------
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
------------------------------
1999 1998
------------ ------------
Gross installment contracts receivable $ 679,201 $ 794,831
Unearned finance charges (99,174) (114,617)
Unearned insurance premiums,
insurance reserves and fees (6,907) (7,565)
------------ ------------
Installment contracts receivable $ 573,120 $ 672,649
------------ ------------
------------ ------------
Non-accrual installment contracts
as a percent of total gross
installment contracts 23.0% 32.4%
------------ ------------
------------ ------------
A summary of changes in gross installment contracts is as follows:
Three Months Ended Year Ended
December 31 December 31
------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- ----------
Balance, beginning of
period $ 682,978 $ 871,704 $ 794,831 $1,254,858
Gross amount of installment
contracts accepted 131,773 102,611 533,065 580,578
Gross installment contracts
securitized - - - (98,591)
Cash collections on
installment contracts
receivable (94,695) (104,364) (409,742) (493,900)
Charge offs (39,012) (72,233) (234,167) (449,870)
Currency translation (1,843) (2,887) (4,786) 1,756
--------- --------- --------- ----------
Balance, end of period $ 679,201 $ 794,831 $ 679,201 $ 794,831
--------- --------- --------- ----------
--------- --------- --------- ----------
Leased Vehicles
---------------
A summary of changes in gross leased vehicles is as follows:
Three Months Ended Year Ended
December 31, December 31,
1999 1999
------------ ------------
Balance, beginning of period $ 3,642 $ -
Gross operating leases originated 4,876 8,550
Operating lease liquidations (185) (217)
------------ ------------
Balance, end of period $ 8,333 $ 8,333
------------ ------------
------------ ------------
Credit Acceptance Corporation
Summary Financial Data
----------------------
(Dollars in thousands)
Dealer Holdbacks
----------------
The following table summarizes the composition of dealer holdbacks:
As of December 31
------------------------------
1999 1998
------------ ------------
Dealer holdbacks $ 540,799 $ 634,102
Less: Advances (net reserve
of $4,329 and $19,954
at December 31, 1999 and 1998,
respectively) (338,656) (411,827)
------------ ------------
Dealer holdbacks, net $ 202,143 $ 222,275
------------ ------------
------------ ------------
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
------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- ----------
Allowance for Credit Losses
Balance, beginning of
period $ 4,765 $ 7,661 $ 7,075 $ 13,119
Provision for loan losses 415 605 1,195 3,432
Allowance on securitized
installment contracts - - - (1,107)
Charge offs (427) (1,171) (3,489) (8,392)
Currency translation (11) (20) (39) 23
--------- --------- --------- ----------
Balance, end of period $ 4,742 $ 7,075 $ 4,742 $ 7,075
--------- --------- --------- ----------
--------- --------- --------- ----------
Three Months Ended Year Ended
December 31 December 31
------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- ----------
Reserve on Advances
Balance, beginning of
period $ 3,832 $ 19,655 $ 19,954 $ 16,369
Provision for advance
losses 1,861 1,900 54,866 12,973
Advance reserve fees - 7 8 181
Charge offs (1,364) (1,504) (70,353) (9,744)
Currency translation - (104) (146) 175
--------- --------- --------- ----------
Balance, end of period $ 4,329 $ 19,954 $ 4,329 $ 19,954
--------- --------- --------- ----------
--------- --------- --------- ----------