EXHIBIT 99.1
[CREDIT ACCEPTANCE LOGO]
SILVER TRIANGLE BUILDING
25505 WEST TWELVE MILE ROAD - SUITE 3000
SOUTHFIELD, MI 48034-8339
(248) 353-2700
WWW.CREDITACCEPTANCE.COM
NEWS RELEASE
FOR IMMEDIATE RELEASE DATE: NOVEMBER 14, 2003
INVESTOR RELATIONS: DOUGLAS W. BUSK
CHIEF FINANCIAL OFFICER
(248) 353-2700 EXT. 432
IR@CREDITACCEPTANCE.COM
NASDAQ SYMBOL: CACC
CREDIT ACCEPTANCE ANNOUNCES:
- 3RD QUARTER EARNINGS
SOUTHFIELD, MICHIGAN -- NOVEMBER 14, 2003 -- CREDIT ACCEPTANCE CORPORATION
(NASDAQ:CACC) Credit Acceptance Corporation (the "Company") announced
consolidated net income for the three months ended September 30, 2003 of
$8,818,000 or $0.20 per diluted share compared to $8,612,000 or $0.20 per
diluted share for the same period in 2002. For the nine months ended September
30, 2003, consolidated net income was $18,419,000 or $0.43 per diluted share
compared to $23,275,000 or $0.53 per diluted share for the same period in 2002.
Excluding the impact of one-time items and foreign exchange losses on forward
contracts, consolidated net income for the three and nine months ended September
30, 2003 was $9,520,000 or $0.22 per diluted share and $25,959,000 or $0.60 per
diluted share, respectively, compared to $4,738,000 or $0.11 per diluted share
and $22,002,000 or $0.51 per diluted share for the same periods in 2002.
As announced on October 30, 2003, the Company's third quarter earnings
announcement was delayed due to a review of its periodic reports by the
Securities and Exchange Commission. The financial reporting changes made as a
result of this review, which are described below, did not impact the Company's
previously reported earnings or shareholders' equity.
As a result of the decision in the second quarter of 2003 to stop loan
originations in the United Kingdom and Canada and the decision to stop lease
originations in early 2002, the Company's sole active business unit consists of
providing "guaranteed credit approval" through a network of automobile
dealer-partners located in the United States.
Segment information follows:
(Dollars in thousands, except THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
per share data) --------------------------------------- -------------------------------------
2003 2002 % Change 2003 2002 % Change
------- ------- -------- -------- -------- --------
NET INCOME (LOSS)
United States (1), (2) $ 8,142 $ 6,473 25.8% $ 24,325 $ 18,955 28.3%
United Kingdom (3), (4) 861 2,994 (71.2) (5,427) 5,477 (199.1)
Automobile Leasing (69) (437) 84.2 (539) (1,293) 58.3
Other (116) (418) 72.2 60 136 (55.9)
------- ------- -------- --------
Consolidated $ 8,818 $ 8,612 2.4% $ 18,419 $ 23,275 (20.9)%
======= ======= ======== ========
NET INCOME (LOSS) PER SHARE
United States (1), (2) $ 0.19 $ 0.15 23.4% $ 0.56 $ 0.44 29.1%
United Kingdom (3), (4) 0.02 0.07 (71.8) (0.13) 0.13 (199.7)
Automobile Leasing (0.00) (0.01) 84.5 (0.01) (0.03) 58.1
Other (0.00) (0.01) 72.8 0.00 0.00 (55.6)
------ ------ -------- -------
Consolidated $ 0.20 $ 0.20 0.4% $ 0.43 $ 0.53 (20.4)%
====== ====== ======== ========
(1) For the three and nine months ended September 30, 2003, net income includes
the foreign currency exchange loss due to the fair value recognition of
forward contracts associated with the anticipated cash flows from the
United Kingdom operation, which decreased net income by $702,000 after-tax,
or $0.02 per diluted share. For the nine months ended September 30, 2003,
net income includes interest income from the Internal Revenue Service,
which increased net income by $400,000 after-tax, or $0.01 per diluted
share.
(2) For the three and nine months ended September 30, 2002, net income includes
interest income from the Internal Revenue Service, which increased net
income by $3,127,000 after-tax, or $0.07 per diluted share. For the nine
months ended September 30, 2002, net income includes a reduction in state
tax related expense, which increased net income by $963,000 after-tax, or
$0.02 per diluted share, and an increase in federal tax related expense,
which decreased net income by $3,564,000 after-tax, or $0.08 per diluted
share.
(3) For the nine months ended September 30, 2003, net income includes
impairment and other expenses associated with the decision to liquidate the
United Kingdom operation, which decreased net income by $7,238,000
after-tax, or $0.17 per diluted share.
(4) For the three and nine months ended September 30, 2002, net income includes
a change in ancillary product revenue recognition policy, which increased
net income by $747,000 after-tax, or $0.02 per diluted share.
The following table reconciles the reported net income and adjusted net income
(reported net income excluding certain adjustments) for the three and nine
months ended September 30, 2003 and 2002:
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
----------------------------- ------------------------------
(Dollars in thousands, except per share data) 2003 2002 2003 2002
------------ ------------ ------------ ------------
Reported net income $ 8,818 $ 8,612 $ 18,419 $ 23,275
Foreign exchange loss due to forward contracts 702 -- 702 --
State tax expense resulting from
re-characterization of income -- -- -- (963)
United Kingdom repatriation tax expense -- -- -- 3,564
United Kingdom impairment expenses -- -- 7,238 --
Ancillary product revenue recognition policy change -- (747) -- (747)
Interest income from Internal Revenue Service -- (3,127) (400) (3,127)
------------ ------------ ------------ ------------
Adjusted net income $ 9,520 $ 4,738 $ 25,959 $ 22,002
Diluted weighted average shares outstanding 43,959,924 43,122,046 43,247,518 43,517,380
Adjusted net income per share $ 0.22 $ 0.11 $ 0.60 $ 0.51
============ ============ ============ ============
Results for the three and nine months ended September 30, 2003 include an
expense of $702,000 after-tax, or $0.02 per diluted share related to foreign
currency exchange loss. During the quarter, the Company entered into forward
contracts to ensure that currency fluctuations would not reduce the amount of
United States dollars received from the liquidation of the United Kingdom
operation. From the date the contracts were entered into, the weakening of the
United States dollar versus the British pound sterling caused a reduction in the
fair value of the forward contracts and an approximately equal increase in the
amount of expected future cash flows.
Under generally accepted accounting principles, the Company is required to
record an expense to reduce the carrying value of the forward contracts to fair
value, and separately to record the change in the amount of cash flows expected
from the United Kingdom due to exchange rate fluctuations in shareholders'
equity. These amounts were not equal for the three months ended September 30,
2003 because the change in shareholders'
equity reflects the change in exchange rates for the quarter while the change in
the value of the forward contracts reflects the change in exchange rates from
the date the contracts were entered into until the end of the quarter. In future
periods, the Company expects that the amount of the gain or loss recognized by
the Company on the forward contracts will be approximately offset by an increase
or decrease in shareholders' equity.
The Company intends to utilize proceeds from businesses being liquidated to: (i)
fund dealer-partner advances on loans originated in the United States and (ii)
fund share repurchases. During the three months ended September 30, 2003, the
Company received $15.9 million in liquidation proceeds and made share
repurchases of $2.8 million.
Detail of expected future net liquidation proceeds follows:
(Dollars in thousands) AS OF SEPTEMBER 30, 2003
----------------------------
United Kingdom $39,500
Canada 6,000
Automobile Leasing 4,200
-------
$49,700
=======
The Company reported loan originations in the United States for the three and
nine months ended September 30, 2003 of $196.8 million and $608.0 million,
respectively, compared to $134.2 million and $441.1 million in the same periods
in 2002, representing increases of 46.7% and 37.8%. The increase in loan
originations in the United States in 2003 is due to: (i) an increase in the
number of active dealer-partners due to increased dealer-partner enrollments and
reduced levels of dealer-partner attrition, (ii) a continued increase in the
number of loans per active dealer-partner and (iii) an increase in the average
loan size.
The Company made no material changes in credit policy or pricing in the third
quarter, other than routine changes designed to maintain current profitability
levels.
Historically, the Company has experienced an adverse change in the profitability
of loan originations during periods of high growth. While the growth rates
experienced in the United States in 2003 are higher than the Company's expected
long-term growth rate, the Company believes that the investments in
infrastructure in 2002, combined with decreases in loan origination volumes in
2002, have adequately prepared the Company for this growth.
As a result of a Securities and Exchange Commission review of the Company's Form
10-K for the year ended December 31, 2002 and Form 10-Q for the period ended
June 30, 2003, beginning in the third quarter of 2003 the Company made two
changes to the presentation of its balance sheet.
(1) Repossessed assets were reclassified from Loans receivable to Other
assets, and
(2) The Reserve for advance losses was eliminated and the balance was
reclassified into the Allowance for credit losses.
As a result of the elimination of the Reserve for advance losses, the Allowance
for credit losses will now have two components: (i) an allowance for earned but
unpaid revenue, which prior to the change was the sole component of the
Allowance for credit losses and (ii) an allowance for losses inherent in the
Company's loan portfolio which prior to the change would have been reported in
the Reserve for advance losses. The current treatment is consistent with the
view that, from an accounting standpoint, losses covered by this allowance are a
result of uncollectible loans and that advance losses do not represent a
separate event of loss.
Additionally, as a result of the Reserve for advance losses being eliminated and
the balance reclassified into the Allowance for credit losses, the Company
implemented revised loan charge-off and recovery policies. These revised
policies did not result in changes to the Company's forecasted loss rates or
profitability. Other changes
resulting from the review relate primarily to additional disclosure regarding
the Company's business, operations and credit loss policy.
Refer to the Company's Form 10-Q, which will be filed today with the Securities
and Exchange Commission, and will appear on the Company's website at
www.creditacceptance.com for a complete discussion of the results of operations
and financial data for the three and nine months ended September 30, 2003.
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 forecast and
estimate future collections and historical 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 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. Credit Acceptance provides
its dealer-partners with financing sources for consumers with limited access to
credit and delivers credit approvals instantly through the internet. Other
dealer-partner services include marketing, sales training and a wholesale
purchasing cooperative. Through its financing program, Credit Acceptance helps
consumers change their lives by providing them an opportunity to strengthen and
reestablish their credit standing by making timely monthly payments. Credit
Acceptance is publicly traded on the NASDAQ National Market 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
REVENUE:
Finance charges $ 25,770 $ 24,018 $ 76,457 $ 74,425
Lease revenue 1,251 3,614 5,371 13,201
Ancillary product income 4,369 5,500 14,335 12,919
Premiums earned 734 1,001 2,246 3,495
Other income 3,738 8,535 10,354 16,075
------------ ------------ ------------ ------------
Total revenue 35,862 42,668 108,763 120,115
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
General and administrative 4,679 5,789 15,361 17,889
Salaries and wages 7,879 7,184 25,083 22,136
Sales and marketing 1,886 1,954 6,546 5,544
Stock-based compensation expense 1,027 535 2,830 1,582
Provision for insurance and service contract
claims 329 590 637 1,723
Provision for credit losses 2,303 8,896 9,354 15,973
Depreciation of leased assets 853 2,251 3,568 7,758
United Kingdom asset impairment expense -- -- 10,493 --
Interest 2,267 2,364 5,264 7,126
------------ ------------ ------------ ------------
Total costs and expenses 21,223 29,563 79,136 79,731
------------ ------------ ------------ ------------
Operating income 14,639 13,105 29,627 40,384
Foreign exchange gain (loss) (1,066) (25) (1,037) 2
------------ ------------ ------------ ------------
Income before provision for income taxes 13,573 13,080 28,590 40,386
Provision for income taxes 4,755 4,468 10,171 17,111
------------ ------------ ------------ ------------
Net income $ 8,818 $ 8,612 $ 18,419 $ 23,275
============ ============ ============ ============
Net income per common share:
Basic $ 0.21 $ 0.20 $ 0.44 $ 0.55
============ ============ ============ ============
Diluted $ 0.20 $ 0.20 $ 0.43 $ 0.53
============ ============ ============ ============
Weighted average shares outstanding:
Basic 42,315,027 42,363,895 42,329,722 42,457,425
Diluted 43,959,924 43,122,046 43,247,518 43,517,380
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) AS OF
--------------------------------------
SEPTEMBER 30, 2003 DECEMBER 31, 2002
------------------ -----------------
ASSETS:
Cash and cash equivalents $ 15,450 $ 13,466
Investments - held to maturity 9,789 173
Loans receivable 869,927 770,069
Allowance for credit losses (14,883) (20,991)
--------- ---------
Loans receivable, net 855,044 749,078
--------- ---------
Floorplan receivables, net 2,920 4,450
Lines of credit, net 2,290 3,655
Notes receivable, net (including $1,565 and $1,513 from affiliates as of
September 30, 2003 and December 31, 2002, respectively) 2,076 3,899
Investment in operating leases 6,364 17,879
Property and equipment, net 18,294 19,951
Other assets 13,152 14,280
--------- ---------
Total Assets $ 925,379 $ 826,831
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Lines of credit $ -- $ 43,555
Secured financing 100,000 58,153
Mortgage note 5,618 6,195
Capital lease obligations 1,258 1,938
Accounts payable and accrued liabilities 33,858 28,341
Dealer holdbacks, net 420,759 347,040
Deferred income taxes, net 17,048 10,058
Income taxes payable 2,538 6,094
--------- ---------
Total Liabilities 581,079 501,374
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock 422 423
Paid-in capital 123,477 124,772
Retained earnings 217,277 198,858
Accumulated other comprehensive income - cumulative translation adjustment 3,124 1,404
--------- ---------
Total Shareholders' Equity 344,300 325,457
--------- ---------
Total Liabilities and Shareholders' Equity $ 925,379 $ 826,831
========= =========