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: AUGUST 5, 2003
INVESTOR RELATIONS: DOUGLAS W. BUSK
CHIEF FINANCIAL OFFICER
(248) 353-2700 EXT. 432
IR@CREDITACCEPTANCE.COM
NASDAQ SYMBOL: CACC
CREDIT ACCEPTANCE ANNOUNCES:
- 2ND QUARTER EARNINGS
SOUTHFIELD, MICHIGAN -- AUGUST 5, 2003 -- CREDIT ACCEPTANCE CORPORATION
(NASDAQ:CACC) Credit Acceptance Corporation (the "Company") announced
consolidated net income for the three months ended June 30, 2003 of $1,008,000
or $0.02 per diluted share compared to $8,466,000 or $0.19 per diluted share for
the same period in 2002. For the six months ended June 30, 2003, consolidated
net income was $9,601,000 or $0.23 per diluted share compared to $14,663,000 or
$0.34 per diluted share for the same period in 2002.
Excluding the impact of one-time expenses, including expenses incurred relating
to the Company's previously reported decision to stop loan originations in the
United Kingdom, consolidated net income for the three and six months ended June
30, 2003 was $8,246,000 or $0.19 per diluted share and $16,439,000 or $0.39 per
diluted share, respectively, compared to $8,466,000 or $0.19 per diluted share
and $17,264,000 or $0.40 per diluted share for the same periods in 2002.
As a result of the decision in the most recent quarter 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:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
(Dollars in thousands, except ------------------------------------------------- -----------------------------------------------
per share data) 2003 2002 % Change 2003 2002 % Change
---------------- --------------- ------------- --------------- --------------- -------------
NET INCOME
United States (2), (3) $ 8,703 $ 7,320 18.9 % $ 16,181 $ 12,482 29.6 %
United Kingdom (1) (7,594) 1,296 (686.0) (6,288) 2,483 (353.2)
Automobile Leasing (153) (305) 49.8 (468) (856) 45.3
Other 52 155 (66.5) 176 554 (68.2)
---------------- --------------- --------------- ---------------
Consolidated $ 1,008 $ 8,466 (88.1)% $ 9,601 $ 14,663 (34.5)%
================ =============== =============== ===============
NET INCOME PER SHARE
United States (2), (3) $ 0.20 $ 0.17 21.5 % $ 0.38 $ 0.29 32.8 %
United Kingdom (1) (0.18) 0.03 (699.0) (0.15) 0.06 (359.5)
Automobile Leasing (0.00) (0.01) 48.7 (0.01) (0.02) 44.0
Other 0.00 0.00 (65.7) 0.00 0.01 (67.4)
---------------- --------------- --------------- ---------------
Consolidated $ 0.02 $ 0.19 (87.8)% $ 0.23 $ 0.34 (32.9)%
================ =============== =============== ===============
(1) For the three and six months ended June 30, 2003, 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.
(2) For the six months ended June 30, 2003, includes interest income from the
Internal Revenue Service, which increased net income by $400,000 after-tax,
or $0.01 per diluted share.
(3) For the six months ended June 30, 2002, 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.
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.
Detail of expected net liquidation proceeds follows:
(Dollars in thousands) AS OF JUNE 30, 2003
----------------------
United Kingdom $ 50,900
Canada 6,300
Automobile Leasing 7,800
--------------------
$ 65,000
====================
It is expected that approximately 70% of the liquidation proceeds will be
recovered within one year, 90% within two years, and the remainder within three
years.
The Company also reported the following:
- Consolidated loan originations for the three and six months ended June
30, 2003 were $206.9 million and $438.9 million, representing increases
of 40.8% and 29.5% compared to the same periods in 2002. Detail of
amounts by business unit follows:
(Dollars in thousands) ORIGINATIONS
------------------------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------------------------- ----------------------------------------------
2003 2002 % Change 2003 2002 % Change
--------------- --------------- ------------- --------------- --------------- -------------
United States $ 190,870 $ 134,829 41.6 % $ 411,152 $ 306,883 34.0 %
United Kingdom* 13,358 9,365 42.6 22,784 26,903 (15.3)
Other** 2,631 2,675 (1.6) 4,969 5,164 (3.8)
--------------- --------------- --------------- ---------------
$ 206,859 $ 146,869 40.8 $ 438,905 $ 338,950 29.5
=============== =============== =============== ===============
* Effective June 30, 2003, the Company stopped originating loans in the United
Kingdom.
** Includes Canada.
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 and (ii) a continued increase in the number of
loans per active dealer-partner.
The Company made no material changes in credit policy or pricing in the
second quarter, other than routine changes designed to maintain current
profitability levels.
The Company's historical results indicate the risk of an unintended
adverse change in the profitability of loan originations is increased
during periods of high growth. The growth rate experienced in the
second quarter of 2003 is higher than the Company's expected long-term
growth rate. However, 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.
- Forecasted collection rates in the United States business segment
stabilized during the quarter. Prior to this quarter, forecasted
collection rates had declined during the three previous quarters. Most
of this decline occurred in the second half of 2002 when a difficult
system conversion negatively impacted collection results, and during
the first quarter of 2003 when post repossession collections declined
from the prior trend line. As a result, the current quarter's results
include a reduction in the amount recorded for advance losses in the
United States business segment compared to the prior three quarters.
Results for the three and six months ended June 30, 2003 include an expense for
asset impairment and accrued expenses related to the Company's decision to stop
loan originations in the United Kingdom as reported in the Company's June 2,
2003 news release. The expense of $7.2 million after-tax, or $0.17 per diluted
share, consists of: (i) $6.8 million after-tax increase in expense due to the
impairment of dealer-partner advance balances and other assets, (ii) $300,000
after-tax increase in salaries and wages resulting from employee severance
expenses, and (iii) $100,000 after-tax reduction in other income due to a refund
of income earned from an ancillary product profit sharing agreement.
The following table reconciles the reported net income and adjusted net income
(reported net income excluding certain adjustments) for the three and six months
ended June 30, 2003 and 2002:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------------- ----------------------------------
(Dollars in thousands, except per share data) 2003 2002 2003 2002
----------------- --------------- --------------- ---------------
Reported net income $ 1,008 $ 8,466 $ 9,601 $ 14,663
State tax expense resulting from
re-characterization of income - - - (963)
United Kingdom repatriation tax expense - - - 3,564
United Kingdom impairment expenses 7,238 - 7,238 -
Interest income from Internal Revenue Service - - (400) -
----------------- --------------- --------------- ---------------
Adjusted net income 8,246 8,466 16,439 17,264
Diluted weighted average shares outstanding 42,868,265 43,821,716 42,629,844 43,684,127
Adjusted net income per share $ 0.19 $ 0.19 $ 0.39 $ 0.40
================= =============== =============== ===============
Results for the three and six months ended June 30, 2003 also include $915,000
and $1.2 million, respectively, compared to $366,000 and $678,000 for the same
periods in 2002 in after-tax expense due to the Company's adoption of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which requires the Company to expense the fair
market value of stock options granted to employees over the expected life of the
options. The fair market value of stock options is dependent upon a number of
variables including the number of options outstanding, the historical volatility
of the stock price, and the expected life of the options, among other factors.
While the number of stock options outstanding declined in 2003 compared to 2002,
stock-based compensation expense increased as a result of a change in
assumptions that reduced the period over which certain performance based stock
options are expected
to vest. The Company has restated all prior periods to reflect the stock-based
compensation expense that would have been recognized had the recognition
provisions of SFAS No. 123 been applied to all awards granted to employees or
directors after January 1, 1995. Prior period results restated for the effect of
SFAS No. 123 are detailed in the Company's Form 10-Q, which is being filed
concurrently with this news release.
Refer to the Company's Form 10-Q, which has been filed with the Securities and
Exchange Commission, and appears 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 six months ended June 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
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)
(Dollars in thousands, except per share data) THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
2003 2002 2003 2002
-------------- -------------- -------------- --------------
(UNAUDITED) (UNAUDITED)
Revenue:
Finance charges $ 26,431 $ 25,522 $ 50,687 $ 50,407
Lease revenue 1,784 4,428 4,120 9,587
Ancillary product income 4,233 3,794 9,966 7,391
Premiums earned 757 1,054 1,512 2,494
Other income 2,767 3,791 6,616 7,568
-------------- -------------- -------------- --------------
Total revenue 35,972 38,589 72,901 77,447
-------------- -------------- -------------- --------------
COSTS AND EXPENSES:
General and administrative 5,198 6,383 10,961 12,100
Salaries and wages 8,687 7,448 17,204 14,952
Sales and marketing 2,483 1,809 4,660 3,590
Stock-based compensation expense 1,428 565 1,803 1,047
Provision for insurance and warranty claims 209 570 308 1,133
Provision for credit losses 2,863 3,562 6,772 7,077
Depreciation of leased assets 1,167 2,566 2,715 5,507
United Kingdom asset impairment expense 10,493 - 10,493 -
Interest 1,401 2,457 2,997 4,762
-------------- -------------- -------------- --------------
Total costs and expenses 33,929 25,360 57,913 50,168
-------------- -------------- -------------- --------------
Operating income 2,043 13,229 14,988 27,279
Foreign exchange gain 14 11 29 27
-------------- -------------- -------------- --------------
Income before provision for income taxes 2,057 13,240 15,017 27,306
Provision for income taxes 1,049 4,774 5,416 12,643
-------------- -------------- -------------- --------------
Net income $ 1,008 $ 8,466 $ 9,601 $ 14,663
============== ============== ============== ==============
Net income per common share:
Basic $ 0.02 $ 0.20 $ 0.23 $ 0.35
============== ============== ============== ==============
Diluted $ 0.02 $ 0.19 $ 0.23 $ 0.34
============== ============== ============== ==============
Weighted average shares outstanding:
Basic 42,321,170 42,535,312 42,317,443 42,486,667
Diluted 42,868,265 43,821,716 42,629,844 43,684,127
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(Dollars in thousands) AS OF
------------------------------------------------
JUNE 30, 2003 DECEMBER 31, 2002
----------------------- ----------------------
ASSETS: (Unaudited)
Cash and cash equivalents $ 22,068 $ 13,466
Investments-- held to maturity 456 173
Loans receivable 857,502 778,674
Allowance for credit losses (5,100) (5,497)
----------------- ----------------
Loans receivable, net 852,402 773,177
----------------- ----------------
Floor plan receivables 2,964 4,450
Lines of credit 2,817 3,655
Notes receivable (including $1,548 and $1,513 from affiliates as of
June 30, 2003 and December 31,2002, respectively) 2,074 3,899
Investment in operating leases 9,328 17,879
Property and equipment, net 18,355 19,951
Other assets 7,077 5,166
----------------- ----------------
Total Assets $ 917,541 $ 841,816
================= ================
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Lines of credit $ 8,305 $ 43,555
Secured financing 100,000 58,153
Mortgage note 5,813 6,195
Capital lease obligations 1,538 1,938
Accounts payable and accrued liabilities 33,034 28,341
Dealer holdbacks, net 417,043 362,534
Deferred income taxes, net 4,010 10,058
Income taxes payable 11,700 6,094
----------------- ----------------
Total Liabilities 581,443 516,868
----------------- ----------------
SHAREHOLDERS' EQUITY:
Common stock 422 423
Paid-in capital 124,446 124,263
Retained earnings 208,459 198,858
Accumulated other comprehensive income - cumulative translation
adjustment 2,771 1,404
----------------- ----------------
Total Shareholders' Equity 336,098 324,948
----------------- ----------------
Total Liabilities and Shareholders' Equity $ 917,541 $ 841,816
================= ================